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More Good Stuff From David Stockman

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August 2, 2010

The people described by Barry Ritholtz as “deficit chicken hawks” have their hands full.  Just as some Democrats, concerned about getting campaign contributions from rich people, were joining the ranks of the deficit chicken hawks to support extension of the Bush tax cuts, people from across the political spectrum spoke out against the idea.  As I pointed out on July 19, President Reagan’s former director of the Office of Management and Budget (OMB) – David Stockman – spoke out against extending the Bush tax cuts for the wealthy, during an interview with Lloyd Grove of The Daily Beast:

The Bush tax cuts never should’ve been passed because, one, we couldn’t afford them, and second, we didn’t earn them  …

The infamous former Federal Reserve chairman, Alan Greenspan, had already spoken out against the Bush tax cuts on July 16, during an interview with Judy Woodruff on Bloomberg Television.  In response to Ms. Woodruff’s question as to whether the Bush tax cuts should be extended, Greenspan replied:  “I should say they should follow the law and let them lapse.”

When Alan Greenspan appeared on the August 1 broadcast of NBC’s Meet The Press, David Gregory directed Greenspan’s attention back to the interview with Judy Woodruff, and asked Mr. Greenspan if he felt that all of the Bush tax cuts should be allowed to lapse.  Here is Greenspan’s reply and the follow-up:

MR.GREENSPAN:  Look, I’m very much in favor of tax cuts, but not with borrowed money.  And the problem that we’ve gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous.  And my view is I don’t think we can play subtle policy here on it.

MR. GREGORY:  You don’t agree with Republican leaders who say tax cuts pay for themselves?

MR. GREENSPAN:  They do not.

The drumbeat to extend the Bush tax cuts has been ongoing.  Federal Reserve chairman, Ben Bernanke, claimed on July 23, that those tax cuts would be one way of providing stimulus for the economy – provided that such a move were to be offset “with increased revenue or lower spending.”  Increased revenue?  Does that mean that people – other than those earning in excess of $250,000 per year – should make up the difference by paying higher taxes?

On July 31, David Stockman came back with a huge dose of common sense, in the form of an op-ed piece for The New York Times entitled, “Four Deformations of the Apocalypse”.  It began with this statement:

IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing.  The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion.  That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice.  It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.

The article included a boxcar full of great thoughts – among them was Stockman’s criticism of the latest incarnation of voodoo economics:

Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too.  But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.

Mr. Stockman took care to lay blame at the foot of the man he described in the Lloyd Grove interview as an “evil genius” – Milton Friedman – who convinced President Nixon in 1971 to “to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves.”

Despite the fact that tax cuts are considered by many as the ultimate panacea for all of America’s economic problems, David Stockman set the record straight about how the religion of taxcut-ology began:

Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts.  But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.

By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s.

Stockman’s discussion of “the vast, unproductive expansion of our financial culture” is probably just a teaser for his upcoming book on the financial crisis:

But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises.  They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives.  They could never have survived, much less thrived, if their deposits had not been governmentguaranteed and if they hadn’t been able to obtain virtually free money from the Fed’s discount window to cover their bad bets.

On the day following the publication of Stockman’s essay, Sarah Palin appeared on Fox News Sunday – prepared with notes again written on the palm of her hand – to argue in support of extending the Bush tax cuts.  Although her argument was directed against the Obama administration, I was fixated on the idea of a debate on the subject between Palin and her fellow Republican, David Stockman.  Some of those Republicans vying for their party’s 2012 Presidential nomination were probably thinking about the same thing.




The Pushback From Europe

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March 16, 2009

There was plenty of action and plenty of inaction in Europe last week, toward addressing the world financial crisis.  Our new Treasury Secretary, “Turbo” Tim Geithner, has been in Horsham, (West Sussex County) U.K., chatting it up with G-20 finance ministers in a run-up meeting to the big London Summit on April 2.  (Meanwhile . . . Who was conducting the “stress tests” on the nineteen “stressed” banks while Turbo Tim was across the pond, eating the awful, British food?  Worse yet:  Treasury still has a few positions to fill.)

We got a taste of the European response to the financial crisis during Sunday’s broadcast of NBC’s Meet The Press.  Near the end of the program, David Gregory asked the BBC’s Katty Kay about the “back story” to the G-20 finance ministers’ meeting in England:

MR. GREGORY:  You’re just back from Europe, Katty, and one of the big debates this week with the administration and Europe is that Europe does not want to do larger stimulus.  And we know that some of the problems in Europe and around the globe with this recession are quite acute.

MS. KAY:  You know, it’s really interesting traveling through Europe this week, and two things really struck me.  One is that there is less public concern about the nature of this crisis, and part of that is that Europeans have a broader social safety net.  I was speaking to a journalist in Sweden who said to me, “You know, if I lose my job, I lose some of my income.  But I still have very good health care and my children have very good state education.”  So people aren’t as panicked by this recession as they are here.  That means that there is less political pressure on European leaders to spend their way out of this and to act some kind of stimulus package, a global stimulus package, what the administration’s been calling for.  There is also a feeling in Europe that they don’t want to have to submit to an American made solution to what is seen by many, by many Europeans as an American made problem.  There is a real resistance here …

Europe’s portrayal of the world financial crisis as “an American problem” became painfully apparent during the recent G-20 finance ministers’ meeting.  As Damien Paletta and Stephen Fidler reported for The Wall Street Journal, the G-20 members exploited the opportunity to pressure Secretary Geithner on solving the problems in America’s banking sector before asking the G-20 to make any efforts toward increased economic stimulus spending.  The G-20 members are well-aware of the Obama administration’s unwillingness to place insolvent banks under government receivership, particularly since this is widely perceived in the United States as being too “un-American”, or worse yet  —  European.  As The Wall Street Journal article pointed out:

The turnaround suggests the limits of U.S. power in the world emerging out of the rubble of the financial crisis.  Many countries, including U.S. allies, are increasingly putting pressure on America to clean up a mess they believe it created.

Mr. Geithner’s actions during the next two weeks will be scrutinized by both Wall Street and world financial markets, which have remained unconvinced that the Obama administration can pull the world out of the downturn.

*    *    *

Participants said they were pleasantly surprised by the meeting’s unity of purpose, given comments beforehand from the Germans and the French rebuffing U.S. calls to make further commitments to fiscal expansion.  But it was also clear U.S. officials had a long way to go before they could satisfy concerns about the banking sector, which emerged as a surprising point of contention during the negotiations.

“I and some others were expecting much quicker movement on the part of the administration” related to the treatment of banks, said one central banker.

From the Obama administration’s perspective, there can only be one culprit responsible for this attitude about our government’s failure to address the unresolved problem of “troubled assets” (i.e. mortgage-backed securities and the multitude of  ill-begotten “derivatives”) responsible for the questionable health of so many American banks.  This culprit is Nobel Prize-winning Economist, Paul Krugman.  Professor Krugman has written again and again about the urgent need for the Obama administration to face the ugly reality that the “zombie banks” must be placed under government receivership (which is not really “nationalization”).

Fortunately, Professor Krugman stepped up and pointed out (in The New York Times) that if the EU really believes that it doesn’t have any skin in this game, it is in for an unpleasant surprise:

The clear and present danger to Europe right now comes from a different direction — the continent’s failure to respond effectively to the financial crisis.

Europe has fallen short in terms of both fiscal and monetary policy: it’s facing at least as severe a slump as the United States, yet it’s doing far less to combat the downturn.

*    *    *

Why is Europe falling short? Poor leadership is part of the story.  European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent.

*    *    *

You might expect monetary policy to be more forceful. After all, while there isn’t a European government, there is a European Central Bank.  But the E.C.B. isn’t like the Fed, which can afford to be adventurous because it’s backed by a unitary national government — a government that has already moved to share the risks of the Fed’s boldness, and will surely cover the Fed’s losses if its efforts to unfreeze financial markets go bad.  The E.C.B., which must answer to 16 often-quarreling governments, can’t count on the same level of support.

Europe, in other words, is turning out to be structurally weak in a time of crisis.

What transpired in this trans-continental dialogue was a lot like a volleyball game between politicians and commentators from the European Union against politicians and commentators from the United States.  After the EU team “spiked” the ball over the net —  it hit Tim Geithner on the head.  The ball then bounced away.  Just as the ball passed above Paul Krugman  —  “Boom Goes the Dynamite!”  Nice play, Paul!

The Stupid War Against The Stimulus

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February 23, 2009

We keep hearing rants against President Obama’s economic stimulus bill.  The final version of the bill was passed by both the House of Representatives and the Senate on February 13.  On February 17, it was signed into law by our new President.  It is now called the American Recovery and Reinvestment Act of 2009.  Nevertheless, there are people out there (nearly all of them Republicans) fuming about the stimulus bill, despite the fact that the debate is now over.  The bill has already gone into effect.  So what’s the point?  Many commentators feel that currently, there is fierce competition to stand out as the new leader of the Republican Party.  Louisiana Governor Bobby Jindal apparently believes he can advance his career by complaining about the stimulus and refusing to accept money allocated under the stimulus bill to expand eligibility for unemployment compensation because it would increase taxes on employers.  As Robert Pear and J. David Goodman reported for The New York Times, Mississippi Governor Haley Barbour said that he, too, would reject the money for expanding unemployment insurance:

“There is some we will not take in Mississippi,” Governor Barbour told CNN’s “State of the Union” on Sunday.  “We want more jobs.  You don’t get more jobs by putting an extra tax on creating jobs.”

The article noted that California Governor Arnold Schwarzenegger (also a Republican) would be happy to take any money from the stimulus bill that had been rejected by any other governor.

The hostility against the stimulus just doesn’t make sense.  A few Republicans may think they might look like heroes to the traditional Republican “base” right now, but as the stimulus plan begins to bear fruit, they are going to look like fools.

Tom Friedman discussed one intriguing conversation he had with a true American capitalist (the sort of voter Republicans always have taken for granted) in the February 21 New York Times:

The wind and solar industries in America “were dead in the fourth quarter,” said John Woolard, chief executive of BrightSource Energy, which builds and operates cutting-edge solar-thermal plants in the Mojave Desert.  Almost five gigawatts of new solar-thermal projects — the equivalent of five big nuclear plants — at various stages of permitting were being held up because of a lack of financing.

“All of these projects will now go ahead,” said Woolard.  “You are talking about thousands of jobs  …  We really got something right in this legislation.”

These jobs will be in engineering, constructing and operating huge solar systems and wind farms and manufacturing new photovoltaics.  Together they will drive innovation in all these areas — and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the “ChinIndia price,” that is the price at which they can scale in China and India.

Mr. Wollard “gets it” but the usual Republican spokesmen don’t.  As Jonathan Alter points out in the March 2 edition of Newsweek:

Columnist Charles Krauthammer called the $787 billion stimulus package “a legislative abomination,” and Karl Rove wrote that “the more Americans learn about the bill, the less they like it.”

Polls say otherwise.  The public likes the signs of action, respects that the new president is willing to admit error and appreciates his constant reminders that there are no easy cures to what ails us.

*   *   *

The GOP did a good job trivializing the stimulus, but Obama may have the last laugh.  The package is so big, and stretches across so many states, that it provides him at least four years of photo ops as Daddy O on tour, bringing home the jobs right in your local media market.  It was hardly a coincidence that video of bridge repair in Missouri began airing only moments after the president signed the bill.

As Walter Alarkon explained in his February 21 posting on The Hill website, there is a split among Republican governors as to whether the party’s next leader will be a centrist or a traditional conservative.  As his piece demonstrated, there are some Republicans who “get it”:

One possible White House hopeful, Utah Gov. Jon Huntsman Jr. (R), wouldn’t criticize the stimulus despite his red state bona fides.  He said that the federal money would fund infrastructure projects that could help the Beehive State’s economy.

“You have to have a party that is results oriented, that actually develops solutions to some of our nagging problems of today,” he said.

He said that Republicans who turn to “gratuitous rhetoric” will continue to lose.

Another Republican who “gets it” is Florida Governor Charlie Crist.  During his February 22 appearance on NBC’s Meet The Press, David Gregory asked Governor Crist whether he thought it was a mistake for the Republican Party to define itself by opposition to the stimulus.  Governor Crist gave this response:

Well, it may be.  All I know is I have to do what I think is in the best interest of the people of Florida.  And from my perspective, it’s to try and help them.  Help them every single day in every way that I can in education, in infrastructure, in health care; do the kinds of things that keep us from having to raise taxes.  You know, another part that people don’t talk about in the stimulus bill is that it cuts taxes.  About a third of it cuts taxes.   . . .   At the same time, because of the stimulus we’ll be able to pay our teachers more next year than we were this past year.  So I think it works, it works well, it helps people, it does what’s right.

How does one argue with that?  The current moot debate over the stimulus bill simply underscores one of the reasons why the Republicans suffered such huge losses in 2006 and 2008.  They need to abandon the failed strategy of focusing on the preferences of their so-called “base” and start representing the rest of America.  If they don’t learn this lesson, they will never win a majority in the Senate or the House and they will have to abandon their dreams of another Republican President.

The Gumball Gets Obnoxious

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October 6, 2008

In the days before the Vice-Presidential debate, many wise Republicans were calling for Sarah “The Gumball” Palin to be “thrown under the bus” and off the Republican ticket.  As I discussed on September 15, Sarah Palin has a limited skill set to fulfill her role as Vice-Presidential candidate.  (This became painfully obvious during the interviews with Charlie Gibson and Katie Couric.)  The Gumball can recite a small number of memorized answers very well, while looking directly into the TV camera to “connect” with her like-minded audience.  She can follow instructions from her handlers and recite the correct answer number as necessary.  She can read speeches, written by her handlers and deliver them in an enthusiastic way.  At the Vice-Presidential debate, she again demonstrated the ability to work from within her limited skill set to connect with the disappointed Republican “base”.  Nevertheless, at the debate, we saw her include another talent in her repertoire: the ability to read answers from cards.  Her “say it ain’t so, Joe” talking point was read from a card and delivered too quickly to have the full impact intended by the writers.  As she reached the following passage, we could see her reading it off a card:

Now, doggone it, let’s look ahead and tell Americans what WE have to plan to do for them in the future.

Because she avoided catastrophe at the debate, her performance was considered a “success” by many.  This inspired the strategists and handlers to give The Gumball a new role:  carrying the “dirty” water for the campaign – to deliver the negative attacks against Obama – Biden, in accordance with the latest game plan.  Palin’s debut in this role, following on the heels of yet another, scathing Tina Fey send-up of this fool, has made her appear as an individual whose ignorance is exceeded only by her obnoxiousness.  It makes me wonder what the campaign really has in mind for her.  Is this just another way of throwing her under the bus?  In this role, she has changed from “goofy” to actually detestable.  Let Palin sling the mud and if it doesn’t work, the guy at the top of the ticket can disown it.

What really gave me the creeps about the mainstream media’s analysis of the VP debate was best exemplified by the remarks of NBC’s White House correspondent, David Gregory, during NBC’s Meet The Press on October 5:

She made a decision that she was going to be rhetorical and not substantive on the issues.

*   *   *

I think she took herself off the table as an issue that could bring down the McCain Campaign.

*   *   *

She chose to ignore a lot of the substantive aspects of the debate and speak right to the American people.

At this point, most people with an I.Q. above 80 realize that The Gumball doesn’t decide anything about this campaign or what her statements will be in the pursuit of victory in this election.  Her job is to follow instructions —  to read or recite what she is told and nothing more.  The fact that someone of Mr. Gregory’s stature would expect the viewing public to believe the myth that The Gumball, herself, has anything substantive or strategic to contribute to this campaign is insulting to our intelligence.  Mr. Gregory:  Do you really think we are all so stupid as to believe that The Gumball can do anything other than recite prepared “talking points”, read scripted speeches and follow instructions?  Why is it so important for you to have us pretend that this numbskull can make important campaign decisions?  Do you have “handlers” directing you to deliver such absurd propositions to us?

On the other hand, Peggy Noonan’s remarks during that same panel discussion on Meet The Press, provide a candid view of the ugly truth about the current campaign:

We live in the age of political strategists.  We live in the age of “The Guys on the Plane”.  We live in the age of “The Blackberry Guy” saying:  “Let’s get ’em this way –  Let’s get ’em this way!”

*  *  *

I have the sense sometimes, lately, that these “Guys on the Plane” think history is their plaything.  History is not their plaything.

*  *  *

This is not a time for playfulness and mischief.  It ain’t right!

Rest assured that The Gumball will be spat out by “The Guys on the Plane” as soon as she loses her flavor.  This is likely to happen by November 5.  After that:  Watch what happens to her political career.

Hillary Delivers The Goods

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August 28, 2008

Like many critics of Hillary Clinton’s performance during this Primary season, I was very skeptical about whether she would deliver a whole-hearted endorsement of Barack Obama at the Democratic Convention.  My reaction to her speech on Tuesday night was similar to what I heard from the voices in my TV.  My first exclamation at the close of her speech, was:  “Out of the park and 300 feet above Waveland Avenue, all the way across!”  Keith Olbermann’s voice then came out of the TV, saying: “Grand Slam!” repeatedly.  After a minute, David Gregory asked New Mexico Governor Bill Richardson to critique the speech.  Richardson described it as “a 500-foot home run”.

After hearing her speech, I felt motivated to apologize for publicly doubting her loyalty to the Democratic Party.  She really did “deliver the goods” by giving what was, perhaps, her best speech on the campaign stump.  Although many of us were surprised by the substance of her speech, I was particularly impressed by her delivery.  Hillary had always addressed her audiences with Lieberman-esque stiffness.  Imagine someone saying “let us go forward” with a groaning, insincere tone for the 10,000th time.  That was the way Hillary used to speak.  In defeat, she really did find her voice.  Although she claimed that happened after her “close call” in New Hampshire, I believe that deep in her heart, she must have known she would not really find her voice until she would be completely vanquished in this campaign.  Once the weight of the world was (literally) lifted off her shoulders, she was able to freely and candidly express herself to the voters.  She needs to review the videos of this speech to reinforce her better public speaking skills, as an example of “how it is done properly”.  The look in Bill’s eyes told the story:  Hillary had finally cultivated her public speaking skills to the level where they belong.  Right on the heels of the Summer Olympics, where we saw so many American women win so many medals, we saw an American woman who ran for the Presidency, delivering a solid performance for Team U.S.A.  I’m sure the audience saw it this way and it was reflected in the sports metaphors used by so many, expressing their reactions to this speech.

I was glad to see the individuals mentioned in my “Women To Watch” article (June 19) behind the podium during the first two days of this Convention.  At the Republican Convention, we will not see this many women speaking, unless they run some sort of “Abortion Confessional” feature.  (John Waters would be the perfect director for such a piece.)

Bill Clinton’s only challenge at this Convention was to show that he still has “the old magic”.  It was not unlike an extended, Keith Richards guitar solo at a Rolling Stones concert.  All he had to do was go out and give the audience a little of the old  …  “little of the old”.   It worked.  Bill was back with his unique ability to enrapture a crowd.  The audience responded warmly to him.

By this point in the Democratic Convention, no speaker had yet really slaughtered John McCain or the Republicans to the extent many Democrats had anticipated.  Patrick Buchanan of MSNBC voiced his criticism that McCain had been “getting a free ride” at this Convention.  His remark drew a round of applause from the largely-Democratic, outdoor crowd at Union Station in Denver.

Finally, Joe Biden stepped up to serve the audience some petit filet mignon.  Democrats aren’t big on red meat.  They’re mostly a “fish” crowd, preferring high levels of mercury over the risk of colon cancer.  The avoidance of “red meat” had been obvious all week.  It was beginning to show.  Had the arugula vegans taken over Obama’s campaign once and for all?  Biden gave the Convention program just what it needed:  some hardball pitches at McCain’s failed foreign policy positions, contrasted with Obama’s foreign policy ideas, some of which were ratified by the Bush Administration even after McCain had dissed them as nonsense.

For his part, Obama educated his Republican critics about the characterization of him as a “celebrity”.  They just can’t get a handle on it.  On Wednesday night, Obama made it clear that he is not just a celebrity …  He’s an “M.C.”  (This means “master of ceremonies” to all of us still using SPF 30 sunscreen in late August.)  “M.C. Barack” had things under control by the end of Wednesday night.  Let’s see how he does on Thursday.