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Welfare as We Know It Now
In the days before welfare reform, single mothers could collect five or six hundred dollars a month without working. That was what welfare looked like before 1996. In the Internet Age, welfare is about having the government do everything it can to make the rich absolutely as rich as possible. As F. Scott Fitzgerald said many years ago, the rich are not like you or me: They need the government's assistance to get by. There are all sorts of ways in which the government helps those who have the most.
For example, Bill Gates might have to work for a living if the government didn't grant Microsoft a copyright monopoly on its software. Sure, we all know copyrights provide an incentive to innovate, but there are much more efficient ways for the government to provide incentives. But, the more efficient mechanisms may not make Bill Gates and his ilk quite so rich, so politicians who hope to get elected and reelected don't talk about them.
Patent monopolies for prescription drugs are also a great way to put more money into the pockets of the extremely rich. The CEOs of drug companies like Pfizer and Merck are able to earn tens of millions of dollars each year only because the government grants them patent monopolies on their drugs. As a result of their government granted monopolies, drugs that would sell for $4 a prescription in a competitive market can instead be sold for hundreds of dollars per prescription, and sometimes even more.
This is enormously inefficient from an economic standpoint. It also leads to unnecessary suffering on the part of millions of people who must struggle to pay for their drugs out of pocket, or deal with crazy bureaucratic rules to get insurers to pick up the tab. But, when it comes to helping the most affluent, efficiency is a secondary consideration.
In the same vein, the fund managers' tax break, which applies a special low tax rate on the earnings of managers of hedge and private equity funds, puts as much as $6 billion a year into the pockets of some of the richest people in the country. This tax break costs about a third as much as the annual TANF appropriation, the main federal welfare program for families with children. While the money for TANF is divided by millions of families, the fund managers' tax break goes to just a few thousand individuals. For the highest paid fund managers, the tax break can mean hundreds of millions of dollars to pay for vacation homes, private jets and other necessities for the extremely rich.
At the moment, many of the high-flying hedge fund boys and girls find themselves in trouble because they invested heavily in subprime mortgages and other risky assets. With the housing bubble starting to deflate, some of these assets are nearly worthless and many are worth far less than what the hedge funds paid.
Hedge funds make big returns by making highly leveraged investments, meaning they borrow heavily to multiply their gains. The flip side in this story is that when the hedge funds bet wrong, they can lose much of their capital very quickly.
The hedge fund crew is desperately hoping the Federal Reserve Board will swoop in to save the day. Most immediately, they need lower interest rates. The hedge funds can only hang onto their assets as long as they can pay interest on the money they borrow. If interest rates fall, then an important source of pressure will be relieved.
Next, they need some sucker on whom they can dump their bad mortgages. The best candidates are Fannie Mae and Freddie Mac. These government-backed firms created the secondary market in mortgage debt that allows banks to sell the mortgages they issue. It turns out the hedge funds have been big players in the secondary market, buying up hundreds of billions in mortgage debt that is going bad at a very rapid rate. The hedge fund boys will be lobbying Congress big-time to broaden the role of Fannie and Freddie so they can buy this bad debt and save them from large losses.
12 Comments so far
Show AllYou know, if we had universal free health care and education along with a living wage and job creation, we might not need to give out so much welfare.
Corporate welfare has always gotten more favors than welfare for people that actually need it. Reagan ushered in the era of reverse Robin Hood that said screw the poor and make the rich richer. We need to reverse this trend before the richest 1% have ALL the money and power. Then there will be nothing that anyone can do about it.
This is an excellent way to reframe the welfare debate. I know, it's tough convincing the fundie voters out there. In VA Beach where I live, voters look at Big Business scumbags such as Microsoft, Fannie Mae, Enron, etc ... as the "children of Jesus" !!!! They don't call red state America the bible belt for nothing especially when Rightwing religious fundies and Corporate America make the strangest of bedfellows just like Big Military and Corporate America.
One thing that could be done would to make payment to an overseas company that holds a trademark taxable at US rates.
This would keep companies like Microsoft from transfering their revenues to a foreign country (ie Ireland)that has a lower tax rate.
One minor fact that Baker fails to note is that "ending welfare as we know it," was a thinly-veiled racist mantra of the Clinton/Gore regime, in an effort to appeal to "centrist" (i.e. racist white) voters.
Bill Clinton continues to brag about this project as a great success. Gore has been less sanguine, but Hillary drags the great accomplishment out for certain audiences.
Also, Baker fails to mention the many ways the Clinton/Gore administration extended corporate welfare and welfare for the rich including: deregulating the SEC, banking, communications etc.; making EPA and OSHA monitoring "voluntary;" re-engineering government and kicking contracts to privatizers; expanding the military, etc., etc., etc.
This is neither old history nor even old news as Hillary quite explicitly says she's proud of what she and Bill did. It's curious that Baker is silent on the Clintons in the middle of an already-too-long presidential campaign.
But then there are always those potential jobs in the council of economic advisers for "progressive" economists who are careful about omitting key facts from time-to-time.
Let Hillary run on a slogan of "ending corporate welfare as we know it." Then she can call herself a progressive.
Don't forget Clinton's 1996 FCC deregulation, promoting media monopolization. Senator Clinton has not fought further media monopolization in this decade.
http://www.nader.org/template.php?/archives/1204-Tax-Haven-Racket.html#extended
It's not the State's job to decide how to run human lives based on 'efficiency'. It's the State's job to protect the rights of it's citizens.
If you want to compete with Pfizer, get your own investors, develop your own IP and pharmaceutical lines, and sell them with the emphasis on service, not profit. If customers want what you have, you'll prove your ethical chops and serve people who need your product...no 'restructuring' needed.
The only thing that is going to change this is a democratic resistance that is willing to make a more complete oversight of the so-called free market one of it's objectives. Entrepreneurial types are fully entitled to a basic profit on their innovations, say, five to seven million dollars, to "grant them a bigger slice of the pie" since they seemingly can't get by without vast wealth. After that, however, every bloody dime goes back into the commonwealth. Bill Gates doesn't need even a billion dollars, which it would take him 300 years to spend at the rate of a dollar a second. He has fifty five billion. Why? Is he really that bright? Does he really contribute that much to society? His ideas on education, which drive much of public policy in the Northwest, are re-hashed ideas that progressive educators have been working with for a hundred years. Many of the education and public health programs that he now espouses were in place before he and his budget cutting yahoo friends ripped up the public sector in this part of the country. Innovators of all kinds have been driven out of the public sector- which they worked in as a career, and efficiency experts of the Gates type have been brought in to re-discover the wheel.
If anything, these people are medicine show men who steal and sell what works perfectly well before they came along and improved it back to the people. Not another dime for these phonies. What bullshit this country is fast becoming.
when the rich start to lose from the stupidity of their own decisions and from the market regime they themselves created, you see what absolute bullshit all of the conservative mantras about personal responsibility and all that crap really is. all of it, not just the sexual morality. morality/legality is for poor people. you can't get an abortion, but i can. you are stuck w/your mortgage, but i'll get fannie mae (the gov't) to buy up my thousands of bundles mortgages. sexual morality, character, integrity, contract law, property rights, free speech, the whole boo-jois scheme is a bunch of horse crap. why? cuz the rich person is always gonna say to the poor: i'm rich thru virtue. you are poor thru vice. always. and they'll make the world so.
www.wsws.org
"With the Fed lowering interest rates and Fannie and Freddie buying up their junk bonds, the hedge fund managers may be able to make it through the housing market crash relatively unscathed. It might take a lot of help from the government to ensure their fortunes, but the rich are different from you and me."
Our government makes every effort to ensure that the wealthy always walk away unscathed! They and many other elitists in this country do very well with taxpayer bailout funds.
"One minor fact that Baker fails to note is that "ending welfare as we know it," was a thinly-veiled racist mantra of the Clinton/Gore regime, in an effort to appeal to "centrist" (i.e. racist white) voters."
oops! Hate to break this to you, but at least here in Texas the majority recieving welfare services are white.
Centrist = racist white voter? Quite a leap!
La Raza = Hispanic racist voter?
Neocon = Conservative?
Perhaps we best leave some of the leftist sterotypes behind. They are no better than the far right's.