Visualizing the Stimulus February 11, 2009Posted by rogerhollander in Economic Crisis.
Tags: bailout, economic history, government spending, Iraq war, korean war, louisiana purchase, marshall plan, moon landing, nasa, New Deal, roger hollander, s&l crisis, Stimulus, stimulus package, Vietnam War, Wall Street, wall street bonuses, wealth redistribution, world war II
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January 30, 2009 — whatthecrap?
So how big is the resulting $1.2 trillion spending package? Big enough to dwarf any government program in history, even after adjusting for inflation. It’s bigger than the New Deal and the Iraq War combined. The interest alone will be costlier than going to the moon or the Louisiana Purchase. The $18 billion in bonuses paid legally by private Wall Street firms in 2008 – decried by the President as “shameful” – is vanishingly small in comparison (smaller even than the bill’s incremental food stamps expenditures).
The only relatively modest component of the spending bonanza is the money tagged for infrastructure and energy efficiency (the ostensibly stimulative part), which accounts for less than 14% of the total.
…The bailout has cost more than all of these big budget government expenditures – combined:
• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion
TOTAL: $3.92 trillion
The only single American event in history that even comes close to matching the cost of the credit crisis is World War II: Original Cost: $288 billion, Inflation Adjusted Cost: $3.6 trillion
The $4.6165 trillion dollars committed so far is about a trillion dollars ($979 billion dollars) greater than the entire cost of World War II borne by the United States: $3.6 trillion, adjusted for inflation (original cost was $288 billion).
Paulson and Bernanke Spread the Wealth Around December 1, 2008Posted by rogerhollander in Economic Crisis.
Tags: Add new tag, bad assets, bailout, Barack Obama, Ben Bernanke, citigroup, creditors, criminal rich, dean baker, fed, Federal Reserve, Henry Paulson, robert rubin, roger hollander, shareholders, socialism, stock, taxpayers, treasury, wealth redistribution
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Monday 01 December 2008, www.truthout.org
by: Dean Baker, t r u t h o u t | Perspective
Wealth is spreading right now as a result of the bailouts and most of it seems to be going upward. (Photo: Getty Creative)
During the campaign, Barack Obama provoked a media flurry and right-wing outrage over his comment to Joe the Plumber about “spreading the wealth around.” They told us that this view was contrary to the American Way, that this was socialism.
Given all the concern over Obama’s ideas about spreading the wealth, it is remarkable how little attention is being given to Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke’s much more ambitious effort to spread the wealth. They are putting in practice measures that swamp any plans put forward by Obama in the presidential campaign; yet, this massive government redistribution of wealth is drawing almost no attention whatsoever.
The basic story is that the Treasury and Fed together now control several trillion dollars of bailout funds. This money is being used with almost no accountability, especially with the Fed’s portion of the bailout, which is by far the bulk of the funds.
Fortunes will be made or lost depending on how this bailout money is used. For example, Secretary Paulson just agreed to lend another $20 billion of the Treasury’s bailout money to Citigroup.
In addition, the Federal Reserve Board agreed to guarantee up to $300 billion of presumably bad assets. This is an enormously valuable guarantee. If Citigroup had to arrange a comparable guarantee in the private market, it would almost certainly pay more than $30 billion a year.
This decision sent Citigroup’s stock soaring. In the week since the bailout was announced, Citigroup’s stock more than doubled, adding more than $25 billion to the company’s capitalization. (The government could have bought the bank outright with the money it lent to Citi.) This is great news for Citigroup’s shareholders, who would be holding almost worthless stock if Mr. Paulson had not been so generous.
Paulson’s decision was also good news for Robert Rubin and other top executives at Citigroup. If the government had not stepped in, Citigroup would almost certainly be in bankruptcy and most of its highly paid executives would likely be out on the street.
Creditors of Citigroup also benefited. If Citigroup went into bankruptcy, their loans would be frozen for a period of time while the court determined what percentage of Citi’s debts could be paid. At the end of this process, many creditors would only receive back a fraction of what they are owed.
The fact that money is being redistributed doesn’t make it wrong to bail out Citigroup or any of the other companies now being aided by the various Fed and Treasury funds. We need to keep the financial system functioning. However, there is every reason in the world to be concerned about the extent to which these policies may be enriching the wealthy and well connected at the expense of the rest of us.
In the case of the Citi rescue, there was no obvious reason the shareholders should not be wiped out. They understood (or should have) that when they bought shares of the company that they could lose their whole investment if the company was poorly managed and went bankrupt. Similarly, there is no obvious reason that the management that wrecked Citi should not be thrown out and replaced with a more competent and lower paid team.
Even among creditors, there are serious grounds for concern. Many holders of Citi debt may have dumped their bonds for a small fraction of their face value because they did not know a bailout was imminent. On the other hand, those with more insight into the operations of the Fed and Treasury could have made enormous fortunes buying up debt, or shares of stock, at discount prices.
Of course, Citi is just a small portion of the bailout story, but the same issues arise everywhere. Corporations that would be out of business if the market were left alone are instead kept operating, courtesy of the taxpayers’ dollars. Due to the secrecy surrounding the bailout, the taxpayers can’t even know whose vacation homes and private jets they’ve saved. (How can we know if we should expect a thank you note?)
While we may not know the details, we can be fairly certain that many people are making millions, and some might be making hundreds of millions or even billions of dollars, as a result of the Fed and Treasury’s bailouts. Money is being redistributed to those who are skillful in anticipating Fed and Treasury actions or, alternatively, who are politically connected or perhaps just lucky.
In other words, we are spreading the wealth around in a really big way right now, and most of it seems to be going upward. The amount at stake in the tax increases that President-elect Obama plans to put in place is almost certainly less than $50 billion a year. The money that is being redistributed upwards through this bailout may be 20 times as much.
The politicians and media types who were upset about Senator Obama’s interference in the market should be yelling bloody murder about the bailout. Their silence shows that they care nothing about the market; they only care about ensuring that money flows upward. They are fine with “spreading the wealth around” as long as it lands with those already at the top.
Tags: Add new tag, Barack Obama, Joe the Plumber, John McCain, McCain and Palin, McCain socialism, Obama economic plan, Obama socialism, Obama tax plan, progressive taxation, redistribute wealth, roger hollander, spreading wealth, wealth redistribution
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It must come as a surprise to the Republicans that the public favors Obama’s idea of speading the wealth.
John McCain and Joe the Plumber are campaigning for Barack Obama, and they don’t even know it. The more McCain has ramped up his attacks on Obama as a “spreader of wealth,” the more the country has lined up behind the Democrat’s plan to spread the wealth. If McCain’s economic agenda was a gun and his attacks on Obama’s agenda the bullets, the old soldier would have shot both his feet clean off a long time ago.
Watching the GOP’s coordinated if increasingly delirious attacks on Obama’s economic plan, it’s clear that the party is even further out of touch with the America of 2008 than previously imagined. After eight years of establishing and then extending America’s lead as the most unequal of all industrialized countries, Republicans thought they could deflect a national groundswell of righteous anger by dusting off and hurling every insult in the conservative arsenal, including old favorites “extremist,” “radical,” “Marxist” and “socialist.” One suspects they are saving “anarchist” and “Hessian” for McCain’s last-gasp speech on Monday.
But a funny thing happened on the way to the Republican hammer-and-sickle-themed haunted house: Nobody showed. The McCain campaign’s attempts to smear Obama as a Trojan donkey for socialistic un-Americanism have belly-flopped, if not backfired. Obama has not only maintained a stable lead under the Republican barrage, he has increased his positives in the traditionally Republican territory of taxes. The final national polls before Tuesday all show a national hunger for national wealth redistribution downward. An Ipsos/McClatchy poll finds that likely voters prefer Obama’s tax plan to McCain’s by 8 points. Pew says Obama added to his edge on taxes and the economy between mid-September and mid-October by 6 points, jumping from 44 to 39 earlier to 50 to 35. On Oct. 30, Gallup released results showing Americans favor Obama’s style of wealth spreading by a whopping 58-to-37 margin.
It appears the nation’s sanity and sense of fairness has reasserted itself to wipe the floor with condescending GOP red-baiting.
It hasn’t hurt that the GOP attacks have been absurd on their face. A 3-point increase in the top marginal income tax rate to 39 percent is not easily morphed into the face of Pol Pot. For much of the 20th century, the top income tax rate in the United States slid between 50 percent and 90 percent, peaking at 94 percent during the final two years of World War II. Most Americans would agree that the mid-century rates were excessive, but support for some kind of progressive tax curve remains widespread. Both Bill Clinton and Al Gore ran winning campaigns promising to raise taxes on the rich.
“The public has always supported moderately progressive taxation, so I don’t think McCain’s pitch had much resonance unless he could convince people that Obama would raise their taxes,” says Dean Baker, co-director of the Center for Economic and Policy Research. “Obama inoculated himself against this attack by saying that he would cut taxes for 95 percent of the public. Basically, McCain was trying to make things up, and most people didn’t believe him.”
Charges of socialism are especially discordant coming from the McCain campaign. The top marginal income tax rate held steady at 50 percent for five years under McCain’s hero, Ronald Reagan. His other hero, Teddy Roosevelt, was a fierce and early booster for federal income and estate taxes. And Sarah Palin? It wouldn’t be all that surprising to see her turn up at a commemoration of this year’s 70th anniversary of the Fourth International. As Hendrik Hertzberg noted in one of many recent New Yorker pieces debunking the newest GOP attack line, the redistributive principle is practiced with particular gusto in Palin’s Alaska, where the governor spreads the oil wealth like creamy butter around the state’s absorbent white bread. “One of the reasons Palin has been a popular governor,” notes Hertzberg, “is that she added an extra $1,200 to this year’s (government) check, bringing the per-person total to $3,269.” Earlier this summer, Palin boasted to journalist Philip Gourevitch, “Alaskans collectively own the resources. We share in the wealth.”
Like Alaskans, we’re all socialist now, to an extent, and have been for a long time. It’s just a question of daring to speak the adjective’s name, which happens to describe hugely popular programs like Social Security and Medicare. Watching McCain’s socialist attack line flop, it’s tempting to think that the country is edging closer to the day when the word, stripped of its Cold War baggage, no longer has the power to frighten Ohio. Another element is the further eclipse of the culture war by economics. As the country’s shifting demographics grow over the divides opened up during the 1960s and ’70s, attempts to bundle pinko economics with fears of godless agents of chaos become increasingly meaningless.
The Right is aware of and worried about this growing de-contextualization of the word “socialism.” The counterrevolution against the New Deal was aided by the presence of the Soviet Union as a running counterpoint. But it’s now almost 20 years after 1989. A generation has matured that never soaked up any of the old propaganda. This generation has studied abroad and knows you can Super-size it in Sweden. It has no memory of “Better Dead Than Red” and can’t imagine an elderly British logician making international headlines for saying he’d rather crawl to Moscow on his hands and knees than die in a nuclear war. Conservatives worry about this group much as arms controllers worry that kids today don’t understand the dangers posed by nuclear weapons. The right’s fright over the post-Cold War generation’s immunity to cries of “socialism!” was expressed clearly in an Oct. 27 editorial in the Investor’s Business Daily titled “Defining Problems With Socialism for the Post-Cold War Generation.”
“John McCain has finally called Barack Obama’s agenda by its proper name,” it begins. “But if he assumes voters understand what he means when he uses the word ‘socialism,’ he assumes too much. Sadly, most people under 60 in this country went to schools and universities where socialism isn’t considered a bad thing.”
Actually, those are two distinct groups — those who don’t understand the word or its gradations, and those who do and wouldn’t mind living under most of them. What they have in common is that together they constitute a future United States where the word “socialist” carries an ever-weakening stigma.
Whether we choose to reclaim or dispense with the word, its days as a conversation stopper appear to be over. Over the last eight years, 90 percent of the new income generated has accrued to the top 10 percent, while average family incomes have dropped $2,000. These numbers have engendered bitterness on top of anxiety that has shifted the economic debate. If Democrats get a chance to seek forceful redress in the coming years, Republicans are sure to call Obama a socialist and much else besides. But that’s OK. Tuesday’s election is going to show that when people are hurting, they don’t mind a little “socialism” — just as long as it’s pointed their way.
McCain’s Socialist Delusion October 24, 2008Posted by rogerhollander in John McCain, U.S. Election 2008.
Tags: Adam Smith, election 2008, income tax, John Mcain, McCain socialism, McCain/Palin, progressive taxation, roger hollander, U.S. Election 2008, Wealth of Nations, wealth redistribution
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Posted on Oct 22, 2008
By Joe Conason
Wherever John McCain appears on the stump in these waning days of the presidential campaign, he is always accompanied by his imaginary friend “Joe the Plumber,” but it is the specter of Karl Marx that lurks just offstage.
Reverting to the Republicanism of eons ago, when he was just a child, McCain inveighs against the “socialist” design of Barack Obama’s tax platform. This delusional ranting, like so much of his behavior this year, tells us nothing about Obama (or socialism!) but much about the Republican senator.
Let’s begin with the dishonesty of the McCain rant. What Obama proposes is to restore tax rates on the wealthy to the same level as during the Clinton administration—that is, to allow the Bush tax cuts to expire without renewing them for individuals and families reporting more than $250,000 in annual income. There is nothing radical in this idea, let alone socialistic (especially compared with the violations of capitalist orthodoxy that McCain has supported recently as emergency measures to rescue the financial industry).
Not only is there nothing radical about repairing the unfairness of the Bush tax cuts, but it is precisely the same position that McCain argued when they were first enacted. Is his memory so poor that he cannot remember saying the Bush tax plan was “skewed” to benefit the rich? Having reversed that position for political convenience, he has also invented a different justification for opposing Bush back then—namely that he thought the cuts were fiscally irresponsible. But that isn’t what he said in 2000 and 2001.
Now let’s address the ignorance of his rant. Progressive taxation is a tradition of Western economics that dates back considerably further than Marx and the Communist manifesto, with all due respect to the wingnuts who seem to be writing McCain’s speeches. He admits that he has neglected his economic studies, so perhaps he isn’t aware that Adam Smith, revered philosopher of market capitalism, advocated tax fairness as far back as 1776, the fateful year when he published the first edition of “The Wealth of Nations.”
Although there was then no income tax, Smith’s principled judgment on the justice of higher taxes on those who could pay more, enunciated on several occasions, could not be clearer. He favored property taxes and luxury taxes because they would fall most heavily on the wealthy. He would have levied a sizable tax on all seven of the McCain homes plus an additional chop at all of Cindy McCain’s credit card binges.
In “Wealth of Nations,” Smith wrote: “The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”
Few legislators are more familiar than McCain, in his maverick incarnation, with the enormous fortunes raked in by oilmen, defense contractors, bond holders and the whole host of modern capitalists under the protection of the American state. The notion that those fortunes, often gotten in a parody of the free market, should be taxed at the same rate as the earnings of a plumber would strike Smith as monumentally unjust and an attack on the moral foundations of society.
Finally, let’s discuss the other bit of demagoguery in McCain’s most recent speeches, when he complains about the “redistribution of wealth” and equates an income tax rebate for working people with “welfare.” Leaving aside the racial subtext of those remarks, it is hard to say whether they display ignorance, dishonesty or both. The American tax system, like all other taxation in modern nations, has always redistributed wealth. Sometimes it sends streams of money upward, from low-income taxpayers into the pockets of corporate executives; at other times it sends those streams downward, to assist the very poor.
But to cast socialist aspersions on a tax refund to working families whose incomes are too low to pay income taxes is to paint a big pink stripe onto McCain’s supposed idol, Ronald Reagan. In 1986, Reagan signed legislation greatly increasing the earned income tax credit, a credit for low-income workers that reduces the impact of payroll taxes in order to boost take-home pay above poverty levels. When the credit is more than the amount of federal income taxes owed by an individual, that person receives a tax “refund.” Reagan praised the earned income tax credit as the best “anti-poverty” and “pro-family” legislation ever enacted by Congress.
It must be troubling for Republicans to learn that according to McCain, the Gipper was a socialist, too.
Joe Conason writes for The New York Observer.
© 2008 Creators Syndicate Inc.