If the media was licensed, the New York Times story, “After Fiscal Cliff Deal, Tax Code May Be the Most Progressive Since 1979,” would be grounds for disbarment. I flagged the piece as a Big Lie in comments yesterday, and figured that since anyone who was either old enough to have been paying taxes in the 1980s or had minimal Google skills could ascertain its claims were nonsense, that it would be debunked elsewhere. Instead, it was apparently tweeted actively by soi-disant liberals on Saturday.
This piece is one of a series of changes over the last month of so of a ratcheting up in the propaganda war against what is left of middle class America. It appears that the effort to sell citizens the necessity of cutting Social Security and Medicare has led our fearless leaders to take us across an event horizon into a late Soviet “all propaganda all the time” footing.
What is disconcerting now is the frequency with which articles that are thinly veiled media plants are run uncritically, and the intensity with which they are touted on Twitter and other social media. Post election, I’ve seen a big increase in newbie commentors running right wing talking points in an effort to re-educate the NC readership. The New York Times has moved decidedly to the right after the crisis, as has the Financial Times, and both have been trumpeting how the bad the debt problem is and why Something Must Be Done. “Something,” of course, is goring your ox, a point that will be kept largely out of view until it is too late for the public to do anything about it.
It’s easier to demonstrate how much things have changed over longer time frames. Look at this section of a March 2010 post, “The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches Fever Pitch.” Notice how I have to set up the use of the “p” word because it would have been seen as screechy and histrionic to come flat out and say, as I did not much later, that Obama thinks the solution to every problem is better propaganda.
The campaign to defend Geithner and Emanuel, both architects of the administration’s finance friendly policies has gone beyond what most people would see as spin into such an aggressive effort to manipulate popular perceptions that it is not a stretch to call it propaganda.
This strategy, of relying on propaganda to mask their true intent, has become inevitable, given the strategic corner the Obama Adminstration has painted itself in. And this campaign has become increasingly desperate as the inconsistency between the Adminsitration’s “product positioning” and observable reality becomes increasingly evident.
Recall how we got here. Early in 2009, the banking industry was on the ropes. Both the stock and the credit default swaps markets said that many of the big players were at serious risk of failure. Commentators debated whether to nationalize Citibank, Bank of America, and other large, floundering institutions.
The case for bold action was sound. The history of financial crises showed that the least costly approach is to resolve mortally wounded organizations, install new management, set strict guidelines, and separate out the bad loans and investments in order to restructure and sell them…
Shuttering sick banks is hardly a radical idea; the FDIC does it on a routine basis. So the difference here was not in the nature of the exercise, but its operational complexity.
This juncture was a crucial window of opportunity. The financial services industry had become systematically predatory. Its victims now extended well beyond precarious, clueless, and sometimes undisciplined consumers who took on too much debt via credit cards with gotcha features that successfully enticed into a treadmill of chronic debt, or now infamous subprime and option-ARM mortgages.
Over twenty years of malfeasance, from the savings and loan crisis (where fraud was a leading cause of bank failures) to a catastrophic set of blow-ups in over the counter derivatives in 1994, which produced total losses of $1.5 trillion, the biggest wipeout since the 1929 crash, through a 1990s subprime meltdown, dot com chicanery, Enron and other accounting scandals, and now the global financial crisis, the industry each time had been able to beat neuter meaningful reform. But this time, the scale of the damage was so great that it extended beyond investors to hapless bystanders, ordinary citizens who were also paying via their taxes and job losses. And unlike the past, where news of financial blow-ups was largely confined to the business section, the public could not miss the scale of the damage and how it came about, and was outraged.
The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn’t a risk; not only was it badly needed, it was just what voters wanted.
But incoming president Obama failed to act. Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff. There would be no Nixon goes to China moment from the architects of the policies that created the crisis, namely Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Director of the National Economic Council Larry Summers.
Defenders of the administration no doubt will content that the public was not ready for measures like the putting large banks like Citigroup into receivership. Even if that were true (and the current widespread outrage against banks says otherwise), that view assumes that the executive branch is a mere spectator, when it has the most powerful bully pulpit in the nation. Other leaders have taken unpopular moves and still maintained public support.
Obama’s repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.
Thus Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.
And that is precisely how things have played out, except I was not pessimistic enough. I thought the inevitable lousy economic outcomes would catch up with Obama, when the combination of yet more PR and an unbelievably weak Republican opponent has allowed his to continue beyond his sell-by date. Matt Taibbi’s latest article, “Secret and Lies of the Bailout,” provides this scathing summary:
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?
It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
How Wall Street Killed Financial Reform
But the most appalling part is the lying. The public has been lied to so shamelessly and so often in the course of the past four years that the failure to tell the truth to the general populace has become a kind of baked-in, official feature of the financial rescue. Money wasn’t the only thing the government gave Wall Street – it also conferred the right to hide the truth from the rest of us. And it was all done in the name of helping regular people and creating jobs. “It is,” says former bailout Inspector General Neil Barofsky, “the ultimate bait-and-switch.”
The bailout deceptions came early, late and in between. There were lies told in the first moments of their inception, and others still being told four years later. The lies, in fact, were the most important mechanisms of the bailout. The only reason investors haven’t run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed. Investors may not actually believe the lie, but they are impressed by how totally committed the government has been, from the very beginning, to selling it.
Be sure to read the Taibbi piece in its entirety.
The campaign to whip up hysteria over the phony fiscal cliff/debt ceiling is depressingly similar to the trumped-up Iraq WMD theatrics, the “bail out the banks or
Godzilla will eat Tokyo the world will come to an end” threats, and the serial brinksmanship that has enabled European technocrats to reduce Greece to a pale shadow of a functioning society, and is pushing Spain and Portugal down the same path. And the common element of these campaigns is that the policies being pursued were both enormously costly and detrimental to the interests of ordinary citizens. They were so big that their impact could not be hidden; therefore it was paramount to obtain public consent, or at least acquiescence. Hence the shifting justifications for the Iraq war, as each was exposed as untrue, or the three-card monte efforts to present the bailouts as a profitable exercise for the public, as opposed to the looters. And now we have simply egregious lies being told about the interim fiscal cliff deal to anesthetize the public for the upcoming amputations.
The Times article is remarkably lazy; it relies on an analysis made by the Tax Policy Center which claims that the top 1% will pay an “average federal tax rate” of 36% this year. The sneaky bit here is the use of “average federal tax rate.” This term is not defined and is most decidedly not a standard, recognized term. The only thing you care about in analyzing tax burdens is the marginal tax rate (how much do you pay on each new dollar earned) and the effective tax rate (taxes paid/income). Everything else is bullshit. That 36% is most decidedly NOT an effective tax rate; the top marginal tax rate (on income in excess of $450,000 for couples filing jointly) will be 39.5%. And I cannot fathom how they claim the top 1% paid less in taxes in the early 1980s. I did my own taxes in 1982, I was not in the top 1%, and as a new MBA my top rate was in the top marginal tax bracket (50%).
It’s simply bollocks to claim this deal makes taxation all that progressive, much the less as progressive as it was in the 1980s. Did the Tax Policy Center forget that we ended welfare as we knew it, for instance? The mavens of income inequality, Thomas Pikkety and Edmund Saez, base their work on tax returns, and point out that they focus on the high end because they can’t get the data to look at what happens to non-taxpayers, specifically, how much they benefit from transfers. Those have been strangled over the last three decades.
The fiscal cliff fix is only a small reversion of the Bush-era big breaks to the rich. Dividends are still taxed at capital gains rates (they were taxed at ordinary income rates before); estate taxes are vastly lower than they were in the 1980s and 1990. And even on the Federal income tax front, this chart gives you an idea of how little the pact does to change the distribution of income across income groups, and actually leaves a big chunk of the affluent but not rich better off. From Richard Green:
But the Times gave us a balanced view, by going to a tax expert from the right wing American Enterprise Institute, who says the taxes for low income people in the Carter era were really high! See! I’d like to have them unpack their analysis. The federal income tax rate on the marginal dollar of someone earning the minimum wage in 2012 is 15%. In 1982 it was just barely in the 17% bracket. But payroll taxes were 5.4% in 1982 versus 6.2% now, which is a major offset, since that is charged on every dollar of wages.
This search for “balance” is merely a way to reinforce the message that we really do live in the best of all possible worlds. It just happens to be the best of all possible worlds for the 1% and its loyal minions. Both parties are in agreement on their plan to reduce the standard of living of the middle class; the big area of difference is how much they need to appear to take from the folks on the top of the food chain. The tax article illustrates is a change in tactics. We really do seem to have moved into Big Lie as the prevailing appproach. There isn’t an effort to make a persuasive argument; we just have quotes from experts (and since all the big money is behind the deal, it’s trivial to find experts who will say the interim pact was just grand) and some impressive looking but unsupported charts. In other words, the article presents a simple message with a thin sheen of expert holy water sprinkled on it so the amplifiers won’t have reason to feel embarrassed. And let’s face it, drowning out the opposition is much easier than allowing a real debate to occur.