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March 3, 2013

Wall Street Caused Much of the Ongoing Fiscal Crisis

Wall Street’s reckless investments and trading were largely the cause of the financial crisis of 2008-2009, which was the worst financial collapse since the Great Crash of 1929 and inflicted the worst economy on the country since the Great Depression of the 1930s.  One direct consequence of that crisis was plummeting revenues at the city, state and national level at the same time spending had to skyrocket due to the greatly increased need for social services.  

The result has been annual trillion dollar deficits since 2008.  

Remarkably, no one ever mentions any of this when talking about our current financial circumstances or what to do about them.  Think about it:  was anyone screaming about deficits in 2005 or 2006 or 2007?  No.  Sure, some were worried about the long term consequences of the demographic changes in the country, but there was no hysteria or daily hand-wringing that we have now, with a major budget crisis seemingly every month now.

Yet, no one asks what happened between the relatively worry-free 2007 and the panicked discussions of 2011, 2012 and into 2013.  Only one thing happened during that time that caused those problems:  the Wall Street caused financial collapse and economic crisis that has wrecked the financial condition of the United States.  (This Report shows that the financial crisis is going to cost the country more than $12.8 trillion.)

Not only isn’t any of that mentioned, national policymakers who know better intentionally mislead if not lie about the facts.  This statement by Republican Speaker of the House, John Boehner, on Meet the Press today is an example of the lies people tell about our fiscal and financial situation, which protect Wall Street:

Now we know that we’ve got a structural deficit. The president has run up five trillion dollars worth of debt in the last five years. We have another one trillion dollar budget deficit this year. It’s time for the president and Senate Democrats to get serious about the long-term spending problem that we have.”

Except that the “five trillion dollars worth of debt in the last five years” and “another one trillion dollar budget deficit this year” have very little to do with “long term spending,” even if it is the “problem” the Speaker wants people to believe it is.   The baby-boom didn’t just get old in the last five years.  They are not responsible for the trillion dollar deficits over the last five years.  

Perhaps not surprising given the state of the media today, the moderator of Meet the Press accepts what the Speaker said as if it was the truth, the whole truth and nothing else.  He follows up by asking a question about the “long term spending problem.” 

Inexplicably, the administration also talks about these problems the same way.  No one talks about where the deficits and the debt have come from, which is critical in terms of how to address them and what their long term implications are.

This repeated failure to talk clearly about how the country got into the financial hole protects Wall Street from being held accountable for what was done to the country and it insulates it from action that the country must take to protect itself from ever happening again. 



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