How About Real Change And Hope In Obama's Second Term-- Like Bob Reich For Treasury Secretary?

I was just watching President Obama speaking at UNLV. I'm not exactly an alumnus but I did take courses there-- and write for the student newspaper-- when my van broke down in Vegas and I couldn't afford to repair it and leave town. That was a lot of years ago. Today the President was saying so many of the right things-- things Romney will never say-- like "no one who fights for this country should ever have to fight for a job when they come home." I heard that while I was putting on my socks upstairs.

And earlier this week, on Air Force One, when a reporter pressed Jay Carney, the Press Secretary on whether Obama would support a temporary extension of the Bush tax cuts for the rich, Carney said: "He will not. Could I be more clear?"

But the problem is that while he talks like a real Franklin and Eleanor Roosevelt Democrat, he hasn't governed like one. Remember he once said he's a Blue Dog Democrat? That's what he governed as-- starting with his first absolutely horrendous appointments-- like Wall Street operatives Rahm Emanuel as Chief of Staff, Larry Summers as Director of the National Economic Council and Tiny Tim Geithner as Treasury Secretary. A high school teacher of mine once told the class that no matter who the president is, Wall Street always gets one of their own as Treasury Secretary. That started with Alexander Hamilton.

FDR's first Treasury Secretary was William Woodlin, a Republican hereditary industrialist who had served on the Fed starting in 1927. Henry Morgenthau, Jr. took over in 1933 when Woodlin resigned due to an illness than killed him within months-- and he served the whole time Roosevelt was president. He was born into wealth; his dad was a NY real estate mogul. Although conservatives were enraged that Roosevelt appointed him, Morgenthau was a vocal anti-Keynesian and was known for utterances like "We have tried spending money. We are spending more than we have ever spent before and it does not work. [...] After eight years of this administration we have just as much unemployment as when we started [...] and an enormous debt to boot!" He worked hard to persuade FDR to give up on deficit spending, although in 1937 he finally got Roosevelt to focus on balancing the budget through major spending cuts and tax increases... and brought on the 1937 Recession.

After Morgenthau, Truman appointed one of his closest friends, Fred Vinson-- who had served as head of the inflation-fighting Office of Economic Stabilization. He wasn't really a Wall Street person but he was soon kicked upstairs to serve as the Chief Justice of the Supreme Court and was followed by John Wesley Snyder, an Arkansas banker. He was the last Secretary of the Treasury that wasn't an actual Wall Street person.

Eisenhower's first Treasury Secretary, George Humphrey was a conservative steel industry tycoon was against aid to the poor and fought for a balanced budget, tight money, tax cuts to the rich that would "trickle down" and drastically curbing federal spending. Next came Robert Anderson, a Texas investment banker and alcoholic who was trial and convicted of tax evasion and of laundering huge sums of money for drug dealers in a typical Ayn Rand-like offshore banking scam that Republicans admire so much. He was disbarred and sentenced to prison.

The next president was JFK but he wasn't going up against Wall Street either-- quite the opposite. His Secretary of the Treasury was C. Douglas Dillon, another hereditary one-percenter and notorious Wall Street investment baker (Dillon, Read & Co.)... with pretensions towards Scottish nobility. He was close personal friends with every high end financial predator in New York. LBJ's first Treasury Secretary was Henry Fowler, a conservative who's primary interest was an immense tax cut, primarily for the rich. Upon leaving the cabinet he was rewarded with a partnership in Goldman Sachs. He was followed by Joseph Barr, who was serving as the Chairman of the FDIC and the Undersecretary of the Treasury before LBJ appointed him Treasury Secretary for the last month of his presidency. He went on to head the American Security and Trust Company and then the Federal Home Loan Bank of Atlanta.

After Barr, they could have just moved the Treasury Department to Wall Street itself. Nixon appointed Mormon bankster David Kennedy, followed by Texas con-man John Connally-- a paid shill for right-wing Texas oil tycoons Sid Richardson and Perry Bass-- and Bechtel CEO George Shultz, whose policies brought on one of the worst inflation spirals in contemporary American history. He was followed by William Simon (who Ford held onto once Nixon resigned in disgrace). Simon, a venture capital predator and Wall Street bankster with a series of shady companies, was an Ayn Rand fanatic, "free market" extremist and was responsible for the revitalization of the term "czar" in American politics (having been Nixon's "energy czar"). Carter had two Treasury secretaries, Michael Blumenthal, a NYC corporate guy, and William Miller, a former Textron CEO and Federal Reserve Chair.

The came the veritable bankster boardroom brought to you by the most Wall Street-centric series of presidents since the Roaring '20s: Reagan, Bush I, Clinton, Bush II and Obama. Reagan gave us Merrill Lynch chairman and CEO Donald Regan, the Carlyle Group's (and bin-Ladens') James Baker, and, briefly Peter McPherson, later Chairman of Dow Jones (and the man who made sure Rupert Murdoch could buy the Wall Street Journal). George H.W. Bush, from a Wall Street bankster clan himself, named Nicholas Brady (former Chairman of the Board of Dillon Read & Co.). Clinton found one of the most conservative Democratic taxcut fanatics around, ex-bankster, Senate Finance Committee Chair & all around Wall Street patsy Lloyd Bentsen. When Bentsen resigned, Clinton appointed an outrageous bankster, Frank Newman who had worked for (and still served) Citicorp, Wells Fargo, and BankAmerica. (After his turn at Treasury-- 4 weeks-- he went to work first for Bankers Trust and then as CEO of Shenzhen Development Bank.) Then can the really bad guys, Wall Street's dream boys, Robert Rubin (Chairman of Goldman Sachs before Treasury, Chairman of Citigroup after Treasury) and Lawrence Summers, an academic who has always groveled in the face of a few bucks held under his nose. His purely Wall Street-oriented deregulation policies were as key to the current worldwide economic meltdown as were Phil Gramm's.

Bush II gave us Alcoa Chairman Paul O'Neill, CSX Transportation's CEO and Chairman of the Business Roundtable John Snow, who later went on to head Cerberus Capital Management, and finally-- and worst of all-- notorious bankster Henry Paulson, CEO of Goldman Sachs. Obama couldn't have done worse than Paulson-- but Geithner, former President of the NY Federal Reserve Bank, isn't much better.

If the mistakes Obama made in his first term don't saddle us with Mitt Romney-- in other words, if Obama gets a second term-- he can do something really historic and become a real agent for Change (and Hope). That would be appointing former Labor Secretary Robert Reich Treasury Secretary. Wall Street might grumble a little commit mass suicide, but Reich, as you can see in the video above, would use the office in a way it has never been used before-- for the good of ordinary working American families. I bet the 18 Members of Congress who proposed raising the minimum wage from $7.50 to $10/hour this week would support the nomination!

In introducing a key chapter, "Tax Cuts Aren't A Solution To Every Problem" in his book, The Fifteen Biggest Lies About The Economy, Joshua Holland quotes Mitt Romney explaining a Republican alternative to stimulating the economy. Rather than the government spending money on public works and rather than putting money in consumers' pockets by increasing the minimum wage, the GOP wants to give more tax cuts to the wealthy. "There are two ways," says Willard, "you can put money into the economy, by spending more or by spending less. But if it's a stimulus you want, taxing less works best. That's why permanent tax cuts should be the centerpiece of the economic stimulus." As Holland points out, he's wrong, gigantically wrong. In fact, he writes, "it's difficult to know where to start deconstructing conservative rhetoric on taxing and spending. This is such a central part of their worldview, and it’s informed by a whole slew of falsehoods. In order to make sense of it all, it’s necessary to understand four key concepts behind the Right’s rhetoric." Here are Holland's 4 key concepts that unwind the basis of the Republican Party ideology of selfishness and greed:

1. Shrink the Government and Drown It in a Bathtub

Conservatives believe in small government as an ideological end unto itself. They believed Reagan when he said, “Government is the problem,” and they think that shrinking that problem down so that it becomes small enough, in the words of antitax activist Grover Norquist, to “drown in a bathtub,” is a virtue.

They naturally tend to assume that their political opponents must take the opposite view: that liberals want to expand government and raise taxes because they prefer bigger government and higher taxes. That’s a serious distortion; progressives see policy goals and aren’t afraid of pursuing solutions to problems through government, the private sector, or a combination of the two. When a real problem can’t be addressed by the private sector-- poor kids lacking health insurance is a perfect example-- then we look to the public sector for the answer.

And then we pay for it, rejecting the reckless “borrow-and-spend” approach that George W. Bush used to turn a tidy budget surplus left by Bill Clinton into a deep sea of red ink. The bottom line is that progressives and liberals couldn’t care less about how big or small the government may
be in the abstract, only whether it functions well and solves the problems we ask it to address.

2. Conservative Programs Don’t Count as Wasteful Spending

Despite conservatives’ ideological devotion to limited government, make no mistake that when they say “government,” they are talking about limiting corporate regulation and reducing the amount of money spent on the relatively meager social safety net that takes the hard edges off America’s brand of unbridled “turbo-capitalism.” In practice, almost everybody, from across the political spectrum, is happy to spend money and expand government in pursuit of his or her own objectives. Spending projects are wasteful “pork” only when they’re in another lawmaker’s district. Republicans rarely object to spending tax dollars on the military, our intelligence agencies, law enforcement, or border security, to name a few. To state the obvious: these things cost money, too-- a lot of it.

3. The Poor Don’t Pay Taxes

Contrary to the right-wing narrative, everyone pays taxes. Conservatives insist that the tax system is highly progressive and that anyone who suggests otherwise is just whining. Rush Limbaugh put it this way: “The bottom 50 percent is paying a tiny bit of the taxes, so you can’t give them much of a tax cut by definition. Yet these are the people to whom the Democrats claim to want to give tax cuts. Remember this the next time you hear the ‘tax cuts for the rich’ business. Understand that the so-called rich are about the only ones paying taxes anymore.”

That’s true, however, only when you do a little sleight of hand. You have to look at the federal income tax in isolation and then pretend that it represents the government’s entire take. It’s true that the bottom 40 percent of U.S. households don’t pay much in federal income taxes. And, according to a Congressional Budget Office (CBO) analysis, the wealthiest 1 percent do pay more in federal income taxes than the bottom 90 percent combined.

Yet that’s a far cry from the claim that the “poor don’t pay taxes.” Rushbo won’t tell you, but the CBO also said that if you look at state and local taxes, the top 1 percent of Americans paid 5 percent of their incomes, while the bottom 50 percent (many of them among those who paid no federal income taxes) shelled out 10 percent, twice as much proportionately. In addition, the CBO found that the bottom 80 percent of the pile paid around 9 percent of their incomes in Social Security taxes, while the top 1 percent paid only 1.6 percent of theirs. After the income tax, Social Security taxes represent the largest share of the federal take.

A 2009 study by the nonpartisan Institute on Taxation and Economic Policy looked at state taxes (including sales taxes) and concluded, “Nearly every state and local tax system takes a much greater share of income from middle- and low-income families than from the wealthy. That is, when all state and local income, sales, excise and property taxes are added up, most state tax systems are regressive [emphasis theirs].” The top 1 percent of earners paid around 5 percent of their incomes in state and local taxes, while the poorest fifth of the population paid almost 11 percent of theirs.

When the institute looked at excise taxes-- on gas, cigarettes, alcohol, and other goodies-- they found that the “average state’s consumption tax structure is equivalent to an income tax with a 7.1 percent rate for the poor, a 4.7 percent rate for the middle class, and a 0.9 percent rate for the wealthiest taxpayers.

When you add it all up-- state and local taxes, federal taxes, and excise fees-- it turns out that the rich, the poor, and those in between all end up with about the same tax rate. That’s the conclusion of a 2007 study by Boston University economists Laurence J. Kotlikoff and David Rapson. They summarized, “The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.”

That brings us to an important point: It wasn’t always that way. According to a 2010 study by Wealth for the Common Good, an organization of deep-pocketed progressives, “Over the last half-century, America’s wealthiest taxpayers have seen their tax outlays, as a share of income, drop by as much as two-thirds. During the same period, the tax outlay for middle-class Americans has not decreased.” The study found that the nation’s “highest earners-- the top 400-- have seen the share of their income paid in federal income tax plummet from 51.2 percent in 1955 to 16.6 percent in 2007, the most recent year with top 400 statistics available.” Between 2001 and 2008 alone, tax cuts for the wealthy cost the U.S. Treasury $700 billion.

4. Tax Cuts for the Rich Will Also Help the Rest of Us

Republicans use the lie that the poor don’t pay taxes to justify big cuts for the wealthy. The bad news is that those cuts raise taxes for everyone else. You won’t read that in the legislation, but it’s the real-world result of cutting taxes without taking on the politically unpopular task of identifying services to be cut.

Even when revenues drop, people expect the cops to come when called and the streetlights to burn. Budgets become stretched, and communities tighten their belts-- perhaps laying off some workers. But then-- and this is key-- state and local governments also make up much of the shortfall with higher fees for various services, higher tuition at public colleges, and increases in sales, excise, and property taxes, all of which fall disproportionately on the poor and the middle class.

Most government spending is locked in-- for Social Security and Medicare, the defense budget, and a host of other programs that would be politically unpopular to cut. The Right has done an excellent job of pushing the notion that they’re for tax cuts, but remember that they are talking about corporate taxes, capital gains taxes on investments, and taxes for the top earners. When those revenues dry up, the rest of us have to pick up the tab.

So keep in mind that the Right actually loves to raise taxes, just as long as they’re hiked on the backs of ordinary working people. Barack Obama’s first budget made the Bush tax cuts permanent for every couple making less than $250,000 and every individual taking in less than $200,000, while allowing those cuts targeted at the richest Americans to expire. This effectively cut the tax bills of about 98 percent of the population. The response from House Minority Leader John Boehner, a long-time advocate of tax cuts? “The era of big government is back, and Democrats are asking you to pay for it,” he told the Washington Post.