“Giving Wall Street More Leeway”: How Paul Ryan’s Budget Paves The Way For Another Financial Crisis
Representative Paul Ryan released his budget blueprint this week, and fans of his work were no doubt pleased: it called for $5 trillion in spending cuts over the next decade, focused heavily on domestic, non-military spending. Safety net programs like Medicaid and food stamps would face savage cuts, and the Affordable Health Care Act would be repealed entirely. Meanwhile, both corporate and individual tax rates would be lowered.
It is easy to make the case that the rich get richer and the poor get poorer under Ryan’s so-called “Path to Prosperity” plan: one needs only to look at the literally trillions cut from Medicaid and food stamps while the rich pay much less in taxes.
But it’s important to refine that point and note that the financial sector in particular gets many special favors in the Ryan plan. After all, it is one of Ryan’s leading benefactors and he can even be spotted sipping $350 bottles of wine with industry leaders from time to time. And his budget is no doubt a path to prosperity for them.
Moreover, in three crucial ways Ryan’s budget not only gives Wall Street more leeway to act recklessly, but makes it more likely that average Americans face the consequences.
Cutting the Securities and Exchange Commission budget: Already, the head of the SEC is complaining that her agency’s budget is not nearly adequate to police the country’s massive financial sector. In a speech earlier this year at SEC headquarters, director Mary Jo White said, “our funding falls significantly short of the level we need to fulfill our mission to investors, companies and the markets.” The SEC has only 4,200 employees, but must regulate eighteen different stock exchanges and over 25,000 different market participants—and the agency’s responsibilities are growing thanks to new mandates from the Dodd-Frank financial reform legislation.
Ryan has a much different take in his budget: he thinks the SEC is just too big. He doesn’t apply a dollar figure, but makes it clear the agency’s already meager budget should be substantially “streamlined.”
“In the run-up to the financial crisis and its aftermath, the SEC repeatedly failed to fulfill any part of its mission,” his blueprint notes, ticking off a familiar list of whiffs, from the unsound nature of Bear Stearns and Lehman Brothers to the Ponzi schemes run by Allen Stanford and Bernie Madoff.
So far, so good. But Ryan goes on: “These failures have taken place despite significant increases in funding at the SEC, which has seen its budget increase almost sixty-six percent since 2004.”
Apparently, the extra money was the problem. “This resolution questions the premise that more funding for the SEC means better, smarter regulation. Adding reams of regulations to the books and scores of regulators to the payrolls will not provide greater transparency, consumer protection and enforcement for increasingly complex markets. Instead, the SEC should streamline and make more efficient its operations and resources.”
In short: since the SEC failed to adequately police Wall Street at a time its budget was increasing, the magic solution would be to cut the agency’s budget, because ipso facto the agency’s performance would get better.
This line of thinking would not be unfamiliar to those who follow Ryan’s recommendations for federal anti-poverty programs, and it’s just as wrong here as it is there. As the agency’s director herself pointed out (on several different occasions), the SEC plainly needs more resources to conduct better regulation of a huge financial sector. Ryan provides no evidence, aside from that odd logical twist, that reducing the number of SEC staffers poring over filings from hedge funds would somehow increase oversight of those outfits.
Transferring the Consumer Financial Protection Bureau budget to Congress: Here Ryan resurrects a longstanding GOP proposal: that Congress, not the Federal Reserve, should fund the CFPB.
As it stands now, the bureau’s budget is essentially guaranteed. It can ask the Federal Reserve for funding up to a certain cap, and that request cannot be denied. The caps are fixed percentages of the Fed’s operating expenses. This guarantees autonomy from a Congress where many members (like, say, Ryan) are elected thanks to campaign contributions from the big financial institutions the CFPB polices.
Ryan claims to have a problem with this arrangement only because the Federal Reserve’s profits are supposed to be returned to the Treasury to reduce the deficit, but instead a portion of them are siphoned off to a new bureaucracy—one in which he suggests via scare quotes is ineffective. “Now, instead of directing these remittances to reduce the deficit, Dodd-Frank requires diverting a portion of them to pay for a new bureaucracy with the authority to write far-reaching rules on financial products and restrict credit to the very customers it seeks to ‘protect,’” says the blueprint.
CFPB funding would thus be transferred to Congress under the Ryan plan, and subject to annual appropriations. He doesn’t say what Congress should do with that budget once its under legislators control, but one needs only to look to his SEC budget proposals to get a sense of what would likely happen.
Ensuring Taxpayer Bailouts of Big Banks: This is another up-is-down situation where a lot of unpacking of Ryan’s language is needed. His budget says:
Although the proponents of Dodd-Frank went to great lengths to denounce bailouts, this law only sustains them. The Federal Deposit Insurance Corporation now has the authority to access taxpayer dollars in order to bail out the creditors of large, ‘‘systemically significant’’ financial institutions. This resolution calls for ending this regime, now enshrined into law, which paves the way for future bailouts. House Republicans put forth an enhanced bankruptcy alternative that—instead of rewarding corporate failure with taxpayer dollars—would place the responsibility for large, failing firms in the hands of the shareholders who own them, the managers who run them, and the creditors who finance them.
Sounds good! But that would actually accomplish the exact opposite.
Indeed, Dodd-Frank gave the FDIC the power to wind down too-big-to-fail banks, which is called “resolution authority.” In a crisis, if a failing bank is deemed too big for traditional bankruptcy, a panel of bankruptcy judges can place it in receivership under the FDIC. That FDIC in turn then makes a plan for winding down the institution safely—something Barney Frank called a “death panel” for big banks.
Crucially, under this structure, taxpayers can’t end up paying for this wind down—Dodd-Frank explicitly forbids it. Any taxpayer money used upfront to ease the firm into bankruptcy would be recouped by a structured sale of the bank’s assets. (Note that Ryan sneakily says the FDIC has the authority to “access taxpayer dollars,” eliding the fact that in the end it has to pay them back.)
Ryan’s alternative is to end FDIC’s resolution authority and simply “place the responsibility for large, failing firms in the hands of the shareholders who own them, the managers who run them, and the creditors who finance them.”
That’s akin to just saying “it will all work out.” It is unlikely in the extreme that the shareholders and managers can somehow bail out a failing big bank, especially in a crisis. Inevitably, Congress and thus taxpayers would have to step in, without any of the established authority like asset sales that the FDIC now possesses.
Ryan’s plan would lead to more taxpayer bailouts of failing big banks—and by stripping down the budgets of the agencies meant to oversee those institutions, make failure more likely in the first place. But in the meantime, his friends on Wall Street could enjoy less regulation, less oversight, and more comfort that taxpayers will someday come to the rescue.
By: George Zornick, The Nation, April 2, 2014
“Blowing Away The Smoke”: A Democrat-Sponsored Tax Cut Calls The GOP’s Anti-Poverty Bluff
For months now, as congressional Republicans have blocked repeated attempts to extend benefits to the long-term unemployed, as they’ve fought to deny low-income Americans access to health insurance, as they’ve advocated to cut tens of billions from the food stamp program, as they’ve resisted proposals to raise the minimum wage, they have simultaneously professed their commitment to American workers and the poor.
Senator Patty Murray put forth a new test of that commitment on Wednesday, by introducing legislation to expand the Earned Income Tax Credit. The EITC is already one of the largest and most effective anti-poverty programs, rewarding low-wage earners for their work and lightening their tax burden. It’s also one of the very few specific anti-poverty policies Republicans have praised in recent months.
Murray’s bill, the “21st Century Worker Tax Cut Act,” would increase the maximum credit for childless adults and create a new tax deduction for families with two working parents. It’s intended to complement the Democrats’ campaign for a higher minimum wage, and to force Republicans to take a real stand on help for American workers. Given their recent nods towards the EITC, one might reasonably expect Republicans to consider Murray’s proposal seriously. (President Obama also proposed an EITC expansion in his budget for 2015.) Even the tax loopholes Murray proposes closing in order to pay for the expansion have already been singled out for elimination by the Republican chairman of the House Ways and Means Committee, Robert Camp. But these are not reasonable times.
The Republican’s recent expressions of support for expanding the EITC have always seemed more opportunistic than sincere. Rather than actively working to extend the credit to more Americans, the GOP instead uses the EITC as “a protective shield against populist attacks,” as Jonathan Chait put it; specifically, as a counterpoint to calls from the left to raise the minimum wage.
“The minimum wage makes it more expensive for employers to hire low-skilled workers, but the EITC, on the other hand, gives workers a boost—without hurting their prospects,” Representative Paul Ryan said of the EITC in a January speech at the Brookings Institution. “It gives families flexibility—it helps them take ownership of their lives.”
Conservative pundits and academics have taken a similar line. Two economists at the American Enterprise Institute argued last year that “expanding the earned income tax credit is a much more efficient way to fight poverty than increasing the minimum wage.” Steve Moore of the Heritage Foundation argued in favor of a higher EITC in January, as did former Bush advisor Glenn Hubbard. Another former Bush advisor, Harvard economist Gregory Mankiw, wrote recently that the EITC was “distinctly better” than raising the minimum wage because the costs are born by taxpayers rather than employers.
In his own much-hyped poverty speech in January, Senator Marco Rubio advocated for replacing the EITC with a “federal wage enhancement” subsidy. The vague contours of the alternative he proposed suggested that what he had in mind was nearly identical to the EITC, but with more support for people without kids.
Rubio was right to point out that one of the major shortcomings of the current EITC is that it offers minimal assistance to childless workers. As the program operates now, people without children who are under 25 are ineligible, and the maximum credit for those between 25 and 64 is $487. Families with children receive more substantial benefits. In 2011, their average credit was $2,905.
Murray’s bill addresses Rubio’s professed concern for childless workers by lowering the eligibility age to 21 and raising the maximum credit for childless workers to about $1,400. Those changes would benefit thirteen million people, according to a Treasury Department estimate. The legislation also increases support for families with two working parents by allowing a secondary earner to deduct twenty percent of their income from their federal taxes. This could offset childcare, transportation, and other costs associated with entering the workforce, thus encouraging more stay-at-home parents to find jobs. More than seven million families would benefit from this new deduction, according to the Joint Committee on Taxation.
The bill also doubles the penalties for tax payers who fail to comply with the Internal Revenue Service’s “due diligence” requirement, a reform that addresses Republican concerns about the costs of improper claims.
If Republicans really wanted to use the EITC as a vehicle for boosting low wages, this legislation provides an excellent starting point for negotiation. But they’re unlikely to engage with it seriously, because their lauding of the EITC was never serious to begin with. For example, Rubio’s proposal to expand the credit for childless workers would have been accomplished by taking money away from workers with kids, instead of by increasing the size of the program overall.
Republicans will face a tricky situation if Harry Reid brings Murray’s bill up for a vote in the Senate. “If Republicans aren’t interested in supporting this bill, they’ll need to explain why they are rejecting the alternative that they have often pointed to in order to justify opposing raising the minimum wage,” a senior Democratic aide told The Nation.
If recent votes on unemployment insurance are any indication, Republicans are far more likely to risk hypocrisy and find reasons to kill the bill than do any real governing, even on policies they profess to support. If a vote doesn’t accomplish much for low-wage workers, it may at least blow away some of the smoke from the GOP’s show.
By: Zoe Carpenter, The Nation, March 26, 2014
“The Toxic Culture Of Conservatism”: Conservatives Have A “Racist Jokes” Culture Problem
Florida Gov. Rick Scott’s reelection campaign had one of those days yesterday. You know, one of those days where you hold a press call with the lieutenant governor but instead of asking about your latest campaign ad like they’re supposed to, all the reporters insist on asking about how the campaign’s finance co-chair recently stepped down because campaign staffers made racist jokes.
Billionaire healthcare mogul Mike Fernandez was Rick Scott’s top fundraiser until last week, when he abruptly quit. The Miami Herald offered some detail on what led up to the decision:
Despite the praise, Fernandez has been unhappy for weeks with the struggling campaign’s direction and the attitude of some of its workers.
Fernandez began expressing his frustrations at least a month ago when he sent an email to top Scott allies and complained about two campaign aides who had joked around in a cartoon-style Mexican accent en route to a Mexican restaurant in Fernandez’s home town of Coral Gables.
The Scott campaign can assure you that it was not that bad:
“Mike was not in the van,” Scott’s campaign manager, Melissa Sellers, said in an email to the Herald.
So no harm done! Sellers also said: “If something was said in an accent, no one remembers what it was.” (Obviously someone remembers, but fine.)
The incident was reminiscent of the recently released internal emails from the staff of Wisconsin Gov. Scott Walker. Those emails revealed an office where campaigning and politicking trumped governing, but they also showed a staff that saw absolutely no issue with forwarding deeply offensive (and stupid, and unfunny) “jokes” involving the inherent hilarity of people of color.
There has been some debate recently on the subject of urban “culture” and its relation to poverty and white supremacy. Conservatives argue, essentially, that the structural forces (white supremacy) holding back “urban” economic advancement have largely receded, and so, where there is still poverty, the problem is “cultural.”
With that in mind, I’d like to posit that one reason conservative minority outreach fails so often and so consistently is because of a tailspin of culture, among Republicans, of generations of men being giant racist pricks. Not just racially “insensitive,” like an old man who doesn’t know it’s not OK to say “Oriental” anymore, but actively, intentionally, overtly, aggressively racist pricks. Like “attend a blackface-themed frat party on MLK Day” racist. Most of us don’t think forwarding a racist joke or speaking in an insulting “comedic” accent is appropriate at the workplace. Unfortunately, for those raised in the toxic culture of conservatism, the sort of mentality that leads government employees to do those things is widespread.
There will be no successful minority “outreach” for the GOP — not even among the “high-achieving” groups — until this culture is addressed. They’ll have to do this work for themselves. Charitable groups have tried for years to educate and help conservatives, but they keep falling back into the same tragic patterns: asking “why isn’t there a WHITE history month,” demanding access to institutions of higher learning based not on merit but on skin color, infringing on free expression merely because it makes them uncomfortable. The list goes on and on. It’s time for the right to stop feeling entitled to lessons in basic human decency, and start addressing their own pathological culture.
By: Alex Pareene, Salon, March 25, 2014
“Ryan’s Rhetoric Has Consequences”: First, One Must Understand His Own Culture And History
Reflections upon the recent holiday: The first time my wife saw tears in my eyes was in St. Patrick’s Cathedral, Dublin, at the tomb of Jonathan Swift. The brilliant 18th-century Irish satirist was my first and most enduring literary hero, a towering figure who Yeats thought “slept under the greatest epitaph in history” — composed by Swift himself.
I knew the Latin by heart, but seeing it engraved in stone moved me, although Swift had been dead since 1745. “It is almost finer in English,” Yeats wrote, “than in Latin: ‘He has gone where fierce indignation can lacerate his heart no more.’”
Reading Swift taught me more about Ireland and my Irish-Catholic ancestors than I ever learned at my alcoholic grandfather’s knee, I can tell you that. An Anglo-Irish churchman who considered himself exiled from London to the city of his birth, Swift condemned British misrule of Ireland in the most memorable satires written in English or any other language.
His 1729 pamphlet “A Modest Proposal for Preventing the Children of Poor People in Ireland from Being a Burden to Their Parents” retains the capacity to shock after almost 300 years. Impersonating the ever-so-reasonable voice of a public-spirited reformer of the sort who might today issue proposals from the Heritage Foundation, the narrator advocated genteel cannibalism.
“I rather recommend buying the children alive and dressing them hot from the knife,” he suggested, “as we do roasting pigs.”
It’s the laconic “rather” that chills to the marrow, precisely revealing the pamphleteer’s inhumanity.
Swift was certainly no Irish nationalist. A Tory by temperament and conviction, he’d have been appalled by the idea that the island’s Roman Catholic majority could govern itself. Even so, Professor Leo Damrosch’s terrific new biography makes a compelling case that both his voice and his personal example were instrumental to an evolving Irish national consciousness.
I thought of Swift’s “Modest Proposal” the other day, listening to the ever-so-reasonable Rep. Paul Ryan (R-WI) explain that America’s poor have only themselves to blame. “We have this tailspin of culture, in our inner cities in particular,” Ryan explained, “of men not working and just generations of men not even thinking about working or learning the value and the culture of work.”
Any question who he was talking about? As several commentators have noted, this business about “inner city” men not working isn’t so much Republican “dogwhistle” as GOP air-raid siren.
Ryan has since alibied that he’d been “inarticulate” and wasn’t trying to implicate “the culture of one community.” This came soon after a speech in which he’d told a heartfelt tale of a small boy who didn’t want a “free lunch from a government program,” but a Mommy-made lunch in a brown paper bag that showed somebody cared about him.
Coming from a guy busily trying to cut funding for school lunch programs and food stamps, this was pretty rich. Also apparently, apocryphal. The witness who’d told Ryan the tale in a congressional hearing had not only swiped it from a book called The Invisible Thread, but reversed its meaning. Which wasn’t so much that government assistance, as Ryan warned, threatens to leave children with “a full stomach and an empty soul,” as that sermons mean very little to hungry children.
Delivered just before St. Patrick’s Day, Ryan’s disquisition upon the undeserving poor earned him the scorn of the New York Times’ Timothy Egan. Taking note of Ryan’s great-great grandfather, who emigrated to the United States during the catastrophic Irish famine of the 1840s, Egan pointed out that Ryan’s words echoed the rhetoric of Victorian Englishmen content to let his ancestors die lest they become dependent upon charity.
It’s not always understood in this country that the mass starvation of Irish peasants — more than a million died, and another million emigrated — resulted not from the failure of the potato crop but English government policy. Ireland remained a net exporter of food throughout, with British soldiers guarding shipments of foodstuffs as they were loaded.
Rhetoric, see, has consequences. From Swift’s time onward, the native Irish had been depicted in terms justifying their subjugation. Virtually every negative stereotype applied to our “inner city” brethren today was first applied to Paul Ryan’s (and my own) ancestors. Irish peasants were called shiftless, drunken, sexually promiscuous, donkey strong but mentally deficient. They smelled bad.
Understanding that history is exactly what makes Irish-Americans like Timothy Egan, Charles P. Pierce and me — if I may include myself in their company — so impatient with a tinhorn like Ryan. If he wanted to understand his own ancestry, it’s authors like Swift, Yeats and James Joyce that Ryan ought to be reading, instead of that dismal ideologue Ayn Rand.
Nobody should let ethnic groupthink determine his politics. But if a politician like Paul Ryan hopes to be respected, it would help if he showed some sign of understanding the past.
By: Gene Lyons, The National Memo, March 19, 2014
“Christianity Vs Ideology”: Christian Conservatives Should Be Christians First And Conservatives Second
Many liberals have long suggested that it’s impossible to be a Christian and a conservative, because the love of the poor preached by Jesus Christ is incompatible with the economic and social policies promoted by conservatives. Christian conservatives, obviously, disagree. They would say that, at least on economic and social policy, Christian liberals and Christian conservatives agree about the ends — policy that promotes the common good with a preferential option for the poor — but disagree about the means. Jesus told us to love the poor. That is not at all the same thing as voting for programs that take money from one group of people to give it to another, whatever the merits.
As a Christian and a conservative, obviously I think that’s true.
But that’s not where the story ends. It’s where it starts.
To most non-Christians — and to many Christians — Christianity is primarily a set of doctrines. But for 2,000 years, Christianity has understood itself to be fundamentally an encounter with a specific person:Jesus Christ. And Christians accept as authoritative the Gospel account of Jesus Christ’s self-description as “the Truth.” Jesus didn’t say that his doctrine was the Truth. He said that he was the Truth.
Why is this important?
Because if you believe that the person of Jesus Christ is “the Truth,” then the corollary that logically follows is that everything that is not Jesus Christ is not “the Truth.”
To put it more practically: To be a Christian is to believe that all political ideologies are suspect. And wrong. It doesn’t mean that Christians should retreat from all political ideologies — as that would also be a political ideology, and also wrong. By all means, be a Christian liberal. Be a Christian conservative. But if you are a Christian liberal, if you are a Christian conservative, then by definition there will be tensions between your Christianity and your political ideology. It’s axiomatic. And if you are a Christian first and an ideologue second, you should confront those tensions instead of papering over them.
Let’s take my own tent of Christian conservatism, since this is about us.
Yes, it is absolutely possible to be a Christian and believe that limited government and free markets are the best ways to advance the prospects of the poor. But when conservatives portray the poor as moochers and divide the world into “Makers” and “Takers,” and hold up those “Takers” quite clearly as objects of contempt, the Christian has to recoil. And not just recoil, but cry injustice.
It’s fine to believe that a rising tide lifts all boats, but a Christian should look at how policies affect the poor first, rather than a byproduct of everything else. (And some Christian conservative politicians like Mike Lee, Paul Ryan, and Marco Rubio have started to look at that.)
Even if the solution isn’t a new government program, a Christian who is also a conservative should at the very least be concerned about an economy that too often seems to have a playing field tilted in favor of the winners.
A Christian who is also a conservative should also wince at cultural narratives, advanced by some conservatives, that constantly belittle, mock, or dismiss the perspectives of groups that have been historically or are marginalized.
A Christian who is a conservative should at the very least be concerned about how a country with the mightiest armed forces in the world uses its strengt abroad and at home.
In the Gospel, Jesus calls on his followers to be “signs of contradiction.” Christians should stand out of the pack and, frankly, be a little weird. By all means, Christians should enthusiastically join political parties and ideological schools. But they should also stand out inside them as Christians.
By: Pascal-Emmanuel Gobry, The Week, March 17, 2014
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