The heads of the country’s largest banks and stock brokers came to Washington, D.C., yesterday to meet with President Barack Obama. Washington is the center of our national hostage drama—to use an old phrase, D.C. is the kidnap house. But we have seen this part of the hostage-taking drama before. First, the extremist House Republicans, who are deeply dependent on Wall Street money, threaten to force the United States into defaulting on its debts to achieve political objectives that Wall Street supports, like cutting Social Security. Then Wall Street pretends to be horrified that the United States might default on its debts, Treasury bonds that underpin much of the world financial system.
Enter the wise old men of Wall Street, many of them around long enough to have been dispensing wisdom back in 2007, when their advice led to the collapse of the global economy. The wise men go to see Obama, and they say, “Mr. President, you have to be the grown-up here, we can’t afford to have the United States default. We know it will be painful, but you have to give the Republicans some of what they want for the good of the country, just like you had to bail us out back in 2009 for the good of the country.”
What the Wall Street people don’t say is that the “pain” they are talking about is pain for the 99%, and promises more gain for the 1%. Wall Street and their Washington hired hands are the big advocates of a “Grand Bargain,” an idea that sounds great but turns out to be neither grand nor a bargain for most of us. We are told that the Grand Bargain involves trading spending cuts for tax increases, and that that’s a good idea. Speaker of the House John Boehner, feeling the heat for taking the nation hostage over the Affordable Care Act, is said to be a fan, and is considering changing his ransom demands. But it turns out that for America's working families, the Grand Bargain is a Grand Bamboozle.
For starters, most Grand Bargain proposals are bad economics in a time of mass unemployment and a weak economy—both spending cuts and tax increases are austerity measures. Austerity policies, as the Europeans have learned the hard way, shrink the economy and cost jobs.
But it gets worse from there. The tax increases the Grand Bargain crowd advocate tend to be aimed at the middle class—they are “base broadening” ideas like ending the tax exclusion for health insurance or ending the home mortgage deduction. They will add to the bizarre unfair upside down u-shaped curve of our tax system—the fact that when you put together income taxes, payroll taxes and sales taxes, poor people pay less of their income in taxes than middle-income people, but the very rich pay a smaller percentage than either the poor or the rich in taxes.
The tax side of the Grand Bargain generally asks nothing of big corporations—typically Grand Bargain proposals include the idea of revenue neutral corporate tax reform and stays away from tax proposals aimed at restoring fair taxation for the 1%, like raising the capital gains rate, creating new high-income brackets or creating a financial transaction tax. Proposals for a Grand Bargain also include lowering tax rates on the 1% and corporations and providing more tax incentives for sending jobs overseas.
But it gets even worse. The spending cuts side of the Grand Bargain is again aimed right at the key institutions that provide economic security for working Americans—Social Security and Medicare. The single most popular policy idea of the Grand Bamboozle crowd is cutting Social Security’s cost-of-living adjustment by a sleight of hand called the "chained" CPI. Cutting the cost-of-living adjustment means letting inflation eat away at the real value of Social Security benefits—a cut that targets people who live the longest—some of the most economically vulnerable people in our society.
So now we see the scam that goes along with the hostage-taking. Extremist House Republicans take the country hostage—closing our government, our museums, our parks, laying off people who do critical work we all depend on, from weather forecasting to protecting our rights on the job. Then Wall Street and the pundits they control come along and pretend to be horrified, while they pressure President Obama to give in to the demands of the extremists—demands they themselves crafted on behalf of hostage-takers they fund. And you have to watch out when dealing with financial types. When they offer you a deal, it often turns out that both sides of it are good for them.
Think about it, you don’t see the Wall Street crowd at the other end of Pennsylvania Avenue, do you? In the Capitol, on the floor of the House of Representatives, where the hostage-takers hang out?
Now it seems that so far, President Obama is not falling for the scam. He seems to have told the Wall Street crowd that he is most definitely not negotiating with hostage-takers. And the bankers and stockbrokers emerged looking a bit more worried than when they came in. And today’s headlines proclaim Wall Street is worried.
So maybe when they were in the meeting, the president told them what he should have told them when they ran this scam the first time back in 2011—“you’re talking to the wrong people—I’m not the person who’s threatening default—you need to go down the street.”
But here’s the real punch line—the whole thing, the hostage taking and the Grand Bargain scam, depends on Wall Street believing that in the end President Obama will cave. Both the House Republican extremists and the Wall Street scam artists believe that they can run this dangerous, destructive game with no risk because the president will in the end give the House Republicans some version of what both the House Republicans and the Wall Street crowd want because he is afraid of the possibility of a default on the nation’s debts..
But if the president stands firm, and makes clear he works for the American people and has sworn an oath to defend the Constitution, he will quickly separate the House hostage-takers from the Wall Street con men. And then this whole unnecessary, profoundly destructive cycle of events that was set in motion in 2011 will come to an end.
And that’s why people need to tell the president, “stand tall, we are with you. No negotiating with hostage-takers. Not about the Affordable Care Act, not about the Grand Bargain and certainly not about cuts to Social Security, Medicare or Medicaid, or more giveaways for big corporations that outsource jobs. You won the election. You must defend democracy and you must stand up for the 99%, and that means no more rewarding hostage-takers.” And if the Wall Street geniuses come back to the White House in a panic, the president should send them down the street to the House Republicans. The bankers know the way there.