Sunday, February 28, 2010

The Bankruptcy Boys

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O.K., the beast is starving. Now what? That’s the question confronting Republicans. But they’re refusing to answer, or even to engage in any serious discussion about what to do.

For readers who don’t know what I’m talking about: ever since Reagan, the G.O.P. has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub.”

But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

And the deficit came. True, more than half of this year’s budget deficit is the result of the Great Recession, which has both depressed revenues and required a temporary surge in spending to contain the damage. But even when the crisis is over, the budget will remain deeply in the red, largely as a result of Bush-era tax cuts (and Bush-era unfunded wars). And the combination of an aging population and rising medical costs will, unless something is done, lead to explosive debt growth after 2020.

So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission.

Many progressives were deeply worried by this proposal, fearing that it would turn into a kind of Trojan horse — in particular, that the commission would end up reviving the long-standing Republican goal of gutting Social Security. But they needn’t have worried: Senate Republicans overwhelmingly voted against legislation that would have created a commission with some actual power, and it is unlikely that anything meaningful will come from the much weaker commission Mr. Obama established by executive order.

Why are Republicans reluctant to sit down and talk? Because they would then be forced to put up or shut up. Since they’re adamantly opposed to reducing the deficit with tax increases, they would have to explain what spending they want to cut. And guess what? After three decades of preparing the ground for this moment, they’re still not willing to do that.

In fact, conservatives have backed away from spending cuts they themselves proposed in the past. In the 1990s, for example, Republicans in Congress tried to force through sharp cuts in Medicare. But now they have made opposition to any effort to spend Medicare funds more wisely the core of their campaign against health care reform (death panels!). And presidential hopefuls say things like this, from Gov. Tim Pawlenty of Minnesota: “I don’t think anybody’s gonna go back now and say, Let’s abolish, or reduce, Medicare and Medicaid.”

What about Social Security? Five years ago the Bush administration proposed limiting future payments to upper- and middle-income workers, in effect means-testing retirement benefits. But in December, The Wall Street Journal’s editorial page denounced any such means-testing, because “middle- and upper-middle-class (i.e., G.O.P.) voters would get less than they were promised in return for a lifetime of payroll taxes.” (Hmm. Since when do conservatives openly admit that the G.O.P. is the party of the affluent?)

At this point, then, Republicans insist that the deficit must be eliminated, but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan — and there isn’t any plan, except to regain power.

But there is a kind of logic to the current Republican position: in effect, the party is doubling down on starve-the-beast. Depriving the government of revenue, it turns out, wasn’t enough to push politicians into dismantling the welfare state. So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe. You read it here first.

Beyond Tea Party Politics

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By Altaf Rahamatulla

Last month, Oregonians overwhelmingly approved ballot initiatives to increase taxes on high-end personal and corporate income. Only the richest individuals and corporations, or 2.5 percent of the state, will be affected—while Oregon generates $700 million in the upcoming year to protect vital services.

The debate around the issue was extremely contentious, but advocates effectively articulated the necessary message: increasing income tax rates at the top only affects a small number of state residents, and is economically sound, politically feasible, and popular with the public. This is especially true when compared to the alternative: massive cuts in education, infrastructure, and health care that endanger a state's economic and social vitality.

As 48 states confront shortfalls this year, budget will be the predominant focus for lawmakers across the country. In fact, the Center on Budget and Policy Priorities estimates $350 billion in cumulative state deficits for 2010 and 2011. The downturn has also taken an enormous toll on tax revenue. Mark Zandi, chief economist at Moody's, reports that state and local tax revenues dropped nine percent in 2009, “the largest decline on record going back to just after World War II.”

The Oregon vote points to progressive tax, budget, and economic policies as the most appropriate measures to deal with deficits this year.

Despite virulent Right wing rhetoric to the contrary, there is actually substantial public support for progressive revenue generation as a means to make critical investments and foster economic growth. The Center for American Progress conducted polling and found that 79 percent of the public believes, “[g]overnment investments in education, infrastructure, and science are necessary to ensure America’s long-term economic growth.” Accordingly, in a time of economic hardship, when so many working families are struggling, voters are likely to support policies to raise revenue, strengthen public programs, and provide safeguards to those who have been affected by the recession.

In 2009 alone, California, Connecticut, Colorado, Delaware, Hawaii, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, and Wisconsin instituted either a permanent or temporary reform of personal income taxes. Another 11 states considered or enacted business tax increases to help deal with budget deficits.

These trends provide insights on the failure of anti-tax campaigns in recent years as well. As the Ballot Initiative Strategy Center explains, "[t]he Grover Norquist, Club for Growth, Glenn Beck, Tea Party crowd tried to use the bleak budget picture as an opportunity to ratchet down even harder as states look to find the revenue necessary to protect priorities, create jobs, and get their economies going—but voters rejected that failed approach." For instance, of the Right wing’s 28 attempts to introduce the so-called “Taxpayer Bill of Rights” (TABOR), an effort to impose a rigid straitjacket on state revenue options, only Colorado has adopted this disastrous policy. The state has since experienced an increase in the number of adults and children without health insurance and a severe decline in education funding as a result of the misguided initiative.

This indicates an inherent acknowledgment that progressive tax policies do not undermine economic growth, lead to out-of-state migration of wealthy residents, or cause unemployment.

Furthermore, a common misconception about taxes is the idea that the wealthy have incredibly high tax burdens. The reality is the richest taxpayers have not been contributing their fair share for years. The Institute for Taxation and Economic Policy discovered that when you factor in sales, excise, property, and income taxes, states place a much heavier tax burden on working families as compared to the wealthy.

During an economic downturn, progressive revenue generation is preferable to deep cuts, as it allows states to provide funding for essential programs, pump money into the economy, make critical investments, and protect working families in this time of hardship.

A budget that relies too heavily on cuts will hurt the private sector and the economy as a whole by reducing consumer spending and increasing unemployment. According to the Economic Policy Institute, one dollar in cuts translates to $1.41 lost in economic activity and 41 cents less spending in the private sector. At the same time, families will have to deal with the reality of budget reductions: reduced health care services, less access to affordable housing, underfunded educational systems with larger class sizes, fewer police officers protecting communities, and generally diminished quality of vital programs.

Peter Orszag, Director of the Office of Management and Budget, and Nobel Prize winning economist, Joseph Stiglitz confirm: “[T]ax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run. Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”

Spending on programs that assist low and middle-income families is smart economic policy. Working families will more readily spend their funds on basic necessities, thus boosting short-run demand and fostering market activity. For instance, economic research indicates that one dollar spent on increasing food stamps creates $1.73 in market demand.

States are exploring several other progressive policies to deal with deficits. These include eliminating wasteful subsidies and ineffective tax credits, closing corporate tax loopholes, enacting combined reporting, expanding the sales tax base to include certain services, and collecting sales tax on Internet purchases. State lawmakers are also advancing transparency legislation to foster more comprehensive reporting of subsidies, contracts, and corporate tax breaks.

Given the fiscal and economic crisis, public investments in jobs and services for those in need are critical. Progressive revenue and budget approaches are not only economically effective, but also popular with the public—for good reason.

Saturday, February 27, 2010

Fox Reports, Fox Decides

Original Link:

By Julie

Bill O'Reilly, to put it nicely, conceals or distorts facts in order to deceive his audience -- mainly to pander to the right-wing agenda of anti-this and anti-that. Depending on your perspective, one may even think he lies. The purpose of the segment on Monday (2/22/10) with "Bill Nye the Science Guy on debunked global warming study" was to misrepresent what actually happened, but this is nothing new for Fox.

O'Reilly opened the segment with the blatantly misleading line: Another global warming study debunked in the journal Nature Geoscience... the study showed the ocean rising because of global warming. Now the journal says sorry, study was flawed.

Except . . . that's not what the story was. The study was not on global warming or current rise in ocean levels. It was a study on predicted ocean rise into the future. There is a big difference between a report on what's going on now (or what happened earlier) and a prediction.

The prediction was based on "data over the last 22,000 years to predict that sea level would rise by between 7cm and 82cm by the end of the century." This was based on an earlier estimate by Intergovernmental Panel on Climate Change (IPCC) which estimated the rise to be 18 to 57 cm. Why were the two studies criticized and the last one retracted? O'Reilly won't tell you, but we will. The reason is simple -- and surprisingly unpleasant to O'Reilly and the Right . . . it's because it's too conservative an estimate.

"Many scientists criticised the IPCC approach as too conservative, and several papers since have suggested that sea level could rise more. Martin Vermeer of the Helsinki University of Technology, Finland and Stefan Rahmstorf of the Potsdam Institute for Climate Impact Research in Germany published a study in December that projected a rise of 0.75m to 1.9m by 2100." So in fact, the reason it was retracted is because it may underestimate the impact of global warming . . . and Fox can't have that.

The report goes on to explain the procedure followed in the scientific community: "Announcing the formal retraction of the paper from the journal, Siddall said: 'It's one of those things that happens. People make mistakes and mistakes happen in science.'" He said there were two separate technical mistakes in the paper, which were pointed out by other scientists after it was published. A formal retraction was required, rather than a correction, because the errors undermined the study's conclusion."

The scientific approach includes peer-review. This is why "science" is real and can be trusted. Unlike Rush Limbaugh or Sean Hannity, scientists who publish papers have to take questions and criticism from many scientists in the field in order to ensure the integrity of their work.

Fox - they report what suits their agenda.

U.S. is ranked #37 in health care in the world

Original Link:

By Karen Harper

Among people living in the 30 OECD (Organization for Economic Co-operation and Development) nations, Americans rate their personal health around the median for the group despite having one of the highest GDPs per capita.

Only 56% of Americans say they have confidence in the U.S. health care system according to a recent Gallup poll. The United States has the highest per-capita total health expenditures of any of the 30 countries yet Americans report only average levels of health. Except for the United States, the more money spent on health care in a nation translates to better health for the respondents.

The World Health Organization ranks the United States at 37th in the world.

Fox News: "Voice of the opposition" on health care reform

Original Link:

By Eric Hananoki

Last March, Fox News VP Bill Shine was asked how his channel would adjust to life under a Democratic Congress and White House. Shine responded with a simple plan: Fox can be the "voice of opposition."

Nearly a year later, Shine's strategy proved correct as Fox News has opposed the White House on nearly every issue: economy, foreign policy, administration officials, environment, taxes, judicial nominations -- even Obama's supposedly elitist choice of mustard.

But Fox News has made defeating health care reform it's top priority, as the channel's hosts, reporters and pundits have pushed a steady stream of falsehoods and smears about "death panels," euthanasia, deficit explosions, the public option, constitutionality, rationing, abortion, and socialized medicine. Fox News served as the chief promoters of anti-health care reform disruptions of town halls, the anti-health care "Code Red" rally and Rep. Michele Bachmann's (R-MN) anti-health care demonstrations.

With so much practice, and the bipartisan health care summit at the top of this week's political agenda, there was then little surprise that Fox News ran its full-court press against health care reform.

Even before the summit began, Fox News personalities agreed with Rush Limbaugh that Obama was setting a "trap" for Republicans -- never mind that just months ago, Fox Newsers were complaining that Republicans were "locked out" and "excluded" from health care discussions.
Discussing Democratic health care proposals, Bill O'Reilly and contributor Doug Schoen falsely suggested that GOP ideas like interstate competition -- not a great idea to begin with -- "aren't in the bill" (they're in the Senate version). Contributor Karl Rove distorted a Congressional Budget Office report to claim that "everybody's health care premiums are going to be higher than they would be otherwise" and falsely claimed that an excise tax on plans would be "paid by people who are not in unions ... [union members] don't have to pay." And contributor Newt Gingrich falsely claimed that "all" the Democrats' health care proposals "require...higher deficits" and would add "big deficits" -- actually, the CBO found that the House and Senate bills would reduce the deficit.

After the summit, Fox News figures reacted predictably by declaring the meeting "boring" and claiming that Obama "lowered himself" by participating. Fox Nation, meanwhile, decided that the "Dems lose summit on substance.

Republican health care falsehoods also got an on-air pass from White House senior correspondent Major Garrett, who presented Sen. Lamar Alexander's falsehood that the Senate bill would increase premiums "because of the government mandate" and Rep. Paul Ryan's falsehood that the Senate bill "does not ... reduce the deficit" as a he-said, he-said with Obama. Garrett did not point out that the non-partisan Congressional Budget Office (CBO) supports Obama.

As they have on numerous other issues, Fox News adopted the GOP's anti-Dem strategy as their own. In 2005, former Sen. Trent Lott (R-MS) coined the phrase "nuclear option" to describe a proposal to change filibuster rules for judicial nominations. After Republican strategists deemed the term a political liability, Republicans began to attribute it to Democrats. Fast-forward to today, and the term has shifted again: In just the past week, Fox News hosts Martha MacCalllum, Megyn Kelly, Glenn Beck, Greta Van Susteren, Sean Hannity and Bret Baier redefined the "nuclear option" to mean the unrelated process of using reconciliation to pass tweaks to the health care legislation.

Rebranding the "nuclear option" not only gives conservatives a more ominous sounding phrase to replace the wonkish "reconciliation," it also allows them to falsely accuse Democrats of hypocrisy for expressing opposition to the actual "nuclear option" in 2005 -- as Fox News repeatedly did in using oppo-material promoted by the website of Fox favorite and unabashed partisan Andrew Breitbart.

Just how indistinguishable has the rhetoric from Fox News and GOP officials been? Try matching the following statements about the Democrats' potential attempt to pass health care with a majority vote to either a Fox News employee (Fox's Megyn Kelly, Sean Hannity or Charles Krauthammer) or GOP official (Sen. Jon Kyl or Rep. John Boehner). (No cheating -- answers at this section's end.):

1) Democrats are "going to ram it through, whether we like it or whether the American people like it."
2) Democrats are threatening "to ram this through with 51 votes."
3) Democrats are "going to ram it down America's throat."
4) Democrats are "preparing to employ a 'trick' to bypass rules in the Senate and ram legislation through on a one-party vote."
5) Democrats are preparing "to try to ram it through on a procedural trick in the Senate."

Fox News also (again) allowed disgraced political adviser turned disgraced Fox "political analyst" Dick Morris to use his employment to organize opposition -- and funds -- against health care reform. On The O'Reilly Factor, Fox & Friends, and Hannity, Morris urged viewers to visit his website to learn how to pressure "vulnerable" congressmembers to vote against health care reform. Morris' Fox-promoted website features numerous fund solicitations ("give us money to run the ad!") for the League of American Voters, a conservative group that employs him as a chief strategist. According to Morris, the group has "raised $200,000 in the past three days."
Has the conservative news organization's year-long drumbeat against health care reform had an effect? Separate Pew Research Center and NBC News polls found that Fox News viewers are more likely than any other viewer to believe health care "misinformation" such as the "death panels" lie. Meanwhile, the channel continues to misinform viewers on "death panels," and executives actually awarded the claim originator (Sarah Palin) a multi-year contract.
With activism like that -- from both the purported "news" and "opinion" sides -- it's no wonder Fox News has become the favorite of Republican officials.

But don't just believe one of the Fox News-described "Media Matters blogger[s] ... stuck in the attic taking turns trying on grandma's underwear." In the past year, the news channel has drawn praise from GOPers like Rep. Michele Bachmann, Gov. Rick Perry, Rep. Mike Pence, Rep. Eric Cantor, Rep. Lamar Smith and pretend-Sen. Liz Cheney. Sen. Jim DeMint touted Fox's conservative agenda-setting; contributor Newt Gingrich told conservative activists that Fox News helped make Scott Brown's "insurgency possible"; and Mitt Romney expressed optimism that the news organization would give the GOP "strength" in 2010 and beyond.

Back in 1994, House Republicans made Rush Limbaugh an honorary member of their caucus for aiding their political efforts. One can't help wonder what's taking the Republican Party so long to bestow a similar honor to the men and women of Fox News.
Fox News employee or GOP official answer key: 1) Sen. Jon Kyl. 2) Fox's Megyn Kelly. 3) Fox's Sean Hannity. 4) Rep. John Boehner. 5) Fox's Charles Krauthammer.

Other stories this week

Conservatives mock the uninsured

For the conservative perspective on the country's health care problems, look no further than Rush Limbaugh and Glenn Beck. Since the beginning of time, politicians have used personal anecdotes to accentuate policy points, and the bipartisan health care summit was no different. But conservatives went out of their way to respond to the summit by mocking the uninsured -- specifically, remarks from Rep. Louise Slaughter (D-NY), who told the story of a woman without health insurance who "had no denture. She wore her dead sister's teeth."

Multi-millionaire Limbaugh, who has claimed "there is no health care crisis," responded to Slaughter by asking, "Isn't that why they make applesauce?"

LIMBAUGH: You know I'm getting so many people -- this Louise Slaughter comment on the dentures? I'm getting so many people -- this is big. I mean, that gets a one-time mention for a laugh, but there are people out there that think this is huge because it's so stupid. I mean, for example, well, what's wrong with using a dead person's teeth? Aren't the Democrats big into recycling? Save the planet? And so what? So if you don't have any teeth, so what? What's applesauce for? Isn't that why they make applesauce?

Multi-millionaire Glenn Beck similarly stated, "I've read the Constitution ... I didn't see that you had a right to teeth." One of Beck's co-hosts responded to the anecdote by talking in a baby's voice: "I have no health care, Mr. Pwesident, and I have no feet and no tonsils because doctors took 'em out."

Conservative attitudes to the health care crisis perhaps can perhaps best be summed up in Limbaugh's advice to a caller who couldn't afford the $6,000 cost to treat his broken wrist: "Well, you shouldn't have broken your wrist." Media Matters' John Santore wrote: "Politics aside, the real question is this: Why do ordinary Americans continue to listen to conservatives who don't even pretend to care about the senseless indignities and horrors experienced by countless citizens of this country?"

The reaction to Slaughter's health care anecdote comes days after conservatives also mocked Senate Majority Leader Harry Reid for linking unemployment to a rise in domestic abuse (a claim supposed by several studies). Steve Doocy,, Jim Hoft, Mike Gallagher, and The Jawa Report all suggested Reid will abuse his wife if he loses his Senate seat. Conservative radio host James Harris, who describes himself as possessing "humor, grace, and insight," went one further on Fox and claimed that Obama's to blame for increased domestic violence reports in

Don't Lie, Don't Misinform

Following President Obama's call for a repeal of the Don't Ask, Don't Tell (DADT) policy in favor of allowing gay men and lesbians to serve openly in the armed forces, Media Matters released a comprehensive guide reviewing the myths and falsehoods conservative media figures have pushed in their efforts to prevent repeal.

Among the myths: DADT is working; repealing DADT would undermine morale and unit cohesion; and the public does not support the policy's repeal.

Earlier this week, NATO military committee chairman Admiral Giampaolo Di Paola drew on his experiences in Afghanistan and told CNN that allowing gay men and lesbians to serve openly is "working out quite well," adding that unit cohesion and combat readiness have "[a]bsolutely not" been undermined.

Media Matters has joined a coalition of leading organizations and activists who have signed an open letter demanding that news reports on DADT remain accurate and fair. Fox News' Special Report demonstrated -- twice -- how not to report on DADT by pushing the debunked claim that repealing DADT would "adversely impact" troop readiness.

Tax the Corporations and the Rich or Take Draconian Cuts -- the Decision Is Ours

Original Link:

By David Sirota

Plagued by deficits, communities everywhere must now decide between tax reform and public spending cuts -- between economic life and death.

Judging by Tim Tebow's much-hyped Super Bowl ad, "choose life" remains conservatives' favorite abortion shibboleth. But really, the phrase better captures the stakes in the Great Budget Wars of 2010.

Plagued by deficits, communities everywhere must now decide between tax reform and public spending cuts -- between economic life and death. And thanks to two Western bellwether states, we know what each choice means.

Choosing death means mimicking Colorado Springs -- a Republican red tattoo on Colorado's purple heart.

As a venue for political experiments, the sprawly GOP enclave is as pristine a conservative laboratory as you'll find in America. If the city has garnered contemporary notoriety at all, it has achieved infamy for domiciling right-wing groups like Focus on the Family and infecting the world with viruses like Douglas Bruce -- the father of draconian initiatives that seek to prohibit governments from raising levies.

When the Tea Party movement's anti-tax activists refer to the abstract concept of conservative purity, we can turn to a microcosm like The Springs (as we Coloradoans call it) for a good example of what such purity looks like in practice -- and the view isn't pretty.

Thanks to the city's rejection of tax increases -- and, thus, depleted municipal revenues -- The Denver Post reports that "more than a third of the streetlights in Colorado Springs will go dark; the city is dumping firefighting jobs, a vice team, burglary investigators, beat cops; water cutbacks mean most parks will be dead … recreation centers, indoor and outdoor pools (and) museums will close for good; Buses no longer run on evenings and weekends; (and) the city won't pay for any street paving."

Meanwhile, even with the Colorado Springs Gazette uncovering tent ghettos of newly homeless residents, the city's social services are being reduced -- all as fat cats aim to punish what remains of a middle class. As just one example, rather than initiating a tax discussion, the CEO of The Springs' most lavish luxury hotel is pushing city leaders to cut public employee salaries to the $24,000-a-year level he pays his own workforce -- a level approaching Colorado's official poverty line for a family of four.

This is what Reaganites have always meant when they've talked of a "shining city on a hill." They envision a dystopia whose anti-tax fires incinerate social fabric faster than James Dobson can say "family values" -- a place like Colorado Springs that is starting to reek of economic death.

Choosing life, by contrast, means doing what Colorado's governor and state legislature are doing by temporarily suspending corporate tax exemptions and raising revenue for job-sustaining schools and infrastructure. Even more dramatically, it means doing what voters in Oregon did last week.

As deficits threatened their education and public health systems, Oregonians confronted two ballot initiatives -- one modestly raising taxes on annual income above $250,000, another hiking the state's $10 minimum corporate income tax.

Despite these measures exempting 97 percent of taxpayers, conservatives waged a vicious opposition campaign, trotting out billionaire Nike CEO Phil Knight as their celebrity spokesperson. But this time, the right's greed-is-good mantra failed. In a swing state that had killed every similar initiative since the 1930s, voters backed the tax increases -- and chose economic life.

No matter where we live, this same choice will soon face us all in some form. It is a choice embodied in President Obama's pragmatic initiative to end his predecessor's high-income tax breaks, a choice for which future local and federal elections will serve as proxies.

Inevitably, anti-tax zealots will attempt to obscure what this choice is about -- but the choice is now crystal clear.

Tax reform or draconian cuts, life or death -- the decision is ours.

The Drive to Eliminate Social Security in America

Original Link:

By Shamus Cooke

In Washington each new day brings a fresh call to “reform entitlement programs” — Social Security, Medicare, etc., (in Congress, the word “reform” now means to eliminate, or drastically reduce). Tackling Social Security has been on the to-do list of the corporate elite for years, and they’re not waiting any longer. After years of promoting this cause, conservative think tanks have now garnered solid support from the political establishment as a whole, which includes the Republican and Democratic parties.

The newest liberal recruit to the destruction of Social Security is Thomas Friedman, the influential columnist for The New York Times, who wrote recently:

“The president needs to persuade the country to invest in the future and pay for the past... We have to pay for more new schools and infrastructure than ever, while accepting more entitlement cuts than ever [Social Security, Medicare, etc.] when public trust in government is lower than ever.” (February 20, 2010).

The nonchalance which Friedman calls for cutting Social Security is indicative of the climate inWashington, where the last remnants of liberalism have been suffocated under the heavy demands of profit-hungry corporations, especially financial institutions and big banks. For political hacks like Friedman — and there are thousands of them — the ONLY solution to curing the U.S. deficit is cutting social services in general, while specifically targeting Social Security and Medicare.

But President Obama revealed these assertions to be lies, when he recently announced, “fixing Social Security would be simple.” The Associated Press explains:

“The system is funded with a tax on earnings, up to $109,000 a year. Obama says lifting that cap to tax a larger share of income would be one way to extend the system of monthly payments for retirees. It also would be unpopular with some.” (February 19, 2010).

This idea is indeed very unpopular with the very rich, who enjoy the privilege of paying no Social Security tax after the $109,000 threshold. Obama let an unpopular truth out of the bag when he brought up this fact; but conveniently for him, many mainstream news outlets decided not to amplify the President’s voice.

Obama, however, is unlikely to promote this “radical” idea much further, since he’s already decided on a method to undermine Social Security. Obama’s National Commission on Fiscal Responsibility and Reform is a bi-partisan group that is set to attack Social Security in a way where, in the end, both political parties will be blamed, so that neither party is overburdened with guilt. The Republicans — having made their contempt for Obama more than known — are salivating at the chance to cooperate.

The Washington Post recently announced that Republican leaders have agreed to Obama’s commission, while making no secret about the motive behind the grouping:

“…Obama's commission may lack the power to force the parties to reach consensus on a plan that is almost certain to require deep cuts to the popular entitlement programs — Social Security, Medicare and Medicaid — as well as significant tax increases…Building bipartisan consensus for such a plan would be particularly difficult in the run-up to the fall elections…” (February 19, 2010).

Since the foregone conclusions of Obama’s panel will be so unpopular, the Washington Post explains that they will be announced after the fall elections, in December 2010.

There will be little room in Obama’s commission for his above-mentioned tax increase on the rich. The Republicans have already announced that they will be solidly focusing on reducing services for the working class, not taxing the wealthy.

What will the “reformed” Social Security look like? Again, the Conservative think tanks have an idea waiting in the wings: personal savings accounts. In the same way that 401(k)s killed the pension, Social Security is set to be privatized for the mighty benefit of Wall Street.

Just last week, Republican Rep. Paul Ryan of Wisconsin announced a privatization plan that just happened to coincide with the creation of Obama’s commission. Michael Hiltzik of The Los Angles Times called Ryan’s plan “a roadmap for killing Social Security.” He writes:

“His [Ryan’s] privatization scheme would allow workers under 55 to place more than one-third of their current Social Security taxes into personal retirement accounts, with the ultimate goal of shifting most of that money into the stock market." (February 17, 2010).

By creating individual accounts, Wall Street is bolstered while the public nature of Social Security is undermined, since Social Security is a “pay as you go” program: if workers under 55 decide to invest in Wall Street, and not to pay into the Social Security fund, older workers don’t receive benefits. Social Security is thus dismantled.

Only workers who have money to save — and are gullible enough to trust their money to Wall Street — will put money in their new Social Security accounts.

The killing of Social Security and Medicare cannot be a one-act drama. If both programs were instantly destroyed, the public outrage would be uncontrollable. Obama’s deficit commission, then, will likely work to undermine the program in a variety of ways so that a future Congress can finish the job.

Therefore, Obama’s commission may recommend a variety of tactics to strip the program: instituting benefit cuts, increasing the age in which benefits are received, and introducing a limited option for personal accounts. Also possible is the implementation of a tiny, ineffectual tax on the rich to give the illusion that everybody is making “sacrifices.”

Whatever methods are used to attack Social Security, they will surely erode the last vestiges of credibility from the two-party system. Most Republicans are aware that their cooperation on the elimination of Social Security and Medicare will destroy what’s left of their party, which is why they are in the midst of creating a new, more radically right-wing party — now a mere tea party.

But the above scenarios are not inevitable, as the corporate establishment would have you think. The only reason Social Security and Medicare were not attacked earlier was the fear of working class reaction. That fear must be reintroduced.

A coalition of unions, pensioners, AARP members, and other retiree organizations must unite to oppose any cuts in Social Security, Medicare, Medicaid, and social services. To begin, these groups could include their demands in a "jobs for all" march on Washington , which many unions have been calling on the labor movement to organize.

Other community and student groups would be drawn into such a struggle, as could the general public. In place of cuts to essential services, a tax on the wealthy and corporations must be demanded, alongside of an end to foreign wars, bank bailouts, and other forms of corporate welfare. If such a coalition fails to materialize, the banks and corporations will continue to loot workers in this country unchallenged. The sooner the cut backs are organized against and smashed, the better.

Wednesday, February 24, 2010

Weiner: The Republican Party Is A Wholly Owned Subsidiary Of The Insurance Industry

Original Link:

By David Dayen

Anthony Weiner just made a fiery speech in the middle of the House debate on repealing the insurance industry’s anti-trust exemption. Angered by a motion to recommit, he lashed out, saying “the Republican Party is a wholly owned subsidiary of the insurance industry!” While continuing on this theme, Republicans asked that the words be taken down, an attempt to rule Weiner’s remarks out of order and ban him from speaking on the floor for the rest of the day. Weiner then asked unanimous consent to substitute remarks, and after withdrawing the initial ones, said “Every single Republican I have ever met in my entire life is a wholly owned subsidiary of the insurance industry!”

Republicans again asked for the words to be taken down.

At issue was a motion to recommit from the Republicans which would essentially scuttle the bill to repeal the insurance industry’s anti-trust exemption. The motion would have inserted a massive loophole that would have allowed insurers to collude with one another. Weiner said “You guys have chutzpah… they say that, well this isn’t going to do enough, but when we propose an alternative to provide competition, they’re against it… they said they want to have competition, and when we proposed requiring competition, the Republicans are against it!”

Eventually, Weiner withdrew his comments. But then he concluded, “there are winners and losers in the way we distribute health care,” and the insurance industry are among the winners, and the motion to recommit would keep that in place. He basically reinstated his “wholly owned subsidiary” comments in slightly more palatable words.

Tuesday, February 23, 2010

Fox News viewers overwhelmingly misinformed about health care reform proposals.

Original Link:

By Matt Corley

Last night, NBC News and the Wall Street Journal released a poll showing that “all the misinformation out there” about health care reform proposals in Congress is taking root with many Americans. For instance, 45 percent believe the false claim that legislation includes “death panels” while 55 percent believe the false claim that coverage will be extended to illegal immigrants. MSNBC’s First Read notes that self-identified viewers of Fox News are disproportionately misinformed:

Here’s another way to look at the misinformation: In our poll, 72% of self-identified FOX News viewers believe the health-care plan will give coverage to illegal immigrants, 79% of them say it will lead to a government takeover, 69% think that it will use taxpayer dollars to pay for abortions, and 75% believe that it will allow the government to make decisions about when to stop providing care for the elderly. But it would be incorrect to suggest that this is ONLY coming from conservative viewers who tune in to FOX. In fact, 41% of CNN/MSNBC viewers believe the misinformation about illegal immigrants, 39% believe the government takeover stuff, 40% believe the abortion misperception, and 30% believe the stuff about pulling the plug on grandma. What’s more, a good chunk of folks who get their news from broadcast TV (NBC, ABC, CBS) believe these things, too. This is about credible messengers using the media to get some of this misinformation out there, not as much about the filter itself. These numbers should worry Democratic operatives, as well as the news media that have been covering this story.

As ThinkProgress has pointed out, Fox News regularly distorts the truth about health care reform. Last week, Media Matters found that over a two day period opponents of health care reform outnumbered supporters by a 6-to-1 margin on Fox.

Monday, February 22, 2010

On Fiscal Conservative Hypocrites

Original Link:

By David Paul Kuhn

The majority party was pushing the largest entitlement expansion since the Great Society. The minority attempted byzantine legislative maneuvers to obstruct the vote. The majority never relented, even taking unprecedented action to ram the bill through Congress.

This was not 2009 but 2003. Republicans controlled the White House and Congress. And with that power they passed the $400 billion Medicare prescription drug bill.

Fast forward to February 2010. Here is Missouri Republican Sen. Kit Bond railing against Barack Obama: "While pretending to get serious about our spiraling deficit there is nothing in the budget to tackle the greatest threat – runaway entitlement spending."

Bond was one of the 42 Republican senators who voted for the historic Medicare entitlement expansion.

The 2003 Medicare bill was not simply any vote. It enlarged a signature program of active-state liberalism (a.k.a.- big government). On a major piece of legislation, GOP lawmakers had to choose between principle and party. And many of today's Republicans chose party.

Republicans were proud back then. That December, not long after George W. Bush signed the bill, then-Republican Majority Leader Bill Frist was on "Hardball." Chris Mathews asked, "What was your biggest achievement this year?"

Frist: "I would have to say Medicare. Eleven months ago, the odds of getting a Medicare prescription drug [bill] through were probably 400-to-one, 500-to-one. ... So that clearly is our biggest single accomplishment, if you look at the last 30 years in this country."

A $400 billion entitlement expansion as the "biggest single accomplishment" in three decades? Yes, that came from a Republican leader.

Little more than six years later, this ugly episode in GOP governance is instructive. Many of the Republicans who backed the historic big government bill are shamelessly sanctimonious about spending today.

Take a look at the Senate primary race in Arizona. Former Rep. JD Hayworth is challenging John McCain from the right. Hayworth has written that McCain's tenure is "not the record of a true conservative, much less a fiscal conservative."

Hayworth voted for the Medicare bill. McCain voted against it.

Fiscal conservative hypocrisy is so rampant we take it for granted. This is Eric Cantor, a Republican House leader, at a press conference two months ago: "Once again we see the Democrats asking to incur more debt at the same time they are claiming to be fiscally responsible; another day where it is more of, ‘Do as I say, not as I do.'"

Ahem. Cantor lobbied hard for the Medicare bill. And he too voted for it.

Republican Senate leader John Boehner has been a relentless critic of Democratic spending. For years Boehner has said and written statements like this: "Will we take the initiative to make the necessary yet difficult choices to save Medicare, or will we become the political equivalent of the ostrich, sticking our head in the sand?"

When Republicans had their big chance in power to make "difficult choices" on big government, Boehner also chose the $400 billion bill.

"To vote for something that large, and then say we have to do something to control entitlements is hypocritical," said Tom Schatz, a leading fiscal conservative watchdog.

The hypocrisy does not stop there. Republican leaders have hammered Democrats for attempting to "ram through" their health care bill, highlighting untoward bribes.

Flashback: It's 6 a.m. on a Saturday morning in 2003. The traditional 15-minute roll call vote is extended for two hours and 51 minutes. The Medicare bill was heading to a 218 to 216 defeat. Key arms were twisted. Promises of campaign money and support were made. It became a 220 to 215 victory.

The drug bill episode also included its share of Democratic double standards. Democratic leaders like Harry Reid lecture Republicans today about obstructionist tactics. But Democratic leaders attempted a filibuster and murkier parliamentary maneuvers to kill the Medicare bill.

This is why the drug bill captures both parties' hypocrisy. It explains why we have millions of conservatives more aligned to the Tea Party movement than to Republicans. It's why we have more independents than Democrats or Republicans. It's why a recent CNN poll found nearly two-thirds of Americans want a major third party.

It's also why Republican recriminations on spending today, from Boehner to Cantor to onetime Bush advisors, sound like sophism. We are the summation of our actions. And both parties' actions brought us to this crushing debt.

Lest we forget, fiscal conservative hypocrisy was not an aberration of the Bush presidency. Ronald Reagan never cut entitlements, even as the national debt nearly tripled on his watch.

Today, even with Republicans out of power, we read the same stories every year. A February 2009 McClatchy headline: "GOP hates earmarks – except the ones its members sponsor." A February 2010 Politico headline: "Fiscal hawks balk at budget cuts."

Americans crave leaders from both parties, who will sit down together and take the hard stands.

But until those leaders emerge, we will likely suffer the fiscal hypocrites. A Democratic president who said "I don't" believe in big government in the same 2009 budget address that heralded the return of big government. And we will suffer the Republicans who lecture, "do as I say, not as I do" about spending, without recalling what they did and what they said.

Last year, Obama raised the issue of getting "serious about entitlement reform." Boehner's office aptly responded to a reporter, ''talk is cheap in Washington." Indeed. But Republicans too often forget how much their cheap talk has cost us as well.

Sunday, February 21, 2010

Senate Republicans: Filibuster everything to win in November?

Senate Republicans are using the filibuster to limit and often derail Democrats' initiatives, paralyzing the Senate and making it nearly impossible to accomplish even the most routine matters.

The filibuster strategy "makes the Senate dysfunctional," said Mark Strand, the president of the Congressional Institute, a nonpartisan research group. That, in turn, blocks the Obama administration's agenda, but it also sours public opinion on Washington, with polls showing clear public disdain for Congress in particular. Republicans think voters will reward them for that in November.

However disruptive it is to governance, their extensive use of the filibuster — extended debate to block a decisive vote — could prove to be a valuable campaign asset this fall. Democrats used similar tactics in 2006 and won enough seats to gain a Senate majority. Now Republicans hope it's their turn.

Since Barack Obama became president nearly 13 months ago, Republicans have made it clear that 60 votes — the number needed to cut off debate in the 100-member Senate — are required to pass not only major Democratic programs, but also many routine proposals. (Democrats controlled 60 Senate seats from July until last week, when Sen. Scott Brown, R-Mass., was sworn in.)

"Republicans have ratcheted use of the filibuster up to completely unheard of levels. Look at the things that the House (of Representatives) has passed that can't make it through the Senate. The list just keeps growing," said Norman Ornstein, an expert on Congress at the American Enterprise Institute, a center-right policy organization.

The list includes legislation to overhaul health care, which has stalled and isn't a good bet to be revived; global warming legislation; and a bill to overhaul financial regulation. Thursday, Senate Majority Leader Harry Reid of Nevada scaled back a bipartisan jobs bill, fearing that a larger package would get tied up in a filibuster. He also filed a "cloture petition," meaning he plans a vote to cut off a filibuster if one starts.

The Senate's 2009-10 votes to cut off filibusters have come on a wide variety of issues, big and small: Health care, domestic and defense spending, and 15 Obama nominees. While 38 of the 42 votes to cut off debate were successful, the debates about debates tie up the Senate and often prevent measures from ever reaching the floor.

"Republicans are gambling they can convince the American people Democrats can't get much done, and at the moment, their gamble is paying off," said former Sen. Bob Kerrey, a Nebraska Democrat and the president of the New School in New York.

Filibusters weren't supposed to be this effective in the modern era. Senate Rule 22 used to require 67 votes to shut one off. However, outrage at filibusters against civil-rights legislation in the 1950s and 1960s, plus the post-Watergate clean-up-government mood, led to the adoption in 1975 of a 60-vote threshold for ending filibusters.

Ironically, that change helped popularize them.

"Filibusters seemed less Draconian," said Frank Mackaman, the executive director of the Dirksen Congressional Center, a nonprofit research group in Pekin, Ill. "They used to be used for the most important issues, but that's changed."

The evolution was gradual; for decades bipartisanship was still valued. Ronald Reagan's 1981 tax cuts attracted lawmakers from both parties, and even in the early George W. Bush years, his tax cuts, education plan and bid to wage war in Iraq won bipartisan support.

The rise in filibusters began in earnest in 1987, said Senate historian Don Ritchie, when Majority Leader Robert Byrd, D-W.Va., began using the tactic more frequently. Democrats had regained control of the Senate for the first time in the Reagan administration, and Byrd often felt he could attract enough Republicans to get his agenda through.

In the 1990s, the two parties became more polarized, changing the nature of the filibuster. "We used to say a working majority was 55, because you could always get five from the other party on various issues," Ritchie said. "But that middle ground kept getting smaller and smaller."

In addition, interest groups began watching filibuster votes more closely, so "members are rewarded for blocking legislation; it's a badge of courage," Mackaman said.

The biggest change came during the 2005-06 session of Congress when Democrats ramped up use of the filibuster. The party controlled 45 seats and sensed the tactic could spur political gains in 2006. Democrats threatened or used filibusters on a wide variety of issues, including legislation affecting campaign finance, abortion, war spending, the Patriot Act, and the nominations of Samuel Alito to the Supreme Court and Dirk Kempthorne as Interior Secretary.

Democrats gained six Senate seats in 2006, capturing the majority, and for the next two years the unified, energized party used the tactic to defy increasingly unpopular President George W. Bush. The Senate took a record 112 votes to cut off debate in the 2007-08 session, about 18 percent of all Senate votes.

The current Congress is on a somewhat slower pace; so far, the 42 votes are about 10 percent of the total. While Democrats insist that Republicans are being obstructionist, GOP senators have a different view.

"It strikes me that Democrats are looking for someone to blame for their failed agenda that they can't even get Democrats, let alone the American people, to support," said Sen. Orrin Hatch, R-Utah, a 33-year Senate veteran.

Clearly, however, Republicans think they'll gain politically at the polls, hoping that an annoyed public will punish those in power — Democrats — in this year's midterm elections.

"Being unable to stop filibusters can make the party in power look ineffective," said Julian Zelizer, a professor of history and public affairs at Princeton University, who's written extensively on the filibuster. "The Republican goal now is to make Obama look like an ineffective leader."

To that end, Republicans appear to be taking the filibuster to a new level. They've filibustered 15 nominees to mid-level jobs that formerly got routine approval; all ultimately were confirmed except for Craig Becker, whom Obama nominated for the National Labor Relations Board.

Tuesday's bid to cut off debate on Becker fell eight votes short and infuriated many Democrats, who saw the GOP blockage as "unprecedented," as Judiciary Committee Chairman Patrick Leahy, D-Vt., put it.

Sen. Tom Harkin, D-Iowa, is leading a bid to change the filibuster rule so that debate could end if 51 senators agree. However, Reid said that's unlikely.

"It takes 67 votes (to make a rules change) and that kind of answers the question," Reid said Thursday.

Anyway, added Nathan Kelly, a faculty fellow at the Howard Baker Center for Public Policy in Tennessee, "Republicans are not going to be in the minority forever, and they've legitimized the extensive use of the filibuster for Democrats when they're in the minority."

California Death Spiral

Original Link:


Health insurance premiums are surging — and conservatives fear that the spectacle will reinvigorate the push for reform. On the Fox Business Network, a host chided a vice president of WellPoint, which has told California customers to expect huge rate increases: “You handed the politicians red meat at a time when health care is being discussed. You gave it to them!”

Indeed. Sky-high rate increases make a powerful case for action. And they show, in particular, that we need comprehensive, guaranteed coverage — which is exactly what Democrats are trying to accomplish.

Here’s the story: About 800,000 people in California who buy insurance on the individual market — as opposed to getting it through their employers — are covered by Anthem Blue Cross, a WellPoint subsidiary. These are the people who were recently told to expect dramatic rate increases, in some cases as high as 39 percent.

Why the huge increase? It’s not profiteering, says WellPoint, which claims instead (without using the term) that it’s facing a classic insurance death spiral.

Bear in mind that private health insurance only works if insurers can sell policies to both sick and healthy customers. If too many healthy people decide that they’d rather take their chances and remain uninsured, the risk pool deteriorates, forcing insurers to raise premiums. This, in turn, leads more healthy people to drop coverage, worsening the risk pool even further, and so on.

Now, what WellPoint claims is that it has been forced to raise premiums because of “challenging economic times”: cash-strapped Californians have been dropping their policies or shifting into less-comprehensive plans. Those retaining coverage tend to be people with high current medical expenses. And the result, says the company, is a drastically worsening risk pool: in effect, a death spiral.

So the rate increases, WellPoint insists, aren’t its fault: “Other individual market insurers are facing the same dynamics and are being forced to take similar actions.” Indeed, a report released Thursday by the department of Health and Human Services shows that there have been steep actual or proposed increases in rates by a number of insurers.

But here’s the thing: suppose that we posit, provisionally, that the insurers aren’t the main villains in this story. Even so, California’s death spiral makes nonsense of all the main arguments against comprehensive health reform.

For example, some claim that health costs would fall dramatically if only insurance companies were allowed to sell policies across state lines. But California is already a huge market, with much more insurance competition than in other states; unfortunately, insurers compete mainly by trying to excel in the art of denying coverage to those who need it most. And competition hasn’t averted a death spiral. So why would creating a national market make things better?

More broadly, conservatives would have you believe that health insurance suffers from too much government interference. In fact, the real point of the push to allow interstate sales is that it would set off a race to the bottom, effectively eliminating state regulation. But California’s individual insurance market is already notable for its lack of regulation, certainly as compared with states like New York — yet the market is collapsing anyway.

Finally, there have been calls for minimalist health reform that would ban discrimination on the basis of pre-existing conditions and stop there. It’s a popular idea, but as every health economist knows, it’s also nonsense. For a ban on medical discrimination would lead to higher premiums for the healthy, and would, therefore, cause more and bigger death spirals.

So California’s woes show that conservative prescriptions for health reform just won’t work.

What would work? By all means, let’s ban discrimination on the basis of medical history — but we also have to keep healthy people in the risk pool, which means requiring that people purchase insurance. This, in turn, requires substantial aid to lower-income Americans so that they can afford coverage.

And if you put all of that together, you end up with something very much like the health reform bills that have already passed both the House and the Senate.

What about claims that these bills would force Americans into the clutches of greedy insurance companies? Well, the main answer is stronger regulation; but it would also be a very good idea, politically as well as substantively, for the Senate to use reconciliation to put the public option back into its bill.

But the main point is this: California’s death spiral is a reminder that our health care system is unraveling, and that inaction isn’t an option. Congress and the president need to make reform happen — now.

Wall Street's Bailout Hustle

Original Link:


On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.

The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a "bailout tax" on banks. Maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.

Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative."

Translation: We made a shitload of money last year because we're so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.

Goldman wasn't alone. The nation's six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. "What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?" asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.

Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?

The only reason such apathy exists, however, is because there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?

The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.

The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.

That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."

To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don't so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids' playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen:


By now, most people who have followed the financial crisis know that the bailout of AIG was actually a bailout of AIG's "counterparties" — the big banks like Goldman to whom the insurance giant owed billions when it went belly up.

What is less understood is that the bailout of AIG counter-parties like Goldman and Société Générale, a French bank, actually began before the collapse of AIG, before the Federal Reserve paid them so much as a dollar. Nor is it understood that these counterparties actually accelerated the wreck of AIG in what was, ironically, something very like the old insurance scam known as "Swoop and Squat," in which a target car is trapped between two perpetrator vehicles and wrecked, with the mark in the game being the target's insurance company — in this case, the government.

This may sound far-fetched, but the financial crisis of 2008 was very much caused by a perverse series of legal incentives that often made failed investments worth more than thriving ones. Our economy was like a town where everyone has juicy insurance policies on their neighbors' cars and houses. In such a town, the driving will be suspiciously bad, and there will be a lot of fires.

AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to "selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars."

Goldman often "insured" some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn't required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat.

Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped.

Still, the trick for Goldman was: how to collect the insurance money. As AIG headed into a tailspin that fateful summer of 2008, it looked like the beleaguered firm wasn't going to have the money to pay off the bogus insurance. So Goldman and other banks began demanding that AIG provide them with cash collateral. In the 15 months leading up to the collapse of AIG, Goldman received $5.9 billion in collateral. Société Générale, a bank holding lots of mortgage-backed crap originally underwritten by Goldman, received $5.5 billion. These collateral demands squeezing AIG from two sides were the "Swoop and Squat" that ultimately crashed the firm. "It put the company into a liquidity crisis," says Eric Dinallo, who was intimately involved in the AIG bailout as head of the New York State Insurance Department.

It was a brilliant move. When a company like AIG is about to die, it isn't supposed to hand over big hunks of assets to a single creditor like Goldman; it's supposed to equitably distribute whatever assets it has left among all its creditors. Had AIG gone bankrupt, Goldman would have likely lost much of the $5.9 billion that it pocketed as collateral. "Any bankruptcy court that saw those collateral payments would have declined that transaction as a fraudulent conveyance," says Barry Ritholtz, the author of Bailout Nation. Instead, Goldman and the other counterparties got their money out in advance — putting a torch to what was left of AIG. Fans of the movie Goodfellas will recall Henry Hill and Tommy DeVito taking the same approach to the Bamboo Lounge nightclub they'd been gouging. Roll the Ray Liotta narration: "Finally, when there's nothing left, when you can't borrow another buck . . . you bust the joint out. You light a match."

And why not? After all, according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG — again, money it almost certainly would not have seen a fraction of had AIG proceeded to a normal bankruptcy. Along with the collateral it pocketed, that's $19 billion in pure cash that Goldman would not have "earned" without massive state intervention. How's that $13.4 billion in 2009 profits looking now? And that doesn't even include the direct bailouts of Goldman Sachs and other big banks, which began in earnest after the collapse of AIG.


In the usual "DollarStore" or "Big Store" scam — popularized in movies like The Sting — a huge cast of con artists is hired to create a whole fake environment into which the unsuspecting mark walks and gets robbed over and over again. A warehouse is converted into a makeshift casino or off-track betting parlor, the fool walks in with money, leaves without it.

The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark. In this case, a pair of investment banks were dressed up to look like commercial banks overnight, and it was the taxpayer who walked in and lost his shirt, confused by the appearance of what looked like real Federal Reserve officials minding the store.

Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.

Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of "free money" by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.

When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. "They had no other way to raise capital at that moment, meaning they were on the brink of insolvency," says Nomi Prins, a former managing director at Goldman Sachs. "The Fed was the only shot."

In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.

"You're borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way," says the manager of one prominent hedge fund. "It's free money." Which goes a long way to explaining Goldman's enormous profits last year. But all that free money was amplified by another scam:


At one point or another, pretty much everyone who takes drugs has been burned by this one, also known as the "Rocks in the Box" scam or, in its more elaborate variations, the "Jamaican Switch." Someone sells you what looks like an eightball of coke in a baggie, you get home and, you dumbass, it's baby powder.

The scam's name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he'd miss the switch, then get home and find a tied-up cat in there instead. Hence the expression "Don't let the cat out of the bag."

The "Pig in the Poke" scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.

One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. "All of a sudden, banks were allowed to post absolute shit to the Fed's balance sheet," says the manager of the prominent hedge fund.

The Fed spelled it out on September 14th, 2008, when it changed the collateral rules for one of its first bailout facilities — the Primary Dealer Credit Facility, or PDCF. The Fed's own write-up described the changes: "With the Fed's action, all the kinds of collateral then in use . . . including non-investment-grade securities and equities . . . became eligible for pledge in the PDCF."

Translation: We now accept cats.

The Pig in the Poke also came into play in April of last year, when Congress pushed a little-known agency called the Financial Accounting Standards Board, or FASB, to change the so-called "mark-to-market" accounting rules. Until this rule change, banks had to assign a real-market price to all of their assets. If they had a balance sheet full of securities they had bought at $3 that were now only worth $1, they had to figure their year-end accounting using that $1 value. In other words, if you were the dope who bought a cat instead of a pig, you couldn't invite your shareholders to a slate of pork dinners come year-end accounting time.

But last April, FASB changed all that. From now on, it announced, banks could avoid reporting losses on some of their crappy cat investments simply by declaring that they would "more likely than not" hold on to them until they recovered their pig value. In short, the banks didn't even have to actually hold on to the toxic shit they owned — they just had to sort of promise to hold on to it.

That's why the "profit" numbers of a lot of these banks are really a joke. In many cases, we have absolutely no idea how many cats are in their proverbial bag. What they call "profits" might really be profits, only minus undeclared millions or billions in losses.

"They're hiding all this stuff from their shareholders," says Ritholtz, who was disgusted that the banks lobbied for the rule changes. "Now, suddenly banks that were happy to mark to market on the way up don't have to mark to market on the way down."


One of the great innovations of Victor Lustig, the legendary Depression-era con man who wrote the famous "Ten Commandments for Con Men," was a thing called the "Rumanian Box." This was a little machine that a mark would put a blank piece of paper into, only to see real currency come out the other side. The brilliant Lustig sold this Rumanian Box over and over again for vast sums — but he's been outdone by the modern barons of Wall Street, who managed to get themselves a real Rumanian Box.

How they accomplished this is a story that by itself highlights the challenge of placing this era in any kind of historical context of known financial crime. What the banks did was something that was never — and never could have been — thought of before. They took so much money from the government, and then did so little with it, that the state was forced to start printing new cash to throw at them. Even the great Lustig in his wildest, horniest dreams could never have dreamed up this one.

The setup: By early 2009, the banks had already replenished themselves with billions if not trillions in bailout money. It wasn't just the $700 billion in TARP cash, the free money provided by the Fed, and the untold losses obscured by accounting tricks. Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed — meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let insolvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. Goldman borrowed $29 billion on the government's good name, J.P. Morgan Chase $38 billion, and Bank of America $44 billion. "TLGP," says Prins, the former Goldman manager, "was a big one."

Collectively, all this largesse was worth trillions. The idea behind the flood of money, from the government's standpoint, was to spark a national recovery: We refill the banks' balance sheets, and they, in turn, start to lend money again, recharging the economy and producing jobs. "The banks were fast approaching insolvency," says Rep. Paul Kanjorski, a vocal critic of Wall Street who nevertheless defends the initial decision to bail out the banks. "It was vitally important that we recapitalize these institutions."

But here's the thing. Despite all these trillions in government rescues, despite the Fed slashing interest rates down to nothing and showering the banks with mountains of guarantees, Goldman and its friends had still not jump-started lending again by the first quarter of 2009. That's where those nuclear-powered balls of Lloyd Blankfein came into play, as Goldman and other banks basically threatened to pick up their bailout billions and go home if the government didn't fork over more cash — a lot more. "Even if the Fed could make interest rates negative, that wouldn't necessarily help," warned Goldman's chief domestic economist, Jan Hatzius. "We're in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more."

Translation: You can lower interest rates all you want, but we're still not fucking lending the bailout money to anyone in this economy. Until the government agreed to hand over even more goodies, the banks opted to join the rest of the "private sector" and "save" the taxpayer aid they had received — in the form of bonuses and compensation.

The ploy worked. In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion "real" dollars.

The government used some of that freshly printed money to prop itself up by purchasing Treasury bonds — a desperation move, since Washington's demand for cash was so great post-Clusterfuck '08 that even the Chinese couldn't buy U.S. debt fast enough to keep America afloat. But the Fed used most of the new cash to buy mortgage-backed securities in an effort to spur home lending — instantly creating a massive market for major banks.

And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.


All of that Rumanian box paper was made even more valuable by running it through the next stage of the grift. Michael Masters, one of the country's leading experts on commodities trading, compares this part of the scam to the poker game in the Bill Murray comedy Stripes. "It's like that scene where John Candy leans over to the guy who's new at poker and says, 'Let me see your cards,' then starts giving him advice," Masters says. "He looks at the hand, and the guy has bad cards, and he's like, 'Bluff me, come on! If it were me, I'd bet everything!' That's what it's like. It's like they're looking at your cards as they give you advice."

In more ways than one can count, the economy in the bailout era turned into a "Big Mitt," the con man's name for a rigged poker game. Everybody was indeed looking at everyone else's cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.

At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. The Treasury Borrowing Advisory Committee has a J.P. Morgan executive as its chairman and a Goldman executive as its vice chairman, while the board advising the Fed includes bankers from Capital One and Bank of New York Mellon. That means that, in addition to getting great gobs of free money, the banks were also getting clear signals about when they were getting that money, making it possible to position themselves to make the appropriate investments.

One of the best examples of the banks blatantly gambling, and winning, on government moves was the Public-Private Investment Program, or PPIP. In this bizarre scheme cooked up by goofball-geek Treasury Secretary Tim Geithner, the government loaned money to hedge funds and other private investors to buy up the absolutely most toxic horseshit on the market — the same kind of high-risk, high-yield mortgages that were most responsible for triggering the financial chain reaction in the fall of 2008. These satanic deals were the basic currency of the bubble: Jobless dope fiends bought houses with no money down, and the big banks wrapped those mortgages into securities and then sold them off to pensions and other suckers as investment-grade deals. The whole point of the PPIP was to get private investors to relieve the banks of these dangerous assets before they hurt any more innocent bystanders.

But what did the banks do instead, once they got wind of the PPIP? They started buying that worthless crap again, presumably to sell back to the government at inflated prices! In the third quarter of last year, Goldman, Morgan Stanley, Citigroup and Bank of America combined to add $3.36 billion of exactly this horseshit to their balance sheets.

This brazen decision to gouge the taxpayer startled even hardened market observers. According to Michael Schlachter of the investment firm Wilshire Associates, it was "absolutely ridiculous" that the banks that were supposed to be reducing their exposure to these volatile instruments were instead loading up on them in order to make a quick buck. "Some of them created this mess," he said, "and they are making a killing undoing it."


Here's the thing about our current economy. When Goldman and Morgan Stanley transformed overnight from investment banks into commercial banks, we were told this would mean a new era of "significantly tighter regulations and much closer supervision by bank examiners," as The New York Times put it the very next day. In reality, however, the conversion of Goldman and Morgan Stanley simply completed the dangerous concentration of power and wealth that began in 1999, when Congress repealed the Glass-Steagall Act — the Depression-era law that had prevented the merger of insurance firms, commercial banks and investment houses. Wall Street and the government became one giant dope house, where a few major players share valuable information between conflicted departments the way junkies share needles.

One of the most common practices is a thing called front-running, which is really no different from the old "Wire" con, another scam popularized in The Sting. But instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business.

Say you're working for the commodities desk of a big investment bank, and a major client — a pension fund, perhaps — calls you up and asks you to buy a billion dollars of oil futures for them. Once you place that huge order, the price of those futures is almost guaranteed to go up. If the guy in charge of asset management a few desks down from you somehow finds out about that, he can make a fortune for the bank by betting ahead of that client of yours. The deal would be instantaneous and undetectable, and it would offer huge profits. Your own client would lose money, of course — he'd end up paying a higher price for the oil futures he ordered, because you would have driven up the price. But that doesn't keep banks from screwing their own customers in this very way.

The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. "Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research," the disclosure reads. "Our asset-management area, our proprietary-trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research."

Banks like Goldman admit this stuff openly, despite the fact that there are securities laws that require banks to engage in "fair dealing with customers" and prohibit analysts from issuing opinions that are at odds with what they really think. And yet here they are, saying flat-out that they may be issuing an opinion at odds with what they really think.

To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as "flash trading" — really is. "Flash trading is nothing more than computerized front-running," says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.

Over the summer, Goldman suffered an embarrassment on that score when one of its employees, a Russian named Sergey Aleynikov, allegedly stole the bank's computerized trading code. In a court proceeding after Aleynikov's arrest, Assistant U.S. Attorney Joseph Facciponti reported that "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."

Six months after a federal prosecutor admitted in open court that the Goldman trading program could be used to unfairly manipulate markets, the bank released its annual numbers. Among the notable details was the fact that a staggering 76 percent of its revenue came from trading, both for its clients and for its own account. "That is much, much higher than any other bank," says Prins, the former Goldman managing director. "If I were a client and I saw that they were making this much money from trading, I would question how badly I was getting screwed."

Why big institutional investors like pension funds continually come to Wall Street to get raped is the million-dollar question that many experienced observers puzzle over. Goldman's own explanation for this phenomenon is comedy of the highest order. In testimony before a government panel in January, Blankfein was confronted about his firm's practice of betting against the same sorts of investments it sells to clients. His response: "These are the professional investors who want this exposure."

In other words, our clients are big boys, so screw 'em if they're dumb enough to take the sucker bets I'm offering.


Not many con men are good enough or brazen enough to con the same victim twice in a row, but the few who try have a name for this excellent sport: reloading. The usual way to reload on a repeat victim (called an "addict" in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year.

It's important to remember that the housing bubble itself was a classic confidence game — the Ponzi scheme. The Ponzi scheme is any scam in which old investors must be continually paid off with money from new investors to keep up what appear to be high rates of investment return. Residential housing was never as valuable as it seemed during the bubble; the soaring home values were instead a reflection of a continual upward rush of new investors in mortgage-backed securities, a rush that finally collapsed in 2008.

But by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing into the most dangerous and destructive investments all over again. Wall Street was going for the reload.

A lot of this was the government's own fault, of course. By slashing interest rates to zero and flooding the market with money, the Fed was replicating the historic mistake that Alan Greenspan had made not once, but twice, before the tech bubble in the early 1990s and before the housing bubble in the early 2000s. By making sure that traditionally safe investments like CDs and savings accounts earned basically nothing, thanks to rock-bottom interest rates, investors were forced to go elsewhere to search for moneymaking opportunities.

Now we're in the same situation all over again, only far worse. Wall Street is flooded with government money, and interest rates that are not just low but flat are pushing investors to seek out more "creative" opportunities. (It's "Greenspan times 10," jokes one hedge-fund trader.) Some of that money could be put to use on Main Street, of course, backing the efforts of investment-worthy entrepreneurs. But that's not what our modern Wall Street is built to do. "They don't seem to want to lend to small and medium-sized business," says Rep. Brad Sherman, who serves on the House Financial Services Committee. "What they want to invest in is marketable securities. And the definition of small and medium-sized businesses, for the most part, is that they don't have marketable securities. They have bank loans."

In other words, unless you're dealing with the stock of a major, publicly traded company, or a giant pile of home mortgages, or the bonds of a large corporation, or a foreign currency, or oil futures, or some country's debt, or anything else that can be rapidly traded back and forth in huge numbers, factory-style, by big banks, you're not really on Wall Street's radar.

So with small business out of the picture, and the safe stuff not worth looking at thanks to the Fed's low interest rates, where did Wall Street go? Right back into the shit that got us here.

One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the crap toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.

So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.

"I said, 'Fuck it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"

This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street.

The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. "Summarizing our views," the bank wrote, "we expect robust flows . . . to dominate fundamentals." In other words: This stuff is crap, but everyone's buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.

To sum up, this is what Lloyd Blankfein meant by "performance": Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn't deserve billions in bonuses for doing all that?

Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.

That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."

More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.