From BillMoyers.com:
The
One Percent is not only increasing their share of wealth — they’re
using it to spread millions among political candidates who serve their
interests. Example: Goldman Sachs, which gave more money than any other
major American corporation to Barack Obama in 2008, is switching
alliances this year; their employees have given $900,000 both to Mitt
Romney’s campaign and to the pro-Romney super PAC Restore Our Future.
Why?
Because, says the Wall Street Journal, the Goldman Sachs gang
felt betrayed by President Obama’s modest attempts at financial reform.
To discuss how the super-rich have willfully confused their
self-interest with America’s interest, Bill is joined by Rolling Stone
magazine’s Matt Taibbi, who regularly shines his spotlight on scandals
involving big business and government, and journalist Chrystia Freeland,
author of the new book
Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.
Full transcript of the interview below the video:
BILL
MOYERS: The new Gilded Age is roaring down on us, an uncaged tiger on a
rampage. Walk out to the street in front of our office and turn right
and you can see the symbol of it: a fancy new skyscraper going up two
blocks away. When finished, this high rise among high rises will tower a
thousand feet, the tallest residential building in the city.
The
New York Times has dubbed it "the global billionaires club," and for
good reason. At least of two of the apartments are under contract for
more than $90 million each. Others, more modest, range in price from $45
million to more than 50 million.
Simultaneously, the
powers-that-be have just awarded Donald Trump -- yes, that Donald Trump
-- the right to run a golf course in the Bronx which taxpayers are
spending at least $97 million to build. What “amounts to a public
subsidy,” says the indignant city comptroller, "for a luxury golf
course." Good grief. A handout to the plutocrat's plutocrat.
This,
in a city where economic inequality rivals that of a third-world
country. Of America's 25 largest cities, New York is now the most
unequal. The median income for the bottom 20% last year was less than
$9,000, while the top one percent of New Yorkers has an average annual
income of $2.2 million.
Across America, this divide between the
superrich and everyone else has become a yawning chasm and studies
indicate it may stifle jobs and growth for years to come. At no time in
modern history has the top one hundredth of one percent owned more of
our wealth or paid so low a tax rate. But in neither of the two
presidential debates so far has the vastness of this astounding
inequality gap been discussed. Not by Mitt Romney, who is the embodiment
of the predatory world of financial capitalism. And not even by Barack
Obama, whose party once fought for working men and women against the
economic royalists.
So just in time, if not too late, comes this
definitive examination of inequality: Plutocrats: The Rise of the New
Global Super-Rich and the Fall of Everyone Else. Its author is Chrystia
Freeland, whose journalism is steeped in years of covering robber barons
from Russia to Mexico and India. Once deputy editor of The Globe and
Mail in Canada and a correspondent for The Financial Times and The
Economist, she is now the editor of Thomson Reuters Digital.
We're
joined by the perceptive and merciless Matt Taibbi, who has made the
magazine Rolling Stone a go-to source for understanding the financial
scandals that roil America. Who can forget his 2009 article on "The
Great American Bubble Machine," which described investment bank Goldman
Sachs as quote, "a great vampire squid wrapped around the face of
humanity, relentlessly jamming its blood funnel into anything that
smells like money”? ... Income inequality has soared to the highest
level since the Great Depression, with the top one percent taking 93
percent of the income earned in the first year after the recovery, the
first full year after the recovery. Why are the two candidates not
talking about inequality growing at breakneck speed?
CHRYSTIA
FREELAND: You know, I think because it is still a taboo in American
political life and in American cultural life. One of the economists I
talk to he works for the World Bank. And he said to me, you know, and
he's a specialist in income inequality.
And he said, "When you go
to think tanks you say you'd like to do a study about poverty, they say,
'That's fine. That's great. We're happy to fund it,' because writing
about poverty makes everybody feel good and feel that they're being
charitable and beneficent. But if you say, 'Actually, I want to study
income inequality,' and even most dangerously, 'I want to study what's
happening at the very top of the distribution," what Branko Milanović
said to me is the think tanks immediately pull away because they say,
"Our donors won't like it."
And that actually challenges the whole
economic setup of the United States and of western capitalism. It’s
very, very threatening. And I think that that’s why you've had the
billionaire class. You know, the minute Barack Obama, I would actually
say rather gently suggested that the millionaires and the billionaires
should pay a little bit more, you had immediate cries of class warfare
from the plutocrats. And very emotional. You know, there was an activist
investor who sent an e-mail to his friends. The subject line is,
"battered wives." And in the e-mail he compares himself and his fellow
multi-millionaires to battered wives who are being beaten by the
president. He actually uses those words.
MATT TAIBBI: And I
thought it was really interesting in your book how you pointed out that
Bill Clinton, himself, responded to Obama's criticism by saying, "You
know, I would have done it a little bit differently. I think, you know,
you can't attack these people for their success." And I think that's
very relevant because if you go back in time, it wasn't always this way.
But
I think the shift really began with Clinton and the New Democrats. I
think after, you know, Walter Mondale lost in 1984, the Democrats
decided, "You know, we're never going to lose the funding battle again."
And they began this sort of imperceptible shift, where they continued
to campaign on social issues the same way they had before.
They
retained their liberalism in that sense. But economically, they began to
side more and more with Wall Street and more and more with the very
rich. And they've, I think we've now reached the point where neither
party really represents the very poor in the way that the Democrats
maybe used to. And so, that there's, that's why, you know, you don't see
it in the debates, because neither party is really an advocate for that
kind of left behind class anymore.
CHRYSTIA FREELAND: It is the people at the bottom, as Matt says. But it's also the people in the middle.
MATT TAIBBI: Right.
CHRYSTIA FREELAND: You know, the middle class is being--
MATT TAIBBI: Decimated, yeah.
CHRYSTIA
FREELAND: --hammered. Those jobs are hollowed out. And where are the
people pulling back and saying, "Okay, technology revolution, we love
it." Globalization, I love that too. And I think it's great people are
being raised up in India and China and now Africa. But let's think about
how our society and our politics need to change to accommodate this.
And no one is doing that. And meanwhile, the guys at the top, who are
making, who are doing so, so well actually are saying, "We need to slant
the political system even more in our own favor."
BILL MOYERS: Why are we so passive about this?
MATT
TAIBBI: Well, I think the, first of all the poor in this country have
been incredibly demoralized whether it's the relentless attention of,
you know, bill collectors. Or if you go to poor neighborhoods, you know,
I was out in Queens last night interviewing a kid who's been stopped
and frisked 70 times already. He's 22 years old. You have this constant
interference by the police if you live in a bad neighborhood.
There're
all these obstacles to getting up and rising up and having your own
voice. And also I think in the media we get these relentless messages
that being poor is actually your own fault and that people who are rich
deserve to be rich. And a lot of Americans are disillusioned about their
situation. They believe, they actually do believe on some level that if
they're poor, they deserve to be that way. I think they're, and so
they're reluctant to go out and revolt the way maybe Europeans in the
last century, early in the last century would have.
BILL MOYERS: Left unanswered, left unanswered where does this vast inequality take America?
CHRYSTIA
FREELAND: Well, I think to a very bad place. And I see two real and
present dangers. One is that you see an increase of the political
capture.
BILL MOYERS: Of what?
CHRYSTIA FREELAND: Of the
political capture. So of the people at the very, very top, capturing the
political system. And most crucially, I think something that an
economist, a guy called Willem Buiter, who's the chief economist at
Citigroup, he calls it cognitive capture. Where he says, look, it's not
like this vast conspiracy. It's not as if, you know, everyone is on the
payroll of the plutocrats.
And this guy, okay, he is now the chief
economist of Citigroup. He wrote this when he was an academic
economist. But so it's, he's hardly, you know, some kind of Marxist on
the barricades. His argument was that part of the reason the financial
crisis happened is the entire intellectual establishment, not just
people inside investment banks, but regulators, academic economists,
financial journalists, had all been captured by the financial sector's
vision of how the economy should work. And in particular, light touch
regulation.
And I think there is a broader cognitive capture of,
you know, you might call it the intellectual class, the public
intellectuals, around maybe the inevitability of plutocracy. You know,
as Matt was saying, this notion that if you're poor, it's your own
fault. You're part of this dependent 47 percent. Unions are very bad.
All of that sort of stuff.
So I think that that cognitive capture
increases. And I think what you see increasingly is, you know, elites
like to think of themselves as acting in the collective interest, even
as they act in their personal vested interest. And so what I think
you'll end up seeing is social mobility, which is already decreasing in
the United States, being increasingly squeezed. You see particularly
powerful sectors, finance, oil. I would say the technology sector is
going to be next in line, getting lots of government subsidies.
And
meanwhile, I think you see much less money spent on the things that the
middle class and the poor need. That's why have this, you know, full
bore attack on entitlements, right? Why is the plutocracy so
enthusiastic about cutting entitlement spending? Because they don't need
it. But they're very worried about their tax dollars funding it.
MATT TAIBBI: Right. Where was that outrage when the $5 trillion or $6 trillion in bailouts was coming their way?
CHRYSTIA
FREELAND: Right. So I really worry about that. And then the other thing
that I worry about is you do start actually stifling economic growth.
So, you know, if you want my dystopia scenario for the United States, it
is that America's moving into a more Latin American structure of the
economy.
BILL MOYERS: People at the top, rich. And a lot of people—
CHRYSTIA FREELAND: A few incredibly rich, you know, having just great lives. And then people at the bottom really struggling.
MATT TAIBBI: We both lived that. We saw that in Russia and it happened in the mid-'90s. And—
BILL
MOYERS: Yeah, you both cut your teeth in journalism covering Russia.
What do you take away from that that is relevant to what's happening in
this country?
MATT TAIBBI: You know, I, that experience completely
shaped the way I look at the present situation in the, in America. In
the mid-'90s, suddenly when Russia became a "capitalist society" you
suddenly has this instant division of the entire society into this very,
very tiny group of people at the top who had more money than anybody in
the world. And then there was everybody else who had nothing. And—
BILL MOYERS: And they got it through privatization, the government sold off the resources of--
CHRYSTIA FREELAND: "Sold" in quotation marks--
BILL MOYERS: Yeah. So--
MATT
TAIBBI: But that was, that's the key part that I think people don't
understand, is that what happened in Russian was really a merger of
state and private power that empowered this one tiny little class. There
was this moment in Russia's history called loans-for-shares. The
loans-for-shares privatizations, where a few people, a lot of them were
ex-KGB types, were essentially handed the jewels of Russian industry by
the people in the Yeltsin government. There were companies that were put
in charge of their own auctions. So they--
CHRYSTIA FREELAND: They were all in charge of their own auctions.
MATT
TAIBBI: They were all in charge of their own auctions. So they, you
would have an auction for an oil company and a bank would be put in
charge of that auction. And the bank magically, you know, would win the
auction for the oil company, which was worth, you know, billions or even
hundreds of billions of dollars. And that's how they instantly created
this super wealthy class of people. And everybody else had nothing. This
one story, for me this image that I'll never forget. I went to a coal
mine up in the Russian arctic north where workers hadn't been paid their
salaries for nine, ten months at a time. And when I went to the mine,
the mine owners, the first thing they wanted to do was to take me to
their bright shiny new lounge that they had built for themselves and
show off their brand new slate pool table that they had built with the
money that they weren't paying to their workers.
And that, to me,
perfectly expressed the divide in modern Russian society. You had these
people who were living off nothing on the one hand. And then you had
these super wealthy people who had been enabled who had just kept the
money for themselves. And that's I think, you know, it's a caricature of
what we're experiencing here in America. But I think that's where the
world is drifting toward now.
BILL MOYERS: You write about some of
these super rich, not only with insight, but with empathy. That is,
you've gotten to talk to a lot of them. You have moved among them as a
financial journalist, been to Davos and other places like that. And I'm
wondering, how did you crack what is clearly a tight knit world?
CHRYSTIA
FREELAND: Well, I guess the way journalists do it, just by talking to
people, writing about them. I think you write stories that show people
that actually you're interested in what they're doing. And what I would
also say is, you know, I believe in capitalism. And I also actually
believe in globalization and the technology revolution. If you gave me
the option of turning the clock back to the 1950s, I wouldn't do it.
Partly because I'm a woman and things were not that great for us then.
BILL MOYERS: Well.
CHRYSTIA
FREELAND: And, you know, it's important, you know, I think a mistake
that the left can make in criticizing income inequality is to behave as
if this is entirely a political confection. It's entirely about
political capture. There are no genuine, legitimate and actually benign
economic forces driving it. Because I think there are. I think the
winner take all economic dynamic is something that is existing separate
from the politics. The politics in the United States are exacerbating
that division rather than mitigating it.
But I do think that when
you pull back and look at the global picture, which is something that
was important for me to do in the book, it becomes a little bit harder
to say, "this particular American tax break," or even, "this particular
American financial reform is the only thing driving income inequality,"
because the really remarkable thing is the extent to which this is a
global phenomenon.
It's happening across the western
industrialized world. I'm Canadian. So I'm practically born a socialist
in the view of many Americans. But even in Canada, income inequality is
increasing. It's even, you know, for a while in the economic literature
the one outlier was France. And so, insofar as economists make jokes
they would say, "oh, the French. They have to be exceptional even in
this area." But now you're seeing it increase in France too. And you're
seeing it increase in the emerging market economies. So I think we do
have to accept that there are some economic drivers.
Now those
economic drivers are partly put in place by the politics. It was
politics that allowed globalization to happen. And in the United States
really crucially, and I think you can't emphasize this too much. Look at
what happened with the tax code. I mean, in the 1950s, this era when
America felt itself to be a very conservative society, and it was, the
top marginal tax rate was above 90 percent.
BILL MOYERS: Yeah, 91 percent, I believe.
CHRYSTIA
FREELAND: Right, just think about that. Imagine if Barack Obama had
said in the debate this week, "You know what Governor Romney? I think
America in the '50s was a wonderful place. That was the age of the
greatest generation. They, too, faced a real budget deficit they had to
pay off. And the people at the very top were willing to pay a 90 percent
top marginal tax rate. Would you be willing to do that, Governor?" I
mean, imagine if he had said that.
BILL MOYERS: You cover some of
the same crowd that Chrystia's writing about, but you do so with a, with
complete irreverence. Do you still gain access to them? Or have all the
doors been slammed in your face?
MATT TAIBBI: Well, the very,
very top people won't talk to me. You know, I don't have access to the
same people that Chrystia maybe talks to. But I do talk to a lot of
people who work on Wall Street. In fact I got started down the road of
this whole topic, you know, after I wrote a couple of articles. And then
suddenly on this there was this outpouring of people from Wall Street
who suddenly wanted to talk to me because they were upset about the
direction that the financial services industry was taking.
So I'm
hearing a lot from people sort of from the middle on down on Wall
Street. And what they're really upset about is corruption. Is this
merging of state and private power, where the losers don't lose anymore.
I think the people who get really upset are small hedge funds, small
banks. And they see companies like, you know, Citigroup and Goldman
Sachs and J.P. Morgan Chase make mistake after mistake. And they get
rewarded for it what with bailouts and even greater market share than
they had before.
And so, you know, my analysis is informed by
those people. And I think, you know, I think Chrystia and I agree about a
lot of things about, particularly about the growing divide and how
extreme it's become. My analysis just might be a little bit angrier just
because the, you know, from the point of view that I'm particularly
looking at is the corruption and the use of force and state power to
keep divide where it is and increase it.
BILL MOYERS: You both
have pointed out that we tend to talk as if Wall Street and the
plutocracy were a monolith. But it's not. Do you think there is a civil
war within the one percent?
MATT TAIBBI: There is absolutely a
schism developing in this community. Think about it just on one level,
on the level of banking, right? If you have these too big to fail banks,
everybody in the world knows that nobody's going to l allow the very
biggest commercial banks to go out of business. It will never happen.
2008 proved it, that if they ever get in trouble the government will
come in and rescue them. So what does that mean for those banks?
It
means that it allows them to borrow money more cheaply because anybody
who lends them money knows they're always going to get paid off. The
government if, in the worst case scenario, they're going to get paid
off. So this gives them an inherent financial advantage over the small,
regional commercial bank, which does not have that implied government
guarantee. And so those people are furious.
They're furious that
they have to compete against these gigantic monoliths that have the
implicit backing of the U.S. government. Then there's the other problem
of corruption. I mean, I hear all the time from hedge funds you know,
these smaller guys who believe that some of the big investment banks are
selling them out to even bigger hedge funds, that are, you know, giving
away information about their positions to even bigger clients so that
somebody else can trade against them.
Or maybe the banks
themselves are front running their positions and trading against their
own clients. There's this schism developing between the smaller guy the
medium size financial player and the very, very big too big to fail
companies that are perceived as getting a break, and getting the backing
of the government. And also are perceived as getting away with stuff
that they wouldn't get away with.
CHRYSTIA FREELAND: I agree with
Matt. And I think what you’re really seeing , actually, it's sort of the
battle of the millionaires versus the billionaires because this winner
take all dynamic is not just between, you know, the 10 percent and the
90 percent or the one percent and the 99 percent.
What's quite
interesting and leads me to really believe that there're some deep
economic forces involved is it's happening just as much within the top
one percent. We saw it in the recovery. You sited those statistics,
Bill, about 93 percent of the recovery going to the one percent.
Thirty-seven percent of the recovery went to the top 0.01 percent.
So
even in there, there's, you know, even more of a gap. And the people
one layer down can be very, very aggrieved precisely because, you know,
they see what's going on. They see that unfairness. And it makes them
really, really mad.
You know, one of the things that I found as I
was writing my book and talking to plutocrats was, you know, as Matt
says, these are very, very smart people. And many of them, not all,
some—
BILL MOYERS: They work very hard too, don't they?
CHRYSTIA
FREELAND: This is not Downton Abbey. These are not people, this is not a
landed gentry. These are people who even, and even if they're sort of a
Mitt Romney or a Bill Gates who grew up very affluent, their actual
business, they did build themselves. They built in a society that was
very supportive of that, but they built it. So, you know, they're
hardworking. They have to be thoughtful about the world because they're
making investments.
And what I found was very interesting was they
were very keen to divide the world into the good plutocrats and the bad
plutocrats. And what was very funny was everyone was happy to make that
division. But everyone felt that they themselves and their particular
type of business belonged to good plutocrats, and somebody else belonged
to bad ones. So you talk to the Silicon Valley guys, they love talking
about this, especially after the financial crisis because their view
was, "Of course income inequality is a problem. Of course there has been
state capture by those bad guys in New York. "We however, are the
innovators. We created value ourselves. We are completely pure and good.
And these issues really have nothing to do with us."
BILL MOYERS: Do you think they think they're really defending honest capitalism?
MATT
TAIBBI: Oh, absolutely. I, you know, the one thing that's consistent in
my exposure to the financial services industry is that the people who
work within it, and particularly the people you know, at the very, very
top, sincerely believe that they have not done anything wrong. And, you
know, when you bring up things like the mass sale of fraudulent mortgage
backed securities, it's just like you say.
It's always somebody
else who made that mistake. You know, "We didn't know at the time that
we were selling billions and billions of dollars of junk and we were
dumping this on pension funds and foreign trade unions." It was always
somebody else who was doing that. And they also have built up this very,
very powerful insulating psychological justification for their
lifestyles. They've adopted this sort of Randian point of view, where--
BILL MOYERS: Ayn Rand.
MATT
TAIBBI: Yeah exactly, you know, they genuinely believe that they are
the wealth creators and that they should get every advantage and break
whereas everybody else is a parasite and they're living off of them. So
when you bring up to them, for instance, how is it that nobody, despite
this mass epidemic of fraud that appears to have happened before the
2008 crash, how come nobody of consequence has gone to jail after that?
They
always, you know, they always argue against more regulation and more
enforcement because they say, "We need room to, we need air to breathe,
we need room to create jobs. And this is just counterproductive to put
people in jail. It'll cast a pall over society.
CHRYSTIA FREELAND:
If I may say so Bill, this very sincere, absolutely, absolutely sincere
self-justification, I think, is one of the most dangerous things that's
happening because in our society, and I would say this is particularly
powerful in America. Really since the Reagan era, there has been this
vision of the successful businessperson as really a leader for the whole
society. And there has been a view that the businessperson, what he
thinks, and, by the way, all of my plutocrats are men.
But, you
know, what he thinks about how society should be ordered, we should all
listen to because he, after all, is the hero of our time, is the hero of
capitalist narrative. And I think it's so important for us to really
understand that what is good for an individual business, particularly in
this age of very high income inequality and the ways of thinking, the
ideas that are no doubt absolutely the right ones for this particular
business, may very well not be good for society as a whole.
BILL MOYERS: Both of you write in different ways that, with irony, that they threaten the system that created them.
MATT
TAIBBI: Well this was another thing, another image from Russia that
always stuck in my mind. And I studied in Russia when it was still
communist. I remember going through the countryside. And you had all
these villages and people walked around in the villages.
And then
suddenly in the mid to late '90s in Russia you drove through the Russian
countryside. And suddenly there were these big brick houses that had
these huge walls on the outside, these big brick walls with guards on
the outside. It was the rich had sort of built this wall that insulated
them from the rest of society.
They were living, there was one
society on one side of those walls, and then one society on the other
side of it. And I think that's where we're headed now. We have this kind
of community of rich people who sort of live, hop from place to place.
And they never have any sort of intercourse with the rest of the world.
BILL MOYERS: Disconnected?
MATT
TAIBBI: They're completely disconnected. And so they've built this kind
of nation where inside, it's all, you know, nice and everything works
logically. And it makes sense to them. But they never really see what
goes on on the outside.
BILL MOYERS: Do they feel entitled?
CHRYSTIA FREELAND: Yes. Absolutely. And, you--
BILL MOYERS: For what reason?
CHRYSTIA
FREELAND: Because they are treated so well. So my favorite story about
this was when I was at Heathrow Airport, about to go to a fancy
conference. And I ran into someone also going to a fancy conference, a
Silicon Valley senior technology person. You know, I didn't have a car.
But he had a car coming to picking him up and so he offered to share the
ride. So we're in the car and this technology guy said to me, when you
live our life, you are surrounded by such power and such entitlement,
you lose touch with reality." And his very personal example was he said,
"I was recently staying at this lovely Four Seasons Hotel. And I was
beside the pool. I was eating a melon. And my spoon fell to the ground.
And he said, "Before I could summon anyone, someone rushed up to me with
three spoons of different sizes on a linen napkin so that, God forbid,
you know, I shouldn't have the wrong size spoon."
And what he said
was, "You know, what was amazing to me," he's talking about himself,
"is when I reentered my real life," he said, "I was kind of a jerk
because I like, I expected to live a life where I was constantly being
presented with three spoons of different sizes. And I just I couldn't
deal with the frustrations of everyday life." What makes this a totally
ironic story is here he's telling this kind of self-aware story about
the plutocracy.
But when we had been in the airport waiting for
the car, he was on the phone, screaming at someone about "Where is my
car," et cetera, et cetera.
So this is, you know, morning in
Heathrow. Middle of the night, you know, in San Francisco. And he's
yelling at someone there because she hasn't organized his car and we had
to wait for five minutes. And then he tells me this story about how
entitlement can make you not an ideal person. That kind of says it all,
right?
BILL MOYERS: But political behavior's another thing. And
there's no doubt in either of your minds, is there, that they tilt the
rules in their favor through their influence and power over the
politicians.
MATT TAIBBI: Absolutely. I mean--
BILL MOYERS: I mean, our own government relaxed the regulations, upended the rules, leveled the laws to make way for them.
MATT
TAIBBI: They have this power and influence over the government to and
they've been continually deregulating the atmosphere to legalize
whatever it is that they want to do, whether it's, you know, merging
insurance companies and investment banks, whatever it is. The
derivatives, the Commodity Futures Modernization Act of 2000, they
lobbied heavily to create a completely deregulated atmosphere for that.
And we saw what happened with that in 2008 with the collapse of
companies like AIG. They've been incredibly successful in creating their
own landscape where they get to do business the way they want to do
business.
CHRYSTIA FREELAND: And what I think is crucial is, this
is not framed as, "I want government to do this so I can get rich and my
company can prosper." This is framed as "We need to do these things for
the greater good." And this is where I think another big problem in
America today is a disempowering and a devaluing of the role of
government and of its authority as an independent, respected arbitrating
body in the center of the ring. And one of the great contrasts for me
in the past decade has been looking at what happened in bank regulation
in the United States and looking at what happened in Canada. Matt has
just spoken about bank mergers. And with hindsight, you know, one of the
great brave decisions taken by the Canadian government was to not allow
the Canadian banks to merge. They wanted to. Huge lobbying effort. And
they made the same arguments about, "Oh, if we can't merge, we'll never
operate on a global scale. You know, Canada will be left behind. We'll
be a provincial backwater." And the government just said no. And that
decision I think flows directly into the Canadian government's ability
to regulate the financial sector.
Leverage at U.S. levels was not
allowed. And the consequence was Canada didn't have a financial crisis.
It's the only G7 country that didn't have to bail out its banks. So
government can actually hold the line. Government can--
BILL MOYERS: But not if it's captured, Chrystia.
CHRYSTIA FREELAND: Not if it's captured. Not if it's captured. And so--
BILL MOYERS: And it is captured—
MATT
TAIBBI: But now we're completely captured, with the banking example,
now we have these banks that are literally too big to fail in America
because we didn't do the same thing.
CHRYSTIA FREELAND: But
government can act. I mean, I think it's important not to have a counsel
of despair. That you can have a sophisticated, industrialized western
economy. People can live, you know, civilized lives. They can have
bankers. Their bankers even, maybe they're not going to earn $25
million. But they can earn $5 million or $6 million.
They can be
perfectly affluent. And government can actually stand up to its banks
and stand up to other sectors of industry and say, "You know what? I'm
sure that would be great for you guys. My judgment is it's wrong for the
country. And you're not going to do it."
BILL MOYERS: They resent
any criticism, despite all the advantages and entitlements they have.
They also exhibit disdain, as Mitt Romney made clear in that infamous or
famous 47 percent video. You know, when he talked about other people
being dependent on government.
MATT TAIBBI: I've heard that
attitude more than once, and not just from Mitt Romney. I think it's,
again, it's consistent with this mindset that there is an intellectual
atmosphere that these people I think have to work within in order to
justify a lot of what they do, because you have to be completely
disconnected from the real world in order to do things like sell
fraudulent mortgages to a state pension fund. If you're actually
thinking about that, you know, you're taking somebody's life savings
away when you do that. But you can't think about that.
BILL
MOYERS: Matt, you quoted the billionaire Charlie Munger of Berkshire
Hathaway, who said that anyone who wants to complain about the Wall
Street bailout should realize they were, "absolutely required to save
your civilization." What did he mean by that?
MATT TAIBBI: Well,
again, this group of people believe that all of civilization depends on
their health and their wellbeing. So when they were threatened in 2008,
when they were all about to collapse, it made absolute sense to them
that the government should immediately intervene and give them as much
money as they needed, to not only to get back on their feet, but to
restore their lifestyles to the level that they had been accustomed to.
CHRYSTIA
FREELAND: So I'm going to, here, step in as a voice in favor of the
bailout. I think that Munger was right. I do actually believe--
BILL MOYERS: Saving civilization?
CHRYSTIA
FREELAND: Yeah, I think it was. I think that the bailouts were
absolutely essential. I think that, had there not been a bailout, which,
by the way, let's remember, voices on the right as well as the left
were objecting to the bailout at the time. I think had there not been a
bailout, you would've had a much more severe crisis. You would've had a
full financial collapse and a much, much deeper economic recession. Now,
I think where you can and should criticize is first of all, why was the
crisis allowed to happen in the first place and the regulatory failure
beforehand. I think second of all, you know, where were the strings
attached? And actually Charlie Munger's great business partner, Warren
Buffett, drove a much harder bargain with Goldman Sachs than the U.S.
Treasury did.
You know, 2008 is not so long ago. And already, the
anti-regulation chorus is so strong. You know, I think the re-regulation
was not done well at all.
But the fact that people are already
making a very, you know, powerful and proud argument against government
regulation, bankers are making this argument. I mean, how dare they. How
dare they have the gall to actually argue that too much regulation of
American financial services is what is killing the economy.
MATT
TAIBBI: Right. Right. Just to be clear, I actually agree that the
bailouts were necessary. What I completely disagree with was the way
they were done. They just simply threw a whole bunch of money at this
community and didn't have any conditions at all. They didn't sweep in
and change any rules. You know, and after the S&L crisis, for
instance, we went in and there were massive criminal investigations.
We
put 1,000 people in jail. There were no such investigations this time
around. So this was just making everybody well again and restoring
everybody to the status quo, which I think was a major mistake because
it produced precisely the result we're talking about now. It allowed
everybody to think that the previous status quo was okay.
BILL
MOYERS: Let me talk about the CEO class because it seems almost every
day now there's a new story of some CEO, some boss of a big company
who's attempting to tell voters to vote as they say.
CHRYSTIA
FREELAND: If you really see yourself as a job creator, someone who is
not just pursuing their business interest in getting richer, but someone
who is creating jobs, doing great things for America and for your
workers, and you also sincerely believe that Barack Obama is a bad guy,
then you feel you have to help your workers to understand this. You
know, you have to let them know that you, the job creator, believe that
this job creation of which they are the fortunate beneficiaries, you
know, that engine is going to slow down. It's going to grind to a halt.
BILL
MOYERS: Do you see this as different from what unions do in urging
their voters to go out and vote for the candidates of their choice? Do
you see it differently?
MATT TAIBBI: I think it's a little
different just because there's an implied threat. It's very, very vague,
but, you know, if the CEO of your company suggests to you that you have
to vote for Mitt Romney or you have to give money to the Romney
campaign, I think the tendency to, you know, to not break ranks, is
going to be a little stronger than maybe it would be in a union.
But
I think it grows out of this, you know, companies and corporations,
they're not democracies. They're authoritarian structures. And the
people who work in those companies-- they start to adopt those attitudes
after a while. And especially the people at the very top.
I think
they've begun to actually believe that their authority extends beyond
that. And I just think that people– it’s a little bit different when
it’s something your boss tells you to do something than when your union
brothers tell you something.
BILL MOYERS: Matt, you have written a lot about the tax code and these plutocrats. Exactly how do they work the tax system?
MATT
TAIBBI: Well the plainest example is Mitt Romney. I mean, you know, if
you look at his tax returns, he paid, you know, rates of 14, 13 percent.
That's totally normal in this world if you work in a private equity
fund. Your income is—
BILL MOYERS: Again, he's not an exception, he's an embodiment.
MATT
TAIBBI: He's an embodiment. In the financial services industry for
sure, the very, very rich mostly receive income as capital gains or if
they're private equity people, as carried interest.
In both of
those, the max rate is 15 percent. So people who make $20 million, $30
million, $50 million a year like Mitt Romney and like, you know, Steve
Schwarzman of whoever it is, they pay half the tax rate of, you know, a
nurse or a doctor or a fireman or a teacher. And it's considered totally
normal in that world.
BILL MOYERS: So they really do consider tax reform a threat?
MATT
TAIBBI: Absolutely. I mean every time that there's been any discussion
about rolling back the carried interest tax break in particular, there's
suddenly been this intense, you know, hurricane of lobbying. And it
never seems to get rolled back. Barack Obama promised to repeal that tax
break and didn't do it.
BILL MOYERS: Give us a working definition in the vernacular of carried interest.
CHRYSTIA
FREELAND: So basically, what this means is that if you're in, if you
work in a private equity firm, the money that you earn– so, you invest a
little bit of your own money. And the gains that you make on that
investment would be treated under any definition as a capital gain taxed
at 15 percent. But you also earn money because you are investing on
behalf of all of your investors.
That money that you earn, it's
called carried interest. And it is treated as a capital gain in the same
ways that the gains to the investors are treated.
The economic arguments in favor of the carried interest tax break are so weak. I mean, even Mike Bloomberg, who is, you know—
BILL MOYERS: The tenth richest man—
CHRYSTIA
FREELAND: --very far from being a socialist. He has come out and said
he doesn't support it. And it says something to you about the power of a
very well heeled, very focused lobby group. That, you know, Barack
Obama is president. He is opposed to this. He says he's opposed to it.
Even Mike Bloomberg is opposed to it. So there's a body of Wall Street
opinion that thinks it should go away. It's still there.
BILL
MOYERS: But when there was an effort, when the Obama White House and
others made an effort to revoke carried interest, the fight was led by
people like Democrat Senator Chuck Schumer, representing Wall Street--
MATT TAIBBI: It’s always the New Yorkers.
BILL
MOYERS: Yes, the New Yorkers. Of course, that's their constituency,
they would say if they were sitting here. But the Democratic Party
didn't come to the aid and relief of working people at that time.
MATT
TAIBBI: Well right, because again, it's because you have a small, very,
very concentrated lobby that is very, very noisy and is very, very
specific in what it wants and what it needs. And then there's the rest
of us who, how many people are really thinking about the carried
interest tax break? So the advocacy against the carried interest tax
break is dispersed. It's sort of random. It's not focused, whereas the
advocacy for it is incredibly organized. It's disciplined. And it has a
ton of money.
CHRYSTIA FREELAND: And it is bipartisan.
BILL MOYERS: Who's looking out for the rest of us?
MATT
TAIBBI: Well, there are, I mean, there definitely are good people in
Washington. You know, I meet and talk to a lot of them. There are a lot
of honest politicians who are trying to do the right thing. But the-- my
experience, the money issue is so overwhelming to people in Congress
that--
BILL MOYERS: Raising money for their campaign?
MATT
TAIBBI: Raising money for their campaigns. It's so central to their
daily lives, really. And especially in the House, where you have to
essentially start raising money the instant you get elected because the
reelection campaign is only a couple years away that -- it's just too
overwhelming for most legislators to get past that issue.
BILL
MOYERS: Despite how the plutocrats have reacted to Barack Obama, he does
not seem to be like FDR, taking on the economic royalists or like
Theodore Roosevelt, fighting the guys he says are taking the country
down. How do you explain Obama's attitude toward these plutocrats?
CHRYSTIA
FREELAND: Barack Obama in many ways is one of them. He is educated the
way a plutocrat is educated. He had an opportunity to join the
plutocracy. He could very easily right now be a top corporate lawyer.
And they know that.
He thinks the way they do. He's a technocrat
in the accepted manner of the current plutocracy. And I think they like
that. I think that's why he had such a strong reception in 2008. So I
think that's one element. Another element though, and I think that this
is something that sort of bothers them, is he isn't over-awed by them.
And that kind of bugs them too, because they do think they’re pretty
great.
MATT TAIBBI: To answer your question about, you know, why
doesn't he take the sort of fist shaking attitude of an FDR or a Teddy
Roosevelt, I just think Barack Obama has surrounded himself with people,
like Larry Summers, like Bob Rubin. And I think he's accepted a lot of
the justifications and the arguments that come from Wall Street and the
business community.
So I don't think he feels genuine class based
rage towards this community. I just don't think that's in him. You know,
I think the-- if you listen to Rush Limbaugh and Sean Hannity and the
likes, they really believe that somewhere under there, there's this
raging socialist. And, you know, there's Lenin ready to break out and
put them all up against the wall in a firing squad. That guy just isn't
there. He really is more one of them than they think.
BILL MOYERS: So you don't think he's fighting a class warfare as the right says he is?
MATT
TAIBBI: Definitely not. No. No, I think he's very emotionally and
culturally much closer to those people than he is to the rest of us.
CHRYSTIA
FREELAND: No, but he is moving-- he is and I don't think he says this
as directly as perhaps, you know, some of his supporters would like. He
is challenging this notion of the successful businessman as the hero and
the driver of the American narrative. And that actually is a big-- if
you think it through to its logical conclusion, that is a big challenge.
And I think that accounts for this hurt. This seemingly completely
disproportionate emotional reaction.
MATT TAIBBI: He's made a
rhetorical mistake in the way he's occasionally described this
community. And that's what's inspiring this whole reaction against him,
this feeling that we are like battered wives because they've
occasionally been described as rich.
CHRYSTIA FREELAND: So it's
easy to laugh about this, and we should. But this hurt feelings, the
fact that this is really playing out in the emotional space as well as
in the balance sheet space, I think is really an important point. I
think it's hard for us civilians to get it because it seems so absurd.
You know, really? That would hurt your feelings? Are you so thin
skinned? But it is real. And I think that it's real for a reason, which
is I think that Barack Obama, the Democratic party, but also the
political discourse more generally is posing an existential threat, or
certainly an existential question to the plutocrats, which makes them
very, very anxious.
BILL MOYERS: I haven't heard that, Chrystia.
CHRYSTIA FREELAND: Well, I'll tell—
BILL MOYERS: Barack Obama said—
CHRYSTIA FREELAND:
--I'll tell you what it is-- BILL MOYERS:
--in the debate this week that-- CHRYSTIA FREELAND: No, but I'll tell you—
BILL MOYERS: --he sounded like, he said, "I'm for free enterprise, I'm for--"
CHRYSTIA FREELAND: And I'm for free enterprise too. But what he had started to say—
BILL MOYERS: That sounds very tough on them.
CHRYSTIA
FREELAND: No, but there is an underlying point that he does make. I
think he should make it more explicitly which is to say that American
capitalism is not working the way it was in the '50s. That we are not
living in a time when a rising tide is lifting all boats. That we are
seeing the people at the very top take off. Their economic fortunes
actually disconnect from those and from --
BILL MOYERS: Stratospherically leaving earth.
CHRYSTIA
FREELAND: --most everybody else. And they're not dependent. You know,
that old Henry Ford model, where you needed the middle class to be well
paid to buy Henry Ford's stuff, that that has broken down. And we can
argue a lot, and we should, about the reasons. But the facts are that it
has. And to say that, to actually state that, is profoundly threatening
because it starts to break down this equation of my wealth equals my
virtue.
The size of my bank account doesn't-- it isn't just good
for me. It is a manifestation of my civic contribution. And that, in
some ways, is Mitt Romney's campaign. He's saying, "I'm a successful
businessman. So I will make a good president." And Barack Obama, he is
actually saying, "You know what? I don't think that that equation works
and is automatic." And actually, in saying that, the plutocrats are not
wrong to detect there a very powerful ideological challenge.
BILL
MOYERS: If plutocrats keep on winning, if they manage to avoid tax
reform, if they keep low regulation, if they get a president who is
sympathetic to them or even enables them, what's ahead for us?
MATT
TAIBBI: Well, I mean, I fear that what's ahead is just a continual
worsening of the situation. You know, what we've seen in our lifetime
even since we've come back from Russia is this decimation of the middle
class in America.
If we continue on this path, what we'll end up
with is, you know, is Russia or some other third world country where,
again, you have this handful of people who are protected and who have
expanding wealth. And then there's this sort of massive population of
everybody else. And that's what I worry about.
CHRYSTIA FREELAND: I
would like to really issue a clarion call to progressives because I
think the sort of the progressive public intellectuals are to blame as
well. I think a big reason people aren't protesting is no one is
offering sufficiently compelling alternatives and solutions.
And
when you think back to the history of the Industrial Revolution, the
Progressive Era, the New Deal, these were brand new ideas and brand new
institutions designed to cope with changed economic circumstances. What I
think is the challenge for everyone who is worried about this, and I
think all of us should be worried about it. We should be terrified. But I
think we need to start taking the next step. And we need to realize the
1950s are not coming back. What angers me sometimes about these debates
is people talking about manufacturing jobs coming back.
That--
it's just not going to happen. So let's really face the facts of how the
world economy works. And really come up with what needs to be the
political and social response.
And frankly, you know, I see the
right not interested in addressing this issue at all. And I see the left
not offering enough new thinking. And people know that. And that's why
people aren't on the barricades. There's no manifesto to be waving.
MATT
TAIBBI: One caveat I would like to just throw anytime you propose
anything that has any kind of government, you know, component to it,
there's this automatic criticism that it's communist and socialist. So,
when you come up with a solution, the boundaries are let's come with a
solution that doesn't have-- that can't be criticized as being communist
or socialist. And that is incredibly difficult for people to work
around.
CHRYSTIA FREELAND: Okay, but let’s at least see the new
ideas. I mean, my argument is we are living through equally profound
economic transformations. And we're just trying to rehash and re-tinker
with the twentieth century institutions. I don't think it's enough.
