Credit: Joe Kekeris

Too often when economic times get tough, scapegoats are found in the wrong places. Wall Street greed and double-dealing sparked much of the nation’s recent near-financial collapse, yet many in the chattering classes instead are attacking public employees for this rolling recession.

Economist Dean Baker puts the situation in perspective:

Fifteen million people are not out of work because of generous public employee pensions. Nor is this the reason that millions of homeowners are underwater in their mortgages and facing the loss of their home. In fact, if we cut all public employee pensions in half tomorrow, it would not create a single job or save anyone’s house. The reason that millions of people are suffering is a combination of Wall Street greed and incredible economic mismanagement.

Even as a consensus is emerging among economists that the United States should put job growth ahead of deficit cuts, a new study focused on New England finds that the region no longer can afford to spend scarce resources on tax credits and other business giveaways. Instead, it needs to channel economic development efforts to rebuilding neglected infrastructure and improving education for people at all levels. “Prioritizing Approaches to Economic Development in New England” provides

ample evidence that infrastructure (roads, bridges, dams, energy transmission systems, drinking water, and the like) and education are effective approaches for creating jobs and generating economic growth.

The study, by the Political Economy Research Institute at the University of Massachusetts-Amherst, finds the New England states have too long viewed funding for public services and economic development as competing interests—and that’s a false dichotomy. Sounds like the study can apply to the rest of the country as well.

Demonizing the public sector harms the U.S. middle class, writes Drum Major Institute for Public Policy (DMI) Research Director Amy Traub, who reminds us how fundamental the jobs they do are to our everyday lives:

It’s easy to lose sight of the other ways that a strong public sector supports our economy. Middle-class Americans and the businesses they work for rely on good schools, clean and safe streets, and high quality public services and infrastructure. In so doing, they depend on the dedicated teachers, police, firefighters, librarians, sanitation workers, parks employees, and support staff that keep states and cities running.

States and cities face very real fiscal challenges, but the cause is falling tax revenue due to the deepest recession in decades—not excessive spending or lavish compensation for public workers.

Further, Traub has a recommendation for Congress, some Democrats included:

Trashing our middle class in an effort to cut costs is short sighted. Downgrading the middle-class pay and benefits of public workers only speeds their erosion in the private sector, undermining everyone who works for a living….Rather than attacking public pensions that afford retirees a middle-class standard of living, [lawmakers] should be thinking about how to increase retirement security for millions of private-sector employees with meager savings.

As Progressive States Network points out, extremist anti-worker organizations like the American Legislative Exchange Council have been trying to gut public employee pensions for years—and they are using the recession as a public relations platform.

There is no crisis in most state retirement systems, even according to the numbers of the researchers demanding state leaders take unneeded action to cut the incomes of retirees.  And despite the hype from a few carefully selected anecdotes of retirees gaming pension systems, the reality is that the overwhelming number of public employees receive pretty bare-bones benefits, in some cases not enough even to keep them out of poverty.

Corporate backed anti-worker groups are the winners when the public taps into public-employee blame game. Wall Street is another big winner. The CEOs of Big Banks and the financial industry are happy to see the finger pointed at public employees. It means America’s workers are fighting each other and not united in targeting the real culprit of our economic misfortunes.

This article was originally posted on AFL-CIO NOW Blog.

About the Author: Tula Connell got her first union card while she worked her way through college as a banquet bartender for the Pfister Hotel in Milwaukee (they were represented by a hotel and restaurant local union—the names of the national unions were different then than they are now). With a background in journalism—covering bull roping in Texas and school boards in Virginia—she started working in the labor movement in 1991. Beginning as a writer for SEIU (and OPEIU member), she now blogs under the title of AFL-CIO managing editor.

The president is going to announce today a tax on the big banks and financial institutions:

The tax on banks, insurance companies and brokerages with more than $50 billion in assets would start after June 30 and seek to collect $90 billion over 10 years, according to a senior administration official who briefed reporters late Wednesday.

The Administration is calling the tax a “financial crisis responsibility fee”. I like that handle. But, there are two problems. First, the bankers themselves still don’t get it:

“Using tax policy to punish people is a bad idea,” J.P. Morgan Chase Chief Executive James Dimon told reporters after a hearing in Washington. Mr. Dimon said it would be unfair for banks to be left shouldering the cost of the auto bailout.

This isn’t punishment, Mr. Dimon. This is about responsibility. To your country. To the people whose hard-earned money you used to save your institution.

Second, frankly, the projected $90 billion to be collected over ten years is a pittance–and that cost is being shouldered by the shareholders of the banks and financial institutions and I’m guessing its customers who will end up paying for the tax in higher fees that the institutions slip into their “cost of doing business”.

The tax avoids any personal responsibility on the part of the individuals who created the economic crisis.

Here is another idea: demand that the Wall Street bonuses go to pay for the recovery efforts in Haiti, and to make taxpayers here whole. After all, the very economic system that Dimon and his peers created over the past several decades is the system that impoverished countries around the world, leaving them with a weak infrastructure to be able to deal with natural disasters. Putting the Wall Street bonuses towards Hait relief will perhaps make Dimon and his peers feel virtuous and not punished–but I would not count on it.

*This post originally appeared in Working Life on January 14, 2010. Reprinted with permission from the author.

About the Author Jonathan Tasini: is the executive director of Labor Research Association. Tasini ran for the Democratic nomination for the U.S. Senate in New York. For the past 25 years, Jonathan has been a union leader and organizer, a social activist, and a commentator and writer on work, labor and the economy. From 1990 to April 2003, he served as president of the National Writers Union (United Auto Workers Local 1981).He was the lead plaintiff in Tasini vs. The New York Times, the landmark electronic rights case that took on the corporate media’s assault on the rights of thousands of freelance authors.

Unions and progressive coalitions are seeking to add grass-roots organizing power to President Obama’s calls for financial reform, with stepped up activism from the AFL-CIO, Jobs for Justice and the progressive Americans for Financial Reform coalition all starting this week.

Following last week’s AFL-CIO convention that aimed to jump-start reform drives and the union movement, new president Richard Trumka and other leaders will be taking their case for economic reform to Wall Street and the  public. As the AFL-CIO Now blog reported:

The team’s tour continues Sunday and Monday in Atlanta, including a rally outside Wachovia, where Trumka will condemn its predatory financial practices, such as foreclosures. On Monday night and Tuesday, the team travels to New York City where Trumka will issue a strong warning to Wall Street at a press conference outside the New York Stock Exchange.

The goal: create a fairer economy that works for everyone, not just the wealthy.

On Thursday, the Jobs for Justice Coalition plans an action—one of many protests scheduled for over 20 cities over the next week—outside a meeting of the pro-banking Financial Services Roundtable in Washington, D.C., a key lobbying coalition opposed to the Administration’s proposed consumer financial protection agency, as well as other reforms.

As a Jobs for Justice press release proclaimed:

Thousands expected to participate in over a dozen cities to mark the one-year anniversary of the bank bailouts.

Nearly a year after Congress authorized hundreds of billions of dollars to bail out the financial industry, major banks continue to pay outrageous salaries and bonuses, drive layoffs and foreclosures, and spend millions lobbying against the interests working people.

Rallies across the country will condemn the “bailout bandits” and “corporate criminals” at Bank of America, JP Morgan Chase, Citigroup and Wells Fargo.

Actions will take place in at least 21 cities, and new cities are being added every week. See below for local contacts and find an up to day list of actions at www.jwj.org/recovery.

There are good reasons for all the anger. But it has has yet to lead to a massive public outpouring for progressive reform, as opposed to the corporate-abetted “Tea Party” events that also decry bailouts along with healthcare reform, while leaving the current toothless oversight of the financial industry in place.

Even though federal officials allowed a free-spending set of bailouts with no requirements and little oversight, virtually nothing has been done to make sure the money isn’t wasted and is spent in ways that benefit the economy. Indeed, nobody really knows how the $700 billion in bailout funds was actually spent.

So while inside-the-beltway analysts claim that Obama has an uphill fight in Congress, out-of-control banks and  Wall Street firms are now squandering taxpayers’ funds while returning to trading in risky investments. And credit is still largely frozen, worsening the “jobless recovery.”

As the Media Consortium summed up in its year-later review of the Wall Street collapse:

While workers experienced increasing pressure on their pocketbooks, Wall Street gambled away their retirement investments. Lehman Brothers filed for bankruptcy one year ago today, a move which created chaos in the financial sector and heavy damage in the rest of the economy. Things were looking bad for the economy before Wall Street imploded, but the financial crisis made those problems a lot worse.

“In a modern society, a credit freeze means instant death to the real economy, since virtually every enterprise, big and small, runs on credit,” Les Leopold explains for In These Times. “When the financial sector froze, it pushed the real economy off a cliff.”

But incredibly, after a year marked by massive financial bailouts, not one new law has been signed to protect our economy–and taxpayers–from Wall Street. Not one.

Even the modest plans to rein in executive pay for taxpayer-supported companies have proved toothless. Leopold notes that President Barack Obama’s refusal to crack down on the banks has left both the financial regulatory process and other important progressive plans–like overhauling the broken health care system–in a precarious political state. The largesse we have shown for bailed-out bankers gives conservatives ammunition against other, more productive activities.

Read more at: http://www.huffingtonpost.com/the-media-consortium/weekly-audit-one-year-aft_b_287290.html

Perhaps the biggest promoter of refom, outside of the president himself, is the potentially influential coalition of 200 labor, consumer and  progressive groups, Americans for Financial Reform. It is planning grassroots actions while working with federal and state government officials to promote greater oversight of the financial system.

Indeed, to shore up support for administration proposals to rein in risky  investments, limit pay and offer a new consumer protection agency — all facing stiff industry opposition — the Treasury Department is reaching out to likely consumer allies, including the AFR organization.

So while some progressives and experts, including former Labor Secretary Robert Reich, remain skeptical about how committed this administration is to truly reforming a broken financial system, Bloomberg News reports that

Treasury Department officials are meeting with consumer allies to build support for a regulations overhaul for Wall Street as President Barack Obama ramps up a campaign to win legislation by year’s end.

The Treasury roundtables have been largely unpublicized, by invitation only and billed by some Democratic lawmakers as consumer-protection forums. The audiences are drawn in part from the rolls of a consumer-advocacy coalition that is pushing the legislation. They are designed to channel public anger at Wall Street and sidestep the financial industry, which is fighting to block the measure…

Audiences for the events are drawn largely from the membership of Americans for Financial Reform, a coalition of more than 12 dozen consumer, labor and civil rights groups that joined this year to push for oversight. The coalition includes the Service Employees International Union and the National Community Reinvestment Coalition.

Illinois Roundtable

The group will hold its next roundtable in Aurora, Illinois, on Sept. 21. State Attorney General Lisa Madigan will lead the session, and the group has invited Representative Bill Foster, an Illinois Democrat on the House Financial Services Committee.

Another non-profit group, Boston-based American Business Leaders for Financial Reform, is recruiting corporate executives to make the case for legislation. Tim Duncan, a Republican and founder of advisory firm Cambridge, Massachusetts-based Story Street Investment Management, created the organization after a conversation with Elizabeth Warren, the Harvard Law School professor who oversees the Troubled Asset Relief Program.

“There are a lot of people in the industry who realize reform is needed,” Duncan said in a telephone interview. “I’m surprised at the knee-jerk reaction industry is taking.”

But long-time observers of the financial industry aren’t suprised that a major battle lies ahead—and unions hope to play a leading role in pushing for reform.

And yet if this drive for reform falters, the fate of the entire economy is at stake. As Robert Reich described the risks we’re now facing:

Put simply, the Street has been given too many opportunities to play too many games with other peoples’ money.

But, like the health care industry, Wall Street has platoons of lobbyists and an almost unlimited war chest to protect its interests and prevent change. And with the Dow Jones Industrial Average trending upward again — and the public’s and the media’s attention focused elsewhere, especially on health care — it will be difficult to summon the same sense of urgency financial reform commanded six months ago.

Yet without substantial reform, the nation and the world will almost certainly be plunged into the same crisis or worse at some point in the not-too-distant future. Wall Street’s major banks are already en route to their old, dangerous ways — now made more dangerous by their sure knowledge that they are too big to fail.

About the Author: Art Levine is a contributing editor of The Washington Monthly who has also written for The American Prospect, Alternet, In These Times, Salon, The New Republic, The Atlantic and numerous other publications. He’s written investigative articles on unionbusting and other corporate abuses, and recently completed Cornell University’s Strategic Corporate Research summer program. He blogs regularly for Huffington Post, and co-hosts a weekly Blog Talk Radio show, “The D’Antoni and Levine Show,” every Thursday at 5:30 p.m. ET.

This article originally appeared in Working In These Times on September 20, 2009. Re-printed with permission from the author.