Big bonuses and bigger deficits are driving new waves of populist anger
Filed under: Economy
As reports about record payouts for Wall Street and record deficits trade off on the front page, millions of Americans are wondering what's going on with their economy and their political system. Many of the nearly 200 reader comments made in response to my recent piece, Middle class squeeze: The deep roots of an economic and social transformation, expressed disgust and anger with both Big Finance and Big Government.At least some of this populist dissatisfaction can be traced back to the 2008 government bailout of big banks, the TARP program. Email and phone calls to congressional offices ran about 300-to-1 against TARP, but Congress approved the massive bailout with very few strings attached. Add in the bailouts extended to other crippled financial institutions such as AIG and Fannie Mae and the government's plans to rework the U.S. health care insurance system, and the sense that the government and the nation's financial elites are failing the citizenry has reached new highs.
"Tea parties" are demonstrating widespread disapproval of Congress, taxes and government control of the economy and health care. But Americans (and plenty of DailyFinance readers) express conflicting goals: many want more capitalism and less government, while others want a safety net for those who have lost their jobs and their health coverage.
Georgetown University historian Michael Kazin, author of The Populist Persuasion, notes that "Big corporations and big government can be seen as parts of the same problem." This is exactly what a number of readers have expressed. Indeed, with politicians openly stating that the banking lobby controls Congress and TARP recipients giving tens of millions of dollars to Congressional representatives, many Americans are seeing the same confluence of Big Government and Big Business which formed a corrupt and cozy system in the Gilded Age. The resentment that dominance created led President Theodore Roosevelt to "bust the trusts" -- the cartels and monopolies which had amassed highly concentrated financial and political power.
To fully understand the roots of American populist distrust of concentrations of power, we need to go all the way back to the decade before the American Revolution. Seeking to recover the costs of its seven-year war with France, the British government imposed a number of taxes on its wealthy American colonies. We all know middle class and working class or artisan Americans were fed up with this "taxation without representation" before the revolution, but few non-historians know that many of them were also fed up with the homegrown elites which had concentrated great wealth and power under British rule.
In a statistic which eerily parallels current concentrations of wealth, five percent of the Boston citizenry controlled 50 percent of the city's taxable assets. It wasn't just tea that got trashed in pre-revolutionary protests; local elites' houses were also looted by angry mobs.
And this populist uprising against oppressive local elites was not just a New England phenomenon. In North Carolina, farmers who organized against wealthy and corrupt officials between 1766 and 1771 were eventually suppressed with military force. At least some people see a similar exploitation of the working poor in the present (see, for instance, Milking the Poor: One Family's Fall Into Homelessness).
In general, colonial government was controlled by a patrician elite. While many of these gentlemen supported the revolution, it was middle class Tom Paine who captured the populist understanding best in his pamphlet Common Sense: a revolution was needed not just to break away from British rule, but to broaden the representation in government to include the lower and middle class citizens.
Paine expressed this healthy distrust of government thusly: "Society in every state is a blessing, but Government even in its best state is but a necessary evil." So on the one hand we are skeptical of Big Government and wary of it crimping our rights, yet we also want government to provide services and safety nets.
We can't have it both ways. Nations with generous social-welfare services such as the Scandinavian countries also sport tax rates of around 60 percent -- somebody has to pay for those generous benefits.
As a rule, we can't have low taxes and costly social programs. We as a nation have decided to bridge the yawning gap between tax revenues and government expenditures by borrowing trillions of dollars, mostly from foreign entities. The unfunded liabilities of Social Security and Medicare alone are estimated at $60 trillion, and that's not counting private pensions, Veterans benefits and a host of other government promises.
Nowhere is this great divide between expectations and reality wider than in health care. Employers' health care costs have risen 149 percent since 2000, and Medicare/Medicaid have leaped to a staggering $682 billion, larger than Pentagon spending ($613 billion) or Social Security ($612 billion).
Clearly, these costs trends, public and private, are unsustainable.
Unfortunately, this great divide between expectations and hard financial realities is reflected in an "either/or" ideological divide which was expressed by some DailyFinance readers who labeled government health care "Communist." Others defended capitalism as if the only alternative was socialism, when the reality is there are numerous shades of capitalism which are by no means equal in benefit to society.
For instance, suppose Apple Computer founders Steve Jobs and Steve Wozniak had assembled $30 million to lobby Congress to buy their computers by the millions. Would you call that capitalism? If so, is it the same kind of free-market capitalism they pursued in establishing Apple as a premiere global brand? Obviously not.
Yet this buying of Congress is precisely what the TARP recipient banks have done, and done so effectively that Representative Collin C. Peterson (D- Minnesota) was recently quoted as saying, "The banks run the place. I will tell you what the problem is -- they give three times more money than the next biggest group. It's huge the amount of money they put into politics."
While many Americans dismiss France's health care system as "socialist," this labeling misses the key feature of the French system, which is that most households have additional private insurance which offers more choices for coverage. Clearly, it is a hybrid system which combines both public and private insurance models.
Just as our economy includes crony capitalism, monopolies, cartels and corporate welfare -- the very opposites of the free-market capitalism we all value -- European-style socialism also has different shades. For instance: right now, there is a huge health care provider in the U.S. which is owned lock, stock and barrel by the Federal government. It serves about six million Americans and offers coverage to 26 million Americans. It directly employs tens of thousands of employees and owns hundreds of clinics and facilities. It is "socialism" par excellence by most pundits' understanding of that term.
Yet it is also the best health care provider in the nation by numerous metrics, providing care for millions for a mere fraction of the cost of the "private provider" Medicare system. The provider is the Veterans Administration. Yes, the waits can be long, and yes, it's not perfect, but private health care experts recognize it is the model of efficient, cost-effective treatment. The slipshod care publicized a few years ago was largely the result of recent vets slipping between active-duty TRICARE and the VA; by most reports, those problems have been addressed.
The VA system treats almost six million vets who owe no co-pays for a cost of about $38 billion a year, while Medicare serves 42 million for a cost approaching $500 billion. So Medicare treats seven times as many people for 13 times the cost. Deciding which provides more care for the buck and thus which is more sustainable is obvious.
So is Big Government the solution? Not when it borrows $1.4 trillion dollars a year from our children to fund its largesse; not only is that morally wrong, it is financially unsustainable. Does Big Business represent capitalism? Not when it's "too big to fail" and when it buys government intervention to save its Elites from the consequences of high-risk gambles.
Do we have a way to change our government's representatives and policies? Yes, we do. It's called the ballot box.
Charles Hugh Smith writes the Of Two Minds blog and is the author of numerous books, most recently Survival+: Structuring Prosperity for Yourself and the Nation.
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Reader Comments (Page 1 of 1)
10-25-2009 @ 10:40AM
Wingnut said...
Hi! Interesting, but, you haven't addressed the REAL problem. Economies themselves. As long as the masses believe "There's nothing wrong with making a good profit"... nothing will be solved.
Think about the inequal rationing of these wellbeing coupons (USA money) that have the pyramid scheme symbol on the back. Think about the massive and easily-seen servitude-infestation within capitalism. Think about capitalism-invented pricetags, blockading the survival supplies... making it so ONLY free marketeers can get survival supplies and luxuries/toys. Think about the parental policy reversal from share, to fight, when children turn 18 and are sharktanked into "out there". "Out there" is where we're (do as we're-) told to COMPETE... but while "in here"... we shall cooperate. What IS "out there" and what IS "in here" and why does this border, or ANY border... exist?? See how out there/in here phenomenon... sets-up the US/THEM civil wars? Folks on the very same planet as each other, fighting with folks on the very same planet... over wellbeing... and empowerments (entitles of ownership of property/money).
Money, entitles of ownership, pricetags, all products of the felony church-o-competers... called capitalism. Where is the church of cooperators (Christianity)? Why don't THEY have a currency that's legal tender TOO, and handed-out lovingly like leafs falling from trees? Where are potluck dinners and barnraisings and communes? Do we all need to read the story of Stone Soup and learn its lesson again?? Do we all need to go back to view the repeated failings of childhood pyramids? Remember how, when we stacked the children in the playground into servitude-infested pyramids... how the upper 1/3 was momentarily "heads in the clouds" while the kids on the bottom got crushed by having the weight of the world's knees in their backs??
Its all caused by... inequality... ie. pyramid schemes... such as capitalism is. Why isn't EVERYONE in EVERY COUNTRY given the same wellbeing as each other? Why not equal pay and equal ownership of ALL land, supplies, and luxuries? Why do capitalists and former Christians operate in a COMPETING environment instead-of in a "we're all on the same team" cooperating environment? Until these questions and problems are pondered and addressed, you can spew theories about inflation until you vomit, and you have solved NOTHING.
Until one understands spirography (what goes around... comes around... once handed-on a thousand times) and until one understands the capitalism BS of "pull your weight, earn your keep, stand on your own two feet, make a living" etc etc (bandwagoning/railroadings/traditions)... you can't address the problem. The "yay America, yay capitalism" self-BSing is too ingrained, the con/sham is too bought-into. Until one scrutinizes the immorality and illegality of servitude/inequality systems such as the felony pyramid scheme called capitalism, nothing will advance. Profiting causes inflation, its as simple as that. Every profit, leaves a hole. For every winner, there's a loser... in capitalism. And until the toybox tug-o-warring, cookieplate-chasing capitalists... are willing to examine the reason for the huge pile of dead bodies at the exhaust pipe of their "everyone climb aboard the bandwagon" Earth-mowing/harvesting machine... nothing will be accomplished. As long as servitude and competing is the theme of the century (forcing 18 year olds to work FOR others instead of WITH others in equality)... we're all doomed. The ONLY way to fix the problem... is to outlaw economies (and thus outlaw pyramid schemes).
Prepare for the collapse of a pyramid! Its a GOOD thing. It allows loving Christian socialism supply/survival systems... another chance to happen. Look to the USA military supply system, as well as the USA public library system... for proper monetary-discriminationless wisdom and morals. And while we're at it, we need to quit doing the unlevel architecture in USA courtrooms. They are currently church simulators and fear chambers... and look NOTHING like a level military tribunal. Sick. Fix inequality on ALL fronts, and clean-up the statistics page at the World Health Organization. Do that, and we're on our way. Right now, capitalism has caused a massive forsaking and negligent homicide festival... via NOT paying attention to the far-reaching ramifications of pyramid schemes-o-servitude. There's more criteria than just monetary worth... to measure the value of things-with. There's nobody to lynch for the FreeMason/Illuminati pyramid scheme... they've all died of old age. We just need to escape the thing now... by outlawing and abolishing economies.
Take care, everyone!
Larry "Wingnut" Wendlandt
MaStars - Mothers Against Stuff That Ain't Right
(anti-capitalism-ists)
Bessemer MI USA
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10-25-2009 @ 12:40PM
layers5252 said...
babble, babble, babble.....!!! good grief
10-29-2009 @ 9:23AM
stephan said...
"Why not equal pay and equal ownership of ALL land, supplies, and luxuries?"
that's been tried (see socialism, communism, etc). The reason these failed is because they don't reward individual ambition, and thus are contrary to human and animal nature. It's like if I move into your living room, and take a few of your things, and add my name to your bank account. I don't plan to get a job, but as long as you keep working, we can share. right?
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10-25-2009 @ 1:23PM
FOXYLYNX said...
TERM AND AGE LIMITS ON OUR ELECTED OFFICIALS. THEY DO NOT LISTEN TO THE MAJORITY, THEY ARE IN THE POCKETS OF THE BANKS AND BIG BUSINESS. IF THIS IS NOT CHANGED, THERE WILL NEVER BE ANY CHANGE. I THINK IT HAS BECOME PAINFULLY OBVIOUS THAT AMERICANS COME LAST IN THE SCHEME OF THINGS. THE BALLOT BOX ONLY LET'S YOU CHOOSE BETWEEN ONE SPECIAL INTEREST GROUP OVER ANOTHER - BOTH PARTIES ARE CORRUPT AND THAT LEAVES US WITH VERY LITTLE POWER. I GUESS AMERICANS NEED A LOBBY TO HAVE OUR VOICE HEARD. YES, WE ARE MAD AS HELL.
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10-25-2009 @ 9:35PM
Paul said...
It is my opinion that American middle class voters will not be happy about the TARP
BAILOUTS until the Government dismantles the two MEGA BANKS AND THE MEGA INSURANCE COMPANY and
liquidates them into non existance. Congress needs to calm the masses
down and this is the only way. Congress needs to systematically
dismantle these companies in a mannor that will not further disrupt
the economy, it can be done and must be done.The country does not
need to bail out companies that pay out BILLIONS of dollars in pay,
benefits and bonuses, charge outrageous RIPOFF intrest and fees to
their customers, while paying out about 2 percent on their CD'S. And
then refuse to lend to those in need who are going out of bussiness
because they are being deprived of those loans.If something isn't
done soon the DEMOCRATS POWER WILL BE SHORT LIVED. By the end of next
election they will no longer have control. Then we will have another
quagmire of gridlock for another10 years.One good thing that did
happen was low fee internet investment trading, which set an example
that change can happen. WALL STREETS BANKERS AND INVESTMENT HOUSES
GREED HAS GOT TO STOP, IT IS TOTALLY OUT OF CONTROL. As millions of
families are being thrown out of their houses and onto the streets
all across America this holiday season, WALL STREETS JACKASSES
biggest worries are wether they are going to get a 1 million, 5
million, or 10 million dollar Christmas Bonus. Middle class American
workers represent Tiny Tim and SCROOGE is not Jim Carey but GREEDY
OVERPAID INCOMPETENT WALL STREET SCUMBAG LEECHES who will NOT be
happy until they control 99.99 percent of the USA's wealth instead of
the current 90 percent of the nations wealth they currently control.
STOP THE GREED NOW. Middle class americans must only remember that WE
THE PEOPLE ARE THE ANTS and WALL STREET GREED MONGERS ARE THE
GRASSHOPPERS. While grasshoppers have a place in society they must be
regulated when they demonstrate as they have, that they have no self
disapline and by their arrogance show a total lack of respect for
middle class Americans. THE GREED OF WALL STREET HAS TO STOP.
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10-25-2009 @ 9:32PM
joe said...
Stephan, you hit on an interesting point. Our society rewards the lazy with medicaid, ssdi,ssi, welfare, and food stamps just to name a few. We have become an entitlement society with no personal accountability. The liberal media wants the people to revolt against big business, but the only problem with that is Congress is responsible for most of what ails this nation. Get rid of those in office who care only about getting reelected(which is all of them), and install those with concern for the betterment of America.
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10-26-2009 @ 7:12AM
Ben said...
Now that we have a "federal emergency" with the swine flu Obama will be able to open the Maoist "education camps". People will start disappearing in the middle of the night.
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10-26-2009 @ 7:31AM
Mitch said...
Anyone who does not believe Obama and his marxist friends are not doing this on purpose is an idiot.
Every sick twisted thing they want to see befall our nation depends on the ignorant masses
rising up in anger.
They have to be certain that the anger is NOT directed at the administration.
So they are stealing HUGE moneys from the coffers and future generations
and simply handing over to the most greedy corporate fat cats.
Our time is about up boys and girls - See this 4 min video: http://is.gd/4Cb1q
Reply
10-26-2009 @ 12:22PM
RAnthony80 said...
I wonder what is the budget of the pay Czar... How much is he saving us vs how much is he costing us?
I bet it would be a wash if you did the math?
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10-26-2009 @ 9:05AM
Tech said...
First off the people did not approve bailing out a bunch of criminal elitist scum in NYC. They don't grow food or produce anything but scheme after scheme to rob decent people of their money and too bad if they lost with derivative bets, credit default swaps, MSB's that they leveraged and tried to con the world with. They could have run an honest game but they got too greedy and threatened Congress with martial law? Who do they think they are? We should have marched to DC and burned down the FED building and let the NYC banksters jump out of their windows and drowned themselves in the Hudson river. They are just parasites and we're tired of supporting a bunch of leeches and blood sucking ticks. What's reaally galling is they streal 23.7 trillion and they are still facing massive losses but they pass out billions in bonuses to themselves with our money then throw millions out of their homes and jobs? It's the end folks, America has been hi-jacked by mafia thugs and Jewish con artists and no-one trusts these scumbags anymore or the "government". Sure they can keep a huge military occupying the oil fields to prop up the dollar for awhile but they are just printing up paper like confetti and after awhile that's all it will be good for-the Chinese Communists make everything now and they're planning to outsource another 40 million jobs? It's David Rockefeller's global economy BS and a New World Order and billions will suffer while America will become just another place name. Human beings are only a cost on a banker's balance sheets, a liablity.
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