Sunday, March 22, 2009

A.I.G. Bonuses - The Last Straw

A.I.G. Bonuses - The Last Straw
By Jerome Grossman

The national explosion of anger over the bonuses awarded to financial officers at American International Group indicates that the tipping point has been reached in the accumulated resentments on American financial inequality.. For generations, under both Republican and Democratic administrations, the income gap between the 95% of U.S. population lumped together as working class and middle class, and the 5% who earned $250,000 or more per year, has widened significantly. The 5% have more clout. They dominate U.S. politics, education, culture, taxation rules, charitable institutions, media, and business, acting as a kind of American nobility with benefits handed down from generation to generation.

Then comes a time when a relatively insignificant event captures the attention of the masses who begin to connect their anger at the current violation with the other half-remembered abuses. Then comes real change. Sometimes a popular leader emerges to dramatize the exploitation, like William Jennings Bryan, who galvanized the Democratic Party with “You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold,” dramatizing the economic ills plaguing farmers and industrial workers. He won the Democratic nomination twice although not the presidency. But he won many of his reforms, backed by an aroused citizenry, were adopted, including the income tax, popular election of senators, woman suffrage, popular knowledge of newspaper ownership etc.

Today Americans are worried that the bailout was designed for the benefit of those who created the crisis. They suspect that America has been taken over by a small class of connected insiders who use money to control elections, buy influence, systematically weaken financial regulation and get government money to bail them out when they get into trouble.

The A.I.G. bonuses remind the 95% of:

• The bailouts of the banks and bankers from their own mistakes
• The failure to bail-out the average citizen from unfair mortgages and job layoffs
• The bankers who gambled with depositor money at enormous risk to build bonuses for themselves
• The low tax rate paid by the wealthiest Americans on the top portion of their earnings now at 35%, once 91% under Eisenhower, 70% under Nixon, 50% under Reagan. What happened to the progressive tax based on ability to pay?

• The special tax rate for capital gains of 20% used by the wealthiest Americans

• The special tax breaks given to insiders as earmarks

• Some business executives maintain control by appointing their friends to boards of directors

• Some business executives vote themselves enormous salaries

• Some business executives vote themselves stock options, some of which are back-dated to take advantage of stock price increases

• Some business executives vote themselves enormous retirement packages not based on performance

• Some business executives discharge workers and speed up the rest of the work force to increase short term profits and stock prices

• Some business executives maintain headquarters outside the U.S.A. and shift corporate income from country to country to avoid taxes

Will the anger about A.I.G. bonuses subside? Or will an organization of citizens spring up to fight for their interests? Will another William Jennings Bryan denounce the current abuses and agitate for fairer wages and fairer division of the profits of our technological society? Will the current anger dissipate into the day-to-day problems of an economy in decline? Will the A.I.G. bonuses be the last straw?


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