Gang Raping the American Working Class

First, they destroyed the unions, they then tore up all the regulations and safeguards designed to protect the citizenry from reckless financial speculation while at the same time instituting the most regressive tax system the country had ever seen. This led to its inevitable outcome: the house of cards came tumbling down, leaving a handful of individuals running for cover with the unbelievable wealth they had been allowed to accumulate while, in the rubble, lay jobless workers and tens of millions of working people with seriously diminished savings accounts and pensions. Most Americans’ homes, their single largest asset, the focus of the bubble (why don’t we call these phenomena boils rather than bubbles?) alleged to have been the core problem, were worth a lot less. But this would be only the first time we were to be ravaged. Within just a few weeks, they would gang on and do it to us again.

For many years, American high school students were taught in their history classes that the one lesson the Great Depression taught us was that capitalism needed regulation. We learned that buying on margin was a thing of the past. You just couldn’t have another depression. There would be no runs on the banks. The Baileys had reined in the Potters. The country had learned its lesson in 1929. We now had an FDIC to insure our savings up to $100,000 per account. The only problem was that by 2008, the savings accounts were empty. The country had a 0% savings rate. After all, only a fool would keep his money in a savings account. Why settle for 0.1% interest at the local savings and loan when you could cash in with a tax-deferred annuity or an IRA or a good mutual fund and make an average of 8%?

Although it would be nice to be able to blame the evil Republicans for this disaster, this proves to be difficult, since both parties were clearly complicit. That the producers of such colorful platitudes as the evil empire and the axis of evil were themselves evil was fairly clear. Should any evidence of Ronald Reagan’s essential mean-spiritedness be called for, one only had to look at his performance while governor of California. The reason that Democrats came to be as likely as Republicans to find in him a miracle worker was that he took an economy which, by the time he took office in 1980, was clearly in crisis and managed—in a fashion that gave him the right to claim full status as a Wizard of Oz—to create an illusion of affluence. If buying time for the system was the goal, he more than achieved it. It was undeniably a miracle of sorts—if one could forgive him for his attack on unions, for his tearing up regulations governing just about every aspect of American life and for his having a philosophy on the environment best summed up in his quip that “A tree’s a tree. How many more do you need to look at?” (He does, of course, get credit for bringing down the USSR, a distinction he must rightly share with Pope John Paul II, the Virgin Mary and a moribund Moscow bureaucracy.)

Credit swaps. Hedge funds. Derivatives. Private equity. Collateralized securities. The average American struggling to figure out why our economy now seems on the verge of a depression has by now had the opportunity to obtain at least some superficial familiarity with the heretofore arcane jargon of finance. Of course, most of us still can’t follow what Hank (“Ace”) Greenberg, the former CEO of A.I.G. is talking about during his appearances on the Charlie Rose Show. The sleight of hand that passes for high finance is necessarily couched in enough jargon and enough actual complexity to form a protective shield around the self-styled Masters of the Universe. Most of us are still reeling from the events of those September weeks when Bear Stearns and Merrill Lynch were teetering and Lehman brothers was allowed to go under, when we were told that others of the most revered names in investment banking were on the verge of collapse. Why was this happening? How could it happen? And, then, we were told that Hank Paulson, then Secretary of the Treasury, and Ben Bernanke, head of “the Fed,” had determined that only trillions of dollars of taxpayer money could “save the system,” that certain companies were “too big to fail.” They needed the money—and they needed it fast. There was talk of a “complete meltdown of the banking system,” and of “a complete freeze on credit,” that money could no longer flow through arteries that had essentially sclerosed with panic calls on paper that was leveraged as much as 30%. The patient was at death’s door. We had to do something, and we had to do it fast. We could worry about where that trillion (and more like it) were coming from after the patient had stabilized. Most of the people I know started flipping through their dog-eared pages of Naomi Klein’s The Shock Doctrine. What had once been the regimen applied by (the now reborn) Harvard economist Jeffrey Sachs to the crippled former Soviet Union was being administered right here at home. Domestic shock therapy.

Oddly enough, looking back on those events, which took place as the presidential campaign was nearing its conclusion, it is John McCain who seems to have gotten it right. McCain was much ridiculed for stating that the American economy was strong and at least making noises that would indicate his opposition to what we now call the “bailouts.” McCain was simply being a good Republican, a good capitalist and an honest broker for a philosophy long identified with the now apparently quaint notion that failed businesses should go bankrupt and that government intervention in the vagaries of enterprise is to be avoided at all cost. It would take a lot of time listening to the endless parade of economic analysts that we have been treated to in the media for the fact to emerge that, as a result of the Reaganite, Milton Friedmanite, laissez faire regimen that the U.S. economy had evolved into, about thirty percent of the U.S. GDP came to grow out of the financial sector. In other words, 30% of our “economy” was devoted to paper pushing rather than creating anything vaguely resembling durable goods. When McCain talked about a healthy economy, he no doubt meant the other seventy percent. Of course, the productive sector now looks gravely ill, in no small measure the by-product of what some diagnose as a “loss of confidence.” The loss of confidence becomes far more profound, of course, when the populace—both here and around the world—must daily confront the floundering of secretaries of the Treasury and Fed Chairman Bernanke as each attempt at “saving the system” falls short, while jobs are lost, wages fall, pensions and savings disappear, and a volatile stock market which we were all being advised to hitch our wagons to loses half of its value.

It is now clear that the system should have been allowed to fail. The trillions of dollars in bailouts and the recent decision by the Fed to just print another trillion dollars is only serving to impoverish the average American wage earner as well as his children and grandchildren. What did they mean when they talked about saving the system? What system were they talking about? Most importantly, whose system did they want to save? When estimates of outstanding derivative debt published in respectable journals were between 500 trillion and a quadrillion dollars, (That’s a one followed by fifteen zeros. Or, viewed another way, the GDP of the entire world for about twenty years.), who was responsible? Hundreds of billionaires were created through the new financial “products” that an unregulated financial sector “miraculously” produced while the richest country in the world watched its standard of living and quality of life decline, watched its infrastructure collapse, its people go without health insurance, its public schools decline to almost third world status, and its redlined masses more and more turn to every drug from cocaine to an inexhaustible array of junk entertainment. Bread and circuses while Rome burned. The U.S. had become its own economic back yard while factories sprouted in China and the other Asian tigers. All of this took place against a backdrop of a decline in the substance and trappings of a viable democracy. An election that many Americans viewed as a coup d’etat resulted in illegal wars and a Homeland Security ethos that borrowed its name and spirit from Weimar Germany. Pages were torn out of the Bill of Rights, newspapers closed, whistleblowers became voices in the wilderness.

Nevertheless, the opposition party, when it was not itself engineering economic programs that ill served the average American, proved to show little real opposition to the “new” economic order in which the World Bank and the IMF would tweak the dials of the planet’s economies. Of course, many Republicans made the disingenuous argument that the whole disaster could be laid at the door of the Democrat Party. It is a convenient argument, but it is also an argument that has some real merit when one considers the nature of the straw that broke this camel’s back. Democrats stood by while being perfectly aware that their ostensibly noble goal of providing housing for the poor declined into the marketplace savagery of “no doc” or outright fraudulent mortgages. It was during the Clinton administration, after all, that some of the significant regulatory checks on the market were allowed to be dissolved. A leading indicator of the “it’s the Democrats fault” line of argument appeared in a Village Voice article titled, “Andrew Cuomo and Fannie and Freddie: How the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis.” The article appeared on August 5, 2008, one month before the meltdown. The Clinton administration may have been reckless (a hallmark trait of the man at the helm) but merely writing bad mortgages would not have resulted in the ensuing nightmare. Criminal as the behavior of many banks had been, their behavior was not a heavy enough straw. For that, we needed to live in an unregulated market of “collateralized securities,” securities leveraged to previously unheard of levels, securities “guaranteed” by good Republican credit houses as solid
gold, AAA level investment vehicles.

There have been few expressions of remorse or regret; there have been no indictments for the greatest rape of the world’s treasure in economic history. Ever the victims of weapons of mass distraction, we are allowed a collective tsk tsk over con artist Bernie Madoff and the luxury of righteous indignation over the multi-million dollar bonuses awarded by A.I.G to its staff. While we are distracted by headline stories chronicling outrages that total millions or billions, we seem blissfully complacent at the prospect of having to cough up many trillions of dollars to “save the system.” And, by now, it is clear what system it is we are saving and who the beneficiaries of this salvation will be—the very same folks who squandered our resources in the first place. So, if a rape took place when the financial sector allowed our wealth to disappear through their recklessness and blind greed, now a second rape is in progress—in the full light of day—as the perpetrators of the crime are made whole courtesy of the men and women on Main Street.

“But we had to do something,” the chorus keens. People need access to credit, need to borrow to keep business moving. Yes. The answer is obvious. Many economists found a prescription in nationalizing the banks. Socialism! In fact, banks are nationalized or taken over by government regulators all the time without any outcry. And for good reason, a nationalized bank is seen as merely a temporary expedient awaiting re-privatization. No, the obvious solution is not nationalized banks; it is a national bank. John McCain was right all along. Let the evildoers suffer the consequences of their deeds; let them go down as the system to which they all nominally subscribe says they should. Instead of all those trillion dollars being handed over—no strings attached—allowing the financial wizards to pay themselves those much publicized bonuses among other things, let those who need to make loans and have the appropriate collateral to qualify line up at the windows of the Bank of the United States. The clogged arteries of enterprise will be opened and the governance of the people’s bank handed over to honest civil servants making wages more in keeping with their actual service rather than making the wages of steroid-injected super athletes. We’ll even make a profit.

As this is being written, the Times announces that the government is going to buy up bad debt and the Dow is up 300 points for the day. The wizard technocrats are doing their magic again. Yet, in my neck of the woods, hospitals are closing, library services are being cut, the New York State legislature is struggling with a 13 billion dollar deficit and most folks not only feel poorer and are poorer, they are fretfully waiting for the next shoes to drop. Or the next pile on.

This one is dedicated to my brother, Joe.

For thirty years, I have been walking by the air raid shelter sign outside of my apartment building, and I have kept asking myself, "When can I paint over that sign?"

I found the idea of my brother walking by that sign and asking himself that question cosmically amusing when he shared this slice of his inner life with me. I couldn't stop laughing. Then I realized that he is a far more sensitive guy than I am, and he probably had wondered all those years, "Is it safe yet? Is it safe to paint over the sign?" Of course, if one finds the thought humorous, it is the darkest kind of humor, dependent for its laugh on growing up, as he and all of our generation had, of instructions from elementary school teachers to get under our desks as the mid-day air raid sirens blared across sun-filled Brooklyn streets in the 1950s. Even as children we knew that there was already a kind of black comedy in thinking that our school desks would save us from the fireball, from the atomic wind shattering the glass in the classroom windows and spraying us like shrapnel and probably killing us instantly. In truth, we didn't find the thought that funny. It scared us, took a big place in our imaginations and our daydreams as well as our nightmares.

I can recall that as a child I awakened to the sound of fire engines in the street in the middle of the night and imagined instead that what I was hearing was the sound of tanks and that the shuffling sounds of the firefighters in their gear became the sound of invading soldiers. I walked across the cold floor of our flat into my parents' bedroom and woke my father to tell him that I was frightened, that there was an army outside. He had to take me to the window and show me the fire engines and firemen to assure me so that I could go back to sleep.

What prompted my brother to make his confession, you may ask. Well, the Dow finally broke the 7000 threshold, and where it will go nobody knows. We reminisced about what is now being called America's Golden Age, basically, the 1950s and '60s. Our Uncle Vic who left his tenement in East New York and drove down the poetically named Sunrise Highway to a new life in Levittown, America's first suburb for the masses. As a veteran, he got a discount on the $8,000 asking price for his dream cottage on (the equally poetic) Low Lane. Ahh... Levittown. I can still smell the fresh paint, the not entirely dry plaster on the sheetrock, the dewy grass in the morning, the hint of chlorine in the air from the community swimming pool in all of its turquoise magnificence mirroring the uninterrupted deep blue celestial dome overhead. Sliding picture windows--floor to ceiling--looked out on a vast back yard. New appliances. A brick hearth in which one could ignite real logs into romantic flames which one could view from both the kitchen and the living room. A new powder blue Chevy parked in the driveway to convey Uncle Vic to his job at the Grumman plant. Everything was new, looked new, but most especially, smelled new. Escape to Levittown meant that gone forever were the smells of urban decay, of rotting wood, walls that had been asked to absorb too many strange cooking odors, scatological accidents in hallways, too many dead vermin, too much coal dust and chemicals in the air. A new beginning.

Looking at Levittown now, of course, one finds an established suburb, the originally treeless landscape with its newly sodded lawns (on the site of old potato farms) replaced by ample greenery, extensions on the original cottages and asking prices that are no doubt 100 times the original price paid by returning war veterans, prices that reflect inflation and the infamous real estate bubble. Sixty years later, too few of the children of those veterans have stopped to reflect on what it all meant, what price was paid--even for a modest piece of the American Dream. It was a time when the United States, with about 5% of the world's population, contolled about 65% of the world's wealth. When the automobile culture that helped to pay for the dream took the lion's share of such of the world's precious resources as copper and steel and aluminum and chrome to build twenty-foot long finned vehicles with red leather uphosltery and three-hundred horse power eight-cylinder engines that consumed what seemed like endless, cheap supplies of gasoline. Rarely did we stop to consider the remaining 95% of the people on the planet who were barely subsisting on the remaining 35% of its available resources. Those golden days, we were taught to believe, were our entitlement as Americans. Not only would they last forever, things would just get better and better. We never believed that a day would come when we would have to get used to, as another friend put it recently, with more of less, more of less.

But as the bill comes due for our excesses, we may want to give some thought to what the good old days were really like, and the price we have paid. We may want to point out to some of our kids what that old air raid shelter sign meant to us when we were kids, and of waking up in the middle of the night and really believing that the Russians were coming.

Oh, and one other thought: Is it safe yet to paint over that sign?