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Occupy Blue Wall Street?    By WALTER RUSSELL MEAD

New Yorkers are getting an uncomfortable look at the ugly realities behind what we like to think of as the country’s bluest, most European and most enlightened city.  A series of trials now underway in the Bronx reveal the harsh truth of embedded corruption and contempt for the public at the heart (if that is the right word) of the New York City police union.

 

A palpably shocked New York Times covered the story last week as union-organized cops hurled their venom and hate at the law they are sworn to uphold:

As 16 police officers were arraigned at State Supreme Court in the Bronx, incensed colleagues organized by their union cursed and taunted prosecutors and investigators, chanting “Down with the D.A.” and “Ray Kelly, hypocrite.”

 

Many of the approximately 1,600 allegations against the Bronx 16 are low level ticket-fixing charges.  In the Bronx (as in many other American jurisdictions) it has been a police perk for many years that officers can quietly fix tickets for family, friends and, one supposes, the occasional generous stranger.  Those perks seem to reflect an informal, parallel power structure in the police force which gives long serving cops and union connected officers what those involved no doubt see as just and fair recompense for services rendered and dues paid.

 

Unfortunately a number of the allegations are more serious, as the piece by N. R. Kleinfield and John Eligon goes on to point out:

Jose R. Ramos, an officer in the 40th Precinct whose suspicious behavior spawned the protracted investigation, was accused of two dozen crimes, including attempted robbery, attempted grand larceny, transporting what he thought was heroin for drug dealers and revealing the identity of a confidential informant.

Ramos is not the only officer charged with something more serious than ticket-fixing.  The Times piece spares us the details, but four of the 16 are charged with helping someone get away with an assault.  Other charges involve “drugs, grand larceny, and unrelated corruption.”

 

 

Worse, it is clear that police union officials are the mainstay of the illegal ticket fixing enterprise, so much so that prosecutors considered indicting the union as a corrupt organization under racketeering laws.  The police demonstration in the Bronx was apparently orchestrated by the union, which sent text messages to officers urging that they show up to support colleagues involved in ticket fixing.  “It’s a courtesy, not a crime,” was the slogan.

 

This of course is what everybody thinks of special privileges.  That’s what doctors and lawyers think when they cover up professional wrongdoings by their guild brethren.  It’s what investment bankers think when they pass on inside information to favored clients — a courtesy not a crime.  It’s what politicians think when they do favors in exchange for money and it’s what Don Corleone and Tony Soprano think when they do favors for their friends.  The essence of privilege (private law, etymologically speaking) is exactly that: exemption from the laws that govern other people.  The police union in New York believes that based on longtime practice it possesses certain unique rights to circumvent the written law.

 

Meanwhile, the Times was deeply shocked and troubled by what it saw.  Policemen booing and cursing prosecutors and officers of the court?  Open solidarity with lawbreakers? But it was even worse.  Across the street from the courthouse is a “benefits center.” When the crowd lined up to collect welfare payments started chanting “Fix our tickets!” at the protesting cops, the cops responded with derisory chants of “EBT! EBT” (electric benefits transfer, a popular method of making social support payments here in the blue paradise of the northeast).  As if heckling poor people wasn’t enough, the Times dismally notes, the taunting, chanting cops failed to pick up after themselves, leaving litter on the streets as the protest broke up.

No doubt the Times reporters involved are more knowledgeable and experienced than this, but the piece sometimes reads as if it was written by a couple of upper middle class college boys shocked and frightened at their first encounter with the rough edges of the urban male working class: dewy cheeked and candy bottomed political studies majors at their first Teamster rally.

 

The police rally against law enforcement was one of those rare moments that illuminate the life of a great city in crisis.  Between the good government, pro-minority Times reporters, the angry crowd of police rallying to protect their privileges and perks against the background of a city facing financial cutbacks, and the crowd of poor benefit seekers waiting in the street, resentful of the privileged police, we see can see the political and social crisis of New York in a single space.

 

The good government upper middle class, the entrenched groups with a solid stake in the status quo and the marginalized working or non-working poor with no prospects for advancement apart from the patronage of the state: this is the mass base of the blue electoral coalition — and the groups in the coalition don’t seem to like each other very much.

 

Ties That Bind

Money and power for the government enable the upper middle class good government types to dream up new schemes to help us all live better lives and give government the resources for the various social, ecological and cultural transformations on the ever-expandable goo-goo to-do list that range from a global carbon tax to fair trade coffee cooperatives and the war on saturated fat. 

All these programs (some useful in the Via Meadia view, others much less so) require a transfer of funds and authority from society at large to well-socialized, well-credentialed and well-intentioned upper middle class types who get six figure salaries to make sure the rest of us behave in accordance with their rapidly evolving notions of correct behavior.

 

The Times reporters represented the goo-goos at the Bronx courthouse.  Sixty years ago the reporters would have had more in common with the cops, but the professionalization of journalism has made these jobs the preserve of the college educated and the upwardly mobile in status if not so much in money.

The angry and determined unionized cops represent what used to be the heart of the blue coalition:  the stable urban middle middle class.  In the old days, this group included a much bigger private sector component than it does now. 

 

 

The cops, the teachers, the firefighters, the sanitation and transit workers: these are most of what remains of the backbone of what used to be the organized working class.  Many who don’t work directly for the government work for the health care industry, where government and private insurance payments have kept the blue model alive for employees.  Others work for infrastructure and construction companies – much of whose business comes from government. 

Their ranks were once swelled by reasonably well-paid manufacturing workers and other private employees in what was once a job-rich metropolitan environment.  A few private bastions of the middle middle class remain (workers in the cooperative buildings where the überrich live, for example), but these days the purely private sector middle middle class is in full scale retreat in cities like New York and public and quasi-public sector employees take the lead.

 

This group doesn’t get paid as well or enjoy the prestige of the goo-goos, but they have built structures and institutions that secure them a middle-middle class existence.  In the public sector at least they have done surprisingly well at passing their jobs and connections down to future generations.  As the urban middle middle class shifted from a largely private sector group to a group primarily dependent on public sector spending and jobs, the political balance also changed.

 

 Like the goo-goos, the urban middle middle class needs more revenue from the rest of society: people in this group want the number of jobs in their institutions to grow and naturally enough they want to be better compensated: more take-home pay, better benefits, a younger retirement age with a more generous pension.

 

The third group at that scene in the Bronx comes from the city’s more marginal population who lack the connections and security that a public union would give them.  In the city’s high-cost, high-regulation economy, there are not enough lower middle and middle middle private sector jobs for them.  As the secure middle middle class comes under pressure, and as immigration brings new, often unskilled workers with weak English language skills into the economy, the low end of the labor market looms large. 

 

Folks in this group often work as casual labor or in hotels, restaurants or the other service businesses that serve wealthier urbanites and in bad times, the charity of the state is the refuge towards which they must turn: for food, shelter, healthcare and the other necessities of life.  Not a few now are unable to do anything much more remunerative than wait in line outside benefit offices; between tight economic times, social pathology, poor personal choices, and the destruction of the city’s entrepreneurial, job-creating culture, the state is the only legal and reliable source of income some have ever known.

 

 

For this group also the most important political question is the revenue issue: they want and need more benefits and services from the only available source.  With some of these needs one can’t help but sympathize; no one but the state can educate their kids or provide basic safety from crime on the streets.

 

These three groups, unhappily met at a Bronx courthouse, are the core of the blue coalition that has dominated New York politics for decades, but to understand their situation and the changing power relations between them it is necessary to consider another part of the coalition: a group that wouldn’t be caught dead off a highway in most of the Bronx but largely controls the fate of the three groups battling for power around that courthouse.

 

Call the fourth group Blue Wall Street: the bankers, financiers and business leaders who thrive in the world of the blue social model — and who likely have never visited a criminal court or a benefits center in their lives.  Members of what Howard Dean likes to call “the Democratic wing of the Democratic Party” prefer not to think too much about Blue Wall Street and its role in the Democratic coalition, but particularly as times get tougher for the blue social model, it is Blue Wall Street that makes things work and calls the shots.

 

 

The symbiosis between Blue Wall Street and the state is strong and deep. The pension funds, bond issues and other financial transactions that blue city and state governments need helps nourish Blue Wall Street; Blue Wall Street helps integrate the policy agenda of other government focused interest groups with larger national priorities and movements.  Fannie Mae and Freddie Mac are the archetypes of this symbiosis: they are government-backed forces in the capital markets built around support for the single most important American social program of the blue period: home ownership.  The securitization of home mortgages was one of the driving forces in the development of American capital markets after World War II; when the blue system was working, Fannie and Freddie promoted Wall Street profits and the economic well being of the middle class.

 

 

Health care, agricultural subsidies, infrastructure construction and the municipal bond market link Wall Street and government at many levels, all with important consequences for Democratic politics.  That link between progressive social goals and the financial system isn’t just one of many features of the Democratic policy agenda: the essence of American progressive social policy since the New Deal has been to achieve “social” purposes through the financial system, linking important groups in society at large to powerful financial interests and firms.

 

Blue Wall Street benefits much more from the blue social model than the other elements in the coalition.  Five figure cop salaries and low six figure salaries for goo-goo social engineers pale before the seven, eight, nine and ten figure paydays on the Street.

 

There is a direct connection between those big paydays and the connection between big finance, big government and Democratic (as well as Republican) interest group politics.  Good relations with politicians help make money: ask the leadership of Goldman Sachs, which has provided much of the leadership and policy advice for administrations of both parties for some time.  It’s a sensible trade-off for well connected i-bankers to accept higher general tax rates in exchange for significant influence over government policy. 

You can not only use that influence to carve out nice loopholes that insulate you from the high tax rates blue policies entail; you can get enough business from good government relations to offset the cost of the taxes the model requires.  If Al Gore’s environmental businesses make enough money as a result of emission laws and price controls, he doesn’t have to worry too much about his tax rate.  And in any case, carbon taxes favor the financial economy (which uses very little carbon though its PR firms emit a lot of hot air) over the manufacturing economy.

 

 

Many blue partisans don’t fully get this; they think of Wall Street as the enemy without fully grasping the essential role that the financial community plays in the creation and administration of blue policy.  The participation in and support of blue social and economic policies by American finance both enables and shapes those policies, and it was the belief on Wall Street in the 1940s and 1950s that the blue social model provided the most effective path for national economic development that created the postwar commonwealth, which many blue activists today hope to restore.

That blue political coalition was the natural party of government of the United States between FDR’s inauguration in 1933 and Ronald Reagan’s accession to power in 1981.  It remains the dominant force in most American cities and the deep blue states from New England to the Pacific, though from state to state and place to place the relative strength of the coalition members shifts.

 

In its earlier, more functional state, the blue political structure matched the economic structure of the United States reasonably well.  The Depression and World War II created a situation in which a small number of large companies, pretty well tied into the government by regulatory controls and laws that kept competitors out of the marketplace, dominated the economy.  With other world economies smashed flat by the war and the international financial system small and tightly controlled, the US government could control the macroeconomic environment much more effectively than it can now.  Cheap foreign labor was not a factor – and immigration was, until the 1960s, still tightly restricted under the quota system.

Under those circumstances, the blue social model could satisfy key interests on Wall Street and in the general population, dividing the rents of monopoly (AT&T) and oligopoly (oil companies, airlines, television networks, money center banks) between management, shareholders and workers, with the government taking its share.  These days the model doesn’t work as well, partly because of changes in the international and national economy that I’ve discussed in earlier posts.

 

 

The good government types want to control the excesses (both financial and physical) of the police and the other government unions while continuing to shift state patronage from ethnic whites to minorities.  They want “good schools” and increasingly are willing to take on the teacher unions to get them.  They respond to the revenue shortfall by seeking to rationalize government, making it more efficient and less expensive so that the upper middle class reformers can continue to attract new resources to help them conquer new fields.  The tougher the economic times the more the goo-goos see the need and the merit to rationalize expenses — and the more Blue Wall Street, worried about credit ratings in the municipal bond market and other such matters, supports them.

 

The police and their allies among state and municipal workers are ready to fight this agenda on the streets.  They are often hostile to the social betterment agenda of the goo-goos, and frequently resist efforts of the reformers to replace informal networks and contacts as the way to get municipal jobs with exams and formal processes heavily tilted to help outsiders (minorities and immigrants) break into these jobs.  They tend to see welfare clients as parasites on the social body, especially when those clients are recent immigrants or otherwise seem like outsiders.  They believe they are competing with these folks for resources and respect, and they bitterly resent the habitual goo-goo preference for the outsider versus the teacher, the cop and the fireman.

 

The underclass and the less privileged workers have divided interests.  On the one hand, they depend so heavily on government for basic services and a safety net that it is hard for them to think much beyond their support for the blue coalition.  On the other hand, as their booing of the cops outside the Bronx courthouse reminds us, they are getting the short end of the stick within that coalition and they know it.  The education bureaucracy is failing their kids; the cops harass them on the streets.  More profoundly, the network of regulations, subsidies and entry barriers the blue model has accumulated over the decades are a powerful force against the private sector job growth that could open up new opportunities and higher wages for them.

 

Threats to the food bowl both unite and divide the Party of Blue.  All of them agree that federal revenues should be higher and that much of that money should flow to the cities and states.  This preference helps hold the Democratic Party together and – combined with other groups (like big agriculture) that get fat subsidies – helps the Party stay competitive at the national level.

 

But when cuts must be made, or when limited resources must be divvied up, the groups divide.  The goo-goos are willing to cut middle class entitlements and government pensions to fund upper middle class social priorities.  Which, they will argue, is more important: to pay (excessive, irrational) pensions to superannuated firemen and cops. or to build a path breaking carbon cap and trade system that could save the planet?  They are ready to sell state unions down the river, as Democratic politicians ranging from California’s Jerry Brown to Chicago’s Rahm Emanuel to New York’s Andrew Cuomo are doing as I write. But they prefer a peaceful and gradual approach that does not reduce the Democratic Party to a state of civil war and can present themselves to the unions as a lesser evil than Republican red staters who want to kill the unions altogether.

 

 

Those who don’t have access to either upper middle or middle middle blue privilege just want what they can get.  Many minority groups continue to support the traditional post-Civil Rights minority agenda of affirmative action plus expanded entitlements.  The divisions between African Americans and Hispanic immigrants complicate this picture, and fights over the division of the “minority pie” between these groups can be expected to grow over time, particularly if that pie, as seems likely, continues to shrink.

 

What that Bronx courtyard shows us is a political culture in decline and a development model on the brink.  New York’s dependence on Wall Street and the federal government is becoming more acute by the year.  Post bubble and post stimulus, neither source of revenue can be expected to grow at an adequate rate, and it is not unlikely that both will be shrinking for years.  The pieces of the coalition are venting their rage and hostility, and new supplies of money are nowhere in view.

 

I’ve written before about the need for a post-blue economic and social model for the United States.  The time is getting short.