Showing posts with label Big government. Show all posts
Showing posts with label Big government. Show all posts

Thursday, November 1, 2012

Hurricane Sandy and the Myth of the Big Government-vs.-Small-Government Debate


by Matt Taibbi
 
Quite a shock the other day to look out my window in Jersey City, and see the Hudson River rushing over what used to be the street in front of my building. For nearly three days my dog and I played Robinson Crusoe and Friday, sleepily watching from our little apartment-island while we waited for hot water, cell service, the internet, even elevators to come back on line.

When I finally got back on the internet and was able to read the news again, I saw that Hurricane Sandy, in addition to being the rare storm to live up to its televised hype, had turned into the last-minute curveball plot twist that always seems to pop up in presidential races.

Some of those twists we hear about – like the sudden appearance of records from George W. Bush's 1976 drunk driving arrest in Maine – while others, like Dick Nixon's apparent secret negotiations with the Vietnamese in 1968, or the more-likely-mythical October Surprise deal involving Reagan and the Iran hostages in 1980, remain secrets until later on.

But this massive hurricane is apparently turning into a boon for Barack Obama on a number of fronts. One, it's allowed him to be seen all over television taking charge and acting presidential, and has even allowed him to brandish bipartisan credentials through the curiously intense bromance that he has developed this week with our own New Jersey Governor Chris Christie (a Romney supporter who, somewhat mysteriously, has gone out of his way to praise the president this week).

On a deeper level, though, the hurricane has seemingly made a powerful argument on Obama's behalf about the role of government in general. The media is casting this as a stark and simple dichotomy. Mitt Romney, the rhetoric goes, is on record as having favored cuts to disaster relief agencies like FEMA ("We cannot afford to do those things without jeopardizing the future for our kids," he said in a primary debate last year), while his running mate, Paul Ryan, has been even more hostile to FEMA ("When disaster-relief decisions are not made judiciously, limited resources are diverted away from communities that are truly in need," he said just last March).

Obama, meanwhile, has reportedly embraced FEMA in the past, and is certainly doing so now, with his comments this past week seeming to argue in favor even of an increase in FEMA spending, noting the frequency of "these kinds of storms."

The storm is also purportedly casting in a kinder light Obama's general attitude toward government, until now often described as an electoral weakness. Pre-Sandy, pundits usually raked the president over the coals for openly embracing the role of government in society during a time when anti-government sentiment is at an all-time high. In the first debate, for instance, his answer to a question about his view of the role of government was considered a dud:
I also believe that government has the capacity — the federal government has the capacity to help open up opportunity and create ladders of opportunity and to create frameworks where the American people can succeed.
It's this kind of language that's allowed opponents of Obama to cast him as the "redistributionist-in-Chief": a man who openly believes that government can help provide "ladders of opportunity." That language is particularly annoying to pure free-market ideologues, who have often claimed the "ladders of opportunity" phrase for themselves, but only in the context of their being provided by the private sector.

Anyway, enter Hurricane Sandy. Suddenly, it seems that most of the mainstream press – as if speaking through one voice – has finally decided that the storm has settled the big-government-versus-small-government argument, with Obama coming out the clear winner. There were a number of online columns like the one by USA Today's Amanda Marcotte, who wrote that "Sandy Shows Why Romney's Wrong on FEMA," or by Catherine Poe at the Washington Times, who pitched in with "FEMA to the Rescue: Why Obama is Right and Romney Was Wrong."

But more than a few outlets used the storm to make an even bigger case for government in general. Up north, for instance, the Globe and Mail decreed that "Superstorm Bolsters Obama's Big-Government Argument". But the more striking piece was the uncharacteristically brazen editorial in the New York Times, titled "A Big Storm Requires Big Government," in which the Times harshly criticized George Bush's cavalier attitude toward disaster relief in the years leading up to Katrina, and argued generally for the necessity of a broadly strong government.

The Times headline was instantly mocked by both the Heritage Foundation, who called it "a shameless attempt to politicize Hurricane Sandy," and the Wall Street Journal ("A Big Storm Requires Big Bird"), which used the editorial as an opportunity to wittily attack the Grey Lady:
Some people prepare for natural disasters by stocking up on food, water and batteries. At the New York Times, they stockpile tendentious ideological arguments.
The editorialists at the Wall Street Journal have a lot of balls themselves calling out anyone else for mass-producing tendentious ideology, but that's another argument for another day. The point is that the storm has become a flash-point for a new media meme: Obama is for big government (which is suddenly a good thing), Romney is for small government (and wants to take rafts and blankets away from flood victims), and goodness gracious, aren't we lucky that we got to see such a clear, real-world demonstration of the important philosophical differences between these two candidates in the week before the election.

All year, the press has been banging a similar drum, i.e. that Mitt Romney and his budget-slashing sidekick Paul Ryan are for small government, while the closet socialist Barack Obama and his old-school New Dealer VP Joe Biden are the obvious big-government candidates.

The only problem with this new line of rhetoric is that it isn't really true. The almost certain reality is that we'll end up with a big (and perhaps even a rapidly-expanding) government no matter who gets elected. People seem to forget that this time four years ago, George W. Bush was winding down one of the most activist, expensive, intrusive presidencies in history, an eight-year period that saw a massive expansion in the size of the federal government. Almost exactly four years ago, this is what the conservative Washington Times wrote about the outgoing president:
George W. Bush rode into Washington almost eight years ago astride the horse of smaller government. He will leave it this winter having overseen the biggest federal budget expansion since Franklin Delano Roosevelt seven decades ago.
Bush, it is true, consistently expanded the size of the federal bureaucracies almost across the board during his eight years in office, greatly increasing the size of government just in terms of sheer numbers and volume of spending, but that wasn't all he did.

People forget that he also took a major qualitative step forward in expanding the role of government, when in 2008 his Treasury Secretary, Hank Paulson, teamed up with then-Fed official and Paulson's future counterpart in the Obama administration, Tim Geithner, to design a series of financial bailouts and state-aided mergers. The bailout program that began under Bush cost trillions of dollars and left the state hopelessly and irrevocably involved in the insurance, banking and auto industries, among other things.

But within a few years, that was forgotten. Forget about the myth that the Republican Party is sincerely interested in reducing the size of government: the real myth is that the American people are in favor of reducing the size of government. And that myth was alive and well again by the summer of 2010, in the runup to midterm elections. Back then, Slate columnist Anne Applebaum described the national self-deception this way:
Americans on both the left and the right have, for the last decade, consistently voted for high-spending members of Congress and consistently supported ever-higher levels of government intervention and regulation at all levels of public life. As a result, the federal government expanded under George W. Bush's administration at a rate that was, at least until President Barack Obama came along, totally unprecedented in U.S. history.
In the abstract, most Americans want a smaller and less intrusive government. In reality, what Americans really want is a government that spends less money on other people.

Hurricane Sandy is a perfect, microcosmic example of America's attitude toward government. We have millions of people who, most of the year, are ready to bash anyone who accepts government aid as a parasitic welfare queen, but the instant the water level rises a few feet too high in their own neighborhoods, those same folks transform into little Roosevelts, full of plaudits for the benefits of a strong state.

The truth is, nobody, be he rich or poor, wants his government services cut. Drive up and down route 128 outside Boston, you'll see a lot of affluent white people waving Romney signs, complaining about entitlement spending. But about four thousand percent of those same people working along the high-tech ring there are totally dependent on the Pentagon contracts that keep doors open at companies like Raytheon and General Dynamics.

Here in the tri-state area, and especially in the lower Manhattan region I'm staring at out my window right now, you'll get much of the same – lots of whining now about deficit spending and the parasitical 47%, but also conspicuous silence a few years ago, when in one fell swoop, taxpayers had to spend about twice the amount of the annual federal budget just to save bonus seasons on Wall Street for the few thousand of our local assholes who nearly blew up the world economy.

And a lot of those same parasite-bashing, Randian pure-market ideologues were in full pucker mode for all of this past summer, while they waited in frank desperation for the Fed to announce a third Quantitative Easing program – in which the Fed will henceforth inject $85 billion of raw, uncut welfare into the financial services industry's bloodstream every month.

Programs like QE are always defended as being necessary to stimulate the economy in general, and who knows, maybe they are – but it's conspicuous that a crowd of people who normally hate "government spending" are suddenly overflowing with praise for the Fed's wisdom and logical explanations for why this massive pseudo-state intervention is necessary.

The point is, we will end up with a big government no matter who wins next week's election, because neither Mitt Romney nor Barack Obama is supported by a coalition that has any interest in tightening its own belt. The only reason we're having this phony big-versus-small argument is because of yet another longstanding media deception, i.e. that the only people who actually receive government aid are the poor and the elderly and other such traditional "welfare"-seekers. Thus a politician who is in favor of cutting services to that particular crowd, like Mitt Romney, is inevitably described as favoring "small government," no matter what his spending plans are for everybody else.

But everyone lives off the government teat to some degree – even (one might even say especially) the very rich who have been the core supporters of both the Bush presidency and Romney's campaign. Many are industrial leaders who would revolt tomorrow if their giant free R&D program known as the federal military budget were to be scaled back even a few percentage points. Mitt's buddies on Wall Street would cry without their bailouts and dozens of lucrative little-known subsidies (like the preposterous ability of certain banks to act as middlemen in transactions when the government lends money to itself).

And if it's not outright bailouts or guarantees keeping the rich rich, it's selective regulation and carefully-carved-out protections from competition – like the bans on drug re-importation or pharmaceutical price negotiation for Medicare that are keeping the drug companies far richer than they would be, in the pure free-market paradise their CEOs probably espouse at dinner parties.

The evolution of this whole antigovernment movement has been fascinating to watch.
People who grew up in public schools, run straight to the embassy the instant they get a runny nose overseas, stuff burgers down their throats without worrying about E. Coli and sleep happily in planes they know have been inspected by the FAA (I regularly risked my life in Aeroflot liners for a decade and know the difference), can with straight faces make the argument that having to pay any taxes at all is tyranny. 

It's almost as if people feel the need to announce that they don't need any help with anything, ever – not even keeping bridges safe or drinking water clean.

It's this weird national paranoia about being seen as needy, or labeled a parasite who needs government aid, that leads to lunacies like the idea that having a strong disaster-relief agency qualifies as a "big government" concept, when in fact it's just sensible.

If everyone could just admit that government is a fact of life, we could probably do a much better job of fixing it and managing its costs. Instead, we have to play this silly game where millions of us pretend we're above it all, that we don't walk on regularly-cleaned streets or fly in protected skies. It shouldn't take a once-in-a-generation hurricane for Americans to admit they need the government occasionally, but that's apparently where we are.

Thursday, June 30, 2011

What are You Going to Do About the Empire?

So You Say You Aren't a Secessionist
By THOMAS NAYLOR

Then what are you going to do about the Empire? More specifically, how will you deal with the following:

Governance
  • The complete loss of moral authority of a government owned, operated, and controlled by Wall Street, Corporate America, and the Israeli Lobby.
  • An empire which is economically, militarily, politically, morally, socially, and environmentally unsustainable because it is too big.
  • A nation governed by a single political party disguised as a two-party system.
  • Congressional gridlock – an ungovernable nation which is, therefore, unfixable.
  • The fantasy of campaign finance reform as a panacea for solving most of our problems.
  • A populace which still believes that only the U.S. government can solve all of our problems all of the time, failing to realize that the U.S. government is the problem.

Foreign Policy
  • A foreign policy based on full spectrum dominance, imperial overstretch, might makes right, and the proposition, just be like us.
  • The disproportionately large influence which the Israeli Lobby has on American foreign policy.
  • Our inflammatory policy towards Iran.
  • Our lack of commitment to an Israeli-Palestinian peace process.
  • The support we provide to dictators and authoritarian leaders in the Middle East, North Africa, and the rest of the world.
  • The Cuban embargo.
  • Our predisposition towards the use of the military option in resolving international conflicts.

Military Might
  • The never ending, highly racist war on terror (Islam).
  • Our immoral, illegal, undeclared wars in Afghanistan, Iraq, Libya, Pakistan, Palestine (via Israel), and Yemen.
  • The 1.6 million American troops stationed at over 1,000 military bases in 153 countries.
  • The 80,000 American troops stationed in Europe, the 36,000 in Japan, and the 30,000 in Korea.
  • NATO, the 27-nation Cold War relic which has lost its way.
  • Ronald Reagan’s fantasy of a strategic missile defense system.
  • The American led proliferation of weapons of mass destruction.
  • The unconditional military support provided to the right-wing Likud government of Israel.
  • America‘s unchallenged position as the world’s leading arms merchant.
  • American pilotless drone aircraft spreading death and destruction worldwide.
  • The outrageously expensive F-35 fighter jets which cost $115 million a pop.
  • The trillion-dollar plus military and national security budget.

Civil Liberties
  • The Patriot Act, the Military Commissions Act, and the proposed Detainee Security Act.
  • The highly intrusive, money-guzzling Department of Homeland Security.
  • Prisoner abuse and torture.
  • The rendition of terrorist suspects.
  • White House ordered assassinations.
  • The Guantanamo prison.
  • Citizen surveillance and the suppression of civil liberties.

The Economy
  • A moribund housing market.
  • An inability to create enough real jobs to compensate for those exported to China, India, and elsewhere over the past two decades.
  • Stagnant real incomes for all but the super-rich.
  • An ever widening income gap between the rich and the poor.
  • Increases in the number of people who find themselves to be among the poor, homeless, or uninsured (no health insurance).
  • A multi-trillion dollar national debt.
  • Increased dependence on China, Japan, and other foreign countries to finance our national debt.
  • A government which prints money as though it were going out of style.
  • Uncertainty about the future value of the U.S. dollar and the rate of inflation.
  • An unreliable system of public and private retirement pension systems.
  • Uncertainty over the sustainability of Social Security and Medicare.
  • A financial regulatory system which favors Wall Street mega-banks at the expense of ordinary citizens.
  • An organized labor movement which has been rendered impotent by two decades of hostile, anti-labor employers such as Wal-Mart.
  • An economy driven by our intense psychological need to fill our spiritual and emotional vacuum with more and more stuff and the illusion that the accumulation of wealth and material possessions can provide meaning to life. Whoever dies with the most toys, wins the game.
  • Wal-Mart with its seductive low prices and the promotion of the idea that what life is all about is unrestrained personal consumption.

Social Services
  • A health care system driven by fear of death on the demand side and greed on the supply side which is spiraling out of control.
  • Over two million people in prison.
  • An international war on drugs that is a complete failure.
  • A federal education program committed to a one-size-fits-all corporate model of education.
  • A social welfare net that is woefully inadequate.
  • Patronizing, racist programs of support for Native Americans, Native Hawaiians, Eskimos, and Inuits.

Energy and Environment
  • Unabated dependence on imported foreign oil and its inherent price fluctuations.
  • Under investment in alternative energy sources by government and private industry alike.
  • A failure to confront the problem of climate change.

Infrastructure
  • Widespread aging infrastructure including highways, bridges, tunnels, airports, dams, levees, and public water systems.
  • Obsolete air traffic control system.
  • Grossly inadequate railroad passenger train system.

Summary

A government that is too big, too centralized, too powerful, too undemocratic, too intrusive, too materialistic, too environmentally destructive, too racist, too violent, too militaristic, and too unresponsive to the needs of individual citizens and small communities.

Thursday, January 6, 2011

Big is Bad

Nassim Taleb Says No to Big Corporations and Big Government
By RUSSELL MOKHIBER

The right likes big corporations but not big government.

The left likes big government but not big corporations.

Nassim Taleb hates both.

Taleb is the author of the best selling mega hit – The Black Swan (Random House, 2007).

And most recently of The Bed of Procrustus – Philosophical and Practical Aphorisms (Random House, 2010.)

Aphorisms as in:
"It is much easier to scam people for billions than for just millions.

"The difference between banks and the Mafia – banks have better legal-regulatory expertise, but the Mafia understands public opinion.

"In poor countries, officials receive explicit bribes. In DC, they get the sophisticated implicit, unspoken promise to work for large corporations.

"In politics, we face the choice between warmongering, nation-state loving, big business agents on the one hand, and risk-blind, top-down, epistemic, arrogant big servants of large employers on the other. But we have a choice.

"English does not distinguish between arrogant-up (irreverence toward the temporarily powerful) and arrogant-down (directed at the small guy)."

If he had to choose the lesser of the two evils – big government or big corporations – which would it be?

"Both are the enemies of progress," Taleb says.
"Big corporations – their job is to suck up resources for themselves. I came to that conclusion after reading Marx. I'm not a Marxist, but I realized that large corporations are just in cahoots with big government.

"When I was debating the chairperson of Pepsico, her sole argument was – I employ 600,000 people. 600,000 people will be unemployed if I don't sell people diabetes causing drinks.

"The second problem is – you are going to be fragile when you employ 600,000. And the society will pay the price of your fragility.

"The chairperson of Pepsico will have a free option. They know they can't go bust. They know that society will prevent them from going bust."
If Taleb doesn't like big corporations or big government, then what does he like?

Artisans.

Small business.

Like the old market in Lebanon – where he was born.
"I shock people when I say the most stable system is an artisan style system. That's the only one that doesn't blow up. The world now has become too complex

"It's the Levantine system of trade and commerce. No debt. And small size. That is the most robust. These people survive much longer."
He says big corporations should never be bailed out.

Ever.

Taleb says that Ronald Reagan started it.
"This is why I get along with Ralph Nader. Nader was the first to say that the difference between Republicans and Democrats is cosmetic.

"It is Ronald Reagan who bailed out the banks in 1983 and started this whole process."
Reagan of the Milton Friedman free market philosophy?
"Exactly. There is something about governments that will be susceptible to the pressure of lobbyists to bailout the big corporations.

"Had Reagan not bailed out Citibank in 1983, we would not be here."
Where would we be?
"If the government didn't bail out Detroit and the banks, we would have a better Detroit and better banks. Smaller and more competitive companies.

"People forget that much of the growth of companies came from debt building.

"Small companies are the energetic ones. The energy and innovation comes from small companies in California. And these companies neither go into debt nor do they get bailed out."
Okay, so government shouldn't be bailing out the big banks.

But what about cracking down on corporate crime?
"If two adults want to speculate, they should be free to do so, conditional on society not bailing them out.
"The government should be there to enforce the rule of no socialization of losses. You want to make sure the banks are never big enough to take these risks at the expense of society.

"The rule is as follows – if you want a bailout, you are under our regulation. And we want you small. And we don't want you to take speculative risks. In other words, you are a utility. And you obey our rules.

"If you are not to be bailed out, then you can do what you want, providing that you don't harm the public."
But Nader's argument is that you need a strong central government to counteract big corporate power. And that of course is what corporate crime enforcement is about. You need to try and control the abuses of large corporations – to keep them in line.
"I don't mind the idea. But I prefer to let the system destroy the corporation before it becomes so big.
"It's good to think about it this way – once a corporation becomes so big, it's going to bully the public. So, you need a big public to stand against it. But a robust world is one composed of very robust cities – not city states necessarily – but strong cities and municipalities – and very strong small companies."
Taleb says – do not give children dynamite sticks, even if they come with a warning label.

And he makes a policy recommendation in this regard – ban complex financial instruments because nobody understands them.
"I don't understand them. And I wrote a text book in 1987 about them. The motivation behind these instruments is regulation. Shocking but true. Regulation had the effect of having people skirt the regulation, hire an expensive lawyer, and design a complex product to get around the regulation."
But Taleb would impose a regulation to ban them?
"I said that a product that has been traded for a long time should be traded. But a product that requires mathematical methods should not be. So, vanilla options have been traded on exchanges for hundreds of years – since Amsterdam in the 17th century – they can be traded.

"Stocks can be traded.

"But these complex products have no reason to exist other than to skirt regulations. They don't need to be there. People don't understand them. And they are designed to take advantage of people's mental biases and misunderstandings of some classes of risk."
But doesn't it require big government to ban complex financial instruments?
"The government has been doing everything but what they are supposed to do. Financial regulation did nothing but help Goldman Sachs."
But that's because that's how they set it up. It didn't have to be that way.

"It was a 5,000 page law," Taleb says. "We could write a one page law – captain goes down with the ship. Bridge engineer sleeps under the bridge. Personal liability."

Thursday, October 28, 2010

Conservatives Push Absurd Lie that Wall Street Hustlers Were Innocent Victims ... of Poor People

Deregulation allowed Wall Street to build a house of cards on America's mortgage industry, but many conservatives live in a parallel universe in which the banks are blameless.
by Joshua Holland - Wednesday, October 27, 2010 by AlterNet

AlterNet is proud to present this excerpt from senior writer Joshua Holland's new book, The Fifteen Biggest Lies about the Economy (And Everything Else the Right Doesn't Want You to Know about Taxes, Jobs, and Corporate America).
Perhaps the most pernicious right-wing lie of late is that the Wall Street hustlers who came close to bringing the global economy to its knees in 2008 were just innocent victims of government-sponsored programs that forced them to lower lending standards in a misguided effort to increase home ownership among the poor (read: dark-skinned).

It’s an alluring story line for those who are ideologically predisposed to blame “inner city” people instead of MBAs in suits roaming the executive suite. It’s also patent nonsense—a Big Lie that has nonetheless become an object of almost religious belief for some on the Right.

Jeb Hensarling, a notably obtuse Republican back-bencher from Texas, wrote that “the conservative case is simple”:

The [Community Reinvestment Act] compelled banks to relax their traditional underwriting practices in favor of more “flexible” criteria. These subjective standards were then applied to all borrowers, not just low-income individuals, leading to a surge in lower-quality loans. . . . Blame should [also be] directed at Fannie [Mae] and Freddie [Mac], and their thirst for weaker underwriting to help meet their federally mandated “affordable housing” goals. . . . This distortion has had seismic consequences as market participants, wrongly believing GSE-touched loans were sanctioned by the government and therefore safe, began to rely on a government mandate as a substitute for their own due diligence.

This tale has everything a conservative could want—Big Government overreach, well-intentioned but out-of-touch liberals causing devastating unanticipated consequences with their social tinkering, and even their favorite bogeyman, ACORN, and other low-income housing advocates that have pushed for increased home-ownership among the poor.

The narrative gained steam with an influential op-ed in the Wall Street Journal by Peter Wallison, a fellow with the American Enterprise Institute (who, according to his bio, “had a significant role in the development of the Reagan administration’s proposals for the deregulation of the financial services industry”). Wallison found that “Almost two-thirds of all the bad mortgages in our financial system, many of which are now defaulting at unprecedented rates, were bought by government agencies or required by government regulations.”

The data shows that the principal buyers were insured banks, government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, and the FHA—all government agencies or private companies forced to comply with government mandates about mortgage lending.

The sleight-of-hand here is pretty straightforward. The U.S. government regulates lenders and provides deposit insurance to banks, which means that a large chunk of all home loans—good, bad, and in between—have some connection to a government program. It’s like saying that the government is responsible for pollution because the EPA regulates industrial emissions.

Yet no bank has ever been “forced to comply with government mandates about mortgage lending.” There are no “government mandates,” and there never were. In order to qualify for government-backed deposit insurance—a benefit that banks aren’t forced to accept but enjoy having—the Community Reinvestment Act and similar measures designed to prevent discrimination in lending (to qualified individuals) only encourage banks to lend in all of the areas where they do business. And Section 802 (b) of the Act stresses that all loans must be “consistent with safe and sound operations”—it’s the opposite of requiring that lenders write risky mortgages.

There are no penalties for noncompliance with CRA guidelines. The only “stick” hanging over banks that fail to meet those standards is that their refusal might be taken into account by regulators when they want to open new branches or merge with other financial institutions. What’s more, there are no defined standards for CRA compliance, and within the banking community, the loose guidelines are considered to be somewhat of a joke.

As Sheila Blair, the chairwoman of the FDIC, asked in a December 2008 speech, “Where in the CRA does it say: make loans to people who can’t afford to repay? Nowhere! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth . . . pure and simple.”

Fannie and Freddie: Tempted by Easy Profits

Fannie Mae and Freddie Mac were created by an act of Congress, but they are (or were, until being taken over in the wake of the housing crash) private, for-profit entities whose dual mandate was to increase the availability of mortgages to moderate- and low-income families, and at the same time turn a profit for their shareholders. Fannie and Freddie did end up with a very large portfolio of subprime loans, with a high rate of default, but they didn’t get into the market because the government mandated it. They dived in deep because there were profits to be made as the housing bubble expanded. As Mary Kane, a finance reporter for the Washington Independent, put it:

Neither the Community Reinvestment Act—the law most cited as the culprit—nor other affordable housing goals set by the government forced Fannie, Freddie or any other lender to make loans they didn’t want to. The lure of the subprime market was high yields and healthy profit margins—it’s as simple as that.

Contrary to the conservative spin, University of Michigan law professor Michael Barr told a congressional committee that although there was in fact quite a bit of irresponsible lending in low-income communities in the late 1990s and the early 2000s, “More than half of subprime loans were made by independent mortgage companies not subject to comprehensive federal supervision; another 30 percent of such originations were made by affiliates of banks or thrifts, which are not subject to routine examination or supervision, and the remaining 20 percent were made by banks and thrifts [subject to CRA standards].” Barr concluded, “The worst and most widespread abuses occurred in the institutions with the least federal oversight [italics added].”

That’s not to say that millions of Americans didn’t bite off more than they would eventually be able to chew in the housing market. A lot of people looking to turn a quick buck by capturing the booming value of real estate in the mid- to late 2000s bought property with “teaser” loans that offered very low rates for the first few years; the investors assumed that they’d be able to turn a tidy profit before higher interest rates kicked in. Many of those individuals have since found themselves “under water”—owing more on their homes (and investment properties) than they’re worth.

Yet it’s worth noting that most of the experts also didn’t identify the real estate bubble as a problem, even as home prices far surpassed values that could be reasonably explained by the laws of supply and demand. Irrational exuberance was the theme of the day. In 2006, David Learah, the former head of the National Association of Realtors, wrote a book titled Why the Real Estate Boom Will Not Bust—And How You Can Profit from It: How to Build Wealth in Today’s Expanding Real Estate Market. The book made quite a splash at the time.

In 2010, former Fed chairman Alan Greenspan offered a bit of historical revisionism to a House committee investigating the causes of the financial crisis, telling lawmakers, “In 2002, I expressed concern . . . that our extraordinary housing boom, financed by very large increases in mortgage debt, cannot continue indefinitely. . . . I warned of the consequences of this situation in testimony before the Senate Banking Committee in 2004.”

Writing in the Washington Post, Dana Milbank offered a corrective with some of the highlights of Greenspan’s congressional testimony at the peak of the housing bubble. In 2005, Greenspan told lawmakers, “A bubble in home prices for the nation as a whole does not appear likely.” He added, “Home price declines . . . were they to occur, likely would not have substantial macroeconomic implications,” and explained that “nationwide banking and widespread securitization of mortgages make it less likely that financial intermediation would be impaired.”

In English, that last bit meant “Banks won’t get into serious trouble even if things do go to hell,” and we know how well that prediction turned out. If Greenspan could be so wrong and the smart people at the Washington Post and the New York Times couldn’t see this huge, dangerously inflated housing bubble, how was your average couple trying to get a place to live or the small investor looking for a few bucks in rental income supposed to make a rational decision about how much debt to take on? That’s not a defense of individuals who got in over their heads; it’s simply an important bit of context.

The narrative that the real estate crash and the subsequent recession were the fault of borrowers, especially poor and middle-income borrowers—while members of the financial community were innocent victims—is not only revisionism of the worst kind, but it’s an especially egregious lie.

The obvious sin of this claim is that it shifts responsibility for the mess away from those who created it, but what makes it even more disgraceful is that conservatives have long argued that efforts to increase home ownership among low-income families and communities of color was the “free market” thing to do (and have, to some degree, negated the need for a decent social safety net). It was George W. Bush, not Vladimir Lenin, who said in a 2002 speech, “We have a problem here in America . . . a homeownership gap,” and said, “we’ve got to work together to close [the gap] for the good of our country.” This was standard American Enterprise Institute–quality conservative fare.

Blaming individuals is easy—it’s not hard to understand how people could borrow a bunch of cash they were later unable to pay back. The real cause of the housing crash is, of course, a far more complicated tale. And it’s a story that ultimately represents the abject failure of conservative economic mythology.

Friday, August 27, 2010

The New American Corporate State

A troika of big government, big business and big labor is attempting to run the country to its own advantage.
Warren Meyer, 08.26.10

Opponents of President Barack Obama and the Nancy Pelosi Congress will often accuse them of being "socialist." I find that this term is unhelpful, as many folks use direct government takeover of industrial enterprises as the litmus test for socialism, and thus will reject this hypothesis about the president. It is more useful to think of this administration as pursuing a European-style corporate state, a form of political economy that allows the state to exert strong control in the economy while maintaining a nominal façade of private ownership.

While the intellectual origins of the corporate state go back much further, the first serious attempt to implement such a system was in 1920s Italy by Benito Mussolini. Under that system, state-sponsored industry cartels programmed every aspect of economic life, from wages and working conditions to prices, production levels and product specifications. Nearly every commercial action required a government license, which would be denied to those who showed insufficient loyalty to the state and its goals.

In the United States President Franklin Delano Roosevelt was almost certainly an admirer of Mussolini's economic system, as he copied many of its salient features into the code authorities and commercial licensing requirements of the National Industrial Recovery Act (which eventually was struck down by the Supreme Court). Prices, wages, production quotas and, in effect, nearly every detail of business practices in an industry were to be set by small groups of government, labor and industry leaders. The president was given the power to unilaterally revoke the right to do business, without any further due process, of any enterprise in America if it refused to conform to this reincarnation of the Medieval guild system.

In their current form, European corporate states tend to be more informal than their predecessors, drawing on mutually supporting networks of labor, industry and government leaders without the explicit structure of Mussolini's cartels or Roosevelt's code authorities. These networks are driven by an implicit deal by each of the three groups to protect their mutual interests and to recognize specific obligations.

In this three-way arrangement, unionized workers in key industries get high wages, guaranteed employment, rich pension systems and government protection from competition from younger and foreign workers. In return, they promise labor peace (barring the occasional strike to demonstrate their power) and tremendous election-day muscle.

Favored businesses (and by these we are talking about the top 20 to 30 largest banks and corporations in a particular country) get protection from competition, both upstart domestic entrepreneurs as well as any foreign rivals. In return, they provide monetary and political support for politicians' pet projects--from recycling to windmills--with the understanding that politicians will give them legislative back doors to recover the costs of these programs from customers or taxpayers.

Monday, July 26, 2010

Modern Political Prisoners in America

By Szandor Blestman  Published: 23 July 2010

When I was growing up, I learned in school that one of the reasons the United States of America was better than the Union of Soviet Socialist Republics was because we didn’t hold political prisoners in our jails. That was something the bad, bad communists did. That was something that was done in communist countries to keep dissidents in line and to silence them. Such a thing could never be done in America. I don’t know if this is still taught in the schools, but if it is then I believe our children are being grossly misinformed. The United States of America has become the leading nation when it comes to jailing its citizens, and the vast majority of them have been jailed for non violent crimes. We are, in effect, being jailed by the political class for disobeying rules they have deigned necessary, not for actions that have harmed another human being or his property. Most of those jailed are, in effect, political prisoners.

The federal government of the United States of America has declared war on its own civilians and the majority of those spending time in jail are prisoners of that war. They call this war many things, the war on drugs and the war on terror being the most prevalent, but it is really a war fought against people in order to try to keep a concept hidden from the public consciousness. That concept is the concept of freedom, the concept that individuals own their own bodies, their own labor, their own property and best know how to run their own lives.

The power elite and their political puppets use such emotionally charged terms as “war” to elicit specific responses from the populace. They want people to believe that anyone with a differing or divergent point of view from that of the establishment is a bad person. They want people to believe that anyone with a difference of opinion is a menace to society and a threat to all that is good and just. Nothing could be further from the truth. Most of the people who are spending time in prison are not only ordinary non violent folk who just happened to be in the wrong place at the wrong time, they are likely kind, loving individuals with family and friends who care for them and miss them dearly. Many of them were likely hard working, productive members of society until they were caught or reported breaking one of the multitude of “laws” created by control freaks who seem to see us common folk as cash cows meant to be milked for their benefit.

This war has spilled across the borders of the United States and is affecting the population worldwide. The DEA seems to think it has the right to enforce the laws of the United States in whatever country it deems necessary. I don’t know that the DEA has the right to do this, but it certainly has the power thanks to your tax dollars. A good example of this is the case of Marc Emery. Mr. Emery is a Canadian. He was simply selling marijuana seeds. This is a practice that is not illegal in Canada. Yet it is illegal in the US, though hardly ever enforced. Mr. Emery was set up by the DEA in a sting operation in which he sold seed across the border. The DEA then used its power as a federal agency of the United States to coerce the federal Canadian government into extraditing Mr. Emery to the United States.

Mr. Emery’s business harmed no one. It only maybe hurt the feelings of a few bureaucrats who felt perhaps Mr. Emery’s opinions were becoming too popular. You see, Marc Emery not only sold marijuana seeds, he ran a magazine named Cannabis Culture and used the money to fund marijuana legalization activism worldwide. He believes, as I do, that everyone owns their own bodies and can determine for themselves which substances to use and which to avoid. He would likely still be free if he had just pocketed his profits rather than using them to promote his marijuana legalization efforts. It appears as if Marc Emery was targeted not for his illegal activity, but for his political activism. And they had to use an unethical sting setup to make it look
legitimate.

The same is true of tax protestors. People fighting the unethical, unconstitutional income tax have been forced into prison despite the obvious unpopularity of this theft. Even though the vast majority of the populace seems to be brainwashed into thinking the federal income tax is legitimate, the arguments against it are intriguing and compelling on both legal and moral grounds. Ed and Elaine Brown were two such protestors who wished to make such arguments during their trail. The federal judge presiding over their trail denied them the opportunity to make over thirty such arguments in their defense. As a result, they realized the court system was rigged in favor of the state and refused to take part in it any longer.

Ed, a contractor, and Elaine, a dentist, gathered together such a following that the Feds determined that the only way to get to them would be to unethically infiltrate their supporters. It appears as if the Feds are worried about their image and don’t want to be thought of by the general public as the violent agency they are. They want people to forget such incidents as Waco and Ruby Ridge, but a leopard cannot change its spots. Ed and Elaine Brown were productive members of society until the Feds put them in unproductive prison cells.

People such as Ed and Elaine Brown and Wesley Snipes aren’t in jail because they didn’t pay their taxes, they’re in jail because they refused to obey. They refused to knuckle under to the coercion and threats of the federal government and decided to exercise their rights. They refused to cower in fear before the political gang that runs this nation and decided to show them for what they are, a violent gang of thugs who believe they own us and a portion of our labor. These are arguments the authoritarian power mongers don’t want to hear because they’re true, and the truth is sometimes hard to face. They would rather do harm to those who have never harmed another than face the reality that they are greedy failures in a coercive monopoly funded by theft and unable to compete in a legitimate marketplace.

What happens when the practices used by the policing agencies are used against them? Barry Cooper is a good example to look at. A former narcotics officer, he created a sting operation to catch the police breaking the law and disobeying the constitution. His police training served him well as he had learned to setup drug dealers. He filmed the police breaking their own laws and streamed it to the web in such a way so that their guilt could not be denied. This angered the cops. As a result, Barry Cooper and his family have been harassed by authorities ever since. Candi, his wife, lost custody of her eight year old son. They have both been arrested and charged with filing a false police report. They await trial on said charges. It seems what’s good for the goose is not good for the gander. It seems that the police can setup and harass ordinary folk to catch them breaking laws, but when ordinary folk do the same to the police, the ordinary folk better watch out.

The system is plagued with unfairness. It is set up so that those with authority aren’t burdened with any personal responsibility for their decisions. They are not held accountable for their actions even when such actions harm others or are financially unsound. It takes those who rail against it and make honest, sensible arguments and silences them by removing them to cold prison cells. We might not have the cruel and unforgiving gulags the Russians had under communist rule in the last century, but we have prisons populated with political prisoners who don’t even know they are political prisoners. Our government has interrupted and ruined the lives of millions for its political power, expediency and agenda.

The war against the people needs to end. The federal government needs to step aside. The common folk need to reestablish their lust for freedom. The bureaucrats need to start respecting the rights of the individual once again. The federal government needs to be recognized for the monstrous mechanism of tyranny it has become. Hopefully, the cogs inside that mechanism will start refusing to allow it to run smoothly. We should be allowed to spend our money as we see fit, to smoke what we want to smoke, to say what we wish to say, and to live our lives as we wish to live them without fear of government intrusion and imprisonment. The disobedience of a few have shown us the ugly truth. The disobedience of many will help set us free.

Sunday, July 18, 2010

Dangerous Allies: Big Business and Big Government

by RonPaul on July 18, 2010





Last week ended with some promising news on finally stopping the oil spill in the Gulf of Mexico. Unfortunately the administration still seems to believe that shutting down working oil wells is a higher priority than effectively dealing with the broken one. They are again issuing a moratorium on offshore drilling while maintaining a de facto ban on new permits even for shallow water drilling which they previously stated would not be affected. The courts have twice declared this unconstitutional, over 70% of the people see this as unreasonable, yet the administration seems determined to simply end offshore drilling, at least for those producers that cannot afford to sit idle for any unknown period of time until the ban is lifted.

Whether or not this latest effort will hold up in court is yet to be seen. Sadly, many smaller oil producers in the Gulf see the writing on the wall and instead of waiting around and risking their livelihoods on the whims of American politicians and judges, they are leaving for friendlier business climates. What is happening to this country when the Republic of the Congo is better for business than the United States?

One big factor is regime uncertainty. Regime uncertainty is the opposite of the rule of law. It is the rule of the whims of the people who are in charge and what mood they are in on any particular day. It is usually associated with third world dictatorships and plays a major role in why some countries remain poor. When a business cannot predict whether a government will issue a permit, confiscate or nationalize their capital investments, tax them into bankruptcy or arbitrarily stall their operations, they tend to do business elsewhere. This type of government hostility is not conducive to wealth creation and it is tragic to see it chasing away businesses here when wee need the jobs and productivity more than ever.

When the rule of law is respected it provides business with some measure of predictability so they can plan and operate smoothly. When it is not respected there are just too many variables, too much risk of loss or waste. Of course disregard of the rule of law creates other problems, too. For the larger and better connected businesses it creates the opportunity of regulatory capture. If the government becomes too unpredictable, one business survival strategy is to become so involved in government and regulatory bodies that they effectively gain control over the very entities that are supposed to keep them in line. In other words, if you can’t beat the government, become the government.

A business that achieves regulatory capture is also able to write and implement laws and regulations that they can deal with but its competitors cannot. The eventual outcome is that companies use regulation to drive everyone else out of business until a monopoly is achieved, putting consumers at its mercy. Meanwhile, the people develop a false sense of security, assuming that the many regulatory bodies in place are protecting them. Without respect for the rule of law, however, those bodies and their regulations are more likely protecting and enabling big business at the expense of small business and the consumer. We see this not only with big oil, but big banking, big defense contractors, you name it. That is why especially in a crisis we should uphold the Constitution. It is the ultimate consumer protection from crony corporatism.

Saturday, May 1, 2010

War and Liberty Aren’t Fellow Travelers

To the Tea Party: War and Liberty Aren’t Fellow Travelers
April 28, 2010
Ivan Eland

In an astute op-ed piece in the Christian Science Monitor, James Bovard points out that the love of liberty by the Tea Party crowd usually takes a backseat to a hatred of President Obama and the Left. After attending a tax day Tea Party event in Rockville, Md., a suburb of the nation’s capital, Bovard reported that the Tea Partiers oppose big government from the Left but not from the Right. Big government from the Right usually involves warfare and its accompanying enhanced police powers at home, which usually severely erode the liberty Tea Partiers claim to stand for. For example, the tea sippers extended their pinkies in a salute to torture, harsh policies toward Iran, and the wars in Afghanistan and Iraq. They didn’t seem to mind the National Security Agency’s warrantless wiretapping and vacuuming up of ordinary Americans’ phone calls either, according to Bovard.

Yet of all the causes of big government in human history, warfare is the most important. The nation-state originally came into being because wars had become too expensive for mere kingdoms to handle.

And then the welfare state followed the warfare state. In fact, a militaristic conservative, Otto von Bismarck, created the first modern welfare state in Germany in the latter part of the 19th century.

In American history too, welfare has followed warfare. The roots of the Social Security system were planted with pensions for Civil War veterans. The progressive movement—with its counterproductive regulations on business that hurt the consumers it was trying to help—followed the Spanish-American colonial war.

But World War I was what allowed big government a vast and permanent foothold in American society. War had become so expensive and large scale that the U.S. government took over the entire economy to fight it—historically, the first time that had happened. Equally important, the government crushed dissent with the worst violations of civil liberties in American history. The war’s only rivals in stifling free political discourse were the Alien and Sedition Acts passed in the late 1700s—ostensibly needed by the government to fight off the French in the Quasi War but really aimed at political opponents. After World War I, resulting anti-foreign sentiments led to a red scare and the Palmer raids by law enforcement on innocent people.

During the Great Depression, Herbert Hoover and Franklin Delano Roosevelt brought back many of the World War I wartime agencies designed to “manage” the economy and simply renamed them. The war had set the bad precedent that no sector of the American economy was immune from government meddling.

World War II, the most horrific war in world history, also gave us the most government. During the war, government again took over regulation of the economy and even accounted for more than 40 percent of the American economy’s output, an all-time high. Although for the general population, civil liberties erosion was not as great as during World War I, that was little comfort to Japanese-Americans, who had not a single instance of disloyalty but were thrown into unconstitutional internment camps anyway.

The Cold War, although spawning only periodic hot wars, corroded civil liberties because it lasted so long. The McCarthyite witch hunts for communists in the 1950s and presidential wiretapping during the Vietnam War era that led to Watergate both began over fears of compromising information to unfriendly ears during those periods.

And of course, we have George W. Bush, a big-government conservative, who curiously wins, as Bovard notes, a 57 percent approval rating from the “small government” Tea Partiers. Yet in parallel with his war on terror, domestic spending increased more than any president since Lyndon Johnson, and he dramatically increased executive power to near tyrannical proportions by illegally using torture, wiretapping, and indefinite detentions without trial.

As Bovard notes, Tea Partiers are right-wing Obama-haters rather than liberty-lovers. And like their icon Sarah Palin, they seem proudly ignorant of history. Even the Boston Tea Party, from which the supposedly anti-tax Tea Party movement gets its name, hardly promoted liberty. The original Tea Party was caused by the British reducing taxes, not increasing them. The British had reduced the tariff on tea, thereby ruining the smuggling business in which many of the Bostonian vandals were engaged. After the violent and unnecessary destruction of private property by a mob—which other American cities had avoided and no true proponent of liberty should celebrate—the British cracked down on Boston. This crackdown thus eventually triggered the American Revolution, which likely decreased liberty in America. Wars almost always do.