Wednesday, October 20, 2010

Kevin Baker from 2009: Barack Hoover Obama

This is so on target that I almost couldn't stand to read it. Now it's over a year after it came out, and it's even more appropriate, which means the worst has happened.

Harpers.org:

Barack Hoover Obama:
The best and the brightest blow it again

By Kevin Baker

Three months into his presidency, Barack Obama has proven to be every bit as charismatic and intelligent as his most ardent supporters could have hoped. At home or abroad, he invariably appears to be the only adult in the room, the first American president in at least forty years to convey any gravitas. Even the most liberal of voters are finding it hard to believe they managed to elect this man to be their president.

It is impossible not to wish desperately for his success as he tries to grapple with all that confronts him: a worldwide depression, catastrophic climate change, an unjust and inadequate health-care system, wars in Afghanistan and Iraq, the ongoing disgrace of Guant·namo, a floundering education system.

Obama’s failure would be unthinkable. And yet the best indications now are that he will fail, because he will be unable—indeed he will refuse—to seize the radical moment at hand.

[. . .]

I've left out a very revealing bio of Herbert Hoover, new to me, about him starting from a Dickens-like life of hardship and working to become a very successful engineer, businessman, and general doer of good deeds all around the world. He was elected president with very much the same hopes, expectatons, and enthusiasm with which Obama was elected.

Here's the end of the article:

No doubt, President Obama and his chief of staff, Rahm Emanuel, would claim that by practicing “the art of the possible,” they are ensuring that “the perfect does not become the enemy of the good.” But by not even proposing the relevant legislation, Obama has ceded a key part of the process—so much so that his retreat seems not so much tactical as a reversion to his core political beliefs.

A major theme of Obama’s 2006 book The Audacity of Hope is impatience with “the smallness of our politics” and its “partisanship and acrimony.” He expresses frustration at how “the tumult of the sixties and the subsequent backlash continues to drive our political discourse,” and voices a professional appreciation for Ronald Reagan’s ability to exploit such divisions. The politician he admires the most—ironically enough, considering the campaign that was to come—is Bill Clinton. For all his faults, Clinton, in Obama’s eyes, “instinctively understood the falseness of the choices being presented to the American people” and came up with his “Third Way,” which “tapped into the pragmatic, non-ideological attitude of the majority of Americans.”

This is an analysis consistent with Obama’s personal story. Like Herbert Hoover, Obama grew up as an outsider and overcame formidable odds—hence his constant promotion of personal responsibility and education. He came of age in a time when hardworking young men and women like him went to Wall Street or to Silicon Valley, and—once properly “incentivized” by the likes of Ronald Reagan and Bill Clinton—seemed to save the national economy, creating what appeared to be great general prosperity while doing well themselves. There’s no need to do battle with these strivers and achievers, individuals as accomplished in their fields as Obama is in his. All that’s required is to get them back on their feet, get the money running again, and maybe give them a few new rules to live by, a new set of incentives to get them back on track.

Just as Herbert Hoover came to internalize the “business progressivism” of his era as a welcome alternative to the futile, counterproductive conflicts of an earlier time, so has Obama internalized what might be called Clinton’s “business liberalism” as an alternative to useless battles from another time—battles that liberals, in any case, tended to lose.

Clinton’s business liberalism, however, is a chimera, every bit as much a capitulation to powerful and selfish interests as was Hoover’s 1920s progressivism. We are back in Evan Bayh territory here, espousing a “pragmatism” that is not really pragmatism at all, just surrender to the usual corporate interests. The common thread running through all of Obama’s major proposals right now is that they are labyrinthine solutions designed mainly to avoid conflict. The bank bailout, cap-and-trade on carbon emissions, health-care pools—all of these ideas are, like Hillary Clinton’s ill-fated 1993 health plan, simultaneously too complicated to draw a constituency and too threatening for Congress to shape and pass as Obama would like. They bear the seeds of their own defeat.

Obama will have to directly attack the fortified bastions of the newest “new class”—the makers of the paper economy in which he came of age—if he is to accomplish anything. These interests did not spend fifty years shipping the greatest industrial economy in the history of the world overseas only to be challenged by a newly empowered, green-economy working class. They did not spend much of the past two decades gobbling up previously public sectors such as health care, education, and transportation only to have to compete with a reinvigorated public sector. They mean, even now, to use the bailout to make the government their helpless junior partner, and if they can they will devour every federal dollar available to recoup their own losses, and thereby preclude the use of any monies for the rest of Barack Obama’s splendid vision.

Franklin Roosevelt also took office imagining that he could bring all classes of Americans together in some big, mushy, cooperative scheme. Quickly disabused of this notion, he threw himself into the bumptious give-and-take of practical politics; lying, deceiving, manipulating, arraying one group after another on his side—a transit encapsulated by how, at the end of his first term, his outraged opponents were calling him a “traitor to his class” and he was gleefully inveighing against “economic royalists” and announcing, “They are unanimous in their hatred for me—and I welcome their hatred.”

Obama should not deceive himself into thinking that such interest-group politics can be banished any more than can the cycles of Wall Street. It is not too late for him to change direction and seize the radical moment at hand. But for the moment, just like another very good man, Barack Obama is moving prudently, carefully, reasonably toward disaster.


I dearly wish this wasn't so prescient.

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Monday, September 13, 2010

Let's get down to Basics: Terrorism 101

Washingtonsblog:
Sunday, September 12, 2010The Warped Mission of the American Military: "Out-Terrorize the Terrorists"

A number of American soldiers are blowing the whistle on the American military practice of indiscriminately killing Iraq civilians - by randomly firing bullets in a 360 degree circle - anytime that an improvised explosive device hits a U.S. soldier.

As Truthout notes:

Both [specialists Ethan McCord and Josh Stieber] say they saw their mission as a plan to "out-terrorize the terrorists," in order to make the general populace more afraid of the Americans than they were of insurgent groups.

In the interview with [Constitutional lawyer Scott] Horton, Horton pressed Stieber:

"... a fellow veteran of yours from the same battalion has said that you guys had a standard operating procedure, SOP, that said - and I guess this is a reaction to some EFP attacks on y'all's Humvees and stuff that killed some guys - that from now on if a roadside bomb goes off, IED goes off, everyone who survives the attack get out and fire in all directions at anybody who happens to be nearby ... that this was actually an order from above. Is that correct? Can you, you know, verify that?

Stieber answered:

"Yeah, it was an order that came from Kauzlarich himself, and it had the philosophy that, you know, as Finkel does describe in the book, that we were under pretty constant threat, and what he leaves out is the response to that threat. But the philosophy was that if each time one of these roadside bombs went off where you don't know who set it ... the way we were told to respond was to open fire on anyone in the area, with the philosophy that that would intimidate them, to be proactive in stopping people from making these bombs ..."

Terrorism is defined as:

The use of violence and threats to intimidate or coerce, especially for political purposes.
So McCord and Stieber are correct: this constitutes terrorism by American forces in Iraq.

Of course, America's institutionalized policy of torture (see this and this) is also terrorism. As I pointed out last year:

An article today in Der Spiegel describes a study on the use of torture over the last couple of thousand years:

A new book, ["Extreme Violence in the Visuals and Texts of Antiquity"] by Martin Zimmerman, a professor of ancient history in Munich, looks at current research into the kinds of violence that inspired "loathing, dread, horror and disgust."

In the ancient Far East, where there were large states peopled by many different ethnicities, leaders demonstrated their might by inventing ingenious new tortures and agonizing methods of execution -- as a way to keep the population obedient...

The issue of state-sanctioned torture to achieve political goals is still a current one.

The study reinforces what I wrote last year:

Listen to the testimony to Congress by a representative of the U.S. Department of Health and Human Services:

"Governments that use torture intend to intimidate their citizens in order to maintain control; those who are tortured become examples of the consequences of dissent."
Indeed, this is a well-known tactic for brutal regimes. Take Zimbabwe, for example:
"Victims and eyewitnesses told Human Rights Watch that [Zimbabwe’s brutal regime] has set up detention centers . . . to round up and instill fear in suspected political opponents."
Torture is a form of terrorism, plain and simple.

As the U.S. Department of Health and Human Services director told Congress:
"... torture is the deliberate mental and physical damage caused by governments to individuals to ... terrorize society."
And the U.S. policy of assassinating people all over the world (including Americans) - without trial - is a form of terrorism as well.

Unfortunately, this is nothing new. As the former director of the National Security Agency said:
By any measure the US has long used terrorism. In ‘78-79 the Senate was trying to pass a law against international terrorism - in every version they produced, the lawyers said the US would be in violation.

(the audio is here).

And as Truthout points out, the 360 degree firing on innocent bystanders is most definitely a war crime:

High-level orders to kill civilians in the context of retaliation for attacks on forces have already been successfully prosecuted as a war crime. In 1944, German SS Obersturmbannführer Herbert Kappler ordered the execution of civilians in the ratio of ten to one for every German soldier killed in a March 1944 attack by Italian partisans. Kappler was sentenced to life in prison. The executions took place in the Caves of Ardeatine in Italy, and were made into the subject of a movie starring Richard Burton. None of the lower-ranking soldiers who actually carried the order out were prosecuted.

***

The attack which spurred the World War II German commander's retaliatory executions, intended as collective punishment for not informing on partisans, was an IED planted in a garbage container. Kappler's rank was the equivalent of a lieutenant colonel.

The ironic thing is that top conservative and liberal terrorism experts say that torture and other war crimes increase terrorism and reduce national security.

And terrorism is bad for the economy as well.

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Sunday, September 12, 2010

Homeland Security at Work

Does this sound familiar....?

savanahnow.com:

Effingham deputies call feds after arresting Russians with shovel, wire cutters outside Georgia Power plant

Posted: September 9, 2010 - 6:05pm | Updated: September 9, 2010 - 7:31pm


By DeAnn Komanecky

SPRINGFIELD — Effingham County sheriff deputies have reported the early Sunday morning arrest of three men to the federal Joint Terrorism Task Force.


The men, two from Russia and one from Kazakhstan, were found near Georgia Power’s Plant McIntosh on Old Augusta Road about 1 a.m. Sunday after a ranger with the Department of Natural Resources reported a suspicious vehicle, Effingham County sheriff’s spokesman David Ehsanipoor said.


Deputies reported the men, who were inside a 1995 Nissan Pathfinder, had a machete, shovel, wire cutters and ski masks. One man also had black silk stockings in his front left pocket.


Arrested were Evgeniy Luzhetskiy, of Kazakhastan Nail Idiatullin and Rustem Ibragimov of Russia. All three reported they lived in Charleston, S.C., deputies reported.


The men were all charged with possession of tools during the commission of a crime.


The three were released after being interviewed by task force members, Ehsanipoor said.

"They did all have visas that allowed them to be here and are supposed to be leaving the country soon."

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Saturday, September 11, 2010

Here's your tax cut for the rich at work

Let freedom ring's Talking Points Memo Blog:

What the wealthy did with their tax cuts


According to the the U.S. census US capital investment in foreign countries has gone from $1.3 trillion in 2000 to $3.2 trillion in 2008 while at the same time the Bush tax cuts which overwhelmingly went to the wealthy cost 1.3 trillion per politifact. So the wealthy essentially took their tax cuts, intended per the Republicans to spur U.S. jobs, and invested them and more in foreign countries, not the U.S..

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Wednesday, September 08, 2010

Wikipedia apparently not biased enough toward Israel

John Caruso at the Distant Ocean:

Since I've written an entire series of posts explaining why Wikipedia is all but useless when it comes to political topics, and especially Israel, I found this amusing indeed:

This week in Jerusalem, two Israeli groups hoping to smite their online enemies, both domestic and foreign, began a course in the "Zionist editing" of Wikipedia entries.

At the opening seminar, attended by about 80 activists, one of the organizers, Naftali Bennett, said that the aim of the course is to make sure that information in the online encyclopedia reflects the worldview of Zionist groups. For example, he said, "if someone searches [for] 'the Gaza flotilla,' we want to be there; to influence what is written there, how it’s written and to ensure that it is balanced and Zionist in nature."

Hilarious, sure, but at the same time I always appreciate it when people are able to generate oxymoronic phrases like "balanced and Zionist in nature" without the slightest awareness of the contradiction. And I particularly liked this bit...:

Another of the course’s organizers, Ayelet Shaked of the My Israel movement, told Arutz Sheva, an Israeli news organization based in the West Bank, that the use of the word "occupied" in Wikipedia entries discussing Palestinian territory conquered by Israel in 1967 was just the kind of problem she hoped a new team of editors could help fix.

...since as I've written before, the only mention of "occupied" or any variant thereof in the Wikipedia page for Jerusalem used to be "The land currently occupied by the Church of the Holy Sepulchre is considered one of the top candidates for Golgotha and thus has been a Christian pilgrimage site for the past two thousand years." That was in 2007, and in looking at it now the situation is still knee-slappingly comical (though nanoscopically better). Go "fix" that "problem", you lying zealots!

The prize for the person who incorporates the most Zionist changes in Wikipedia entries is apparently a trip in a hot-air balloon over Israel. But that's not all; I've heard rumors that the prole who makes the most doubleplusgood efforts to rectify WikiError may even get a guided tour of the Ministry of Truth!

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Monday, September 06, 2010

Somehow I missed this US Senate testimony by Brzezenski

Here's the straight scoop from the guy who invented the concept of War in Afghanistan.

http://web.archive.org/web/20070206230803/http://www.senate.gov/%7Eforeign/testimony/2007/BrzezinskiTestimony070201.pdf

SFRC Testimony -- Zbigniew Brzezinski
February 1, 2007

Mr. Chairman:
Your hearings come at a critical juncture in the U.S. war of choice in Iraq,
and I commend you and Senator Lugar for scheduling them.

It is time for the White House to come to terms with two central realities:

1. The war in Iraq is a historic, strategic, and moral calamity.
Undertaken under false assumptions, it is undermining America’s
global legitimacy. Its collateral civilian casualties as well as some
abuses are tarnishing America’s moral credentials. Driven by
Manichean impulses and imperial hubris, it is intensifying regional
instability.

2. Only a political strategy that is historically relevant rather than
reminiscent of colonial tutelage can provide the needed framework for
a tolerable resolution of both the war in Iraq and the intensifying
regional tensions.

If the United States continues to be bogged down in a protracted bloody
involvement in Iraq, the final destination on this downhill track is likely to
be a head-on conflict with Iran and with much of the world of Islam at large.
A plausible scenario for a military collision with Iran involves Iraqi failure
to meet the benchmarks; followed by accusations of Iranian responsibility
for the failure; then by some provocation in Iraq or a terrorist act in the U.S.
blamed on Iran; culminating in a “defensive” U.S. military action against
Iran that plunges a lonely America into a spreading and deepening quagmire
eventually ranging across Iraq, Iran, Afghanistan, and Pakistan.

A mythical historical narrative to justify the case for such a protracted and
potentially expanding war is already being articulated. Initially justified by
false claims about WMD’s in Iraq, the war is now being redefined as the
“decisive ideological struggle” of our time, reminiscent of the earlier
collisions with Nazism and Stalinism. In that context, Islamist extremism
and al Qaeda are presented as the equivalents of the threat posed by Nazi
Germany and then Soviet Russia, and 9/11 as the equivalent of the Pearl
Harbor attack which precipitated America’s involvement in World War II.

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Retiring Chairman of Obama's Economic Council Totally Clueless

Some say the elite have no contact with the real world.

Washington Post: (via Cryptogon)
Economist Christina Romer serves up dismal news at her farewell luncheon

By Dana Milbank
Washington Post Staff Writer
Wednesday, September 1, 2010; 10:40 PM

Lunch at the National Press Club on Wednesday caused some serious indigestion.

It wasn't the food; it was the entertainment. Christina Romer, chairman of President Obama's Council of Economic Advisers, was giving what was billed as her "valedictory" before she returns to teach at Berkeley, and she used the swan song to establish four points, each more unnerving than the last:

She had no idea how bad the economic collapse would be. She still doesn't understand exactly why it was so bad. The response to the collapse was inadequate. And she doesn't have much of an idea about how to fix things.

What she did have was a binder full of scary descriptions and warnings, offered with a perma-smile and singsong delivery: "Terrible recession. . . . Incredibly searing. . . . Dramatically below trend. . . . Suffering terribly. . . . Risk of making high unemployment permanent. . . . Economic nightmare."

Anybody want dessert?

At week's end, Romer will leave the council chairmanship after what surely has been the most dismal tenure anybody in that post has had: a loss of nearly 4 million jobs in a year and a half. That's not Romer's fault; the financial collapse occurred before she, and Obama, took office. But she was the president's top economist during a time when the administration consistently underestimated the depth of the economy's troubles - miscalculations that have caused Americans to lose faith in the president and the Democrats.

Romer had predicted that Obama's stimulus package would keep the unemployment rate at 8 percent or less; it is now 9.5 percent. One of her bosses, Vice President Biden, told Democrats in January that "you're going to see, come the spring, net increase in jobs every month." The economy lost 350,000 jobs in June and July.

This is why nearly two-thirds of Americans think the country is on the wrong track - and why Obama's efforts to highlight the end of U.S. combat in Iraq and the resumption of Middle East peace talks have little chance of piercing the gloom as voters consider handing control of Congress back to the Republicans.

Romer's farewell luncheon had been scheduled for the club's ballroom, but attendance was light and the event was moved to a smaller room. Romer, wearing a green suit, read brightly from her text - a delivery at odds with the dark material she was presenting. When she and her colleagues began work, she acknowledged, they did not realize "how quickly and strongly the financial crisis would affect the economy." They "failed to anticipate just how violent the recession would be."

Even now, Romer said, mystery persists. "To this day, economists don't fully understand why firms cut production as much as they did or why they cut labor so much more than they normally would." Her defense was that "almost all analysts were surprised by the violent reaction."

That miscalculation, in turn, led to her miscalculation that the stimulus package would be enough to keep the unemployment rate from exceeding 8 percent. Without the policy, she had predicted, unemployment would soar to 9.5 percent. The plan passed, and unemployment went to 10 percent.

No wonder most Americans think the effort failed. But Romer argued, a bit too defensively, against the majority perception. "As the Council of Economic Advisers has documented in a series of reports to Congress, there is widespread agreement that the act is broadly on track," she declared. Further, she argued, "I will never regret trying to put analysis and quantitative estimates behind our policy recommendations."

But the problem is not that Romer did a quantitative analysis; the problem is that the quantitative analysis was wrong. Inevitably, this meant that, as she acknowledged, "the turnaround has been insufficient."

And what to do about this? Here, Romer became uncharacteristically hesitant to make predictions. She suggested some "innovative, low-cost policies." But the examples she cited - a "national export initiative," new trade agreements and a "pragmatic approach to regulation" - aren't exactly blockbusters.

"The only sure-fire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less," she said. But asked about the main Republican proposal, extending George W. Bush's tax cuts for those earning more than $250,000, Romer replied that doing so would be "fiscally irresponsible."

The truth is that the Obama administration is pretty much out of options. Any major new effort would be blocked by Republicans, who have few alternatives of their own. "What we would all love to find - the inexpensive magic bullet to our economic troubles - the truth is it almost surely doesn't exist," Romer admitted.

The valedictory was becoming more of an elegy. At the end of the depressing forum, the moderator read a question submitted by a member of the audience: "You seem like you'd be a lot of fun at parties. Are you?"

The economist blushed. "You'll have to just take it for granted," she said.

Like 8 percent unemployment.

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Friday, September 03, 2010

The rigged card game that is the US Economy

Washingtonsblog:

Friday, September 3, 2010

Government Policy Caused the Drought of Unemployment


The unemployment rate has risen again for the the first time in 4 months. I predicted a growing, long-term unemployment problem last year.

Indeed, the government's actions have directly contributed to the rising tide of unemployment.

The Government Has Encouraged the Offshoring of American Jobs for More Than 50 Years

President Eisenhower re-wrote the tax laws so that they would favor investment abroad. President Kennedy railed against tax provisions that "consistently favor United States private investment abroad compared with investment in our own economy", but nothing changed.

For the last 60 years, the tax benefits to American companies making things abroad has encouraged jobs to move out of the U.S.

The Government Has Encouraged Mergers

The government has actively encouraged mergers, which destroy jobs.

For example, the Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry.

This is nothing new.

Citigroup's former chief executive says that when Citigroup was formed in 1998 out of the merger of banking and insurance giants, Alan Greenspan told him, “I have nothing against size. It doesn’t bother me at all”.

And the government has actively encouraged the big banks to grow into mega-banks.

The Government Has Let Unemployment Rise in an Attempt to Fight Inflation

As I noted last year:

The Federal Reserve is mandated by law to maximize employment. The relevant statute states:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
***

The Fed could have stemmed the unemployment crisis by demanding that banks lend more as a condition to the various government assistance programs, but Mr. Bernanke failed to do so.

Ryan Grim argues that the Fed might have broken the law by letting unemployment rise in order to keep inflation low:

The Fed is mandated by law to maximize employment, but focuses on inflation -- and "expected inflation" -- at the expense of job creation. At its most recent meeting, board members bluntly stated that they feared banks might increase lending, which they worried could lead to inflation.

Board members expressed concern "that banks might seek to reduce appreciably their excess reserves as the economy improves by purchasing securities or by easing credit standards and expanding their lending substantially. Such a development, if not offset by Federal Reserve actions, could give additional impetus to spending and, potentially, to actual and expected inflation." That summary was spotted by Naked Capitalism and is included in a summary of the minutes of the most recent meeting...

Suffering high unemployment in order to keep inflation low cuts against the Fed's legal mandate. Or, to put it more bluntly, it may be illegal.

In fact, the unemployment situation is getting worse, and many leading economists say that - under Mr. Bernanke's leadership - America is suffering a permanent destruction of jobs.

For example, JPMorgan Chase’s Chief Economist Bruce Kasman told Bloomberg:

[We've had a] permanent destruction of hundreds of thousands of jobs in industries from housing to finance.
The chief economists for Wells Fargo Securities, John Silvia, says:

Companies “really have diminished their willingness to hire labor for any production level,” Silvia said. “It’s really a strategic change,” where companies will be keeping fewer employees for any particular level of sales, in good times and bad, he said.

And former Merrill Lynch chief economist David Rosenberg writes:
The number of people not on temporary layoff surged 220,000 in August and the level continues to reach new highs, now at 8.1 million. This accounts for 53.9% of the unemployed — again a record high — and this is a proxy for permanent job loss, in other words, these jobs are not coming back. Against that backdrop, the number of people who have been looking for a job for at least six months with no success rose a further half-percent in August, to stand at 5 million — the long-term unemployed now represent a record 33% of the total pool of joblessness.
And see this.
In fact, the Fed intentionally curbed lending by banks in an attempt to stem inflation.

The Government Has Allowed Wealth to be Concentrated in Fewer and Fewer Hands

As I pointed out a year ago:

A new report by University of California, Berkeley economics professor Emmanuel Saez concludes that income inequality in the United States is at an all-time high, surpassing even levels seen during the Great Depression.

The report shows that:

  • Income inequality is worse than it has been since at least 1917
  • "The top 1 percent incomes captured half of the overall economic growth over the period 1993-2007"
  • "In the economic expansion of 2002-2007, the top 1 percent captured two thirds of income growth."

As others have pointed out, the average wage of Americans, adjusting for inflation, is lower than it was in the 1970s. The minimum wage, adjusting for inflation, is lower than it was in the 1950s. See this. On the other hand, billionaires have never had it better.

As I wrote in September:

The economy is like a poker game . . . it is human nature to want to get all of the chips, but - if one person does get all of the chips - the game ends.

In other words, the game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone's money, the game ends.

The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed...

This is not a question of big government versus small government, or republican versus democrat. It is not even a question of Keynes versus Friedman (two influential, competing economic thinkers).

It is a question of focusing any government funding which is made to the majority of poker players - instead of the titans of finance - so that the game can continue. If the hundreds of billions or trillions spent on bailouts had instead been given to ease the burden of consumers, we would have already recovered from the financial crisis.

I noted in April:

FDR’s Fed chairman Marriner S. Eccles explained:

As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

***

When most people lose their poker chips - and the game is set up so that only those with the most chips get more - free market capitalism is destroyed, as the "too big to fails" crowd out everyone else.

And the economy as a whole is destroyed. Remember, consumer spending accounts for the lion's share of economic activity. If most consumers are out of chips, the economy slumps.

And unemployment soars.

As former Secretary of Labor Robert Reich wrote yesterday:

Where have all the economic gains gone? Mostly to the top.

***

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

***

THE Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity.

***

And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. By contrast, little has been done since 2008 to widen the circle of prosperity.

So through it's policies encouraging the offshoring of jobs, mergers, decreasing of economic activity to fight inflation, and allowing wealth to be concentrated in fewer and fewer hands, the government has channeled water away from U.S. jobs, creating the worsening unemployment drought.

Note for Keynesians: As I have repeatedly explained, the government hasn't spent money on the right kind of things to stimulate employment. See this and this.


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Thursday, September 02, 2010

What Can Obama Really Do?

2010 August 29

A zombie argument is going around about why Obama hasn’t accomplished liberal and progressive ends to the extent many would have liked him to:

Obama can’t do anything because he needs 60 votes in Congress and he doesn’t have them because Republicans and Dems like Lieberman and Nelson won’t vote for his programs.

This argument is misleading in one sense and incorrect in another. It is misleading in that it misrepresents how things get done in Congress. It is incorrect in that many liberal policies do not require the consent of Congress.

Let’s examine the misconceptions this zombie argument is built on.

Negotiation 101

Let’s look at how things get done in Congress. Obama apologists make the excuse that Obama couldn’t have passed a larger stimulus because he was forced to reduce the stimulus by $100 billion as it was. This line of reasoning demonstrates a misunderstanding of how negotiation (or Congress) works.

If Obama had wanted a $1.2 trillion stimulus, say, he should have asked for a $1.6 trillion stimulus. Then “moderate” Republicans and Dems could have negotiated him down $400K. This is basic negotiation, which anyone who has ever negotiated in a third world bazaar knows—you start off with an offer far higher (or lower) than what you’re willing to accept, and leave room for the inevitable haggling.

The same is true of health care reform. If you’re negotiating for a public option—if you actually want one, then you don’t throw single payer advocates out. You act as if that’s something you’re seriously considering, you talk about polls showing it has majority support, and you then “compromise” to a public option.

This sort of self-defeating, pre-negotation concession has been a repeated pattern for the Obama administration (assuming that Obama does seek Liberal ends).

Force It Through

Many liberal policies do not require the consent of congress.

The Bush tax cuts were pushed through under reconciliation. Most of health care reform, including a public option could have been accomplished the same way. The tactical choice was entirely at the discretion of the Democratic leadership.

If Obama and Reid can’t hold 50 votes, then the problem is them, not the policies themselves, or “how congress works”.

Congress: Who Cares about Congress?

Now, let’s talk about other issues. There are many areas where Obama does not need Congress’s approval.

Don’t Ask, Don’t Tell: Obama can issue a stop loss for any soldiers any time he wants. Bang, that’s it, at least for as long as he’s President.

HAMP (the program supposedly intended to help homeowners, which hasn’t): This program is totally under administrative control. If Obama wanted it to work, there’s nothing to stop him.

Habeas Corpus: Obama can give everyone in Gitmo their day in court. Restoring habeas corpus is totally at his discretion, and he has chosen not to.

Social Security: After Congress voted down a debt and deficit commission, Obama went ahead and created one anyway–and stacked it with people with track records of wanting to slash Social Security.

In short, Obama has managed to side-step Congress in order to work against Democratic policy positions (e.g., Social Security), but otherwise has ignored executive privilege when he wanted to continue Bush-era policies (e.g., detention without trial at Gitmo) or to ignore the rights and needs of everyday Americans (e.g., HAMP and DADT). To the Obama administration, Congress is a very selective obstacle.

Going Forward: What Obama Can Still Do

Not only could Obama rectify DADT, HAMP, Habeus Corpus, and his Social Security commission with a stroke of his pen, he can still do a great deal to help the economy. If he wants to.

TARP: Obama has complete control of the TARP funds, the majority of which have not been spent. (We’re talking over $500 billion in slush funds.) $ 500 billion is a lot of stimulus, if it’s done right. Cash for Clunkers, representing a tiny fraction of the total stimulus funds, massively goosed GDP while it was in effect.

Leaving aside direct stimulus, there are plenty of other helpful things Obama could do. For example, as a friend of mine noted, most distressed debt today is selling to collection agencies for less than 10 cents on the dollar (often under 5 cents). The Treasury could buy up $100 billion of that distressed debt at 10 cents on the dollar. Reclaim the money at 15 cents on the dollar through the IRS, and otherwise just write it off. You won’t make 50% profit, because some people can’t pay even 10%, but you’ll almost certainly make some profit. Roll the money over and buy up more debt. Keep doing it. (N.B. In the past such debt didn’t sell so cheap, mainly because in the past, pre-Bankruptcy “reform”, people who really couldn’t pay would declare bankruptcy, but now they can’t. Obama never made fixing that horrible bankruptcy bill a priority at all.) Folks would be absolutely thrilled by a way to deal with distressed debt. With the debt off their backs, they could spend again, so it would also be stimulative. There are plenty of other things that could be done with over 500 billion dollars to help ordinary people and goose the economy.

Breaking the Banks (and getting lending going again): The banks have been pretty ungrateful for the massive bailout they received. They have unilaterally increased credit card rates to gouge customers, have been gaming the market (so much so that one quarter many banks didn’t lose money on their trading operations even one day of the quarter), have fought against financial reform, and have generally acted against the interests of the majority of Americans. One might say “well, now that they’re bailed out, there is nothing we can do about it.”

Wrong.

The Fed still holds over $2 trillion in toxic waste from the banks. The banks still hold trillions of dollars of toxic waste. If sold on the open market this stuff would sell for, oh, about 5 cents on the dollar. If forced to mark the assets they are keeping on their books at inflated prices to their actual market value, I doubt there is a single major bank in the country which wouldn’t go bankrupt. Including Goldman Sachs.

So here’s what you do. As the Federal Reserve you sell $100 billion of the toxic waste on the open market. Set an actual price for it. Then you make the banks mark their assets to market value. They go bankrupt. You nationalize them. (Why not?–They are actually bankrupt after all, and they haven’t increased lending like they were supposed to; in fact, they have decreased it.) You make the stockholders take their losses and the bondholders too, then you reinflate the banks. (If the Fed can print trillions to keep zombie banks “alive” it can print money to reinflate nationalized banks.) The banks lend under FDIC and Fed direction, at the interest rates the Fed directs. The FDIC and Fed eventually break the banks up into a reasonable size. And while they’re at it, they get rid of the entire executive class which caused the financial crisis, and have the DOJ go over all the internal memos and start charging everyone who committed fraud. (Hint: that’s virtually every executive at a major bank.) Again, this is completely up to Obama–the DOJ answers to him.

Think Obama can’t do this without Bernanke? Wrong. Obama can fire any Fed Governor for cause and replace them during a Congressional recess with no oversight.* (”Cause” is never defined, but Obama can note that the Fed’s mandate includes maximum employment and not stopping the financial crisis in the first place is certainly plausible as cause as well.)

Obama had the power. Obama had the money. Obama has the power–and the money.

The idea that Obama, or any President, is a powerless shrinking violet, helpless in the face of Congress is just an excuse. Presidents have immense amounts of power: the question is whether or not they use that power, and if they do, what they use it for.

Obama has a huge slush fund with hundreds of billions of dollars and all the executive authority he needs to turn things around.

If Obama is not using that money and authority, the bottom line is it’s because he doesn’t want to.

Putting aside the question of what Obama could have accomplished already, if he wants to help everyday Americans, turn around Democratic approval ratings in time for the midterm elections, and leave behind him a legacy of achievemant, he can still do it. If he wants to.


ndnote:

*”2. Members Ineligible to Serve Member Banks; Term of Office; Chairman and Vice Chairman
The members of the Board shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank, except that this restriction shall not apply to a member who has served the full term for which he was appointed. Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on the date of enactment of the Banking Act of 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President. “

12 USC 242

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Thursday, August 26, 2010

Ian Welsh explains how the right thing morally is usually also the best thing practically

This is so true, and the fact that it's commonly ignored is so sad...

The right thing to do

2010 August 25

What makes me saddest of all things in the world is this: the vast majority of the time the right thing to do morally is the right thing to do in terms of broad self-interest, and yet we don’t believe that and we do the wrong thing, thinking we must, thinking that we’re making the “hard decisions”.

This spans the spectrum of issues. It doesn’t matter whether you’re talking about foreign affairs, where the money used on Iraq and Afghanistan could have rebuilt America and made it more prosperous. It doesn’t matter if you’re talking about health care, where everyone knew that the right thing to do was single payer or some other form of comprehensive healthcare, which would have reduced bankruptcies massively, saved 6% of GDP and massive numbers of lives. It doesn’t matter if you’re talking about the financial crisis, where criminally prosecuting those who engaged in fraud (the entire executive class of virtually ever major financial firm) and nationalizing the major banks, wiping out the shareholders and making the bondholders eat their losses was the right thing to do, and didn’t happen. It doesn’t matter if you’re talking about drug policy, where the “war on drugs” has accomplished nothing except destabilizing multiple countries and giving the US the largest prison population proportional to population in the entire world and where legalizing marijuana, soft opiates and coca leaves would save billions of dollars, reduce violence, help stabilize Mexico and would help tax receipts. It doesn’t matter if you’re talking about food, where we subsidize the most unhealthy foods possible and engage in practices which have reduced the nutritional content of food by 40% in the last half century. It doesn’t matter if you’re talking about environmental pollutants, which have contributed to a massive rise in chronic diseases so great it amounts to an epidemic.

And on, and on, and on.

Now the fact is that there is no free lunch. When you spend money on war, you can’t spend it on education or health or crumbling infrasture or civilian technology. When you allow oligopolies to control the marketplace and buy up politicians, the cost of that is a decreased standard of living. When you refuse to deal effective with externalized health pollution, whether from soda pop or carcinogens, you pay for that with the death of people you care for from heart disease, cancer and other illnesses.

The response is “we have to do this to protect ourselves/to make a profit”.

No, you don’t. America would be more prosperous and just as safe if you didn’t waste trillions on wars and a bloated military whose purpose isn’t to protect you but to beat on foreigners (who is going to invade the US? No one. Next.) You would be happier if you did not allow health pollution because you and your loved ones would be healthier and it’s damn hard to be happy when you or your loved ones get cancer, or diabetes, or asthma and so on. Cheap consumer goods do not make up for it and the costs are so high that it’s questionable that the consumer goods ARE cheap—you’re just paying for them in illness and health care bills.

All of these things are moral wrongs. We know it’s wrong to invade other countries that haven’t attacked us. We know that it’s wrong to put illness inducing substances into the air or food. We know that we shouldn’t subsidize high fructose corn syrup and that if we’re going to subsidize food we should subsidize healthy food. We know that’s immoral, yet we do it anyway.

One of the great ironies of human society is that we create it ourselves, but as individuals and even groups we feel powerless to control what we created. We forged our own chains, and can’t get out of them.

But the first step to freeing ourselves from our chains is to stop telling ourselves that the moral thing to do isn’t the right thing to do in practical terms. The right thing to do… is the right thing to do. When we refuse to do the right thing, instead we impoverish ourselves and our loved ones, we make ourselves sick and we kill ourselves. When we do horrible things to other people, we make them hate us, and then they try and do horrible things to us.

Doing the wrong thing, the immoral thing, is almost never the practical thing if you care about the well-being of yourself, your children, your friends and your family. It always blows back. If you’re lucky, you may die before the cost comes to bear, but that’s only if you’re lucky, and in the American context, if you aren’t dead yet, you probably aren’t going to get lucky.

So do the right thing. Not just because it is the right thing morally, but because it’s the right thing to do for you and your loved ones in a very practical way.

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Thursday, August 19, 2010

Leaner, Meaner Capitalism at Work

Mike Malloy was talking about this tonight.

A company gets new management, which decides to reward the 300 workers who enabled the company to go from a loss last year to a half billion dollar profit this year by docking them $1.50/hr, decimating their pension program, and generally behaving like greedy capitalist pigs. Three months later, the strike is still on, and the company is making more money than ever, thanks to strikebreaking scabs.

This is the first I've heard about it.

Here's the original story, from May of this year:

RWDSU.info:

Strike!: Mott's Wage Cuts Despite Huge Profits Forces Work Stoppage (5/23/10)

Over 300 full time manufacturing workers at the Mott’s plant in Williamson, New York, went out on strike this morning at 6 AM after company executives demanded painful wage cuts while the company enjoyed a record year of $550 million in profits. The work stoppage was caused as a direct result of the Mott’s (a subsidiary of Dr. Pepper Snapple Group) executives' unfair labor practices as they tried to peel away good jobs and wages, including not bargaining in good faith. The company had publicly declared an impasse and plans to implement their last contract terms, which offered nothing but a reduction in hourly wages and drastic healthcare and pension concessions for the skilled, dedicated workforce at the Williamson manufacturing plant.


“The workers that were forced to strike today are the same workers who helped make Mott’s the highly profitable company they are today, and they should not be treated like a bunch of rotten apples by overpaid executives,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, UFCW. “We understand that no one wins when there is a strike, but is very troubling and disturbing that such a profitable company as Mott’s would carve away a core relationship with their workforce all for corporate greed. Whittling down wage and benefit standards, while exponentially increasing CEO compensation is rotten business, and frankly unAmerican!”

RWDSU Local 220, which represents the workers, has been tirelessly negotiating to secure a fair and decent contract for months with Mott’s management. Despite the company’s profitability, Mott’s/Dr. Pepper Snapple have demanded givebacks, including a $1.50 per hour wage cut for all employees, a pension elimination for future employees and a pension freeze for current employees, a 20 percent decrease in employer contributions to the 401K and increased employee contributions toward health care premiums and co-pays.

Mott’s workers overwhelmingly rejected this offer and voted in favor of authorizing their negotiating committee at RWDSU Local 220 to call an unfair labor practice strike. The union has continued to demand that the company bargain in good faith in order to quickly reach a fair contract.

By contrast, Dr. Pepper Snapple Group President & CEO Larry D. Young has enjoyed a 113 percent salary increase over the last 3 years (or 28 percent each year). In 2009, Young's total compensation was $6,519,378.

Michael Leberth, president of RWDSU Local 220 said “the company has not budged from our reasonable and dignified offer and there will be no late night negotiations. We are tired of being juiced by such a profitable company.”

May is the busiest season for Mott’s apple juice and applesauce manufacturing as the demand for these family favorites is highest during the summer season.

The Williamson plant is the only plant that produces Mott’s applesauce, including high margin single serve packs, with 70 percent of the workforce in skilled labor categories. A labor dispute could damage the value of Mott’s family-friendly brand by associating it with corporate greed and union busting. Additionally, the product may suffer quality issues, as the skilled workforce is not easily replaceable. The Mott’s brand is responsible for more than $550 million worth of Dr. Pepper Snapple’s retail sales each year.

“Why would DPS, with millions in profit, risk interrupting production at a high volume plant?” asked Ira Bristol, who has worked at the plant for almost five years. “Destroying goodwill and creating this antagonistic atmosphere will badly hurt the production system and bottom line, not to mention negatively affect employee morale and tarnish the Mott’s good brand around the country.”


Here's a thumbnail of Dr Pepper Snapple—

ABCnews.go.com:
Since being spun out of U.K. conglomerate Cadbury Schweppes two years ago at around $25 per share, DPS shares have risen to nearly $40, and have more than doubled off of March 2009 lows. Last year, the company, which produces 50 brands, including Mott's juice, namesake brands Dr Pepper and Snapple, as well as 7-Up, Hawaiian Punch, A&W root beer and others, recorded $555 million in profits on more than $1 billion in revenues.
Here's where we're at now...

New York Times:
By STEVEN GREENHOUSE
Published: August 17, 2010

WILLIAMSON, N.Y. — After nearly 90 days of picketing in the broiling sun outside the sprawling Mott’s apple juice plant here in upstate New York, Michelle Muoio recognizes that the lengthy strike is about far more than whether the 305 hourly workers at the plant get a fatter or slimmer paycheck.

The union movement and many outsiders view the strike as a high-stakes confrontation between a company that wants to cut its labor costs, even as it is earning record profits, and workers who are determined to resist demands for wage and benefit givebacks.

“It’s disgusting, honestly, that they want to take things away from the people who made them profitable,” said Ms. Muoio (pronounced MOY-oh), a $19-an-hour machine operator who has worked at the plant 15 years.

The company that owns Mott’s, the beverage conglomerate Dr Pepper Snapple Group, counters that the Mott’s workers are overpaid compared with other production workers in the Rochester area, where blue-collar unemployment is high after years of layoffs at employers like Xerox and Kodak.

Chris Barnes, a company spokesman, said Dr Pepper Snapple was seeking a $1.50-an-hour wage cut, a pension freeze and other concessions to bring the plant’s costs in line with “local and industry standards.”

The company, which has 50 brands including 7Up and Hawaiian Punch, reported net income of $555 million in 2009, compared with a loss of $312 million the previous year. Its 2009 sales were $5.5 billion, down 3 percent.

With each passing week, the two sides have dug in deeper, doing their utmost to outmaneuver and undercut each other. Rain or shine, dozens of workers picket outside the plant each day, standing alongside a 15-foot-tall inflatable rat and a mock coffin emblazoned with “R.I.P. Corporate Greed.”

Rebecca Givan, a professor of industrial relations at Cornell, said the strike has taken on broader symbolism. “The union wants to tap into the public backlash against perceived corporate greed,” she said. “The company wants to emphasize the depressed local labor market.”

The strike has become so important because of the prominence of the brands and because of its unusual nature: a highly profitable company is taking the rare and bold step of demanding large-scale concessions.

Unlike previous battles, where American manufacturers have often sought to cut labor costs by threatening to close plants or move operations to the South or overseas, Dr Pepper Snapple is not making such threats.

For unions across the country, the stakes are high because if the Mott’s workers lose this showdown, it could prompt other profitable companies to push for major labor concessions. Such a lengthy strike is unusual at a time when work stoppages have become much less common than they once were.

Strikes and other work stoppages nationwide have plunged in recent decades, to 126 last year from 831 in 1990, according to the Bureau of National Affairs, as unions represent fewer workplaces and workers increasingly recognize the considerable pain and risk involved in walkouts.

“Companies have asked for concessions throughout the history of the labor movement because they’ve faced hard times and needed help to survive,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, which represents the Mott’s workers. “Dr Pepper Snapple is different. They don’t even show the respect to lie to us. They just came in and said, ‘We have no financial need for this, but we just want it anyway because we figure we can get away with it.’ ”

Negotiations have not been held since May, and Dr Pepper Snapple says it has no intention of resuming them. The company has continued to operate the plant using replacement workers and says that production of apple juice and apple sauce is growing each day. Union officials say production is one-third of what it was before the walkout.

The Mott’s workers voted 250 to 5 to strike, walking out on May 23. They were furious about the company’s demands to cut their wages by about $3,000 a year, freeze pensions, end pensions for new hires, reduce the company’s 401(k) retirement contributions and increase employees’ costs for health care benefits. Dr Pepper Snapple said it was merely seeking to bring its benefits more in line with those of its other plants.

Even before the strike vote, workers were stewing, saying that management had begun treating them far worse after Cadbury Schweppes, the former owner, spun off its American beverages division in 2007, creating Dr Pepper Snapple.

The new management eliminated their bonuses, the summer picnic and the year-end holiday party for employees’ children, several workers complained.


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Fidel Castro Fascinated by Book on Bilderberg Club

Associated Press:

HAVANA — Fidel Castro is showcasing a theory long popular both among the far left and far right: that the shadowy Bilderberg Group has become a kind of global government, controlling not only international politics and economics, but even culture.

The 84-year-old former Cuban president published an article Wednesday that used three of the only eight pages in the Communist Party newspaper Granma to quote — largely verbatim — from a 2006 book by Lithuanian-born writer Daniel Estulin.

Estulin's work, "The Secrets of the Bilderberg Club," argues that the international group largely runs the world. It has held a secretive annual forum of prominent politicians, thinkers and businessmen since it was founded in 1954 at the Bilderberg Hotel in Holland.

Castro offered no comment on the excerpts other than to describe Estulin as honest and well-informed and to call his book a "fantastic story."

Estulin's book, as quoted by Castro, described "sinister cliques and the Bilderberg lobbyists" manipulating the public "to install a world government that knows no borders and is not accountable to anyone but its own self."

The Bilderberg group's website says its members have "nearly three days of informal and off-the-record discussion about topics of current concern" once a year, but the group does nothing else.

It said the meetings were meant to encourage people to work together on major policy issues.

The prominence of the group is what alarms critics. It often includes members of the Rockefeller family, Henry Kissinger, senior U.S. and European officials and major international business and media executives.

The excerpt published by Castro suggested that the esoteric Frankfurt School of socialist academics worked with members of the Rockefeller family in the 1950s to pave the way for rock music to "control the masses" by diverting attention from civil rights and social injustice.

"The man charged with ensuring that the Americans liked the Beatles was Walter Lippmann himself," the excerpt asserted, referring to a political philosopher and by-then-staid newspaper columnist who died in 1974.

"In the United States and Europe, great open-air rock concerts were used to halt the growing discontent of the population," the excerpt said.

Castro — who had an inside seat to the Cold War — has long expressed suspicions of back-room plots. He has raised questions about whether the Sept. 11 attacks were orchestrated by the U.S. government to stoke military budgets and, more recently suggested that Washington was behind the March sinking of a South Korean ship blamed on North Korea.

Estulin's own website suggests that the 9/11 attacks were likely caused by small nuclear devices, and that the CIA and drug traffickers were behind the 1988 downing of a jetliner over Lockerbie, Scotland, that was blamed on Libya.

The Bilderberg conspiracy theory has been popular on both extremes of the ideological spectrum, even if they disagree on just what the group wants to do. Leftists accuse the group of promoting capitalist domination, while some right-wing websites argue that the Bilderberg club has imposed Barack Obama on the United States to advance socialism.

Some of Estulin's work builds on reports by Big Jim Tucker, a researcher on the Bilderberg Group who publishes on right-wing websites.

"It's great Hollywood material ... 15 people sitting in a room sitting in a room determining the fate of mankind," said Herbert London, president of the Hudson Institute, a nonpartisan policy think tank in New York.

"As someone who doesn't come out of the Oliver Stone school of conspiracy, I have a hard time believing it," London added.

A call to a Virginia number for the American Friends of Bilderberg rang unanswered Wednesday and the group's website lists no contact numbers.

Castro, who underwent emergency intestinal surgery in July 2006 and stepped down as president in February 2008, has suddenly begun popping up everywhere recently, addressing Cuba's parliament on the threat of a nuclear war, meeting with island ambassadors at the Foreign Ministry, writing a book and even attending the dolphin show at the Havana aquarium.

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Wednesday, August 18, 2010

Democrats Go GOP on Tax Cuts

Counterpunch.org:

August 18, 2010

Meandering Into the Midterm Elections

By ANTHONY DiMAGGIO

President Obama supports letting many of the Bush tax cuts expire. He’s defending the passage of a new round of tax cuts, promised to benefit America’s middle and working classes. These cuts, however, would continue to benefit the affluent, or those individuals earning more than $170,000 a year. CNN Money reports that the tax cuts promoted by Obama for the middle class would also reduce taxes for those making between $171,850 and $195,550. This group would now fall into a “sweet spot” that would reduce their payments from the 33 percent tax bracket down to the 28 percent tax bracket. In contrast, those individuals who make more than $200,000 would see their payments increase from the 36 percent bracket to the 39.6 percent bracket.

The increase in taxes for those making more than $200,000 is misleading, however. While these individuals would legally be required to pay more in terms of their tax bracket, they would nonetheless qualify for other tax reductions under Obama’s plan.

The details are provided by the Center on Budget and Policy Priorities (CBPP). The organization reports that under Obama’s plan, “people making more than $1 million will receive more than five times the tax cut benefit, in dollar terms, as a middle class family making $50,000 to $75,000. The wealthy would qualify for cuts under the proposed extension of the income tax rate reductions and married filers’ reductions. In relation to the income tax, the CBPP estimates that those in the $200,000 to $500,000 income category would receive, on average, an 83 percent greater tax cut than those immediately below them earning more than $100,000 but less than $200,000. Those earning between $500,000 and $1 million would receive, on average, a 13 percent greater tax cut than those immediately below them making between $200,000 and $500,000. Finally, individuals earning more than $1 million would benefit from a 15 percent greater cut than those immediately below them making between $500,000 and $1 million. These numbers may sound confusing, but the major theme is really quite simple: as an individual’s (or a household’s) earnings increase into the six figures and beyond, they will be entitled to increasingly larger tax cuts under the Obama plan when compared to middle, working class, and poor Americans.

The Obama tax cuts, while clearly benefitting the middle class in many ways, will also represent a major pay day for America’s upper class. This apparently isn’t enough for Republicans in Congress, however. They complain that the rich should benefit from all the tax cuts granted under Bush, not merely some of them. They feel that any tax increases (relatively to the cuts the rich received in the last few years) are illegitimate. Nowhere is this position more clearly declared than by House of Representatives Republican Minority Leader John Boehner, who defends the Bush era tax cuts, which went overwhelmingly to the wealthiest one to five percent of Americans.

Boehner complains that “you can’t raise taxes in the middle of a weak economy without risking the double-dip in this recession…You cannot get the economy going again by raising taxes on those people who we expect to create jobs in America and to get the economy going again. If we want to solve the budget problem, we’ve got to have a healthy economy and we have to get our arms around the runaway spending that’s going on in Washington, D.C.”

The supply side notion (first advocated by the Reagan administration) claims that economic growth only comes from massive tax cuts directed toward the rich. This theory, although promising prosperity for America’s middle class and poor, has done little to deliver benefits to the masses. A careful study from the Economic Policy Institute finds that “the economy has little to show for the $860 billion in tax cuts” passed under Bush from 2001 to 2005. In this EPI report, Lee Price concludes that “by virtually every measure the economy has performed worse in this business cycle than was typical in past ones, including that of the early 1990s, which saw major tax increases.” The EPI compares the 2001 to 2005 business cycle to other cycles in history (a cycle being defined in economics as a period beginning with a contraction in national GDP, a trough period when contraction ends and expansion begins, a sustained expansion period, and a peak of growth). EPI finds that, in spite of the 2001 and 2003 tax cuts, “almost every broad measure of economic activity – GDP, jobs, personal income, and business investment, among others – has fared worse over the last four and a half years (again, 2001 to 2005) than in past cycles.”

The EPI’s findings raise serious questions about the effectiveness of tax cuts aimed at the rich in bringing about economic recovery. The worthlessness of tax cuts for the rich in assuring middle class prosperity has been reinforced over the last few years as well. The Bush tax cuts are set to expire this year. Since the 2008 economic collapse and ensuing recession, the Bush tax cuts (in addition to the massive infusion of TARP funds for American “too big to fail” banks) have not been sufficient to push the U.S. into a serious economic recovery at a time when those who still have jobs are working harder and harder for declining wages. It was not until this year that the recession formally ended (a recession being defined as two consecutive quarters of negative growth), and economic growth has been rather anemic, at just over one percent for the second quarter of 2010.

One would think that all these negative signs would be enough to convince Republicans (and conservative Democrats) not to renew tax cuts for the wealthy. This, however, has not been the case. The Republican Party – aided by reactionary pundits in the media – continues to push tax cuts for the rich. They do this, not because these cuts promote strong recovery and prosperity for middle America, but because they subsidize Republicans’ primary constituency – the rich. Democrats have long been reliant on, and supportive of corporate power as well, so their relatively weaker support for tax cuts for the rich is not surprising either.

Rather than asking what the Democrats and Republicans should be doing to reduce the size of government (as both parties’ leaders are doing), we should be asking how the government should be expanding its efforts to help the needy during times of economic desperation. The Democratic expansion of Medicaid under the 2010 health care reform bill will certainly help America’s poor in terms of increasing the size of the social welfare state, but a far larger (and much needed) expansion in the form of establishing a universal health care, Medicare-for-all system, would do a lot more in reducing the suffering of vulnerable Americans. What also would help the country (in addition to the recent extensions of unemployment and state school funds passed by Democrats in Congress) is another stimulus, which should be passed prior to the 2010 midterm elections.

The Democratic Party has gone Republican in at two ways when it comes to the tax cuts: 1. by pushing for a market solution over expanding government social welfare services; and 2. by continuing the tax cuts to the rich, even if in a reduced form from the far larger, more extreme amount preferred by conservatives. The choice to promote tax cuts over increased social spending (on food subsidies for the poor and on a new stimulus) signals a privileging of the well off over the truly needy. Instead of helping preserve the jobs of state educators and other public employees through massive stimulus spending, the Democrats have instead chosen to grant tax cuts to those who already have jobs. Why this group should be prioritized over the unemployed is anyone’s guess. The Democratic approach signifies the party’s increasing embrace of the Republican themes that “the government is the problem,” and that the best way to promote economic recovery is to reduce government revenues, and “give the people more of their own money,” rather than use that money to help those who are the most desperate.

There are penalties to be paid for going Republican at a time when Republicans are just as unpopular as the Democrats in the public mind. The Democratic Party’s emphasis on unnecessary tax cuts, and its timidity in pushing for an expansion of government stimulus has left us in the desperate economic position we are in today. The party is willing to promote at least limited welfare spending, passing $34 billion in unemployment extension benefits, and an additional $26 billion to help states fill their deficits and stave off cuts in education and Medicare. These most recent education and Medicaid packages, however, came along with $10 billion worth of cuts in food aid to the poor. The recent Medicaid, school, and unemployment bills also total just $50 billion for the year (after adjusting for the food aid cuts), and this represents a small fraction of the hole in state deficits that needs to be filled.

The state deficits for 2010 were estimated to total $192 billion, according to the CBPP. State deficits for 2011 are estimated at approximately $120 billion. Allowing all the Bush era tax cuts to expire would produce an additional $217 billion in revenues for the federal government throughout 2010 and 2011, according to a recent study by the Brookings Institute and the Urban Institute. This amount is more than enough to plug in the $120 billion hole in the 2011 state budget deficits. It’s unlikely that the Democratic Party will take this route, however, in light of its increasing support for Republican mantras about the holiness of tax cuts as a means of economic stimulation.

Democrats could single handedly end the state budget crises that will (sadly) continue to grip the country over the next year. Instead, they will continue to meander throughout the rest of 2010, refusing to push any sort of stimulus on par with the $787 billion stimulus package passed in 2009. Democratic refusals to pass a second stimulus will all but guarantee continued economic stagnation – and possibly decline. The party’s incompetence and preference for the rich will likely come back to haunt it in the 2010 election, in which the American public will angrily (and rightly) throw out many Democrats due to their mishandling of the economic crisis.

Anthony DiMaggio is the editor of media-ocracy (www.media-ocracy.com), a daily online magazine devoted to the study of media, public opinion, and current events. He has taught U.S. and Global Politics at Illinois State University and North Central College, and is the author of When Media Goes to War (2010) and Mass Media, Mass Propaganda (2008). He can be reached at: mediaocracy@gmail.com

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