Here is an email I received that outlines what a fair bank settlement might look like and what we could hope the President will say in Tuesday’s State Of The Union Address.

Talking Points Memo has the article Scott Brown: What About All The Rich Schoolteachers?  It starts with the paragraph:

Sen. Scott Brown (R-MA) made the case in Lowell, MA on Friday that letting the Bush tax cuts for the wealthy expire would create a burden for well-off teachers, firefighters, and police officers.

The tenor of most of the comments was about how dumb Scott Brown is  to not understand that there would be little burden to these public servants even for the tiny minority that did manage to earn incomes above $250,000.

It is not Scott Brown who is too dumb to understand the concept of the higher marginal tax rates only applying to the part of the earnings that are above $250K.  He knows that the people listening to him don’t understand.  When he makes these comments, he is just reinforcing their misunderstanding to use for his advantage.

When I was in college, I had a friend who was studying accounting.  He was afraid that if he earned more money he would be in a higher tax bracket and would therefore take home less money.  I never could explain to him the concept that there is no marginal tax rate that is above 100% which is what would be necessary for his nightmare scenario to be true.  In other words for each extra dollar he earned in the new tax bracket, he would get to keep a large share of it after taxes.  So his total income after taxes would increase for each extra dollar he earned.  He wasn’t going to be richer by refusing a salary increase.

I have been competely unsuccessful in explaining to the Warren campaign that she cannot just assume everyone will recognize the flaws in Brown’s ideas.  He is spending a lot of time miseducating the voters.  If she doesn’t spend a greater amount of time educating the voters, then she might lose.  And even if she wins, she won’t be able to be an effective Senator because of all the misinformed voters that will not want her to do the things that need doing.  Large numbers of middle-class people will be against her raising taxes on the wealthy, because of their flawed understanding of what that means.  These people will be against regulating the banks because they mistakenly think it will be bad for the economy.  These people will be against more economic stimulus because they mistakenly believe that raising taxes on the wealthy to pay for the stimulus will be bad for the economy.  They mistakenly believe that higher taxes on the wealthy is penalizing success, when it is in fact penalizing the taking unfair advantage of the rest of us.

Some of the wealthiest of the wealthy 1% made their money by vulture capitalism stealing the pension funds from the corporations they take over and then walking away from the debts they made the company incur in order to pay the vulture’s high earnings above what they took in pension funds. They also sold off all the company’s productive assets that were no longer needed after all the jobs had been shipped overseas.  They got rich by all their schemes that made other people poor.  This also had the salutary effect for these vultures of getting rid of the labor unions who might be strong enough to resist them.

Others of this class made money by enticing unsuspecting homeowners to take out mortgages with low initial teaser interest rates, so that they would borrow more than they could really afford to when the interest rose to its final, real rate.  These mortgage scammers then sold these mortgages to unsuspecting investors who were falsely given assurances that these were high quality mortgages.  Moreover, the mortgages were valued as if the borrowers would eventually pay the higher interest rates, which the lenders were assuring the borrowers that they never would have to pay. When the trap was sprung, the borrowers lost their homes, the investors lost their investments, and the con artists walked away with huge profits. Of course the profits grew even more when the tax payers bailed out the banks and bankers that had done the scamming.

The Moyers & Company episode David Stockman on Crony Capitalism starts with:

Moyers & Company explores the tight connection between Wall Street and the White House with David Stockman, former budget director for President Reagan.

Now a businessman who says he was “taken to the woodshed” for telling the truth about the administration’s tax policies, Stockman speaks candidly with Bill Moyers about how money dominates politics, distorting free markets and endangering democracy. “As a result,” Stockman says, “we have neither capitalism nor democracy. We have crony capitalism.”

Stockman shares details on how the courtship of politics and high finance have turned our economy into a private club that rewards the super-rich and corporations, leaving average Americans wondering how it could happen and who’s really in charge.

“We now have an entitled class of Wall Street financiers and of corporate CEOs who believe the government is there to do… whatever it takes in order to keep the game going and their stock price moving upward,” Stockman tells Moyers.

This episode is a perfect example of why I sometimes stop watching Bill Moyers’ shows. The truth he tells is just too depressing. For someone like me, whose faith in President Obama has already been severely shaken, this show makes it even more difficult to conceive of supporting Obama in the 2012 election.

Can the President’s State of the Union speech on Tuesday contain anything that will change my mind? There are many things he could say, but I have my doubts he will say them. Is he going to say that his administration is now going to promote policies that are against the best interest of all of his own senior advisers? If he fails, that will just further cement my disappointment.

My previous post Elizabeth Warren And Hillary Clinton Trade Lessons has this disheartening quote from Elizabeth Warren:

…I believe that Mrs. Clinton was responsible for President Clinton’s veto of that bankruptcy bill. Ultimately, Congress passed the bill again in 2005 and George Bush signed it into law. But in that five-year period in between, eight million families went through the bankruptcy system, while the law was still intact. So the veto was important, and I believe she was the cause. And that’s what’s so disheartening. She changed her vote in the Senate. If Hillary Clinton, one of the strongest, most independent politicians of her generation, felt that she needed to conform her voting to the desires of the banking industry once she held elective office, what hope is there for the rest of the politicians?

I think I can detect in the way that the Warren campaign is running, that Warren has already found the need to conform her votes to the desires of the banking industry.