How exciting it was to read your posting of Michael Renner's article about Mondragon Internacional, S.A.'s moves to introduce Mondragon-style manufacturing cooperatives in the U.S. and Canada, illustrated by a recently signed agreement with the United Steel Workers. In 2007, there was a report published by the Blue-Green-Action Alliance --a public policy partnership of the US Steel Workers, the Sierra Club and Environment America -- entitled, "Indiana's Road To Energy Independence". The report cioncluded a minimum of +-40,000 new "green" jobs will be created in Indiana by manufacturing components for wind turbines, solar panels, and other renewable energy equipment.
Mondragon's unique and highly successful Cooperative Model of worker-member ownership and participatory decision-making in the Industrial, Retail/Distribution, and Finance sectors could be just the right catalyizing paradigm force behind the Reindustrialization our country so desperately needs. The Mondragon Cooperative Corporation has an over 50 year remarkable record of expanding and protecting worker employment with its strict cooperative policies of : heavy investments in applied R&D, worker applied training/education programs, pay solidarity, no-layoffs, and profit distribution of 45% to worker-members, 45% to MCC's collective reserve, and 10% to the community.
This approach includes employing a significant number of temporary workers to cover peak demand cycles and to create a buffer for member firms operating in volatile markets. MCC doesn't accept the transnational, conglomerate, giant monopoly, vast corporate enterprise paradigm of super-huge profits over the backs of workers (by maximum job elimination by automation, outsourcing and redundancy) .... all supported with the familiar US false themes of decline in productivity, bad worker attitudes, and costly wage demands. MCC firms have managed to achieve excellence in manufacturing production in both industrial and consumer goods while also being a leading example of democratic worker ownership and representation on the highest authority councils in each company. The MCC cooperative model shows how good business and concern for workers are inseparably competitive, mutually reinforcng strengths.
The real cause of our economic decline that is also a major barrier to our national effort to Reindustrialize and bring back production competence in the key old (infrastructure) and new (green) civilian industries is the WAR ECONOMY. Foreign countries have been devoting over the years increasing proportions of their government spending to civilian-related R&D with almost no research funds going to to Defense. In contrast, the US Defense budget constitutes over 45% of all Federal R&D spending. This amounts to a tremendous diversion of engineering skills, talent, technology, and general knowhow to relatively large areas of non-productive sources or dead-end materials and equipment as opposed to creating a flow of useful, life-serving goods and services.
Europe, particularly Germany, and Japan took advantage of US preoccupation to take control of Korea and then Vietnam over a protracted period to strengthen their position and modernize their industrial and retail sectors. We in effect helped such countries to become our competitors. We are doing it again with the massive diversion of scarce taxpayer funds to social-engineering tasks in Irag and Afghanistan. We are making the same mistakes all over again when we should be undertaking a many-sided effort to Reindustrialize, where an accumulation of productive successes will no doubt open up new, more sustainable prospects for the working lives of vastly greater numbers of Americans compared to the limited numbers working in the greedy financial industry and unaffordable, waste in the defense establishment.
Firms like Mandragon are a refreshing business and humane paradigm redynamic to our stale economy and a key opportunity to help overcome the almost insurmountable problem to Reindustrialization of our basic industrial structure in a manner that will transform the lives of all who participate.
I wish you every success, John, with your well-conceived models for optimizing worker scheduling, productivity and happiness for Mondragon and others. Given the high emphasis by MCC on utilizing advance, applied knowledge in their business strategies and large numbers of temporary workers, there appears to be much room for your kind of unique expertise and contribution to MCC's US worker effectiveness and satisfaction. Good luck!
Best wishes and good health to you and Judy for the New Year !
Of all the most ridiculous excuses for the failure of government agencies in the case of Umar Farouk Abdul Mutallab is the one that, although he was listed in a database, the database was too large! Evidently, there are several databases, and, if Umar Farouk, had been in the 1400 person database, he would have been spotted. But he was in a 500,000 person database, and that one is just too big for him to be noticed. He was lost in the crowd of a too large database! This is just so ridiculous as to make you laugh if we weren't crying so hard over an almost tragedy of enormous proportions.
A 500,000 person database is computer searchable in at most a couple of seconds. What would they have us believe - that someone was visually checking that database? Some human was sitting at their desk and going down a list of 500,000 persons. How ridiculous! And why are there three databases? They would have us believe that, since there are three databases, maybe only two of them or one of them would be searched, the other one(s) somehow were overlooked in the process? These explanations are an insult to anyone's intelligence.
And the fact that Umar's father, a prominent Nigerian banker, went personally to the US Embassy to tell them that he suspected his son was a terrorist and Umar wasn't immediately put on a no-fly list, this is the second most ridiculous error of omission. To think that some bureaucrat at the US Embassy was too lazy to immediately take action on this, he or she should be fired immediately. These kinds of errors of omission, laxness and laziness are exactly the same ones that allowed 9/11 to happen. What are these people thinking? They probably checked their itinerary and saw that they wouldn't be flying over the holidays so c'est la vie! It's like the proverbial volunteer fireman who, when the fire alarm goes off in the middle of the night, rolls over in his bed and touches the wall to see if his house is on fire. If not, he rolls back over and goes to sleep.
OK, let's look at even more clues. Umar was a single Muslim, traveling alone with no checked baggage having paid cash for a one way ticket. If this wasn't enough right there to set off all kinds of alarms! You'd think the terrorists would wise up and start checking their baggage and buying round trip tickets with credit cards! These government agents just are not doing their jobs - plain and simple! It's not a question of "failing to connect the dots." The fact of the matter, as Washington pundits like to say, is ... is (oh, no, the double is) that they were not not connecting the dots. They were just incompetent and lazy and not doing their jobs and probably earning upwards of $100,000 a year. Sheer incompetence, I'd say.
And the hysteria about full-body scanners! My God, these people take their clothes off in front of their doctor in order to protect their health. They don't want to figuratively take their clothes off in order to protect their and other people's lives?! What a pathetic, ridiculous bunch of assholes. If it comes down to it, they should all be required to go into a room and strip naked. Aren't you required to do this in the Army? You could even have separate rooms for men and women. No million dollar high tech machines required!
It just goes to show that the government has put a half ass effort into protecting the flying public while spending billions on the military-industrial complex. They've put a half ass effort into protecting our ports and borders while spending billions on the military-industrial complex. When are they going to wake up and take the resources (the money) and actually spend it in such a way as to protect the American people instead of on military adventurism and Pentagon job protection. The military-industrial complex is just a large jobs protection program for the middle class - middle class social welfare. The lower middle class gets to enlist and actually go and fight. That's for the ones with only a high school education. A college degree will get you a job with the FBI or CIA or maybe even Lockheed or Halliburton.
In short the efforts to "protect the homeland" have been paltry while they've spared no expense when it comes to worthless military equipment and misbegotten wars. The American people are treated like poor Richards while the defense contractors are given the white glove, gold plated and red carpet treatment. Those profiting from their defense contractor stocks should be ashamed also. It almost seems as if the defense contractors and politicians (some of them anyway) want another 9/11 style attack so they can stoke the flames of fear and anger and justify all their military hysteria and adventurism. Their stock goes up, and their Wall Street casino bets - that there will be more war and higher defense budgets not to mention more duly elected Republicans - pay off.
I'm sick and tired of having the protection of the American people treated like the poor stepchild that sucks hind teat while the military-industrial complex that is devoted to nothing more than profits eats high on the hog and sucks up the largesse of taxpayer money draining the coffers dry. They even wanted to resurrect the worthless F-22 jet after the Secretary of Defense canned it because it's a jobs program and politicians don't want to lose jobs in their district because some worthless military program is shut down. The American people are being shortchanged while at the same time being stoked with fear by the likes of Dick Cheney. When in history has an ex-vice President come out and criticized the President who succeeded him? What an asshole!
Finally, you have to call a spade a spade. Political correctness is a bunch of hogwash. Why don't they just come out and say it. All the terrorist attacks have been the work of Muslims, and they are the most likely ones to do more. The only exception to this rule is the right wing nut cases like Timothy McVeigh and the ones who shoot the abortion doctors, but it's pretty easy to separate these two groups of people and their motives. The right wing nut cases don't blow up airplanes or drive them into buildings! So I say do profile them. Do separate them out for secondary inspections. If they don't like it, they don't have to fly. I sympathize with them when it comes to not wanting US military bases in their Holy Lands, but I don't sympathize with them when it comes to not wanting to take their clothes off either figuratively or literally to see if they have bombs in their underwear.
One of AlterNet's most popular articles of the year: Confident that you are buying good, socially conscious brands? Find out the real story.This article was AlterNet's 6th most popular article in 2009.
My first introduction to natural, organic and eco-friendly products stems back to the early '90s, when I stumbled upon Burt’s Bees lip balm at an independently owned health food store in the heart of Westport, Kansas City, Mo.
Before the eyesore invasion of ’98, when Starbucks frothed its way into the neighborhood, leading to its ultimate demise, Westport was the kind of 'hood I still yearn for. It was saturated with historically preserved, hip and funky, mom-and-pop-type establishments, delivering their goods people to people.
I was surprised more recently when I saw Burt's Bees products everywhere -- in grocery stores, drug stores, corner bodegas and big-box stores like Target and Wal-Mart. I thought to myself, fantastic; the marketplace is working, and good for Burt. He has made his mark, and the demand for his products is on the rise.
Needless to say, I was shocked when I recently found out that Burt's Bees is now owned by Clorox, a massive corporate company that has historically cared very little about the environment, but whose main industry is directly associated with harmful chemicals, some of which require warning labels for legal sale.
Clorox; yes, that's right -- the bleach company with an estimated revenue of $ 4.8 billion that employs nearly 7,600 workers (now bees) and sells products like Liquid-Plumr, Pine-Sol and Armor All, a far cry from the origins of Burt.
I now understood. The reason Burt's Bees products were everywhere was precisely because they now had a powerful corporation in the driver's seat, with big marketing budgets and existing distribution systems.
The story of Burt is a charming one gone bad. Burt Shavitz, a beekeeper in Dexter, Maine, lived an extremely humble life selling honey in pickle jars from the back of his pickup truck and resided in the wilderness inside a turkey coop without running water or electricity.
In the summer of 1984, Shavitz was driving down the road and spotted a hitchhiker who needed a lift to the post office. He pulled over and picked up Roxanne Quimby, a 34-year-old woman who eventually became Shavitz's lover and business partner. Quimby started helping him tend to the beehives, and that eventually led to the all natural-inspired health care products made with Shavitz's honey and the birth of Burt's Bees products.
Burt's story and very powerful narrative gave Burt's Bees products their legitimacy in my book. Creative entrepreneurs and knowledgeable consumers together working their magic; not the results of a corporate behemoth out to dominate the marketplace.
However, Quimby and Shavitz's relationship became 'sticky' in the late '90s for reasons unclear, yet probably having little to do with honey. Their romantic break up carried over to the split of their business partnership as well. In 1999, Quimby bought out Shavitz's shares of the company for a small six-figure sum. Quimby then continued, becoming phenomenally successfully and growing sales to $43.5 million by 2002.
In 2003, a private equity firm, AEA investors, purchased 80 percent of Burt's Bees from Quimby, with her retaining a 20 percent share and a seat on the board. In 2006, John Replogle, the former general manager of Unilever's skin-care division became CEO and president of Burt's Bees. The company was sold to Clorox in late October 2007 for $925 million.
Quimby was paid more than $300 million for her stake in Burt's Bees. At the time of that deal, Shavitz reportedly demanded more money, and Quimby agreed to pay him $4 million. Quimby now refurbishes fancy, swank homes in Florida, travels the world and buys massive chunks of land in her free time. Our bearded man Shavitz, on the other hand, now 73 and unchanged, continues to reside amidst nature in his now-expanded turkey coop, which still remains absent of electricity or running water.
The Burt's Bees story is disconcerting. I vaguely remembered long ago that one of my favorite ice cream products, Ben & Jerry's, sold out. Unilever (which also owns Breyers), the giant conglomerate with an estimated market cap of $50 billion and close to 174,000 employees, bought Ben & Jerry's in 2000 for $326 million.
Published on Tuesday, December 29, 2009 by YES! Magazine
More and more people across America are waking up to the mismatch between what is taught in schools and what common sense tells us we need to know. What can you do about it?
by John Taylor Gatto
Nobody gives you an education. If you want one, you have to take it.
Only you can educate you—and you can’t do it by memorizing. You have to find out who you are by experience and by risk-taking, then pursue your own nature intensely. School routines are set up to discourage you from self-discovery. People who know who they are make trouble for schools.
To know yourself, you have to keep track of your random choices, figure out your patterns, and use this knowledge to dominate your own mind. It’s the only way that free will can grow. If you avoid this, other minds will manipulate and control you lifelong.
One method people use to find out who they are becoming, before others do, is to keep a journal, where they log what attracts their attention, along with some commentary. In this way, you get to listen to yourself instead of listening only to others.
Another path to self-discovery that seems to have atrophied through schooling lies in finding a mentor. People aren’t the only mentors. Books can serve as mentors if you learn to read intensely, with every sense alert to nuances. Books can change your life, as mentors do.
I experienced precious little of such thinking in 30 years of teaching in the public junior high schools of Manhattan’s ultra-progressive Upper West Side. I was by turns amused, disgusted, and disbelieving when confronted with the curriculum—endless drills of fractions and decimals, reading assignments of science fiction, Jack London, and one or two Shakespeare plays for which the language had been simplified. The strategy was to kill time and stave off the worst kinds of boredom that can lead to trouble—the trouble that comes from being made aware that you are trapped in irrelevancy and powerless to escape.
Institutionalized schooling, I gradually realized, is about obedience in exchange for favors and advantages: Sit where I tell you, speak when I allow it, memorize what I’ve told you to memorize. Do these things, and I’ll take care to put you above your classmates.
Wouldn’t you think everyone could figure out that school “achievement tests” measure no achievement that common sense would recognize? The surrender required of students meets the primary duty of bureaucratic establishment: to protect established order.
It wasn’t always this way. Classical schooling—the kind I was lucky enough to have growing up—teaches independent thought, appreciation for great works, and an experience of the world not found within the confines of a classroom. It was an education that is missing in public schools today but still exists in many private schools—and can for you and your children, too, if you take time to learn how to learn.
On the Wrong Side of the Tracks
In the fall of 2009, a documentary film will be released by a resident of my hometown of Monongahela, Pennsylvania. Laura Magone’s film, “One Extraordinary Street,” centers on a two-mile-long road that parallels polluted Pigeon Creek. Park Avenue, as it’s called, is on the wrong side of the tracks in this little-known coal-mining burg of 4,500 souls.
So far Park Avenue has produced an Army chief of staff, the founder of the Disney Channel, the inventor of the Nerf football, the only professional baseball player to ever strike out all 27 enemy batsmen in a nine-inning game, a winner of the National Book Award, a respected cardiologist, Hall of Fame quarterback Joe Montana, and the writer whose words you’re reading.
Did the education Monongahela offered make all these miracles possible? I don’t know. It was an education filled with hands-on experience, including cooking the school meals, serving them individually (not cafeteria-style) on tablecloths, and cleaning up afterward. Students handled the daily maintenance, including basic repairs. If you weren’t earning money and adding value to the town by the age of seven, you were considered a jerk. I swept out a printing office daily, sold newspapers, shoveled snow, cut grass, and sold lemonade.
Classical schooling isn’t psychologically driven. The ancient Greeks discovered thousands of years ago that rules and ironclad procedures, when taken too seriously, burn out imagination, stifle courage, and wipe the leadership clean of resourcefulness. Greek education was much more like play, with studies undertaken for their own sake, to satisfy curiosity. It assumed that sane children want to grow up and recognized that childhood ends much earlier than modern society typically allows.
We read Caesar’s Gallic Wars—in translation between fifth and seventh grades and, for those who wanted, in Latin in ninth and tenth grades. Caesar was offered to us not as some historical relic but as a workshop in dividing and conquering superior enemies. We read The Odyssey as an aid to thinking about the role of family in a good life, as the beating heart of meaning.
Monongahela’s education integrated students, from first grade on, into the intimate life and culture of the town. Its classrooms were free of the familiar tools of official pedagogy—dumbed-down textbooks, massively irrelevant standardized tests, insanely slowed-down sequences. It was an education rich in relationships, tradition, and respect for the best that’s been written. It was a growing-up that demanded real achievement.
The admissions director at Harvard College told The New York Times a few years ago that Harvard admits only students with a record of distinctive accomplishment. I instantly thought of the Orwellian newspeak at my own Manhattan school where achievement tests were the order of the day. What achievement? Like the noisy royalty who intimidated Alice until her head cleared and she realized they were only a pack of cards, school achievement is just a pack of words.
A Deliberate Saboteur
As a schoolteacher, I was determined to act as a deliberate saboteur, and so for 30 years I woke up committed to making the system hurt in some small way and to changing the destiny of children in my orbit in a large way.
Without the eclectic grounding in classical training that I had partially absorbed, neither goal would have been possible. I set out to use the classical emphasis on qualities and specific powers. I collected from every kid a list of three powers they felt they already possessed and three weaknesses they might like to remedy in the course of the school year.
I pledged to them that I’d do my level best inside the limitations the institution imposed to make time, advice, and support available toward everyone’s private goals. There would be group lessons as worthwhile as I could come up with, but my priorities were the opportunities outside the room, outside the school, even outside the city, to strengthen a power or work on a weakness.
I let a 13-year-old boy who dreamed of being a comic-book writer spend a week in the public library—with the assistance of the librarian—to learn the tricks of graphic storytelling. I sent a shy 13-year-old girl in the company of a loudmouth classmate to the state capitol—she to speak to her local legislator, he to teach her how to be fearless. Today, that shy girl is a trial attorney.
If you understand where a kid wants to go—the kid has to understand that first—it isn’t hard to devise exercises, complete with academics, that can take them there.
But school often acts as an obstacle to success. To go from the confinement of early childhood to the confinement of the classroom to the confinement of homework, working to amass a record entitling you to a “good” college, where the radical reduction of your spirit will continue, isn’t likely to build character or prepare you for a good life.
I quit teaching in 1991 and set out to discover where this destructive institution had come from, why it had taken the shape it had, how it managed to beat back its many critics for a century while growing bigger and more intrusive, and what we might do about it.
School does exactly what it was created to do: It solves, or at least mitigates, the problem of a restless, ambitious labor pool, so deadly for capitalist economies; and it confronts democracy’s other deadly problem—that ordinary people might one day learn to un-divide themselves, band together in the common interest, and take control of the institutions that shape their lives.
The present system of institutionalized schooling is a product of two or three centuries of economic and political thinking that spread primarily from a militaristic state in the disunited Germanies known as Prussia. That philosophy destroyed classical training for the common people, reserving it for those who were expected to become leaders. Education, in the words of famous economists (such as William Playfair), captains of industry (Andrew Carnegie), and even a man who would be president (Woodrow Wilson), was a means of keeping the middle and lower classes in line and of keeping the engines of capitalism running.
In a 1909 address to New York City teachers, Wilson, then president of Princeton University, said, “We want one class of persons to have a liberal education, and we want another class of persons, a very much larger class of necessity to forgo the privilege of a liberal education.”
My job isn’t to indict Woodrow or anyone else, only to show you how inevitable the schools you hate must be in the economy and social order we’re stuck with. Liberal education served the ancient Greeks well until they got too rich to allow it, just as it served America the same way until we got too rich to allow it.
What Can You Do About All This? A lot.
You can make the system an offer it can’t refuse by doing small things, individually.
You can publicly oppose—in writing, in speech, in actions—anything that will perpetuate the institution as it is. The accumulated weight of your resistance and disapproval, together with that of thousands more, will erode the energy of any bureaucracy.
You can calmly refuse to take standardized tests. Follow the lead of Melville’s moral genius in Bartleby, the Scrivener, and ask everyone, politely, to write: “I prefer not to take this test” on the face of the test packet.
You can, of course, homeschool or unschool. You can inform your kids that bad grades won’t hurt them at all in life, if they actually learn to master valuable skills and put them on offer to the world at large. And you can begin to free yourself from the conditioned fear that not being accepted at a “good” college will preclude you from a comfortable life. If the lack of a college degree didn’t stop Steve Jobs (Apple), Bill Gates (Microsoft), Michael Dell (Dell Computer), Larry Ellison (Oracle), Ingvar Kamprad (IKEA), Warren Avis (Avis Rent-a-Car), Ted Turner (CNN), and so many others, then it shouldn’t be too hard for you to see that you’ve been bamboozled, flummoxed, played for a sap by the propaganda mills of schooling. Get rid of your assumptions.
If you are interested in education, I’ve tried to show you a little about how that’s done, and I have faith you can learn the rest on your own. Schooling operates out of an assumption that ordinary people are biologically or psychologically or politically inferior; education assumes that individuals are sovereign spirits. Societies that don’t know that need to be changed or broken.
Once you take responsibility for your own education, you’ll join a growing army of men and women all across America who are waking up to the mismatch schools inflict on the young—a mismatch between what common sense tells you they’ll need to know, and what is actually taught. You’ll have the exquisite luxury of being able to adapt to conditions, to opportunities, to the particular spirits of your kids. With you as educational czar or czarina, feedback becomes your friend and guide.
I’ve traveled 3 million miles to every corner of this country and 12 others, and believe me, people everywhere are gradually waking up and striking out in new directions. Don’t wait for the government to say it’s OK, just come on in—the water’s fine.
John Taylor Gatto wrote this article for Learn as You Go, the Fall 2009 issue of YES! Magazine. Gatto was a New York State Teacher of the Year. An advocate for school reform, Gatto's books include Dumbing Us Down: The Hidden Curriculum of Compulsory Schooling and Weapons of Mass Instruction.
I have blogged before about employee shift bidding which has been used by hospitals to schedule shifts for nurses. This gives the nurses some choice over their preferred shifts and pay levels. Employees would usually be able to get a higher pay rate for working less desirable shifts such as the graveyard shift. Employees who want the more desirable shifts would usually have to work for less. From the hospital's viewpoint, they can choose the nurse with the lowest bid for any particular shift thus minimizing their total budget.
What I am proposing here is a cooperative shift choice arrangement which would be appropriate for a worker's cooperative such as the Mondragon Corporation in Spain. In this situation the goal would not be to minimize total workers' pay as it would be in a for profit corporation. The overall budget for worker/owners would be set by some procedure such as negotiations between management and labor. Then subject to the overall constraint, workers would input their preferences as to shift choice and pay level. A computer program (or algorithm) would then seek to maximize worker satisfaction within the overall budgetary constraint. A detailed paper, "Algorithm for Employment Cooperative Shift Choice," can be found here.
This process goes beyond shift bidding or mere first come, first served scheduling. In addition to shift choices and pay levels, other parameters could be taken into account such as job location and work assignment assuming that the employee is qualified for more than one kind of work. More flexible time commitments than fixed shifts could also be considered. There is no reason why an employee couldn't work a certain number of hours on a particular day in a time slot of his or her own preference and a different number on another day in a different time slot as long as the need for employee coverage of shifts was met. This might be considered a secondary constraint.
In general a society or entities within a society which give individuals as much choice as possible over their work/pay schedules would tend to maximize employee and worker satisfaction. I have called this preferensism. It is based on utilitarianism which seeks to maximizes societal satisfaction or happiness. Recently, there has been much interest in basing a society on Gross National Happiness rather than GDP (Gross Domestic Product). Consumer choice can also be taken into account in terms of what is produced or stocked. Computerized consumer choice is already widely available, but there is no direct link between consumer choice and what is produced. "Just-in-time" production scheduling tends to make production a function of consumer choice, but consumers are generally "pushed" into consuming by advertising rather than producers being pushed by consumers so that only that which is really needed gets produced.
A delegation from the state-owned Chinese company, China Metallurgical Group Corporation, visited the site of a copper mine in Aynak in 2007.
KABUL, Afghanistan — Behind an electrified fence, blast-resistant sandbags and 53 National Police outposts, the Afghan surge is well under way.
But the foot soldiers in a bowl-shaped valley about 20 miles southeast of Kabul are not fighting the Taliban, or even carrying guns. They are preparing to extract copper from one of the richest untapped deposits on earth. And they are Chinese, undertaking by far the largest foreign investment project in war-torn Afghanistan.
Two years ago, the China Metallurgical Group Corporation, a Chinese state-owned conglomerate, bid $3.4 billion — $1 billion more than any of its competitors from Canada, Europe, Russia, the United States and Kazakhstan — for the rights to mine deposits near the village of Aynak. Over the next 25 years, it plans to extract about 11 million tons of copper — an amount equal to one-third of all the known copper reserves in China.
While the United States spends hundreds of billions of dollars fighting the Taliban and Al Qaeda here, China is securing raw material for its voracious economy. The world’s superpower is focused on security. Its fastest rising competitor concentrates on commerce.
S. Frederick Starr, the chairman of the Central Asia-Caucasus Institute, an independent research organization in Washington, said that skeptics might wonder whether Washington and NATO had conducted “an unacknowledged preparatory phase for the Chinese economic penetration of Afghanistan.”
“We do the heavy lifting,” he said. “And they pick the fruit.”
The reality is more complicated than that. The Chinese bid far more for the mining rights to the Aynak project and promised to invest hundreds of millions more in associated infrastructure projects than other bidders. It is a risky venture that has not yet proved to be economical, and it has already been dogged by allegations of bribery.
But the Aynak investment underscores how China’s leaders, flush with money and in control of both the government and major industries, meld strategy, business and statecraft into a seamless whole. In a single move, Beijing strengthened its hold on a vital resource, engineered the single largest investment in Afghan history, promised to create thousands of new Afghan jobs and established itself as the Afghan government’s pre-eminent business partner and single largest source of tax payments.
An Odd Global Pairing
Afghanistan is not the only place where the United States and China find themselves so oddly juxtaposed in the post-9/11 world. China is investing more in extracting Iraqi oil than American companies are. It has reached long-term arrangements to buy gas from Iran, even as the government there comes under the threat of Western sanctions for its nuclear program. China has also become a dominant investor in Pakistan and volatile parts of Africa.
But it is in Afghanistan where China’s willingness to take risks for commercial and diplomatic gain are most striking.
China Metallurgical Group, often called M.C.C., will build a 400-megawatt generating plant to power both the copper mine and blackout-prone Kabul. M.C.C. will dig a new coal mine to feed the plant’s generators. It will build a smelter to refine copper ore, and a railroad to carry coal to the power plant and copper back to China. If the terms of its contract are to be believed, M.C.C. will also build schools, roads, even mosques for the Afghans.
The sweeping agreement has some experts rubbing their eyes in disbelief. “It’s almost as if the Chinese promised too much,” said one international expert who, like some others interviewed, refused to be identified for fear of alienating the Afghans or the Chinese.
But even if elements of the agreement fall through, the Chinese have already positioned themselves as generous, eager partners of the Afghan government and long-term players in the country’s future. All without firing a shot.
Nurzaman Stanikzai was a mujahedeen in the 1980s, using American-supplied arms to help drive the Red Army from his homeland. Today he is a contractor for M.C.C., building the Aynak mine’s electric fence, blast wall, workers’ dormitories and a road to Kabul.
“The Chinese are much wiser. When we went to talk to the local people, they wore civilian clothing, and they were very friendly,” he said recently during a long chat in his Kabul apartment. “The Americans — not as good. When they come there, they have their uniforms, their rifles and such, and they are not as friendly.”
American troops do not, in a narrow sense, protect the Chinese. The United States Army stations about 2,000 troops in Logar Province, where Aynak is located. But an Army spokesman said they generally patrolled well south of the mine area and had not provided direct security for Chinese investors or mine workers.
The Afghan National Police, which does protect the mine, was largely built and trained with American money. The 1,500 guards the police have posted in and around Aynak are special recruits not drawn from the main force, according to Maj. Gen. Sayed Kamal, who heads the National Police.
But the conclusion is inescapable: American troops have helped make Afghanistan safe for Chinese investment. And there is no sense that either government objects to that reality. As diplomats and soldiers alike stress, the war in Afghanistan was never motivated by commercial prospects. Had an American company won Aynak, some Afghans noted wryly, critics inevitably would have accused the United States of waging war to seize the country’s mineral wealth. Moreover, if China succeeds in developing Aynak and generating revenue for the Kabul government, that helps achieve an American goal.
“To the extent that the Chinese bring Afghanistan up to speed and start paying a billion dollars a year in royalties,” a Western government official who has followed the Aynak project said, “that would mean that Afghanistan is on a firmer ground to start paying for its own security.”
The Chinese, meanwhile, have rebuffed requests to join the Afghan war effort, saying that national policy forbids military action abroad except as part of a peacekeeping force. Instead, China’s foreign policy is based on commerce. Its state-owned companies have been snapping up energy and mineral resources worldwide for years now, often by overwhelming competitors with lavish offers.
In 2006, for example, another state-owned goliath known as C.M.E.C. swept bidding for one of the world’s largest known iron ore deposits, in Gabon, by offering to build a 360-mile railroad to the nearly inaccessible mine site, two hydroelectric dams to power the mine and a deepwater ocean port to export the mined ore.
Such splurges are both national strategy — China’s goal is to control long-term access to critical commodities — and a matter of necessity if Beijing is to keep its industrial empire running. With 700 to 1,000 steel mills to feed, China is the world’s largest importer of iron ore. Similarly, China already imports 40 percent of the world’s copper.
If the Aynak venture differs from those in the past, both international and Afghan experts say, it is because it appears to be as much a strategic coup as a commercial one.
Opportunity in Southwest Asia
The United States views Southwest Asia mostly as a security threat. China sees it as an opportunity. Decades of military cooperation with Pakistan, which shares India as a rival, have flowered into an economic alliance. A Chinese-built deepwater port in Gwadar, Pakistan, on the Gulf of Oman, is expected eventually to carry Middle Eastern oil and gas over the western Himalayas into China.
Afghanistan, which borders both Iran and Pakistan, drew scant attention from China until the middle of this decade.
Aynak’s riches had been known since Alexander the Great’s armies forged copper there 2,300 years ago. When the Soviet Union invaded Afghanistan in 1979, its geologists took core samples and mapped the Aynak deposit, but were never able to begin mining.
The Soviets were succeeded by Osama bin Laden, who used Aynak as a training camp while planning the Sept. 11, 2001, attacks on the United States. After the American-led invasion of Afghanistan, Afghan geologists rescued the Soviet surveys of Aynak and hid them until exploration could resume.
That exploration — a detailed overflight of much of the country by American surveyors in middecade — showed Afghanistan to be far richer in oil, natural gas, iron, copper and coal than anyone had imagined. Aynak, in particular, was judged a world-class copper deposit, not just huge but of unusually rich quality, and the government chose it as the first major mineral concession to be auctioned to developers.
To minimize corruption, the Afghan government decided, on the advice of American advisers, to ask the World Bank and a Colorado geological consulting firm to help oversee the bidding. A report last month in The Washington Post quoted an American official as charging that the Chinese swayed the bid with $20 million or more in bribes to the mining minister, Muhammad Ibrahim Adel, who was recently dismissed from the Afghan government in part because of the allegations. Mr. Adel has denied the charge.
Foreign experts say that the possibility of bribery in Afghanistan, one of the world’s most corrupt nations, can hardly be ruled out. But they also say that the Chinese bid was so clearly superior to others that any bribe money may have been incidental to the outcome.
“This was not a backroom deal. This was not Adel, sitting in Beijing, cooking this up,” said one of several international experts interviewed for this article. “This was thoroughly vetted by the governments of the day.”
A. Rahman Ashraf is a veteran geologist and senior adviser on mining to Afghanistan’s president, Hamid Karzai. Mr. Ashraf intervened in 2002 to stop Aynak’s mining rights from being sold under the table to a Korean bidder.
“Our wish was that this process must be very transparent,” he said of Aynak, “because this is the first time. If it is not transparent, then nobody comes to the others.”
China won the bid, he said, for good reason: it offered a package deal, from power plants to railroads to smelters to coal mines, that no other bidder could match. And it promised to staff the entire venture with Afghan laborers and managers — many of whom must be trained from scratch in a country with little mining expertise.
Indeed, outside experts here say, the striking aspect of China’s Aynak venture is the degree to which it left competitors in the dust. Increasingly, the world’s richest remaining mineral deposits are in hostile territory — malarial jungles, combat zones, unstable nations that possess mineral riches but no realistic way to get them to market.
With government money and backing behind them, China’s state-run giants take risks in places that even the largest private behemoths will not tolerate, and they can add sweeteners — from railroads to mosques — that ordinary mining firms are ill equipped to provide.
“The Chinese have sort of raised the bar. They’ve taken it beyond the scope of just an extractive operation,” the Western official said. “The Chinese are willing to step up and take a long-term strategic approach. If it takes 5 or 10 years, at least they have a beachhead.”
The wild card, of course, is that no outsiders can know how much of China’s Aynak venture is in fact brilliant strategy, and how much is merely a potentially ruinous business deal by an overzealous corporation. Beijing’s corporate strategy is as opaque as it is overwhelming.
China Metallurgical, a Fortune Global 500 company that has so many subsidiaries that they are mostly identified by numbers, is a signal example. The corporation reports to the top level of the Chinese government. Big foreign investments like the one at Aynak require blessing at an equally high level. M.C.C. has huge and productive investments around the world.
Yet hardly all those ventures are successes. An M.C.C. copper mine in Pakistan is widely said to have serious environmental problems. A Pakistan lead mine has been dogged by conflict, including a suicide bombing that killed 29; residents accuse the company’s Chinese work force of stealing local jobs. In Papua New Guinea, 14 Chinese workers at an M.C.C. nickel mine were injured in May in a pitched battle with local people who rioted over what they called intolerable working conditions.
That bid in 2006 for the iron mine in Gabon? Four years after C.M.E.C. struck its deal, the bargain appears to be unwinding over hints of corruption and global objections to a dam that would destroy Kongou Falls, one of central Africa’s most treasured waterfalls.
Was Too Much Promised?
Not surprisingly, that record leads skeptics to suggest that in Afghanistan, M.C.C. may have overpromised and, later, will underdeliver.
In interviews here, some experts said that M.C.C.’s Aynak bid was so munificent that the company might be forced to renegotiate lavish payments of copper royalties to the Afghan government. Others predicted that the company would be forced to shift parts of the vast project, like the yet-to-be-built railroad, to international donors.
Still others said the company’s initial environmental efforts already badly lagged behind the promise in its winning bid to strictly adhere to the Equator Principles and World Bank benchmarks — the gold standards for environmentally sensitive projects.
China Metallurgical is not talking. Its officials not only refused to be interviewed for this article, but also sought to prohibit a journalist even from photographing the mine site from afar.
But the company clearly is undeterred. The Afghan government is seeking bids for its second great mineral project, a behemoth called Hajigak that is said to contain 60 billion tons of iron ore. There are seven finalists — all companies from India and China. M.C.C. is one of them.
There is no “war” against terrorism. What George W. Bush launched and Barack Obama insists on perpetuating does not qualify. Not if by war one means doing the obvious and checking a highly suspicious air traveler’s underwear to see if explosives have been sewn in. If Umar Farouk Abdulmutallab had put the stuff in his shoes we would have had him because that was tried before, but our government was too preoccupied with fighting unnecessary conventional wars and developing anti-missile defense systems to anticipate such a primitive delivery system.
The explosives-laden underwear—worn by an airline passenger who had previously been flagged as a potentially dangerous fanatic, and who had paid cash for his ticket and had no checked luggage—was the terrorist’s weapon of choice, one that could have blown a hole in the side of Northwest Airlines’ Detroit-bound Flight 253 on Christmas Day, killing hundreds of innocents. But it is not a weapon to be effectively countered with the deployment of hundreds of thousands of American combat troops. Nor can it be stopped by the hundreds of billions of dollars worth of planes, subs and missiles in our arsenal of Cold War-era weapons, part of an annual defense budget that is higher in inflation-adjusted dollars than at any time in the past half-century.
In response to the 9/11 hijackers, armed with artillery that cost a couple hundred dollars at most, we threw money and, more important, attention at conventional military responses while neglecting the difficult police work and the intelligence evaluation and civilian-focused technology necessary to thwart homeland attacks. Yes, there are evildoers out there that mean us harm, as President Bush declaimed. But they are often the products of the best of Western education who, as examples ranging from the lead 9/11 hijackers – the Hamburg group—to the elite University College London-educated engineer in the latest incident demonstrate, move more easily in urbane Western societies than in Afghan villages.
The technology that could help detect a sophisticated plane hijacker or suicide bomber has been largely botched in development and only halfheartedly deployed even when it is available. On Tuesday, a devastating report in The Washington Post revealed that the full-body scanning equipment hyped after 9/11, which might have detected the explosives involved in last week’s incident, is still not in wide use. As the Post stated, “A plan that would have helped focus the development of better screening technology and procedures—including a risk-based assessment of aviation threats—is almost two years overdue, according to a report this fall by the Government Accountability Office, the investigative arm of Congress.”
So, screening equipment that can detect plastic explosives exists, but it was not used in this case and, as the GAO predicted, “TSA cannot ensure that it is targeting the highest priority security needs at checkpoints; measure the extent to which deployed technologies reduce the risk of terrorist attacks; or make needed adjustments to its PSP [Passenger Screening Program] strategy.” As a result, the GAO concluded: “TSA lacks assurance that its investments in screening technologies address the highest priority security needs at airport passenger checkpoints.”
The “systematic failure” in the nation’s security that President Obama referred to Tuesday derives from the war metaphor itself and from the assumption, begun with Bush’s irrational invasion of Iraq and extended with Obama’s escalation in Afghanistan, that terrorism is a military rather than a criminal threat. The terrorists are not rebel fighters rooted, as are the Taliban and the remnants of the Iraq insurgency, in their homeland struggles and subject to being defeated on conventional battlefields.
Rather, they are rootless cosmopolitans of violence, alienated from any stated homeland and free to move easily about the world, armed in almost every instance with valid passports, visas and money to exploit our inability to seriously evaluate our own intelligence data. They can count on our top government officials ignoring blinking red warnings, as the Bush White House did before 9/11, or the alarm of a well-connected and properly concerned Nigerian banker-father.
Preventing terrorist attacks on the U.S. homeland has nothing to do with occupying vast tracts of land or winning the hearts and minds of backward villagers whom we falsely depict as surrogates of an evil empire, as we did in Vietnam and are now doing in Afghanistan. What is needed is smart police work to catch these highly mobile fanatics, and that begins with actually reading and then acting on the readily available intelligence data. It requires detectives with brains and not generals with firepower.
The ballooning of the defense budget after 9/11 has proved a great boondoggle for the military-industrial complex, which suddenly found an excuse to build weapons and deploy conventional forces against a superpower enemy that no longer exists. But our stealth fighters and bombers designed to defeat Soviet defenses that were never built are a poor match against a terrorist’s stealth underwear.
In late August, my colleague Tom Prugh blogged about a non-capitalist, worker-owned corporation—the Mondragón Corporación Cooperativa (MCC) in Spain’s Basque region. For Americans who are skeptical about European ideas of how to run the economy in a more socially-conscious manner, it may be all too easy to dismiss MCC as yet another crazy idea that will never take root in American soil.
MCC has its own – highly regarded - university.
Photo credit: Mahaibruak
But on October 27, the United Steelworkers (USW)—North America’s largest industrial union—and Mondragón Internacional, S.A. signed an agreement to collaborate in establishing Mondragón-style manufacturing cooperatives in the United States and Canada. These cooperatives are to be governed by MCC’s model of “one worker, one vote.”
MCC is a federation of democratically-run enterprises that produce and sell a range of goods and services (including appliances and machinery needed to produce solar panels). Set up in 1956 in the Basque town of Mondragón, it relies on democratic methods in its organizational structure and is concerned with generating assets for the benefit of its members and their communities, rather than for shareholders. Today, MCC is the seventh largest company in Spain. It has about 100,000 cooperative members in about 250 cooperative enterprises that operate in more than forty countries. (It should be noted that MCC has acquired some companies that are run in conventional capitalist style, although the idea is to convert them to cooperatives in due time. An MCC enterprise in Poland, Fagor Mastercook, has been embroiled in controversy over low wages and anti-union tactics.)
The loss of nearly 6 million U.S. manufacturing jobs over the past decade and the stagnation of real wages across the economy during the last three decades are throwing more and more families and communities into a tailspin. Signing the agreement, USW President Leo Gerard commented: “Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants. We need a new business model that invests in workers and invests in communities.”
It remains to be seen how well the USW-MCC agreement can be translated into a new U.S. economic model. Even before this agreement was struck, some promising new worker co-op initiatives motivated by the Mondragón experience were started, including the Evergreen Cooperative Laundry and a solar installation service and an industrial-size hydroponics greenhouse, all located in Cleveland, Ohio. If the USW-MCC connection takes off, such initiatives may well multiply—not just in the service sector, but also in manufacturing.
Paul Krugman recently penned an insightful article where he argues that the 1999-2009 decade should be called the "Big Zero" decade because over the course of ten years there was no real job growth or notable "progress" in tackling any of the nation's problems. But Krugman's view, I'm afraid, is overly optimistic. What we had in the 2000s was far, far worse than a "Big Zero." The last ten years have been so miserable for the United States that a "Big Zero" would be an immeasurable improvement compared to what we got. If we could freeze time and move the country back to January 1999 it would be like hitting the jackpot! With all its squandered wealth, wasted lives, despoiled environment, growing inequality, and a Supreme Court stacked to favor corporate power, a "Big Zero" is a distant, unattainable goal.
Ronald Reagan was president from 1981 to 1989, leading many historians and journalists to call the 1980s the "Reagan Era" or the "Age of Reagan." George W. Bush served from 2001 to 2009, but is it fair to us to refer to the 2000s as the "W. Era?" I don't think so.
It was the decade when the country experienced the corporate take-over of everything -- every value, every human interaction, every institution.
Bush stacked the Supreme Court with two relatively young Justices who can be counted on, in perpetuity, to rule against people and in favor of corporations every time their interests clash. He also stuffed the federal judiciary with torture enthusiasts, religious fanatics, and corporate servants.
It was a decade when a new Gilded Age took hold led by Robber Barons far worse and rapacious than any of those associated with the turn of the last century. Goldman Sachs' CEO Lloyd Blankfein, without irony, told the press that his financial behemoth was doing "God's work," just like John D. Rockefeller said over a century ago: "I believe the power to make money is a gift from God."
It was a decade where corporate advertising reached new levels with "word of mouth" marketing and "reality" TV shows that are little more than commercials posing as "television shows."
In November 1999, President Bill Clinton repealed the Glass-Steagall Act by signing the odious Gramm-Leach-Bliley Act that deregulated, once and for all, the financial sector. Clinton, Newt Gingrich, Bob Dole, Alan Greenspan, and Robert Rubin lit the fuse that exploded the American economy ten wretched years later traumatizing the nation and sapping its lifeblood.
There was a "War on Terror" and "video news releases" to manipulate the public. In the past ten years the nation's two dominant political parties finally merged to represent essentially the same corporate interests. It was the decade when the ideological viewpoint of the National Association of Manufacturers, which was formed in 1895 to trash workers' pensions as "handouts," came to dominate the economic policies of both parties. Labor unions took it in the chin suffering setback after setback as real wages declined, unemployment rose, and pensions dwindled.
It was the decade of Enron and Worldcom and Global Crossing and Tyco and all those other corporate criminal rackets. Joe Lieberman, who received campaign donations from Enron, held a hearing where he tisk-tisked the practices that his own cheerleading for deregulation helped cause. And don't forget Blackwater and Haliburton and all the other war profiteers that made a killing, and the wars themselves we'll be paying for in overt pay-outs and hidden social costs for many decades to come. Death on the installment plan we might call it.
It was the decade when the "race to the bottom" resulting from "free trade" deals like NAFTA and the WTO came to apotheosis. The outsourcing and international trade imbalances hollowed out the American economy, eliminated whole categories of manufacturing jobs, and pushed the U.S. on a trajectory less like Europe and more like Mexico. China owns us.
During the 2000 campaign there was a running joke that George W. Bush got so much record-breaking corporate campaign cash that he wasn't really a human being seeking the presidency but a corporation. We can call the 2000s the "Worse Than Zero" decade or the "Big Zero," or anything we wish, but what characterized it most for me was the near total control of corporations, especially over our civic institutions. All of the terrible economic and governing ideas from the Reagan era crested and then crashed in the last eighteen months leaving something far less than "zero" in their wake.
Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.
It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. “If you ask why the American financial system succeeds,” he said, “at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.” And he went on to declare that there is “an ongoing process that really is what makes our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system.
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.
Copyright 2009 The New York Times Company
Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.
WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
"The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said Laurence Kotlikoff, a Boston University economics professor who's proposed a massive overhaul of the nation's banks. "This is fraud and should be prosecuted."
John Coffee, a Columbia University law professor who served on an advisory committee to the New York Stock Exchange, said that investment banks have wide latitude to manage their assets, and so the legality of Goldman's maneuvers depends on what its executives knew at the time.
"It would look much more damaging," Coffee said, "if it appeared that the firm was dumping these investments because it saw them as toxic waste and virtually worthless."
Lloyd Blankfein, Goldman's chairman and chief executive, declined to be interviewed for this article.
A Goldman spokesman, Michael DuVally, said that the firm decided in December 2006 to reduce its mortgage risks and did so by selling off subprime-related securities and making myriad insurance-like bets, called credit-default swaps, to "hedge" against a housing downturn.
DuVally told McClatchy that Goldman "had no obligation to disclose how it was managing its risk, nor would investors have expected us to do so ... other market participants had access to the same information we did."
For the past year, Goldman has been on the defensive over its Washington connections and the billions in federal bailout funds it received. Scant attention has been paid, however, to how it became the only major Wall Street player to extricate itself from the subprime securities market before the housing bubble burst.
Goldman remains, along with Morgan Stanley, one of two venerable Wall Street investment banks still standing. Their grievously wounded peers Bear Stearns and Merrill Lynch fell into the arms of retail banks, while another, Lehman Brothers, folded.
To piece together Goldman's role in the subprime meltdown, McClatchy reviewed hundreds of documents, SEC filings, copies of secret investment circulars, lawsuits and interviewed numerous people familiar with the firm's activities.
McClatchy's inquiry found that Goldman Sachs:
Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they'd misled borrowers or exaggerated applicants' incomes to justify making hefty loans.
Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.
Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.
Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.
The firm benefited when Paulson elected not to save rival Lehman Brothers from collapse, and when he organized a massive rescue of tottering global insurer American International Group while in constant telephone contact with Goldman chief Blankfein. With the Federal Reserve Board's blessing, AIG later used $12.9 billion in taxpayers' dollars to pay off every penny it owed Goldman.
These decisions preserved billions of dollars in value for Goldman's executives and shareholders. For example, Blankfein held 1.6 million shares in the company in September 2008, and he could have lost more than $150 million if his firm had gone bankrupt.
With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money — a 23 percent taxpayer return that exceeded federal officials' demand — the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.
Goldman announced record earnings in July, and the firm is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.
THE BLUEST OF THE BLUE CHIPS
For decades, Goldman, a bastion of Ivy League graduates that was founded in 1869, has cultivated an elite reputation as home to the best and brightest and a tradition of urging its executives to take turns at public service.
As a result, Goldman has operated a virtual jobs conveyor belt to and from Washington: Paulson, as Treasury secretary, sent tens of billions of taxpayers' dollars to rescue Wall Street in 2008, and former Goldman employees populate some of the most demanding and powerful posts in Washington. Savvy federal regulators have migrated from their Washington jobs to Goldman.
On Oct. 16, a Goldman vice president, Adam Storch, was named managing executive of the SEC's enforcement division.
Goldman's financial panache made its sales pitches irresistible to policymakers and investors alike, and may help explain why so few of them questioned the risky securities that Goldman sold off in a 14-month period that ended in February 2007.
Since the collapse of the economy, however, some of those investors have changed their opinions of Goldman.
Several pension funds, including Mississippi's Public Employees' Retirement System, have filed suits, seeking class-action status, alleging that Goldman and other Wall Street firms negligently made "false and misleading" representations of the bonds' true risks.
Mississippi Attorney General Jim Hood, whose state has lost $5 million of the $6 million it invested in Goldman's subprime mortgage-backed bonds in 2006, said the state's funds are likely to lose "hundreds of millions of dollars" on those and similar bonds.
Hood assailed the investment banks "who packaged this junk and sold it to unwary investors."
California's huge public employees' retirement system, known as CALPERS, purchased $64.4 million in subprime mortgage-backed bonds from Goldman on March 1, 2007. While that represented a tiny percentage of the fund's holdings, in July CALPERS listed the bonds' value at $16.6 million, a drop of nearly 75 percent, according to documents obtained through a state public records request.
In May, without admitting wrongdoing, Goldman became the first firm to settle with the Massachusetts attorney general's office as it investigated Wall Street's subprime dealings. The firm agreed to pay $60 million to the state, most of it to reduce mortgage balances for 714 aggrieved homeowners.
Attorney General Martha Coakley, now a candidate to succeed Edward Kennedy in the U.S. Senate, cited the blight from foreclosed homes in Boston and other Massachusetts cities. She said her office focused on investment banks because they provided a market for loans that mortgage lenders "knew or should have known were destined for failure."
New Orleans' public employees' retirement system, an electrical workers union and the New Jersey carpenters union also are suing Goldman and other Wall Street firms over their losses.
The full extent of the losses from Goldman's mortgage securities isn't known, but data obtained by McClatchy show that insurance companies, whose annuities provide income for many retirees, collectively paid $2 billion for Goldman's risky high-yield bonds.
Among the bigger buyers: Ambac Assurance purchased $923 million of Goldman's bonds; the Teachers Insurance and Annuities Association, $141.5 million; New York Life, $96 million; Prudential, $70 million; and Allstate, $40.5 million, according to the data from the National Association of Insurance Commissioners.
In 2007, as early signs of trouble rippled through the housing market, Goldman paid a discounted price of $8.8 million to repurchase subprime mortgage bonds that Prudential had bought for $12 million.
Nearly all the insurers' purchases were made in 2006 and 2007, after mortgage lenders had lifted most traditional lending criteria in favor of loans that required little or no documentation of borrowers' incomes or assets.
While Goldman was far from the biggest player in the risky mortgage securitization business, neither was it small.
From 2001 to 2007, Goldman hawked at least $135 billion in bonds keyed to risky home loans, according to analyses by McClatchy and the industry newsletter Inside Mortgage Finance.
In addition to selling about $39 billion of its own risky mortgage securities in 2006 and 2007, Goldman marketed at least $17 billion more for others.
It also was the lead firm in marketing about $83 billion in complex securities, many of them backed by subprime mortgages, via the Caymans and other offshore sites, according to an analysis of unpublished industry data by Gary Kopff, a securitization expert.
In at least one of these offshore deals, Goldman exaggerated the quality of more than $75 million of risky securities, describing the underlying mortgages as "prime" or "midprime," although in the U.S. they were marketed with lower grades.
Goldman spokesman DuVally said that Moody's, the bond rating firm, gave them higher grades because the borrowers had high credit scores.
Goldman's securities came in two varieties: those tied to subprime mortgages and those backed by a slightly higher grade of loans known as Alt-A's.
Over time, both types of mortgages required homeowners to pay rapidly rising interest rates. Defaults on subprime loans were responsible for last year's housing meltdown. Interest rates on Alt-A loans, which began to rocket upward this year, are causing a new round of defaults.
Goldman has taken multiple steps to put its subprime dealings behind it, including publicly saying that Wall Street firms regret their mistakes. Last winter, the company cancelled a Las Vegas conference, avoiding any images of employees flashing wads of bonus cash at casinos.
More recently, the firm has launched a public relations campaign to answer the criticism of its huge bonuses, Washington connections and federal bailout. In late October, Blankfein argued that Goldman's activities serve "an important social purpose" by channeling pools of money held by pension funds and others to companies and governments around the world.
KNOWING WHEN TO FOLD THEM
For investment banks such as Goldman, the trick was knowing when to exit the high-stakes subprime game before getting burned.
New York hedge fund manager John Paulson was one of the first to anticipate disaster. He told Congress that his researchers discovered by early 2006 that many subprime loans covered the homes' entire value, with no down payments, and so he figured that the bonds "would become worthless."
He soon began placing exotic bets — credit-default swaps — against the housing market. His firm, Paulson & Co., booked a $3.7 billion profit when home prices tanked and subprime defaults soared in 2007 and 2008. (He isn't related to Henry Paulson.)
At least as early as 2005, Goldman similarly began using swaps to limit its exposure to risky mortgages, the first of multiple strategies it would employ to reduce its subprime risk.
The company has closely guarded the details of most of its swaps trades, except for $20 billion in widely publicized contracts it purchased from AIG in 2005 and 2006 to cover mortgage defaults or ratings downgrades on subprime-related securities it offered offshore.
In December 2006, after "10 straight days of losses" in Goldman's mortgage business, Chief Financial Officer David Viniar called a meeting of mortgage traders and other key personnel, Goldman spokesman DuVally said.
Shortly after the meeting, he said, it was decided to reduce the firm's mortgage risk by selling off its inventory of bonds and betting against those classes of securities in secretive swaps markets.
DuVally said that at the time, Goldman executives "had no way of knowing how difficult housing or financial market conditions would become."
In early 2007, the firm's mortgage traders also bet heavily against the housing market on a year-old subprime index on a private London swap exchange, said several Wall Street figures familiar with those dealings, who declined to be identified because the transactions were confidential.
The swaps contracts would pay off big, especially those with AIG. When Goldman's securities lost value in 2007 and early 2008, the firm demanded $10 billion, of which AIG reluctantly posted $7.5 billion, Viniar disclosed last spring.
As Goldman's and others' collateral demands grew, AIG suffered an enormous cash squeeze in September 2008, leading to the taxpayer bailout to prevent worldwide losses. Goldman's payout from AIG included more than $8 billion to settle swaps contracts.
DuVally said Goldman has made other bets with hundreds of unidentified counterparties to insure its own subprime risks and to take positions against the housing market for its clients. Until the end of 2006, he said, Goldman was still betting on a strong housing market.
However, Goldman sold off nearly $28 billion of risky mortgage securities it had issued in the U.S. in 2006, including $10 billion on Oct. 6, 2006. The firm unloaded another $11 billion in February 2007, after it had intensified its contrary bets. Goldman also stopped buying risky home mortgages after the December meeting, though DuVally declined to say when.
I'VE GOT A SECRET
Despite updating its numerous disclosures to investors in 2007, Goldman never revealed its secret wagers.
Asked whether Goldman's bond sellers knew about the contrary bets, spokesman DuVally said the company's mortgage business "has extensive barriers designed to keep information within its proper confines."
However, Viniar, the Goldman finance chief, approved the securities sales and the simultaneous bets on a housing downturn. Dan Sparks, a Texan who oversaw the firm's mortgage-related swaps trading, also served as the head of Goldman Sachs Mortgage from late 2006 to April 2008, when he abruptly resigned for personal reasons.
The Securities Act of 1933 imposes a special disclosure burden on principal underwriters of securities, which was Goldman's role when it sold about $39 billion of its own risky mortgage-backed securities from March 2006 to February 2007.
The firm maintains that the requirement doesn't apply in this case.
DuVally said the firm sold virtually all its subprime-related securities to Qualified Institutional Buyers, a class of sophisticated investors that are afforded fewer protections than small investors are under federal securities laws. He said Goldman made all the required disclosures about risks.
Whether companies are obliged to inform investors about such contrary trades, or "hedges," is "a very hot issue" in cases winding through the courts, said Frank Partnoy, a University of San Diego law professor who specializes in securities. One issue is how specific companies must be in disclosing potential risks to investors, he said.
Coffee, the Columbia University law professor, said that any potential violations of securities laws would depend on what Goldman executives knew about the risks ahead.
"The critical moment when Goldman would have the highest liability and disclosure obligations is when they are serving as an underwriter on a registered public offering," he said. "If they are at the same time desperately seeking to get out of the field, that kind of bailout does look far more dubious than just trading activities."
Another question is whether, by keeping the trades secret, the company withheld material information that would enable investors to assess Goldman's motives for selling the bonds, said James Cox, a Duke University law professor who also has served on the NYSE advisory panel.
If Goldman had disclosed the contrary bets, he said, "One would have to believe that a rational investor would not only consider Goldman's conduct material, but likely compelling a decision to take a pass on the recommendation to purchase."
Cox said that existing laws, however, don't require sufficient disclosures about trading, and that the government would do well to plug that hole.
In marketing disclosures filed with the SEC regarding each pool of subprime bonds from 2001 to 2007, Goldman listed an array of risk factors that grew over time. Among them was the possibility of a pullback in overheated real estate markets, especially in California and Florida, where the most subprime loans had been made.
Suits filed by the pension funds, however, allege that Goldman made materially false or misleading statements in its public offerings, failing to disclose that many loans were based on inflated appraisals and were bought from firms with poor lending practices.
DuVally said that investors were fully informed of all known risks.
"What's going to happen in the next few years," said San Diego's Partnoy, "is there's going to be a lot of lawsuits and judges will have to decide, should Goldman have disclosed more or not?"
In September 2008, as the worst of the financial crisis engulfed Wall Street, George W. Bush issued a warning: "This sucker could go down." Around the same time, as Congress hashed out a bailout bill, New Hampshire Sen. Judd Gregg, the leading Republican negotiator of the bill, warned that "if we do not do this, the trauma, the chaos and the disruption to everyday Americans' lives will be overwhelming, and that's a price we can't afford to risk paying."
In less than a year, Wall Street was back. The five largest remaining banks are today larger, their executives and traders richer, their strategies of placing large bets with other people's money no less bold than before the meltdown. The possibility of new regulations emanating from Congress has barely inhibited the Street's exuberance.
But if Wall Street is back on top, the everyday lives of large numbers of Americans continue to be subject to overwhelming trauma, chaos and disruption.
It is commonplace among policymakers to fervently and sincerely believe that Wall Street's financial health is not only a precondition for a prosperous real economy but that when the former thrives, the latter will necessarily follow. Few fictions of modern economic life are more assiduously defended than the central importance of the Street to the well-being of the rest of us, as has been proved in 2009.
Inhabitants of the real economy are dependent on the financial economy to borrow money. But their overwhelming reliance on Wall Street is a relatively recent phenomenon. Back when middle-class Americans earned enough to be able to save more of their incomes, they borrowed from one another, largely through local and regional banks. Small businesses also did.
It's easy to understand economic policymakers being seduced by the great flows of wealth created among Wall Streeters, from whom they invariably seek advice. One of the basic assumptions of capitalism is that anyone paid huge sums of money must be very smart.
But if 2009 has proved anything, it's that the bailout of Wall Street didn't trickle down to Main Street. Mortgage delinquencies continue to rise. Small businesses can't get credit. And people everywhere, it seems, are worried about losing their jobs. Wall Street is the only place where money is flowing and pay is escalating. Top executives and traders on the Street will soon be splitting about $25 billion in bonuses (despite Goldman Sachs' decision, made with an eye toward public relations, to defer bonuses for its 30 top players).
The real locus of the problem was never the financial economy to begin with, and the bailout of Wall Street was a sideshow. The real problem was on Main Street, in the real economy. Before the crash, much of America had fallen deeply into unsustainable debt because it had no other way to maintain its standard of living. That's because for so many years almost all the gains of economic growth had been going to a relatively small number of people at the top.
President Obama and his economic team have been telling Americans we'll have to save more in future years, spend less and borrow less from the rest of the world, especially from China. This is necessary and inevitable, they say, in order to "rebalance" global financial flows. China has saved too much and consumed too little, while we have done the reverse.
In truth, most Americans did not spend too much in recent years, relative to the increasing size of the overall American economy. They spent too much only in relation to their declining portion of its gains. Had their portion kept up -- had the people at the top of corporate America, Wall Street banks and hedge funds not taken a disproportionate share -- most Americans would not have felt the necessity to borrow so much.
The year 2009 will be remembered as the year when Main Street got hit hard. Don't expect 2010 to be much better -- that is, if you live in the real economy. The administration is telling Americans that jobs will return next year, and we'll be in a recovery. I hope they're right. But I doubt it. Too many Americans have lost their jobs, incomes, homes and savings. That means most of us won't have the purchasing power to buy nearly all the goods and services the economy is capable of producing. And without enough demand, the economy can't get out of the doldrums.
As long as income and wealth keep concentrating at the top, and the great divide between America's have-mores and have-lesses continues to widen, the Great Recession won't end -- at least not in the real economy.
We have ongoing wars in Iraq and Afghanistan and a far flung network of military bases en- compassing almost every country in the world. Our military budget is larger than the rest of the world's combined. Yet we are neglecting to protect our own borders. We are losing the border war with Mexico laying our country open to a far worse and more deep-rooted problem than a few Al-Quaeda along the Afghanistan-Pakistan border represent. And although the war in Iraq is supposedly "winding down", the same stuff is happening there that has happened all along and was such grave cause for concern a few years ago, namely, random bombings killing scores of people. But now, although this was cause for ramping up US troop involvement a few months ago, it is no cause for concern now because we have officially decided that the war is "winding down." However we decide to define what's going on in Iraq and Afghanistan, there is no mistaking the officially undeclared war along the US-Mexico border. It is raging. Thousands more have been killed by the drug cartels than by Al-Quaeda. Yet the US ignores these incursions across its own border while pursuing a phantasmagoria elsewhere. When will they realize that the war is here not there.
LAREDO, Tex. — The streets of Laredo are awash in money, stacks of grimy bills tainted with cocaine residue, wrapped in plastic and stowed in secret compartments built into the trucks, buses and cars that flow south over the Mexican border daily like a motorized river.
Customs officials have discovered a host of ingenious hiding places, from $3 million secreted in the floor of a Mexican passenger bus to $1.6 million stuffed in duffel bags and balanced atop the heads of people wading across the Rio Grande to Mexico.
At border crossings and airports alone, American customs officers seized $57.9 million in the fiscal year ending Sept. 30, up 74 percent from the previous year. And once the money lands in Mexico, it is easily swept into a largely unregulated underground cash economy or laundered through seemingly legitimate businesses.
As the United States has tightened bank regulations and clamped down on sophisticated money-laundering schemes in the past 35 years, more of the money from illicit drug sales is being smuggled across the border to Mexico the old-fashioned way, law enforcement officials say.
American officials say stopping the bulk cash shipments and scuttling money laundering are critical to crippling the cartels in Mexico, which have unleashed a wave of violence that has claimed more than 15,000 lives since President Felipe Calderón began cracking down on their operations in December 2006.
Law enforcement officials and business owners in Mexico say that the assault on the cartels has driven drug traffickers to branch out into an array of other money-making ventures, setting up businesses like spas and day care centers to launder drug proceeds or selling new products like pirated movies or pilfered oil.
“It’s a natural evolution of criminal activity, just as with the mob in the 1950s,” said John Feeley, the deputy chief of mission of the United States Embassy in Mexico City. “They can’t continue to work on one illegal product.”
But Mexican authorities have yet to make much headway against money launderers, and customs officials say the cash they seize is still a trickle of what flows across the border.
Joint operations of customs, border patrol and immigration agents set up checkpoints on southbound lanes every day, fishing for money. Customs officials have assigned 25 more teams of dogs and handlers to the task in the past two years.
Mr. Feeley said that he expected Mexico and the United States to devote even more energy to going after the cartels’ profits.
Although United States authorities seized $138 million last year, that amount pales in comparison to the $18 billion to $39 billion a year the Drug Enforcement Agency estimates is being smuggled to Mexico every year.
“There is an enormous amount of money that is flowing undetected and uninterdicted,” said John T. Morton, the assistant secretary for immigration and customs enforcement. “We are trying to be a step ahead of the people moving the money. Unfortunately, right now we are a step behind.”
On the border, federal authorities play a constant cat-and-mouse game with the traffickers. The dealers employ spies to spot checkpoints, while informants tip off agents about the movement of cash.
Not only are the wars in Iraq and Aghanistan sheer folly because Al-Quaeda is not there, but terrorism including Al-Quaeda affilated fighters are cropping up in other countries, Yemen, for instance. A recent airstrike there apparently failed to kill a radical cleric associated with the Fort Hood gunman.
SAN'A, Yemen - A U.S.-born radical cleric is alive and well after reports he may have been killed in a Yemeni air strike against suspected al-Qaeda hideouts, friends and relatives said yesterday.
The government said it targeted a meeting of high-level al-Qaeda operatives in Thursday's air strike in the remote Shabwa region in southeastern Yemen. It said at least 30 militants were killed, possibly including Anwar al-Aulaqi, a Yemeni American cleric who has been linked to Maj. Nidal Hasan, the Army psychiatrist charged in last month's shooting attack at Fort Hood, Texas.
Yesterday, Aulaqi's friend Abu Bakr al-Aulaqi said he was not among those killed. The friend would not say whether the cleric had been attending the meeting.
Are we going to invade Yemen now? Or maybe we should invade Nigeria since yesterday a Nigerian, who claimed to be an Al-Quaeda affiliate, tried to blow up an airplane as it descended into Detroit's airport. But then maybe we should invade ourselves as far more terrorists linked to Al-Quaeda have been American citizens. The Fort Hood gunman and the five erstwhile Al-Quaeda joiners that were detained in Pakistan are US citizens as have been many others. Now the US is having a hard time getting them back as Pakistan is viewing the situation as a foreign invasion of terrorists threatening their own country from the US. The handwriting is on the wall. Terrorism is all around us - not located in a particular country. It is not a problem that will be solved by a military invasion. We have gotten to the root of the problem and the problem is us.
The porous sieve-like border with Mexico only begs the question that, if Mexican cartel agents can cross in both directions with impunity, why can't assorted terrorists do the same. Not that there is any need for them to actually come here from abroad. They're already here!
Here's the crux of the matter. We're wasting hundreds of billions of dollars on the military which is doing nothing to solve the actual problem. The actual problem is not Al-Quaeda; it's the Mexican drug cartels. Rather than invading other countries, we should be using our military resources to protect our own borders. We should be beefing up our ability to detect terrorists in our own midst. A country that allows itself to be invaded with impunity while it dilly dallys somewhere else spending billions of dollars in the process is a country that has its head where the sun don't shine. Terrorists are cropping up in every country in the world. The War on Terrorism must of necessity be a defensive war fought mainly by intelligence assets. Military invasions of other countries are only fueling the resentments that lead to terroristic attacks against the US.
All this nonsense about our having to be committed to the people of Afghanistan now that we're there for years and years is ridiculous. We should leave bad enough alone, get out and strategically redeploy our assets with a view to solving the cross border incursions that really threaten us from a more formidable entity than Al-Quaeda, and that would be the Mexican drug cartels. And as a by-product it just might solve at the same time the illegal immigration problem. A twofer!
Indulge me while I tell you a story — a near-future version of Charles Dickens’s “A Christmas Carol.” It begins with sad news: young Timothy Cratchit, a k a Tiny Tim, is sick. And his treatment will cost far more than his parents can pay out of pocket.
Fortunately, our story is set in 2014, and the Cratchits have health insurance. Not from their employer: Ebenezer Scrooge doesn’t do employee benefits. And just a few years earlier they wouldn’t have been able to buy insurance on their own because Tiny Tim has a pre-existing condition, and, anyway, the premiums would have been out of their reach.
But reform legislation enacted in 2010 banned insurance discrimination on the basis of medical history and also created a system of subsidies to help families pay for coverage. Even so, insurance doesn’t come cheap — but the Cratchits do have it, and they’re grateful. God bless us, everyone.
O.K., that was fiction, but there will be millions of real stories like that in the years to come. Imperfect as it is, the legislation that passed the Senate on Thursday and will probably, in a slightly modified version, soon become law will make America a much better country.
So why are so many people complaining? There are three main groups of critics.
First, there’s the crazy right, the tea party and death panel people — a lunatic fringe that is no longer a fringe but has moved into the heart of the Republican Party. In the past, there was a general understanding, a sort of implicit clause in the rules of American politics, that major parties would at least pretend to distance themselves from irrational extremists. But those rules are no longer operative. No, Virginia, at this point there is no sanity clause.
A second strand of opposition comes from what I think of as the Bah Humbug caucus: fiscal scolds who routinely issue sententious warnings about rising debt. By rights, this caucus should find much to like in the Senate health bill, which the Congressional Budget Office says would reduce the deficit, and which — in the judgment of leading health economists — does far more to control costs than anyone has attempted in the past.
But, with few exceptions, the fiscal scolds have had nothing good to say about the bill. And in the process they have revealed that their alleged concern about deficits is, well, humbug. As Slate’s Daniel Gross says, what really motivates them is “the haunting fear that someone, somewhere, is receiving social insurance.”
Finally, there has been opposition from some progressives who are unhappy with the bill’s limitations. Some would settle for nothing less than a full, Medicare-type, single-payer system. Others had their hearts set on the creation of a public option to compete with private insurers. And there are complaints that the subsidies are inadequate, that many families will still have trouble paying for medical care.
Unlike the tea partiers and the humbuggers, disappointed progressives have valid complaints. But those complaints don’t add up to a reason to reject the bill. Yes, it’s a hackneyed phrase, but politics is the art of the possible.
The truth is that there isn’t a Congressional majority in favor of anything like single-payer. There is a narrow majority in favor of a plan with a moderately strong public option. The House has passed such a plan. But given the way the Senate rules work, it takes 60 votes to do almost anything. And that fact, combined with total Republican opposition, has placed sharp limits on what can be enacted.
If progressives want more, they’ll have to make changing those Senate rules a priority. They’ll also have to work long term on electing a more progressive Congress. But, meanwhile, the bill the Senate has just passed, with a few tweaks — I’d especially like to move the start date up from 2014, if that’s at all possible — is more or less what the Democratic leadership can get.
And for all its flaws and limitations, it’s a great achievement. It will provide real, concrete help to tens of millions of Americans and greater security to everyone. And it establishes the principle — even if it falls somewhat short in practice — that all Americans are entitled to essential health care.
Many people deserve credit for this moment. What really made it possible was the remarkable emergence of universal health care as a core principle during the Democratic primaries of 2007-2008 — an emergence that, in turn, owed a lot to progressive activism. (For what it’s worth, the reform that’s being passed is closer to Hillary Clinton’s plan than to President Obama’s). This made health reform a must-win for the next president. And it’s actually happening.
So progressives shouldn’t stop complaining, but they should congratulate themselves on what is, in the end, a big win for them — and for America.
It's been a good decade for the Pentagon. The most recent numbers from Capitol Hill indicate that Pentagon spending (counting Iraq and Afghanistan) will reach over $630 billion in 2010. And that doesn't even include the billions set aside for building new military facilities and sustaining the U.S. nuclear arsenal.
But even without counting the costs of the wars in Iraq and Afghanistan, the Department of Defense budget has been moving relentlessly upward since 2001. Pentagon budget authority has jumped from $296 billion in 2001 to $513 billion in 2009, a 73% increase. And again, that's not even counting the over $1 trillion in taxpayer money that has been thrown at the wars in Iraq and Afghanistan. Even if those wars had never happened, the Pentagon would still be racking up huge increases year after year after year.
And perhaps most disturbing of all, the Pentagon budget increased for every year of the first decade of the 21st century, an unprecedented run
that didn't even happen in the World War II era, much less during Korea or Vietnam. And if the government's current plans are carried out, there will be yearly increases in military spending for at least another decade.
We have a permanent war budget, and most of it isn't even being used to fight wars - it's mostly a giveaway to the Pentagon and its favorite contractors.
What Can Be Done?
For starters, the Pentagon needs to cut unnecessary weapons systems that were designed to meet Cold War threats that no longer exist. A good place to look for these kinds of cuts is in the Unified Security Budget, an analysis provided annually by a taskforce organized by Foreign Policy In Focus. Its most recent recommendations call for over $55 billion in cuts in everything from unneeded combat aircraft to anti-missile programs to nuclear weapons spending.
To their credit, President Obama and his Secretary of Defense Robert Gates have sought to eliminate eight such programs, from the F-22 combat aircraft to the Kinetic Energy Interceptor (a leftover from the old "Star Wars" program). An analysis recently produced by Taxpayers for Common Sense indicated that six of the eight proposed program cuts stuck. This is an impressive record, given the need to fight the weapons contractors and their pork-barreling allies in Congress to get the job done. But as the analysis also notes, additional spending on other programs added up to $1 billion more than the amount saved by the cuts.
This shouldn't be surprising. As a candidate for president, Obama told a rally in Iowa that it might be necessary to "bump up" the military budget beyond the record levels established by the Bush administration. And in announcing the administration's proposed weapons cuts in spring 2009, Secretary of Defense Robert Gates made it clear that he was seeking to rearrange priorities within the Pentagon, not reduce its budget. Gates sought more funding for equipment that would support counterinsurgency operations - like unmanned aerial vehicles - and less for systems designed to fight a Soviet threat that no longer exists - like the F-22 combat aircraft. And he got pretty much what he asked for.
Reducing U.S. Reach
Another area for savings would be to cut the size of the armed forces. But Obama campaigned on a promise to carry out a troop increase of 92,000, mirroring proposals made by the Bush administration. And his commitment of 30,000 additional troops to Afghanistan might set the stage for even larger increases in the total U.S. forces at some point down the road.
Finally, any real savings in U.S. military spending would need to be accompanied by a reduction in U.S. "global reach" - in the hundreds of major military facilities it controls in Africa, Asia, Europe and Latin America. But - in parallel to the war efforts in Iraq and Afghanistan- U.S. overseas-basing arrangements have been on the rise, not only in Iraq and Afghanistan themselves but in bordering nations.
So, barring major public pressure, don't expect the overall Pentagon budget to go down anytime soon. We can certainly still achieve some real reforms, from the elimination of outmoded systems like the F-22, to cracking down on war profiteering, to supporting the Obama administration's indispensable efforts to cut back the size of the U.S. nuclear arsenal. At least for now, though, making the Pentagon do with less when most communities in the country are suffering from the deepest economic downturn since the Great Depression is not in the cards. Not unless large numbers of us make it an issue.
Published on Wednesday, December 23, 2009 by CBS News
by Bob Fuss
The Senate filibuster has turned what some have called the "greatest deliberative body" into a place where passing the simplest bill takes days or weeks and a major bill like health reform ends up in a month-long slog of round the clock and weekend sessions and a final vote on Christmas Eve.
(CBS/iStockphoto)
Far from a tool to insure that debate is not cut off before everyone has his say, it has become a routine method by which the Senate is bogged down to the point where it becomes almost impossible to get things done.
Republicans have used more than 100 filibusters this year, frequently on bills they fully support, such as funding the wars in Iraq and Afghanistan. The idea isn't to keep debate going -- it is simply to slow things down and make it harder for Democrats to run the Senate. Though Republicans have been far more aggressive about it, Democrats did the same thing when they were in the minority.
The modern filibuster is not like the drama of "Mr. Smith Goes to Washington" where Jimmy Stewart played a principled senator standing up to corruption -- talking on the Senate floor until he lost his voice and collapsed.
Now the filibuster is simply automatic and assumed and the result is nothing can pass without 60 votes and those votes can be delayed for days on end. No one talks until they are hoarse and in fact during the lengthy multiple filibusters on the health reform bill, most of the time no one was talking at all as the staff presided over an empty Senate chamber.
The filibuster is not used to prevent debate from being stopped prematurely, it is used to replace majority rule with super-majority rule. It has been decades since a party has had the super-majority of 60 votes in the Senate Democrats now enjoy, but the result is not the ability to pass whatever they want. Instead it has resulted in any individual Democrat having a veto over whatever the majority wants and using it, as Nebraska Senator Ben Nelson (seen at left) did on health reform, to exercise outsized power.
There is nothing in the Constitution that allows filibusters and in fact the Senate started out with the same rule that works in the House and virtually every state legislature, city hall and high school student council -- allowing a simple majority vote to end debate. The Senate after an odd rule change in 1806 had no way to end debate, then required a two-thirds vote and now three-fifths. It can change the rule again at any time.
Republicans threatened to do away with the filibuster in 2005 when they were upset at Democrats blocking some of President George W. Bush's judicial nominees. They called it the "nuclear option" and it terrified members of both parties and was never carried out. If Democrats get rid of the filibuster now, they know they will have less power at some point in the future when Republicans win the majority back.
But the fact that a party with 60 votes still can't make the Senate operate in any reasonable way suggests it may be time to take another look.
In late October 2007, as the financial markets were starting to come unglued, a Goldman Sachs trader, Jonathan M. Egol, received very good news. At 37, he was named a managing director at the firm.
Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.
Goldman’s own clients who bought them, however, were less fortunate.
Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.
Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.
How these disastrously performing securities were devised is now the subject of scrutiny by investigators in Congress, at the Securities and Exchange Commission and at the Financial Industry Regulatory Authority, Wall Street’s self-regulatory organization, according to people briefed on the investigations. Those involved with the inquiries declined to comment.
While the investigations are in the early phases, authorities appear to be looking at whether securities laws or rules of fair dealing were violated by firms that created and sold these mortgage-linked debt instruments and then bet against the clients who purchased them, people briefed on the matter say.
One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded.
Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created.
Goldman and other Wall Street firms maintain there is nothing improper about synthetic C.D.O.’s, saying that they typically employ many trading techniques to hedge investments and protect against losses. They add that many prudent investors often do the same. Goldman used these securities initially to offset any potential losses stemming from its positive bets on mortgage securities.
But Goldman and other firms eventually used the C.D.O.’s to place unusually large negative bets that were not mainly for hedging purposes, and investors and industry experts say that put the firms at odds with their own clients’ interests.
“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”
Investment banks were not alone in reaping rich rewards by placing trades against synthetic C.D.O.’s. Some hedge funds also benefited, including Paulson & Company, according to former Goldman workers and people at other banks familiar with that firm’s trading.
Michael DuVally, a Goldman Sachs spokesman, declined to make Mr. Egol available for comment. But Mr. DuVally said many of the C.D.O.’s created by Wall Street were made to satisfy client demand for such products, which the clients thought would produce profits because they had an optimistic view of the housing market. In addition, he said that clients knew Goldman might be betting against mortgages linked to the securities, and that the buyers of synthetic mortgage C.D.O.’s were large, sophisticated investors, he said.
The creation and sale of synthetic C.D.O.’s helped make the financial crisis worse than it might otherwise have been, effectively multiplying losses by providing more securities to bet against. Some $8 billion in these securities remain on the books at American International Group, the giant insurer rescued by the government in September 2008.
From 2005 through 2007, at least $108 billion in these securities was issued, according to Dealogic, a financial data firm. And the actual volume was much higher because synthetic C.D.O.’s and other customized trades are unregulated and often not reported to any financial exchange or market.
Goldman Saw It Coming
Before the financial crisis, many investors — large American and European banks, pension funds, insurance companies and even some hedge funds — failed to recognize that overextended borrowers would default on their mortgages, and they kept increasing their investments in mortgage-related securities. As the mortgage market collapsed, they suffered steep losses.
A handful of investors and Wall Street traders, however, anticipated the crisis. In 2006, Wall Street had introduced a new index, called the ABX, that became a way to invest in the direction of mortgage securities. The index allowed traders to bet on or against pools of mortgages with different risk characteristics, just as stock indexes enable traders to bet on whether the overall stock market, or technology stocks or bank stocks, will go up or down.
Goldman, among others on Wall Street, has said since the collapse that it made big money by using the ABX to bet against the housing market. Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly.
Even before then, however, pockets of the investment bank had also started using C.D.O.’s to place bets against mortgage securities, in some cases to hedge the firm’s mortgage investments, as protection against a fall in housing prices and an increase in defaults.
Mr. Egol was a prime mover behind these securities. Beginning in 2004, with housing prices soaring and the mortgage mania in full swing, Mr. Egol began creating the deals known as Abacus. From 2004 to 2008, Goldman issued 25 Abacus deals, according to Bloomberg, with a total value of $10.9 billion.
Abacus allowed investors to bet for or against the mortgage securities that were linked to the deal. The C.D.O.’s didn’t contain actual mortgages. Instead, they consisted of credit-default swaps, a type of insurance that pays out when a borrower defaults. These swaps made it much easier to place large bets on mortgage failures.
What if there was a way to raise a population's life expectancy and reduce its rates of crime, suicide, teenage pregnancy and mental illness, among other social problems? British epidemiologists Richard Wilkinson and Kate Pickett believe they have found one. In The Spirit Level: Why Greater Equality Makes Societies Stronger, published in the U.S. on Dec. 22, they present data suggesting that almost every indicator of social health in wealthy societies is related to its level of economic equality. (See the data here). Comparing statistics between developed economies and within the U.S., Wilkinson and Pickett argue GDP and overall wealth matter little to wealthy societies. Rather, it is the gap between the rich and poor that is telling. They spoke to TIME about what they believe are revolutionary findings.
You found a very strong correlation between income equality and societal well-being. Why had no one spotted it before? KP: We and other researchers had noticed this trend. But the field was splintered — people looked at only health, or only crime. We've brought it together. Treating the 50 United States as separate countries and then comparing them really strengthened the evidence.
Why does greater income inequality lead to social problems? RW: In hierarchical societies the quality of social relationships becomes strained, and that can be stressful. Many of the effects we note spring from chronic stress, whether you are talking about obesity or mental health or the sexual development of girls stressed early in childhood.
KP: Humans are highly social beings — we can either behave competitively or we can be cooperative. In more unequal societies, people are more out for themselves. Their involvement in community life drops away, and that’s corrosive.
Is it just the poor who suffer in unequal societies? KP: The impact of inequality, although greatest among the poor, does seem to effect people almost all the way up the income ladder. We are not sure about the super-rich. They make up less than 1% of the population, so it's difficult to track.
If you had to pick a U.S. state to live in based on your data, which would it be? KP: Vermont, with Iowa, New Hampshire or Utah close behind.
RW: Vermont or perhaps New Hampshire. But the point is that at any given level of income, education or occupational level, you are better off in a more-equal state. You will be less likely to have mental illness, and your children will be more likely to avoid drugs or teenage pregnancy, or become victims of violence.
How did you define income equality? RW: There are many measures. We compared the gap between the richest and poorest 20% of households in each society. You can use more sophisticated indicators like the gini index, but they produce broadly the same answers.
So is an emphasis on GDP growth misleading? RW: Increases in income and economic growth are important in poorer countries where food, shelter and clean water are important. But when it's a matter of getting more cars per household or higher-quality electronics, it doesn't translate to well-being.
How can we achieve more income equality in a market economy? RW: Some relatively equal societies, such as Japan, and some states such as New Hampshire have smaller differences between earnings before taxes and benefits. The other way is to start off like Sweden does — with large inequalities between earnings — and then redistribute wealth with high taxes and benefits. I think we need to do both. To reduce earning differences you need as many different forms of economic democracy as possible. We need to make it a bit more embarrassing for company directors to give themselves huge pay deals and bonuses while holding down wages elsewhere in their company.
You believe an emphasis on economic equality could help the battle against climate change. How? RW: The biggest challenge to slowing carbon emissions is consumerism. Consumerism is driven by status competition and is intensified by inequality. Further, more-equal societies are more willing to think about the common good and to be more public-spirited. You can see this in terms of the proportion of waste recycled or the proportion of international development aid given. Both are greater in more-equal countries. In more-equal countries, business leaders are more likely to stress that their governments should abide by international environmental agreements, too.
KP: Since we finished the book, we’ve found that more-equal societies are more innovative in terms of patents granted per capita. This is probably because they develop more human capital. Kids do better in school, and social mobility is higher. We need innovation to tackle climate change.
Spend like there's no tomorrow. Encourage your citizens to spend like there's no tomorrow. Borrow as much money as you can. Lower taxes so that there's less money coming in, and then borrow more to fill the gap. Export all the good jobs thinking that the economy will continue to function well based on 'do you want fries with that?' jobs. Turn the banks into casinos. In good times lower taxes never figuring that there will ever be bad times so that you might need to build up a reserve. In bad times lower taxes so that businesses can create jobs. Never learn anything from the past (like the existence of boom bust cycles).
Encourage citizens to consume more even when they have run out of money. When they run out of money, encourage them to borrow in order to consume more. Allow multinational corporations to get away without paying taxes. Allow corporations to set up in your state without paying state or local taxes. Create a dysfunctional government that allows a minority to filibuster any meaningful legislation. Polarize your people in two different camps. Create a right wing fiction talk machine that encourages people to believe fairy tales so that the real stealing can go on behind their backs. Encourage people to buy guns.
Start wars everywhere and anywhere based on the slightest pretext. Allow the "enemy" to blow up equipment costing millions of dollars with a $10. improvised device. Try to make people think that you're helping them when you're blowing up innocent civilians and dropping bombs on wedding parties. Never really end a war. Instead create a permanent prescence by establishing a world wide network of military bases that have to be funded year after year in perpetuity. Meanwhile, borrow the money for all the military expenditures from a country whose political system represents one that justified almost 50 years of previous military expenditures. Allow this country to flood your markets with products while protecting their own markets.
Create an economy based on health care and financial transactions and cheap foreign made imported goods. Encourage your corporations to export jobs while encouraging your citizens to go back to school to get more edumacated imbuing them with the notion that the reason they don't have a job is that they're not well enough edumacated or bright enough. Encourage them to take out massive loans to finance their edumacation. Imbue them with the ethic that any lack of a job is due to personal failings and not society's fault. After all the government never guaranteed them a job. Nor did any of the corporations which control the government. It's up to them to find one, and the successful usually do. Any other result is due to personal failings - lack of a sufficient work ethic or sufficient intelligence.
While overseeing the diminution of jobs and the concomitant run-up in stock prices, praise Wall Street for 'bringing the economy back' to where it was before the recession. Spend trillions if necessary bailing out failing financial institutions while being parsimonious about helping average Joe citizens. Instead, kick them out of their houses when they can't pay their mortgages because they've lost their jobs (due to personal failings). Foreclosure becomes a tool to provide cheap houses for real estate investors. Ensure that those who have lost jobs are kept afloat temporarily until their jobless benefits run out. Then, unfortunately, they will have to be consigned to the streets where they will swell the ranks of the homeless especially those that for some reason can't be taken in by a relative. Go from a two job family to a one job extended family.
While your country is going down the tubes, encourage your citizens to buy more guns. Spend money on building more prisons to house at great expense those convicted of minor crimes like smoking dope. Meanwhile, let dope flow freely over your borders creating a boom industry in gun exports to foreign drug dealers. But let drugs, people and money cross the borders with impunity. Instead of beefing up the borders, spend your money funding foreign wars and occupations. The relatively unprotected sieve-like borders can then be used by terrorists smuggling in weapons side by side with the drug dealers smuggling them out. Once the prisoners have served their time for minor offenses, turn them out to the street where they will remain unemployed because of their criminal background and low credit rating.
Let banks determine the social morality like a $30. slap on the wrist for being one day late in their payments. Meanwhile, use your media to encourage people to be immoral by glorifying crime shows and dwelling on guns and violence. Fill the airwaves with mindless drivel and let your large corporations fund news shows thereby guaranteeing that nothing critical of large corporations will ever be aired. Have them fund Public Broadcasting too for the same reason. Have your politicians take money from large corporations either through campaign donations or from promise of a job after 'public service' (nothing in writing though just a wink wink). Prosecute those who write their bribes down on the back of a napkin or take money and put it in their freezer. These politicians need to be weeded out on a survival of the fittest basis. Have lobbyists write the laws because most laws are too complicated for politicians to understand while corporations can afford high powered lawyers who have the expertise. Pay your President one one hundredth or one one thousandth of what a CEO of a major corporation makes. Then have him summon the CEOs to the White House only to be told they're too busy to come. After all they're financial giants compared to him.
While encouraging corporations to cut jobs and export jobs in order to get their stock prices up, make it clear that unemployed workers are in that situation due to their own personal failure and lack of responsibility or they're not smart enough or their work ethic is lacking. Act like no one could have possibly predicted that exporting jobs and cutting jobs in order to drive up stock prices would result in a situation of widespread joblessness. That couldn't have possibly been foreseen much like flying airplanes into tall buildings could'nt have possibly been imagined prior to 9/11. Act really surprised when bailing out banks doesn't lead to job creation. Make up excuses why this phenomenon is so like 'job creation is a lagging indicator.' A lagging indicator of what - that there are no jobs? They will only find out later that the lagging indicator that there are no jobs is an indicator that there are no jobs. Low information types will not understand this gobbledegook anyway since they're too concerned about what Tiger Woods, Lindsay Lohan, Paris Hilton and Brittany Spears are up to in their dysfunctional lives. Offer them distractions galore in order to keep low information voters inundated with low information. Make sure every magazine at the supermarket check-out counter has the word 'sex' displayed prominently several times on its cover and points out who is cheating with whom.
Make the only source of entry level jobs be military employment. That ensures that there will be an adequate supply of young men and women to fight interminable wars and staff innumerable military bases. This should be the primary jobs program. No one need to go without a job when all they need to do is join the military. There are even good benefits like health care and edumacation. One stands to be in a position to get a good job when they get out because veterans are the first ones hired. Except for those who end up homeless for some reason. But they can even get signing bonuses much like professional athletes. With them they can go out and buy a new pick-up thereby fulfilling two patriotic duties with one stone.
So having gone into debt to fight wars and having borrowed the money from a country whose political system is similar to your former arch enemy's, you are now in the position of having let your former arch enemy morph into your banker. Now you need to go on bended knee to beg your banker to tinker with their currency instead of fixing the problem by investing in jobs here at home and protecting those jobs with tariffs. But having bought free trade hook, line and sinker from Alan Greenspan and Milton Friedman and having preached it to the rest of the world, you can't really do that without looking foolish. And countries, especially proud ones, like people, don't want to go around looking foolish especially when they think that they are the greatest and best thing that ever happened to the world. A proud nation cannot do such as that. Instead a proud nation must stick to its guns even when it means that other nations are secretly eating its lunch and gaining economic supremacy without even firing a shot while the proud nation lets its million dollar 'buffaloes' be blown up by $10. improvised explosive devices in a nation that will never be a rival for number one status and has virtually no resources. But out of pride we must keep fighting. To pull out would be an admission of failure and we have to win at all costs. We must win! So we must go to our former arch enemy turned banker and beg for more money so we can continue to fight and lose more million dollar buffaloes and have our young men and women come back with missing limbs and traumatic head injuries if they come back at all.
A country whose GDP is based on consumption is a country built on sand whereas a country whose GDP is based on production is a country built on a rock. You make a country go broke by basing GDP on consumption while exporting the production to other countries where labor is cheaper and environmental standards and taxes are lower. Then having exported your jobs to that country, you ask to borrow money from them. You end up paying so much interest on the debt that there is no money left to bail out the cities or states or to pay unemployment benefits. There is only money to bail out the banks and that money is largely created out of thin air. But you can't create money out of thin air to help miserable people. They must learn to fend for themselves. They must have the experience of learning to live without a job or a house and in many cases without a family. This experience will be invaluable in case they ever have to face such a situation again. It's all about being resilient, bouncing back, being resourceful. It teaches life skills like how to collect cans and bottles and redeeming them for cash at recycling centers. It teaches that one can always get by if one is resourceful enough. Or one can join the military.
Primary Health, Dental Care for 25 Million More Americans
WASHINGTON - December 19 - A $10 billion investment in community health centers, expected to go to $14 billion when Congress completes work on health care reform legislation, was included in a final series of changes to the Senate bill unveiled today.
The provision, which would provide primary care for 25 million more Americans, was requested by Sen. Bernie Sanders (I-Vt.).
He said the additional resources will help bring about a revolution in primary health care in America and create new or expanded health centers in an additional 10,000 communities. The provision would also provide loan repayments and scholarships through the National Health Service Corps to create an additional 20,000 primary care doctors, dentists, nurse practitioners, physician assistants and mental health professionals.
Very importantly, Sanders also said the provision would save Medicaid tens of billions of dollars by keeping patients out of emergency rooms and hospitals by providing primary care when then needed it.
Sanders worked with House Majority Whip James Clyburn (D-S.C.) to include $14 billion in the House version of the legislation.
Sanders is also working with Sen. Ron Wyden (D-Ore.) to improve language already in the bill to provide waivers for states that want to provide comprehensive, affordable health care and curb rapidly-rising costs for money-making private health insurance companies. The waivers could clear the way for a state-run, single-payer system.
For the health centers, the $14 billion in the bill that the House of Representatives approved on Nov. 7 would increase the number of centers from 20 million to 45 million over the next five years.
The investment would more than pay for itself by saving Medicaid $23 billion over five years on reduced emergency room use and hospital costs, according to a study conducted by George Washington University.
The system of Federally Qualified Health Centers began four decades ago under pioneering legislation by the late Sen. Edward M. Kennedy. Community health centers now provide primary health care, dental care, mental health counseling and low-cost prescription drugs for about 20 million Americans. The centers offer basic services like prenatal care, childhood immunizations and cancer screenings. Open to everyone, the centers care for patients covered by Medicaid, Medicare and private insurance as well as those who have no insurance.
Dan Hawkins, senior vice president of the National Association of Community Health Centers, testified before Congress earlier this year that the cost of care at health centers is 41 percent less than what is spent to care for patients elsewhere. The savings would grow if health centers were expanded to serve more patients, according to Hawkins.
Who is against jobs in the United States? The big banks, Wall Street, the Council on Foreign Relations, the Business Roundtable, the United States Chamber of Commerce, the National Retail Federation, Corporate America, the President of the United States, Congress of the United States. Everyone is crying for jobs, but no one seems to understand why there aren't any. And the reason for those opposing jobs is money.
Beginning in 1973, big banks made most of their profit outside of the United States. Industries off-shoring, investing, banks financing the investments, transfer fees, fees and interest on the loans made for bigger profits. Long since, the big banks under the leadership of David Rockefeller have led the way to off-shore and make a bigger profit. Goldman Sachs, AIG, Citicorp and Wall Street, conspiring for a bailout and now using it for bonuses, make more money from the off-shored operations.
The Council on Foreign Relations ought to be renamed the Council on Making Money. A recent PEW poll reported fully 85% of Americans said that protecting United States jobs should be a top foreign policy priority. But only 21% of the Council on Foreign Relations agrees. Financial interests organized the Business Roundtable to continue off-shore investment and profit. The local Chamber is for Main Street America, but Tom Donahue and the United States Chamber have sold out to the financial interests and oppose jobs and producing in the United States. Thirty years ago, hundreds of thousands of Arrow shirts produced in China were a best seller in the United States. But at Christmastime, the Chinese supply ran short and the retail stores had to order the same shirt from New Jersey. They made 20% less profit on the New Jersey shirt. Retailers are all for profit from imports and against domestic production and jobs in America.
Corporate America would fight any initiative by the President, the Congress, or the government to create jobs in the United States. That is, production that faces competition offshore. In globalization, U. S. production can't make a profit, can't survive. Its competition will off-shore the same article for a lesser price, putting you out of business. Moreover, Corporate America doesn't have to bother with labor in China. The China government controls labor and you don't have to worry about a work stoppage or minimum wage. All they have is a maximum wage.
And Corporate America doesn't have to worry with clean air and clean water or the environment in China. Nor does it have to worry with OSHA and all of its safety rules. Many times the factory building is furnished and you don't have to worry with capital costs. If you make a profit, you can just reinvest it in an additional operation and not have to pay any U. S. income tax. If the operation fails, walk away with no legacy costs. Corporate America bitterly opposes its government protecting and strengthening the U. S. economy because producing again in America will put the executives back to work. They can send a Jaycee to China to watch the quality control daily and sit on the 32nd floor on Sixth Avenue with the internet, keeping check, and, leaving early for a massage and drinks. With production in China they don't have to work.
As Commander-in-Chief, the President dithered for months over the number of troops. But he can't equip the troops except for the favor of a foreign country. The War Production Act of 1950 requires the President to make sure that we can produce in- country those articles necessary for our national defense. Enforcing this law would limit the campaign contributions. Under Section 201 of the trade laws, the President is supposed to take action, like impose tariffs or quotas, when a certain production is endangered. Not only endangered, our automobile production has been bankrupted. But all the President does is give Detroit bailout welfare. The President doesn't want to limit the campaign contributions.
The same with Congress. Senator Byron Dorgan of North Dakota long ago tried to allocate the tax incentive for foreign jobs and production to domestic jobs and production. The Business Roundtable and the U. S. Chamber fought it like a tiger and killed it.
As the President said in his West Point talk, there is fierce competition in international trade and globalization. All countries move to protect and build their economies while the United States goes out of business. The one advantage that the U.S. has is its richest market in the world. It is fast becoming the poorest market and the U.S. is losing any clout to maintain a strong economy.
The economy is in the hands of Summers, Bernanke and Geithner. Campaign contributions are in the hands of David Axelrod and Rahm Emanuel. The poor President is smart, diligent and working his head off campaigning. But he is inexperienced and not governing, and the Congress is in a Mexican standoff over an archaic filibuster rule that reveres democracy by the minority.
Of course, the media, which knows this and keeps it top secret, is owned by big business.
If I don't meet you in the breadline, my children will.
Unless some legislator pulls off a last-minute double-cross, health care reform will pass the Senate this week. Count me among those who consider this an awesome achievement. It’s a seriously flawed bill, we’ll spend years if not decades fixing it, but it’s nonetheless a huge step forward.
It was, however, a close-run thing. And the fact that it was such a close thing shows that the Senate — and, therefore, the U.S. government as a whole — has become ominously dysfunctional.
After all, Democrats won big last year, running on a platform that put health reform front and center. In any other advanced democracy this would have given them the mandate and the ability to make major changes. But the need for 60 votes to cut off Senate debate and end a filibuster — a requirement that appears nowhere in the Constitution, but is simply a self-imposed rule — turned what should have been a straightforward piece of legislating into a nail-biter. And it gave a handful of wavering senators extraordinary power to shape the bill.
Now consider what lies ahead. We need fundamental financial reform. We need to deal with climate change. We need to deal with our long-run budget deficit. What are the chances that we can do all that — or, I’m tempted to say, any of it — if doing anything requires 60 votes in a deeply polarized Senate?
Some people will say that it has always been this way, and that we’ve managed so far. But it wasn’t always like this. Yes, there were filibusters in the past — most notably by segregationists trying to block civil rights legislation. But the modern system, in which the minority party uses the threat of a filibuster to block every bill it doesn’t like, is a recent creation.
The political scientist Barbara Sinclair has done the math. In the 1960s, she finds, “extended-debate-related problems” — threatened or actual filibusters — affected only 8 percent of major legislation. By the 1980s, that had risen to 27 percent. But after Democrats retook control of Congress in 2006 and Republicans found themselves in the minority, it soared to 70 percent.
Some conservatives argue that the Senate’s rules didn’t stop former President George W. Bush from getting things done. But this is misleading, on two levels.
First, Bush-era Democrats weren’t nearly as determined to frustrate the majority party, at any cost, as Obama-era Republicans. Certainly, Democrats never did anything like what Republicans did last week: G.O.P. senators held up spending for the Defense Department — which was on the verge of running out of money — in an attempt to delay action on health care.
More important, however, Mr. Bush was a buy-now-pay-later president. He pushed through big tax cuts, but never tried to pass spending cuts to make up for the revenue loss. He rushed the nation into war, but never asked Congress to pay for it. He added an expensive drug benefit to Medicare, but left it completely unfunded. Yes, he had legislative victories; but he didn’t show that Congress can make hard choices and act responsibly, because he never asked it to.
So now that hard choices must be made, how can we reform the Senate to make such choices possible?
Back in the mid-1990s two senators — Tom Harkin and, believe it or not, Joe Lieberman — introduced a bill to reform Senate procedures. (Management wants me to make it clear that in my last column I wasn’t endorsing inappropriate threats against Mr. Lieberman.) Sixty votes would still be needed to end a filibuster at the beginning of debate, but if that vote failed, another vote could be held a couple of days later requiring only 57 senators, then another, and eventually a simple majority could end debate. Mr. Harkin says that he’s considering reintroducing that proposal, and he should.
But if such legislation is itself blocked by a filibuster — which it almost surely would be — reformers should turn to other options. Remember, the Constitution sets up the Senate as a body with majority — not supermajority — rule. So the rule of 60 can be changed. A Congressional Research Service report from 2005, when a Republican majority was threatening to abolish the filibuster so it could push through Bush judicial nominees, suggests several ways this could happen — for example, through a majority vote changing Senate rules on the first day of a new session.
Nobody should meddle lightly with long-established parliamentary procedure. But our current situation is unprecedented: America is caught between severe problems that must be addressed and a minority party determined to block action on every front. Doing nothing is not an option — not unless you want the nation to sit motionless, with an effectively paralyzed government, waiting for financial, environmental and fiscal crises to strike.
Meritocracy, the notion that those who are the brightest, most talented and hardworking should get ahead in society, is a tacit adjunct to democracy, capitalism and the American way. Shouldn't the best and the brightest prevail and assume leadership positions in society not to mention reap the most financial rewards? Shouldn't society promote and shower honors and prizes on people who by dint of their achievements and accomplishments have shown that they deserve preeminence?
In "Smile Southern California, You're the Center of the Universe," author James Flanigan extolls the virtues of such people and goes on and on about the talented people who have built businesses and created fortunes for themselves. Such people as Charles Woo who founded Megatoys. Today, Megatoys does $100 million in annual sales and employs 200 to 400 people depending on the season. Revolutionary ways of combining entrepreneurialism, capital markets, supply chains, computers and the latest technology result in vibrant contributions to the new economy and promise the best of all possible worlds. Or so it seems until you lift the carpet and find all the dirt that's been swept beneath it. And many of these wonderful people who have created billions in wealth (mainly for themselves) later go on to become philanthropists giving a lot of it away. What could be a more ideal scenario? The best and the brightest work hard, become entrepreneurs, start businesses, develop new products, employ people, create wealth, contribute to increased GDP, become philanthropists. This is the promise of capitalism. Isn't it all wonderful?
The problem with such a world view is that it doesn't take into account the masses of people who don't have the prodigious talent or work ethic of these few with 190 IQs who are capable of working 18 hour days. Tremendously talented workaholics will undoubtedly create value and get ahead in the workplace and the marketplace. But where does this leave average Joes who don't possess the talent or the smarts or the work ethic? You might say, forget them, they are the laggards, the C students, the less talented, the less deserving. Well, acknowledging the contributions of the best and the brightest, a society nevertheless has to take into account and provide for all its members, not only the most prolific and the most productive. A society that doesn't becomes a hierarchical, top down society relegating the less talented to inferior positions of economic and financial well-being. And such a society verges on fascism and corporatism when the less talented are exploited by the more knowledgable and powerful and used as cannon fodder or workplace fodder. Although society needs to let the talented do their thing, it is not a good idea to give them ultimate control or they will get into a position to lord it over the merely average.
Meritocracy can easily create aristocracy and even turn into fascism unless it is leavened by a respect for all human beings whether of high or low endowments and achievements. There is certainly a spectrum of human talents and abilities, but not all rewards should go to the most talented with a few crumbs from the table going to those of more modest talents and abilities. Everyone except the most physically and mentally disabled can make a contribution and deserves respect and acknowledgment, not just the most talented. Sweeping the floors is a necessary function and the person who does it deserves recognition for that and not merely condescension. And a compassionate society provides a comfortable place for everyone to dwell in not just the most intelligent who are sometimes the most ruthless. Societies lacking compassion and based on meritiocracy alone soon veer into fascism. The Germany of Adolph Hitler is a good example. It was a society not lacking in brilliant achievements and talented and hardworking individuals. If Hitler had died before the invasion of Poland in 1939, he would have gone down as one of the world's greatest individuals. But a belief in German triumphalism, exceptionalism and social Darwinism taken to extremes turned German society into an inhuman and compassionless monster. The least talented, the disabled, as well as the least German, the Jews, were earmarked for elimination.
Flanagan goes on detailing the stories of other rags to riches immigrants such as Sabrina Kay who made millions in the fashion industry. A second generation Korean immigrant, she was able to borrow $500,000. from her parents to open California Design College in 1991. She sold out in 2003 for $15 million. I guess it takes money to make money, but not all entrepreneurs have needed parental handouts. Some like Irwin Jacobs, who founded Qualcomm and whose father was a taxi driver, started out with little except a college education. Nevertheless, the question arises what about the employees and workers that the budding millionaires and billionaires have used along the way. In many cases they have been sweatshop workers in foreign countries who have worked for peanuts while creating fortunes for their employers. That's the dirty little secret of meritocracy - the meritocrats have been talented enough to exploit less talented people along the way. And this holds especially true for immigrants with ties to their old countries where people are desperate for work. So jobs are exported there. Flanagan sees nothing wrong with this because the high value jobs are still here in America. Except that they aren't; they're being shipped overseas as well where well educated individuals are willing to work for less. Even if all high value jobs stayed in the US, the question is begged as to what about those workers who aren't capable of doing the high value jobs but whose jobs have been shipped overseas. Flanagan blithely ignores this part of the equation as he waxes romantic over wealth creation and entrepreneurialism which is assumed to, but often doesn't, trickle down to the merely average.
While in some cases the most talented such as Bill Gates have been amply rewarded for their efforts, there are other cases in which the most talented lost out to those better organized in the corporate format. Take Robert Armstrong, for example, the inventor of FM. He also invented the Super-regenerative circuit (patented 1922), and the Super Heterodyne receiver (patented 1918). The superheterodyne receiver makes AM and FM radio as we know them possible, and is probably the single greatest invention affecting radio of all time. It makes tuning a radio possible. Each radio station has a different carrier frequency, and the superheterodyne receiver allows the information riding on the carrier to be stripped off when the radio is tuned to a particular station.
But RCA CEO, David Sarnoff, a Russian immigrant, conspired to have Armstrong's FM radio put out of business partly because RCA was so heavily invested in AM and partly because it would interfere with the launch of television by RCA after WW II. RCA lobbied the FCC to change the frequency allotment for FM, which it did, thus making all of Armstrong's radios and radio stations obsolete overnight. Most experts believe that FM technology was set back decades by the FCC decision. What a little lobbying can do! Armstrong would see no personal rewards for all his work and all his genius. He'd expected royalties on the manufacture of FM receivers. He expected to negotiate contracts with FM broadcasters. He also expected royalties on every TV set sold - in the U.S. and, eventually, abroad, for TV's sound system was his - FM.
But that wasn't going to happen. RCA tried to circumvent Armstrong's patents, and began producing televisions with his sound system, but paying him nothing, and then, finally, offering him $1 million for a non-exclusionary license. It was something like a scene from the Old West, the rich rancher going to his upstart competitor next door and saying, "I'm going to give you $1 million for your spread. Do you want me to pay you, or do you want me to pay your widow?"
In 1948, Armstrong turned to the courts - charging open theft, infringement on five of his basic FM patents. RCA responded with an army of lawyers who tied him up for six years with trickery, truth-twisting, evasion, procrastination, spoliation, and botheration. Armstrong went broke with legal expenses and was outspent and outargued by RCA corporate resources and their team of attorneys. Armstrong lost his marriage and eventually committed suicide. Meritocracy sometimes produces ghastly results. Arguably the best and the brightest, Armstrong lost out to corporate chicanery. In his case meritocracy yielded to corporate power.
A similar fate was visted on Philo Farnsworth, the inventor of television, at the hands (again) of David Sarnoff and his RCA corporate lawyers. So meritocracy isn't all it's cracked up to be especially when corporations are arrayed against individual inventors and entrepreneurs. The corporate form overpowers and dominates them. And if this can happen to talented individuals, how much more likely is it to happen to individuals who are less talented?
Even in the best of all possible meritocracies, a high degree of inequality will eventually obtain. If most of the rewards go to a small minority of very talented individuals, they will come to have economic and political domination over the vast majority of average Joes. The only way to forestall this eventuality is for government to step in and prevent it by seeing to it that society's rewards are distributed more equitably and evenly, by seeing to it that all financial rewards do not go to the most talented and hardworking, by enforcing an ethic of sharing through redistributing some of the spoils and wealth creation to society as a whole and not just to private interests no matter how meritorious they are.
While I would agree that more of society's rewards should go to those who have contributed more to society, we have to look at the meaning of the word "contribution." Is it really a contribution to society if the rewards from an endeavor go exclusively to the private entity that created it? No, that is a contribution not to society but to self. It would be a contribution to society if society, meaning the public, reaped some of the financial rewards as well. This means that any creation cannot be exclusively owned by the creator. If there needs to be a rationale for this, it is that the creator was enabled by society in the first place whether by the educational system or some other publicly provided good or service. Therefore, a meritocracy needs to be leavened by wealth sharing which is usually accomplished through taxation although cooperative enterprises are possible which share wealth directly. Luck is a big factor in who reaps rewards from an invention as most inventions such as the telephone had multiple inventors, namely, Alexander Graham Bell, Elisha Gray, Paul la Cour, Antonio Meucci and others. In most cases only one got to the patent office first and got the credit.
Does this mean that a corporatrion like Microsoft, for instance, has to go out and hire people who will be mediocre at their jobs. Not at all. It just means that work should not be the complete basis of income. Those who are unable to do a good job are better left unemployed, but still need to be provided for. If they are truly incompetent, it is better to pay them to stay out of the work force rather than to screw it up. But they can't be left to wither on the streets. This is the difference between a compassionate society and fascism.
To sum up, wealth needs to be redistributed to some extent so that those who are not the best, brightest and most talented share in it in order to prevent a large degree of inequality and so that meritocracy doesn't veer into corporatocracy and fascism.
Heather Lewis was wracked with guilt when she realized she was addicted to the bottle.
A A debate over water is boiling over in the United States and elsewhere amid growing environmental concerns about bottled water and questions about safety of tap water. (Karen Bleier / AFP-Getty Images file)
Bottled water, that is.
At her worst, she said she went through five plastic bottles of water a day nearly every day for two years.
"It was appalling," said Lewis, an architect from Louisville, Colo. "I felt like Aquafina's trained monkey."
But one day in January, as she gazed at the piles of plastic in her recycling bin, she decided to quit. "It was a cumulative sense of responsibility that made me do it," Lewis said
Lewis is part of a bigger backlash against bottled water happening across the nation, and after decades of growth, the $11 billion industry is stuttering.
After steady expansion that saw U.S. per capita consumption grow from less than two gallons a year to a peak of 29 in 2007, bottled water sales slipped 3.2 percent in 2008 and are projected to dip another 2 percent this year, according to estimates by the Beverage Marketing Corporation, a New York research and consulting firm.
The primary cause of the decline is hotly contested.
Industry executives say the downturn is purely due to the economy. "We don't think that anti-bottle water activists have had any impact," said Tom Lauria, spokesman for the International Bottled Water Association. "People love their bottled water."
Every other bottled beverage segment - soda, energy drinks, tea and the like - saw even worse sales declines this year, said Gary Hemphill, managing director of Beverage Marketing Group, a research and consulting firm in New York.
"Environmental concerns among consumers may have had an effect on bottled water sales, but the primary reason sales are soft is the economy," he said.
Certainly environmental groups are eager to take credit after campaigning for years against the industry over waste, safety concerns and the corporate privatization of water.
Restaurants, towns ditch the bottle
And there is no doubt the campaign has resulted in some high-profile changes.
Hundreds of high-end restaurants - from celebrity chef Alice Waters' Chez Panisse in Berkeley, Calif., to Mario Batali's Del Posto in New York City - now serve tap instead of bottled water.
In some towns, residents are protesting and rejecting large-scale water extraction by bit water bottlers. Even during a severe recession, residents of Wells, Maine, rejected last month a proposal to extract up to 250,000 gallons a day from an aquifer for Nestlés Poland Spring brand.
New York, Illinois and Virginia state governments now bar bottled water at public events and in state offices. Cisco and Google ditched it from their corporate campuses as well.
"In some ways, bottled water has become the SUV of the ecological movement," said Tony Clarke, director of the Polaris Institute, a Canadian nonprofit that organized an anti-water bottle campaign called "Inside the Bottle."
Web sites like InsidetheBottle.org, TakeBackTheTap.org and ThinkOutsideTheBottle.org encourage consumers to ditch the bottle, while environmental research groups like the Environmental Working Group publicize startling facts like the existence of an area twice the size of Texas in the Pacific Ocean awash with millions of plastic water bottles and garbage.
Companies take notice of protests
Environmental concerns are not going ignored by big bottle water producers like Nestlé, the world's largest water bottler.
Nestlé has introduced bottles with less plastic and launched a new brand of water called Resource that uses bottles made of 25 percent recycled plastic. The company also is doling out local grants for recycling programs.
"We recognize we have an environmental footprint and it's possible to lower it," said Jane Lazgin, Nestlé spokeswoman. "We think about that every day."
PepsiCo and Coca-Cola also have launched bottled water products that use less plastic.
Next on the horizon for the industry: compostable bottles made from corn, said Lauria. "We will see in our lifetime biodegradable plastic, and this whole controversy will disappear," he said.
Maybe, or maybe not.
Besides the concern about waste, a separate battle rages over privatization of shrinking water resources and the impact of bottled water operations on local aquifers, wildlife, water quality and community access to drinking water.
Voters in Shapleigh, Maine, this year passed an ordinance that protects groundwater rights for citizens but not corporations. The nearby town of Fryeburg has been in litigation with Nestle for six years over the company's expansion plans. Similar protests have played out in McCloud, Calif., and in Mescota County, Mich.
"There's a realization that bottled water is simply taken from a community and put in a bottle with a giant price tag," said Jon Keesecker, senior organizer of the Take Back the Tap campaign at Food & Water Watch in Washington D.C. "Many of these small communities feel like they're being cheated by these corporations."
Executives of Nestlé, which has faced criticism for its extraction practices, say they use groundwater just as any farmer or beer plant might, and its 75 springs provide jobs and economic diversity to small communities.
"The health of these springs requires vigilance to be sure they're stable and safe and sustainable, and that allows us to be in business," said Lazgin, Nestle spokeswoman.
Water safety questioned
Meanwhile, YouTube videos, research studies and press releases continue to fly about another controversy - the health and safety of tap vs. bottled water.
Each side argues over which water is more highly regulated. The Environmental Protection Agency oversees tap water while the Food & Drug Administration examines bottled water, so they're handled differently.
"For the last 10 to 15 years, bottled water companies have been marketing that theirs was safer and healthier than tap water," said Patti Lynn, campaign director at the environmental group Corporate Accountability International. She said the marketing undermined consumer confidence in tap water as well as necessary public investments needed to maintain public water systems, which face a $24 billion gap in funding.
So environmental groups have been making their case against bottled water on safety. Last year, the Environmental Working Group looked at 10 brands of bottled water and found that bottled water can contain complex mixtures of industrial chemicals never tested for safety, and may be no cleaner than tap water.
Bottled water companies defend their water and claim they are highly regulated by the FDA. Industry Web site BottledWaterMatters.com reports that bottled water is tested 30 times more often than tap water and that the Centers for Disease Control attributes more than 19 million illnesses to tap and none to bottled water.
Congress held hearings on safety regulation of bottled water over the summer, and the Government Accountability Office issued a report that revealed current FDA rules don't require certified laboratories for water testing of bottled water nor public disclosure of quality and contaminants found in bottled water as EPA rules do for tap water.
Earlier this month, Sen. Frank Lautenberg, D-N.J., introduced the Bottled Water Safety and Right-to-Know Act intended to inform consumers about what's in bottled water. Lautenberg has introduced similar legislation in the past.
Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.
Then he got elected.
What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.
How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we've been seeing on TV this fall who Obama really is?
Whatever the president's real motives are, the extensive series of loophole-rich financial "reforms" that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street's political power by institutionalizing the taxpayer's role as a welfare provider for the financial-services industry. At one point in the debate, Obama's top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals.
How did we get here? It started just moments after the election — and almost nobody noticed.
'Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It's fucking amazing. Amazing! And nobody said a thing about it."
Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama's election.
That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama's chief advisers during the campaign, didn't make the cut. Neither did Karen Kornbluh, who had served as Obama's policy director and was instrumental in crafting the Democratic Party's platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive "a Nobel Prize — for evil."
But come November 5th, both were banished from Obama's inner circle — and replaced with a group of Wall Street bankers. Leading the search for the president's new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama's biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).
Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama's economic team, Froman brought in none other than Jamie Rubin, who happens to be Bob Rubin's son. At the time, Jamie's dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.
Now here's where it gets really interesting. It's three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O'Doul's portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama's economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama's transition team that same month.
So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin's messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that's just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi. "If you had any doubts at all about the primacy of Wall Street over Main Street," former labor secretary Robert Reich declares when the bailout is announced, "your doubts should be laid to rest."
It is bad enough that one of Bob Rubin's former protégés from the Clinton years, the New York Fed chief Geithner, is intimately involved in the negotiations, which unsurprisingly leave the Federal Reserve massively exposed to future Citi losses. But the real stunner comes only hours after the bailout deal is struck, when the Obama transition team makes a cheerful announcement: Timothy Geithner is going to be Barack Obama's Treasury secretary!
Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup — Michael Froman — before the ink is even dry on a massive government giveaway to Citigroup that Geithner himself was instrumental in delivering. In the annals of brazen political swindles, this one has to go in the all-time Fuck-the-Optics Hall of Fame.
Wall Street loved the Citi bailout and the Geithner nomination so much that the Dow immediately posted its biggest two-day jump since 1987, rising 11.8 percent. Citi shares jumped 58 percent in a single day, and JP Morgan Chase, Merrill Lynch and Morgan Stanley soared more than 20 percent, as Wall Street embraced the news that the government's bailout generosity would not die with George W. Bush and Hank Paulson. "Geithner assures a smooth transition between the Bush administration and that of Obama, because he's already co-managing what's happening now," observed Stephen Leeb, president of Leeb Capital Management.
Left unnoticed, however, was the fact that Geithner had been hired by a sitting Citigroup executive who still had a big bonus coming despite his proximity to Obama. In January 2009, just over a month after the bailout, Citigroup paid Froman a year-end bonus of $2.25 million. But as outrageous as it was, that payoff would prove to be chump change for the banker crowd, who were about to get everything they wanted — and more — from the new president.
The irony of Bob Rubin: He's an unapologetic arch-capitalist demagogue whose very career is proof that a free-market meritocracy is a myth. Much like Alan Greenspan, a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters, Rubin has been held in awe by the American political elite for nearly 20 years despite having fucked up virtually every project he ever got his hands on. He went from running Goldman Sachs (1990-1992) to the Clinton White House (1993-1999) to Citigroup (1999-2009), leaving behind a trail of historic gaffes that somehow boosted his stature every step of the way.
As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year's financial crisis: the repeal of the Glass-Steagall Act (passed specifically to legalize the Citigroup megamerger) and the deregulation of the derivatives market. Having set that time bomb, Rubin left government to join Citi, which promptly expressed its gratitude by giving him $126 million in compensation over the next eight years (they don't call it bribery in this country when they give you the money post factum). After urging management to amp up its risky investments in toxic vehicles, a strategy that very nearly destroyed the company, Rubin blamed Citi's board for his screw-ups and complained that he had been underpaid to boot. "I bet there's not a single year where I couldn't have gone somewhere else and made more," he said.
Despite being perhaps more responsible for last year's crash than any other single living person — his colossally stupid decisions at both the highest levels of government and the management of a private financial superpower make him unique — Rubin was the man Barack Obama chose to build his White House around.
There are four main ways to be connected to Bob Rubin: through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project, a think tank Rubin spearheaded under the auspices of the Brookings Institute to promote his philosophy of balanced budgets, free trade and financial deregulation. The team Obama put in place to run his economic policy after his inauguration was dominated by people who boasted connections to at least one of these four institutions — so much so that the White House now looks like a backstage party for an episode of Bob Rubin, This Is Your Life!
At Treasury, there is Geithner, who worked under Rubin in the Clinton years. Serving as Geithner's "counselor" — a made-up post not subject to Senate confirmation — is Lewis Alexander, the former chief economist of Citigroup, who advised Citi back in 2007 that the upcoming housing crash was nothing to worry about. Two other top Geithner "counselors" — Gene Sperling and Lael Brainard — worked under Rubin at the National Economic Council, the key group that coordinates all economic policymaking for the White House.
As director of the NEC, meanwhile, Obama installed economic czar Larry Summers, who had served as Rubin's protégé at Treasury. Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin's Hamilton Project. The appointment of Furman — a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports with titles like "Walmart: A Progressive Success Story" — provided one of the first clues that Obama had only been posturing when he promised crowds of struggling Midwesterners during the campaign that he would renegotiate NAFTA, which facilitated the flight of blue-collar jobs to other countries. "NAFTA's shortcomings were evident when signed, and we must now amend the agreement to fix them," Obama declared. A few months after hiring Furman to help shape its economic policy, however, the White House quietly quashed any talk of renegotiating the trade deal. "The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement," U.S. Trade Representative Ronald Kirk told reporters in a little-publicized conference call last April.
The announcement was not so surprising, given who Obama hired to serve alongside Furman at the NEC: management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be "as beneficial to the U.S. as to the destination country, probably more so."
Joining Summers, Furman and Farrell at the NEC is Froman, who by then had been formally appointed to a unique position: He is not only Obama's international finance adviser at the National Economic Council, he simultaneously serves as deputy national security adviser at the National Security Council. The twin posts give Froman a direct line to the president, putting him in a position to coordinate Obama's international economic policy during a crisis. He'll have help from David Lipton, another joint appointee to the economics and security councils who worked with Rubin at Treasury and Citigroup, and from Jacob Lew, a former Citi colleague of Rubin's whom Obama named as deputy director at the State Department to focus on international finance.
Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler had been instrumental in helping to pass the infamous Commodity Futures Modernization Act of 2000, which prevented regulation of derivative instruments like CDOs and credit-default swaps that played such a big role in cratering the economy last year. And as head of the powerful Office of Management and Budget, Obama named Peter Orszag, who served as the first director of Rubin's Hamilton Project. Orszag once succinctly summed up the project's ideology as a sort of liberal spin on trickle-down Reaganomics: "Market competition and globalization generate significant economic benefits."
Taken together, the rash of appointments with ties to Bob Rubin may well represent the most sweeping influence by a single Wall Street insider in the history of government. "Rather than having a team of rivals, they've got a team of Rubins," says Steven Clemons, director of the American Strategy Program at the New America Foundation. "You see that in policy choices that have resuscitated — but not reformed — Wall Street."
While Rubin's allies and acolytes got all the important jobs in the Obama administration, the academics and progressives got banished to semi-meaningless, even comical roles. Kornbluh was rewarded for being the chief policy architect of Obama's meteoric rise by being outfitted with a pith helmet and booted across the ocean to Paris, where she now serves as America's never-again-to-be-seen-on-TV ambassador to the Organization for Economic Cooperation and Development. Goolsbee, meanwhile, was appointed as staff director of the President's Economic Recovery Advisory Board, a kind of dumping ground for Wall Street critics who had assisted Obama during the campaign; one top Democrat calls the panel "Siberia."
Joining Goolsbee as chairman of the PERAB gulag is former Fed chief Paul Volcker, who back in March 2008 helped candidate Obama write a speech declaring that the deregulatory efforts of the Eighties and Nineties had "excused and even embraced an ethic of greed, corner-cutting, insider dealing, things that have always threatened the long-term stability of our economic system." That speech met with rapturous applause, but the commission Obama gave Volcker to manage is so toothless that it didn't even meet for the first time until last May. The lone progressive in the White House, economist Jared Bernstein, holds the impressive-sounding title of chief economist and national policy adviser — except that the man he is advising is Joe Biden, who seems more interested in foreign policy than financial reform.
The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers. It's that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants. "Bob Rubin, these guys, they're classic limousine liberals," says David Sirota, a former Democratic strategist. "These are basically people who have made shitloads of money in the speculative economy, but they want to call themselves good Democrats because they're willing to give a little more to the poor. That's the model for this Democratic Party: Let the rich do their thing, but give a fraction more to everyone else."
Even the members of Obama's economic team who have spent most of their lives in public office have managed to make small fortunes on Wall Street. The president's economic czar, Larry Summers, was paid more than $5.2 million in 2008 alone as a managing director of the hedge fund D.E. Shaw, and pocketed an additional $2.7 million in speaking fees from a smorgasbord of future bailout recipients, including Goldman Sachs and Citigroup. At Treasury, Geithner's aide Gene Sperling earned a staggering $887,727 from Goldman Sachs last year for performing the punch-line-worthy service of "advice on charitable giving." Sperling's fellow Treasury appointee, Mark Patterson, received $637,492 as a full-time lobbyist for Goldman Sachs, and another top Geithner aide, Lee Sachs, made more than $3 million working for a New York hedge fund called Mariner Investment Group. The list goes on and on. Even Obama's chief of staff, Rahm Emanuel, who has been out of government for only 30 months of his adult life, managed to collect $18 million during his private-sector stint with a Wall Street firm called Wasserstein-Perella.
The point is that an economic team made up exclusively of callous millionaire-assholes has absolutely zero interest in reforming the gamed system that made them rich in the first place. "You can't expect these people to do anything other than protect Wall Street," says Rep. Cliff Stearns, a Republican from Florida. That thinking was clear from Obama's first address to Congress, when he stressed the importance of getting Americans to borrow like crazy again. "Credit is the lifeblood of the economy," he declared, pledging "the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money." A president elected on a platform of change was announcing, in so many words, that he planned to change nothing fundamental when it came to the economy. Rather than doing what FDR had done during the Great Depression and institute stringent new rules to curb financial abuses, Obama planned to institutionalize the policy, firmly established during the Bush years, of keeping a few megafirms rich at the expense of everyone else.
Obama hasn't always toed the Rubin line when it comes to economic policy. Despite being surrounded by a team that is powerfully opposed to deficit spending — balanced budgets and deficit reduction have always been central to the Rubin way of thinking — Obama came out of the gate with a huge stimulus plan designed to kick-start the economy and address the job losses brought on by the 2008 crisis. "You have to give him credit there," says Sen. Bernie Sanders, an advocate of using government resources to address unemployment. "It's a very significant piece of legislation, and $787 billion is a lot of money."
But whatever jobs the stimulus has created or preserved so far — 640,329, according to an absurdly precise and already debunked calculation by the White House — the aid that Obama has provided to real people has been dwarfed in size and scope by the taxpayer money that has been handed over to America's financial giants. "They spent $75 billion on mortgage relief, but come on — look at how much they gave Wall Street," says a leading Democratic strategist. Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion. And while the government continues to dole out big money to big banks, Obama and his team of Rubinites have done almost nothing to reform the warped financial system responsible for imploding the global economy in the first place.
The push for reform seemed to get off to a promising start. In the House, the charge was led by Rep. Barney Frank, the outspoken chair of the House Financial Services Committee, who emerged during last year's Bush bailouts as a sharp-tongued critic of Wall Street. Back when Obama was still a senator, he and Frank even worked together to introduce a populist bill targeting executive compensation. Last spring, with the economy shattered, Frank began to hold hearings on a host of reforms, crafted with significant input from the White House, that initially contained some very good elements. There were measures to curb abusive credit-card lending, prevent banks from charging excessive fees, force publicly traded firms to conduct meaningful risk assessment and allow shareholders to vote on executive compensation. There were even measures to crack down on risky derivatives and to bar firms like AIG from picking their own regulators.
Then the committee went to work — and the loopholes started to appear.
The most notable of these came in the proposal to regulate derivatives like credit-default swaps. Even Gary Gensler, the former Goldmanite whom Obama put in charge of commodities regulation, was pushing to make these normally obscure investments more transparent, enabling regulators and investors to identify speculative bubbles sooner. But in August, a month after Gensler came out in favor of reform, Geithner slapped him down by issuing a 115-page paper called "Improvements to Regulation of Over-the-Counter Derivatives Markets" that called for a series of exemptions for "end users" — i.e., almost all of the clients who buy derivatives from banks like Goldman Sachs and Morgan Stanley. Even more stunning, Frank's bill included a blanket exception to the rules for currency swaps traded on foreign exchanges — the very instruments that had triggered the Long-Term Capital Management meltdown in the late 1990s.
Given that derivatives were at the heart of the financial meltdown last year, the decision to gut derivatives reform sent some legislators howling with disgust. Sen. Maria Cantwell of Washington, who estimates that as much as 90 percent of all derivatives could remain unregulated under the new rules, went so far as to say the new laws would make things worse. "Current law with its loopholes might actually be better than these loopholes," she said.
An even bigger loophole could do far worse damage to the economy. Under the original bill, the Securities and Exchange Commission and the Commodity Futures Trading Commission were granted the power to ban any credit swaps deemed to be "detrimental to the stability of a financial market or of participants in a financial market." By the time Frank's committee was done with the bill, however, the SEC and the CFTC were left with no authority to do anything about abusive derivatives other than to send a report to Congress. The move, in effect, would leave the kind of credit-default swaps that brought down AIG largely unregulated.
Why would leading congressional Democrats, working closely with the Obama administration, agree to leave one of the riskiest of all financial instruments unregulated, even before the issue could be debated by the House? "There was concern that a broad grant to ban abusive swaps would be unsettling," Frank explained.
Unsettling to whom? Certainly not to you and me — but then again, actual people are not really part of the calculus when it comes to finance reform. According to those close to the markup process, Frank's committee inserted loopholes under pressure from "constituents" — by which they mean anyone "who can afford a lobbyist," says Michael Greenberger, the former head of trading at the CFTC under Clinton.
This pattern would repeat itself over and over again throughout the fall. Take the centerpiece of Obama's reform proposal: the much-ballyhooed creation of a Consumer Finance Protection Agency to protect the little guy from abusive bank practices. Like the derivatives bill, the debate over the CFPA ended up being dominated by horse-trading for loopholes. In the end, Frank not only agreed to exempt some 8,000 of the nation's 8,200 banks from oversight by the castrated-in-advance agency, leaving most consumers unprotected, he allowed the committee to pass the exemption by voice vote, meaning that congressmen could side with the banks without actually attaching their name to their "Aye."
To win the support of conservative Democrats, Frank also backed down on another issue that seemed like a slam-dunk: a requirement that all banks offer so-called "plain vanilla" products, such as no-frills mortgages, to give consumers an alternative to deceptive, "fully loaded" deals like adjustable-rate loans. Frank's last-minute reversal — made in consultation with Geithner — was such a transparent giveaway to the banks that even an economics writer for Reuters, hardly a far-left source, called it "the beginning of the end of meaningful regulatory reform."
But the real kicker came when Frank's committee took up what is known as "resolution authority" — government-speak for "Who the hell is in charge the next time somebody at AIG or Lehman Brothers decides to vaporize the economy?" What the committee initially introduced bore a striking resemblance to a proposal written by Geithner earlier in the summer. A masterpiece of legislative chicanery, the measure would have given the White House permanent and unlimited authority to execute future bailouts of megaconglomerates like Citigroup and Bear Stearns.
Democrats pushed the move as politically uncontroversial, claiming that the bill will force Wall Street to pay for any future bailouts and "doesn't use taxpayer money." In reality, that was complete bullshit. The way the bill was written, the FDIC would basically borrow money from the Treasury — i.e., from ordinary taxpayers — to bail out any of the nation's two dozen or so largest financial companies that the president deems in need of government assistance. After the bailout is executed, the president would then levy a tax on financial firms with assets of more than $10 billion to repay the Treasury within 60 months — unless, that is, the president decides he doesn't want to! "They can wait indefinitely to repay," says Rep. Brad Sherman of California, who dubbed the early version of the bill "TARP on steroids."
The new bailout authority also mandated that future bailouts would not include an exchange of equity "in any form" — meaning that taxpayers would get nothing in return for underwriting Wall Street's mistakes. Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts. In fact, the resolution authority proposed by Frank was such a slurpingly obvious blow job of Wall Street that it provoked a revolt among his own committee members, with junior Democrats waging a spirited fight that restored congressional oversight to future bailouts, requires equity for taxpayer money and caps assistance to troubled firms at $150 billion. Another amendment to force companies with more than $50 billion in assets to pay into a rainy-day fund for bailouts passed by a resounding vote of 52 to 17 — with the "Nays" all coming from Frank and other senior Democrats loyal to the administration.
Even as amended, however, resolution authority still has the potential to be truly revolutionary legislation. The Senate version still grants the president unlimited power over equity-free bailouts, and the amended House bill still institutionalizes a system of taxpayer support for the 20 to 25 biggest banks in the country. It would essentially grant economic immortality to those top few megafirms, who will continually gobble up greater and greater slices of market share as money becomes cheaper and cheaper for them to borrow (after all, who wouldn't lend to a company permanently backstopped by the federal government?). It would also formalize the government's role in the global economy and turn the presidential-appointment process into an important part of every big firm's business strategy. "If this passes, the very first thing these companies are going to do in the future is ask themselves, 'How do we make sure that one of our executives becomes assistant Treasury secretary?'" says Sherman.
On the Senate side, finance reform has yet to make it through the markup process, but there's every reason to believe that its final bill will be as watered down as the House version by the time it comes to a vote. The original measure, drafted by chairman Christopher Dodd of the Senate Banking Committee, is surprisingly tough on Wall Street — a fact that almost everyone in town chalks up to Dodd's desperation to shake the bad publicity he incurred by accepting a sweetheart mortgage from the notorious lender Countrywide. "He's got to do the shake-his-fist-at-Wall Street thing because of his, you know, problems," says a Democratic Senate aide. "So that's why the bill is starting out kind of tough."
The aide pauses. "The question is, though, what will it end up looking like?"
He's right — that is the question. Because the way it works is that all of these great-sounding reforms get whittled down bit by bit as they move through the committee markup process, until finally there's nothing left but the exceptions. In one example, a measure that would have forced financial companies to be more accountable to shareholders by holding elections for their entire boards every year has already been watered down to preserve the current system of staggered votes. In other cases, this being the Senate, loopholes were inserted before the debate even began: The Dodd bill included the exemption for foreign-currency swaps — a gift to Wall Street that only appeared in the Frank bill during the course of hearings — from the very outset.
The White House's refusal to push for real reform stands in stark contrast to what it should be doing. It was left to Rep. Paul Kanjorski in the House and Bernie Sanders in the Senate to propose bills to break up the so-called "too big to fail" banks. Both measures would give Congress the power to dismantle those pseudomonopolies controlling almost the entire derivatives market (Goldman, Citi, Chase, Morgan Stanley and Bank of America control 95 percent of the $290 trillion over-the-counter market) and the consumer-lending market (Citi, Chase, Bank of America and Wells Fargo issue one of every two mortgages, and two of every three credit cards). On November 18th, in a move that demonstrates just how nervous Democrats are getting about the growing outrage over taxpayer giveaways, Barney Frank's committee actually passed Kanjorski's measure. "It's a beginning," Kanjorski says hopefully. "We're on our way." But even if the Senate follows suit, big banks could well survive — depending on whom the president appoints to sit on the new regulatory board mandated by the measure. An oversight body filled with executives of the type Obama has favored to date from Citi and Goldman Sachs hardly seems like a strong bet to start taking an ax to concentrated wealth. And given the new bailout provisions that provide these megafirms a market advantage over smaller banks (those Paul Volcker calls "too small to save"), the failure to break them up qualifies as a major policy decision with potentially disastrous consequences.
"They should be doing what Teddy Roosevelt did," says Sanders. "They should be busting the trusts."
That probably won't happen anytime soon. But at a minimum, Obama should start on the road back to sanity by making a long-overdue move: firing Geithner. Not only are the mop-headed weenie of a Treasury secretary's fingerprints on virtually all the gross giveaways in the new reform legislation, he's a living symbol of the Rubinite gangrene crawling up the leg of this administration. Putting Geithner against the wall and replacing him with an actual human being not recently employed by a Wall Street megabank would do a lot to prove that Obama was listening this past Election Day. And while there are some who think Geithner is about to go — "he almost has to," says one Democratic strategist — at the moment, the president is still letting Wall Street do his talking.
Morning, the National Mall, November 5th. A year to the day after Obama named Michael Froman to his transition team, his political "opposition" has descended upon the city. Republican teabaggers from all 50 states have showed up, a vast horde of frowning, pissed-off middle-aged white people with their idiot placards in hand, ready to do cultural battle. They are here to protest Obama's "socialist" health care bill — you know, the one that even a bloodsucking capitalist interest group like Big Pharma spent $150 million to get passed.
These teabaggers don't know that, however. All they know is that a big government program might end up using tax dollars to pay the medical bills of rapidly breeding Dominican immigrants. So they hate it. They're also in a groove, knowing that at the polls a few days earlier, people like themselves had a big hand in ousting several Obama-allied Democrats, including a governor of New Jersey who just happened to be the former CEO of Goldman Sachs. A sign held up by New Jersey protesters bears the warning, "If You Vote For Obamacare, We Will Corzine You."
I approach a woman named Pat Defillipis from Toms River, New Jersey, and ask her why she's here. "To protest health care," she answers. "And then amnesty. You know, immigration amnesty."
I ask her if she's aware that there's a big hearing going on in the House today, where Barney Frank's committee is marking up a bill to reform the financial regulatory system. She recognizes Frank's name, wincing, but the rest of my question leaves her staring at me like I'm an alien.
"Do you care at all about economic regulation?" I ask. "There was sort of a big economic collapse last year. Do you have any ideas about how that whole deal should be fixed?"
"We got to slow down on spending," she says. "We can't afford it."
"But what do we do about the rules governing Wall Street . . ."
She walks away. She doesn't give a fuck. People like Pat aren't aware of it, but they're the best friends Obama has. They hate him, sure, but they don't hate him for any reasons that make sense. When it comes down to it, most of them hate the president for all the usual reasons they hate "liberals" — because he uses big words, doesn't believe in hell and doesn't flip out at the sight of gay people holding hands. Additionally, of course, he's black, and wasn't born in America, and is married to a woman who secretly hates our country.
These are the kinds of voters whom Obama's gang of Wall Street advisers is counting on: idiots. People whose votes depend not on whether the party in power delivers them jobs or protects them from economic villains, but on what cultural markers the candidate flashes on TV. Finance reform has become to Obama what Iraq War coffins were to Bush: something to be tucked safely out of sight.
Around the same time that finance reform was being watered down in Congress at the behest of his Treasury secretary, Obama was making a pit stop to raise money from Wall Street. On October 20th, the president went to the Mandarin Oriental Hotel in New York and addressed some 200 financiers and business moguls, each of whom paid the maximum allowable contribution of $30,400 to the Democratic Party. But an organizer of the event, Daniel Fass, announced in advance that support for the president might be lighter than expected — bailed-out firms like JP Morgan Chase and Goldman Sachs were expected to contribute a meager $91,000 to the event — because bankers were tired of being lectured about their misdeeds.
"The investment community feels very put-upon," Fass explained. "They feel there is no reason why they shouldn't earn $1 million to $200 million a year, and they don't want to be held responsible for the global financial meltdown."
Which makes sense. Shit, who could blame the investment community for the meltdown? What kind of assholes are we to put any of this on them?
This is the kind of person who is working for the Obama administration, which makes it unsurprising that we're getting no real reform of the finance industry. There's no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America's racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shitheads. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it, leaving even his erstwhile campaign adviser, ex-Fed chief Paul Volcker, concerned about a "moral hazard" creeping over his administration.
"The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted," Volcker told Congress in September, expressing concerns about all the regulatory loopholes in Frank's bill. "Ultimately, the possibility of further crises — even greater crises — will increase."
What's most troubling is that we don't know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it were any other politician, we wouldn't be surprised. Maybe it's our fault, for thinking he was different.
Correction: Due to an editing error, the original version of this story incorrectly identified Jamie Rubin, Bob Rubin's son, as a former diplomat in the Clinton administration.
Conservatives have destroyed this version of health care reform
by Keith Olbermann
Finally, as promised, a Special Comment on the latest version of H-R 35-90, the Senate Health Care Reform bill. To again quote Churchill after Munich, as I did six nights ago on this program: "I will begin by saying the most unpopular and most unwelcome thing: that we have sustained a total and unmitigated defeat, without a war."
Last night on this program Howard Dean said that with the appeasement of Mr. Lieberman of Connecticut by the abandonment of the Medicare Buy-in, he could no longer support H-R 35-90. Dr. Dean's argument is informed, cogent, heart breaking, and unanswerable.
Seeking the least common denominator, Sen. Reid has found it, especially the "least" part. This is not health, this is not care, this is certainly not reform. I bless the Sherrod Browns and Ron Wydens and Jay Rockefellers and Sheldon Whitehouses and Anthony Weiners and all the others who have fought for real reform and I bleed for the pain inflicted upon them and their hopes. They have done their jobs and served their nation.
But through circumstances beyond their control, they are now seeking to reanimate a corpse killed by the Republicans, and by a political game played in the Senate and in the White House by men and women who have now proved themselves poorly equipped for the fight. The "men" of the current moment, have lost to the "mice" of history.
They must now not make the defeat worse by passing a hollow shell of a bill just for the sake of a big-stage signing ceremony. This bill, slowly bled to death by the political equivalent of the leeches that were once thought state-of-the-art-medicine, is now little more than a series of microscopically minor tweaks of a system which is the real-life, here-and-now version, of the malarkey of the Town Hallers. The American Insurance Cartel is the Death Panel, and this Senate bill does nothing to destroy it. Nor even to satiate it.
It merely decrees that our underprivileged, our sick, our elderly, our middle class, can be fed into it, as human sacrifices to the great maw of corporate voraciousness, at a profit per victim of 10 cents on the dollar instead of the current 20. Even before the support columns of reform were knocked down, one by one, with the kind of passive defense that would embarrass a touch-football player - single-payer, the public option, the Medicare Buy-In - before they vanished, the Congressional Budget Office estimated that the part of this bill that would require you to buy insurance unless you could prove you could not afford it, would cost a family of four with a household income of 54-thousand dollars a year, 17 percent of that income. Nine thousand dollars a year. Just for the insurance!
That was with a public option. That was with some kind of check on the insurance companies. That was before — as Howard Dean pointed out — the revelation that the cartel will still be able to charge older people more than others; will — at the least — now be able to charge much more, maybe 50 percent more, for people with pre-existing conditions — pre-existing conditions; you know, like being alive.
You have just agreed to purchase a product. If you do not, you will be breaking the law and subject to a fine. You have no control over how much you will pay for the product. The government will have virtually no control over how much the company will charge for the product. The product is designed like the Monty Python sketch about the insurance company's "Never-Pay" policy ... "which, you know, if you never claim — is very worthwhile. But you had to claim, and, well, there it is."
And who do we have to blame for this? There are enough villains to go around, men and women who, in a just world, would be the next to get sick and have to sell their homes or their memories or their futures — just to keep themselves alive, just to keep their children alive, against the implacable enemy of American society, the insurance cartel. Mr. Grassley of Iowa has lied, and fomented panic and fear. Mr. DeMint of South Carolina has forgotten he represents people, and not just a political party. Mr. Baucus of Montana has operated as a virtual agent for the industry he is charged with regulating. Mr. Nelson of Nebraska has not only derailed reform, he has tried to exploit it to overturn a Supreme Court decision that, in this context, is frankly none of his goddamned business.
They say they have done what they have done for the most important, the most fiscally prudent, the most gloriously phrased, the most inescapable of reasons. But mostly they have done it for the money. Lots and lots of money from the insurance companies and the pharmacological companies and the other health care companies who have slowly taken this country over.
Which brings us to Mr. Lieberman of Connecticut, the one man at the center of this farcical perversion of what a government is supposed to be. Out of pique, out of revenge, out of betrayal of his earlier wiser saner self, he has sold untold hundreds of thousands of us into pain and fear and privation and slavery — for money. He has been bought and sold by the insurance lobby. He has become a Senatorial prostitute. And sadly, the President has not provided the leadership his office demands.
He has badly misjudged the country's mood at all ends of the spectrum. There is no middle to coalesce here, Sir. There are only the uninformed, the bought-off, and the vast suffering majority for whom the urgency of now is a call from a collection agency or a threat of rescission of policy or a warning of expiration of services.
Sir, your hands-off approach, while nobly intended and perhaps yet some day applicable to the reality of an improved version of our nation, enabled the national humiliation that was the Town Halls and the insufferable Neanderthalian stupidity of Congressman Wilson and the street-walking of Mr. Lieberman.
Instead of continuing this snipe-hunt for the endangered and possibly extinct creature "bipartisanship," you need to push the Republicans around or cut them out or both. You need to threaten Democrats like Baucus and the others with the ends of their careers in the party. Instead, those Democrats have threatened you, and the Republicans have pushed you and cut you out.
Mr. President, the line between "compromise" and "compromised" is an incredibly fine one. Any reform bill enrages the right, and provides it with the war cry around which it will rally its mindless legions in the midterms and in '12. But this Republican knee-jerk inflexibility provides an incredible opportunity to you, Sir, and an incredible license.
On April 6th 2003, I was approached by two drunken young men at a baseball game. One of them started to ask for an autograph. The other stopped him by shouting "Screw him, he's a liberal." This program had been on the air for three weeks. It had to that point consisted entirely of brief introductions to correspondents in Iraq or to military analysts. There had been no criticism, no political analysis, no commentary. I had not covered news full-time for more than four years. I could not fathom on what factual basis, I was being called a "liberal," let alone being sworn at for being such.
Only later did it dawn on me that it didn't matter why, and it didn't matter that they were doing it — it only mattered that if I was going to be mindlessly criticized for anything, the reaction would be identical whether I did nothing that engendered it, or stood for something that engendered it.
Mr. President, they are calling you a socialist, a communist, a Marxist. You could be further to the right than Reagan - and this health care bill, as Howard Dean put it here last night, this bailout for the insurance industry, sure invites the comparison. And they will still call you names.
Sir, if they are going to call you a socialist no matter what you do, you have been given full unfettered freedom to do what you know is just. The bill may be the ultimate political manifesto, or it may be the most delicate of compromises. The firestorm will be the same. So why not give the haters, as the cliché goes, something to cry about.
But concomitant with that is the reaction from Democrats and Independents. You have riven them, Sir. Any bill will engender criticism but this bill costs you the left — and anybody who now has to pony up 17 percent of his family's income to buy this equivalent of Medical Mobster Protection Money.
Some speaking for you, Sir, have called the public option a fetish. They may be right. But to stay with this uncomfortable language, this bill is less fetish, more bondage. Nothing short of your re-election and the re-election of dozens of Democrats in the house and senate, hinges in large part on this bill. Make it palatable or make it go away or make yourself ready — not merely for a horrifying campaign in 2012 — but for the distinct possibility also of a primary challenge.
Befitting the season, Sir, these are not the shadows of the things that will be, but the shadows of the things that may be. But at this point, Mr. President, only you can make certain of that. There is only one redemption possible. The mandate in this bill under which we are required to buy insurance must be stripped out.
The bill now is little more than a legally mandated delivery of the middle class (and those whose dreams of joining it slip ever further away) into a kind of Chicago stockyards of insurance. Make enough money to take care of yourself and your family and you must buy insurance — on the insurers terms — or face a fine.
This provision must go. It is, above all else, immoral and a betrayal of the people who elected you, Sir. You must now announce that you will veto any bill lacking an option or buy-in, but containing a mandate.
And Sen. Reid, put the public option back in, or the Medicare Buy-In, or both. Or single-payer. Let Lieberman and Ben Nelson and Baucus and the Republicans vote their lack-of-conscience and preclude 60 "ayes." Let them commit political suicide instead of you.
Let Mr. Lieberman kill the bill — then turn to his Republican friends only to find out they hate him more than the Democrats do. Let him stagger off the public stage, to go work for the insurance industry. As if he is not doing that now.
Then, Mr. Reid, take every worthwhile provision of health care reform you legally can, and pass it via reconciliation, when ever and how ever you can — and by the way, a Medicare Buy-In can be legally passed via reconciliation. The Senate bill with the mandate must be defeated, if not in the Senate, then in the House.
Health care reform that benefits the industry at the cost of the people is intolerable and there are no moral constructs in which it can be supported. And if still the bill and this heinous mandate become law there is yet further reaction required. I call on all those whose conscience urges them to fight, to use the only weapon that will be left to us if this bill becomes law. We must not buy federally mandated insurance if this cheesy counterfeit of reform is all we can buy.
No single payer? No sale. No public option? No sale. No Medicare buy-in? No sale. I am one of the self-insured, albeit by choice. And I hereby pledge that I will not buy this perversion of health care reform. Pass this at your peril, Senators, and sign it at yours, Mr. President. I will not buy this insurance. Brand me a lawbreaker if you choose. Fine me if you will. Jail me if you must.
But if the Medicare Buy-In goes, but the Mandate stays, the people who fought so hard and so sincerely to bring sanity to this system must kill this mutated version of their dream, because those elected by us to act for us have forgotten what must be the golden rule of health care reform. It is the same one to which physicians are bound, by oath: First do no harm.
As world leaders arrive in Copenhagen for the crunch phase of the climate conference, the focus turns to what kind of deal is likely to emerge. Pre-eminent climate scientist Prof James Hansen of the Nasa Goddard Institute has already given the entire process the kiss of death. Any political deal cobbled together is, he believes, likely to be so profoundly flawed as to lock humanity on to “a disaster track.”
Hansen voiced publicly what environmental scientists and campaigners have murmured all year. A political fudge that ducks science is the likeliest outcome at Copenhagen. Earlier this week, for instance, EU fisheries ministers agreed a deal that pleased our Government and our fishermen. However, it does little to arrest the progressive annihilation of a common resource that, like our atmosphere, is owned by no one – and so exploited by all.
The world faces a dangerous convergence of environmental and resource crises, not all directly climate related. All, however, are increasingly difficult to resolve in a rapidly warming world. Taken together, they are not amenable to a business-as-usual political response. Here, in no particular order, are six:
1. Biodiversity: “The world is currently undergoing a very rapid loss of biodiversity comparable with the great mass extinction events that have previously occurred only five or six times in the Earth’s history,” says the World Wildlife Fund. It has tracked an astonishing 30 per cent decline in the Earth’s biodiversity between 1970-2003. Hunting, habitat destruction, deforestation, pollution and the spread of agriculture are leading to as many as 1,000 entire species going extinct every week – that’s a species every 10 minutes. The economic cost of destroying biodiversity is also immense. A 2008 EU study estimated the cost of forest loss alone is running at $2-$5 trillion (€1.3-€3.4 trillion) annually.
2. Ocean acidification: The evidence of the effects of increased CO2 levels on the world’s oceans is unequivocal. Surface ocean acidity has increased by 30 per cent since 1800, with half this increase occurring in just the last three decades. The rate of change in oceanic pH levels is around 100 times faster than any observed natural rate. Increasing acidity is impeding the ability of plankton called foraminifera to produce shells. These creatures form the base of the entire marine food system. The world’s vital reef systems are also in peril from acidification.
3. Population pressure: Broadcaster Sir David Attenborough has witnessed how the natural world is being crushed by humanity. “I’ve never seen a problem that wouldn’t be easier to solve with fewer people, or harder – and ultimately impossible – with more,” he says. The Earth must provide for around 80 million more people than this time last year. It took us almost 10,000 years to reach a billion people. We now add that many every 12 years.
4. Peak oil: This month, the International Energy Agency formally predicted global peak oil by 2020. Today, the world burns the equivalent of 82 million barrels of oil every day. Projected growth in energy demand will see this rise to almost 100 million barrels within a decade, but by then, output from the oilfields currently in production will have plummeted to barely a third of that. A massive energy gap is looming, and with discoveries having peaked in the mid-1960s, we are approaching the bottom of the cheap oil barrel. Non-conventional oil, renewables and nuclear will be nowhere near capable of bridging this energy gap in time. The oil shocks of the coming decade will be intense.
5. Peak food: the global food system is predicated on lashings of cheap oil, fresh water, soil and natural gas. All four are in decline. The food riots of 2008 were an early warning of a global system in crisis. In the US, it is estimated every calorie of food energy requires 10 calories of fossil fuel energy. More food production is now being channelled into fattening animals. Meat is a tasty but entirely inefficient way to use finite food resources. Meanwhile, the UN predicts the collapse of all global commercial marine fisheries by 2048, depriving up to two billion people of food.
6. Peak water: During the 20th century, human water usage increased nine-fold, with irrigation (for agriculture) alone using two-thirds of this total. With almost all major glaciers retreating, many river systems are at risk. Groundwater in aquifers is another key fresh water source. Over-extraction, mostly for agriculture, has caused their levels worldwide to plummet. Pollution, especially from fertiliser overuse, adds to the loss of fresh water. The Environmental Protection Agency yesterday reported only 17 per cent of Ireland’s rivers are of “high ecological status”.
The 19th century naturalist John Muir famously wrote that “when one tugs at a single thing in nature, he finds it attached to the rest of the world”. As the Copenhagen conference draws to a close, the words of a contemporary of Muir, politician and orator Robert Ingersoll, have never seemed more apt: “In nature there are neither rewards nor punishments; there are only consequences.”
"Don't make the perfect the enemy of the better," says the President and congressional insiders when confronted with the sorry spectacle of a health-care bill whose scope and ambition continue to shrink, and whose long-term costs to typical Americans continue to grow. They're right, of course. But by the same logic, neither the White House nor congressional Democrats will be able to celebrate the emerging legislation as a "major overhaul" or "fundamental reform." At best, it's likely to be a small overhaul containing incremental reforms.
Real reform has moved from a Medicare-like public option open to all, to a public option open to 6 million without employer coverage (still in the House bill), to a public option open only to those same people in states that opt for it, or about 4 million (the original Harry Reid version of the Senate bill), to no public option but expanded Medicare (the Senate compromise) to no expanded Medicare at all (the deal with Joe "I love all the attention" Lieberman).
In other words, the private insurers are winning and the public is losing.
Pharmaceutical companies are winning as well. Yesterday, proposals to allow US pharmacies and wholesalers to import prescription drugs from Europe and Canada were defeated in the Senate. No matter that American consumers pay up to 55% more for their prescription drugs than Canadians, or that the measure would have saved the government at least $19.4 billion over ten years (according to the Congressional Budget Office). Big Pharma's argument that the safety of such drugs couldn't be assured was belied by the defeat of another proposed amendment that would have allowed drug imports only if their safety and economic benefits were certified by the Secretary of Health and Human Service.
Doctors and hospitals are also winning. More and more of the putative "savings" from health care reform ("savings" should really be understood as projected costs that are under the wildly-escalating costs projected without such savings) rely on contraints on future Medicare spending. But the details of such constraints keep vanishing, while ever more of the messy work of coming up with them is assigned to a so-called Medical Advisory Board that will supposedly recommend them later on. What no one wants to admit is that Congress never actually implements promised Medicare savings. When crunch time comes, it caves in to the AMA and the AARP. In a few years time, when boomers swell the ranks of seniors, and the political power of the AMA and AARP together rival that of Wall Street, the cave-ins will be boggling.
Meanwhile, opponents of abortion are winning, too. Ben Nelson (a Nebraska Democrat who enjoys being the spoiler even as much as Joe Lieberman) is holding out for even more restrictions.
The political reality right now is that Harry Reid will do anything to get sixty votes -- which means Lieberman, Nelson, and even Olympia Snowe are able to use extortion on behalf of Big Insurance, Big Pharma, the AMA, and abortion foes. The President, meanwhile, remains eerily above the fray. Having closed deals months ago with Big Insurance, Big Pharma, and the AMA -- in order to get their support in exchange for guaranteeing them big profits -- his only apparent interest is keeping the deals going while helping Reid corral sixty votes for just about anything. (The deals have caused some awkwardness for the White House. Drug importation would have cost Big Pharma far more than the $80 billion price tag it agreed to, forcing the White House to oppose importation even though the President had publicly supported it during his presidential campaign last year, and even though John McCain supported yesterday's amendment.)
Is the effort worth still worth it? Yes, but just. Private insurers will have to take anyone, regardless of preconditions. And some 30 million people who don't now have health insurance will get it. But because Big Insurance, Big Pharma, and the AMA will come out way ahead, the legislation will cost taxpayers and premium-payers far more than it would otherwise. Cost controls are inadequate; in fact, they barely exist. If Wall Street's top brass are "fat cats," as the President described them last weekend, the top brass of Big Insurance, Big Pharma, and the AMA are even fatter. While they don't earn as much, they're squeezing the public for even more.
We are slouching toward health-care reform that's better than nothing but far worse than we had imagined it would be. Even those of us who have seen legislative sausage-making up close, even those of us who never make the perfect the enemy of the better, are concerned. That two or three senators are able to extort as much as they have is appalling. Why hasn't Reid forced much of the bill into reconciliation, requiring only 51 votes? Why has the President been so cowed? In all likelihood, the White House and the Dems eventually will get a bill they can call "reform," but they will not be able to say with straight faces that the reform is a significant improvement over the terrible system we already have.
Officially, Detroit's unemployment rate is just under 30 percent. But the city's mayor and local leaders are suggesting a far more disturbing figure -- the actual jobless rate, they say, is closer to 50 percent.
As many have noted, the Bureau of Labor Statistics, which culls federal unemployment data, does not account for all of the jobless in its widely-quoted national unemployment figures. Among those omitted: part-time workers who are looking for full-time jobs and frustrated job seekers who abandon their job search altogether.
(For some context, the official national unemployment rate is 10 percent, but the "underemployment rate" is 17.2 percent.)
Detroit city officials argue that, when workers who are underemployed are added to the calculation, the number of city residents who are out of work is close to one in every two.
The Detroit News reports:
"The Bureau of Labor Statistics estimated that for the year that ended in September, Michigan's official unemployment rate was 12.6 percent. Using the broadest definition of unemployment, the state unemployment rate was 20.9 percent, or 66 percent higher than the official rate. Since Detroit's official rate for October was 27 percent, that broader rate pushes the city's rate to as high as 44.8 percent."
The alarming numbers coming from Detroit officials are supported by another set of recent data from the Bureau of Labor Statistics, which stand in harsh contrast to the more positive national employment picture. The jobless rate in the Detroit MSA (metropolitan statistical area) increased 7.3 percentage points in just one year, the highest increase for any metro area in the nation.
Statewide, Michigan still leads the nation in official unemployment, with a rate of 15.1 percent. Homelessness, especially among those becoming homeless for the first time, is expected to jump at least 10 percent this year.
The employment situation, as The Detroit News suggests, is actually significantly worse for men in Detroit:
For a variety or reasons -- access to transportation, job availability and work skills -- an estimated 48.5 percent of male Detroiters ages 20 to 64 didn't have a job in 2008, according to census figures. For Michigan, it's 26.6 percent; for the United States, 21.7 percent.
The paper's calculations back up Mayor Dave Bing's assertion at last week's White House Jobs Summit that Detroit's unemployment rate was "probably close to 50 percent." Bing was in Washington to press the federal government to channel more money directly into city clean-up projects and infrastructure development. "We've got projects that are shovel-ready," he pleaded.
OK, so Joe Lieberman has put the kibosh on real health care reform. But granted that, there's some truth in the case that the Dems are making: that even as it now stands, the health care bill is considerably better than nothing at all even though it's a huge disappointment to many who hoped for something better. Let's not let the perfect be the enemy of the good etc. etc.
Well, here's a strategy for eventual success. Go ahead and pass into law the watered down health care bill as it now stands, thanks to Joe Lieberman's party of one - namely, hisself. Then revisit a stripped down follow-on bill that would only deal with some added financial aspects under reconciliation next year. In other words build on success, and this bill with all its defects could conceivably be sold as a political feather in the cap for Obama regardless of the fact that it leaves much to be desired. So politically this bill can be seen as a huge success, something that couldn't be accomplished by Teddy Roosevelt, Harry Truman, John Kennedy or Lyndon Johnson.
Reconciliation which only requires a majority of 51 not a filibuster proof 60 votes in the Senate, as Dems have reminded us, can only be used for financial aspects of a bill and not for insurance reform. OK, then, next year put forth a bill containing only the financial aspects that Joe Lieberman has been successful in stripping from the present bill. The insurance reform will already be in place. Then add on the stripped out financial aspects of the public option and/or the Medicare buy-in, building on the success of the already passed health care bill as presently constituted. And it's important, once this bill is safely passed, to do the follow-on bill under reconciliation before the elections of 2010 while the Congress as presently constituted is still in place. That way if the elections of 2010 result in Democratic losses in the House and Senate, as they most surely will, a reconciliation bill next year will still have large Democratic majorities and will not be dependent on the whims and the likes of Joe Lieberman, Ben Nelson, Blanche Lincoln and Mary Landrieu, Democrats in name only or DINOs. And the filibuster will have been defeated. Democracy in the form of the majority vote will have prevailed!
The more I think about it, the more I like this solution. Rather than going back to the drawing board now and abandoning all the work done so far, a prospect that the Republicans would dearly love because it would be so self-defeating for the Democrats, consolidate and solidify the work done so far, giving Obamna a political victory, and then come back next year and stick it in Lieberman's ear. Hey Joe (Bronx cheer) we don't need you any more, you sorry sack of scheist! Nor you Ben Nelson, nor you Blanche Lincoln, nor you Mary Landrieu. A follow on bill which stripped away the power of this crew and made them irrelevant to the process would be their just desserts. In the process wouldn't it be loverly if Lieberman was stripped of his committee chairmanship in the same bill.
Health care redux. Health care revisited. That's the ticket. The Dems have nothing to lose having already obtained a political victory with the present health care bill. This two pronged approach, securing insurance reform first and public option/Medicare buy-in second is a strategy that could be used for other things as well. But a thought just occurred to me. In honor of Joe Lieberman who is not only on record but on video all over youtube as having supported the Medicare buy-in just three months ago, we could call the Medicare buy-in follow-on bill the Joe Lieberman Medicare Buy-in bill. Wouldn't that scorch his smug ass? That sniveling snot nose would be hoisted on his own petard, something he righteously deserves. Well, Joe you would have to go back to your insurance corporation obermeisters with your tail between your legs, having been knocked down a peg or two, with egg on your face and a stick up your ass. Oh, it would be a glorious spectacle seeing the Lieberman brought low, getting his just desserts.
Revenge is sweet especially when it comes to the snot nosed, whiny voiced Lieberman. From King of the Hill to Lord of the Flies in one swell foop! Stripped of his committe chairmanship, Joe Lieberman will go down in infamy as the ex-Dem who, having basked in the light of his power to bring health care reform down to his puny level, will then be reduced to powerlessness. Then you'll have nothing, Joe, and nobody will care anything about you any more, having sold out your own constituents in the great state of Connecticut who won't be tricked into voting for you again. Your corporate overlords will probably abandon you also now that you will no longer be of any use to them.
So long, Joe, it's been ... how do I say it ... so-so?
WASHINGTON -- The surgery complete, the great doctor finally stepped back from the operating table and paused for a moment of self-congratulation.
"We've got a great health insurance reform bill here," Sen. Joe Lieberman, I-Conn., told reporters solemnly Tuesday morning, after he had forced Democrats to jerk the bill to the right yet again to buy his vote on President Obama's top domestic policy priority. "And the danger was that some of my colleagues, I think, were just trying to load it up with too much. And what happens then is that you run the risk of losing everything." Lieberman doesn't use a scalpel when he's operating on legislation, of course; he goes for brute force instead. So what if he'd bludgeoned the patient half to death in the course of the procedure?
By the time Lieberman was done with his intervention into the healthcare reform process Tuesday, two things were clear. One, it only looked like the Democrats controlled the Senate by a filibuster-proof margin. The party that's actually running the show is an obscure, regional outfit known as the Connecticut for Lieberman Party. And the guy who was elected on its ticket -- a hack who worked his way up the ranks by showing undying devotion to the party's cause, i.e., advancing the political career of its founder -- isn't really on board for all the hope and change of 2008.
And two, the end stages of the debate over healthcare reform will essentially be a mad scramble by progressives to mitigate the damage Lieberman and conservative Democrats can do to the legislation before it passes -- and to try to convince their wavering allies that the bill is still worth supporting. What started out as a sweeping effort to change the entire healthcare system looks likely to wind up as a moderately ambitious attempt to regulate the insurance market (in exchange for a promise of millions of new customers).
"We're not going to get all that we want," said Sen. Jay Rockefeller, D-W.Va., a leading advocate for the now-defunct public option. "But we're going to get so much more than we have." Rockefeller and most of his colleagues were singing from the same rueful hymnal. "Look at 31 million Americans who will have health insurance as a result of this bill," said Sen. Dick Durbin, D-Ill., the second-ranking Senate Democrat. "How do you say to them, 'Sorry, you can't have health insurance, we think this bill could be better'? ... I'm not happy with it, I don't like the way this has happened. But at this point in time, look at where we are."
If that sounds a little like rationalization, it probably is: Chances are progressives won't be able to shift the bill back to the left much, even in a conference between the House and Senate. Keeping Lieberman on board is simply the price of doing business. Trying to pass parts of the legislation through budget reconciliation, which many liberals see as a magic bullet, might just be a fantasy. The rules of that process would mean most of the insurance reforms in the legislation get dropped. So that means Democrats need 60 votes -- and that puts Lieberman, and Nebraska Sen. Ben Nelson, another conservative who has refused to endorse the bill yet, in a position to exact a heavy price.
Which they've certainly done. They managed to kill not just the notion of a public health insurance option, but also the compromise Democrats had hatched just a week ago, which would have expanded Medicare a bit instead of launching a government-run insurance plan. That's not the end of the damage. To get the bill through the Senate, Democrats will probably have to fund its $900 billion price tag by taxing expensive health benefits packages, instead of with a new tax on the rich, as the House prefers. Some sort of language restricting access to abortion under the new, government-supervised insurance exchanges will be thrown in, as a sop to win Nelson's anti-choice favor. Access to Medicaid, the government insurance program for the poor, won't be expanded as much as many progressives want. And yes, the bill would dole out $50 million to groups teaching abstinence-only sex education plans, which helped buy the support of Sen. Blanche Lincoln, D-Ark.
All that seems like too much to swallow for many liberals. "Honestly, the best thing to do right now is kill the Senate bill," former Democratic National Committee Chairman Howard Dean told Vermont Public Radio. "The Senate has somehow managed to turn the House's silk purse into a sow's ear," said Rep. Raúl Grijalva, D-Ariz., co-chairman of the House Progressive Caucus. "Without a public option and no hope of expanding Medicare coverage, this bill is not worth supporting," said Stephanie Taylor, the co-founder of the Progressive Change Campaign Committee. Liberal blogs erupted with anger, and Taylor's group released a video targeting White House chief of staff Rahm Emanuel, who many on the left think has manipulated the process in order to crush progressives' dreams.
But President Obama and Senate Democrats tried, even in the face of all that outrage, to remind their erstwhile allies of what else the bill does. "The final bill won't include everything that everybody wants," Obama said after meeting with Senate Democrats -- including Lieberman -- at the White House. "No bill can do that. But what I told my former colleagues today is that we simply cannot allow differences over individual elements of this plan to prevent us from meeting our responsibility to solve a long-standing and urgent problem for the American people. They are waiting for us to act."
The legislation would, after all, bar insurance companies from refusing coverage to people who are already sick. It would give federal subsidies to people who can't afford insurance coverage on their own. It would set up a regulated marketplace to shop for policies. It would set up some experiments in changing the way medical care is paid for, to reward outcomes instead of procedures, which could save the country billions of dollars down the line. It would at least alleviate, if not completely fix, the status quo, which left untouched would lead to continuing, rapid increases in premium costs for the middle class -- and continue the insurance industry's capricious practice of denying care just when it's most needed. Yes, the insurance companies would get millions of new customers, thanks to a new federal requirement that all individuals buy insurance. But is the point of reform to punish the insurers, or is it to expand access to what every other industrialized nation considers a basic human right?
It wasn't hard to see where the White House came down on that question. "These aren't small changes," Obama said. "These are big changes. They represent the most significant reform of our healthcare system since the passage of Medicare. They will save money. They will save families money; they will save businesses money; and they will save government money. And they're going to save lives." Joe Lieberman may have won the battle Tuesday. But the White House is determined to win the war.
A common explanation for the U.S. presence in Afghanistan is Washington's interest in Central Asian fuel sources -- natural gas in Turkmenistan and Uzbekistan and petroleum in Kazakhstan. The idea of Zalmay Khalilzad and others was to bring a gas pipeline down through Afghanistan and Pakistan to energy-hungry India. Turkmenistan became independent of Moscow in 1991, making the project plausible. For this reason some on the political right in the U.S. actually supported the Taliban as a force for law and order.
So the U.S. is bogged down in an Afghanistan quagmire, and China is running off with the big regional prize.
On Tuesday, radical guerrillas deployed a bomb to kill eight persons and wound 40 in an upscale area of Kabul where foreigners, including Indian aid workers, live -- in another sign of the deterioration of security in Afghanistan's capital. It is obvious how long a gas pipeline would last under these circumstances.
I'm not sure very many politicians in Washington were ever really so interested in the gas pipeline. For someone like then Secretary of Defense Donald Rumsfeld, making Afghanistan a U.S. base may have aimed at surrounding and weakening Russia and keeping it from reemerging as a peer (a la the attempted push of NATO into places like Georgia).
Some U.S. leaders, however, were pushing for it. In recent years a Turkmenistan pipeline was seen as a way of forestalling India from breaking the embargo on Iran. And I remember that in fall 2001, when congressmen asked Colin Powell how the Afghanistan war would be paid for, he replied that the region is rich in resources. Since Afghanistan is not, he must have been speaking of places like Turkmenistan.
In any case, the Chinese just demonstrated that you don't need war to get resources. Avoid costly adventurism and grow your economy like hell, and it all falls into your lap.
Four hundred forty-two days after Lehman Brothers declared bankruptcy, the U.S. House of Representatives has finally passed financial reform legislation.
The long delay between the onset of the financial crisis -- a direct consequence of a quarter century of deregulation -- and the passage of Wall Street Reform and Consumer Protection Act of 2009 did not well serve the cause of reform.
As time passed, public anger over the Wall Street bailout became more diffuse. And Wall Street relentlessly continued its campaign to undermine meaningful efforts at reform.
The bill passed Friday contains some positive measures, but it does not do nearly enough to rein in the Wall Street banksters. It is wholly incommensurate with the devastation Wall Street has wreaked across the land and planet.
Most importantly on the positive side, the bill creates a powerful financial consumer watchdog agency. Had the Consumer Financial Protection Agency existed during the go-go years earlier this decade, it could have prevented millions of consumers from being ripped off -- and protected the banks from themselves. The financial crisis would have been significantly less severe.
The bill also contains some modestly beneficial provisions establishing liability for credit ratings firms, regulating derivatives and imposing leverage limits on the largest institutions. And it includes an important measure for a comprehensive public auditing of the Federal Reserve.
But there are huge holes in the legislation. Wall Street successfully maneuvered to keep most of the important big picture reforms off the table:
The bill does very little to address industry structure. Wall Street and the big banks engaged in reckless betting under the belief that they were too big to fail -- that they were protected by a federal backstop. The biggest banks are now even bigger than they were before the crisis. The solution to the too-big-to-fail problem is to break up the big banks, so that the system can absorb their failure. The bill fails to impose limits on bank size.
Many news accounts misleadingly highlight that the bill gives regulators the authority to break up big financial institutions. The bill does confer that authority -- but only upon a finding of a "grave threat to the financial stability or economy of the United States." It is extraordinarily unlikely that regulators will ever reach such a finding.
A related problem is the intermixing of commercial and investment banking in single firms and resultant excessive risk taking by federal insurance-backed commercial banks. The bill fails to separate commercial and investment banking, as the Glass Steagall law did before repeal in 1999, or otherwise address this problem.
Financial derivatives and other exotic instruments -- labeled by Warren Buffett as weapons of financial mass destruction -- fueled the crisis. The bill contains very modest regulations over financial derivatives but leaves more than a quarter of the market free from regulation and contains loopholes to enable another substantial chunk to escape regulatory control. Even for derivatives covered by the bill, the new rules are very limited. The bill does not establish a regulated exchange for derivatives trades. It does not ban financial instruments that do little more than enable high-stakes gambling. And it does not require the purveyors of derivative instruments to prove that the benefits of their new products outweigh the costs and risks to the financial system.
The bill also fails to tackle seriously the problem of executive and high-level pay. Wall Street mocks the Congress -- and the American people -- by preparing to pay tens of billions of dollars in bonuses, in the shadow of a vote on financial regulation and while the financial sector continues to benefit from trillions of dollars of public supports.
At a minimum, there should be binding rules mandating that bonus pay be tied to long-term performance. For 2009, there should also be a windfall tax imposed on Wall Street profits and bonuses.
It's no mystery why this legislation is not stronger. Wall Street spent $5 billion in political investments in the decade before the financial crisis to obtain deregulation and nonenforcement of existing rules. Despite Wall Street having crashed the economy, nothing has changed on Capitol Hill. Wall Street continues to invest heavily in politics and wield enormous influence. More than 900 former federal employees, including 70 former members of Congress, are working as lobbyists for the financial services sector this year. Wall Street has spent more than $40 million on campaign contributions since November 2008.
But Wall Street was not wholly able to get its way. Leading Wall Street lobbyists announced at the outset of the legislative process that they intended to "kill" the Consumer Financial Protection Agency, and they failed. Now, as the bill heads to the Senate, there is still an opportunity for a populist upsurge to demand far-reaching controls on Wall Street.
It comes down to one worthless SOB like Joe Lieberman to defy the majority of the US Senate and the whole nation by essentially vetoing health care reform. I can't find words to express how deplorable and disgusting this asshole is. He ought to be hounded out of the Senate. Instead, up to now at least, Obama has been kissing his ass. Oh we need Joe Lieberman. Let's not piss off Joe Lieberman. BS. Joe Lieberman sucks, pure and simple. What arrogance to take upon himself the role of singlehandedly defying the will of 59 senators and unilaterally deciding that he will kill a major provision of health insurance reform after his colleagues have been working on it for almost a year and after Harry Reid dropped the public option in favor of the Medicare buy-in, a provision that Joe Lieberman supported just three months ago. As far as Harry knew, Lieberman still supported it and that is precisely why, after Lieberman said he wouldn't support the public option, Harry Reid substituted the Medicare buy-in for it.
The Medicare buy-in was all about giving Joe Lieberman precisely what he wanted - only he decides at the last minute that he doesn't want it after all. And to think he was Al Gore's running mate! A pox on Joe Lieberman's house! He ought to be roundly and soundly condemned by everyone in the nation for the hypocrite he is. During his vice-presidential run and just three months ago he was advocating the very thing that now he has relegated to the dustbin of history. Here's the asshole supporting the Medicare buy-in in his own words three months ago!
Joe Lieberman ought to be roundly condemned in the Senate and have his committee chairmanship stripped away. He ought to be ridden out of town on a rail and tarred and feathered for the hypocrite he is. To think Obama and the other Democratic Senators have been kissing his ass thinking that they would need his vote when it came down to it. Instead, Lieberman voted with the health insurance lobby to kill health care reform when the majority of the constituents in his own state are for it. I can't express how disgusted I am with this pretentious, hypocritical asshole. If he had the least amount of integrity, he would have made his intention to kill health care reform clear from the start. Instead, this weasle lets everyone believe that, when it came down to it, Joe Lieberman would be there for the Democratic caucus and the American people. He ought to be kicked out of the Democratic caucus and totally ostracized. I'd hate to think what would have happened to him if he had done this to Lyndon Johnson. You would have heard a slew of expletives then!
Joe Lieberman's wife, Hadassah, has been a "senior counsellor" for Hill and Knowlton, a firm that lobbies on behalf of the healthcare industry so I'm sure they both look forward to a nice pay day from the insurance industry which is headquartered in their own state of Connecticut. The state is home to 72 insurance headquarters including Aetna, CIGNA, the Hartford and many others.
At the time she joined the public relations and lobbying conglomerate in the spring of 2005, she expressed the touching hope that she would somehow be able to help those in need. "I have had a lifelong commitment to helping people gain better healthcare," she said in a press release. "I am excited about the opportunity to work with the talented team at Hill & Knowlton to counsel a terrific stable of clients toward that same goal." Less than a year later, having pocketed $77,000 in salary, she quit without explanation -- just as her husband was facing a tough primary that he would eventually lose. Throughout the campaign, Hadassah Lieberman, her husband and their spokespersons explicitly refused to discuss her professional activities, except to note that she had not been required to register as a lobbyist.
But her stint at Hill & Knowlton was merely one episode in a professional lifetime devoted to the corporate health sector. For most of the past three decades, Hadassah Lieberman has been employed by either pharmaceutical companies or the lobbying firms that represent them -- starting with nearly a decade in the "public affairs department" at Hoffman-LaRoche from 1972-81, followed by stints at Pfizer, where she spent four years as "director of policy, planning and communications," and APCO Associates, a major lobbying firm where she served as a "senior associate" in its large healthcare division before retiring in 1998.
She went back to work when she joined H&K, an outfit that became notorious for its billion-dollar defense of the tobacco industry. Not long after her contract began, Sen. Lieberman introduced legislation vastly extending patent protection for pharmaceutical companies -- notably including GlaxoSmithKline, a top client of his wife's firm.
Joe Lieberman, you disgusting POS, GO TO HELL and your wife too!!
Hospital cleaners play a vital role, the study found
Hospital cleaners are worth more to society than bankers, a study suggests.
The research, carried out by think tank the New Economics Foundation, says hospital cleaners create £10 of value for every £1 they are paid.
It claims bankers are a drain on the country because of the damage they caused to the global economy.
They reportedly destroy £7 of value for every £1 they earn. Meanwhile, senior advertising executives are said to "create stress".
The study says they are responsible for campaigns which create dissatisfaction and misery, and encourage over-consumption.
Waste workers promote recycling, researchers note
And tax accountants damage the country by devising schemes to cut the amount of money available to the government, the research suggests.
By contrast, child minders and waste recyclers are also doing jobs that create net wealth to the country.
The Foundation has used a new form of job evaluation to calculate the total contribution various jobs make to society, including for the first time the impact on communities and environment.
Eilis Lawlor, spokeswoman for the New Economics Foundation, said: "Pay levels often don't reflect the true value that is being created. As a society, we need a pay structure which rewards those jobs that create most societal benefit rather than those that generate profits at the expense of society and the environment".
Tax accountants are said to destroy £47 in value for every £1 generated
She said the aim of the research was not to target individuals in highly paid jobs, or suggest people in low paid jobs should earn more.
"The point we are making is more fundamental - that there should be a relationship between what we are paid and the value our work generates for society. We've found a way to calculate that," she said.
A total of six different jobs were analysed to assess their overall value. These are the study's main findings:
The elite banker
"Rather than being wealth creators bankers are being handsomely rewarded for bringing the global financial system to the brink of collapse
Paid between £500,000 and £80m a year, leading bankers destroy £7 of value for every pound they generate".
Childcare workers
"Both for families and society as a whole, looking after children could not be more important. As well as providing a valuable service for families, they release earnings potential by allowing parents to continue working. For every pound they are paid they generate up to £9.50 worth of benefits to society."
Hospital cleaners
"Play a vital role in the workings of healthcare facilities. They not only clean hospitals and maintain hygiene standards but also contribute to wider health outcomes. For every pound paid, over £10 in social value is created."
Advertising executives
The industry "encourages high spending and indebtedness. It can create insatiable aspirations, fuelling feelings of dissatisfaction, inadequacy and stress. For a salary of between £50,000 and £12m top advertising executives destroy £11 of value for every pound in value they generate".
Tax accountants
"Every pound that a tax accountant saves a client is a pound which otherwise would have gone to HM Revenue. For a salary of between £75,000 and £200,000, tax accountants destroy £47 in value, for every pound they generate."
Waste recycling workers
"Do a range of different jobs that relate to processing and preventing waste and promoting recycling. Carbon emissions are significantly reduced. There is also a value in reusing goods. For every pound of value spent on wages, £12 of value is generated for society."
The research also makes a variety of policy recommendations to align pay more closely with the value of work.
These include establishing a high pay commission, building social and environmental value into prices, and introducing more progressive taxation.
When I first began writing for The Times, I was naïve about many things. But my biggest misconception was this: I actually believed that influential people could be moved by evidence, that they would change their views if events completely refuted their beliefs.
And to be fair, it does happen now and then. I’ve been highly critical of Alan Greenspan over the years (since long before it was fashionable), but give the former Fed chairman credit: he has admitted that he was wrong about the ability of financial markets to police themselves.
But he’s a rare case. Just how rare was demonstrated by what happened last Friday in the House of Representatives, when — with the meltdown caused by a runaway financial system still fresh in our minds, and the mass unemployment that meltdown caused still very much in evidence — every single Republican and 27 Democrats voted against a quite modest effort to rein in Wall Street excesses.
Let’s recall how we got into our current mess.
America emerged from the Great Depression with a tightly regulated banking system. The regulations worked: the nation was spared major financial crises for almost four decades after World War II. But as the memory of the Depression faded, bankers began to chafe at the restrictions they faced. And politicians, increasingly under the influence of free-market ideology, showed a growing willingness to give bankers what they wanted.
The first big wave of deregulation took place under Ronald Reagan — and quickly led to disaster, in the form of the savings-and-loan crisis of the 1980s. Taxpayers ended up paying more than 2 percent of G.D.P., the equivalent of around $300 billion today, to clean up the mess.
But the proponents of deregulation were undaunted, and in the decade leading up to the current crisis politicians in both parties bought into the notion that New Deal-era restrictions on bankers were nothing but pointless red tape. In a memorable 2003 incident, top bank regulators staged a photo-op in which they used garden shears and a chainsaw to cut up stacks of paper representing regulations.
And the bankers — liberated both by legislation that removed traditional restrictions and by the hands-off attitude of regulators who didn’t believe in regulation — responded by dramatically loosening lending standards. The result was a credit boom and a monstrous real estate bubble, followed by the worst economic slump since the Great Depression. Ironically, the effort to contain the crisis required government intervention on a much larger scale than would have been needed to prevent the crisis in the first place: government rescues of troubled institutions, large-scale lending by the Federal Reserve to the private sector, and so on.
Given this history, you might have expected the emergence of a national consensus in favor of restoring more-effective financial regulation, so as to avoid a repeat performance. But you would have been wrong.
Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.
Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don’t fit the narrative.
In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won’t let it face up to the reality of what happened to the U.S. economy.
So it’s up to the Democrats — and more specifically, since the House has passed its bill, it’s up to “centrist” Democrats in the Senate. Are they willing to learn something from the disaster that has overtaken the U.S. economy, and get behind financial reform?
Let’s hope so. For one thing is clear: if politicians refuse to learn from the history of the recent financial crisis, they will condemn all of us to repeat it.
Copyright 2009 The New York Times Company
Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.
I must confess that I’ve found it increasingly difficult to follow the intricacies of the health care reform debate in the US over the past two months as it’s moved through Congress. (I think I’m for putting Medicare compensation rates in the hands of an independent agency rather than Congress, but since Henry Waxman is against it and the Blue Dogs are for it I feel I may be missing something; in any case it’s clear that without being based in Washington I can’t follow the details closely enough.) But I still think it worthwhile to keep posting occasionally based on my personal experience of European health insurance and health care systems.
The system the US is going to end up with if the current House bill becomes law will look something like the system in the Netherlands: a combination of private insurance plans sometimes linked to one’s employer, a public plan, a mandate that everyone must purchase health insurance, and a mix of public and private health care providers (doctors and hospitals). When I moved from the US to the Netherlands in 1999, I switched from an American HMO to a Dutch health insurance plan. In both cases I was buying insurance as an individual on the private market. My premiums dropped 75%, from somewhere over $2000 a year to a little over $500. During the course of the following year and half, I visited a private-practice primary care doctor three times, which was about three times as often as I visited one in the US. On each occasion I saw the doctor the day I called with no appointment. The cost was somewhere between $25 and $50 per visit, I can’t remember the exact figure. The doctor’s office was a spiffy one located in a gorgeous canal house in the center of Amsterdam.
Since leaving the Netherlands to live in first Togo and now Vietnam, our family health insurance plan has come through private insurers paid by my wife’s jobs. Our current plan is with a company headquartered in the Netherlands and, because my wife is Dutch and works for a Dutch employer, functions within that framework. It initially gave us global coverage everywhere in the world except for two countries where health care costs are so far out of line with the rest of the planet that they demanded a higher premium for coverage there. Those two countries were Switzerland and the United States, which also happen to have the most deregulated and private-sector-oriented health insurance systems in the developed world.
Because we spend several weeks each year in the US and didn’t want to run the risk of bankrupting ourselves in case of an accident, we eventually kicked in the higher premiums to get coverage in the US as well. Our coverage includes full reimbursement for all doctors’ visits and prescription medicine, major dental, the occasional pair of eyeglasses, and various other routine expenses that actually entail rather perverse incentives and perhaps shouldn’t be included in insurance plans if one wants to hold costs down. While on this plan, we have had two children in Dutch hospitals. We have had one very serious medical intervention in which my then 9-month-old son had to be medevac’d from Hanoi to Bangkok for a life-threatening respiratory infection. We have had one other hospital visit and minor operation for him, and various other significant expenses. The cost of our all-embracing gold-plated global coverage is in the range of 6000 euro per year for our family of four — currently about 70% of the average cost of family health insurance in the US. That’s at the historically high level of 1.4 dollars to the euro. If the dollar regains any strength against the euro, the plan will look even cheaper.
At some level, I’m not sure why I care whether the US finally gets a sane health insurance system. If people who live in the US want to waste 5% of their annual income on a full employment program for health insurance company call center workers and pharmaceuticals executives’ golf course memberships, that’s their prerogative. But my passport says “United States of America”, I vote in the State of New York, and to make a long story short, it’s my country and I love it. The insanity of the US’s health insurance system, and the inability of the US’s political system to get a handle on problems caused by corporate interests that run against the public welfare, is wrecking the government’s budget and rendering the country unable to act on issues of global urgency. The US needs that money to fight climate change and to fund development aid in Afghanistan. And more broadly, I don’t like it when people from other countries consider my country stupid, and are right about it. It feels much better having a president who people from other countries respect. It’d be nice if on this issue too, when people from Vietnam asked how health insurance works in the US, I could explain it to them as a positive model, not as a warning of how not to do things.
What you can see from the American chaotic approach to something so fundamental as Health Care for ALL Citizens is how Dogmatic Idealogy constantly substitutes for Common Sense, particularly around issues affecting the general welfare.
For example, the Dutch have a universal, standard health care system required by law for 16.5 million citizens/residents. i.e., from the lowest income-scaled educated worker/non-worker to the highest income-scaled executive. Upon hearing such things, American dogmatism and ultra right mass media pundits start the demonizing cliche chorus of "Invasion of Rights of Free Choice," "Loss of Freedom," "Government Control of Your Life," "Socialism even Communism" , etc., etc. We do this with a Blind Eye as to how the Dutch (or any advanced European or Asian nation) democratically came to their universal health care system which, in Holland, is in essence a Regulated Competition Private system. Furthermore, we ignore the democratic fact that the system provides ample choice for those who want a more enriched health care insurance coverage at their option and insurer's option and premium price discretion which also does not result in exhorbitant pricing .... and the system democratically, humanely, equitably, and prudently provides help to those who cannot afford it. Furthermore, very importantly, we ignore the democratic fact that by having the universal system Standard for Reasonably Comprehensive Coverage Benefits with health supplier cost and premiums Totally Transparent, costs and premiums are under strong market pressures to be affordable. All medical coding is identical for the same medical procedure or drug prescription no matter where it is performed in Holland. This adds to the market competitive pressures.
But the single most important advantage of the Dutch and other advanced European country approaches to health care insurance WE IGNORE is that the universality requirement for an inclusive Standard Basic Benefit Coverage for large numbers of people brings down the costs for EVERYONE without compromising quality care!
Americans are so self-assured in their own blind, provincial narrowness and orchestrated propaganda that they don't make an honest effort to learn what others do better. As a consultant to European firms and resident here for many, many years, I can say forthright that my European experiences have taught me that Europeans are generally never too proud or arrogant to admit mistakes, to pick the best of American ideas or ideas of others .... which they invariably adapt, correct, and improve upon for application within their own societies. The Chinese, at an immense unimaginable speed, are teaching us and the world this very same lesson of benefiting from the learning curves of others in many areas.
When are we going to get smart and set politics aside where necessary in the interests of all our citizens by exploiting/balancing the best of our governing common sense, creativity, compromise, and constructive cooperation (without resorting to do-little mediocrity) for the benefit of our nation as a whole? With no psychotic, drummed up fears we are compromising our dynamic, can do qualities that formerly made us a leading nation admired by so many. Until we come up with good answers to this basic question in a world of increasingly scarce resources, slower growth, global interconnectedness, we will slide further down the road of social-economic-cultural decadence .... as Europe and Asia adapt, stabilize and progress in the equitable interests of all their citizens. The answer to this question not only requires daring leadership but also objective, informed participation in the debate by all citizens. Such an ongoing debate to be productive must see that egocentric preconceptions and comfortable demogoguery are drastically temporized .... or better still, thrown out the window!
The German philosopher George Willem Friedrich Hegel (1770/1831) said it perfectly 200 years ago:
"What experience and history teach us is this -- that people and governments never have learned anything from history, or acted upon any lessons they might have drawn from it."
This applies to our internal human to human interactions as well as to our external government to government interactions!
You are right on! I think the main dilemma in the US is that the citizens have abandoned "we-ness" for "I-ness." The US citizenry has no common identity as a nation. Instead, we worship individual initiative, not common purpose initiative. This has led to the perverse situation where large corporate interests and a few super wealthy families actually control the political process and also the propaganda machine which, far from being an Orwellian government enterprise, is actually in private hands. Government has been demonized for the last 30 years especially since Reagan uttered the words: "The nine most feared words in the English language are 'I'm from the government and I'm here to help.'"
It's hard to have a common purpose or agreement on anything if government is not seen in a positive light and government has abdicated its role of providing a common purpose to private interests. In the interplay between privatism and socialism, privatization and socialization, the US has come down squarely behind glorifying the private and excoriating the public. This has resulted in the masses of Americans being exploited by the small minority of super wealthy Americans and economic inequality reaching astronomical proportions.
The nations of the world which have governments that are capable of setting a national agenda with a common purpose are surging ahead of the US due to their ability to unify their people in working towards a common goal. The US is divided into factions working at cross purposes. There is no common agreed upon agenda with the result that private interests work totally in their own self interest and not in the interests of the nation as a whole. The only unity of purpose in the US is in the military sphere where an ever expanding military-industrial complex consumes all the funds that might have gone to provide public services. But the very idea that the government should provide public services or benefits to all its citizens has been demonized. Instead the idea which has been successfully sold is that government should lower taxes instead.
So lower taxes, enormous military expenditures paid for with borrowed money, an emphasis on short term profits even at the expense of systemic economic meltdowns and a government incapable of any other common purpose than seeking military dominance is leading to a shriveled public sector, financial stagnation for the middle class and increasing dependence on the rest of the world to loan us money. As private interests continue to work at cross purposes and continue to buy off politicians whose work increasingly is to cater to them instead of working for the common good, the US government becomes a captive of and is being cannibalized by its own large corporations and super wealthy families rather than by any foreign government(s). As noted conservative Grover Norquist said: "The goal is to get government so small you can drown it in the bathtub." At that point America will just be a number of private interests each persuing their own private agendas. There will be no common interest or unifying concept formerly know as "America."
After interminable buck passing, wrangling, temporizing, false starting, back tracking and hee hawing, what is happening now in the Senate shows an absolute failure of democracy at work. After working on a health care reform bill for the last year, the Senate abandons the public option at the last minute in favor of a "compromise" that all senators can agree upon. Harry Reid announces with great fanfare that now the Senate has reached agreement and by giving up the public option, which had been watered down to the point of being almost unrecognizable anyway, he now has reached an accord that 60 members of the Senate can vote yea upon.
But wait a minute. No sooner than Harry Reid announces this Grand Accord than some senators start backing away from it. The Grand Accord turns out to be nothing less than the latest sack of shit, a mess of pottage that, after working for a year, reduces the whole democratic process to a ridiculous parody of itself, a laughable enterprise ending up with absolutely nothing but 2000 pages of worthless mish mash. The not-so-fast and let's-start-over Republicans couldn't be more pleased. But it's not only the Republicans. It's conservative Democrats who are just as likely to throw health reform under the bus, glad to do the bidding of their corporate overmeisters. If this doesn't make a mockery of the supposedly democratic political process, I don't know what does.
Obama has been reduced to tinkering at the edges of an economy in the toilet and a political process that has sucked all the oxygen out of the congressional chambers. Senatorial sclerosis has resulted in a process in which you need 60 not a majority of 51 votes to pass anything. Rather than challenge the undemocraticness of this phenomenon, Democrats have just gone along with it. That's the primary problem in a nutshell. Now Harry Reid has to pander to the likes of Joe Lieberman, Mary Landrieu and Ben Nelson. Senators from small staes with large insurance lobbies are in the position of torpedoing and vetoing the whole process regardless of what the majority wants to do. The whole ridiculous process is taking up too much time and energy preventing Obama from moving on with the next phase of his agenda which is another accident waiting to happen - job creation. Republicans are all too happy to have the health reform process continue indefinitely, then putting the kibosh on it at the last minute, much like Lucy removing the football just beforer Charlie Brown goes to kick it.
Republicans are gleefull! Now more than ever they want health care reform to fail just to make Obama look defeated and ridiculous. After spending so much time and political capital on it, they want to hand him a nail biting, enervating defeat just to make him look impotent and ineffective. They could care less about what's best for the American people. ALL THEY WANT TO DO IS TO HUMILIATE AND DEFEAT OBAMA, THE PUBLIC BE DAMNED! If Harry Reid and Nancy Pelosi can't bring this ridiculous process to a successful conclusion without further ado, they are making the American democratic process look ridiculous. No other mature country would stand for such a spectacle. Gridlock, dithering, going round in circles, being lashed and whipped from pillar to post, this is the definition of limbo if not hell itself. Dante could make this a separate chapter of The Inferno. All the good intentions of most of the Democrats in the House and Senate are being made a mockery of by Republicans and a few conservative Democratwits and Joe Lieberman. We, the American people, shouldn't stand for it. Obama shouldn't stand for it. They need to get 'er done and get 'er done now! No more interminable haggling and obstructionism. They are giving democracy a bad name and demonstrating its ineffectiveness to the rest of the world!
Here's what they need to do: use the budget reconciliation process which requires only 51 votes to pass the parts of the bill that can be passed this way. Overturn the filibuster rule. Pass the rest of the bill after strengthening it to the max. Move on.
As my grandmother used to say, "I was born on a weekend but not last weekend." The latest insult to Americans hungry for a bit of healthcare justice for all comes from the news that the Senate health bill now allows insurance companies to place annual limits on payments for some catastrophic illnesses, like cancer.
Surprise, surprise, surprise. Another day. Another lie uncovered in the process. Another piece of this reform bill that favors the for-profit health insurance industry.
Associated Press' Ricardo Alonso-Zaldivar writes, "Health care loophole would allow coverage limits": "A loophole in the Senate health care bill would let insurers place annual dollar limits on medical care for people struggling with costly illnesses such as cancer, prompting a rebuke from patient advocates.
"The legislation that originally passed the Senate health committee last summer would have banned such limits, but a tweak to that provision weakened it in the bill now moving toward a Senate vote.
"As currently written, the Senate Democratic health care bill would permit insurance companies to place annual limits on the dollar value of medical care, as long as those limits are not 'unreasonable.' The bill does not define what level of limits would be allowable, delegating that task to administration officials."
Read that passage again folks. The bill was "tweaked." No official or legal amendment required when the insurance industry needs a tweak they damn well get a tweak. And this is quite a tweak.
Just hours ago, I continued to read reports that claimed our healthcare reformers in Congress were doing away with pre-existing condition clauses and also ending lifetime caps on coverage. Some patients and families were thrilled with this change alone, and most especially those people struggling with serious illnesses.
This summer, a friend of mine in Colorado was asked to introduce President Obama at a forum in Grand Junction. Nathan Wilkes was selected to do so because he could speak clearly and passionately about his family's troubles keeping enough insurance coverage for his son, Thomas, who has a serious blood disorder. My friend has been and is a supporter of Medicare for all, single-payer type reform, but this opportunity to introduce the President and weigh in about eliminating lifetime benefit caps was a powerful pull. Nathan gave an intelligent and emotional intro for the President, and he was later invited to Washington to watch Obama's address to Congress on healthcare reform.
Well, the joke’s on you Nathan and on a lot of others who trusted the details of reform being sold by members of Congress and President Obama. Only this is not at all funny. Families like the Wilkes family will go broke trying to keep kids like Thomas alive. And kids like Thomas will die without the care they need.
Nathan responded to the latest news out of the Senate with the clarity of a father who has fought hard to support reform that would make our system better not more problematic, “Now it looks like such plans will have a floor before they start covering (beyond the deductible/out-of-pocket) and a ceiling at which they stop (no "unreasonable annual limits"). That is the sweet spot for profiteering health insurers. They avoid paying the common and the catastrophic, while soaking up premiums from all of us.”
The death panels allowed by this legislation are those set up and protected by the insurance industry – and tweaked into law by Congress and the President.
You simply cannot do this sort of tweaking and not have people notice. Did you think the Wilkes family wouldn't notice when the annual cap is reached for Thomas and they have to start paying out of pocket or stop treatment?
This process has been fraught with disclosures of the misleading marketing of various details in the reform legislation from all involved. Who can the American public trust on this? Anybody?
As we sit on the verge of 2010, we citizens have some more political work of our own to do. We need to do some tweaking in the streets and at the polls. Because we surely are not going to get healthcare as a basic human right from this Congress and this administration. Neither the Republicans nor the Democrats seem to get it.
When we do the math for ourselves and when we watch you all play a deadly game of push-me, pull-me with our healthcare reform legislation, we know for certain you are only maneuvering for political advantage while we are out here fighting for our lives, our health and for our financial security. You didn't hear us loudly enough at the polls in 2008, apparently.
Let me get this straight. You will force us to buy private insurance products that will not guarantee approval of treatment or payment for treatment. You will tax our insurance benefits if our employers offer those deemed as "Cadillac coverage" regardless of whether or not we make less than $250,000 a year. You cannot guarantee that employers will keep our current insurance plans and provider networks or that insurance companies will keep benefits and providers the same - therefore we cannot keep what we've got if we like it. You've crumbled on the notion of any real public option for coverage at all much less a "robust" option -- whatever that squishy word ever meant. And now insurance companies will decide when we've had enough treatment for serious illness each year.
Wow. Sweet tweaking indeed for the profit-takers -- and without so much as a debate or airing on the floor of the Senate. It seems only the things that would benefit real people require an appropriate following of legal process in Congress and full debate -- amendments like Senator Bernie Sanders' single-payer amendment aimed at strengthening real reform haven't even gotten a hearing. We're still fighting for that.
Please don't insult us any more by selling this legislation as healthcare reform or even health insurance reform. This seems more and more like health industry protection and less like anything at all to do with providing what President Obama declared as a basic human right during the campaign. Even he said the only way to get to full coverage is a single-payer plan. And that's a tweak too far from profit protection, it seems.
Hang on, fellow citizens. This healthcare mess is about to get messier and make you wonder if anyone told us the truth at all. Then we'll have some serious tweaking of our own to do in 2010 and 2012. We will not forget this.
I sure hope that there is a full and speedy recovery to the massive recession we are all now suffering under.
But, I'll be honest. I doubt that there will be. Most of the upticks following our latest national downturns have been dismal enough that economists have had to invent a new term for them. The phrase is "jobless recovery", and the implications are as ugly as they sound.
What it means is that GDP rises, but life remains crappy for real people with real jobs. If they're lucky enough to have one, that is.
Where does the money from rising GDP go, then? Funny you should ask. It goes exactly where it's been going for the last three decades. Not to the public, and not to raising the living standards of ordinary folks. But, rather, to the über-class.
My guess is that "The Great Recession" - as some are calling the current disaster (presumably to avoid using the "D" word) - will be followed by what history will record as the "The Tepid and Rather Jobless, Thank You Very Much, Recovery". If that.
And, more importantly, my guess is that this will be the latest and greatest click yet of what is the most massive ratcheting project of the last three decades, perhaps the most wholesale redistribution of wealth in human history.
Consider the numbers...
The ratio of executive salary to the average paycheck during the mid-twentieth century was about thirty to one. In the last decade it has ranged from three hundred to over five hundred to one.
The richest four hundred Americans were worth an average of about $13 million each in the middle of the century, using today's dollars. Now they average over $260 million each.
The top taxpayers in America now pay the same proportion of their income in taxes as those earning less than $75,000 per year. Those taxes on the wealthy went from being more than half of their income fifty years ago to about a sixth today.
In the past three decades, the income of the richest Americans quadrupled, while the income of the lowest ninety percent actually fell. Today, the median wage is lower than it was in the 1970s, even though productivity has grown by nearly fifty percent.
All told, from the 1930s through the 1970s, America produced the biggest and richest middle class in human history. But then many of us made the mistake - as I did - of assuming that this had become, based on a solid society compact, the default status quo for the foreseeable future.
In fact, it was instead an aberration. And it was contingent.
It was an aberration because we are now speedily returning (if we haven't already arrived) to the days prior to the New Deal, when the rich had everything and the middle class was small and insecure. And it was contingent because the good old days depended on a combination of elite satiation and/or a strong progressive defense of an equitable economic order.
But both have disappeared in the Age of Reagan. Today, there are seemingly no bounds conceivable to what the already astonishingly wealthy will do in order to further magnify their holdings. No suffering of the struggling middle class - let alone impoverished brown people inconveniently sitting on top of desirable resources somewhere abroad - represents the slightest impediment to a greed which long ago ceased to have any passing relationship with utility. We are simply talking here about sociopaths - people who cannot fathom a reason to alter their predatory behavior under any circumstances, even when the lives of millions are at stake, and even when another pile of millions of dollars in their investment portfolio does nothing to improve their condition because they are already so rich to begin with.
Okay, well, that's not exactly a new thing. Unless, say, you're a geologist and you happen to think that human beings are a new thing. But what is new is that the other possible protection against the gutting of the middle and working classes - that is, the existence of a progressive bulwark against greed - has all but disappeared. At the level of elites, this has transpired because the Democratic Party has simply joined the GOP in becoming a corporate tool, serving the interests of Goldman Sachs and a few others, with near complete disregard for the public interest. At the mass level, Americans have embraced their own petite bourgeois form of greed, and have become stupider and Republicaner with each passing year.
The result is that the aberration is ending, albeit slowly and somewhat fitfully, and the country is returning to its natural state, where outrageous disparities of wealth are common. So common, in fact, that no serious political movement exists to redress ths injustice. So common that the wealthy go to churches where Jesus the proto-socialist who talked about camels and needles has been morphed instead into the First Coming of Ayn Rand. So common that a guy can run for president incessantly repeating the word "change", invoking the greatest moral struggles of history, and come to office during a time of multiple crises for a deeply stressed American public, only to turn out to be just another Wall Street hack, busy diverting the remaining chunks of the commonwealth to the plutocracy.
It's not exactly a mystery how we ended up here, although there's more obfuscation on this question than there are hypocritical sinners at a GOP family values convention. And that's a lot. Every American government since Reagan has essentially been consumed with the task of denuding the middle and working classes of their paltry share of the national pie, in order to deliver those dollars into the hands of wealthy political benefactors. This includes Democrats as well as Precambrians. Indeed, probably the president least tenacious in pursuing this project, of the five we've been blessed with these last three decades, was George H. W. Bush. That really tells you something, right there, doesn't it?
Yes, it's true that even a mixed economy system practicing both Keynesianist and monetarist countercyclical macro-economic strategies will experience oscillations in growth. (Although, remember when, a decade ago, people were speculating about whether the business cycle had forever been tamed? Remember when people thought Alan Greenspan walked on water? Seems like a lot longer than ten years ago now...) But at the same time, government policies on economic and political issues really do matter, especially when it comes to cutting up the pie.
If you adopt policies that decimates unions, you're gonna wind up decimating unions. Never particularly high in America, and peaking historically at about thirty-five percent, the share of workers who are organized in this country is now down to about seven percent. Guess what sort of effect that is going to have on worker negotiating power over wages, benefits, safety, general treatment and respect?
If you adopt trade policies that undermine labor at every turn, you're gonna wind up with a lot of unemployed Americans competing against low-wage Mexican, Chinese and Indian workers overseas. This wasn't exactly hard to see coming as NAFTA and the WTO were being negotiated, two of the biggest priorities of the Clinton administration. It was even less hard to see when Republicans created tax incentives for companies to ship jobs outside America, and when John Kerry was either too stupid or too fully coopted to turn that slam-dunk issue into the Willie Horton of the 2004 presidential campaign.
If you adopt policies that slash taxes on the already wealthy, guess what that's going to do to the distribution of wealth in the country? Guess what impact it will have on the federal government's revenues and debt? Guess who will be stuck, in the future, paying for the loans to finance the share of revenue that the wealthy are excused from today? Plus interest, of course.
And guess what that will mean for social needs spending as the government grows so deeply indebted that its creditors force it to make cuts in outlays, like some banana republic getting the whip hand from the IMF? Will those cuts be on the military, or on healthcare? Wars or food stamps? We know they won't be on service to the debt. That interest we now pay on the $12 trillion or so we've already borrowed is currently one of the biggest single items in the federal budget, and cannot be defaulted upon without producing disaster. We already know from the Clinton administration the answer to these questions about spending priorities. Even in the flushest of times, this supposed Democratic president slashed welfare spending.
So how shocking is it, when you add it all together, to find that anti-American labor, trade, tax and spending policies turn out to hurt the middle and working classes?!?! The only thing really shocking about the entire affair is that voters have been swallowing whole that baited hook for thirty years now. And that they will likely do so again, in 2010 and 2012, as they perceive the failure of Democratic Party ‘liberalism', and knee-jerk their way into a reign of repeated GOP pillaging, after just rejecting it in deserved disgust only a year or two ago.
Of course, new Republican governments won't be any more successful at generating public prosperity than Democrats, not least because neither has much interest in doing so, except perhaps incidentally. What the Grand Old Pricks might be able to pull off, however, is some more raghead slaughtering, fag bashing, or terror traumatizing in order to keep the hoi polloi focused on anything and everything but the emptying of their wallets.
Ultimately, the game will end, and we'll wind up looking like the British following the Second World War - a great empire bled dry, all its people running around with bad teeth. Right now, Republicans and Democrats are essentially competing, as in a game of musical chairs, to avoid being the party in charge when the fictions of our economic condition can absolutely no longer be sustained. Kinda like what you see in California, the once great state. Looks to me like the Democrats lost. Now there's a shocker, huh? - the party of Obambi getting reamed by the party of Tom "The Hammer" DeLay.
Politicians continue to play the same old cards about resurrecting the same old prosperity. No one will say the truth about how the US standard of living will probably never be restored for the bottom ninety-eight percent, while elites now have the kind of wealth that European kings once had to conquer entire continents in order to acquire. In fact, none of our courageous politicians will even tell you that you can't afford to have tax cuts and full governmental services at the same time. They're too busy borrowing it all from their kids and ours. Well, really just ours. Anyhow, isn't responsibility kinda boring? Isn't that whole honesty thing so twentieth century?
The simple and sad fact is that greedy elites will always use their power to acquire unseemly quantities of wealth, unless one or both of two conditions obtain. The first is that they are socialized to be slightly less greedy, slightly more patriotic, and remotely compassionate about those who have nothing. They may also recognize, as Henry Ford did, that their long-term prospects are rather heavily tied to those of all the rest of us.
The other option is that we, acting through genuinely progressive politics, distribute the cash more fairly. Even if we do this, the wealthy will still have ridiculous amounts of absolute wealth, of course, and truly sickening amounts of relative wealth. It's just that the rest of us will be a bit less impoverished. Perhaps all full-time workers would be guaranteed a living wage, for example. What a concept, eh? Perhaps if we throw all-in with our subversive little Bolshevist revolution, we'll go so far as to even join the rest of the world's developed countries in supplying our people with healthcare. Radical, man.
We got part of the way to a more just society during the middle chunk of the twentieth century, though it was a minor miracle that we did. And it probably really required the Great Depression to do it, along with the twin legislative forces of nature more commonly known as Franklin Roosevelt and Lyndon Johnson.
We may actually get there again.
Though if I had to guess, I suspect instead that the next stop is Palinism.
Whether we'd have the brains subsequently to ever transcend that disaster for a moderately equitable American economic order is a real question.
Whether we even could at that point is quite another.
David Michael Green is a professor of political science at HofstraUniversity in New York. He is delighted to receive readers' reactions to his articles (mailto:[email protected]), but regrets that time constraints do not always allow him to respond. More of his work can be found at his website, www.regressiveantidote.net.
The public option is dead, killed by a handful of senators from small states who are mostly bought off by Big Insurance and Big Pharma or intimidated by these industries' deep pockets and power to run political ads against them. Some might say it's no great loss at this point because the Senate bill Harry Reid came up with contained a public option available only to 4 million people, which would have been far too small to exert any competitive pressure on private insurers anyway.
To provide political cover to senators who want to tell their constituents that the intent behind a robust public option lives on, the emerging Senate bill makes Medicare available to younger folk (age 55), and lets people who aren't covered by their employers buy in to a system that's similar to the plan that federal employees now have, where the federal government's Office of Personnel Management selects from among private insurers.
But we still end up with a system that's based on private insurers that have no incentive whatsoever to control their costs or the costs of pharmaceutical companies and medical providers. If you think the federal employee benefit plan is an answer to this, think again. Its premiums increased nearly 9 percent this year. And if you think an expanded Medicare is the answer, you're smoking medical marijuana. The Senate bill allows an independent commission to hold back Medicare costs only if Medicare spending is rising faster than total health spending. So if health spending is soaring because private insurers have no incentive to control it, we're all out of luck. Medicare explodes as well.
A system based on private insurers won't control costs because private insurers barely compete against each other. According to data from the American Medical Association, only a handful of insurers dominate most states. In 9 states, 2 insurance companies control 85 percent or more of the market. In Arkansas, home to Senator Blanche Lincoln, who doesn't dare cross Big Insurance, the Blue Cross plan controls almost 70 percent of the market; most of the rest is United Healthcare. These data, by the way, are from 2005 and 2006. Since then, private insurers have been consolidating like mad across the country. At this rate by 2014, when the new health bill kicks in and 30 million more Americans buy health insurance, Big Insurance will be really Big.
In light of all this, you'd think the insurance industry would be subject to the antitrust laws, so the Justice Department and the Federal Trade Commission could prevent it from combining into one or two national behemoths that suck every health dollar out of our pockets (as well as the pockets of companies paying part of the cost of their employees' health insurance). But no. Remarkably, the Senate bill still keeps Big Insurance safe from competition by preserving its privileged exemption from the antitrust laws.
From the start, opponents of the public option have wanted to portray it as big government preying upon the market, and private insurers as the embodiment of the market. But it's just the reverse. Private insurers are exempt from competition. As a result, they are becoming ever more powerful. And it's not just their economic power that's worrying. It's also their political power, as we've learned over the last ten months. Economic and political power is a potent combination. Without some mechanism forcing private insurers to compete, we're going to end up with a national health care system that's controlled by a handful of very large corporations accountable neither to American voters nor to the market.
The chemical building blocks that make plastics so versatile are the same components that might harm people and the environment. Greener solutions, however, are becoming available
From cell phones and computers to bicycle helmets and hospital IV bags, plastic has molded society in many ways that make life both easier and safer. But the synthetic material also has left harmful imprints on the environment and perhaps human health, according to a new compilation of articles authored by scientists from around the world.
More than 60 scientists contributed to the new report, which aims to present the first comprehensive review of the impact of plastics on the environment and human health, and offer possible solutions.
“One of the most ubiquitous and long-lasting recent changes to the surface of our planet is the accumulation and fragmentation of plastics,” wrote David Barnes, a lead author and researcher for the British Antarctic Survey. The report was published this month in a theme issue of Philosophical Transactions of The Royal Society B, a scientific journal.
As the scrutiny of the environmental toll of plastic increases, so has its usage, the scientists reported.
Since its mass production began in the 1940s, plastic’s wide range of unique properties has propelled it to an essential status in society. Next year, more than 300 million tons will be produced worldwide. The amount of plastic manufactured in the first ten years of this century will approach the total produced in the entire last century, according to the report.
“Plastics are very long-lived products that could potentially have service over decades, and yet our main use of these lightweight, inexpensive materials are as single-use items that will go to the garbage dump within a year, where they’ll persist for centuries,” Richard Thompson, lead editor of the report, said in an interview.
Evidence is mounting that the chemical building blocks that make plastics so versatile are the same components that might harm people and the environment. And its production and disposal contribute to an array of environmental problems, too. For example:
• Chemicals added to plastics are absorbed by human bodies. Some of these compounds have been found to alter hormones or have other potential human health effects.
• Plastic debris, laced with chemicals and often ingested by marine animals, can injure or poison wildlife.
• Plastic buried deep in landfills can leach harmful chemicals that spread into groundwater.
• Around 4 percent of world oil production is used as a feedstock to make plastics, and a similar amount is consumed as energy in the process.
People are exposed to chemicals from plastic multiple times per day through the air, dust, water, food and use of consumer products.
For example, phthalates are used as plasticizers in the manufacture of vinyl flooring and wall coverings, food packaging and medical devices. Eight out of every ten babies, and nearly all adults, have measurable levels of phthalates in their bodies.
In addition, bisphenol A (BPA), found in polycarbonate bottles and the linings of food and beverage cans, can leach into food and drinks. The U.S. Centers for Disease Control and Prevention reported that 93 percent of people had detectable levels of BPA in their urine. The report noted that the high exposure of premature infants in neonatal intensive care units to both BPA and phthalates is of “great concern.”
Polybrominated diphenyl ethers or PBDEs, which are flame-retardants added to polyurethane foam furniture cushions, mattresses, carpet pads and automobile seats, also are widespread. The plastics industry maintains that its products are safe after decades of testing. “Every additive that we use is very carefully evaluated, not just by the industry, but also independently by government agencies to look at all the materials we use in plastics,” said Mike Neal, a consumer and environmental affairs specialist at PlasticsEurope, an industry trade association, and a co-author of the report.
But some of these chemicals have been shown to affect reproduction and development in animal studies, according to the report. Some studies also have linked these chemicals with adverse effects in people, including reproductive abnormalities.
“We have animal literature, which shows direct links between exposure and adverse health outcomes, the limited human studies, and the fact that 90 to 100 percent of the population has measurable levels of these compounds in their bodies,” said John Meeker, an assistant professor of environmental health sciences at the University of Michigan School of Public Health and a lead author. “You take the whole picture and it does raise concerns, but more research is needed.”
Shanna Swan, director of the University of Rochester's Center for Reproductive Epidemiology, conducted studies that found an association between pregnant women’s exposure to phthalates and altered genital development in their baby boys.
Also, people with the highest exposure to BPA have an increased rate of heart disease and diabetes, according to one recent study. Animal tests studies of PBDEs have revealed the potential for damaging the developing brain and the reproductive system. Yet the effects on human health remain largely unknown. To help shed more light on the issue, the report recommends more sophisticated human studies.
“It’s tough to have a smoking gun with a single animal study or observational human study,” Meeker said. “We need to have different types of studies indicating a consistent pattern to more definitively determine health effects resulting from these chemicals.”
But testing humans for endocrine disruptors can be tricky because phthalates and BPA pass through the body so quickly. In addition, tests for each chemical cost about $100 a pop. Deciding which chemicals to test and at what dose is also an issue. To date, most studies have addressed single chemicals, and there are limited data on the interactions between chemicals. Compounding the problem is the discovery that endocrine disrupting chemicals may have effects at doses lower than those used in the Environmental Protection Agency’s standard toxicity tests.
Swan said the old model of testing should be thrown out and that the new goal should be tests that mimic real human exposure.
“It’s a very complicated picture and the laboratory model of just taking one isolated chemical and giving it to a genetically pure strain of rats in clean cages, clean air and clean water and seeing what it does just doesn’t come close to mimicking the human situation,” she said.
Many researchers recommend studies that test pregnant women as well as their children. The National Children’s Study will do just that by examining environmental influences on more than 100,000 children across the United States, following them from before birth until age 21.
“There are so many questions now with these chemicals in relation to cardiovascular disease, age and puberty, obesity, developmental disorders,” said Swan. “We don’t know what’s causing it, only hints, so the beauty of the National Children’s Study is that we can look at all of these endpoints and it should reveal a lot of answers.”
Plastic’s problems extend beyond the human body, according to the report. More than one-third of all plastic is disposable packaging like bottles and bags, many of which end up littering the environment.
Although the image of a bird tangled in a plastic necklace is by now burned into the public’s eye, ingestion of plastic fragments is much more common. Once inside, plastic can pack a one-two punch by both clogging an animal’s stomach and poisoning it with chemicals that have concentrated in the plastic. Some chemicals are then transferred to the food web when animals eat them.
More than 180 species of animals have been documented to ingest plastic debris, including birds, fish, turtles and marine mammals, according to the report.
Unfortunately, collecting data on plasticizers’ impacts on wildlife suffers the same pitfalls as studying human health. Still, there is already evidence that chemicals associated plastics might harm wildlife.
For example, laboratory studies have shown that phthalates and BPA affect reproduction in all studied animal groups and impair development in crustaceans and amphibians.
“While there is clear evidence that these chemicals have adverse effects at environmentally relevant concentrations in laboratory studies, there is a need for further research to establish population-level effects in the natural environment,” according to the report.
Charles Tyler, a professor at the University of Exeter School of Biosciences in the United Kingdom and a senior author of the report, said that scientists have shown that “some of these chemical compounds are getting into the environment and are in some environments at concentrations where they can produce biological effects in a range of wildlife species.” Traveling from coast to coast, plastic can endure for thousands of years due to the reduced UV exposure and lower temperatures of aquatic habitats.
Barnes demonstrates plastic’s mobility with his account of a plastic sighting during an expedition to the Amundsen Sea where he took biological samples, the first there ever. The Amundsen, located in the Pacific Sector of Antarctica, is the only sea in Antarctica with no research station on its coast and the nearest urban center thousands of miles away.
“Even for us, getting in was a challenge because there’s so much ice and it’s so difficult to get there,” said Barnes. “But even in that remotest of environments, there was plastic floating on the sea surface.
Plastic also serves as a floating transportation device that allows alien species to hitchhike to unfamiliar parts of the world, threatening biodiversity. Global warming further aids the process by making previously inhospitable areas like the Arctic livable for invasive species, which can be detrimental to local species.
For example, plastic items are commonly colonized by barnacles, tubeworms and algae. Along the shore of Adelaide Island, west of the Antarctic Peninsula, ten species of invertebrates were found attached to plastic strapping that was littering the ice.
“Raising the temperature just one degree can make the difference between getting to someplace and actually surviving once you get there,” said Barnes.
Plastic is so resilient that even burying it deep within the earth doesn’t keep it from impacting the environment. Currently it accounts for approximately 10 percent of generated waste, most of which is landfilled. But, as the report notes, placing plastics in a landfill may simply be storing a problem for the future, as plastic’s chemicals often sink into nearby land, contaminating groundwater.
In addition, production of plastics is a major user of fossil fuels. Eight percent of world oil production goes to manufacturing plastics.
As plastics grow in volume at a rate of about nine percent each year, the authors emphasize that tackling its problems means addressing its sustainability.
One solution is to treat plastic as a reusable material rather than as a disposable commodity that’s quickly discarded. That means making plastic more easily recyclable from the get-go by using fewer materials in the manufacturing process and increasing recycling facility availability. “The recycling message is simple; both industry and society need to regard end-of-life items, including plastics, as raw materials rather than waste,” stated the report.
Increasing the availability of biodegradable plastic, which can be made from renewable materials from plants such as corn and soy, is another option.
“Biodegradable plastics have the potential to solve a number of waste-management issues, especially for disposable packaging that cannot be easily separated from organic waste in catering or from agricultural applications,” according to the report.
However, currently production capacity for biodegradable plastics worldwide is around only 350,000 tons, representing less than 0.2 percent of petrochemical-based plastic. In addition, “most of these materials are unlikely to degrade quickly in natural habitats, and there is concern that degradable, oil-based polymers could merely disintegrate into small pieces that are not in themselves any more degradable than conventional plastic,” stated the report.
To help mitigate the potentially harmful chemicals in plastics, the authors recommend that more studies be conducted on the biological mechanisms that may be affected by plastic additives and in particular, low-dose chronic exposures.
In the meantime, the report recommends reducing the use of these chemicals and developing safer alternatives, a strategy known as green chemistry.
“Had this approach been in place 50 years ago it would probably have prevented the development of chemicals that are recognized as likely endocrine disruptors,” the report said.
The report also suggests that plastic waste can be reduced by using labels that allow consumers to choose packaging based on a lifecycle analysis that includes all components of the manufacturing process. For example, if the product were made of mostly recycled materials, used minimal packaging and could be easily recycled, it would get a green dot. If the product were made of excessive packaging that used a lot of virgin materials, it would get a red dot.
“Personally, I feel that’s the way to do it, rather than a knee jerk reaction where legislation says we can’t use certain types of plastic,” said Thompson. “Having that information will help drive the system because I think consumers are keen to make the right choice when provided with all the information.”
Neal of PlasticsEurope said consumers, not the industry, are responsible for making sure plastics don’t wind up littering the environment.
“In my view the responsibility is fairly and squarely on the consumer,” he said. “People tend to pick on plastics because perhaps it’s the most visible form of litter and because it’s lightweight so it can move around a bit, but actually it’s only a small part of the litter problem.”
The authors said that if plastics are made and used responsibly, they can help solve some environmental problems.
For example, one study found that packaging beverages in PET (a type of plastic) versus glass or metal reduces energy use by 52 percent and greenhouse gas emissions by 55 percent. And, solar water heaters containing plastics can provide up to two-thirds of a household’s annual hot water demand, reducing energy consumption.
Plastics, if used wisely, “have the potential to reduce mankind’s footprint on the Earth,” Thompson said.
This article originally ran at Environmental Health News, a news source published by Environmental Health Sciences, a nonprofit media company.
So now it becomes clear that the Obama administration's strategy for economic recovery from the Great Recession as carried out by Treasury Secretary Tim Geithner has averted a total calamity for the financial system but has done little or nothing in terms of stemming foreclosures or unemployment because there was no trickle down (as if we should even be using this metaphor subsequent to the immense failure of Reaganomics). Also it has not prevented the proliferation of small bank failures and lack of available credit for small businesses. So for the average person the Great Recession is still here. There was not a complete meltdown of the financial system, but that's of little solace to the average Joe.
Obama would like to use the remaining TARP money to do something about the job situation, but the reality is he's not in a position to start a Civilian Conservation Corp or a Works Project Administration as FDR did. So the question is why could FDR take these measures during the Great Depression to put people back to work, but Obama can't during the Great Recession even though there are more people unemployed now in absolute numbers than there were during the Great Depression. The main reason is that the political climate is different now than it was then. FDR had majorities of Congress solidly behind him. Even though the majority in both the House and Senate are Democrats, they are not solidly behind Obama. For one thing there are a lot of conservative Democrats; there is no overriding party loyalty among Democrats. For another, unlike in FDR's day, 60 votes, instead of 51, seem to be necessary to pass anything in the Senate. This situation is patently ridiculous, but the Democrats don't seem to want to do anything about it. They just accept it. Republicans will filibuster anything that has less than 60 votes in the Senate. It's just a fait accompli because the Republicans do have party loyalty and vote solidly along party lines. And they are determined to defeat Obama at all costs, even at the cost of screwing the American people.
By fictionalizing every situation, the Republicans feed red meat to their following who would rather be presented with a good story than a real situation. The Democrats are put in the position of confronting a fictionalized situation with a stark reality. The public, geared up for entertainment rather than harsh reality, responds by eating up the fictionalized situation and supporting the Republican cause even though, unbeknownst to most of them, they are supporting a party that is perpetrating an agenda that is not in their interests and doing so behind their backs. Republicans do this by supporting wedge interests like abortion, gay marriage and guns. Their adherents get all exercized about these issues while ignoring more pertinent and arcane issues like banking regulation and global warming. The Republicans appeal entirely to self-interest and greed using simple slogans and ignoring complex issues which they leave to lobbyists who work their will behind the scenes which results in long term damage to the interests of the average American including their own constituencies.
Let's be clear. Republicans will not support Obama's attempts to create even one job because they know that the quickest and simplest way for them to regain control of Congress in 2010 and the White House in 2012 is for unemployment to remain high. They will do this by demonizing Obama's policies and suggesting instead their own which, if implemented, actually would do nothing to create jobs. They have beat the health care reform bill to death for nearly a year thereby sucking all the oxygen out of any other aspect of Obama's agenda including job creation.
How this is likely to play out is that the Republicans will take over in 2010 and 2012, but with their policies in place, the real economy will continue to tank and at an accelerating pace. The likely result of that is a Democratic retakeover in 2014 and 2016. Oscillation between Republican and Democratic control of the political process with little citizen organization (no union labor movement, for example) will probably lead to further erosion of the US as a world power and increasing Third World status for average American living standards. With Republicans back in power, they will stop worrying about the debt and deficit and lower taxes again thus increasing the debt even more. They will also cut social programs exacerbating the misery of the poor and working poor. The erosion of the American Dream for an increasing majority of Americans is the likely consequence as the Republicans will preside over an accelerating exodus of American jobs to countries where labor is cheaper. Republicans in power will proceed with more fraying of the safety net protecting the most vulnerable Americans and turning over even more power to large corporations whose only interest is in maximizing their own profits. Thus the environment will continue to deteriorate at an alarming pace because this maximizes profits. When corporations have to be responsible about protecting the environment, this reduces profits because of the added costs.
Republicans, conservatives and rich people have figured out that the despoliation of the environment will mainly affect poor people just as the recent economic crisis has mostly affected poor people and just as the destruction of New Orleans by Katrina has mostly affected poor people. The poor people mostly affected by global warming are people who live on islands such as the Maldives and Bangladishis who live on a flood plane. These people are among the world's poorest and will become, as they are becoming already, environmental refugees as their homes become uninhabitable due to rising sea levels. But rich people, a lot of them, simply don't care what happens to these people in the same way that they don't care about the 47 million people in the US who don't have health care. What they care about is their own financial situation and lower taxes are the main thing they want from government not increased taxes so that governments around the world can help poor people and economic and environmental refugees.
What the American people can expect is increasing inequality as the rich get even richer and social programs are cut even more. The neocon agenda is to get rid of all public institutions including public schools, libraries, parks, police forces, fire departments etc. These can be replaced, they argue, by private equivalents who will do a better job and at lower rates of taxation. Well, we see how well this has worked out with health insurance. While other countries pay less for better outcomes, the privatization of the health care industry has led to greater expense and worse outcomes on average. But Republicans don't care about averages. Again they argue the US has the best health care system in the world (for those who can pay), and they don't care about the worse outcomes that bring down the overall averages because they affect primarily only poor people. Their goal is to have the best for people who can pay, namely rich people, while the rest can fend for themselves and if they can't afford a good or a service, even if their life is at stake, they can go without.
In a teleconference with reporters, panel chairwoman Elizabeth Warren said the TARP was effective in stopping a spreading panic in financial markets. However, she said, the TARP also was supposed to support the broader economic recovery by stemming foreclosures and boosting lending to consumers, and in those aspects it's fallen far short.
"Step one was to stabilize the economy, and that has been accomplished and we give the Treasury very high marks for that," Warren said. "But there was a very important step two behind that. The TARP program was not authorized for the sole purpose of bailing out large financial institutions. Congress specifically states in the legislation that it expects that the benefits will be felt in getting ahead of the foreclosure crisis and in dealing with the larger economy."
Of the $700 billion authorized for TARP in late 2008, the Treasury Department now expects to deploy just $550 billion. It also expects up to $175 billion in TARP repayments by the end of next year, and this week Treasury announced it expects the TARP will cost taxpayers $200 billion less than anticipated.
Pelosi, with the support of President Barack Obama, is now looking to divert some of those TARP "savings" into job creation efforts with the nation's unemployment rate at 10 percent and projected to rise into next year. Obama has conditioned his support on using some of those TARP "savings" into deficit reduction, while congressional Republicans would like to see if all of it used to knock down the deficits.
They're the 9th richest people in America and they're pushing hard to upend President Obama's progressive agenda.
by Faiz Shakir, Amanda Terkel, Matt Corley, Benjamin Armbruster, Zaid Jilani, Lee Fang, and Alex Seitz-Wald
Billionaire brothers David and Charles Koch are the wealthiest, and perhaps most effective, opponents of President Obama's progressive agenda. They have been looming in the background of every major domestic policy dispute this year. Ranked as the 9thrichest men in America, the Koch brothers sit at the helm of Koch Industries, a massive privately owned conglomerate of manufacturing, oil, gas, and timber interests. They are best known for their wealth, as well as for their generous contributions to the arts, cancer research, and the Smithsonian Institute. But David and Charles are also responsible for a vicious attack campaign aimed directly at obstructing and killing progressive reform. Over the years, millions of dollars in Koch money has flowed to various right-wing think tanks, front groups, and publications. At the dawn of the Obama presidency, Koch groups quickly maneuvered to try to stop his first piece of signature legislation: the stimulus. The Koch-funded group "No Stimulus" launched television and radio ads deriding the recovery package as simply "pork" spending. The Cato Institute -- founded by Charles -- as well as other Koch-funded think tanks like the Heritage Foundation, produced a blizzard of reports distorting the stimulus and calling for a return to Bush-style tax cuts to combat the recession. As their fronts were battling the stimulus, David's Americans for Prosperity (AFP) spent the opening months of the Obama presidency placing calls and helping to organize the very first "tea party" protests. AFP, founded in 1984 by David and managed day to day by the astroturf lobbyist Tim Phillips, has spent much of the year mobilizing "tea party" opposition to health reform, clean energy legislation, and financial regulations.
STOPPING CLEAN ENERGY: David Koch presents himself as a champion of science. Next year, because of his donations, a wing of the Smithsonian will be named after him. Nevertheless, Koch has done more to undermine the public's understanding of climate change science than any other person in America. The Competitive Enterprise Institute, funded in part by Koch foundations, has waged an underhanded campaign to falsely charge that a set of hacked e-mails somehow unravels the scientific consensus that global warming is occurring. Koch finances the "Hot Air" tour, a nationwide roadshow using a balloon to depict climate change science as "hot air." Despite the brothers' extravagant wealth, Koch's Americans for Prosperity has run populist ads mocking environmentalists as spoiled brats more concerned about their "three homes and five cars" than about economic conditions. In addition to its efforts to misinform the public, Koch Industries has spent nearly $9 million dollars so far on direct lobbying, much of it on climate change legislation. With a team of Koch-funded operatives going as far as attempting to crash the United Nations Climate Change Conference in Copenhagen this week, the brothers may succeed in scuttling any prospect for addressing climate change.
STOPPING HEALTH REFORM: Much of the fierce opposition to health reform can be credited to Koch organizations. As the health care debate began, AFP created a front group, known as "Patients United," dedicated itself to attacking Democratic health care reform proposals. Patients United has blanketed the country with ads distorting various provisions of the health reform legislation, particularly the public option. Patients United even centered a media campaign around Shona Robertson-Holmes, claiming she had a brain tumor the Canadian system refused to treat. However, the Ottawa Citizen reported that Patients United has been exaggerating Holmes' case, and that she in fact had a benign cyst. In their quest to block health care reform, Koch-funded groups have fostered extremism. A speaker with the roving Patients United bus tour repeatedly compared health reform to the Holocaust while an eight-by-five foot banner at an AFP health care rally with Rep. Michele Bachmann (R-MN) read, "National Socialist Health Care: Dachau, Germany" superimposed over corpses from a concentration camp. Although many were surprised at the level of anger AFP channeled into Democratic healthcare town halls in August, it wasn't the first time Koch groups have helped to hijack the health reform debate. Back in 1994, Americans for Prosperity, then known as Citizens for a Sound Economy, worked closely with then-House Speaker Newt Gingrich to bring mobs of angry men to health reform rallies with then-First Lady Hillary Clinton.
A LONG HISTORY OF STOPPING PROGRESS: The Koch brothers clearly have a financial stake in blocking reform. Koch Industry oil refineries are major carbon dioxide polluters, and George-Pacific, a Koch Industries timber subsidiary, is one of the largest contributors to the loss of carbon-sink capacity. According to the EPA, Koch Industries is responsible for over 300 oil spills in the U.S. and has leaked three million gallons of crude oil into fisheries and drinking waters. So there are clear business-related reasons why Koch would want to block regulatory enforcement, clean energy, labor, and other reforms. But part of their opposition stems from a long family tradition of funding conservative movements to shift the country to the far right. Fred Koch, father of Charles and David and the company's namesake, helped to found the John Birch Society in the late 1950s. The John Birch Society harnessed Cold War fears into hate against progressives, warning that President Kennedy, Civil Rights activists, and organized labor were in league with communists. By presenting progressive reform as a capitulation to the Soviet Union, Fred Koch and the other industrialists bankrolling the Birch Society were able to galvanize hundreds of thousands of middle class people into supporting their narrow agenda of cutting corporate taxes and avoiding consumer regulations.
Barack Obama is trying once again for balance. On the one hand, he wants enough government spending to offset the timid spending of consumers and businesses. Otherwise, the jobs and wage recession could drag on for years. On the other hand, he doesn't want to set off more alarm bells about the budget deficit. Otherwise, conservative Democrats might join forces with Republicans to block heath care. So what does he do? A little bit more stimulus spending, but stimulus spending that doesn't look like more stimulus because it's not really adding to the deficit. It's coming out of savings from money already authorized to be spent on the bank bailout. Hmmm?
No president in modern times walks a tightrope as exquisitely as this one. His balance is a thing of beauty. But when it comes to this economy right now -- an economy fundamentally out of balance -- we need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.
States and cities, for example, are estimated to be $350 billion hole this year and next. They can't run deficits so they're wildly cutting spending, cutting jobs, cutting contracts, and raising taxes and fees. That's a huge anti-stimulus package roughly as big as the remaining direct spending in the old federal stimulus package. Which means, Obama's "new" stimulus, announced today, is about all we have, and it's not nearly enough.
The word in Washington is we're out of the woods. The rate of unemployment dipped from 10.2 percent in September to 10 percent in October. In our nation's capital, a one-month trend marks a turnaround. Don't believe it for a moment. The real story of October was the increasing number of Americans who dropped out of the labor force, too discouraged even to look for work.
Main Street is hurting worse than ever. Ten percent unemployment translates into roughly 18 percent of our workforce unemployed or underemployed. Housing markets are in terrible shape: One quarter of homeowners are paying more each month than their houses are worth; the rates of tardy mortgage payments continue to rise. Thirty percent of American households contain someone who has lost a job and can't find another, and yet almost all households are dependent on more than one wage earner in order to make ends meet. A quarter of all American children are now dependent on food stamps.
There is no reason to tolerate this degree of misery. We know exactly what to do. The government has the fiscal tools to do it. Start by bailing out state and local governments (if Congress would prefer to call it a loan and require payback over the next five years, fine). Renew unemployment and COBRA benefits. Increase federal spending on infrastructure. If we have to, hire people directly. The package should be $400 billion over two years.
We don't know exactly how much the President is proposing to spend, but sources tell me it's in the range of $70 billion, redirected from the $200 billion in TARP savings. The President's small, calibrated attempt to balance a stimulus with deficit reduction will in fact make the deficit worse over the long haul. It postpones the day when we're back to near full employment, when almost all Americans who need a job get paychecks on which they pay taxes. This isn't really balance at all. It prolongs the economic imbalance.
Dr. Reich has come up with another clear-eyed bit of advice to Obama's Administration. He's echoing again the message of the disastrous job market and all the nasty economic side-effects therefrom. He applauds Obama's agile balancing act between stimulus and debt building but maintains that Obama is still doing too little by pumping only $70 billion from TARP funds into job stimulus actions .... Reich recommends $400 billion for job stimulus spread over two years. It's refreshing to hear someone pleading for the common man rather than for support to those who have brought about America''s crisis of money and moral values.
I agree because the dramatic decline in jobs is so deeply structural as result of outsourcing and automation. It is compounded by fact consumers are finally saving more and spending less in this crisis which, until a new equilibrium is achieved as in Europe, will contribute to slower demand for quite some time. Reich finally talks about an out-of balance economic model .... a theme I've been writing about in detail for two years now. His solution is to pump more money into short-term job generation by providing incentives to small firms and startup firms, by further intensifying investments in infrastructure, by offering incentives for job creation.
Reich perceptively reminds us that when total spending falls sharply below the level required for reasonable employment at 4-6% unemployment levels, the economy is hopelessly unable to recover on its own .... something the Japanese learned the hard way with their 1992-2004 prolonged economic stagnation. Keynes got this theory right when he said deficits are the order of the day when an economy is in a deep downturn. How the stimulus money is spent will determine whether the deficits are a cruel enslaver of long-term economic vitality. Not to spend money now will only worsen and lengthen the downturn, causing the eventual need of even more borrowed funds to bring back recovery. Failure to respect this principle resulted in Japan's national debt mushrooming from 65% of GDP in 1992 to over 165% of GDP in 2004, rising to a phenomenal 200% of GDP in the current crisis situation.
Our national debt level of ± 60% of GDP today (excluding past borrowings from trust funds, e.g., Social Security) -- while nothing to be pleased about considering just the booming interest and defense costs as well as health care costs -- is a far cry from Japan's extremely dangerous indebtedness today. This is not to say we can borrow ad infinitum (China will also not allow this), but we do have some room to pump-prime the economy out of the current MESS largely created by Republican overspending and tax cuts to the rich as were Bush Jr.s Presidential legacy. The answer is NOT cutting government spending as some ultra-right fiscal hawks are repetitively mouthing. Tell that to California and 10-20 other states either bankrupt or bordering on bankruptcy who are being forced to cut public spending for schools, police, firemen, basic infrastrucure works. As someone has said, California's schools used to be among the very best; now they're among the worst. Of course, we must pump-prime the economy with Constructive Debt for productive investments that truly create sustainable growth and job generation patterns. Of course, the government money flows and borrowing must stop immediately once the economic indices show a clear return to economic stability.
Obviously, added tax revenues will still be needed. This is not an Einstein problem but it does require that we get control of our standard political entrapment in fixed dogmas. In addition to harmonizing the maze of existing taxation, simply tax items where the tax burden is on harmful activities, thus indirectly providing a societal benefit, for example, as so often has been suggested: a tax on financial transactions, an increase in the tax on cigarettes; a tax on sulpher dioxide and carbon dioxide emissions, a weight-tax on cars, etc. Constitutional purists and anti-tax hawks say taxes violate constitutionally given property rights protecting how we invest and spend our money. At the same time, however, the Constitution does not say we can indiscriminately engage in activities that harm others or the general community. Similarly, the Constitution does not say we have a right not to be taxed. Taxing harmful activities not only will help restore budgetary surpluses seen only three times in past 28 years through Bush Jr.s' Presidency ... and those three years occured during Clinton's Presidency.
When politicians start their usual fear tactics that Big Spending, Higher Taxes and Deficits are the primary concern and economic recovery is of secondary importance, then we know we are on the road to self-deceiving double-talk and, ultimately, a national bankruptcy and stagnation that will duplicate Japan's stagnant decade and huge national debt development .... but on a truly Grander Scale with severe worldwide backlashes.
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