I was asked yesterday why there is suddenly so much talk, in publications like the Wall Street Journal, about the unearned privileges and exploitations of the “political class?” And why there is so much populist posturing by Washington Democrats against executives at companies such as AIG, from which they were accepting campaign contributions in large denominations just a year or two ago? Let’s review. For 30 years, two kinds of people have been getting richer. Top executives who sit on each others’ boards and vote each other an ever larger share of private sector wealth. And today’s senior citizens, the richest in history, particularly retired public employees, and public employees who do not deign to do their jobs, who suck up a larger and larger share of public sector resources as a result of their control state legislatures and Congress, in the absence of contested elections (which are no longer permitted for such offices).
Everyone else has been getting poorer, but this has been covered up in two ways. By having their losses postponed to the future — in the form of lost pensions and health benefits that aren’t so important when one is young and healthy. And by having people go deeper and deeper into debt so their spending doesn’t decline with income. But today the cover up is no longer possible. The standard of living of most Americans is dropping severely, their taxes are rising, their public services and benefits are being cut, and their paper wealth is disappearing. Neither the political class nor the executive class is willing to give anything back, but they do want to deflect blame. So they are pointing fingers at each other.
The privileged self-dealers who have seized control of our public and private institutions, and are systematically looting and destroying them, have an incredible sense of entitlement and no shame. They only compare themselves with others like them, and never even think about whether what they have taken is fair relative to younger generations, and to those whose pay is set in the marketplace rather than as a result of power. They never think about other people, and feel entitled to every cent of their bonus, and every day and year paid to not work. Millions of Americans face poverty, and others are facing pay and hours cuts. None of these private sector workers would dare tell their customers to pay more and accept less. And yet the political class and executive class shamelessly add new demands.
Let me give you two examples. Michigan is a state that has been in recession, in a depression really, since 2000. Taxes have soared, and public services have been cut over and over again. Some municipalities are facing bankruptcy. The unemployment rate is over 12%. Property values have collapsed. And the auto industry, including the richest and most privileged workers in the U.S. outside of Wall Street and Hollywood, is facing the loss of pension and health benefits through bankruptcy or something like it.
And yet in the face of this, Michigan’s Teachers’ Union felt free to push — and almost got — a huge pension enhancement for those about to retire that would have cost $4 billion. (For comparison the New York State legislature just passed a huge tax increase that will raise $4 billion an year, and since New York is a larger and richer state, $4 billion is like $8 billion here). The enrichment was justified on the grounds that future teachers would be less well compensated as part of the deal — and perhaps less well qualified and motivated as well. In her new job, Randi Weingarten — who succeeded in destroying the NYC schools with a similar deal (the destruction part is coming soon) is also in charge of this union. This is what they do. They are insatiable.
Also insatiable: the executives. Investors have lost $trillions of dollars because the “profits” on which past bonuses were based proved to be falsely inflated. Shareholders have received little in dividends, and those dividends are being slashed. Stock prices are in the tank. And yet company after company is re-pricing stock options, which were supposed to reward top employees only if stock prices went up and shareholders shared the benefit. With the re-priced options, the top execs win even if the shareholders never see a dime from their investments. In fact as those options are exercised, the shareholders face more losses as the value of their investments is diluted. Anyone think stocks are a good deal?
As our debt puffed economy deflates, and most Americans have less and less, both the political class and the executive class have to take a rising share of whatever is left just to keep the privileges they already have. Taxes have to be higher, and debt service, pensions, retiree health care and sinecures account for a higher share of those taxes, leaving ordinary citizens worse off. Wages and benefits for rank and file private sector workers must be cut, and once excess capacity is wrung out of the global economy, the quality, variety and affordability of goods and services is going to go down. Far from giving the privileged members of Generation Greed pause, they seem desperate to grab more while there is still something left to grab. The more people save and invest, the more those who control business skim off the top. The higher the taxes people as a part of “shared sacrifice,” the more goes to early retirement and past debts. More donations are solicited for parks and libraries, but these and closed and not maintained anyway. More and more money is borrowed to build improvements such as the Second Avenue Subway, but they are not built.
The executive class and political class are like bad parasites. An effective parasite keeps its host in a weakened and diseased state, not quite sucking all the life out of it and counting on its will to live to provide a continuing source of food. Kind of like counting on people to keep paying more and more to keep the schools and transit system going even as they deteriorate and are worth less and less. A bad parasite like Ebola burns itself out by killing its hosts; when the hosts die the parasite does too, and when they die to quickly the disease is unable to spread. I have come to believe that the privileged members of Generation Greed are so needy, greedy and insatiable that our institutions — public and private will eventually collapse, because they’ll keep grabbing and grabbing until there is nothing left. Killing both the parasite and host, the way that both the overpaid executives and over-privileged retirees of the auto industry would have been wiped out — had the rest of us, much worse off, not been sacrificed to help them.
More and more Americans have less and less to lose, and would prefer such a collapse to perpetual serfdom for themselves and their children. I, for one, see the bankruptcy of New York State and its local governments as the only way out of ever-rising taxes and diminishing services. Only after a total collapse will the vested interests lose their vesting. The United States may also be facing the collapse of its currency, wiping out a huge share of the paper wealth in the country. As I’ve written previously, keep your eye on that ball. The straight talk about what might happen here is coming from China.
The greedy are worried enough to blame each other. Expect more shrill posturing for public consumption among those who always find the way to bury the hatchet in our backs in the back rooms. It is the Democrats that are working to bail out Wall Street. It is a Republican who was carrying water for Michigan’s soon to retire teachers. Republicans, after 25 years of deficits don’t matter, are beginning to test market “generational equity” as an issue for them, of all people. What a joke.
This week we saw a bunch of New York City Democrats claiming to “fight for the people” against the MTA. What is the MTA? It is a organization run by the government, the government being a job machine for Democrats, whose jobs are held by members of public employee unions, the foundation of Democratic control of our public institutions, which sends most of its money to retired public employees and holders of its debts, who are generally affluent senior citizens attracted by the tax exemption for interest on those bonds. Seniors and the retired are also among the people that matter. The MTA is run by a board with appointees of a Democratic Governor, whose debts and pensions and capital plan have been approved by Democratic legislators.
These slimy little trolls are in fact “fighting for the people” against themselves, having already sucked all the money off the top. What the gang of four understand is that people rightly perceive that whatever more they pay will come to nothing, because they will be robbed — by themselves.
As for myself, I’ve come to see attempts to save public services and benefits and social institutions as hopeless. The greedy and needy cannot contain themselves, will not reform, and cannot be dislodged. We have a predatory oligarchy of cronies. Things are going to get worse and worse for most of us until there is a collapse and things get really terrible. The goal of the political class, and the executive class, is to prevent that collapse, for our benefit they may tell us and even themselves, but for their benefit in reality, because their privileges rely on the continued existence of the organizations they control.
The only hope for our children is the economic and fiscal equivalent of the 1988 Yellowstone fire. Do I want my state, city and country an economy to end up like this? No, but it probably can’t be helped, and it may be best if it happens sooner rather than later. Only the destruction of the institutions controlled by the political class and executive class will force them to share the pain. And make this will be possible someday.
