Dear Readers: I am Back

By | October 24, 2012

Dear Readers:

I am back.

Not as frequently as before; I’m aiming for once a week.

A bigger change: I’m going to talk about far more topics.

Yes, I’m still going to write about our housing, foreclosure and fraud crises. I’ll point out how the biggest banks—the biggest bankers– routinely demonstrate their sovereign-level power, codifying their policy preferences in law and regulation, shaping enforcement priorities and influencing enforcers.

But I’m also going to talk about our tax insanity and the related shredding of our social contract, and how we’re destroying our planet in the most wasteful ways possible.

I’m going to discuss how America has become a feudal nation, run by oligarchs-cum-aristocrats and run on the labor of debt slaves. The Land of Opportunity has become Sharecropper Nation.

Most of all I’m going to focus on exposing the propaganda that works to control us all, to keep us in our place, keep us participating in the status quo.

First up will be a key piece of propaganda, the idea that the redistribution of wealth is bad, so much so it’s taboo, to be rejected instinctively without discussion. That’s an amazing feat of social engineering that empowers the greedy and ignores our needy.

But before focusing on the social control propaganda, let’s pay attention to our status quo. Really look at what our nation has become.

Over the past forty years or so American businesses stopped paying living wages so their executives could siphon even more of the company’s earnings for themselves. Even worse, executives fattened their paychecks by raiding worker pensions.

This economic destabilization was softened by the advent of large scale, revolving consumer credit and ever looser lending standards. Because today’s wages just don’t pay the bills, we lease our standard of living. For so long as we can service the debt.

When we get hurt, sick, divorced or laid off, when our income becomes unexpectedly slashed below debt-servicing levels, our Government denies us meaningful relief in bankruptcy. This rejection comes in a nation whose founders understood debt and financial crisis so well they included bankruptcy protection in our Constitution.

Sure, people can get some help by going bankrupt, but those twin, enormous pillars of debt supporting the American Dream—the home mortgage and student loans—cannot be restructured in bankruptcy. Think about that.

Home mortgages and student loans are socially beneficial debts. Homeownership traditionally stabilizes communities, builds wealth, and provides retirement security.  A college education is supposed to provide the skills of today and tomorrow’s economy, making our country more prosperous. We, the People, America, want people to take these debts on. It’s good for everybody.

More precisely, home financing is good for everybody only if appraisals are honest, underwriting standards are pre-securitization conservative, loan terms aren’t predatory, the documentation of all kinds is not fraudulent, and the securities aren’t rated deceptively or sold fraudulently. Of course, all those conditions were violated during our last bubble and bust. Similarly using student loans is good for everybody only if the degree delivers good  job opportunities, enabling the graduate to work off her debt. Again, that’s not what’s going on.

Our bankruptcy code’s ‘no restructuring for you!’ treatment of debtors with these loans is punitive and wrong. Brutally punitive and breathtakingly wrong, given the size of those debts, the social utility of these loans when done right, and the injustice of enforcing their terms when done wrong.

’Our’ government’s policy choice is even more vividly unjust when you remember corporations in bankruptcy can restructure wage and retirement promises to their workforce, and consumers can restructure mortgages on vacation houses and investment properties, and among other luxurious debts.

Our bankruptcy code is a moral document drafted in our name. Everything about bankruptcy, other than the Constitutionality of the federal bankruptcy system and the Bankruptcy Clause’s power to trump the Contract Clause, is the considered judgment of Congress and the President.

Yes, of course, corporate lobbyists wrote much of the current version of the law, but Congress agreed to it (with President Obama’s help), making the lobbyists’ wishes our law.

Let’s shift from our unjust bankruptcy code to another offensive aspect of our status quo:

A hedge fund guy “earning” a  billion bucks in a single year ($1,000,000,000/yr) pays 15% tax (or less) on all his income. This year you and I start losing 25% of our paychecks when we earn our 35,351st dollar.

The billionaire hedge  pays our treasury only a nickel and dime of every dollar he wins off his bets but  teachers, firefighters, police officers, soldiers, postal workers and other genuine servants of the public interest  start kicking in a quarter from every dollar when they finally earn as much as the hedgie did in 19 minutes.

(19 minutes using income of $1 bil/year; at $1 million/year it’s 13 days before the hedgie racks up $35,351.)

The hedgie’s non-cash contribution to society is virtually zero; the public employees’ work makes society function. And yet he’s taxed as if he were the greatest gift our country ever knew. Must be that the hedgie’s lobbyist is  the greatest gift Congress ever knew.

The moral corruption of the decision to tax the earns-a-billion-in-a-single-year gambler so little is clearest when you remember this:

When that hedgie earned a billion dollars in a single year, he already had functionally unlimited purchasing power. It’s not just that he doesn’t need the money; it’s worse. He doesn’t benefit (other than ego gratification) by making more.

Our tax code lets people with unlimited purchasing power nickel and dime America. But those of us who know what it is to live paycheck to paycheck, who budget, who defer desires, we all have to kick in a quarter or more long before our income equals economic security, much less unlimited purchasing power. All because we’re foolish enough to work for a living, while the hedgie types ‘invest.’

Feel how wrong that is.

I respect the charity of people like Bill Gates and Warren Buffett. But the tax code, like bankruptcy code, is a moral document, and their charity does not redeem it.

Even so a sane tax code is not possible while our political conversation treats redistributing wealth as a taboo topic.

So next week I’m going to focus in how crazy our politics of wealth redistribution is. Be well until then, and question everything.

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