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New York Times Article Tells Big Lies on Impact of Fiscal Cliff Deal on Rich v. Ordinary Americans

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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?

Wrong.

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.

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78 comments

  1. Sleeper

    Here’s what burns me -

    If anyone including the media remembers the Bush era tax cuts were pitched as temporary measures that would expire. These tax cuts and the two wars that were financed on a Chinese credit card blew a hole in the budget and left an ever increasing deficit. Temporary indeed.

    And the recent fiscal cliff – no one is willing to mention that the bill included tax breaks for the likes of NASCAR and Goldman Sachs. And no one is willing to ask J. Carney or Obama what deal was made for these specific tax cuts.

  2. mcc777c2

    Trust. Our entire financial system is built on trust. We trust that our deposits are safe. We trust that our pension plans and insurance policies use realistic assumptions, that the stocks, bonds, etc. held in trust are there and that regulators are working to insure bad actors constrained and punished. We trust that financial elites and regulators understand the risks and know what they are talking about.
    I fear in the next financial crisis we will learn that our trust has been misplaced. In todays world of leveraged, rehypothicated bets all it takes is one small mistake to take down the whole system. JPM, according to a recent Bloomberg story, has 72 trillion dollars in derivatives. In an article talking about the London whale in 2012, Daily Finance (http://www.dailyfinance.com/2012/06/14/what-happens-when-jpmorgan-fails/) points out that a loss of 50 billion would cause JPM to go bankrupt. That’s an error of 50/72,000.
    Even if JPM is perfectly hedged, we have to ask will their counterparties be able to pay up? Each TBTF bank hedges their risk with another TBTF bank. What are the odds that in a crisis everyone will be perfectly hedged that everone will be able to pay up? Your deposits – gone. They’ve been used as collateral for the derivative trade. FDIC insurance – totally inadequate. The FDIC doesn’t have a trillion dollars just lying around ready to make good on these losses. Your pension funds and insurance policy money- the stocks, bonds, cash, etc. have all been used as collateral or rehypothicated(loaned from one bank to another in a daisy chain). When the next crisis hits, someone in that chain won’t be able to repay and we will all be Corzined or MF Globaled if you prefer.
    If I’ve learned one thing reading Naked Capitalism, it’s that when the next crisis hits the government will protect the big banks – especially the Obama administration – to the detriment of everyone else and that the rule of law will be broken. Just think about it – MF Global theft of over a billion dollars, rampant foreclosre fraud, Sarbanes-Oxley violations, money laundering on an epic scale, HFT front-running and quote stuffing, Libor, price fixing municipal bonds. No one of any consequence will go to jail under Obama and only cost of doing business fines paid by shareholders will be assessed. In the next crisis, all the little people will be sacrificed to protect the financial elites.

    1. from Mexico

      mcc777c2 said:

      Your pension funds and insurance policy money- the stocks, bonds, cash, etc. have all been used as collateral or rehypothicated(loaned from one bank to another in a daisy chain).

      This is something that came up in one of the threads following a Michael Hudson post the other day.

      With the replacement of defined benefit retirement plans (e.g., social security) with defined contribution plans (e.g., 401ks), the financialization of what few defined benefit plans remained, and the belief that one’s home is the quintessential investment vehicle, a great many working people became vested in Ponzi and asset/debt bubble economics — finance capitalism.

      As Jacob Hacker douments in The Great Risk Shift, none of this happened by accident. These schemes were thought up and sold to an unsuspecting public by economists and think tanks in order to give finance capitalism a wider base of popular public support. A small slice of the rentier pie was carved out for the proles, just enough to lure them into believing they were going to be the fuckors and not the fuckees.

      1. from Mexico

        With the replacement of defined benefit retirement plans (e.g., social security) with defined contribution plans (e.g., 401ks)…

        Just imagine, with one of the most elaborate anti-government propaganda campaigns of all time, American proles have been sold on the idea that JPM is a better counterparty than the US government.

        Such a notion, of course, is massively ficticious. This should have become self-evident in the wake of the GFC, when it was the US federal government who bailed out the JPMs of the world. Without the government bailout, all the TBTF banks, right down to and including Goldman Sachs, would no longer be with us. And yet the fiction that these banks are more trustworthy than the federal government is a mythology still widely believed in by the proles. In such a way can the power of propaganda, mythology and wishful thinking trump prima facie evidence.

        1. from Mexico

          Propaganda does not deceive people; it merely helps them to deceive themselves.

          – ERIC HOFFER

          1. Capo Regime

            From Mexio a.k.a desde mexico…..spot on. Que bien, tu analysis es profundo e ademas le pegas al centro de la realidad en los EUA. Cada dia se reducen mas y mas a fantasia y estafa.

        2. Ed

          Eric Hoffer was much too optimistic, probably because he lived in the U.S.-as-was, not our brave-new-world corporatist super-state as-is. Propaganda has been raised to a whole new level, which would be difficult to imagine for someone like E.R., who lived and wrote in a world which has now vanished.

          1. LeonovaBalletRusse

            Ed, quite right. It really is shocking that the Times has descended to the level of “tabloid journalism” for Elite Propaganda. But hey, didn’t somebody at the Times die not too long ago? Don’t the heirs just want their cut of the Elite Pie?

      1. Eric Zuesse

        Yes, we now have “the Rule of Fraud,” and The New York Times has long been the most skillful practitioner of it, not just with Judith Miller reporting about the actually non-existent “WMD” being still in Iraq after the IAEA reported in 1998 that they had all been destroyed (see p. 41 of my 2004 Iraq War: The Truth), but going back to the cover-up of the attempted aristocratic fascist coup plot to overthrow FDR in 1934 (see Jules Archer’s 1973 masterpiece, The Plot to Seise the White House).

        When The New York Times misleadingly headlined on January 4th, “After Fiscal Deal, Tax Code May Be the Most Progressive Since 1979,” their “reporter” (propagandist) Annie Lowrey asserted that under the new system, there would be “about 99.3 percent of households experiencing no change in their income taxes.” She cited two sources for her falsehoods, one at the far-right AEI, and the other at the centrist corporate Tax Policy Center. Roberton Williams of the TPC was quoted as saying, “We made the system more progressive by raising rates at the top end and leaving them for everyone else,” which was definitely false, since leaving them for everyone else” contradicted the removal of the payroll tax cut, which was at the very opposite from “the top end,” and which will add $960 to the annual federal tax on a $50,000 wage-earner (defininitely not top-end). Alan D. Viard of AEI was quoted there as saying, “Back at the end of the Carter and beginning of the Reagan administrations, we had a pretty severe income-tax burden for people at a low level of income. It was actually kind of appalling,” as if an AEI spout would really care to protect tax-progressivity, which AEI had instead always fought tooth-and-nail against. Contrast Viard’s quoted assertion versus the findings of the most highly regarded experts on progressivity, the team of Thomas Piketty and Emmanuel Saez, headlining in the highly respected Journal of Economic Perspectives, in Winter 2007, “How Progressive is the U.S. Federal Tax System? A Historical and International Perspective.” Their “Table 2: Federal Tax Rates by Income Group from 1960 to 2004” showed that in 1980, the top 0.01% paid an “Average federal tax rate” of 59.3%. That would be impossible in 2013; it will now be closer to 35%. Yet, this NYT story was being headlined “After Fiscal Deal, Tax Code May Be the Most Progressive Since 1979.” It was true that George W. Bush’s tax cuts (due to Democratic pressure) had lowered the federal tax-rates for many low-income Americans; and that those low rates would now be restored for those low-earners. On the other hand, those low tax-rates had been in effect until now also under Obama, who had additionally cut their taxes by eliminating the payroll tax; and taxes would now be going up – not down – for those low earners, because this Democratic suspension of payroll taxes would now be eliminated. So, the NYT’s basic claim, that, “After Fiscal Deal, Tax Code May Be the Most Progressive Since 1979,” was misleading, at best, and so were the quoted statements by the TPC and AEI so-called experts cited in the article.

        1. LeonovaBalletRusse

          Eric, not only the onerous “payroll tax” but the tax of inflation of commodities, now just toys in the HFT computer owners’ playpen.

    2. Tommy Strange

      You are right. But us little people are not so overwhelmed by the experts. I meet nobody of the working class or middle class in my ‘left’ milieu that is anything but ready for action. Yes I live in SF, but when I visit old friends in Cleveland, it is the same. We are raging. But the organization is not happening. Neither from the remnants of the anti capitalist occupy members, which actually was near a majority, nor from the old should know better anarchists. So us little people are adrift, in that we will accept no leninist solution, but wait, and wonder why the people that should know better, are not forming large bottom up anti capitalist orgs. I’ve been trying since the 80′s. IOPS looks ok to me. Why aren’t millions joining? Why are thousands creating bottom up anti orgs with middle class and working class? Are we ALL so brainwashed to think ‘americans’ can’t do it….so we don’t even TRY? my god

        1. Nathanael

          Watch for the modern equivalent of the Bonus Army. If this crap from our “government” keeps up, it will happen, guaranteed.

      1. Nathanael

        Tommy: bluntly, people aren’t desparate enough. Well, the people you’re talking to aren’t, anyway.

        More cuts to food stamps and people will be desparate enough.

      2. jonboinAR

        Tommy,

        Believe me. I’m from CA, both LA and the Bay Area. I live in Arkansas now, near Texas. The views and mores of the CA population, even the working class, are in no way representative of the rest of the country. Here in the Southern Mid-west it’s pretty much Fox News, all the time. The Federal Gubmn’t is to blame by way of over-regulation and interfering with the normal course of business, and the socialist Kenyan is bound and determined to institute a commie regime to the ruin of us all.

        (Those are not my views, BTW, at all, but pretty much standard amongst the population in general as far as I can tell.)

  3. jake chase

    You are right about the present, but it has all been going on full time, on one front or another, since at least 1980, and perhaps since 1946. All the nonsense about big consulting and big finance and big business, including its claims to reward merit and attract the best and brightest, and satisfy consumer wants, are nothing but cant. What these firms attract are clever and book smart collaborators, who understand perfectly that their own gains are someone else’s losses, but they either do not care or convince themselves to buy into the big lie about an invisible hand making everything right.

    There is an invisible hand but it is just giving 99% of us the finger.

    1. jake chase

      And the biggest lie of them all is that the “bailout” was limited to $800 billion. The real bailout was undertaken by the Fed, on the order of $20 trillion and counting. Who is paying for that? The retirees whose savings now yield under 1%, while banks are paid 3% for parking “reserves” at the Fed, and given the right to convert worthless MBS to reserves down at the friendly Fed window.

      The more one knows about all this the worse it actually is.

    2. LeonovaBalletRusse

      jake, precisely so, and now they want Social Security Trust Fund to be their Muppet Counterparty for the People en bloc.

  4. Butch in Waukegan

    “And that is precisely how things have played out, except I was not pessimistic enough.”

    This reminded me of a comment made years ago by Lily Tomlin: “No matter how cynical you get, you can’t keep up.”

  5. bob

    I saw this get picked up and run by the AP this week..

    http://www.washingtonpost.com/blogs/fact-checker/post/why-is-the-national-debt-16-trillion/2013/01/03/e2a85386-55fc-11e2-8b9e-dd8773594efc_blog.html

    ” Why is the national debt $16 trillion? ”

    First up, it doesn’t even pretend to answer the question. The numbers included are handpicked partisan garbage.

    But, it does set up the ‘bond holders’ above Social Security.

    Trying to pick these “arguments” apart is impossible. They are not arugments…they are propaganada, pure and simple.

  6. rob

    Obama is using the big lie machine.his headlines are different,but the same as bush’s.Clinton didn’t need to use the big lie machine as much, because everyone was more interested in the “stories” and accusations…..so he got more of a pass.Bush I just denied everything,but was dirtier than obama, and reagan just didn’t remember, or at least “those lines weren’t in his script”,because during the reagan years, it was VP bush who was really connected to the scandals of the reagan era..The media didn’t really “push” anything back then that wasn’t the party line.Then the regular control through “the establisment” channels wasn’t in question.Those who were in the council on foreign relations “orbit”,controlled what was discussed.and what wasn’t.
    While I would say that the gov’t has always been in bed and beholden to “the powers that be”;ever since 9-11 there has been a steady stream of absolute BS.And not just from the “age-old” establishment propaganda orifices,but with this media consolidation, it is coming out of every orifice out there.And instead of having to be “cagey” by lying using “truth”,they are just lying on top of lying. They distort facts everyone knows.They distort;not just the past,but the present we are all living.As well as what is likely in the future.I like the soviet reference saying”all propaganda ,all the time”.It is apt.
    Now it really is “orwellian”.
    what I don’t understand .Are there really “investors” out there who actually believe this stuff?Or is everyone just trying to get what they can before the train goes off the rails and falls over a cliff and is swallowed by the sea….and then eaten by seamonsters?

  7. Ep3

    Yves, I am on page 2 of the rolling stone article but wanted to point something out. Remember the auto industry became the scapegoat for the bailout rage that ppl were feeling. All the restrictions on funds were placed on GM and Chrysler. They were beaten and broken to the point that one is now foreign owned (again) and the other is nearly broke again.
    But also, don’t forget that the auto companies negotiated with the UAW to get rid of retiree health benefits. They promised to dump $50 billion in a VEBA fund that would then pay retiree benefits from investment returns. I ask this question, how much was the auto bailouts? $50 billion. The auto companies got the govt to bail them out of their responsibility to their retirees.

    1. Lambert Strether

      Even better, the auto bailouts were “swing state Keynesianism” that surely won OH for Obama and might have won MI. Do you think Obama would have bailed out the auto companies if there was nothing in it for him? Pas si bête.

    2. LeonovaBalletRusse

      Ep3, GM auto business was just cover for GMAC (now handily split-off “Ally”), scamming and siphoning wealth from the Real Economy for decades. Don’t forget, their racket necessitated the Original “Repo” Man. Did GM give birth to Rehypothecation for the “Finance” industry?

    3. Glen

      The GM bankrupcty was pretty bad, but at least it was a bankrupcty. Auto companies have been taken through BK with government help before and emerged more or less OK. The bank bailout just defies all common sense, and has never been done before. No accountability, no transparency, no restructuring, just shovel bucks at them and tell John Q. Pulic that everything is OK, nothing to see here, move along…

  8. Norman

    As one of those who already eats cat food for lunch, will probably end up in one of the concentration camps somewhere or in a black hole, when the hell is “enough of this crap” going to stir the juices to the point of doing something about this? We can all pontificate till the cows come home, but when the cows are diverted to the slaughter house on the way, well, need I say more?

    1. Nathanael

      You’ll know that people have said “enough” when people march en masse to specific locations, and start camping out there, like the Bonus Army did.

      Maybe the homes of bank executives are better targets than the White House. Not sure.

  9. Stephanie

    Yves, when you say you flagged the piece in the comments section yesterday, do you mean the comments section of the piece itself? I don’t see a comments section there at all, and wonder if they removed it.

  10. Style section

    There was a time when you might see people sitting in public looking at an issue of the Times to look or feel smart. It was a cheap emblem of cultural capital for people with modest economic capital. Does that still happen anywhere, or is the paper now a universal joke? If you hear of something noteworthy in a story there, you have to corroborate it with foreign press or independent media. At least now it’s easy to find it for free, thanks to its state-sanctioned propaganda function. Free and worth it – the paper of record burns well in the fireplace but it leaves a lot of fluffy ash, and it’s rough and scratchy on my bum.

  11. guns

    Wall-to-wall propaganda includes illegal propaganda too. The US official position on illegal war propaganda is that the supreme law of the land is bullshit, and that every government should be allowed to whip its population into a war frenzy, and if Iran wants to say, Eradicate Israel, or whatever, that’s entirely legally Kosher.

    So anyway, there’s this hot new Katy Perry video, the one where Russell Brand dumps her or something so she signs up to kill wogs with the military. But it must be some kind of highly classified posing-and-modeling squadron, because she doesn’t get her face blown off, or get her legs shredded and get soil biota blown up into the wound so it rots underneath the stump shrinker and they have to cut off more and more, and her unit doesn’t hold her down in the shower and rape her, and she doesn’t shoot an unarmed kid and stand on his aorta to bleed him out so he can’t report the war crime. She doesn’t torture any captive whistleblowers either. Also, she doesn’t pull mortuary duty and plop mush from mixed grunts into body bags until her hands smell like death all the time, and she doesn’t go home and choke her kids and eat a gun, so it’s kind of flirty and fun and all like girl power and stuff.

  12. Bill Frank

    Let’s see, control of the financial system – check; control of economic policy – check; control of the political process – check; control of information – check; control the nation – CHECK.

  13. charles sereno

    Yves has used the term “Vichy Left” to describe sellout “liberals.” My nomination for a Laval atavar is President Clinton. Among the “Free Left,” we have leaders like Yves d’aNC and Matthieu du Lac.

  14. indio007

    I don’t think may really understand the gravity of Matt’s article.

    I’ll break it down.
    The economy was 4 Trillion dollars in 2008
    The banks borrowed money at 5%
    That $1.4 trillion is parked at the FED at .25% interest. (according to Matt “before the bailout began, there were just $2 billion in excess reserves at the Fed”)

    This is a money losing proposition no?

    Why take 30% of the US economy and simply sideline it ESPECIALLY if you are losing money by doing it?

    Banks make money via interest rate arbitrage so this is no accident.
    There can only be one of 2 purposes.
    1. intentionally lose money.
    2. Take money out of the economy (creating an artificial shortage).

    It must be #2.

    From 2 billion in sidelined money to 1.4 trillion 4 years…. WHY?

    1. Ben Johannson

      Don’t confuse reserves with the money supply. Bank reserves can only be used for a few things: obtaining cash (for things like ATMs), buying Treasurys and clearing payments between banks. Reserves are not used to make personal and commercial loans. The biggest problem with the Taibbi article is that he doesn’t understand how reserves and bank loans work.

      1. jake chase

        I believe that reserves are loaned between banks, so they can be used to support loans and investments. The Fed Funds rate is what banks charge one another for these loans. For years and years, giant banks were net borrowers of these reserves. Their game was expanding assets and covering liabilities by borrowing Fed Funds. The net lenders were smaller out of town banks.

        These days large banks exchange toxic MBS “assets” for reserves and generate interest at 3% risk free. Reserves accumulate because large banks cannot identify better opportunities. A huge slice of major bank lending goes to fuel speculation in asset markets.

        1. Ben Johannson

          This is a common misconception. Reserves are not used to make or support commercial or retail loans. If BoA makes an auto loan to you, it simply clears a payment for you by transferring reserves to the dealer’s bank. It does not loan the reserves out to you. Pumping banks full of reserves does not increase their ability to make loans.

    2. Nathanael

      indio: we’ve understood the reason for this for a very long time. The banks are all bankrupt. They are stockpiling cash in order to attempt to cover up their bankruptcies.

      They get a small rate of return by borrowing at 0% from the Fed and putting it back into interest-paying reserves at 0.25% at the Fed — this is a method by which the Fed gives the banks free money.

  15. PeonInChief

    Yes, the Taibbi piece is very good, but I would recommend having a small brandy available to counter the inevitable teeth-grinding as you read along.

  16. Bruce

    “This (duplicitous) search for “balance” is merely a way to reinforce the message that we really do live in the best of all possible worlds.” –
    Pingloss from the BarBarack Obamarionette LIP$TICK-UP Artist:
    Hey, Ho, BH0; how many CEOs have you had to blow? NO Gran’ Buggerin’ !

  17. allcoppedout

    Thanks Yves – it remains important to know others are thinking straight. It can seem we have no intelligent commentary on the UK economy. The story we are plied with seems to be:
    the British economy makes an extraordinarily complicated picture. We have an economy which is either flatlining or going into an unprecedented triple dip, but is rapidly growing jobs (despite 30,000 government jobs going a month); we have brutal cuts in government spending, while government spending continues to rise; we have a country where things feel as if they’ve been bad for a long while, and yet on the figures, most of the hard times are still ahead. You’d think the banks had been thrown a few peanuts rather than £120K per household. Productivity, despite all the ‘thrusting’ private-sector created jobs, is down 15% on where it would have been on pre-2008 trend. We will soon have less crime because we got rid of 28,000 police staff and now have rank amateurs setting police budgets.

    I salute the squadrons of flying British pork off to maintain Empire as they soar over the Pennines, counting them all out and counting them all back!

  18. YankeeFrank

    I was listening to the awful NPR yesterday where they gave a minute-long “review” of Tim Geithner’s stint at Treasury. It began with the problems he had early on in “not being ready for prime time” and ended with, and I paraphrase, “he ends with success, and he did a lot better job than many thought at the beginning”. I almost barfed on my steering wheel. Its dangerous to listen to NPR in the car, the car being a deadly weapon in enraged hands. Too bad it wasn’t Geithner walking the crosswalk in front of me, or the idiot on NPR…

    The propaganda exists everywhere all the time now, with the tiny exceptions of sites like NC, but its important that the flame of reality be kept by someone, and in that case it appears we who actually understand what is going on must make a record and tell those we can.

    I’m not trying to ascribe some rare nobility to those of us who do clearly understand the crisis of this time. It is perhaps just an accident of temperament, circumstance or experience, but nevertheless, its important that we do the tiresome and lonely work of spreading knowledge and dissolving the propaganda as best we can. We may not have much hope of success but that can’t stop us from the task at hand. Perhaps when all has crashed and crumbled those who spoke the truth will finally be listened to.

    1. Ray Phenicie

      Spot on for your take on NPR; they do seem to be so very popular and oh so chic to listen to when chatting about the current affairs with one’s friends at the church social hall. The level of sleazy propaganda swirling around-not just NPR- is astonishing, especially in regards to the much ballyhooed fiscal cliff. However, there is much propaganda on other topics, mostly by omission. What we were not told about Fuskushima and the Gulf Oil eruption -Deepwater Horizon explosion-would fill volumes, some of which did come across here. But in general, one has to one’s own journalist, researcher, writer and critic or one can expect to be snowed under by huge lies on all fronts.

      1. LeonovaBalletRusse

        It is all propaganda all the time, and so blatant that you know they’ve reached some tipping point that tells them they can spit into our faces with impunity.

      2. Sleeper

        Here’s what gets me about NPR -

        At least once a week we are offered a report on gasoline prices at the pump – a nationwide survey – from a euphonious survey person.
        Then we are told that gas price will go up or down by some amount which is more often than not correct.

        And finally the manta that the cost of gasoline is a function of supply and demand but NPR never includes the data about supply or demand which can easily gleaned EIA data.

        So trust me and oh you don’t need to bother you little head with facts.

        1. LeonovaBalletRusse

          How did NPR move from the left to its post position as Hard Right Totalitarian Propaganda Mill embracing Globalized BIS “Governance” in America?

          Please see, within frame of my comment down-thread, the buried book:
          “RUNNING COMMENTARY: The Contentious Magazine That Transformed the Jewish Left Into the Neoconservative Right by Benjamin Balint (2010).

      3. OpenThePodBayDoorHAL

        I am so glad I RAN AWAY in 2005 and now live in still-sensible Australia where people have BS-radar built in especially for anything to do with SOCIAL JUSTICE. Anytime I hear NPR over here it makes me want to BARF, that snarky tone full of the lies from what used to be the LEFT but is now just the same corporate controlled misinformed and did I say snarky? neo-liberals. Obomba, the ultimate Manchurian Candidate, who else could we have to dismantle Social Security, to institutionalize the POLICE STATE, to hand gift after gift to the megabanks while pretending to slap their wrists with joke fines and NO PROSECUTIONS. If you used to be on the left, and I mean the LEFT, the ones who stopped the war in the 1960′s and threw a crook president out of office then you should be DISGUSTED and ASHAMED with the DRONE BOMBING BANKER CODDLING PERMANENT WARRIOR Black Bush Basketballer-in-Chief who now inhabits the White House.
        There. I feel better. It won’t last…

  19. Hugh

    This story illustrates the importance of burning bridges and keeping them burnt. The healthcare debate was the modern benchmark for this. It was never just Obama who sold progressives out with Obamacare. It was the whole of the Democratic party, including its so-called progressive caucus, and it was what Yves calls the Vichy left. Together they took a cheaper, better system of Medicare for All off the table right from the start. They set up the bait-and-switch of the amazing disappearing public option and finished with the corporatist giveaway and public looting that had been baked into Obamacare from the beginning.

    The whole Obamacare sellout was for some and should have been for all a bright red line event. Obama, the Democrats, and the Vichy left did not just betray progressives and their base. They showed to everyone that they could not be trusted. Not only would they not fight for change, they would use all their efforts to preserve the very worst of the status quo.

    Fast forward to now and we see another Great Betrayal manufactured by this very same troika of Obama, the Democrats, and the Vichy left. Tax rates as applied to the rich are a fiction. If you learned anything from the 2012 Presidential race, it is how easy it is and how many ways there are for a rich man like Romney to shift money around so that he really only pays the amount of tax that he wants to pay. A rich person can push their wealth into charities and foundations they control. They can ship it into accounts and havens overseas, or stick it in tax-deferred shelters here at home. They can take income and declare it as capital gains. They can take anything, including their hobbies and diversions, and say they are businesses or business expenses. A marginal rate means nothing unless it applies to all one’s wealth from whatever source wherever held. It merely adds insult to injury that the increases in these fictional taxes are so minor, and yet our rulers would still equate them to real cuts in workers’ wages (expiration of the payroll tax rollback) with the prospect of more to come (Social Security).

    1. LeonovaBalletRusse

      Hugh, you have just described our Totalitarian BIS *Governance*, which has usurped the legitimate Constitutional Government of/by/for the People.

      We are experiencing Absolute Dictatorship by Agents of a Foreign Power.

    1. LeonovaBalletRusse

      ltr, you are quite right. This blog should go viral. But it is important to recognize the “tipping point” of IMF/WB Politics by which the Global Reich Agents brought together “laisser-faire” Master Class Republicans and New Age Dixiecrats together in common cause as the Globalizing “NOBILITY and Analogous Traditional Elites in the Allocutions of Pius XII” after 1970, which included the mass of Christian Zionists joining with PNAC and AIPAC for the Policy of the “Shock Doctrine” PUTSCH created by Leo Strauss and Milton Friedman of the Economics Department of the University of Standard Oil in Chicago, implemented by the Bush-Nixon-Kissinger Petrodollar Terrorism campaigns for Global Regime Change and BIS “Governance” worldwide.

      This “tipping point” is revealed in a significant book that has been buried:
      “RUNNING COMMENTARY: The Contentious Magazine That Transformed the Jewish Left Into the Neoconservative Right” by Benjamin Balint 2010.

      The groundwork for this “tipping point” of our BIS “Governance” (which has usurped our Constitutional Government) was prepared decades before:
      See:
      “CONJURING HITLER” by Guido Giacomo Preparata; “TRADING WITH THE ENEMY” by Charles Higham; “HITLER’S BENEFICIARIES” by Goetz Aly; “THE SHOCK DOCTRINE” by Naomi Klein.
      CONNECT:
      http://www.eu-facts.org/en/background/dark_roots_europe_lecture.html
      //This article highlights the birth place of the “Brussels EU” on the drawing boards of the Nazi/IG Farben-coalition for a post-war Europe under their control./
      . . .
      /One of the strategic industries for which IG Farben sought global control was the pharmaceutical “investment business”. They knew that the pharmaceutical industry is not primarily a health industry, but an investment business that defines the human body as its marketplace. While presenting itself as the purveyor of health, the entire existence of this investment industry has been based on the continuation and expansion of diseases as multibillion dollar markets for patented drugs.//
      ———-
      http://en.wikipedia.org/wiki/McGill_University [connect w/ CIA]
      http://en.wikipedia.org/wiki/Samuel_Bronfman
      //Bronfman’s Distillers Corporation acquired Joseph E. Seagram & Sons of Waterloo, Ontario, from the heirs of Joseph Seagram in 1928. Bronfman eventually built an empire based on the appeal of brand names developed previously by Seagram—including Calvert, Dewars, and Seven Crown—to higher-level consumers. His sales were boosted during the United States’ abortive experiment with prohibition, and he was apparently able to do so while staying within the confines of both Canadian law where prohibition laws had been previously repealed and American law, while dealing with unsavory characters such as the Chicago Outfit of gangster Al Capone.
      His renamed company, Seagram Co. Ltd., became an international distributor of alcoholic beverages, and a diversified conglomerate which included an entertainment branch./
      /Because of changes to US tax law in the Lyndon Johnson administration, it became advantageous for Bronfman to purchase an oil company,[4] which he did with the purchase of Texas Pacific Coal and Oil Company in 1963 for $50 million. In 1980, the Bronfman heirs sold the Texas Pacific Oil holdings to Sun Oil Co. for $2.3 billion.[5]/
      The Seagram assets have since been acquired by other companies, notably The Coca-Cola Company, Diageo, and Pernod Ricard./
      . . .
      /In 1952, he established the Samuel and Sadie Bronfman Family Foundation, one of Canada’s major private granting foundations. Bronfman was President of the Canadian Jewish Congress from 1939 to 1962, and he was made a Companion of the Order of Canada in 1967.[6] In 1971, he helped to establish the Bronfman Building at McGill University, which houses the Desautels Faculty of Management./
      http://en.wikipedia.org/wiki/The_Coca-Cola_Company
      http://en.wikipedia.org/wiki/CNN
      http://en.wikipedia.org/wiki/Canadian_Jewish_Congress
      http://en.wikipedia.org/wiki/World_Jewish_Congress
      http://en.wikipedia.org/wiki/International_Cotton_Exposition
      http://en.wikipedia.org/wiki/The_Coca-Cola_Company
      http://en.wikipedia.org/wiki/CNN
      http://en.wikipedia.org/wiki/IntercontinentalExchange
      //ICE is organized into three business lines:
      /ICE Markets — futures, options, and OTC markets. Energy futures are traded via ICE Futures Europe; soft commodity futures/options are handled by ICE Futures U.S.
      /ICE Services — electronic trade confirmations and education.
      /ICE Data — electronic delivery of market data, including real-time trades, historical prices and daily indices.
      /Contracts sold through ICE Futures U.S. are processed through a subsidiary, ICE Clear U.S. (ICEUS). In May 2008, ICE launched its own Clearing House, ICE Clear, with divisions for Europe, US, Canada & Trust (ICEU).[2]
      /Headquartered in Atlanta, ICE also has offices in Calgary, Chicago, Houston, London, New York and Singapore, with regional telecommunications hubs in Chicago, New York, London and Singapore.//
      ——————————
      Like the Third Reich (Holy Roman Reich III), the Fourth Reich Principals and Agents are in a “Conspiracy” to “Rule the World” by engaging in “Pre-Emptive Wars” military/psy-ops/propagandistic/financial.

      “With rue my heart is laden.” I recognize my Colonial American-French-Scottish Hebrew roots and hang my head in grievous shame.

  20. William Neil

    Thanks Yves. I didn’t get any further than the headlines in my print edition but I still did a doubletake on the claim in the headline.

    1. DANNYBOY

      I implore you AGAIN.

      Please do not expose me to ANY New York Times psychosis.

      I have begged, prayed and even rationally appealed, but HERE IT IS AGAIN.

      I am a nice person and do not deserve to be exposed to ANY New York Times Psychosis.

      I have done nothing to deserve being exposed to New York Times psychosis.

      Please

  21. The Gizmo51

    Who, in their right mind, would create an economy that of every ten workers, 1 becomes a millionaire and/or billionaire, 3 live in poverty, 4 live pay check to pay check, and 2 make enough to buy a new car every 6 years? That’s what capitalism is!

    1. rob

      Really?
      One out of every ten people in your high school class, BECAME millionaires and/or billionaires?

  22. bmull

    You guys know Lowrey’s Ezra Klein’s wife, don’t you? Nepotism at its finest. (She is a Harvard grad of course, but you’d never know it from any of her journalism.)

  23. Nathanael

    “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. ”

    I predicted that the lousy results would catch up with Obama and the Democratic Party in *2016*. I stand by that prediction.

    Expect the Worst President Ever in 2016 — a Republican who is like a rerun of James Buchanan on steroids. At that point localities will wake up and start fighting. 2020 is when things get really unpredictable, as far as I’m concerned.

    1. Aquifer

      Nat, i hate to say this, but i have been saying the same thing for some time now – “Next time’s gotta be the time when folks have had enough!” but somehow it never is – i don’t know if that is a testament to our “ignorance” or their “cleverness” or simply to inertia, which is, after all a powerful force …

  24. Aquifer

    I continue to marvel at the extent to which the payroll tax has become a big villain in all this – first in the MSM and increasingly in comments. It was speculated when the “holiday” was introduced that it wouldn’t expire because it would be called a “tax hike” and we can’t have that, now can we? And sure enough, now that the “holiday” is over – it has assumed the role of a big drag on the “worker”, when prior to the holiday, it was, at least to my knowledge, primarily considered the payment of a premium for retirement – a safe “investment”, if you will, in one’s future ….

    Instead of pushing for raising the minimum wage or making the income tax more progressive – Obama chose cutting the payroll tax – did anyone really wonder why? Oh, yeah – because it was the “fastest” and “most immediate” – but has it really made a difference in people’s lives – or set the stage for a continued undermining of SS …. Even Bush never tried that maneuver, he just cut income taxes instead …. But even those who recognize that Obama is the “more effective” evil don’t seem to want to examine this maneuver in that light …

    Though lifting the cap on the cap is still discussed periodically – the low, or not so low, buzz that is increasingly creeping in, on little cat’s feet, is what a “drag”, that payroll tax is …

    Congratulations – judging from the MSM and, increasingly, in even “prog” comments, the payroll tax, the thing that has made SS “impregnable”, at least in folks perception, the brilliance of the system that FDR set up – is becoming increasingly “a bummer” in people’s eyes …

    And folks think they are “immune” to propaganda …. Though of course, via certain schools of economics we are told that the “real propaganda” was the payroll tax itself and now the scales are being lifted from our eyes – and folks like myself, who continue to defend it, will be considered more and more suspect …

    Methinks we are being “had”, as they say – but me also thinks that folks like myself who suggest such will be those who will be marginalized – i see it happening now …

  25. Alan8

    Yet another reason I voted straight Green Party — They don’t accept corporate money and they represent CITIZENS’ interests, not corporate interests.

    You all got what you voted for. Your unconditional support of corporate politicians has given them the confidence to sell us out to corporate interests.

    Make wiser choices next election.

  26. Z54

    The legal term for what the Obama administration has done for Wall St. and the banks is called aiding and abetting! At one time it was a felony in this country!

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