There are so many ways to look at what’s happened in the US economy over the past year. But I think the best way is to look at how unequal the recovery has been. The growing income gap was apparent before the recession. But the nature of the government’s approach, and the extraordinary behavior of the banks has only exacerbated it. It goes to the heart of why the behavior of Goldman Sachs and the other banks still feasting on cheap government backed debt is so unpleasant.
To take Goldman. It has raised $21 billion of capital by issuing debt insured by the government – on the principle that this money would help stimulate the broader economy. Goldman gets to borrow cheaply, courtesy of the US government, then invest to make healthy returns. It then uses these returns to pay its employees and stock-holders. Has any of this helped unglue the credit markets for ordinary Americans? Hardly. Has it helped Goldman? Yes. Tremendously. Anyone able to borrow cheaply and invest over the past year would have done exceedingly well.
Meanwhile, small businesses and employees have been left to go to hell. This article in the New York Times about the rise in teenage runaways over the past two years is especially galling. Of the $787 billion stimulus plan approved earlier this year, $1.5 billion is going to homeless problems. That’s less than Warren Buffett will make on the Goldman investment he made last year.
I know exactly what Goldman’s supporters will say. Come on. You can’t blame us for everything that ails this country. No. But one can blame them for contributing mightily to the social and economic discordance everyone beyond Wall Street can feel. One can blame them for shoving their own interests to the top of the government’s to-do list, using their Washington muscle and bogus threats about the collapse of the entire economic system, then lining their own pockets.
Goldman, J.P.Morgan et al. have made the economy feel like a zero-sum game. Their actions have consequences which ripple down to the very lowest levels of society. During boom times, this seems less obvious. But at times like these, when borrowing, even for the US government, is so tough, it’s glaringly apparent that the money Wall Street has is money the teen runaways and homeless don’t have.
Go on, Goldman. Do something about it.