Here is a fascinating video of the Mayor of Lansing, Michigan, Virg Bernero on Fox News discussing the auto workers:
The Republicans and Spending: A story about Credibility
I just want to make some brief points about the importance of credibility in politics, as it relates to stimulus, followed by some general points about the merits of stimulus. In doing so, I'd like to try to make a subtle distinction here between the argument that Republicans have no credibility to oppose spending versus whether or not spending is actually necessary. The Republicans have no credibility on spending,which is not say spending on stimulus is correct or incorrect. I just want us all to remember, the next time you hear a Republican expressing deep concern over the stimulus spending, that these are the same people who passed a $1.2 trillion Medicare Bill, a $1 Trillion Iraq War, a $250 Billion War in Afghanistan, and a $1.2 trillion tax cut all in the same eight year period.
Ofcourse this point does not address the merits of a stimulus bill, it just is saying the Republicans have no credibility in opposing spending and what they say in that regard cannot be trusted. They have lost a seat at the spending debate table. This point is not, however, intended to offer a license to Democrats to enact stimulus or any other spending program. Once we agree that Republicans have no credibility, and get that out of the way, then we can begin discussing the merits of a stimulus bill. So why do the Republicans have no credibility on spending?
The eight year spending binge previously mentioned is a good start to answering that question, but does the responsibility of that spending extend throughout the Republican party? The answer is a resounding Yes. The Republicans are complicit in Bush-Cheney's profligate behavior because they either looked the other way or were involved. They were not standing up against the wasteful spending of the Bush Administration. In fact, they were relishing in the profligacy when it was Republicans doing the spending. Therefore, they have lost all credibility to say they are against "spending."
It would be as if the Democrats looked the other way at the Blagojovich scandal and then a year later tried to argue that they are the party opposed to political corruption. They would have lost credibility on the issue. In fact, they were vocally in opposition to him from the get go. Since they stood up to Blago, they have the credibility to say they are opposed to political corruption.
Now with that point out the way, a few points on stimulus spending. I keep hearing the argument that "spending got us into this, more spending won't get us out." Or "if you are in a hole stop digging." I have also heard arguments that, "since we don't know if stimulus will work, we should do nothing." All fair points, but not entirely well thought out.
First, spending really did NOT get us into this mess. Spending has been a problem, no doubt. But spending is not the problem, or at least the central problem, that caused the economic crisis. This crisis was caused by an unregulated banking industry gone wild. Derivatives, mismanagement and banking sector risk caused a systemic freezing of credit, causing a general loss of confidence and spending power throughout the economy. So to say spending caused this crisis, although tempting to say, is not entirely true.
The stimulus is classical Keynesian economics and is largely considered the best solution in a deflationary spiral. No one is positive it will work, but economists think it is the best solution. No decision ever carries a certainty of success and they often have mixed results. If you look at economist's views on the stimulus I think they would say there is a 50/50, or some similar probability, of success and there will be side effects. However, they argue, the pros outweigh the cons and we should, therefore, bite the bullet.
If you consider the effects of a deflationary spiral it is sort of the economic equivalent of cancer. It feeds on itself and destroys an economy. It has to be stopped, almost at all costs. If fiscal conservatives are worried about the national debt, or the American standard of living, with the stimulus plan imagine the national debt and the American standard of living with a great depression. Not to mention the geopolitical risks associated with a U.S., or even worldwide, depression. It is much worse than the deficit concerns posed by a stimulus.
Its like radiation treatment for cancer. Cancer is awful. Radiation is slightly less awful. It is not guaranteed to succeed and even if it does there are harsh side effects. Our economy has cancer and it needs radiation treatment. The stimulus treatment is not guaranteed to succeed and even if it does the economy will still be very sick. So it is very easy to put forward arguments about why radiation is awful, we can all agree with that. Similarly spending money you don't have is awful, but allowing a deflationary spiral to occur unchecked is unthinkable.
"Deficits Don't Matter" No Wait... Unless they Create Jobs for Americans
In relentless defiance of economic reality Republican Representative Paul Ryan is arguing, in a NYT editorial, that the Stimulus package threatens the nation's fiscal health! This is the same man who repeatedly voted to fund the Iraq War,voted for a massive new entitlement program known as Bush's Medicare Prescription Drug Bill, and then to make the Bush tax cuts permanent. In fact, he voted with his Republican colleagues and President Bush to create the largest deficits in U.S. history exactly 98.6% of the time.
In this surreal editorial he also implies that the words "crisis", "emergency" and "catastrophe" are not necessarily accurate ways to describe the current situation:
Instead of a stimulus package to create jobs through infrastructure and other types of investment, Mr. Ryan feels we should have cut the corporate income tax rate! In other words, maybe the Banks and other multinational corporations, if we give them bigger tax cuts, will miraculously start hiring American workers!
Coming from the party that, for eight years, argued that "deficits don't matter", this is truly remarkable. Apparently deficits while Republicans are in power, don't matter. Ronald Reagen, the Republican icon, practically invented massive deficits. What a complete joke of a political party. Their allegiance is only to power and money.
In this surreal editorial he also implies that the words "crisis", "emergency" and "catastrophe" are not necessarily accurate ways to describe the current situation:
Amid a rhetorical debate centered on words like “crisis,” “emergency” and “catastrophe,” it acted too fast.Where is he getting his economic data because I am hearing a lot of comparisons to the Great Depression being made by highly respected economists, i.e., Paul Krugman. If he hasn't noticed unemployment is increasing at an alarming rate, all economic numbers have gone off a cliff and we appear to be caught in a downward deflationary spiral. Notice that he did not provide a single statistic on unemployment or anything related to the current economic plight of the American people. Instead he argues that a vague threat is looming, inflation! Hello, Mr. Ryan, we are in a deflationary spiral. You might have noticed the plummeting home values, car values and the cost of just about everything!
Instead of a stimulus package to create jobs through infrastructure and other types of investment, Mr. Ryan feels we should have cut the corporate income tax rate! In other words, maybe the Banks and other multinational corporations, if we give them bigger tax cuts, will miraculously start hiring American workers!
Coming from the party that, for eight years, argued that "deficits don't matter", this is truly remarkable. Apparently deficits while Republicans are in power, don't matter. Ronald Reagen, the Republican icon, practically invented massive deficits. What a complete joke of a political party. Their allegiance is only to power and money.
Stress Testing Banks: You mean we haven't done that already?
Stress testing is the big catch phrase coming out of Geithner's bank rescue plan. Even the incessantly critical econoblogosphere has greeted the stress test aspect of the plan with open arms. Calculated Risk put together a much better analysis of the Stress test than I ever could, so I refer you to that.
In short, the stress test will send government regulators into all the major banks to go through their books. The regulators will do an analysis and determine whether the banks are solvent. The huge gaping whole in the plan is that no one is sure what the plan calls for if, and more likely when, they find several insolvent banks.
Putting aside the question of what to do if banks are insolvent, why have we not done a stress test already? This crisis hit last September. That is almost six months ago. It became obvious, after we realized that we were caught in a credit crisis, that the banks were not lending because their balance sheets were a mess. The government, within weeks, had committed hundreds of billions of dollars to propping up the banking system. Why did they not demand a look at the books?
Why does the "bold" new plan from Geithner basically consist of the most obvious plan of action? It does not strike me as very bold to look at the books of institutions into which you have dumped billions dollars. Do an analysis of the Bank's books? This means we have been throwing billions at banks having no idea what their books look like?
I don't know how anyone in the government could have been pretending to do anything about the banking crisis without the most critical piece of data, the bank balance sheets!
This does not bode well for our future. We are so far behind the curve it is scary.
In short, the stress test will send government regulators into all the major banks to go through their books. The regulators will do an analysis and determine whether the banks are solvent. The huge gaping whole in the plan is that no one is sure what the plan calls for if, and more likely when, they find several insolvent banks.
Putting aside the question of what to do if banks are insolvent, why have we not done a stress test already? This crisis hit last September. That is almost six months ago. It became obvious, after we realized that we were caught in a credit crisis, that the banks were not lending because their balance sheets were a mess. The government, within weeks, had committed hundreds of billions of dollars to propping up the banking system. Why did they not demand a look at the books?
Why does the "bold" new plan from Geithner basically consist of the most obvious plan of action? It does not strike me as very bold to look at the books of institutions into which you have dumped billions dollars. Do an analysis of the Bank's books? This means we have been throwing billions at banks having no idea what their books look like?
I don't know how anyone in the government could have been pretending to do anything about the banking crisis without the most critical piece of data, the bank balance sheets!
This does not bode well for our future. We are so far behind the curve it is scary.
The two tiers of Justice
It does sound unbelievable, but I saw it with my own eyes. I had the pleasure of sitting in Municipal Court today to have a ticket dismissed. It was dismissed for lack of prosecution, in other words, the cop didn't show up. The municipal court system is a game and I won today. However, I witnessed the most ridiculous display of "justice" I have seen in awhile.
The guy didn't pay a ticket for riding the train without a ticket. A warrant was issued. He was stopped for riding the train again without a ticket and, because he had a warrant for the initial ticket, he was cuffed and brought to court.
The judge asked him, "Why didn't you pay the ticket"
He said, "I need to borrow the money from my mother, but she doesn't have enough"
The Judged indignantly asked, "why do you need to borrow this money from your mom, you are 35 years old?"
The man replied, "I have been sending out my resume every day, I go and ask people for jobs, but no one calls me back"
The judge gave him two weeks to come up with the money.
Now clearly, the handcuffs were purely for the humiliation factor. To remind this man that he is subhuman and not worthy of the freedom of his hands. After not having paid a train fare, why else would handcuffs be necessary? On top of that it looked incredibly humiliating for this man to explain in a packed court that his mom doesn't have enough money to loan him the payment, he can't get a job, and he rides the subway without paying. The judge even took pleasure in asking why a 35 yr old man can't pay his tickets.
Was Bernie Madoff handcuffed? He might have been, but I never saw it. Was he dragged in front of a judge and made to explain why he is not man enough to make money legally? In front of his Park Avenue community? Ofcourse not!
Hard to believe. We have a merciless justice system, unless you are connected, have massive wealth, or steal enough that you can hire a team of attorneys. We have 2.2 million people behind bars in this Country, which gives us the honor of having the highest incarceration rate in the world. (1 in 100 Americans behind bars). The U.S. has 5% of the world population and 25% of the world's incarcerated.
This is what is meant by the two tiers of American justice. It is relentlessly applied to the poor, but sparingly applied to the rich.
Geithner's Big Plan: We Don't Have a Plan
It is clear to anyone who listened to Geithner's presentation today that the Administration still has not made a decision on how to deal with the Banking component of the economic crisis.
Why would you hype a big announcement, as Obama did in his first press conference, by your Treasury Secretary when you do not have a plan ready?
It seems the market, Wall Street, Main Street and the economic blogosphere are a bit underwhelmed by Geithner's big announcement.
The general sense is that they are still evaluating option to deal with toxic assets, which is essentially the heart of the Banking problem. So we were not offered any plan to speak of.
No wonder the markets reacted so poorly.
Why would you hype a big announcement, as Obama did in his first press conference, by your Treasury Secretary when you do not have a plan ready?
It seems the market, Wall Street, Main Street and the economic blogosphere are a bit underwhelmed by Geithner's big announcement.
The general sense is that they are still evaluating option to deal with toxic assets, which is essentially the heart of the Banking problem. So we were not offered any plan to speak of.
No wonder the markets reacted so poorly.
The Collapse of the Middle Class
I just watched this lecture, given by Professor Warren of Harvard Law School, explaining the reasons for the collapse of the middle class. It is worth watching.
Professor Warran presents data explaining the difference in the middle class of the 1970s to today, looking at the change to dual income households, increasing cost of healthcare, etc. It is a complex, data driven, view of the demise of the middle class, but I think it overlooks the most obvious, glaring reason for this phenomena, the class war. The wealthiest Americans have been engaged in a systematic class war, which has completely decimated the Middle Class.
We are going through hoops trying to figure out why the middle class is falling apart, but the answer is right in front of our eyes. The wealthy have captured more of the nations wealth, leaving less for the middle class.
Over the Republican rule of the 1980's and through the present, the costs of healthcare and retirement have been shifted from corporations and large institutions to the individual. That is massive wealth transfer.
Also, until Reagan we had a 70% tax rate for the top bracket. Through out the period the professor is looking at, the 1970s, the wealthy carried a larger share of the nation's burden. That top rate was slashed by Reagan, then Bush. Now we have a top tax rate of 36%. Ofcourse that has transferred wealth to the top.
Our economy has been growing at a solid rate since the 1970s, but all of the growth was going to the top. We are engaged in a class war, but one side isn't even aware there is a war taking place. The Republican party has the middle class so confused that they aren't even aware they are getting there ass kicked. The Republicans drag out "Joe the Plumber" and talk about tax cuts for Small Businesses, when in reality all the Republican agenda has done is to make the rich richer than they have been since the gilded age.
The Middle Class needs to wake up, stop struggling for one minute, and realize that they hold the political power in this Country. The top tax bracket must go back above 50%, which would allow us to lift healthcare costs and some retirement risk off the shoulders of the middle class. This class war has gone on too long with one side completely unengaged.
It is Time to Protest
I think it is time for the people to send a message to Wall Street and Washington DC. There are protests around the world, but we Americans, are not doing a thing! The economy and politics have gotten so out of control, it is time for us to do something.
Let me be a little more specific. A lot of people have a general sense of frustration and anger at the way things are going. I am proposing a protest theme that is general enough to encompass most of those concerns, but sets a specific message.
So I would boil it down to the following:
When the political elite, Republican and Democratic, do not pay their taxes that makes us all look foolish for actually paying ours. It is unacceptable.
Bailouts to Banks may or may not be necessary, we can debate that. But there is no debating whether Bailouts to Banks with absolutey NO STRINGS ATTACHED is corrupt and unacceptable. It is unacceptable.
The influence of corporations, particularly Wall Street, on our Government is choking our Middle Class and ultimately the Country. Both the Bush Administration and the Obama administration are full of corporate insiders. It is unacceptable.
Any other suggestions?
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The video has been discussed by Greenwald and over at Kos. I just want to provide my take.
What was so fascinating about that interview was how uncomfortable, and condescending, the Fox News host appeared with someone expressing the anger and frustration most Americans are feeling. The Mayor, although not necessarily providing specific answers, was simply venting the frustrations of people. The way the Mayor was speaking is the way I hear most Americans talking right now, that is, with indignation and anger. When this gets expressed on TV, particularly Fox, the corporate media starts looking very nervous. It is striking how rare that kind of language and anger is witnessed on TV or in the mainstream media. The anger is usually directed the other way, at the "spoiled" auto workers.
Another interesting part of this exchange was the often quoted, and repeatedly debunked, $70 per hour statistic. The statistic is misleading for a variety of reasons, which is a whole other post, but we know that FOX does not hamper themselves with information or facts.
The common assumption floated around is that the UAW has not given up enough to make the car companies competitive. I don't know enough about the subject to argue one way or the other, but I do know how many people feel. They feel that the American worker has been kicked around for decades. The fact is that the sacrifices all come from the worker and the taxpayer, while the people at the top sacrifice nothing.
This all fits neatly into the "blame the homeowners" for the economic crisis meme. Or we can point to JP Morgan's CEO, Jamie Dimon, whose industry is in the middle of the largest taxpayer bailout in world history, today suggested that homeowners that are underwater on their mortgages have an obligation to stay and pay them:
The calls for responsibility always seem to go to the homeowner, or the taxpayer, or the worker. Who is calling for responsibility from the corporate leadership?For example, Bloomberg reports that Citigroup, which lost $18 Billion dollars last year, laid off 36,000 and got a $52 Billion government bailout still provides perks to directors and former CEOs such as airplane travel, helicopters and drivers costing millions of dollars. Whether its the auto workers, the taxpayer, low level bank secretaries, homeowners; they all are not sacrificing enough, meanwhile according to the mainstream media, the suggestion that a CEO should not have a private plane is ludicrous.
I ask who is not sacrificing enough?
I think Doug Hanscorn, a 32 year veteran in an auto plant put it best:
"I know one thing: I I lose my pension, I bet you Rick Wagner (the GM CEO) and all those guys won't lose theirs."