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Are Handouts for Billionaires More Important than Feeding Children?

Are Handouts for Billionaires More Important than Feeding Children?

The crazy conservative assault on government spending has become one of the most irrational economic policy debates in recent years.

The Republican Party is trying to maintain the fiction that direct economic relief for millions of working Americans is a fiscally irresponsible splurge, while simultaneously backing hundreds of billions of dollars worth of economically useless tax cuts for the wealthy. The demands are staggering: cut food stamps for the poor, but preserve perks for billionaires.

As Tim Fernholz notes for The American Prospect, serious economists do not believe that President George W. Bush’s tax cuts for the rich are an effective way to stimulate the economy. Rich people don’t spend money, they save it. We need lots of consumer spending to reinvigorate economic growth and put people back to work.

If we want to create jobs, we need to put money in the hands of people who will spend it. At minimum, that means directing aid to the unemployed and providing federal assistance to states, so that local governments don’t lay off hundreds of thousands of teachers and cops. This is not only the decent, humane thing to do when the economy is struggling, it actually helps. Money the government spends to save a teacher’s job goes out into the economy to pay bills and buy products. For states, this also means that basic public infrastructure is preserved — kids learn and the streets stay safe.

Stonewalling aid

But as the editors of The Nation highlight, Republican politicians have made it nearly impossible to get that critical aid out to American families. They’ve demanded strict measures for these benefits, forcing Democrats to cut food stamps — that’s right, food stamps — in order to keep teachers in school and cops on the street.

Millions of families all over the country depend on food stamps. In the middle of the worst recession since the Great Depression, Republican politicians took a stand to take food from the mouths of children — and they did it while supporting a $300 billion a year in handouts for the rich.

There is no immediate budget crisis. The government can borrow money at record low interest rates, meaning that investors don’t believe the federal budget deficit is too big. But if conservatives were really serious about shrinking the deficit, they’d be encouraging economic growth, not backing billionaire giveaways.

Banking on predation

Our perverse economic policy preferences aren’t limited to budget priorities. As Amy Goodman and Juan Gonzalez emphasize in a segment for Democracy Now!, inadequate rules governing bank lending practices were a fundamental cause of the recession, and are actively hampering the economy’s recovery today.

The Community Reinvestment Act of 1977 (CRA) required banks to make good loans to credit-worthy borrowers in the bank’s community. The idea was simple: If a bank wants to benefit from a community’s resources, it has to give something back and help strengthen the local economy.

Conservatives have lashed out at CRA, blaming it for the mortgage crisis, but the truth is that CRA loans had almost nothing to do with the subprime disaster. CRA loans are affordable loans to creditworthy borrowers — the whole point of subprime lending was to charge outrageously high rates to borrowers with poor credit.

In reality, policymakers’ refusal to expand CRA exacerbated the crisis. Only traditional banks are subject to CRA guidelines, and during the past two decades a host of independent mortgage companies have taken over large swaths of the mortgage market. These unregulated firms issued a lot of lousy loans, often working under direct, explicit instructions from bigger banks, who outsourced their lending in order to get around CRA rules and rip off whole neighborhoods.

Lending is critical to moving the economy out of the recession, and CRA provides reliable, proven rules to get banks back in the business of helping our communities and our economy.

Overdrafting the banks

But a host of other banking policies are also making the recession worse. One of the most egregious is the overdraft fee, which, as Annie Lowrey notes for The Washington Independent, scored banks over $38 billion in 2009 alone. To put that in perspective, the entire banking industry earned a combined profit of $12.5 billion last year, which means that the banks are making their money from gotcha fees, not from productive lending.

Banks have spent years charging overdraft fees without telling their customers that they’re subject to such gouging. Lowrey notes that the average fee is $35 on an average charge of $17. But they also have engaged in a backdating scam, rearranging the order of their customers’ purchases in order to charge more overdraft fees. As I explain for AlterNet:

“Say you’ve got $80 in your checking account, and you decide to pay some bills and run some errands. You spend $30 on gas and another $20 on your water bill. Later, you head to the grocery store and spend $81 — oops! — on groceries. To reasonable people, it looks like you’re going to get hit with an overdraft fee. That last purchase put you over the line. But instead, the banks reorder your transactions, processing the groceries first. Now you’re below zero, and they can charge additional fees for your gas and water bills. Wells Fargo charged up to $39 per overdraft. This one mistake cost you $117, and nobody even bothered to tell you it was going to happen.”

Fortunately, a federal judge in California just ruled that this backdating scam was grossly illegal, and ordered megabank Wells Fargo to pay back every penny that it swindled from its California customers with the practice since 2004. But Wells Fargo was not alone — every large bank in the United States does the exact same thing, and it’s allowed them to score billions in deceptive profits. A similar ruling in a larger case against all of the big banks could end a transparent outrage, and restore an enormous amount of unfairly seized wealth to citizens all over the country.

We don’t need to be pushing policies that benefit billionaires at the expense of everyone else. The Bush tax cuts are an unnecessary economic waste. Financial policy that puts the interests of a few giant predatory banks above those of the entire citizenry makes no economic sense.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. 


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Photo courtesy Bruce Tuten via flickr
by Zach Carter, Media Consortium blogger

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246 comments

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9:40AM PDT on Aug 28, 2010

Absolutely LOVE this article! Sent it to several Repub friends who were already complaining & whining in e-mail messages about how much their 2011 taxes were going to be. In my estimation, these people lack all sense of social responsibility & ethical/ moral integrity. Always taking & keeping; never giving or caring for others. I would have loved to seen their reaction to the reading of this; but they just probably deleted it w/o reading as I did their selfish tax whine.

1:23PM PDT on Aug 23, 2010

David there are rich in both parties. When will you realize they have no intention of making this hurt them. It will only prevent those who even think of moving up from doing so. Look at the rules Congress makes in BOTH parties. The health care bill does not effect Congress. Wow big surprise there did you really think they were going to pass a bill that hurt them? The IRS constantly audits average Americans. Yet, BOTH parties have some of the biggest tax cheats writing tax laws.

Class warfare is just a distraction to make you think you are going to get something from them. While you are talking about eating the rich, another group of rich are manipulating you to get control. All rich and powerful, just different groups. Don't expect that share the wealth thing anytime soon. The only sharing is among themselves.

1:19PM PDT on Aug 23, 2010

Again Janice it is you obsessing with what I post and constantly coming back to it.

You only concern yourself with the hate on the left and expect those on the right to change. You never look left to see the hate spilling out because you justify it as being OK. You don't like the people they hate so that must be OK.

When you model what being tolerant of people you don't embrace looks like, you have a position to stand on when expecting it of others. When you continue to spout hate towards people you disagree with, why do you possibly expect others to change their habits and behaviors? If you can't do it how do you expect others to change?

Again you can stop any time, it is your obsession that brings you back. Self control is always an option.

12:03PM PDT on Aug 23, 2010

I really can't believe the Republicans are pulling this. I'm mean you blame Obama when he spends money to stimulate the economy helping the middle and lower class. But then when we can take some more money in from the upperclass (millionaires and billionaires), they say it isn't fair. Someday we in the middle class will have to wake up and realize the Republicans only care about the rich. If you're not in the upper class than you vote your rights away by voting Republican. The Republicans will always side with those who fill their coffers, the wealthy, the Corporations, pretty much anyone who writes them a check.

11:39AM PDT on Aug 23, 2010

Chris, you really need to get a life. I do realize what I posted. Maybe I need to paraphrase because you don't seem to understand what I clearly stated. I said there is nothing wrong with hating what someone is doing to you. There is everything wrong with hating people because of their color, size, etc. Now go get a life!

10:52AM PDT on Aug 23, 2010

Chris, the big difference between the hate on the left and the hate on the right is that people on the right hate people because of who they are, what their skin color is, etc. People on the left hate because of what someone is doing so callously to other people, the great harm they are causing, and their total indifference to anyone they may have harmed. There is nothing wrong with hating what someone does. There is something greatly wrong with hating somebody just because you don't like the way they look or because they love someone of the same sex or because their skin color is a little darker than yours. Big difference. The reason I am responding to your comments so much is because, at the same time as you are acting so pompous, you are making some pretty silly arguments. Only someone who is exploiting other people would be so gung ho for more deregulation. Most intelligent people who are not trying to take advantages of others know the importance of regulation in this world full of ruthless, greedy people who would do anything to make a buck.


It's sad when you become so obssessed with another poster that you forget what you are even posting. Perhaps being done is not a bad thing if you are unable to keep up with your own comments you want others to respond to and claim they are off topic?

10:41AM PDT on Aug 23, 2010

Chris, I am through. You and I are no longer talking about the same topic. I am talking about over-privileged people taking advantage of under-privileged people. You are talking about Democrats and Republicans and hate and racism. I think you are on the wrong poast.

7:10AM PDT on Aug 23, 2010

Judith you post only about the hate on the right because you refuse to see the hate on the left. Then you whine that the right won't address the hate on the right. Why do expect others to do what you will not do? Until you stand up and denounce the hate mongers on the left, why do expect the hate to change on the right? It never will because it is hypocritical to expect others to do what you will not do.

Keep blaming the other side for being worse, they will do the same. Set an example of calling out the people who behave with a lack of tolerance on your side and you then can expect others to do the same.

I have no expectations that the left will ever change their behaviors. If you are unwilling to change, why do expect others will?

You don't want to pay more, make financial sacrifices to fix the problems in this country, why expect others to do so? This class warfare game is based on getting every class to fight the class above them. You have more money then someone below you and the idea is to get them to want what you have as well. Someone always has less. Stir up discontent, get people frustrated and we all loose, because the people with real wealth and power know how to protect it in times of disrupton. It is only those who are some what comfortable and can't escape that truly suffer from all that you want to do.

Just look at our Congress. They pass laws and exempt themselves. Kerry tells us the joys of paying taxes and skips out of paying.

7:37PM PDT on Aug 22, 2010

Chris, your responses are getting more and more insensible. I don't think we are on the same wave-length because I am talking about people who are taken advantage of by greedy businesses and banks, and you seem to be ranting about hate and prejudice or something on that order. I am talking about hating the action, not the person. Anyhow, since you are going further and further off-track, I am through with it; have better things to do.

2:29AM PDT on Aug 22, 2010

Well it shows what America thinks is important.

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