One of the standout features of our increasingly financialized economy is a systemic disinvestment in public goods such as infrastructure and education. As the finance sector hoards the wealth our economy produces, wages stagnate, corporations and the wealthy avoid contributing their rightful share in taxes, and money and power coalesces at the top, revenues at all levels of government have declined.
Correspondingly, we have witnessed a turn to austerity measures including big cuts to the budgets of the entities that provide vital public goods, from water to public education. This is no accident — it’s a feature of a rigged economic system in which austerity is the price most of us pay for the wealthiest to get even wealthier.
Austerity creates vulnerability. As the stewards of public goods strive to meet the needs of the constituents they serve — from water customers to students attending public colleges — without breaking their shrinking budgets, they can become susceptible to financing schemes peddled by the financial industry.
Banks have pushed a variety of financial products, such as interest rate swaps, auction rate securities, and capital appreciation bonds, that are risky to borrowers and invariably deliver massive returns to the financial institutions selling them. Many of these deals have gone horribly wrong for public borrowers, draining even more money out their diminishing budgets.
The combination of austerity politics and a financial industry with an increasingly predatory business model has created a vicious cycle of decreased revenues, budget cuts, increased reliance on borrowing, the use of risky financial products in an attempt to save money, big losses on those risky deals, and more austerity.
Roosevelt and ReFund America Project…