Will Blog for Food

Is Obama the Worst President in American History?

by John Lawrence

Republican politicians are in the habit of assailing President Obama with statements like the following: "I believe that President Obama is the worst President in American history." Really? Based on what facts? Was he worse than Willard Fillmore? Was he worse than Franklin Pierce? Was he worse then James Buchanan? According to every poll including the Chicago Tribune, the New York Times, the Wall Street Journal, C-SPAN and Sienna College, these Presidents are considered the worst. But never mind that. What Republican politicians and right wing talking heads like Rush Limbaugh, Glenn Beck, Sean Hannity and other right wingers do is to create an alternative reality based not on facts but on beliefs. They've constructed a completely fictitious alternative Barack Obama, one that is worthy of being detested and ridiculed and demeaned. Then their job is to sell that image of Barack Obama to the American public. The American public, most of them, have never met Barack Obama. They've never discussed politics, economics or anything else with Barack Obama. Their only knowledge of Barack Obama is whatever comes over the TV tube. So competing realities are out their for defining and either demonizing or angelizing Barack Obama. According to this view of reality, the side with the most TV and media output wins. Republican politicians and TV and talking head radio personalities are mostly either lawyers or people like lawyers with immense powers to persuade and convince people of practically anything. A good lawyer can convince a jury that an innocent man is guilty or that a guilty man is innocent. That is their job, and the better that the lawyer can distort the truth, the better lawyer he or she is considered to be.

When it comes to politics, the more right wing talking heads can convince people that Barack Obama is the worst President ever, the more money they make. The whole point is to demonize Obama by associating him with Muslims or Kenyans or the devil. They  don't quite go so far as to associate him with Hitler. That seems to be one line even the lunatic fringe will not cross. But they tell you he is a European socialist despite the fact that he went all out to save the big banks, the very beating heart of capitalism, from complete collapse in the recent financial calamity. Despite the fact that not one fraudulent banker is in jail, Obama is a socialist. Too bad the Soviet Union no longer exists or they would be tagging Obama with the communist label. So now they are reduced in effect to accusing him of being sympathetic to the European Union! Gorbachev said that the collapse of the Soviet Union would deprive the US of its enemy. How right he was? The US was deprived of its chief bogeyman when the Soviet Union imploded. And they cannot very well demonize The Communist Party of China, our chief trading partner and financial co-dependent. So they are reduced to accusing Obama of being a European socialist.

The dynamic here is to demonize Obama based on beliefs not facts. And they have a lot of money to do it with. In many media markets there are no countervailing views. People are left to the imprecations of Rush Limbaugh and Fox News. So they hear day in and day out that Obama is A TERRIBLE PRESIDENT, the worst President etc. Knowledgable persons whose voices are hardly consulted might say that Obama's predecessor, George W Bush, was among the worst.

A 2006 Siena College poll of 744 professors reported the following results: "George W. Bush has just finished five years as President. If today were the last day of his presidency, how would you rank him? The responses were: Great: 2%; Near Great: 5%; Average: 11%; Below Average: 24%; Failure: 58%." "In your judgment, do you think he has a realistic chance of improving his rating?” Two-thirds (67%) responded no; less than a quarter (23%) responded yes; and 10% chose no opinion or not applicable." Thomas Kelly, professor emeritus of American studies at Siena College, said: "President Bush would seem to have small hope for high marks from the current generation of practicing historians and political scientists. In this case, current public opinion polls actually seem to cut the President more slack than the experts do." Dr. Douglas Lonnstrom, Siena College professor of statistics and director of the Siena Research Institute, stated: "In our 2002 presidential rating, with a group of experts comparable to this current poll, President Bush ranked 23rd of 42 presidents. That was shortly after 9/11. Clearly, the professors do not think things have gone well for him in the past few years. These are the experts that teach college students today and will write the history of this era tomorrow." A 2010 Siena poll of 238 Presidential scholars found that former president George W. Bush was ranked 39th out of 43, with poor ratings in handling of the economy, communication, ability to compromise, foreign policy accomplishments and intelligence. Meanwhile, the current president, Barack Obama was ranked 15th out of 43, with high ratings for imagination, communication ability and intelligence and a low rating for background (family, education and experience).

Bush doubled the national debt from $5 trillion to $10 trillion by giving tax cuts to the rich, an unfunded prescription drug benefit to seniors which was a giveaway to the pharmaceutical corporations and two unfunded wars in Iraq and Afghanistan. Obama took out the leadership of Al Quaeda including Osama bin Laden and Anwar al-Awlaki, brought or is bringing those unfortunate wars to an end and is doing his best to restore Clinton's tax structure which would raise taxes on the rich while keeping tax cuts for the middle class and poor. Obama's health care act, popularly known as Obamacare, would, among other things, end the insurance corporations' policy of rescission which denies insurance to people with pre-exisitng conditions, close the doughnut hole for seniors and keep young people on their parents' policies till age 26, an important consideration in an era of high youth unemployment. The fact is that Bush Jr was cavalier in implementing policies that were not only disastrous for the US including the war he lied us into in Iraq, but also ran up the national debt in a huge way. These policies are still in effect because of Republican filibusters that keep them in effect. Only now Obama is being blamed for them by the right wing talking heads, and using their powers of persuasion, they are doing their best to convince the American people that Obama is a spenthrift who only wants bigger government despite the fact that there have been massive job losses in the public sector and modest gains in the private sector.

So the fictitious President Obama is what Santorum, Romney, Gingrich, Limbaugh, Hannity and all the rest are trying to sell to the US public. They are fueled with billions of dollars from right wing billionaires like the Koch brothers and Sheldon Adelson for whom a million or two invested here or there is nothing more than pocket change. With an income of $1 billion a year, which translates to $1000 million a year or $2.7 million a day, these guys can well afford a day's pay to influence elections in their favor. That's pocket change to them. So they associate Obama with Satan. He's supposed to be in league with the devil. They send around emails showing a skunk, half black and half white, and associate that with Obama. There's no depth that they won't sink to to demonize Obama except of course they haven't sunk to the depth of trying to convince us that he's channeling Adolf Hitler. I guess Hitler's considered to be even worse than the devil! And of couse all this is based on statements like "I think that Obama blah blah..." and "I believe that Obama blah blah ...." Nothing based on facts because the facts are quite the opposite of the image they are trying to create

And the truth is that they don't give a rip about all the stuff they try to get the electorate riled up about like the social issues - abortion, birth control, God, gays and guns. These are all smoke screens to hide their real agenda which is tax breaks for the rich, deregulation for corporations and privatization of public schools. Of course they never talk about inequality or the fact that corporations only contribute 8% of Federal revenues instead of the 30% they used to contribute. They don't talk about the fact that the rich pay taxes at a lower rate than the poor. The last thing they want to talk about is the fact that there is $2.5 trillion in the social security trust fund because they want to eliminate social security on the grounds that it is running out of money.

So Obama is terrible, a failure (they love that tag), the worst President in American history based on not facts but beliefs. Except that these intelligent men don't really believe that at all. Just like the lawyer that knows his client is guilty and effectively and skillfully convinces the jury that he really is innocent, right wing talking heads including Republican politicians are trying to draw a picture of Obama as the worst President in American history and then convince you that this belief based reality is the real reality. 

Republican Stratregy: Spend Like a Drunken Sailor When a Republican is in the White House, Scream Bloody Murder About the Deficit When a Democrat is President

by John Lawrence

There was no hue and cry when George W Bush was doubling the national debt. Bush started two illegal, unpaid for wars, gave huge tax breaks to the wealthy and instituted a pharmaceutical benefit for seniors that was again unpaid for. All these programs which were inherited by Obama were based on borrowed money and hence their net effect was simply to increase the national debt. In order to get the national debt under control all that would be necessary would be to reverse these Bush era programs, but Republicans want to stick Obama with these Bush institutionalized deficits instead. Republicans and Democrats went along with all this dutifully raising the debt limit whenever Bush asked them to. Now Republicans are screaming bloody murder about the debt, but they have not deinstituted Bush's programs that are still causing it. They haven't let Medicare negotiate prices with the pharmaceutical industry; they haven't done away with the Bush tax cuts although Obama has tried to get them to. Instead, they put Obama's back to the wall and demanded that the Bush tax cuts continue. They are due to expire at the end of 2012, and that is the primary reason why Obama insisted on a debt ceiling deal that would carry us through 2012. If there had been another debt ceiling fiasco around Christmas of 2011, Republicans would have held Obama hostage over the Bush taxs cuts forcing him to not let them expire or they would shut the government down. The current debt deal wisely avoids this scenario. Obama is trying to wind down Bush's stupid wars in a way that doesn't raise Republican ire, but he is not doing it fast enough. They are still consuming far too much money.

The debt ceiling deal provides for a commission that will get absolutely nowhere which will result in an automatic spending trigger which will provide for significant cuts to the Pentagon in addition to scaling back social programs. The fact that there will be significant cuts to the Pentagon is a stroke of genius on Obama's part. So I don't think the debt deal was such a bad agreement from Obama's point of view. He managed to put off the most significant cuts in social programs until the "out years." This means that nothing much will happen until after the next elections. If Democrats win big at that time they can undo whatever damage was done by any deals they made with Republicans. Nothing is set in stone that the next Congress cannot fix.

The Republican modus operandi for some years has been to vote against anything that would make a Democratic President look good in order to get the American people to vote against him in the next election putting a Republican in the White House. So this creates the conventional wisdom that a Democratic President doesn't know how to get anything done no matter how good his ideas or proposals are. Democrats have then obligingly gone along with Republican Presidents to get things done because they are not quite as venal and dastardly as Republicans and are more interested in helping out the American people. Consider Richard Nixon. Although no dirty trick was beneath him in order to obtain the Presidency, Nixon governed as a liberal. He established the Environmental Protection Agency, ushered in the first Earth Day, made an opening to the Chinese communists, something no Democrat would have dared to have done because of the expectation of a huge Republican outcry, tried to put together a National Health Care plan which was cut short by his impeachment, imposed wage and price controls, created Supplemental Insurance Income and on and on. The Republciacn MO in those days was to give the American people what they wanted but only when a Republican was in the White House. Otherwise, fight against any improvement in the lot of the American people thus convincing said people that the only way to get anything done was to put a Republican in the White House.

Then along came Jude Wannisky with a better idea, the Two Santa Claus Theory. The part about resisting any progress when a Democrat was in the White House remained the same. But instead of governing as a liberal, what the Republicans would do was to give everybody a tax break and put it on the American credit card. The idea was to run up the debt as much as possible, spend like a drunken sailor, create the ambiance of prosperity and then scream bloody murder about the debt after a subsequent Democrat was elected President. This would put Democrats in a bind because they would not be able to implement any social programs such as those implemented by Nixon. Their only job would be to clean up the elephant poop after the parade was over. This would further contribute to the conventional wisdom that the only way to get anything done was to elect a Republican President. This worked because Congressional Democrats were not as shameless as Republicans and would go along with Republican initiatives, if they thought they would benefit the American people, even when they did not hold the Presidency.

These techniques have been raised to an art form under the Obama Presidency. Republicans will not let any legislation pass that would in any way be considered a victory for Obama even if the legislation represents Republican ideas and no matter how much the lack of it harms the American people. By so doing they hope that the American people will blame Obama for not getting anything done and not notice that the real reason nothing gets done is Republican Congressional obstructionism. Even when Democrats controlled both Houses of Congress, as they did during the first two years of the Obama Presidency, Republicans used the filibuster in the Senate to prevent a whole slew of legislation, such as the legislation that would have closed the loophole giving tax breaks to corporations that ship American jobs overseas, from getting passed. Now that they control the House, their mission is even easier. They simply will not bring to a vote any Democrat inspired legislation, or if they did, they would simply vote it down because they have a majority. They don't even need to use the filibuster.

Only this time, after they get a Republican elected President in 2012, he or she will not pull a Nixon and govern as a liberal. Their far right philosophy is too much ingrained for that to happen. This time, even though the American people might be yearning for a "can do" President, what they will get instead is the opportunity to jump out of the frying pan and into the fire. If Republicans control both Houses of Congress and the Presidency after the 2012 elections, what the American people will get is the complete elimination of all social programs unless Democrats use the filibuster in the Senate to stop them. They will get lower taxes for millionaires and billionaires and higher taxes for the poor and middle class. (Expect payroll taxes to increase.) They will get class warfare in the extreme while being called out for engaging in class warfare themselves by the likes of Rush Limbaugh. One Republican tactic is to accuse the other side of doing the very thing they themselves are doing. The Tea Party will stop worrying about the National Debt because that will be what their minders want them to do. Instead the push will be on for "revising" Medicare, Medicaid and Social Security, deregulating corporations, lowering corporate taxes while lobbyists drill new loopholes in the "lower" taxes, privatizing public schools, parks, libraries, fire and police forces, getting rid of unions and converting all public employee defined benefit pension plans to 401ks. What's happening in Wisconsin, Ohio, Michigan and some other states will have been only a prelude to what will happen on a national scale. The American people, despite opinion polls to the contrary, will not figure into any Republican calculations and their way of life will be decimated before their very eyes with them powerless to do anything about it. This is the morass that the conventional wisdom - that a Democrat can't get anything done while a Republican "can do" - will lead us into. This is the race Mitt Romney is gearing up for.

While the Republicans in Congress are determined not to give the Obama administration any "victories" which might actually make the lot of the American people better, and to force his back to the wall and demand that he implement the Republican agenda, the American people are too dumb to figure out what's happening. They will be swayed by the billions of dollars which will be poured into TV advertising that Obama's administration was a bust and that, in order to have "Morning in America," they must elect Republicans in 2012. If they are so led and if they so comply, they will be treated to Republican economic policies which will eliminate even more American jobs while creating tons of them overseas, the homeless population will mushroom, middle class people will be forced out onto the streets in droves while the economy goes into a tailspin. But while this is happening corporate balance sheets and CEO salaries will continue to skyrocket. Any talk by Democrats of a "jobs program" will be branded as socialism. The next Republcian President will fill a couple of Supreme Court vacancies with hard right Republicans thus guaranteeing that Republcian policies and laws will prevail into the next millenium. Any agencies that protect the American people will be defunded even if they are allowed to continue to exist. Workers will lose all the rights that their forefathers fought so hard for. Federal tax receipts will come less from corporations and billionaires and more from the working poor. The sick, the elderly and the disabled will have to rely on church based charity and forego any hope of help from their government. Hoovervilles (Romneyvilles?) will spring up all over the country.

Republicans are recreating the Great Depression and doing it with a vengeance. Their policies are ideologicaally based, not pragmatic, and they are bound and determined to thwart the will of the people in order to create a libertarian utopia. It doesn't matter to them how much harm they do to the average American or what the average American wants from government. Their mantras of small government, privatization of any and every public agency or program will carry the day despite any cost. According to them the Great Depression should have been allowed to proceed as long as corporate profits were up. The fact that unemployment was 25% was no big deal. Their advice to the unemployed: "Get a job, you lazy, shiftless suckers!" The prison-industrial complex will continue to expand especially for people of color who will find themselves incarcerated for drug offenses and petty crime while fraudulent bankers and rating agencies will only be bailed out when they get in trouble. Thus a libertarian utopia will have been achieved in which there is a small class of very wealthy people while the vast majority becomes increasingly immiserated. Sure, there will be a few lone voices crying out in the wilderness, a few disgruntled people who won't go along with the Republican program. They will be characterized as losers, socialists and people who have renounced the American dream.

 

The Fly in Obama's Ointment on Jobs

by John Lawrence

President Obama is waxing ebullient on the jobs front. He's partnered up with GE CEO Jeffrey Immelt, and they are both proclaiming that the US will again be a robust manufacturing and exporting nation. They have rejected the model for the US as a mainly consuming and service oriented nation. That's all to the good. But Obama seems to have placed too much faith in the corporate CEOs. He seems to think they're going to stop outsourcing, and, out of the goodness of their hearts, they're going to start creating jobs here at home. But the official US government still has in place laws and policies - and in particular tax policies - that actually encourage outsourcing. Nancy Pelosi, when the Democrats controlled the House, said after passing a bill which would have reined in outsourcing: "In this legislation, which is job creating, it closes the loophole which has allowed businesses to ship jobs overseas.  Can you believe that we have a tax policy that enables outsourcing?  So if you have one thing to say about this bill to your constituents, you can say that today, you voted to close the loophole to ship U.S. jobs overseas and giving businesses a tax break to do so. It is not right. It will be corrected today.” This was in May, 2010. Of course, this bill never made it into law because it was filibustered by Republicans in the Senate. Sorry, Nancy.

Closing the loophole that has allowed businesses to ship jobs overseas? Well, sorry to say that loophole was never closed! President Obama though wants us to believe that, regardless of that loophole being closed, CEOs like Jeffrey Immelt are going to be nice guys and create local manufacturing jobs here in the US even though it is going to lower their profit margins, even though the loopholes for shipping jobs overseas are still open! Is he being naive? And then there is this from Robert Reich:

General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE’s joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.

Will the real GE please stand up? Corporations are required by law to maximize their profits. This means that they will lower their expenses by getting the cheapest labor wherever they can get it. And American labor is relatively expensive compared to Chinese labor. So Obama is skating on thin ice. His bravado overlooks the underpinnings of law that give American corporations huge incentives for creating jobs overseas and outsourcing American jobs. Sure, GE wants to sell to the Chinese. But this doesn't mean that those products will be exported from the US. In the last ten years 42,000 American factories have closed. Millions of jobs have been lost. And now Mr. Nice Guy, Jeffrey Immelt of GE, is going to forego maximizing profits and his salary and his duty to shareholders in order to do a favor for President Obama and create some jobs in the US? What game is he playing? Mr. President, where are the legal underpinnings that would make sure that this will happen? You have a Congress that won't even close loopholes that would encourage job creation in the US. Do you have the feeling you're teetering on the brink? You said you've moved us back from the abyss. But have you? The abyss still looms because now for sure with a Republican controlled House, no loopholes that encourage and enable outsourcing will ever be closed unless and until Democrats control both Houses and the filibuster rules have been changed. Mr. President, you are whistling Dixie, in the dark, and past the graveyard too!

As President Obama touts the jobs being created at GE's Schenectady plant we have this dated January 14, 2011: "Solar Panel Maker Moves Jobs to China":

BEIJING — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States. But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

It looks like the right hand doesn't know what the left hand's doing. It seems like not only does China have cheaper labor, but they have more government support for American companies that want to build plants and create jobs there! The US on the other hand has no industrial policy, no set of incentives in order to have companies, domestic or foreign, build more plants in the US. And there are no unions to speak of that would fight for the rights of American workers. America, for all intents and purposes, has been deunionized starting with Reagan's firing of the air traffic controllers which effectively put their PATCO union out of business.

In "19 Facts About The Deindustrialization Of America That Will Make You Weep", Michael Snyder says:

The United States is rapidly becoming the very first "post-industrial" nation on the globe.  All great economic empires eventually become fat and lazy and squander the great wealth that their forefathers have left them, but the pace at which America is accomplishing this is absolutely amazing.  It was America that was at the forefront of the industrial revolution. It was America that showed the world how to mass produce everything from automobiles to televisions to airplanes. It was the great American manufacturing base that crushed Germany and Japan in World War II.  But now we are witnessing the deindustrialization of America.  Tens of thousands of factories have left the United States in the past decade alone. Millions upon millions of manufacturing jobs have been lost in the same time period.The United States has become a nation that consumes everything in sight and yet produces increasingly little. Do you know what our biggest export is today? Waste paper. Yes, trash is the number one thing that we ship out to the rest of the world as we voraciously blow our money on whatever the rest of the world wants to sell to us. The United States has become bloated and spoiled, and our economy is now just a shadow of what it once was. Once upon a time America could literally outproduce the rest of the world combined. Today that is no longer true, but Americans sure do consume more than anyone else in the world. If the deindustrialization of America continues at this current pace, what possible kind of a future are we going to be leaving to our children?

The US is embarked on its own destruction thanks to the "small government" mantra of the Republican controlled Congress. Small government means no industrial policy except by lobbyists seeking special favors for their particular corporate sponsors. It means that US government policy will favor US business but not necessarily US workers. Unless and until the US can adopt policies which favor job creation in the US, US workers will be left out in the cold. And President Obama's soaring rhetoric about cooperation with CEOs like Jeffrey Immelt will be just that: rhetoric.

American Multinational Corporations Have No Interest in Creating American Jobs So Let's Take Another Approach

by John Lawrence

President Obama's trip to Asia was billed as one to increase American exports. But American multinational corporations aren't interested in increasing exports because they have built manufacturing facilities in China, South Korea, Thailand and other places where labor is cheaper than American labor. Their preferred modus operandi is to export to the American market and sell directly to the local market abroad, hence, exports from the US are a non-starter.  For consumers in foreign countries who want an American product, there is no need to import it from the US. They can buy it from a US corporate manufacturing facility located in their own country. That's why President Obama is barking up the wrong tree. He should be more interested in getting multinational corporations, American and otherwise, to locate manufacturing facilities in the US in order to create American jobs even if their only goal is to sell to the American market and not to export. The only way to do this is to change the import tax laws to encourage companies to locate production facilities here. President Clinton threatened a 100% import tax on luxury vehicles and Toyota promptly started locating manufacturing facilities in the US to protect the market for their Lexus.

It doesn't really matter whether foreign multinationals or American corporations build manufacturing facilities in the US. It's all about providing jobs. With current policies successful start-up companies will provide American jobs temporarily until they grow to a certain size, and then they will offshore those jobs in order to increase profits. So small business start-ups will not be the salvation for American job-seekers except in the very short run. Some worry that profits from Toyota's US manufacturing operations, for example, are repatriated to Japan. But so what? Profits from American corporations operating abroad are held offshore where they aren't taxed. So for all intents and purposes they are not repatriated to the US and, even if they were, they would only end up in rich investors' pockets. By encouraging foreign corporations to locate here, they can at least be taxed before their profits are repatriated. That makes them more desirable than American multinationals who neither provide jobs in the US nor pay taxes in the US. Their sole relation to the US is the fact that they originated here and are registered here, but that can be quickly changed as we saw with Halliburton which moved its registration to Dubai. And even "American" companies have subsidiaries in places like the Cayman Islands, the better to take advantage of lax tax laws. From the average middle class American's point of view, if a corporation doesn't provide American jobs or pay American taxes, what good is it? And if a foreign multinational corporation does provide American jobs and pays American taxes, it is preferable to an American multinational.

The only way to get muiltinational corporations to build production facilities in the US is to make it relatively unprofitable for them to import into the US market. This can only be done by an import tax or tariff of some sort. I'm sure there are sophisticated ways to accomplish the same thing without mentionaing the dreaded word "tariff." Tariffs, by the way, were the largest source of federal revenue from the 1790s to the eve of World War I, a period of some 124 years or more than half the country's history. Ideologically at the present time, tariffs are anathema to the US because of its rhetoric and espousal of free trade. But the US is being played by other countries who effectively take advantage of American open markets while effectively closing their own markets. South Korea is a good example. It exports its cars here while closing its markets to cars from the US. However, it is open to the idea of American car corporations building production facilities in their country. Why? Because that provides jobs for their own citizens and local taxes. Thus there is no need to import those cars and other products from the US.

Globalization is not going away. Each country needs to respond to it in such a way as to protect its own interests. So far the US has failed to do so. President Obama's attempts to invoke rules to even out the trade imbalances so far have gotten him nowhere. Trying to jawbone China to revalue its currency is an excercise falling on deaf ears. Even quantitative easing, the Fed's latest attempt to make American exports more competitive only breeds resentment among our foreign competitors and represents taking a club to kill a gnat. The only effective response is one which unilaterally changes American laws and policies to create a benefical trade policy, not going around trying to get a bunch of other nations to cooperate in doing something beneficial to American interests. The only solution is to take a page out of the other countries' books. It's not exports that matter. It's the location of production facilities in the US that matters. That's what will provide jobs and increase tax revenues. So importing into the US market from abroad has to be made more onerous for the importers. Only then will they decide that locating production facilities and hence providing American jobs within the US is the way to go. Over half the imports into the American market are from American corporations which have located production facilities abroad in order to take advantage of cheap foreign labor.

The US taxpayers bailed out General Motors. We actually own a good percentage of GM, but what is GM doing? It's building production facilities abroad. It is not providing American jobs in gratitude for being bailed out. This is from the Detroit News:

Washington -- General Motors Corp. will shift more production of vehicles bound for the U.S. market to China, Mexico, South Korea and Japan, but will keep total imports at roughly one-third of all sales here. In a confidential 12-page presentation to members of Congress, obtained by The Detroit News on Friday, GM said it will boost U.S. sales of vehicles built in those four countries by 98 percent -- or about 365,000 vehicles -- while shrinking production in Canada, Australia and European countries by about 130,000 vehicles. GM also disclosed it will start importing vehicles made in China in 2011, reaching 51,546 vehicles in 2014. Imports from South Korea to the United States will jump from 36,967 vehicles in 2010 to 157,126 in 2014. The automaker said it is canceling expansion projects in Russia, India and Mexico. GM's plan to import more vehicles from low-wage countries raises questions about whether it should beef up its foreign operations as it is relying on federal money to stay afloat. It also puts the automaker at odds with the United Auto Workers, which is trying to protect U.S. jobs amid a dramatic restructuring of the domestic auto industry.

So GM has no effective allegiance to the US despite being bailed out with taxpayer money. The same goes for Ford. Ford is planning to build a $450 million car plant in Thailand.

Ford Motor Co. is investing $450 million in a new passenger car plant in Thailand, cementing the country's status as an Asian manufacturing base for the automaker despite prolonged political unrest. The plant with an annual production capacity of 150,000 vehicles will begin assembling the next-generation Ford Focus from 2012, the company said Thursday. Some 85 percent of cars produced at the facility will be sold overseas and the rest in Thailand. Ford said up to 2,200 people will be employed at the factory slated for construction in the eastern seaboard province of Rayong that serves as a base for automakers and other industries.

It's all about the jobs. How does Germany, a high exporting nation, manage to keep high paying jobs in its own country? That's maybe something Obama and the Democrats should study and try to emulate. One way they do it is that most German companies build their products in Germany and then export them while US corporations build plants near their markets and produce for the local foreign market so their sales do not count as exports. Coca Cola has production and marketing facilities in over 200 countries. Germany has powerful trade unions and an extensive vocational education program. Every manufacturing facility is unionized unlike in the US where unions have a vastly smaller role than they did just 30 years ago. Work councils in Germany put workers and management together in a decision making capacity. All industrial imports into Germany are subject to an "Import Turnover Tax" of 19%, which is charged on the duty-paid value of the import article plus the customs duty, which varies by item. The Import Turnover Tax is designed to place the same tax burden on imported goods as goods produced domestically, on which is levied a 19% "Value-added Tax" (VAT). The German customs authorities collect both customs duty and Import Turnover Tax. Germany's regulations and bureaucratic procedures can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters. Complex safety standards, not normally discriminatory but sometimes zealously applied, complicate access to the market for many U.S. products. U.S. suppliers are well advised to do their homework thoroughly and make sure they know precisely which standards apply to their product and that they obtain timely testing and certification. Selling into the American market should be considered a valuable privilege. Therefore, according to free market principles, it shouldn't be given away for free. The US government needs revenue. A VAT tax and a corresponding import turnover tax would not only replenish US government coffers but would tend to equalize the profitability of companies manufacturing abroad and those manufacturing in the US. Reunionization of US workers would also contribute a voice in favor of keeping production and, therefore, jobs local and in country.

It's true that Honda and Toyota only located plants in the US because they were worried about import duties that might come into being. But their US plants were just used for assembly operations. They still imported most of the parts from foreign cheap labor countries. What the US needs is an industrial policy that is concerned with providing jobs for American citizens. This means that the US has to be seen as an attractive place for multinational corporations to locate or it has to be seen as an unattractive place to import into a desirable consumer market. In the past tax breaks and other perks have been given to auto companies by states in competition among themselves to get plants located in their state. A national industrial policy needs to be put in place that would prevent the states from competing against each other in order to get plants located within their state.  That way the states can't be played off against each other by foreign or domestic corporations.

The US will not be successful in cajoling its trading partners to "equalize" trade balances or to revalue their currencies. Only unilateral policies that seek to get multinational corporations to locate production plants inside the US can hope to change the status quo. Trade policy and industrial policy can effectively provide incentives to create jobs here and to discourage imports. The US needs to renounce its policy of free trade in favor of fair trade, and fair trade can only be established if the US changes its policies from within.

How Exactly, Mr. Reich, Do You Create Jobs?

by John Lawrence

Robert Reich writes in his October 1 post that lowering the value of the dollar is not the way to create jobs in the US. Lowering the value of the dollar seems to be the US government's job creation policy at this time. The theory is that that will produce more exports because our products will be cheaper abroad and fewer imports because imported products will be more expensive. Mr. Reich contends that other countries will simply follow suit and lower the value of their currencies. Result: a currency war.

The other way the Obama administration seems to favor for creating jobs is just to wait for the natural dynamics of the US economy to create them. The theory is that the US economy is so resilient that, if we wait long enough, it will just naturally recover and things will go back to normal - normal being 5% unemployment. This might be called the cross-your-fingers-and-wait-and-see approach. This approach is doomed to failure for reasons that have been mentioned on this blog before - outsourcing of jobs and automation, to be succinct. OK, then, what are some other methods by which jobs might be created. Innovation, for one thing. The creation of whole new industries. Technological innovation has fueled capitalism for centuries. Recently, computers and the internet are good examples. Problem is there are no new innovations on the horizon. Especially ones of an exclusively American nature. While the computerization of the world was conceived, developed and capitalized on in the US, current innovative technologies like alternative energy are being pursued more vigorously elsewhere. Automoble technology was developed concurrently in other countries but at a time when outsourcing was impractical so the development of the automobile proceeded independently in a number of countries as if they were on separate planets. In today's world that would not be possible.

Labor arbitrage means that major production facilities will be located wherever the cost of plants, equipment and labor is cheapest. Automation means that most products can be manufactured with a minimum of human labor. So where does this leave Americans who need to work in order to have an income that will let them consume the products and services that they need in order to have at least a decent middle class life? In other words where are the good jobs at good pay going to come from? Of course, one alternative is for Americans to work for starvation wages. There will always be a certain number of low paying service jobs available. But in order to have widespread prosperity among the majority of the population, there are only a few remaining alternatives none of which is being given serious consideration at this time.

Alternative #1: The government sets an industrial policy and subsidizes the development of certain industries which can compete at a world class level. Such is the case with Finland where Nokia has competed successfully at a world level and as a result brought prosperity to Finland. This is also true in Germany which has successfully retained a manufacturing base and has profited from its exports.

Alternative #2: The government sets up public/private partnerships to internally develop the US infrastructure. This in turn will lead to the creation of more private sector jobs following in the wake of infrastructure development just as the development of the railroads or the interstate highway system opened up opportunities for private sector development.

Alternative #3: The US government can create jobs directly in areas that the private sector is not interested in. This was done during the Great Depression when FDR created the Works Project Administration (WPA) and the Civilian Conservation Corps (CCC). There is just as great a need for conservation type projects today and just as much of a lack of interest on the part of the private sector. In fact the private sector ususally is in the business of degrading the environment rather than protecting or enhancing it. This creates an opportunity for government to be in the business of enhancing the environment in such a way that it is not in competition with private enterprise. There may be other areas where government can directly create jobs in ways that do not compete with private enterprise or in ways that are symbiotic with private enterprise. It is possible for government and private enterprise to be involved in a positive sum game, one which is beneficial for both sectors.

Alternative #4: Spread the wealth. Redistribution of wealth. Since income and wealth are becoming more centralized and concentrated (23.5% of income in 2007 went to the upper 1% similar to 1928 just before the Great Depression), the upper income brackets can be taxed heavily and the money used to create jobs ala the WPA and CCC or it can be redistributed by providing unemployment benefits and food and housing subsidies. In other words the social safety net could be greatly expanded. My preference is for the direct and indirect creation of jobs since I think that work is more ennobling than permanently remaining on the dole. Marx was right about the natural tendency of capitalism, particularly unregulated laissez faire capitalism, to centralize and concentrate capital in fewer and fewer hands. Economic inequality in the US has never been greater except just before the Great Depression.

The US is the most laissez faire capitalist country on the planet. At least it has been so for the last 30 years ever since Reagan became President. The lowering of tax rates on the upper income brackets and the deregulation of corporate industry has produced a society in which most of the economic benefits go to a very small number of people at the top. Other countries have prevented this phenomenon by means of their governments being more directly involved in their economies. Whether its the Euro zone, China, Japan or other prosperous nations, they are all - as governments - more directly involved in their economies than the US which has essentially a hands off policy between the government and the economy. Unfortunately for the US, these other nations are becoming more prosperous as the US loses ground. These capitalist hybrid economies especially in China are gaining while the US is losing. Another reason the US is falling further behind is that, while the other capitalist economies have been devoting large amounts of resources with a hands on policy towards their commercial sectors, the US has devoted huge amounts of resources with a hands on policy to its defense sector while maintaining a hands off policy towards its commercial sector.  Unfettered, unregulated capitalism is proving to be not as successful an economic model as is hybrid capitalism.

Government involvement in the economy, what might be called a socialist-capitalist hybrid, seems to be evolving as the successful economic model of the 21st century. Governments that don't have industrial policies such as the US and leave everything to a hands off policy towards the economy seem destined to stagnation. They are heading in the direction of Third World status which is defined as a country with a very small, very wealthy elite surrounded by a very large poverty class. This seems to be what unregulated capitalism produces.

The New Finance Bill: A Mountain of Legislative Paper, a Molehill of Reform

by Robert Reich

Friday, July 16, 2010

Thursday the President pronounced that “because of this [financial reform] bill the American people will never again be asked to foot the bill for Wall Street’s mistakes.”

As if to prove him wrong, Goldman Sachs simultaneously announced it had struck a deal with federal prosecutors to pay $550 million to settle federal claims it misled investor — a sum representing a mere 15 days profit for the firm based on its 2009 earnings. Goldman’s share price immediately jumped 4.3 percent, and the Street proclaimed its chair and CEO, Lloyd (“Goldman is doing God’s work”) Blankfein, a winner. Financial analysts rushed to affirm a glowing outlook for Goldman stock. 

Blankfein, you may recall, was at the meeting in late 2008 when Tim Geithner and Hank Paulson decided to bail out AIG, and thereby deliver through AIG a $13 billion no-strings-attached taxpayer windfall to Goldman. In a world where money is the measure of everything, Blankfein’s power and influence have grown. Presumably, Goldman can expect more windfalls in future years. 

Although the financial reform bill may have clipped some of Goldman’s wings — its lucrative derivative business may require Goldman to jettison its status as a bank holding company, and the access to the Fed discount window that comes with it — the main point is that the Goldman settlement reveals everything that’s weakest about the financial reform bill. 

The American people will continue to have to foot the bill for the mistakes of Wall Street’s biggest banks because the legislation does nothing to diminish the economic and political power of these giants. It does not cap their size. It does not resurrect the Glass-Steagall Act that once separated commercial (normal) banking from investment (casino) banking. It does not even link the pay of their traders and top executives to long-term performance. In other words, it does nothing to change their basic structure. And for this reason, it gives them an implicit federal insurance policy against failure unavailable to smaller banks — thereby adding to their economic and political power in the future. 

The bill contains hortatory language but is precariously weak in the details. The so-called Volcker Rule has been watered down and delayed. Blanche Lincoln’s important proposal that derivatives be traded in separate entities which aren’t subsidized by commercial deposits has been shrunk and compromised. Customized derivatives can remain underground. The consumer protection agency has been lodged in the Fed, whose own consumer division failed miserably to protect consumers last time around. 

On every important issue the legislation merely passes on to regulators decisions about how to oversee the big banks and treat them if they’re behaving badly. But if history proves one lesson it’s that regulators won’t and can’t. They don’t have the resources. They don’t have the knowledge. They are staffed by people in their 30s and 40s who are paid a small fraction of what the lawyers working for the banks are paid. Many want and expect better-paying jobs on Wall Street after they leave government, and so are shrink-wrapped in a basic conflict of interest. And the big banks’ lawyers and accountants can run circles around them by threatening protracted litigation. 

Why do you think Goldman got off so easily from such serious charges of fraud?

Reliance on the discretion of regulators rather than structural changes in the banking system plays directly into the hands of the big banks and their executives and traders who contribute mightily to Democratic and Republican campaigns. The flow of money virtually guarantees that regulatory agencies won’t be adequately staffed to enforce the law, that penalties for violations won’t be overly onerous, and that all loopholes (what’s a “derivative”? what has to be listed on exchanges? exactly how much capital must be on hand for which transactions? How are the various forms of predatory lending to be defined?) will be easily stretched in future years. Wall Street lawyers will have a field day. The profit-for-nothing sector of the economy (law, accounting, finance) will continue to grow buoyantly.

Make no mistake: As long as there’s no fundamental change in the structure of Wall Street — as long as the big banks stay as big and are allowed to grow bigger, and have every incentive to invent new financial gimmicks with which to bet other peoples’ money — they will remain too big to fail, and too politically powerful to control.

Goldman’s share price, as well as those of JP Morgan Chase, Citicorps, Morgan Stanley, and Bank of America, will no doubt soar on the basis of the final bill because their future profits are almost guaranteed. The pay of their executives and traders, and of the managers of hedge funds and private-equity funds they deal with, will likewise accelerate. In the short term the economy will benefit, at least to the extent financial entrepreneurship is now the apex of American wealth and innovation. But over the longer term we will be much weaker for it.  

Congress has labored mightily to produce a mountain of legislation that can be called financial reform, but it has produced a molehill relative to the wreckage Wall Street wreaked upon the nation.

Most Subprime Loans Originated by Private Companies Not Subject to Regulation by Community Reinvestment Act

by John Lawrence

The Community Reinvestment Act (CRA) of 1977 only required banking institutions to issue mortgages in low income neighborhoods. The Gramm-Leach-Bliley Act of 1999 deregulated the banking industry and in particular did not require private mortgage companies to be subject to the CRA. These mortgage companies originated about 85% of subprime loans. So when conservatives blame the CRA for the housing crisis and the subsequent financial meltdown of 2008, they don't know what they're talking about. After the loans were originated, they were sold off to Wall Street banks who repackaged them as collateral debt obligations (CDOs), turned them into bonds, had them rated AAA by credit rating agencies such as Moody's and Standard and Poor's and then sold them off to investors such as pension funds.

Consider this:

Our second point is a matter of the originating entity. When considering the potential role of the CRA in the current mortgage crisis, it is important to account for the originating party. In particular, independent nonbank lenders, such as mortgage and finance companies and credit unions, originate a substantial share of subprime mortgages, but they are not subject to CRA regulation and, hence, are not directly influenced by CRA obligations. ... Using loan origination data obtained pursuant to the Home Mortgage Disclosure Act (HMDA), we find that in 2005 and 2006, independent nonbank institutions—institutions not covered by the CRA—accounted for about half of all subprime originations. Also, about 60 percent of higher-priced loan originations went to middle- or higher-income borrowers or neighborhoods, populations not targeted by the CRA. In addition, independent nonbank institutions originated nearly half of the higher-priced loans extended to lower-income borrowers or borrowers in lower-income areas. In total, of all the higher-priced loans, only 6 percent were extended by CRA-regulated lenders (and their affiliates) to either lower-income borrowers or neighborhoods in the lenders' CRA assessment areas, which are the local geographies that are the primary focus for CRA evaluation purposes. The small share of subprime lending in 2005 and 2006 that can be linked to the CRA suggests it is very unlikely the CRA could have played a substantial role in the subprime crisis.

Subprime lending was at its height from 2004 to 2006. More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions not subject to the CRA. The loan originators immediately sold their loans into the secondary market, received their loan origination fee and were done with them. So sticking people with adjustable rate loans (ARMs) and other loans which reset to higher interest rates in a couple years had nothing to do with the CRA. The deregulation of the banking industry directly led to the expansion of the subprime lending industry, and this led to liar loans (loans with no proof of income required) and other exotic loans which borrowers had no hope of repaying. They were told that when the loans reset to higher interest rates, they could always refinance or sell their homes at a profit. Thus it was aggressive salesmanship fueled by substantial commissions in an unregualted environment that was responsible for the huge increase in subprime loans.

There were outstanding subprime loans of $1.3 trillion in 2007. Some Wall Street wheelers and dealers realized that the securitized subprime loans rated triple A were in actuality triple B because they consisted of liar loans also known as "stated income" loans and started finding ways to bet against them or selling them short. It was for this purpose that credit default swaps (CDSs) were invented. CDSs were a relatively inexpensive way to bet against the bonds consisting of subprime mortgages. Later when these mortgages went into default, the CDSs paid off big time, and in fact caused AIG, the issuer of most of the CDSs to teeter on the edge of insolvency until they were bailed out by the Federal government. The $700 billion that went into the TARP program was used to bail out insolvent institutions who had sold insurance on triple A rated bonds consisting of securitized subprime mortgages. The securitization process converted the mortgages into bonds.

So the fact of the matter is that the CRA had little or nothing to do with the housing crisis and the subsequent financial meltdown. That had to do with the availability of cheap money due to Fed chief Alan Greenspan's policies and the sales abilities of mortgage brokers who reaped big commissions every time they signed somebody up for a subprime mortgage. Smart people on Wall Street knew that the bonds based on these mortgages were likely to default and so they bought derivatives that would pay off when that occurred. Institutions that sold insurance on those bonds in the form of CDSs did not have the capital to pay off on the CDSs they sold again due to deregulation. Since they were deemed too big to fail, the taxpayers had to bail them out when their bills came due. The gamblers who went short on subprime mortgage backed securities made out big time as the Federal government covered all their bets.

Financial Institutions Take Precedence Over Democracy

Published on Sunday, June 13, 2010 by Huffington Post

Is there a Global War Between Financial Theocracy and Democracy?

by Les Leopold

Senate and House conferees are about to reconcile a financial reform bill that is virtually designed to institutionalize "too big to fail." And when they do we'll lose another battle in the ongoing war between global financial markets and democratic nation-states.

This war has been going on for decades -- but democracy hasn't always been in full retreat.

The New Deal Conquest: During the Great Depression democratic forces gained the upper hand in the war. We realized that financial markets, which are driven by the largest banks and financiers, had to be tightly controlled. We knew that global speculation on currencies only deepened the Depression and had to be strictly limited. We knew that an iron curtain was needed between commercial and investment banking to protect Main Street depositors from market madness (that was the Glass-Steagall Act). And most importantly we knew that the key to preventing economic upheaval was to limit the wealth of the super-rich and to increase the wealth of working people through progressive taxes, Social Security, wage and hour laws, and the promotion of unionization. The Bretton Woods agreements forged by the Allies during WWII set up strict rules for global finance, rules that kept financiers in check for more than a quarter century.

And it worked pretty damn well. As economist Joseph Stiglitz points out, this era saw only one financial crisis (Brazil, 1964), and working people in western democracies made huge gains. Since the era of deregulation took hold in the late 1970s, the world has suffered over a hundred financial crises and middle-class incomes have stagnated.

The Deregulatory Counter-Offensive: By the late 1970s, bankers regained the advantage through the spread of a new faith in self-regulated markets. The economic apostles of unfettered markets lobbied against progressive taxes, unions, and social welfare programs. The new orthodoxy was: Let the elites collect the money--they'll invest wisely (instead of consuming), and all boats will rise. This near-religious revolution rapidly spread through the economic and policy establishment. Regulations were dismantled right and left, and the revolving door between government and Wall Street started spinning. The American financial catechism ruled the world. And on Wall Street, the money tap was open. It did not trickle down.

Then, suddenly, in 2008, the market gods destroyed themselves as the unregulated financial casinos crashed and burned, just like they did in 1929. For a few months, it seemed like the deregulatory theology become a global heresy. It was obvious that Wall Street's reckless speculation and its bold new wave of financial engineering had caused the Great Recession. (See The Looting of America for an accessible account.). It was also clear that if government didn't come to the rescue, Wall Street would lay in ruins, along with the rest of the economy. This was the perfect moment for democracy reassert democratic control on financial markets, just as we did during the New Deal. We blew it.

The Victory at Too Big to Fail: At the moment when Wall Street was on its knees, we decided to bypass serious reform. Instead, we rebuilt Wall Street, using taxpayer money and guarantees - more than $10 trillion worth. We let bankers use our bailout money to pay themselves $150 billion in bonuses -- at a moment when over 29 million Americans were jobless or forced into part-time jobs. We allowed the top hedge fund managers to walk off with over $900,000 an hour (not a typo) in 2009. Windfall profits taxes? No. In fact we let hedge fund honchos pay an extra-low tax rate by calling their income "capital gains." We didn't restore Glass-Steagall, we didn't break up "too big to fail" financial institutions. In fact the biggest banks became even bigger, courtesy of the U.S. government.

The Invasion against Democracy: The war is escalating. Right now, financial elites aren't just fighting a defensive battle against new regulations. They're playing offense: They're whipping up deficit hysteria around the globe and calling for drastic cuts in middle class programs. Why? They want to ensure that their loans to governments aren't threatened by rising public debt. Ironically, the public debt they're so worried about was created in large part by them -- the result of huge bailouts and other expenses stemming from the crash they caused. Although the bankers want us to dismantle what remains of our worker-oriented policies, welfare for the financial elites is still fine and dandy.

This is the most dangerous counter attack in the history of finance. We had better know a great deal more about the attackers. Who makes up this shadowy force called "global markets"? Who fights their battles? Do they have a high command?

Not really. There is no executive committee of financial elites. There's no international conspiracy, no Elders of Zion. Instead these markets are pulled and pushed by about 50 very large banks and financial institutions. This is where much of the nation's $2 trillion in hedge fund money roams. This is where the top six US banks frolic. They don't have to sit around a table strategizing. They instantly sense threats to their power. They instantly smell profitable openings and they're poised to grab what they can, whenever they can. They thrive on turmoil, which gives them new "proprietary" trading opportunities to exploit. Volatility means big bucks, especially now that the largest players know that the government will back up even their wildest gambles. History has just proven that they are way too big to fail.

Of course they still have to lobby government officials--many of whom either were bankers, or will be once they leave office. But their most powerful lever on government is through the market itself: Here, by moving vast quantities of money around, they can instantly veto policies they don't like. If the EU talks seriously about financial transaction taxes, the markets go down the Euro grows weaker, and interest rates rise--making it more expensive for governments to borrow the money they need to operate. Politicians have learned to "listen" to the markets and are conditioned to placate them.

Should a nation state get out of line (Greece, Italy, Spain, Portugal, etc), the markets slap them silly. Politicians rush to the scene and start slicing social spending. If instead they demand new taxes on financial elites to reduce public debt, the markets respond with even more fury. Money flees.

All the external machinery of democracy still clanks along. We still pull the levers in the voting booth. But the decisions that affect us the most are made in a profoundly undemocratic way. Faceless financial markets exercise far more control over politicians than the voters who elected them.

So the problem isn't just the corporate campaign contributions, or corporate media control or the academic consensus supporting our financial theocracy. It's the raw power of the markets. They've been roaming free and virtually unregulated for more than a generation, and now their power is unparalleled. Just months after they brought our economy crashing down, they're right back to their old tricks, setting the stage for the next crash and the next bailout while getting filthy rich along the way.

Bill Clinton nailed it on the head when he reportedly said:

"You mean to tell me that the success of the economic program and my reelection hinges on the Federal Reserve and a bunch of fxxxing bond traders?" (See Agenda by Bob Woodward)

No Retreat, No Surrender? There's no room for pacifists in this war. Clearly, Wall Street and its global minions are not seeking a truce. Instead, they're coming after our Social Security, Medicare and Medicaid programs. They want us to work longer before we retire and get less when we do. They want us to pay more for health care and get less of it. They want less public money to go to schools, teachers and public infrastructures. And they want us to get used to a jobless recovery with double digit unemployment rates. (And when millions and millions of people are unemployed, we can't maintain high labor standards, and our wages and benefits erode.) In short, they want to undermine all the policies and programs that have built and sustained middle class life.

Already government officials in the UK, Germany and here are telling us we must endure austerity for "decades to come." As Fed Chair Ben Bernanke candidly put it:

"We can see what problems can arise in a country if investors lose confidence in the fiscal position of that country, so it is very important that we address this problem."

Of course, he's not going to point out that this austerity is only for the masses, definitely not for the financial elites. Or that the underlying cause of the debt investors are so worried about is the giant economic crater caused by the very same financial elites who now might "lose confidence" in financing a middle class society.

We shouldn't kid ourselves about the pitched battles ahead. Fighting back won't be easy, and winning will be even harder. People in country after country will have to mobilize themselves in defense of real democracy, in defense of each nation's right to provide its people with a decent quality of life. In my opinion, that includes sustainable jobs with decent benefits and a solid public infrastructure that promotes equity, protects the vulnerable and enriches the environment.

Unfortunately, no one can guarantee that democracy will prevail in the war against financial theocracy -- just recall the totalitarian chaos in Europe during the Great Depression. But don't count it out, either. It's true that many of us regular folks have been diverted by the media, distracted by the Internet or lulled into a stupor by pharmaceuticals. But when we realize that we've been shoved into a corner with no way out, we'll act. A popular struggle will begin. And when it does, we'll at least have a fighting chance to recapture our democratic souls.

© 2010 Huffington Post

Les Leopold is the author of The Looting of America: How Wall Street's Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.

It's Obvious: They Don't Know What They're Doing

by John Lawrence

Does anyone doubt that the biggest oil spill in human history was caused by deregulation? Or the biggest financial catastrophe since the Great Depression? Or, well we could go on and on. With BP essentially unregulated and Wall Street essentially unregulated, with six lobbyists for every Congressman, with corporations promising Congressmen lucrative jobs when they exit Congress, does anyone doubt that the government has been sold to the highest bidder?

Now that BP has fouled the Gulf of Mexico for generations, they are whistling dixie as they fail to come up with a solution for "plugging the damn hole." Obviously, they don't know what they're doing, nor does anyone else know any better. If BP's knowledge and technology is insufficient to come up with a solution, no one else's is any better. So we're essentially at a loss as to what to do while the oil surges forth on an hourly basis. It should be easy: just go down there and plug the damn hole. But the hole is a mile down under the ocean where the pressure is 2000 pounds per square inch. No one is volunteering to don a wetsuit or scuba gear to be let out of a submarine to stick his finger in the dike.

Instead we're treated to the fix du jour. If this one doesn't work, BP will come up with another one. With obvious criminal negligence on BP's part, we're treated to the spectacle that we have to trust the criminal to fix the problem of their crime much as we had to trust Goldman Sachs ex-employees to fix the results of Goldman Sachs' crimes. But who else has the knowledge or the wherewithal? Not the government evidently. Any government employee including the President makes peanuts compared to Wall Street take home pays. So basically they can buy and sell the government. They have more money; they have more knowledge; they have more power.

When one Senator can hold up the passage of a bill or even for the debate to start based on some arcane rule about unanimous consent, you don't even need the filibuster to halt progress of any kind. So the whole system is dysfunctional, based on selling out to the highest bidder and the promise of a lucrative lobbying job on your way out. Money runs the government; money runs the country; money runs the message which implores us to ignore what is really happening and adopt some fiction about "freedom" instead. The only ones really free are the billionaires whose goal is to further enslave the hoi polloi with each passing year. Even the pension fund managers are their dupes. When securities are peddled to CalPERS, the largest pension fund in the world, and one hedge fund manager shorts them making $3.7 billion on one trade while the hapless pension fund manager loses his shirt on our behalf, something is wrong. When a Wolf Pack can short a whole country and drive its citizens to penury making billions for themselves in the process, something's not right. Fortunately, China had to step in to save the US stock market and the euro.

The following article is recommended reading:

Published on Thursday, May 27, 2010 by CommonDreams.org

Trusting the Scorpion: BP, the Legacy of Republican Hypocrisy and Democratic Cowardice

by John Atcheson

The progressives are up in arms over the oil spill.  Like a scene from Frankenstein, the good citizens are storming the hydrocarbon castle with torches ablaze, and pitchforks held high.

Some demand stricter regulations, some a wiser energy policy, but they're all focused on tarring BP with this heinous crime against nature.  Especially now that Obama is starting to get some blame.  An inordinate amount of energy is being spent on how we can use this event to "message," with the emphasis here on assigning the blame to BP.

It would be nice to get stricter regulations; certainly a wiser energy policy would be good.  But focusing on blaming BP is missing the point.  Of course they cut corners; of course they're sleazy.  It's what they do.

But they can do it only because we let them.  The whole thing is reminiscent of the fable about the scorpion and the frog.  If you've forgotten, it goes like this:

 A scorpion asks a frog to carry him across a river. The frog, afraid of being stung, refuses at first, but when the scorpion points out that if it were to sting the frog,  the frog would sink and the scorpion would drown as well, he relents. Yet when they reach the middle of the river, the scorpion stings him. As they are sinking,  the frog asks why, and the scorpion explains, "I'm a scorpion; it's what we do."

The hydrocarbon castle we would storm is but one building in a vast city as dark as Mordor.

That's why focusing on blaming BP, even in hopes of getting a saner energy policy, is such a waste - it's like worrying about a case of the sniffles (albeit a very bad case) when you've got end stage cancer.  Was Exxon - the mot profitable company in history last year -- not blamed for the "Exxon-Valdez?" Did it change anything?

Here's the grim reality: the oil spill is merely a symptom of a much deeper problem, one that is our fault, because for the last 30 years we've been trusting the scorpion.

The fact is, Reagan had it backwards. Government, it turns out, is often the solution and unconstrained private industry the problem.  Many of us knew this, but few have had the courage to stand up to Reagan's dangerous, but popular, fantasy, then or now. 

Indeed, when the history of the last three decades is written, it will be a story of epic hypocrisy on the part of Republicans, enabled by abject cowardice on the part of Democrats, with consequences that created a legacy far more tragic and irreversible than even this horrendous oil spill.

There may have been a few conservative ideologues who actually believed the small government, magic market mantras spouted by the likes of Reagan, Grover Norquist (I simply want to rduce [government] to the size where I can drag it into the bathroom and drown it in the bathtub) William Kristol and assorted industry-funded think tanks, but they were few and far between. 

The real reason this philosophy spread was because it was politically expedient, it was backed and funded by powerful interests who made campaign contributions, and few had the courage or conviction required to confront a fantasy that told people they didn't have to pay for the services they demanded.

Across our entire economy and society we are now reaping the harvest of that hypocrisy, and the fruits of that cowardice. 

To any remaining acolytes of Reaganism, the track record stands in stark rebuke.

The evidence mounts every day.  The BP oil spill, yes.  But also The Big Branch coal mining disaster; the sub-prime disaster; the AIG and various other Wall Street disasters; the growing income disparity between the rich and the rest of us; a global thermostat set on self-destruct; a globalized economy as volatile as a vial of nitro-glycerin - everywhere you look, you see more proof that the conservative mantra of small government and uber-free markets has completely failed. 

If one examines the record, it's pretty clear that Republicans and conservatives (effectively the same thing) never really cared much about small government.  In fact, government grew rapidly under Reagan, Bush I, and Bush II. The only time since Carter that government growth subsided was under Clinton.

Doubt that?  Here's the numbers.

If you rank all Presidents since Nixon by the number of government employees per 1000 citizens, here's what you'll find: Reagan tops the list with the most, and Bush II is next. Clinton, on the other hand, had the smallest government by number of employees.  The story is much the same for deficits: Reagan increased the federal deficit as a per cent of GDP by 10%, Bush I by 13%, and Bush II by an incredible 20%.  In contrast, Clinton lowered it by 10%.

Of course there are lots of ways to slice and dice the statistics, but any honest look at the numbers comes up with the same conclusion - Reagan, Bush I and Bush II talked about small government but presided over dramatic growth in the size of government, while Clinton actually made progress in reducing the size of government. 

And rather than having the courage to actually cut popular services, Republicans cut taxes and raised deficits to continue providing them, while making it virtually inevitable that someone, someday would have to shrink government - hopefully enough to drown it in the bathtub.  Ironically, Democrats - only slightly more interested in delivering good government than amassing power than Republicans are - did most of whatever spending cuts did happen.

So, if small government wasn't really the goal for conservatives, what was? 

Simple: weak government.  Government that couldn't constrain the vaunted private sector - the font of all good things according to conservatives' public pronouncements - the font of campaign contributions in reality as Paul Krugman pointed out in a recent column, and Thomas Frank noted in What's the Matter with Kansas?. 

And while Clinton made real progress in constraining government growth, he signed onto the Conservative notion of eviscerating government.  It was Clinton's economic team, after all, which led the charge to rescind the Glass Steagall Act - the jewel in the crown of financial deregulation, and the source of much of our misery now.  It was Clinton who  ended welfare and proclaimed the era of big government to be over.

It wasn't just Clinton. Democrats quickly became complicit in this epic hypocrisy. They formed the DLC and went after corporate campaign contributions, they triangulated, they became split-the-difference Democrats, adopting much of the conservative playbook, and legitimizing more of it.

Aside from the obvious ethical and moral issues, the problem with this strategy is that when the policy, philosophy or system fails, the triangulator owns a big share of the catastrophes that failure creates.

For example, back to the BP oil disaster.  Just weeks before it occurred, in a classic triangulation, Obama announced that he supported off-shore drilling.  Because he failed to take a stand then, he couldn't avoid taking some of the blame for the spill.  Had he made Republican deregulation an issue and opposed offshore drilling rather than cratering to the drill-baby-drill crazies - had he stood on principle - he wouldn't be in a defensive position, trying to pass off blame and criticism to BP.  Rather he would have made deregulation the issue, and he'd be leading a popular charge against a broken regulatory system and a failed political philosophy, putting conservatives in a defensive position. 

That's right, because of political cowardice and a too-clever-by-a-half strategy, the Obama administration is fending off blame for something Republicans, conservatives, and the drill-baby-drill crowd fought to put in place.

And this is just one example of a dynamic that has dominated politics since Reagan. 

You can't confront Wall Street when you've set up Goldman Sachs South in the US Treasury and the White House, stocking it with the very folks who created the problem.

You can't confront Health Care crazies when you've made back room deals with big Pharma, and preemptively ceded the victory to private industry. 

You can't confront the collapse of the educational system, if you've advocated tax cuts.  Look at California, which was at the vanguard of the tax cutting frenzy.  Their educational system went from number 1 in the country when Reagan took over to number 47, now. 

You can't get out of illegitimate and ill-advised wars when you've given them legitimacy.  Come on.  Does anyone really believe the US has a strategic stake in Afghanistan?  And even if you did, does anyone believe that occupying the hapless country with conventional military forces is the way to deal with it?  Let's face it, we doubled down on this war because Democrats thought it would be the best way to inoculate themselves against the dreaded "soft on defense" epithet.

In fact, Democrats have been so ready to run from name calling it's as if they're wearing track shoes and poised in starting blocks, the better to sprint from their convictions at the first whiff of a meanie. 

They've been so eager for power, that they stopped thinking about why the want it - it became an end, not a means.

If we'd been willing to stand on principle for the last three decades, we might have lost a few elections, but at least the debate would be framed, the battle lines clear.

And when the inevitable failures from the conservative hypocrisy came, Tea-partiers might have been pouring into the streets demanding that the rich pay their fair share of taxes and the corporations quit exploiting humanity and the planet so that a few CEOs might buy an extra 25,000 square foot vacation home in Barbados.  Indeed, they might even be demanding that government fulfill its role as guarantor of a civil society.

Now, instead, no one believes government has a role.

Bottom line: we're not having the debate this country so desperately needs to have because for decades, we've run from that debate, and to do so now would be to expose the full depth of that cowardice.   

That's why watching liberals and progressives falling all over themselves trying to figure out how to fix the blame on BP is such a tragedy. Even if they succeed the root cause of the disaster remains, and far more serious issues go unaddressed.

We are now fording difficult passages - as dangerous as any this country has ever faced - and until we confront the larger conservative failure, we will do so with the scorpion on our collective back. 

The countless failures of Reaganism are laid out like stepping stones across this broad river we must ford. 

We can see, on the other side, shimmering in the distance, the promised land - a land in which citizens run government, not corporations; in which the wealth of our collective endeavors is shared among us all, not ceded to the top 1%; a land in which we treat nature with the care and reverence our very survival demands, not as a spare parts shed and waste pile; a land in which government is the way we come together to meet the great challenges of the 21st Century, not a punch line to a cynical and manipulative speech given by corporate lackeys posing as politicians.

The choice is clear.  We could treat each of the national disasters facing us as discreet entities, in which case we attempt to swim the river with the scorpion on our back.  Or with a little courage and a little integrity, we could confront them as symptoms of the larger failures of conservatism that they are, in which case we simply step across the stones before us to reach the other side.

We have no choice.  Conservatism's failure is complete, the consequences of not confronting that failure too dear.  The time is now; cowardice is no longer an option. All we lack is a leader with the courage to take the first step.

Mr. Obama, will you be that leader?

John Atcheson's writing has appeared in the New York Times, the Washington Post, the Baltimore Sun, the San Jose Mercury News, the Memphis Commercial Appeal, as well as in several wonk journals. His last article for Common Dreams was "Fear, Ignorance and the Summer of Our Discontent" on 10/4/09. He is currently at work on a fictional Trilogy that centers on climate change.  Atcheson's book reviews are featured on Climateprogress.org. Email to: atchman@comcast.net