Yes, Hillary Will Have To Meet Conditions To Get Bernie's Supporters On Board

"WAAAH! I shouldn't have to accept conditions to get Bernie's supporters!"


In a victory lap speech last night, after taking four eastern primary states (DE, PA, CT. MD) Hillary made a pitch to Bernie Sanders's' supporters that "there is more that unites us than divides us" - betraying a real desperation to be able to actually turn Right, and go after Donald Trump. She also showed again that talk is cheap. But what Bernie's people really want to see is engraved in stone promises to back up the unity blather (having already been burned by "hope and change" nonsense eight years earlier.). You know the old saw: "Fool me once, shame on you. Fool me twice shame on me."

Well, Bernie's supporters don't plan to get fooled again, especially when most of them already sense a yen to get off the leftward tilt and turn to the "center" and the Right. (In fact the current center, so called, is really center-Right.)

Bernie himself, in response to an idiot reporter's inane question ('When do you plan to drop out?') answered correctly that the campaign isn't just about winning the nomination but changing the political direction of the party and the country - implying that it must be away from its Neoliberal tilt of the past 34 years. (Since the formation of the DLC, 'Democratic Leadership Council', and its "Third way", Republican lite version of the Dems.)

That means building planks into the Democratic Party platform that reflect Bernie's positions, such as dealing with the banks in a real way as opposed to "optically". At the very least that means bringing back a version of Glass-Steagall to keep investment and commercial banks separate. As in Canada, banks should not be using depositors' hard earned savings to make risky bets with derivatives and then have to be bailed out with taxpayer money when they fail. That also means at least verbally acknowledging the validity of Bernie's bill which allows the Treasury Secretary to name banks too big to fail.

It also means making a clear promise to lower the burden of student loan debt.  As one expert on military  growth interviewed recently by Laura Flanders put it, nations are spending an average of $1.75 trillion per year on military armaments. Just a fraction of that ($200b) could be used to enable lower tuition at U.S. public universities for example.

We also want to see Hillary accept a non-interventionist foreign policy given we simply can't continue to spend precious resources on occupations and wars when there are so many pressing domestic needs, like repairing crumbling infrastructure.

In a nutshell then, these are some of the conditions we expect to be met when Bernie rolls into Philadelphia with well over 1, 500 delegates and 10 million votes that Hillary will need to beat Trump:

-  Acceptance of a viable plan to separate commercial and investment banks

- Acceptance of a plausible plan to reduce student college loan debt (at the very least lowering interest rates to 3% or less.)

- Promise not to advocate for any cuts for Social Security (as Obama tried with his "Debt Commission" in 2010)

- No to any cuts to Medicare, including "privatization" plans

- No to any liaisons with Israel to either attack Iran or Syria, or send troops (or cruise missiles) in.

- No to any new adventures in the Ukraine, or trying to set up a "no fly zone" over Syria.

The last two are particularly apropos given Hillary's robust background as a hawk, illuminated in a recent NY Times magazine piece, e.g.

http://www.nytimes.com/2016/04/24/magazine/how-hillary-clinton-became-a-hawk.html?_r=0

The piece noted that Clinton’s extreme belligerence “will likely set her apart from the Republican candidate she meets in the general election,” noting “neither Donald J. Trump nor Senator Ted Cruz of Texas have demonstrated anywhere near the appetite for military engagement abroad that Clinton has.” In the 2016 presidential campaign, the report concludes, “Hillary Clinton is the last true hawk left in the race.”

HRC's gender backers - who may have sons that she enlists to fight a war of choice, say in Syria or Iraq-   ought to take note.

I would also add that before we embrace "Hill"' she come clean and release those transcripts of her Wall Street speeches (mainly to reps of Goldman- Sachs).  We deserve to know exactly what she said, and whether any statements made included promises to "cut entitlements", privatize Social Security or punch any more holes into Dodd-Frank.

Hillary whined last week that she never issued any conditions (to get her supporters on board) when she ultimately backed Obama in 2008. But she omitted saying the differences between them were tweedle-dee and tweedle-dum, both Neoliberals at heart.

This time around is not the same, given we have a democratic socialist exposing the flaws of a diehard Neolib and warhawk. Thus, millions of Bernie supporters won't be satisfied with anything less than her not only mouthing words of unity - but building Berne's main proposals into the party platform.

See also:

http://www.salon.com/2016/04/27/why_bernie_sanders_will_should_and_must_stay_in_the_race/

Protecting Social Security in Event of Financial Collapse

A recent and critical issue raised by Andrew Biggs in a Wall Street Journal column highlights the large jump in the projections of the Social Security shortfall since 2008. Biggs complains that progressives have responded to the economic collapse by proposing an increase in benefits that would make the shortfall even larger rather than supporting plans for eliminating the projected shortfall. Biggs' focus is exclusively on the solvency of the program, so the actions of progressives can only be understood against the larger economic context.

This is short sighted and absurd.

In fact, an expansion of benefits is a rational response to the economic collapse. Even more so because the collapse was 100 percent preventable and  one of the worst blunders in the history of economic policy-making. Nearly all of it could  have been prevented had two things happened: 1) Preserve the Glass-Steagall Act instead of repealing it in 1999, which allowed commercial banks to engage in investment banking, and 2) Regulate the credit default swaps  - a form of derivative - which took off in 2007-08. These derivatives were responsible for allowing low grade, risky bonds to be rated AAA thereby luring people into them. See e.g.

http://brane-space.blogspot.com/2014/02/lights-go-out-on-dismal-science-long.html

As a result of the credit collapse, many people nearing retirement saw their savings disappear as the stock market collapsed, house prices plummeted and they lost their jobs during their peak savings years. Thus, millions of workers had to draw down their savings to support their families at a point where they had planned to be accumulating wealth for retirement. In addition, due to the weakness of the labor market created by high unemployment, tens of millions of workers have been saddled with stagnant wages over the last six years when they could have expected to see real wage growth in the neighborhood of 1.0 percent annually had the economy continued on the path projected in 2008.

In short, the collapse vastly increased the need for Social Security, which is the basis for the response of progressives such as yours truly  We can't afford to impose any cuts, irrespective of type, because all will create even more financial havoc and economic stress. Biggs is correct that the cost of additional benefits will have to be covered at some point, but there is no obvious reason that it is necessary to come up with the full plan today. Part of the cost can be recovered by increasing the payroll cap as has been proposed by people across the political spectrum.

It is likely that we will need some increase in the payroll tax at some point, but there is little reason that the exact timing needs to be pinned down today. In the decade from 1980 to 1990 the payroll tax increased by over 2.0 percentage points. In spite of this hike, many conservatives tout the eighties as an economic golden age. It is difficult to see why it would be such a disaster if there were a comparable increase somewhere over the next three decades.

Workers care about their after-tax wages which are primarily determined by what they earn before taxes. Due to economic mismanagement and trade and regulatory policies that were designed to redistribute income upward, most workers have seen very little growth in before-tax wages over the last three decades. If they get an even share of the projected growth in compensation over the next three decades, then before tax compensation will be almost 60 percent higher in 2044 than it is today. It is understandable that progressives would be more focused on ensuring that workers get their fair share of economic growth than the risk that 3-4 percent of these gains might be taken back in tax increases to support their retirement.

Beyond Social Security, Medicare must not be cut either! Fix the Debt parasites have vowed  to expand the means testing of Medicare to lower middle income seniors. According to the Newsletter  of the National Committee to Preserve Social Security And Medicare:

"The proposal would shift billions of dollars in additional costs to beneficiaries by further expanding means testing for Medicare Parts B and D – until 25% of all beneficiaries are paying higher, income related premiums. A recent study found that this proposal would eventually impact individuals with annual incomes equivalent to $47,000 in today’s money.”


Let’s make it clear here that $47,000 /yr. is not a princely sum for an annual income, especially for seniors who – unlike younger folks- are burdened by additional health care costs including more medications, as well as the possibility of having to enter a nursing home for everything from a broken hip, to Alzheimers. The nursing homes are not cheap at $3,000 a month or more. Hence, this expanded means testing is nothing short of deplorable. The fact that the richest 1% will still make out like bandits while lower middle income seniors suffer is even more disgusting.


The NCPSSM Newsletter went on to note that this expanded means testing along with a chained CPI for Social Security, and possibly higher eligibility age for Medicare would:


“generate a tsunami of seniors living in poverty”


Setting the cuts in stark contrast to the wealthy tax payers, the Newsletter goes on:

"The benefit cut resulting from the chained CPI proposal alone would result in Social Security beneficiaries losing about 2 percent of their income, while the 2013 tax increase on wealthy Americans earning $500,000 results in a negligible 0.6 percent loss’


Process that difference! For the half million a year wealthy guy his piddling 0.6% loss is barely equal to the current cost of one share in his favorite hedge funds or a 1/10  kt blood diamond. For the senior it would equal a month's worth of blood pressure and diabetes meds and half his groceries. Do the rich Neoliberals who make up most of the Beltway's blabber set care? Of course not!

In other words, the confluence of benefits cuts is designed to increase inequality and poverty rates dramatically (already 15% of seniors live at or below the poverty line)

By contrast, the increase of Social Security benefits will not only protect it for seniors who need it, but also compensate them for lost wages in the wake of the 2008 meltdown - after which they were unable to get jobs.  Such an increase in Social Security payments can also be justified given how much congress has ransacked over the years - which I enumerate below:

The following data shows how much has been raided each year, the data from the same Trust Fund sources and GAO:

Year:  ................Amount raided

2011.................$67.0 billion

2010.................$87.0 billion

2009...............$137.0 billion

2008...............$180.2 billion

2007...............$186.0 billion

2006...............$185.5 billion

2005..............$173.5 billion

2004..............$151.1 billion

2003.............$155.6 billion

2002.............$159.0 billion

2001.............$163.0 billion

2000.............$151.8 billion
----------------------------

TOTAL:  $2.63 TRILLION

Thus increasing S.S. payments by 10% or so would be an excellent way to start paying that stolen money back to beneficiaries who deserve it.  The worker-to -beneficiary ratio is a red herring meant to deflect attention from the REAL problem which is the yearly raids on monies received from payroll taxes and intended to go to future beneficiaries! So long as these raids continue unabated, NO solution or "re-tooling" of the program will work, not raising payroll taxes, not making cuts, NOTHING!

But providing a significant Social Security increase would at least demonstrate to beneficiaries that their government is operating in good faith with their interests at heart.

An even more important immediate way to do that is to halt the shuttering of Social Security field offices. The Social Security Administration has been forced to close dozens of field offices around the country, thereby limiting access to seniors whose only way may be face-to-face appearance with administrators.   Meanwhile, the Senate Special Committee on Aging held a hearing two months ago after a bipartisan report showed Social Security has closed 64 field offices since 2010, the highest number of closures in a 5-year period in history. (Denver Post, June 19, ‘Agency closes field offices’, p. 18A)

 

Interestingly, as the article also points out (ibid.):

“The closings came as applications for retirement and disability benefits are soaring”.

In other words, those who want to kill S.S. via the back door  are adopting the exact same back-handed methods they did with injured vets seeking VA care. In that case, the miserable fuckers declined to approve $24b to expand VA facilities for care – thereby creating the recent crisis we beheld. According to the Post article, again echoing what’s gone on with vets seeking care in the VA system:

“Seniors seeking information and help from the agency are facing increasingly long waits, in person and on the phone.”

Blogger R. J. Eskow wrote in June on the Huffington Post that:  “many disabled and elderly Social Security recipients depend on field offices, and the workers in them.” And as Michael Hiltzik of the Los Angeles Times said, “They haven’t been able to cut benefits, so they’re doing the next best thing: making it hard for you to know what you’re due, and harder to get it when it comes due.”

The bottom line is, Americans came together to create the Social Security system to provide a basic, reliable foundation for retirement and disability. Closing field offices and making it more difficult to access benefits information is an attempt to dismantle that foundation.

 

But even before we try to get congress to increase Social Security payments we have to ensure those field offices remain open so that millions of people can access their benefits in the first place! The push to strengthen benefits and enhance them is pointless if the yearly raids on S.S. continue unabated and the Repos keep using budget cuts to shutter S.S. admin offices!

Time for Obama to Make Some Hard Economic Decisions!

The time for Obama to make some hard economic decisions has arrived. While most of the hard left has all but put his visage on their dart boards - so infuriated are they at his various choices- the latest to offer Medicare as part of a "Grand Bargain"- I remain somewhat optimistic he will do the right thing.

According to an email from the Daily Kos :

"According to The Wall Street Journal, White House Chief of Staff Denis McDonough is meeting with Sen. John McCain and other leading Republicans to discuss cutting Medicare benefits."

Via special Newsletter notices from the National Committee to Preserve Social Security and Medicare (NCPSSM) one of the options being considered is to expand means testing of Medicare to lower middle income seniors. According to the Newsletter:

"The proposal would shift billions of dollars in additional costs to beneficiaries by further expanding means testing for Medicare Parts B and D – until 25% of all beneficiaries are paying higher, income related premiums. A recent study found that this proposal would eventually impact individuals with annual incomes equivalent to $47,000 in today’s money.”

Of course, this would be disastrous, since seniors have a hard enough time as it is, with increasing health care costs as they age. This is also why the chained CPI is a lousy idea and Obama needs to kill it once and for all.

Re: the Medicare cuts, Let’s make it clear that $47,000 /yr. is not a princely sum for an annual income, especially for seniors who – unlike younger folks- are burdened by additional health care costs including more medications, as well as the possibility of having to enter a nursing home for everything from a broken hip, to Alzheimers. (Which prevalence is doubling every five years for people over 65) Note also the nursing homes are not cheap at $3,000 a month or more. Hence, this expanded means testing is nothing short of deplorable. The fact that the richest 1% will still make out like bandits while lower middle income seniors suffer is even more disgusting.

 The NCPSSM Newsletter went on to note that this expanded means testing along with a chained CPI for Social Security, and possibly higher eligibility age for Medicare would:

“generate a tsunami of seniors living in poverty”

This is why it will be regarded as a major betrayal by Obama if he forges any "grand" deals with the Repugs to cut either Social Security or Medicare. Unlike most of my hard left colleagues, i.e. in the Democratic Socialists, I don't regard Obama as an "evil" guy - just one who has possibly listened to too much bad advice from his economic advisors, aka peanut gallery. It's time now in his second term he stop listening to them and be a man on his own two feet, make his own decisions that actually reflect his professed concern for the middle class and indeed the rising inequality that affects everyone not lucky enough (by birth  - not hard work!)  to be amongst the silver spooned 1%. Don't just use the lesser-monied citizens as background props!

Another major decision concerns the choice of Federal Reserve Chairman after Bernanke departs. Many in Obama's circle and most of the Neoliberal elites are screaming that he will pick Larry Summers on account of he "already has a relationship with Larry and he's comfortable with him". Look here, Mr. Prez, you no more have to be "comfortable" with a prospective Fed chief than I have to think I need to be able to have a beer with a presidential candidate - else I can't vote for him!

This isn't a popularity contest, and the only person you ought to be considering is Janet Yellin, currently in the San Francisco Fed. If you pick Summers, you're going to be constantly reminded by the hard left (and doubtless Sen. Elizabeth Warren) that Summers was almost single handedly responsible for pushing the repeal of the Glass-Steagall Act in 1999 which opened the Pandora's Box to the sub-prime loans and the credit meltdown partly based on them. Glass-Steagall also formed a critical barrier between neighborhood unsexy checkbook banking and high powered gambler-speculator banking (with other people's money) using credit derivatives. Larry may be a nice guy at heart, but not a Fed chairman!

Lastly, extremely disturbing news arrived this a.m. on 'Morning Joe' of all places that your administration is actually considering a special "deal" that would keep U.S. troops in Afghanistan many more years beyond 2014. Pardon me, but this is freaking nuts! We don't have the money for such baloney and besides we have domestic security needs to attend to - like our crumbling bridges, water-sewer mains which the American Society of Civil Engineers now estimates will cost $3.6 trillion to repair at least to passable standard. You need to not opt for any such special deals, as we've been in the Afghan theater long enough. It is destroying our moral integrity after 13 years.

You know you have hard decisions to make, and they need to be YOUR decisions, not anyone else's. But you knew that, else you'd not have signed on a second term.

Why Quibble Over the Volcker Rule?

As noted in previous blogs, the implementation of the "Volcker Rule" is long overdue, especially after the repeal of the Glass-Steagall Act which had separated commercial and investment banking. Indeed, this removal of a protective barrier ca. 1999 is what led directly to the financial meltdown of 2008, with regular commercial banks becoming caught up in trillions of unregulated and risky derivatives called "credit default swaps".

What's the big deal here? Basically, that any banks that use taxpayer-provided funds, e.g. via federal deposit insurance, ought not be allowed to place market bets with that money.....lose a bundle of it....then beg for taxpayer bailouts. As noted in the FORTUNE article: 'The $55 TRILLION QUESTION' (October, 2009, p. 135), credit default swaps (CDS) emerged as bets "that: 1) could be struck in a minute, 2) required little or no cash upfront and 3) could cover anything"

Thus did we see counterparty CDS bets wagered between commercial banks that bet $x billions worth of mortgages would fail, or that ten thousand communities would go down the toilet. When many of the bets were lost, the banks left holding the debts became "zombies" often with ten times more liabilities than cash on hand. Hence, the parlous credit freeze, and hence also ...the urgent need for government to supply a stimulus or watch another Great Depression unfold.

In other words, the Volcker rule embodies a common sense goal that banks that ought to be holding our money safely for us and making only secure loans with reasonable probability of being repaid, shouldn't be making reckless Vegas-style casino bets.

Thus, in the "Volcker Rule", the banks either have to make do with no "proprietary trading" (such as in the risky derivatives market) or they will cease to be afforded the protection of the government, including the Federal Reserve - which will entail giving up federal deposit insurance protection, as well as any Federal Reserve bail outs for misguided moves.

As Volcker himself put it, quoted in a 2010 Financial Times piece (Feb 15, 'Goldman Faces Stark Choice on 'Volcker Rule'):

"Don't expect the support you would get from being a bank within the club of insured deposits, and access to the Federal Reserve and all the loving attention you get as a banking organization"

Yet now evidently there are thousands of quibbles over implementing the Volcker rule, to the extent it may well be diluted to the point of near uselessness. Most of these objections arrived at the SEC before Monday's deadline for comments on the proposed rule. At issue: Who gets dinged by the rule and who doesn't? Encapsulating this is the opinion appearing in the article 'No Exception to the Volcker Rule' (WSJ, Feb. 15, p. C14):

"Already some have argued that all, not just some, state and municipal debt, should be exempted. That in turn raises the question of why (U.S.) government debt markets are being favored over corporate ones......some say the rule actually needs to be strengthened...one way to do this: apply the rule equally by eliminating the exemption of U.S. government debt."

Showing, of course,this writer has his head stuck where the Sun doesn't shine. This is evident by his convenient conflation of U.S. government debt (in the selling of government securities, U.S. treasury bonds, etc.) and the selling of local or municipal or state debt, or corporate debt. The reason for this deficit in thought is difficult to parse.

Seemingly, the WSJ author (David Reilly) never heard of the Constitution mandate to address debt as written in Amendment XIV, Section 4, which stipulates:"The validity of the Public Debt of the United States, authorized by law, includes debts incurred for payment of pensions ....and shall not be questioned."

The effect of this is that U.S. government securities must trump all others in value and faith. It is for this reason holders grasp that what they have isn't an empty promise on paper (as we saw in the case of so much municipal and state debt, as well as corporate in the wake of the CDS meltdown) but rather a debt that the holder can count on as being repaid. Thus, as Bloomberg columnist John M. Berry put it three years ago ('The Wrong Solution', Rocky Mountain News, p. 2c, Dec. 5):

"What the bondholder has is the United States' promise to pay -- the government's full faith and credit -- which has always been good. "

Do we have that from the local states and municipalities? Errrr.....NO! If they make incorrect or hubristic investments, say as they did in the CDS derivatives market in 2007-08, holders can lose. Did we have that in the corporate bond (or junk bond )markets? Say in the 80s? I have only two words for you: Michael Millken! Who was he? Creator of the alleged "high yield junk bonds" which left tens of thousands of investors in the lurch, or poor house. Millken proferred a 1990 guilty plea for felony charges, in violating US securities laws.

So do we believe the artifacts known as corporations will hold to the law any better? If anyone does I have a three acre ocean front plot in Barbados to sell you! See, corporations are profit machines, not indemnifying machines. If you lose bucks, too bad. You should have known better. Think a corporation or even bank would ever WILLINGLY offer something along the lines of FDIC protection which most of us take for granted? If you do, I have a ten acre plot off Barbados' west coast for you with a beach house tossed in!

The same WSJ author Reilly observes that Bank Of Canada governor Mark Carney is also whining about the selective application of the Volcker Rule. But can he assure Americans that if they have Canadian securities and something happens, those securities are backed by the full faith and credit of the Canadian goverment like U.S. securities are? I doubt it! He can't extend that assurance because he can't give it, the Canadian laws and regs don't permit it. Nuff said.

The Volcker rule as it must be applied can only exempt U.S. government securities because they have the highest faith and quality value - that's why every Tom, Dick and Harry on the planet is now feverishly buying that debt in order to escape the unsafe places.

One more thing, it is that debt purchase which allows the U.S. government to keep on keeping on, something neither local- municipal, state or corporate debt can do! Want to see your armies overseas continue to get fed, equipped, supplied and be able to carry on? Want to keep receiving your Social Security checks? Want your federal highways, airports to be maintained ....including the latter staffed with enough air traffic controllers? Then you better damned well hope that U.S. securities, bonds, keep getting sold to support those causes ....and not become subject to a Volcker rule as certain financial nimrods try to claim!

Attacks on the New Deal Continue as Current Middle Class Vanishes

It is absolutely mind-boggling that as the last of the Middle Class appears to be cratering and crashing in this country (see accompanying charts), ever more vicious and histrionic attacks are being launched against the New Deal and its benefits. Of course, the most radical of these jeremiads has been compliments of Rick Perry, against Social Security, and I already dealt with in an earlier blog:

http://brane-space.blogspot.com/2011/09/potential-rick-perry-voters.html

But more on these anti-New Deal shibboleths later. The news in yesterday's Wall Street Journal (p. A1, charts etc. on p. A16) is that the continued evaporation of the net wealth of the Middle Class (those deemed to earn in the range from $50,000- $140,000) has meant marketers can no longer assume this economic niche can purchase the wares that in the past they had taken for granted. (Their sales projections and inventories have been consistently off the past three yrs.) For example, now many middle class consumers are down shifting from purchasing "Tide" to "Gain" Laundry detergent. Ditto across a wide range of products, from paper towels (Bounty Basic instead of regular Bounty), to toilet paper (Kirkland basic two-ply brand instead of 'Charmin') to toothpaste ('Pepsodent' or Baking Soda, instead of Crest).

The marketers for the companies, whose shares have taken big hits, have become so profoundly worried that they 're now devising a marketing "hourglass" based upon a "consumer hourglass theory" by which the top section appeals to the desires and tastes of the wealthy clientele (such as one prosperous matron quoted in the WSJ article who insisted "budget" is a "dirty word" to her, and "if Gain is so cheap, it can't be very good as a detergent" - in response to a marketer's query if she'd ever consider buying it). Meanwhile, bolstering this theory, we read the net worth of middle class households has fallen by 26.2% in the past three years.

Then there is the most objective measure of national inequality, called the "Gini index" or "Gini coefficient". This ranges from zero (when we have perfect equality or everyone earns the same amount) to 1, when all income goes only to one person. Ginis in the 0.4- 0.5 range typically disclose 90% of earnings or wealth are being controlled by 5% of the populace, with 10% for the other 95%. This is a structure more typical of Banana Republics where one fixed ruling class cops all the spoils or proceeds from oil refining etc., and everyone else gets the dregs.

In 2009, the most recent year for which calculations were available, the Gini coefficient for the U.S. stood at 0.468, or a 20% increase in income-earning disparity from 40 years ago, according to the U.S. Census Bureau (see chart). According to one marketer from P&G quoted in the article:

"We now have a Gini index similar to the Philippines and Mexico - you'd never have imagined that!. I don't think we've typically thought about America as a country with big income gaps to this extent".

Yes, sure....but why express surprise? Why do that when destructive tax policies have been enacted over the past 30 years, while we've also nearly tripled our military spending as a % of GDP, and barged into more nations where we don't belong ...and at least in one (Iraq) under false pretenses which will end up costing us over $3 trillion when the final bill is tallied.

Let's also be clear that it wasn't just one political party responsible for this debacle of sending us hurtling towards Third World-nationhood. (Which we will have when the last remnants of the middle class vanish). While it was certainly the GOP that first proposed and pushed the most massive tax cuts in history (back in 1981 under Reagan, from 70% down to 28%) it was the DEMS who went along with it and voted the goddamned cuts in! In other words, they enabled this whole misshapen dynamic, just as they did again in 2001 with Bush's $1.7 TRILLION tax cuts - which ought to have been shot dead on arrival in the (Dem-controlled) Senate. But what happened? TWELVE Judas Priest Dem traitors, with more concern for their re-election than the nation's welfare, voted them in!

They added insult to injury when Bush demanded action for the costly and massive Iraq invasion under the auspices of the Iraqi War Resolution in 2002. Instead of standing on principle, most of these pusillanimous Dem pricks collapsed like weasels (no doubt fearful of being tagged "unpatriotic" by Cheney and Rove) and voted for it, as well as its fearsome economic costs which still plage us today.

No surprise then, that as ABC reported last night, the costs from the two "wars" alone have added $6 trillion to the deficits. Add in Bush's tax cuts (still being extended by the stupid Dems) and you have more than $9 billion added up that could have been used for creating jobs in this country, repairing the crumbling infrastructure and getting our collective national mojo back. But sadly, it seems evident we no longer have political parties invested in this, all they want is corporate coppers and $$$ to keep their campaign boxes flush. Then they have the absolute nerve to also ask ordinary citizens for handouts when they haven't shown themselves capable of doing anything for the common good.

It is also clear that both parties have now taken the tax cut kool aid, when back in Reagan's era it was confined to the Laffer curve morons and supply side idiots. Now, it appears to have become a central policy. When we expected the Bush tax cuts would finally expire for ALL, back in December, we were than nonplussed to see the Dems use them as a political football, vowing to extend them only for the middle class, but not the rich - which paved the way for the repukes to use their tea party guerilla warfare and get the Ds to cave on both fronts.

The point is that the middle class just didn't all of a sudden arrive at its precipice from some spontaneous event or an interphasing with a parallel universe. No, our own leaders helped to dig the grave of the middle class via their gratuitous greed for more money, more lobby perks and more corporate campaign largesse. Thus, the tax cuts they continue to enact aren't for any middle class benefits (since they have to know taking these cuts now will force benefits cuts later) but rather to pad the wallets of the rich so they can increase their expense accounts at Nieman Marcus and Tiffany's. (In the WSJ article, a Tiffany spokesman sniffs that their 'lowest priced baubles' - once a sop to the middle class so they could imagine a piece of the rich man's pie, "are now its weakest sellers in the U.S.". Well, uh duh! Righto, because if you ain't born with a silver spoon in your mouth, as 95% of the wealthy are - according to Michael Parenti in 'Dirty Truths'- you can't even afford to play at being rich!)

Despite this descent and the emergence of possibly disastrous austerity budgets (aimed at not only cutting Medicare, but Social Security - from what I've read) the last vestiges of the middle class stand to be eviscerated within a few years. And helping this process along will be those pundits of the press and media who continue to attack the New Deal.

A typical example appeared in a book review in today's WSJ by Amity Shlaes, with whom I had run ins before, when she wrote for The Financial Times. I recall consistently sending out harsh e-mails to the FT editors telling them that their esteemed publication merited better than to have a hack like Shlaes fulminating her unsupported libertarian dreck week after week. Don't know if it was coincidence, but after about my 5th email Shlaes was no longer to be seen.

Anyway, in her review of Michael Hiltzik's new book 'The New Deal', Shlaes gets about everything wrong as usual. In other areas, so typical of propagandists (say Gerald Posner in his 'Case Closed' on the JFK assassination) she plays fast and loose with facts, or doesn't balance them all out properly, as an objective reporter would. For instance, she complains:

"Notwithstanding the billions of dollars spent and the thousands of regulations enacted, the economy did not get back to its 1929 level in Roosevelt's first two terms"

But she doesn't take the next step to explain objectively why this didn't occur! (Which is a typical tactic of most anti-stimulus-spending wingnuts and libbies). In a way her efforts resemble those of Intertel's Kort Patterson, who in one of his "Port of Call" issues (March, 2009), attempted to disparage FDR as being the culprit who “prolonged” the Great Depression, totally oblivious to the fact that the Federal Reserve’s then deflationary interest rate policy was at the crux. I referred him (as I do Shlaes now) to Chris Farrell’s excellent monograph: ‘Deflation’, page 103, the Chapter, ‘The Great Depression’.

In addition, FDR made another critical error, which was to listen to deficit and budget hawks and apply spending cutbacks prematurely, in 1937. This added to the Fed's belt tightening spelled disaster ...or rather prolonged economic pain - which is why "unemployment only occasionally moved into single digits" (according to Shlaes, though 9% is still terrific given it started at 25%!)

In terms of history repeating, many economists - including Paul Krugman, and Joseph Stiglitz- believe there is a parallel between FDR's premature spending cutback and Obama's concessions to do so again - tapping more deficit-driven spending cuts, instead of the higher spending needed to fuel higher aggregate demand and more jobs. Thus, we may see a re-enactment of what we saw with FDR because well, evidently humans don't learn from the past so they keep repeating its mistakes!

Shlaes other complaint that "the DOW Jones Industrial Average did not return to its pre-Crash level" is easily explained. Bear in mind the 1929 stock landscape was literally contaminated with toxic waste and "land mines" that had to first be cleared away to render the market safe for people to partake of again. At the top of the list, there had to be regulations preventing one subset of investors getting heads ups on stocks before others, and profiting from their losses. Then there were the horrific "investment trusts" (analogous to today's mutual funds) which promised ordinary Joes and Janes a stake in the market. However, they were laden with toxic devices and very few profited. They were also one of the main engines driving the crash of 1929 as by then so many had been lured by Maul Street's snake oil salesmen into buying into the damned things. Finally, there was the need to eliminate the nexus between regular commercial banks and investment banks, accomplished via the Glass-Steagall law in 1933.

Contrary to Shlaes' offhand claim (at the end of her sorry piece), that Hiltzik in his book refused to "acknowledge the many ways in which the New Deal failed the economy it was trying to save", the New Deal in fact saved capitalism in the end. Had the FDR incentives like the WPA and Social Security etc. not been passed, as well as other regs like Glass-Steagall, there is no doubt in many people's minds that the whole enchilada would've been burned to the ground - Wall Street and all- by the millions with grievances wielding their "pitchforks and torches".

Such is the danger when inequality grows to cancerous proportions, and FDR knew it. A pity that Amity Shlaes and the current deficit cutting Repukes don't.

Responding to Libertarian Dreck

In 'Port-of-Call' - a subsidiary Newsletter (March issue) of Intertel, the top 1% IQ society, I had published an article entitled 'The Tattered Illusions of Knowledge', examining in depth the basis for what are called "toxic assets". I was specifically addressing one Libertarian's claim that there was no such thing and that the term "toxic assets" amounted to a travesty of language.

My original article and the Editor's response can be found here:

http://www.hevanet.com/kort/2009/stahl4.html

The Editor, Kort Patterson, also a hardcore Libertarian, totally missed the boat in his remarks - but never published my reply to his off-base criticisms. I presume because he didn't wish to carry on the debate further. Not wishing to let a good response go to waste, I therefore provide it below in its entirety:

As usual, Editor Kort amuses me with his rejoinder to my recent article (‘The Tattered Illusions of Knowledge’, March) and his claims that I have evinced little demonstration that I know what Libertarianism is about. Well, Kort, I do – but to have put all that into perspective would have required about doubling the article.

But let me stick to the basics here: I regard Libertarianism (after its main progenitor, Ayn Rand) as little more than an economic creed. Roughly the political-economic equivalent to creationism.

Before I go on to Libertarianism proper I want to demolish a few of the Editor’s early claims made to do with regulation, deregulation and “free markets”.

Kort avers (page 7): “there hasn’t been any meaningful deregulation of the American economy in the last half century”

Evidently he conveniently forgets (or perhaps doesn’t know – since we are on the topic of illusions of knowledge) that massive deregulation was ushered in under the Reagan administration, from the Bank Holding Act(1984) to rescinding “Regulation Q” – for which, as G.P. Brockway notes (‘The End of Economic Man’, pp. 156-57) state usury laws were suspended and banks were allowed to sell money market funds. There was also massive relaxation of restrictions on branch banks and – by 1984, “the New Deal reforms were in a shambles”. (Brockway, ibid.)

Brockway further points out (p. 157):

“Competition is by no means a universal good and in the case of banking it is almost a universal disaster. Ordinary businesses compete with each other more at the selling end than at the supply end. The competition at the selling end forces them to exert downward pressure on the prices they pay for supplies. In the case of banking, the shape of competition is significantly different – because its supply (money) is different.”

As Brockway goes on to note, the core competition in banking is for deposits, and this means banks try to out-do each other in interest rates offered. The dealie here is you don’t want the interest rate offered to Joe or Jane Public to be anywhere near the “spread” or interbank rate.

As he observes (ibid.)

“Competition forces banks to pay higher and higher interest rates and to offer more and more expensive services. As their costs of funds increases, so also rates charged borrowers must increase.”

Of course, Kort ignores or forgets the most egregious deregulation of them all, which paved the way for CDS (credit default swaps) to multiply in the first place: the repeal of the Glass –Steagall depression era law that prohibited mixing investment banking with commercial banking.

This leads into Kort’s next charge that the selling and dispensing of these (CDS) derivatives was simple “fraud”. No, it wasn’t – once the Glass-Steagall Act was repealed (unless one interjects the assignment of ‘AAA’ bond ratings as I noted in my article) all such inventions were allowed. The cruel fact and irony of the matter was that Glass-Steagall's revocation ok’d all activities that would be common to an investment bank and that included the creation of novel instruments to enhance yields or returns.

The tragedy is that Glass-Steagall’s repeal enabled the contamination to spread to commercial banking as well. And, as I noted, they are now holding $55 trillion of these toxic assets.

Kort may be further amazed to know that in a number of financial quarters (e.g. The Financial Times, The Economist) clarion calls have been made NOT to outlaw CDS!! If the calls have been made not to outlaw them then clearly they are still valid and legal instruments. You do not demand entities not be outlawed if in fact they are ALREADY outlawed. Hence, their creation cannot be “fraud” and in particular cannot be “willful and intentional fraud”. (Though I do agree that the bond rating of the SIVs or structured investment vehicles – by insurance companies like AIG, most likely was!)

To reinforce this, I refer the Editor to John Dizard’s column on ‘Wealth’ in The Financial Times of Dec. 30 (page 6). Dizard observes:

“Just because we have had a global financial crash caused by a credit meltdown, accelerated by the workings of credit default swaps and their unholy offspring, doesn’t make it quite fair to condemn a whole risk management program”

Dizard instead argues for more transparent information on bond issuers, and rating agencies. As he puts it, if this is done, along with small “lot trading size” then the demand for CDS as a hedging tool will diminish. Again, the point is the existing CDS are not “fraudulent” as Kort makes them out to be, but their hidden use in SIVs and instruments is, if bond ratings do not reflect the risk.

Let’s try to understand what is happening here: the dismantling of a Depression-era law (based on the then experience of investment banks – especially in offering certain vehicles then, known as "investment trusts”) prohibited mixing investment banking and commercial banking. This is deregulation no matter how one (even a Libertarian believer) chooses to parse it.

With the Glass-Steagall regulation gone the way of the dodo, there was nothing to hold back the flood, a point reaffirmed in the FORTUNE article I cited (‘The $55 TRILLION Question', October).

Kort in another paragraph displays a gross misunderstanding of the issue and perhaps this is my fault for not making myself clearer, or expatiating at more length, in my article. He asserts the victims “did not know what they were buying”. But my point was they didn’t know what they were buying because the derivatives were buried (concealed) in the legal instruments or CDOs. (collateralized debt obligations) comprising the quite legit bond funds purchased.(For the gory details on this I recommend Kort and others interested get hold of The Financial Times from Monday, December 17, 2008, wherein they will find – on page 8- the Analysis, ‘Out of the Shadows: How Banking’s Hidden System Broke Down’)

In the same way, I am 100% certain that neither Kort nor any of his Libertarian friends know the extent to which they own untold $$$$ of derivatives (all unregulated by the SEC) in the mutual funds they currently have! These derivatives are so obscure that not even the highest ranking financial advisors are able to fully explain where and how they are integrated into a typical fund or its components. Does this lack of knowledge make Kort cease to purchase mutual funds? I doubt it. Does their lack of SEC regulation and transparency make him scream “Fraud!”? I doubt that too. Since like most other Americans’ he has been conditioned to believe that only by owning equities (usually via mutuals) will he be able to afford retirement. Never mind how the equities as mutual funds are constructed. We don’t wanna know ‘bout that!

As Kort so aptly puts it:

“Hardly a free market of VOLUNTARY transactions based on real value and accountability”

INDEED!

And, of course, inhering in this insight is the core defect of all Libertarianism: that in order to really work to any effect it requires 100% transparency in all transactions and markets. Something that is totally and ultimately a fantasy. It can never happen, nor would ever happen – even if the country were now being run by Ron Paul as President and Jacob Sullum as Veep instead of Obama-Biden whom Kort casts as “authoritarians” – one of the most astounding pieces of hyperbolic aspersion ever rendered. (He also lamely tries to disparage FDR as being the culprit who “prolonged” the Great Depression, totally oblivious to the fact that the Fed’s then deflationary interest rate policy was at the crux. I refer him to Chris Farrell’s excellent monograph: ‘Deflation’, page 103, the Chapter, ‘The Great Depression’)

Another beef I have is this notion, permeating Kort’s remarks, that a “free market” exists. It does not. More Libertarian delusions. What we have is a coercive market. In this sort of perverse artifact, corporations create demand via the gimmick of mass market advertising. They can also create artificial shortages and hence, spike higher costs (say for oil) whenever they want. Having worked in an oil company once, in the late 60s, I can first hand vouch for that. I used to hear the laughter of the honchos echoing from their 7th floor offices as I made my rounds as a geologist’s assistant.

William Wolman and Anne Colamosca in their book: The Judas Economy: The Triumph of Capital and the Betrayal of Work, Addison-Wesley, 1997, detail the coercive market in labor and the horrific costs it has imposed. Chief culprit is the usurpation of the productive economy’ by the speculative one on Wall Street. From the era of “Chainsaw” Al Dunlap companies have had to tow the Street’s line and that usually means cutting workforce to the bone to increase share value. Never mind the poor slobs laid off, in the Libertarians’ dream world they can land on their feet if resourceful enough.

Exhibit A: the de-regulation of the energy industry ca. 1997 and later. Hyped as the greatest benefit of the “free market” ever for the small, residential consumers, since now - for once - the great market would determine cost, and not "greedy local utility companies." But no one could have foreseen or predicted how the likes of Enron would manipulate the energy markets - by shutting down access, energy in one state - and re-selling it in other states at robbery rates. This energy manipulation cost the state of CA more than $4 billion over 2000-001 alone. Not to mention untold customer misery, even as Enron shylocks were caught on tape laughing about how many 'grannies' they managed to get thrown out of their homes'.So much for your great “free” markets.

Kort’s most glaring and egregious misstep is saved for later when he insists:

“the citizens of the Weimar Republic failed to understand that their crisis was the result of government inflicted corruption of the free market”.

He compounds that with an earlier canard that “the Weimar Republic suffered from aggressive interference in its economy by a socialist popular government”

The truer story, as noted by Ian Kershaw in his magnificent account of Hitler’s rise to power (‘Hitler Nemesis’) is that Weimar constituted a weak democracy which had little or no control over the most radical Rightists, especially Hitler’s NSDAP party. They would regularly beat Marxists, socialist, any leftists on the streets while holding up signs that read: “Tot dem Marxem” (Death to Marxists)

With no strong government (a kind of Libertarian ideal, no?) Weimar was hit from pillar to post by the polarizing forces unleashed between Left and Right, after World War I. As Kershaw puts it, a “political culture of violence” had taken root. A political law of the jungle dominated, since inevitably the biggest, baddest and strongest were the ones who wielded power. Who were these bullies? Not any “Socialists” (more often then not the victims along with Jews) but the NDSAP party of Hitler and crew. [1]

Kershaw (p. 328, ‘Hitler Hubris’ – the first volume of his Hitler history) notes that the Nazi leaders didn’t immediately recognize the significance of the stock market crash in the U.S. in 1929. The newspaper, Volkischer Beobachter, did not even mention Black Friday, according to Kershaw. (ibid.)

This didn’t halt the financial carnage, since before long the reverberations struck - given Germany’s dependence on American short term loans. Within weeks, as Kershaw points out, “industrial output, prices and wages began the steep drop that would reach its calamitous low point in 1932.” Coincidentally, it was on July 31, 1932 Hitler and the Nazis achieved their highest ever vote totals in the Reichstag, 13,745,800 votes or 37.4 percent.

A result of Socialist “meddling” in free markets? Hardly. Rather an inevitable result based on a canny understanding of Weimar’s inherent political instability and the exploitation of brute force and propaganda to gain total power and intimidate the actual government. (Another reason why as an unabashed “statist” I advocate powerful central power- with the instant ability to take down bullies in whatever form they may appear) Hitler nonetheless kowtowed to the capitalists and industrialists to finally gain the measure of support he needed to finally attain the Chancellorship (with the unwitting help of Paul von Hindenburg)

How happy were the capitalists and German industrialists? Kershaw again (‘Hitler Nemesis’, p. xxxiii):

“Leaders of big business, though often harboring private concerns about current difficulties and looming future problems for the economy, for their part were grateful to Hitler for the destruction of the left-wing parties and trade unions. They were again ‘masters in the house’ in their dealings with their work force”

Well, looks like a Libertarian capitalist’s wet dream to me! And how exactly did the assorted industries of high capital fare under der Fuhrer? Well, boffo times were afoot except for one little segment. Now, let us hear from Clive Ponting (‘Armageddon: The Reality Behind the Distortions, Myths, Lies and Illusions of World War II', p. 333):

“The only major purge was in the newspaper industry “

Of course, this is the industry charged with reporting the truth to the people. I don’t think it needs to be added that the journalists were also among the first to be dispatched to the concentration camps!

Let’s now move on to Libertarianism itself. Truth is there are so many assorted Libertarian voices of the past and present, one never knows who speaks for most current day followers. One can perhaps look at Ayn Rand, in her treatise ‘The Virtue of Selfishness’, but I’ve had freethinkers Libertarians at cocktail parties tell me in no certain terms I should not use her as the standard for their credos. Rand herself once insisted she was “not a Libertarian”. So who else?

Well, how about Charles Murray writes in What it means to be a Libertarian (p. 6):

“It is wrong for me to use force against you, because it violates your right to control of your person....I may have the purest motive in the world. I may even have the best idea in the world. But even these give me no right to make you do something just because I think it's a good idea. This truth translates into the first libertarian principle of governance: In a free society individuals may not initiate the use of force against any other individual or group”

Of course, this is also undoubtedly where the pet Libertarian canard that “taxes = theft’ comes from. But look at it objectively (not to be confused with ‘Objectivism’) this is arrant twaddle and illogical to boot.

I mean “libertarian principle of governance”! This is an oxymoron! Governance presumes and demands the non-passive act of governing, which means someone is actively setting standards of expected action, and also providing the means to uphold them. Else, what’s the point? It’s all an exercise in mental masturbation. In other words, unless someone (coercively) enforces governance, it will be meaningless. Now, maybe there IS a docile libertarian principle of “governing suggestion”- but this in no way is the same as “governance”!

Anti-statism is a central tenet of libertarianism, but it rests on no foundations, other than the so-called libertarian principles babbled by Murray and others. For example, Frank Chodorov, quoted by David Boaz of CATO Inst. in ‘Libertarianism: A Primer’, goes so far as to write:


“Society is a collective concept and nothing else; it is a convenience for designating a number of people... The concept of Society as a metaphysical concept falls flat when we observe that Society disappears when the component parts disperse”

Boaz himself joins in on what the “individual” means:

“For libertarians, the basic unit of social analysis is the individual.... Individuals are, in all cases, the source and foundation of creativity, activity, and society. Only individuals can think, love, pursue projects, act. Groups don’t have plans or intentions”


But, as Prof. Ernest Partridge puts it in his blog piece on ‘Liberals and Libertarians’ cited in my earlier article:

“Now consider the implications of this denial of the "independent existence" of "the public" and "society." If there is no "public," then there are no "public goods" and there is no "public interest." If there is no "society," then there is no "social harm," or "social injustice" or "social (and public) responsibility." It then follows that government has no role in mitigating "social injustice" or promoting "the public interest," since these terms are fundamentally meaningless. Poverty and racial discrimination, for example, are individual problems requiring individual solutions”.

I can assure Kort and his brethren that if Boaz’ concept held sway and government force was not used in Alabama in Sept. 1963 (JFK nationalizing the Alabama National Guard to enforce school integration) we would still be a segregated nation, with blacks sitting in the back of the bus, ‘colored’ water coolers and restrooms, and the rest. Only someone totally divorced from reality would claim individual African-Americans could have obtained their civil rights with mere individual effort and no government input.

Meanwhile, The Libertarian Party Principles state:

“We hold that all individuals have the right to exercise sole dominion over their own lives, and have the right to live in whatever manner they choose, so long as they do not forcibly interfere with the equal right of others to live in whatever manner they choose.”

Again, more inherently contradictory twaddle and piffle. Interference with the lives of others is permitted, so long as it’s not “forcible interference”. Anti-coercion libertarians do not simply oppose coercion they also claim to legitimately define it. Their definition excludes much that others would see as coercion. To me, the TABOR law in Colorado, because it continuously and aggressively scales back tax support for the public domain (based on the past year’s population and growth) is coercion and very vicious besides. Right now, thousands of disabled people across the state stand to lose their services thanks to TABOR and controls like it. All with the best intentions of course, that we not “take by force” those hard-earned gains of the filthy rich bastards ensconced in one of several of their 45.000 square foot mansions in Aspen!
As one critic has put it (to do with Libertarians’ convoluted principles):

“Libertarians make exceptions for defense of property and prosecution of fraud, and call them ‘retaliatory force’ But retaliation can be the initiation of force: I don't need force to commit theft or fraud. This is a bit of rhetorical sleight of hand that libbies like to play so that they can pretend they are different from government”.

Libertarianism clearly posits initiation of force for what it identifies as its minions interests and calls it righteous retaliation, and uses the big lie technique to define everything else as “evil initiation of force". (As they would certainly call JFK’s nationalization of the AL guard in ’63 to force school integration) They support the initial force that has already taken place in the formation of the system of property (e.g. the seizure of Native American lands and violation of umpteen treaties), and wish to continue to use force to perpetuate it and make it more rigid. It is this inchoate ethics that translates into the system’s weakness and exposes Libertarians as true hypocrites – just maybe a slight cut under the fundagelicals.

The long and short of it is every belief system has its evangelistic “scriptures”, designed to help proselytize the unwashed masses to their cause. The Campus Crusade for Christ uses Josh McDowell’s ‘Evidence That Demands A Verdict’, Scientology uses Ron Hubbard’s ‘Dianetics’, and Libertarians use ‘Libertarianism in One Lesson"’ (I am also cracking up just writing the words)

In the absence of counterargument all these tracts are semi-convincing. However, they can all be easily rebutted because of their weak, exposed flanks: the many exceptions that must be omitted in order for their so-called principles and dogmas to be convincing.

I warrant Libertarianism and its fanciful world of minimal force might work, in a fantasy world-universe where all citizens are equally educated and have equal access to facts and information, and equal opportunities to advance their social-economic station. But that is emphatically not the world we inhabit, whether Kort concedes it or not. This is why Libertarianism will remain the province of the very few, though it is disturbing to behold all the inroads it’s made into the high IQ societies like Mensa and Intertel lately. To read some of the letters or articles is almost like witnessing a collective mind-virus unleashed, and by people whose “bible” is ‘Atlas Shrugged’.

Thankfully there are still many of us who don’t buy this bunkum, no matter who tries to peddle it. Call us proud “statists” if you will, but we will continue to advocate expanding government so that it serves all citizens – not merely the corporations, the rich, and not so rich, or any who can afford the luxury of Libertarian codswallop.

Finally, to anyone out there whose mind hasn’t been infected by the Libertarian mind virus, I commend Paul Kurtz’s excellent Editorial (‘Overcoming the Global Economic Tsunami’) in the February-March issue of ‘Free Inquiry’ magazine, page 4. Kurtz has it exactly right in his proposals, especially when he avers:

“Effective regulation must be reintroduced to protect the public interest”.

[1] It is a somewhat tragic fact that too many Americans, full of naivete and very little historical or political comprehension, mistakenly believe the “National Socialist Party” (NSDAP) of Hitler were valid Socialists. Nothing could be further from the truth! They were out and out FASCISTS who detested Socialists, as well as their kin, the Marxists. Amazing how language misuse can pervert the careless brain!