Populism is Not the Problem….

Happy Thanksgiving!  A 2010 flashback… the more things change, the more they stay the same.  Alas in more recent years, the Federal Reserve has become the primary purchaser of U.S. debt, having surpassed China; otherwise, the following piece on many levels still rings true.     - J.M.H. (11-27-2014)

Populism is Not the Problem….

By J.M. Hamilton  (2-8-10)

Populism, as decried in the New Yorker article, is not the problem…. 

Perhaps, populism is sometimes, a little misguided, yes, but in fact, it’s the solution.  As usual the instincts of the American people are, in fact, highly accurate.   And any politician, who wants to survive and navigate these troubled times would do well to heed, get out in front of, and attempt to steer public opinion.   Such is the calling of President Obama, the second coming of the Great Communicator, leading up to these mid-term elections!

As for the populist rallying cry of the Tea-Bag crowd, “cut taxes,” this originates from the public’s inherent fear of big government and rising fiscal deficits.  Obama was elected on a platform of change, and what his administration gave the nation was not change, but a redux of the Clinton’s first years in office.   The bill that was about to be passed by Congress, was NOT healthcare reform (or healthcare cost management), but rather, a serious power grab and an expansion of the welfare state.

And hence, the Massachusetts’ miracle, or debacle, depending upon one’s views!

What Mr. Obama really should have spent his first year doing, instead, was giving the nation real change, by addressing the public’s need for jobs, and shearing Wall Street, and cutting it down to size, via the Volcker Rule and much, much more.  In brief, the taxpayer owned banks should have already been broken up, which – allegedly (per the banks anyway) – creates dis-economies of scale, and hence, by definition, more jobs, via greater inefficiencies.   Breaking up the banks into their core constituent parts would also go a very long way towards eliminating systematic risk; and breaking them up would help prevent the next financial melt-down…. A financial meltdown that this nation can ill afford.

President Obama would have been perceived as a real agent of change had he taken on Wall Street, and given government support to the people, instead of government support/welfare to Wall Street.  Instead enormous piles of the President’s political capital were wasted on millionaires and billionaires.

And what has it got the President?

The banks are now lobbying against real reform, and they are planning Obama’s overthrow, by biding their time, and NOT lending to small and mid-sized businesses.   As we read in today’s NY Times, the banks are in fact getting ready to back the very same Republican party that ran this nation into the ground.  That’s right, the Republican party that has ran record, annual, budget deficits, since Reagan, and unleashed today’s financial crisis, via soft money policies and bank deregulation.  Okay, the Democrats were not exactly absent for the last thirty years – but rarely were they in charge of the executive branch, except for Clinton – who actually ran budget surpluses.

In fairness to President Obama, Mr. Paulson, Goldman Sachs Alum, did set up the President, by attaching little or no strings to TARP lending.   But I digress…. It was Mr. Obama who brought Tim Geithner on board.

Had this administration spent its first year reining in Wall Street’s worst tendencies, and had the President done more to stimulate the economy and create jobs (instead of giving hand outs, on top of hand outs, to the banks)…. One wonders if the Tea-Bag movement would have ever gotten off the ground?  But what we got instead was not change, but business as usual in Washington: finger pointing, half measures, and stalemate.  Exactly, what the Republican party delivered for the last eight years.

As for the populist….it’s important for all of us to remember that tax cuts are always nice, but unless they are coupled with reductions in government spending, they are no better than government spending that is not supported by tax revenue (borrow and spend).   In short, tax cuts w/out corresponding reductions in government spending (Republicans) are no better than increased government spending which is unsupported by an increase in government tax receipts (Democrats), because they both lead to …What?…. greater government borrowing, greater dependence upon our enemy, China, and an ever rising national debt to GDP ratio.

It would be grand to emulate the great supply-siders of the 20^th Century:  Kennedy and Reagan!  (Kennedy proposed reducing the top individual tax rate from 91% to 65%... no your eyes do not deceive you, and the corporate tax rate from 52% to 47%.  Who knew JFK was a radical?)

However, our National Debt no longer allows such extravagances.  Instead, it is this President’s challenge, to create jobs and spur economic growth through means other than government spending.  And what better way to create jobs than to break up the banks, and insist that any foreign banks – operating on U.S. soil – also adhere to U.S. bank law (Volcker Rule, Et Al.), and also be cut down to their proper size.  Otherwise, foreign banks who do not adhere – good-bye.
 
President Obama was very wise to embrace Messrs. Volcker and King’ counsel, post Massachusetts.   Healthcare reform – real cost containment – can wait for another day, like when the unemployment is below 6% again (for two consecutive quarters), and the banks are made to heel!

The President has to do all this with both governmental arms tied behind his back, that would be the House of Representatives and the Senate.   Let us all pray for President Obama’s success!  Obama’s success is our country’s success.   Given the incompetence of the U.S. Congress, the President truly will need divine intervention, and truly deserves our best wishes.   Time for Obama to channel, not only Reagan optimism, but the trust busting courage of Teddy Roosevelt.

 

Copyright JM Hamilton Publishing 2014

The End of History

The End of History

“The president continues to send a signal that he has no intention of moving toward the middle,” said Sen. Mitch McConnell(R-Ky.)  Washington Post, 11-12-2014

By J.M. Hamilton  11-15-2014

Euless, Texas  - (Circa ’89, ’90 and ’91).  From my balcony on a clear Texas night, one could see maybe a dozen aircraft in the air, circling D/FW International or taking off.   It was a spectacular sight, although I sometimes wondered if one of those aluminum birds might come down upon me.  

No less spectacular was the fall of the Berlin Wall.  The 25^th anniversary of which, we recognize this month, here and now, November 9^th, 2014.  For a young Republican, an ardent conservative, who detested freedom crushing dictatorships and totalitarian regimes… that was it.  The fall of the Berlin Wall was the cat’s ass.  Watching East-Germans scale those walls made me very proud to be an American and alive to witness that event.  That feeling was only surpassed two short years later, with the collapse of the Soviet Union. 

The exponentially smarter of the two Bush presidencies was in power, Mr. George Herbert Walker Bush.  And at the time, I confess, I did not understand the man.  Bush Senior, or Poppy, as the clan is said to call him, reneged upon his “read my lips - no new taxes pledge,” and it would cost him a second term.  Then again, Mr. Bush Sr. never believed in what he termed – when campaigning against Ronald Reagan  -“voodoo economics” (aka tax cuts for the rich), which, by ’91, was grounds for excommunication from National Review and the conservative movement. 

For many of us, the elder Bush Presidency was a riddle, and by today’s GOP standards, moderate and entirely unelectable.   He even loaned money to Soviet Union to help Gorbachev prop up the communist regime.  Why was a Republican President helping to prop up the nemesis of freedom?  The Koch Brothers' owned CATO Institute also wanted to know.  And then there was the first Gulf War, where for the first time in my life time, I saw a U.S. President utilize military force to protect commercial oil interests in a highly successful manner: deftly, with an international coalition, a lightning quick victory, and no nation building.

And now, through the prism of time, we can look back and see: this man was right about nearly everything.  H.W. knew federal budget deficits were not sustainable indefinitely, contrary to what Mr. Richard – “deficits don’t matter” – Cheney would have us believe.  While one can disagree with Mr. Bush (H.W.) about going into Iraq in the first place, he clearly knew how to properly use force and correctly eschewed nation building  (The opposite of the Bush Presidency to come).  And as for supporting the Soviet Union, H.W. – a former CIA Director – knew that when the U.S.S.R. crumbled, all sorts of hell was likely to break out in the world, in the forms of religious wars, ethnic cleansing, and popular uprisings. 

Of course, the Soviet Union fell because it was over-extended militarily, bogged down in a nasty war of attrition in Afghanistan (caught in a nation building exercise), its finances were a complete mess, and its economy and economic system didn’t do a whole lot for its people (but consign them to egalitarian poverty).

Sound familiar?  Yes, history repeats time and time again.

For a brief shining moment, in the early ‘90s, America had it all.  It was supposed to be the end of history… as utopian democracy and capitalism would engulf the world, making everyone prosperous beyond belief.  As the only super power left standing, the U.S. could have influenced dictatorships to go democratic, instead of practicing realpolitik by propping up authoritarian regimes, globally, for quarterly profits and short-term commercial gain.  The U.S. could have raised taxes – as Mr. Clinton later did – w/out harming or slowing down the economy; hence, putting money away for the future good of our country and the next bust-cycle, instead of turning on the Fed’s printing presses now, in our time of need. 

Many of today’s problems seem to harken back to the late eighties/early nineties:  the collapse of the Soviet Union, and the decades of strife and war that have followed (some of it of America’s making); not raising taxes during relatively or highly prosperous times (as the Keynesian model proscribes), and the resulting Federal deficits as far as the eye can see (much of these, under Republican administrations and GOP dominated Congresses, no less); and later in the decade, the Democratic Party turning politically right under the Clintons, with their love of Wall Street banks and the resulting campaign contributions, and the Clintons speeding up the process of banking deregulation. 

The foundation for the gross wage & wealth inequality we see in this country today, goes back to the late eighties and early nineties: tax cuts for the rich; the Federal Reserve engineered economy – led by the Maestro; an economy built on debt and finance; and banking and commercial deregulation  (You have to give Reagan, H.W., and Clinton credit.  At least they were smart enough to stay out of long term military engagements, particularly in the Middle-East.)  In short, we are where we are as a nation, because both political parties have bought into the Republican agenda for the last thirty-five years.  Arguably, the only difference between the GOP and GOP-Lite (the Democratic Party) are a handful 50 year old social issues, which goes along way towards explaining the 2014 mid-term route for the Dems.   After all, why wear a condom, when you can go all the way, bareback with the GOP?  (Ponder that analogy, but only for a moment.)

Both parties pander to the business round table, the chamber of commerce, the MIC, and the plutocracy’s agenda, so that in essence we now live in a one party state.  So why vote?  Voters showed their disdain for the one-party state in 2014, by turning up in record low numbers.

We are all slaves to history.   As much as we like imagine our Presidents as omnipotent and all-powerful, they are all too human and highly limited it what they can accomplish.  Their aspirations and goals for the nation and its people, as well as themselves, often fall victim to history and forces beyond their control. 

Fast forward to today, and President Obama.  Mr. Paul Krugman, who I generally admire, recently in the pages of the Rolling Stone, called the President transformative and consequential.   Really?

Granted, just my opinion, but President Obama to date struck me more along the lines of a caretaker President (a preserver of the status quo, and a great friend of the plutocracy), and what a competent Republican administration should look like; President Obama to me, appears more along the lines of a Herbert Walker Bush, than the revolutionary radical the GOP often attempts to portray him to be.  And I think if we viewed Obama’s presidency honestly, and from the perspective of where the GOP was at under Reagan and Herbert Walker Bush, or say even an Eisenhower, vis a vis, today’s Molotov cocktail throwing GOP, why yes, of course, the analysis holds.  

But don’t take my word for it, let’s let numbers and facts speak for themselves.  Let’s call the following analysis the duality of the Obama Presidency.

·      President Obama came into office inheriting the worst economic crisis, since the Great Depression, and two badly botched and grossly mismanaged nation-building exercises.  Moreover, the prior administration – Bush (W) – The Younger – didn’t run a budget surplus in a single year of his eight years in office.   Financial deregulation, from Reagan through Bush II, brought the nation to its knees.

·      So what did the “radical/transformative” Obama do?

·      All the bank bailout measures of the prior administration, were kept and expanded upon by the Obama administration.

·      Not a single bank executive or CEO responsible for the crisis, or subsequent crimes (FOREX, LIBOR, commodities, HFT, derivatives/swaps, money laundering for terrorists, the shafting of consumers and clients, accounting scandals,  etc., etc.) saw jail time, or even faced charges.  Obama’s AG, Mr. Holder, said the Cartel was too big to prosecute.

·      The banks – under Obama  - have grown bigger, more concentrated, and more powerful, as have the economic and power elite.  And Dodd Frank isn’t worth the paper it’s printed upon, in its ability to protect the American people.

·      Thanks in large part to Obama reappointments and appointees at the Fed, the Federal Reserve gunned the printing presses, with predictable results: a rise in nearly all financial and speculative asset classes, a boon to the wealthy and uber wealthy.

·      Meanwhile free trade agreements, globalization, the off-shoring and outsourcing of labor, have led to stagnant wage growth and high and higher rates of unemployment/underemployment, for much of Obama’s time in office.   Cheap labor?  What could be dearer to an employer’s heart?

·      In short, under President Obama the rich have grown wealthier, more powerful, and the middle-class and the poor have been hit hard, with unemployment/underemployment, stagnating wages, and home prices that in many markets never fully recovered .

·      Under fiscal blackmail and brinkmanship executed by the GOP, President Obama signed into law an extension of 82% of the Bush (W) tax cuts for the wealthy.   Obama, like Herbert Walker Bush before him, did not believe in “voodoo economics,” but you wouldn’t know it from the 2012 negotiations.

·      President Obama talks a great game on the climate, and the need to cut carbon emissions.  Further validating POTUS’ claims, the DOD says the climate change is now an issue of national security.  Even Exxon officially acknowledges carbon’s impact on the environment, due to its own product.  And yet, tax breaks for big oil continue, the U.S. production of coal, gas and oil has never been higher, and a concerted and focused effort to move to green technologies and a carbon tax, largely abandoned.

·      On Civil Rights, Obama – thanks in large part to VP Joe Biden – did the right thing by the LGBT community; but minorities are still treated like second and third class citizens in our society.  Whether it’s record levels of incarceration for victimless crimes, like drug possession, or a failure on the part of his administration to act on immigration reform, the President has not taken care of our brown and black citizens, and future citizens.  This has played into the GOPs agenda, perfectly, coupled with voter suppression laws.  Their goal: to disenfranchise the non-white voting public.

·      SCOTUS has tarnished and struck a blow at our democracy, with Citizens United and McCutcheon decisions, but have the Dems pushed for political reform, and a roll back of big money and dark pools of money in politics?   Quite the opposite, the Democratic led Senate crushed an opportunity at reform earlier this year.  Pathetic.

·      On foreign policy, Obama started out well enough, by at least not expanding the number of aimless wars this country was in; but he was slow to pull out of Iraq, and slower still to wind down, Afghanistan.   And even though we are energy independent, there always seems to be an excuse to put more and more boots on the ground in the Middle-East.  Despite energy independence, and a whole cornucopia of domestic issues and problems in this country to solve, the President couldn’t help but start up a new war in Iraq and Syria, so that commercial interests,  and big oil, could continue to operate in Iraq.

·      As a constitutional law prof, you’d think Obama would know better, but Obama has been a great defender of the Surveillance state, and the countless number of agencies and bureaus that make up the intelligence community. 

To be sure President Obama has had zero help from Congress, and in particular The House, first run by Ms. Pelosi, and now run by Mr. Boehner.  The House has done everything to thwart the President, but the President, time and time again, appears to be an all too willing accomplice (in the protection of moneyed interests).

The GOP has moved so far right in this country, in the exclusive service of cartels, money and power, that the Democratic Party – from Clinton forward – has all too often followed suit, if not in lockstep (the Dems moving further right than perhaps H.W., himself).  And then the Dems wonder why the long forgotten and economically disenfranchised voters did not show up in support of their efforts, for the mid-term elections?  Quite the mystery, that.

Either the Democratic Party doesn’t have the strength of its convictions, the intelligence to argue its case, or has become little more than a milder form of the GOP.   At the same time, the party that used to have the likes of Lincoln and Roosevelt in their midst, grows increasingly rabid, reactionary, brittle, and regressed, so that many, like myself, had to finally flee, post – W/Cheney. 

One alternative view, giving Obama the benefit of the doubt, is that the President has had to hold himself back for the last six years.  Reasons as varied as re-election concerns, two mid-terms, being the first president of color, and a legitimate and naïve belief that he could bridge the gap in our political system (alas, what gap is there to bridge in single party plutocracy?)…. May have all factored, to some degree, into his political calculations.

Those chains have been removed now.  President Obama has two years to show the nation: who he really is; to illustrate and demonstrate the real differences between the two parties; to re- launch a progressive agenda; to rein in the MIC, foreign adventures, and the Surveillance state; and to above all - fight for the people and give them a reason to vote again.  Most importantly, while government has a critical role to play in balancing out the needs of the many against the incredible wealth and power of the few… President Obama must show that capitalism works and can work for the many.  The primary way to demonstrate capitalism works for all is to bust up cartels and monopolies, insure competition, and where appropriate, mandate regulatory controls. The government is great at many things, but American workers don’t need more palliatives, like unemployment checks and foods stamps.  What America needs is more jobs and higher wages.

This means business executives will need to practice what H.W. Bush might have called a "gentler and kinder" form of capitalism, than what has been practiced in this country as of late.

Shipping more jobs offshore to the Pacific Rim, in another “free trade bonanza” for the wealthy, would be the wrong move.

By turning sharp left (which is where the political center was two to three decades ago), President Obama will reveal today’s GOP for what they are, slaves to moneyed interests and adversaries to the interests of the majority of Americans.

I know all of these things are in the President: courage, conviction, intelligence and empathy.  I voted for him twice. 

Besides…. What’s the President got to lose?  The GOP is going to spend the next two years stalling and holding impeachment hearings, and/or filing litigation against the President for no good reason.

Get out your Veto pens Mr. President, and your Executive Order pens…. this ride is about to get extremely nasty.  Time to make some history.

P.S.

Not too long ago, the NY Times ran a story about how the GOP missed the good ol’ days under a President Clinton (whom they tried to impeach).  Given what President Obama has done for the wealthy and the plutocracy in this country, I wonder if in a few years time, the GOP will be pining away for those good ol’ “President Obama days?”  Under a Warren Presidency, or even a Paul Presidency, that’s entirely possible.

Copyright JM Hamilton Publishing 2014