Why Would Wall Street Want Austerity?

One week to go and no cavalry is in sight. The dreaded “sequester” seems inevitable. If Congress wanted to head it off, it could. But Congress does not want to head it off. The Republicans who control the House flatly refuse to compromise. They want deep cuts in social programs and no taxes – not even closing the loopholes that allow the rich and corporations to pay Uncle Sam little or nothing.

Of course the president isn’t going to sign off on that kind of lopsided deal. And Congress knows it.

One of the things that puzzle me is the absence of any complaint from the financial industry. It would seem the money men have as much to lose as the rest of us.

But apparently not.

The obduracy exhibited by Congress isn’t a reflection of blind ideology, as some in the media would have us believe. Knowingly or unknowingly, the Republicans are serving their rich bosses as usual.

Here’s an excerpt from an analysis by Mary Bottari, director of the Center for Media and Democracy:

They (Wall Street bankers) recently unveiled a new front group with a clunky name but a glitzy new webpage called “Fix the Debt.” The goal of the 95 firms in the coalition? To make sure that as the economy continues to stagger that Congress does not raise taxes on corporations or the rich, but first looks to slash the social supports that millions of average Americans rely upon. Always ambitious, the Institute for Policy Studies has documented that the firms also want to permanently exempt from U.S. taxation all income earned by U.S. firms operating offshore — a proposal sure to exacerbate the debt problem they claim to be so concerned about.

According to Ms. Bottari, the mastermind behind America’s austerity crusade is an 87-year-old investment banker named Pete Peterson.

She noted that Peterson co-founded  the Blackstone Group with Steven Schwarzman in 1985. Both men benefited from the “carried interest” loophole, which lets fund managers get away with paying 15 percent rather than the standard 35 percent. Obviously, they are not in favor of closing that loophole. Ms. Bottari recalls that when the president proposed ending this tax break in 2010, Schwarzman compared the proposal to “Hitler invading Poland.”

So, it’s not hard to figure out why Peterson’s New America Foundation would spend millions to block any attempt to close such loopholes.

But there’s more to the austerity crusade than that.

Wall Street is no longer content with collecting brokerage fees that come with a thriving economy. The bankers have figured out how to get hold of the investment capital itself.

That’s why they are promoting austerity. And why they are hell-bent on destroying Social Security, Medicare and Medicaid.

They stand to collect billions from privatizing programs like Social Security. And they stand to collect more as investors shy away from government bonds.

As Columbia University professor Dorian Warren told the Huffington Post:

Austerity policies are literally a redistribution from the bottom of the income spectrum to the top.

The financiers are not just focusing on America; they have their greedy eyes fixed on the rest of the world, too. With the International Monetary Fund as their ally, the predators are ravaging economies around the globe so they can feast on the ruins. The offensive has left Europe and the United Kingdom in wretched distress.

Meanwhile, in America, a million jobs are in jeopardy, and middle class families face abject misery as austerity budget cuts loom.

Click here for an explanation of the sequester.

Click here for more on Wall Street and austerity.

Click for the Huffington Post article.