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Bill Black: Part 2. While voting for Obama, people should be prepared for his plans to launch major cuts to social security

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s part two of The Black Financial and Fraud Report with Bill Black. He’s an associate professor of economics and law at the University of Missouri–Kansas City. He’s a white-collar criminologist, former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.


JAY: So we left off part one—and if you haven’t watched part one, you might want to, ’cause we’re just going to pick things up. But what are the possible plans with Social Security? There’s been a lot of talk that if President Obama wins these elections, that he’s likely to negotiate some kind of—what his side would like to call a grand bargain about social security. What’s your take on that?

BLACK: Yes. The president came into office talking about the possibility of this grand bargain—more than the possibility; this desire reach it. And then he tried to reach it in budget discussions with the Republicans. They refused.

He just a few days ago went and met with the editorial board of The Des Moines Register, the leading newspaper out in that portion of Iowa, and he had a discussion off the record, and emphasized that because it was off the record he could be more blunt, and said that his first course of business, and one that he believed he could get done very quickly should he be reelected, would be to strike a grand bargain. And he described the grand bargain, and there would be $2 in budget cuts for every dollar in increased taxes.

So this grand bargain is: we will weight this much more heavily towards killing social programs, or at least cutting them back significantly and raising taxes on the rich.

Now, that’s got most of the attention from progressives, but note two other things that he was saying. One, he’s talking about austerity. He’s talking about following exactly the kind of model that Europe has followed that put them gratuitously back into recession, and indeed into a Great Depression. And as we’re doing this interview, it has just come out that European unemployment reached a new high in September, which is the latest month that they had data for. So this has cost millions of Europeans their jobs, and it’s Great Depression levels of unemployment in Spain and Greece, and growing in many other nations. So this is insane to follow this strategy.

But, of course, one of the things that’s happened during this election cycle is that Bill Clinton has been restored to glory within at least Democratic Party ranks as the great person who produced the balanced budget, and indeed budget surpluses. And they want to run politically on these things. And so they’ve essentially adopted Romney’s critique that the deficits are immoral and that they’re a burden on our children and our grandchildren, and that the way to help our children and grandchildren is to unemploy their parents and throw millions of additional children and grandchildren into poverty.

JAY: And if you buy that as the underlying assumption, then why not vote for Romney? Why not go for the guy who wants to go all the way, if that’s what the problem is?

BLACK: Oh. Well, I haven’t gotten to all the way, because in addition to throwing you in unemployment, they want to cut long-term unemployment benefits, and they want to cut food stamps significantly.

JAY: Now, when you’re saying “they,” who’s the they in this sense?

BLACK: Well, the first they was Ryan. That’s what the Ryan plan is all about, the vice presidential candidate of the Republican Party. But when you talk—say that we’re going to do $2 in budget cuts for every dollar in increased taxes, well, that is going to come out of social programs, primarily.

JAY: And that’s President Obama.

BLACK: That is correct. And the Republicans are going to insist on that. And that is what President Obama is putting on the table.

JAY: And one should just mention [incompr.] people haven’t heard it, that after having that meeting with the newspaper in Iowa, I guess it was—was it Iowa?

BLACK: Iowa.

JAY: Yeah. He didn’t get their endorsement, right?

BLACK: No. They endorsed Romney, and they had previously endorsed him. So he sold his soul and got nothing. You know.

JAY: Now, you’ve written that if there is this grand bargain—and you’ve called it the grand betrayal—that it takes a Democrat to sell it. You said that only Nixon could go to China; well, only a Democrat could really savage Social Security. So, I mean, if you believe that, then where do you come down on who you would like to see win?

BLACK: Well, let me first explain that part. Obama also was telling The Des Moines Register that the entitlements would be on the table, that it’s been the president’s position from the time he came in, and—.

JAY: Yeah. Just if anyone wants to check that, there’s lots of news reports of a meeting that President Obama had after he had dinner at George Will’s house, the conservative columnist. George Will and David Brooks and several others, I think—anyway, several—I’m going—doing a mind blank at the moment, but it was a group of small—very influential conservative columnists. And President Obama promised them within days after being inaugurated that he would put all the social programs on the table, all entitlement programs. He said, just give me time to get to them, he said.

BLACK: That’s right, and they loved him for it. So they wrote all of these favorable accounts of that talk. And he did follow through and try to create this so-called grand bargain. So, of course, he’s not going to kill Social Security all in one fell swoop, and he’s not going to privatize it immediately. But we have to remember the great desire of Wall Street is privatization or even partial privatization of Social Security, because we are talking about trillions of dollars of investments that they would manage, and scores of billions of dollars in additional fees.

JAY: Now, this is the voucher plan that Ryan and Romney are pushing—essentially, give people the right to have vouchers they can invest as they please, which would make them essentially go play on the markets or hand their vouchers over to some kind of investor or broker. But my understanding is Obama and Biden have said, you know, without any ambiguity, no voucher system. Does that not mean no privatization?

BLACK: That means no privatization initially. My point is, the Republicans have learned that this is the third rail, right? If you as a Republican come forward and say, I want to gut Social Security, unless you’re in an incredibly safe seat—and, you know, they lost a seat that they had held for 120 years when one of their candidates did this—you really face destruction at the polls. So somebody has to—from the Democratic Side, has to legitimize opening the door to taking whacks at Social Security.

And that is precisely what Obama is proposing to do. And they are appealing to his vanity, that you can be the great centrist, the great bipartisan person that achieved this grand bargain and saved the nation and such, which is, of course complete nonsense in terms of the numbers. And it would actually, in conjunction with austerity, make everything worse by putting this in a gratuitous recession.

Now, the irony is that CNBC, the media folks that worship Wall Street, of all things, tried to embarrass Krugman, Paul Krugman, in a column by soliciting a statement from Bill Clinton that would endorse austerity. But the statement Clinton sent over says, if we adopted austerity now, it would slow the economy, cut jobs, and increase the deficit.

So you tell me what kind of grand bargain would put the economy back in recession, cost us jobs, increase the deficit, and begin the process of gutting Social Security. That’s not a grand bargain. That is a complete surrender. That is the great betrayal. And that is what Obama is telling us he intends to seek. And he went on after The Des Moines Register—which, as I said, he did in secret—to do this openly on Morning Joe with the former congressman Joe Scarborough.

JAY: So that would lead one to the conclusion, for people that are debating and these sort of left-of-center people, progressives, you know, whether or not to try to vote for Obama in swing states and that whole debate. It would make one come to the conclusion, well, maybe it’s not worth going all out to elect Obama. What’s your take on that?

BLACK: I’m so worried about what Romney would do on the social side and do to the courts and such that we would essentially gut all regulation, we’ll tremendously screw up reproductive rights and such, women will be enormous victims if Romney and Ryan are elected, of course gays and such, minorities, that that’s not my personal decision.

But I’m warning people, we have to get together if Obama is reelected. He is intending to engage in the great betrayal on the fiscal side. And, of course, as your frequent viewers know, it’s still the just absolute refusal to indict any of the Wall Street frauds that drove this crisis. And note, that’s not even an issue in this debate. You don’t see either party pushing to hold Wall Street accountable.

JAY: Well, both candidates heavily funded by Wall Street.

BLACK: Absolutely.

JAY: Thanks for joining us, Bill.

BLACK: Thank you.

JAY: And thank you for joining us on The Real News Network. And if you’d like to see more of this type of report, don’t forget the Donate button over here. If you don’t click it, we can’t do this.


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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.