Money Quotes from David Cay Johnston on WXXI
The 1370 Connection covered a lot of ground during the show with David Cay Johnston. Johnston is a smart, plain-spoken man who not only knows his stuff but knows how to get it across. It’s no wonder he’s a prize-winning author. Rochester is just a little cooler because we’ve got a guy like him around.
It’s tough to boil down what got us into this mess and what we need to do going forward, but somehow Johnston managed to put it into soundbites that don’t insult the intelligence. I’ve put them below in case you didn’t want to read my transcript of (most of) the show. (I welcome any corrections.)
Just one of the many services we provide here at RT.
On the Bush/Paulson plan and priorities:
This is the plan: Paulson could buy whatever assets he wants, at whatever price he wants. No requirement that he look for best price for taxpayers. Oversight board would include Paulson and Bernake. [i.e. Fox & henhouse].
We couldn’t afford $7B/year for schip, providing healthcare to kids, but we can afford this?
On the corruption driving the immediate crisis:
Backstory: Lehman bros collapse triggered this. Paulson decided not to help Lehman. Why? Goldman Sachs (Paulson’s company before he became Treasury Sec) is competitor to Lehman. Only non-gov’t person in room when deciding to not help Lehman Bros was the CURRENT head of Goldman Sachs.
Congress needs to bring in Goldman Sachs execs under oath. How much of this bailout is to protect Goldman Sachs?
On what the American people need to do:
Call congress: We want options. We want the least expensive solution.
On the problem with corporate capitalism:
Congress doesn’t respond to the voters. Gerrymandering has made most districts either safe Dem or safe GOP. Congress responds to the political donor class. Americans hopefully are realizing that our country has outsourced itself to people that make money off bad business decisions that are bad for America.
On why it’s not how much you’re taxed, it’s how that tax money is invested:
I was just in Europe interviewing people for new book, on finances. In Stockholm, a group of bus drivers owned two homes (city and country), free and clear. what are the chances of that in the US? They pay the highest taxes in the world. 85% higher taxes than in the US. It all depends on what you spend those taxes on. Most swedes have a higher standard of living than we do. Why? Their taxes go to oil the wheels of commerce, alt energy, mass transit, health care, etc.
On bailouts in general:
A study of bailouts show that bailouts don’t work. They reward the bad decsions. They keep in practice the same things that got in the mess. They’re a transfer of wealth from poor to rich.
On why it’s patriotic to pay taxes, especially if you’re rich:
The reason that we have democracy is: no wealth without civilization. The greater the wealth of civilization has helped you, the greater your moral burden to help civilization back.
A simple explanation of what Wall St. is hoping the bailout will do:
There’s a fundamental thing going on: through government action and inaction, Wall St. has inflated all kinds of assets. They have to come back down. There’s no escaping that pain. And Wall St. wants YOU to absorb the pain.
On the anti-capitalist danger of mega mergers:
[Companies that are] too big to fail? That’s not capitalism. Why are we getting more consolidation? We need more competition, not more consolidation.
On why you NEED regulation:
The bailout happened because banks came to lawmakers and said: get rid of government regulations, we know how to manage money.
Compare that to if you went to state government, and say “Most drivers are responsible, let’s get rid of speed limits, DWI laws, etc.” Regulation is not for the responsible, but when people make bad choices.
On what the government needs to do next:
DCJ: The market is not the problem. The problem is, who holds these illiquid assets? If they’re highly concentrated in few banks, let them fail.
BS: And eliminate the bad debt.
DCJ: Right. If they’re spread around, it’s a bigger problem. We need to find out where these assets are, and strategically apply the least expensive solution. Know first, then act.
“Know first, then act.” Sound advice. Reminds me of my Dad advising me to not “run off all half-cocked”.
Related posts:
Johnston’s one of the best at explaining economics to the average person alongside David Sirota and Naomi Klein