6 Shocking Ways Capitalism Is Failing Working America
Continued from previous page
3. Surprise! Federal Auditors Find Big Pay for Bailed-Out Bankers
While the middle-class suffers, top executives are raking it in yet again, even at the companies bailed out by our tax dollars. You may recall that the Obama administration demanded that executives at the top seven bailed-out firms receive no more than $500,000 a year. Congress complied by passing a law to set up a “special master” to administer the salary cap. Well, this week we discovered that the special master got mastered, according to federal auditors.
Apparently, the bailed-out companies teamed up with Treasury Secretary Timothy Geithner and company to pressure the special master to allow salaries 10 times as high for these failed executives. “Forty-nine people received packages worth $5 million or more from 2009-2011,” according to the auditor’s report. (What the auditor failed to mention is that the law only applies to direct bailout money. It does not cover the big Wall Street firms that took trillions in hidden loans from the Federal Reserve to avoid collapse. Those top bankers earn much more than those at the seven bailed-out firms.)
So what was the excuse for busting the pay cap? Without fatter paychecks, these poor executives would...quit.
Here’s the argument one bailed-out company used to claim a “hardship” exemption so the employee could receive at least $1 million in cash: “This individual is in their early 40s, with two kids in private school, who is now considered cash-poor.” Such people “would not meet their monthly expenses” if the $500,000 a year cap were applied to him. Ouch!
Why not let this executive walk? After all, his or her firm was a failure. It was only saved from destruction because of the generosity of the taxpayer. Where’s that executive going to go anyway, and couldn’t a suitable replacement be found at $500,000 a year?
Just count all the alleged “laws of capitalism” that are broken in this example: 1) the original bailout instead of bankruptcy; 2) the irreplaceable executive in an economy with massive layoffs even in the financial sector; and 3) a financial wage scale having no connection to real value produced (especially since the firm produced negative value and needed to be bailed out).
So while the Apple workers in China get up in the middle of the night from their company dorms to assemble phones, and while Staples workers try to live on $8 an hour, we the taxpayers are supporting financial executives who can’t make ends meet on $500,000 a year?
4. Economically Addicted to War
The news is hot this week with military strife. Iraq is drifting back to civil war. Afghanistan is already there. Iran is threatening to close the Straits of Hormuz, and the New York City police got nabbed using an anti-American Muslim training film on 1,400 of its officers. What does this all add up to? Spending trillions on the military and then asking the middle-lass to tighten its belt to make up for deficits.
Since W.W.II pulled the U.S. out of the Great Depression, massive military expenditures have been used repeatedly to keep the economy near full-employment. During the Cold War, these expenditures contributed mightily to a new form of state capitalism where public funds were used to subsidize private corporations which supplied the military. Along the way, this process also helped prop up the middle-class in defense industry jobs.
But over the last decade this military Keynesianism got a new wrinkle. The U.S. went to war without paying for it, thereby racking up nearly a trillion dollars in new debt. At the same time an enormous tax cut was handed over to the super-rich which proceeded to spend a good deal of it in the Wall Street casino which then crashed. In total, the unfunded wars, the tax cuts and the economic crash account for the entire deficit problem. Let me repeat, there would be no deficit at all were it not for the Bush tax cuts, the two unfunded wars and the Wall Street crash.