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Jeremy Grantham And Ike

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As an avid reader of Jeremy Grantham’s Quarterly Letter, I was surprised when he posted a Special Topic report on January 14 — so close to release of his Fourth Quarter 2010 Letter, which is due in a couple of weeks.  At a time when many commentators are focused on the 50th anniversary of John F. Kennedy’s historic Inaugural Address, Jeremy Grantham has taken the opportunity to focus on President Dwight Eisenhower’s Farwell Address of January 17, 1961.  (Grantham included the full text of Ike’s Farwell Address at the conclusion of the Special Topic essay.)

One passage from Ike’s Farwell Address seemed particularly prescient in the wake of the TARP bailout (which was not a success) and the “backdoor bailouts” including the Maiden Lanes (which were never to be repaid) as well as the cost of approximately $350 billion per year to investors and savers, resulting from the Federal Reserve’s zero-interest-rate-policy (often referred to as “ZIRP”).  Keep those Wall Street bailouts in mind while reading this passage from Ike’s speech:

Crises there will continue to be.  In meeting them, whether foreign or domestic, great or small, there is a recurring temptation to feel that some spectacular and costly action could become the miraculous solution to all current difficulties.  A huge increase in newer elements of our defense; development of unrealistic programs to cure every ill in agriculture; a dramatic expansion in basic and applied research – these and many other possibilities, each possibly promising in itself, may be suggested as the only way to the road we wish to travel.

But each proposal must be weighed in the light of a broader consideration:  the need to maintain balance in and among national programs – balance between the private and the public economy, balance between cost and hoped for advantage – balance between the clearly necessary and the comfortably desirable; balance between our essential requirements as a nation and the duties imposed by the nation upon the individual; balance between actions of the moment and the national welfare of the future.  Good judgment seeks balance and progress; lack of it eventually finds imbalance and frustration.

In his Special Topic report, Jeremy Grantham focused on the disappointing changes that caused Ike’s America to become 21st Century America.  After quoting Ike’s now-famous admonition about the power of the military-industrial complex (for which the speech is frequently quoted) Grantham pointed out that the unrestricted influence of corporate power over our government has become a greater menace:

Unfortunately, the political-economic power problem has mutated away from the military, although it has left important vestiges there, toward a broader problem:  the undue influence of corporate America on the government, and hence the laws, taxes, and social policies of the country. This has occurred to such a degree that there seems little real independence in Congress, with most Congressmen answering first to the desire to be reelected and the consequent need to obtain funding from, shall we say, sponsors, and the need to avoid making powerful enemies.

*   *   *

The financial resources of the carbon-based energy companies are particularly terrifying, and their effective management of propaganda goes back decades.  They established and funded “independent” think tanks and even non-profit organizations that have mysteriously always come out in favor of policies favorable to maintaining or increasing the profits of their financial supporters.  The campaign was well-organized and has been terrifyingly effective.

*   *   *

The financial industry, with its incestuous relationships with government agencies, runs a close second to the energy industry.  In the last 10 years or so, their machine, led by the famously failed economic consultant Alan Greenspan – one of the few businessmen ever to be laughed out of business – seemed perhaps the most effective.  It lacks, though, the multi-decadal attitude-changing propaganda of the oil industry.  Still, in finance they had the “regulators,” deregulating up a storm, to the enormous profit of their industry.

Grantham concluded his report with a suggestion for the greatest tribute we could give Eisenhower after America ignored Ike’s warnings about the vulnerability of our government to unrestricted influences.  Grantham’s proposed tribute to Ike would be our refusal to “take this 50-year slide lying down”.

To steal a slogan from the Tea Party, I suggest the voters need to “take America back” from the corporations which bought off the government.  Our government has every intention of maintaining the status quo.

In the 2010 elections, voters were led to believe that they could bring about governmental reform by voting for candidates who will eventually prove themselves as protectors of the wealthy at the expense of the disappearing middle class.  In the 2008 elections, Barack Obama convinced voters that he was the candidate of change they could believe in.  In the real world of 2011, economist Simon Johnson explained what sort of “change” those voters received, as exemplified by the President’s appointment of his new Chief of Staff:

Let’s be honest.  With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout.  The risk inherent to our financial system is now higher than it was in the early/mid-2000s.  We are set up for another illusory financial expansion and another debilitating crisis.

Bill Daley will get it done.

Just as Jeremy Grantham explained how Eisenhower’s concerns about the military-industrial complex were materialized in the form of a corporate-controlled government, another unholy alliance was discussed by Charles Ferguson, director of the documentary film, Inside Job.  Ferguson recently offered an analysis of the milieu that resulted in President Obama’s appointment of Larry Summers as Director of the National Economic Council.  As Larry Summers announced plans to move on from that position, Ferguson explained how Summers had been granted the opportunity to inflict his painful legacy upon us:

Summers is unique but not alone.  By now we are all familiar with the role of lobbying and campaign contributions, and with the revolving door between industry and government.  What few Americans realize is that the revolving door is now a three-way intersection.  Summers’ career is the result of an extraordinary and underappreciated scandal in American society:  the convergence of academic economics, Wall Street, and political power.

America needs new leaders who refuse to capitulate to the army of lobbyists on Capitol Hill.  Where are they?


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If Joe The Plumber Knew Bill Ayers

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October 16, 2008

The final Presidential debate turned an ordinary, hard-working American into a cult hero.  Not since the introduction of Sarah Palin onto the national political scene, have we seen such an “overnight sensation”.  Once again, we have John McCain to thank.

It all started on Sunday, October 12.  Senator Barack Obama was working the crowds in the battleground state of Ohio.  While meeting the people in Holland, Ohio, the television camera crews caught an exchange between Obama and a gentleman named Joe Wurzelbacher.  On the evening of Wednesday October 15, after the debate, the Associated Press informed us that Joe had been interested in buying a plumbing business.  He was concerned about Obama’s tax plan.  Apparently, this plumbing business generated enough income to put it over Obama’s $250,000 tax threshold, although not significantly above that.  Joe would likely be getting “the worst of both worlds” under the Obama plan:  He would have to pay the 39-percent tax instead of a 36-percent tax and as a result, he might pocket a net income lower than what the business would get if that company had earned less than $250,000.  According to the Associated Press report on the conversation, the following exchange took place:

“It’s not that I want to punish your success,” Obama said.  “I just want to make sure that everybody who is behind you that they’ve got a chance at success, too.”

At a later point in the discussion, Obama said:  “I think when you spread the wealth around, it’s good for everybody.  But listen, I respect what you do and I respect your question, and even if I don’t get your vote, I’m still gonna be working hard on your behalf because small businesses are what creates jobs in this country and I want to encourage it.”

McCain seemed excited that the Obama campaign had abandoned that huge demographic of small business owners earning between $250,000 and $300,000.  His campaign finally found its target audience!  Better yet, Obama had used the expression:  “spread the wealth around”  — a catch-phrase validating the claim that “liberals” are on  a mission to redistribute the wealth.  Of course, this concern resonates only with rich people.  It has never caused America’s (now disappearing) middle class to lose any sleep.

Joe Wurzelbacher was identified during that final debate as:  “Joe The Plumber”.  He would become the archetype for those segments of the voting public, not yet ready to accept Obama as their choice for the Presidency.  If Obama wants to sweep all 50 States (and The District) in this election, he will need to win the support of “Joe The Plumber” and most of Joe’s peers.  Joe appears to be a man who is very street-wise.  He resembles the character on the label of Mister Clean, an ammonia-based cleaning solution that many of us recall from childhood.  He might not be from a big city like Chicago … but he knows how to “read” people.  We could see this during the video clip of his conversation with Obama.  After the Democrat placed his left hand on Joe’s right shoulder – Joe immediately recoiled, folding his arms over his chest.  That was some great body language!  McCain’s handlers must have loved this.  Joe saw through the “politician’s trick” of attempting to win the trust of a voter by touching that person.  Joe was not about to be “played” by a politician on national TV – Presidential candidate or not!

Poor Joe is now being set upon by a mob of bloggers, reporters and wonks.  They will be in his face from now until Election Day.  Rest assured that during the final weeks of this campaign, Obama will be presenting his case to the Joe Wurzelbachers of America.  News analysts will be dissecting the candidates’ tax plans to determine which is better for Joe.  For his part, Joe will suffer through a huge invasion of his own privacy.

In a perfect world (my imagination) the non-stop interviews would eventually turn up an interesting coincidence:  that Joe had once crossed paths with the vilified Bill Ayers (the other star of that final debate).  If only …       The press would ask Joe about this and he would say:

I worked a job about ten years ago.  I did the plumbing for a redevelopment effort in Gary, Indiana, to help the neighborhoods affected by the closing of the steel mills there.  It was called the Community Rescue Advancement Project.  We just called it “The Project”.  We couldn’t use the initials.  That Bill Ayers guy was a leader of the project.  It was a charity.  His real job was a college professor or college dean or something.  I met him a few times.  In fact, he signed the checks I got.  He didn’t really sign them himself … It was just his signature printed by a computer.  You know:  embossed – like with the little holes punched into a multi-colored signature that said: “William Ayers”.  I found out later that he was a radical from the 1960s.  They use the term “terrorists” now but we used to just call them: “Hippie Radicals”.  The first real terrorist here was the guy in Oklahoma City who blew up that Federal Building.  These hippies just fought with the police and blew off bombs that damaged equipment and stuff.  I don’t know if they really hurt anybody.  In fact, I read somewhere that all of these 60s radicals were actually working with the CIA and using police officers as guinea pigs to test riot weapons they could use to overthrow communist dictators in the banana republics and stuff.  These hippies ended up getting stock options from the companies that made these weapons – really weird stuff, you know: like mace with LSD in it  — kinky, perverted stuff like the CIA would come up with.  Anyway, these guys are all jillionaires right now.  Look at Jerry Rubin!  He’s a HUGE guy on Wall Street!  Anyway, I learned during the campaign that this Ayers guy used to be a radical.  When I met him, he didn’t seem like a hippie.  His hair was short but he did have John Lennon glasses.  I couldn’t imagine him fighting the police because he looked … you know, uhh … kinda’ gay.  Besides, he was too old to be fighting police when I met him.

Unfortunately, the real “Joe The Plumber” will probably not have any such information to share with his bothersome inquisitors.  In a perfect world, he would.  In a perfect world:  the Dow Jones would be climbing past 14,000.  In a perfect world  . . .