Setting the Record Straight

February 10, 2009

Grand Old Partisanship


Making Petty Points
      They still don’t get it, the Republicans. With almost-daily reports of harm to the economy, dithering and delay are the mantra of Republicans in Congress debating the economic stimulus.

  sr-stockmanreaganjpeg    Some of them made speeches reminiscent of David Stockman and Ronald Reagan and trickle-down economics: Give the rich a tax break and in their generosity, they will spread the wealth to the lowest. That has not worked. It will not work, but Democrats in Congress have had to accept some portions of that argument just to get enough support to enact the stimulus legislation.

      GOP leader John Boehner said President Obama’s plan for the economy, with its enormous deficits to come, has to be paid for by the current generation’s children and grandchildren. Where was Boehner when our just-past Imbecile-In-Chief, George W. Bush, frittered away a huge surplus left to him by Bill Clinton, and rushed and lied the nation into a trillion-dollar war in Iraq? Republicans did not whimper about deficits or future generations then.

      Where was the Republican leadership when Bush’s hatred of federal oversight and regulation led to the excesses that brought the “meltdown” to Wall Street and the banks? Where were the howls about golden parachutes and billions in bonuses?

      We would not be debating a recovery, let alone one that will cost record deficits, if Bush and the Republican-controlled Congress had not led the nation down those paths.

      Lost in the shouting is a basic fact of spending: A person of modest income gets $1,000, whether in a new job or an outright grant, and spends it mostly on necessities, across a broad spectrum of labor-intensive goods, produced in ways that create jobs. A super-rich person gets $1,000, say from a tax cut, and his high-end spending goes out to a more limited spectrum of goods and labor force.

      Some of the arguments are just silly. Some critics say that giving a boost to the arts, for example, is not productive because it does not create jobs. Just taking my city as an example, spending on the arts brings tourism that is the biggest generator of jobs and prosperity.

      Just from the standpoint of practicality, tax cuts are heavy on paperwork and delay, compared with the more direct effects that come with generating new jobs, boosting aid to localities, helping the homeless and poor, or boosting working families’ purchasing power.

      The hubbub over recovery has forced a new definition of pork barrel. Some of what is “pork” in ordinary times could be recast as “recovery projects” in the deep recession. So members of both parties should be careful not to allow too much of the necessary infrastructure spending to become dismissed as “pork.” There is still inexcusable pork-barrel spending, of course. Alaska’s “bridge to nowhere” would still be “pork,” even under a shifting definition. But a meritorious public works project long postponed only because of the recession could add to the recovery by creating jobs.          –Veritas



December 22, 2008

Gift Card From Your Government

Trickle-Up Bailout Card—Part II

     Instead of bailing out the economy by spreading government money at the top of the income pyramid, we suggest the government concentrate instead on the bottom of the pyramid, spread the bailout money there and let it trickle-up through the economy.

     But our proposal also relies on some social engineering attached to the funds. Since the ails of the domestic auto industry are front and center now, we will begin with that.

     Call it a bailout by gift card, the giver being the store of last resort, the federal government. The givees would be American households, each with a choice of which gift card to receive.

     Under the plan, the household would receive a huge amount of the equivalent of cash (huge having much more meaning at the bottom of the scale than at the top) they could not spend frivolously (except in the many instances of buying an unnecessary car), and that in turn would stimulate the neediest segments of the economy as well as benefit the societal problems of the environment, alternative fuels, credit, savings and many others.

     As we saisr-giftwrappedcar2jpegd in Part I, there may be many problems with the proposal, but the thinking in Washington has been nowhere near considering a new way of dealing with the financial crisis while at the same time steering the American public in the direction they as well as the U.S. automakers should have been moving before the economic bubble burst.

     1. Gift card for a car, $20,000 for one of the “big three,” $5,000 all others. The card would be good only for cars that meet government-set criteria, the social engineering part of the proposal. They must meet some combination of a minimum mileage standard, carbon footprint standard, reliance on alternative fuels, safety and a few other concerns. Those cars currently produced have been rated on most of those standards by the Environmental Protection Agency.
      The U.S. automakers were selling about 3.6 million cars a year in 2000 when they were riding high. In November of this year, the month they went begging for a bailout, they were selling about 2.1 million. Thus, if the $20,000 stimulus led to 1.5 million sales, presumably the automakers would be out of financial trouble with time to retool and begin making only cars that meet those government criteria. There is $30 billion of the $700 billion bailout funds, leaving $670 billion.
     2. Gift card to pay off credit card debt, but coupled with new usury laws at the federal level more stringent than new ones scheduled to take effect, perhaps limiting the cards to pay off debt capped at a certain interest rate. The average American household has $8,000 in credit card debt and 48 million spend more than they earn. That amounts to $384 billion, trimming the bailout fund to $286 billion if all 48 million took that option.
     3. Gift card to pay off student loans, recover mortgage stability, cover the cost of alternative energysr-foreclosurejpeg sources or a variety of other “green issues.” Recent figures put 2 million homes facing foreclosure because of the credit crisis, and at an average of $35,500 to save each household, the cost would be $71 billion. About 6 million outstanding student loans amount to $85 billion, or an average of $14,600 each. A $10,000 card would cost $60 billion. Those two programs would cost $157 billion, leaving $129 billion worth of cards for those who select from other government priorities.
     4. Subject the gift cards to taxes, but couple that onerous requirement with a supplementary card in the form of a certificate of deposit, treasury bill or federal bond that would not be redeemable for at least another year, to cover those who do not plan well for the extra tax burden of having thousands added to their tax bill the filing period after they receive the gift card. The forced savings also would be beneficial in introducing some people to the idea of the value of having savings to help them weather crises such as this one.


December 20, 2008

Bailout or Gift Card?

Bailout by Trickle-Up Gift Card—Part I

     The effort to correct the financial crisis in the United States has been largely ineffective, and for good reason. The people in charge, mostly at the top of the economic arm of the Bush administration, but aided and abetted by similarly minded people in Congress, continue to focus on the top of the pyramid instead of thesr-giftcardjpeg bottom.
     We continue to beat the drum here in favor of some “trickle-up” economic thinking instead of “trickle-down.” So here is a proposal for consideration that is outside the box of what everyone has been hearing from those in charge.
     This proposed solution, as with much of outside-the-box thinking, probably has some holes in it others will be quick to point out, but at least consider it as a possible point of departure for figuring out a solution.
     This proposal was inspired by one of a series of off-the-wall suggestions from largely uninformed and somewhat naïve people (and this proposal may give us membership in that group) in response to proposals from the top.
     Most are based on faulty math and false statistics, so let us begin with some true figures. The $700 billion bailout package the federal government currently is sitting on is equivalent to nearly $7,000 for each of the 111.2 million U.S. households. There are 138 million taxpayers, but millions who don’t earn enough to pay taxes.

     Throwing that much money at every U.S. family without strings attached would only encourage more of the same reckless spending without solving the financial or any other problems. But the idea does suggest a trickle-up solution that inspires us to give some serious thought to the basic idea.
     We see a possibility of solving not only the financial crisis, but many other social crises in America with that $700 billion. Unfortunately the people in charge of those funds don’t see the little people way down there at the bottom of the pile have looked only at the top of the financial pyramid because of trickle-down groupthink. Even our suggestion begins with the classic Republican economic model of tax credits to be filtered back into the economy through private enterprise.
     The stimulus checks so far have been ineffective in overcoming the financial collapse, in part because they are too little at a maximum of $600 per taxpayer and totally unstructured. Even if those checks had stimulated anything, they would have had only a narrow impact.
     The incoming Obama administration faces many more problems than the financial crisis, although it currently takes first place in concern. The major issues include the climate crisis, the associated issue of U.S. dependency on both foreign and domestic oil, the individual-based credit crisis, the savings crisis, foreclosure crisis and on and on.

     So what if the government, instead of worrying about big business and those at the top of the financial pyramid, it focuses instead on a “trickle-up” plan, beginning at the bottom of that pyramid.
     That brings us to the proposal. Shoot holes in it as you will, but at least consider it as a takeoff point for considering a solution to the crises at hand. We can already see some problems with foreign trade agreements, political problems and other likely attacks on the proposal, but let us consider it as a new way of looking at the situation.
     Instead of bailing out anyone, give not a three-figure stimulus check to each American taxpayer, give each of the 111 million households (rather than each of the 138 million taxpayers, since the very bottom does not make enough to pay taxes) a gift card similar to those offered by stores and good only in that store, valued at $5,000 to $20,000.

Next: Part II–Gift cards for, cars, cards, loans and green 


November 21, 2008

Guzzling From the Tin Cup

The Best Favor Detroit Did Not Want
     Doubtless, the U.S. auto industry won’t see it this way, sr-dingelljpegbut Congress did Chrysler, Ford and GM a huge favor as their CEOs testified elsewhere on Capitol Hill. House Democrats ousted John Dingell as chairman of the Energy and Commerce Committee.
     As we noted in Help the U.S. Auto Industry: Vote Against It, as chairman, and before that as a high-ranking member on the panel, the Michigan Democrat did grave harm to the auto industry by giving them what it asked for. What it asked for essentially boiled down to “help us fail to compete with foreign automakers.”
     Just before the gas crisis in the early 1970s, Congress wanted to require catalytic converters on all cars to reduce pollution. Dingell helped the automakers defeat the first measures, while foreign automakers began including them on their cars.
     Dingell also helped automakers defeat efforts in Congress to require cars to have low-impact bumpers as a safety feature and to reduce weight to reduce fuel consumption, again while foreign makers included them on their cars.
     He also helped the automakers prevent stronger CAFE standards governing fleet fuel-efficiency. Together, they wrangled an exemption of trucks and certain large cars from the standards and even gave them a business-tax advantage. Foreign automakers widened the gap between average miles per gallon on their cars versus domestic ones.
     After the gas crisis eased and energy-conscious President Jimmy Carter was ousted from the White House, lights were turned back on federal monuments and all the calls for alternative energy sources began being ignored. At the same time, U.S. automakers began promoting ever-larger behemoths for the road, spending billions on advertising to begin a new trend.
     An advertising pro once told us the mantra on Madison Avenue had become “you can sell a boomer anything,” and this was the age of the all-consuming boomers. The macho-vehicle rage began and Detroit reaped the higher profits on more-expensive machines exempt from the CAFÉ fleet averages. Toyota, Honda and others continued heavy research on greater fuel-efficiency, alternative propulsion techniques and alternative fuels, and churned out the high-quality cars that resulted from that work.
     When Detroit began seeing the flight to better-quality cars made abroad, its best response was from Lee Iacocca who claimed that at Ford, “quality is job 1” even before the company lifted a hand to try better quality.
     With all their congressional goodies in hand, Detroit-based automakers decided they did not have to compete with foreign-made cars and didn’t. So when the muck hit the fan with the latest fuel crisis, their downfall was secured.
     As far-sighted managers, foreign automakers bucked the effort by Detroit to paint them as home-wreckers by locating research and manu- facturing plants in the United States and hiring Americans to build their cars.
     Of course, members of Congress heard none of this explanation during the round of hearings on the industry’s request for a piece of the financial meltdown bailout, pleaded for by CEOs of the “Big 3” who had flown to Washington on private jets with huge expense accounts and tin cup in hand.
     But House Democrats, most of whom favor the bailout because of the union jobs they think would be saved, did the auto industry a favor and doubtless will put in back in condition to compete, if it survives.
SCENES FROM A COMMITTEE     The new chairman is Henry Waxman, a tireless and dogged California Democrat who wages war on behalf of the environment and consumers, a combination that is just what the auto industry needed lo these many years instead of the Democrat who helped them on their path to oblivion.


November 10, 2008

Right-To-Work Hurts Big 3

Automakers: Mind What You Wish For
     How can we lay the U.S. automaker crisis at the feet of the Republicans who were in control of the government for the past 14 years? How about this.
     The Big Three, whose method of operating has been, and is likely to continue to be, one of aiming for instant gratification, were aided and abetted by the Republicans and their decades-long drive to emasculate labor unions in the United States.
    That, of course, contradicts the conventional wisdom that has become a religion among the Big Three (why do we call them that any more—they’re the only three). The automakers have complained and complained the United Auto Workers and its demands on behalf of the union’s workers are what have hurt their industry.
    To be sure, the UAW did overreach in the heydays of the 1950s and 60s and became so strong they also became their own worst enemies and needed to be trimmed back a bit.
    But the UAW would say, and we would agree, that the Big Three were unable to compete with foreign automakers on U.S. soil because the foreign firms built their plants in “right-to-work” states. Whatever union that workers in those plants may have pales by comparison with the UAW.
    How did those right-to-work states come into being? In the wake of the industrial revolution born at the end of the 19th century, labor unions were formed to redress the greedy excesses of their employers who were operating as fief to serf.
    Until the Taft-Hartley Act in 1947, workers and their employers thrived quite well with union rights to require workers to support the unions. Soon after the act was passed, taking away those union rights, 12 states enacted “right-to-work” laws and another 10 states have followed as Republican Party policy relentlessly defeated Democratic and union efforts to repeal Taft-Hartley.
    The result has been that average wages for workers in right-to-work states are 6.5 percent lower than those of their counterparts in states that have not enacted the laws. Of course, they attracted foreign automakers, and Toyota opened the first of its 13 U.S. plants in 1989. An overlay of right-to-work states today closely matches the map of what the red (GOP-voting) states before the election just completed.

National Right To Work Legal Defense Foundation

National Right To Work Legal Defense Foundation

    With the gas-shortage crisis of the mid-1970s and the popularity of more fuel-efficient and safer cars produced by foreign automakers, who also employed features U.S. automakers would have included had they not (thanks to the leadership of Democrat John Dingell) defeated congressional efforts to require them, Americans began turning to the better cars once made abroad, but now made at home with foreign-sounding names.
     As the 1970s crisis waned, Instead of looking ahead as Toyota and Honda did, U.S. automakers went for the bigger instant bucks and began pushing sales of SUVs and huge macho trucks, neither of which got anywhere near the gas mileage foreign makers continued to offer.
     And now U.S. automakers are asking for help from the same federal government they joined their GOP friends in beating on so unmercifully for decades.




November 3, 2008

Detroit’s Money-Guzzlers

Is Our Auto Industry Relevant?
     The U.S. Congress and the Bush administration arranged to give the U.S. auto industry, which now numbers three companies, $25 billion in its own version of the much more massive financial meltdown. Now the industry is back asking for $25 billion more, because the first 25 was only half of what they originally asked for.
     Following the original $25 billion, General Motors and Chrysler began using the money to concoct a merger, which would lower a once-proud industry back to just two members. The other would be Ford, and some mixture of a merger from within the three has been talked about since earlier this year.
     Sorry, but so what? Why do we need them any more? Even if we helped them, what would the American people get out of it? The government’s money and efforts might be better spent preparing the current employees for the fallout of the U.S. auto industry’s collapse, with retraining, adult education, financial help and guaranteed health care.
     Recent U.S. history tells us a bailout of Detroit would be folly. We would be ignoring George Santayana’s admonition: “Those who don’t remember history are condemned to repeat it.” So let us remember, beginning with the fact Chrysler has been at that federal trough before.
     In late 1973, with the U.S. automakers gloating over recent victories over congressional efforts to force them to make their cars safer and with better gas mileage, the Organization of Oil Exporting Countries slapped an embargo on oil exports to the United States. That pushed a growing supply-and-demand into a crisis that led to miles-long lines of cars queuing up for gas from draining pumps.
     Unknown to U.S. automakers, their victories over regulation efforts already were beginning to cripple them as Americans turned to safer cars made abroad. With the OPEC embargo, their victory over tough gas mileage efforts was about to bite U.S. makers in the rear.
     In 1979, as the Carter administration and Congress struggled to overcome the financial damage of the embargo, Chrysler, still U.S. born and bred, said it was facing bankruptcy and needed a $1.5 billion bailout from the federal government (that’s more than $9 billion in today’s dollars).
     Instead of bailing out Chrysler, the administration and Congress worked out an arrangement guaranteeing a $1.5 billion loan from the private sector and required the company to raise another $2 billion to cover its operations, but without federal backing. Chrysler also was required to make certain commitments, but none required the firm to make cars that would match the subsequent success of foreign-made models.
     The Carter administration also launched with Congress a series of energy-conservation and alternative-energy initiatives to reduce the stranglehold foreign oil had just placed on the United States. They included requiring all automakers, including the three domestic ones, to meet higher mileage standards.
     A year after the Chrysler loan, Ronald Reagan ousted Carter and it didn’t take long for the country to return to its fuel-wasting days and a large-scale ignorance of the need for conservation. The U.S. automakers merrily went along with that mood and began manipulating the mileage standards so they could continue building ever bigger vehicles getting relatively low mileage and spending billions in advertising to convince the American public bigger was better and pooh-poohing the need to conserve newly abundant gasoline. Eventually Chrysler recovered enough to make it attractive to a German automaker, which swallowed it up, reducing the U.S. automaker number to just two.
     Volvo, Toyota, Honda and several other foreign car makers continued with their business models of the early 1970s, continued to make ever-more reliable, safe and fuel-efficient models and exploring alternatives to the old-fashioned combustion engine that still ran all cars. U.S. automakers could have done the same thing, but they did not; all they were interested in was getting around the regulations, getting their friends in Congress to eliminate them or at least weaken them.
     Prodded by the U.S. auto industry, Americans began buying bigger and bigger cars, moved to SUVs and macho trucks, such as Hummers, so big some psychologists termed them penis substitutes. They also moved much of the manufacturing of the parts for their vehicles to Mexico and other countries, so most of the elements of their cars ended up foreign-made.
     As Detroit advertised its way to a return to its old profligacy, foreign automakers began making cars in the United States (notably in states antithetical to labor unions), research alternative fuels and gas-conserving models and, particularly Toyota and Honda, building reputations as makers of the world’s best-made cars.
     When the new gas crisis hit the United States, motorists found themselves driving gas guzzlers as the average price of gasoline more than doubled. Foreign makers had joined in some of the mad rush to gas-guzzlers, but kept their eyes on the prize, so they weathered the new crisis in much better shape than U.S. automakers (Chrysler had returned to U.S. ownership) and well-suited to move U.S. automakers all the way out of the title of the “big three.”
     Therefore, the government needs to focus on helping auto industry employees at this point, as well as the state of Michigan and the city of Detroit and all the other towns across the country that depend on Detroit and its suppliers. But help the automakers themselves? Why?
     We already know how the U.S. automakers are going to behave after the current financial crisis begins to ease in a year or two. The same way they did after the previous crisis, and guess how the executives of those three firms fared during the relatively plentiful years.


October 16, 2008

Good News From the Meltdown-Part II

Chance to Remake America

     The worldwide financial meltdown gives the United States under a new government come January a chance to think outside the box and shake off some of the old thinking that obviously has not worked to the good of the American people. We see three good things emerging from this mess.

     Since the government already is borrowing a bit from socialism, at least partially nationalizing some companies and now has support of both political parties to restoring a regulatory atmosphere, that should help dilute some of what has become an automatic Pavlovian response of seeing those three things as evils.

     There is nothing wrong with socialism, nationalization or regulation if they are used for the common weal. If this meltdown has shown us nothing else, it has demonstrated that unbridled capitalism allows our basic greed to overpower our basic good.

     There are two other bright spots from this collapse:

2. As we also have noted in yet another item on this Web site, the American public from the middle-class on down was aware by the beginning of this past summer that inflation was rising at a time when the nation also was entering a recession.
    The government and Wall Street were saying in unison at the time there was no recession and the rate of inflation was reasonable. But oil prices already had been rising at an alarming rate for months and even the price of food was rising. No other commodities have as much of an impact on those with little or no disposable income as do gas and food.
     Why did the government and Wall Street not see this happening? First, the government has to rely on objective data, not anecdotal indications, to show an economic slide qualifies as a “recession,” which relies on a downturn taking place over several months. Inflation is measures much faster, but it still takes weeks to reach the proper government levels. Meanwhile, as the government studies and Wall Street awaits the word on high, those without disposable income are getting pinched at the pump and checkout aisle while their employer cuts back on health care and pensions, and fewer jobs are listed in the help-wanted ads.
     The government needs to find some non-anecdotal way to capture what is happening at the level of the common weal at the time it is happening, not months later.
     With that trickle-up process, it could take action that would prevent the twin evils of inflation and recession, which become stagflation if they occur together. Currently, the government can only step in to correct the evils after they already have hurt the middle-class and below. That hurt eventually trickles up the line as their reduced buying affects business upon business stacked above them in the economic chain, eventually reaching Wall Street.

3. Even before nations in the EU moved to pour government funds into its businesses and financial institutions, other nations around the world were looking to move their investments from America to Europe as the United States led the world into the crisis.

     When we speak of these national investments, we’re talking about many billions of dollars per country into a smaller economy, a situation likely to make the EU the international financial center as the United States struggles to get back on its feet. Or at least the status of equality with the United States.
     America already had lost its leadership and credibility in terms of international security with the lunatic involvement in Iraq. Losing its leadership as the center of capitalism and eventually democracy would likely become a permanent situation in the lifetime of anyone alive on Earth today.
     What better time to remake the United States into a true democracy, back to a system that works with the interests of the common weal at its core. We have moved away from that over the decades that followed World War II into today’s division between the haves and have-nots that is as wide as what existed between the nobility and the serfs of the old British Empire.
     A new age is dawning in the United States. What are we going to do about it?


October 15, 2008

Good News From the Meltdown

Chance to Remake America

     Believe it or not, there are several good signs emerging from the financial meltdown, enabling the U.S. government to think “outside the box,” just as we did earlier on this page in our suggestion to Warren Buffett.
     First, the methods used to resolve the problem should help take some of the onus off the words “socialism,” “nationalization” and even “regulation,” terms that engender negative Pavlovian responses by the uninformed. That will allow for some creative solutions to many of the problems that have plagued the country for decades.
     Second, it should demonstrate anew the government needs to consider solving problems from the bottom up instead of the past and current trend, demonstrated at the beginning of the financial meltdown, solving problems from the top down. We labeled our way “trickle-up economics.”
     Third, we have a chance for a major makeover of U.S. policies across the board as the nation attempts to climb back to the top of the community of nations and tries to avoid losing its economic leadership status to the European Union, as now seems likely.

1.  Look for a major push by the next Congress and the next president, particularly if it is Barack Obama, to make major efforts to pass new regulations and restore old ones in the financial area.
     But the government is not likely to stop there. There have been widespread complaints about the lack of regulation in many other sectors of society, so look for new regulations in most areas and a return to enforcing regulations already in place. Along with this push will come a strengthening of several government institutions, beginning with the Food and Drug Administration.
     We suggested in an earlier piece the government build its own oil refinery to give it more muscle in influencing the price and supply of oil and gas that is a vital piece of the nation’s economy. Similar investments in other industries could give the government greater influence in them.
     By investing in banks and buying out major financial institutions, the government has overcome the previous onus labeled as “socialism” and taken a socialistic approach to resolving the financial crisis. There is nothing wrong with socialism as long as it never forgets its purpose is to serve the common weal. Past efforts lost that core purpose.
     Some of the government’s actions in the bailout were described as “nationalization.” If an industry operates against the interests of the common weal, such as the telephone industry has a history of doing and the oil industry often does, nationalization of that industry should not be off the table.
     Obviously, all these government interventions must be done with great care and never taking the eye off the prize: serving the common weal. But as the Bush administration economics leaders have demon-strated, the United States remains very reluctant to sign on to any of those three “evils.”
     But the idea that any of the three evils would be used as a tool by a U.S. Republican administration, let alone even a Democrat-led one, to solve an economic mess would have been unthinkable just weeks ago, let alone years ago.

NEXT, Part II: Trickle-Up and New America


October 12, 2008

Shut Up, Racism & Chairman McCain

Metaphorical Musings

     Does anyone else get the feeling Dubya would be more effective during this financial crisis if he would just shut up?

     He was whistling past the graveyard before the muck hit the fan, and since the meltdown began he has been fiddling as the U.S. economy goes down in flames.

     Climbing out of that paragraph of mixed metaphors, we should note that other countries quit listening to him years ago and have been wondering why his constituents still do.


     Back when we were still in the throes of the primaries, we wrote that racism would be the elephant in the voting booth in November when all of the racists who told pollsters they were not (most actually do not believe they are racists) actually cast their ballots in secret.

     The McCain/Palin campaign’s advisers also have known that and that is the reason the two have been whipping their audiences into a fever, with Sarah Palin even failing to rebuke a man who yelled “kill him” as she repeated her Barack-Obama-pal-of-a-terrorist claim.

     That campaign has now discovered it has been shaking a bag with a Tasmanian devil inside and is not sure how to deal with it. John McCain finally cautioned one of his audiences about hateful remarks, but then rebuked John Lewis, a black congressman, for pointing out in an op-ed piece the racist undertones of the campaign’s mud-slinging.


     It is curious, as the financial meltdown becomes increasingly serious, that the McCain/Palin campaign has little, if anything, to say about it. We know why Palin does not—George Bush looks somewhat knowledgeable by comparison—but why not McCain?

     As our Veritas reminds us, McCain once acknowledged he knew little about economics, later joined Bush and company in the graveyard whistling ding dong, the economy’s strong, and immediately after referred to the economy in crisis.

     We’ll take him at his word about the deficit in his knowledge of economics, but since he has been in the Senate, he has served on and even chaired for several years, the Senate committee that is all about regulations.

     That perhaps, is why he has been quiet about the economy when he is on the stump—it might lead to questions about his and his party’s deregulatory past, the past that allowed the runaway greed that created today’s tumbling house of cards.

     As the hate-Obama campaign begins to backfire, look for McCain to make some specific economy-repairing proposals, but be assured they will not be aimed at the little guy. They will be true-blue Republican and all about businesses and those with enough disposable income to be investors.


October 11, 2008

Deregulation = Meltdown, Part II

Republicans’ Meltdown

     American voters have good reason to be angry with Republicans over the current financial meltdown. John McCain has good reason to try to keep the issue in the background of his campaign.

     Democrats facing their ouster from control of Congress because they were not Republican enough were responsible in their final days in 1994 for allowing banks to cross their state borders and become maxibanks, but they were still not megabanks. That would require additional legislation and Democrats were not ready to go that far.

     Today’s financial meltdown has been called the most serious one since the Great Depression, a situation expected to be prevented by government entities, programs and regulations Republicans in those days fought against creating.
     Actually, today’s meltdown has exceeded that event in terms of scale. As part of the effort to get control of the depression meltdown, one of the New Deal reforms was the Glass-Steagall Act of 1935. It not only created today’s deposit insurance system, it barred commercial banks from engaging in investment banking and underwriting insurance. It also gave the Federal Reserve system more muscle, making it into today’s central bank.
     Republicans gained control of both houses of Congress in 1995. Jim Leach, an Iowa Republican, became chairman of House Banking and Phil Gramm, Texas Republican became chairman of Senate Banking. Together they maneuvered through both houses the Financial Modernization Act of 1999, which they named after themselves and Tom Bliley, a Virginia Republican, the Gramm-Leach-Bliley Act of 1999.
     The law repealed Glass-Steagall, allowed financial institutions, including banks, to create financial holding companies so one corporation such as today’s Wachovia could merge its various financial services into one gigantic corporation. And now Wachovia is being purchased in a fire sale by another megabank.
     Officials of the Federal Deposit Insurance Corp., a government institution affected by both of the acts, warned four years ago of the dangers of the widespread consolidation that occurred since the savings-and-loan crisis, creating megabanks concentrating assets and deposits in just a few places. They warned of the idea of “too big to fail” becoming a reality.
     They were ignored and now the government has decided some of the gigantic financial institutions are so big that allowing them to fail would have catastrophic repercussions through American society, and by extension in the globalization era, just about the entire world.
     Late into his campaign for the presidency, John McCain echoed the philosophy of his fellow Republicans and boasted of his stance against regulations, proudly calling himself “the deregulator.” He no longer does so, but failed to suggest or even endorse any return to regulation.
     In fact, at a campaign stop, a man with no understanding of what is going on angrily railed against growing socialism. McCain did not correct him. Barack Obama, has joined Democrats in moving to restore regulations.
     All but most libertarians in Congress signed onto the nub of the beginning of regulatory restoration when they finally voted for the bailout bill to begin an effort to restore some federal control of the nation’s financial system, an effort expected to dominate the term of the next president.
     Intellectual libertarians strangely endorse government actions to halt the meltdown with intervention, i.e., regulation and control, but hasten to call for an end to the cure once the patient is well again.
     And it should not be forgotten that the same Phil Gramm most responsible for the deregulation that allowed the current mess of greed served as the McCain campaign’s economics adviser until long after the low and middle classes already were living stagflation, that the nation was a bunch of whiners. So much for guilt by association.


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