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© 2008 – 2014 John T. Burke, Jr.

Giving Centrism A Bad Name

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It seems as though every time some venal politician breaches a campaign promise while attempting to grab a payoff from a lobbyist, the excuse is always the same:  “I’ve decided to tack toward the center on this issue.”  “The Center” has become stigmatized as the dwelling place of those politicians who lack a moral compass.

I get particularly annoyed by those who persist in characterizing Barack Obama as a “centrist”, who is mimicking Bill Clinton’s “triangulation” strategy.  During his campaign and throughout the early days of his Presidency, Obama successfully posed as a centrist.  Nevertheless, his track record now demonstrates a policy of what Marshall Auerback described as “gutting the Democratic Party of its core social legacy.”   I particularly enjoyed reading the comments to Auerback’s above-quoted piece about Obama entitled, “Worse Than Hoover”.  Most of the commentators expressed the opinion that Auerback went way too easy on Obama.  Here are some examples:

Sandra:

We have to stop comparing Obama to these iconic American figures. Obama is an opportunistic corporatist. There is no there there.

Rex:

I’m beginning to wonder if we are still giving Obummer too much credit.  Common view seems to be trending toward he’s a manipulative scumbag.

Wasabi:

He’s very useful to the plutocracy.  A Repub president could never persuade Dems to cut SS, Medicare, and Medicaid and all sorts of other essential programs.

Z:

He got the glory and the thrill of winning the election to become the 1st black president and I suspect that’s all the narcissio-path ever really wanted as far as the presidency is concerned.  He certainly doesn’t look like he’s enjoying himself right now.  I think he’s ready to cash out and is trying to create a scenario where he becomes an untenable candidate.  He also wants to maintain his celebrity appeal so he’s going to try to posture as the adult of adults that was just too good for dc …

Steelhead23:

From a more technocratic perspective, I tend to see Obama as a consummate politician – able to inspire – but sadly lacking in intellectual curiosity and overflowing with ego, thus unable to quench his ignorance.  This leaves him extremely susceptible to “experts” whom he parrots with enthusiasm.  It was experts who helped him pick his advisers and now his expert advisers are misleading him and making him complicit in this quest toward neo-feudalism.

Keep in mind that those comments were not posted at Fox News or some right-wing website.  They were posted at Naked Capitalism, where the publisher – Yves Smith – offered a comment of her own in reaction to Marshall Auerback’s “Worse Than Hoover” posting.

Yves Smith:

Obama is an authoritarian narcissist, an ugly combination.

He also seems unaware of the limits of his knowledge.  That can render many otherwise intelligent people stupid in their decisions and actions in their blind spots.

Obama’s foremost critic from the Left is Glenn Greenwald of Salon.  Mr. Greenwald has frequently opined that “… Obama wants to be attacked by liberals because of the perception that it politically benefits him by making him look centrist, non-partisan and independent . . .   It’s not merely that he lacks a fear of liberal dissatisfaction; it’s that he affirmatively craves it.”  Greenwald emphasized the foolishness of following such a course:

But that’s a dangerous strategy.  U.S. presidential elections are very closely decided affairs, and alienating the Left even to some degree can be lethal for a national Democratic campaign; shouldn’t the 2000 election, along with 2010, have cemented that lesson forever?

I doubt that Obama is attempting to follow anything similar to Bill Clinton’s “triangulation” strategy.  If Obama had been attempting such a plan, it has already backfired to an embarrassing degree, causing irreparable damage to the incumbent’s reelection prospects.  Barack Obama has lost his credibility – and in the eyes of the electorate, there is no greater failing.

To get an appreciation for how much damage Obama has caused to his own “brand”, consider this article written by Columbia University economist Jeffrey Sachs for the Huffington Post:

Thus, at every crucial opportunity, Obama has failed to stand up for the poor and middle class.  He refused to tax the banks and hedge funds properly on their outlandish profits; he refused to limit in a serious way the bankers’ mega-bonuses even when the bonuses were financed by taxpayer bailouts; and he even refused to stand up against extending the Bush tax cuts for the rich last December, though 60 percent of the electorate repeatedly and consistently demanded that the Bush tax cuts at the top should be ended.  It’s not hard to understand why.  Obama and Democratic Party politicians rely on Wall Street and the super-rich for campaign contributions the same way that the Republicans rely on oil and coal.  In America today, only the rich have political power.

*   *   *

America is more militarily engaged under Obama than even under Bush.  Amazing but true.

*   *   *

The stimulus legislation, pushed by Obama at the start of his term on the basis of antiquated economic theories, wasted the public’s money and also did something much worse.  It discredited the vital role of public spending in solving real and long-term problems.  Rather than thinking ahead and planning for long-term solutions, he simply spent money on short-term schemes.

Obama’s embrace of “shovel-ready” infrastructure, for example, left America with an economy based on shovels while China’s long-term strategy has given that country an economy based on 21st-century Maglev trains.  Now that the resort to mega-deficits has run its course, Obama is on the verge of abandoning the poor and middle class, by agreeing with the plutocrats in Congress to cut spending on Medicaid, Medicare, Social Security, and discretionary civilian spending, while protecting the military and the low tax rates on the rich (if not lowering those top tax rates further according to the secret machinations of the Gang of Six, now endorsed by the president!)

*   *   *

America needs a third-party movement to break the hammerlock of the financial elites.  Until that happens, the political class and the media conglomerates will continue to spew lies, American militarism will continue to destabilize a growing swath of the world, and the country will continue its economic decline.

The urgent need for a third-party movement was also the subject of this recent piece at The Economic Populist:

If the country had a legitimate third party to vote for, the Democrats and Republicans would be in serious trouble.  Of course, the political system is geared to prevent third parties from emerging, so the country flounders about, looking for leadership from pusillanimous Democrats or ideological Republicans who consider raising taxes a mortal sin.  The voters are probably a few steps away from concluding what is meant to be hidden but by now should be obvious:  American democracy doesn’t exist, and the political system in Washington is beyond repair.  What is worse: there are people and organizations who like things just the way they are and will fight any attempts at reform.

*   *   *

None of this suggests that Barack Obama is even considering abandoning his servitude to corporate interests.  He’s merrily going along from one fundraiser to the next, raising millions of dollars each week from hedge fund managers and corporate lobbyists, so that he can get reelected as a “centrist” and bipartisan deal maker.  This is based on his reading of what The People want – an end to the divisiveness in Washington – but Obama is fundamentally misreading the problem in Washington.  It isn’t the rancor, name-calling, and petulance that is constantly on display which worries the American people.  It is the backroom deals, the hidden bailouts, the tax evasions, the deregulation initiatives, the lack of prosecution for criminal behavior, that is more than frustrating Americans, because the beneficiaries of all this are wealthy people and corporations who have shifted power and money to themselves.  Voters want this system overthrown – even the Tea Party voters, who keep searching for Republicans who will finally say no to corporate money.

In the mean time, we are stuck witnessing America’s demise.  If you think that Obama’s critics from the Left are the only people voicing a dispirited attitude about our country’s future, be sure to read this essay at Counterpunch, “An Economy Destroyed”, written by Paul Craig Roberts – Assistant Secretary of the Treasury during the Reagan Administration and the co-creator of Reaganomics:

Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase.  The downgrade threat is not credible, and neither is the default threat.  Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.

*   *   *

The US economy is driven by consumer demand, but with 22.3 per cent unemployment, stagnant and declining wages and salaries, and consumer debt burdens so high that consumers cannot borrow to spend, there is nothing to drive the economy.

Washington’s response to this dilemma is to increase the austerity!  Cutting back Medicare, Medicaid, and Social Security, forcing down wages by destroying unions and offshoring jobs (which results in a labor surplus and lower wages), and driving up the prices of food and energy by depreciating the dollar further erodes consumer purchasing power.  The Federal Reserve can print money to rescue the crooked financial institutions, but it cannot rescue the American consumer.

As a final point, confront the fact that you are even lied to about “deficit reduction.”  Even if Obama gets his $4 trillion “deficit reduction” over the next decade, it does not mean that the current national debt will be $4 trillion less than it currently is.  The “reduction” merely means that the growth in the national debt will be $4 trillion less than otherwise.  Regardless of any “deficit reduction,” the national debt ten years from now will be much higher than it presently is.

The longer you think about it – the more obvious it becomes:  We really need to sweep all of those bastards out of Washington as quickly as possible and replace them with intelligent, honest individuals who are willing to represent this country’s human inhabitants – rather than its corporations, lobbies and “special interests”.


 

Time For Some Serious Pushback

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The American people are finally getting angry.  I thought it would never happen.  In case you haven’t heard about it yet, the most popular topic on Twitter right now is:  #FuckYouWashington.  (For those who don’t like typing dirty words on their computer – there is the alternative #FYW.)  If you’re looking for some refreshing reading, which will reinforce your confidence in the people of this great country (especially after excessive exposure to the depressing, “debt ceiling” debate) be sure to check in on it.

Meanwhile, our fake, “two-party system” is facing a fresh challenge.  The Republi-Cratic Corporatist Party is being threatened by an Internet-based organization called, Americans Elect.  Here’s how the group describes itself:

Americans Elect is the first-ever open nominating process.  We’re using the Internet to give every single voter – Democrat, Republican or independent – the power to nominate a presidential ticket in 2012.  The people will choose the issues. The people will choose the candidates.  And in a secure, online convention next June, the people will make history by putting their choice on the ballot in every state.

*   *   *

We have no ties to any political group – left, right, or center.  We don’t promote any issues, ideology or candidates.  None of our funding comes from special interests or lobbyists.  Our only goal is to put a directly-nominated ticket on the ballot in 2012.

*   *   *

The goal of Americans Elect is to nominate a presidential ticket that answers to the people – not the political system.  Like millions of American voters, we simply want leadership that will work together to tackle the challenges facing our country.  And we believe a direct nominating process will prove that America is ready for a competitive, nonpartisan ticket.

Just when the Obama Administration was getting comfy with the idea that it could take the voters for granted  …  along came this new threat in the form of Americans Elect.  The timing couldn’t have been more appropriate.  A recent CNN poll revealed that Obama’s support among liberals has dropped to “the lowest point in his presidency”.  The man whom I characterized as the “Disappointer-In-Chief” during his third month in office, is now being referred to by The Nation as the “Compromiser-in-Chief”.  Ari Melber’s essay in The Nation provides a great summary of the criticism directed against Obama from the Left.  One example came from economist Paul Krugman, who described Obama as “President Pushover”.

In order to resist any new challenges to the status quo, the Republi-Cratic Corporatist Party is taking advantage of the proposed “debt ceiling” legislation to cement its absolute control over the United States government.  Ryan Grim of The Huffington Post provided us with the revelation of a bipartisan effort to create an authoritarian governing body, designed to circumvent Constitutionally-prescribed legislative procedures:

This “Super Congress,” composed of members of both chambers and both parties, isn’t mentioned anywhere in the Constitution, but would be granted extraordinary new powers.  Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers — six from each chamber and six from each party.

Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote.  With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law.  A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits.  Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

House Speaker John Boehner (R-Ohio) has made a Super Congress a central part of his last-minute proposal, multiple news reports and people familiar with his plan say.

Independents and “Third-Party” members of Congress would be excluded from this “Super Congress”, thus subverting any attempts by the “little people” to steal control of the government away from the Republi-Cratic Corporatist Party.  Concern about the upstart Americans Elect organization could have been the motivating factor which inspired the “Super Congress” plan.  Tom Friedman’s recent New York Times commentary must have set off a “treason alert” for the Congressional kleptocrats, who read this:

Write it down:  Americans Elect.  What Amazon.com did to books, what the blogosphere did to newspapers, what the iPod did to music, what drugstore.com did to pharmacies, Americans Elect plans to do to the two-party duopoly that has dominated American political life – remove the barriers to real competition, flatten the incumbents and let the people in.  Watch out.

The Republi-Cratic Corporatist Party is already watching out.  That’s why they are moving to create a new, imperial “Super Congress”.  Be sure to express your opposition to this power grab by logging-on to Twitter and sharing your feelings at #FuckYouWashington.


Elizabeth Warren Should Run Against Obama

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Now that President Obama has thrown Elizabeth Warren under the bus by nominating Richard Cordray to head the Consumer Financial Protection Bureau (CFPB), she is free to challenge Obama in the 2012 election.  It’s not a very likely scenario, although it’s one I’d love to see:  Warren as the populist, Independent candidate – challenging Obama, the Wall Street tool – who is already losing to a phantom, unspecified Republican.

A good number of people were disappointed when Obama failed to nominate Warren to chair the CFPB, which was her brainchild.  It was bad enough that Treasury Secretary “Turbo” Tim Geithner didn’t like her – but once the President realized he was getting some serious pushback about Warren from Senate Republicans – that was all it took.  Some Warren supporters have become enamored with the idea that she could challenge Scott Brown for his seat representing Massachusetts in the Senate.  However, many astute commentators consider that as a really stupid idea.  Here is the reaction from Yves Smith of Naked Capitalism:

We argued yesterday that the Senate was not a good vehicle for advancing Elizabeth Warren’s aims of helping middle class families, since she would have no more, and arguably less power than she has now, and would be expected to defend Democrat/Obama policies, many of which are affirmatively destructive to middle class interests (just less so than what the Republicans would put in place).

A poll conducted in late June by Scott Brown and the Republican National Committee raises an even more basic question:  whether she even has a shot at winning.

*   *   *

The poll shows a 25 point gap, which is a massive hurdle, and also indicates that Brown is seen by many voters as not being a Republican stalwart (as in he is perceived to vote for the state’s, not the party’s, interest).  A 25 point gap is a near insurmountable hurdle and shows that Warren’s reputation does not carry as far as the Democratic party hackocracy would like her fans to believe.  But there’s no reason not to get this pesky woman to take up what is likely to be a poisoned chalice.  If she wins, she’s unlikely to get on any important committees, given the Democratic party pay to play system, and will be boxed in by the practical requirements of having to make nice to the party and support Obama positions a meaningful portion of the time. And if she runs and loses, it would be taken as proof that her middle class agenda really doesn’t resonate with voters, which will give the corporocrats free rein (if you can’t sell a liberal agenda in a borderline Communist state like Massachusetts, it won’t play in Peoria either).

Obviously, a 2012 challenge to the Obama Presidency by Warren would be an uphill battle.  Nevertheless, it’s turning out to be an uphill battle for the incumbent, as well.  David Weidner of MarketWatch recently discussed how Obama’s failure to adequately address the economic crisis has placed the President under the same pressure faced by many Americans today:

He’s about to lose his job.

*   *   *

Blame as much of the problem on his predecessor as you like, the fact is Obama hasn’t come up with a solution.  In fact, he’s made things worse by filling his top economic posts with banking-friendly interests, status-quo advisers and milquetoast regulators.

And if there’s one reason Obama loses in 2012, it’ll be because he failed to surround himself with people willing to take drastic action to get the economy moving again.

In effect, Obama’s team has rewarded the banking industry under the guise of “saving the economy” while abandoning citizens and consumers desperate for jobs, credit and spending power.

There was the New York Fed banker cozy with Wall Street: Timothy Geithner.

There was the former Clinton administration official who was the architect of policies that led to the financial crisis: Larry Summers.

There was a career bureaucrat named to lead the Securities and Exchange Commission:  Mary Schapiro.

To see just how unremarkable this group is, consider that the most progressive regulator in the Obama administration, Federal Deposit Insurance Corp. Chairman Sheila Bair, was a Republican appointed by Bush.

*   *   *

The lack of action by Obama’s administration of mediocrities is the reason the recovery sputters.  In essence, the turnaround depends too much on a private sector that, having escaped failure, is too content to sit out what’s supposed to be a recovery.

*   *   *

What began as a two-step approach:  1) saving the banks, and then 2) saving homeowners, was cut short after the first step.

Instead of extracting more lending commitments from the banks, forcing more haircuts on investors and more demands on business, Obama has let his team of mediocrities allow the debate to be turned on government.  The government caused the financial crisis.  The government ruined the housing market.

It wasn’t true at the start, but it’s becoming true now.

Despite his status as the incumbent and his $1 billion campaign war chest, President Obama could find himself voted out of office in 2012.  When you consider the fact that the Republican Party candidates who are currently generating the most excitement are women (Bachmann and the undeclared Palin) just imagine how many voters might gravitate to a populist female candidate with substantially more brains than Obama.

The disillusionment factor afflicting Obama is not something which can be easily overlooked.  The man I have referred to as the “Disappointer-In-Chief” since his third month in office has lost more than the enthusiasm of his “base” supporters – he has lost the false “progressive” image he had been able to portray.  Matt Stoller of the Roosevelt Institute explained how the real Obama had always been visible to those willing to look beyond the campaign slogans:

Many people are “disappointed” with Obama.  But, while it is certainly true that Obama has broken many many promises, he projected his goals in his book The Audacity of Hope.  In Audacity, he discussed how in 2002 he was going to give politics one more shot with a Senate campaign, and if that didn’t work, he was going into corporate law and getting wealthy like the rest of his peer group.  He wrote about how passionate activists were too simple-minded, that the system basically worked, and that compromise was a virtue in and of itself in a world of uncertainty. His book was a book about a fundamentally conservative political creature obsessed with process, not someone grounded in the problems of ordinary people.  He told us what his leadership style is, what his agenda was, and he’s executing it now.

I expressed skepticism towards Obama from 2005, onward.  Paul Krugman, Debra Cooper, and Tom Ferguson among others pegged Obama correctly from day one.  Obama broadcast who he was, through his conservative policy focus (which is how Krugman pegged him), his bank backers (which is how Ferguson pegged him), his political support of Lieberman (which is how I pegged him), and his cavalier treatment of women’s issues (which is how Debra Cooper pegged him).  He is doing so again, with his choice to effectively remove Elizabeth Warren from the administration.

I just wish Elizabeth Warren would fight back and challenge Obama for The White House.  If only   .   .   .


 

John Ashcroft Was Right

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Many commentators have expressed surprise about the extensive criticism directed against President Obama by liberals.  During the new President’s third month in office, I pointed out how he had become the “Disappointer-In-Chief” – when he began to elicit groans from the likes of Keith Olbermann and Rachel Maddow.  President Obama has continued on that trajectory ever since.  More recently, Obama’s mishandling of the economic crisis resulted in a great cover story for New York Magazine by Frank Rich, entitled, “Obama’s Original Sin”.  Although Frank Rich may have been a bit restrained in his criticism of Obama, Marshall Auerback didn’t pull any punches in an essay he wrote for the New Economic Perspectives website entitled, “Barack Obama:  America’s First Tea Party President”:

Cutting public spending at this juncture is the last thing the US government should be doing.  Yet this President is pushing for the largest possible cuts that he can on the Federal government debt.  He is out-Hoovering the GOP on this issue.  He is providing “leadership” of the sort which is infuriating his base, but should endear him to the Tea Party.  This is “the big thing” for Barack Obama, as opposed to maximizing the potential of his fellow Americans by seeking to eliminate the scourge of unemployment.  Instead, his big idea is to become the president who did what George Bush could not, or did not, dare to do:  cut Medicare, Medicaid and Social Security.  What more could the Tea Party possibly want?

Glenn Greenwald of Salon has been a persistent critic of President Obama for quite a while.  Back in September of 2010, I referenced one of Glenn Greenwald’s exceptive essays about Obama with this thought:

Glenn Greenwald devoted some space from his Salon piece to illustrate how President Obama seems to be continuing the agenda of President Bush.  I was reminded of the quote from former Attorney General John Ashcroft in an article written by Jane Mayer for The New Yorker.  When discussing how he expected the Obama Presidency would differ from the Presidency of his former boss, George W. Bush, Ashcroft said:

“How will he be different?  The main difference is going to be that he spells his name ‘O-b-a-m-a,’ not ‘B-u-s-h.’ ”

John Ashcroft’s prescient remark could not have been more accurate.  Who else could have foreseen that the Obama Presidency would eventually be correlated with that of President George W. Bush?  Although it may have seemed like a preposterous notion at the time, it’s now beginning to make more sense, thanks to a very interesting piece I read at the Truthdig website entitled, “If McCain Had Won” by Fred Branfman.  Branfman began with a list of “catastrophes” we would have seen from a McCain administration, followed by this comment:

Nothing reveals the true state of American politics today more, however, than the fact that Democratic President Barack Obama has undertaken all of these actions and, even more significantly, left the Democratic Party far weaker than it would have been had McCain been elected.

More important, the sentence immediately following that remark deserves special attention because it forms the crux of Branfman’s analysis:

Few issues are more important than seeing behind the screen of a myth-making mass media, and understanding what this demonstrates about how power in America really works – and what needs to be done to change it.

From there, Branfman went on to explain how and why McCain would have made the same decisions and enacted the same policies as Obama.  Beyond that, Branfman explained why Obama ended up doing things exactly as McCain would have:

Furious debate rages among Obama’s Democratic critics today on why he has largely governed on the big issues as John McCain would have done. Some believe he retains his principles but has been forced to compromise by political realities. Others are convinced he was a manipulative politico who lacked any real convictions in the first place.

But there is a far more likely – and disturbing – possibility.  Based on those who knew him and his books, there is little reason to doubt that the pre-presidential Obama was a college professor-type who shared the belief system of his liberalish set …

*   *   *

Upon taking office, however, Obama – whatever his belief system at that point – found that he was unable to accomplish these goals for one basic reason:  The president of the United States is far less powerful than media myth portrays.  Domestic power really is in the hands of economic elites and their lobbyists, and foreign policy really is controlled by U.S. executive branch national security managers and a “military-industrial complex.”

The ugly truth strikes again!  The seemingly “all-powerful” President of the United States is nothing more than a tool of the plutocracy.  It doesn’t matter whether the White House is occupied by a Democrat or a Republican – the policies (domestic, foreign, economic, etc.) will always be the same – because the people calling the shots are always the same plutocrats who control those “too big to fail” banks, the military industry and big pharma.  As Branfman put it:

.   .   .   anyone who becomes president has little choice but to serve the institutional interests of a profoundly amoral and violent executive branch and the corporations behind them.

Perhaps in response to the oft-cited criticism that “if you’re not part of the solution – you’re part of the problem”, Fred Branfman has offered us a proposal that could send us on the way to changing this intolerable status quo:

But however important the 2012 election, far more energy needs to be devoted to building mass organizations that challenge elite power and develop the kinds of policies – including massive investment in a “clean energy economic revolution,” a carbon tax and other tough measures to stave off climate change, regulating and breaking up the financial sector, cost-effective entitlements like single-payer health insurance, and public financing of primary and general elections – which alone can save America and its democracy in the painful decade to come.

Wait a minute!  Didn’t Obama already promise us all of that stuff?

Perhaps the only way to achieve those goals is by voting for Independent political candidates, who are not beholden to the Republi-cratic Corporatist Party or its financiers.  When the mainstream media go out of their way to pretend as though a particular candidate does not exist – you might want to give serious consideration to voting for that person.  When the media try to “disappear” a candidate by “hiding” that person “in plain sight”, they could be inadvertently providing the best type of endorsement imaginable.

The same level of energy that brought Obama to the White House could be used to bring us our first Independent President.  All we need is a candidate.


 

Ignoring The Smart People

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The clowns in Washington seem to be going out of their way to ignore the advice of respected economists as they focus on deficit reduction while ignoring the worsening unemployment crisis.  The fact that mainstream news outlets are oblivious to the consequences of foolish economic policy doesn’t really help.  President Obama now finds himself wedded to a policy of economic destruction, while at the mercy of his opponents, simply because he ignored the good advice he was receiving back in 2009.

The urgency of our current predicament is lost on the asshats vested with the responsibility and authority to implement a “course correction”.  As I pointed out last month, bond guru Bill Gross of PIMCO made an effort to debunk the myth that balancing the budget “will magically produce 20 million jobs over the next 10 years”.  More recently, Princeton economics professor and former vice-chairman of the Federal Reserve, Alan Blinder, wrote an article for The Wall Street Journal entitled, “Our National Jobs Emergency”.  After discussing the most recent non-farm payrolls report from the Bureau of Labor Statistics, Professor Blinder made this observation:

The horrific June employment number made it two in a row.  With the latest revisions, job growth in May is now estimated to have clocked in at only 25,000 jobs.  So that’s 25,000 and 18,000 in consecutive months.  Given the immense size of total U.S. payroll employment (around 131 million) and the sampling error in the survey, those numbers are effectively zero.  Job creation has stopped for two months.

If we were at 5% unemployment, two bad payroll reports in a row would be of some concern yet tolerable.  But when viewed against the background of 9%-plus unemployment, they are catastrophic.

*   *   *

All this adds up to a national jobs emergency.  Tragically, however, it is not being treated as such.  When is the last time you heard one of our national leaders propose a serious job-creating program?

The operative word here is “serious.”  Every day brings new proposals to slash government spending.  But as I noted on this page last month, those are ways to kill jobs, not create them.  As a matter of fact, despite all the cries of “big government” or even “socialism,” public-sector employment has been falling.

Fortunately, Professor Blinder had some good ideas for private-sector job creation.  One such idea was a tax credit for firms that create new jobs:

As one concrete example, companies might be offered a tax credit equal to 10% of the increase in their wage bills (over 2011 levels, say).  No increase, no reward.

You might think Republicans would embrace an idea like that. After all, it’s a business tax cut and all the new jobs would be in the private sector.  But you’d be wrong.  Frankly, I’m not sure why. Maybe it’s seen as “left-wing social engineering.”

Professor Blinder then proposed an alternative:

Suppose we allow firms to repatriate profits at some super-low tax rate, but only to the extent that they increase their wage payments subject to Social Security.  For example, if XYZ Corporation paid wages covered by Social Security of $1.5 billion in 2011, and then boosted that amount to $1.6 billion in 2012, it would be allowed to repatriate $100 million at a tax rate of 5% or 10% instead of the usual 35% rate.  The tax savings to the company would thus be $25 million-$30 million for raising its payroll by $100 million.  That’s a powerful incentive.

Did anyone in Washington pay serious attention to Professor Blinder’s Wall Street Journal article  . . .  or were they all too busy shorting Treasuries to give a damn?

Oxford-educated economist Martin Wolf wrote a piece for the Financial Times, in which he lamented the antics of those entrusted with the power of managing financial and economic policy:

It is not that tackling the US fiscal position is urgent.  At a time of private sector deleveraging, it is helpful.  The US is able to borrow on easy terms, with yields on 10-year bonds close to 3 per cent, as the few non-hysterics predicted.  The fiscal challenge is long term, not immediate.  A decision not to allow the government to borrow to finance the programmes Congress has already mandated would be insane…. Yet, astonishingly, many of the Republicans opposed to raising the US debt ceiling do not merely wish to curb federal spending:  they enthusiastically desire a default.  Either they have no idea how profound would be the shock to their country’s economy and society of a repudiation of debt legally contracted by their state, or they fall into the category of utopian revolutionaries, heedless of all consequences.

*   *   *

These are dangerous times.  The US may be on the verge of making among the biggest and least-necessary financial mistakes in world history.  The eurozone might be on the verge of a fiscal cum financial crisis that destroys not just the solvency of important countries but even the currency union and, at worst, much of the European project.  These times require wisdom and courage among those in charge of our affairs.  In the US, utopians of the right are seeking to smash the state that emerged from the 1930s and the second world war.  In Europe, politicians are dealing with the legacy of a utopian project which requires a degree of solidarity that their peoples do not feel.  How will these clashes between utopia and reality end? In late August, when I return from my break, we may know at least some of the answers.

At this point, those “answers” are beginning to look pretty scary.  Of course, the Republicans are not the only ones to blame.  Let’s take a look at the wonderful job Mike Whitney of CounterPunch did when he dropped the entire matter back onto President Obama’s lap:

How do you light a fire under Washington, that’s the question?  Is Congress even aware that we’re undergoing a major jobs crisis or are they too busy bickering over tax cuts for fatcats or how much money they can divert from Social Security to Wall Street?

Look; unemployment is over 9% and rising.  The states are firing tens of thousands of teachers and public employees every month because they need to balance their budgets and they’re not taking in enough revenue.  The stimulus is dwindling (which means that fiscal policy is actually contractionary in real terms) And the 10-year Treasury has dipped below 3 percent (as of Monday morning.)  In other words, the bond market is signaling “recession”, even while the dope in the White House is doing his utmost to slice $4 trillion off the deficits.

Does that make any sense?

Maybe if you’re Herbert Hoover, it does.  But it makes no sense at all if you were elected with a mandate to “change” the way Washington operates and put the country back to work.  Obama is just making a bad situation worse by gadding about in his golf togs blabbering about belt tightening.  It’s enough to make you sick.

Get with the program, Barry, or resign.  That would be even better.  Then maybe we can find someone who’s serious about running the country.

As I pointed out on November 4, 2010  . . .  someone has to challenge Obama for the 2012 Democratic nomination and I have someone in mind   .   .   .


 

Discipline Problem

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At the conclusion of a single, five-year term as Chair of the Federal Deposit Insurance Corporation (FDIC) Sheila Bair is calling it quits.  One can hardly blame her.  It must have been one hell of an experience:  Warning about the hazards of the subprime mortgage market, being ignored and watching the consequences unfold . . .  followed by a painful, weekly ritual, which gave birth to a website called Bank Fail Friday.

Bair’s tenure at the helm of the FDIC has been – and will continue to be – the subject of some great reading.  On her final day at the FDIC (July 8) The Washington Post published an opinion piece by Ms. Bair in which she warned that short-term, goal-directed thinking could bring about another financial crisis.  She also had something to brag about.  Despite the efforts of Attorney General Eric Hold-harmless and the Obama administration to ignore the malefaction which brought about the financial crisis and allowed the Wall Street villains to profiteer from that catastrophe, Bair’s FDIC actually stepped up to the plate:

This past week, the FDIC adopted a rule that allows the agency to claw back two years’ worth of compensation from senior executives and managers responsible for the collapse of a systemic, non-bank financial firm.

To date, the FDIC has authorized suits against 248 directors and officers of failed banks for shirking their fiduciary duties, seeking at least $6.8 billion in damages.  The rationales the executives come up with to try to escape accountability for their actions never cease to amaze me.  They blame the failure of their institutions on market forces, on “dead-beat borrowers,” on regulators, on space aliens.  They will reach for any excuse to avoid responsibility.

Mortgage brokers and the issuers of mortgage-based securities were typically paid based on volume, and they responded to these incentives by making millions of risky loans, then moving on to new jobs long before defaults and foreclosures reached record levels.

The difference between Sheila Bair’s approach to the financial/economic crisis and that of the Obama Administration (whose point man has been Treasury Secretary “Turbo” Tim Geithner) was analyzed in a great article by Joe Nocera of The New York Times entitled, “Sheila Bair’s Bank Shot”.  The piece was based on Nocera’s “exit interview” with the departing FDIC Chair.  Throughout that essay, Nocera underscored Bair’s emphasis on “market discipline” – which he contrasted with Geithner’s fanatic embrace of the exact opposite:  “moral hazard” (which Geithner first exhibited at the onset of the crisis while serving as President of the Federal Reserve of New York).  Nocera made this point early in the piece:

On financial matters, she seemed to have better political instincts than Obama’s Treasury Department, which of course is now headed by Geithner.  She favored “market discipline” – meaning shareholders and debt holders would take losses ahead of depositors and taxpayers – over bailouts, which she abhorred.  She didn’t spend a lot of time fretting over bank profitability; if banks had to become less profitable, postcrisis, in order to reduce the threat they posed to the system, so be it.  (“Our job is to protect bank customers, not banks,” she told me.)

Bair’s discussion of those early, panic-filled days during September 2008 is consistent with reports we have read about Geithner elsewhere.  This passage from Nocera’s article is one such example:

For instance, during the peak of the crisis, with credit markets largely frozen, banks found themselves unable to roll over their short-term debt.  This made it virtually impossible for them to function.  Geithner wanted the F.D.I.C. to guarantee literally all debt issued by the big bank-holding companies – an eye-popping request.

Bair said no.  Besides the risk it would have entailed, it would have also meant a windfall for bondholders, because much of the existing debt was trading at a steep discount.  “It was unnecessary,” she said.  Instead, Bair and Paulson worked out a deal in which the F.D.I.C. guaranteed only new debt issued by the bank-holding companies.  It was still a huge risk for the F.D.I.C. to take; Paulson says today that it was one of the most important, if underrated, actions taken by the federal government during the crisis.  “It was an extraordinary thing for us to do,” Bair acknowledged.

Back in April of 2009, the newly-appointed Treasury Secretary met with similar criticism in this great article by Jo Becker and Gretchen Morgenson at The New York Times:

Last June, with a financial hurricane gathering force, Treasury Secretary Henry M. Paulson, Jr. convened the nation’s economic stewards for a brainstorming session.  What emergency powers might the government want at its disposal to confront the crisis? he asked.

Timothy F. Geithner, who as president of the New York Federal Reserve Bank oversaw many of the nation’s most powerful financial institutions, stunned the group with the audacity of his answer.  He proposed asking Congress to give the president broad power to guarantee all the debt in the banking system, according to two participants, including Michele Davis, then an assistant Treasury secretary.

The proposal quickly died amid protests that it was politically untenable because it could put taxpayers on the hook for trillions of dollars.

“People thought, ‘Wow, that’s kind of out there,’ ” said John C. Dugan, the comptroller of the currency, who heard about the idea afterward.  Mr. Geithner says, “I don’t remember a serious discussion on that proposal then.”

But in the 10 months since then, the government has in many ways embraced his blue-sky prescription.  Step by step, through an array of new programs, the Federal Reserve and Treasury have assumed an unprecedented role in the banking system, using unprecedented amounts of taxpayer money, to try to save the nation’s financiers from their own mistakes.

Geithner’s utter contempt for market discipline again became a subject of the Nocera-Bair interview when the conversation turned to the infamous Maiden Lane III bailouts.

“I’ve always wondered why none of A.I.G.’s counterparties didn’t have to take any haircuts.  There’s no reason in the world why those swap counterparties couldn’t have taken a 10 percent haircut.  There could have at least been a little pain for them.”  (All of A.I.G.’s counterparties received 100 cents on the dollar after the government pumped billions into A.I.G.  There was a huge outcry when it was revealed that Goldman Sachs received more than $12 billion as a counterparty to A.I.G. swaps.)

Bair continued:  “They didn’t even engage in conversation about that.  You know, Wall Street barely missed a beat with their bonuses.”

“Isn’t that ridiculous?” she said.

This article by Gretchen Morgenson provides more detail about Geithner’s determination that AIG’s counterparties receive 100 cents on the dollar.  For Goldman Sachs – it amounted to $12.9 billion which was never repaid to the taxpayers.  They can brag all they want about paying back TARP – but Maiden Lane III was a gift.

I was surprised that Sheila Bair – as a Republican – would exhibit the same sort of “true believer-ism” about Barack Obama as voiced by many Democrats who blamed Rahm Emanuel for the early disappointments of the Obama administration.  Near the end of Nocera’s interview, Bair appeared taken-in by Obama’s “plausible deniability” defense:

“I think the president’s heart is in the right place,” Bair told me.  “I absolutely do.  But the dichotomy between who he selected to run his economic team and what he personally would like them to be doing – I think those are two very different things.”  What particularly galls her is that Treasury under both Paulson and Geithner has been willing to take all sorts of criticism to help the banks.  But it has been utterly unwilling to take any political heat to help homeowners.

The second key issue for Bair has been dealing with the too-big-to-fail banks. Her distaste for the idea that the systemically important banks can never be allowed to fail is visceral.  “I don’t think regulators can adequately regulate these big banks,” she told me.  “We need market discipline.  And if we don’t have that, they’re going to get us in trouble again.”

If Sheila Bair’s concern is valid, the Obama administration’s track record for market discipline has us on a certain trajectory for another financial crisis.


Looking Beyond The Smokescreen

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We bloggers have the mainstream news outlets to thank for our readership.  The inane, single-minded focus on a particular story, simply because it brings a huge audience to one’s competitors, regularly provides the driving force behind programming decisions made by those news producers.  As a result, America’s more discerning, critical thinkers have turned to internet-based news sources (and blogs) to familiarize themselves with the more important stories of these turbulent times.

Robert Oak, at The Economic Populist website, recently expressed his outrage concerning the fact that a certain over-publicized murder trial has eclipsed coverage of more important matters:

For over a week we’ve heard nothing else by the press but Casey Anthony.  Imagine what would happen if Nancy Grace used her never ending tape loop rants of hatred against tot mom to spew and prattle about the U.S. economy? Instead of some bizarre post traumatic public stress disorder, stuck in a rut, obsessive thought mantra, repeating ad nauseum, she’s guilty, we might hear our politicians are selling this nation down the river.

*   *   *

Folks, don’t you think the economy is just a little more important and actually impacts your lives than one crime and trial?  The reality is any story which really impacts the daily lives of working America is not covered or spun to fiction.

The fact that “our politicians are selling this nation down the river” has not been overlooked by Brett Arends at MarketWatch.  He recently wrote a great essay entitled, “The Next, Worse Financial Crisis”, wherein he discussed ten reasons “why we are doomed to repeat 2008”.  Of the ten reasons, my favorite was number 7, “The ancient regime is in the saddle”:

I have to laugh whenever I hear Republicans ranting that Barack Obama is a “liberal” or a “socialist” or a communist.  Are you kidding me?  Obama is Bush 44.  He’s a bit more like the old man than the younger one.  But look at who’s still running the economy: Bernanke. Geithner. Summers. Goldman Sachs. J.P. Morgan Chase. We’ve had the same establishment in charge since at least 1987, when Paul Volcker stood down as Fed chairman.  Change?  What “change”?  (And even the little we had was too much for Wall Street, which bought itself a new, more compliant Congress in 2010.)

As the 2012 campaign season begins, one need not look too far to find criticism of President Obama. Nevertheless, as Brett Arends explained, most of that criticism is a re-hash of the same, tired talking points we have been hearing since Obama took office.  We are only now beginning to hear a broader chorus of pushback from commentators who see Obama as the President I have often described as the “Dissapointer-In-Chief”.  Marshall Auerback wasn’t so restrained in his recent appraisal of Obama’s maladroit response to our economic crisis, choosing instead to ratify a well-deserved putdown, which most commentators felt obligated to denounce:

It may not have been the most felicitous choice of phrase, but Mark Halperin’s characterization of Barack Obama was not far off the mark, even if he did get suspended for it.  The President is a dick, at least as far as his understanding of basic economics goes.  Obama’s perverse fixation with deficit reduction uber alles takes him to areas where even George W. Bush and Ronald Reagan dared not to venture.  Medicare and Social Security are now on the table.  In fact entitlements of all kinds (excluding the myriad of subsidies still present to Wall Street) are all deemed fair game.

To what end?  Deficit control and deficit reduction, despite the fact that at present, the US has massive excess capacity including millions of unemployed and underemployed, a negative contribution from net exports, and a stagnant private spending growth horizon.  Yet the President marches on, oblivious to the harm his policies would introduce to an already bleeding economy, using the tired analogy between a household and a sovereign government to support his tired arguments.  It may have been impolitic, but “dick” is what immediately sprang to mind as one listened incredulously to the President’s press conference, which went from the sublime to the ridiculous.

*   *   *

Let’s state it again:  households do not have the power to levy taxes, to issue the currency we use, and to demand that those taxes are paid in the currency it issues.  Rather, households are users of the currency issued by the sovereign government.  Here the same distinction applies to private businesses, which are also users of the currency.  There’s a big difference, as all us on this blog have repeatedly stressed:  Users of a currency do face an external constraint in a way that a sovereign issuer of its currency does not.

*   *   *

The President has the causation here totally backward.  A growing economy, characterized by rising employment, rising incomes and rising capacity utilization causes the deficit to shrink, not the other way around.  Rising prosperity means rising tax revenues and reduced social welfare payments, whereas there is an overwhelming body of evidence to support the opposite – cutting budget deficits when there is slack private spending growth and external deficits will erode growth and destroy net jobs.

The increasing, widespread awareness of Obama’s mishandling of the economic crisis has resulted in a great cover story for New York Magazine by Frank Rich, entitled, “Obama’s Original Sin”.  While discussing Rich’s article, Yves Smith of Naked Capitalism lamented the fact that Obama is – again – the beneficiary of undeserved restraint:

Even Rich’s solid piece treats Obama more kindly that he should be.  He depicts the President as too easily won over by “the best and the brightest” in the guise of folks like Robert Rubin and his protégé Timothy Geithner.

We think this characterization is far too charitable.  Obama had a window in time in which he could have acted, decisively, to rein the financial services in, and he and his aides chose to let it pass and throw their lot in with the banksters.  That fatal decision has severely constrained their freedom of action, as we explain .  .  .

Miscreants such as Casey Anthony serve as convenient decoys for public anger.  Hopefully, by Election Day, the voters will realize that Casey Anthony isn’t to blame for the pathetic state of America’s economy and they will vote accordingly.


 

Another Great Idea From Ron Paul

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Congressman Ron Paul is one of the few original thinkers on Capitol Hill.  Sometimes he has great ideas, although at other times he might sound a little daft.  He recently grabbed some headlines by expressing the view that the United States “should declare bankruptcy”.  A June 28 CNN report focused on Paul’s agreement with the contention that if bankruptcy is the cure for Greece, it is also the cure for the United States.  However, as most economists will point out, the situation in Greece is not at all relevant to our situation because the United States issues its own currency and Greece is stuck with the euro, under the regime of the European Central Bank.  Anyone who can’t grasp that concept should read this posting by Cullen Roche at the Seeking Alpha website.

Nevertheless, economist Dean Baker picked up on one of Congressman Paul’s points, which – if followed through to its logical conclusion – could actually solve the debt ceiling impasse.  The remark by Ron Paul which inspired Dean Baker was a gripe about the $1.6 trillion in Treasury securities that the Federal Reserve now holds as a result of two quantitative easing programs:

“We owe, like, $1.6 trillion because the Federal Reserve bought that debt, so we have to work hard to pay the interest to the Federal Reserve,” Paul said. “We don’t, I mean, they’re nobody; why do we have to pay them off?”

In an article for The New Republic, Dr. Baker commended Dr. Paul for his creativity and agreed that having the Federal Reserve Board destroy the $1.6 trillion in government bonds it now holds as a result of quantitative easing “is actually a very reasonable way to deal with the crisis”.  Baker provided this explanation:

Last year the Fed refunded almost $80 billion to the Treasury.  In this sense, the bonds held by the Fed are literally money that the government owes to itself.

Unlike the debt held by Social Security, the debt held by the Fed is not tied to any specific obligations.  The bonds held by the Fed are assets of the Fed.  It has no obligations that it must use these assets to meet.  There is no one who loses their retirement income if the Fed doesn’t have its bonds.  In fact, there is no direct loss of income to anyone associated with the Fed’s destruction of its bonds.  This means that if Congress told the Fed to burn the bonds, it would in effect just be destroying a liability that the government had to itself, but it would still reduce the debt subject to the debt ceiling by $1.6 trillion. This would buy the country considerable breathing room before the debt ceiling had to be raised again.  President Obama and the Republican congressional leadership could have close to two years to talk about potential spending cuts or tax increases.  Maybe they could even talk a little about jobs.

Unfortunately, the next passage of Dr. Baker’s essay exposed the reason why this simple, logical solution would never become implemented:

As it stands now, the Fed plans to sell off its bond holdings over the next few years.  This means that the interest paid on these bonds would go to banks, corporations, pension funds, and individual investors who purchase them from the Fed.

And therein lies the rub:  The infamous “too-big-to-fail” banks could buy those bonds with money borrowed from the Fed at a fractional interest rate, and then collect the yield on those bonds – entirely at the expense of American taxpayers!  Not only would the American people lose money by loaning the bond purchase money to the banks almost free of charge – we would lose even more money by paying those banks interest on the money we just loaned to those same banks – nearly free of charge.  (This is nothing new.  It’s been ongoing since the inception of “zero interest rate policy” or ZIRP on December 16, 2008.)  President Obama would never allow his patrons on Wall Street to have such an opportunity “stolen” from them by the American taxpayers.  Banking industry lobbyists would start swarming all over Capitol Hill carrying briefcases filled with money if any serious effort to undertake such a plan reached the discussion stage.  At this point, you might suspect that the grifters on the Hill could have a scheme underway:  Make a few noises about following Baker’s suggestion and wait for the lobbyists to start sharing the love.

In the mean time, the rest of us will be left to suffer the consequences of our government’s failure to raise the debt ceiling.



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