Wednesday, May 22, 2013
Tuesday, May 21, 2013
Tan, ready and rested… indeed.
Tan, ready and rested… indeed.
Richard Nixon and the Southern Strategy
“If the Republican Party cannot
win in this environment, it has to get out of politics and find another business,” declared George Will on ABC’s “This Week With
George Stephanopoulos.”
By J.M. Hamilton (11-6-12)
Yesterday marked the 44th anniversary of former
President Nixon’s defeat of Mr. Hubert Humphrey. Mr. Nixon won that
election’s popular vote by the slenderest of margins (the complete inverse of
the thorough stomping Mr. McGovern endured four short years later at the hands
of then President Nixon). More important than the result itself, the 1968
election achieved a built in GOP electoral hedge, in modern presidential
campaigning, that was to last to the present day. That hedge came to be
known as the Southern strategy and counted on a white southern electorate to
vote Republican and against the Democratic Party. The Southern strategy,
with the Bible belt superimposed in the same geographic region, has been a boon
to the GOP and the bane of the DNC ever since. To such an extent that
even conservative Democrats need not apply for office, in nearly all southern
districts.
Up until ’68, white southern voters were deeply committed to
the Democratic Party, as the Republicans were associated with Mr. Lincoln,
carpetbaggers, and the awesome power of the Federal government, versus state’s
rights. For approximately a hundred years, post-civil war, white southern
constituents voted largely as a block with the Democratic Party. The
Kennedys and President Johnson changed all that with the passage of 1960’s
civil rights legislation.
Sensing an opportunity and a wedge issue, the Nixon campaign
swung in to embrace disaffected southern whites. This voting block helped
to cement every Republican President’s ascent and hold on power ever since,
starting with Mr. Nixon.
But this year, this block’s power and the Southern strategy
seems to be on the wane. Mr. Romney’s showing in the polls, despite a
still struggling economy and high unemployment figures, appears to illustrate
that the strategy is doomed – if not now then certainly longer term. Two
generations later, demographic shifts account for much of the strategy’s
failure; but seemingly the RNC’s endless ability to alienate nearly every other
political group/stratification in society, other than the white male, plays an
equally large role.
As an older generation of Americans fades, the RNC and
future Republican candidates are going to have to broaden their horizons, if
this party is to remain viable for executive office. Pundits assertions
that the GOP is an insurgency party, and really doesn’t govern well, are not
without merit (see Mr. Bush – W).
There are many characteristic by which we can measure the
rise and fall of political parties… but in my opinion, one particular measure
is key. That measure, call it the hypocrisy factor, is the number
of revolutions a presidential candidate must turn to distance himself from his
base, once he’s received the nomination, in order to be accepted by the
mainstream (that is, to become electable).
Compare both presidential candidates – this season – on the
basis of the hypocrisy factor, and judge for yourself. If you are honest
with yourself, Mr. Obama – although far from perfect – had to do very little to
become acceptable to the mainstream, since his party’s nomination; while Mr.
Romney has all but turned himself inside out, repeatedly, on nearly every
issue, since obtaining his party’s prize.
What this tells us is not that Mr. Romney is a bad man, but
rather, the thoughts and beliefs of the Republican core are a much greater
distance from today’s mainstream then the thoughts and values of the Democratic
base. Factor in the very shrinking of that GOP base as time takes its
toll, add in demographic trends, and you have a party that is facing
marginalization if not extinction.
That is to say, that while the GOP has swung hard right, the
values – particularly the social mores of the nation – have moderated or become
left of center, vis a vis the GOP base.
The bottom line: Mr. Nixon’s
Southern strategy, no matter what one feels about it, has been highly
successful for over forty years. If this election represents a turning
point in the efficacy of Mr. Nixon’s Southern strategy, then J.M.H. would argue
that the GOP may have to risk jettisoning some extremist groups within their own
party in order to remain viable and ultimately, electable to the presidency.
My guess is the GOP will fare much better without these
elements.
Copyright JM Hamilton
Publishing 2013
Sunday, May 12, 2013
THE EMPEROR WEARS NO CLOTHES: “The last thing we want to do is be defensive or apologetic about the state of our field. But at the same time, we’re not satisfied with it either."
Psychiatry’s Guide Is Out of Touch With Science, Experts Say
By PAM BELLUCK and BENEDICT CAREY
Just weeks before the long-awaited publication of a new edition of the
so-called bible of mental disorders, the federal government’s most
prominent psychiatric expert has said the book suffers from a scientific
“lack of validity.”
The expert, Dr. Thomas R. Insel, director of the National Institute of
Mental Health, said in an interview Monday that his goal was to reshape
the direction of psychiatric research to focus on biology, genetics and neuroscience so that scientists can define disorders by their causes, rather than their symptoms.
While the Diagnostic and Statistical Manual of Mental Disorders, or
D.S.M., is the best tool now available for clinicians treating patients
and should not be tossed out, he said, it does not reflect the
complexity of many disorders, and its way of categorizing mental
illnesses should not guide research.
“As long as the research community takes the D.S.M. to be a bible, we’ll
never make progress,” Dr. Insel said, adding, “People think that
everything has to match D.S.M. criteria, but you know what? Biology
never read that book.”
The revision, known as the D.S.M.-5, is the first major reissue since
1994. It has stirred unprecedented questioning from the public, patient
groups and, most fundamentally, senior figures in psychiatry who have
challenged not only decisions about specific diagnoses but the
scientific basis of the entire enterprise. Basic research into the
biology of mental disorders and treatment has stalled, they say,
confounded by the labyrinth of the brain.
Decades of spending on neuroscience have taught scientists mostly what
they do not know, undermining some of their most elemental assumptions.
Genetic glitches that appear to increase the risk of schizophrenia in one person may predispose others to autism-like symptoms, or bipolar disorder. The mechanisms of the field’s most commonly used drugs — antidepressants like Prozac,
and antipsychosis medications like Zyprexa — have revealed nothing
about the causes of those disorders. And major drugmakers have scaled
back psychiatric drug development, having virtually no new biological
“targets” to shoot for.
Dr. Insel is one of a growing number of scientists who think that the
field needs an entirely new paradigm for understanding mental disorders,
though neither he nor anyone else knows exactly what it will look like.
Even the chairman of the task force
making revisions to the D.S.M., Dr. David J. Kupfer, a professor of
psychiatry at the University of Pittsburgh, said the new manual was
faced with doing the best it could with the scientific evidence
available.
“The problem that we’ve had in dealing with the data that we’ve had over
the five to 10 years since we began the revision process of D.S.M.-5 is
a failure of our neuroscience and biology to give us the level of
diagnostic criteria, a level of sensitivity and specificity that we
would be able to introduce into the diagnostic manual,” Dr. Kupfer said.
About two years ago, to spur a move in that direction, Dr. Insel started a federal project called Research Domain Criteria, or RDoC, which he highlighted in a blog post last week. Dr. Insel said in the blog that the National Institute of Mental Health would be “reorienting its research away from D.S.M. categories” because “patients with mental disorders deserve better.” His commentary has created ripples throughout the mental health community.
For at least a decade, Dr. First and others said, patients will continue
to be diagnosed with D.S.M. categories as a guide, and insurance
companies will reimburse with such diagnoses in mind.
Dr. Jeffrey Lieberman, the chairman of the psychiatry department at Columbia and president-elect of the American Psychiatric Association,
which publishes the D.S.M., said that the new edition’s refinements
were “based on research in the last 20 years that will improve the
utility of this guide for practitioners, and improve, however
incrementally, the care patients receive.”
He added: “The last thing we want to do is be defensive or apologetic
about the state of our field. But at the same time, we’re not satisfied
with it either. There’s nothing we’d like better than to have more
scientific progress.”
Saturday, May 11, 2013
Roll Tide
-->
The Political Tide
Breaks? Roll Tide!
"David Souter and John Paul Stevens (both Republicans) were so repulsed by the party of George W. Bush that they gave the most precious gift any Justice can proffer to his successor, Barack Obama - their seats on the Court." -
The New Yorker, Justice O'Connor Regrets (5-7-13)
"David Souter and John Paul Stevens (both Republicans) were so repulsed by the party of George W. Bush that they gave the most precious gift any Justice can proffer to his successor, Barack Obama - their seats on the Court." -
The New Yorker, Justice O'Connor Regrets (5-7-13)
By J.M. Hamilton
(5-11-13)
There were many recent articles that caught my eye, concerning Mrs. Thatcher's passing. One line in particular really struck home. Perhaps the story was in the Times of London. At the end of her political career, PM Thatcher lamented Labor's rightward shift, and seeing Tory policies co-opted by what was formerly the political left, Labor.... which today, is right of center. Witness the prime example, what the British press referred to as Bush's (W) poodle, PM Tony Blair. Mr. Blair was more Toff than Laborite, and after years of government service, and no experience in the private sector, inexplicably, he parachuted out of office fabulously wealthy. I never dreamed government paid so well? Mr. Blair's foreign policy was closely associated with the neo-cons running Washington during the last decade, and the disasters in Iraq and Afghanistan. To look at the PM and his policies, you never knew the U.K. was being run by the Labor Party.
With PM Blair, Labor's assimilation into Tory establishment, policies and practices was complete.
Labor and in this country, Democrats, were both closely associated with the financial crisis that dropped lady liberty to her knees, also brought down old smoke, and nearly tore the London financial district in two.
J.M.H. has pointed out the rightward shift in this country on many occasions. From acknowledging President Obama as the uber 2012 Republican candidate to writing of the most fiscally conservative President in the last 35 years, Mr. Bill Clinton. In this country Mr. Reagan set off the political plate tectonics with his rhetoric, and Mr. Clinton jumped the Rubicon when he hired campaign advisor Mr. Dick Morris ( Arch - Right Wing Conservative, Senator Jesse Helm's advisor) to help him land his second term. Mr. Morris' advice to the "liberal" Clinton?
Turn hard right.
He did, and some of the worst banking deregulation in last thirty-five years, much of it initiated by Senate Republican Phil Gramm, was passed under Mr. Clinton's watch.
As this blog has asserted previously, in watching the Dems and GOP fall all over themselves to support the plutocracy (with tax breaks, welfare, friendly political appointees, SCOTUS nominees, and government giveaways), at the expense of the remnants of the middle-class, the poor and downtrodden... it's as if we live in a one party state.
That's why I find it so interesting and surreal when I hear the extremist refer to President Obama as Satan. A very good friend of mine, very smart and very conservative, believes that to be the case.
"President Obama is not Satan," I soberly explained. "Why, Mr. Obama would have to stand in line behind Mephistopheles to reclaim his throne from my Ex-wife." But my friend was having none of it. As if to emphasize the evils of government over the relatively benign private sector, he asked the following question.
"What would you rather have, J.M.?
A) A despotic commander and chief? Or
B) A chief executive officer gone rogue?
Which is worse?"
I rejoined, what's worse is the rogue CEO (not that all CEOs are rogue). You see, I replied, we can still vote the President out of office, or let the 22nd Amendment to the Constitution run its course (as aside, it's a damn shame the 22nd doesn't apply to all judgeships and state and federal officeholders). Given the state of shareholder rights today, it is nearly impossible remove an entrenched board or management team from running a company, look at J.P. Morgan and Mr. Dimon's dual role. What's more, some of these corporations have the financial, economic and political power of nation states; and indeed, have balance sheets and incomes statements that exceed the GDP of many small to mid-sized nations. Couple economic and political power with regulatory capture, tax and labor arbitrage, a Citizens United decision, and a toadying Supreme Court, add in zero social responsibility - and well yes, some cartels, monopolies, and corporations have the power to take down the global economy, kingdoms, elected officials and political parties (witness the Wall Street and London banking cartels, circa 2008).
It's monopolistic power that we have to fear, I explained to my friend; our elected politicians are merely servants to this higher private sector power. In fact, I said, Mr. Obama, with no disrespect meant, is a caretaker President, and a very good one at that. He serves corporate interests like any Republican would. Observe the manufactured stock market results, the Wall Street bailouts, his private sector appointees - from Government Sachs and the Wall Street Cartel - to high government regulatory positions, and his friend at the Fed - with the printing press set on over-drive, deficit spending like a Republican on a bender (a la Reagan and both Bush presidencies), irresponsible MIC budgets, and what has become his own war without end, Afghanistan. President Obama, like Mr. Clinton before him, has effectively co-opted GOP domestic and foreign policy in many areas, with the sop of Obama -care, previously Romney-care, thrown to those in need. Not only that, he's emasculated the GOP, while ripping off many of the previous administration's policies.
Don't you see it, Obama - like Mr. Clinton before him - is a Republican? But my friend wasn't buying. My friend is certainly no racist, but I suspect that for too many conservatives, they just can't get past the President's skin color to recognize the President as one of their own. Besides, demonizing the President sells very well, and caters to the extreme right. Hence, the current division within the GOP over immigration reform. Legalize a flood of immigrants and the GOP and the DNC will change forever, as will the balance of power in this country. It's what many caucasians and the elite fear most: Democracy.
My guess is the nation's political establishment has moved so far right, while the general population has moved increasingly towards moderation and tolerance - particularly the youth on social policy, that an articulate and well intentioned left of center candidate might kick some serious A in the next presidential election. (It's an absolute shame that the American public doesn't recognize M&A activity, cartels, private equity, and monopolies for what they are.... job killing, economy draining, opportunity threatening, and private sector taxing succubi. When they do, that's when real political change will occur in this country.) A candidate to the right of Nixon but to left of the ultra-conservative President Obama or even the more right leaning, Hillary, could sweep this nation. That's right, I said it... President Obama, and Hillary, are much further right than President Nixon ever was, while in the White House. It was under Mr. Nixon's watch that the EPA and OSHA were created, wage and price controls set, the dollar was taken off the gold standard, and more great society programs were expanded than Messrs. Kennedy and Johnson ever dreamed of... and of course, it was Nixon, who quite correctly, embraced the Chinese Reds! Mr. Nixon, by today's standards, might appear more like a late 60's acid freak, than a GOP stalwart; but, smartly, he was just catering to the middle-class, the demands of the time, and maintaining his own power.
President Nixon was the last liberal we had in the White House, when we observe his administration's polices, not his rhetoric. And like most moderate establishment Republicans of yesteryear, he appreciated and supported business, but not at the expense, primacy, or efficacy of the government's power, and in particular, his own power.
By comparison than, President Obama appears positively right-wing.
My how the times have changed. Democrats are not only giving the GOP a run for their money, but in fact have run over the GOP in catering to the plutocracy's needs, or at least can be counted on to turn a convenient blind eye to real reform.
And as for the "rogue CEOs" and intransigent board of directors? Well, since many cartel's are dependent upon the state and the taxpayer (e.g. Wall Street) for their very existence, shouldn't the public enjoy at least a 25% share of the board of directors seats? "Revolving door insiders" need not apply. Mr. Buckley once said he rather the nation be ruled by an indiscriminate selection of folks within the Boston phone directory, than the Harvard faculty. Now, there's an idea. Maybe a national lottery to see which members of the public fill those corporate board seats, within the nation's/public's government sponsored cartels and monopolies?
My guess is that if such a proposal were to become law (along with higher reserve requirements, and a substantive interest rate increase at the federal funds window), the nation's banking cartel couldn't get small fast enough. Ms. Thatcher and Mr. Reagan kick-started a right-wing revolution that is with us to this very day, but the tide -she's finally beginning to recede. The Ghost of Ms. Thatcher might rejoice that the Tories and Republicans may have a little less competition in the future, as opposed to support from the Tory-lite and Republican-lite political parties, Labor and the Dems.
There were many recent articles that caught my eye, concerning Mrs. Thatcher's passing. One line in particular really struck home. Perhaps the story was in the Times of London. At the end of her political career, PM Thatcher lamented Labor's rightward shift, and seeing Tory policies co-opted by what was formerly the political left, Labor.... which today, is right of center. Witness the prime example, what the British press referred to as Bush's (W) poodle, PM Tony Blair. Mr. Blair was more Toff than Laborite, and after years of government service, and no experience in the private sector, inexplicably, he parachuted out of office fabulously wealthy. I never dreamed government paid so well? Mr. Blair's foreign policy was closely associated with the neo-cons running Washington during the last decade, and the disasters in Iraq and Afghanistan. To look at the PM and his policies, you never knew the U.K. was being run by the Labor Party.
With PM Blair, Labor's assimilation into Tory establishment, policies and practices was complete.
Labor and in this country, Democrats, were both closely associated with the financial crisis that dropped lady liberty to her knees, also brought down old smoke, and nearly tore the London financial district in two.
J.M.H. has pointed out the rightward shift in this country on many occasions. From acknowledging President Obama as the uber 2012 Republican candidate to writing of the most fiscally conservative President in the last 35 years, Mr. Bill Clinton. In this country Mr. Reagan set off the political plate tectonics with his rhetoric, and Mr. Clinton jumped the Rubicon when he hired campaign advisor Mr. Dick Morris ( Arch - Right Wing Conservative, Senator Jesse Helm's advisor) to help him land his second term. Mr. Morris' advice to the "liberal" Clinton?
Turn hard right.
He did, and some of the worst banking deregulation in last thirty-five years, much of it initiated by Senate Republican Phil Gramm, was passed under Mr. Clinton's watch.
As this blog has asserted previously, in watching the Dems and GOP fall all over themselves to support the plutocracy (with tax breaks, welfare, friendly political appointees, SCOTUS nominees, and government giveaways), at the expense of the remnants of the middle-class, the poor and downtrodden... it's as if we live in a one party state.
That's why I find it so interesting and surreal when I hear the extremist refer to President Obama as Satan. A very good friend of mine, very smart and very conservative, believes that to be the case.
"President Obama is not Satan," I soberly explained. "Why, Mr. Obama would have to stand in line behind Mephistopheles to reclaim his throne from my Ex-wife." But my friend was having none of it. As if to emphasize the evils of government over the relatively benign private sector, he asked the following question.
"What would you rather have, J.M.?
A) A despotic commander and chief? Or
B) A chief executive officer gone rogue?
Which is worse?"
I rejoined, what's worse is the rogue CEO (not that all CEOs are rogue). You see, I replied, we can still vote the President out of office, or let the 22nd Amendment to the Constitution run its course (as aside, it's a damn shame the 22nd doesn't apply to all judgeships and state and federal officeholders). Given the state of shareholder rights today, it is nearly impossible remove an entrenched board or management team from running a company, look at J.P. Morgan and Mr. Dimon's dual role. What's more, some of these corporations have the financial, economic and political power of nation states; and indeed, have balance sheets and incomes statements that exceed the GDP of many small to mid-sized nations. Couple economic and political power with regulatory capture, tax and labor arbitrage, a Citizens United decision, and a toadying Supreme Court, add in zero social responsibility - and well yes, some cartels, monopolies, and corporations have the power to take down the global economy, kingdoms, elected officials and political parties (witness the Wall Street and London banking cartels, circa 2008).
It's monopolistic power that we have to fear, I explained to my friend; our elected politicians are merely servants to this higher private sector power. In fact, I said, Mr. Obama, with no disrespect meant, is a caretaker President, and a very good one at that. He serves corporate interests like any Republican would. Observe the manufactured stock market results, the Wall Street bailouts, his private sector appointees - from Government Sachs and the Wall Street Cartel - to high government regulatory positions, and his friend at the Fed - with the printing press set on over-drive, deficit spending like a Republican on a bender (a la Reagan and both Bush presidencies), irresponsible MIC budgets, and what has become his own war without end, Afghanistan. President Obama, like Mr. Clinton before him, has effectively co-opted GOP domestic and foreign policy in many areas, with the sop of Obama -care, previously Romney-care, thrown to those in need. Not only that, he's emasculated the GOP, while ripping off many of the previous administration's policies.
Don't you see it, Obama - like Mr. Clinton before him - is a Republican? But my friend wasn't buying. My friend is certainly no racist, but I suspect that for too many conservatives, they just can't get past the President's skin color to recognize the President as one of their own. Besides, demonizing the President sells very well, and caters to the extreme right. Hence, the current division within the GOP over immigration reform. Legalize a flood of immigrants and the GOP and the DNC will change forever, as will the balance of power in this country. It's what many caucasians and the elite fear most: Democracy.
My guess is the nation's political establishment has moved so far right, while the general population has moved increasingly towards moderation and tolerance - particularly the youth on social policy, that an articulate and well intentioned left of center candidate might kick some serious A in the next presidential election. (It's an absolute shame that the American public doesn't recognize M&A activity, cartels, private equity, and monopolies for what they are.... job killing, economy draining, opportunity threatening, and private sector taxing succubi. When they do, that's when real political change will occur in this country.) A candidate to the right of Nixon but to left of the ultra-conservative President Obama or even the more right leaning, Hillary, could sweep this nation. That's right, I said it... President Obama, and Hillary, are much further right than President Nixon ever was, while in the White House. It was under Mr. Nixon's watch that the EPA and OSHA were created, wage and price controls set, the dollar was taken off the gold standard, and more great society programs were expanded than Messrs. Kennedy and Johnson ever dreamed of... and of course, it was Nixon, who quite correctly, embraced the Chinese Reds! Mr. Nixon, by today's standards, might appear more like a late 60's acid freak, than a GOP stalwart; but, smartly, he was just catering to the middle-class, the demands of the time, and maintaining his own power.
President Nixon was the last liberal we had in the White House, when we observe his administration's polices, not his rhetoric. And like most moderate establishment Republicans of yesteryear, he appreciated and supported business, but not at the expense, primacy, or efficacy of the government's power, and in particular, his own power.
By comparison than, President Obama appears positively right-wing.
My how the times have changed. Democrats are not only giving the GOP a run for their money, but in fact have run over the GOP in catering to the plutocracy's needs, or at least can be counted on to turn a convenient blind eye to real reform.
And as for the "rogue CEOs" and intransigent board of directors? Well, since many cartel's are dependent upon the state and the taxpayer (e.g. Wall Street) for their very existence, shouldn't the public enjoy at least a 25% share of the board of directors seats? "Revolving door insiders" need not apply. Mr. Buckley once said he rather the nation be ruled by an indiscriminate selection of folks within the Boston phone directory, than the Harvard faculty. Now, there's an idea. Maybe a national lottery to see which members of the public fill those corporate board seats, within the nation's/public's government sponsored cartels and monopolies?
My guess is that if such a proposal were to become law (along with higher reserve requirements, and a substantive interest rate increase at the federal funds window), the nation's banking cartel couldn't get small fast enough. Ms. Thatcher and Mr. Reagan kick-started a right-wing revolution that is with us to this very day, but the tide -she's finally beginning to recede. The Ghost of Ms. Thatcher might rejoice that the Tories and Republicans may have a little less competition in the future, as opposed to support from the Tory-lite and Republican-lite political parties, Labor and the Dems.
PS:
This piece is dedicated to Mr. Alan Abelson, a great
writer, journalist, and one of many inspirations for this blog. His wit, insight, and sardonic humor will be
missed greatly.
And finally, Thanks Mom!
Copyright JM Hamilton Publishing 2013
Copyright JM Hamilton Publishing 2013
Sham Democracy
When Shareholder Democracy Is Sham Democracy
By JAMES B. STEWART
Two weeks ago, I argued that it was hard to imagine a more compelling case for ousting directors than the one posed by Hewlett-Packard.
It turns out there are many stronger cases — 41.
That’s the number of publicly traded companies where directors actually
lost their elections last year, meaning that more than 50 percent of the
shareholders withheld their votes of approval. Yet despite these
resounding votes of no confidence, they remained in their posts.
At least at H.P., all the directors got a majority of the votes cast,
and even then, two resigned and a third gave up his post as chairman.
But at Cablevision Systems,
the New York cable and media company controlled by the Dolan family,
three directors lost shareholder elections twice in the last three years
— in 2010 and 2012 — and received only tepid support in 2011.
Nonetheless, the three remain on the board.
“As fiduciaries, we can’t sit by and let the board make a mockery of our
fundamental right to elect directors,” said New York City’s
comptroller, John Liu, who oversees the city’s pension funds, which own
more than 532,000 Cablevision shares. “Share owners need accountable
directors who will ensure the company isn’t being run for the benefit of
insiders at our expense.”
Mr. Liu sent the company a letter earlier this month urging it not to
nominate the three again and threatening a proxy fight. “The fact that
all three directors remain on the board suggests that one of the few
rights” afforded shareholders is “illusory,” he wrote. Mr. Liu warned
that he’d oppose their election and that “my office will also encourage
other shareholders to join us.”
Mr. Liu didn’t get a response, but a Cablevision spokesman told me this
week, without being specific, that Mr. Liu’s letter was “woefully
misinformed, inaccurate and political.” In proxy materials released by
Cablevision this week, all three directors — Thomas V. Reifenheiser,
John R. Ryan and Vincent S. Tese — were renominated for new terms.
Even directors who resign after losing votes don’t necessarily leave.
Two directors of Chesapeake Energy in Oklahoma, V. Burns Hargis,
president of Oklahoma State University, and Richard K. Davidson, the
former chief executive of Union Pacific, were opposed by more than 70 percent
of the shareholders in 2012. Chesapeake requires directors receiving
less than majority support to tender their resignations, which they did.
The company said it would “review the resignations in due course.”
It later said that the board declined to accept Mr. Hargis’s
resignation, a decision made with the
“input” of the activist
shareholder Carl Icahn and another large shareholder who had voted
against Mr. Hargis. (Mr. Davidson left a month after the vote, but Mr.
Hargis left only last month.)
At Iris International, a medical diagnostics company based in
Chatsworth, Calif., shareholders rejected all nine directors in May
2011. In keeping with the company’s policy, they submitted their
resignations. And then they voted not to accept them. The nine stayed on
the board. (The company was acquired in late 2012 by the Danaher
Corporation.)
A list of companies retaining directors who were rejected by
shareholders in 2012 — so-called zombie directors — was compiled by the
Council of Institutional Investors, which represents pension funds,
endowments and other large investors. The list includes not just
smaller, family-controlled companies, where disdain for shareholder
views may be more ingrained, but also Loral Space and Communications,
Mentor Graphics, Boston Beer Company and Vornado Realty Trust.
“It’s appalling,” Nell Minow, a co-founder of GMI Ratings, which rates
companies based on risk to shareholders, including corporate governance
issues, told me this week. “It’s the No. 1 issue in corporate
governance.” She noted that the reason such a thing was possible was
that many companies operate under a “plurality” voting system, in which
directors run unopposed and just one vote is enough to be elected. And
even companies that require a majority vote may decline to accept a
director’s resignation.
That an electoral system unworthy of Soviet-era sham democracies is
flourishing today in corporate America is largely thanks to the
management- and director-friendly policies of Delaware, where more than
half of United States companies are incorporated and where the corporate
franchise tax contributes disproportionately to the state’s revenue.
State law controls board governance, and Delaware has long tolerated
plurality voting. The Delaware Supreme Court has also affirmed the power
of boards to reject the resignations of directors who fail to gain a
majority of votes.
“We’ve had lengthy correspondence suggesting they change this,” Amy
Borrus, deputy director of the Council of Institutional Investors, told
me. ”We’ve even provided the wording to make it easier. Nothing
happens.”
Ms. Minow agreed. “Delaware is a race to the bottom,” she said. “There’s
no benefit to doing anything friendly to shareholders.“ The only state,
she said, that bars plurality voting is North Dakota — and it’s no
coincidence that no major company is incorporated there.
A spokesman for the Delaware secretary of state’s office, which oversees
the division of corporations, didn’t have any comment.
Defenders of plurality voting have typically argued that majority voting
or elections that would be binding might be destabilizing or disrupt
continuity. But “that’s simply to say that democracy is destabilizing,”
Ms. Minow said. “Continuity is exactly what shareholders voting against
directors do not want. That’s why they’re withholding their votes.”
First and foremost fee for service (FFS), the primary payment arrangement for doctors in the U.S., should be abolished.
Doctor Feelbad
By JM Hamilton (3-31-12)
“Of course I’m respectable, I’m old. Politicians, ugly buildings, and whores all get respectable if they last long enough.” - John Huston (aka Noah Cross) from the movie Chinatown
It would appear that Mr. Huston left doctors off the list of items that become more respectable with time. After all, the practice of medicine must be the second oldest profession (think about that – but only for a second). As my readers know this blog is fond of taking on both the sacred and the profane; and this week we lance that most sacred of boils, the medical profession. Aside from the almighty herself – there is perhaps no group of individuals or body of professionals, we hold in higher regard than doctors and the industries that support same. Perhaps it is because Americans place such a high value on life, and in particular our own, that we have a special fondness – call it near pagan idolatry – for the men and women wearing white coats.
How else can we explain why we would allow this industry/profession to run with double digit cost increases, perennially? There’s no other industry like it. Medical inflation is destroying our Federal and State budgets, and my guess is probably the single biggest reason why corporations and business are reluctant to hire Americans.
And as much as JMH is a fan of President Obama and his administration, replete with it’s many successes, one of its two greatest failures was the Democratic Party’s complete waste of 111th Congress, with the passage of the Patient Care and Affordable Protection Act, otherwise known as the healthcare reform.
Why my disdain for this legislation? After all before it was derisively known as “Obamacare,” it was called “Romneycare” and was originally thought up by a right-wing think tank, the Heritage Foundation. No, the goal of healthcare reform was perfectly acceptable: universal care via the private sector coupled with REFORM (read: cost containment). But the appalling outcome was the complete lack of reform. That is to say, in order to get this dog passed the Democratic leadership had to “suck up” to nearly every medical special interest known to man – but primarily Big Pharma, major corporate hospitals chains, and of course, doctors. Meanwhile, Rome burned, unemployment soared, and the banking industry (the architect of our destruction) grew bigger and more powerful.
Had the 111th passed true health care cost containment, the Democratic Party very well might have addressed the unemployment issue, simultaneously; because employers would not then be confronted with this run away inflationary train.
Next time you look at your ever shrinking paycheck with it’s every shrinking purchasing power, don’t blame your employer — blame ever escalating healthcare costs (and several other predatory monopolies and cartels I enjoy writing about). That’s where your annual pay raise has gone: to pay for double-digit medical care increases. As we know real U.S. wages have been stagnant since the 90’s.
What might true reform have looked like then, so that you might actually enjoy a future payroll increase going forward, that is if both political parties weren’t so slavishly devoted to special interests and had the guts to take on same?
First and foremost fee for service (FFS), the primary payment arrangement for doctors in the U.S., should be abolished. Doctors should be placed on a salary – based upon what the market will afford, and incentivized based upon outcome, cost containment, and preventive care. In exchange for going to a salary, and committing to providing care within the U.S., doctors might be made immune from medical malpractice litigation and some percentage of their medical education paid for; in exchange for foregoing medical malpractice insurance, professional lapses/problems might be reviewed by a board made up of professional peers, and patients.
By placing doctors on salary, and eliminating medical malpractice costs for same, America would take one large step forward in controlling double digit medical cost increases, since doctors would no longer be incentivized to order superfluous tests and exams. And not to get nasty, but if doctors become like any other class of worker in America, we would expect their wages to “flat line.” For as we learned in the last couple of years some captains of industry collude to contain payroll expense, prevent the bidding up of worker income, and eliminate employee poaching (witness the Justice Department settlement with Silicon Valley). Hey if nearly every other industry or business class in America colludes, directly or indirectly, to set the wages of their labor- why should doctors be exempt?
But controlling FFS and doctor wages is just the first step. America is probably the only Western Democracy that does not negotiate the price of medicine and drugs with major pharmaceutical companies (otherwise known as Big Pharma). As a consequence, American labor is uncompetitive, and the drug cartel makes obscene profits. The world, in turn, rides our coattails and benefits from the subsidy America pays Big Pharma. The Washington Post estimates the mark up maybe as high as 20%; and we have all read about contrived shortages of key medicines daily, which further hike profit margins. Right out of the monopoly play book. Big Pharma – with its seemingly never ending patented medicines – is just another monopoly preying upon ordinary Americans and the system; as such it presents an enormous economic drag (i.e. tax).
Profits in America, in turn, finance Big Pharms’ dividends, stock buy backs, mergers and acquisition, with only a small percentage of Big Pharma profits going to finance R&D. As a result, America is going broke, and Big Pharma has grown larger, less efficient and more politically powerful.
America then has one of two solutions: either present a bill to the other Western democracies to pay their fair share of Big Pharma’s mark up (not a likely scenario); or two, negotiate – annually – lower drug costs and margins, like every other country. As this Cartel has shown less productivity in recent years (with a slow down in new medicines), and diseconomies of scale, strong consideration should also be given to breaking up these companies to make them more competitive and more attuned to the free market principles the executives of Big Pharma subscribe to.
Finally, it appears that an absurd and disproportionate amount of annual medical costs are spent prolonging terminal patients last few months of life…. this clearly needs to change. That is, here’s your morphine drip, go home, our prayers are with you, and we’ll see you in heaven. Sound cruel? No, what’s cruel is spending criminal amounts of money to keep Uncle Benny alive for the last three months of his existence, when that money could be spent on preventive care, or even education for our youth. Perish the thought.
Perhaps the one positive that came out of healthcare reform was data collection, and the mandate for electronic records, which could ultimately lead to Artificial Intelligence within the medical field. How many times in the last five years, have you logged onto Web MD and diagnosed your own health problem in advance of your doctor visit? And how often were you, or rather WebMD, found to be correct? Digital medical records, and the accumulation and analysis of medical data, may eventually solve escalating medical costs, w/out reform. The advent of digital medical records and computer diagnostics and diagnosis … may make doctors obsolete, if nothing else certainly general practitioners.
Let’s hope that arrival of medical AI appears before Big Pharma and our white coated friends bankrupt our country and make U.S. employment untenable.
P.S.
Until that day arrives… I just want to go on record as stating that I love my doctor. She’s a wonderful person.
As for politicians who sit in judgment on this law within the Supreme Court (as flawed as it maybe)… I can think of no greater reasons to re-elect our sitting President than to replace these conservative judges, as they retire or shuffle off their mortal coil. Republican governor Rick Perry of Texas did have at least one great idea, while on the campaign trail this year and last…. and that is Americans should not be held hostage by the political beliefs of the judges on the bench in perpetuity. As Noah Cross might have said, some of the older judges on the court have earned our respect, and like any good politician/”jurist,” we wish them well in retirement.
Copyright JM Hamilton Publishing 2013
By JM Hamilton (3-31-12)
“Of course I’m respectable, I’m old. Politicians, ugly buildings, and whores all get respectable if they last long enough.” - John Huston (aka Noah Cross) from the movie Chinatown
It would appear that Mr. Huston left doctors off the list of items that become more respectable with time. After all, the practice of medicine must be the second oldest profession (think about that – but only for a second). As my readers know this blog is fond of taking on both the sacred and the profane; and this week we lance that most sacred of boils, the medical profession. Aside from the almighty herself – there is perhaps no group of individuals or body of professionals, we hold in higher regard than doctors and the industries that support same. Perhaps it is because Americans place such a high value on life, and in particular our own, that we have a special fondness – call it near pagan idolatry – for the men and women wearing white coats.
How else can we explain why we would allow this industry/profession to run with double digit cost increases, perennially? There’s no other industry like it. Medical inflation is destroying our Federal and State budgets, and my guess is probably the single biggest reason why corporations and business are reluctant to hire Americans.
And as much as JMH is a fan of President Obama and his administration, replete with it’s many successes, one of its two greatest failures was the Democratic Party’s complete waste of 111th Congress, with the passage of the Patient Care and Affordable Protection Act, otherwise known as the healthcare reform.
Why my disdain for this legislation? After all before it was derisively known as “Obamacare,” it was called “Romneycare” and was originally thought up by a right-wing think tank, the Heritage Foundation. No, the goal of healthcare reform was perfectly acceptable: universal care via the private sector coupled with REFORM (read: cost containment). But the appalling outcome was the complete lack of reform. That is to say, in order to get this dog passed the Democratic leadership had to “suck up” to nearly every medical special interest known to man – but primarily Big Pharma, major corporate hospitals chains, and of course, doctors. Meanwhile, Rome burned, unemployment soared, and the banking industry (the architect of our destruction) grew bigger and more powerful.
Had the 111th passed true health care cost containment, the Democratic Party very well might have addressed the unemployment issue, simultaneously; because employers would not then be confronted with this run away inflationary train.
Next time you look at your ever shrinking paycheck with it’s every shrinking purchasing power, don’t blame your employer — blame ever escalating healthcare costs (and several other predatory monopolies and cartels I enjoy writing about). That’s where your annual pay raise has gone: to pay for double-digit medical care increases. As we know real U.S. wages have been stagnant since the 90’s.
What might true reform have looked like then, so that you might actually enjoy a future payroll increase going forward, that is if both political parties weren’t so slavishly devoted to special interests and had the guts to take on same?
First and foremost fee for service (FFS), the primary payment arrangement for doctors in the U.S., should be abolished. Doctors should be placed on a salary – based upon what the market will afford, and incentivized based upon outcome, cost containment, and preventive care. In exchange for going to a salary, and committing to providing care within the U.S., doctors might be made immune from medical malpractice litigation and some percentage of their medical education paid for; in exchange for foregoing medical malpractice insurance, professional lapses/problems might be reviewed by a board made up of professional peers, and patients.
By placing doctors on salary, and eliminating medical malpractice costs for same, America would take one large step forward in controlling double digit medical cost increases, since doctors would no longer be incentivized to order superfluous tests and exams. And not to get nasty, but if doctors become like any other class of worker in America, we would expect their wages to “flat line.” For as we learned in the last couple of years some captains of industry collude to contain payroll expense, prevent the bidding up of worker income, and eliminate employee poaching (witness the Justice Department settlement with Silicon Valley). Hey if nearly every other industry or business class in America colludes, directly or indirectly, to set the wages of their labor- why should doctors be exempt?
But controlling FFS and doctor wages is just the first step. America is probably the only Western Democracy that does not negotiate the price of medicine and drugs with major pharmaceutical companies (otherwise known as Big Pharma). As a consequence, American labor is uncompetitive, and the drug cartel makes obscene profits. The world, in turn, rides our coattails and benefits from the subsidy America pays Big Pharma. The Washington Post estimates the mark up maybe as high as 20%; and we have all read about contrived shortages of key medicines daily, which further hike profit margins. Right out of the monopoly play book. Big Pharma – with its seemingly never ending patented medicines – is just another monopoly preying upon ordinary Americans and the system; as such it presents an enormous economic drag (i.e. tax).
Profits in America, in turn, finance Big Pharms’ dividends, stock buy backs, mergers and acquisition, with only a small percentage of Big Pharma profits going to finance R&D. As a result, America is going broke, and Big Pharma has grown larger, less efficient and more politically powerful.
America then has one of two solutions: either present a bill to the other Western democracies to pay their fair share of Big Pharma’s mark up (not a likely scenario); or two, negotiate – annually – lower drug costs and margins, like every other country. As this Cartel has shown less productivity in recent years (with a slow down in new medicines), and diseconomies of scale, strong consideration should also be given to breaking up these companies to make them more competitive and more attuned to the free market principles the executives of Big Pharma subscribe to.
Finally, it appears that an absurd and disproportionate amount of annual medical costs are spent prolonging terminal patients last few months of life…. this clearly needs to change. That is, here’s your morphine drip, go home, our prayers are with you, and we’ll see you in heaven. Sound cruel? No, what’s cruel is spending criminal amounts of money to keep Uncle Benny alive for the last three months of his existence, when that money could be spent on preventive care, or even education for our youth. Perish the thought.
Perhaps the one positive that came out of healthcare reform was data collection, and the mandate for electronic records, which could ultimately lead to Artificial Intelligence within the medical field. How many times in the last five years, have you logged onto Web MD and diagnosed your own health problem in advance of your doctor visit? And how often were you, or rather WebMD, found to be correct? Digital medical records, and the accumulation and analysis of medical data, may eventually solve escalating medical costs, w/out reform. The advent of digital medical records and computer diagnostics and diagnosis … may make doctors obsolete, if nothing else certainly general practitioners.
Let’s hope that arrival of medical AI appears before Big Pharma and our white coated friends bankrupt our country and make U.S. employment untenable.
P.S.
Until that day arrives… I just want to go on record as stating that I love my doctor. She’s a wonderful person.
As for politicians who sit in judgment on this law within the Supreme Court (as flawed as it maybe)… I can think of no greater reasons to re-elect our sitting President than to replace these conservative judges, as they retire or shuffle off their mortal coil. Republican governor Rick Perry of Texas did have at least one great idea, while on the campaign trail this year and last…. and that is Americans should not be held hostage by the political beliefs of the judges on the bench in perpetuity. As Noah Cross might have said, some of the older judges on the court have earned our respect, and like any good politician/”jurist,” we wish them well in retirement.
Copyright JM Hamilton Publishing 2013
Saturday, April 27, 2013
Chairman Bernanke and Trickle Down Monetary Policy
Chairman Bernanke & Trickle Down Monetary Policy
“It’s pretty clear that the stock market is the most important transmission mechanism of monetary policy right now,” said Peter Hooper, chief economist at Deutsche Bank AG in New York.
Bloomberg (10-3-12), Bernanke Seeks Gain for
Stocks in Push for Jobs: Economy
By J.M. Hamilton (10-14-12)
How bad is it when, within the last sixty days, nearly every
central bank in the world has added monetary stimulus to the global economy, or
intimated that they are about to pop the clutch on the printing presses once
again? Answer: Pretty bad.
We are into year four of this crisis, and the politicians
have largely abdicated responsibility, and instead relied upon central bankers
to lead the way. As J.M.H. has written before, monetary policy is a crude
instrument to conduct the affairs of state; and some would argue, myself
included, that central banks have only aggravated the situation, with economic
contagion spreading. Those European governments that are acting to
address fiscal policy and structural reform are doing so under duress, at the
expense of those citizens who can least afford the hardship. Moreover,
these states are addressing these problems at the point of a financial gun;
that is, the threat of having the next ECB or IMF subsidy/bailout
withheld. Even left of center governments, elected because the populace
it tired of choking on bank mandated austerity, find that once they are in
power – they still have to answer to the banks (granted many southern periphery
nations are already under bank management).
Meanwhile the 99% suffer, and the one percent prosper.
Any reasonable leader would suggest that it is in Greece’s
or Spain’s best interest to let the banks go under, and reboot their sovereign
pre-euro currency. Iceland defaulted, let their banks fail, and today
they are economically as right as rain. German politicians, opposed to
bailing out their southern neighbors, are beginning to advocate that the PIIGS
leave the euro. Apparently, not all Germans are enthralled with Ms.
Merkel’s commitment to the banks, I mean Euro, and bailing out their
neighboring states. But its not that simple, and no leader, even left of
center politicians, wants to be responsible for breaking clear of the Euro, or
declaring bankruptcy; because to do so would constitute a credit event, and
more than likely set off economic Armageddon, via a web of credit default swaps
(CDS).
CDS, of course, are insurance products issued by banks that
are used to insure government bonds against default, and are also speculative
instruments used to bet upon sovereign debt and against sovereign
nations. It is these instruments that caused the global crisis in 2008, and
it is these very instruments that prevent the world from clearing the decks,
and breaking free from the economic malaise that binds most Western democracies
to the banking cartel. And as of this date, reform of these CDS
instruments, including clearing houses, putting up collateral to back these
instruments (an impossibility because who has tens of trillion in security to
support a gambling addiction), and transparency, has yet to transpire. It
is these instruments that prohibit governments from restructuring, or rebooting
old or creating new currencies. Why? Because the banks call the
shots and the banks own the governments and the politicians, and again, nobody
wants to responsible for setting off a global doomsday scenario.
The symbiotic relationship between banks and governments
works like this: the banks screw up in another speculative frenzy; tapped
out governments bailout the banks at taxpayer expense; governments borrow to
bailout the banks harming their credit rating; interest rates rise; and central
and national banks invest in what is by now rapidly becoming junk sovereign
debt (witness Spain’s credit rating). Hence, creating another bubble, a
very un-virtuous cycle, indeed. The politicians fail to rein in the
banks, because politicians are owned by them. Meanwhile, the banks and
the right-wingers say the problem is not the bank bailouts, but social policies
and social spending of the various governments – which leads to calls for
austerity. However, in many countries the social spending is but a
fraction of the money and welfare spent on the banking cartel.
The great enabler in all this are the central
banks. The Fed’s stated
mandate of course, is maximum employment and price stability, but their real
master is the banking cartel, who is calling the shots.
Take the U.S. housing market for instance, which has laid
like a dead dog in the street for four to fives years now. The engine of
economic growth, the arbiter of Main Street health, and the storehouse of the
public’s wealth – I write of course of the residential housing market – has
languished, losing in some markets as much as thirty percent of it’s
value. Why? Because nobody has untangled the mess that the bank
created: MBS and CDO products, and the MERS registry system.
The banks, of course, don’t want engage in traditional
lending (preferring instead speculation in securities, commodities, private
equity/hedge funds, and public debt), and so have held the economy and the
nation’s housing market hostage, by insisting that the collateralized mortgage
market – or debt securitization – be reinvigorated, so that they can generate
huge fees, w/out maintaining any underwriting responsibility for their loans or
tying up bank capital.
Whew!
Entre Fed and Chairmen Bernanke, once again: and rather than
announce QE4, QE5, etc, etc, etc… the Fed has said it will continue to purchase
MBS from the banks in perpetuity to the tune of 40 billion per month, at
taxpayer expense.
Gee, do you see another housing bubble on the horizon, with
the taxpayer holding the bag yet again? Instead, however, when this
blows, the banks will be able to point their collective fingers at the Fed, and
blame the public sector once again. Much of the MBS undoubtedly ends up
with the GSEs, Freddie and Fannie, which is a favorite whipping boy of the GOP.
With the Fed buying MBS, this frees the banks to pump up a
stock market that no rational or sane adult will invest in, because the stock
market is now about as safe as a crack den in a very bad part of town.
Mr. Jamie Dimon, on the heals of Chairmen Bernanke’s
announcement of unlimited MBS purchases, states that the housing recovery is
now underway. His bank and the cartel got their way, a reinvigorated
collateralized debt market, and now the taxpayer sponsored lending can begin in
earnest. There’s just two problems: one in five mortgage owners is
underwater, and there are still millions of unsold homes in the inventory, many
of which are kept conveniently on the sidelines so that home prices can begin
to reflate.
Meanwhile, the consumer – the engine of economic growth – is
tapped out, mired in debt, and in many instances upside down or underwater on
their home loan. The banks refuse to write down the home loans, and do
not have to because of the Fed’s easy money policies and interest rate
suppression. The consumers only means of getting out from under their
debt is wage inflation, but wages in this country are suppressed by
unemployment and free trade and globalization -which SURPRISE benefit the one percent
and the banks. As evidenced by Japan, both the banks and the politicians
are willing to wait a generation or more until a real recovery ensues, and home
prices reflate; as they control the Fed and global central banks, and as they
are wrapped in a cocoon of liquidity – the cartel feels little pain.
In short, Keynesian policy is working very well
for the one percent, and has shielded the banks from their responsibility in
this crisis. However, Keynesian policy is doing very little for the rest
of the nation, because the Cartel is not lending the money out, and it is
having little stimulative impact upon the economy.
They say the definition of insanity is doing the same thing
over repeatedly, and getting the same negative outcome; but nobody has the cojones
to call Fed policy insane. The savers in this country are being robbed,
via interest rate suppression, so that the folks who put this nation into the
tank can prosper in the stock market and with alternative speculative
investments, like commodities and fuel (which again, give the 99% the shaft).
Having failed in their endeavor to rescue the American
economy, the Fed’s monetary policy now appears to be trickle down, at best.
That is, the reflation of asset prices, like stocks and commodities, in the
hopes that the rich and the elites will spend more, and the breadcrumbs will
come floating down to the 99%. This is the very policy that Democrats
decry, when Republican reverse engineer taxation in favor of the wealthy.
There’s just two problems with trickle down policies, whether they be tax or
monetary policy: wealth has become increasingly concentrated into too few
hands, and the consumer is tapped out… both of which leads to a decreased
economic demand.
In short, trickle down monetary policy does not work.
And QE3, et al., only prolongs the very painful deleveraging process.
An alternative path? Having failed in its endeavor,
and because Keynesian monetary policy is now facing the roadblock of a very nasty
cartel, the Fed could consider an alternative solution, which is to raise
interest rates, like Mr. Volker did in the late seventies and early
eighties. This will force banks to write down asset prices, and offer to
restructure or forgive debt on home loans. This will allow housing to
bottom and recover. Higher interest rates would stop commodity
inflation. It will put interest income back into the hands of savers and
the consumer who have fled the stock market for good reason, and spread the
wealth of monetary policy throughout all saving classes of society – instead of
into the hands of a few. And it would help get this country on its feet
again, as savers began to spend. This in turn will generate growth and
opportunity, and an expand the tax base and reinvigorate the economy. Higher
interest rates would also force politicians to finally put their fiscal house
in order, as well as reform the stock market, since capital would flow to bonds
and money market funds. Outlawing CDS until this crisis is over, and unwinding
these bets, means that the bank’s financial gun held to our collective head
simply disappears. It’s one thing to ask taxpayers to bailout a nation,
it’s another thing, entirely, for the public support those who bet and gambled
against a nation and her people, in the first place. Telling FHFA
director DeMarco to move forward and compete against the cartel is also the
appropriate thing to do, since lending rates have not fallen as rapidly as the
banks borrowing costs.
Of course, there could be short-term side affects to
increasing interest rates… some banks might fail, some governments might
default, and some of the one percent might get burned betting against nation
states and their economies. In the short run, there would undoubtedly be
economic hardship and dislocation, but for a finite period of time. The
alternative, however, and the path we are presently on, is a stagnant economy,
sub par growth, a more polarized society, higher headline inflation, and a
Federal Reserve/GSEs loaded up with MBS and CDOs. Not to a mention the
ticking time bomb of a disorderly default scenario.
And yet, another housing bubble on the horizon, instigated
by the Fed.
Isn’t it time for the Fed to reconsider its bank-centric
economic policies, and failed trickle down monetary policy?
Copyright JM Hamilton
Publishing 2013
Friday, April 26, 2013
In some cases, we have favored more radical proposals, including debt restructuring...
Debt, Growth and the Austerity Debate
By CARMEN M. REINHART and KENNETH S. ROGOFF
CAMBRIDGE, Mass.
IN May 2010, we published an academic paper, “Growth in a Time of Debt.”
Its main finding, drawing on data from 44 countries over 200 years, was
that in both rich and developing countries, high levels of government
debt — specifically, gross public debt equaling 90 percent or more of
the nation’s annual economic output — was associated with notably lower
rates of growth.
Given debates occurring across the industrialized world, from Washington
to London to Brussels to Tokyo, about the best way to recover from the
Great Recession, that paper, along with other research we have
published, has frequently been cited — and, often, exaggerated or
misrepresented — by politicians, commentators and activists across the
political spectrum.
Last week, three economists at the University of Massachusetts, Amherst, released a paper
criticizing our findings. They correctly identified a spreadsheet
coding error that led us to miscalculate the growth rates of highly
indebted countries since World War II. But they also accused us of
“serious errors” stemming from “selective exclusion” of relevant data
and “unconventional weighting” of statistics — charges that we
vehemently dispute. (In an online-only appendix accompanying this essay, we explain the methodological and technical issues that are in dispute.)
Our research, and even our credentials and integrity, have been furiously attacked in newspapers and on television.
Each of us has received hate-filled, even threatening, e-mail messages,
some of them blaming us for layoffs of public employees, cutbacks in
government services and tax increases. As career academic economists
(our only senior public service has been in the research department at
the International Monetary Fund) we find these attacks a sad commentary
on the politicization of social science research. But our feelings are
not what’s important here.
The authors of the paper released last week — Thomas Herndon, Michael
Ash and Robert Pollin — say our “findings have served as an intellectual
bulwark in support of austerity politics” and urge policy makers to
“reassess the austerity agenda itself in both Europe and the United
States.”
A sober reassessment of austerity is the responsible course for policy
makers, but not for the reasons these authors suggest. Their conclusions
are less dramatic than they would have you believe. Our 2010 paper
found that, over the long term, growth is about 1 percentage point lower
when debt is 90 percent or more of gross domestic product.
The University of Massachusetts researchers do not overturn this
fundamental finding, which several researchers have elaborated upon.
The academic literature on debt and growth has for some time been
focused on identifying causality. Does high debt merely reflect weaker
tax revenues and slower growth? Or does high debt undermine growth?
Our view has always been that causality runs in both directions, and
that there is no rule that applies across all times and places. In a paper
published last year with Vincent R. Reinhart, we looked at virtually
all episodes of sustained high debt in the advanced economies since
1800. Nowhere did we assert that 90 percent was a magic threshold that
transforms outcomes, as conservative politicians have suggested.
We did find that episodes of high debt (90 percent or more) were rare,
long and costly. There were just 26 cases where the ratio of debt to
G.D.P. exceeded 90 percent for five years or more; the average high-debt
spell was 23 years. In 23 of the 26 cases, average growth was slower
during the high-debt period than in periods of lower debt levels.
Indeed, economies grew at an average annual rate of roughly 3.5 percent,
when the ratio was under 90 percent, but at only a 2.3 percent rate, on
average, at higher relative debt levels.
(In 2012, the ratio of debt to gross domestic product was 106 percent in
the United States, 82 percent in Germany and 90 percent in Britain — in
Japan, the figure is 238 percent, but Japan is somewhat exceptional
because its debt is held almost entirely by domestic residents and it is
a creditor to the rest of the world.)
The fact that high-debt episodes last so long suggests that they are
not, as some liberal economists contend, simply a matter of downturns in
the business cycle.
In “This Time Is Different,” our 2009 history of financial crises over
eight centuries, we found that when sovereign debt reached unsustainable
levels, so did the cost of borrowing, if it was even possible at all.
The current situation confronting Italy and Greece, whose debts date
from the early 1990s, long before the 2007-8 global financial crisis,
support this view.
http://www.nytimes.com/2013/04/26/opinion/debt-growth-and-the-austerity-debate.html?nl=todaysheadlines&emc=edit_th_20130426
The 1 Percent’s Solution
The 1 Percent’s Solution
By PAUL KRUGMAN
Economic debates rarely end with a T.K.O. But the great policy debate of
recent years between Keynesians, who advocate sustaining and, indeed,
increasing government spending in a depression, and austerians, who
demand immediate spending cuts, comes close — at least in the world of
ideas. At this point, the austerian position has imploded; not only have
its predictions about the real world failed completely, but the
academic research invoked to support that position has turned out to be
riddled with errors, omissions and dubious statistics.
Yet two big questions remain. First, how did austerity doctrine become
so influential in the first place? Second, will policy change at all now
that crucial austerian claims have become fodder for late-night comics?
On the first question: the dominance of austerians in influential
circles should disturb anyone who likes to believe that policy is based
on, or even strongly influenced by, actual evidence. After all, the two
main studies providing the alleged intellectual justification for
austerity — Alberto Alesina and Silvia Ardagna on “expansionary
austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt
“threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out.
And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings, while many economists raised fundamental questions about Reinhart-Rogoff long before we knew about the famous Excel error.
Meanwhile, real-world events — stagnation in Ireland, the original
poster child for austerity, falling interest rates in the United States,
which was supposed to be facing an imminent fiscal crisis — quickly
made nonsense of austerian predictions.
Yet austerity maintained and even strengthened its grip on elite opinion. Why?
Part of the answer surely lies in the widespread desire to see economics
as a morality play, to make it a tale of excess and its consequences.
We lived beyond our means, the story goes, and now we’re paying the
inevitable price. Economists can explain ad nauseam that this is wrong,
that the reason we have mass unemployment isn’t that we spent too much
in the past but that we’re spending too little now, and that this
problem can and should be solved. No matter; many people have a visceral
sense that we sinned and must seek redemption through suffering — and
neither economic argument nor the observation that the people now
suffering aren’t at all the same people who sinned during the bubble
years makes much of a dent.
But it’s not just a matter of emotion versus logic. You can’t understand
the influence of austerity
doctrine without talking about class and
inequality.
What, after all, do people want from economic policy? The answer, it
turns out, is that it depends on which people you ask — a point
documented in a recent research paper
by the political scientists Benjamin Page, Larry Bartels and Jason
Seawright. The paper compares the policy preferences of ordinary
Americans with those of the very wealthy, and the results are
eye-opening.
Thus, the average American is somewhat worried about budget deficits,
which is no surprise given the constant barrage of deficit scare stories
in the news media, but the wealthy, by a large majority, regard
deficits as the most important problem we face. And how should the
budget deficit be brought down? The wealthy favor cutting federal
spending on health care and Social Security — that is, “entitlements” —
while the public at large actually wants to see spending on those
programs rise.
You get the idea: The austerity agenda looks a lot like a simple
expression of upper-class preferences, wrapped in a facade of academic
rigor. What the top 1 percent wants becomes what economic science says
we must do.
http://www.nytimes.com/2013/04/26/opinion/krugman-the-one-percents-solution.html?nl=todaysheadlines&emc=edit_th_20130426&_r=0
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