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Wall Street's Plan to Push Obama to Betray Those Who Elected Him

Through its lobbying group Third Way and media mouthpieces, Wall Street is determined to destroy the social safety net.
 
 
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The safety net is the glory of America and the unending nightmare of Wall Street. That's why Wall Street’s leading “false flag” group, the Third Way (which calls itself a "leading moderate think tank"), has responded to the warnings that Robert Kuttner, AFL-CIO President Trumka, and I have made that if President Obama is re-elected our immediate task will be to prevent the Great Betrayal – the adoption of self-destructive austerity programs and the opening wedge of the effort to unravel the safety net (including Social Security, Medicare, and Medicaid).

Here's what you need to know about this plan to rob Americans of their future.

1. Both Democrats and Republican Oppose Cuts to the Safety Nets

Huge majorities of Americans oppose cuts in the safety nets: A majority of Republicans oppose such cuts and Democrats overwhelmingly oppose the cuts. The American people love the safety net because they know it is essential to a humane America.  They know that it has transformed the nation.  Before Social Security, older Americans were frequently reduced to poverty and dangerously inadequate health care that made the remainder of their lives dangerous and miserable. 

The safety net does not cover only the elderly and the sick.  My father, for example, died when I (the eldest of three children) was 19 and a sophomore at the University of Michigan.  Even though in-state tuition was inexpensive in those days, I would have had to drop out of school.  Survivors’ benefits allowed me to obtain a superb education and pay back the nation with service and decades of greater taxes because education increased my income.  Food stamps and unemployment insurance frequently provide the temporary support that prevent tragedy and allow Americans to obtain useful education and jobs.  The safety net has made America a nation we are proud of and a nation that makes it possible for Americans to recover from hard times and tragedy and to lead lives that are vastly more productive and enjoyable.

2. Only a Democrat Can Make it Politcally Safe for GOP Pols to Unravel the Net

One of the most important reasons that more Americans support the Democratic Party than the Republican Party is that the Democratic Party is viewed as the Party that created and guards the safety net.  The elements of the safety net are the crown jewels of Democratic Party policy successes.

Only a Democrat can make it politically safe for Republicans who hate the safety net to unravel it (a process that would occur over a number of years) by legitimizing the claim that the safety net must be cut.  Obama may not intend to unravel the safety net. He may have been convinced by Wall Street that it is necessary to begin to unravel the safety net in order to save it.  But the result would be to declare open season on the safety net by legitimizing the false Republican memes that the safety net is unsustainable and harms the nation.  The Republican Party’s and Wall Street’s greatest frustration is that they have been unable to unravel or discredit the safety net. The Democratic Party has its Wall Street wing, but the Republican Party has been Wall Street’s principal representative for decades. The Republican Party has been unable to deliver Wall Street’s unholy grail – privatizing Social Security.

3. Wall Street's Schemes for Social Security Endanger the Economy

Wall Street salivates at the prospect of any privatization of social security.  This would lead to them being able to charge tens of billions of dollars in fees annually. The banks that administered the privatized program would be Too Big to Fail, or what I call "systemically dangerous institutions" (SDIs) because the consequences of allowing bank failures to cause tens of millions of Americans to lose their retirement savings would require either that all such deposits be federally insured or that the failing banks be bailed out by the federal government. Privatization, therefore, is a convenient fiction. The banks’ profits will be private; any catastrophic losses will be borne by the public.  The SDIs’ that already enjoy massive political power, often exerted through front groups like "Third Way,” will burgeon.

The Third Way lobbies for Wall Street and is used to discredit Democratic polices. The Wall Street response (via Third Way) to our warning of the Great Betrayal repeats its central assertion that there is no alternative – the safety net must be cut.  The Wall Street Wing of the Democratic Party alleges that if Obama wields the knife, he will do less damage to the safety net than would Romney.  That, of course, does not respond to our point. Once Obama endorses Wall Street’s false claim that the safety net is unsustainable and a grave danger to our economy he legitimizes future Republican assaults on the safety net. Third Way admits that these assaults would wield a chainsaw.  Indeed, if Wall Street (via Third Way) is correct that the safety net is destroying our nation’s ability to make productive investments, then Republicans should take a chainsaw to the safety net. Third Way, therefore, has implicitly admitted and even supported our analysis.

The Wall Street response to our warnings of the coming Great Betrayal did not attempt to rebut the point I (and many others before me) made about Wall Street’s quest for the riches it would obtain when Social Security privatization began.  Third Way cannot rebut the point because it proposes that we should begin to privatize Social Security.  The Third Way is faithful to the interests of Wall Street.

4. It's Time to Orgazine

Obama has told us he will try to commit the Great Betrayal as soon as possible.  We have to organize now to be able to act immediately to prevent it.  Again, the point I and others have made in our warnings is not that Obama wants to unravel the safety net or that the initial concessions to the Republicans will destroy the safety net. The point we made is that by accepting the false Wall Street (via Third Way) and Republican claims about the safety net, Obama would be legitimizing continued assaults on the safety net by Republicans and Democrats that would eviscerate it.

Third Way warns that if Obama does not commit the Great Betrayal the Republicans will destroy the economy:

“The alternative to a grand bargain is a grand throwdown, one like the debt ceiling debacle of 2011. Only this time, the threat of default would be joined by the double threat of sequestration and tax hikes on the middle class.”

Giving in to Republican extortion would only prompt repeated Republican extortion. President Clinton followed the correct strategy against similar attempts at extortion by refusing to give in to it. The extortion strategy blew up in the Republican’s faces.  They remember what happened.  Third Way’s proposed appeasement strategy would encourage relentless Republican extortion.

5. Third Way Spreads False "Moral Panic" and Protects Fraudsters

Pete Peterson, a Republican Wall Street billionaire, has long led an unholy war to eviscerate the safety net.  He has pledged a billion dollars to the effort and funded many groups. The “Third Way” was founded and run by Jonathan Cowan, one of his “acolytes", and its board of trustees is dominated by Wall Street executives.  Third Way refuses to disclose its donors.

Third Way represents the Wall Street wing of the Democratic Party and has pushed successfully for the worst domestic failures of the Obama administration, including continuing the Bush administration policy of granting the elite banksterswhose frauds drove the crisis de factoimmunity from criminal prosecution.  Third Way has been conspicuously silent in pushing either administration to prosecute these elite financial frauds.  Its board of trustees is peppered with senior executives of systemically dangerous institutions that the federal government has charged – but only in civil cases – engaged in fraud.  Third Way has applauded the administration’s grant of immunity from criminal prosecution for the massive foreclosure frauds (hundreds of thousands of frauds) committed by several major banks in a November 9, 2012 press release entitled: “Third Way Lauds Landmark Foreclosure Deal.”

In addition to unraveling the social safety net, Third Way is also useful to Wall Street’s pursuit of other major priorities, including austerity and gaining access to tens of billions of dollars in freebie profits from beginning to privatize social security. Wall Street and Republicans use Third Way to try to discredit the Democratic Party, candidates, and policies. The repeated motif is that critics of the Democratic Party’s policies cite pro-Wall Street statements by Third Way officials to “prove” that even Democrats admit that the policies endanger the nation.  Third Way’s specialty is spreading the faux“moral panic” that the safety net is the great threat to America.

6. The New York Times' Bill Keller and Third Way Endorse False GOP Memes

The NYT’sBill Keller recently authored a column (“The Entitled Generation”) on July 29, 2012.  He excoriated baby boomers based on a study specially given to him in advance by Third Way.  Here is how he described this organization run by Wall Street for Wall Street.  “This brings me to a soon-to-be released study by the incorrigible pragmatists at Third Way, the centrist Democratic think tank.”

Keller proceeds to accept, with no demonstration of even the feeblest effort at critical analysis, Wall Street’s position as gospel.  Remember, he is doing this in 2012, during an epidemic of fraud and failed models when every week brings the disclosure of a new scandal by our most elite financial institutions, including those that direct the Third Way.  Keller implies that he has to accept Wall Street’s numbers because they are “arithmetic.”  Keller must have amnesia about the entire financial crisis, which demonstrated that Wall Street’s “arithmetic” consisted of maximizing fictional accounting income through the famous four-ingredient fraud “recipe.”  That recipe produces massively inflated asset values, fictional income, real bonuses, and catastrophic losses.  Each of these results is a “sure thing.”  Nobody does arithmetic worse than Wall Street.

Third Way is “centrist” on matters that involve Wall Street’s compensation only if Keller subscribes to the view that “what’s good for Goldman Sachs is good for America.”  Keller fails to inform his readers that the Third Way is a creature of Wall Street and that the anti-safety net policies it is lobbying for would be worth hundreds of billions of dollars in increased profits (plus SDI or Too Big to Fail status and even greater political dominance) to the Wall Street firms that dictate Third Way’s policies.  Third Way is also a “think tank” only if one views Goldman Sachs’ reports as coming from a “think tank.”  Keller then demonstrated why he didn’t believe his readers should learn that Third Way was a creature of Wall Street.  He was already afraid that his readers would reject his swallowing the Third Way report’s claims hook, line, and sinker.

“Indignant readers are already revving up to tell me that Social Security and Medicare are sacred promises, that cutting them would be stone-hearted Republicanism. A.A.R.P., the lobby for people we used to call senior citizens until we realized that meant us, got hammered by the left earlier this year when its C.E.O. dared to convene a meeting of Washington insiders to even discuss the subject. No wonder A.A.R.P. shies away from supporting any entitlement reform.

But the traditional liberal alternatives — raise taxes on the well-to-do, cut military spending — are not nearly enough by themselves. The arithmetic simply doesn’t work, unless we face the fact that entitlements are a bargain we can’t afford to keep, not in full.”

The quoted passages are revealing in several areas.  Wall Street lobbyists like Third Way fear the public. AARP was not simply hammered by “the left.”  It was hammered by its members, who overwhelmingly opposed AARP management’s trial balloon in favor of beginning to unravel the safety net.  Bloomberginterpreted the management’s effort as supporting a reduction in the safety net.

Actually, the “center,” including a majority of Republicans, opposes such a betrayal of the safety net by the U.S. and by the AARP. 

7. Unraveling the Safety Net is an Ultra-Right Position

Keller makes the claim in his article that unraveling of the safety net is the “centrist” position, but take a look how ultra-right his “center” moves in the process.

“Centrists like those at Third Way and the bipartisan authors of the Simpson-Bowles report endorse a menu of incremental cuts and reforms that would bring down costs without hitting the needy or snatching away the security blanket from those nearing retirement.”

Erskine Bowles is a member of the Wall Street wing of the Democratic Party.  Alan Simpson is a former Republican Senator known for raging at anyone who defends the safety net, including bizarre personal verbal assaults on individual elderly citizens who oppose his proposals.  Keller defines Simpson as a “centrist” and “liberals” as non-centrists.  Keller needs a cartographer or some introduction to the political science literature on how vastly far to the right the Republican Party has moved over the last decade because his view of the “center” is warped. 

Eric Laursen has just published a book on this marginalization of the vast majority of Democrats who oppose unraveling Social Security.  [“The People’s Pension: The Struggle to Defend Social Security Since Reagan” (AK Press)].  Laursen explains how the right has created the bizarre state of being that the administration and most of the media treats groups that defend the safety net as extremists – within the Democratic Party – and defines people and groups like Peterson, Third Way, and Simpson as “centrists” despite the fact that the overwhelming majority of Americans support the safety nets.  The supposed non-centrists include the Democratic base – the labor unions, nationally famous leaders like Warren, and other groups that are the most likely to vote for Democratic Party candidates.

8. Alan Simpson and Erskine Bowles are Allies of Austerity Hawk Pete Peterson

Obama appointed Bowles and Simpson as co-chairs of the commission to recommend budget cuts knowing that both were Pete Peterson allies eager to impose austerity, begin to unravel the safety net, and to begin to privatize Social Security.  The Bowles/Simpson (BS) co-chairs pushed each of these three policies (though even they warned that what former President Clinton terms “austerity now” must be avoided because it would throw the nation back into recession).  The BS co-chairs, however, were unable to convince the required number of members of their commission to support their recommendations.  The co-chairs, therefore, simply went ahead and published a report making their recommendations.

The New York Times' Bill Keller admits, but only elliptically, that Wall Street’s (Third Way and BS) proposals are “snatching away the security blanket from those [not yet] nearing retirement.”  That is a massive, destructive assault on the safety net and Keller’s readers deserve to be told so directly.  Keller’s readers deserve to be told what Third Way and BS want to replace the safety net – privatized savings accounts – the holy grail of Wall Street and its false flag operation known as the Third Way.

But these passages from Keller do not represent the most extreme and destructive attack on the safety net, the American people, and the Democratic Party by Keller and the Third Way.  Keller adopts Wall Street’s memes for destroying the safety net.  Gutting the safety net becomes not a sad necessity, but the essential act necessary to save the nation.  The great threat to our nation becomes the safety net.  That means that the people who guard the safety net (like me) endanger the nation.

9. In Reality, the Social Safety Net is Good for Economic Growth

Observe how Third Way talks about safety net payments and "investments" in a way that makes the makes the social safety net look harmful:

“[The Third Way study] examined two categories of federal spending over the past 50 years, representing two of government’s fundamental missions.  One was “investments,” … helping assure that our work force is educated to a high standard….  The other category was “entitlements,” a catchall word for the safety-net programs….”

Now observe how Keller adopts wholesale Third Way’s asserted dichotomy and its warning that the increase in safety net payments relative to “investments” harms our nation.

“By 2030, when the last of us boomers have surged onto the Social Security rolls, entitlements will consume 61 cents of every federal dollar, starving our already neglected investment and leaving us, in the words of the study, with ‘a less-skilled work force, lower rates of job creation, and an infrastructure unfit for a 21st-century economy.’”

While the numbers in the Third Way report are not accurate, note that Keller adopts the Wall Street (and Republican Party) assertion in the Third Way report that safety net expenditures “crowd out” “productive” “investments” in the public and private sectors.  The asserted dichotomy between “productive” “investments” and “unproductive” “safety-net” expenditures is false.  In reality, the safety net often produces some of the most economically productive results of any private or public sector expenditure, as George Romney’s career showed.  Health care expenditures often extend lives and “productive” work lives.  More fundamentally, the entire dichotomy and claimed “crowding out effect” is false.  Indeed, when we are below full employment (our most common condition), the safety net expenditures increase economic growth.  What Keller and Wall Street (via their Third Way mouthpiece) are pushing in these passages is a variant of Romney’s “47 percent” claim that people who receive payments under the safety net are drones who harm the productive class.

Keller ends with this proposal:  “We should make a sensible reform of entitlements our generation’s cause.” 

As a nation, we have immense needs because of how our working class and the poor have been hammered over the last three decades.  Keller, and Wall Street (via the Third Way), however, urge us to make “our generation’s cause” the reduction of the safety net that has reduced massively the agony of the suffering of the poor and the working class and was essential to the economic recovery we have experienced.  Keller and Wall Street claim that the “centrist” position is that the Democratic Party’s central mission is to lead an assault on the poor and the working class.

As extreme as Keller’s position is, Wall Street’s position (as expressed in the Third Way study) was more extreme.  The report claims that:  “Entitlements are a critical part of economic security, but without change, investments will all but dry up….”

Here is the Third Way’s summary of the report.

“Public investments and entitlements are on a collision course.

Since the 1960s, LBJ’s Great Society and JFK’s New Frontier have competed for federal dollars. And as the cost of entitlement programs like Medicare and Social Security has skyrocketed, we’ve spent less and less of our budget educating kids, building roads, and curing disease.

In this report, we argue that the only way for Democrats to save progressive priorities like NASA, highway funding, and clean energy research is to reform entitlements. The lame duck offers Congress a “Now or Never” chance to set the terms of a budget deal that saves money on entitlements, raises revenue, and protects investments. And the heart of the Democratic brand is depending on it.”

Third Way has provided another proof of our family rule that it is impossible to compete with unintentional self-parody.  Only Wall Street could argue that preserving the Democrats’ “heart” depends on cutting benefits to the poor and working class so that they could burnish their “brand” by spending the money instead on building roads or rockets.  Some heart!  Wall Street is describing its heartless “brand.”

10. Third Way Slimes Elizabeth Warren for Criticizing Wall Street Frauds

Another example of how proponents of unraveling the safety net use Third Way as a false flag scheme was illustrated by the Chamber of Commerce.  They ran a huge ad campaign in mid-October designed to defeat Elizabeth Warren in her run for the Senate.  The Chamber’s goal was to achieve Republican control of the Senate.  The title of the ABC article about the Chamber’s ad campaign was:  “U.S. Chamber of Commerce Calls Elizabeth Warren ‘Catastrophically Antibusiness’.”

The centerpiece of the Chamber ad and the title was the quotation that Warren was “Catastrophically antibusiness.”  The person who made the statement that the Chamber quoted was one the Third Way’s founders and a principal spokesmen.

“‘If you listened only to Elizabeth Warren [at the Democratic Party’s national convention], the message was catastrophically antibusiness,’ said Matt Bennett, co-founder of Third Way, a centrist Democratic group. That ‘further drives a wedge between business and Democrats that may not be fair but is the way business perceives things,’ he said. ‘And making voters into victims is not a winning strategy.’

‘As Bill Clinton used to say, you can’t love the jobs and hate the job creators,’ said Mr. Bennett, who worked in the Clinton administration.”

Warren outraged the Wall Street wing of the Democratic Party by speaking truth to power about Wall Street:

“Wall Street C.E.O.’s — the same ones who wrecked our economy and destroyed millions of jobs — still strut around Congress, no shame, demanding favors and acting like we should thank them.”

The same article noted that “moderates” were upset that Warren was allowed to speak to the convention during prime time, but the Democratic Party felt supporting her candidacy was one of the vital steps in preventing the Republicans from controlling the Senate.

“To the chagrin of moderate Democrats, a prime-time speaker was Elizabeth Warren, the liberal scourge of Wall Street who is running in Massachusetts to unseat Senator Scott P. Brown, a Republican. Her scheduling slot reflected Democrats’ zeal to capture that seat and protect their slim Senate majority.”

The Chamber ad attacking Warren identified Bennett, the Third Way’s co-founder, as the author of the quotation and described him as working for an organization of moderate Democrats.  Note that Bennett also adopted the false Republican meme that only CEOs are “job creators.”  The reality is that each of us, by creating private sector demand and by creating wealth through our labor we create jobs.

The Third Way attacked one of the most praised public servants in the nation because she had the temerity to criticize the Wall Street CEOs who caused the crisis (often through frauds that made them wealthy), were bailed out by the government, and responded with insolence.  Third Way not only applauds the administration’s refusal to prosecute the Wall Street frauds who drove the crisis – the Wall Street Wing demands that the Democratic Party not criticize the CEOs and claims that calling for the senior executives to be held accountable for their crimes and misconduct is impermissible because it will enrage business people and because any discussion of elite frauds would have to address the fact that they victimized the public.

11. The Good News: Wall Street is Worried

The fact that Wall Street (via Third Way) is worried by our opposition to Obama engaging in the Great Betrayal by adopting austerity and cutting the safety net is good news.  Wall Street knows that the public wants the President to protect the safety net from Wall Street’s depredations. We need to organize now to save the safety net.

*This article was adapted from a longer essay on Benzinga.com.

William Black is the author of The Best Way to Rob a Bank Is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as executive director of the Institute for Fraud Prevention, litigation director of the Federal Home Loan Bank Board and deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.