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Barack Oblivious

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As I’ve been discussing here for quite a while, commentators from across the political spectrum have been busy criticizing the job performance of President Obama.  The mood of most critics seems to have progressed from disappointment to shock.  The situation eventually reached the point where, regardless of what one thought about the job Obama was doing – at least the President could provide us with a good speech.  That changed on Monday, August 8 – when Obama delivered his infamous “debt downgrade” speech – in the wake of the controversial decision by Standard and Poor’s to lower America’s credit rating from AAA to AA+.  This reaction from Joe Nocera of The New York Times was among the more restrained:

When did President Obama become such a lousy speech-maker?  His remarks on Monday afternoon, aimed at calming the markets, were flat and uninspired — as they have consistently been throughout the debt ceiling crisis.  “No matter what some agency may say,” he said, ”we’ve always been and always will be a triple-A country.”  Is that really the best he could do?  The markets, realizing he had little or nothing to offer, continued their swoon.  What is particularly frustrating is that the president seems to have so little to say on the subject of job creation, which should be his most pressing concern.

Actually, President Obama should have been concerned about job creation back in January of 2009.  For some reason, this President had been pushing ahead with his own agenda, while oblivious to the concerns of America’s middle class.  His focus on what eventually became an enfeebled healthcare bill caused him to ignore this country’s most serious problem:  unemployment.  Our economy is 70% consumer-driven.  Because the twenty-five million Americans who lost their jobs since the inception of the financial crisis have remained unemployed — goods aren’t being sold.  This hurts manufacturers, retailers and shipping companies.  With twenty-five million Americans persistently unemployed, the tax base is diminished – meaning that there is less money available to pay down America’s debt.  The people Barry Ritholtz calls the “deficit chicken hawks” (politicians who oppose any government spending programs which don’t benefit their own constituents) refuse to allow the federal government to get involved in short-term “job creation”.  This “savings” depletes taxable revenue and increases government debt.  President Obama — the master debater from Harvard – has refused to challenge the “deficit chicken hawks” to debate the need for any sort of short-term jobs program.

Bond guru Bill Gross of PIMCO recently lamented this 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.

Back in July of 2009 – five months after the economic stimulus bill was passed – I pointed out how many prominent economists – including at least one of Obama’s closest advisors, had been emphasizing that the stimulus was inadequate and that we could eventually face a double-dip recession:

A July 7 report by Shamim Adam for Bloomberg News quoted Laura Tyson, an economic advisor to President Obama, as stating that last February’s $787 billion economic stimulus package was “a bit too small”.  Ms. Tyson gave this explanation:

“The economy is worse than we forecast on which the stimulus program was based,” Tyson, who is a member of Obama’s Economic Recovery Advisory board, told the Nomura Equity Forum.  “We probably have already 2.5 million more job losses than anticipated.”

Economist Brad DeLong recently provided us with a little background on the thinking that had been taking place within the President’s inner circle during 2009:

In the late spring of 2009, Barack Obama had five economic policy principals: Tim Geithner, who thought Obama had done enough to boost demand and needed to turn to long-run deficit reduction; Ben Bernanke, who thought that the Fed had done enough to boost demand and that the administration needed to turn to deficit reduction; Peter Orszag, who thought the administration needed to turn to deficit reduction immediately and could also use that process to pass (small) further stimulus; Larry Summers, who thought that long-run deficit reduction could wait until the recovery was well-established and that the administration needed to push for more demand stimulus; and Christina Romer, who thought that long-run deficit reduction should wait until the recovery was well-established and that the administration needed to push for much more demand stimulus.

Now Romer, Summers, and Orszag are gone.  Their successors – Goolsbee, Sperling, and Lew – are extraordinary capable civil servants but are not nearly as loud policy voices and lack the substantive issue knowledge of their predecessors.  The two who are left, Geithner and Bernanke, are the two who did not see the world as it was in mid-2009.  And they do not seem to have recalibrated their beliefs about how the world works – they still think that they were right in mid-2009, or should have been right, or something.

I fear that they still do not see the situation as it really is.

And I do not see anyone in the American government serving as a counterbalance.

Meanwhile, the dreaded “double-dip” recession is nearly at hand.  Professor DeLong recently posted a chart on his blog, depicting daily Treasury real yield curve rates under the heading, “Treasury Real Interest Rates Now Negative Out to Ten Years…”  He added this comment:

If this isn’t a market prediction of a double-dip and a lost decade (or more), I don’t know what would be.  At least Hoover was undertaking interventions in financial markets–and not just blathering about how cutting spending was the way to call the Confidence Fairy…

President Obama has been oblivious to our nation’s true economic predicament since 2009.  Even if there were any Hope that his attentiveness to this matter might Change – at this point, it’s probably too late.


 

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Tinfoil Hat Session

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I must admit – I often enjoy a good conspiracy theory.  That’s just one of the reasons why I wrote a posting back on January 28, 2010 entitled, “The Conspiracy Against Conspiracy Theories”.  That particular piece concerned President Obama’s appointment of Cass Sunstein to the position of Administrator of the Office of Information and Regulatory Affairs (OIRA).  My beef about Sunstein was a reaction to an article written on January 12, 2010 by Daniel Tencer of The Raw Story website.  Dan Tencer pointed out that Mr. Sunstein co-authored a paper with Adrian Vermule, published in the Journal of Political Philosophy in 2008 entitled, “Conspiracy Theories: Causes and Cures”.  In the published paper, Sunstein and Vermule advocated for a government program to target “conspiracy groups”.  I concluded my posting with this statement:

A program to conspire against conspiracy groups could serve no other purpose but to validate the claims made by those groups.

(As an aside, for a recent update on the antics of Cass Sunstein, read this essay by Dan Froomkin of the Huffington Post.  It exposes Sunstein’s true function as the Obama administration’s saboteur of financial and environmental regulations, which somehow made it through Congress, despite the boatloads of payoffs “campaign contributions” from lobbyists.  Obama’s use of Sunstein, as well as his appointment of Jacob “Jack” Lew, who replaced his fellow Citigroup tool, Peter Orszag, as Director of the Office of Management and Budget – the subject of this rant – will likely alienate a large number of former Obama supporters.)

The latest event, which has motivated me to don my tinfoil hat, concerned the mainstream news media silence concerning the Level 4 Emergency, which began on June 6, 2011 at the Fort Calhoun nuclear reactor, located 20 miles north of Omaha, Nebraska.  The situation resulted from the Missouri River flood. The event involved an electrical fire, requiring plant evacuation because the fire evaporated some of the cooling water from the reactor’s spent fuel pool.  As a result of the Fukushima disaster, most of us know what happens when the pool containing spent fuel rods loses its water.  On the other hand, most of us don’t know that this event happened at the Fort Calhoun reactor last week.  I found out about it when I read this piece at The Business Insider website.

As of this writing, the only “mainstream news” article I could find from a Google search on the subject was this item from The Washington Post.  The short, “nothing to see here – move along” article began with this statement:

A small fire briefly knocked out the cooling system for used fuel at a nuclear power plant in Nebraska, but temperatures never exceeded safe levels and power was quickly restored, federal officials said Wednesday.

To learn just how dangerous the Fort Calhoun situation really was, listen to this 40-minute, WBAI Radio interview with Arnie Gundersen of Fairewinds Associates.  (A review of the Fairewinds Associates website reveals that Mr. Gundersen is a respected authority in the field of nuclear power engineering, who is no stranger to CNN.)  During the WBAI Radio interview, Mr. Gundersen made a number of points, which made me wonder about the caliber of chuckleheads we have working at the NRC, who are supposed to be protecting us from radiation hazards.  Worse yet, I began to wonder what decision the NRC might reach in considering the Tennessee Valley Authority’s request to reactivate “the zombie reactor” – Bellefonte 1 – in Hollywood, Alabama.  Scary stuff!

Pondering the question of why the Fort Calhoun reactor incident was “spiked” by most mainstream news outlets might lead many to suspect that the “big media” are out to protect the nuclear power industry – a big advertiser.  My own theory is focused on the possibility that there is a good deal of “self-censorship” taking place with respect to the subject of nuclear power plant hazards, out of fear that terrorists might somehow attempt to exploit those vulnerabilities.  This would be yet another area where the reaction to the September 11 attacks could end up causing more harm to Americans.  The pretext of “not educating the terrorists” is used to keep the American public in the dark – about how regulatory capture can compromise public safety.  I was reminded of what Dan Rather said about media “self-censorship” in a BBC interview during the early days of the “war on terror”, back in May of 2002:

Rather says:  “It is an obscene comparison – you know I am not sure I like it – but you know there was a time in South Africa that people would put flaming tyres around people’s necks if they dissented.  And in some ways the fear is that you will be necklaced here, you will have a flaming tyre of lack of patriotism put around your neck.  Now it is that fear that keeps journalists from asking the toughest of the tough questions, and to continue to bore in on the tough questions so often.  And again, I am humbled to say, I do not except myself from this criticism.”

Rather admits self-censorship:  “What we are talking about here – whether one wants to recognise it or not, or call it by its proper name or not – is a form of self-censorship.  It starts with a feeling of patriotism within oneself.  It carries through with a certain knowledge that the country as a whole – and for all the right reasons – felt and continues to feel this surge of patriotism within themselves.  And one finds oneself saying:  ‘I know the right question, but you know what?  This is not exactly the right time to ask it’.”

For the mainstream media, it’s never the “right time” to ask the tough questions.  That’s why so many people primarily rely on internet-based sources for the news.

June 18 Update: The Bulletin of the Atomic Scientists published an article on June 16 entitled, “Rising water, falling journalism”, which characterized the news coverage of the Fort Calhoun situation as a “failure of the fourth estate”:

Newspapers and websites all over the country have reported on the flooding and fire at Fort Calhoun, but most articles simply paraphrase and regurgitate information from the NRC and OPPD (Omaha Public Power District) press releases, which aggregators and bloggers then, in turn, simply cut and paste.

*   *   *

Admittedly, it’s not easy finding information about Fort Calhoun, even if you’re a local reporter without a tight deadline.  OPPD press releases and the company’s online newsroom do not provide details about the plant’s layout and components.  Some of that information was available before 9/11 but was removed because of concerns about terrorism.  In protecting ourselves from enemies, we have also hidden vital information from ourselves.

Meanwhile, Arnie Gundersen has disclosed some disturbing information about the ongoing Fukushima crisis.  Did an American news outlet run the story?  Nope.  You can read the bad news at Al Jazeera.  This raises the question of why the American news media might believe that they have the power to determine whether terrorists could gain access to this type of information


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A Shocking Decision

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September 23, 2010

Nobody seems too surprised about the resignation of Larry Summers from his position as Director of the National Economic Council.  Although each commentator seems to have a unique theory for Summers’ departure, the event is unanimously described as “expected”.

When Peter Orszag resigned from his post as Director of the Office of Management and Budget, the gossip mill focused on his rather complicated love life.  According to The New York Post, the nerdy-looking number cruncher announced his engagement to Bianna Golodryga of ABC News just six weeks after his ex-girlfriend, shipping heiress Claire Milonas, gave birth to their love child, Tatiana.  That news was so surprising, few publications could resist having some fun with it.  Politics Daily ran a story entitled, “Peter Orszag:  Good with Budgets, Good with Babes”.  Mark Leibovich of The New York Times pointed out that the event “gave birth” to a fan blog called Orszagasm.com.  Mr. Leibovich posed a rhetorical question at the end of the piece that was apparently answered with Orszag’s resignation:

This goes to another obvious — and recurring — question:  whether someone whose personal life has become so complicated is really fit to tackle one of the most demanding, important and stressful jobs in the universe. “Frankly I don’t see how Orszag can balance three families and the national budget,” wrote Joel Achenbach of The Washington Post.

The shocking nature of the Orszag love triangle was dwarfed by President Obama’s nomination of Orszag’s replacement:  Jacob “Jack” Lew.  Lew is a retread from the Clinton administration, at which point (May 1998 – January 2001) he held that same position:  OMB Director.  That crucial time frame brought us two important laws that deregulated the financial industry:  the Financial Services Modernization Act of 1999 (which legalized proprietary trading by the Wall Street banks) and the Commodity Futures Modernization Act of 2000, which completely deregulated derivatives trading, eventually giving rise to such “financial weapons of mass destruction” as naked credit default swaps.  Accordingly, it should come as no surprise that Lew does not believe that deregulation of the financial industry was a proximate cause of  the 2008 financial crisis.  Lew’s testimony at his September 16 confirmation hearing before the Senate Budget Committee was discussed by Shahien Nasiripour  of The Huffington Post:

Lew, a former OMB chief for President Bill Clinton, told the panel that “the problems in the financial industry preceded deregulation,” and after discussing those issues, added that he didn’t “personally know the extent to which deregulation drove it, but I don’t believe that deregulation was the proximate cause.”

Experts and policymakers, including U.S. Senators, commissioners at the Securities and Exchange Commission, top leaders in Congress, former financial regulators and even Obama himself have pointed to the deregulatory zeal of the Clinton and George W. Bush administrations as a major cause of the worst financial crisis since the Great Depression.

During 2009, Lew was working for Citigroup, a TARP beneficiary.  Between the TARP bailout and the Federal Reserve’s purchase of mortgage-backed securities from that zombie bank, Citi was able to give Mr. Lew a fat bonus of $950,000 – in addition to the other millions he made there from 2006 until January of 2009 (at which point Hillary Clinton found a place for him in her State Department).

The sabotage capabilities Lew will enjoy as OMB Director become apparent when revisiting my June 28 piece, “Financial Reform Bill Exposed As Hoax”:

Another victory for the lobbyists came in their sabotage of the prohibition on proprietary trading (when banks trade with their own money, for their own benefit).  The bill provides that federal financial regulators shall study the measure, then issue rules implementing it, based on the results of that study.  The rules might ultimately ban proprietary trading or they may allow for what Jim Jubak of MSN calls the “de minimus” (trading with minimal amounts) exemption to the ban.  Jubak considers the use of the de minimus exemption to the so-called ban as the likely outcome.  Many commentators failed to realize how the lobbyists worked their magic here, reporting that the prop trading ban (referred to as the “Volcker rule”) survived reconciliation intact.  Jim Jubak exposed the strategy employed by the lobbyists:

But lobbying Congress is only part of the game.  Congress writes the laws, but it leaves it up to regulators to write the rules.  In a mid-June review of the text of the financial-reform legislation, the Chamber of Commerce counted 399 rule-makings and 47 studies required by lawmakers.

Each one of these, like the proposed de minimus exemption of the Volcker rule, would be settled by regulators operating by and large out of the public eye and with minimal public input.  But the financial-industry lobbyists who once worked at the Federal Reserve, the Treasury, the Securities and Exchange Commission, the Commodities Futures Trading Commission or the Federal Deposit Insurance Corp. know how to put in a word with those writing the rules.  Need help understanding a complex issue?  A regulator has the name of a former colleague now working as a lobbyist in an e-mail address book.  Want to share an industry point of view with a rule-maker?  Odds are a lobbyist knows whom to call to get a few minutes of face time.

You have one guess as to what agency will be authorized to make sure those new rules comport with the intent of the financial “reform” bill   .   .   .   Yep:  the OMB (see OIRA).

President Obama’s nomination of Jacob Lew is just the latest example of a decision-making process that seems incomprehensible to his former supporters as well as his critics.  Yves Smith of Naked Capitalism refuses to let Obama’s antics go unnoticed:

The Obama Administration, again and again, has taken the side of the financial services industry, with the occasional sops to unhappy taxpayers and some infrequent scolding of the industry to improve the optics.

Ms. Smith has developed some keen insight about the leadership style of our President:

The last thing Obama, who has been astonishingly accommodating to corporate interests, needs to do is signal weakness.  But he has made the cardinal mistake of trying to please everyone and has succeeded in having no one happy with his policies.  Past Presidents whose policies rankled special interests, such as Roosevelt, Johnson, and Reagan, were tenacious and not ruffled by noise.  Obama, by contrast, announces bold-sounding initiatives, and any real change will break eggs and alienate some parties, then retreats.  So he creates opponents, yet fails to deliver for his allies.

Yes, the Disappointer-In-Chief has failed to deliver for his allies once again – reinforcing my belief that he has no intention of running for a second term.