Goldman Sachs CEO Lloyd Blankfein and his fellow Wall Street travelers yes terday released a letter warning that unless Congress and the president agree on a budget deal and raise the debt ceiling, the apocalypse will befall us next Tuesday — when the country, according to Treasury Secretary Timothy Geithner, is scheduled to run out of money.
Funny — anybody recall the last time Wall Street’s head honchos were warning about “grave” consequences?
It came nearly three years ago, when the heads of the big Wall Street firms were running around Washington begging for a taxpayer bailout of their massive losses from risky trades gone bad — or else the country would go into something close to a depression.
As we’re all painfully aware, Washington did indeed bail them out — saving the likes of Goldman Sachs, Bank of America, Morgan Stanley, Citigroup and JP Morgan from imminent collapse. But the country wasn’t quite saved from serious economic pain.
Even though many of the banks have gone back to making sizable profits, unemployment remains sky high, housing prices severely depressed and economic growth chronically anemic.
With that in mind, it’s hard to take seriously just about any thing uttered by Blankfein & Co. — particularly yesterday’s noise.
Bad enough that these guys are preaching responsibility — but that’s not the end of the hypocrisy in their much-hyped letter. Remember: Blankfein & Co. are a big reason why we need to have debt-limit debate in the first place. These same CEOs were some of the biggest contributors to the 2008 Obama campaign — and the president these donors helped elect then gave us Uncle Sam’s largest-ever peacetime spending spree.
Add chutzpah to the hypocrisy: In demanding that any budget deal get done this week, these guys say nothing about spending or the $14 trillion of debt the American people owe to support the modern welfare state.
Sure, it’s reasonable to worry about a default on our debt and the financial implosion it will undoubtedly cause. But they fall silent on a key point: The two guys who’ve been threatening default since this drama began — President Obama and Geithner — have the ultimate power to prevent one.
Time and again, both have emphasized default as a consequence of the debt ceiling’s remaining frozen. In fact, Uncle Sam would unquestionably have the income to make bond payments and Social Security, too — although he’d have to delay sending out other checks until a deal is reached and we can start borrowing again. The only way we get default — sparking another financial meltdown — is if the president and Treasury secretary choose to stiff bondholders in order to keep government fat and happy.
Maybe the biggest problem with the Wall Streeters’ sticking their noses in this debate is that they make it sound as if politicians arguing over the size of government is a waste of time. In fact, there’s probably no better debate (national security aside) for politicians to have right now.
Yes, you can see why Wall Street isn’t interested in having a debate about the size of government: The big banks make a lot of money financing the welfare state by underwriting the nation’s debt.
But the American people are finally learning in no uncertain terms what it takes to keep this welfare state in business: We take in roughly $2.2 trillion in tax revenues, but we’re now spending $3.6 trillion and borrowing massively to make up the difference — heading us right toward a Greek-style collapse, only without anyone to bail us out.
Two visions are playing out on how to deal with this mess: Republicans want less debt and less government to make up that $1.4 trillion difference; Democrats want more taxes to keep government growing.
Of course, this debate is nasty and messy — even uglier than the usual doings of the political sausage factory — but it’s a debate worth having, no matter what Lloyd Blankfein says.
Charles Gasparino is a Fox Business Network senior corre spondent.