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Paul Buchheit
NationofChange / Op-Ed
Published: Monday 20 February 2012
“Citizens for Tax Justice reports that the 280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010.”

The Definition of Insanity: Deregulating Over and Over and Expecting Different Results

A cynic might argue that business leaders and their friends in Congress weren't expecting different results.

In either case, we've become a bipolar nation, 1% manic and 99% depressive. Our affliction is caused by a 30-year experiment in the dismal economics of delusion. Deregulation for corporations and tax cuts for the wealthy have defined conservative policy since the 1970s, when University of Chicago economist Arthur Laffer convinced Dick Cheney and other Republican officials that lowering taxes on the rich would generate more revenue.

Ronald Reagan complied in the 1980s by dramatically reducing the top marginal tax rate. And while declaring government "the problem" he eased a half-century of protective regulations on mortgage lending.

In the Clinton years, Larry Summers and Alan Greenspan and Phil Gramm and others lobbied against regulations on the derivatives that evolved into toxic assets a decade later. A lonely voice of opposition, Commodities Trading Commission head Brooksley Born, was denounced by the powerful Treasury men, who were shocked by her affront to the nation's "financial stability."

The repeal of the Glass-Steagall Act in 1999 removed long-held protections for commercial bank deposits, as the newly liberated financial institutions now coveted the unprecedented profits in high-risk investments. Soon after, the 2000s brought us the Bush tax cuts, which have cost the nation over two trillion dollars, and a further assault on the Securities and Exchange Commission by Goldman Sachs and other financial institutions committed to "self-regulation."

So what's the result of all this? The financial collapse of 2008, of course. But it goes way beyond that. Tax cuts and deregulation led to the worst inequality since the Great Depression, with the top 1% nearly tripling their income while wages leveled off. The richest 10% own 80% of the "unearned income" that gets taxed at rates lower than those for teachers or health care workers. Corporate profits are at a record high, having accounted for 88% of the recovery after the 2008-9 recession.

Yet taxes on corporate income have been shrinking dramatically. The total tax revenue derived from corporate taxes has dropped from about 20% in the 1960s to under 9% in 2010. From 2008 to 2010, the top 100 U.S. corporations paid only 12.2% of their income in taxes, and thirty of them paid nothing at all.

The lack of SEC regulation has also allowed corporate America to seek tax dodges beyond our borders. Citizens for Tax Justice reports that the 280 most profitable U.S. corporations sheltered half their profits from taxes between 2008 and 2010. The "Ugland House," a single building in the Cayman Islands, is now the 'home' of 18,857 corporations. While the worldwide average corporate profit per employee is $40,000, in Bermuda in 2007 it was $5.4 million per employee.

But corporate heads, especially in the financial sector, keep lobbying for more deregulation, often infiltrating the regulatory agencies with former employees to get their point across. The Washington Post reported on the clamor by business leaders to link regulations to job losses. Congress listens. "Dodd-Frank obviously is a disaster," proclaimed Ron Paul. "But Sarbanes-Oxley costs a trillion dollars, too. Let's repeal that, too!"

Ironically, even earnest attempts at regulation can be foiled by big business. The Daily notes that "Stringent regulations tend to protect incumbent firms from...innovative start-ups that could drive them out of business...Google, Apple and other technology giants, for example, have spent billions of dollars on software patents to defend themselves against pointless litigation. Shoestring entrepreneurs can't even begin to do the same, so many new tech firms are never established."

We don't have the political will to regulate greed in a reasonable and effective manner. Instead, wealthy Americans continue to insist that more for them is better for everyone, and that the system will work if we just leave it alone. As Rachel Marsden said, "If capitalism is perceived to not be working in America...it's because the system isn't capitalist enough."

After 30 years of economic devastation for most Americans, it's sad to watch our rapid fall from sanity.



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ABOUT Paul Buchheit

Paul Buchheit is a college teacher with formal training in language development and cognitive science. He is the founder and developer of social justice and educational websites (UsAgainstGreed.org, RappingHistory.org, PayUpNow.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.

Well golly! As Abraham

Well golly! As Abraham Lincoln was wont to say, 'A vast gulf separates good, sound sense from good-sounding sense.' As has more often than not been the case in these postings on "Nation of Change," the work here decidedly illustrates the wrong end of Lincoln's observation.

Historically, analytically, and dynamically, the problem that "the 99%" face has little or nothing to do with Glass-Steagall's repeal as such. Our problems come from the nearly universal prevalence of capitalist power, number one, and, more critically, from our own failure to seek to understand, critique, and seek alternatives to that power.

This humble correspondent has petitioned "Nation of Change" repeatedly for a chance, as one perspective that is not getting a hearing here, to make this case as a commentator. Alas, not even the courtesy of a rejection has been forthcoming.

This humble correspondent did participate in Occupy discourse, however, including one exchange about this issue. One installment of that dialog appears here now, which those reading along would do well to consider.

Do we want a thoroughgoing and in-depth understanding? Inquiring minds would like to know. Here is the material promised.

"Hey there!

This is Jim Hickey. I promised that I would write. We spoke yesterday briefly about our differing perspectives on the current pass that humankind faces.

I hope that you realize that I have no organization, no budget, no real support from any quarter. I am the classic ‘public intellectual.’ I produce the research and narrative that I do because, along with Bill Russell, I believe that ‘understanding is more important than being understood.’ I also continue investigating and writing because I recognize deficiencies, or what look glaringly like gaps and miscues, in the way that folks conceive of many of our current problems.

This second rationale accounts for my reaching out to you. To start, I want to restate, in very brief précis, what your position is. First of all, you believe that the repeal of Glass-Steagall, circa 1999, was substantially, and perhaps devastatingly, harmful to the interests of working class—you might choose to use the label ‘middle-class’—Americans. Second, you contend that reinstating the Act would reenliven, rejuvenate, and otherwise powerfully assist in protecting the interests of working class Americans.

In relation to the first point, my response is that your focus is far too narrow. Understanding the travails of contemporary folks in terms of one piece of legislation is, at best, not very helpful. However, this is a discussion for another day. I have done loads of research on this point, but it is not easy to present quickly; a nexus for conversation that is more collegial and longer lasting than a brief e-mail would be necessary to develop this complex and multifaceted point.

In regard to the second point, although the Great Depression was within the years that I studied for my undergraduate and graduate work in American history, Glass-Steagall itself was never a focal point of my research. Thus, I’ve spent a few hours conducting searches and coming up with citations.

What I’ve come up with, a hundred hits or so that I’ve copied, downloaded, or otherwise catalogued, with many, many thousands of other sources left behind, either very incompletely digested or ignored, is evidence that persuasively, or in my mind dispositively, undermines an explicit premise of your argument. That premise is that a key Glass-Steagall purpose and function, from its inception to its formal overturning, was to protect and assist working people’s interests. Of course, were this not a premise that you were willing to defend, then the choice to prioritize Glass-Steagall’s return, as a necessity for working people, would be anomalous indeed.

In their article, “Understanding America’s Steps Toward Financial Capitalism,” George Mason University’s Carlos Ramirez and Berkeley’s J. Bradford De Long make a powerful empirical case that your position regarding Glass Steagall is untenable(http://www.jstor.org/pss/30026186). Here is a screen shot of their abstract for the piece.
(READERS WILL HAVE TO GO TO THE LINK, IF THEY LIKE)

Again, in only a matter of hours, I generated a dozen or more similar citations, only a few of which were radical or Marxist, and some of which were, like Ramirez and De Long, thoroughly mainstream. In light of such findings, what can you produce that demonstrates something counter to this point, something that shows how the actual legislators and administrators who first propounded Glass Steagall really wanted to help regular people, and not banks, insurance companies, and other ruling class institutions?

In relation to the principals behind this legislation, I can argue, again persuasively or dispositively, that they were far from ‘populist’ in their primary orientation. I will provided some citations for you to peruse in this regard, concerning Carter Glass, a close associate of Woodrow Wilson and for two years Secretary of the Treasury of the U.S., prior to becoming Virginia’s Senator and pushing for the Banking reforms ten years later that we’ve been discussing.

Here are the pieces:
http://www.semp.us/publications/biot_reader.php?BiotID=605
http://www.semp.us/publications/biot_reader.php?BiotID=606
http://www.semp.us/publications/biot_reader.php?BiotID=607
The first evidences Glass’s role in the behind-the-scenes and up-front machinations for the formation of the Federal Reserve. The second proffers data that Glass’s position on the Banking Reform Act, i.e., that investment banks and depository institutions be separate, was a complex phenomenon with many stakeholders’ interests in play over and above the populist appearance of the Act. The third shows that from the outset, financiers and ideological ‘free marketeers’ successfully sought to divert and undercut any truly populist potential that the Act might have had, an evisceration that they succeeded in finalizing as much as ten years before the Act’s legal repeal.

I assume that you’ve had occasion to read the FDIC’s internal history of its first fifty years, http://www.fdic.gov/about/history/index.html. If not, it contains instructive and important information for understanding these issues, including lists of the ruling class bankers and businessmen, who universally have been in charge of the institutionalization of Glass Steagall, as representatives of their own class interests rather than serving the objectives of the likes of you and me.

Finally, for now, I would highly recommend that you read various Government Accounting Office studies of the past 20 years. Many of these lay a foundation for a rich and comprehensive understanding of how financial regulation works, almost always as a way of advancing the business of big-capital rather than as any kind of populist enterprise or program.

When push-came-to-shove in our dialog yesterday, you modified your original assertions about Glass Steagall’s supposed benefits to common folk. You said that these benefits would accrue from the support that Glass Steagall would provide to ‘more local’ financial institutions than the international banking operations that currently control plus or minus 90% of the banking and finance business around the globe.

I asked if Buncombe Bank and Trust was such a ‘more local institution.’ You weren’t sure. When you are sure, I’d be happy to respond further to this point as well. It is unsupportable. Such institutions as BB&T, and other participants in the contemporary finance-capital scene, overwhelmingly consist of “the one per cent” whom the “99%” at Occupy Wall Street, and Asheville, say they want to replace. In the words of a pal of mine, “they are not your friends.”

You also want to rid the United States of what you see as the yoke of NAFTA. To those who might find the idea interesting and instructive, I could also demonstrate that such an action—even moreso, and in even worse fashion than a bringing back of Glass-Steagall—would have counterproductive, or even disastrous, results for working-class, or middle-class Americans.

All of your top main concerns revolve around the desirability of a strong regulatory structure for economic matters. On this, as you pointed out yesterday, we are already in basic agreement. The disagreements that we have concern what sorts of regulations are necessary, who should be the regulators, how will the administration of the regulation take place, and so on.

My top priority, what seems to me the focus that we should not lose sight of, is to continue discussions such as these and the many others that O.W.S. has generated; moreover, this continuity should acknowledge that our goal is to seek the power of regulating the economy ourselves, so that the plans and processes that administer finance and trade are actually under our control, rather than being the bailiwick of rich rulers, or their political functionaries, whom we putatively elect. I’ll look forward to hearing from you, should you choose to respond."

Nice. Keep on trying SDJ.

Nice. Keep on trying SDJ.

@spindoctorjimbo Good

@spindoctorjimbo Good analysis with one proviso, there was absolutely no "ideological free marketers" with significant power trying to to divert and undercut anything about Glass-Steagall at it's formation. Ideological free marketers were about as powerful an influence on policy formation as Leon Trotsky at the time. The vested interests in American banking and other business was throughly anti-market before, during and since the passing of Glass-Steagall, as you yourself show by referencing their support of the Federal Reserve system. A minutes thought should convince you that the rich will always be anti-market. In the market how much money you get depends on what you can offer someone, in politics how much money you get depends on what politicians will do for you. We the 99% can compete in the former arena, we can build and sell as well as any billionaire, but we can't lobby as well as them. Therefore they will always prefer the political means over the market means.

The real reason for Glass-Stegall was not class warfare, for or against the working class, but intraclass struggle between the Morgans and the Rockefellers, see "The separation of commercial and invesetment banking: The Morgans vs. the Rockefellers" by Alexander Tabarrok. He certainly is no marxist or leftist if you're worried about being classed as one.

http://www.whatcausedthehousingbubble.com/docs/12.pdf

typo correction to headline

typo correction to headline The Definition of Insanity: regulating Over and Over and Expecting Different as with spice a little regulation goes a long way

Obama's Wall Street "Savvy

Obama's Wall Street "Savvy Businessmen" buddies are Thieves who should be doing "GOD's work" on their lifelong world prison tour after their ill-gotten gains have been seized under racketeering laws.

The Fortune 500 corporations which pay no income taxes (but sometimes even get refunds) have gamed the system and rigged it in their favor by bribing influence-peddling political whores to the point that government can't and/or won't function.

Bill Clinton informed us all when he was president that globalization would require us as a nation to lower our standard of living. He wasn't talking about his standard of living or that of his family and friends.

The conservative rich don't want to pay their fair share of taxes because of simple GREED and Selfishness, and they have purchased "judges", legislators, attorneys general, governors, and presidents to ensure that outcome. It is a prelude to violent revolution because you can't reason with criminals who have established a racketeering corporate kleptocracy and peacefully protest a solution to end it and re-establish the Rule of Law.

It is not insanity, it is

It is not insanity, it is greed. Correct me if I am wrong, but wasn't Laffer responsible for some racist theory about intelligence? That provides a great base for an economic principle. We need real regulations, with real teeth for enforcement. When you sell a product and bet against it without informing the purchaser you are betting his product will fail, that strikes me as being just a little bit criminal in fact, if not in law.

How many times does

How many times does regulation have to cause the problem before you guys get it? Repealing Glass Steagall didn't cause the problem, we know that because it wasn't the commercial-investment bank combinations that went bankrupt, it was their competitors. We also know that Freddie and Frannie financed about 40% of the mortgage market that did go bust, and they were government-backed enterprises. We also know that the whole problem could not have occured without cheap credit from the Federal Reserve system, a system with government privileges created by regulation. Count the increase in the number of pages of federal regulation under the Bush administration and tell me deregulation is a religion in America. Seriously guys repeating the propaganda to yourself is self-indulgent and bad for the people you claim to want to help, including yourself.

You are waving your arms and

You are waving your arms and yelling "Fannie and Freddie".

You forgot to say, "Those poor minority borrowers took out loans they had no intention of paying back."

The last time the Republicans caused a depression they were done as a political party for many decades and the nation THRIVED. This time they were ready with their own TV station and hundreds of AM radio misinformation sources. So this time they escaped the blame. Their Wall Street allies were even rewarded.

But your propaganda no longer works with thinking people. Oh, it still works on Fox "News" Republicans.

Repealing Glass Steagall led directly to tax payers bailing out the financial system.

The economic meltdown never would have happened if not for Gramm-Leach-Bliley.

If the commercial-investment

If the commercial-investment banks didn't go bankrupt, then why did we bail them out? And exactly who are the "competitors" of the commercial-investment banks that went bankrupt? Regurgitating the unsubstantiated diatribe of others doesn't make facts of lies.

The commercial banks crossed

The commercial banks crossed over into other territories. They lost a lot of the people's money too.

It's almost axiomatic that

It's almost axiomatic that regulations come into existence as a reaction to something catastrophic, usually someone dies. At the very least, someone was inflicted with great pain for no discernible benefit to society. (Before there was an FAA, airlines played fast and loose with how they operated in the airspace. It took an inflight collision over the Grand Canyon to illuminate the need to control airspace by the Federal government. And of course there is a push to privatize the system. You wanna fly in an airspace controlled by say Halliburton? Me neither). Regulations are not something dreamed up in Moscow or Beijing and foisted off on the American public by nefarious operators of foreign origin with the intent to cripple and destroy the American people and our precious democracy. It comes from Americans with the intent to SERVE the American public. (Wanna step into an elevator that hasn't been inspected? Me neither). The idea that regulations are an inherent evil comes from people whose motivations are inherently evil......... "I want more money and regulations cost me money so regulations are therefore evil"............ Sorry Mr. romney, sorry Mr lay. Sorry Mr. blankfein. If they're not screaming about it like Nancy Kerrigan, there not being regulated enough.

Riconui, your post is

Riconui, your post is perfect. I love it.

It was no coincidence that Bush's top campaign contributions came from Ken Lay. I think they should have to exhume the body and prove Lay is dead.

It is also no coincidence that Phil Gramm's wife was on the board of directors of Enron.

The definition of insane is

The definition of insane is believing the republican talking points.

Ain't that the damn truth.

Ain't that the damn truth.

The paragraph starting with

The paragraph starting with "Ironically, even earnest attempts at regulation can be foiled by big business." completely baffles me.

Maybe it's the meds, but the paragraph is in desperate need of elucidation and a closing statement resolving the proposition. Please help, Mr Buchheit.

They're not crazy. They're

They're not crazy. They're kleptocrats.

No other nation on earth runs

No other nation on earth runs it's capitalism as does the USA. Americans have a religious like belief in market economies.

And what is interesting, as nations all around us have benefits such as universal healthcare, including Mexico, Americans would rather go without healthcare than universalize it.

I love the argument (wrong of course) that it takes 6 months in Canada to get a necessary operation. My response: Better to wait 6 months than to do without.

Comment I meant to post:

Comment I meant to post: Yeah, they NEED a good support group...

Ooops...sorry, posted comment

Ooops...sorry, posted comment to wrong article...my baaaaaaaaaaadddd!

Hmmm...perhaps named Idiot

Hmmm...perhaps named Idiot Wind for a reason???

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