Financial crisis manmade
November 17, 2011
The financial crisis we find ourselves in today is manmade. However, it was not made by unions, teachers, first responders, seniors or the poor. It was made by policies in Washington and practices on Wall Street.
The gutting of the Glass-Steagall Act of 1933 in 1999 allowed for the merger of banks, security firms and insurance companies and thus the creation of institutions “too big to fail.” The top six financial institutions went from being 17 percent of our GDP to over 60 percent in eight years alone.
Deregulation of the commodities market allowed for uncontrolled speculation on commodities such as energy. This led to abuses such as Enron and spikes in gas prices due to unregulated speculation.
Deregulation also allowed Credit Default Swap sector to grow unregulated and unsecured. The CDS sector grew from about $144 billion dollars in 2000 to over $62 trillion dollars in eight years. CDS are intertwined between countries, which makes us more vulnerable to other countries financial instability, i.e. Greece and Italy.
Our financial crisis and high unemployment will not be solved by continuing to lower the taxes on corporations and the wealthy.
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Corporations are reportably sitting on over $2 trillion dollars in cash, with 30 Fortune 500 companies having paid zero taxes over the last three years and with the average corporation tax rate at 18.5 percent. Lowering corporation taxes further will not create jobs.
The wealthy, top 1 percent, have seen their wealth grow over 250 percent in the last 30 years, most of which has happened in the last 10 years. Continuing to lower taxes for the wealthy will not create jobs.
Social programs such as Social Security and Medicare did not create our large deficit. Government spending was increased, but not paid for, i.e. Medicare Prescription Part D and the Afghanistan and Iraq wars. At the same time our spending increased, we were cutting revenues (i.e. tax cuts for the wealthy). These policies had a negative impact on our deficit (increased it significantly).
We need to create consumer demand so that the private sector will start hiring. At this stage the only entity large enough to do this is the federal government. The federal government can help create jobs by making money available for such things as infrastructure improvements, teachers and first responders.
A cuts only approach will not/does not work. One only has to look at the U.K. and Greece to see that an austerity only program does not work. We need to cut spending but we also need to increase our revenue.
A cuts only approach also gives those who do not like government social programs such as Social Security and Medicare their best chance in over a generation to cut or eliminate them.