Was Hurricane Sandy a Democrat? Two weeks ago, Mitt Romney’s tormentor was a debate moderator named Candy. This week, Romney’s nemesis is a storm named Sandy. The latest blow to the Republican’s Presidential campaign came from an actual wind. Precious news program time, normally devoted to the battle for the White House – which amounts to free infomercial time from the networks – is now being diverted to coverage of the storm’s havoc. Worse yet, the Benghazi story has become “old news”, bumped back to oblivion. As Romney’s surrogates complain that Obama cannot be trusted to work with Republicans, news coverage shows the President with Republican Chris Christie at his side so frequently that rest-home-bound geriatrics are remarking about the excessive weight gained by Joe Biden. Despite the claim that government is the problem rather than the solution, many of Sandy’s victims are finding the opposite to be the case. FEMA can no longer be described as a government extravagance. If all that weren’t bad enough – global warming is back in the news . . . big time . . .
What could likely be a lasting legacy from Sandy will have a bipartisan impact – a painful blow to Democrats and Republicans who remain dogmatically opposed to government-initiated fiscal stimulus programs. Sandy is about to prove them wrong. The massive infrastructure restoration efforts, which will be necessary to address Sandy’s damage, could end up providing the financial stimulus which Congress would never have approved if Sandy had not headed westbound.
Duncan Bowen Black has a PhD in Economics from Brown University. His Eschaton blog presents the liberal perspective on more issues than those related to the economy. Love him or hate him, his April 30 USA Today article is downright prescient. Sandy will prove, once and for all, that Keynes was right. Resistance is futile. Consider his points:
To suggest that the response to the storm impact might improve the economy is not to suggest that the storm is somehow a good thing, but a quick mobilization of resources to complete necessary repairs could temporarily boost employment and improve business for companies producing and selling construction materials. There would also be additional multiplier effects of this spending on the economy, as workers and business owners spend their increased wages and profits.
But this could be true even absent widespread storm damage. Speeding up other infrastructure repair projects would also put people back to work. For example, many cities have aging water systems that experience regular costly water main breaks. These projects don’t need costly studies or lengthy environmental impact reports and could be implemented almost immediately. Buy materials, dig up the streets, replace the pipes, repair the streets and pay your workers. They are truly shovel ready projects in need of funding.
No degree of Austerian opposition will be able to prevent the post-Sandy infrastructure restoration programs from being implemented. Sandy is about to teach America an important lesson, which could motivate many politicians to repeat what Richard Nixon said in 1971: “I am now a Keynesian in economics”.
By now, you’ve heard about it dozens of times. Mitt Romney is taking heat for remarks he made at a private fundraiser in Boca about the 47 percent of Americans who won’t vote for him because they enjoy taking handouts from the government. In response to the dustup, the Romney camp has focused on remarks made by Barack Obama during the 2008 campaign about people who “cling to their guns and religion”. Obama’s discussion with “Joe the Plumber” about “spreading the wealth around” has been cited as another example of Obama’s favoritism of one population segment over another. Nevertheless, as Brit Hume explained to Greta on Fox News, the Republicans’ focus on those remarks did not work during the 2008 campaign and there is no reason to believe that it will gain any more traction during the current election cycle.
Actually, there is a better example of Obama’s expression of contempt for a bloc of voters during a fundraiser, which is somewhat analogous the situation involving Romney in Boca. During the mid-term election campaign in September of 2010, Obama managed to alienate a good number of his own supporters during an event at the home of the appropriately-named Rich Richman. The event demonstrated how politicians – from either party – will speak more candidly and cynically about the “little people” when talking to their fat cat contributors. Nevertheless, the Republicans will not likely exploit Obama’s remarks at the Rich-man event. Of course, Obama supporters would be reminded that their candidate is not a significantly different alternative to Romney. However, by the same token, Romney supporters would be reminded that their candidate does not offer a significantly distinct alternative to Obama. As a result, the Republicans will never use it.
Let’s jump into the time machine and look back at how I discussed the Richman event on September 20, 2010:
President Obama recently spoke at a $30,000-per-plate fundraising event for the Democratic National Committee at the home of Richard and Ellen Richman. (Think about that name for a second: Rich Richman.) Mr. Richman lives up to his surname and resides in the impressive Conyers Farm development in Greenwich, Connecticut. Christopher Keating of the Capitolwatch blog at courant.com provided us with the President’s remarks, addressed to the well-heeled attendees:
. . . Democrats, just congenitally, tend to get – to see the glass as half empty. (Laughter.) If we get an historic health care bill passed – oh, well, the public option wasn’t there. If you get the financial reform bill passed – then, well, I don’t know about this particularly derivatives rule, I’m not sure that I’m satisfied with that. And gosh, we haven’t yet brought about world peace and – (laughter.) I thought that was going to happen quicker. (Laughter.) You know who you are. (Laughter.)
The tactlessness of those remarks was not lost on Glenn Greenwald of Salon.com. Mr. Greenwald transcended the perspective of an offended liberal to question what could possibly have been going on in the mind of the speaker:
What’s most striking about Obama’s comments is that there is no acceptance whatsoever of responsibility (I’ve failed in some critical areas; we could have/should have done better). There’s not even any base-motivating vow to fight to fix these particular failures (we’ll keep fighting for a public option/to curb executive power abuses/to reduce lobbyist and corporate control of our political process). Instead, he wants you to know that if you criticize him — or even question what he’s done (“well, I don’t know about this particular derivatives rule, I’m not sure that I’m satisfied with that”) – it’s your fault: for being some sort of naive, fringe-leftist idiot who thought he would eliminate the Pentagon and bring about world peace in 18 months, and/or because you simply don’t sufficiently appreciate everything he’s done for you because you’re congenitally dissatisfied.
* * *
Sitting at a $30,000 per plate fundraising dinner and mocking liberal critics as irrational ingrates while wealthy Party donors laugh probably does wonders for bruised presidential egos, but it doesn’t seem to be a particularly effective way to motivate those who are so unmotivated. Then again, Barack Obama isn’t actually up for election in November, so perhaps the former goal is more important to him than the latter. It certainly seems that way from these comments.
Of course, liberals weren’t the only Obama supporters who felt betrayed by the President’s abandonment of his campaign promises. In fact, Obama owed his 2008 victory to those independent voters who drank the “Hope and Change” Kool-Aid.
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.’ ”
One important difference that Ashcroft failed to anticipate was that Bush knew better than to disparage his own base.
By the onset of the 2012 Presidential Campaign, many of Obama’s 2008 supporters had become ambivalent about their former hero. As I pointed out on August 13, once Romney had named Paul “Marathon Man” Ryan as his running mate (rather than Ohio Senator Rob Portman), he provided Democrats with a bogeyman to portray a Romney Presidency as a threat to middle-class Americans:
As the Democratic Party struggled to resurrect a fraction of the voter enthusiasm seen during the 2008 campaign, Mitt Romney came along and gave the Democrats exactly what they needed: a bogeyman from the far-right wing of the Republican Party. The 2012 campaign suddenly changed from a battle against an outsourcing, horse ballet elitist to a battle against a blue-eyed devil who wants to take away Medicare. The Republican team of White and Whiter had suddenly solved the problem of Democratic voter apathy.
We have never experienced a Presidential campaign with more fact-checking than what we are seeing during the current cycle. The well-timed release of a popular new book by Janine Driver entitled, You Can’t Lie to Me might be one of the reasons why this is happening. Fact-checking websites such as PolitiFact and FactCheck have been overflowing with reports of exaggerations, half-truths and flat-out lies by the candidates and their surrogates.
Paul Ryan’s acceptance speech drew instant criticism from a number of news outlets. I quickly felt vindicated for my last posting, which asserted that Romney made a mistake by selecting Ryan, rather than Ohio Senator Rob Portman, as his running mate. FactCheck provided this breakdown of the misrepresentations in Ryan’s speech:
Paul Ryan’s acceptance speech at the Republican convention contained several false claims and misleading statements. Delegates cheered as the vice presidential nominee:
Accused President Obama’s health care law of funneling money away from Medicare “at the expense of the elderly.” In fact, Medicare’s chief actuary says the law “substantially improves” the system’s finances, and Ryan himself has embraced the same savings.
Accused Obama of doing “exactly nothing” about recommendations of a bipartisan deficit commission — which Ryan himself helped scuttle.
Claimed the American people were “cut out” of stimulus spending. Actually, more than a quarter of all stimulus dollars went for tax relief for workers.
Faulted Obama for failing to deliver a 2008 campaign promise to keep a Wisconsin plant open. It closed less than a month before Obama took office.
Blamed Obama for the loss of a AAA credit rating for the U.S. Actually, Standard & Poor’s blamed the downgrade on the uncompromising stands of both Republicans and Democrats.
If the widespread criticism of the veracity of Ryan’s speech had not been bad enough, Runner’s World saw fit to bust Ryan for making a false claim that he once ran a marathon in less than three hours. In reality, it took him just over four hours.
Ultimately, convention speeches are about making the argument for your team. We should fully expect politicians to make their case using facts and figures that either tilt positive about their accomplishment – or negative about their opponents. As the fact-checking business has blossomed in the news media, it has been increasingly hard for politicians to get away with such truth-shading without someone noticing.
Both political parties will stretch the truth if they believe it will advance their political interests. It’s been a rough campaign so far, but the GOP convention that just ended was strictly in the mainstream for such party celebrations.
As the Democratic Convention approaches, a good deal of attention has been focused on PolitiFact’s Obameter, which measures how well Obama has delivered on his campaign promises. PolitiFact’s most recent status report offered this analysis:
Our scorecard shows Obama kept 37 percent of his promises. He brought the war in Iraq to a close and finally achieved the Democratic dream of a universal health care program. When the United States had Osama bin Laden in its sights, Obama issued the order to kill.
Sixteen percent are rated Broken, often because they hit a brick wall in Congress. Global warming legislation passed the House but died in the Senate. He didn’t even push for comprehensive immigration reform. His program to help homeowners facing foreclosure didn’t even meet its own benchmarks. (PolitiFact rates campaign promises based on outcomes, not intentions.)
With four months left in Obama’s term, PolitiFact has rated Obama’s remaining promises Compromise (14 percent), Stalled (10 percent) or In the Works (22 percent).
The ad claims that Romney raised taxes on the middle class. It’s true that Romney imposed a number of fees, but none of them targeted middle-income persons. Also, Romney proposed cutting the state income tax three times – a measure that would have resulted in tax cuts for all taxpayers – but he was rebuffed every time by the state’s Democratic Legislature.
I suspect that the Obama campaign has a secret plan in the works to avoid the scrutiny of fact-checkers during their convention. Their plan to have John Kerry speak is actually part of a plot to cause the fact-checkers to fall asleep. Once “Operation Snoozeboat” is complete, the speakers who follow Kerry will be able to make the wildest claims imaginable – and get away with it!
On May 22, the Congressional Budget Office released its report on how the United States can avoid going off the “fiscal cliff” on January 1, 2013. The report is entitled, “Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013”. Forget about the Mayan calendar and December 21, 2012. The real disaster is scheduled for eleven days later. The CBO provided a brief summary of the 10-page report – what you might call the Cliff Notes version. Here are some highlights:
In fact, under current law, increases in taxes and, to a lesser extent, reductions in spending will reduce the federal budget deficit dramatically between 2012 and 2013 – a development that some observers have referred to as a “fiscal cliff” – and will dampen economic growth in the short term.
* * *
Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects – with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.
As the complete version of the report explained, the consequences of abruptly-imposed, draconian austerity measures while the economy is in a state of anemic growth in the wake of the 2008 financial crisis, could have a devastating impact because incomes will drop, shrinking the tax base and available revenue – the life blood of the United States government:
The weakening of the economy that will result from that fiscal restraint will lower taxable incomes and, therefore, revenues, and it will increase spending in some categories – for unemployment insurance, for instance.
An interesting analysis of the CBO report was provided by Robert Oak of the Economic Populist website. He began with a description of the cliff itself:
What the CBO is referring to is the fiscal cliff. Remember when the budget crisis happened, resulting in the United States losing it’s AAA credit rating? Then, Congress and this administration just punted, didn’t compromise, or better yet, base recommendations on actual economic theory, and allowed automatic spending cuts of $1.2 trillion across the board, to take place instead. These budget cuts will be dramatic and happen in 2012 and 2013.
Spending cuts, especially sudden ones, actually weaken economic growth. This is why austerity has caused a disaster in Europe. Draconian cuts have pushed their economies into not just recessions, but depressions.
The conclusion reached by Robert Oak was particularly insightful:
This report should infuriate Republicans, who earlier wanted to silence the CBO because they were telling the GOP their policies would hurt the economy in so many words. But maybe not. Unfortunately the CBO is not breaking down tax cuts, when there is ample evidence tax cuts for rich individuals do nothing for economic growth. Bottom line though, the CBO is right on in their forecast, draconian government spending cuts will cause an anemic economy to contract.
Although the CBO did offer a good solution for avoiding a drive off the fiscal cliff, it remains difficult to imagine how our dysfunctional government could ever implement these measures:
Or, if policymakers wanted to minimize the short-run costs of narrowing the deficit very quickly while also minimizing the longer-run costs of allowing large deficits to persist, they could enact a combination of policies: changes in taxes and spending that would widen the deficit in 2013 relative to what would occur under current law but that would reduce deficits later in the decade relative to what would occur if current policies were extended for a prolonged period.
The foregoing passage was obviously part of what Robert Oak had in mind when he mentioned that the CBO report would “infuriate Republicans”. Any plans to “widen the deficit” would be subject to the same righteous indignation as an abortion festival or a national holiday for gay weddings. Nevertheless, Mitt Romney accidentally acknowledged the validity of the logic underlying the CBO’s concern. Bill Black had some fun with Romney’s admission by writing a fantastic essay on the subject:
Romney has periodic breakdowns when asked questions about the economy because he sometimes forgets the need to lie. He forgets that he is supposed to treat austerity as the epitome of economic wisdom. When he responds quickly to questions about austerity he slips into default mode and speaks the truth – adopting austerity during the recovery from a Great Recession would (as in Europe) throw the nation back into recession or depression. The latest example is his May 23, 2012 interview with Mark Halperin in Time magazine.
“Halperin: Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?
Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course.”
Romney explains that austerity, during the recovery from a Great Recession, would cause catastrophic damage to our nation. The problem, of course, is that the Republican congressional leadership is committed to imposing austerity on the nation and Speaker Boehner has just threatened that Republicans will block the renewal of the debt ceiling in order to extort Democrats to agree to austerity – severe cuts to social programs. Romney knows this could “throw us into recession or depression” and says he would never follow such a policy.
* * *
Later in the interview, Romney claims that federal budgetary deficits are “immoral.” But he has just explained that using austerity for the purported purpose of ending a deficit would cause a recession or depression. A recession or depression would make the deficit far larger. That means that Romney should be denouncing austerity as “immoral” (as well as suicidal) because it will not simply increase the deficit (which he claims to find “immoral” because of its impact on children) but also dramatically increase unemployment, poverty, child poverty and hunger, and harm their education by causing more teachers to lose their jobs and more school programs to be cut.
Mitt Romney is beginning to sound as though he has his own inner Biden, who spontaneously speaks out in an unrestrained manner, sending party officials into “damage control” mode.
This could turn out to be an interesting Presidential campaign, after all.
His crusade against corruption in politics has made him the invisible Presidential candidate. The mainstream news media have no interest in him. His anti-status quo message is probably the reason why. Andrew Kreig of Washington’s Blog reported that Buddy Roemer appeared with reformed ex-convict / former lobbyist Jack Abramoff before a cozy, standing-room-only audience of 120, convened on March 22 by the non-partisan Committee for the Republic. For those unfamiliar with Buddy Roemer, Kreig provided this summary of the candidate’s background and political perspective:
“I don’t think the answer is the Republican Party,” said the former two-term governor of Louisiana, who became a Republican in 1991 and returned to politics last year after a 16-year absence. Earlier, he served four terms as a Democratic congressman beginning in the 1980, running unopposed in his last three races.
“And,” he continued, “I don’t think the answer is the Democratic Party.” He says both parties are controlled by special interests and political action committees (PACs), whose checks he has refused to take since his first race three decades ago.
* * *
The big knock on Roemer is that he lacks high poll numbers and name recognition, doubtless because GOP debate-organizers excluded him. Yet he was doing better in certain key criteria than some other candidates invited repeatedly for nationally broadcast debates. Roemer concluded that his basic problem was that GOP chieftains did not want him to describe his reform message.
Therefore, Roemer’s campaign is now focused on winning the Americans Elect nomination to be on the November ballot in all 50 states. Then he wants 15% support in poll numbers so he will be included in debates with the Democratic and Republican nominees.
On December 12, I discussed some of the criticism directed at Americans Elect. Most notably, Richard Hansen, a professor at the University of California at Irvine Law School, wrote an essay for Politico, which was harshly critical of Americans Elect. Professor Hansen concluded the piece with these observations:
But the biggest problem with Americans Elect is neither its secrecy nor the security of its election. It is the problems with internal fairness and democracy. To begin with, according to its draft rules, only those who can provide sufficient voter identification that will satisfy the organization – and, of course, who have Internet access – will be allowed to choose the candidate. These will hardly be a cross section of American voters.
In addition, an unelected committee appointed by the board, the Candidates Certification Committee, will be able to veto a presidential/vice presidential ticket deemed not “balanced” – subject only to a two-thirds override by delegates.
It gets worse. Under the group’s bylaws, that committee, along with the three other standing committees, serves at the pleasure of the board – and committee members can be removed without cause by the board. The board members were not elected by delegates; they chose themselves in the organization’s articles of incorporation.
The bottom line: If Americans Elect is successful, millions of people will have united to provide ballot access not for a candidate they necessarily believe in – like a Ross Perot or Ralph Nader – but for a candidate whose choice could be shaped largely by a handful of self-appointed leaders.
Despite the veneer of democracy created by having “delegates” choose a presidential candidate through a series of Internet votes, the unelected, unaccountable board of Americans Elect, funded by secret money, will control the process for choosing a presidential and vice presidential candidate – who could well appear on the ballot in all 50 states.
Roemer’s ability to survive this questionable nomination process is just the first hurdle. Even if he wins that nomination, he will be confronted by critics of Americans Elect to defend that organization’s controversial nomination procedure. Nevertheless, if none of his opponents from that nomination campaign step up to oppose the result, Roemer might just breeze through any questions concerning that issue.
One interesting way to get a look at Buddy Romer is to read his Twitter feed – (@BuddyRoemer). Roemer’s staff members occasionally post tweets about such subjects as the candidate’s desire to restore the “Made in America” label so that consumers would have the choice to buy products from manufacturers who employ their neighbors. Here are some of Buddy’s own tweets:
If Santorum and Gingrich don’t get the GOP nomination, will they return to lobbying? Or keep their records clean for 2016?
“Few men have virtue to withstand the highest bidder.” – George Washington
RT “@maximosis: The more people wake up from their tacit acceptance of the corporatocracy, the more apparent these abuses will become.”
“The people do not control America, the big checks do.”
From 1998-2010, the Financial, Insurance, Real Estate sectors spent $6.8 BILLION in lobbying & campaign donations.
At his campaign website, supporters are encouraged to post tweets to Romer’s Twitter feed in addition to making contributions within the self-imposed, $100 limit. At the “Blog” section, there are links to videos of the candidate’s television appearances. A visit to the “Issues” section of his website will reveal Roemer’s position on banking reform:
As a small business banker, Buddy Roemer is proud to have chosen smart investments that kept his bank on solid footing while others were taking bailouts from the government to remain solvent. Banking is too important to be left to the bankers, but Buddy recognizes that regulation of the industry must be a fine balance between too much and too little.
That sure sounds better than Romney’s “regulations kill jobs” theme and Obama’s track record of giving the banks everything they want, with revolving doors connecting the West Wing to Citigroup and Goldman Sachs.
The bigquestion will be whether (as the Americans Elect nominee) Romer could accumulate the support from 15% of poll respondents so that he could participate in the Presidential debates with Obama and Romney. It sure would be interesting to see him on the stage with those two. The public might actually take interest in the process.
A good deal of Mitt Romney’s appeal as a Presidential candidate is based on his experience as a private equity fund manager – despite the “vulture capitalist” moniker, favored by some of his critics. Many voters believe that America needs someone with more “business sense” in the White House. Listening to Mitt Romney would lead one to believe that America’s economic and unemployment problems will not be solved until “government gets out of the way”, allowing those sanctified “job creators” to bring salvation to the unemployed masses. Those who complained about how the system has been rigged against the American middle class during the past few decades have found themselves accused of waging “class warfare”. We are supposed to believe that Romney speaks on behalf of “business” when he lashes out against “troublesome” government regulations which hurt the corporate bottom line and therefore – all of America.
Nevertheless, the real world happens to be the home of many wealth managers – entrusted with enormous amounts of money by a good number of rich people and institutional investors – who envision quite a different role of government than the mere nuisance described by Romney and like-minded individuals. If only our elected officials – and more of the voting public – would pay close attention to the sage advice offered by these wealth managers, we might be able to solve our nation’s economic and unemployment problems.
Last summer, bond guru Bill Gross of PIMCO lamented the Obama administration’s obliviousness to the need for government involvement in short-term job creation:
Additionally and immediately, however, government must take a leading role in job creation. Conservative or even liberal agendas that cede responsibility for job creation to the private sector over the next few years are simply dazed or perhaps crazed. The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper. That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities. Our labor force is too expensive and poorly educated for today’s marketplace.
* * *
In the near term, then, we should not rely solely on job or corporate-directed payroll tax credits because corporations may not take enough of that bait, and they’re sitting pretty as it is. Government must step up to the plate, as it should have in early 2009.
Have no doubt, this is a complex, multiyear effort that involves several government agencies acting in a delicate, coordinated effort. It will not happen unless our political leaders come together to address what constitutes America’s biggest national challenge. And sustained implementation will not be possible nor effective without much clearer personal accountability.
One would think that, given all this, it has become more than paramount for Washington to elevate – not just in rhetoric but, critically, through sustained actions – the urgency of today’s unemployment crisis to the same level that it placed the financial crisis three years ago. But watching the actions in the nation’s capital, I and many others are worried that our politicians will wait at least until the November elections before dealing more seriously with the unemployment crisis.
On October 31, I focused on the propaganda war waged against the Occupy Wall Street movement, concluding the piece with my expectation that Jeremy Grantham’s upcoming third quarter newsletter would provide some sorely-needed, astute commentary on the situation. Jeremy Grantham, rated by Bloomberg BusinessWeek as one of the Fifty Most Influential Money Managers, released an abbreviated edition of that newsletter one month later than usual, due to a busy schedule. In addition to expressing some supportive comments about the OWS movement, Grantham noted that he would provide a special supplement, based specifically on that subject. Finally, on February 5, Mr. Grantham made good on his promise with an opinion piece in the Financial Times entitled, “People now see it as a system for the rich only”:
For the time being, in the US our corporate and governmental system backed surprisingly by the Supreme Court has become a plutocracy, designed to prolong, protect and intensify the wealth and influence of those who already have the wealth and influence. What the Occupy movement indicates is that a growing number of people have begun to recognise this in spite of the efficiency of capital’s propaganda machines. Forty years of no pay increase in the US after inflation for the average hour worked should, after all, have that effect. The propaganda is good but not that good.
* * *
In 50 years economic mobility in the US has gone from the best to one of the worst. The benefits of the past 40 years of quite normal productivity have been abnormally divided between the very rich (and corporations) and the workers.
Indeed “divide” is not the right word, for, remarkably, the workers received no benefit at all, while the top 0.1 per cent has increased its share nearly fourfold in 35 years to a record equal to 1929 and the gilded age.
But the best propaganda of all is that the richest 400 people now have assets equal to the poorest 140m. If that doesn’t disturb you, you have a wallet for a heart. The Occupiers’ theme should be simple: “More sensible assistance for the working poor, more taxes for the rich.”
I’ve complained many times about President Obama’s decision to scoff at using the so-called “Swedish solution” of putting the zombie banks through temporary receivership. Back in November of 2010, economist John Hussman of the Hussman Funds discussed the consequences of the administration’s failure to do what was necessary:
If our policy makers had made proper decisions over the past two years to clean up banks, restructure debt, and allow irresponsible lenders to take losses on bad loans, there is no doubt in my mind that we would be quickly on the course to a sustained recovery, regardless of the extent of the downturn we have experienced. Unfortunately, we have built our house on a ledge of ice.
* * *
As I’ve frequently noted, even if a bank “fails,” it doesn’t mean that depositors lose money. It means that the stockholders and bondholders do. So if it turns out, after all is said and done, that the bank is insolvent, the government should get its money back and the remaining entity should be taken into receivership, cut away from the stockholder liabilities, restructured as to bondholder liabilities, recapitalized, and reissued. We did this with GM, and we can do it with banks. I suspect that these issues will again become relevant within the next few years.
The plutocratic tools in control of our government would never allow the stockholders and bondholders of those “too-big-to-fail” banks to suffer losses as do normal people after making bad investments. It’s hard to imagine that Mitt Romney would take a tougher stance against those zombie banks than what we have seen from the Obama administration.
Our government officials – from across the political spectrum – would be wise to follow the advice offered by these fund managers. A political hack whose livelihood is based entirely on passive income has little to offer in the way of “business sense” when compared to a handful of fund managers, entrusted to use their business and financial acumen to preserve so many billions of dollars. Who speaks for business? It should be those business leaders who demonstrate concern for the welfare of all human beings in America.
In my last posting, I focused on how Jon Huntsman has been the only Presidential candidate to present responsible ideas for regulating the financial industry (Obama included). Since that time, I have read a number of similarly favorable reactions from respected authorities and commentators who reviewed Huntsman’s proposals .
Simon Johnson is the former Chief Economist for the International Monetary Fund (IMF) from 2007-2008. He is currently the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management. At his Baseline Scenario blog, Professor Johnson posted the following comments in reaction to Jon Huntsman’s policy page on financial reform and Huntsman’s October 19 opinion piece for The Wall Street Journal:
More bailouts and the reinforcement of moral hazard – protecting bankers and other creditors against the downside of their mistakes – is the last thing that the world’s financial system needs. Yet this is also the main idea of the Obama administration. Treasury Secretary Tim Geithner told the Fiscal Times this week that European leaders “are going to have to move more quickly to put in place a strong firewall to help protect countries that are undertaking reforms,” meaning more bailouts. And this week we learned more about the underhand and undemocratic ways in which the Federal Reserve saved big banks last time around. (You should read Ron Suskind’s book, Confidence Men: Wall Street, Washington, and the Education of a President, to understand Mr. Geithner’s philosophy of unconditional bailouts; remember that he was president of the New York Fed before become treasury secretary.)
Is there really no alternative to pouring good money after bad?
In a policy statement released this week, Governor Jon Huntsman articulates a coherent alternative approach to the financial sector, which begins with a diagnosis of our current problem: Too Big To Fail banks,
“To protect taxpayers from future bailouts and stabilize America’s economic foundation, Jon Huntsman will end too-big-to-fail. Today we can already begin to see the outlines of the next financial crisis and bailouts. More than three years after the crisis and the accompanying bailouts, the six largest U.S. financial institutions are significantly bigger than they were before the crisis, having been encouraged by regulators to snap up Bear Stearns and other competitors at bargain prices”
Mr. Geithner feared the collapse of big banks in 2008-09 – but his policies have made them bigger. This makes no sense. Every opportunity should be taken to make the megabanks smaller and there are plenty of tools available, including hard size caps and a punitive tax on excessive size and leverage (with any proceeds from this tax being used to reduce the tax burden on the nonfinancial sector, which will otherwise be crushed by the big banks’ continued dangerous behavior).
The goal is simple, as Mr. Huntsman said in his recent Wall Street Journal opinion piece: make the banks small enough and simple enough to fail, “Hedge funds and private equity funds go out of business all the time when they make big mistakes, to the notice of few, because they are not too big to fail. There is no reason why banks cannot live with the same reality.”
These banks now have assets worth over 66% of gross domestic product—at least $9.4 trillion, up from 20% of GDP in the 1990s. There is no evidence that institutions of this size add sufficient value to offset the systemic risk they pose.
The major banks’ too-big-to-fail status gives them a comparative advantage in borrowing over their competitors thanks to the federal bailout backstop.
Far be it from President Obama to make such an observation.
More specifically, real reform means repealing the 2010 Dodd-Frank law, which perpetuates too-big-to-fail and imposes costly and mostly useless regulations on innocent smaller banks without addressing the root causes of the crisis or anticipating future crises. But the overregulation cannot be addressed without ending the bailout subsidies, so that is where reform must begin.
Beyond that, Huntsman’s Wall Street Journal piece gave us a chance to watch the candidate step in shit:
Once too-big-to-fail is fixed, we could then more easily repeal the law’s unguided regulatory missiles, such as the Consumer Financial Protection Bureau. American banks provide advice and access to capital to the entrepreneurs and small business owners who have always been our economic center of gravity. We need a banking sector that is able to serve that critical role again.
American banks also do a lot to screw their “personal banking” customers (the “little people”) and sleazy “payday loan”-type operations earn windfall profits exploiting those workers whose incomes aren’t enough for them to make it from paycheck-to-paycheck. The American economy is 70 percent consumer-driven. American consumers have always been “our economic center of gravity” and the CFPB was designed to protect them. Huntsman would do well to jettison his anti-CFPB agenda if he wants to become President.
So we need to get serious about derivatives regulation by bringing transparency to the over-the-counter derivatives market, with serious collateral requirements. This was turned into law as the Wall Street Transparency and Accountability Act of 2010, or Title VII of Dodd-Frank.
So we need to eliminate Dodd-Frank in order to pass Dodd-Frank’s resolution authority and derivative regulations – two of the biggest parts of the bill – but call it something else.
You can argue that Dodd-Frank’s derivative rules have too many loopholes with too much of the market exempted from the process and too much power staying with the largest banks. But those are arguments that Dodd-Frank doesn’t go far enough, where Huntsman’s critique of Dodd-Frank is that it goes way too far.
Huntsman should be required to explain the issues here – is he against Dodd-Frank before being for it? Is his Too Big To Fail policy and derivatives policy the same as Dodd-Frank, and if not how do they differ? It isn’t clear from the materials he has provided so far how the policies would be different, and if it is a problem with the regulations in practice how he would get stronger ones through Congress.
I do applaud this from Huntsman:
RESTORING RULE OF LAW
President Huntsman’s administration will direct the Department of Justice to take the lead in investigating and brokering an agreement to resolve the widespread legal abuses such as the robo-signing scandal that unfolded in the aftermath of the housing bubble. This is a basic question of rule of law; in this country no one is above the law. There are also serious issues involving potential violations of the securities laws, particularly with regard to fair and accurate disclosure of the underlying loan contracts and property titles in mortgage-backed securities that were sold. If investors’ rights were abused, this needs to be addressed fully. We need a comprehensive settlement that puts all these issues behind us, but any such settlement must include full redress of all legal violations.
* * *
And I will note that the dog-whistles hidden inside the proposal are towards strong reforms (things like derivatives reform “will also allow end-users to negotiate better terms with Wall Street and in turn lower trading costs” – implicitly arguing that the dealer banks have too much market power and it is the role of the government to create a fair playing field). Someone knows what they are doing. His part on bringing down the GSEs doesn’t mention the hobbyhorse of the Right that the CRA and the GSEs caused the crisis, which is refreshing to see.
If Republican voters are smart, they will vote for Jon Huntsman in their state primary elections. As I said last time: If Jon Huntsman wins the Republican nomination, there will be a serious possibility that the Democrats could lose control of the White House.
The bombastic non-Romney Republican Presidential hopeful, Herman Cain, has been providing us with a very entertaining meltdown. He has attempted to silence the handful of women, who came forward to accuse him of sexual harassment, with threatened defamation suits. Nevertheless, a woman who claimed to have been his paramour for thirteen years – Ginger White – possessed something the other women lacked: documentation to back up her claim. She has produced phone records, revealing that Cain was in contact with her at all hours of the day and night. Cain’s humorously disingenuous response: He was providing advice to Ms. White concerning her financial problems. When I first heard about Ginger White’s allegations, I assumed that she was motivated to tell her story because she felt outraged that Cain had been trying to cheat on her by making inappropriate advances toward those other women.
The next non-Romney candidate to steal the Republican spotlight was Newt Gingrich. Aside from the fact that Newt exudes less charisma than a cockroach, he has a “baggage” problem. Maureen Dowd provided us with an entertaining analysis of the history professor’s own history. The candidate and his backers must be counting on that famously short memory of the voting public. The biggest problem for Gingrich is that even if he could win the Republican nomination, he will never get elected President.
Meanwhile, Romney’s fellow Mormon, Jon Huntsman, is gaining momentum in New Hampshire. Huntsman has something the other Republicans lack: the ability to win support from Independent and Democratic voters. The unchallenged iron fists of Rush Limbaugh and Fox News, currently in control of the Republican party, have dictated to the masses that the very traits which give Huntsman a viable chance at the Presidency – are negative, undesirable characteristics.
Huntsman is branded as the Republican field’s lonely moderate, of course, which is one reason why he’s currently languishing at around 3 percent in the polls.
* * *
Huntsman has none of Romney’s health care baggage, and unlike the former Massachusetts governor, he didn’t spend the last decade flip-flopping on gun rights, immigration and abortion.
* * *
At the same time, because Huntsman is perceived as less partisan than his rivals, he has better general election prospects. The gears and tumblers of my colleague Nate Silver’s predictive models give Huntsman a 55 percent chance of knocking off the incumbent even if the economy grows at a robust 4 percent, compared to Romney’s 40 percent.
* * *
On issues ranging from foreign affairs to financial reform, Huntsman’s proposals have been an honorable exception to the pattern of gimmickry and timidity that has characterized the Republican field’s policy forays.
But his salesmanship has been staggeringly inept. Huntsman’s campaign was always destined to be hobbled by the two years he spent as President Obama’s ambassador to China. But he compounded the handicap by introducing himself to the Republican electorate with a series of symbolic jabs at the party’s base.
As Ross Douthat pointed out, New Hampshire will be Huntsman’s “make-or-break” state. The candidate is currently polling at 11 percent in New Hampshire and he has momentum on his side. Rachelle Cohen of the Boston Heraldfocused on Huntsman’s latest moves, which are providing his campaign with some traction:
Monday Huntsman introduced a financial plan aimed at cutting the nation’s biggest banks and financial institutions down to size so that they are no longer “too big to fail” and, therefore, would never again become a burden on the American taxpayer.
“There will be no more bailouts in this country,” he said, because taxpayers won’t put up with that kind of strategy again. “I would impose a fee [on the banks] to protect the taxpayers until the banks right-size themselves.”
The strategy, of course, is likely to be music to the ears of anyone who despised not just the bailouts but those proposed Bank of America debit card fees. And, of course, it gives Huntsman a good opening to make a punching bag of Mitt Romney.
“If you’re raising money from the big banks and financial institutions, you’re never going to get it done,” he said, adding, “Mitt Romney is in the hip pocket of Wall Street.” Lest there be any doubt about his meaning.
That issue also happens to be the Achilles heel for President Obama. Immediately after he was elected, Obama smugly assumed that Democratic voters would have to put up with his sellout to Wall Street because the Republican party would never offer an alternative. Huntsman’s theme of cracking down on Wall Street will redefine the Huntsman candidacy and it could pose a serious threat to Obama’s reelection hopes. Beyond that, as Ms. Cohen noted, Huntsman brings a unique skill set, which distinguishes him from his Republican competitors:
But it’s on foreign policy that Huntsman – who served not only in China and Singapore but as a deputy U.S. trade representative with a special role in Asia – excels, and not just because he’s fluent in Mandarin.
This is the guy anyone would feel comfortable having answer that proverbial 3 a.m. phone call Hillary Clinton once talked about.
If that phone call is coming from China – Huntsman won’t have to wake up an interpreter to conduct the conversation in Chinese.
Any other Republican candidate will serve as nothing more than a doormat for Obama. On the other hand, if Jon Huntsman wins the Republican nomination, there will be a serious possibility that the Democrats could lose control of the White House.
Will an Independent candidate please step into the 2012 Presidential campaign?
On November 6, 2012 a good number of citizens who voted for Barack Obama in 2008 will realize that they are faced with the choice of voting for either Black Romney or White Romney. As a result, those former Obama supporters won’t bother to vote at all. Barack Obama won’t be seen as a significantly dissimilar alternative to Romney. The indiscernible difference between those candidates would not justify the effort of standing in line at the polls.
Voter disappointment with the President is now being overshadowed by the rising pile of dirty laundry he has accumulated during his tenure in the White House. The burgeoning Solyndra scandal is being mishandled by the President himself. You would think he had learned a lesson from Weinergate, to the effect that fallacious denials about scandal allegations can create more trouble for a politician than the scandal itself. FactCheck.orgrecently caught Obama in a lie about the loan guarantee program exploited by Solyndra:
Obama referred to Solyndra’s loan at an Oct. 6 press conference as “a loan guarantee program that predates me.” That’s not accurate. It’s true that the Energy Policy Act of 2005 created a loan guarantee program for clean-energy companies developing “innovative technologies.” But Solyndra’s loan guarantee came under another program created by the president’s 2009 stimulus for companies developing “commercially available technologies.”
* * *
In a March 2009 press release announcing a $535 million loan guarantee for Solyndra, the Energy Department said: “This loan guarantee will be supported through the President’s American Recovery and Reinvestment Act, which provides tens of billions of dollars in loan guarantee authority to build a new green energy economy.” Damien LaVera, an Energy Department spokesman, confirmed that Solyndra’s funding came solely from section 1705.
That revelation is simply the first layer of frosting on a cake with some noxious ingredients baked into the recipe. ABC News provided this report:
An elite Obama fundraiser hired to help oversee the administration’s energy loan program pushed and prodded career Department of Energy officials to move faster in approving a loan guarantee for Solyndra, even as his wife’s law firm was representing the California solar company, according to internal emails made public late Friday.
“How hard is this? What is he waiting for?” wrote Steven J. Spinner, a high-tech consultant and energy investor who raised at least $500,000 for the candidate before being appointed to a key job helping oversee the energy loan guarantee program. “I have OVP [the Office of the Vice President] and WH [the White House] breathing down my neck on this.”
Many of the emails were written just days after Spinner accepted a three-page ethics agreement in which he pledged he would “not participate in any discussion regarding any application involving [his wife's law firm] Wilson [Sonsini Goodrich & Rosati].”
* * *
Recovery Act records show Allison Spinner’s law firm, Wilson Sonsini, received $2.4 million in federal funds for legal fees related to the $535 million Energy Department loan guarantee to Solyndra. That ethics agreement said his wife would forgo pay “earned as a result of its representation of applicants in programs within your official duties.”
Although many Obama apologists have characterized the Solyndra scandal a nothing more than a “Republican smear campaign”, Ryan Reilly of the non-Republican Talking Points Memo offered this analysis of the allegations:
Solyndra was raided by the FBI earlier this month. The Government Accountability Office had raised concerns that the Energy Department agreed to back five companies — including Solyndra — with loans without properly assessing their risk of failure. All this from a company that Obama described as a company with a “true engine of economic growth.”
And the details that are emerging from the investigators at the Republican-controlled House Energy and Commerce Committee are making things look worse for the administration.
Nine days before the administration formally announced the loan, a White House budget analyst wrote an email calling the deal “NOT ready for prime time,” according to documents given to ABC News by the House Energy and Commerce Committee investigators.
Despite the ongoing Occupy Wall Street protest, President Obama has seen fit to launch an assault on the Sarbanes-Oxley Act, which was created after the Enron scandal. Sarbanes-Oxley most notably assigned responsibility to corporate officers for the accuracy and validity of corporate financial reports and established criminal penalties for destruction or alteration of financial records, interference with investigations, as well as providing protection for whistle-blowers. The Business Insider reports that President Obama is advancing the recommendations of his jobs council which call for attenuating the Sarbanes-Oxley regulations, in order to make it easier for small companies to go public, by way of initial public offerings (IPOs):
The jobs council, headed by GE CEO Jeff Immelt and including Sheryl Sandberg and Steve Case, found that the Sarbanes-Oxley was a key factor in reducing the number of IPOs smaller than $50 million from 80 percent of all IPOs in the 1990s to 20 percent in the 2000s.
Obama also said the “Spitzer Decree,” which bans investment banks from using banking revenues to pay for research and expert analysis of publicly-traded companies, deserves reconsideration as well. The council said the rule shares the blame for the decline in IPOs among small companies.
This is ridiculous. Do you know what happens with small stocks? Pump and dump (and I’ve seen this at closer range than I would like. I had a former client get involved by having his private company merged into a public company controlled by small stock low lifes. They ran it from $1 to about $12 twice, and then it went back to under $2 and stayed there).
We were reminded of Obama’s hypocrisy on the subject of financial reform by a fantastic article written by Suzanna Andrews for Vanity Fair, which detailed how Elizabeth Warren was thrown under the bus by Obama, who shocked his supporters with his refusal to nominate Warren as chair of the Consumer Financial Protection Bureau (which she created).
Another disillusioned 2008 Obama supporter, Bill McKibben, wrote an essay for Tom’s Dispatch about how the President has sold out to Big Oil:
Here’s an example: by year’s end the president has said he will make a decision on the Keystone XL pipeline, which would carry crude oil from the tar sands of northern Alberta to the Gulf of Mexico. The nation’s top climate scientists sent the administration a letter indicating that such a development would be disastrous for the climate. NASA’s James Hansen, the government’s top climate researcher, said heavily tapping tar-sands oil, a particularly “dirty” form of fossil fuel, would mean “game over for the climate.” Ten of the president’s fellow recent Nobel Peace Prize laureates pointed out in a letter that blocking the prospective pipeline would offer him a real leadership moment, a “tremendous opportunity to begin transition away from our dependence on oil, coal, and gas.”
But every indication from this administration suggests that it is prepared to grant the necessary permission for a project that has the enthusiastic backing of the Chamber of Commerce, and in which the Koch Brothers have a “direct and substantial interest.” And not just backing. To use the words of a recent New York Times story, they are willing to “flout the intent of federal law” to get it done. Check this out as well: the State Department, at the recommendation of Keystone XL pipeline builder TransCanada, hired a second company to carry out the environmental review. That company already considered itself a “major client” of TransCanada. This is simply corrupt, potentially the biggest scandal of the Obama years. And here’s the thing: it’s a crime still in progress. Watching the president do nothing to stop it is endlessly depressing.
We shouldn’t be too surprised to learn that Obama’s dirty laundry has a few oil stains. The BIG surprise would be Obama’s reelection.
In the aftermath of Hurricane Irene, there has been plenty of criticism directed at efforts by the media to amp-up the danger threat during the days before the storm made landfall. Despite the fact that eleven people were killed by the hurricane, a wide assortment of commentators has seen fit to complain about the “hurricane hype”. Here is a bit of what Howard Kurtz had to say at The Daily Beast:
But the tsunami of hype on this story was relentless, a Category 5 performance that was driven in large measure by ratings. Every producer knew that to abandon the coverage even briefly – say, to cover the continued fighting in Libya – was to risk driving viewers elsewhere. Websites, too, were running dramatic headlines even as it became apparent that the storm wasn’t as powerful as advertised.
The fact that New York, home to the nation’s top news outlets, was directly in the storm’s path clearly fed this story-on-steroids. Does anyone seriously believe the hurricane would have drawn the same level of coverage if it had been bearing down on, say, Ft. Lauderdale?
In fact, here in south Florida, we have become accustomed to the scare-mongering, which runs ahead of any tropical depression appearing west of the Cape Verde Islands. Our local newscasters have an incentive to overstate the threat: If they can scare the local politicians into ordering a mandatory evacuation – the story goes national and the networks provide some face time for the local correspondents. At The Weather Channel, the incessant drumbeat warns: Keep watching us or die! I would be more than happy to cooperate if only they would feature Stephanie Abrams as often as they have Jim Cantore or Bryan Norcross on camera.
A similar fear-mongering strategy is becoming apparent in the Presidential campaign. Before Rick Perry jumped into the race, disgruntled former Obama supporters saw the 2012 campaign as a choice between two nearly-indistinguishable corporatists. With the ever-increasing likelihood that Rick Perry could become the Republican nominee, those ex-Obama fans are being constantly bombarded with reasons to be afraid … be very afraid. Are you going to just sit back and watch when President Perry declares war on Switzerland?
The most-frequently quoted observation about Rick Perry came from Bruce Bartlett, who served as deputy assistant secretary for economic policy at the Treasury Department, in the administration of President George H.W. Bush. During a recent appearance on CNN’s American Morning, Bartlett remarked:
“Rick Perry is an idiot, and I don’t think anybody would disagree with that.”
At the Huffington Post, the fixation on Rick Perry’s intellectual limitations resulted in the publication of some information from the candidate’s college transcript:
A source in Texas passed The Huffington Post Perry’s transcripts from his years at Texas A&M University. The future politician did not distinguish himself much in the classroom. While he later became a student leader, he had to get out of academic probation to do so. He rarely earned anything above a C in his courses — earning a C in U.S. History, a D in Shakespeare, and a D in the principles of economics. Perry got a C in gym.
Perry also did poorly on classes within his animal science major. In fall semester 1970, he received a D in veterinary anatomy, a F in a second course on organic chemistry and a C in animal breeding. He did get an A in world military systems and “Improv. of Learning” — his only two As while at A&M.
Josh Harkinson wrote an article for Mother Jones, recounting some episodes from Perry’s tenure as Governor of Texas. In addition to discussing the infamous Trans-Texas Corridor fiasco, the essay provided these factoids:
In 2004, whistleblowers repeatedly informed Perry’s office that the Governor’s Texas Youth Commission hires and protects “known child abusers.” His office ignored the warnings. Three years later, the story broke that top officials with the TYC had learned of and done nothing to stop widespread child molestation at a juvenile detention facility in West Texas.
* * *
Last year, Perry called the BP oil spill an “act of God.”
* * *
Perry has accepted $1.2 million from Texas billionaire Harold Simmons, who is building a nuclear waste dump in West Texas over the objections of some of the state’s own environmental regulators. In January, Texas’ Low-Level Radioactive Waste Disposal Compact Commission opened the door to allowing the dump to accept nuclear waste from around the country. Six of of the commission’s seven members were appointed by Perry.
The passage from Harkinson’s article, striking fear into the hearts of Democrats, concerns a bit of history, which might repeat itself in the event that progressives should decide to support a third-party candidate:
Perry’s political associates, including top adviser Dave Carney, have been repeatedly accused of helping the Green Party qualify for the ballot in order to siphon votes away from Democratic candidates.
Could something similar happen in November of 2012? Rick Perry is counting on it — and the media will incessantly remind you of that.
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.