by Don Washington on 2012/07/11
Before we get into this I feel as if some basic physics and civics may be of use as a guide to then next thousand words or so. The physics you need to follow this post are that in macro space-time the concept of cause and effect holds up and the arrow of time moves in one direction. The civics you need, that governments have the power to tax and spend… it’s what defines them. Where/who/how they get the money and what they spend/invest the money on is what defines a government’s values. Governments are not businesses. A government provides services and looks out for the interests of the entire society by defending and improving the commons. The commons are things that are communally owned because it would be a Night of the Living Dead disaster if they responded to market forces alone. Got all that, good… now do not fall asleep! I promise all this studying will pay off with hilarity and maybe fully justified anger.
Every time I pick up a story on Chicago’s government it explains that we’re broke and how our super, financial genius Mayor is going to fix it by making us live within our means and shaping up that inefficient and wasteful government, one lousy union worker and spendthrift, deadbeat pensioner at a time. We’ve reached the point in this narrative where every cut service is a needed “tough” call, every reduced tax on corporations is an attempt to jump start the economy and every shrunken pension, benefit or salary is an unalloyed good as part of our shared sacrifice. This narrative is the cornerstone of ignorance upon which idiot commentary is composed and bad to evil public policy is made. Bad public policy simply doesn’t work because it can’t. Evil public policy is public policy that purports to do one thing but really does something else. Bad public policy would be something like spending more money on an effective anti-violence program, like Safe Passage; while firing the ex-felons it employs that are the backbone of the program. Evil public policy would be privatizing schools via charters for no provable or identifiable academic or cost savings reason. We are guilty of both by the way.
Why does no one ever ask: “How the hell did things get like this? Who the hell has all the money we need to tax to spend to provide services? How did some pensioner cause these deficits… did they cause these deficits? What services are supposed to provide and how much does it cost to provide them at a quality level? I could ask a lot more questions like this but you’ve not been reading anyone writing about these issues, asking questions like these. I blame the altitude and maybe the unnatural cold… wait a second… you see my problem with what we don’t know and why we don’t ask to know these things.
Remember we started by talking about physics, cause and effect and the arrow of time. Why are our pension funds in such bad shape? Do you remember 2007-08, I do and wish the people creating the common wisdom would try to remember what I can’t forget. It turns out that our banking system’s criminality knew/knows no bounds. You see every major bank, say Citibank and JP Morgan Chase for example, were creating fraudulent financial products called Mortgage Backed Securities and Credit Default Swaps and taking out derivative bets on them failing… that’s right failing so that when they failed they would make a bundle. Unfortunately every fraud has two parts. The prick-rat-bastard stealing all the money and the victim and the primary victims of this fraud were homeowners, first time homeowners, minority borrowers, first time borrowers, unions, state pension funds, governments and other institutional investors.
So let’s recap. These banks used some fancy math they knew wasn’t sound, colluded with the rating agencies, Moody’s, S&P and Fitch to say these new financial products that they knew were a toxic brew of in-securable, uninsurable debt, were Triple-A instruments. Then they sold them to institutional investors: pension, unions, foreign trade unions, foreign governments and the like while betting against them as they were selling them. This would be the cause of our financial/economic problems because it kicked the bottom out of pensions everywhere, then federal governments, then state governments and then city governments while concentrating the wealth in the top 1% and in the hands of corporations… some of the very ones responsible for the this theft… which by the way is the largest redistribution of wealth from the bottom to the top in history of humankind. Now we come to find out that they’ve been jiggering the LIBOR maximize their profits and make them look more solvent as well. By the way I’m calling this fraud because I understand what a derivative is. It is a financial instrument where you can’t see the price or know the history of how it came to be so you can’t “price compare” when “shopping” for one and their incredibly complex mathematical formulations absolutely obscure fees in how they structure both risks and returns said instrument delivers. They are vehicles to steal and little else.
That’s the cause, here are the effects and we are seeing them in Chicago at the most basic level imaginable. Kids are homeless as foreclosures rise. Education is cut unless we pry money out of the 1%, here we’re seeing teacher’s brutalized to the point of wanting to strike and libraries close and cut hours for example. Pensions are cut and those promises made to those workers, who gave up pay raises to protect them are being broken. Trash doesn’t get picked up. Hospitals close… like our mental health centers and violence and instability follows look at the shootings happening in our neighborhoods. All the extra cops and Ceasefire workers are not nearly as effective as a raft of decent frick-frackin’ jobs and decent schools; Wal-Mart isn’t an economic savior it’s a sign of the damn apocalypse and the collapse of a viable economy. The implications are grim because the arrow of time is relentless. The feds cut costs and spending so they take in less income, which creates more debt, which creates more deficits, which gives us deflation, which destroys to economy. The arrow of time is relentless; the feds bail out the banks, which creates less money as demand for services like unemployment insurance goes up, which drops tax revenues, which means less government income, which creates less government services, which ends in the wholesale destruction of the safety net and defunds public schools, safety and services. Such a spiral ends in real bad trouble for all of us.
So let’s get local. Remember all a government can do is tax and spend. Rahm’s response to shrinking public funds for education, public safety and public health has been first to immediately stop collecting a head tax from corporations who were large enough to easily pay it. Then to fight to insure that we, the public, will get nearly a trillion less in revenue from them for the next decade from CME, an enterprise whose behavior merits something closer to jail time than a tax break and a few other entities… Entities whose behavior caused the present financial mess our pension funds and city in are in. This is the exact opposite of making a tough call or wrestling with a fiscal reality. Anyone can go to bat for the people who have all the money and power but taking a bat to them to get the money needed for the commons… that’s a quick way to become Eliot Spitzer, Julian Assange or John Edwards sans the sexual scandals.
Rahm’s plan to “leverage” our stalled infrastructure needs is not to raise bonds in a conservative way but to get into bed with a consortium of corporations whose individual records of shameless thievery of public funds fills Mammon with pride but whose individual criminal behavior shocks even Satan’s conscience. There’s ULLICO, whose new management still managed to get all sticky fingered with union pension funds. There’s JP Morgan Chase that said it lost $2 billion and I told you then the number is closer to $10-12 billion. Now they are coping to losing $5 billion and I still say it’s $10-12 billion. Now Wall Street firms, full of folks who profit off of knowing these sorts of things are saying $9 billion and I am sticking with $10-12 billion and thinking I may have gone too low. All of this on top of the Alabama infrastructure and bid rigging scams they’ve run to steal from the public. There’s Citibank… an organization that has done so much dirt that a federal judge calls them a recidivist organization and given how much time they spend in court who can disagree?
What I am pointing out here is two things. One, Rahm is not raising money from the people who have it. Two, Rahm is giving them our money for free after they’ve already stolen money from us and done us massive, societal economic damage. So he's not doing anything that is likely to make Chicago more fiscally secure. Remember the arrow of time, cutting costs creates/fuels a death spiral; not taking in revenue does not create more revenue, we call that Supply Side/Neoliberal nonsense not quality economics. Let’s just look at the I-Bank as an example of what bad/evil economic policy looks like. The reason given for this “innovative financing idea” is that we need to find money the government can’t come up with. Never mind that this crisis was caused by the use of debt by some of our I-Bank “partners” to gamble with our pension funds and mortgages. Don’t you focus on the fact that the government on every level, including Rahm right here is “solving” the crisis with public policy that protects the interests of the banking and financial sector… like the I-Bank does, so instead of bonds we have this mutant, profit-creating machine that we can’t hold accountable and will not be able to know exactly how it works.
The bottom line is this. The very same entities that helped cause the crisis we’re in right now are going to be financing our infrastructure. Trusting these corporations to not engage in malfeasance seems incredibly stupid. The only folks sharing sacrifice here are the mass of people who are experiencing lower wages, like our teachers; reduced pensions like our police, fire and laborers will be; public sector job losses, like our understaffed police, teachers and firemen; shredded safety nets like our loss of mental healthcare clinics while the says it must be done because government is spending too much money. Which is all a monstrous lie because we could tax these bandits and spend appropriately on the commons but we won’t and we won’t even ask why they get their money for nothing and the city for free.