Category Archives: Financial Crisis

Infinite Debt

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harpercoverIf you’re anywhere near a newsstand this weekend, look for the April issue of Harper‘s. I scanned in a photo of the cover. There’s an article in it by Thomas Geoghegan called “Infinite Debt” that’s a must read. As in must. read.

It’s a long and complex article, but Geoghegan makes a case that the financial sector has been sucking the life out of the economy. There’s a huge imbalance between finance and industry. Money has been going into financial instruments, not manufacturing. Consumer debt plays a part in this mess also.

Here’s a snip:

What is history, really, but a turf war between manufacturing, labor and the banks? In the United States, we shrank manufacturing. We got rid of labor. Now it’s just the banks.

Which is why the middle class is shrinking. Basically, we’re all waiters now; we’re bowing and scraping and working for the banks. Look closely at any American, and it’s even odds that he or she, directly or indirectly, is somehow employed by the “financial services sector,” which covers insurance and real estate and financial instruments of any kind. As brokers, lawyers, loan collectors, loan consolidators, secretaries at big investment firms, chauffeurs of private limousines, or even the high-tech types who exist solely to service banks — all of us, millions of us, are part of it, living off it in some way, as three generations ago we lived off manufacturers.

Health Care Scare

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Ezra Klein talks about “zombie lies that will not die.” He links to a ridiculous Bloomberg article by Amity Shlaes, who raises the dreadful specter of “government-run health care,” which I assume is a system in which heartless government bureaucrats decide what medical treatments you will receive. This would be a huge departure from our current system, in which heartless insurance company employees decide what medical treatments you will receive.

Shlaes writes,

The administration seems almost to relish the sinister aspect of government-run health care. Otherwise it wouldn’t have created a position called “National Coordinator of Health Information Technology.” That’s a title worthy of Rhineheart, Neo’s boss, who tells him, “This company is one of the top software companies in the world because every single employee understands that they are part of a whole.”

Ezra writes,

This idea that the stimulus bill “created a position” called “National Coordinator of Health Information Technology” got its start in another Bloomberg column written by Betsy McCaughey. She called the National Coordinator of Health Information Technology a “new bureaucracy.”

But this just isn’t true. It’s not sort of true or arguably true or caught in arguments about the nature of truth. George W. Bush created the position of National Coordinator of Health Information Technology in 2004. Five years ago. The current director of the office is a Bush appointee by the name of Robert Kolodner. He has served there since 2006. He exists. If you prick him, he will bleed. If you touch him, he will recoil, because he is subject to our laws of space and time and as such was not somehow created by President Obama back when George W. Bush occupied the Oval Office.

What passes for “opinion” in wingnut world comes from the Pan’s Labyrinth dreamworld they live in. Don’t even try to make sense of it.

Elsewhere in Bloomberg News, John F. Wasik writes a nice piece about single-payer.

In a “Medicare-for-all” program, care would be publicly financed and privately delivered. You would keep your own health- care providers and hospital. The government wouldn’t dictate who your doctor is or choose your hospital. It would be acting more like a huge purchaser bargaining for the best treatment and drugs at the lowest price. …

…There would be a national market and regulation for health policies and no one could be denied affordable coverage. No more “cherry-picking” of only the healthiest people and rejection of the sickest or those with chronic conditions.

Wow, think of that.

Of course, even if their ideas are absurd, the fact that the Right is proposing changes means that we’ve progressed from the position they held as recently as the 1990s, and probably into the 2000s, which was that the health care system we have is just fine the way it is, and if it ain’t broke, don’t fix it. I believe George H.W. Bush used those very words in his re-election campaign against Bill Clinton.

With wingnuts, things have to get this bad before they acknowledge there’s a problem. On the other hand, they are grand at making up phantom problems (e.g., Saddam Hussein is going to nuke us) and flogging them ceaselessly. But real problems are uninteresting to them.

In other words, they get worked up over imaginary monsters under the bed and don’t notice the roof is coming off the house.

That’s why Tom Friedman shouldn’t be surprised. He writes today about the financial crisis:

Friends, this is not a test. Economically, this is the big one. This is August 1914. This is the morning after Pearl Harbor. This is 9/12. …

… Yet I read that we’re actually holding up dozens of key appointments at the Treasury Department because we are worried whether someone paid Social Security taxes on a nanny hired 20 years ago at $5 an hour. That’s insane. It’s as if our financial house is burning down but we won’t let the Fire Department open the hydrant until it assures us that there isn’t too much chlorine in the water. Hello?

See also Paul Krugman, “Can America Be Saved?”

Shifting Ground?

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At Tapscott’s Copy Desk, DC Examiner, we find “Obama is in trouble.”

Did you feel it? The political ground shifting beneath President Barack Obama since his speech last week to Congress? It’s been downhill since and I’m not referring mainly to the Dow Jones record-setting dive. The pivot point of the shift was the speech, or rather what the speech did to the evolving public narrative of Obama.

The “evolving public narrative,” one learns, is going on entirely on right-wing public radio and Faux Nooz. Rush Limbaugh and Glenn Beck are on fire, apparently. Further, “a potentially devastating conservative case against Obama is coming together rapidly.” Wow! This could be troublesome. But yes, two columns “tell the tale.” They are:

Daniel Henninger at the Wall Street Journal:

The Republicans have been handed on a tarnished silver platter the chance to offer the American people an alternative vision of how their economy works — and grows.

They should take political ownership of the 75% of the U.S. economy that the Democrats have abandoned — the private economy.

Hello?

Over the past four decades and the decline of private-sector industrial unions, professional Democrats — politicians, intellectuals like Robert & Robert, campaign professionals, unions and satellite groups — have severed their emotional and intellectual connection with private production.

Wow, that’s so — nonsensical. OK, so what’s the other column? Why, it’s Charles Krauthammer! The same column I cited in my last post! Let’s look at Tapscott’s synopsis Krauthhammer:

Obama’s mastery of public speaking has heretofore served to deflect attention away from the details of what he is actually proposing. And there is in those details, according to Krauthammer, a fundamental deception: Obama summons visions of catastrophe that are the result of too little government regulation of the financial markets and he offers as a solution vastly more government regulation of …. health care, energy and education.

Krauthhammer and Tapscott are saying that Obama is deceiving the public by claiming the financial meltdown is the result of deregulation of financial markets and offering as the solution more regulation of health care, energy and education. Tapscott continues,

In other words, Krauthammer said, Obama tries to have it both ways, with the alleged errors of deregulation being compounded into the worst economic crisis since the Great Depression by America’s failure to nationalize health care, shift our economy to alternative energy sources and give everybody a free pass to college. Obama is trying to make the cause and the cure synonymous. “Clever politics, but intellectually dishonest to the core,” Krauthammer said.

I read this three times to try to see where Obama’s dishonesty lies, and it eludes me. Of course, like most righties Tapscott and Krauthammer cannot so much as breathe without being intellectually dishonest about it. For example, they are being intellectually dishonest when they say Obama’s solution is more regulation of health care, energy and education. Some regulation is needed, but even more important is more investment in health care, energy and education.

And what’s with the “free pass to college”? Exactly where do they get this stuff?

Anyway, like most right-wing arguments, it is based on ideology that is utterly unconnected to anything happening in the real world. People who are already convinced that President Obama is a radical socialist terrorist fist bumper will take this argument to their hearts and repeat it like parrots without knowing what any of it really means. Everyone else will say, “huh?”

Michael Hirsch writes at Newsweek about the shifting ground:

Despite the tumbling economy, Barack Obama continues to enjoy a honeymoon with the American public in the face of the most trying crisis any newly inaugurated president has encountered since Franklin Delano Roosevelt. The GOP, meanwhile, is viewed by a majority of Americans as the party of “no,” without a plan of its own to fix the economy, and even rank-and-file Republicans are concerned about the party’s direction, according to the first NEWSWEEK Poll taken since Obama assumed office. …

… Overall, 58 percent of Americans surveyed approve of the job Obama is doing, while 26 percent disapprove and one in six (16 percent) has no opinion. Although his approval ratings are down from levels seen a few weeks ago in other polls, 72 percent of Americans still say they have a favorable opinion of Obama—a higher rating than he received in NEWSWEEK Polls during the presidential campaign last year. The president’s rating in this poll is consistent with estimates provided by other national media polls in the last week.

Many on the Right also are claiming that Obama owns the nation’s faltering economy, since he’s been POTUS for less than seven weeks and hasn’t fixed it yet. In particular, the Right is seizing the falling stock market as proof that Obama’s economic policies are already failing. Robert Reich explains why this is nonsense. See also Tom Petruno at the Los Angeles Times.

Of course, going back many years we see that righties always claim good economies as theirs and bad economies as belonging to Democrats. In rightie world, the “Reagan Recession” of 1981-1982, which began after St. Ronald of Blessed Memory took office, was Jimmy Carter’s fault. On the other hand, the strong economy of Bill Clinton’s second term was, of course, Saint Ronald’s doing, even though Reagan had been out of office for a decade.

Time has a way of strangely compressing and expanding in the rightie brain.

Blinking on Banks

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Paul Krugman argues that the Obama Administration should just nationalize the banks and be done with it.

The real question is why the Obama administration keeps coming up with proposals that sound like possible alternatives to nationalization, but turn out to involve huge handouts to bank stockholders.

For example, the administration initially floated the idea of offering banks guarantees against losses on troubled assets. This would have been a great deal for bank stockholders, not so much for the rest of us: heads they win, tails taxpayers lose.

Now the administration is talking about a “public-private partnership” to buy troubled assets from the banks, with the government lending money to private investors for that purpose. This would offer investors a one-way bet: if the assets rise in price, investors win; if they fall substantially, investors walk away and leave the government holding the bag. Again, heads they win, tails we lose.

Why not just go ahead and nationalize? Remember, the longer we live with zombie banks, the harder it will be to end the economic crisis.

I have to agree with Professor Krugman on this one. Prairie Weather says Obama is listening to too many former Wall Street and financial industry guys right now, and he’s probably right.

Choosing Sides

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Louisiana Governor Bobby Jindal has chosen to refuse $90 million of federal dollars that would have benefited his state’s unemployed citizens. His reason for this is that the state would have been required to change its own laws and expand unemployment eligibility. The federal money would fund the expansion for only three years, after which time the state would have to tax businesses to make up the slack. Therefore, accepting the $90 million would hurt business.

Of course, there is no earthly reason why Louisiana couldn’t plan on phasing out the expansion once the federal money ran out. We’re in an emergency mode, after all. And one would think that putting a little extra money into the pockets of Louisiana residents would be, you know, good for business. People who understand these matters better than I do say that unemployment benefits are a particularly effective stimulus, because nearly every penny is spent:

Temporary increases in unemployment insurance (UI) benefits are particularly effective as stimulus: the benefits go to workers who have lost their jobs, so the added income is likely to be spent quickly. As CBO director Orszag recently told the House Budget Committee, “research has shown that the unemployment insurance system is among the most effective dollar-for-dollar economic stabilizers that we have in terms of counterbalancing periods of economic weakness.”

Already Louisiana is a state that receives more in federal tax dollars than it pays. According to the Tax Foundation, in 2005 for every dollar paid in federal income taxes, Louisiana got $1.30 back. Louisiana got $1.37 back in 2004, so don’t blame Katrina.

Governor Jindal, however, has chosen sides. He is being hailed as a hero by the wingnuts, who are calling the federal dollars a “bribe” and the stipulations attached to it “unconstitutional.”

On the other hand, California Governor Arnold Schwarzenegger just signed into law a $12.5 billion tax increase. Michael Finnegan writes for the Los Angeles Times,

With that, the Republican governor broke one of the few bonds left between his shrunken party and California’s mainstream voters, marring its hard-won image as a guardian against higher taxes.

Actually, California has a hard-won image of a state that lacks the sense to come in out of the rain, or back away from a mudslide, or whatever.

To be sure, none of the GOP lawmakers who demanded that the state close its $42-billion shortfall without raising taxes detailed the doomsday cuts that approach would entail, nor did the activists who lobbied against the tax increases. If the state had laid off its entire workforce of 238,000 — every prison guard, firefighter and clerk — it still would have fallen billions shy of a balanced budget.

I bet no one in the GOP still is talking about a constitutional amendment that would allow Ahnold to be president.

Anyway, these two governors have chosen their sides. Gov. Jindal chose to stay on the sinking ship that is the GOP. Gov. Schwarzenegger, whatever his many faults, at least is smart enough to know when it’s time to grab a lifeboat.

Update: From Liberal Journal —

Keeping money out of the hands of the unemployed during a severe recession is just the kind of stunt that could vault him to the top of the Republican Presidential primary field in 2012. And with potential competition from the mighty Sarah Palin, BJ can’t leave anything to chance.

Exactly.

Who’s the Idiot?

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David Brooks’s column today is titled “Money for Idiots.” Naturally I assumed it must be about a bailout for pundits. But no; the “idiots” are people who are behind on their mortgage payments. And here’s yet another unexpected twist — after berating the idiots for being idiots, Brooks grudgingly admits that we have to help them, anyway, for the sake of the economy.

The nation’s economy is not just the sum of its individuals. It is an interwoven context that we all share. To stabilize that communal landscape, sometimes you have to shower money upon those who have been foolish or self-indulgent. The greedy idiots may be greedy idiots, but they are our countrymen. And at some level, we’re all in this together. If their lives don’t stabilize, then our lives don’t stabilize.

Well, yes, that really is the bottom line. Talk of whether any individual “deserves” help is beside the point. Letting so many people fail amounts to a national economic murder-suicide pact.

I haven’t had time to digest the details in the save-the-homeowners plan. Edward L. Glaeser, an economics professor at Harvard, provides a brief critique that mostly approves of it.

The Right, of course, is opposed to the Obama plan. They don’t have a plan of their own other than to do nothing, but they don’t like Obama’s plan one bit. Their reasons for disagreement range from the stupid to the stupid and clueless to the stupid and clueless plus hallucinatory.

See also: Ryan Chittum, “CNBC Editor: The People Are Revolting!“

Sick of It

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Adventures in the land of the Best Health-Care System in the Worldâ„¢:

They borrow leftover prescription drugs from friends, attempt to self-diagnose ailments online, stretch their diabetes and asthma medicines for as long as possible and set their own broken bones. When emergencies strike, they rarely can afford the bills that follow.

The article is about how you get health care if you’re a 20-something living and working in New York City. However, I suspect this is true of vast numbers of 20-somethings throughout America. And I want to emphasize that we’re talking about children of the middle class. I’m not saying children from lower-class families don’t deserve health care as much. The point is that if this were a coal mine, the canary would be decomposed to a pile of bones and feathers by now.

Of course, some healthy young people who are eligible to get health benefits from employers choose not to do so because they are foolish. But many more, I think, either don’t get health benefits from their jobs or honestly cannot afford what they’d have to pay to join their company group insurance plan.

Today, the same people on the Right who fought S-CHIP expansion tooth and nail suddenly care about young people, although not about their health. Little Lulu and some of the other hysterical shriekers are pushing “porkulus” protests against the stimulus package. Lulu’s got photos of children and youths holding signs saying “I don’t want to pay for the ‘swindle-us’ package” and “Say no to generational theft.” But when Moveon produced videos like the one, for some reason the Right was not moved.

But as Steve M says, if the Right wants to waste its time with tactics that didn’t work for the Left, who am I to complain?

How Conservatism Is Destroying America

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California is on the brink of financial collapse. Jennifer Steinhauer writes for The New York Times,

The state, nearly out of cash, has laid off scores of workers and put hundreds more on unpaid furloughs. It has stopped paying counties and issuing income tax refunds and halted thousands of infrastructure projects.

This crisis has many causes, but addressing it has been rendered nearly impossible by Republicans in the state legislature who block any form of tax increase. Hilzoy says,

They need three (3) Republican votes in each house. They can’t get them. And this despite the fact that the Republicans who have been negotiating have gotten a lot, including, according to the LATimes, “tax breaks for corporations”.

Really. I am not making this up. With the state budget $41 billion in deficit, Republicans held out for corporate tax cuts, and then aren’t even supporting the resulting bill.

Stopping building projects is costing Californians millions of dollars. Borrowing money to keep the government going is going to cost Californians millions of dollars.

As the stimulus bill becomes law today, we learn that a number of Republican governors are lining up to support it. It may be too little, too late for California. But a number of other states, both red and blue, may be pulled back from the brink of disaster by federal dollars — in no particular order, New York, Virginia, Iowa, Tennessee, Missouri, Ohio, etc. etc. Add your state here.

States are in trouble for a lot of reasons, but an immediate one is the loss of revenue by retailers. City and state budgets are breaking all over America.

Florida Governor Charlie Crist, a Republican, explains,

“It really is a matter of perspective,” Mr. Crist said in an interview. “As a governor, the pragmatism that you have to exercise because of the constitutional obligation to balance your budget is a very compelling pull” generally.

With Florida facing a projected $5 billion shortfall in a $66 billion budget, and social costs rising, the stimulus package “helps plug that hole,” Mr. Crist said, “but it also helps us meet the needs of the people in a very difficult economic time.”

And it appears Americans on the whole are glad Congress came through.

So, who’s not happy? Well, we know, don’t we?

As there weren’t enough Republicans in Washington to provide fodder for the story the New York Times wanted to write – they simply took it on the road to those Republicans Governors who also happen to be the ones most hat in hand when it comes to Federal dollars. Yep, quite a “conservative” bunch this crew. Or so the Times would have one believe. …

… How about if the Feds didn’t suck the money out of states to begin with only to wastefully plow it back in?

If you are wondering how the feds are sucking money out of states, read the comments to the rightie blog post linked above. They’ve noticed that poor New Jersey only gets back 70 percent of what it sends to Congress. Yes, and this is something I’ve written about in the past. The wealthier, more industrialized states (nearly all of which are blue) tend to pay more in taxes than they receive in federal dollars. Poorer, less industrialized states (nearly all of which are red) pay less in federal taxes than they receive in federal dollars.

In other words, for many years blue states have been carrying the load for red states that won’t pay for their own messes.

Now, if the conservatives who run the poor red states want to be real conservatives and stop grabbing money out of the hands of New Jersey taxpayers, I wouldn’t object. Let the freeloaders in Mississippi pay their own bleeping taxes, heh?

Of course, in the real world what would happen is that there would be a belt of states sunken into Third World style poverty by their idiot GOP state government, and this belt would stretch across the southeastern U.S. and reach up to the more rural western states. And in the long run it would hurt the U.S. as a whole more than it would help.

Right-wing economic “theory” is destroying America. It’s doing a bigger job on us that al Qaeda could ever have dreamed.