George W Bush Pushes Neoliberalism even farther

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George W Bush Pushes Neoliberalism even farther

By the time George W. Bush became president in January 2001 neoliberalism had defeated even the Perot faction of American thought: politicians who opposed it, like Bernie Sanders and Sherrod Brown on the left and Mike Lee and Ron Paul on the right, were dismissed as cranks and outliers trying to stand in the way of progress.

Bush continued the process, with his largest success being the privatization, with the Medicare Modernization Act of 2003, of a large chunk of the nation’s premiere government-funded healthcare program, Medicare.

The new “Medicare Advantage” programs, entirely run by private entities, cost the federal government on average 11% more than Medicare and were given the freedom to deny services to their customers the way health insurance companies have been scamming their customers for generations.[xcv]

I lay this out chapter-and-verse in The Hidden History of American Healthcare, but suffice it to say that by this writing nearly half of the entire Medicare program has now been replace by fully privatized health insurance under the deceptive rubric of “Medicare Advantage” while Medicare itself has been seriously defunded by the transfer of so many billions to the bottom lines of “Advantage” providers.

Bush also used the excuse of the deregulation of the banking industry in 1999 to look the other way as his morbidly rich donors in the financial services industry created hundreds of exotic new “products” to sell to investors, the most notorious being Collateralized Debt Obligations (CDOs) used to bundle fraudulent home mortgages in with good ones to disguise their provenance and risks.

Bankers like California’s notorious “Foreclosure King” Stephen Mnuchin became fabulously rich, picking up a private jet and multimillion-dollar mansion while the nation’s economy inched further and further out onto thin ice. [xcvi]

Through it all, despite a few warning voices, the Bush administration and the neoliberal-leaning governments of Europe’s largest nations all reassured us that the market operated on its own “magic invisible hand” rules and there was nothing to worry about. Just trust the market and the market-makers. They know what they’re doing.

And, indeed, they did know what they were doing. Just like John Dillinger and Ken Lay did. They extracted literally trillions of dollars out of the US and other western economies and then stood back, feigning helplessness, when it all collapsed in the “Bush Crash” of 2008.

In response to the crisis bankers created, governments around the world shoveled money at those very same bankers and their institutions.

“The total potential federal government support could reach up to $23.7 trillion,” is what Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP), reported to Congress in 2008.[xcvii]

While the actual American part of the banker bailout was probably closer to $5 trillion, by 2010 the bankers were giving each other billion-dollar bonuses and diving off the high boards into their money bins.

It’s almost as if Milton Friedman had planned it; after all, his first step out of academia and into paid shilling for industry and the ultra-rich was to author that notorious 1946 pamphlet for the real estate industry advocating total deregulation of both the real estate business and the banks that offered mortgages.

Bush’s other big neoliberal experiment was with the government of Iraq. His brother Jeb Bush, along with his Defense Secretary Donald Rumsfeld, his Vice President Dick Cheney, and his advisors Paul Wolfowitz, Bill Kristol, and John Bolton had all signed onto the notorious 1998 Project for a New American Century statement calling on then-President Bill Clinton to immediately invade Iraq and expel Saddam Hussein.[xcviii]

As Cheney would later note, Iraq was sitting atop the second-largest single-country reserve of oil in the world, just behind Saudi Arabia. “He sits on top of 10 per cent of the world’s oil reserves,” Cheney said, adding, “He has enormous wealth being generated by that.”[xcix]

While former Haliburton oil company chief Cheney was salivating over the prospect of seizing and selling all that oil, George W. Bush saw a war in Iraq as a way to guarantee his own re-election in 2004.

Back in 1999, writer Mickey Herskowitz, hired by the Bush family to ghost-write Bush’s autobiography A Charge To Keep,[c] explained that Bush told him:

“One of the keys to being seen as a great leader is to be seen as a commander-in-chief. My father had all this political capital built up when he drove the Iraqis out of Kuwait and he wasted it. If I have a chance to invade, if I had that much capital, I’m not going to waste it. I’m going to get everything passed that I want to get passed and I’m going to have a successful presidency.”[ci]

Bush wasn’t much of an ideologue and its unlikely he could have even explained neoliberalism, but his Defense Secretary Donald Rumsfeld was both a student and close personal friend of Milton Friedman and an ardent neoliberal.

Once Iraq was conquered and Hussein was dead, Rumsfeld put former Kissinger and Associates managing director L. Paul Bremmer III in charge of the country. Bremmer, the wealthy son of the former CEO of Christian Dior, had been educated in the world’s best private schools from Phillips Andover Academy to Yale University to the Paris Institute of Political Studies. He knew the rich and powerful of the world – he was one of them – and had been Rumsfeld’s assistant in the first Bush administration overseeing the first Gulf War against Saddam.

Bremmer followed the Mont Pelerin neoliberal script to the last detail. The Iraqi army was the nation’s largest employer, with over a half-million men drawing a weekly paycheck and each having an AK-47 handy in their homes. Bremmer fired them all, creating an instant and well-armed insurgency of pissed-off formerly middle-class soldiers.

He also shut down almost all of the hundreds of government-owned companies, from those manufacturing steel to machine tools to cement and military goods.

He threw open the country to the world’s predatory corporations, eliminating all tariffs and trade regulations, while standing aside as the nation’s government-run libraries and museums were looted on behalf of wealthy foreign antiquities collectors. All of this was a clear violation of international law that prevents winners in wars from looting the countries they’ve conquered, but neoliberals around the world had always ignored such laws.

Rumsfeld defended the video of looters carrying off 3000-year-old irreplaceable artifacts with the glib, “Freedom’s untidy, and free people are free to make mistakes and commit crimes and do bad things.” When asked if looting was the inevitable consequence of Rumsfeld’s “freedom,” he replied, as CNN reported, “Stuff happens.”[cii]

Bremmer then threw out Iraq’s progressive corporate and individual income taxes that peaked at 45% and replaced them with Milton Friedman’s beloved 15% flat-tax, a huge windfall to Iraq’s wealthy elite but a massive and sudden tax increase for the country’s low-income workers.

He ended Iraq’s laws requiring domestic ownership of major industries, allowing foreigners to buy and own 100% of pretty much anything – from land to oil to businesses – and take up to 100% of their profits out of the country tax-free.[ciii]

After neoliberalism had failed spectacularly in Chile, gutted the American and British middle classes, and had flipped Russia from a brief democracy into a brutal oligarchy, Iraq was to be the final proof that it could work.

Wolfowitz, Bremmer, and neoliberal apologists around the world promised the country would soon flower, as the “free market” lacking government regulation and with minimal taxation would solve all problems from poverty to political corruption to meeting the people’s basic food, housing and safety needs.

It didn’t work out that way.

Instead of a million flowers blossoming in the soil of neoliberal “freedom,” over three million Iraqis lost their homes and became internal refugees,[civ] nearly a half-million fled the country (those with the wealth to get out), and 288,000 died as a direct consequence of the American invasion.[cv]

And that doesn’t begin to account for generations of trauma and PTSD, destroyed infrastructure and torn-apart families, and the shattering of America’s image and influence around the world.

Twenty years later and the neoliberal project largely abandoned and never mentioned out loud by its champions, Iraq is still staggering, plagued by political instability, disease, and an Iraqi warlord version of the oligarchic political culture neoliberalism always produces.

Neoliberalism blows up in Bush’s face

Meanwhile, back here in America, neoliberal policies brought our government and economic system to its knees in the last year of Bush’s presidency. Banks, investment houses and real estate speculators had been deregulated nine years earlier and used their new “freedom” to essentially rob, rape, and pillage the American financial landscape.

In the process, corrupt financial operations and betting on stocks became a huge part of the American economy.

The greatest damage to America came because loaning, borrowing, and trading money and securities produces absolutely nothing of lasting value to a country. It’s not at all like manufacturing, where applying labor to raw materials produces products that have lasting value.

Instead, unregulated finance extracts massive amounts of cash as commissions and fees for a small number of fabulously wealthy and powerful Wall Street giants, actually reducing resources that could instead be used to manufacture things that do add value for generations.

But don’t just take my word for it. Jack Bogle was the guy who created the first widely-traded index fund, the Vanguard 500, back in 1976. Although he stepped down as chairman of the company in 1999, he still opines about the state of the economy and, in a moment of extraordinary candor, told reporters for Money magazine in 2015:

“The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings. What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources.”[cvi]

In 2008 the bill came due for the trillions of dollars speculators, hedge funds, mortgage bankers and other predators in the financial services industry had extracted from the American and world economies.

It started in 2000, after the 1999 neoliberal deregulation of America’s banks: bankers went on a lending spree to would-be homeowners, offering them mortgages with no income or asset requirements (sometimes called “Liar Loans”).

Because this practice was injecting so much new money into the housing market, housing prices were soaring; many of the no-asset home purchasers were average people trying to be real estate speculators, figuring they’d buy a house, hold it for a year or two, and sell it for a solid profit.

“Home Flipping” became a thing.

All across America telephone poles had flyers on them for “real estate seminars” promising to teach average folks how to make money in the housing market just like the billionaire bankers did. It was a national celebration of get-rich-quick grifting.

One of the larger grifts in this marketplace, for example, was Trump University. As the Washington Post noted, Trump’s sales pitch was, “[T]he billionaire had made enough money for himself. Now, he would put his famous brain to work for the little guy.”[cvii]

The Liar Loans not only let millions of people speculate in the real estate market but also gave an entrée into single-family housing for millions of people whose income and assets would have prevented them from borrowing in a regulated market. As long as the economy was good, though, and they had a reliable income, they could hang on to their first homes.

The banks and mortgage houses took those Liar Loan mortgages, mixed them with “good” assets like mortgages to people with the means to repay their loans, and sold these interest-bearing “products” in the open investment market.

They bribed the credit rating agencies to give them a seal of approval, and banks themselves bought and sold trillions in these “Collateralized Debt Obligations” or CDOs and other exotic “products.”[cviii]

Because they were generally high-interest loans (because of the borrowers’ poor credit ratings), they paid far more than most all other readily available investments. Throughout the first 8 years of the 21^st century they spread into investment portfolios all over the world.

Then came the recession of 2006. The market softened, unemployment went up, and millions were facing foreclosure. Most hung on, driving up credit card or other debt to keep their houses, hoping prices would rise back up enough that they could sell them for what they owed.

That wasn’t to happen.

By 2008, the housing market was completely in the tank and foreclosures had reached the point where the owners of CDOs and other “innovative” investment instruments created out of the 1999 deregulation could no longer ignore the risk of defaults.

January 2008 saw a 57 percent increase in foreclosures over the previous year, and February dropped another 24 percent year-over-year. Resale home prices fell 4.6 percent in January and were down 8.2 percent by the end of February. The system was hemorrhaging cash. [cix]

The biggest problem big investors in CDO’s and other debt instruments had was that, because the market was deregulated and supposedly run by the “invisible hand” of the marketplace, nobody knew exactly how many bad mortgages were buried in these bundles or what kind of a liability they represented as a share of the US’s $12 trillion mortgage market.[cx] Freddie Mac and Fannie Mae alone had taken on $3 trillion in loans all by themselves: the big banks were opaque and, if they knew how much poison they’d packaged, they weren’t telling anybody.[cxi]

Money market funds were heavily invested in these new “products” and tried to unload them as fast as they could…but nobody was buying. Seeing that the funds, which are not federally guaranteed, could fail, investors pulled out cash like there was no tomorrow.

On September 16^th, the Reserve Primary Fund “broke the buck,” meaning they paid back dollars given them with less than a dollar each. The next day investors pulled a record $172 billion from money market funds, adding to the pressure (normal withdrawals are around $7 billion/day).[cxii]

By the time of the 2008 election, Congress had poured $700 billion into bailing out bankers and the Fed had anted up almost three trillion dollars, between their $1.7 trillion “commercial loan program,” their $540 billion loan to money markets, and their June “Term Auction Facility” loan of $225 billion. The FDIC threw an additional $1.3 trillion into the banking system on November 21^st.

Wall Street bankers (except for Lehman Brothers, the only bank “allowed to fail”) were sighing a huge sigh of relief and hurrying to stash their billions of ill-gotten gains in tax havens overseas.

At the same time, homeowners across America were being thrown out of their houses in a national tsunami of foreclosures that lead an early explosion in homelessness.

Bankster Steve Mnuchin alone would pick up one of the California banks holding some of this debt and throw 36,000 people out of their homes, each foreclosure earning his company a federal bailout payment and earning him the moniker “The Foreclosure King.” This positioned him perfectly for a later job with Donald Trump as the nation’s Treasury Secretary. His profitable, no-risk strategy was being replicated by banks and mortgage brokers all across the nation.

As fully 10 million Americans lost their homes, Americans began to openly question neoliberalism. On my radio program at the time, I openly speculated that 2008 would go down in history as “the year neoliberalism died in America.”

Sadly, I was premature in that proclamation.

My newest book, Who Killed the American Dream?: The Greatest Political Crime Ever Told is now available for presale from bookstores nationwide. It’s a modern-day telling of the “murder mystery” of how, in 1886, a great crime was committed against America by a cynical court reporter and an on-the-take Supreme Court justice that changed the course of American politics and led straight to Citizens United. It also details the massive ongoing cover-up of this crime and what we can do to fight back.