Last Build Date: Thu, 09 Apr 2009 00:40:00 -0600Copyright: Copyright 2009
Thu, 09 Apr 2009 00:40:00 -0600In a recent private meeting with some of the world's largest bankers, President Obama reportedly railed at them: "My administration is the only thing between you and the pitchforks!" But not so fast, Mr. President. The Obama administration, remember, signed the Democratic-sponsored bill to authorize new bailouts for Wall Street firms and mega-bonuses for their executives. And during the Clinton administration, Treasury Secretaries Robert Rubin and Larry Summers - who both later made millions on Wall Street - succeeded in freeing investment banks from federal regulations that eventually led to their reckless gambling with trillions in sub-prime mortgage debt. The quasi-government-run Fannie Mae and Freddie Mac mortgage agencies - staffed with ex-Clinton administration cronies - were at Ground Zero of the financial meltdown. Liberals in Congress like Sen. Chris Dodd and Rep. Barney Frank were among the largest recipients of Wall Street money. In the 2008 presidential campaign, most of the big investor money went to Democratic candidate Obama. Billionaire investors like Warren Buffet and George Soros proved to be among Obama's staunchest supporters. Health and Human Services Cabinet-nominee Tom Daschle had to bow out because he skipped paying income taxes on free corporate limousine service. Democrats are clearly no longer the party of dirt farmers in bib overalls and sweaty dockworkers. Can fiscally conservative Republicans pull off the feat of galvanizing populist backlash against fat-cat Democrats and their supporters on Wall Street? Looking at some of President Obama's initiatives, you'd think conservatives would have plenty of ammunition. Obama's promises to tax only those families making above $250,000 will probably prove a fantasy, given the proposed $1.7 trillion annual budget deficit and the nearly $10 trillion in additional debt that we are projected to incur over the next decade. There simply are not enough wealthy to tax to pay back that sum. Instead, most likely our children and grandchildren for generations, through all sorts of higher taxes, will have to service the mountain of debt and interest for the larger entitlements we'll soon receive. Shouldn't this kind of out-of-control spending and big government be natural wedge issues for conservatives against free-spending liberals? But, again, not so fast, as conservatives have credibility problems of their own. The last Bush administration budget racked up a $500 billion annual deficit and added more than $4 trillion to the national debt over eight years of governance. During the first Bush term, when the Republicans controlled Congress, government spending grew on average at an annual rate of over 4 percent - far higher than during the previous Democratic Clinton administration. Barack Obama and the Democratic Congress may be planning unheard of multitrillion-dollar budgets, but they are in fact only expanding on earlier Republican fiscal recklessness. You know we live in strange times when it's hard to figure out whether to blame big money or big government. In the past, Democratic populists could rail against the Wall Street excess that had helped to wreck Americans' retirement portfolios. These populist Democrats, though, are gone, replaced by liberal grandees who are more interested in the money of Wall Street than its ethics. Today's Democratic-led government, meanwhile, has gone on a spending spree, taking on massive debt for all sorts of new "stimulus" - and Republican conservatives, given their recent profligate past, can hardly serve as credible watchdogs. So, take your pick whom to blame: not-so liberal Democrats, now trashing the Wall Street that enriched them, or not-so conservative Republicans, suddenly railing against Washington's out-of-control budgets that they themselves had never balanced. In a democracy that chooses its own leaders, maybe the real problem is ourselves - for wanting big government without big taxes, big stock returns without big risk and easy money without hard work. More on RCP: U.S. Releases Aid to Auto[...]
Mon, 06 Apr 2009 00:30:04 -0600An Old Sore Europe--given its Western heritage, its own intellectual roots (reflected in the French Enlightenment, the French Revolution, the canonization of 1848, Marx's natural landscape, postcolonial guilt, the lingering shame of appeasement and collaboration, postmodern anti-Western philosophy), the legacy of the bloody twentieth century, the conditions of the Cold War, and the American defensive shield--has devolved into a largely secular, if not atheistic society. That it is now shrinking, facing endemic childlessness, can neither assimilate nor deport Islamic immigrants, becoming increasingly protectionist, and is unarmed and pacifist is all logical rather than aberrant. How we still maintain such friendly relations with our now distant European cousins, given our (prior) capitalism, Christianity, fertility, assimilation practices, classlessness, enormous military power, and international profile is the real mystery. One thing that Europe most definitely does not want is for President Obama to turn the United States into a socialist, protectionist, disarmed, pacifist--Europe II--a clone of itself that won't protect it, provide an open market for its goods, or stimulate the world economy. Sorta Capitalist While capitalism survives there, it does so by the more successful buying insider influence, relying on hereditary wealth and inherited privilege, avoiding as many laws as possible, and praising publicly socialism as you privately get it around it in the real world--sorta like the New York Times lauding Obama's bailout of GM while it threatens to shut down the Boston Globe unless the print unions shave off millions in wage concessions, or the city officials of Detroit serially alleging racism while they loot what little is left of the city solely for friends and family. To visit Italy or Greece is to be impressed by the sheer human ingenuity of small entrepreneurs who deal mostly in cash, avoid taxes, arrange barter, skirt regulations (half their restaurants would be shut down for safety violations in the states), hire either family or workers off the books without proper papers, and generally try to have some sort of government job that requires no work but income in down times. Again, despite our common culture and long shared history, there is bound to be differences. President Obama should read about poor General Pershing's frustrations with Foch and Petain, the hatred between Wilson and Clemenceau, the tension between de Gaulle and Roosevelt/Truman, Reagan's efforts to base Pershing missiles to counter Russian tactical nukes, and Bill Clinton's five-year long frustrations in dealing with Germans, Italians, Greeks, and the Dutch over Milosevic. Sit Down and Listen! No matter. Obama walks in. He sees a "new" problem (read Bush's). And as if he's trying to resolve a renter group's anger over bad conditions in a city-owned apartment building, he immediately decides his "cool" can relieve the "tension". So Europe gets 50% of the blame, America 50%--but, wait, in reality more since an American while abroad "courageously" blames first his fellow Americans on the charge of being cowards "arrogant". Then, presto, problem addressed and solved, Obama goes into campaign mode to wow the crowds with his untraditional heritage. If you dare suggest that when he serially announces "I'm more interested in looking forward than backward" it simply means he has just trashed his predecessor; if you let out a peep that the Euros are smiling over no more combat troops sent to Afghanistan; that the Russians are delighted that they got everything they dreamed of; that Sarkozy is preening about his transnational financial czar; that Merkel wasn't joking when she boasted that she won't stimulate a penny; that the 50/50 "speech" to the Euros was more like the spring 2008 Rev. Wright effort (Wright had reasons to be racist himself given people like Obama's racist grandmother, but failed to see we've gotten better), then you are "partisan", "angry" "need to get over it," and more or less acting lik[...]
Thu, 02 Apr 2009 00:35:20 -0600Europe Out-europed. There is a certain sort of irony in London. Bush was so easily caricatured as the right-wing Texas-slanging cowboy that Euros found it easy to pose as progressive utopian antitheses. (Never mind that Bush in his second term was good to Europe, or that his positions on immigration, spending, new federal programs, etc. were hardly conservative.) Now Obama is trumping them all as a far more genuine leftist than any in Berlin or Paris. The President wants far bigger deficits than they do, wants more trade protectionism to protect domestic unions, wants to embrace cap and trade whole hog, is more eager to engage radical regimes abroad, and will pay for his socialism with big cuts in defense that will make it harder to protect socialist unarmed Europe. All sorts of ironies arise: is all this sort of a 'be careful what you wish for' nemesis that Europe deserves? (I wrote about this for this week's TMS column). A sort of Obama doing a Nixon to China that everyone can take an odd delight in? (no liberal will dare suggest he is being rude to the Brits or having trouble connecting with our allies). Or is Obama reflecting new realities that the US is now a revolutionary society whose immigration the last 50 years has come from Latin America, Africa, and Asia, that in turn better warrant our attention? Hussein is not the middle name of most European ministers (nor are many of African heritages), and Obama reminds Europe that we too were a colony without much of a colonialist history. All so strange. Debt, debt, debt everywhere. The backdrop behind the entire scene is that Obama is borrowing $1.7 trillion, and with future projected budgets that require perhaps another ca. $10 trillion over the next possible eight years. The message seems to be that we Americans need new entitlements that we cannot pay for, nor have we earned them with goods and services, but we want all of you abroad to lend us the cash nonetheless. Odd, as was pointed out a few posts ago, that we will have cradle-to-grave health care due to borrowed Chinese dollars that didn't go to basic cancer treatment to millions of Chinese who toil at factories. And Apologies Too! Obama apologized for American culpability for the meltdown. But wait: Iceland melted without us. No American forced Austrian banks to lend 100% plus of their worth to eastern Europe. What did Wall Street have to do with the crazy Spanish or Aegean real estate market, or the nutty spending habits of oil-drunk Russians and Middle Easterners? If he wants to apologize (this is going to be a long Carter/Clinton "I'm sorry" Presidency), then, for God's sake apologize for the new borrowing, and draining the world's available capital to finance our out of control budgets. Re: the new relations with Russia. I hope all the happy talk leads to less tensions. But it is easy to sort of promise to be nice, to push the "reset" button, or to talk grandly of new protocols; but the fact is that all this rhetoric means nothing. What Obama must answer is to what degree is he going to turn Ukraine, Georgia, and other former Soviet republics back over to Russian influence, to what degree is he going to ignore Russian gas/oil blackmail over energy-hungry Western Europe, to what degree is he going to tsk tsk Russian complicity in Iran's nuclear program, to what degree is he going to drop talk of protecting eastern Europe (and Western) with an anti-ballistic system aimed at Iranian missiles, etc. If those really are issues, then we will have problems with an authoritarian and dictatorial Russia bent on restoring former grandeur. Hope and Change. In every case, a democratic Russia, integrated within the West, could solve such tensions fairly easily. But I fear now that all of them are challenges that Putin, Inc. will see as means to an end, such as restoring domestic pride, restoring Russian hegemony in areas encroaching upon Eastern Europe, and creating more problems for the US that will check our power. I fear that the Russians will leave praisi[...]
Thu, 02 Apr 2009 00:00:00 -0600Obama's multiracial, nontraditional heritage seemed sophisticated and cosmopolitan in a European way that Bush's Texas accent and Christian fundamentalism most definitely were not. Despite Bush's efforts in his second term to work closely with the Europeans, and the emergence of conservative governments in France, Germany and Italy, Old Europe for the most part was all too happy to see him go. But will Europe always be happy with the Obama it wished for? Mirek Topolanek, prime minister of the Czech Republic (which currently holds the European Union presidency), just blasted the Obama administration's stimulus plans as "a way to hell." German Chancellor Angela Merkel sniffed: "We must look at the causes of this crisis. It happened because we were living beyond our means. . . . We cannot repeat this mistake." And just when President Obama announced the dispatch of thousands more troops to Afghanistan, many European leaders confirmed they will withdraw their own contingents over the next two years. America, meanwhile, may backtrack on missile defense of Eastern Europe in the face of Russian threats. And there is talk of more trade protectionism in the Democratic-controlled Congress. Europeans wouldn't be happy if either of these things come to pass. What then is going on? In some sense, the Obama administration will bring a new honesty to European-American relations. For the last eight years, Europeans have had it both ways. Bush took out Saddam Hussein, removed the Taliban from power, hunted terrorists, offered firm security guarantees to the Europeans in their squabbles with the Russians, tried to box in Iran, and ran trade deficits with his free and open trade policies. For his efforts, he was caricatured as a cowboy buffoon by European sophisticates. But now after welcoming Obama, the Europeans are beginning to discover that they must contend with a new administration to the left of themselves. And as we saw with Obama's recent cavalier treatment of visiting British Prime Gordon Brown -- he was given a packet of DVDs, unviewable in Europe, as a going-away gift -- Obama doesn't seem convinced of any special relationship with Europe. His interests and priorities lie more in Asia, Latin America and Africa -- places that have also been the great sources of immigration to America the last half-century. So, it will be harder for Europeans to pull off the old two-step of quietly wanting the U.S. to deter threats while loudly deploring our Neanderthal reliance on brute force. As Afghanistan turns from a joint NATO project into an American war, the Obama administration may well conclude that if we don't have European allies against the Taliban, we won't elsewhere. Perhaps NATO will be seen as a Cold War relic, with no place in Obama's brave new multipolar world. Given Obama's plans to emulate Europe's expensive socialist entitlement system, there may be less money for defense. Ironically, that would mean less American protection abroad of a disarmed socialist Europe -- a continent sandwiched between North Africa, the Middle East and Russia, with millions of unassimilated Muslim immigrants at home. In matters of foreign policy, Obama likewise has outflanked the Europeans. His calls for talks without restriction with the Iranians; his offer to pour hundreds of millions into Gaza; his outreach to the Syrians; and his popular resonance in South America, the Middle East and Africa suggest that a leftist America now has more in common with some of these former European colonies than do the centrist Europeans. It was once easy to slur Bush's war on terror as typical American overkill. But now Europeans better worry that someone in the Obama administration will notice that the renditions, preventative detentions, wiretapping and summary deportations practiced in parts of Europe were often as authoritarian as anything Bush embraced. On a number of other issues -- expensive legislation to combat global warming, multilateral foreign policy, mas[...]
Thu, 26 Mar 2009 00:30:00 -0600The historian Thucydides offers even more frightening accounts of bloodthirsty voters after they were aroused by demagogues ("leaders or drivers of the people"). One day in bloodthirsty rage, voters demanded the death of the rebellious men of the subject island city of Mytilene; yet on the very next, in sudden remorse, they rescinded that blanket death sentence. Lately we've allowed our government to forget its calmer republican roots. We've gone Athenian whole hog. Take the AIG debacle. The global insurance and financial services company is broke and needed a federal loan guarantee of $180 billion to prevent bankruptcy. Some $165 million (about 1/1000th of that sum) had previously been contracted to give bonuses to its derelict executives. That set off a firestorm in Congress. Politicians rushed before the cameras to demand all sorts of penalties for these greedy investment bankers. Soon, they passed an unprecedented special tax law just to confiscate 90 percent of these contracted bonuses. Those who shouted the loudest for the heads of the AIG execs had the dirtiest hands. President Obama was outraged at their greed. But he alone signed their bonus provisions into law. And during the recent presidential campaign, no one forced him to accept over $100,000 in AIG donations. Rep. Charles Rangel, D, N.Y., was even more infuriated at such greed and helped pass the retroactive tax bill. Yet for years, the populist Rangel - who is in trouble over back taxes owed and misuse of his subsidized New York apartments - had tried to entice AIG executives to fund his Charles B. Rangel Center for Public Service at the City College of New York. Sen. Chris Dodd, D-Conn., was the fieriest in his denunciations of Wall Street greed. Yet he was the very one who inserted the bonus provision into the bailout bill, despite later denying it. And Dodd has taken more AIG money than any in Congress - in addition to getting V.I.P. loan rates from the disgraced Countrywide mortgage bank. Then there is the matter of blowing apart the budget. President Obama inherited from George Bush a $500 billion - and growing - annual budget deficit and a ballooning $11 trillion national debt. Obama nevertheless promised us an entirely new national health plan, bigger entitlements in education and a vast new cap-and-trade energy program. But there is a problem in paying for the $3.5 trillion in budgetary expenditures that Obama has called for in the coming fiscal year. Proposed vast additional taxes on the "rich" still won't be enough to avoid tripling the present budget deficit - and putting us on schedule over the next decade to add another $9 trillion to the existing national debt. During the Clinton years, we got higher taxes but eventually balanced budgets. During the Bush administration, we got lower taxes but spiraling deficits. But now during the era of Obama, we apparently will get the worst of both worlds - higher taxes than under Clinton and higher deficits than under Bush. In other words, we - through our government - are spending money that we don't have. We're told the rich will pick up the tab, even though there are not enough rich with enough money to squeeze out the necessary amounts. Our new demagogues, though, are arguing that this is the only fair course of action. Meanwhile, these leaders - who have taken so much Wall Street money in the past - are driving us into fury to punish the guilty on Wall Street. This is truly the age of mindless mob rule. Of course, we probably won't hear any candidate in four years assure the voters, "I won't take any more money from Wall Street and will give back any that I already got. And if elected, I promise four consecutive years of budget cuts to achieve each year $1.5 trillion in annual budget surpluses. Only that way can we get the national debt back down to the past 'manageable' 2008 sum of $11 trillion." We need such a Socrates in Washington right now, who would dare tell the American [...]
Thu, 19 Mar 2009 00:20:00 -0600
But suddenly last week, physician Obama flipped and issued an entirely new prognosis: "I don't think things are ever as good as they say, or ever as bad as they say." He added. "(Things) are not as bad as we think they are now."
What happened to living through hard times akin to the Great Depression?
Maybe it was the unexpected news that Citibank and Bank of America are starting to show a profit -- thanks to the past bailouts of 2008 and new profitable loans. Maybe it was General Motors' recent decision not to (for now) ask for more federal cash. Maybe it was the reports that consumer spending is not down as much as feared.
Or did Obama's change in rhetoric reflect a sort of premeditated strategy: talk down the economy to scare everyone into supporting more government spending and borrowing; then, once the stimulus bill has passed, talk up the economy to reassure us that it will work?
Or, as seems more likely, does the new government simply not know what is going on -- much less what to do about it?
It can't seem to fill slots at the Treasury Department, and strangely talks about fiscal responsibility and the evils of pork-barrel spending while expanding upon the Bush budget deficit and approving more than 8,000 earmarks.
Obama -- and Congress -- should take a deep breath before further expanding the budget with ever-more stimulus spending, borrowing and aggregate debt that will plague our children, who will have to pay back the trillions long after this present recession ends.
It's time to let natural market forces work us through the current downturn. The reason why the stock market inched up a bit, and companies reported something other than the usual losses, is that we may already be in a stimulatory climate. When George Bush left office, his last budget projected a $500 billion shortfall -- quite a lot of borrowing to spend on ourselves.
Billions of dollars are also stimulating the economy through reduced energy costs. Once the price of oil fell from a high of $147 a barrel last July to between $40 and $50 a barrel at present, American families began saving hundreds of dollars in reduced gasoline and home-energy costs. Savings in energy also reverberate throughout the economy and make everything from food to building materials cheaper. That, too, has been a sizable stimulus.
This month, the indebted U.S. government paid its creditors less than half a percentage point in interest on six-month Treasury notes, which is below the rate of inflation. In other words, we are financing much of our new spending spree with near-free use of someone else's money.
Billions of cheap dollars on loans entering the U.S. eventually translate into lower mortgages and car loans; at present, banks are paying little money in interest to cash depositors while collecting 4 to 6 percent in mortgage interest from borrowers. With a spread like that, no wonder banks are starting to show a profit again.
Finally, millions of cash-strapped families freed themselves from debt by walking away from mortgage and credit-card loans, and are restarting with less financial burdens. And even most of those who lost home equity and saw the crash of their retirement portfolios are still working. Most from this latter group are still earning income, not cashing in their fallen 401(k)s, and not selling their homes at a loss.
It is clear from the last two months that no one in this herky-jerky administration quite knows what is going on in the economy, which has its own self-correcting mechanisms that were already in play without vast new federal spending and borrowing.
So before we give more toxic-debt medicine to the recovering patient, let us take a timeout from the massive borrowing, let nature do its work -- and at least do no more harm to generations not yet born.
Wed, 18 Mar 2009 00:34:39 -06002. Stimulating the Stimulated. I am also confused the various stimuli, bailouts, and guarantees. We all support some type of federal guarantees for some banks, lest like a house of cards they start falling seriatim. Yet, I have not seen signs yet (unemployment, deflation, crashing GDP, etc.) that we are in the Great Depression, or even close to the hard times that supposedly will last "for years" as warned by President Obama. Are there not self-correcting mechanisms and natural stimuli at work that simply are ignored by the media and the administration in this madcap race to socialism? Cf. hundreds of billions saved, both collectively and by the government, when oil prices crashed from $147 a barrel to around $40; billions more were saved when 6-month U.S. treasury notes, sold to finance the debt, crashed to about a half-a-percentage point in interest (allowing us free use of money, given that what we pay out is less than the rate of inflation); then there are the preexisting stimuli, given that Bush left with a $500 billion annual deficit. Before we charge our grandchildren with another $3-5 trillion in aggregate debt over the next four years, cannot we take a deep breath, stop the hysteria, and let these stimuli have a chance to work--on the real chance we are in a 1981-3 serious recession, but hardly at 1929-41 Great Depression? 3. We all work at the DMV now. But debt is not the only problem. When we expand the percentage of government-controlled GDP in the overall economy far about 20% to near 40%, the change-over will guarantee for generations that we have less productive workers, not subject to the pressures of supply and demand of the private sector? We learned out here that even in our near $40 billion meltdown that California in extremis continued to hire new employees, and gave raises to state workers as it went broke. As someone who farmed for well over a decade and was a professor at a state-run institution for 21 years, I can attest that the government cannot approximate the market. I met many farmers who would have been delighted to have state-guaranteed jobs and very few government workers who would have preferred to be self-employed. I'll leave it at that. But the DMVing of the economy is a terrifying thought. 4. Madder than Hell--and? There is a populist anger out there, hard to calibrate exactly, but growing nonetheless. Here's what I think people are saying: Wall Street gets bailed out, despite billions that the masters of the universe skimmed off. Meanwhile our retirement accounts are crashed. Then the government bails out those 'homeowners' who failed, often due to their own greed and foolishness, not those who played by the rules: so default on your over priced home that you should have never bought, and the fed is there to bail you out; put away $1,000 a month in your 401(k)--and tough luck. No new taxes of course for "all of us" except the evil "them," but rumors still somehow abound that health care benefits will be taxed, carbon emissions will be taxed, and even veterans will pay for their care via private accounts before drawing on VA resources. And why would not Obama resort to more bait and switch to pay for a $3.5 trillion budget--when that proverbial evil 5% simply does not have the wherewithal to make up for the 50% who pay no federal income tax at all? This growing unease is a weird sort of prairie-fire populism, focused on both Wall Street and still more the government. (Who is worse, the AIG execs that praise capitalism, then want federal handouts to ensure their bonuses, or the incompetent and unethical government who feeds them the cash ("hope and change"?)--or we the poor fools who will keep working to pay for all this? Where it all leads I don't know. But Team Obama does itself no good when it nominates grandees like Daschle, Geithner, Richardson, etc. who suffer the additional wage of hypocrisy that all tax-dod[...]
Thu, 12 Mar 2009 00:00:00 -0600"By March of next year, my new $3.6 trillion budget will include a spending bill with over 8,500 budget earmarks to target in-need constituents. "In addition to the stimulus/borrowing plan, I intend to devote $634 billion to fund a new supplementary national health care system. But that is not all. Unfortunately, the initial Bush bank bailout of some $700 billion also may well have to be augmented by an additional $750 billion. "Although my new spending proposals may raise the federal deficit in my first year to $1.75 trillion, I promise the American people that by the end of my first term, I will halve the federal deficit -- albeit adding another $3 to $5 trillion to the national debt. "Those savings can be accomplished by upping the federal income tax to about 40 percent on those rich 5 percent of Americans who currently pay only 60 percent of our aggregate income taxes -- as well as lifting Social Security caps on their payroll taxes and cutting out many of their tax deductions. "With state income taxes, federal income tax, Social Security and payroll taxes, along with new cutbacks in deductions, some of these rich will pay over 60 percent of their incomes in taxes. That is not an unreasonable rate in comparison with past levels -- or the fact that well over 40 percent of Americans do not make enough to pay any federal income taxes. "I expect that Wall Street may react negatively to these proposals. We may see the Dow fall an additional 2,000 to 3,000 points after I'm elected. It may descend to under 7,000 during my first weeks of office. And this may be the moment when the economy continues to cool and unemployment rises. "But to deal with this reaction of entrenched interests, I promise a fresh team of hard-nosed American professionals -- understanding that it is impossible to appoint some without past insider connections and occasional tax problems. "From the former Clinton administration, I will select Rahm Emanuel to run my staff. To oversee revenue, Timothy Geithner will assemble a large team at Treasury. Sen. Clinton herself will run state, and I will anchor my Cabinet with pros like Tom Daschle, Eric Holder, Bill Richardson and Hilda Solis. "On matters of protecting civil liberties, I assure the American people that I have examined the Patriot Act, the FISA accords and renditions -- and I have discovered that they, in fact, do not shred our Constitution. I will, however, shut down Guantanamo Bay -- but must keep it open another year and appoint a taskforce to study the issue. "Our new direction in energy policy will center on cap-and-trade initiatives that promote wind and solar power. While we won't rule out oil, gas, coal and nuclear development, problems with greenhouse gas emissions and nuclear waste mean that these ossified 20th-century industries -- including new offshore drilling development -- must be discouraged and further taxed or regulated to subsidize our green future. "Abroad, I promise to give America a new image. My first television interview will be with al Arabiya. Due both to new initiatives and my unique background, I can reassure them that no longer will the United States alienate the Muslim world. Our aim is to return to stable and friendly relations with the Middle East characteristic of 20-30 years ago. "Indeed, on matters in the Middle East, I will bring back my suspended adviser Samantha Power. I look forward to her input, along with that of Charles Freeman, former ambassador to Saudi Arabia and critic of Israel, as head of the National Intelligence Council, to craft new directions in the region "We expect to open new dialogues with Basher al-Assad of Syria and Mahmoud Ahmadinejad of Iran without preconditions. And to further the cause of peace in the Middle East, the United States will pledge almost $1 billion to help rebuild the Gaza strip that is governed by Hamas." Now all that w[...]
Fri, 06 Mar 2009 00:20:00 -0600Second, prior can-do generations of Californians created an unparalleled infrastructure of dams, canals and hydroelectric generation that once provided the state with ample energy, irrigation and recreation. Its three-tier higher education system -- 110 junior colleges, 23 state universities, and 10 University of California campuses -- once ensured a literate populace. We associate Hollywood with the world's motion picture industry. Napa Valley tops the wines of France. The Silicon Valley fueled the high-tech revolution that gave us Apple, Google, Hewitt-Packard, Intel and Yahoo. Millions of tourists each year flock to Disneyland, Death Valley, Kings Canyon, Lake Tahoe, San Francisco and Yosemite. California remains America's richest farming state, leading the nation in fresh fruit, vegetable, nut and dairy production. In other words, the present generation enjoyed quite a head start on their lives through the work and investment of often forgotten predecessors. The final observation we can agree on is that something has gone drastically wrong in the state in the last two decades. California managed to achieve all at once the nation's highest sales and income tax rates -- and yet also the largest annual state deficit. So far under Republican Governor Arnold Schwarzenegger's tenure, state spending grew 34.9 percent, well beyond inflation and population that increased only 21.5 percent. And yet the governor often prevented the state Legislature from spending even more it didn't have. The budgets of Medi-Cal, the state-run health program for the poor, are out of control. Prison costs increased about 50 percent in less than a decade, and now claim almost 10 percent of state spending -- almost as much as higher education. The state is in its third year of drought. Billions of dollars of agricultural production are threatened by water cut-offs. Yet California hasn't build a major dam or canal in years. Biannual state proposition initiatives, often put on the ballot by narrow special interests, allowed voters to vote for additional entitlements and benefits without providing the money to pay for them. Yet Californians are not an informed electorate, as the state's mediocre high schools experience 30 percent dropout rates. More than half a million aliens are caught each year trying to enter California's southern border illegally. Some estimates put illegal alien state residents at 3 million, a population that may cost the state's taxpayers more than $13 billion per year for services. California has the worst credit rating in the nation. It has the fourth highest unemployment rate and the second highest home foreclosure rate, thanks to enormously inflated prices due in part to complicated building regulations, high labor costs, and often Byzantine land-use restrictions. California's net state-to-state migration loss was higher than every other state. Most reports suggest that those who are leaving the state are far more highly educated than those entering it. If we can agree that Californians have somehow squandered a rich natural and inherited wealth, what were the root causes of this collective suicide? Critics disagree. Some cite expanding but inefficient state government, out of control state pensions and oppressive taxes. Or is the problem costly prisons and astronomical rates of incarceration, illegal immigration, unchecked welfare, and oppressive regulation and environmental restrictions? All these may be true. But less discussed is the common culprit: a weird sort of utopian mindset. Perhaps because have-it-all Californians live in such a rich natural landscape and inherited so much from their ancestors, they have convinced themselves that perpetual bounty is now their birthright -- not something that can be lost in a generation of complacency. Californians count on the wealth of farming but wo[...]
Wed, 04 Mar 2009 00:44:25 -0600In short, while the rhetoric was often inspirational, I found no real reason then--or now--to believe that Barack Obama wishes to be a uniter. And nothing in his first five weeks of governance has disabused me of that first tough impression. Nevertheless, here are five modest recommendations that he might adopt if he were really interested in bringing the country together. 1) Forget talk radio. During the campaign, President Obama, you went after Sean Hannity on numerous occasions--which are recycled ad nauseam almost daily as sound-bites on his radio program. Once in office, both you and your staff have zeroed in on Rush Limbaugh by name. But Presidential candidates and elected Presidents must seem above the fray, and not descend into tit-for-tat with media celebrities. There is a reason why even your closest associates have ceased calling you Barack and now quite properly address you as "Mr. President"--and it is not due to your persistence in demonizing talk radio. Did George Bush go after Bill Maher or Air America or Keith Olbermann when almost daily they slandered his character? Did he serially evoke Michael Moore? To have done so by name, would have demeaned his office. Worry about refuting conservative ideas, and governing the country, rather than dueling over the airways with those who get paid for only that. The country wanted a Lincoln, not another Nixon going after Dan Rather at a press conference. So far your administration resembles the latter, not the former. 2) Forget about George Bush. We got the message already that he is near satanic, you angelic. Yet even in your inauguration speech, you could not leave well enough alone, and so once again went after a predecessor who won two elections, and so far has been circumspect in his criticism of your own brief tenure. Even ex-Presidents--cf. Jimmy Carter's self-serving ankle-biting and Bill Clinton contorted snipes--reduce the office when they engage in schoolyard "they did it, not me" finger-pointing. Again, in your first address to the nation, you went out swinging: "As for our common defense, we reject as false the choice between our safety and our ideals." But President Bush never set up such a Manichean either/or situation, as you yourself must accept, when you embraced his protocols on FISA, the Patriotic Act, the Bush-Petraeus Iraq withdrawal plan, and kept rendition, and so far have not quite closed Guantanamo. And there was more still in that address: "A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. . .Regulations were gutted for the sake of a quick profit at the expense of a healthy market." But Mr. President, deficits arose from out-of-control spending, inasmuch as the Bush tax cuts resulted in increased revenue. It is fair to fault the past eight years of profligate spending, but when you engage in such demagoguery, the American people can detect your subtext: "I won't criticize Bush's spending because I found it not enough and will trump it; I will criticize his tax cuts, since I want to make the wealthier pay for my even greater borrowing." Cutting taxes on everyone who pays them is not transferring wealth, unless you believe that one's own income belongs to the government in the first place. Under Bush, nearly 50% of the tax filers for the first time paid no income tax at all--hardly a transfer of wealth. As far as "gutting" regulations go, I don't think you wish to go there--given the careers of Franklin Rains, a disgraced Jim Johnson (of your recent hire), Barney Frank, and Chris Dodd, who not only really did gut regulations that were at the center of the financial meltdown, but profited from such complicit laxity. 3) Drop the messianic style. The campaign is over. The Victory Column and Parthenon facades belong to last summer. R[...]
Thu, 26 Feb 2009 00:00:00 -0600Abroad, the news is worse. European banks have lost trillions of euros in bad loans to Eastern Europe and Asia. Countries like Iceland, Ireland and Greece are teetering on insolvency. China's export industries may have to lay off millions of workers. Given all that news, we are in a funny sort of depression. Our spiraling national deficit is being financed by China, Japan and other overseas concerns at almost no interest -- saving the United States trillions of dollars in debt service costs. Nearly 93 percent of those Americans in the workforce are still employed. The difference between what the banks pay out in interest on depositors' savings and what they charge borrowers for loans is one of the most profitable in recent memory. The sudden crash in energy prices may be hurting Iran, the Gulf monarchies, Russia and Venezuela. Yet Americans, who import 60 percent of their transportation fuel, along with natural gas, have been given about a half-trillion-dollar annual reprieve. The reduced price of energy could translate into more than $1,500 in annual savings for the average driver, and hundreds of dollars off the heating and cooling bills for the homeowner. For the vast majority of Americans with jobs, the fall in prices for almost everything from food to cars has, in real dollars, meant an actual increase in purchasing power. The loss in value of home equity is serious for those who need to relocate for work or want to downsize and move to an apartment or a retirement community. But when averaged over the last decade, real estate still shows a substantial annual increase in value. Moreover, the vast majority of American homeowners -- well over 90 percent -- meet their mortgage payments. They have no plans to flip their homes for profit. For them, the fact that they have lost paper equity, or even owe more than their homes are currently appraised at, is scary -- but not equivalent to a depression. Most are confident that after a few years their houses will appreciate again. As for now, working young couples have a chance to buy a house that would have been impossible just two years ago. The same holds true for many retirement accounts whose decline is terrible for those retirees who count on drawing out each month what they put away or must cash out their depleted accounts at vastly reduced value. But the majority of working Americans are not yet pulling out their sinking retirement funds. Most are still putting away pre-tax money each month, apparently confident that within a few years their portfolios will return to their former value. Some are even consoled that they are now buying mutual funds at rock-bottom prices rather than investing in sky-high investments at the peak of a bull market. Times are bad for those out of work or those who bought expensive homes with paltry down payments. Yet for those hurting, there is a vast array of government help. Both private companies and public agencies offer all sorts of ways to either walk away from mortgage obligations or have them renegotiated. The same is true for credit-card debt. Unemployment insurance, welfare, food stamps and even more new social programs on the way have redefined poverty from what our grandparents told us of the Great Depression. I live in southeastern Fresno County, one of the poorest regions of a now nearly bankrupt California. Many people are hurting. Yet to go to the local Wal-Mart is to see late-model cars in the parking lots and plenty of cell phones, iPods and BlackBerrys among the shoppers. Carts are stuffed with consumer goods, lots of food and Easter confections. So are we in a depression that justifies a vast redefinition of government and a massive takeover of the private sector? Not quite. What we are a witnessing instead is a sharp downturn from the most af[...]
Mon, 23 Feb 2009 00:33:53 -0600Natural Stimuli In other words, there are natural stimuli--quite substantial ones--occurring that are lost amid the hysteria of foreclosure. Cheaper energy prices permeate throughout the entire economy from tractor fuel to fertilizers. Cheap foreign capital means renegotiating loans down to near 4% and several hundred dollars per month in savings on one's mortgage. We are in a recession that has self-remedying qualities rather than justifications for the most radical changes in the economy since the Great Depression. Haves and sorta have nots Are we seeing an enormous transference of wealth? Those with capital who lost their stock accounts, and those who sold homes at a loss in some ways subsidized those who walked away from homes and credit card debt, or are renegotiating with the IRS and banks for reduced obligations. The illogical exuberance that resulted in purchase of "things" like televisions, cars, and vacations, financed in some cases by additional second and third (defaulted) mortgages (or 5th and 6th credit cards), was ultimately paid by someone else when the crash occurred--first by the lending agencies themselves, but ultimately (and soon) by the public through higher taxes or decimated retirement accounts, or those average Joes who had securities bundled among real estate debt. Not Quite a Depression, After all Another sobering thought. Over 92% of Americans are still at work. Over 90% are still servicing their mortgage debts each month. For these, the "depression" so far doesn't mean a radical need to reinvent America. They plan to stay in their homes, even if they have negative equity in them; again, loss of equity doesn't mean catastrophe if they don't have to sell quickly, refinance, or remodel. Ditto 401(k)s. If you are retired--terrible. If you are nearing retirement as many of us are--worrisome. But for those under 50, who still put away pre-tax dollars each month, there is a weird sort of solace. I have friends in their 40s who say they won't pull anything out for a quarter-century, and would prefer to buy stocks and mutual funds now at rock-bottom prices, rather than as was true in 2005 or 2006 at the peak of the market. Quite logical--if the entire market doesn't go belly up. Meanwhile, gas, food, cars, houses, and consumer goods fall in price, a tremendous benefit for those still working, and one that translates in a rise in the purchasing power of their incomes. Postmodern Poverty And for the less fortunate? Here is southern Fresno County, at ground zero of the illegal immigration explosion, where unemployment reaches 14%, agriculture is in the doldrums and construction and manufacturing fare worse, the depression among the poor is still ambiguous, at least in historical terms. I went into the local Food 4-Less again the other day, a cut-rate, bulk-buy chain food store. The parking lot was full of late model trucks and cars--not the sort I prefer, but those V-8 monsters, loaded up with high-priced rims, wide tires, custom paint, tinted windows, oversized trailer hitches, the whole American shebang so to speak that tops out at around $40,000. The customers may have been out of work, but I counted nine, just nine, of some 100 (this was a research trip for this blog posting), who did not have one of the following four appurtencies visible--cell phone, Bluetooth, blackberry-like device, I-pod. On the way out of the parking lot, the car radio was blaring with three sorts of ads: get out of credit card debt, get out of mortgage debt, get out of back IRS payments--now! Easy! Little cash upfront! This is not Bleak House as we are led to believe. We are hurting, but not in 1933 fashion, due both to expanded government entitlements; Chinese-made cheap consumer goods; the fumes of past easy credit; bl[...]
Fri, 20 Feb 2009 00:36:48 -0600As he thinks about this apology business, the battered American always gets a little angrier, "And another thing. Mr. Holder, I've never said or done a racist thing in my life, not one. Always supported equal opportunity, always will. So don't call me a "coward" or my countrymen "cowards," not when you're my Attorney General. You are The Attorney General of the United States of America, so please, no more playing Al Sharpton or Jesse Jackson, leveling the latest shake-down charge on television. That's not really in your job description to call your own countrymen "cowards." When I was in high school I was taught that name-calling like that might be what they said was "projection." So maybe, just maybe, you have been cowardly--and arrogant too--but not those whom you accused of all that. At least if someone asked me to help pardon a fugitive on the FBI's most wanted list, I would have said "no." Always, no exceptions, period! Anything else? That would be cowardly." Our battered American I noticed gets even more riled up and would say to our new energy secretary, "And another thing Mr. Chu, California isn't going anywhere. What's this dry up and blow away nonsense? You're our Energy Secretary, not Jimmy Carter in his cardigan sweater or Al Gore doing interviews on that private jet. So Americans aren't going to "vanish" in rural California. We're proud that we created, by blood, and hard work, and suffering, the richest agricultural valleys in the world. They won't disappear soon--at least not if you allow us to have the water that our great-grandfathers tapped and brought down from the Sierra, instead of letting it run full blast into the sea so that Speaker Pelosi's mice can live more nicely in the bay than we do on our farms." I think this battered American would also say, "Mr. President, I passed on buying that bigger house. When I wanted to refinance and put in that extra room, I also backed out, since I couldn't meet that additional $400 a month on the debt. I never flipped a house; I never missed a mortgage payment; and I never took out a second, third, or fourth mortgage either. I didn't even know there were such crazy things. So please don't tell me that the 93% of us that played by our grandfathers' rules are obligated to come to the rescue of the 7%, who did the exact opposite. At one of your town meetings, just one, instead of pandering to those who defaulted, ask one of us to stand up for paying our debts and then say to the crowd, "Give a hand to Mrs. Battered American. She pays her mortgage, so the rest of us don't have to!" Try that just once." Mrs. Battered American would go on, "I have two credit cards, and only use one, and it is not maxed out. And when I hear the radio blaring to renegotiate my mortgage, to renounce my credit card debt, or stick it to the IRS, I turn it off. I was raised to pay what I owe--or not to borrow the money in the first place. I never thought what I make today I would necessarily always make tomorrow, and so I did not go into debt on the chance that our government--other Americans--should pay off what I charged." "I tried to put away a little away for college, Mr. President. Just a bit for tuition and such. But when I did, my kids no longer qualified for loans, and scholarships and federal help. So, yes, I want more education. But we are in debt for over a trillion dollars this year, and maybe, just once, you might advise us to pass on that big-screen television, that digital camera, and instead put a tiny bit away for our girls' tuition, or our boys' books, so others won't have to." "And Mr. President," the battered American would add, "When I add up my federal income tax, my state income tax, my Medicare, and my Social Security taxes, I am paying hal[...]
Thu, 19 Feb 2009 00:00:00 -0600On her initial tour abroad, Secretary of State Hillary Clinton re-emphasized the Obama and Biden message, announcing that she would follow an approach that "values what others have to say." And then Clinton elaborated on this now well-worn "blame Bush" theme: "Too often in the recent past, our government has acted reflexively before considering available facts and evidence or hearing the perspectives of others." America, Clinton promised, from now on would be "neither impulsive nor ideological." Contrast such admirable talk with recent events: North Korea has just announced that it plans to launch a new Taepodong-2 missile capable of reaching the United States. China, which holds hundreds of billions of dollars in U.S. Treasury bonds and will be asked to loan us billions more, advised the Obama administration to drop the "buy American" talk in the new Democratic stimulus program. Iranian President Mahmoud Ahmadinejad recently bragged that his country would soon go nuclear, and that President Obama's offer to talk without preconditions revealed a new passivity in the West. Russia just announced that it had developed a new strategic relationship with Iran, and warned that American-sponsored missile defense for Eastern Europe was unpalatable. About the same time, the former Soviet republic of Kyrgyzstan, on Russian advice, disclosed that it may no longer allow Americans to use a base in their country to supply the war effort in Afghanistan. Pakistan just released from house arrest A.Q. Khan, the father of the Pakistani nuclear bomb, who had sold nuclear technologies to the likes of Libya and North Korea. This rather provocative behavior reminds us that President Obama's laudable assurances of a new age of American diplomacy may often be ignored -- or exploited -- rather than always appreciated. North Korea, for example, may agree with Hillary Clinton's criticism of the United States the last eight years -- and thereby announce to her that it feels less obligated to keep promises once made with an "impulsive" United States. European governments in France, Germany, Italy and most of Eastern Europe have long been pro-American. India is friendly; so is most of Asia. Africa has received billions of dollars in recent American help to combat AIDS. These friends of ours., despite their serial complaining about the U.S., may privately be worrying that a kinder, more eloquent antithesis to George Bush will lead to too much dialogue and not enough leadership. After all, the agendas of Mahmoud Ahmadinejad, Hugo Chavez, Kim Jong Il, the leaders of Hamas and Hezbollah, Vladimir Putin and other roguish leaders transcend the Bush presidency. We have already learned from Barack Obama's adjustments from his original positions on the Patriot Act , the FISA accords, the surge and overseas rendition that often the past administration faced only bad choices -- which were easier to criticize as a candidate than to reject outright as president. Now, by so loudly broadcasting a near-divine morality, rather than just quietly putting its own imprint on us foreign policy, the Obama administration only sets itself up for the charge of hypocrisy. True, it is wise to drop the unnecessary smoke-'em out dead-or-alive lingo that sometimes characterized the Bush administration. But it would be foolish to reject many of its successful initiatives simply because they were poorly articulated or sometimes couched in unfortunate tough-guy rhetoric. The last president to promise such a grandiose break from the American past was Jimmy Carter. As he entered office in the post-Watergate, post-Vietnam age, he lectured the world about human rights. Carter promised an end to America's inordinate fears of com[...]
Thu, 12 Feb 2009 00:30:00 -0600Financial wizards like Robert Rubin at Citicorp, Richard Fuld at Lehman Brothers and Franklin Raines at Fannie Mae -- all of whom made millions as they left behind imploding corporations -- had degrees from America's top universities. They had sophisticated understanding of hedge funds, derivatives and sub-prime mortgages -- everything, it seems, but moral responsibility for the investments of millions of their ordinary clients. The result of such speculation by thousands of Wall Street gamblers was that millions of Americans who played by the rules, and put money each month away in their 401(k) plans and elsewhere, lost much of their retirement savings. Many likely will have to keep working well into their 60s or 70s, and delay passing on their jobs to a new generation awaiting employment. Yet most disgraced Wall Street elites will retain their mega-bonuses and will not go to jail. Their legacy is having destroyed the financial confidence of a society that depends on putting capital safely away to be directed for investment by responsible overseers. A sort of unraveling of the entire system of credit and debt may follow from the loss of confidence in Wall Street. Ads on radio now blare out to the rest of us how to renegotiate our mortgages, how to avoid paying the IRS and how to walk away from freely incurred credit-card debt. We hear not to trust in mutual funds or even banks -- but instead, like medieval hoarders, to revert to the age-old safety of gold. Apparently, the institutions run by our elites aren't trustworthy, so why should we put any faith in them? Meanwhile, we are learning that the brightest and best-educated Americans at the highest levels of government simply refuse to pay their required taxes. Yet because the IRS audits a tiny percentage of taxpayers, voluntarily compliance with our tax code is the glue that holds together a sophisticated society and separates it from a failed state. Rep. Charles Rangel, D-N.Y., is the chairman of the Ways and Means Committee that overseas our tax laws. But his lawyer recently admitted that Rangel didn't report some $75,000 in income. Timothy Geithner is the new Treasury secretary and oversees the IRS. Yet Geithner improperly wrote off his son's summer camp fees as a dependent-care expense, and failed to pay thousands of dollars in Social Security and Medicare taxes. Then there is former Sen. Tom Daschle, who was nominated to be secretary of Health and Human Services. It was revealed that he owed the IRS over $140,000 in taxes on unreported free limo services; as a result, he had to ask President Obama to withdraw his nomination. Nancy Killefer, who just withdrew her name from consideration as "performance czar," did not pay required taxes for domestic help. The husband of Labor secretary nominee, Hilda Solis, had over a dozen liens for back taxes on his property and just now paid up amid public outcry. (The issue is relevant, since the couple filed a joint income tax return.) Daschle, Geithner, Killefer and Solis did not disclose their tax liabilities until they were nominated to high office and scrutinized by the press. And they apparently did not pay their back taxes until their appointments were in jeopardy from public disclosures. That raises disturbing questions: Would we have known about such tax dodging had our best and brightest not wished career advancement in government? And would they have ever paid up if they had not been caught? Take your pick -- on the one side, we have free-market capitalists who took huge amounts of money as their companies eroded the savings of tens of millions; on the other, we have supposedly egalitarian liberals who skipped paying taxes. The [...]