How The Banks Stole Medicare

By Simon Johnson

The world’s largest banks have been accused of many things in recent years, including taking excessive risk in the run-up to 2008, doing great damage to the American economy by blowing themselves up and then working hard to resist any sensible notions of financial reform.

All of this is true, but it misses what is likely to be the most profound negative impact of the banks’ behavior on most Americans. The banks’ actions led directly to an increase in government debt, which in turn has made the reduction of that debt by “cutting runaway spending” a centerpiece of the Republican presidential campaign to date.

As a result of this pressure, Medicare now stands on the brink of being eliminated as a viable form of social insurance. Yet the executives who lead these banks – and the politicians with whom they work closely – will not be held accountable this election season.

How is this possible? The economic mechanism through which a bank-led financial crisis has a broader adverse fiscal impact is straightforward. The recession that deepened sharply in 2008 implied a deep loss of tax revenue, mostly because people lost their jobs. Lower revenue means larger government deficits, particularly when the government also provides unemployment insurance. This deficit implies a surge in government annual borrowing and in its stock of debt.

The Congressional Budget Office estimates that the total increase in federal government debt because of the severe financial crisis will end up around 50 percent of gross domestic product. Let’s call that $7.5 trillion in today’s money (our G.D.P. per year is currently around $15 trillion).

Here’s how that calculation works. In January 2008, when almost no one expected a financial disaster, the C.B.O. forecast that by 2018 federal government debt would be just over 20 percent of G.D.P. Once the severity of the problems brought on by the credit contraction after the collapse of Lehman in September 2008 became clear, the C.B.O. redid this medium-range forecast – now taking a view on what debt would be after a difficult economic recovery to trend growth.

In its forecast of August 2009, the C.B.O. expected that debt would reach nearly 70 percent of G.D.P. in 2018. The change in this C.B.O. forecast for 2018 – to 70 percent of G.D.P. from 20 percent – is the likely total fiscal impact of the 2008 crisis and deep recession.

To be clear, there was already a potential fiscal issue looming in the distance, in the 2020s and beyond – with the retirement of the baby boomers, increase in life expectancy and, most of all, our collective failure to control health-care spending.

But until 2008 we had time to deal with this – and gradual solutions seemed most likely, preferably including ways to control the growth of health-care spending more broadly across the economy.

But the perception of a “fiscal crisis” brought the longer-run budget issues forward in time and the jump in government debt created a sense of panic in some quarters, so measures to “fix” the budget in a dramatic fashion are now on the front burner in Washington.

Ironically, although the main reason for the recent increase in public debt was the financial crisis, brought on by extreme deregulation, the situation has strengthened the hand of people who want, above all, to cut spending.

Medicare had been in the sights of conservatives for some time, but providing health care for Americans at age 65 is a very popular program, and with good reason. Before Medicare was created, it was very hard for people in their 70s, 80, and 90s to buy health insurance. If Medicare were to end, the adverse impact on older Americans with limited resources, including almost everyone who is not very wealthy, would be significant.

Yet that is what those committed to reducing the size of government and its programs are prepared to do. Whether they can convert this popular theme in the Republican primaries into political momentum that carries through the general election and gives the G.O.P. the presidency and control of Congress remains to be seen.

It is not surprising Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, is suggesting that we effectively eliminate Medicare over the next decade or so (for the details of how this would happen, see this piece by my colleague James Kwak, drawing on the analysis of the C.B.O.).  The New York Times reports,

“Medicare would be turned into a subsidized set of private insurance plans, with the option of buying into the existing fee-for-service program. The annual growth of those subsidies would be capped just above economic growth, well below the current health care inflation rate.”

The surprise should be that his proposal is being so warmly welcomed by many people who see themselves as centrists in American politics; in the past they would have been more skeptical.

It does not have to be this way. Social insurance programs like Medicare can be kept in place at the same time as the federal budget is brought under control. To be sure, we need to adjust Medicare’s terms and some features of how it operates, but moderate and gradual changes would be sufficient, along with returning tax rates to where they were in the mid-1990s.  (In Chapter 7 of White House Burning, we propose one way to do exactly this.)

Few people want to engage with this issue in a substantive way. The right is focused on not raising tax revenue. The left wants to protect Medicare and Social Security but for the most part does not discuss the details of how this can be done while limiting debt relative to G.D.P. over the next two decades.

This is a tactical mistake, opening those on the left to charges of fiscal irresponsibility. In fact, it was the administration of George W. Bush that oversaw big tax cuts, two foreign wars and a runaway banking system.

Part of the problem is that the Obama administration saved the failing big banks in 2009 and then defended them against being broken up in 2010 – the president’s top advisers consistently asserted that we need highly leveraged and very large financial institutions, irrespective of the damage they cause.

It will be very hard for the president to change his narrative at this point.

And it may be too late; many in the center have become enamored of Mr. Ryan, who also appeals to the Republican base and may even become Mitt Romney’s vice-presidential running mate. Certainly his ideas are likely to become a prominent part of the Republican platform for the general election.

In financial crises, it is people at the bottom of income distribution who end up being hurt; most of the rich do fine. When I made this point in “The Quiet Coup” in April 2009, some commentators shrugged off the comparison of the United States and emerging markets that had experienced crises, such as Russia or Indonesia or Brazil.

Surely, they argued, the United States had a much stronger democracy. But while the precise mechanism differs across countries, the link from financial elite misbehavior to squeezing the lower half of society is present everywhere. In the United States, it most likely will take the form of ending Medicare.

To many people, the financial crisis of 2008 seems but a distant memory. If you kept your job or found another, you might feel that the adverse consequences are behind you.

That would be a mistake. The worst is yet to come. When you are 85 and cannot afford decent health care, think about the banks.

An edited version of this post appeared yesterday morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce this material in full, please contact the New York Times.

47 responses to “How The Banks Stole Medicare

  1. This is actually old news, and the solution was to let the tax cuts expire, so the external debt to gdp ratio is reduced and the lenders can then feel happy about lending, especially when stood up against the EU numbers, then all is good in the world of Irish debt.

  2. Dear Mr. Johnson,

    It’s simple, really: if medicare and related programs are gutted, many of the post 65 population will die of their
    serious ills….that’s the extreme right’s answer to the
    troubling baby-boom/deficit problem. ( Apparently they quite forget–or don’t care–that many of their OWN nearest and dearest aren’t fabulously wealthy.)

    The U.S. is not a democracy. It’s a republic (at times
    even a democratic republic). Benjamin Franklin said so
    on Sept. 17, 1787, when queried as to the new form of government. Then there’s the Pledge of Allegiance:
    “…and the republic, for which it stands…”. –“Democracy”! This and other high-flown expressions that so many endlessly repeat and rely on are hopelessly inaccurate. No nation has ever had a TRUE democracy, not even the Ancient Greeks who created the word; they had slaves, including the pedagogues (teachers).

    I’ll be reading your new book shortly. Please keep up the
    fine work you, James, Ellen Warren, Pauls Volcker and Krugman, et al do. This nation and the rest of the world need it.

    Sincerely,
    Best Wishes,
    Amber Ladeira

  3. More evidence of Nihilistic *thinking*, if one can call it that. With a big smattering of sadism…maybe change the conversation to discuss whether it is a form of torture to deny people healing techniques that exist, but that they don’t deserve, even when they were involved in the evolution of those very same science-culture healing techniques? Maybe then they’ll *save* the Medicare program because it can be morphed into a eugenics program?

    Every Human Being has the right to make their lives less miserable through honest work. Advances in health care, which took centuries to achieve, btw, is testament that sane leadership, over centuries, used the establishment of life-maintenance institutions as a *governing* technique.

    Why these Nihilists are given a public stage is beyond comprehension.

    I guess SANE people should have realized that misanthropes, mercenaries and the merciless would form a *political* party….FIAT $$$$ and fractional reserve banking – making it up as you go along….

    Just War 101….

  4. Capitalism and Charity don’t make good bedfellows when 20% of the population is unable to afford minimum health insurance policy payment.
    This isn’t something a mere fixed voucher will address — it is a systematic failure of monumental proportions.

    The fallacy is that Private Healthcare Industry is all that efficient. Unless, you consider an arms race between Health Insurers and Hospitals/Doctors/Pharma. The current piecemeal payment system seems to encourage bureaucratic waste and duplication. A single hospital visit generates several different bills. Each one is trying to game the Health Insurers for payment for minor things and it all cost $$$ to support the current infrastructure and doesn’t at all benefit who receives those services.

    On can almost hope that Supreme Court will strike down the health care law — maybe …just …maybe we will join the rest of the developed world and have health care provided by the government since Swiss healthcare solution (http://www.npr.org/templates/story/story.php?storyId=92106731) is off the table.

  5. We’re not talking about *charity* here, are we? We are talking about not ALLOWING people a standard of living that they can provide for themselves!

    I called this raiding of the family’s cookie jar – Medicare – a while back…new neighbors moved in just to figure out which cookie jar they should empty out as a loan payback…who are we kidding here? No attempt at trade anymore – not even offering a bottle of cheap Yak juice (snake oil for all you wild west historians) in exchange for moving into the civilization that someone else built….

  6. If it hadn’t been for the banks the Baby Boomers wouldn’t have aged? Talk about Peter Panism.

  7. Well, as George Carlin said shortly before his unfortunate passing, “they’re coming for it all.”

    The two party system has completely collapsed, and with it all pretenses that the “public interest” has to served or even addressed.

    The principle issues now are whether mass support can be generated for an alternative political option, and whether it can happen before all meaningful dissent is criminalized.

  8. Back in the real world, the Portuguese are dying at a 20 % higher rate than last year. The reason given was the new austerity programs implemented from the country’s debt. Spain now demands more dry powder as Greece wants to default, but mainstream politicians won’t allow it as the under ground now accounts for more gdp than the real economy there. Here, our laws have created a sub-culture armed to the teeth and not afraid of chiefs, sheriffs, or deputy’s of any kind, everyone is a narc, until proven not to be. But debate in circles we will, until dizziness or rationalism takes hold of your senses and guides you to the path of redemption.

  9. Here we go again, for the slow learners – USA demographics:

    Median age
    36.8 years

    Further information:
    Children and adolescents in the United States 0-14 years: 20.2% (male 31,639,127/female 30,305,704)

    15–64 years: 67% (male 102,665,043/female 103,129,321)

    65 years and over: 12.8% (male 16,901,232/female 22,571,696) (2010 est.)

    So 67% of USA population is of working age and 12.8% of the population is 65 and older – get it??!!

    Boy, asking for massive social violence, aren’t they, by LYING about Medicare and Social Security over and over and over again…?

  10. Simon, you’ve strengthened my viewpoint of the GOP being a “death cult” with your clearly-worded post relating this pent up right wing need to rid the USA of Medicare, and having the non-rich elderly fend for themselves. This means death for millions, literally.

    The democrats are hardly better on the issue than the reich wingers.

    Tax Wall Street derivative transactions (sales taxes) and your funding issues are no more for Medicare and Social Security.

    It’s time for those responsible for this shitty mess to actually take the bull by the balls and start paying for it.

  11. Bill Gilwood

    We do not have a real democracy in this country, except on paper. How can there be a real democracy when the politicians and the media are owned by the Big Money and voters are so ignorant and stupid? The public is kept ignorant, distracted and stupid by way of the media so that the politicians can deliver it to their sponsors to be looted. Medicare (and possibly all other public goods) will very probably be stolen (‘privatized’), since the billionaire class would rather invest that money somewhere else, where labor is much cheaper and easier to repress and potential markets are bigger.

  12. I recently read an article in Fortune magazine by Allan Sloan on whether we should cut Social Security benefits for the rich. He stated that the net benefit that he and his wife will get is only about 35% of the value they paid in. This got me curious about the benefit I will get based on the amount paid in. I used his assumptions that the employer share should be counted as what was paid in on my behalf. So my share + employers share on my behalf + interest earned on this money over my 39 year working career, plus the last 6 years before I was eligible to collect Social Security at 62, was quite a substantial amount of money. Considering that this substantial amount of money should continue to be earning interest on the amount that should have been in my SS account at 62 less the full yearly benefit amounts they pay me (before they deduct my Medicare insurance premiums), my net yearly benefit is extremely low. Deducting this from the amount that should be in my account, it would take an extremely long time for me to collect even a portion of the amount which should be in my SS account. After calculating this, I have no idea why SS is not swimming in money. They have been collecting this money over many years of our lives, and it builds up greatly. Many people die before they are able to collect a dime. Many people do not live long enough to collect very much of their deposits and earnings. Even some of the hardy people who live to say 85 can only collect full benefits for 20 or so years. Of course they do pay out money to children who have lost a parent and things, but still, I don’t how this SS fund could not be swimming in money.

    I know a lot of people don’t manage their money very well but, personally, I would have much rather managed my own money rather than paying it over to SS over all of those years.

  13. “The left wants to protect Medicare and Social Security but for the most part does not discuss the details of how this can be done while limiting debt relative to G.D.P. over the next two decades.”

    How about the budget proposed by the Progressive Caucus of the House? The best budget out there. Media won’t give it the time or day nor are you, Mr. Johnson.

  14. Let’s get something straight here. The problem is not Medicare. The problem is Health Care Costs and it is an ugly problem Here is what should be done and why.

    ONE: There is no question that health care costs are the single biggest problem we have to face. The actual amount is staggering, 16%-18%, depending on who is counting, of our GNP. That is roughly twice as much as any other developed country, and we get worse results than almost any other developed country.

    The really troublesome aspect of health care costs is that they are growing 4%-6% annually. That is faster than inflation and is on track to reach 30% in a few short years. At 30%, the country would be basically bankrupt.

    There are five major activities that must be started as soon as possible to get health care costs under control.

    1) The majority of health care costs are incurred at the end of life. There have been four major, scientifically sound, studies on the problem. They used different definitions, but all four can be summarized as, 60%-80% of all health care costs are incurred in the last two years, two months, two weeks of life. What is amazing is how little it would cost to dramatically reduce this expenditure. Paying for Living Wills, Do Not Resuscitate orders, and consultations with doctors and counselors about the choices available before the decision is required will significantly reduce the expenses associated with the end of life. (And believe me, I take this problem very, very seriously!)

    The Wicked Witch of the North ran around screaming “Death Panels”
    three years ago. That was, and is, complete nonsense. The real Death Panels are those nameless, faceless clerks in health care companies who make life and death decisions about which procedures are to be paid for and which will not be paid.

    2) Chronic diseases are the second major source of savings in health care costs. While end of life expenses are self ending costs, chronic diseases can be very, very long term costs. Diabetes is a perfect example of a life long disease that is very, very expensive to treat.

    One-third of all U.S. adults are over-weight and another one-third are clinically obese. Well over half of all Americans are prime candidates for type II diabetes, heart failure and a host of other medical problems. And the number of teenagers and children who are over weight or obese already is truly frightening.

    While the approach to the end of life costs are relatively simple and straight forward, dealing with chronic disease costs is horribly complicated. The cause of over weight and obesity is pretty straight forward—over eating. But changing the eating habits of 200 million Americans is a daunting task. Over eating is primarily caused by the fact that a lot of stuff just plain tastes good. The minute the government attempts to attack this problem, it will be going toe to toe with the fast food industry and all food processors, all their campaign contributions.

    And then there is the question of the “nanny state”. What role does the government have in the very personal actions of people in their own homes? And fast food restaurants.

    But the fact remains that unless something is done to slow down, and then reverse it; the problem of over weight and obesity, health care costs will continue to grow faster than the economy.

    3) The next source of waste in health care costs involves the continued use of ineffective treatments and ineffective medicines. This happens because there is no central clearing house for such information.
    Peter Orsag, former director of the Congressional Budget Office, has worked for years to establish such a clearing house. He estimates that the savings would be huge.

    You can find out more about his work at orsagonline.com and look at Health Care Reform there.

    In the meantime, keep this fact in mind. The identical procedure that costs $100,000 at the Mayo Clinic costs $200,000 at the UCLA Medical Center.

    4) The typical operating margin of U.S. healthcare companies is 24% of the cost of doing business. All the developed countries with really good health care delivery operate with a 2% margin, which, incidentally is what it costs to administer Medicare. The point is that there are huge, demonstrable savings in administrative costs.

    5) And there is a huge amount of graft and theft in the Medicare system that demands attention. However, nobody much seems interested.

    So here we go!!!!

  15. @Bhans, there actually hasn’t been a “buildup of money” to speak of. Social Security is a flow through system, where today’s workers pay for today’s retirees. Except that they also pay for today’s Social Security Assistance clients, and the excess has been paying for other programs and funding a higher level of benefit for a much longer period of time than was originally expected as well. The trust fund, so to speak, is in the form of I.O.U.s, AKA Treasury Bonds. If the government had actually been building up an interest-bearing trust fund, it would have sequestered much of the market and throttled commercial investment activity, or so the original complaints against it went.

  16. The trust fund, so to speak, is in the form of I.O.U.s, AKA Treasury Bonds

    Do not bonds earn interest?

  17. For health care costs to be controlled there must be rationing. Rationing can be accomplished by fiat or by the market, but we must be honest about it. The major obstacle to rationing in the US is not the Republicans or Sarah Palin, it is the disease and disability lobbies and their large funders who often turn out to be the manufacturers of equipment and producers of drugs used to screen for or treat those illnesses or disabilities.

  18. @Josa: At the point that Social Security needs to borrow to meet its current obligations, yes. But the “trust fund” is a nicely crafted piece of fiction; current income is used to directly fund current expenses. The gov’t hasn’t had to buy a bond to meet its SS obligations, so no interest has been accruing. Income beyond that required for current expenses has, in the past, been used to expand benefits, and those benefits have been much more generous than the plans of the original system largely because of the baby boomer’s contributions and the overall growing economy of the mid-20th century. However, what was originally estimated to be a 5 to 10 year obligation has now grown to 25-30 years, the boomers are now starting to draw down the system, the benefits have increased through COLA but the wages (and the contributions) of working have not, and the American workforce is smaller. So, sometime in the next 20 years, the SS system will have to buy a bond.

    What @Bhans is arguing for is a Personal Retirement Account to replace Social Security. Given a host of favorable outcomes (regular contributions to the fund, consistent work, adequate pay, favorable investment decisions, consistent economic growth and no big surprises) this is a feasible option, but would, like the AHCA, need an individual mandate to avoid massive “retirement ER” style costs for those who eschewed creating an account, and it would do nothing to help those who were not so lucky in their PRA outcomes.

    Social Security is a redistributional system partly created out of our compassion for our fellow Americans and partly out of a practical realization of the benefits to society of keeping its most needy out of the most expensive sectors of our service systems by providing basic support. PRAs help individuals, but they do not solve the problem of old-age poverty that existed at the inception of SS and is making a comeback today. Some combination of redistribution and mandatory PRA may be needed in the future, but SS functions something like an annuity; you get a fixed (or market-decoupled) income, but the entity providing that income keeps the gains on the investments it made to fund the cash flows. In SS’s case, the “investments” were the size of the working population and the growth of the American economy.

  19. The 2008 financial crisis and its consequences are simply “starve the beast” on steroids. By tanking the economy with their reckless behavior, the too-big-to-fail banks and their laissez faire friends in Congress have managed a hat trick: they generated enormous compensation for management and increasing profits allocated to campaign contributions and lobbying, they stiffed taxpayers with a trillion dollar bar bill, and they sucked trillions more out of the economy and government treasuries. All this has set the stage for a massive assault on Medicare, education, etc.,etc. for the sake of debt reduction.

    Mr. Johnson, I rarely find anything to disagree with in your writing, but I think you are gravely mistaken, and politically naive, regarding the Democrat’s stance on Medicare. You suggest that the left should be discussing how Medicare can be reformed as a way to address the growing federal debt. No doubt true in an ideal world–even a reasonable world.

    But in the real world today, following your prescription invites the GOP to attack Democrats as willing to cut seniors’ Medicare benefits while claiming their own proposals will save Medicare from the coming debt armageddon, which they, of course, blame on entitlement spending but in fact have brought on themselves with their economic, regulatory, tax and war policies.

    And the GOP attack has the ring of plausibility. After all, it was Obama’s healthcare plan that cut Medicare spending to pay for healthcare of the undeserving uninsured, right? And some Democrats publicly suggest they’re willing to consider “reforms” to Medicare as part of a grand bargain to address the debt crisis. Seniors know what this means, and the GOP is happy to interpret it for them as they hawk their plans to save Medicare.

    Unfortunately, until the GOP is ready to deal on the debit, it is self-destructive for the Democrats to indicate flexibility on Medicare and Social Security. To do otherwise will hand all three branches of government to the anti-entitlement, small government, laissez faire ideologues.

  20. @Woop, “….Simon, you’ve strengthened my viewpoint of the GOP being a “death cult” with your clearly-worded post relating this pent up right wing need to rid the USA of Medicare, and having the non-rich elderly fend for themselves. This means death for millions, literally….”

    And the flurry of posts that followed yours, what did you discern from them?

    Here’s what I see:

    1. Whoa – a heck of a lot of people who are criminally clever and have studied the *system* in depth have tracked every single penny of their fractional reserve banking FIAT $$$$ in order to suck it back in to themselves and create a vortex behind it to suck in everything in the MATERIAL world that you accessed and interacted with – food, clothing, shelter, transportation, hobbies, health care – EVERYTHING. You made a ceramic bowl for Mom in kindergarten, they leveraged on that kiddie bowl and will come to get it right before you NEED to use it since all the bowls you bought on their dialing-for-debt dollars was spent on WAR in the middle east (AKA countries whose continued existence depends on the Perfect Ponzi).

    2. They’ll tell you, right before they take the kiddie bowl you made for Mom with your bare hands in Kindergarten, that you did not deserve access to the clay you scooped up from the banks of the river with your little hands. It was THEIR clay. God made it FOR THEM. Of course, they figured out THAT detail – God made the clay for them – AFTER you did all the work – along with your whole village, btw, the oven makers, the builders, etc. You see, they need to PROVE that you are a stupid filthy animal eating from the dirt and the only way they can do that, now, is to take away the bowl, and demolish the whole village that made it possible for everyone to eat from a bowl…

    3. There must be some entertainment value for these *economists* in watching people die in such an un-entertaining way. But then you see how much $$$$ sloshes around a closed circle in the professional sports world and you wonder why they NEED the additional *entertainment* of watching Grandma lose the bowl she made for her Mom….well, Grandma is no longer *sell-able* as porno, and she lost her ability to run fast enough away from 5 men who want to tackle her and take away the pigskin…well, so let’s entertain ourselves with taking away that sentimental kiddie bowl and know our job is done – she’ll be dead sooner or later – even *social media* with their attention deficit disorder won’t follow her on Facebook….everyone learned the lesson from Katrina – they won’t die fast enough to make good footage….

    So, Woop, does Grandma have the RIGHT to defend herself from the DEATH CULT with full lethal force, or not?

    Just War 101….

  21. Health Care Costs: Two examples from real life.
    1) An elderly relative recently died of cancer. The last six months of his life were spent lying in a hospital bed completely unconcious. His quality of life was zero. The medicine that kept him alive for the last six months cost $10,000 A MONTH.
    2) A much younger relative was involved in a single car accident. He was transported by ambulance to the hospital where he was held over night for observation. The bill was $38,000.
    That is real life in the American health care system. Rationing is not driving the costs and has nothing to do with the real problem.

  22. Why attribute to ideology what can be explained by greed?

    The elite want access to that pot of money and to the huge captive market.

    Ideological justifications are post hoc.

  23. American politics has always been rife with “power centers” that is groups of special interests which agglomerate into a critical mass with economic and political power. Historically, although the great American republic was based upon representative democracy at every level of government, the influence of these powerful groups has tilted the democracy in ways that were mostly destructive, and rarely productive. The Great Depression was a result of the most powerful financial and industrial economic and political interests “corrupting” political leadership to reshape the regulatory landscape in ways which favored their economic interests over those of the rest of the nation. This happened in the early part of the 20th Century, and most of us know the story, as well as the fall, that is the Great Depression. Not only do we know the outcome, but we also know about the reformative measures taken as a result of the investigation conducted by the Pecora Commission which resulted in several measures, especially the Glass-Steagall legislation which isolated regular commercial banking from other businesses, notably investment banking and insurance. This measure alone led to a recovery of fiscal and financial sanity and a reasonably stable economy for the next 60 plus years.
    In the late 90’s, Alan Greenspan (Ayn Rand disciple) and his powerful friends in the Federal banking community, led a movement to deregulate banking and this resulted in the abrogation of Glass-Steagall with the passing of the Gramm-Leach-Bliley legislation. This was a truly sad day, which, in many ways, sealed our fate and the buildup of the massive credit and housing bubble to its collapse in 2007 and 2008, culminating in the second Great Depression. Oh, I know that we call it a recession, and, from the standpoint of GDP, it is. I would argue that the GDP in the age of a massively tilted playing fiscal playing field, is simply inadequate as a measure, but then the argument is moot, since the descriptor is only that and the facts are the facts. In the three and a half years since the crash, the banks have not lost any power at all. Sure, there have been relatively small curative measures, considering the massive corruption involved, such as the Dodd-Frank legislation, which has truly had but small impact on the banks, as much as they may have complained. The result, among others, of the last fifteen years, has been to firmly solidify the hold that the banking oligarchy has on our politics.
    Paul Ryan and his Republican friends, especially the Tea Partiers (having moved far from the ideas of the original movement in just three short years to morph into a major branch of the GOP), working in concert with those who fund their election victories, the financial oligarchs and other major business sectors, are moving forward with a domination of the 99%. What has developed, politically, is now a faceoff of movements, between the Ryan faction of government, the plutocracy’s most powerful branch at present, versus the Occupy Movement and its sympathizers.
    Simon, your article is spot on. The Ryanites are making a strong effort to consolidate power and totally cripple those among our population who wield exactly no unified political power, that is the backsliding middle class and the continually growing poor or near poor. Not only have the banks consolidated their political power, but their economic power has seemingly grown exponentially, to the point where we must view them as nearly indestructible. We all know that there are rational solutions to the country’s growing debt and deficit. We also know that, in lieu of pursuit of these solutions by our legislators, we are going to continue to see massive erosion in the various programs, such as Medicare and Medicaid, which make even meager health care affordable for most of us. The tragic thing is the even the massively tilted, vaunted Ryan budgetary proposition will NOT result in a future reduction of the national debt at all. Ryan’s supporters claim to be in favor of tax reform, but there have been almost no proposals to move forward with this, and that is despite our knowing (and their knowing but not admitting) that a major key to our future potential control of the budget and national prosperity is massive tax reform. As an example, we hear the conservative pundits and politicians complaining about the corporate tax rate, and that it is too high at 35%. However they are massively dishonest by not following their rate arguments with the fact that the massive loopholes in the Tax Code have created a situation in which fewer than half of our corporations pay any tax at all. Even in our personal income tax, the rates are essentially meaningless since the Code so thoroughly corrupts the effects of those rates (one result is our debate over the “Buffet” rule).
    Until and unless, those like Bernie Sanders, Vermont Senator, succeed in forming a Constitutional convention to overcome things like the politically corrupting “Citizens United” Supreme Court decision, how can we ever hope to overcome the negative impact of the wealthy elite on American politics? Herein lies the rub. Without escaping the Plutocratic iron heel on our throats, we can’t get rational, effective policies to overcome our financial and other issues which can’t be resolved without being able to make difficult and necessary decisions to map out a prosperous future.

  24. ‘In the late 90’s, Alan Greenspan (Ayn Rand disciple) and his powerful friends in the Federal banking community, led a movement to deregulate banking and this resulted in the abrogation of Glass-Steagall with the passing of the Gramm-Leach-Bliley legislation. ‘

    That’s a bit problematical, given that Simon Johnson told Russ Roberts, in their podcast discussion (much recommended, btw), that GLB was mostly symbolic. Although one wouldn’t get that impression from ’13 Bankers’ .

    Leaving aside that GLB was bi-partisan, and signed by Bill Clinton, it merely eliminated two provisions (of over 30) of what people call Glass-Steagall (aka, The Banking Act of 1933). Those provisions concerned ‘affiliations’ between commercial and investment banks. That is, a holding company could now own both. The provisions of Glass-Steagall that actually keep banks from using their FDIC insured deposits to underwrite corporate securities are still in place.

    Of course, it wasn’t corporate securities that caused the 2008 financial meltdown. It was mortgage backed securities, and banks had been dealing in them since they were invented in the 1970s. Which is a bit too early for GLB to have had any responsibility.

  25. “Mcmike | April 14, 2012 at 1:19 pm |
    Why attribute to ideology what can be explained by greed?

    The elite want access to that pot of money and to the huge captive market.

    Ideological justifications are post hoc.”

    There ARE no *idea-logical justifications – scheesh!

    But let’s drill down to which *elite* want TO STEAL that USA collective-family emergency cookie jar money….shall we…?

    GLOBAL war lords, savage DRUG lords, and Ann Romney’s *blind trust* investment management by GoldmanSucks – SLAVE LORDS….

    Locked and loaded – it’s a CLEAR case for JUST WAR.

  26. If you don’t believe me, Bayard, how about Brad DeLong and Alan Blinder;

    ‘Joe Stiglitz thinks that the investment bank culture took over the commercial banks. I think that merging investment and commercial banks gave investment banks more stability in their liabilities that allowed them to ride out the storm more easily.

    ‘Alan Blinder agrees with me, which makes me happy.

    …“Banks did terrible things, investment banks did terrible things, a big insurance company named A.I.G. did terrible things, but basically none of that was enabled by the repeal of Glass-Steagall,” said Alan Blinder, an economist at Princeton, who had his share of confrontations with Summers when he was a member of the C.E.A., in the first two years of the Clinton Administration. Brad DeLong added, “To say that the breaking down of the Glass-Steagall wall between investment banks and commercial banks was the source of the current crisis is just wrong” ‘

    You can find the above at DeLong’s blog from Oct. 4, 2009, under; GLASS-STEAGALL AND THE CRISIS.

  27. “….The Ryanites are making a strong effort to consolidate power and totally cripple those among our population who wield exactly no unified political power, that is the backsliding middle class and the continually growing poor or near poor…”

    You just made the case for a JUST WAR, Bayard – it’s a DUTY to take them out….we ARE all unified then :-)) Only thing protecting Rand’s rabid ryan raccoons in D.C are a bunch of gay internet bloggers….

    http://www.cbsnews.com/8301-505267_162-57414068/secret-service-supervisor-in-prostitute-scandal/

  28. @ Annie: “So, Woop, does Grandma have the RIGHT to defend herself from the DEATH CULT with full lethal force, or not?”

    Under the doctrine of self-defense, an individual is entitled to use lethal force when confronted with an imminent threat to one’s own life. This is well-settled in legal circles, case law, and natural history.

    Frankly, I can’t see this happening here, however, given the protracted threat (as opposed to sudden, unexpected, un-announced) to grandmother, and the advanced years being a genuine real hindrance to aggression.

    Removing medical care for seniors (anyone for that matter) is such a gross abomination to the rational mind, I find it remarkable the proponents of such radically dangerous and muddle-headed ideas even have the wherewithal to garner a night’s sleep.

    But, here too, we are dealing with a group of fanatics that essentially are void of a conscience and are ill-motivated, and delusional, to say the least.

    I do think, Annie, that many people on the board see the threat as quite real, and buy into the Just War paradigm, whether publicly fessing up or nay.

    In my own situation, one of being recently diagnosed with a serious illness. removal of my health insurance……let’s say a precursor to Medicare for accuracy…..would result in the illness dramatically progressing, and the onset of my demise much sooner than otherwise.

    Multiply this unfortunate fact by the millions of seniors who built this country with HONEST LABOR and made their lives, as well as the lives of their families, so much less miserable than otherwise.

  29. Just a gnat on the wall

    I ditto woop.

  30. Frank Capra seemed to understand where unbridled greed and all its’ related psychopathies land a society……into dystopic Pottersville…..where even Emile Durkheim would be transfixed with the degree to which anomie had settled across the land.

    European businessmen are now resorting to suicide, in the wake of the mass extraction of wealth taking place:

    http://www.nytimes.com/2012/04/15/world/europe/increasingly-in-europe-suicides-by-economic-crisis.html?_r=2&hp=&pagewanted=all

    A portent here if Medicare goes away…….

    Willard Romney and the fabulous Koch brothers won’t need to worry about funding their health care needs, so what do they care?

    America is better than these bums, that’s for sure.

  31. Good Grief Woop!! You are beginning to sound like The Idiot From Alaska!

    NOBODY is talking about taking away your pills, not now, not ever.
    So let me explain it is small, simple words. There is a very large difference between a person and a body. Medical science now has incredible abilities to keep the body alive long after the person is gone. It is your right to keep your body alive long after the person is gone. Just make sure people know that is your wish before your person is gone.

    Personally, I don’t want to hang around after my mind is gone, and to make sure that doesn’t happen I have a Living Will, A DNR and an Organ Donor Directive. But those are my choices. Nobody is talking about forcing you to make those choices, NOBODY!

    Apparently you do not know much about what goes on in hospitals these days. I would suggest you volunteer to work a day or two week and see what really happens. You will be pleasantly surprised.

    And nobody, except Paul Ryan, is talking about taking away your Medicare.

    Death Cult?? Only a full fledged idiot would say something like that! Do you really believe death is an option???

  32. I struck a nerve here, didn’t I? That’s fine, but your rude arrogance and snotty disposition is unbecoming, James.

    And how dare you say I don’t know what goes on in hospitals, you son of a bitch.

  33. Well lets study Woops article, it does seem that Mr. Taylor is more akin to a banker than minimum wage rat. Where even in EU the min wage is @14/hr rather than the 5.15/hr we had just before the great inflation of 8/8/08. The free world does have a kick um when they are up, and kick um when they are down personality. The elites made laws not only protecting their wealth, but also increasing it by eliminating usury and then creating gambling games to reduce the human being to mere human capital to be used up and thrown out. And it all end up in the bankers hands somehow, leading to a can never get enough attitude and aggression. I always favored a take out as many as you can before you take yours, but the desperate elderly have to use any options available to them once their money runs out. And if you have irresponsible or no kin at all, their comes a point where you realize that this life for me is not going to get any better, and that’s when the real choices with life are made. As with all mechanicals, I prefer a well maintained human, over the discarded type, which has those thing to consider. And the time police will see to it that koch bros and their like minded friends, get their reward too. So just sit back and wait too see if the Queen is waiting for the king, or the king is waiting for the queen. That is what the 12/21/12 timer is all about. Letting us know the direction that one should take.

  34. @woop, “Multiply this unfortunate fact by the millions of seniors who built this country with HONEST LABOR and made their lives, as well as the lives of their families, so much less miserable than otherwise.”

    And fractional reserve banking is what makes it possible to suck it all away from HONEST LABOR…

    Absolutely unacceptable – it’s REVERSE eugenics – the biggest psycho sadists running amok …. and here is their latest *religious* argument on religion blogs – because the soul is not material, it has no business interacting with the material world….

    They ARE telling you to die, Woop, right to your face. Seems to me like brute force – CONTAINMENT – of such hooliganism is a DUTY.

  35. You have to give credit to a person who can write this article about banks stealing from Medicare, and then a couple of days later, present a story about 2 people amazingly rising to lofty levels of leadership who are smart enough to deal with the health concerns of 7 billion people….how those 2 people are going to avoid the banks is anyone’s guess. Certainly a balance between selfishness and altruism that will be something to watch…too bad the selfishness won out at the bottoms-up level in the first place thus giving us the 7 billion diaper change problem.

    I kinda liked the simplicity of “100 of us, 1000 buffalo” – always leave a little wiggle room, eh?

  36. Overpopulation has created the environmental and societal problems we see today, caused in turn by no self-restraint or regard for the world and its future….oh, and ignorance about consequences, as well. I am not optimistic about the future: it would take about 5 of the 7 billion humans here to agree to the changes that would clean up the Earth and institute peaceful resolution of problems/conflicts.

  37. I suspect even without the shenanigans of bankers Medicare would continue to place an undue burden on the taxpayers given the rapidly aging population. However the bankers — to the extent that they have damaged the financial affairs of the country, which is substantial — have yet to be held accountable for their actions.

  38. @Jose

    Here we go again, for the slow learners – USA demographics:

    Median age
    36.8 years

    Further information:
    Children and adolescents in the United States 0-14 years: 20.2% (male 31,639,127/female 30,305,704)

    15–64 years: 67% (male 102,665,043/female 103,129,321)

    65 years and over: 12.8% (male 16,901,232/female 22,571,696) (2010 est.)

    So 67% of USA population is of working age and 12.8% of the population is 65 and older – get it??!!

    Boy, asking for massive social violence, aren’t they, by LYING about Medicare and Social Security over and over and over again…?

  39. Carly EngageAmerica

    As the country faces increasing fiscal challenges, it has become imperative to revisit allocations made to the three largest entitlement programs: Medicaid, Medicare and Social Security. Medicaid is an especially important target for cost reduction because it has grown the most rapidly in recent years. Though information for 2011 is not yet available, it is estimated that average monthly enrollment exceeded 55 million, with 70 million people having receiving benefits at some time. Combined federal and state Medicaid expenditures have grown from 2.0 percent of gross domestic product in 2000 to 2.7 percent in 2007. Reforms to entitlement programs are exceedingly difficult to implement, as there are strong interests that support the continuance of the status quo. Recent reforms by five states can be instructional in demonstrating effective ways to reorganize the program. Rhode Island, Washington, Tennessee, Florida and Idaho each have attempted efforts to change the system, and their experiences may prove insightful:
    Attempts at reform cannot be rushed, and instead must be vetted of issues before they are put to a vote or implemented.
    All interested parties, including those in opposition, should be included in negotiations — this allows for movement in the right direction and reduces the risk of having reform killed entirely.
    Radical terminology must be avoided in such a crucial issue; activists in favor of reform must avoid an in-your-face approach to the opposition and instead mitigate their militant tendencies.
    Following these principles, reform efforts in Rhode Island and Washington were largely successful while attempts in the other three states floundered. Given these differing outcomes, federal reform-activists should take note (http://bit.ly/yGZRQr).

  40. @Annie:

    We as a country are reaching a boiling point regarding our fiscal state. Right now our debt to GDP ratio is over 100% which is considered unhealthy, and its parabolic rise is unsustainable. It’s not just Greece, Italy and Spain that will have to default eventually. We are likely to see a default in this country and one in Japan eventually as well. We will have to rein in our military spending as well.

    I have a business degree and have spent many hours studying the bond market. I try to divorce politics as much as possible.

  41. I think we need to replace the three witches with three Big Pharma warlocks for the modern interpretation of MacBeth:

    “This is the well-known incantation of the Three Witches in Shakespeare’s Macbeth, 1605:

    All:
    Double, double toil and trouble;
    Fire burn and cauldron bubble.

    Second Witch:
    Fillet of a fenny snake,
    In the cauldron boil and bake;
    Eye of newt, and toe of frog,
    Wool of bat, and tongue of dog,
    Adder’s fork, and blind-worm’s sting,
    Lizard’s leg, and howlet’s wing,
    For a charm of powerful trouble,
    Like a hell-broth boil and bubble.”

    There is a man to land ratio that, if exceeded, brings doom to everyone because the effects are exponential. Environmental toxins and uncontrolled epidemics (NOT old age!) will eventually produce such an amount of health problems that technology and modern medicine will not be able to manufacture enough health care to alleviate the crisis. Both threats to health – environment and epidemics – are not controlled by the individual, as an individual! Throw in the occasional weather storms that tear down *shelter*, and there you go – the NEED for currency to keep flowing to commerce that supports life-maintenance – MAIN STREET business.

    We have a guns vs. butter situation that can only be explained by a monkey-brain imagination belief like Marxist Commodity Fetishism, or something equally off the scale of common sense. There is no rational or logical explanation for listening to the very people who threw everything into a spin with *financial instruments* that, THEORETICALLY, locked up 60+% of GDP into a handful of UNCONTROLLED banking creations. What part of stopping the virtual suck out of REAL wealth to cover toxic derivatives bets (much worse in scale than the tax sadism suck out) don’t people understand?

  42. @ Annie, MF Global and John Corzine make a fine case in point.

    Thouands of self-employed people defrauded and farmers also, many of whom had contained in the accounts their a large part of their paper wealth.

    Who’s in jail over this, today? Bunch of dirty liars and crooks in any case.

  43. @Woop – the economy was re-tooled over 30 years to be one giant Ponzi scheme to support perpetual war in the Middle East.

    Basically, it’s going to be a constant cycle of horrors like the 20th century was – wars that never settle anything – sadists on an endless killing spree because they issue the *coin*….

    The reason it was a decade long war was that is how long it took to make it permanent and to build all those *corp* buildings in the ME…

    The REAL joke here in USA was the growth of the *enforcer* industry under The Patriot Act. Banking would have NEVER become 60% of GDP without the thugs – and, yes, they DID plant the *bugs* in the bathroom – it’s always in the ceiling light fixture…

    At least there is no pretense anymore that works on We The Stupid – we were successful in ripping over their moral high ground cape….

    Every HUMAN BEING has the right to make their lives less miserable through honest work. If we need to have the battle – again – against slavery – fine. It’s a GREAT battle to have (“woman is the nigger of the world” – remember that?)….if us crazy white chicks weren’t GENETICALLY DIFFERENT, we’d be living in the boys will be boys world where a classroom of little girls DESERVES to be sprayed with acid….kinda clear that’s where the “boyz” want to take us, no?

  44. @woop – big picture – they *created* an economy in a big country with enough natural resources, like USA, with 330 million NON SLAVES people – (their economy) SLAMMED everyone way below what IS a sustainable CIVILIZATION.

    JUST WAR.

    Look at that punk, Cantor. Was he raised to respect anybody? Seriously, who the hell do they think they are…?! And WHY do they get to be the only ways to transmit their snarky sneering faces over the air waves….? It’s OBVIOUS that they are Nihilists and misanthropes – and MUCH worse…

  45. I wish we’d spend more on the people in this country than on wars. How revolutionary!

  46. @ Annie, true that, couldn’t be in any further agreement, actually!

  47. back to the drawing board:

    http://retractionwatch.wordpress.com/2012/04/23/the-hela-problem-what-a-retraction-says-about-whether-cancer-researchers-trust-their-cell-lines/

    wonder how many people were fired for not “liking the corporation”….?