A student of recent history (recent meaning the last 25 years) might listen to all the discussion of how the current financial breakdown is "changing forever the way Wall Street works" and think, Yeah, I doubt it.
Until greed is somehow legislated out of existence, Wall Street will operate the same way it always has. Look back over the last eight years alone and think of how many examples of rampant greed run out of control and the subsequent downfalls of individuals or corporations and try and remember if they had any affect on the behavior that led to the subprime mortgage crisis. Enron's executives created off-the-books entities and all sorts of complicated entities to disguise what was, in essence, a high-stakes shell game in the classic sense. And when I mean "the classic sense," I'm saying that at the close of the game, they end up holding all the money no matter which shell you choose.
Remember, right before Enron declared bankruptcy, it gave away $55 million in bonuses to its top 200 executives, supposedly to keep them from cutting out and lessening the "value" of the company--probably the only instance you will ever hear of employees being considered as "assets" rather than "costs." In the same way, also back in 2001, Polaroid gave its 45 top bosses "stay bonuses" that basically doubled their salaries. What's the big deal? This was right before the company filed for Chapter 11 and was looking for a buyer.
Ridiculous compensation plans for top executives is an idea that supposedly was appropriate to today's high-flying financial world, because those big shots shouldn't be allowed to take their alleged value to a competitor. Yet, when these same CEOs run their companies into the ground, like Enron and Polaroid and WorldCom and Arthur Anderson and Tyco International and Adelphia and Bear Stearns and Lehman Brothers, the bonuses fly, the golden parachutes float, and somehow things never seem to change, because the culture never did. Greed, as the character Gordon Gekko said in Oliver Stone's movie Wall Street, is good, still. On the other hand, the idea that treating employees as something to be shed in downtimes and bear markets is an idea that doesn't die.
Long ago, an economist named Arthur Laffer drew a diagram on a napkin, a Wall Street Journal writer named Jude Wanniski got hold of it, conservatives running for office grabbed it, and the country's finances have never been the same. Laffer's idea was somehow that if you cut taxes, revenues go up. Since then, every Republican from Reagan to Bush to Bush II keeps repeating the mantra that cutting taxes is good for the economy. Yet over and over again, taxes are cut, the deficit skyrockets, and the beneficiaries of those lower taxes (usually the wealthy top tier) get too enamored of the good times and we end up with some sort of crash, be it the savings and loan crisis of the late 1980s, the energy manipulation of 2001, or today's subprime mortgage debacle. Lather, rinse, repeat.
Cutting taxes to raise revenues is one of those zombie ideas that, no matter how many times you shoot it, never dies. After Bill Clinton's balanced budgets and a projected surplus, George W. Bush waltzed into office promising that tax cuts would keep the good times going. When gas prices shot up in 2001 (remember when $1.75/gallon gas was considered to be expensive?), Bush said about his proposed tax cut, "If I had my way, I'd have it in place tomorrow, so people would have money in their pockets to deal with high energy prices." Cutting taxes is a Republican panacea that can cure any economic woe short of a giant stock-market crash, and you can be sure that even then, it won't be long before the editors of The Wall Street Journal and their cheerleaders in the executive suites will be pushing for one yet again.
The underlying goal behind all of these zombie ideas is, in the end, to eliminate the social safety net erected by Franklin Roosevelt's New Deal and carried all the way through Lyndon Johnson's passage of Medicare. Conservatives never wanted them, never liked them, and have dreamed of gutting them. If it took massive tax cuts and their resulting deficits, no problem--like Dick Cheney said, "Deficits don't matter." If it meant a push for Social Security privatization, they'd try that, too, until the term itself got so toxic that every Republican who ever signed onto the idea had to run away from it with his pants on fire.
Each time we've managed to climb out way out of the supply-side, trickle-down hole--after the Resolution Trust Corp.'s shutdown or once the Wall Street "bailout" has done its job--you'll start hearing them once again. Cut taxes, they'll say: capital gains, the so-called "death" tax, whatever.
It didn't work before. It won't work now. But mark my words, no matter who is president next year, it won't be long before you'll hear the call to cut taxes. Because they know you'll have forgotten the last time the zombie came back from the grave.
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