The Economic Crisis: Interview with Danny Schechter
Danny Schechter predicted the economic meltdown of 2007-08. In his 2006 film, In Debt We Trust, he put a spotlight on the dangers posed by America’s debt burden and the unregulated sale of housing loans on securities markets. (Click here for more on that subject.) Schechter followed up his film with a 2008 book, Plunder, which detailed the unfolding economic crisis and the arms-folded response of the Bush administration and corporate media. In this interview, he comments on the current state of the economy and discusses policies President Barack Obama might pursue. He also talks about the importance of continued grass-roots activism by the new president’s supporters, and provides some tips for financial survival in these harrowing times.
Interview by Chris Pepus
Chris: You’ve been critical of the federal government’s 2008 bailout of financial institutions. What should Congress and the president have done?
Danny: I’m not a magician [laughs]. I don’t know that what has been attempted has worked. Clearly, the trajectory has been downward, with more unemployment, more of a credit squeeze, manufacturing disappearing. Many people feel either that we’re in a depression or we’re on the way to being in a depression. Obama and his advisors believe that the way to deal with this is through a stimulus program that will pump a lot of money into the economy. There is truth to that, but there are also some traps. When President Bush supposedly gave people money (the 2008 stimulus checks)—it was actually an advance on their 2009 taxes; I don’t think most people realize that—most of that money went into people paying their debts. Consumer demand did not go up. We have an economy that has gone from making things to buying things. When people don’t have money to buy things, the economy stalls. Under Bush, the Treasury Department started off with the idea of buying up this kind of toxic waste in the form of bad assets from banks so they could restore (the banks’) balance sheets. But they dropped that whole idea because they didn’t know how much these assets were worth. So they substituted another idea, which was that under the Treasury’s “authority,” they would just pump money into banks and financial institutions. So these institutions began getting billions of taxpayer money with no conditions. The whole idea was presented as a way to get credit unlocked, unfrozen. But credit has not been unlocked. What the banks have done instead is buy other banks, pay their executives, etcetera. To them, it was a big Christmas present. There was no accountability. The Treasury hasn’t even released a detailed list of who got what. The Federal Reserve Board has also refused disclosure. Bloomberg News has been suing them to get information. Here you have a very undemocratic set of institutions and we’ve ended up giving money to the very people who created the problem. It’s been business as usual. It seems like it doesn’t make sense and, if you talk to people who are supposedly in the know, it doesn’t make sense to them either.
Chris: How big a change of approach do you expect from the Obama administration?
Danny: I think you’re going to find a lot of refinements in the strategy. Something that sounds good doesn’t necessarily pay off in terms of actual jobs. I think we’re in for very hard times. The National Bureau of Economic Research declared that, officially, the recession started a year before the government and the media said it began. In that year, the media were asking, “Will they stave off a recession?” We were already in a recession. Both the government and the private companies are incompetent and inefficient. The companies are filled with very highly paid executives and much lesser-paid employees. Also, we’re dependent on foreign money. China is now saying, “We’re not sure we want to buy your debt any more.” We’re dependent on two billion dollars a day coming from China. The options are being foreclosed. We are starting to have hunger in America. There are parking lots in Santa Barbara, for instance, with large numbers of people sleeping in their cars. We’re not seeing this economic pain in our media, because our media are still disconnected from these realities. Television is there to get people to buy; it’s a marketing machine. But you need a holistic strategy. You need a plan to go up against the private interests on health care and other issues. President Obama has appointed an officer to assess his performance—good move, but he hasn’t appointed an officer in charge of mobilization. If his base is not really activated to push him and Congress, it’s all going to get compromised away.
Chris: The corporate press has finally acknowledged that this is the worst economic crisis since the Great Depression. When Franklin Roosevelt took office in 1933, he made dramatic changes during his first one hundred days as president. What should President Obama try to achieve in that time frame?
Danny: I think there has to be an acknowledgement that this is a structural crisis. We have to recognize that a lot of this was caused by corporate crime. We need a jailout, not just a bailout. Hold these people responsible. Also, the role of the wage collapse in causing this crisis—nobody’s really talking about that. The rich have to be taxed more. We have the deepest inequality in decades, not just between the rich and the poor, but between the rich and the super-rich. We’re talking about fundamental changes. I think Obama will find that, if he starts with the milder programs, that they won’t produce results instantly. I think he’ll be pushed as Franklin Roosevelt was. FDR did not start out as a complete New Dealer, but he got pushed into more dramatic efforts. Today, we need changes to allow labor unions to organize. They’re being restricted now because of the way labor boards have interpreted labor laws. We need something that’s going to empower working people and poorer people to fight for their interests, because that will help the interests of everybody. The people on Wall Street, who are subjects of excessive reporting, are not the people who are hurting the most.
Chris: Or at all.
Danny: Right. There are a number of proposals that have been put forward, but I’m not too encouraged by the fact that Obama’s not including many progressives among his appointments.
Chris: He has appointed a lot of the same old faces. But some have argued that Melody Barnes, the director of the Domestic Policy Council, may be able to pressure the cabinet secretaries and move policy in a progressive direction. What do you think about that?
Danny: If he doesn’t have strong advocacy from below, he’s not going to achieve anything. His base is going to have to be active and organized. The same old faces are masters of blocking new policies and watering them down. The Obama campaign represents the promise of a more participatory democracy, and I hope that spirit will continue in this next period. He seems to be pursuing a strategy of appointing the cabinet to run the agencies, but also building a group in the White House to drive these agencies where he wants them to go. Even though there are disappointments—his refusal to speak out on Gaza, his appointing so many Clintonistas—I think it’s wrong for progressives to start attacking him. Millions of people invested their hopes in this administration. We don’t want to be perceived as attacking them. We want to reach them and engage with them.
Chris: What steps can Americans take to survive the economic crisis?
Danny: It depends on your situation. If you have a job, you need to try to save money and lower your exposure. One thing is to find cooperative ways to lower your costs, through food co-ops and the like.
Chris: In Plunder, you warned about so-called “rescue loans.” Could you explain the problems with those?
Danny: If you watch TV at about 3:00 in the morning, all you’ll see are ads for debt consolidation and foreclosure “rescue.” These are mostly scams: they’ll get you deeper in debt or steal your house. The government is finally warning against it; the FBI is starting to prosecute. But this is a massive industry, inspired by America’s dependence on debt. The reason they run the ads at 3:00 a.m. is that a lot of people who are in debt can’t sleep. We have to be extremely informed and skeptical. There are organizations that actually can help, though. For instance, I work with a group in Boston called NACA, the Neighborhood Assistance Corporation of America, that helps people do loan modification. They offered free services in WashingtonD.C. and about 25,000 people turned out. People need assistance that the government and private sector are not providing. I hope the progressive community will recognize that it’s not enough to advocate policy changes. You also have to try to provide services for people.