Spend Bailout Cash On The Middle Class

The Nation: Government Has Always Bailed Out Big Business; Why Shouldn't We Get Some Largesse, Too?

(The Nation)  This column was written by Howard Zinn.

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It is sad to see both major parties agree to spend $700 billion of taxpayer money to bail out huge financial institutions that are notable for two characteristics: incompetence and greed. There is a much better solution to the financial crisis. But it would require discarding what has been conventional wisdom for too long: that government intervention in the economy ("big government") must be avoided like the plague, because the "free market" can be depended on to guide the economy toward growth and justice. Surely the sight of Wall Street begging for government aid is almost comic in light of its long devotion to a "free market" unregulated by government.

Let's face a historical truth: we have never had a free market. We have always had government intervention in the economy, and indeed that intervention has been welcomed by the captains of finance and industry. These titans of wealth hypocritically warned against "big government" but only when government threatened to regulate their activities or when it contemplated passing some of the nation's wealth on to the neediest people. They had no quarrel with big government when it served their needs.

It started way back when the founding fathers met in Philadelphia in 1787 to draft the Constitution. The year before, they had seen armed rebellions of farmers in western Massachusetts (Shays's Rebellion), where farms were being seized for nonpayment of taxes. Thousands of farmers surrounded the courthouses and refused to allow their farms to be auctioned off. The founders' correspondence at this time makes clear their worries about such uprisings getting out of hand. Gen. Henry Knox wrote to George Washington, warning that the ordinary soldier who fought in the Revolution thought that by contributing to the defeat of England he deserved an equal share of the wealth of the country, that "the property of the United States...ought to be the common property of all."

In framing the Constitution, the founders created "big government" powerful enough to put down the rebellions of farmers, to return escaped slaves to their masters and to put down Indian resistance when settlers moved westward. The first big bailout was the decision of the new government to redeem for full value the almost worthless bonds held by speculators.

From the start, in the first sessions of the first Congress, the government interfered with the free market by establishing tariffs to subsidize manufacturers and by becoming a partner with private banks in establishing a national bank. This role of big government supporting the interests of the business classes has continued all through the nation's history. Thus, in the nineteenth century the government subsidized canals and the merchant marine. In the decades before and during the Civil War, the government gave away some 100 million acres of land to the railroads, along with considerable loans to keep the railroad interests in business. The 10,000 Chinese and 3,000 Irish who worked on the transcontinental railroad got no free land and no loans, only long hours, little pay, accidents and sickness.

The principle of government helping big business and refusing government largesse to the poor was bipartisan, upheld by Republicans and Democrats.

President Grover Cleveland, a Democrat, vetoed a bill to give $10,000 to Texas farmers to help them buy seed grain during a drought, saying, "Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character." But that same year, he used the gold surplus to pay wealthy bondholders $28 above the value of each bond - a gift of $5 million.

Cleveland was enunciating the principle of rugged individualism - that we must make our fortunes on our own, without help from the government. In his 1931 Harper's essay "The Myth of Rugged American Individualism," historian Charles Beard carefully cataloged fifteen instances of the government intervening in the economy for the benefit of big business. Beard wrote, "For forty years or more there has not been a President, Republican or Democrat, who has not talked against government interference and then supported measures adding more interference to the huge collection already accumulated."

After World War II the aircraft industry had to be saved by infusions of government money. Then came the oil depletion allowances for the oil companies and the huge bailout for the Chrysler Corporation. In the 1980s the government bailed out the savings and loan industry with hundreds of billions of dollars, and the Cato Institute reports that in 2006 needy corporations like Boeing, Xerox, Motorola, Dow Chemical and General Electric received $92 billion in corporate welfare.

A simple and powerful alternative would be to take that huge sum of money, $700 billion, and give it directly to the people who need it. Let the government declare a moratorium on foreclosures and help homeowners pay off their mortgages. Create a federal jobs program to guarantee work to people who want and need jobs.

We have a historic and successful precedent. The government in the early days of the New Deal put millions of people to work rebuilding the nation's infrastructure. Hundreds of thousands of young people, instead of joining the army to escape poverty, joined the Civil Conservation Corps, which built bridges and highways, cleaned up harbors and rivers. Thousands of artists, musicians and writers were employed by the WPA's arts programs to paint murals, produce plays, write symphonies. The New Deal (defying the cries of "socialism") established Social Security, which, along with the GI Bill, became a model for what government could do to help its people.

That can be carried further, with "health security" - free healthcare for all, administered by the government, paid for from our Treasury, bypassing the insurance companies and the other privateers of the health industry. All that will take more than $700 billion. But the money is there: in the $600 billion for the military budget, once we decide we will not be a warmaking nation anymore, and in the bloated bank accounts of the superrich, once we bring them down to ordinary-rich size by taxing vigorously their income and their wealth.

When the cry goes up, whether from Republicans or Democrats, that this must not be done because it is "big government," the citizens should just laugh. And then agitate and organize on behalf of what the Declaration of Independence promised: that it is the responsibility of government to ensure the equal right of all to "Life, Liberty, and the pursuit of Happiness."

This is a golden opportunity for Barack Obama to distance himself cleanly from John McCain as well as the fossilized Democratic Party leaders, giving life to his slogan of change and thereby sweeping into office. And if he doesn't act, it will be up to the people, as it always has been, to raise a shout that will be heard around the world - and compel the politicians to listen.

[ubrew12]

Wealth concentration is bad for America in three ways:
1. Wealth concentration leads to predatory behavior in society. With excess cash, the purpose of the Richs spending inevitably shifts from utility to vanity. Cars, houses, bank accounts do not simply furnish transportation, shelter, and independence; they purchase the envy of neighbors (fast cars, monster houses, grossly-fat bank accounts). That desire, to be able to look down on your neighbors, then infects the society at large, who copy the successful. But the trade in envy has two problems: 1. No amount of money is enough to service the hole envy wants filled. So saving turns to hoarding (Scrooge fever), taking money out of the general circulation which exacerbates the problem, 2. Envy is relative. It can be as easily obtained by breaking down your neighbor as working to elevate yourself. Symptoms of the resulting predation are lying, workplace harassment, racism/ sexism/ ageism, robbery, bullying, workaholics, malicious gossip, monopolistic behavior, gambling, youth exploitation, and withdrawal from society (gated communities, drugs, pornography). As wealth concentrates, there is a shift in the general population from a ''one-for-all'' mindset to a ''winner-take-all'' mindset. Such a society engages in at least as much destructive behavior as constructive, a slave to the ''envy trade''.

[ubrew12]

2. Wealth concentration is bad for capitalism. Capitalism works because labor and capital are both put to work in the free market. Capital works by being risked for a return. One hundred millionaires will each need a 10% return to live comfortably. If the wealth is concentrated so that there are only ten of them, each with 10 million dollars, they need only a 1% return to live comfortably. Common sense: the rich invest their money wisely, the filthy rich do not, for the simple reason that the rich NEED to invest wisely, and the filthy rich do not. Companies that return 10% lead the economy; companies that return 1% follow it.

[ubrew12]

3. Wealth concentration is bad for democracy. Money influences politics. Representatives of the people end up representing the money instead. This is OK as long as the money is also owned by the people, but this general ownership is lost as wealth concentrates. The media are also influenced by wealth. Whether ''biased'' liberal or conservative, a media-persons primary bias is for dinner. The law establishments, and the lobbyists, are also working for money. As wealth concentrates, the wealthy gain great ability to affect the way laws are written, interpreted, enforced, and sold to the general public. As wealth concentrates, these laws are no longer in the publics'' interest.

[ubrew12]

How much of America''s total wealth should be owned by her richest 10% of citizens? Pre-1930, ownership was above 70%. A time of low taxes, monopolists, robber barons, pyramid schemes. Their gift to America: the Great Depression. Between 1930 and 1970, ownership was less than 55% due to high taxes. What did these lazy socialists (otherwise known as the Greatest Generation) do with all that ill-gotten tax booty?
Built every major dam in America (still generating 20% of our electricity today).
Built the interstate system (''freeways'' to stimulate trade and commerce).
Built levees and canals (100% responsible for California''s agricultural miracle).
The rural electrification program (so rural farms could also be factories).
SocSec safety-net (now in need of reform).
Defeated fascism and communism worldwide, and rebuilt war-ravaged Europe.
Fought a major war in SE Asia and, the same decade, flew to the moon.

[ubrew12]

Since 1980, ownership is above 70% again, due to low taxes and supply-side economics. After 25 years of this, our infrastructure crumbles like the New Orleans levees. The military we paid for has been hijacked by the worlds rich to enforce globalization. Our society shows all the hallmarks of predation: bullying, sloth, lying, crime. Our debt, our debt, our national debt: Reagan tripled the debt and Bush is on track to triple it again! This $10 trillion debt is a gift to the next generation along with our crumbling infrastructure. Supply-side economics: pretending to stimulate your economy by rolling your taxes onto the backs of your children. And, as recent events have shown, that money may be needed to bail out capitalism from its ''tight spots''.

America needs to roll back wealth concentration to its value in the 1960s, when the wealthiest 10% of Americans'' owned 60% of the nations total wealth. Progressive taxation will do this. It''s the RIGHT thing for our future, and our society.

[voidmaster-2009]

There is no such thing as a free market. The marketeers have been manipulating the market for decades. Leaving the market to correct itself is like hoping the foxes will get full and leave some of your chickens alive.

[docadams3]

Pew has done some fine work on this subject. Aristole has the last word on what happens when the middle class fails.

[rmsdm4]

Capitalism works when the gov''t stays out of it. All of our economic woes are government caused. How many jobs does a poor person create in the private sector, none.

[ubrew12]

rmsdm4 said: "Capitalism works when the gov''t stays out of it. "

If you and I were neighboring farmers, and I kill you and your family for your farm, to ''free market capitalism'' all I did was make a good business decision. ANY OTHER TAKE on what I did involves ''morality'', some kind of ''do-gooderism'' that would serve to restrict the ''invisible hand''. And if you want to codify that morality into legality, and enforce those laws saying that murder is NOT a proper decision, for business or any other reason, then you are talking about regulating ''free-market capitalism'' with government.

Of course, capitalism DOES work when gov''t stays out of it. Its society that doesn''t work...

[trillion1]

The middle class are the engine that drives the economy. Until they can spent beyond just what they need to stay alive the economy will not improve. The holiday season this year will make last years abysmal showing seem like boom times.

[rw7b]

Why is everybody so enthused to give all the cash to upper/middle income and nothing to lower/retired income people?
I have a very nice good reason to be ticked off at some of those lobbiest and special interest groups.
1). The wealthy upper income people who has been paying taxes have been actually been able to keep a 6 digit figure net pay -- some of them still steal
2). The "big" oil who Clinton supposidly taxed, just been passing their taxes onto the general public who fill their cars up at the pump.
3). The supposidly middle income who possibly went college, some of them still DO NOT know how to add/subtract on paper, run a calculator, or read.
4). Nothing has been mentioned about the lower income and small businesses any of those worthless campaign ads.
5). The lower income/unemployed just been busting their own ***** just to make ends meet and pay bills, which SOME of the so called middle income just do not know how to do.
6). Just somebody want Bush just to throw over 700 Billion bucks into the street somewhere in NY, (Wall/Main St.) right when they just could have grown enough brains to give some of it to the lower income, unemployed, and elderly.
7). The thing that just worries me now is that Wall/Main just might come back crying for more cash nobody has.

[babooph]

Endless $ for the rich & lost wars -little for health,schools ,roads & bridges,water,sewers,stolen soc.sec $ sent into the rot -one party brags about it ,the other pretends they can do nothing about it,[but vote to continue it!]

[oneworldusa]

Fantastic article. It''s the middle class that drives the economy, and when greedy employers ship jobs overseas, give themselves millions in raises while middle/lower class wages remain stagnant as demands increase in the workplace, and congress votes themselves huge raises but fails to increase the minimum wage, the shoe falls, and it has.

[noloyalisti]

Capitalism works when the gov''''t stays out of it. All of our economic woes are government caused. How many jobs does a poor person create in the private sector, none.

Posted by rmsdm4

So it is the government that caused this disaster that is un-regulated and runaway capitalism. I have to say that this right wing junk is all used up. Maybe that is why the right wing is so angry, their entire ideology has been found to be a failure. For all the world to see.

[bonosera]

Note to Obama: Hellooo! I am middle class. I am disgustingly middle class. My last name even begins with %u201CB,%u201D as in bourgeois. And I don%u2019t freaking want to be rescued by you or anyone else. I want to be left alone. Especially since there is ample evidence that the machinations of politicians Left and Right are directly responsible for the 50 percent deterioration in my personal M-1 during the past month. Read more at www.halfjoking.net