The Rich Are Destroying the Economy

Published on Sunday, June 12, 2011 by CommonDreams.org

by Shamus Cooke

Ever since the Great Recession shook the foundations of the U.S. economy, President Obama has been promising recovery. Evidence of this recovery, we were told, was manifested in the massive post-bailout profits corporations made. Soon enough, the President assured us, these corporations would tire of hoarding mountains of cash and start a hiring bonanza, followed by raising wages and benefits. It was either wishful thinking or conscious deception. The recent stock market meltdown has squashed any hope of a corporate-led recovery.

The Democrats fought the recession by the same methods the Republicans used to create it: allowing the super rich to recklessly dominate the economy while giving them massive handouts. This strategy, commonly referred to as Reaganomics or Trickle Down Economics, is now religion to both Democrats and Republicans; never mind the staged in-fighting for the gullible or complicit media.

When it becomes obvious to even the President that the economic recovery never existed beyond the bank accounts of the rich, questions will have to be answered. Why, for example, did nobody in either political party foresee the disastrous consequences of the bailouts? Not only did the U.S. deficit drastically increase but the same U.S. corporations that caused the recession were given reinforcement for their destructive actions, ensuring that it would continue unabated.

In his book, Crisis Economics, Nouriel Roubini outlines the insane response to the recession by Republicans and Democrats. Because both parties simply threw money at the banks and hedge funds instead of punishing them, a condition of "moral hazard" was created, meaning, that banks would assume another bailout would come their way if they destroyed the economy again -- too big too fail, remember? Roubini explains how the Democrats allowed the "too big" banks to get even bigger; how Wall Street salaries based on short-term profits went unregulated; how the regulations that were put into place were inadequate and filled with loopholes; how nothing of any significance changed.

Roubini has also written extensively about how the post-bailout Federal Reserve policies were fueling a commodity bubble that may be in the midst of bursting, possibly triggering a double dip recession. Essentially the big banks and rich investors were borrowing cheap dollars from the Fed and investing abroad in commodities with the hopes of higher returns. Roubini states:

“The risk is that we are planting the seeds of the next financial crisis...this asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals." (October 27, 2009).

This investor-created commodity bubble pushed up prices in oil, food, and other basic products, causing further pain for working families and the economy as a whole. This speculative bubble was easily predictable but ignored by both political parties, since they claimed the bubble was a sign of recovery.

Another mainstream economist, Paul Krugman, also admits that the rich's death-grip on the U.S. political and economic system is causing pain for everybody else:

"Far from being ready to spend more on job creation, both parties agree that it's time to slash spending - destroying jobs in the process - with the only difference being one of degree...policy makers are catering almost exclusively to the interests of rentiers [rich investors] - those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense." (June 10, 2011)

Krugman explains that this process continues because the rich dominate the political system through campaign contributions, "access to policy makers,” promises of high paying corporate jobs after their congressional term is over, and good o'l fashion corruption. Because he's a true blue Democrat at heart, Krugman nevertheless focuses most of his rage on Republicans.

Krugman's repeated calls to Democrats and Republicans to create jobs have fallen on deaf ears. Both parties agree that the "private sector" [corporations] should create jobs; until they decide to hire, nothing will happen. This is not merely "bad policy,” as liberals like Krugman like to fret about, but the conscious agenda of the rich. Corporations and rich investors love high unemployment. The Kansas City Star explains why:

"Last year [2010], for the second year in a row, U.S. companies got more work out of their employees while spending less on overall labor costs." (February 3, 2011)

It really is that simple. High unemployment creates a downward pressure on wages, allowing employers to work the remaining employees harder and thus to increase profits. This dynamic, combined with the above commodity speculation, has been the entire basis for the corporate recovery, while working people have literally seen nothing beneficial.

This process is an extension of the bailouts, in the sense that more wealth is being transferred from working people to the corporations. Since consumer spending accounts for 70 percent of the U.S. economy, policies like these ensure that another crisis is inevitable.

Further complicating matters is the ending of the Federal Reserve's Quantitative Easing program (printing money), which amounted to the Fed buying $600 billion in U.S. Treasury bonds since last fall, essentially funding the U.S. debt and driving down interest rates.

Since the Fed was buying 60 percent of the bonds, a new creditor will need to be found; and this lender will likely require higher interest rates before loaning to the U.S. government, to make sure the loan is profitable. And although different nations buy U.S. debt for different reasons, much of this debt is bought by rich U.S. citizens, who will put the squeeze on the rest of us that have to pay back this debt. The Washington Times explains:

"...Bill Gross, the head of America's own Pimco bond fund, the largest buyer of bonds worldwide, recently reduced Pimco's holdings of Treasuries to zero out of concern that they weren't yielding enough given the risks of inflation and deficit spending." (June 7, 2011)

When the Federal Reserve raises interest rates to satisfy these rich investors, the economy will likely take a further nosedive. It appears, then, that the rich have a win-win situation: they got free bailout money, which increased the deficit; and because the deficit is too high, the rich want higher interest rates for investing in U.S. Treasury Bonds. In both instances working people pay the bills.

This insanity cannot be stopped by conventional measures, since politicians are tone deaf to anything that doesn't ring of corporate cash. The jobs crisis continues as a result of the policy agreed to by both Democrats and Republicans. The labor movement has a special role to play in reversing the above policies.

The corporate-led discussion around cutting social programs to fix the deficits -- on a state and national level -- can be challenged by a nationally coordinated campaign of unions and community allies demanding: Tax the Rich! This demand is significant because it can address both the deficits and the jobs crisis: a massive public works program can be funded by taxing the corporations and the wealthy to pre-Reagan levels. And it makes complete sense because the growing inequalities in wealth over the past three decades has meant a spectacular concentration of wealth at the top. The rich have plenty of money to spare.Organized labor needs to bring masses of people in the street all over the country in order to get attention and pressure the government to respond to these demands. And it can succeed, especially if it organizes a serious, protracted campaign and especially if this campaign does not get funneled into supporting Democratic candidates, the surest way to kill campaign momentum.

AFL-CIO President Richard Trumka recently spoke in favor of a strong, independent labor movement. This is the direction it must take, rather than relying on the Democrats. The labor movement must get its act together, unite to put up a fight and demand specific policies that can concretely address the crisis faced by millions of working people.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org).  He can be reached at shamuscook@gmail.com

Richard Trumka's address to nurses

http://www.nationalnursesunited.org/blog/entry/remarks-of-afl-cio-president-richard-trumka

National Nurses United Assembly

Washington, District of Columbia

June 7, 2011

 

Thank you, Rose Ann DeMoro, for inviting me here today – there’s nowhere I’d rather be and there’s nobody I’d rather be standing beside. 

 

And thank you, nurses! It’s great to see each and every one of you in Washington! I love the way nurses fight for patients, for quality care, for fairness and progressive values! 

 

You’re standing tall all across our country, and you make the entire labor movement better for it! You make America better... every single day.

 

And let me tell you this, your nine points that together describe our shared values, truly illustrate your commitment to all the working men and women, all the children and all the seniors of our communities and our country.

 

Your commitment to a single-payer health care system is inspiring, and the idea of paying for it with a financial speculation tax is just. 

 

And let me congratulate you on your tremendous organizing successes in Florida and Texas, and on winning your contract at Washington Hospital Center! 

 

Your organizing and your actions, including your daylong strike right here in DC, are powerful statements for middle-class standards.

  

Back in early March, I went down to Washington Hospital Center – one of the most renowned hospitals in Washington -- and I rallied with the nurses there.

 

A few weeks earlier, I was told, only two nurses had been scheduled overnight to work in Labor and Delivery.  Two nurses! 

 

That night, each nurse carried a patient load of six women who were delivering babies. That meant that each nurse cared for 12 patients. Six moms and six newborns! That’s too many. Thank God there were no emergencies, and thank you for speaking up about it! 

 

Why were only two nurses scheduled? Not for a lack of money, I can tell you that.  And not for a lack of quality nurses. 

 

No, two were scheduled because two is cheaper than three. 

 

Without your voice, two nurses would have been scheduled in Labor and Delivery, until there was an emergency, until something went terribly wrong, until a tragedy occurred, and that is not OK.

 

Without your voice, the Wall Street ethic would have continued to run rampant at Washington Hospital Center – and at health care facilities all over America. 

 

Your work’s not done there, but you’ve made your mark. It takes nurses who truly care about quality care to raise a stink about staffing decisions, so patients don’t have to suffer. 

 

And it takes nurses who truly care about a fair shake for Main Street to raise a stink about the Wall Street agenda, so working Americans don’t have to suffer!

 

You won’t be quiet, will you?  No. I know you won’t be silenced.

 

You know, it’s the same thing all over. Right here in Washington, politicians are fighting over how much to cut from our federal budget, but not because America’s broke. The fact is, our nation has never been richer! 

 

This deficit hysteria is an excuse, nothing less, for politicians to pay back their Wall Street backers with more tax cuts. 

 

Instead of downsizing, American needs jobs -- jobs with living wages. 

 

Instead of demonizing teachers, we need to prepare our children for the future by making sure every single one of them has access to quality public education. 

 

Instead of downgrading public pensions, we need to make sure all working people have solid retirement security. 

 

Let me say it again: America is not broke. 

 

But working people feel poor because our nation’s wealth has all gone to only a handful among us, and they and the Wall Street politicians would rather break promises to our parents and grandparents and deny our children a future than pay their fair share of taxes. 

 

Still, a lot of people are saying, "I don't need government services. I made it on my own and you should, too." But I say to anybody who buys into that myth: We didn't build this country with a philosophy that says, "I got mine."  

 

My father and grandfather didn’t get out of the mines alive by taking care only of themselves. We did it with each other, for each other. United.

 

Some of us may have climbed the ladder, but all of us built the ladder—we make it possible with our public education system, our local governments and our roads and highways.

 

In the labor movement, we're all about that ladder.

 

We built that ladder for our families and neighbors, and do you know what makes that ladder strong? It's the voice on the job and the security that comes from a union contract. That’s how we turn bad jobs into good jobs—that's how we build a ladder to the middle class.

 

That's what we are. That's what we do.

 

Together, we’re going to build up our working families, and return America to prosperity the only way it’s ever been done -- by working people standing shoulder-to-shoulder and fighting for what’s right -- and we won’t be quiet until we win! 

 

And together with the AFL-CIO's construction and manufacturing workers, pilots and painters, plumbers and public employees, engineers and bakers and others, we will be heard.

 

Sisters and brothers, let’s use our voice to piece together the fabric of America’s common life, by holding our elected leaders accountable. 

 

We’ll hold them to a simple standard: Are they helping or hurting working families?

 

And we’ll build up our labor movement—in the workplace and in political life. 

 

We want an independent labor movement strong enough to return balance to our economy, fairness to our tax system, security to our families and moral and economic standing to our nation.

 

We can’t simply build the power of any political party or any candidate. For too long we’ve been left after the election holding a canceled check and asking someone to pay attention to us.  No more!  No more!

 

Our goal is not to help candidates or parties, our goal is to improve the lives of working families and strengthen our country, and that’s what we’re going to do. 

 

When it comes to politics, we’re looking for real champions of working women and men.  

 

And I have a message for some of our “friends.”  It doesn't matter if candidates and parties are controlling the wrecking ball or simply standing aside—the outcome is the same either way. 

 

If leaders aren't blocking the wrecking ball and advancing working families' interests, working people will not support them. This is where our focus will be—now, in 2012 and beyond.

 

We will uphold the dignity of work and restore respect for working people. 

 

This year, teachers, nurses and firefighters have been vilified. 

 

Decent jobs with economic security have been cast as more than America's workers deserve. Low-wage, part-time, temporary, no-benefit work is being sold as the "new normal" for our economy.

 

Well, that “new normal” is not good enough. And you’ve taken a stand against it, and so have working people all across America.  

 

We've been given a moment, and it's our job to turn this moment into a movement.  

 

It has to be a movement for jobs.

 

It has to be a movement big enough for every worker who wants to form a union to bargain for a better life.

 

It has to be a movement to fight against intimidation, and for an economy that honors the dignity of all workers and our fundamental freedoms every single day.

 

We'll work for it. We'll stand for it -- Together. To bring out the best in America.  To bring out the best in ourselves, and each other.

 

To build the future we know we can have, we must have, for ourselves, for our children, for our grandchildren.

 

And we will never, ever back down.

 

It’s time to stand together against the worst of Wall Street, with the best of America. 

 

Stand for those who want to work but who cannot find jobs, for the families fighting to keep their homes out of foreclosure, for the workers trying to keep jobs that are good enough to support families and send kids to college, for our veterans and young people, for health care workers, for private workers, for public workers, for all workers.

 
Thank you, and God bless you and the work you do.