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Hurricane Rick

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Be afraid.  Be very afraid.

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.

You’ve been warned!


 

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The Broken Promise

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September 21, 2009

We expect those politicians aiming for re-election, to make a point of keeping their campaign promises.  Many elected officials break those promises and manage to win another term anyway.  That fact might explain the reasoning used by so many pols who decide to go the latter route  —  they believe they can get away with it.  Nevertheless, many leaders who break their campaign promises often face crushing defeat on the next Election Day.  A good example of this situation arose during the Presidential campaign of George H.W. Bush, who assured America:  “Read my lips:  No new taxes!” in his acceptance speech (written by Peggy Noonan) at the 1988 Republican National Convention.  Although he didn’t enact any new taxes during his sole term in office, he also promised the voters that he would not raise existing taxes after telling everyone to read his lips.  When he broke that promise after becoming President, he was confronted with the “read my lips” quote by everyone from Pat Buchanan to Bill Clinton.

Back on July 15, 2008 and throughout the Presidential campaign, Barack Obama promised the voters that if he were elected, there would be “no more trickle-down economics”.  Nevertheless, his administration’s continuing bailouts of the banking sector have become the worst examples of trickle-down economics in American history — not just because of their massive size and scope, but because they will probably fail to achieve their intended result.  Although the Treasury Department is starting to “come clean” to Congressional Oversight chair Elizabeth Warren, we can’t even be sure about the amount of money infused into the financial sector by one means or another because of the lack of transparency and accountability at the Federal Reserve.  (I seem to remember the word “transparency” being used by Candidate Obama.)  Although we are all well-aware of the $750 billion TARP slush fund that benefited the banks to some degree, speculation as to the amount given (or “loaned”) to the banks by the Federal Reserve runs from $2 trillion to as high as $6 trillion.  So far, the Fed has managed to thwart efforts by some news organizations to learn the ugly truth.  As Pat Choate reported for The Huffington Post:

Bloomberg News filed a federal lawsuit in November 2008 in the U.S. District Court, Southern District of New York (Manhattan) challenging that stonewalling and won the case.  Chief U.S. District Judge Loretta Preska on August 24 ruled that the Fed had “improperly withheld agency records” giving it a week to disclose daily reports on its loans to banks and other financial institutions.

Three days later, Federal Reserve lawyers asked the courts for a delay so that they could make an expedited appeal of her decision.  Several major banks, operating through an organization named “The Clearing House,” filed a supporting brief with the appeals court, claiming that the Federal Reserve had provided its members emergency funds under an agreement not to identify the recipients or the loan terms.

The Clearing House brief described its members as, “[T]he most important participants in the international banking and payments systems and among the world’s largest intermediaries in interbank funds transfers.”  They include ABN Amro Bank, N.V. (Dutch), Bank of America, The Bank of New York Mellon, Citibank, Deutsche Bank Trust (Germany), JP MorganChase Bank, UBS (Switzerland), and Wells Fargo.

*   *   *

Why are the Fed and the banks fighting so hard to keep the loan details secret?  Congress and taxpayers cannot know until they have the information the Federal Reserve is keeping from them, but several plausible explanations exist.

One is that the Fed has taken a great deal of worthless collateral and is propping up failed companies and banks.  A second is that the information will make the issue of paying out huge Wall Street bonuses in 2009 politically radioactive, particularly if it turns out the payments are dependent on these federal loans.

Finally, the Federal Reserve probably does not want that information to be part of the forthcoming Senate hearings on the re-confirmation of Ben Bernanke, current Chairman of the Federal Reserve.

President Obama’s failure to keep his campaign promise of “no more trickle-down economics” is rooted in his decision to rely on the very same individuals who caused the financial crisis — to somehow cure the nation’s economic ills.  These people (Larry Summers, “Turbo” Tim Geithner and Ben Bernanke) have convinced Mr. Obama that “trickle-down economics” (i.e. bailing out the banks, rather than distressed businesses or the taxpayers themselves) would be the best solution.

On Saturday, Australian economist Steve Keen published a fantastic report from his website, explaining how the “money multiplier” myth, fed to Obama by the very people who caused the crisis, was the wrong paradigm to be starting from in attempting to save the economy.  Here’s some of what Professor Keen had to say:

While economic outsiders like myself, Michael Hudson, Niall Ferguson and Nassim Taleb argue that the only way to restart the economic engine is to clear it of debt, the government response, has been to attempt to replace the now defunct private debt economic turbocharger with a public one.

In the immediate term, the stupendous size of the stimulus has worked, so that debt in total is still boosting aggregate demand.  But what will happen when the government stops turbocharging the economy, and waits anxiously for the private system to once again splutter into life?

I am afraid that all it will do is splutter.

This is especially so since, following the advice of neoclassical economists, Obama has got not a bang but a whimper out of the many bucks he has thrown at the financial system.

In explaining his recovery program in April, PresidentObama noted that:

“there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – ‘where’s our bailout?,’ they ask”.

He justified giving the money to the lenders, rather than to the debtors, on the basis of  “the multiplier effect” from bank lending:

the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth. (page 3 of the speech)

This argument comes straight out of the neoclassical economics textbook.  Fortunately, due to the clear manner in which Obama enunciates it, the flaw in this textbook argument is vividly apparent in his speech.

This “multiplier effect” will only work if American families and businesses are willing to take on yet more debt:  “a dollar of capital in a bank can actually result in eight or ten dollars of loans”.

So the only way the roughly US$1 trillion of money that the Federal Reserve has injected into the banks will result in additional spending is if American families and businesses take out another US$8-10 trillion in loans.

*   *   *

If the money multiplier was going to “ride to the rescue”, private debt would need to rise from its current level of US$41.5 trillion to about US$50 trillion, and this ratio would rise to about 375% — more than twice the level that ushered in the Great Depression.

This is a rescue?  It’s a “hair of the dog” cure:  having booze for breakfast to overcome the feelings of a hangover from last night’s binge.  It is the road to debt alcoholism, not the road to teetotalism and recovery.

Fortunately, it’s a “cure” that is also highly unlikely to work, because the model of money creation that Obama’s economic advisers have sold him was shown to be empirically false over three decades ago.

*    *    *

I’ve recently developed a genuinely monetary, credit-driven model of the economy, and one of its first insights is that Obama has been sold a pup on the right way to stimulate the economy:  he would have got far more bang for his buck by giving the stimulus to the debtors rather than the creditors.

*    *    *

The model shows that you get far more “bang for your buck” by giving the money to firms, rather than banks.  Unemployment falls in both case below the level that would have applied in the absence of the stimulus, but the reduction in unemployment is far greater when the firms get the stimulus, not the banks: unemployment peaks at over 18 percent without the stimulus, just over 13 percent with the stimulus going to the banks, but under11 percent with the stimulus being given to the firms.

*    *    *

So giving the stimulus to the debtors is a more potent way of reducing the impact of a credit crunch — the opposite of the advice given to Obama by his neoclassical advisers.

This could also be one reason that the Australian experience has been better than the USA’s:  the stimulus in Australia has emphasized funding the public rather than the banks (and the model shows the same impact from giving money to the workers as from giving it to the firms — and for the same reason, that workers have to spend, so that the money injected into the economy circulates more rapidly.

*    *    *

Obama has been sold a pup by neoclassical economics:  not only did neoclassical theory help cause the crisis, by championing the growth of private debt and the asset bubbles it financed; it also is undermining efforts to reduce the severity of the crisis.

This is unfortunately the good news:  the bad news is that this model only considers an economy undergoing a “credit crunch”, and not also one suffering from a serious debt overhang that only a direct reduction in debt can tackle.  That is our actual problem, and while a stimulus will work for awhile, the drag from debt-deleveraging is still present.  The economy will therefore lapse back into recession soon after the stimulus is removed.

You can be sure that if we head into a “double-dip” recession as Professor Keen expects, the President will never hear the end of it.  If only Mr. Obama had stuck with his campaign promise of “no more trickle-down economics”, we wouldn’t have so many people wishing they lived in Australia.



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Joining The Supremes

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May 4, 2009

On April 30, Supreme Court Justice David Souter announced his intention to retire after the current court term recess in June.  Many were surprised by this announcement.  Since Justice John Paul Stevens is 89 and Justice Ruth Bader Ginsburg is 76, most Supreme Court watchers expected one of those two jurists to be the first to retire after the election of President Obama.  Those who know Justice Souter all concur that he hates living in Washington, D.C. where he is a reluctant member of the capitol’s “elite”.

Watching Friday’s news programs, I was amused by the mad scramble by those on the “hard right” to organize their opposition to the confirmation of Preisdent Obama’s nominee to the high court.  Obama has not yet even announced whom he intends to nominate, yet these reactionaries are already against that person.  So, the fun begins  . . .

Once the President makes the nomination, the Senate Judiciary Committee begins the confirmation hearings, wherein the candidate will become incessantly badgered about his or her views on abortion, gay weddings, gun control and whether the court should “intervene” by overturning patently unconstitutional laws enacted by a bought-off (Oops!  — I mean “lobbied”) Congress.  The Judiciary Committee then issues its report and the full Senate votes to either confirm or reject the nomination with 51 votes.

This process became a spectator sport back in 1987, when Ronald Reagan nominated the Amish-looking, Robert Bork.  The Democrats immediately launched a full-on battle against the nomination, considered by many as a bit over-the-top, since it involved scrutiny of Bork’s video rentals.  This particular judicial confirmation resulted in the use of the word “Bork” as a verb.  Since that time, getting “Borked” described any situation wherein a political appointee became the target of a partisan attack during the confirmation process.  Nevertheless, Bork’s view that the Constitution provides no guarantee of an individual’s right to privacy, justified much of the ire against him.  During the confirmation hearings, he criticized the decision in Roe v. Wade.  Dumb idea.  Since that time, Republican nominees to any Federal Court do all they can to avoid providing straight answers to questions dealing with a woman’s right to determine whether she will carry a fetus to term.

The most entertaining confirmation hearings came along when George H.W. Bush nominated Clarence Thomas to the Supreme Court in 1991.  By that time, Bush appointee David Souter had already begun to disappoint the “hard right”.  The administration wanted to be sure they had a hard-line conservative this time and in Thomas they found the prefect candidate to replace the court’s first African-American Justice, Thurgood Marshall, who retired.  The excitement began when the committee heard testimony from Anita Hill, who had worked for Thomas at the Equal Employment Opportunity Commission (EEOC).  Ms. Hill testified that while working at the EEOC, she was sexually harassed by Clarence Thomas on several occasions.  The most memorable portion of her testimony concerned a remark by Thomas that his favorite porn video was a feature entitled:  Long Dong Silver.  Although Hill’s testimony ultimately did not block the confirmation of Thomas, people began lining up at adult book stores to purchase copies of the overnight classic.  I always wondered whether a certain chain of seafood restaurants also might have benefited from that aspect of the proceedings.

At this point, many Republicans likely assume that President Obama will nominate an ultra-liberal judge to counter-balance the far-right members of the court:  Clarence Thomas and Antonin Scalia.  News outlets are already abuzz with speculation concerning the most likely nominee.  The betting is heavy that Obama will nominate a woman for this vacancy because a man (Samuel Alito) was appointed by George W. Bush to replace Sandra Day O’Connor, one of only two females on the court when Bush took office.  Some pundits expect Obama to nominate someone from a minority group to add a little more diversity to the court.  As a result, many of these people expect Judge Sonia Sotomayor from the Second Circuit Court of Appeals to get the nod.  My prediction is that the President will select Judge Diane Wood from the Seventh Circuit.  She shares Obama’s experience as an instructor at the University of Chicago Law School and she has a solid background.

Nevertheless, we can expect quite a bit of showboating once the confirmation process begins.  It might not be as much fun as the Clarence Thomas hearings  .  .  .  but who knows?

Let the games begin!

Just Keep Walking

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April 23, 2009

Peggy Noonan had an esteemed career as speechwriter to former Presidents Ronald Reagan and George H.W. Bush.  She now writes a weekly column for The Wall Street Journal and she frequently appears as a panelist on many television news programs.  She has been on the blogroll of this website since its inception.

On Sunday, April 19, she appeared as a panelist on ABC’s This Week with George Stephanopoulos.  During that program’s Roundtable discussion, the subject eventually turned to President Obama’s decision not to prosecute the CIA operatives involved in the torture of detainees in the “War on Terror” as well as the decision to release the so-called “torture memos”.  Those memos were prepared by the Office of Legal Counsel during the Bush administration.  They described the permissible use of such techniques as waterboarding, sleep deprivation, confinement in a box with insects and other sadistic acts, intended to get detainees to provide valuable information.  Roundtable panelist Sam Donaldson expressed his opinion that the operatives who administered these interrogation techniques were not “just following orders”; they believed they were following the law because they were relying on the legal opinions expressed in those memos.  However, as Donaldson explained, if the people who devised those methods and wrote the legal memos condoning their use were “just trying to find cover” and just trying to find a way to get around American law and the Constitution, they should be held accountable in a court of law.  Donaldson added that if the President wanted to pardon those people, he should do so, although it would be important for those individuals to be held accountable before a court.

Peggy Noonan then remarked:

Oh, I have reservations about all of this.  It’s hard for me to look at a great nation issuing these documents and sending them out to the world and thinking:  “Oh, much good will come of that?”  Sometimes in life you wanna’ just keep walkin’.

Sam Donaldson then interrupted with the question as to whether it was right “to let people walk who may have committed a crime”.  Noonan then replied:  “Some of life has to be mysterious”.

Noonan’s remarks drew immediate outrage from Senator Russ Feingold of Wisconsin.  As Sam Stein reported for The Huffington Post, Feingold was harshly critical of the rationalizations for avoiding prosecution of these people, as expressed by government officials as well as those in the news media.  Stein quoted the Senator’s expressed indignation:

“If you want to see just how outrageous this is, I refer you to the remarks made by Peggy Noonan this Sunday” …  “I frankly have never heard anything quite as disturbing as her remark that was something to the affect of:   ‘well sometimes you just have to move on’.”

Noonan’s opinion is emblematic of the mainstream media’s all-too-frequent response to scandalous events and it demonstrates why so many people have turned to the Internet to get the news.  If you overhear someone in a restaurant arranging a bribe with a politician:  Just keep walking.  If you discover information about illegal toxic dumping by one of your publication’s sponsors:  Just keep walking.  If Harry Markopolos approaches you and tries to explain how Bernie Madoff is running a Ponzi scheme:  Just keep walking.

Peggy Noonan’s statement wasn’t just a situation where she “misspoke”.  It was the expression of an arrogant attitude held by too many in the media who decide it is up to them to determine when the public deserves to know something and when it doesn’t.  After all:  “Some of life has to be mysterious”.

Shame on you, Peggy Noonan!  Shame on you!