Sunday, November 06, 2011

Class Warfare

"It's class warfare, my class is winning, but they shouldn't be." -Warren Buffett

We hear a lot of sound bytes about class warfare these days. Yes, most of it comes from conservative politicians. This is what politicians do, they craft a message in ten seconds or less and then pass it off as thoughtful insight into the American psyche. Conservatives are no more guilty of this than Liberals, the right wing is simply better at it.

On the matter of class warfare there are really two rather obvious positions. First from the left: "Are you nuts? You think the Occupy Movement is a call to begin class warfare? Hell the rich have been at war with the poor for centuries, it's only recently that they have taken on the middle class as well." There really isn't a lot more to that argument, either you think the rich prosper at the expense of the rest of us or you don't. I have seen very little movement on the right in response to the arguments, facts and/or figures that have come out time and time again in the last six weeks.

The other argument is a bit more nuanced. It begins by suggesting that the essential democratic economic premise is simply that anyone can become wealthy in America. This endeavor requires some set of character traits that involve hard work, a great business plan and leadership skills. The argument further says that things like tax breaks, low corporate taxes and government subsidies are available to every business and that taking advantage of what the market offers is what the free enterprise system is all about. 

What both arguments fail to address, of course, are the people involved. There certainly are many wealthy Americans who use their capital for good through charities and other philanthropic deeds. A primary example would be Warren Buffett quoted above. But Mr. Buffett also knows that if the economy were thriving, if the middle class was not burdened with foreclosures, joblessness and shrinking retirement funds; if those things had not happened, he would be making even more money with his investments.

But back to class warfare. Is it getting worse? Yes. Does Occupy suggest it will get even more so, Yes. The facts are that much of the newly created wealth in America is stolen money. The simple facts behind the mortgage crisis that pushed the entire globe off this economic escarpment is that banks in the U.S.A. made horrible loans to unqualified borrowers. Then they packaged these loans to sell to pension funds and other financial institutions while, wait for it, paying off credit rating companies to grossly overrate the potential value of these hundreds of billions of dollars of bad loans. Finally, after selling the loans, the banks bet on the predictable foreclosures and sold the debits short. They lied about the creditworthiness of the loans they sold and then turned around and bet those loans would go bad.

Criminal fraud pure and simple. And people suffered in all segments of the community but those are the bottom with the least ability to recover got hit the hardest. But truth be told, there would be no Occupy if the pain hadn't climbed so high and hurt so many. 

We are the 99% and we all got hurt by the greed of Wall Street. Otherwise there would be no encampments, no protests, no 99%.

So is there real class warfare happening in the United States today. Yes and it's going to get a lot worse if the political demagogs of both parties don't start listening soon.

For a somewhat different slant on class warfare, stuffed cabbage and Jimi Hendrix you might want to read my friend Arlene Goldbard.


Curtis K said...

You totally ignore the government's role in the whole situation. Why? Is it because they started the whole thing by requiring the bank to make the problem loans? That would make it more difficult to pin the problem on the banks, though it would be more honest. Come on, Tim. Trust the people and tell the whole story.

The Shrink said...

Yes it's true the government under both parties deregulated the financial industry under the assumption that the market would do best as a free market. You know, good olde Adam Smith.

But we get into a "cart before the horse" discussion here. If not deregulated they would not have stolen the money, but they did steal it. So put the congress in the cell next to the bankers. I'm good with that.

Curtis K said...

True enough when you blame it on both parties, but the point here is that it was government pushing banks to give more to the 99% (mortgages that they couldn't afford) that directly caused the problems (made worse by the derivatives). So now OWS et. al. are asking the gov't to step in and do it again. I'm not so sure that's a good move. It would be like asking to deregulate banking more.

Winweasel said...

Bear in mind, though, that those same banks and mortgage companies were handing campaign money to members of Congress hand over fist ;and, so, if they really didn't want to be "forced" to make bad mortgages to low income applicants, they could easily have pushed back and gotten Congress to back off. It was the lure of money to be made on sub-prime mortgages that was the real impetus behind the bad loans, not the urging of Barney Frank and Chris Dodd. The banks needed to commit fraud on the mortgage applications to write the worst of those and despite many members of Congress wanting the banks to write loans for lower income applicants, Congress never mandated fraud in the loans. Yeah, they wanted them written in unicorn blood on fairy lotus petal paper, but as I wrote above, the one place all members of Congress really connect with reality is at their campaign fund bank accounts. Had the mortgage institutions really not wanted to write those loans, they would have lobbied Congress to change some policies with both soft and hard dollars given or withheld from those campaign war chests.
Plenty of blame to go around, but the bulk of it is on the financial corporations.

Arlene Goldbard said...

Hi, Tim. I linked this to my own post on class warfare: Thanks!