FAILING PRESIDENCY, FRACTURING PARTY

FAILING PRESIDENCY, FRACTURING PARTY

December 14, 2010

Dear Citizens and Elected Officials:

We have been in no great rush to write since our September and October postings, even taking into consideration the disaster that was visited upon the national Democratic Party in the November 2nd mid-term elections. That’s because, in good part, from mid-summer on, the outcome seemed dismally clear to us – and to others on the left. After all, we opened our September 4th posting (Election Menu: Ran Out of Jobs, Now Serving Austerity) with an epigraph from Paul Krugman, from his August 30th column: “‘…my guess is that the president will continue to play it safe, all the way into catastrophe.’”

Since that grim first Tuesday in November, we have been busy gathering material for forthcoming essays on the foreclosure (fraud) crisis, the election itself, and what it means for the future of the Democratic Party. Once again we remind ourselves about that overdue book review of Amity Shlaes’ attack on the New Deal, the one read by so many Republicans in Congress. If we would bump into her today, we might be tempted to tell her that the work was really quite unnecessary: the Democratic Party represented by Bill Clinton and Barack Obama has gutted the memory and relevance of the New Deal in its own collective mind, and policies, so historical revisionism from the Right was hardly necessary; but we got it anyway. (Yes, we saw their strange press conference from Friday, Dec. 10. We spend more than an hour a day on the economy, Bill, a lot more, and we apparently have very different tastes in our preferences for FDR’s speeches).

Yet political and economic events have a way of intervening with their own insistent, demanding time-logic, making a shambles of writers’ schedules. Hence this posting, addressed to the current firestorm over the “Great Compromise” on the now expiring, now renewing Bush tax policies.

Actually, this ripe current moment wasn’t entirely surprising either. The second epigraph from that same Sept. 4th essay was from Martin Wolfe of the Financial Times, also written at the end of August, and it went like this:

“‘So what is going to happen? I assume that, after the mid-term election, resurgent Republicans will offer new tax cuts and ignore the fiscal deficits. They will pretend that this has nothing to do with any reviled stimulus, though it is much the same thing – increasing fiscal deficits, thereby offsetting private frugality…allowing Republicans to get the credit for their ‘yacht and mansion-led recovery.’ Any recovery is better than none. But it could have been much better than this. Those who were cautious when they should have been bold will pay a big price.’”

Well, we’ll see about that “yacht and mansion-led recovery,” because there are now even more ominous economic forces in motion: simmering currency and tariff wars, European bank and national solvency troubles (the connection is direct) , and falling American real estate prices (again) on top of that recently risen unemployment rate (November’s, to 9.8%). These forces, which have the potential to contribute a “Black Swan” type market shock, make us discount the impact of the size of the fiscal chips “on the table” in the great tax dispute, at least over a two year time-frame. But it isn’t the scope of the proposals on the table as much as their deeper meanings that have fueled the blow-up.

Before we take a closer look at the dynamics of this situation, we’ll tell you what we did on the issue in front of us: we signed three online petitions calling upon Congressional Democrats to reject the Obama-Republican deal, and also phoned and Emailed our senators and representative to that effect. Apparently, we had a lot of company, because suddenly Democratic backbones, sorely missing during the fall election season, snapped into place. We did watch parts of the first Obama press conference on Tuesday, December 7th; unfortunately for the President, his arguments about Republican hostage taking and his observation that polls showed that the American people strongly oppose the Bush tax extensions for the wealthiest Americans only convinced us that if he would have taken to the road, for the modern equivalent of a whistle-stop campaign like Truman’s in 1948, perhaps accompanied by re- vertebrated Democratic congressional leaders, he might yet have turned the tables on the Republican game plans. But rather than taking Congressional leaders into his strategy counsels, and taking his anger out upon Republicans, there he was raking the left, and letting the Congressional Dems find out later, to bitter effect, about the deal that was struck at the other end of the package on those estate taxes. Rather than interpreting the Congressional election as Republicans do, as a mandate for their own worn-out policies, he might have instead seen it more as a referendum upon his own previous economic timidity, for his failures on unemployment and foreclosures – which is closer to the truth, at least as far as what we are able to decipher from all the post-election polling, some of which is flatly contradictory on economic policy directions.

Now let’s give you a magnitude on those foreclosures, which we’ve checked with some effort because when we saw the numbers in the New York Times’ editorial from October 15, they seemed so high, nearly ten million. But they’re right: some 2.5 million already gone, another six million plus in the pipeline; other leading researchers put the eventual cumulative total– predicated on unemployment not rising and no “double dip” – at 10 to 13 million. It’s not some distant economic abstraction; the house next to us is now “underwater,” and empty, and just a few doors down is a Fannie Mae foreclosure property, now back on the market.

In the personal notes tacked onto the “get a backbone” petitions we signed, and to our Congressional representatives, we added a different take on why not everyone “deserved” to be served the Bush wealth transfers. All through the fall, as sub-themes to the pending election, we were following, among many, two other story lines in particular. One was the missing notes, files and folders, with multiple legal and economic ramifications, on home foreclosures, what is being called “foreclosuregate”; the other was the continuing campaign to bring accountability to the teachers in our public schools, especially the unionized ones. In the push for charter schools, and teacher accountability for student performance, we took note of the role played by powerful financial firms, wealthy private investors, not the least of which were major hedge fund players. We observe with regret, and no small amount of disagreement, the general societal trend to attempt to solve basic problems in the political economy mainly through educational reforms, as more than hinted at by Fed Chairman Bernanke’s comments during his Dec. 5th “60 Minutes” interview. This represents a basic confusion over what forces shape what institutions in society. Our schools reflect broader failures in our culture and economic system, and the school systems which are doing well more often than not are reflections of the economically healthier communities around them. This isn’t an argument against educational reforms; rather, it’s an argument over where we should spend the most resources for the maximum changes we seek and whether we can successfully alter children’s habits while minimizing the fates of their parents. It’s far easier, given some of the biographies backing the privatization efforts, to go after the “government” run schools and their unions, than taking up the deeper reform challenges that, for example, David Simon so eloquently raised in his book The Corner, about street life in West Baltimore. No wonder Van Jones was sacrificed without so much as even a glance backward from those who hired him. But this is a topic for its own essay.

Wouldn’t you just know that during this same tumultuous week of national politics and economic policy, that Doug Henwood’s latest edition of Left Business Observer (#130) arrived, with its own version of economic “accountability”: a close look at various measurements about how dismal our economic situation is, and the performance of the economy was, during our nearly concluded decade. So how dismal was it? So dismal that the decade’s average growth in real GDP was only .7%, the “lowest in 80 years.” It was even worse than “the mid-1930’s,” when GDP still managed to grow 2.0%. Henwood asks rhetorically: so what does that mean, since most people couldn’t say whether 2% was good or bad.

David Harvey, an anthropology professor who writes about the political economy, has a new book, The Enigma of Capital (2010, Oxford University Press), which the Financial Times praised on its back cover as “Elegant…interesting not only for the breadth of his scholarship but his recognition of the system’s strengths…” It helps more than a bit to put these growth rates into perspective. The average compound rate of growth throughout the measurable history of capitalism has been “close to 2.25%,” says Harvey, averaging “nearly 5% - in the period 1945-1973.” He writes that the current consensus is that “a ‘healthy’ capitalist economy…expands at 3 per cent per annum. Grow less than that and the economy is deemed sluggish. Get below 1 per cent and the language of recession and crisis erupts…” (Pages 26-27).

Henwood actually gives us seven other charts to help illustrate the theme of his “accountability” section, entitled – “What a damn mess.” We don’t have time for all of them, but we will share another one of the more striking ones with you to buttress the point. It measures corporate profits versus employee compensation for the first year of the recovery of each of the last 11 recessions, starting in 1949. He observes that it is a normal feature that profits recover before wages, but that “the average ratio…for the previous ten recoveries is three-to-one; the latest is fifty-to-one.” (Our emphasis.)

So now here’s our own “accountability” take on the those tax cut extensions for what we will call America’s “financial leaders,” those who have garnered such a large share of wealth and earnings over the span of the last 30 years or so, coincident with the rise of the Republican Right and given such a burst of earnings fuel since the Bush tax policies of 2001-2003: measured by any one of the eight “metrics” charts Mr. Henwood displays, to put it quite simply, they haven’t earned it. Of course such accountability wouldn’t be perfectly fair; we would have to broaden our definition to include not just those at the top of the income and wealth charts, but those also who formulate economic policy and teach it – with a heavy emphasis on professional economists – 99.9% of them, at least – who failed to spot the housing/real estate bubble or see the dangers from the new derivatives, and we suspect some who mainly teach wouldn’t have high enough incomes to meet the threshold. But many of the fully culpable are consultants and investors themselves, so it might work out to some sense of rough justice.

And there is another broader, national sense in which our financial leaders, investors and policy wonks, haven’t “earned it” - their tax “forbearance” (which is on top of the many deductions, incentives and privileges already built into the tax code for people like themselves over the past three decades.) It’s hard to miss now, in the polls and broader mood of the nation, the growing sense that we are in decline, in many ways, but especially in a broad economic sense. This has been the great taboo for professional politicians, and presidential candidates, and a most painful topic for history’s great “exceptional” nation, but we take it as a small road sign of hope, of growing maturity, that Time Magazine’s Joe Klein could begin his “An American Journey” article with that theme, one of national decline. (Thanks to Rick Sullivan for getting us a copy of the October 18, 2010 article; Here at http://www.time.com/time/nation/article/0,8599,2024065,00.html ). Klein is even questioning the obsession with deficit politics, and the wisdom of placing it ahead of productive long term national investments: see his article from November 18th in Time, here at http://www.time.com/time/nation/article/0,8599,2031958,00.html

American declension, Chinese ascendancy – the two are linked. The tensions, clear over the past ten years for anyone with a sense of economic history, are now bursting forth in a new form every week. The remarkable thing is the patience of the American people with their economic leaders in the private sector, academe, and public life, who have rolled out all the red-carpets for trade with China – in pursuit of the long fabled “China market,” and thereby speeding the rise of the world’s next economic superpower. It was all done, ostensibly, for our good: in place of rising middle and working class incomes we got cheap imported goods and bundles of subprime credit lending (and every other imaginable type of credit lending) to compensate for workers losing their bargaining power. This unsatisfactory substitute for full employment and an adequate incomes policy forms an interesting minor theme in Michael Lewis’ admirable new book The Big Short, given voice by none other than successful toxic securities shorter Steven Eisman., certainly one of the most fascinating financial personalities you’re ever likely to read about. As the trade deficits skyrocketed and the dollar sank under one of the greatest international trade imbalances in history, our economic leaders tried to soften the truth, and the pain (ours), with tales economic uplift (their own, actually): and for the millions their policies lifted out of poverty - in China.

Even as American states and counties (at our local level, Virginia and Maryland, Montgomery and Fairfax) increasingly engaged in tax competition with one another for scarce private sector jobs, behaving like little nation states, our national political and economic leaders adopted the stance of sophisticated internationalism, downplaying the national interest, a stance just now softening as they can no longer ignore where it has led our nation. It’s almost enough to call for a progressive version of the late 1940’s-early 1950’s Right wing investigative cry: “Who Lost China?” – replacing it with “Who Short-changed America?” And we are hearing the second thoughts, mild chagrin at best, from our economic “betters,” that maybe this bi-partisan trade policy with China hasn’t worked out so well for a good part of the American people. We heard a bit of that when we went to the Robert Rubin-John Podesta “Hamilton Project” presentation at the National Press Club on December 3rd, “The Future of American Jobs, Part II.” Based on the policy discussion we heard, and despite our protest question from the audience, we come away recommending that our readers begin pushing for earlier retirement ages for Social Security and Medicare.

We attended against our own better judgement and past experience with these types of frustrating forums, telling ourselves that these policy shapers and drivers, like Peter Orszag, former director of OMB under President Obama, might one day shift direction. Instead, less than a week later, we learned from the NY Times that Orszag will be joining mega-bank Citigroup’s investment banking unit as a Vice Chairman. Kevin Phillips, wherever he is, must be shaking his head over this latest, familiar passage through the revolving door between the Democratic Party and Wall Street firms. We’ll leave you to read the unpleasant details in Eric Dash’s article, here at http://dealbook.nytimes.com/2010/12/09/ex-white-house-budget-director-jo...

Just where Citigroup is headed under CEO Vikram Pandit is given careful consideration in a fine New Yorker article, “What Good is Wall Street?” by John Cassidy in the November 29, 2010 edition. In addition to a fascinating interview with Pandit, who is pledging to take better long term care of Citi’s investing customers - care than Wall Street traders are infamous for not providing - (see the books of Michael Lewis and Frank Partnoy , two of the best authors on the subject), readers will also learn that Paul Woolley, who ran the London affiliate of GMO, Jeremy Grantham’s investment firm (more on Grantham below) from 1987-2006, has now set up the “Woolley Center for the Study of Capital Market Dysfunctionality.” We wonder if Peter Orszag had a chance to read this article before he made his Wall Street decision. After all that has happened, we're still amazed that this is a popular career option. Here’s the article at http://www.newyorker.com/reporting/2010/11/29/101129fa_fact_cassidy

Before we leave the topic of why America’s public and private financial leadership doesn’t deserve an additional share of the nation’s economic resources, we want to add one other line of evidence to the argument, one that can help our readers understand one of the more important currents of influence in our still unfolding financial crisis. It involves a category of asset investing and ownership, part of a pecking order that doesn’t usually get written about very clearly – financial bond ownership. Now bond owners, public and private, tend to be at the very apex of national wealth charts: they can be wealthy individuals, financial institutions, or public pension funds, or even other nations or their sovereign wealth funds. There are also different legal classes of bond ownership, just like there are different classes of stock share ownership. When things go bad, and matters head to bankruptcy proceedings, there is a complicated pecking order of who gets paid first, and who last, among these different categories of asset owners. Now the remarkable thing, both here and in all of Europe’s great distress, is that the grand bond holders of the financial institutions (and nations) that have been at the center of the financial storm have not been held accountable for their investment losses in 98% of the cases. Instead, as in Ireland, and to a lesser extent the US, the bill for rescuing floundering private banks and other types of private firms has been transferred to the public’s balance sheet, either the Treasury directly, or the balance sheets of the central banks, like the Federal Reserve, which has taken more than a trillion dollars worth of the most toxic mortgage backed bonds off of private hands. And, as we will see later in Nouriel Roubini’s comments, after the losses go from the private balance sheets to the public national ones, they in turn tend to get shifted to supra-national bodies, such as the European Central Bank and the IMF. The recent, Congressional-forced disclosure of the Federal Reserves’ actions during the crisis indicates that our Fed served almost like an international central bank in bailing out foreign institutions. (And acted far earlier and with more scope than had been previously known – thanks to Frank Partnoy’s “Sunlight shows cracks in crisis rescue story,” Dec. 3rd, Financial Times.) In the lingo of the financial world, this means the bond holders didn’t “take a haircut” (write down/losses) on their investments, but public workers, pensions and government spending may have to – according to conservative austerity politics, at any rate.

Now the conventional argument against making bondholders take a “haircut” – accept fair losses for their poor investment decisions, in other words – is that if it is attempted in the high distress levels of a threatening financial crisis it can have a cascading effect upon the institutional entanglements of these senior investors. That’s because in the contemporary world they are often deeply entangled in the webs of the shadow banking system’s poorly regulated players: hedge funds, private equity firms, and off-balance sheet vehicles of every description. Yet the basic thrust here is grossly unfair: private losses become public burdens and the austerity is foisted upon the weakest links in the political economy: public employees. This topic, bond-holder immunity, and how private losses become public obligations is one of the most sensitive in the entire realm of political economy. Just look at the reaction of the bond markets after Germany’s Chancellor Angela Merkel broached this topic in November in the midst of the latest phase of the European financial crisis: the possibility of bond holders eating some of the losses wouldn’t kick in until 2013, but still, it was too much, too direct on the forbidden topic. For an excellent article on this situation, we suggest one by our old reliable guide William K. Black, now writing regularly for an Irish financial forum, benzinga, here at http://www.benzinga.com/life/politics/10/11/619101/the-celtic-chimera?qu...

We also noticed former President Bill Clinton’s glancing reference as to who will pay in future financial crises according to the protocols of “our” new financial regulations – during that same strange press conference of December 10th. Clinton sounded sure it would be the private bondholders. We wish we could share that assurance. Maybe Yves Smith over at her Naked Capitalism site could take the former President up on the topic and what’s unfolding in the regulations which govern. Perhaps Maryland’s own Sarah Bloom Raskin, newly appointed to the Federal Reserve’s Governing Board, or even Chairman Bernanke himself, could address this issue, so important to the overall sense of fairness and equitable burden sharing in the broader society (which is perhaps why Clinton said what he did.).

According to Karl Polanyi, in his magisterial book The Great Transformation, the creation of central banks in 19th century Europe, under the old international gold standard, was driven, in good part, by the need to apportion the pain issuing from the “automatic” currency devaluations in the wake of panics and international financial crises – and trade imbalances. It’s a central question, and we have more than a hunch that the way Europe is going about solving it – enforcing disproportionate public austerity for private failures - isn’t going to fly.

The “Great Compromise” – And its Aftermath
Now that our readers have a clear appreciation of our warm regard for where America’s financial leadership has taken the nation over the past 30 years, it’s time to take a look at what we consider to be the best of the voluminous outpourings from the first ten days of December on the “Great Compromise,” the Obama presidency and the state of the Democratic Party.

It wasn’t easy picking a favorite, given the wide range of choices, but James Galbraith’s “Whose Side Is the White House On?” from the December 6th edition of the HuffingtonPost, came in first. (At http://www.huffingtonpost.com/james-k-galbraith/whose-side-is-the-white-... ). Perhaps because his earlier caustic testimony to the Deficit Commission was left out of the formal record when the Commission submitted its report in December (he was snubbed, or dissed, in other words) Galbraith was driven to be even blunter than normal. But that’s fine with us. He puts the foreclosure-fraud crisis front and center, and sounds like William K. Black when he asks why the Prompt Corrective Action law hasn’t been invoked by the legal arms of the Obama Administration. He’s talking directly to us when he calls for progressives to “make an honorable defense of the great legacies of the New Deal and the Great Society,” and accuses the Democratic Party of becoming “too associated with Wall Street…It is a structural problem” and in consequence of that “progressives need…to draw a line and decide that we would be better off with an under-funded, fighting progressive minority party than a party marked by obvious duplicity and constant losses on every policy front as a result of the reversals in our own leadership.” We like his long term view, with unmentioned echoes of how the Right proceeded from the 1960’s to 1980: “…bold proposals are what we should be advancing now; even when they lose, they have their value; We can talk about job programs, we can talk about an infrastructure bank…We are not going to get these things, but we should have a clearly defined program so that people know what they are…” and “we need to recognize that the fate of the entire country is at stake…Large countries can and do fail…this isn’t a parlor game. .. What we do, how we proceed, and how we effectively resist what is plainly about to happen, matters very greatly for the future of our country…We need to lose our fear, our hesitation, and our unwillingness to face the facts.”

Next was William K. Black’s HuffingtonPost from Dec. 8th, “What Aspect of Dealing with Bullies did Obama Fail to Learn as A Child?” – at http://www.huffingtonpost.com/william-k-black/what-aspect-of-dealing-wi_... . Black looks at the cards the President was holding, and the ones the Republicans had, and citing David Cay Johnson’s “Call Their Bluff, Mr. President,” decides, like we did, that the Republicans really had a very weak hand. So weak, in fact, it summoned up the “surrounded sheriff” gag from the movie Blazing Saddles, where the Republicans were threatening to shoot themselves by “(1) vote(ing) to prevent a tax cut to over 100 million Americans…(2) refuse(ing) {two weeks before Christmas} to extend unemployment benefits for millions of long-term unemployed; and (3)…doing all this for the benefit of the wealthiest one percent (which all the polls showed was contrary to the will of Americans.) The chances that the Republican Party would pull the trigger on the three-barreled gun they had aimed at their own head was minimal.” In light of the President’s assessment that he held the weaker hand, Black concludes the article with these thoughts: “Your job is not to get reelected. Your job is not to work on your ‘portrayal.’ Your job is to prevent bad tax policies you (correctly) said threatened our democracy, economy, and society. You are failing at your job.”

We mentioned it briefly above, but again, our readers should know that Bill Black now has a weekly column, appearing on Mondays, in an Irish online financial news publication called “benzinga,” (at http://www.benzinga.com). Although we see his postings from time-to-time at the HuffingtonPost, Black is apparently still a far too threatening voice to the financial sector to be given a formal governmental role, because of his past prosecutorial record during the Savings and Loan crisis and current stance on the failure to prosecute the white collar crimes which are becoming known as “foreclosuregate.” After all, if the remaining Wall Street firms are “Too Big To Fail” then logically, they are probably to big to prosecute if the crimes are systemic in nature. We’ll have more to say on the topic ourselves in forthcoming editions, but readers who want to get a jump on it might consult Black’s “Lenders Put the Lies in Liar’s Loans, Part 2,” dated November 10th here at
http://www.benzinga.com/life/politics/10/11/598842/lenders-put-the-lies-...

Continuing down the road of Presidential difficulties, the title of Thomas I. Palley’s recent post at the Financial Times’ “economists forum” was equally direct as Galbraith’s and Black’s, offering to explain “Why Obama is Failing” at http://blogs.ft.com/economistsforum/2010/12/deaf-to-historys-rhyme-why-p... . Palley, you may remember, is the economist whose essay “America’s Exhausted Paradigm” from June of 2009 we highly recommended – several times. Now he’s posting in one the world’s most prestigious economic forums. Unlike Bill Clinton’s obscure December 10th press conference reference to a FDR speech at Choate prep school from 1926, Palley says today’s historical “rhyme” is with the 1930’s, not the 1990’s, so he opens with a quote from “FDR’s great Madison Square Garden speech of October 1936.” Note that Palley was right on target here, ahead of the joint Clinton-Obama press conference of Friday, December 10, where Clinton closes by commenting that he likes “balanced budgets and surpluses.” Fortunately for the nation’s millions of unemployed and foreclosed upon during the Great Depression, FDR governed more with a compassionate heart and deficits then he did with green eyeshades and a surplus, although he had his austerity moments as well, which triggered the 1938 relapse – which we’ve written about on several occasions. Palley says that Obama is sinking due to his “attempt to revive a 1990’s paradigm that never worked as advertised…Painful though it is for Democrats to acknowledge, the reality is the economic policies of President Clinton were largely the same as those of President Bush.” Shocking? Here’s Palley’s basis for writing that:

On this the record is clear for those willing to see: The Clinton administration pushed financial deregulation; twice reappointed Alan Greenspan; promoted corporate globalization through NAFTA and China PNTR (Permanent Normal Trade Relations); initiated the strong dollar policy; spoke of the ‘end of the era of big government’; contemplated privatization of Social Security; and struck down a core element of the New Deal by ending the right to welfare.

And then Palley introduces the themes that we’re going see from two other progressives writing in the early December’s firestorm, Rabbi Michael Lerner and Professor George Lakoff. Here’s how Palley draws the unfavorable contrast between Presidents Obama and Franklin D. Roosevelt:

…it was FDR’s new politics of solidarity and compassion that created the necessary political space; solidarity that recognized the country was in the Depression together and compassion that recognized many were suffering through no fault of their own. That is the political rhyme President Obama must hear, while the New Deal is the policy rhyme. The President’s failure to deliver on the country’s desire for change of substance has left a vacuum that is being filled by dangerous unstable forces. This is the tale of the Tea Party, which is a tale that has resonance for Europe. The economic risk…is a doubling-down of disastrously failed hardcore neoliberal economic policies…

(Editor’s notes: that would be budget “austerity.” The Franklin D. Roosevelt Presidential Library contacted us on Monday, Dec. 13th, by Email, saying they were unable to locate any FDR speech from Choate and 1926 in their archives, and pointing out that FDR went to Groton for Prep School. They thought Clinton might have been confusing the dates and place for FDR’s 1932 campaign speech at the Commonwealth Club, in San Francisco; but that’s a famous one, in a memorable year, so we don’t know what Clinton meant or where he wanted to go with the reference.)

The New Deal and a “politics of solidarity and compassion”: there are no better words to introduce the “intervention” of Rabbi Michael Lerner into the December debate, for they mesh so closely with his call for “the spiritual and ethical need for a new bottom line – one of love, kindness and generosity,” words taken from his guest editorial in – of all places – The Washington Post on December 4: “Save Obama’s presidency by challenging him on the left,” at http://www.washingtonpost.com/wp-dyn/content/article/2010/12/03/AR201012... .

Well, we guess quite a few folks at the White House, at John Podesta’s Center for American Progress and at Brookings might question just how much love and kindness Lerner is distributing as he shades over just a bit towards the Right’s tough love equation: we want to help you by a primary challenge. He probably also has George Lakoff tugging at his hair over his use of the term “bottom line” to describe a new national ethos. It’s a term we know pretty well. We actually kept a notebook in the late 1990’s and the early part of this decade to track how the phrase “bottom line” crept into many wildly inappropriate areas of public and private life, everything from ministers’ sermons to the name of a nightclub in Paterson, NJ owned in the 1980’s by former Mayor Martin Barnes – who had switched from being a Democrat to a Republican in 1980. (We never had the pleasure of dropping in; maybe the bouncers wore green eyeshades.) We felt that the term’s increasing deployment was a good barometer of just how deeply conservative market values were penetrating all aspects of society, not just Wall Street and the formal accounting world where it belongs. But we digress here; just a friendly heads up, Rabbi Lerner, before George Lakoff zings one in your direction. We liked the spirit and the direction of your editorial, and also the post election pep talk you sent out after the November debacle. We liked nearly all the planks in the platform and especially your call for a “new New Deal.” Your message apparently struck a very response chord, and was a prelude to the progressive outcry which followed in its wake.

And last, but not least, there was George Lakoff’s HuffingtonPost from December 10th, “Untellable Truths,” at http://www.huffingtonpost.com/george-lakoff/untellable-truths_b_794832.h... . Although it seems that from the values he discusses at some length he would have been strongly opposed to Obama’s course, Lakoff never clearly says where he stands on the week’s “Great Compromise.” But that’s all right. He gives us all a useful lesson in our failures to be better framers and to understand what’s wrong with attacking the Right with the phrase “No tax cuts for millionaires,” which is one reason why we took the approach that our financial leaders hadn’t earned yet another wealth transfer based on the nation’s economic performance over the past decade.

Lakoff’s discussion of how the Right has “owned” the entire policy debate surrounding the word “tax,” and what it would take to create the infrastructure (in the language itself as well as institutionally) for an alternative progressive framing is excellent. And those with good ears over the past seven days will acknowledge that Bernie Sanders has been relying perhaps too heavily on the “drive up the deficits” argument against the upper end financial deals. What’s wrong with this strategy in terms of framing is this: the Bush “gifts” are on the extension discussion table because President Obama and his economic advisors and far too many progressives themselves have not been able to put the James Galbraith recommended jobs program in their place; Larry Summers was wrong to say we could have a recession-depression fighting short run program and a longer term deficit fighting discussion at the same time as long as the public understood they were on different timelines. Obama undermined that hope himself in his very first year by setting in motion his deficit commission, ignoring the New Deal programs to create jobs and get control of the foreclosure crisis, and here we are with, at best, a stalling recovery, with a budget deficit discussion in lieu of what Galbraith said we really needed for a genuine recovery: “…a full mobilization: all resources, all hands on deck, major departures of policy, no holding back, and the responsibility for trouble and failure falling plainly on those who would obstruct the course. None of the people he chose to advise him on economic policy was remotely capable of thinking in those terms.”

Then, in the midst of the firestorm, as the New York Times gave short shrift to the House Democratic Revolt by pushing it to the very back pages of the front section, there the paper was on Friday December 10th, giving Obama’s “let’s change the discussion” agenda the lead story -“Obama Weighing Broad Overhaul for Income Tax, subtitled: Tackling Nation’s Debt.” That just coincidently echoes a theme struck by Fed Chairman Bernanke in his Dec. 5th “60 Minutes” interview. The details, we might add, to both the Times’ story and the CBS interview, seem to run towards the technocratic tax “efficiency” tropes. We don’t want to oversimplify here, but if the President’s and the Chairman’s answers to growing inequality and high unemployment are education reforms and greater tax efficiencies (which will surely include the Chamber of Commerce’s desire for lower business rates) then we are in even greater trouble than we thought. Get ready for more “hostage taking.”

Lakoff says the left is so far from countering the Right’s control of language in discussing the nation’s political economy that he has to resort to entire paragraphs just to begin the discussion of reframing the issues: the Right has so dominated that “they have changed the meaning of words and made some truths untellable by political leaders in present discourse.” In the sense that getting back to language parity with the Right may take years, his article begins to resemble the stark, sober realism which Galbraith uses to describe our situation, pointing towards progressives’ own long march towards a dramatically altered party, new leadership, or both.

Lakoff closes upon the note which draws him closer, by language and meaning, to the articles by Lerner and Palley, although they seem to have less hope than he does that Obama can ever get back there, if that was indeed, ever where he was:

If there is a teachable communication moment for President Obama, this is it. Bring back ‘empathy’ – ‘the most important thing my mother taught me.’ Speak of ‘empathy’ for ‘people who are hurting.’ Say again how empathy is the basis of democracy (‘caring for your fellow citizens’), how we have a responsibility to act on that empathy: social as well as personal responsibility.

In a counter note to these hopes for empathy, James Surowiecki’s interesting article – “Greedy Geezers?” – in the November 22 issue of The New Yorker, raises the disturbing question of just how compassionate Americans are towards one another in 2010, that maybe they’ve become Social Darwinists themselves. He also draws upon economist Benjamin Friedman’s work, The Moral Consequences of Economic Growth, contrasting the Great Depression, whose “effects were so deep and widespread that it created a sense of social solidarity,” with the current crisis, which, “bad as it is, isn’t severe enough to do that; instead, it has tended to drive people apart, with economically anxious voters trying to hold on to what they have.” Here’s the link to the full article at http://www.newyorker.com/talk/financial/2010/11/22/101122ta_talk_surowie...

While we appreciate Lakoff’s holding open the door of “hope” for Obama, we think that Lerner, Galbraith and Palley have reached the right conclusions. The audacity is gone, and hope is all Lakoff has left. Many progressives, instead of hope, have a sense of betrayal, although we can’t claim that ourselves, having remained at some good distance from the Obama aura. In Palley’s words, Obama’s “rhyme” is with Clinton’s 1990’s, and the Wall Street advice and policies that go along with it. Obama therefore can’t translate his politics into the policies of “solidarity and compassion” that marked the New Deal. And those in the middle of the spectrum, the Independents, may soon have a lesson, which we will all be caught up in, as it dawns on them that Republican economics translates into a crash course in Social Darwinism. Far from steering the nation along some imaginary “balanced” middle channel, Obama’s current course, if it can be called that, is steering “Right” into their hands.

Where’s the Economy Headed?
We’ve already covered a lot of ground in this posting, but we wanted to leave our readers with some economic resources so that you can brace yourselves, as best you may, for the size of the waves that may well wash over all of us. We have two videos to recommend, which, if you listen carefully, are comprehensive summaries of all the dangerous economic currents swirling about us in the late fall of 2010, from another drop in housing prices, to the Fed’s very problematic QE II program, to foreclosuregate, to the European banking, currency and solvency crisis – including the latest odds on another recession supplied by none other than the redoubtable Nouriel Roubini, with much head nodding in agreement by R. Christopher Whalen of Institutional Risk Analysis, who is no slouch himself in economic and real estate matters.

The first video is about 30 minutes in length, and features Jeremy Grantham being interviewed on CNBC on November 11, 2010. We’ve been recommending this interview to a number of folks since we’ve first seen it, and have gone back to look again since it first appeared, and have found that his carefully spoken judgements have held up very well. He’s the CEO of the Boston based asset management firm of Grantham, Mayo & Van Oterloo, aka as GMO, and has won renown for his ability to anticipate the rise of bubbles and their bursting, and how to steer investors around the wreckage. It has a relaxing feel, the polar opposite from the usual frantic CNBC commentator pace, and we think you will enjoy it, although the economic forecast is sobering. We smiled, upon first watching the tape, when he calls for a public jobs program based on insulating homes for energy efficiency. Then we went off to try to ascertain his politics, to no avail, for we couldn’t find a donor trail; all we came up with is that he’s worked to set up environmental foundations back in his native England. But we still have to laugh: here’s a temperamentally conservative investment guru, you can see him weighing every word on an invisible scale, going to the left of 95% of the elected Democratic Party officials in the US, including our President, on the importance of public jobs. At http://www.cnbc.com/id/15840232/?video=1640401359&play=1

The second video is longer, just under two hours, of a conference held at the conservative American Enterprise Institute on October 6, 2010, under the title: “Living in the Post-Bubble World: What’s Next?” It features, in order of their appearance, Desmond Lachman, a resident economist at AEI who is only half-kidding when he says he’ll be competing with Dr. Doom himself, Nouriel Roubini, for the bleakest assessment of the economic situation. We think he’s got a strong grasp of reality, though: pay close attention to what he says on the four major reasons we’re in trouble. Then we hear from Thomas Zimmerman of UBS Investment bank, another new commentator for us, but he gives high grades to Laurie Goodman of Amherst Securities Group, who is a widely recognized housing/real estate specialist who is predicting 11.5 million foreclosures over the next three years. Then, Dr. Roubini himself, putting the odds at a double dip recession in the US, Japan and Europe at 40%, and predicting a 10% further drop in housing prices. He displays his usual trenchant and pithy commentary on QE II, the Euro crisis and the slim odds that after the private sector has transferred its debt to the various governments of Europe, and they to the Union and the ECB, and they then along to even greater universal bodies, like the IMF, that extraterrestrials will step in at the last moment to bail out everyone else. (Based on what we know now, maybe the Fed can do it again.) He’s followed by Chris Whalen’s warning that we are only one-quarter of the way through the housing crisis. At http://www.aei.org/event/100297

Until the next post, all the best for the Christmas season and the New Year.

Bill Neil
Rockville, MD
w.neil@att.net

Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future