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The chancellor who played with fire

by on February 5, 2012

menafn.com…

(MENAFN – Jordan Times) German Chancellor Angela Merkel should be happy nowadays: her party’s approval ratings aren’t bad, and her own are very good. She no longer has serious rivals within the …

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The chancellor who played with fire

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Stephen Herrington: The Tea Party Fiscal Flip Flop(s)

by on May 25, 2011

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When the 2011 federal budget was being bludgeoned into it’s final form, the Republicans/Tea Party screamed that continued borrowing would raise the cost of borrowing by increasing the perception that the U.S. government might not be able to service higher debt. At what level a punitive demand for interest increases on U.S. debt would happen is anybody’s guess, but it was argued that it would happen, eventually. Standard & Poor’s even threatened that the rating of U.S. Treasuries might be lowered from AAA sometime in the next dozen years if the U.S. budget deficit is not subdued. Bond vigilantes would surely punish us for our profligate spending by raising demands for interest on U.S. debt. Attendant to that argument was that the possibility of tax increases required to cover debt payments, both growing principal and interest, created “uncertainty” in the business community. “Uncertainty” is what, Republicans say , is keeping businesses from hiring. Now, within a few weeks of sealing the 2011 budget deal, as the argument has shifted from the budget to the raising of the debt ceiling, something strange has happened. The Tea Party Republicans are now saying that it’s OK for U.S. government interest expenses to go up. It’s OK to default on some obligations, and if that causes interest costs on the debt to go up, all the better. Higher interest payments will decrease the capacity of government to take on further debt and will, therefore, extort spending cuts. Since Republicans control the House, no tax increases can be passed to cover the increased interest costs and government will have to be made smaller. The fact that default, wholly or in part, will raise interest costs no longer seems to matter. Now, in fact, to Tea Partiers it seems to be a good thing. The threat of higher interest on U.S. securities has been serious, if not exactly imminent. If the interest paid on new borrowing goes up, that’s one thing, but since about 2/3rds of the U.S. debt is short term two year notes, an increase in interest on debt would actually deepen our debt problems as two year term Treasuries get refinanced at a higher rate. It would be like deliberately opting to increase your adjustable mortgage interest with no increase in your ability to pay. Republicans, and many Blue Dog Democrats, were/are concerned about long term debt consequences, and rightly so. If nothing is done to spur economic growth and create jobs, revenues would remain the same while costs of debt service increase. We have to default, but the means we might use to avoid default, like monetizing the debt or slashing spending, would simply redistribute the burden of increased debt service to the populations with exposure to changes in inflation or government programs. So the best thing to do, all around, is to balance the budget in the long run. The long run is not the short run. To borrow a popular term from what’s left of the housing industry, the Tea Party is now talking about a strategic default. The difference is that the purpose of this government strategic default would be political instead of financial. Default by the U.S. government would be financial absurdity. In many states, you can walk away from an underwater mortgage, but your credit is ruined. The ruination of U.S. credit as a country means the ruination of the credit of every last citizen of the country. It would be like deliberately missing a payment on your credit card so that the interest you pay goes from 12 percent to 29 percent, and the GOP is thinking that’s clever enough to impose it on every U.S. citizen. The political reasons to do it range from capping the economy short of recovery to making the Democrats look bad to the baseline misguided conservative ideology. It is clever, Republican clever, because it will force the cost of government to go up and so force government to do less and so shrink government. A shrinking government that is more expensive will prove, once and for all, that government is a waste of money. This strategic default is a new variant on starving the government beast through amassing debt. Since they aren’t in a position to run the debt up any further, even their base gets upset with that, they can still increase the cost of government. It’s a last ditch attempt, short of winning elections on a platform of destroying Medicare, to break the government. With a Tea Party strategic default, the “uncertainty” for business will become worse sooner, rather than later. Business, still not recovered from the Great Republican Recession, fears tax increases and would now face both tax increases and higher cost of credit for themselves, as credit terms for government set the expectation of credit terms across credit markets. Much worse though, current short and long term Treasury holders would see the cash value of their bonds fall. As interest rates go up, bonds that pay less in interest lose cash value. Treasuries are widely held as investments. Domestically and internationally, holders of Treasuries could be forced into insolvency by loses in their bond portfolios. A banking, stock market, pension, endowment and global government debt crisis would ensue. “Uncertainty” for business will become a certainty. It’s hard to imagine that the party of business, the GOP, would condone legislative actions that would make it worse for business than it is already, but that’s the inevitable outcome of deliberate strategic default. Businessmen, traditional GOP constituents, it’s time to call your congressman and Senator and tell them to kick the Tea Party to the curb. It appears a right wing populist movement is just as dangerous to your short term interest as is any left wing populist movement. Sure, the deficit needs to come down, but the way to do it is to grow the economy and/or make economically neutral cuts. Default now will just make things worse sooner, rather than later. The Tea Party flip is a fiscal and financial flop.

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Stephen Herrington: The Tea Party Fiscal Flip Flop(s)

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Why Medicare Will Be The Issue Of 2012

May 25, 2011

WASHINGTON — The 2012 election found its defining issue on Tuesday night, with an insurgent Democrat upsetting a well-financed Republican in a deeply red district in New York state. The GOP paved the way for the Democrat’s victory by voting earlier this year to end the current Medicare program that guarantees health coverage to seniors and replace it with a voucher system that provides premium support for the elderly to purchase private health insurance. The Republican in the race, Jane Corwin, fully endorsed the GOP plan to alter Medicare, while the Democrat, Kathy Hochul, defended the social safety net. The race’s polling trends point to Medicare as the defining issue, while the conversation has played out on a national level. Former House Speaker Nancy Pelosi (D-Calif.) summed up the Democratic position: “We have a plan –- it’s called Medicare.” With some exceptions, Democrats have ranged from reluctant defenders of government spending to outright hawkish assailants of social funds. But nothing focuses the mind like political calculation, and the upset in upstate New York has sent a message so clear that not even the highest priced Democratic consultant could miss it. “Kathy Hochul’s victory tonight is a tribute to Democrats’ commitment to preserve and strengthen Medicare, create jobs and grow our economy. And it sends a clear message that will echo nationwide: Republicans will be held accountable for their vote to end Medicare,” Pelosi said in a statement after the election. The race began turning toward the Democrat when Corwin embraced the GOP’s Medicare plan in mid-April. The campaigns had already been communicating with voters, airing television spots for nearly a month. Corwin attacked Hochul on the airwaves in late March for having sought property tax increases and attempted to link Hochul to Pelosi, following the playbook Republicans applied with success during 2010. Hochul responded with a series of ads beginning in early April, but none mentioned Medicare. That changed on April 26 when the Hochul campaign began airing an ad that hit Corwin for saying “she would vote for the 2012 Republican budget that would essentially end Medicare,” that would have seniors “pay $6,400 more for the same coverage” and would “cut taxes for the wealthiest Americans.” WATCH : Just before Hochul’s television campaign shifted to Medicare, a Siena Research survey showed Corwin leading Hochul by a surprisingly narrow margin, 36 percent to 31 percent. But ten days later, an automated survey conducted by Democratic firm Public Policy Polling and sponsored by SEIU showed Hochul leading by four points (35 percent to 31 percent). And in the final week, two more surveys, one from PPP and one from Siena College, both showed Hochul leading by similar margins. Jef Pollock, Hochul’s pollster, told HuffPost that the numbers showed the Democrat winning among seniors and independents, two groups that broke heavily for Republicans in 2010. “This race was won, in a significant way, because of the disastrous decision by the GOP to dismantle Medicare as we know it,” he said. “Kathy Hochul was a great candidate. And credit is due to her for running a great race as well as credit to the campaign for making Medicare a central issue — that’s why Hochul was winning 74 percent of the voters who said that Medicare was the most important issue to them in the most recent Siena poll conducted just a few days ago,” he said. Steve Murphy, Hochul’s media consultant, argued that his candidate persuaded voters she was concerned about the deficit without needing to cut Medicare. “A Democrat in a competitive district can win on the Ryan budget and Medicare issue as long as they first demonstrate to voters that they are tough on spending and serious about the problem of rising deficits,” he suggested. “Five of our seven ads had a strong fiscal component, not just Medicare.” Democrats highlighted the serious money the Republicans put into the election. “Today, the Republican plan to end Medicare cost Republicans $3.4 million and a seat in Congress. And this is only the first seat,” said Rep. Steve Israel (D-N.Y.), head of the Democrats’ House campaign arm. House Republicans pinned blame for Corwin’s loss on a quirky third-party candidate, Jack Davis, who ran under the Tea Party despite an eclectic and sometimes liberal political past. “Republican Jane Corwin ran a hard-fought campaign against two well-funded Democrats, including one masquerading under the Tea Party name,” said Rep. Pete Sessions (R-Texas), head of the House GOP campaign operation. “Obviously, each side would rather win a special election than lose, but to predict the future based on the results of this unusual race is naive and risky.” American Crossroads, a GOP group that spent heavily in the race, said that the race indicates a resurgent Democratic party, whether the third-party candidate tipped it or not. “The debate over whether Medicare mattered more than a third-party candidate who split the Republican vote is mostly a partisan Rorschach Test,” said American Crossroad’s Jonathan Collegio. “What is clear is that this election is a wake-up call for anyone who thinks that 2012 will be just like 2010. It’s going to be a tougher environment, Democrats will be more competitive, and we need to play at the top of our game to win big next year.” The GOP can’t and won’t retreat from the Medicare valley it has occupied. “We know that bell can’t be un-rung, and we wouldn’t want to,” said a well-placed GOP aide. “We’re on the right side of history. If President Obama wants to be ‘the grown-up in the room,’ he’s going to have to grapple with grown-up problems. We have.” Indeed, the GOP has been doing plenty of grappling lately, but it’s been mostly with constituents and members of the party. Presidential candidate Newt Gingrich was browbeaten by his party for calling the Medicare plan “right-wing social engineering” and endorsing Paul Ryan’s budget, which includes Medicare reform as its signature component and has become a litmus test for candidates. At home, Republicans have faced hostile town halls with seniors questioning how they’ll be able to purchase private insurance with a voucher that doesn’t rise at the rate of health care costs. At a recent town hall, a constituent of Rep. Rob Woodall (R-Ga.) raised a practical obstacle to obtaining coverage in the private market within the confines of an employer-based health insurance system: What happens when you retire? “The private corporation that I retired from does not give medical benefits to retirees,” the woman told the congressman in video captured a local Patch reporter in Dacula, Ga. “Hear yourself, ma’am. Hear yourself,” Woodall told the woman. “You want the government to take care of you, because your employer decided not to take care of you. My question is, ‘When do I decide I’m going to take care of me?’” Sen. Chuck Schumer (D-N.Y.) pounced on the remark, telling the Washington Post that it typifies Republican ideology. Tuesday’s special election was held to fill the seat of Chris Lee, who resigned after topless photographs he sent of himself to a woman on Craigslist surfaced.

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Gary Liberson, PhD: Social Engineering Medicare

May 23, 2011

This week Newt Gingrich, as is his way, is at the epi-center of the brouhaha over his comments about Paul Ryan’s (R-WI) plan to replace Medicare with a voucher system. Let me say right now, I like vouchers. I like the idea of allowing a broad array of solutions for a problem and letting the marketplace determine the best solution. I now have to caveat this statement: I only like vouchers if they are not designed at the outset to place the burden of Medicare on the elderly (i.e., a voucher needs to have a fair market value). The whole Newt-Voucher thing started me thinking about how confused I am about government and political identity. I don’t know about you, but I want to go back to those good old days when government expanded and the USA was King of the Mountain. Bill Clinton was Alan Greenspan’s favorite Republican when it came to fiscal conservancy. My favorite Democratic president is Richard Nixon. You know the Richard Nixon who created the Department of Education and the Environmental Protection Agency, as well as opening up China. Sure he had some frailties, but I don’t talk about Clinton’s foibles; why belabor Nixon’s? All this said, I know when Nixon was alive, I did not recognize his contributions. I particularly like the following June 4, 1971 special message to Congress from Nixon: We believe that part of the answer lies in pricing energy on the basis of its full costs to society. One reason we use energy so lavishly today is that the price of energy does not include all of the social costs of producing it. The costs incurred in protecting the environment and the health and safety of workers, for example, are part of the real costs of producing energy — but they are not now all included in the price of the product. Makes you want to cry when you think Nixon was really a closet liberal. Republicans (Newt aside, well, Newt prior to his numerous mea culpas) like vouchers but do not like insurance exchanges. They think insurance exchanges are socialism. A recent news item in The Denver Post noted: House Democrats on Wednesday had to rescue a Republican-backed bill to set up health insurance exchanges in Colorado, legislation blasted by Tea Party activists as furthering “Obamacare” and “socialism” but roundly supported by businesses. The Republican Party has not always been the Party of NO. Eisenhower’s party wasn’t no. Nixon was certainly not no. Reagan wasn’t no (he actually raised taxes). Bush 42 was noblesse oblige. But now the definitions of socialism and capitalism have been warped to such a degree that our vocabulary is unable to provide clarity for a politician’s opinions. Seems like today’s Glenn Beck Republican is about anti-socialism, pro-capitalism and an Ayn Rand philosophy of Me FIRST and You NEVER. Here’s the strange part about it, none of this has anything to do with what the majority of Americans believe — even the majority of voting Independents and Republicans. What would happen today if some ranchers or farmers joined together to form a coop to gain better market force? The nerve of those pinkos: Coops are definitely socialism. Yet, what is the difference between an insurance exchange and a coop? Nothing. Forty years ago, I worked on school vouchers for the Office Economic Opportunity (OEO), a predecessor to the Department of Education. School vouchers made strange bedfellows. The religious right banded together with disenfranchised minorities; both seeking a better choice, in their eyes, for their children’s education. Charter schools are now the result of people seeking empowerment and by all metrics a good solution. Vouchers for Medicare may have the same peculiar base of support. AARP, unions and employers may end up banding together to reap the same billions of dollar windfall that insurance companies see in vouchers. Yet, their motives may be very different. Those billions of funding dollars can be the basis for the creation of insurance exchanges, employer self-insurance and new insurance companies. More companies are self-insuring and using insurance management firms to provide accounting and claims administration. These firms provide claims management as a fee-for-service (i.e., a fixed cost per claim versus a percentage of the claims). Medicare vouchers offer the possibility of transforming the insurance landscape. So which is the Republican proposal and which the Democrats? Medicare vouchers can ignite market forces through insurance exchanges that Tea Party members label as socialism. Vouchers can also be priced so retirees face an increasing financial burden. It’s confusing. Newt was right; social engineering is hard to explain.

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Medicare Revamp Exposes Divisions Within GOP

May 17, 2011

Newt Gingrich’s dismissal of the House Republican plan to overhaul Medicare provoked a rebuttal from the proposal’s author, Rep. Paul Ryan, highlighting a split in the party over how hard to push a priority for the House GOP majority.

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Paul A. London: Unemployment and the Deficit: The Disconnect

May 6, 2011

A recent Gallup poll shows that Americans view unemployment as the biggest economic problem facing the country. So why are Republicans letting Tea Party zealots put out in their name a draconian plan to cut the deficit that would do nothing to bring joblessness down? Today’s painfully high unemployment — over 14 million jobless and millions more forced to work part time — has nothing to do with budget deficits. The surge in unemployment at the end of the Bush Administration had nothing to do with the budget deficits he ran every year of his administration. Spending on Medicare, Social Security and aging Baby Boomers that the Tea Party deficit plan in its sights has nothing to do with joblessness. The “war of choice” that George W. Bush opted for in Iraq has nothing to do with unemployment, although it is adding trillions to the deficit. The Tea Party’s focus on deficits is not about jobs. To the contrary, it is a way to shift attention from the real cause of joblessness — egregiously greedy behavior by the American financial community and anti-regulation regulators — to the government. It burns me that the Tea Party invokes the history of patriots who threw British tea into Boston Harbor and ignores the history of a dozen American financial speculations that led to mass unemployment when they collapsed. In the late 1980s, a speculation in housing on President Reagan’s watch led to the collapse of almost a quarter of U.S. Savings and Loan institutions and required a $90 billion government bailout. The recession and unemployment that followed probably cost George H.W. Bush the presidential election of 1992. President George W. Bush learned nothing from his father’s experience. He and Alan Greenspan, the overrated chairman of the Federal Reserve, stood by and cheered a much larger financial speculation in housing from 2002 to 2007. The Great Recession that followed is the reason the U.S. has 8.8 percent unemployed today. Tea Party Republicans act as though the 2002-2007 housing speculation and the unemployment that followed had nothing to do with them. They refuse to accept responsibility for cheering on the hucksters, the erstwhile “masters of the universe,” whose wealth they would not touch. Like Huck Finn’s drunken father, the Tea Party blames the “govment” when the problem is the culture of quick enrichment that they continue to encourage. It is not the deficit that is causing unemployment. What happened is that private lenders loosened credit standards so that they could make more money. Taking advantage of peoples’ trust, they made loans to millions to buy houses knowing that many of them would not be able to pay back the loans. These lenders then packaged the dicey loans into mortgage-backed securities and got rid of them. CEO’s at the nation’s leading banks, who should have known better or been better supervised had their institutions buy the risky securities because they paid high interest rates. Many bankers only pretended that they knew what was in the packaged securities they were buying. They did not want to look a gift horse in the mouth. Wiser ones knew what was in the securities but hoped to sell them before others found out. They minimized in their minds, no doubt, the outsized risks they were taking to “earn” returns that would justify bloated compensation. Real students of American history — although clearly not the Tea Party — know the same thing happened in almost identical fashion in the late 1920s. In 2007 and 2008 the gravy train stopped. The ordinary Americans who had been suckered into borrowing at high rates were unable to pay the lenders back. The mortgage-backed securities the banks had bought became unsalable and lost much of their value. The value of the capital in bank vaults, therefore, fell drastically reducing their ability to make loans to solid non-speculative businesses. The government had to step in to keep essential credit flowing to non-speculators. Unemployment soared in the housing industry, spread to raw materials linked to building, and then to manufacturing and the service sector. Did this soaring joblessness have anything to do with government deficits? Absolutely not! Alexander Hamilton was the American Founder who understood best what makes an economy work. He built the foundations of America’s modern free enterprise system while serving as George Washington’s Secretary of the Treasury. Hamilton had a friend, William Duer, who was speculating in government bonds in the early 1790s, and borrowing heavily to do so. Hamilton had nurtured a market for government bonds because he understood that it would help the young country grow. He knew the difference, however between prudent investment and speculation. He warned his friend Duer repeatedly not to go too far. Duer, like the “masters of the universe” the Tea Party is hiding behind the deficit smokescreen, did not listen. Duer lost everything when the speculation collapsed: He was not protected by corporate law that today limits liability, allowing modern speculators to stash gains away where the people they fleece can not get them. Duer was sent to debtor’s prison where he was almost lynched by other New Yorkers whose money he had lost. Hamilton, unlike the Tea Party zealots, took care of the country and did not pretend his businessman friend was innocent. He made sure that the banks that the speculators could not repay had enough money in their vaults to continue making worthwhile loans to others. He put customs and other government revenues in their vaults to tide them over until they had made up for the speculative loses. Lending for worthwhile projects continued and no depression followed. As for William Duer, he died in the debtor’s prison 7 years later. Hamilton remained his friend but despite Duer’s entreaties he would not get him out of jail or absolve him of responsibility. There are lessons in this history that are lost on today’s Tea Party-led Republican Party. They have not learned from Hamilton’s behavior toward Duer 220 years ago that belief in free enterprise does not require us to believe that financial markets don’t need to be supervised. Hamilton also could teach them that government debt for real investments — public works, education — is worthwhile and is not, as they so foolishly say, just another word for “spending.” Hamilton led American troops in a dangerous assault on British trenches at the climactic Battle of Yorktown when he could have stayed out of harm’s way. He had matching political courage that he displayed in building a tax system to fund the government, something a majority of Republicans have not had the political guts to vote for in three decades. Most important, Hamilton understood that job creation depends on releasing the energies of all the people not on get-rich-quick speculations that benefit only a few sharpies. Sadly in the Tea Party distortion of American history real causes of unemployment — the sins of financial wheeler-dealers like Duer left unsupervised — are covered up by rhetoric about government spending, and the government whose vital role Hamilton understood gets smeared.

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Hedge Fund Managers Give To GOP After Becoming Dissatisfied With Obama

April 26, 2011

Hedge-fund managers made a big bet on Barack Obama and other Democrats in 2008. Now, with the 2012 contest gearing up, some prominent fund managers have turned their backs on the party and are actively supporting Republicans.

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Conservative Strategists Warn GOP About Economic Risks Of Pushing Debt Ceiling Debate Too Far

April 23, 2011

Conservative strategists are warning that the GOP should not push the debt ceiling debate too close to the breaking point. “If there is a vote on raising the debt ceiling and it fails, there will be a significant market reaction,” said Tony Fratto, a former Treasury and White House official in the Bush administration. “Investors already believe that Congress doesn’t understand the financial markets. A failure to raise the debt ceiling will confirm this to them.” If the markets get spooked, U.S. treasury bond yields will spike, driving up interest rates and increasing the price of borrowing money for everyone from the federal government to municipalities to consumers, Fratto warned. The cascading effects on the economy would be severe and long-lasting. The negative market reaction would “come quickly,” Fratto said. “I think you can virtually guarantee that, and I hear it from everyone that I talk to in the markets, here and abroad.” He added, “I’m uncomfortable about the number of [Congress] members who don’t seem to understand that.” But the market’s reaction to any debt vote will depend on what expectations are set by political actors in Washington, cautions Doug Holtz-Eakin, a former top adviser to Sen. John McCain’s (R-Ariz.) 2008 presidential campaign. “If there was an up or down vote on the debt limit with nothing attached to it, that [investors] knew was not going to pass, I don’t think it would cause any trouble at all,” Holtz-Eakin said. “But if we get to July and it’s a deal that is perceived to be the deal and it fails — yeah, I think they’ll freak.” “Both sides are going to spend a lot of time setting expectations” for the markets and the voters, he said. For Democratic leaders, the narrative is relatively straightforward: The ceiling should be raised promptly, and some limited spending cuts would be appropriate. Republican leaders face a more delicate balancing act. They must get enough of their Congress members to vote for the debt ceiling increase at a time when most of their voters –- and especially those in the Tea Party -– oppose such a move. “The one thing we want more than anything else out of the debate over the debt ceiling: No increase in the debt ceiling,” said Mark Meckler, co-founder of the Tea Party Patriots. Rep. Tim Griffin, a freshman Republican from Arkansas’s Second District, told The Huffington Post that the feedback he has heard this week from voters back home has been “mostly just opposition to raising” the debt ceiling. Rep. Dennis Ross, another freshman Republican from Florida’s Twelfth District, responded to a question from The Huffington Post on Twitter about what he was hearing from constituents: “Universally, across parties and socio-economic levels, hearing ‘do not raise it.’” All of this is supported by a poll from the Tea Party group FreedomWorks, which found that 69 percent of all voters oppose raising the debt ceiling . While there is disagreement between Democrats and Republicans over when a default would occur if the government hit the debt ceiling, there is broad bipartisan agreement that such a scenario is undesirable and would likely have dire consequences for the economy and the nation. So the task for House Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.) will be to extract significant concessions from President Obama and Democrats in Congress that will not be rejected as a fig leaf by Tea Party activists. Judging from the Tea Party’s scathing reaction to the deal struck in the most recent fight over this year’s budget, that will be a difficult task. There are three main components to any potential deal that Boehner and McConnell must address. One is what kind of structural changes to spending can be enacted, such as spending caps for each year’s budget. A second is how deeply spending will be cut in the budget for fiscal year 2012, which starts in October. And the third is how high the debt ceiling will be increased from its current $14.3 trillion level, and whether that will last beyond the 2012 election or not. They must also deal with what are essentially two different Congressional Republican camps. Many GOP lawmakers are in the conventional wisdom crowd, which says that the debt ceiling has to be raised no matter what. This subset wants to avoid scaring the markets, but they also think the united GOP bloc has substantial leverage and can extract significant spending cut concessions from Democrats. The second Republican camp is the more hard line conservative group, which appears willing to press their case to the political and economic limit. They will not vote for a debt ceiling increase unless they receive significant concessions. This hard-line group is led by Sen. Jim DeMint (R-S.C.). In his view, the only achievement worth the price of raising the debt ceiling is an amendment to the Constitution that would require the federal government to balance its budget every year. His constitutional amendment is supported by all 47 Republican senators and in a test vote in March. Eleven Democrats also gave DeMint’s amendment their backing. That’s still far short of the the two-thirds majority needed in both the Senate and the House for a constitutional amendment. (Two-thirds of the nation’s 50 state legislatures must also approve.) But DeMint appears ready to go to the mat on this issue. He has promised to filibuster the debt ceiling increase, if the constitutional amendment is not included. Anything less, DeMint sees as capitulation and failure. “It’s balance or bust,” the Tea Party firebrand wrote in a fundraising email earlier this month. “Agreeing on the right policy is not enough to save our country. Republicans also have to be willing to fight to enact that policy, even if it means sacrificing their political careers,” he said. Certainly some portion of the GOP will line up behind DeMint. Yet even the most conservative group in the House, the Republican Study Committee, has not yet coalesced around what they want out of the debt ceiling fight. Republicans from both camps interviewed by HuffPost gave the balanced budget amendment virtually no chance of passing with a Democratic-controlled Senate and a Democratic president. Conservative congressional analysts agree. “It is going to be very difficult to get a two-thirds vote to pass a balanced budget amendment with so many big spending liberals in the Senate,” said Brian Darling, a senior fellow for government studies at the conservative Heritage Foundation. “The [amendment] has a good chance of passing in 2012 with a new Tea Party congress.” To give themselves some breathing room, Republicans are inoculating themselves against falling into a situation similar to 2008, when many in the GOP feel they were bum rushed into passing the TARP bailout by dire warnings from the Bush administration. The GOP vaccine is one half psychological and one half process-oriented. They argue that hitting the debt ceiling does not equal automatic default, because the Treasury Department can move money around and prioritize payments to ensure creditors continue to get paid for a time. So when Treasury Secretary Tim Geithner’s May 16 deadline arrives and the $14.294 trillion red line is reached, don’t expect the GOP to appear too worried. But the wild card in the debt ceiling fight is how the global credit markets will respond to what Congress does, and at what point there might be a negative reaction. If there is a chaotic spiral set off by a failed balanced budget amendment vote or some other development along the way, all bets might be off. Or, conversely, there is a chance that the axiom “what’s good for Wall Street is good for Main Street” will fall on deaf ears, and then be put to the test.

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Federal Taxes At Historic Low, Statistics Consistently Show

April 18, 2011

While Republican lawmakers appear unified against tax increases and many Tea Party activists want existing rates rolled back, statistics consistently show that federal taxes are at a historic low.

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No-Tax-Hike Pledge Creates Republican Rift

April 15, 2011

Republicans are feuding over whether to abandon the party’s long-held opposition to higher taxes in pursuit of a deficit-cutting deal with Democrats.

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John R. Talbott: Warren Buffet Is Not God

April 1, 2011

Warren Buffet is involved in a situation in which he is deciding whether one of his employees, David Sokol, did something wrong and possibly illegal when he bought close to $10 million in Lubrizol stock prior to Buffet’s firm, Berkshire Hathaway, making an offer to buy the company. Buffet should be careful in his defense of Sokol that it wasn’t just Sokol who did something wrong here and quite possibly illegal. In a letter to Berkshire’s shareholders , Buffet defends Sokol by saying that Sokol notified Buffet of his substantial position in Lubrizol prior to Buffet’s decision to acquire the company, and that Sokol had no authority to give final approval for acquisitions at Berkshire. Green-lighting a potential merger candidate was solely the purview of Buffet, his vice-chairman, Charlie Munger , and the Berkshire board. But, does Buffet have the power himself to decide what is legal and illegal activity inside his firm or is that a subject better handled by the law and regulators? If CEOs are given the role of deciding illegal activity wouldn’t that motivate them to hush most things up rather than risk their firm’s reputation? Maybe the employee knows where other bodies are buried in the firm and so it is in everyone’s interest to forget the whole matter and just move on. David Sokol was a full time employee of Berkshire Hathaway who was assigned the task of finding suitable merger candidates for the firm. He was often identified as the possible successor to Buffet himself . To see who harmed whom here, imagine if I (Buffet) hired you (Sokol) full-time for a salary of $5 million a year to scour the world and find houses that were undervalued that I would then purchase. In your work on my behalf, for which you were very well compensated, you came across a beautiful home that you purchased for yourself for $1 million dollars. You then showed the home to me and told me I could have it for $1.5 million, which was a good deal for me as we both knew that the home was worth at least $2 million once you made a few minor improvements. Who was harmed? First, the seller of the home (Lubrizol shareholders) who ended up only getting $1 million for their home that you knew might well be acquired by me for up to $1.5 million. Next, I was harmed because the purchase ended up costing me $1.5 million instead of the $1 million it may have if you had acted properly in your role as my agent and employee and not as principal for your own interests. Finally, let’s say that I don’t own the company outright that did the buying of these homes, but that I (Buffet) am the CEO of a publicly traded company (Berkshire Hathaway) and that I have public shareholders to be concerned with as well. In this case, I am in no position to act as judge and jury in determining your innocence or guilt because I am no longer the only party harmed. I myself have fiduciary responsibilities to my shareholders for they also lost money by not only paying your salary but compensating you for your renegade principal activities in the housing market. So Buffet in this case does not have the authority to decide unilaterally if Sokol violated the law or whether to forgive him. His actions not only hurt other Berkshire shareholders who Buffet must protect, they hurt Lubrizol shareholders who cannot be expected to be protected by Buffet acting as lord and master of the law in this case. And it is not just insider trading laws that may have been broken here, it raises the issue of legal responsibilities of an employee to his firm and others whether that employee is David Sokol or Warren Buffet. This case is at the heart of much of what went wrong on Wall Street in this crisis. Employees of publicly traded firms, like Sokol and Buffet, got very confused as to what their responsibilities were to their shareholders, other firms’ shareholders and to society in general. Regulations were removed such that it was up to individuals to decide what was in their best interest versus what was best for others. Conflicts are certain to arise when the party making the decisions to act is the party making the judgment as to whether and how to mete out punishment. Buffet cannot play both roles, even though at times he does seem to be omniscient and all powerful. John R. Talbott is a best selling author. His new book is entitled, “How I Predicted the Global Economic Crisis*: The Most Amazing Book You’ll Never Read”. You can read more about the new book and order it at www.johnrtalbott.com or at Amazon.com .

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Examination Reveals How Washington Influence Industry Has Adapted To Tea Party Era

March 31, 2011

The Tea Party movement is as deeply skeptical of big business as it is of big government. Yet an examination of the Institute for Liberty shows how Washington’s influence industry has adapted itself to the Tea Party era. In a quietly arranged marriage of seemingly disparate interests, the institute and kindred groups are increasingly the bearers of corporate messages wrapped in populist Tea Party themes.

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Matt Cohen: Four Market Research Mistakes to Avoid

March 21, 2011

Somebody in my family was recently sent a direct-mail survey from the National Republican Senatorial Committee (NRSC). The survey’s purpose, according to the accompanying letter from NRSC Chairman Senator John Cornyn (R-TX), is to help Republicans in the Senate “fight for the interests and issues that matter to our grassroots base…” That’s a legitimate reason to put a survey in the field, but the questionnaire — like so many others — has a variety of flaws that prevent it from accurately collecting and reflecting the views of the respondents. Whether it’s for political, business, or academic purposes, proper survey design should help market researchers to reveal truths that will enable better decision-making. With that in mind, I’d like to look at some of the flaws in this particular survey with the goal of demonstrating how surveys should actually be constructed. To begin, look at the format of the following questions: Note that the Very important/Somewhat important/Not important answer format doesn’t allow for negative responses. You have to either agree that the prompts represent issues that are important to you (“Very important” and “Somewhat important”) or state that you are indifferent (“Not important”). There is no way for anybody to express that they disagree with a party platform. Suppose you’re a Republican voter who thinks we need amnesty for illegal immigrants. Saying the issue is “Not important” will not accurately reflect your opposition to one of the party platforms. This entire section could have more accurately captured the opinions of the respondents if a five-point Likert scale had been used. For example, the immigration question could have been written as: The Senate should stop passage of amnesty for illegal immigrants. __ Strongly Agree __ Somewhat Agree __ Neither Agree Nor Disagree __ Somewhat Disagree __ Strongly Disagree Of course, this suggestion assumes that the purpose of the survey is to accurately reflect the opinions of Republican voters. There are, however, some questions on the survey that suggest that may not be the case. For example, look at this item from the same section: The prompt is worded to intentionally bias the reader. “ObamaCare” is a weighted term that was coined to make the listener feel negative feelings against health care reform. Here’s the most blatant example of bias being built into the questions: That’s not a question — it’s a lecture. Are the creators of the survey anticipating that anybody will check the “No” box? Here’s an important rule to remember about survey design: never ask a question if the response will not influence your decision-making process. Otherwise, the data you collect will be useless. This survey has many questions where the responses are unlikely to have any impact on how the NRSC behaves either in terms of the legislative agenda or their campaign marketing strategy. So why did they ask that last question? Just as some earlier questions were meant to remind readers about how they should feel about key issues, this final question is meant to act as a pledge . The survey is asking you to confirm your party loyalty. It should come as no surprise that this pledge (disguised as a survey question) is used to segue to the final section of the document: It may look like a survey — but this mailing is really a fundraising effort. Combining market research and fundraising into a single mailing is an ethically questionable practice that violates the trust of the participants. When people choose to complete a survey, they believe that they are helping the researcher and having their voice heard. If the survey turns out to be nothing more than a fundraising campaign, then the participants waste their time and their good intentions. Hypothetically, if this poll really did have the dual purpose of collecting data and raising funds, what effect would the donation or fee requirement have on the results of the survey? The survey’s stated purpose is to take the pulse of all Republicans. The fundraising effort would have the effect of making sure that the sample represents only Republican donors . (There is no check box for completing the survey but not sending money.) This would introduce a selection bias and corrupt the results. If you’re a Democrat, I hope this case study doesn’t make you feel superior: I’m sure there are progressive and liberal organizations that use similar fundraising tactics. If you’re a Republican, I hope you’re able to look past politics to see that the purpose of market research is to collect accurate data that represents your target population, not to persuade people. It doesn’t matter whether a survey is being conducted by political fundraisers or by businesses — the basic standards of responsible market research must remain absolute.

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Scott Brown Talks With David Koch About 2012 Support

March 7, 2011

Sen. Scott Brown (R-Mass.) has a battle ahead of him to retain his Senate seat in 2012. After taking over the office of the late progressive hero Ted Kennedy in a 2010 Bay State special election, Brown now appears to be attempting to tap into an arsenal of conservative cash by mingling with billionaire donor David Koch — and lobbying him for contributions. In a video captured by ThinkProgress , Brown is seen speaking with oil magnate and Tea Party benefactor David Koch at the recent dedication of MIT’s David H. Koch Integrative Cancer Institute. “Your support during the election, it meant a ton. It made a difference and I can certainly use it again,” Brown can be heard telling Koch. While ThinkProgress points out that Koch pumped large sums of money into the GOP’s campaign arms as well as to Brown’s campaign itself, the senator also owed much of his success to the growth of Tea Party activism in the largely blue state. The Koch’s have since become known for their integral role in bankrolling the Tea Party movement through groups such as Americans for Prosperity . Ironically, however, Brown has since managed to upset much of the conservative constituency that helped propel him to unlikely victory last January. While he’s publicly disavowed any loyalty to the Tea Party mantle, Brown has also cast a number of votes that have caused some of his former conservative backers to promise new efforts to oust him in 2012. WATCH via ThinkProgress :

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Liberal Tea Party? U.S. Uncut Disrupts Service At Bank Of America

February 27, 2011

Demonstrators posing as a liberal Tea Party disrupted service at banks across the country on Saturday, in an effort to spotlight the gimmicks multi-billion dollar corporations use to avoid paying their fair share in taxes. Self-organized through anti-austerity movement U.S. Uncut , regional captains helped organize demonstrators at more than 40 different branches of Bank of America. The newly-minted group was inspired by an article published recently in The Nation by Johann Hari: ” How to Build a Progressive Tea Party .” Hari writes: Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind … Instead of the fake populism of the Tea Party, there is a movement based on real populism. It shows that there is an alternative to making the poor and the middle class pay for a crisis caused by the rich. It shifts the national conversation … This may sound like a fantasy–but it has all happened. The name of this parallel universe is Britain. As recently as this past fall, people here were asking the same questions liberal Americans have been glumly contemplating: Why is everyone being so passive? Why are we letting ourselves be ripped off? Why are people staying in their homes watching their flat-screens while our politicians strip away services so they can fatten the superrich even more? Hari evokes the spirit of UK Uncut — a movement made up of British citizens, who, in the face of brutal budget cuts, have sought to shame corporate tax dodgers through public demonstrations — and suggests Americans follow suit. U.S. Uncut is doing just that; Saturday marked the group’s first coordinated event. “Billionaires got bonuses, bailouts and tax cuts, too — the least they can do is pay their fair share of taxes,” said Ryan Clay, a 28-year-old media analyst who helped organize the U.S. Uncut demonstration in Washington, DC. “I got inspired, other people got inspired, we met online, and we’re working through social media to really bring these abhorrent facts to the public.” A rally in San Francisco drew scores of protesters to a branch of Bank of America at Union Square; dressed in ordinary street clothes, they filed into the bank one by one, getting in line to speak with the tellers. Each of them carried a fake check from Bank of America made out to “The United States c/o Tax Paying Citizens,” for $1.5 billion. The sum would cover all the bank’s unpaid taxes on its 2009 earned income of $4.4 billion, demonstrators said. Only a few people had presented their fake checks to the tellers before the bank temporarily closed for business; protesters were peacefully escorted out of the building by the police. Once on the street, however, they stayed put and kept handing out fake checks, which had facts about corporate tax avoidance written in fine print on the back, as fliers. “Two-thirds of all U.S. corporations do not pay federal income tax,” the fliers said. “BofA is the largest bank and the 5th largest corporation in America.” “I think our fliers did better than political fliers usually do,” said Leslie Dreyer, 32, a resident of Oakland, Calif., who came up with the idea of using checks as props. “People were like, ‘Oh, a check!’” A Bank of America spokeswoman did not immediately return a request for comment. Many of the largest corporations in the country have mastered the art of evading taxes, booking expenses in the U.S. and profits in low-tax countries. A list compiled by Forbes shows that Bank of America was far from being the only multi-billion dollar corporation to avoid paying taxes on billions of dollars in earnings in 2009; it is also not the only bank to spark angry demonstrations this week. On Wednesday morning, New York City Councilman Jumaane Williams marched into a Park Avenue Chase bank to denounce the bank’s failure to help homeowners avoid foreclosure. HuffPost’s Laura Basset reports : After denouncing the bank to a cheering crowd and calling its executives “bloodsuckers” for accepting bailout money and refusing to help the suffering homeowners they “preyed on,” Williams was stopped by security guards at the door and told the branch was closed. The mob then chanted “open the door” until Williams was let in, at which point he closed his account. Williams told HuffPost that when campaigning in New York City, he met at least two people on every block with mortgage troubles. He said he doesn’t want the bank to use his money to “further deteriorate the community” he represents, especially in light of chief executive Jamie Dimon’s recent $17 million bonus. “It’s incredible what these banks are making people go through,” he said. “It’s disgusting. They’re like bloodsuckers, just sucking the lifeblood out of communities and refusing to help out. I understand that people need to get paid to get the best and brightest and these bonuses help with that, but you can’t do that and then not assist the community and then get a taxpayer bailout to the tune of billions of dollars. That’s just greed at its worst.” To help readers navigating an underwater mortgage, HuffPost has scheduled a meetup where homeowners can get together and talk about their mortgage-related troubles. The next meetup is slated for the second Tuesday in March, and each subsequent meeting will also be held on the second Tuesday of the month; locate your local meetup chapter here . If you’re interested in organizing a meetup and need help doing it, email us at lucia@huffingtonpost.com, arthur@huffingtonpost.com or ryan@huffingtonpost.com. If you’re a real estate professional or attorney with experience in short sales and foreclosures who can help with the meetups, contact us or find your local chapter.

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Jane White: America’s Pension Crisis — Where’s the Rage?

February 21, 2011

We should all be inspired by the breathtaking speed that protests against repressive regimes are spreading across the Middle East. It’s amazing how the power of the Internet has enabled these heroes to galvanize the public to take their countries back from the dictators. At the same time, it saddens me that there has been no uprising in the U.S., with the exception of the phony-baloney Tea Partiers ranting about high taxes. While the American public appears to be divided over whether unions should have generous wages and pensions as they do in Wisconsin, they are remarkably complacent when it comes to their own pension poverty. While I don’t blame people for being angry about subsidizing public sector pensions that start at age 50 why don’t they mind that they will probably have to work into their 80s? Most likely because their employers aren’t required to deliver this bad news and the media hasn’t covered this fact until Saturday’s front page Wall Street Journal article . Why is nobody up in arms that the mortgage mess won’t be remedied anytime soon, thanks to lobbying by the financial dis-services industry? I’m sure that’s why Elizabeth Warren was forced to selected leaders of the Consumer Financial Protection Bureau, who are “more friendly to the financial industry,” than to borrowers, according to the Wall Street Journal . The result: we taxpayers will continue to be on the hook for future bank bailouts. It didn’t take long for the newly-elected Tea Party members of Congress to get cozy with K Street, where many lobbyists have their offices in D.C.. As pointed out i n Business Week , according to the Sunlight Foundation, nearly one-fifth of the 87 new Republican House members held fundraisers from lobbyists — as opposed to the constituents who elected them — in early February. “A lot of members did say they were coming to Washington to change it,” Sunlight editorial director Bill Allison told Business Week . “It’s very hard to change it when you are sitting down with the kinds of lobbyists who are interested in keeping the status quo.” Cozying up with lobbyists isn’t simply an easy way to pay off your campaign bills, it ensures you a job as a lobbyist in the event that your constituents throw you and other bums out of office. As I pointed out in my book, America, Welcome to the Poorhouse , this revolving door strategy was dreamed up in 1995 by then-House Republican Whip Tom DeLay of Texas and conservative activist Grover Norquist, calling it the “K Street Project.” The idea: Republicans would take over the big lobbying firms as successfully as they already had taken hold of the House of Representatives. As a result, between 1998 and 2004 some 42% of former House members and 50% of former senators became registered lobbyists. For that reason, don’t be surprised that even if we’re lucky enough to see Sen. Richard Shelby and House Majority Leader John Boehner get thrown out of office they will likely end up with cushy jobs lobbying for the financial dis-services industry. That will be the payback for Shelby, who, as chairman of the Senate Banking, Housing and Urban Affairs Committee opposed credit card reform and a Bush administration proposal for mortgage reform. Bankers and real estate interests thanked him with nearly $2 million in contributions in 2007-2008, ranking him fourth in the Senate. He is also King of Earmarks, having sponsored or co-sponsored 66 earmarks totaling more than $173 million in fiscal year 2010 alone, ranking 19th. And in Boehner’s previous job as chairman of the House Education and Labor Committee student loan-industry officials got him to draft legislation that would prevent borrowers from locking in a low fixed interest rate, along with making it more difficult to extend payment terms. Comedian Lewis Black famously said that the Republicans were the party of bad ideas and the Democrats of no ideas. Those of us who consider ourselves progressives need to get off our butts and take this country back.

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Facebook Copycat Poised To Make History

February 21, 2011

The first social networking site in the world to go public may be an unknown quantity for even the most avid tweeters and Facebookers: Renren , a six-year-old company that has been dubbed “the Facebook of China.” Renren’s rumored initial public offering, which will reportedly take place in the United States later this year, marks the rising stature of China’s homegrown technology sector and provides a window into the unique set of challenges facing Internet startups there. At the same time, Renren’s IPO ambitions highlight China’s evolution from follower to trendsetter. Though Renren was initially a Facebook clone, offering equivalent features and even a matching color scheme, China’s social network appears to be leading the way as it preps the stage for a slew of expected IPOs by better-known brands like LinkedIn, Groupon and Facebook. Launched the year after Facebook CEO Mark Zuckerberg’s “thefacebook.com” went live, Renren, then called “Xiaonei,” was at first available only to college students. The site was sold to holding company Oak Pacific Interactive in 2006 and has grown to over 160 million members as it has worked to expand its user base beyond campuses. Though conceived as a Facebook knockoff, Renren has displayed remarkable innovation and adaptation, launching new features and offerings that are tailored to Chinese users and distinct from those of Zuckerberg’s site. As Fast Company noted in a profile of Chinese startups, Renren has been far more aggressive than its Western counterpart in pushing social gaming and advertising, a tactic that appears to be boosting the company’s bottom line. Renren claims it grew ad revenues by more than 100 percent in each of the last two years. “China’s social media has a long tradition of borrowing heavily from what’s happening outside, then adapting it,” explained Thomas Crampton, Asia-Pacific director of Ogilvy’s 360 Digital Influence, a social media marketing service. Given the many public clashes between Chinese officials and U.S. companies struggling unsuccessfully to make inroads in the world’s most populous nation, outsiders might assume the Chinese government, with its blocks, firewalls, rules and censors, represents one of the most formidable challenges faced by China’s social networking sites, which ostensibly give voice to the masses. Beijing has a robust arsenal of tools it uses to maintain its “Great Firewall” and crack down on online services and conversation it perceives as running counter to Party interests. In the hopes of preventing the protests in the Middle East from spreading to China, the government recently blocked searches for terms like “Egypt,” prevented users from sending messages or posting updates online containing phrases it deemed sensitive, and disabled certain functions, such as search, on social networking sites. Even Renren was not immune: the Wall Street Journal reported that “status updates with the word ‘Jasmine’ [a reference to a post calling for China to lead a 'Jasmine Revolution'] were met Sunday with an error message and a warning to refrain from postings with ‘political, sensitive … or other inappropriate content.’” In the past, the government has gone so far as to shut off sites entirely, including as Fanfou, a Twitter-like service launched by Renren founder Wang Xing that was blocked in 2009 after riots shook Urumqi. But some business experts downplay the risk China’s government poses to these social startups, all of which are subject to some level of state intrusion, and argue that the greater threat comes from the industry’s ever-more-numerous competitors. “Government censorship is a level playing field for anybody who operates here,” said Richard Robinson, a tech entrepreneur working in China. “I would say the challenges [facing Renren] have much less to do with the government and are much more about the ferociously competitive environment here.” China-watchers predict that the kind of draconian rules Chinese officials impose on Facebook and Twitter, both of which are blocked in the country, will not dramatically hamper the fortunes of Chinese sites like Renren, which focus more on entertainment — though it’s unclear how their users will fare when forced to deal with censorship and service interruptions. These online networks are not exempt from censorship and other restrictions, yet they are perhaps more accustomed than outsiders to negotiating Beijing’s bureaucracy and its many stipulations. Cooperating with state censors is the norm and the cost of doing business. Redundancy, not government crackdowns, is most likely to keep China’s entrepreneurs awake at night. Whereas Facebook is virtually without peer in the United States, China has a slew of social networking services, from Twitter-like microblogging sites to bulletin board systems buzzing at all hours with activity, all battling for their share of the world’s populous web market. Renren faces competition from a host of other “Facebooks of China,” such as Kaixin001 and 51.com, and new rivals are constantly joining the playing field: Major portals, such as Sina, Tencent and Baidu, will frequently clone successful startups, rather than acquire them, then drive traffic to their own versions of properties like Twitter and YouTube. “People often think of China’s Internet culture as a collection of warring states,” said Guobin Yang, a sociology professor at Barnard specializing in Asia and the Middle East. “The Chinese Internet sector is more diversified: you don’t have a Facebook that dominates the whole social networking scene. In China, it’s usually quite a few of these sites competing with one another.” Competition may be fierce, but Renren and its rivals all stand to benefit mightily from China’s huge and growing online population. The world’s most populous country now boasts around 457 million Internet users — roughly one and a half times the total population of the United States — and they are choosing to express themselves online in ever-increasing numbers. “The usage of social media in China is off the charts relative to almost any country in the world,” Crampton said.

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Gemma Godfrey: What We Can Learn From Central Banks About Managing Our Wealth

February 21, 2011

“Pleasure is none, if not diversified” — John Donne (English Poet) When the Brazilian Prime Minister himself proclaimed that currency wars are turning into trade wars, the world took notice and investors were shaken. Taking it a stage further, therefore, these wars are turning into foreign exchange market turbulence. What are these so-called “currency wars” and what can we learn from Central Banks’ reactions when deciding what to do with our own money? Why the Currency War? Brazil spent $40b intervening in the currency markets last year, attempting to keep the BRL low to protect the competitiveness of their domestic manufacturers. If the currency strengthens — the products the country exports become more expensive and demand and income is damaged. The main concern is inflation. Economists expect the figure for this year to come in at 5.5%, far above the central bank’s target of 4.5%. With interest rates already among the highest among large economies, at 11.3%, hot money is flowing from abroad which pushes up the price of the currency (i.e. it strengthens) and so the Brazilian government is fighting back. An Issue Across Emerging Markets… This year Chile joined the party, pledging $12bn in their “currency war”. There seems to be a “fight to the bottom”. China in particular has stirred up much angst with the US with a currency pegged to the $ and little evidence of willingness to appreciate the currency by the ~40% analysts are saying is needed to become fair value. The Big Risk: Protectionism The biggest risk is these political tensions convert into protectionist policies. Brazil, for example, has implemented a 6% tax on foreign investment in sovereign bonds. At a time when the economic recovery in many Western countries remains fragile, measures which may damage activity would be a disaster. In fact, Mervyn King was quoted on Friday by the Telagraph saying “If we, collectively, do not deal with these problems at best we will have a weak world recovery and at worst we will sow the seeds of the next financial crisis.” Interestingly it was the Turkish Finance Minister who highlighted the issue saying “At the early stages of the financial crisis, at G20 level, there was a lot of talk of coordination … I think now everybody is going their own way,” at a forum at Davos . Central Banks Leading the Way in “Protecting” Their Capital… Stan Fischer, the Governor of the Bank of Israel, provided the evidence needed of the forward-looking trend of Central Banks “Spreading their Wealth”. “We ourselves are diversifying into currencies which we would never have put in the reserves before, including the Australian dollar and so forth,” Reuters quoted him as saying, again at Davos last month; “I think people will diversify their reserves.” He was supported by the Governor of the Bank of Canada with his belief that we will see a “multi-polar” system. So What Does This Mean for Us? The Investment Insight Being an expatriate (living in a country outside of your upbringing or legal residence), thinking of relocating at some point, frequently traveling internationally, or looking for an investment opportunity to exploit — currency fluctuations can seriously affect our wealth . Utilizing the trading strategy of buying low and selling high (buy something cheap which will appreciate in price), emerging market currencies look interesting. As always, note — not all emerging markets are the same!! They carry entirely different political, economic and market risks. But overall, as a trend, diversifying our currency holdings and the currency denomination of our assets may be something to look at….

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Matt Spangler: Find New Profits From Old Products: YouTube, Brand Channels, and Easy Money

February 18, 2011

“Can you help us quickly find new opportunities and open new markets to deliver short term revenue growth?” It’s the most common question I hear through my consulting practice, when corporate executives from blue chips discuss their challenges with me. In many cases, the answer might be hiding in plain sight. Not to chase after the shiny new thing but look for innovation and new profits in existing systems and businesses. It might not be as sexy as the hot new startup, but those potential revenue streams have the chance to return new profits with less upfront investment. After all, those shiny new things can be quite expensive. Even YouTube , considered one of the most innovative companies in the world, struggles with similar challenges. Through personal experience with the company over the last year, I saw an opportunity to rethink their brand channel process, a mainstay service that already exists but is painfully difficult to setup, and leverage it in new ways to deliver value for users and profits for the video giant. Hard to believe that just five years ago YouTube was that shiny new thing, hemorrhaging money to blaze the internet TV trail. Five years later it’s annual page views are upward of 700 billion and its monthly global audience, according to a recent article by Fast Company , is 500 million people. The crowd-sourced broadcast behemoth is the definitive place to view video online with 35 hours of video footage pushed live every minute. Like many successful online ventures, translating pageviews into revenue has been YouTube’s challenge since its inception. Much of the Fast Company profile focused on YouTube’s “relentless experimentation” with new monetization models but with no public financial data, and speculation on its bandwidth costs, few know if their current models are profitable. One thing not in doubt is that YouTube continues to face rising competition from companies like Hulu , Vimeo , Netflix , Boxee and Apple and will need continual innovation around monetization (along with the constant need to keep consumers happy) to win the race and dominate home entertainment. March 2010 reports indicate that the site should generate close to 1 billion in sales , so what do they offer brands now, and are there ways they could generate new profits before they have to reinvent the wheel? There are many options for how to get involved. A chart in the Fast Company article provides a breakdown that includes traditional ad units, expensive homepage customization, in-video ad units that plays before the content (including Content ID ), promoted videos, an Adwords system and more. Some would argue there is no better place to tell your story then through video, and when it comes to nearly every brand’s involvement with YouTube, a customized “channel” is the starting point. Channel accounts allow you to customize the design of your YouTube page and create a place for brands to send customers to hear the story of a new product or service. This is especially important for emerging companies, since their advertising strategies will likely not begin with ads, but rather the creation of great content to build audience and brand awareness. But even the largest global brands embrace the brand channel model, which makes it all the more surprising that at present YouTube has few answers when it comes to monetizing it or even providing customers with an easy way to set one up. It’s broken. It needs fixing. It needs focus, both from a consumer support and profitability standpoint. And that can be done with a few simple steps. And by increasing focus on channels, you move to grow the YouTube “partner” program , which provides revenue share to encourage audience growth from super users who in turn drive the overall traffic without additional marketing (ex: Huffington Post’s free blogger network ). So how do you setup a brand channel on YouTube? Log on to YouTube and try setting one up. Sounds simple, right? I thought it would be, until I experienced it for myself. In the summer of 2010 while coordinating communication efforts for a small business client, we produced a series of twelve professional parenting videos geared towards YouTube’s active community of new parents. We planned an ongoing series and wanted a page for the videos that fit their brand aesthetic. We searched YouTube for basic information on brand channels and arrived at the Advertising page (http://www.youtube.com/advertise). A downloadable pdf for “creating a brand channel” explained the functionality along with the distinction between free and paid channels but had no information about the costs or installation instructions. There was no automated process to upgrade your page and after an extensive search of the help forum a few random comments indicated the costs to edit your channel was rumored to climb into six figures. I contacted some ad industry contacts with experience working on brand channels, and they confirmed the rumor and insinuated, that while they had heard of cheaper options, their experience opening the iFrames and adding custom code had cost over $100,000. In September 2010 my team filled out the form, to contact a YouTube representative , indicating our interest and budget. No automated email response. Two weeks passed; no response. We filled out the form again; still nothing. A month later the developer I hired to help me implement the channel design was kind enough to send a personal email to a contact at YouTube. Thanks to that lucky break, our request finally found it’s way to the proper person. After one more week. Finally an email arrived, asking what kind of channel we wanted. We waited 10 more days for the first bit of concrete information: they added us to the white list and said our brand channel upgrade would be free, but we would not receive the full capabilities of a paid channel. Perfect. Done. That was, um, easy? Two weeks later, over two months after our first email, we randomly checked our channel page, and it turned out that the account had been upgraded. There was no notification or instructions of any kind. The YouTube brand channel system is something my client was ready to pay for. We allocated a budget to produce the videos and wanted our brand presence to reflect the same quality. We expected a setup fee to help facilitate a timely launch to our channel and would have paid a monthly subscription charge for ongoing service that included analytics on visitors and tools to promote the channel to users interested in our subjects. Currently the only revenue being derived from the program is the extremely high, rumored fees that large brands pay for extensive customization. Note: Since our experience, the help section was updated in early 2011 with a dedicated area for brand channels and a new “Show and Tell” section with examples of brand channels curated by the ADC (Art Directors Club) . This does a decent job of showing examples of custom channel designs but provides no information about the options, pricing or process to join the party. In fact, you’re sent to the same signup form that returned us no results. There is great opportunity here. Small business and personal branding was one of the hottest topics of 2010 with sites like Flavors.me and About.me growing large audiences by making it easier for individuals to create well-designed personal websites. Combined with the proliferation of video tools like the Canon 5D Mar II , more individuals and small businesses are using video to tell their story to the consumer and the volume of individuals interested in controlling their brand’s image creates a bigger market for personalized channels. According to an article published on theStreet.com , in the US alone, local online advertising is expected to grow to nearly one quarter of all advertising dollars spent by 2014 . As the economy continues to recover, much of the growth will come from small to medium businesses looking to establish their name in a crowded market. No place is better positioned to grab that crowd, many still internet novices, than YouTube. It was speculated that Google’s desire to purchase Groupon was because the daily coupon site has, “more than 1,500 employees that deal with places like restaurants, nail salons and spas. Google also hoped to leverage Groupon’s sales team to encourage advertisers to list on its local business directory.” Through automation and product improvements YouTube can help build the small and local business relationships without spending money on acquiring human capital. The ecosystem exists, and the audience is thirsty for reasonably priced alternatives to market their businesses. Automation of the brand channel system would allow customers to choose from a suite of options. They would be presented clearly on the site with all their features, capabilities, and levels of customization delineated. Templates and simple tools would help novice users upload images to brand a page and promote the videos they create. For example lets use a basic three-tiered pricing model; a common pricing strategy for subscription software products ( 37Signals , Mailchimp , Shopify etc). Apply to the brand channel model: Small fees, $25/month, allow you to apply your brand style to the design of the page and greater access to color control. Medium fees, $50/month, provide greater control, improved analytics and promotional options. For $100/month you receive further design customization, additional widgets built exclusively for YouTube and access to advertising tools imbedded in your dashboard. (assuming that a $1200 a year investment on your YouTube page means you are likely interested in buying advertising to drive interest to the page-ex. Facebook ads ) Dedicated reps and in-depth customization would still be available for the six figure rates and include other premium features and promotion on highly trafficked sections of the site. Basic, sure, but if you take the yearly charge of the three example programs levels ($300 / year), and combine it with 1% of the estimated 100 million active viewers (vastly less then their 250 million registered users), you have $300 million per year in additional revenue on customized brand channels with very little additional work or infrastructure. Additionally you would explode your community of engaged brands who would work to drive interest and traffic to their own channels, increasing the growth rate of the site and advertising spend within the ecosystem. YouTube pulls in revenue from something it already offers, and small businesses get an easy and affordable platform to build their brands. It’s a win-win. A s 2011 hits full swing, and you look hard at your own business, YouTube offers a valuable lesson. There might be revenue opportunities hidden inside your existing businesses if they just take the time to look. Sometimes that innovation may be as simple as extending an existing, successful platform, and customizing it for an underserved target with spending power. It seems so simple. It’s unbelievable YouTube hasn’t leveraged their brand channels. And it’s simply a matter of time before they do. Easy money.

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Richard (RJ) Eskow: Hank Paulson: Ex-Goldman Sachs CEO, Ex-Bush Treasury Secretary, and Ex-actly Right

February 17, 2011

Somebody said that regulators need real power in order to be tough and effective. He said a strong, independent consumer protection agency is needed to help prevent the next financial crisis. And that we should help the millions of “responsible” homeowners hurt by the crash, instead of demonizing them. This guy described Fannie and Freddie’s assets as “bullsh*t capital” — $5.4 trillion of it, with taxpayers on the hook and potential debtors that included China and France. He also said this about the whole notion of privatizing a government activity: “To me, if there’s a guarantee, they should be a (government) utility (rather than a private company) — why should people get wealthy off of a government guarantee?” So who is this socialist — Noam Chomsky? He’s Hank Paulson, former Goldman Sachs CEO and Bush’s Treasury Secretary during the 2008 meltdown. Paulson’s interview with the Financial Crisis Inquiry Commission may leave you wishing he was still in Washington. The clarity of his comments highlight the absurdity of those politicians who claim that the FCIC reached a “partisan” conclusion. Here’s a Wall Street powerhouse and GOP stalwart who’s saying the same things — and more. Paulson didn’t just express opinions to the FCIC. He also provided anecdotes that illustrate the real problem with Fannie, Freddie, and the entire “privatize government” movement: When you give government backing to people with private-sector incentives, very bad things happen. So as the media distracts itself (and us) with the power struggle between Democrats and Republicans, a conflict it insists on describes as the “left” versus the “right,” Paulson described problems and their solutions in ways that neither party’s leaders are willing to discuss. Paulson spoke to FCIC staff last April, and an internal memo summarized that conversation: Not enough regulation + no consumer protection = catastrophe Here’s how the memo summarized Paulson’s thoughts, under the heading “Sec. Paulson’s Evaluation of Root Causes of Crisis” (all emphases in these excerpts are mine): Sec. Paulson stated that the root causes of the crisis were housing policy in addition to the lack of regulation . He explained that many mortgages had big regulatory gaps and many mortgages issued in many number of states did not have an adequate regulator. Sec. Paulson recommended including in a regulatory blue print a consumer agency that focuses on consumer protection and a mortgage origination commission that evaluates the training and regulation that goes on a state level and will be able to evaluate the different programs so investors would be informed . [ pdf ] Look at what Paulson’s saying: We need more regulation (“regulatory gaps”) and more regulators. We need a “consumer agency that focuses on consumer protection” (we now have the Consumer Financial Protection Bureau — it was downgraded from an agency to a bureau by the Senate). We need better training and regulation at the state level (banks are now trying to overrule state regulations to escape the consequences of foreclosure fraud). Investors need to be better informed about where there investments are going (Mr. Paulson’s former company is, of course, a major offender in this area). How many of these ideas are being promoted today by either party? And about that “housing policy”: This may sound like the old right-wing theme that it’s over-reaching when government tries to help poor people, but that’s not what he’s saying. As I hear it, he’s saying that many people were encouraged to buy homes who would’ve been better off renting. The problem wasn’t that government was too activist, but that the “ownership society” idea (and other government policies, including taxation) used government to encourage over-borrowing by some homeowners, enriching financial speculators while creating needless risk for borrowers. A lot of innocent homeowners got hurt — and they weren’t getting enough help. Paulson held town hall-style meetings in hard-hit real estate markets like Burbank, Stockton, Orlando, Chicago, and Kansas City. “I was literally sickened in terms of what I saw in terms of what had happened to some people, the terms of the mortgages,” he told the FCIC staff. He added that “lending essentially shut down on the private side, so now we were in a situation where very responsible people who wanted to buy or refinance to prevent losing their homes under very reasonable terms were having difficulty doing so.” Paulson described his own efforts to get loans out to these homeowners, which met with strong resistance from Fannie and Freddie’s badly-incentivized executives. Since Paulson left office, the current Administration’s HAMP program has only helped a few hundred thousand people although an estimated eleven million homes are considered at risk for foreclosure, and HAMP has harmed many others through the “extend and pretend” phenomenon. Meanwhile the House is planning to eviscerate funding for all housing programs in the next budget. Ideological battles diverted Congress from the task at hand. It’s ironic how many politicians who get campaign money from Wall Street banks — banks which continue to collect billions in indirect government assistance — resist anything that might help homeowners, because American families who obtained mortgages from those banks are supposedly “undeserving.” From the FCIC memo: According to Sec. Paulson, the “march to reform” in 2008 was diverted because of “really what were inconsequential battles” in the House over the Hope for Homeowners legislation, which he called a “a flash point” in the debate about on one hand, bailing out irresponsible individuals, and on the other hand inflating the number of individuals it would actually help … the battle over the program delayed GSE regulatory reform from being accomplished. In other words, Representatives were trying so hard to score points by knocking homeowners that they delayed action on the big-picture reforms that were so desperately needed. Significantly, ten Republican on the House Financial Services Committee crossed party lines to join with Democrats in forwarding Hope For Homeowners to the floor of the House, proving once again that common-sense reform needn’t be and shouldn’t be a partisan issue. By privatizing Fannie and Freddie, we created a monster. Intentionally or not, Paulson paints the picture of a monster: A company run by private-sector sharks, backed by government guarantees but unwilling to help the government carry out its policy — and aggressively lobbying to undermine the very principles that led to its creation. From the FCIC memo: “I had been trying to work regulatory reform through Congress, the House was not a problem, the Senate was a big problem” … Sec. Paulson said that he felt it was necessary to get the GSEs on board with reform … “I wanted them [the GSEs] to reiterate in front of the Senators the commitment to raise capital,” Sec. Paulson said. “And also, we had figured out that we were not going to get regulatory reform done if they opposed it. They had a lot of contacts on both sides of aisle, and were enormously effective , and they had different views …” Here’s what Paulson doesn’t say: Like Sallie Mae , the institution created to issue government-backed student loans, Fannie and Freddie were privatized and then went on a lobbying rampage designed to undermine their very own mission in order to further enrich the executives in charge. Paulson ran into roadblocks when he tried to get these “government sponsored enterprises” to collaborate with the government during an emergency. “Regulators were downplaying [the capital situation],” said Paulson. “There was a little bit of regulatory capture going on, I think.” That’s an understatement: He’s referring to $5.4 trillion in loose securities that had the implicit guarantee of the Federal government. $1.7 trillion was held by foreign countries, and Paulson explains how messy it became when he tried to explain this illogical and risky public/private marriage to leaders from countries like China and France. From the memo: Sec. Paulson said that the enterprises had “flimsy capital” and he said that some people referred to it as “bullshit capital,” (the deferred tax asset, for example), and that the regulator had no discretion to use its judgment with respect to the level of capital. Added to that, the country promoted a policy where the companies were chartered by Congress, “try to go around the world and explain to one leader after another what this implicit-not-explicit government guarantee was about. To me, if there’s a guarantee, they should be a utility — why should people get wealthy off of a government guarantee? Regarding those regulators, Paulson’s putting it mildly. Fannie and Freddie’s overseers ” didn’t have the power of a normal safety and soundness regulator,” as he put it, adding: “I don’t want to leave Washington without there being some major attempt to make it better and get a regulator who was more power.” Overall, Paulson paints the picture of runaway enterprises that were designed to fulfill a government mission but structured to do what private corporations do – with the corrupting influence of government guarantees creating a recipe for disaster. The end result was almost inevitable: Overly aggressive and reckless officers, backed by a Board of Directors Paulson described as “cheeky” and uncooperative. Despite this experiences, what’s the most popular recommendation in Washington these days for reforming Fannie and Freddie? Making them even more “privatized.” Somebody really ought to listen to Hank Paulson. In fact, why not put him in charge of the SEC? I know, I know: He’s ex-Goldman. But hey, Joe Kennedy did a damned good job at the SEC under Roosevelt. This guy’s learned a thing or two, and we could use him now. Besides, nobody ever called Hank Paulson a socialist. Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Rob Johnson: Who Is Influencing Obama’s Budget Proposal? Follow the Funders

February 15, 2011

Cross-posted from New Deal 2.0 . President Obama is a smart man. When Gallup surveys suggest that unemployment is around 10 percent — and that unemployment plus underemployment is 19 percent of the workforce — then it’s clear that the best way to raise revenues and close the deficit is to put people back to work. President Obama surely knows this. But his actions don’t seem to follow this obvious logic. Why is that? Part of the reason lies in a group of people who pour money into our political system but don’t necessarily want the same things that ordinary Americans want. In fact, these people benefit from municipal crises, breaking teachers unions, and increasing the fear of the workforce. They fall disproportionately into the group that Harvard professor Lawrence Lessig identified as “the funders” in his recent TedX Talk in San Antonio, Texas. The increasing power of this group produces political contortions by buying results in Congress that do nothing for regular folks. Their influence also steers President Obama to focus on his reelection rather than trying to change the climate of opinion and become America’s Great Persuader. The public has now heard the conservative mantra that government is the problem and not the solution for 40 years. Couple that with the experience of valid rage following the bank bailouts, and it’s not surprising that the public overwhelmingly feels that the government has become an instrument of the wealthy and powerful. Strong leadership is needed to challenge this narrative. But the President seems content to conform to the prevailing suspicion of government. He fails to convince the public that the government can have an active response to the jobs crisis that benefits them. And that suits many funders in the top 3 percent of the wealth distribution just fine. With profits so high and so many slack resources, it is sad that President Obama continues on the path of “triangulation” and chooses to “pre-concede” so much to the Republicans. In electoral terms, the breaking of all of the unions at the state and local level will serve to benefit the Republican party in many regions and exacerbate inequality. It is surprising the the President does not resist this for the benefit of his own party’s future. But Presidents often fly solo rather than represent their party when reelection looms — especially in a post- Citizens United world that will be influenced by unprecedented rivers of money. Looking forward, we can see that our infrastructure is worn out in many, many places. We can also see that a dearth of public goods, education, basic science and infrastructure portend a weakening of the living standard of our nation. President Obama seemed to acknowledge this in his State of the Union address vision. But his budget strategy does not. The current budgets, both Democrat and Republican, appear to be imposing cuts on the lower middle class and poor. We are, as Paul Krugman said in The New York Times on Monday , are eating our future. Unfortunately, the proposed budget appears more likely to contribute to the ongoing widening of wealth and income inequality. And it seems more likely to increase, rather than reduce, the idle resources in our society. This budget logic makes little sense, and the human costs are dreadful. Only the logic of power sheds light on our path of dysfunction in the USA. Andrew Mellon must be smiling.

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Chris Weigant: Budget Season Overview

February 15, 2011

It’s “Budget Season” once again in Washington, and since it’s going to be a particularly contentious and complex one this year, it’s worth taking a moment at the beginning to provide an overview of the entire process which is about to play out over the next two or three months. There are, at this point, three main budget battles to be fought. One of these isn’t strictly a budget battle, but will likely devolve into one, hence its inclusion in the list. Two of these have hard and fast calendar deadlines. All three of them are going to be major political battles, and it’s unclear what the outcome of any of them is going to be at this point. Let’s look at these three items, in the order they’re going to be fought on Capitol Hill, and then we’ll take a look at some of the political constraints on each side of this fight.

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‘Death Panel’ For Elmo?

February 12, 2011

House Republicans called for cuts in hundreds of programs across the face of government Friday night in a $61 billion savings package toughened at the last minute at the demand of tea party-backed conservatives. From education to job training, the environment and nutrition, few domestic programs were left untouched – and some were eliminated – in the measure, which is expected to reach the floor for a vote next week. Among the programs targeted for elimination are Americorps and the Corporation for Public Broadcasting. In contrast, spending on defense and veterans’ programs were protected. U.S.News & World Report notes that liberal groups, along with public radio and television stations, are preparing for a showdown with House Republicans over the budget cut proposal. “Fans of Big Bird and All Things Considered ” are reportedly readying for battle as well. “They probably think that no one will notice these cuts in the midst of so many others. But the millions of listeners and viewers who rely on public broadcasting for Sesame Street, All Things Considered, and independent journalism will notice,” said MoveOn.org in an urgent E-mail just sent out. “We need to tell Republicans that cutting off funding was unacceptable last time they were in charge, and it’s unacceptable now,” said MoveOn. The New York Times reports : It blocks the spending of about $2 billion in unused economic stimulus money and seeks to prevent the Internal Revenue Service from enforcing the new health care law. The measure also cuts financing directly from the office of the president. The measure marks an initial down payment by newly empowered Republicans on their promise to rein in federal deficits and reduce the size of government. In a statement, House Majority Leader Eric Cantor, R-Va., called the measure “a historic effort to get our fiscal house in order and restore certainty to the economy. .This legislation will mark the largest spending cut in modern history and will help restore confidence so that people can get back to work.” Democrats harshly criticized the bill within moments of its formal unveiling, signaling the onset of weeks of partisan struggle over spending priorities. House Democratic leader Nancy Pelosi issued a statement calling the bill irresponsible, adding that it would “target critical education programs like Head Start, halt innovation and disease research, end construction projects to rebuild America and take cops off the beat.” But first-term Republican conservatives claimed victory after forcing their own leadership to expand the measure after rejecting an earlier draft as too timid. “$100 billion is $100 billion is $100 billion,” said Rep. Tim Scott R-S.C., referring to amount the revised package would cut from President Barack Obama’s budget request of a year ago. That was the amount contained in the Republican “Pledge to America” in last fall’s campaign, and when party leaders initially suggested a smaller package of cuts this week, many of the 87-member freshman class who have links to the tea party rebelled. In fact, even some Republicans acknowledged privately the legislation will cut about $61 billion from current spending on domestic spending. Some of the largest cuts would be borne by WIC, which provides nutritional support for women and infants, cut by $747 million, and training and employment grants to the states, ticketed for a $1.4 billion reduction. In addition, Republicans proposed a 43 percent cut in border security fencing and a 53 percent reduction in an account used to fund cleanup of the Great Lakes. The measure also asserts Republican priorities in several contentious areas. It prohibits the Nuclear Regulatory Commission from terminating plans for a nuclear waste site at Yucca Mountain in Nevada – a direct challenge to Senate Majority Leader Harry Reid, D-Nev. Reid dissented quickly, issuing a statement that said, “Any attempt to restart the Yucca Mountain project will not happen on my watch as Senate majority leader.” The Environmental Protection Agency would be banned from regulating greenhouse gases, linked to global warming, from fixed sources such as factories. The District of Columbia could not use federal funds to run a needle-exchange program for drug users. While a 48-hour revolt by tea party-backed conservatives roiled the party this week, its conclusion could mean an easier path to passage for the spending cut bill when it reaches the House floor. “The leadership responded to the concerns of those who are far to the right of the middle,” said Scott. The cuts will become part of a spending bill that is needed to keep the government in operation through the Sept. 30 end of the fiscal year. The current funding authority expires on March 4. Passage in the Republican-controlled House would send the bill to the Senate, where Democrats control a majority and are certain to support more generous funding levels. Barring a compromise before March 4, the two houses will be under pressure to agree on a short-term bill to keep the federal government operating without interruptions. Even that could prove difficult, though, and Democrats assert that Republicans will resort to a government shutdown to get their way. “It is time for the House Republicans to stop with the games and finally rule out a government shutdown once and for all,” said Sen. Chuck Schumer, D-N.Y. “Stop being coy about it and take it off the table.” Congressional Republicans were damaged politically in 1995 when a protracted dispute over funding with President Bill Clinton led to a government shutdown.

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Bernanke Responds To GOP Grilling On Inflation

February 9, 2011

WASHINGTON — Members of Congress sharply questioned Federal Reserve Chairman Ben Bernanke Wednesday over whether the Fed’s policies are raising the risk of higher inflation in the months ahead. House Budget Committee Chairman Paul Ryan, R-Wis., said he is concerned that the Fed won’t be able to detect inflation until “the cow is out of the barn” and inflation is already spreading dangerously through the economy. Bernanke acknowledged that inflation is surging in emerging economies. But he downplayed the risks to the U.S. economy, even as lawmakers expressed concerns about rising gasoline and food prices. Inflation in the United States remains “quite low,” Bernanke said. He blamed higher prices on strong demand from fast-growing countries such as China_ not the Fed’s policies to stimulate the economy, including buying $600 billion worth of Treasury debt. Bernanke’s remarks suggest the Fed will stick with the bond-buying plan through June, as scheduled. The program is aimed at invigorating the economy by lowering rates on loans and boosting prices on stocks. It was Bernanke’s first appearance before the House since Republicans took control last month. He faced tough questions from them, despite being a member of the party. Ryan worries that the Fed’s stimulus policies, including the debt purchases, could trigger inflation or fuel speculative buying of stocks or other assets. “Many of us fear monetary policy is on a difficult track,” Ryan said. Rep. Todd Rokita, R-Ind., seemed skeptical of the Fed’s ability to fend off inflation before it gets out of hand. In the Fed’s history, when did the Fed “get it right?” Rokita asked. Bernanke said former Fed Chairman Paul Volcker brought down double-digit inflation during the 1980s by pushing up interest rates to levels not seen since the Civil War. The Fed chief said he was confident the Fed has the political will to boost interest rates and snuff out inflationary forces before they take hold. Bernanke did acknowledge that rising gas prices are a threat to the economy. Prices have been around $3 a gallon nationally. If they were to go above $4 a gallon, that would “take a significant amount of disposable income away from people,” he said. Still, Bernanke defended the bond-purchase program. He said it is needed to ease high unemployment and credited all the Fed’s stimulus policies with creating or saving 3 million jobs over the past several years. The unemployment rate was 9 percent in January after the fastest two-month decline in 53 years. Bernanke said the drop is encouraging but cautioned that it will take four or five years for hiring to return to normal – around 5 percent or 6 percent. He said the economic recovery won’t be assured until companies step up hiring on a consistent basis. Ryan and Bernanke agreed that Congress and the White House must have a plan to reduce the government’s $1 trillion-plus deficits. Ryan favors budget cuts to get the deficits under control. Bernanke didn’t endorse any specific policies on deficit-cutting. He said lawmakers should hold off on spending cuts or tax increases until the economy is in better shape. Bernanke again warned Republicans that they shouldn’t play political games with the Treasury Department’s request to raise the government borrowing authority. Treasury has asked to raise the $14.3 trillion debt ceiling. House Republicans have vowed to make deep spending cuts a precondition. “We do not want to default on our debts. It would be very destructive,” Bernanke said. At the same time Bernanke was testifying, Rep. Ron Paul, R-Texas, held a hearing on whether the Fed’s bond-buying program and record-low interest rates can really help create jobs. Paul, an outspoken critic of the central bank, favors abolishing the Fed. Lawmakers at that hearing also expressed concerns that the Fed’s policies will spur inflation. “If the Fed didn’t see this mess coming, will they see the recovery starting in time to turn off the printing presses to stop inflation,” asked Rep. Frank Lucas, R-Okla. “I am not sure their vision in the future will be any better than in the past.” ___ AP Economics Writer Martin Crutsinger contributed to this report.

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Dan Dorfman: Dire Warnings From a Bear and His Top Stinkers

February 5, 2011

If anything, the latest bummer of an employment report, last month’s creation of just 36,000 jobs, versus a widely anticipated gain of 130,000 to 150,000 jobs, is a renewed S.O.S. that the wave of euphoria engulfing Wall Street may be way overdone. Apparently investors don’t want to hear — or they don’t believe — any dissent. Indicative of this, with the sizzling 12,000 Dow already up about 84% from its March 2009 low of around 6,500 and 20% since late August, investors are once again scurrying to the stock market on the heels of a peppier economy. Last month, for example, they snapped up an estimated $8.3 billion worth of U.S. equity mutual funds, the biggest such buying outburst since May of 2009. But where there’s assent, there’s always dissent just around the corner. One dissenter is Dallas portfolio manager John Del Vecchio, who believes the recent buyers are waking on thin ice, are way too late to the party and predicts a 9,000 Dow later this year, which reminded me — if he’s right — of a noteworthy comment by Robert Louis Stevenson: “Sooner or later, everyone sits down to a banquet of consequences.” He’s right. Just ask Egyptian president Hosni Mabarak; he can tell you all about it first hand. On a very different scale — call it a financial scale — Del Vecchio believes America’s more than 80 million stock owners should also prepare for their 2011 banquet of consequences. “I wouldn’t buy a stock now with counterfeit money,” he says. That’s highly contrary stuff, given the widespread bullish sentiment sweeping Wall Street. Del Vecchio is practically a lone voice in the wilderness. Still, give the man his due because the 35-year-old portfolio manager is gutsy enough to bet his career he’s right. In effect, he’s essentially attempting to do what not even the bravest matador would do — basically enter a bull ring armed with little more than a ball point pen. Essentially, that’s what our bold market matador did January 27 by launching, in what appeared to be an act of atrocious timing, given the vigor of the market, an exchange-traded short fund — AdvisorShares Active Bear. The Dallas-based fund which manages assets of more than $25 million, is traded on the Big Board under the symbol HDGE. Its thrust: to short equities of companies that it concludes has low earnings quality, aggressive accounting and which may also be understating expenses. Del Vecchio, a forensic accountant and a former hedge fund manager the past 2.5 years at the Ranger Capital Group in Dallas where he averaged a 16.5% gain during that period, singled out the government’s inability to create jobs as one of the key reasons for his bearish outlook. He also spotlighted a number of his top stinkers, stocks he’s short and sees underperforming the market this year by about 20%. These include such well known names as Bank of America, Amazon.Com, Juniper Networks, Avon Products, Kohl’s Corp., Abercrombie & Fitch, Yahoo, Salesforce.Com, Visa, Broadcom Corp. and Stanley Black & Decker. As far as the economy goes, Del Vecchio is convinced it won’t really come back until jobs come back. And QE2 (quantitative easing) is not creating jobs, he says. In conjunction with this, he sees the economy continuing to suffer from shrinking incomes, people dipping into savings to pay their bills, inflation (namely higher food and gas prices) and deepening housing woes. As such, in contrast to most economists, he expects very little economic growth year, with the likelihood of a double-dip recession starting some time in the second half. The economy aside, Del Vecchio also believes the market is foolishly brushing off the Egyptian mess, In particular, he points to the danger of extremists infiltrating any new leadership. “The market has now added a new element of uncertainty,” he says. The manager is also worried about the overwhelming amount of bullish sentiment pervading Wall Street, noting there are three bullish investment advisers for every bearish adviser, that 93% of stocks are trading above their 200-day moving average and that 80% of equities are trading above their 50-day moving average. The risk here, says Del Vecchio, is there’s so much complacency, with too many investors following the herd. The added danger, he notes, is that “investors could follow the herd off the roof.” An obvious question: With the market as strong as it is, what is the trigger that could drive the Dow down to 9,000? Del Vecchio offers two of them: debt rollovers involving Europe or U.S. municipalities. Running out his current list of his stinkers, our bear points to such additional shorts as Hasbro, Digital River, Green Mountain Coffee Roasters, Herbalife, Netapp, Citrix Systems, Paccar, Netgear, Foot Locker, Trinity Industries, QLogic, Sandisk Corp., WMS Industries, Rackspace Hosting, Expeditors International, Asiainfo-Linkage and Pegasystems. A golf lover, Del Vecchio shoots in the high 70s and low 80s, he tells me. That’s impressive. The $64,000 question, of course, is whether a bear can tee off as well in a bull market? What do you think? E-mail me at Dandordan@aol.com.

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Richard (RJ) Eskow: What If Ben Bernanke Was Hosting Our Super Bowl Party Instead of My Friend Pete?

February 4, 2011

Federal Reserve Chairman Ben Bernanke held a press conference today, and my friend Pete is holding a Super Bowl party this Sunday. This is the second year in a row that two pre-expansion teams will go head-to-head, which means their names would’ve been familiar to people back in the 1950′s when I was a little kid in Utica, NY. If you had tried to tell the old Italian and Irish and Polish and other ethnic guys in our neighborhood that someday we’d have football teams with names like the “Marlins,” the “Buccaneers,” and the “Jaguars,” know what they would’ve said? They would’ve said, “Get outta here!” What if Pete managed his party the same way Bernanke’s running the Fed? Well, we’d have a lot of unhappy people watching the game, along with a couple of very happy ones. Since the presence of a large-screen TV is a given, Pete has two obligations as host: to provide a pleasing gustatory experience (aka “good eats”), and to ensure that costs don’t get out of control. Pete’s two goals can be tracked using two simple measurements: the “did it cost more than a meal at Red Lobster?” budgetary indicator, and the “where my nachos at?” food availability rate (also expressed positively as the “got my nacho on” index). These indicators track Pete’s two areas of responsibility, and his performance should be measured against them. Word to Florida fans: Don’t get me wrong. I’m not knocking your franchises, so please don’t flame me. I’m just explaining how unusual those names would have been sounded back when I was a little kid. Any new team names would’ve looked odd and unfamiliar back then. Things are terrible and that’s okay. Know what else would’ve looked wildly unfamiliar to Americans in the fifties? Today’s unemployment figures . We’ve got an official unemployment rate of 9.4%, with figures for discouraged workers and long-term unemployed that are even worse. Unemployment in the 1950′s ranged from a low of 2.5% to a high of 5.4%. Even allowing for changes in the way the number’s calculated, that’s a staggering difference. The fact that joblessness isn’t considered a national emergency shows how differently politicians view their responsibilities today. Leaders of both parties had a common vision of our country’s best interests during the period of our greatest prosperity. Where has it gone? Bernanke’s remarks came less than a week after Treasury Secretary Tim Geithner said that the economic expansion currently being enjoyed on Wall Street is “not a boom. It’s not an expansion that’s going to offer a rapid decline in unemployment.” And he didn’t say it as in, “and so we’ve got to do something about this horrible situation.” He said it as in, “Hey, it’s too bad, but sh*t happens.” Geithner made his remarks at Davos, where the bankers responsible for these staggering unemployment numbers – through incompetence, dishonesty, and often through out-and-out crime – met to celebrate their renewed wealth and figure out how to get more of it. They’ve got a lot to celebrate. The overall economy has expanded for six quarters. Banks are enjoying record revenues and surging profits, and bonuses are soaring. Put it this way: Nobody’s sweating about the cost of their first-class ticket to Switzerland, or the price of that chartered helicopter to fly them from the Zurich Airport straight to their mountain resort. (Limos are for nobodies. Who wants to spend two hours in the back of a stretch when you can be luxuriating among evergreen-carpeted peaks in less than 30 minutes?) The Administration keeps echoing the Right’s cost-cutting rhetoric, despite the ongoing pain of millions of Americans. And Republicans are in full-tilt crazy mode, pushing radical budget cuts that could mean another million lost jobs. Yet Bernanke offered only empty rhetoric about unemployment. You know what the old guys back in Utica would’ve said to that, don’t you? They’d have said, “Get outta here!” (Actually there would’ve been a couple of other words in there too – one of which starts with an “f” – but this is a family publication.) The State of the Nacho Economy at Pete’s House, February 2011 Bernanke’s remarks reflected the one-dimensionality behind much of today’s macroeconomic thinking, which tends to deals only in averages and can therefore overlook fundamental problems. Consider our party analogy: Let’s say there weren’t enough nachos at last year’s Super Bowl, and everybody went home bitching about it. Pete promises he’ll fix it – that’s the host’s job, after all – so he buys more nachos this year. But he doesn’t pay any attention to how they’re distributed. So the first couple of guys show up, get out a couple of shopping bags, pack up all the nachos, and take them home. That’s great for them – they’ll be snacking for days. The other eight guys show up starving, but there’s nothing for them to eat. And I mean nothing – no nachos, no Doritos, no buffalo wings, not even a freakin’ Pringle they can divide eight ways. (Yes, it will be all guys on Sunday, but that doesn’t we’re “no girls in the treehouse” men. My wife’s a basketball fanatic, for example, but she has no interest in football. The party’s gender uniformity was a market-driven outcome, the product of demand rather than regulation.) Back to the nacho problem: Pete, understandably, gets some heavy criticism from the eight hungry guys. If he were Bernanke, he’d … well, let’s just paraphrase Bernanke’s statement, changing a word here and there so that it describes the party rather than the national economy: “Guys,” Pete says, “we have seen increased evidence that a self-sustaining recovery in nacho spending may be taking hold. Notably, we learned that attendees increased their nacho consumption in real terms at a rate of more than 4 percent.” Pete goes on, acutely aware of the guys who are pissed about the snack situation: While indicators of overall chowing-down have, on balance, been encouraging, the “got-my-nacho-on” rate overall has improved only slowly … It will be several years before the “got-my-nacho-on” rate returns to a more normal level. In sum, although snack growth will probably increase this year, we expect the “where-my-nachos-at” rate to remain stubbornly above the levels that Big Game party planners have judged to be consistent over the longer term with our mandate to foster both full “got-my-nacho-on” satisfaction and “didn’t-cost-more-than-a-meal-at-Red-Lobster” overall stability. Yes, that’s exactly what Bernanke said, adjusted for our analogy. Picture what a roomful of hungry football fans would say if Pete gave that speech. Now ask yourself why Bernanke’s comments are any more acceptable. If you had a friend like Ben … The fact that Bernanke held a press conference at all shows how unusual things have become. The Fed Chair typically keeps contact with the press to an absolute minimum, because any offhand or misinterpreted comments can move billions of dollars in the market. The Chairman’s remarks are studied with the same obsessive fascination courtiers once directed toward their Emperor: Did he raise an eyebrow slightly while he nodded, indicating that this offer has truly pleased him? It’s worth re-examining an economic system which places so much power in one person. But given that the Fed chair does have that power, Bernanke’s caution is understandable. The Fed’s two primary missions are to ensure “price stability” and maintain “full employment” (roughly equivalent to our “Red Lobster budget” and “nacho” party goals.) There was a time when Bernanke didn’t even acknowledge the “employment” aspect of his mandate, so presumably it’s a sign of progress (or, more likely, of political pressure) that he even mentioned it today. But he didn’t say the situation was unacceptable. He said “we expect the unemployment rate to remain stubbornly above, and inflation to remain persistently below, the levels that Federal Reserve policymakers have judged to be consistent over the longer term with our mandate from the Congress to foster maximum employment and price stability.” In other words, he’s saying he knows its in his job description, but it’s not going to happen. What’s more, he’s not going to try doing anything new to make it happen. How would your boss react if you said that? Feeding the Python Let’s use a complete different analogy for a second. Let’s say you’ve got a python and some hungry leopards in a cage. What happens if you feed a rat to the python? There will be a big bulge in the python, but the leopards will still be hungry. Bernanke’s approach “creates” money. But if banks don’t invest that money in job-creating investments, they’ll become more profitable but unemployed Americans continue to go without work. Will his policies create jobs? Maybe a few. But there are much more efficient ways to reduce unemployment, and right now targeted government spending is the best approach. Instead of supporting stimulus spending, Bernanke made a point of praising the destructive austerity economics of the Simpson/Bowles Deficit Commission. The commission chairs’ proposals (the commission itself failed to deliver a report) would kill millions of jobs while further enriching the well-to-do. Bernanke indicated he’ll keep pursuing monetary policies that do little or nothing to reduce unemployment, and his premature emphasis on deficit reduction undermines the investment we need to stimulate economic growth and create jobs. In a cage full of hungry leopards, he’s about to feed another rat to the python. Whaddya gonna do? Why does Bernanke say that the unemployment rate is “stubborn”? The unemployment rate is a thing , not a living creature. It’s the product of human decisions and human behavior. It has neither emotions nor a will of its own. Consciously or not, Bernanke performed a little rhetorical misdirection by anthropomorphizing this figure. He’s drawing our attention away from the effect of his own actions. He’s saying that unemployment doesn’t “want” to come down, instead of saying that he can’t or won’t do more to bring it down. What do you think would happen at the party if Pete said the nachos don’t “want” to be available to everybody? Let’s get real: The unemployment rate isn’t being “stubborn”: Bernanke, Geithner, and our other economic planners are. If the stock market had fallen as catastrophically as employment has, and had stayed down as long,, don’t you think they’d be in full “Defcon 4″ mode trying to fix it? Of course they would. They’d use every tool at their disposal – and if that didn’t work they’d invent new tools. But when it comes to unemployment, they’re all shrugging their shoulders and saying “whaddya gonna do?” They’re saying there’s nothing more they can do to fix the problem. That’s not an acceptable answer – and it’s not an honest one, either. It’s crunch time We can have a little fun with our party nachos analogy, but economic pain isn’t funny. Institutions like the Fed and the Treasury Department are charged with managing unemployment and sustaining economic growth, and they’re failing. But hey: Enjoy the game. I’ve been planning to root for Pittsburgh this year, because I love the people there and because Pittsburgh reminds me of my home town. But wait — I’m being interviewed on Madison radio tomorrow, and I’ve never even been to Green Bay. Maybe I should reconsider … As for who I think will win, that’s a deeply personal matter, to be discussed only in the strictest confidence with my bookie religious confessor. Both towns have been hit hard by the loss of jobs. Who hasn’t? And nobody in either town wants to hear our leaders say that the worst unemployment figures in modern history are the “new normal,” or that they don’t feel the need to come up with a new game plan. But they better find one, and fast. It’s crunch time for Washington, and we need some come-from-behind job creation along with a whole lot of smash-mouth economic stimulus. It ain’t over ’til it’s over, but if they don’t get their act together it’s gonna be over. Now pass the nachos, wouldya? _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Ian Fletcher: Cluelessness Trifecta as Tea Party Flubs Response to Obama State of the Union

January 28, 2011

I have already written about the economic cluelessness of Obama’s State of the Union Address and the cluelessness of the official Republican response. Neither party seems to grasp that free trade killed the Great American Job Machine, and both are grasping at straws, repeating mantras from 30 years ago, or promoting policies (a NAFTA with South Korea?!) that will make things even worse. But I was holding out a tiny glimmer of hope for the Tea Party. Whatever one may think of them on other issues, they are a populist insurgency, so if a challenge to the Demopublican Tweedledum-Tweedledee consensus on trade was to emerge somewhere, it just might be here. And polls now report that a solid 61% majority of Tea Party supporters are now against free trade agreements. Unfortunately, the Washington leadership of this loosely-organized movement is notoriously not the same as its rank and file, and the response to the State of the Union by Tea Party supporter Rep. Bachmann merely repeated the same mistakes as the official Republican response: a) no grasp of the Keynesian idea of deficit spending to get out of recession, and b) no idea why jobs are being lost. She said, Two years ago, when Barack Obama became our president, unemployment was 7.8 percent and our national debt stood at what seemed like a staggering $10.6 trillion dollars. We wondered whether the president would cut spending, reduce the deficit and implement real job-creating policies. Unfortunately, the president’s strategy for recovery was to spend a trillion dollars on a failed stimulus program, fueled by borrowed money. The White House promised us that all the spending would keep unemployment under 8 percent. Well not only did that plan fail to deliver, but within three months the national jobless rate spiked to 9.4 percent. It hasn’t been lower for 20 straight months. While the government grew, we lost more than 2 million jobs…In October of 2001, our national unemployment rate was at 5.3 percent. In 2008 it was at 6.6 percent. But just eight months after President Obama promised lower unemployment, that rate spiked to a staggering 10.1 percent. Today, unemployment is at 9.4 percent with about 400,000 new claims every week. Narrowly true, most of it, but why, Michelle? Why is the jobs engine broken? No mention of that in your speech. Just some bits from the old Reaganite deregulation agenda — as if deregulation hadn’t caused a big part of our current mess, and as if we could ever win a race to lower regulatory standards with Guandong. The Tea Party claims to believe in returning to the Founders’ vision of America. Well, here’s something they should consider: the founders were explicitly against free trade. Article I, Section 8 of the Constitution is what they need to be pondering right about now.

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Mark Goulston, M.D.: The 5-Step System That Can Help Obama — And You! — Overcome Any Setback

January 16, 2011

When we hit obstacles in life, too often we are tempted to get angry or give up. The best and usually least used alternative is to “workaround” that obstacle. I was fortunate to receive an advance galley of Russell Bishop’s breakthrough book, “Workarounds That Work: How to Conquer Anything that Stands in Your Way at Work” (McGraw-Hill, 2011). Here are Bishop’s steps: The steps as I understand them are simple and easy to follow: Step 1: Own It

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Tim Scott, Incoming GOP Congressman, Warns Boehner Not To Cave On Raising Debt Ceiling

December 21, 2010

Incoming GOP Rep. Tim Scott (R-S.C.) recently warned John Boehner that a move to raise the nation’s quickly approaching debt ceiling without first attempting drastic spending cuts could quickly repulse the Tea Party base. Scott, a Tea Party-backed candidate who was selected as one of two freshman Republicans on the House leadership team, told the Daily Caller in an interview that no actions should be taken to extend the debt limit until all other options were exhausted. “I think until proven otherwise we’re looking for $300 billion in cuts if that’s possible,” Scott told the Daily Caller. “Right now all the talk about the issue seems to be that it’s a foregone conclusion that you cannot do that. I’d like to let the proof be in the pudding.” In a recent profile of John Boehner in The New Yorker , the future Speaker of the House raised some eyebrows when he described the impending decision to address the debt ceiling as likely the GOP’s first ” adult moment ” of his tenure, and one that he said he would need to “help people understand the serious problem that would exist if we didn’t do it.” But Scott told the Daily Caller that the optics of accepting an increase in the debt limit — as Boehner appears prepared to do — would send the message that the newly empowered GOP was “not paying attention” to the conservative promise of addressing what the Tea Party has seen as an over-spending Washington. “If we have spending cuts,” he asked, “is there a way to avoid increasing the debt ceiling? That’s the question. And I think if we don’t research the answer to that question, and look for whether the cuts are possible, I don’t know that you’re saying to the American people that you’re taking seriously the message that we must spend less.” The Wall Street Journal reported in November on the potential consequences — beyond a costly shutdown of the government — of failing to raise the ceiling: If an increase in the current debt limit of $14.3 trillion does not pass, it would suggest the country may not meet its obligations and would shake the financial system. It could rock the bond market, rattle the dollar and scare away foreign buyers of U.S. debt. While voting to increase the cap is seen as a necessity by many, apparently including Boehner himself, this issue is the latest, and perhaps most pressing, manifestation of a growing rift in the GOP between incoming legislators who feel beholden to their fiscally conservative constituents and lawmakers who may be bound by things that many consider unavoidable political realities. Congressmen-elect Mick Mulvaney (R-S.C.) Jeff Denham (R-Calif.) and Bill Johnson (R-Ohio) have all said that they would vote not to raise the debt ceiling, despite the potential risks of doing so. But it’s not just freshman lawmakers who are rallying to the piercing cries for increased fiscal austerity. Seasoned Republican representatives such as Jerry Lewis (R-Calif.), Jack Kingston (R-Ga.) and Ron Paul (R-Texas) have all signaled their intention to vote against the measure when the time comes. And GOP Senators Tom Coburn of Oklahoma and David Vitter of South Carolina have both suggested that they would oppose the raising of the debt limit in the first quarter of next year.

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Teddy Roosevelt: Estate Tax Champion, Republican Icon

December 18, 2010

Abolishing the estate tax has been a goal of some conservative Republicans since the 1940s, so it’s easy to forget that its modern champion was a president the GOP used to regard as among the greatest the party has produced — Theodore Roosevelt.

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Marian Salzman: Who’s in Control?

December 10, 2010

This is the tenth in a series of 12 posts expounding on the 2011 forecasts in the annual trends report from Salzman, president of Euro RSCG Worldwide PR and an internationally respected trendspotter. Remember “The Gong Show,” where there was the loud bonnnnnng to save contestants from catastrophe’s bottomless pit? Hello, Central Casting…. Has anybody seen the gong? Our 24/7 news cycle with daily cascades of worsening news has become enough to blanch even an egg. State pension funds are coming up $1 trillion short . The FDIC’s list of failed banks , a parade of former stalwarts, numbered 140 in 2009 and 149 through Nov. 19 of this year. Yes, Virginia, sometimes facades really do hide blank vessels. The ire at home, though, pales lately against the anger in Great Britain over Ireland’s required $110 billion IMF bailout . The Guardian says , “the western world teeters on the edge of calamity caused by the bank-lending extravaganza that fuelled the great property bubble.” (Echo, anyone?) Ireland’s house price index dropped almost 19 percent in 2009, to April 2003 levels–but, more shockingly, amid Flickr feeds of abandoned Irish houses, one learned that house prices would have to come down 57 percent more for the average household income to afford one. Irish government officials, meanwhile, expanded from fat cats to “morbidly obese cats”–after disclosures that 66 public servants receive more than €500,000 each (about U.S.$662,000; David Cameron’s salary, by comparison, equals about $225,800). And Bono has apparently abandoned his home shores for the Netherlands, where business tax rates are much lower. Investors dumped Spanish and Portuguese bonds in a panic sell-off; Iceland is in a cash crisis ; and this week, Ireland announced $8 billion in tax hikes and spending cuts to secure its IMF loan. Prime ministers and world leaders at the G-20 meeting in Seoul, contemporaneously, denied it was just Ireland on their minds, but how to deal with a future of restabilizing the shared currency, without country-by-country costs far outweighing the benefits to the union? Who’s in control? If we could find somebody, what possible line would be drawn around their responsibilities? (And what would Jean Monnet have said? He who thought up the EU in the 1950s, revolutionized industry for unparalleled European postwar prosperity and constantly repeated, “Continue, continue, there is no future for the people of Europe other than in union.) But, continue, continue this way? Is it any wonder that we the people of the U.S. might feel a great longing for some old way? A strong nostalgia for, yes indeed, the repressive but sedate 1950s, when the idea of union was so positive? A Norman Rockwell magazine cover, “Home for Thanksgiving,” showed a heartwarming mom and uniformed son joined to peel the taters, after a war of huge sacrifices. By 1957, tune in to June Cleaver issuing forth maternal clucking–seen through Beaver’s eyes, the Tom Sawyer of the television age. Barbara Billingsley (the real-life June Cleaver) died earlier this year, and I found all the buzz around that very significant. Did we mourn her together because June Cleaver’s death stands for the end of ideals that appeared to be collective, ideals around motherhood, gender roles , knowing and keeping your place because society itself was orderly? The flip side–and arguably more apropos to the insane volatility we’ve experienced in the last couple of years–lies in Dennis Hopper’s death this May. As Frank Booth in Blue Velvet , Hopper inhabited the dark side of the American dream. Whether you vote for pathos or horror, what can’t be argued is how finally the curtain has rung down over a simpler epoch, long-gone as the age of Lassie or silly love songs about blue velvet or blue suede shoes. One would need more than a weatherman to call out the rogue winds that have unmoored whole continents and sent stock and sterling swirling. It used to be that the things lamented as cultural fall-offs had to do with mores. Conservative parents in the ’60s responding to problems of a post-Cleaver decade blamed Dr. Spock and the Beatles. Meanwhile, in France, where new philosophies were being written, Simone de Beauvoir described Brigitte Bardot–the opposite of mommy figure–in a 1959 essay as a “locomotive of women’s history.” Lately, it strikes me as fitting to recall Peter Fonda’s warning to Hopper, as Billy, in Easy Rider : “We blew it.” That could well be the underscore of the last few years. These massive failures go straight to what mental health professionals call family systems. The effect of unsettling losses of control, where you realize you have none, is called ambiguity. In literature, ambiguity underpins terror. The less you know, the more you fear the evil behind the curtain, the unforeseen Frankenstein born of hope. As I’ve written in earlier trends in this series, we’ve all been experiencing the many effects of our loss-of-faith crisis . Stepping right up to the fear-filled plate, the Tea Party has tapped into widespread anxieties Americans have of losing control, being overwhelmed by vast, inhumane systems. The market phrase “wild swings” applies, too, to human life. In uncertain, ambiguous times, it does and should give anybody concerned about addictive and compulsive behaviors plenty to worry about. From ADHD in kids to eating disorders, suicide attempts and miscellaneous substance addictions that have parents and spouses shaking their heads over what that new thing is called, much less what it is , our wired society makes our worst impulses as easily accessible as borrowing a cup of sugar from neighbors used to be. Shopping addictions are said to affect 6 percent of Americans. Gambling is especially risky for teens. Next year, we’ll see mass-scale demands for greater control, but how will they be expressed? From the home to the boardroom, no doubt, with outcomes possibly short-term and private but longer-term socially disruptive. What precisely should be controlled, and by whom? Such queries promise to expose new schisms and widen already appearing cracks in the social network. There are those who consider addiction issues morality issues, and even sexuality an arena for legislating self-control. (But who wins a hormonal battle? Not even Christine O’Donnell could read a crystal ball on that score.) There are others who think regulatory control is the answer to corporations spinning out of control. Then there’s the issue of who controls the airwaves, the broadband, the Internet and the media, where all this gets endlessly dissected for effect, not meaning. Conservatives complain about liberal media, and liberals berate conservative agendas thinly veiled. On both sides of the aisle, election laws permit shadowy nonprofits to make contributions –and control us without ever being seen. In 2011, we’ll all be looking for more control in answer to being sick at heart, sick to busting, of unpredictability. Like “riders on the storm” (as the recently pardoned Jim Morrison sang), “into this house we’re born/into this world we’re thrown.” But we’ll be looking to redress our vertigo with greater control. Previously: “Mad as Hell–and Only Getting Madder” “Talk to the Hands” “Net Gain” “Public Mycasting System” “Booting Up” “Yes, We Can…Reinvent Ourselves” “Reinvention, Part II” “Separated at Worth” “Gender Bender” On Monday: “Tapping Minitrends”

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Video: Goodfriend Favors `Strong, Effective’ Oversight of Fed: Video

December 10, 2010

Dec. 10 (Bloomberg) — Marvin Goodfriend, an economics professor at Carnegie Mellon University, talks about U.S. Representative Ron Paul’s appointment as the head of the House subcommittee that oversees the Federal Reserve. Paul, a Texas Republican and author of “End the Fed,” will lead the House Financial Services Committee’s domestic monetary policy subcommittee when his party takes the House majority next month. Goodfriend speaks with Betty Liu and Michael McKee on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Video: Goodfriend Favors `Strong, Effective’ Oversight of Fed: Video

December 10, 2010

Dec. 10 (Bloomberg) — Marvin Goodfriend, an economics professor at Carnegie Mellon University, talks about U.S. Representative Ron Paul’s appointment as the head of the House subcommittee that oversees the Federal Reserve. Paul, a Texas Republican and author of “End the Fed,” will lead the House Financial Services Committee’s domestic monetary policy subcommittee when his party takes the House majority next month. Goodfriend speaks with Betty Liu and Michael McKee on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

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Larry Summers: If Tax Deal Goes Down There’s A ‘Significant Risk’ Of A Double Dip Recession

December 8, 2010

Senior White House officials significantly raised the stakes on congressional Democrats in their efforts to get a deal passed on the Bush tax cuts, warning on Wednesday that inaction would “significantly increase the risk” of a double dip recession. It wasn’t quite the metaphorical flare of mushroom cloud imagery, but outgoing senior economic adviser Larry Summers offered a fairly dire assessment of the stakes in the tax cut debate. “If they [Democrats] don’t pass this bill in the next couple weeks it will materially increase the risk that the economy would stall out and we would have a double dip,” he told a gathering of reporters at an off camera briefing. A double dip recession? “What I said it would significantly increase the risk,” Summers replied. The message was hardly subtle. But it certainly was debatable. Summers himself, downplayed the significance of continuing the Bush tax cuts back in September — though he was speaking, then, about the rates for the rich and the tax cut deal, at that point in time, did not include money for a 13-month extension of unemployment insurance or other tax incentives to help lower income workers. Asked whether the country would find itself dipping towards the economic doldrums if Congress waited a month or two to get a tax cut package passed, Rob Shapiro, a former commerce official in the Clinton White House and a proponent of the current tax cut deal, offered more sober-minded analysis. “The wait would not cause a double dip,” he said. “A double dip would come out of the reality of a relatively contractionary fiscal policy… I do think the deal that they announced is stimulative. And it ought to boost growth by some increment… But the issue is, that the deal certainly is not enough to lift the economy to a different place. Will we see what happened with the large stimulus happen here, which is once the stimulus is over the economy returns to slow growth? That’s the danger. And I keep on saying this, the single most important thing they can do to avert that is to stabilize housing prices.” Stabilizing the housing market, however, is not on the current congressional docket. And on Wednesday, the White House began a robust process of selling the deal to Democrats — skeptical, as they are, about an extension of Bush tax cuts for the wealthy and a generous revision of the estate tax. There were few carrots to go along with the sticks. Asked, for instance, if the White House would be willing to revise the informal compromise to bring more Democratic lawmakers on board, White House Press Secretary Robert Gibbs said any changes would be fine, so long as they didn’t result in decreased support. Then he cautioned: “The physics and the blood and the sweat that might be involved in that, I’m not entirely sure I would put it quite as simply as that.” If anything, the pitch being offered from the administration to the rest of the party was: take the package now or risk being blamed for an economic downturn. “I guess the question back for those who ask [why not fight for more] is where does this go, what is the end game and what are the consequences of playing it?” said senior adviser David Axelrod. “Do they have a sense of how this ends and how long will that take, because as Larry said there are real consequences to that. Just as the forecasts went up on the basis of this agreement they will go down if this agreement fails. That we know. We know that on January 1 people’s taxes will go up, we know that at the end of this month 2 million people will lose their unemployment insurance. And so there are real consequences to that decision. We, I think we all stipulate, the president did, no one likes those provisions that they dislike but on the other side of the ledger are significant things that will help people and help the economy. And what we know for sure is that without any of it we are facing a really difficult situation.” Added Gibbs: “I think you would really have to ask somebody who says… lets have some eight week fight and on February the 15th come in and say, alright, now we are ready to make a compromise, who on earth, who on earth thinks that that is somehow going to be a fundamentally better agreement than the one we are looking at right now? No one I have ever talked to.”

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FLASHBACK: Obama Slams Bush Tax Cuts For ‘Millionaires And Billionaires’ (VIDEO)

December 7, 2010

NEW YORK — Over the past three months, Obama described the Bush-era program that he’s now adopting as his own as “tax cuts for millionaires and billionaires” no fewer than 50 times, according to a review of his stump speeches, weekly addresses, and comments to campaign donors and members of the news media. The rhetoric was deliberate: Obama was trying to cast Republicans as the party of the wealthy while his fellow Democrats represented the middle class. He used that rhetoric at campaign events across the country, from Los Angeles and Las Vegas to Des Moines, Iowa, and Richmond, Virginia. During at least three pre-election rallies, Obama, playing to crowds filled with die-hard supporters, railed against the tax cuts for the wealthy, eliciting rounds of boos from the audience, according to White House transcripts. Video produced by HuffPost’s Ben Craw Obama repeated the “millionaires and billionaires” line once again on Monday in announcing the deal, but with a slight twist: Rather than rejecting Republicans’ call for a full extension of the tax cuts, he simply expressed opposition to their demand of making it permanent. Obama didn’t make that distinction on the campaign trail. But in addition to the class-warfare rhetoric, Obama described the tax cuts as unaffordable and ultimately ineffective. On Sept. 25, during his weekly radio address Obama referred to the initiative as “tax breaks we cannot afford.” A few days later, during an event the White House billed as a “backyard discussion” at the home of a family in Albuquerque, New Mexico, Obama said the nation would “have to borrow the $700 billion” — the estimated cost of the cuts over 10 years — “from China or the Saudis or whoever is buying our debt, and then we’d pass off on average [a] $100,000 check to people who are making a million dollars, up to more than a billion dollars.” Obama wanted to make sure that his audience understood that either the U.S.’s main rival for decades to come would be financing the tax cut, or the nation that sells the U.S. most of its oil. He used the reference to China and Saudi Arabia a few times. And while Republicans and some Democrats have claimed that no one — even the wealthy — should have their taxes raised during a recession because that could stunt the recovery, Obama cast aside those fears, arguing on Sept. 29 that “98 percent of Americans wouldn’t see any benefit from it.” On Monday, the White House tone towards the tax cuts changed from hostility to acceptance. On a conference call with reporters, senior administration officials declined to explain why. If passed by Congress, the tax initiative would expire in two years. The Federal Reserve forecasts the unemployment rate to hover around 8 percent at the end of 2012. Prior to the current recession, unemployment hadn’t reached the 8 percent level since January 1984. There have been two recessions since then: 1990-91 and 2001. It’s unclear how the White House will be able to let the tax cuts lapse with 8 percent unemployment. Senior administration officials declined to comment when asked. ************************* Shahien Nasiripour is the business reporter for The Huffington Post. You can send him an e-mail ; bookmark his page ; subscribe to his RSS feed ; follow him on Twitter ; friend him on Facebook ; become a fan ; and/or get e-mail alerts when he reports the latest news. He can be reached at 646-274-2455. Ben Craw is the video editor for The Huffington Post. He can be reached at bencraw@huffingtonpost.com.

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Anthony Tjan: In Negotiations, Play Stupid to Win Smart

December 7, 2010

In my last blog, I shared with you one of my partner’s sayings that he learned from his uncle, “play stupid, and win smart.” His uncle was a skilled poker player with an uncanny ability to hide his emotions. Other players bought into his “play stupid” routine, and he’d later disarm them with his winning hands. This is a real skill, since in general, the brain lags the mouth. Our impulse is to speak our minds, talk first, think and act later. As a natural extrovert, I never fully appreciated the importance of this play stupid, win smart philosophy until I reflected and noted common patterns in business negotiations and other high stakes tasks where pausing before reacting would have made a significant difference in the outcome. This has made me more cognizant to try (and this is difficult because emotions often override logic) to follow this DVR-inspired approach in important and sensitive business situations: Pause. Consider business situations as a mini movie in production in which you are the director. When you have any new and sudden disruption to filming (i.e. new information, a new competitive entrant, a new shift in available resources, etc.), the first call to action should be to take a pause. Play. Let the movie play out in your head and think about the various scenarios and how you can use the new information or situation to your advantage. Mute. Remind yourself to hit your internal mute button so that you keep your thinking to yourself unless there is a compelling reason to share. Think like a poker player and ask if there is any upside to sharing what you know with the counter-party. There usually isn’t. Rewind and Record Again. Appropriately reset your actions and hit “record” again to move toward your desired “win smart” ending. The act of pausing to contemplate the various scenarios that are likely to play out is critical. As in physics, every action has a equal and opposite reaction. The key is to avoid any unwanted consequences. In a recent negotiation with a company, it came to our attention that another party had put an offer on the table. It turned out that the other party was a group with whom we were actually planning to partner on the deal. We had proposed the opportunity to them shortly before the negotiation. My knee-jerk response was to call up the person with whom I had been dealing and offer some harsh criticism on what they had done and to effectively tell them that we were done working with them. Period. But I paused to ask myself how that course of action would benefit me. In truth, the only benefit would have been to make me feel better right at that moment. Unfortunately this seems to be a common mistake that people make in their “talk first” decision-making process in order to feel better in the moment — but it doesn’t move them toward their goal. Playing the movie forward and carefully considering the likely outcomes, I realized that remaining silent and using the knowledge to our advantage was a far better approach than flying off the handle. Why? Scenario A: Get mad, other party has no chance to explain themselves and our reaction will hinder the probability of working with them; Scenario B: Get mad before thinking about what alternative partners might do the deal with us, which may lead to no deal at all; Scenario C: Get mad, tell the other party we can do the deal on our own, which would have made them bid up the price on the deal to try to win it for themselves. We’d be putting the dog in the corner, so to speak, and they’d be left to bark or bite. By remaining silent, we could effectively play stupid and win smart. Having that knowledge gave us two pieces of valuable insight: first the other party showed how much they really wanted to do the deal, and second, their behavior to try and get the deal on their own illustrated a lack of professional protocol and gave us an early and helpful signal that this might not be the type of partner with whom we wanted to work. We quickly mobilized another partner on the deal and we proposed a joint deal at the original agreed-to price, which was accepted. It is too easy to forget the desired goal in moments of emotion. Here the goal was to win the deal at a reasonable price and silence and restraint were our best friends toward winning smart. This article first appeared on Harvard Business Publishing on November 30, 2010.

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Jane Hamsher: UAW Gets 800 Jobs for Endorsing Obama’s NAFTA-Style Korea Trade Deal, Which Will Cost 159,000 US Jobs

December 4, 2010

Last night the United Auto Worker’s Union, which was bailed out by American taxpayers two short years ago, announced they were endorsing the Obama administration’s NAFTA-style free trade agreement with South Korea and would act as liberal “postage stamp” for the deal. UAW President Bob King decided to endorse trade pact despite strong opposition from his staff. The UAW then joined with Jamie Dimon of JP Morgan, Vikram Pandit of Citigroup, Tom Donahue of the US Chamber of Commerce and John Engler of the National Association of Manufacturer in congratulating Obama on reaching the deal with South Korea. Earlier in the day, the White House invited interested parties to a briefing where they announced the NAFTA-style trade pact. They embargoed the story until 7pm, however, so that it could be released in the dark of night. According to sources close to the discussions, King was on a plane from Europe all day and when he landed, the first one who got him was Obama. King told UAW staff that he supports the deal because he trusts the president, and is confident that it will be a good deal for auto workers because Ford has endorsed it . Ford, however, manufactures in China — and Thailand, and the Phillippines — so what is good for Ford is not automatically good for the UAW. But by choosing to endorse this agreement, which includes many of the provisions that have led to massive manufacturing job losses under NAFTA and CAFTA, King once again demonstrates that the UAW has become a Chinese-style union: much closer to the interests of management and the government than those of its line workers. What does the UAW get for selling out American workers? A total of 55,000 additional cars, or about 800 jobs . The Economic Policy Institute estimates that the Korea Free Trade deal (KORUS) will cost 159,000 American jobs over the next five years. Sander Levin, Chairman of the Ways and Means Committee, worked the phones aggressively to whip support for the bill. Heavy pressure is being brought to bear on United Steelworker President Leo Gerard, in an attempt to keep the AFL-CIO on the sidelines. Getting a rather cheap “give” from the Koreans to the auto industry to buy off the UAW was actually quite clever — because the steelworkers are also being told that with all the cars that will be sold to Korea, there will be US steel used to make them. Of course, that’s a crock. Korea would still face a lower tariff (2%) in the US than the US will face in Korea (4%). The deal will devastate the building trade unions , also part of the AFL-CIO, who have been the hardest hit by NAFTA-style trade agreements. Much of their work has been building factories in the midwest, and as those factories get shipped overseas, their jobs have disappeared. In splitting the member unions, the administration hopes to sideline the powerful resources of the AFL-CIO which would otherwise organize to protect the building trades. It’s a deviously brilliant plan, which makes me suspect it didn’t originate at the White House. Unsurprisingly, the Chamber of Commerce has come out in support of the deal, and are already organizing online to pass it . Labor Secretary Hilda Solis has also been on the phone, pressuring labor presidents into supporting the trade deal. As someone who raised money for her and supported her when she was in congress, she can officially kiss my ass in Macy’s window. The White House had recently told the building trade unions that they had no intention of dealing with Korea Free Trade for another year. They used the same tactic with the Social Security groups — telling them they would not be taking up the issue for another year, knowing all the while they would spring the deficit commission on them imminently. In June of this year, Obama said he wanted to submit the George W. Bush negotiated Korea Free Trade Agreement to a vote in Congress. That bill contains many provisions which are in violation of the pledges he made on the campaign trail, and there has been no signal from the White House or anyone else involved that any fixes have been made other than sweetheart deal for autos and beef. Earlier this month, Tea Party Nation founder Judson Phillips launched a broadside attack against NAFTA-style free trade agreements. It will be an interesting first test for the freshmen Republican members of Congress — will they stick with the Tea Party activists who carried them into office, and who largely oppose such deals — or will they be captivated by Republican leaders like John Boehner, who (like Freedomworks head Dick Armey) strongly supported NAFTA? Republican representatives Dave Camp, Allyson Schwartz and Kevin Brady also cheered Obama for reaching the deal, thumbing their nose at the same Tea Party members they courted less than a month ago when the election was at stake. It remains to be seen whether USW Leo Gerard will join with the UAW and help the White House undermine the building trade unions and ship more American jobs overseas. I hope not. The UAW are a bunch of selfish pigs and I have no problem joining hands in a transpartisan alliance against them, but I don’t want to wind up fighting Leo Gerard and the Steelworkers on this. But we will fight them. Because this is a terrible, terrible deal for America, at a time when unemployment is soaring and the White House has zero plans for creating jobs — unless you’re in the international bank looting business. Everyone involved should be deeply, deeply ashamed of their participation in this, and we will do everything in our power to organize against its passage.

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Jonathan Weiler: Face Value: Deficits as Code for Tribal Fears

November 25, 2010

It’s obvious, of course, that the right’s new concern with deficits is not really about deficits, per se (any more than their new-found concern with government tyranny can be viewed with a straight face). Little fuss was heard from right-wing precincts during the Bush years, when the decider quickly burned through Clinton-era surpluses and ran up large deficits by pursuing reckless fiscal and military policies. And it would be hard to square American conservatives’ conferring of sainthood on Ronald Reagan with their now profound, deep, over-riding concern with deficits, given that Reagan oversaw dramatic increases in deficit spending . If deficits are the ultimate measure of irresponsibility, out-of-control government and a failure to live prudently and within one’s means — all values conservatives claim to hold dear — lionizing as the very embodiment of greatness and true leadership a President who behaved fiscally irresponsibly would simply make no sense. For some in Washington and its media environs, deficits do mean, roughly, something related to spending too much money. Erskine Bowles, co-chair of the deficit commission, believes that there is a threshold for spending money beyond which very bad things will happen( though Bowles has failed to come up with a coherent rationale for explaining what that threshold is ). And people like CNN ‘s Gloria Borgen, who recently insisted that the voters’ message on November 2 was that they wanted deficits reduced ( despite data showing how utterly laughable that claim is ) probably have nothing more in mind when it comes to deficits than what they hear at cocktail parties. But for the movement that has made the biggest issue out of deficits, the Tea Party, broadly speaking, deficits mean more than arbitrary numbers on a balance sheet or stupid mischaracterizations of what Americans actually care about. And because they’ve so powerfully shaped political discourse in the past eighteen months, it’s worth understanding what the underlying meaning of their concern with deficits is really all about. Yes, Wall Street, bondholders, banking interests and central bankers care about deficits for their own reasons, and these matter, of course, for what’s on the political agenda ( including Bowles himself ). But as a galvanizing emotional issue, deficits are a big deal in 2010 because they pack the kind of emotional punch and dog-whistle politics that once made crime and welfare such potent wedge issues. Deficits have become code. And the code is quite clear, once you think about it for a moment — that when government acts, it always acts to help the undeserving and, in doing so, hurts real Americans who are faithful to real American values. In this code, America is awash in free-loaders and law-breakers — poor, illegal, grubby-handed “losers” who are ruining everything that once made America great. Deficits are government’s way of indulging, coddling and abetting these losers. Crime and welfare had an obvious “face” — an African-American face. And politicians from Nixon, to Reagan to the elder Bush self-consciously exploited that racial code to win elections, as Lee Atwater , among others, openly acknowledged. But the code is more diffuse now. It’s not strictly about race any longer. It’s about every sort of un-nerving difference. Yes, swarthy skin is still a surefire way to set off the terror that has galvanized the Beck-istas and the dittoheads — Muslims and illegal immigrants being easy focal points of the hatred du jour. But it all runs together now — embodied in what Sarah Palin during the 2008 campaign, when she spoke of the “real” America — a place of exclusion, fear, resentment and desperation to defend their besieged communities from the tax collector and all those menacing representations of difference on whose behalf the tax collector serves. This is why, as I’ve said before, though Obama’s skin color, name and background are highly relevant to the right-wing’s insane and misplaced hatred of him (he’s cut taxes for nearly everybody, presided over record corporate profits, expanded our military operations and continued the most repressive features of the Bush national security apparatus) — the skin color issue also misses the deeper-seated motives behind that hatred . Had Hillary Clinton been president and pursued similar deficit-spending policies, she would have been subject to similar attacks. It’s what deficits represent that matters most — a hand out to people who are worthy of nothing but hatred and contempt, who have bespoiled “our” fragile community, who are responsible for the dread and insecurity we feel – because what those deficits mean is that the government will help and defend “them,” but not “us.” In sum, deficits are code for government taking sides in a tribal war, with the one good tribe — the real Americans — under siege from all the tribes of venality, dissipation and filth. We can debate the significance of long-term deficits for our economic well-being and, yes, I am well aware that, in the long run, most economists agree that this is a significant policy problem that we need to tackle. But this fairly technical policy debate is not what’s mobilizing the tea party to scream about deficits in 2010, after having watched quietly while their putative conservative heroes acted with fiscal abandon from 1980 on. Spending money on their own kind is one thing (and the Reagans and Bushes can be reliably counted on to do that) — an affirmation of the natural, acceptable state of things. Spending it on all those “others” out there is something else entirely. People are entitled, of course, to believe that they and their kind are more deserving than others. But we’re under no obligation to take their anger about deficits at face value, when it’s so clear that something much deeper lurks behind the crying over spilled red ink. Jonathan Weiler’s second book, Authoritarianism and Polarization in American Politics , co-authored with Marc Hetherington, was published last year by Cambridge University Press.

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Euro Faces Pressure as Irish Junior Party Balks at Rescue

November 23, 2010

Euro Faces Pressure as Irish Junior Party Balks at Rescue

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Robert Slayton: Deficit Reduction…Seriously

November 15, 2010

The new American obsession is with deficit reduction; everybody is talking about it, wringing their hands with concern for debt levels. Many commentators are declaring that the near future will go down in the history books as the Age of Austerity. Before I critique these campaigns, let me state clearly: I am not debating the validity of this issue. Too many smart folks are crying out about this, claiming that this is the road to national ruin. I am in no position to dispute that prognosis, nor am I doing it here. My observation instead, is simply: don’t expect anything substantial to be done about this in the near future. Neither party has the backbone nor the honesty to legislate the sacrifices required. Plus, the American people are conflicted, and not supportive of anything that diminishes their own sacred cows, as opposed to the other fellow’s. So let’s look at a partial list of some of the moves that might seriously reduce the deficit. For reasons of brevity, I’m exempting plans that cause a lot of noise and do little to adjust the bottom line. Cutting out the poet laureate might whet some people’s juices, but won’t do a thing to seriously reduce this massive problem. End the tax deduction for mortgage payments, munching a substantial bite from the deficit, as advocated by the recent commission. Not even worth talking about. When I worked for the Chicago Urban League in the 1980s, they opposed most of Reagan’s fiddling with the tax code, favoring hitting the wealthy. But any attempt to cut back on this deduction brought howls from them, even when it was set up to only affect the rich. The message was clear: do not tamper with this bulwark of the middle class, in any way. Ever. Owning a house is the American dream. Eliminate the tax cuts for those making over $250,000. The Republicans oppose this, because it would affect their constituency. But it would cut the deficit down substantially. Cut Social Security benefits: – advance the age when benefits accrue – make the SS tax applicable to higher incomes Fuhgeddaboutit. Neither party would touch this third rail in any serious cutback. Yet it would make the biggest dent in our bottom line. Medicare: see above. Cut military bases and weapons systems. A little of this is being done, but not enough. Every base has a local constituency, every program its lobbyists. There are no orphans here. Legislators from every party will fight to protect their constituents, and, especially, their contributors. Enact a flat tax with no deductions whatsoever. For giving to charities? To the church? Eliminate tax breaks to Mother Theresa? To disabled children? The reality would be a flat tax with a few — just a few — select deductions. Some of these would be honorable, some sops to entrenched interests to get their congresspersons on board. It wouldn’t matter. After we had opened that door, we’d get the creeping revisions. Every year a few more “justifiable” tax deductions would be added. Soon, we’d have a low tax rate, lots of exemptions even from that level, very little government income, and a deficit growing by enormous swaths. No matter the merits of this idea, its application in the real world will blossom the deficit more than Social Security. Get out of both Afghanistan and Iraq. Now. Completely. This one would actually cause a sizable dip in the short-term figures. But war is a national security issue; tread carefully. Besides, no one cares. Notice how many outspoken politicians didn’t speak of this in 2010? Didn’t mention it at all? Everyone figures it’s winding down at its own pace. Not worth dabbling with. Raise the tax on gas. And hurt the middle class. What about the folks unemployed, who have to drive for interviews? Remember, everybody has a car. DOA. End some of the farm subsidies. How much do we pay to support tobacco growers? How much do tobacco companies contribute to politicians? Massively cutting social programs. Right. Small programs for the poor will be cut; they already are. And make some folks cheer, but are like pennies to Goldman Sachs. I’m talking about the big programs. You know, the ones that affect millions of Americans. All of whom vote. Or will, after their benefits are eliminated. End earmarks. Fully, definitively. Great idea. Only, it would have to be passed by politicians of all parties. The same folks who make hay from these measures. About as likely as a missile reaching Saturn next year. Restore part of the estate tax. Bring it back up, and exempt everything below $3.5 million in inheritance. But after that Horatio Alger rules. This country blooms when people strive to get ahead, using their brains and their gumption. Not when daddy provides a free ride for life. Raise taxes? Are you crazy? Institute a national sales tax. Taxes are off the table. Haven’t you heard? My first point is this: neither party has the guts to actually tackle this problem in a serious, substantial way that really drops the deficit, rather than dosing us with verbiage. My next point is even more important: neither party has the integrity to apply hardship in a fair manner, the only way this will work. Both sides want to hit the other side, but exempt their supporters. That won’t pass muster; any plan that doesn’t include every possible measure — both cuts and taxes — flat out isn’t serious; the problem is that big. The only chance for success would be for a program that called for mutual sacrifice, and then delivered it. And a mechanism, as well, that threw lobbyists of all kinds out the window. Obscene money cannot rule here. Patriotism, shared hardship, must. Finally, none of this is in the slightest sense realistic until we develop a national consensus on the issue. Exit polls from November’s elections showed almost exactly the same percentage chose, as their top political priority, spending on the unemployed, as on reducing the deficit. These concepts are as far apart as is conceivable. The number of Americans solidly behind deficit reduction is not even close to the powerful majority that would be required. As an article in the New York Times put it, voters “have rewarded politicians who say they are worried about the budget much more than politicians willing to make specific benefit cuts and tax increases.” The piece quotes William Gale of the Brookings Institution, that, “whatever the eventual solution is…it will probably be something that is not politically feasible now.” Thus, what is needed first is to build a new constituency. Politicians may be venal, but they’re not stupid. Until they have that kind of support, backing these ideas would be like slitting one’s wrists. Not something many people choose to do. After that, make both–the cuts and the tax measures–fair and across the board, and we might have a chance at really achieving something. Till these things change, expect small, loud measures rich in symbolism, but meager in their actual impact. Be prepared for lots of talk. And lots of deficits.

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James Kwak: Dear Mr. President, Please Don’t Extend The Bush Tax Cuts

November 15, 2010

There have been ( admittedly unclear ) indications from your administration that you may accede to the Republicans’ demand to extend the Bush tax cuts for everyone. I urge you not to do this. The question is: Is it better to extend the tax cuts for everyone or for no one? The answer is to extend them for no one. The Bush tax cuts have always overwhelmingly benefited the rich, not the middle class, and that is no less true today than when they were enacted. They were bad policy then and they are bad policy today. Extending the tax cuts would dramatically enrich the wealthy relative to everyone else. 65.5 percent of the total benefit would go to the top quintile by income, 26.8 percent to the top 1 percent, and 14.7 percent to the top 0.1 percent.* Leaving aside discredited, Reagan-era theories about trickle-down economics, there are two main arguments for extending the tax cuts: 1. You shouldn’t “increase”** taxes during in tough economic times. It is true that tax increases would have a modest first-order negative impact on economic growth. But that impact will be small (per dollar of net fiscal impact) for exactly the same reasons that tax cuts are a poor stimulus. The multiplier for tax cuts is far lower than the multipliers for virtually every other type of government spending, especially aid to state and local governments. In particular, the economic impact of tax increases is smaller when they go to the rich rather than the middle class, because the rich consume a smaller portion of their marginal income. In addition, letting the tax cuts expire would have positive second-order effects because it would improve the government’s fiscal balance, which is widely (though perhaps incorrectly) perceived as a source of risk to the economy. Now, it might be preferable to extend the tax cuts only until the economy recovers and then let them expire. But that is probably politically infeasible, and in any case creates the risk that, at that point, Congress would then make the tax cuts permanent. 2. The tax cuts will help the middle class. Yes, but they won’t help very much. If the tax cuts are extended, the average benefit for tax units (roughly speaking, households) in the middle income quintile will be $880 per year.*** By contrast, tax units from the 80th to 99.9th percentile will gain $6,094 each, and the top 0.1 percent–those with over $2 million in annual income–will gain $339,473 each. Now, $880 means a lot to a middle-class family, and I will no doubt be called heartless for saying we should extend the tax cuts for no one rather than everyone. But letting the tax cuts expire will be better for the middle class, for one big reason–actually, 3.7 trillion reasons. $3.7 trillion is the figure that is generally cited as the projected ten-year impact of the Bush tax cuts. Letting the tax cuts expire will eliminate $3.7 trillion from the projected national debt with one stroke. Why does this help the middle class? Because Social Security and Medicare are currently under assault. The national debt is being used as a bogeyman to frighten politicians (and the people who elect them) into agreeing to significant reductions to Social Security and Medicare. Yet middle-class households need Social Security and Medicare far more than they need $880 of current-year income. Our country faces the very real threat of a retirement security crisis, since saving via 401(k) plans is shockingly low; in 2007, the average retirement account balance for a household where the head of household was between ages 55 and 64 was only $63,000 ( Federal Reserve Survey of Consumer Finances , Table 6). That figure is surely lower today, after the financial crisis. And your administration knows very well the problem of health care cost inflation, having done more to attempt to solve this problem than any other administration, ever. The single most important thing you could do to protect the retirement and health care security of the vast majority of Americans would be to let the tax cuts expire. The CBO (full document, Table 1-7) projects the cost of those tax cuts in 2020 at $368 billion, or 1.6 percent of GDP. The tax cuts mean the difference between a federal deficit of 3.0 percent of GDP (probably sustainable) or 4.6 percent of GDP (probably unsustainable). Removing that enormous wedge from the structural deficit would reduce the current pressure for “entitlement reform” and give the cost-saving provisions in your health care reform bill time to work. In short, letting the tax cuts expire would be better for the middle class (and even more so for the poor–the lowest quintile would gain only $45 from extension), and for the country, than extending them for everyone. Since you have a reputation for putting the welfare of the country before your political fortunes and those of your party, I hope this should be enough to convince you. But I believe this would also benefit you politically. If the American people want to know why their taxes will be higher in 2011 than 2010, this is what you can say: “We face a grave threat to our nation’s future prosperity. That threat is a ticking time bomb set by my predecessor’s administration. In 2001 and 2003, my predecessor pushed through enormous tax cuts for the very wealthy, using small tax cuts for the middle class as a fig leaf. Instead of being honest about the impact this would have on our national finances, his administration timed the tax cuts to expire on December 31, so they could pretend they were smaller than they actually were. “The Republicans want to let this time bomb explode. They want to make these tax cuts for the wealthy permanent, meaning that families making more than $2 million would save $300,000 in taxes, while ordinary families would save less than $1,000. This is at a time when our governments–federal, state, and local–lack the resources necessary to provide basic services to our citizens, secure our borders, educate our children, provide health care to the elderly, and invest in our economy. “My proposal is to extend the tax cuts for the middle class, but not for the wealthy. The Republicans, who control the House of Representatives, insist on permanent tax cuts for the rich–tax cuts that load debt onto our children and grandchildren for decades to come. They are willing to sacrifice our future prosperity so that millionaires can save hundreds of thousands of dollars. “I refuse to force future generations to pay for our own failure to make hard choices. I refuse to allow an enormous hole in the national budget that will threaten the long-term health of Social Security and Medicare. Because this is the price that the Republicans are demanding that I pay in order to extend the middle class tax cuts, all of the tax cuts will expire on December 31–under the law passed by the Bush administration.” I’m sure your speechwriters, pollsters, and strategists can come up with something better (and didn’t you once say that you were a better speechwriter than your speechwriters?) than I came up with while lying in bed last night. But come up with something. * All figures, unless otherwise noted, are from the Tax Policy Center . These figures also assume extension of the AMT patch. Note that these figures exclude the impact of making permanent the repeal of the estate tax (a permanent repeal is assumed in both scenarios); including that impact would skew the benefits even more heavily toward the rich. ** Of course, it is President Bush and the 2001 and 2003 Congresses that are increasing taxes on January 1, 2011. *** The actual figure is probably slightly less than $880, since the Tax Policy Center’s analysis also includes extension of the AMT patch, so some of the $880 is due to the AMT patch, and some of it is due to extending the Bush tax cuts. Extending the AMT patch does not benefit the very rich (since they are above the AMT threshold in any case), so all of their benefits are due to extending the Bush tax cuts. Update: After The Huffington Post featured this post, I realized I made a mistake in the fictional speech. The Republicans don’t control the House yet, so theoretically the Democrats still have majorities in both chambers. But they still face the Party of No in the Senate, so practically speaking the Democrats cannot pass Obama’s plan on their own. I suppose it is possible they could use reconciliation to get past the filibuster, but having just suffered a crushing loss in the midterm elections, the democratic legitimacy for such a tactic would be questionable at best.

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Les Leopold: When will we face up to the enormity of the jobs crisis?

November 12, 2010

“If future job creation reaches about 208,000 jobs per month, the average monthly job creation for the best year for job creation in the 2000s, it will take almost 140 months (about 11.5 years) to reach pre-recession employment levels. In a more optimistic scenario with 321,000 jobs created per month, the average monthly job creation for the best year in the 1990s, it will take 59 months (almost 5 years).” Michael Greenstone, Adam Looney “The Long Road Back to Full Employment: How the Great Recession Compares to Previous U.S. Recessions,” The Brookings Institution This may be the first time in American history that the super-rich are experiencing an economic boom while the rest of us are coping with serious economic difficulties. Even during the depths of the Great Depression there was some equality of suffering. Of course, the wealthy weren’t exactly standing in bread lines wondering if they’d ever work again. But the rich and the poor both felt the crisis. This time around, it’s a Tale of Two Cities: the super-rich are doing just fine, thanks to taxpayer largess, even as the rest of us are staggering through the highest sustained unemployment level since 1937. Our Wall Street billionaires easily weathered the financial storm that they themselves created. It’s as if nothing had happened. The financial reforms Congress passed are weak. The biggest banks actually are bigger. And Wall Street profits and bonuses are approaching record highs. That’s in stark contrast with the fact that more than 29 million Americans are without work or have been forced into part-time jobs. With the Republican landslide, the super-rich have nothing to fear from Congress. No need to worry about tax increases or tighter regulations now. The hedge funds will be able to hang on to their 15 percent tax rate (by claiming their earnings as capital gains) while raking in $900,000 an hour (not a typo). Meanwhile the pressure mounts to cut social spending–because, of course, we’ve got to combat the large deficits we racked up by giving tax breaks to the rich, bailing out Wall Street, and dealing with the financial crash that Wall Street created. (We get a deficit commission instead of a jobs commission?) But the real mystery is how quiet progressives are. We seem constitutionally incapable of facing the enormity of the employment crisis. As far as I can tell, most liberal advocacy groups are carrying on as if the economy hadn’t crashed at all. It’s like we’re all stuck in our remote silos – each working on our own separate issues. We have no shared vision, shared programs or shared will to tackle the broader unemployment crisis. We hope the economy will somehow resurrect itself so that we can go on fighting for our favorite cause without any further interruptions. Meanwhile, the right, especially the Tea Party, definitely is in crisis mode, and they have a plan. In my opinion they have misidentified the crisis – big government and debt – and have the wrong plan — cut taxes and government spending. But they have a vision, they have passion, and they’re not afraid to challenge not only the Democrats, but the Republicans. They’ve hit on a clever theory to explain the jobs crisis, one that can’t be disproved by facts: It’s caused by big government’s interference in the economy. The solution: slice government spending and regulations so that free enterprise can prosper. And if unemployment still remains high after budget cuts–well, then we just didn’t cut enough. It’s a perfect Catch 22. And the rest of us are saying …what? What do environmentalists propose to do about the jobs crisis? What is the women’s movement’s economic program? What do progressives involved in healthcare or education think we should do to create the 22 million new jobs we need to get back to full employment? Yes, there’s a lot of positive discussion about rebuilding our economy through green jobs and renewable energy. But the scale of these proposals is far too small to put much of a dent in the unemployment numbers. Are we all too afraid to say what’s really needed? We need hundreds of billions of dollars of public investment, right now, paid by taxes on the super-rich. Why are progressives so timid? Part of the answer lies in our permanent attachment to the Democratic Party. It seems that we can’t ever imagine a time when it would be appropriate to abandon or at least openly fight with the Dems–even those who abandoned us long ago. What will we do as the remaining Blue Dogs move even further to the right, joining with the Republicans on deficit reduction, gutting health care reform, outlawing abortions and stonewalling on climate change? One thing is certain — the Democratic Party is in no mood to lay out a bold national proposal to create the millions of new jobs we need. Most are tacking to the “center” to avoid the fate of Russ Feingold, the very best of the bunch. What would a massive job creation program look like ? Let’s start with a no-brainer: We hire an army of at least one million installers to weatherize every home and business in the country. Hiring all these workers –at decent wages –through tens of thousands of local contractors will probably add another 400,000 jobs (in addition to the original million) as these re-employed workers spend their earnings. Households and businesses will save on their energy bills, and we’ll reduce global warming emissions. The budget crisis facing state governments will ease as tax dollars start pouring in and unemployment insurance claims plummet. We’ll trigger an economic upswing that’s also good for the environment. Next, we should fund free higher education at all public colleges and universities, a social good that will also open up the job market by drawing people from the workforce into the educational system. A hiring and construction boom on campuses all over the country will generate a flood of jobs for our millions of unemployed construction workers. This is precisely how the GI Bill of Rights averted what could have been a staggering unemployment crisis after WWII–a time when millions of returning veterans were coming back home in search of work. Through the GI bill, three million instead went to school. Congressional studies show that the GI Bill returned almost $7 dollars of economic growth for every dollar invested–probably the best investment the federal government ever made. We should also invest massively in alternative energy research, in rebuilding and enhancing our infrastructure, and in meeting a myriad of other needs in our communities. Ask every town in the country to come up with ten projects that need doing right now, and then have the federal government fund them. The ripple effect would wake up our slumbering economy. Oh, but won’t all this cost a fortune? Aren’t we already tapped out from Wall Street bailouts and the half-assed stimulus program (not to mention two wars)? Good question — it gets us to the best part of our in-your-face program. We need to make those who crushed our economy, and whom we so generously bailed out, foot the bill. The American people, I believe, would support a windfall tax on financial profits and bonuses and eliminating tax loopholes on hedge funds to fund the jobs we so desperately need. Time for a Jobs Party ? Will any of this pass in the near future? Of course not. But it’ll never happen if we don’t propose what is really needed. We have no prayer of tackling the jobs crisis until we articulate a clear-cut agenda and start pressing for it. And we can’t do it alone. We need a sustained, organized voice independent of the Democratic Party that focuses clearly on the jobs crisis. In fact, we should take a cold hard look at creating a Jobs Party. Maybe, one day, it would become a third party that would truly vie for power. But at the very least it could create the same kind of chaos among the Democrats as the Tea Party is creating among the Republicans. Wouldn’t it be nice to see Democratic officials, fearing primary fights, tripping all over themselves to proclaim their allegiance to the Jobs Party agenda? Right now, the only conversation we’re hearing on jobs is a boring rerun of failed neo-liberalism – cut taxes on the super-rich, deregulate big business and pray for rain. Instead, we need to force politicians to engage in a much more aggressive national conversation about jobs. How are we are going to create the 22 million new jobs to get us back near full-employment? Will it really take eleven years or more, as the Brookings Institution study (cited above) suggests, for us to get these jobs back? That’s up to us. A Jobs Party with moxie could speed up the timetable during this new era of joblessness. Maybe all this sound fanciful and unrealistic. But let’s remind ourselves of how fast the world is changing. Did anyone believe that President Obama could go from being America’s darling to chopped liver in less than two years? Did anyone believe that a Tea Party would become a “credible” force among more than 40 percent of the electorate by pushing an agenda that died with Barry Goldwater a generation ago? Actually, the most fanciful path of all might be hoping we can muddle through indefinitely with the Democrats while ignoring the employment crisis as we plug away, day after day, inside our issue silos. Come on — let’s say what we really believe in before we forget how. Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009. He is currently working on a new book, How to Earn $900,000 an Hour: The Rise of Wall Street Billionaires and the New Class War, (hopefully to be published in 2011).

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JPMorgan Internal Document Predicts ‘Gridlocked’ Congress ‘Without Any Landmark Legislation’

November 9, 2010

The financial titan JPMorgan Chase is betting on the next congressional session to be historic in its lack of productivity, according to a leaked internal document. On Tuesday, the money-in-politics research group Center for Responsive Politics published a document from JPMorgan’s government affairs office that gives some interesting hints as to how Wall Street views the fallout of last week’s elections. The viewpoint is bleak. “[T]he 112th Congress could be remembered as a gridlocked one without any landmark legislation,” the document’s author writes. In the House, Republicans will likely hail their wave of support as a mandate from voters to reject the comprehensive reform measures that passed over the past two years. House Republicans will look to pass a series of spending cuts, tax cuts and repeal measures — to create a distinct alternative in the mind of the electorate from the administration and reinforce their image as the party of fiscal restraint. The Senate will likely be gridlocked on nearly every substantive policy issue, unable to move legislation under the rules of the body that require 60 votes to move forward procedurally on controversial issues. The tense partisan battle will ensure a series of cloture votes and procedural motions meant to make the opposing party take difficult political votes. jpmdoc On the specific items, JPMorgan seems ready for nasty partisan fights, though in several instances they foresee areas of agreement between the two parties. On the issue of extending the Bush tax cuts, for instance, the firm predicts a “one-year extension… for all filers” to pass during the lame-duck session, though the author goes on to note that the lawmaker responsible for corralling the votes in the Senate — Sen. Max Baucus (D-Mont.) — will have a difficult task owing to Sen. Orrin Hatch’s (B-Utah) growing concern over a primary challenge in 2012. The firm also expects the Republicans to attempt to de-fund health care reform (not a surprise) as well as financial regulatory reform (more of a surprise). The latter will be done, the author predicts, by using “the appropriations process to slow implementation of Dodd-Frank by underfunding the new federal agency staff needed to get those programs off the ground.” The entire document is worth a read if, for nothing else, because it offers a rare insight into how the financial community views the drama unfolding in our nation’s capital. It’s impossible to know whether the sentiments expressed by JPMorgan’s government affairs arm are based on simple observation or insider knowledge. Mostly, they are fairly obvious and carefully worded takes on the major policy debates. But what’s telling is that for all of the talk about Wall Street wanting certainty in Washington, at least one major firm seems resigned to a legislative process that’s even more difficult to predict as it moves forward.

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Timothy Karr: Who Will Head MSNBC if Comcast Takes Over?

November 9, 2010

And Why That Poses an Even Bigger Threat to Keith Olbermann Keith Olbermann is back, and for his many fans, including the 300,000 who petitioned MSNBC to reinstate him, it would seem a return to form. But Olbermann’s dispute with the brass at MSNBC may only serve as a prelude to more troubled times. MSNBC’s parent company, NBC Universal, is likely to be taken over by cable giant Comcast, should regulators sign off on the $30 billion deal. If history is any guide, this merger poses an even bigger threat to the future of MSNBC personalities like Olbermann and Rachel Maddow than the recent dustup that temporarily sidelined the host. That’s why tens of thousands have already urged the Federal Communications Commission and Department of Justice to stop the merger. They cite a multitude of reasons the takeover would bring them harm, including higher prices and fewer choices in programming and services. Indeed, such concentration of media power leads to a less vigilant news media, a muted marketplace of ideas and fewer consumer options at a time when are demanding more. Add to this the dim but real prospect that MSNBC’s new boss will be even less welcoming than the current one to commentators that rock the boat. Just consider the candidates in line to take over MSNBC: Steve Burke, Comcast’s Chief Operating Officer According to The Street , Steve Burke will take NBC’s CEO spot from Jeff Zucker should the merger be approved. In an e-mail to colleagues , Zucker said: “Comcast will be a great new steward, just as GE has been, and they deserve the chance to implement their own vision.” That vision – in the hands of Burke – might not be to the liking of MSNBC’s stable of talent. Burke has deep ties to the Republican Party. According to Public Citizen , Burke raised at least $200,000 for the Bush-Cheney re-election campaign. Prior to that, he served on the President’s Council of Advisers on Science and Technology under Bush, at a time when the administration was undermining scientific consensus on topics including climate change, stem-cell research, and even the relationship between corn syrup and rates of diabetes in children. As a top science adviser to President Bush, did Burke condone administration efforts to bury scientific findings that challenged official policy? What would he do when comments or reporting by Olbermann or Maddow challenge Comcast’s corporate dogma? Peter A. Chernin, Former Second in Command at News Corp. Peter Chernin was a major fundraiser for Sen. Hillary Clinton, according to the New York Times , which also reports that he may be on the short list to take over NBC operations should Comcast get the nod. For years, Chernin has co-owned a restaurant on Martha’s Vinyard with Comcast Chief Executive Brian Roberts. More recently, he was tapped by Roberts to become a “special adviser” to Comcast on the potential merger. Chernin’s close ties to Clinton, Roberts and Rupert Murdoch indicate his biases may be more corporate than political. But it was during his tenure at Fox that the network looked the other way as many of its personalities actively — and financially — supported Republican candidates and Tea Party causes. Chernin once asked Roberts whether he planned to interfere in editorial content at MSNBC — a question that Roberts refused to answer. Eileen Dolente, Senior Director, Comcast Multimedia Content Development Odds are slim that Eileen Dolente would be picked to head MSNBC programming. But her record at Comcast offers a disturbing glimpse into the cable company’s mindset regarding speech that interferes with business as usual. As director of programming for Comcast’s news division, CN8, Dolente fired host Barry Nolan. His crime? Nolan had protested a major award being given to Fox News Channel’s Bill O’Reilly. Nolan was “appalled” that an award would be given to O’Reilly. He dashed off e-mails stating that O’Reilly’s “indiscretions, inaccuracies, and prejudices disqualify him for such a lofty honor.” Dolente was appalled that one of her hosts would share such an opinion, and within a week of the award ceremony, she showed Nolan the door. Documents filed in a subsequent lawsuit revealed that the mutual business interests of Comcast and News Corp., which employs O’Reilly, were a major factor in Nolan’s firing. What position would Comcast take should MSNBC personalities launch a similar attack on a valued business partner? If Dolente takes the helm, past may become prologue for MSNBC.

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The 14th Banker: Creating an American Latvia

November 8, 2010

The United States faces profound risks in the way its financial markets continue to operate. As I wrote last week, Ben Bernanke’s latest stimulus effort smacks of desperation. If we are to find real solutions to our domestic problems, we need to open our minds to rethink what the core problems might be. The videos below are of a speech Michael Hudson made several weeks ago to the American Monetary Institute. I hope you find time to watch it. Some of his examples are simplified to serve an explanatory purpose. So let’s not quibble about every detail. Let’s see where these explanations correspond with our reality and use that as a starting point to understand our reality. In the first segment he correctly points out at about the 3:30 mark that banks do not lend for productive purposes (in general). They lend on existing assets and cash flow streams. This is particularly the case with large banks that have much standardization and centralization of functions. As Amar Bhidé states in his book: The financial system has been giving up, albeit unwittingly, on the decentralization of judgment and responsibility. Case-by-case judgments by many, widely dispersed financiers with the necessary ‘local knowledge’ have been banished to the edges, to activities such as venture capital, which accounts for a useful, but tiny proportion of financing activity. Without this decentralized judgement and responsibility, banks are simply incapable of providing productive risk capital as Hudson describes. Instead, capital is consistently deployed to increase the values of existing assets, much like Bernanke proposes to do today. All Tea Party supporters should watch this speech because it explains how America is becoming the new Latvia and how labor (90% of us) is and will continue to pay the freight. The greater public has been co-opted by a blind faith in the Neo-Classical economic paradigm. They believe that their angst, created by flat to decreasing real incomes for those still employed, high unemployment, and extreme volatility in perceived wealth, has been caused essentially by too much regulation and too much government. While I agree that inefficient or ineffective government is a problem, it pales relative to the effects of the power structures dividing up the wealth in a way the average citizen cannot grasp. Further in the speech, Hudson refers to this increasingly debt based system and how all cash flow streams and assets are ultimately “capitalized”. In other words, debt is issued against them and profits are extracted by those able to do so. Perhaps you have seen this as we have more and more toll roads, red light cameras, and prisons run by private companies for profit. Those who outsource these things see one part of the picture, the part where government outlays are supposedly reduced. They do not see the part of the picture where those assets and cash flow streams are used to move wealth to the top of the social structure. Tea Party favorite Rand Paul unwittingly plays into this with his ideas on privatization. From an interview this weekend comes this quote: When pressed on This Week about which programs the he would cut, Paul declined to identify individual programs. “All across the board,” the senator-elect said. Amanpour challenged Paul, saying, “But you can’t just keep saying all across the board.” Still, the newly elected senator refused to budge. “No, I can. I’m going to look at every program, every program.” He later continued on the theme: “You need to ask of every program — and we take no program off the table. Can it be downsized? Can it be privatized? Can it be made smaller?” This things that are privatized will then be leveraged and the profits will be extracted up front. Any change in the cash flow stream will then create future losses on that leverage and those losses will be allocated to taxpayers or the most unwary investors who bought the residuals after all the fees and equity dilutions for management have been stripped. While John Hussman is writing on a different topic, the Bubble Crash cycle, his points tie in as well. After acknowledging that the markets already rose on the Fed action, Hussman effectively makes it clear that this has little to do with real wealth. As a result of Bernanke’s actions, investors now own higher priced securities that can be expected to deliver commensurately lower long-term returns, leaving their

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The 10 Economic Commandments Of The Tea Party: 24/7 Wall Street

November 6, 2010

By 24/7 Wall Street : In the latter days of Rome, the economy was crumbling, the emperor … would placate the mob with bread and circus — food and entertainment to placate them since the economy was in shambles and dwindling around them,” Kentucky Senator-elect Rand Paul. It was only a few years ago that most Americans thought tea parties were old-fashioned get-togethers, featuring warm caffeinated beverages and bite-sized sandwiches. Of course, that’s no longer the case after this week’s election results. The Tea Party is a philosophy as much as a political movement. In fact, there is no single Tea Party or even a recognized leader, though several people including Sen. Jim DeMint (R-SC) and Sen.-elect Rand Paul (R-KY) could claim the title. It’s not necessarily pro-Republican either. Sen. Robert Bennett (R-UT) was driven from office for not being conservative enough. Former Tea Party darling Christine O’Donnell defeated Rep. Mike Castle (R-DE) in the Republican primary. For months, the Tea Party has waged an ideological war against the Obama administration over its handling of the economy. The battle has become personal at times. Tea Party favorite Rep. Joe Wilson (R-SC) became infamous for shouting “you lie” in the middle of President Obama’s State of the Union address. He later apologized. Others shouted down members of Congress at town hall meetings discussing Health Care Reform. Activists wearing colonial costumes and waving “Don’t Tread on Me” flags showed up at rallies across the country. One of the movement’s biggest tests may be the debt ceiling. Rand Paul has not ruled out filibustering any efforts to raise the limit on how much money the government can borrow, on which a decision is expected to be made early next year. If Congress fails to pass the legislation, the U.S. won’t be able to make good on its commitments such as bonds. Of course, the Tea Party doesn’t want to be held responsible for the financial catastrophe that experts say would occur if the debt ceiling is not raised. The question is what sort of concessions the movement will want to make and whether the movement’s supporters will keep their faith when political ideology meets economic reality. The ideas espoused by the Tea Party about limited small government and lower taxes were once heard mostly at think tanks and campaign rallies. Many voters, though, probably know little about the movement’s ideas beyond the soundbites reported in the media. 24/7 Wall St. decided to take a closer look at the Tea Party. We reviewed the position papers, public statements and websites of self-described Tea Party candidates. We then determined the party’s 10 key economic ideas which may help shape government policy for years to come. Check out the 10 economic commandments of the Tea Party and v isit 24/7 Wall Street for more information:

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Lynn Parramore: Green Tide: The More Money You Make, the More Likely You Voted Republican

November 5, 2010

Memo to David Brooks, whose sentimental, fact-free musings on working class Americans and how they rejected the Democrats graced the Opinion page of the New York Times today: Think that ordinary, hard-working folks have gone Republican? Think again. The Wall Street Journal has posted some very illuminating charts on 2010 voter preferences that help us blow through the blather and by-pass the baloney. Despite what you are hearing about Tea Party Populism and hopping mad Main Streeters, one thing is indisputable. The more money you make, the more likely you were to cast a ballot for Republicans in the 2010 elections. The GOP was swept into office by a green tide of affluence. The numbers do not lie, friends. And here they are. Voters who said their income is… Less than 30K per year voted 58% for Dems, 40% for Repubs 30K – 49,999: 52% for Dems, 45% for Repubs 50K-74,999: 46% for Dems, 52% for Repubs 75K – 99,999: 43% for Dems, 56% for Repubs 100K-199,999: 43% for Dems, 56 for Repubs Over $200,000: 36% for Dems, 62% for Repubs Notice that as soon as you past the average household income level in the United States, which is currently around 50K per year , you see voters trending Republican. What to make of this? Well, poor and working class people are not stupid. They know darn well that Republicans are out to put the squeeze on them. Make no mistake: they’re plenty mad at Democrats for all the bank-centric bullshit and backroom deals. They are outraged that the same crooks that got bailed out are now kicking them out of their houses. But they aren’t fooled by the phony populism that the Right is spewing. They know that between the two parties, the Democrats at least have a vestigial memory of standing against the brutal income inequality, exploitation, wage depression and ripping of social safety nets that the Right has come to think of as the norm. More affluent folks, on the other hand, are feeling greedier as their uncertainty about the future heightens. Apparently many of them aren’t in the mood to share. The Journal observes that the 2010 trend represents a distinct shift from 2006. “Democrats saw support in their long-term stronghold of low earners, while Republicans – many of whom have espoused tax overhauls that would limit income taxes – saw more support at higher income levels. A two-point edge in 2006 among voters with income between $50,000 and $75,000 a year turned into a deficit for Democrats, the preliminary data showed. And a five-point advantage among those with income of $75,000 to $100,000 has turned into a more substantial deficit for Democrats. These income groups made up a third of the 2010 electorate, early data showed.” Somehow, we have got to convince more of the affluent voters that the ever-widening gap between the rich and poor is not in their interest, no matter how uncertain the future looks. It rips communities apart. It leads to every kind of social ill and unrest, from increased crime to depression to teen pregnancy. It’s ruinous to democracy and it’s even destructive to capitalism. Society will absorb only so much unfairness, only so much disparity between haves and have-nots. Ideas like cutting Social Security, extending tax breaks to millionaires and billionaires, cutting unemployment benefits so that Americans will take any job they can get, no matter how shitty, are the kinds of things these Republicans who have just been elected are going to be talking about. The trick is to get the Democrats to stop getting cowed and call them out. To get them to ask themselves tough questions about how they drifted from their roots, and how they can come back to being the party that they historically have been: the one that protects average, hard-working Joe and Jane. Cross-posted from New Deal 2.0 .

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Heather McGhee: It’s Time to "Out-Jobs" the Conservatives

November 5, 2010

A national referendum on the economy went badly for incumbents on Tuesday, but there’s a clear way for the President to be true to progressive values and regain the political momentum. It’s time to “out-jobs” the conservatives. I imagine my anxious, unemployed aunt looking up at the TV from the dishes she’s washing to listen to a candidate projecting fear and frustration and saying, “yes, he gets it.”  On the campaign trail in a frightening economy, a candidate who echoes voters’ negative emotions doesn’t have to get to solutions.  That’s why if you were one of the 4 out of 10 Americans feeling more economic pain than two years ago, you voted Republican .  It’s also why President Obama will not prevail if we are still near 10 percent unemployment — or worse — in 2012.  Luckily, the right thing to do for my aunt and people like her is also the best thing the President can do to ensure re-election in 2012: put Americans back to work. “But we tried that,” Democrats say.  “The Republicans watered down the first stimulus and then blocked subsequent ones.  And now the American people have sent a clear message that they don’t want more government spending.”  Wrong.  The American people want jobs, jobs, and more jobs.  Yet the President’s party has failed to make the simple case — made effectively even by many conservatives, from Reagan’s chief economist to a Wall Street CEO — that spending is essential to creating jobs in the short-term.  Astonishingly, Democrats in Congress are saying that it’s time to cut spending.  At 10 percent unemployment.  They really are, even though pulling money out of the economy is the most certain way to damage it further and a further-damaged economy is the most certain way to damage their own prospects in 2012.  Don’t get me wrong; I believe the election has a lesson for progressives.  It’s just that conservatives actually ran on two issues: jobs and deficits.  The scary thing is that of these two, the President and his party may wind up earnestly adopting the one that is less politically powerful and downright economically dangerous: the deficit. It’s a terrifying “only-in-Washington” scenario, but it doesn’t have to come true.  Instead, progressives could bring laser-like focus to jobs, putting forward bold plans like a national jobs bill to remind Americans what they get when the government spends.  A jobs bill — not a complex indirect stimulus bill, not something that the conservative message machine could turn into a “death panel” — but jobs, plain and simple.  Making things.  In America.  My out-of-work aunt could look up from clipping coupons to see her President offering a job rebuilding the country she loves; and watch in subsequent horror when conservatives in Congress try and snatch that job away.  And conservatives would most definitely snatch it away, screaming that a jobs bill will raise the deficit. But they’ll have to admit that their only jobs plan — more tax breaks for those they’ve begun calling “jobs creators” instead of “millionaires, billionaires, and multinational corporations” — will raise the deficit by much, much more.  That’s the problem with conservatives’ campaign promise: their narrow economic agenda means that they can’t, cannot, deliver on both jobs and the deficit .  They’ll have to pick one, and for them it’s not really a hard choice.  By picking the deficit, they will prolong an economic recovery in order to campaign against Obama with it in 2012.  Sticking to their anti-tax, anti-spending guns even though it cripples the economy is a gimme… it’s a twofer.  Yet this shouldn’t be a hard choice for the President and his party, either.  The party of working people should find it easy to stand up for the 15 million middle-class Americans who lost their jobs through no fault of their own.  The party of reasoned policy-making should find it easy to listen to economists who say that short-term spending is the only way to put Americans back to work and end this recession-deficit . Choosing to focus on job creation shouldn’t be a difficult policy decision, and for the sake of my aunt, her husband, her children and the future of the middle class, I hope the President agrees. Heather McGhee is the Director of the Washington Office of Demos , a non-partisan policy center that has launched a new progressive project on fiscal policy, www.OurFiscalSecurity.org

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Don Hutson: The Massive Price of ‘Negotiaphobia’

November 1, 2010

Our research and experience have convinced us that “negotiaphobes” in America have left enough money on the table to pay off our National Debt! Why is it that today so many people are reluctant to engage in negotiations? Working with business professionals on six continents has shown that this reluctance to engage in negotiations in both our professional and personal lives is due to a desire to avoid confrontation, a lack of skill in the negotiation process, and a willingness to be a victim and simply live with an (often dysfunctional) status quo. Negotiaphobia is a disease that can be treated. This treatment is simple and it involves learning the various negotiation strategies and the skills to deploy them. Our book, ” The One Minute Negotiator ,” shares an E-A-S-Y three-step process which will get you on the road to fighting back your fears as you become mentally ready to engage and succeed in negotiating for your desired outcomes. We examine this simple yet innovative process below. The E in E-A-S-Y stands for engage … asking yourself “Is this an encounter where a negotiation is possible?” Many people miss these opportunities, as the people they deal with mask them by saying things like, “Of course there is a $20 dollar set up fee.” We all see the big negotiations like tax and health care reform, but we miss the ones such as a drop fee on a rental car. These “small” ones are the exchanges we can do something about and they do impact our discretionary income, and thus our quality of life. Once there appears to be the opportunity to negotiate, the second aspect of this initial step is to quickly review the four viable negotiation strategies presented in a clear 2X2 matrix form in the book. These strategies are avoidance (reactive and low cooperation), accommodation (reactive and high cooperation), competition (proactive and low cooperation) and collaboration – sometimes called win-win (proactive and high cooperation). Each of these four strategies has its place in the various negotiations we face on a daily basis. The “A” in E-A-S-Y prompts negotiators to assess their natural tendencies to use each of the four strategies, as well as the probable tendencies of the party they are negotiating with to follow one of the paths. To assist readers in assessing their own tendencies, The One Minute Negotiator includes a 20-Question self-assessment scale in its fifth chapter. This easy and fun tool can also be downloaded for no charge at www.theoneminutenegotiator.com. We propose that the best read on what strategy someone will use in negotiating with you is how they have negotiated with you in the past. This is the other dimension of negotiaphobia; lack of adaptability. Most people are one-trick ponies as they use the same approach every time. For people we have not negotiated with in the past one of the best reads on behavior is their interaction style. Drivers tend to come out in a very competitive stance, but do not overlook the possibility of winning them over to a collaborative approach. Expressives embrace the idea of win-win collaboration, but they rarely have the attention span to do so. “Strategize” is the third-step in the E-A-S-Y treatment process. Based on the significance of the situation, one’s own tendencies, and the expected strategy to be deployed by the other side or sides, a person now carefully selects their opening and fall-back strategies. The fall-back strategy is a lot like having an umbrella with you. If you have an umbrella in your brief case or your golf bag it rarely ever rains, but leave it in the trunk of your car and prepare to get drenched. On the issue of significance, you should not just look at this one encounter, but look for long-term potential. Some deals, like buying a car, are usually one-offs that push you toward competition. There are other instances where a small opportunity today, if handled collaboratively, could lead to a much larger and recurring deal into the future. Engage, Assess, and Strategize combine to form the “Y” in our acronym… “Your one minute drill.” This is where on a regular basis you automatically cycle through the first three steps as you face any negotiation. This one-minute reflection should become an automatic and very powerful tool to make you a more effective negotiator. We recognize that many negotiations take longer than a minute; some hours, months and even decades. The EASY process, however, will be your guide to get your head in the game for each negotiation encounter. Our personal and coaching experiences clearly show that most negotiations are won or lost before the first words of communication between parties even take place. We know that if you follow the E-A-S-Y process you will have more success and less stress in all areas of your life!

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Robert Reich: Why Aren’t Business Leaders Standing Up to the Tea Party?

October 29, 2010

America’s business leaders have not exactly shied away from offering political views. Verizon CEO Ivan Seidenberg has accused President Obama of creating a hostile environment for investment and job-creation, while General Electric’s Jeff Immelt says the administration is out of sync with entrepreneurs. All of which makes particularly curious the deafening silence of business leaders about the tea party that’s now taking over the GOP and about to take over a chunk of Congress. Maybe business leaders see it as a relatively harmless fringe group advocating the fiscally responsible small-government positions most CEOs agree with. Business leaders should take a closer look. Even if it’s now on the fringe, the tea party won’t be for long. By fueling the Republican surge in the midterm elections, the tea party has become the single most powerful force in the GOP. It’s backing at least 14 Senate candidates, both challengers and incumbents, and is playing a significant role in scores of House races. It has already shaken the GOP to its core, defeating establishment Senators Lisa Murkowski in Alaska and Bob Bennett in Utah, and exerting a strong gravitational pull on many other Republicans, such as Arizona’s John McCain. It will be a force in the run-up to the 2012 presidential election. Presidential aspirant Newt Gingrich has already declared his fealty, and Sarah Palin has become its grande dame. Beyond fiscal rectitude and less spending, tea party candidates are targeting the central institutions of American government. The GOP Senate candidate from Kentucky, Rand Paul, is among several who want to abolish the Federal Reserve. They blame the Fed for creating the Great Recession and believe that the economy would be better off without a single institution in Washington setting monetary policy. Even Maine’s stolid Republican Party, now under tea party sway, has called for eliminating the Fed. In a Bloomberg poll a few weeks ago, 60% of tea party adherents wanted to overhaul or abolish the Fed (compared with 45% of all likely voters). Another tea party target is the Internal Revenue Service. South Carolina Sen. Jim DeMint, who has emerged as the Senate’s leading tea party incumbent, says that his “main goal in the Senate will not only be to cut taxes, but to get rid of the IRS.” Mr. DeMint’s goal is echoed by many tea party candidates, including Arkansas Rep. John Boozman, now running for Senate. At the least, business leaders who complain about uncertainties caused by Mr. Obama’s policies might be concerned. John Castellani, the former head of the Business Roundtable who is now running the Pharmaceutical Research and Manufacturers of America, told Bloomberg Businessweek this month, with remarkable understatement, “This kind of extremism makes it much harder to plan from a business perspective.” GE’s Mr. Immelt may be unhappy with President Obama, but he’ll be far unhappier if the tea party takes over the GOP. Tom Borelli, director of the Free Enterprise Project of the National Center for Public Policy Research, a conservative think tank and vocal supporter of the tea party movement, has demanded Mr. Immelt’s resignation, calling GE an “opportunistic parasite feeding on the expansion of government.” Among Mr. Immelt’s alleged sins: taking federal subsidies for clean energy. In a press release last week, the National Center for Public Policy Research stated clearly: “Liberal CEOs are the next target for tea party activism.” Presumably, business leaders should also be uncomfortable with the Tea Party’s nativism. At the first national convention of the “Tea Party Nation” last February in Nashville, Tom Tancredo, former Colorado congressman and now Tea-Party-sponsored candidate for governor (as an Independent), brought the crowd to its feet by denouncing the “cult of multiculturalism” and accusing immigrants of threatening America’s Judeo-Christian values. “This is our country,” he declared to wild cheers. “Take it back!” More than half of Tea Party backers say they’d be more likely to vote for a candidate who supports changing the 14th Amendment to prevent the children of non-citizens born in the U.S. from automatically becoming citizens. And Tea Partiers strongly support Arizona’s recent immigration law making failure to carrying immigration documents a crime and giving police broad powers to detain anyone suspected of being in the country illegally. “We’re all Arizonans now,” says former Alaskan Gov Sarah Palin. Many Tea Partiers similarly recoil from global institutions and agreements. Minnesota Representative Michele Bachmann, leader of the House’s Tea Party caucus, calls the Group of 20 summit “one short step” away from “one world government,” and suggests America withdraw from international economic organizations. “I don’t want the US to be in a global economy where our economic future is bound to that of Zimbabwe” she says. And a higher proportion of Tea Partiers oppose free trade than does the American population in general. In a recent WSJ/NBC poll, 61 percent of respondents who characterized themselves as Tea Partiers thought trade was bad for America. Under normal times, ideas like these wouldn’t gain much public traction. Why are they now? Because of the continuing effects of the Great Recession. History has shown that people threatened by losses of jobs, wages, homes, and savings are easy prey for demagogues who turn those fears into anger directed at major institutions of a society, as well as individuals and minorities who become easy scapegoats – immigrants, foreign traders, particular religious groups. Were it not for their ongoing economic stresses, Americans wouldn’t be receptive to abolishing the Federal Reserve and the IRS, or believe government and big business were conspiring against them, or turn nativist and isolationist. Business leaders should be standing up to the tea party. And they should be actively supporting policies to relieve the economic stresses that fuel it. Their silence in both regards is not only bad for business; it threatens the stability of our economic and political system. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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