Main Street Goes to War Against Itself as Job Crisis Persists

The February unemployment rate is 8.9 percent. The broader Bureau of Labor Statistics U6 jobless rate is 15.9 percent. The report shows a net increase of 192,000 jobs. However, we need 127,000 new jobs every month to keep up with population growth. At this rate it will take 11.2 years to get back to full employment.

A Wall Street billionaire, a unionized public employee, and a Tea Party member are sitting at a table eying a plate of a dozen delicious cookies. The financier reaches across and takes 11 cookies, looks at the tea partier and says, "Watch out for that union guy. He wants your cookie."

How did this happen? How did we get to the point where governors all over the place are blaming the economic crisis on working people?

We're here because we didn't take the fight to Wall Street. The White House, Congress, and even trade unions let Wall Street off the hook. And now working people and the middle class all over the country are paying a heavy price.

The battle actually started thirty years ago when our nation embarked on a real-time experiment: Would wholesale financial deregulation and tax cuts for the super-rich drive a massive investment boom that would make all boats rise? It turned out, no. Instead, working families' incomes stalled. But the wealthy were left with such thick wads of cash that they didn't know where to spend it all. So they bought up Wall Street's new toxic "financial innovations." And presto: the largest financial crash since the Great Depression. (My apologies for the self-promotion but please see The Looting of America for an accessible account of the meltdown.)

Remember a couple years back, when Wall Street was on its knees, begging for our support? That was the perfect moment to reverse the 30-year trend and create a new kind of financial system that wouldn't gamble away our nation's wealth. Instead we resurrected too-big-to fail institutions and bailed out virtually every Wall Street investor.

And now, the right wing, which has been banging its drum against unions, government, and taxes for years, is having a field day using our recession-induced budget problems as a cover for slicing their enemies -- the unions -- to smithereens.

There's plenty of blame to pass around.

The White House:

President Obama started out with populist rhetoric that reflected America's disgust with Wall Street's greed. But soon, he tucked behind his Wall Street-friendly corps of advisors -- Geithner, Summers and Bernanke -- who told him there was only one way to avert another Great Depression and start generating jobs: Resurrect Wall Street with trillions of dollars in loans, asset swaps and guarantees -- and throw in a modest stimulus program.

So Obama stopped talking about shrinking Wall Street's profits and wages. He stopped talking about how our best and brightest should forgo Wall Street and instead build productive careers in education, science and medicine. He stopped talking about how appalling it was to be bailing out the very people who'd brought the economy to its knees. What could he say given how much the administration had done for the Wall Street billionaires? Now it's hard even to remember that our cocky financiers were so recently on their knees begging for survival.

It turned out that Geithner, Summers and Bernanke were only half right: The US did avert (or postpone) a Great Depression -- but jobs did not follow. Thanks to the US taxpayer, Wall Street's profits and bonuses went back to record levels, as if nothing much had happened. People stopped talking about financial nationalization and "hair cuts" for investors.

Obama squandered the progressive moment. Because had had refused to make Wall Street pay for the damage it had caused, we had no way to fund serious job creation. As a consequence, the "nationalization" we saw was of deep, persistent unemployment in every corner of the country. And the people getting the hair cut were the Democrats. They were pummeled in the mid-terms not because of health care reform, but because the traditional "Party of Jobs" failed to create them. In my opinion, they were punished for being the Party of Wall Street.

After the massive electoral defeat, the President turned into a deficit hawk, pushing the entire debate to the right. When he called for freezing public employees' wages, he fired the first shot in the war against workers on Main Street.


Of course the President had many fainthearted enablers on Capitol Hill. Congress failed miserably to build on Main Street's anger against Wall Street. Lawmakers couldn't even bring themselves to close a simple loophole to force the richest hedge fund financiers -- people making $2.4 million an HOUR -- to pay normal income taxes. Instead these hedge honchos still only pay 15 percent -- a lower rate than their own office cleaners. Closing that loophole on the top 25 hedge fund managers alone would have reduced the deficit twice as much as Obama's two-year wage freeze on federal employees.

Congress members also couldn't bear to break up too-big-to-fail institutions. They couldn't stomach windfall profits taxes or transaction taxes on the financial sector to help pay for our continuing bailout. (Who do you think now owns and guarantees hundreds of billions in toxic assets? You do!) And of course, the Capitol Hill crew didn't have the nerve to put Americans back to work through visionary moves like free higher education or the nationwide weatherization of all our homes and businesses.

The Labor Movement

Unfortunately, most trade unions also missed the moment. They were so invested in Obama and the Democrats that they didn't want (and maybe forgot how) to mobilize en masse against Wall Street. Americans needed a clear narrative explaining how Wall Street caused the financial crisis and a coherent program to create millions of sustainable jobs. They got neither from organized labor.

To be fair, labor had its hands full. With union jobs rapidly evaporating, it had bet the farm that a Democratic administration and Democratic Congress would pass the Employee Free Choice Act. (EFCA aims to level the playing field so that workers who want unions can form them without being fired.) This reform, they hoped, would unleash a great new surge of union organizing. But the bill didn't even come up for a vote. Now, in state after state -- even in old union strongholds like Wisconsin, Iowa and Michigan -- politicians are hacking at workers' basic collective bargaining rights, as if somehow those workers caused the financial crisis. As one savvy union staffer quipped, "Workers don't make synthetic CDOs!"

So let's square up. Where we are, and how did we get to this fateful moment?

1. Because we bailed out Wall Street banks and then let them off the hook, they're now back to collecting record profits. Hedge fund managers are making billions for themselves thanks to our blanket bailout of the financial sector. Not only are they not paying reparations, they're fighting hard to roll back even more regulations so they can run their financial casinos with full impunity. Their contribution to deficit reduction is minuscule. Equality of sacrifice is a joke on Wall Street.

2. Because of the financial crisis set off by Wall Street and Wall Street alone, 8.75 million jobs were lost in one year. With economic growth still feeble and corporations hoarding their money, it will take over 11.2 years to reach full-employment again at the rate we're going.

3. Because of high unemployment and the resulting drop in tax revenues (as well as years of tax cuts for the wealthy and large corporations), state and local government budgets are having a fiscal heart attack. It's open season on public employees, the last bunch of American workers who are a) unionized in large numbers, b) still have decent health care benefits and c) still have defined benefit pension plans (which don't force workers to shoulder all the financial risks in retirement). Meanwhile, no one's going after the ultra-rich for shirking their state and local taxes. In every state of the union, the richest one percent of residents pay a lower percentage of their income in total state and local taxes than do middle- or low-income residents.)

4. Political demagogues are playing working people against each other with the rhetorical cry, "Why should taxpayers pay for public employee benefits that they themselves can only dream of?" The obvious answer is that private sector workers should also have decent health care benefits and pensions. Meanwhile, a windfall profits tax on Wall Street could close every state budget gap in the country.

Thank goodness for the intrepid workers and students in Wisconsin, Indiana, and elsewhere who are resisting the assault. And thank goodness most Americans are on their side, according to a recent New York Times/CBS News poll. It showed that a majority support public sector collective bargaining, favor tax increases over cuts in public sector benefits, and don't think unions are too influential.)

The bagpiping firefighters camped out at the Wisconsin capitol are blocking the maniacal march to lower our standard of living. But that's not good enough. It's time for the bagpipes to march on Wall Street... and for the rest of us to join them.

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009. He is currently working on a new book, How to Earn $900,000 an Hour: The Rise of Wall Street Billionaires and the New Class War, (hopefully to be published in 2011).