Cutting Spending
Adam Kotsko:
You know what would really help, if you want to cut spending? Most things that actually help the majority of people — social programs, preventive health care, even free college tuition — are not very expensive. Most human beings’ needs are actually quite modest, even if you’re thinking in terms of “full human flourishing” — which of course is a ridiculous thing for the government to care about, but stay with me. The really expensive things are huge tax cuts for the wealthy ($300bn), bailouts for reckless speculators who threaten to undermine capitalism as a whole ($700bn), and unnecessary wars ($700bn).
Bailout Burnout
I haven’t read through all of these yet, but Talking Points Memo has a great list of various economist’s reactions, including Paul Krugman’s, Robert Reich’s, and Nouriel Roubini’s, to the failure of the bailout plan to pass through Congress and where that leaves us. Definitely worth checking out.
“Fleecing Shareholders”
In the comments section recently a discussion erupted extending from fascism, to liberalism, to communism, and finally to the Wall Street bail-out. Yesterday Mark featured part of the discussion on the economics of fascism. Today I want to bring up this notion of “fleecing shareholders” as a form of benefiting the majority. As Ezra Klein notes in the above link
…[T]he majority of the country doesn’t own any stock. Indeed, the bottom 90 percent of us only own 20 percent of the market. The top 10 percent, by contrast, control 80 percent, with the top one percent of Americans controlling an astounding 36.9%.
You can see a graph over at The American Prospect, and the data comes from the Economic Policy Institute. So, again, the question with the bail-out is one chiefly concerning the question of who benefits, but seeing as the bail-out is in limbo at the moment there is not much else to add.
Bailout Talking Points
Posted at 5:22 PMThe blogosphere reacts!
- David Brooks thinks we should take this opportunity to completely overhaul the financial system by hoping for the appearance of a financial oligarchy of “bipartisan” Economic Wise Men who will fix everything. Glenn Greenwald reminds him that this was basically the guiding idea before the entire financial market collapsed!
- Kos asks why some of the planned $700 bn. bailout will go to banks that aren’t even failing. TPM has more thoughts on this.
- Doubt is cast on whether or not we’re really in a “crisis.”
- Jonathon Schwarz at A Tiny Revolution sums up what I will likely find to be the most fucked up part this entire scheme:
Whatever happens with the Wall Street bailout, I hope the recipients will take $30 million and endow a Hank Paulson Chair in Free Enterprise at AEI. Then the person in that position can spend the next forty years writing op-eds and going on TV telling us how if we just deregulate Wall Street it will make us all rich! rich! rich!
I think it’s clear that the Fed/Treasury is in the wrong: for one, the problem is not simply “liquidity,” it’s rather that the financial institutions, which had little oversight, were using bad loans as collateral. Some have used that argument to assert that the people who took out subprime mortgages are fundamentally at fault, but this perverted logic ignores the fact that the entire solipsistic speculation started with Wall Street.
Now all of the die-hard free-marketeers are becoming socialists, and so it’s at such a time that socialists should be extremely skeptical: is institutional oversight really the answer? What kind of punishment should be administered? How will a bailout close to $1 trillion affect social benefits and public programs? It seems that, if anything, this period of crisis offers us a chance to rapidly re-politicize politics against the quasi-religious view that capital needs to be “sacrificed” to the totemic Market Deity. As Glenn Greenwald writes:
This was one of the central arguments of David Sirota’s book — Uprising: An Unauthorized Tour of the Populist Revolt Scaring Wall Street and Washington: namely, that while cultural wedge issues have divided ordinary American on the Left and Right, there is a growing, angry populism among both factions against the dominant Washington establishment elite that is so transparently running the Federal Government on behalf of the tiny group of corporate elite which funds and owns them. The backlash against the Paulson plan on both the Left and Right is a function of that same anger and resentment.
The Left ought to take advantage of this populist resentment and transform it into a political movement, rather than side with liberals calling for more oversight or modifications of the Republican financial agenda, such as Chris Dodd. How they might go about this, I’m not quite sure.
The Pantheon of Capital
Premediation:
So where does the agency of the market to prompt the federal government to hand over nearly $1 trillion to bail out Wall Street come from? This agency, I would argue, in some sense comes from, participates in, the agency of premediation. The tone of this mediation is urgency. We are to be on the alert, to be concerned, and ultimately to be scared. The agents that we should fear are called “the market” or “Wall Street” or “the Dow.” “The market will not be happy if too many limitations are put on this bailout.” “Wall Street is worried that unless the Fed acts, more turbulence lies ahead.” “The Dow is demonstrating its concern about the terms of the bailout.” Not unlike the pantheon of Greco-Roman gods, these powerful creatures need to be feared and respected and pacified. The mediasphere is filled with the priests and votaries of these gods, warning the public of the danger that could come if they are angered or their will is flaunted.
…But the gods of Wall Street are in turmoil and they are still at the present moment more powerful than the collective voices of Main Street. Only when the premediation of Main Street’s agency begins to compete with the premediation of Wall Street’s agency will it be possible to imagine an economic future in which the US government acts to bail out the overwhelming majority of the American public who are threatened by this financial crisis, not the minority of those whose investments and livelihoods depend upon the financial markets.
‘All of a Sudden’
Senator Bernie Sanders:
For years now, they’ve told us that we can’t afford — that the government providing healthcare to all people is just unimaginable; it can’t be done. We don’t have the money to rebuild our infrastructure. We don’t have the money to wipe out poverty. We can’t do it. But all of a sudden, yeah, we do have $700 billion for a bailout of Wall Street.
Watch the video interview here. (Via Daring Fireball.)
Paulson Bailout Plan a Historic Swindle
William Greider in The Nation:
Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses—many hundreds of billions, maybe much more. What’s not to like if you are a financial titan threatened with extinction?
If Wall Street gets away with this, it will represent an historic swindle of the American public—all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called “responsible opinion.” If this deal succeeds, I predict it will become a transforming event in American politics—exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.
(Via A Tiny Revolution.)
The Free Market
Atrios over at Eschaton:
The entire financial system is practically collapsing and they’re lamenting the possibility of more regulation. I don’t think the sports/referee metaphor is perfect, but it’s probably good enough. People who prattle on about “the free market” are usually too stupid to have a clue how complicated and pervasive the “rules” had to be to to get a well-functioning modern market system: sophisticated concepts of contracts and enforcement, property rights, legal entities, proper accounting, bankruptcy, limited liability, etc… etc…, did not descend from the heavens but were, in fact, created.
The Sound of Raining Bullshit
Lenin chimes in with his usual perspicuous analysis of the situation:
… The news can’t talk sensibly about this, because they can’t talk about class. They implicitly favour the capitalist purview in their focus, but they cannot directly address the issues involved. That is why no one relying on the papers and the television for enlightenment is going to have a clue what is going on…. In fact, the best explanation you are likely to end up with is that some banks made some horribly bad bets on mortgages for poor people (and, therefore, what? - poor people shouldn’t have mortgages?). To talk realistically about this crisis is to talk about what has happened to wages and profits for thirty years, the contours of class struggle and the associated political projects (socialism, social democracy, neoliberalism, etc), as well as the basic mechanism of exploitation behind that. To talk realistically about the issues raised by this crisis is also to talk about class, and particularly the impact on working class people. You can’t understand why those who gain most from the system suffer least when it fails, while those who gain least suffer most unless you at least mention the fact that there is such a thing as highly concentrated class power in the society…
Change We Can Believe In
While John McCain is out and about touting how the “fundamentals” of the economy are strong (as to what he means by “fundamentals,” I’m sure he has a very thorough answer), because to say they aren’t means that you are insulting hard-working Americans (unlike, say, actively voting against workers’ rights), McCain’s economic council is busy pretending that they had nothing to do with bringing about one of the worst economic crises in U.S. history. Worth mentioning in particular is Phil “A Nation of Whiners” Gramm’s special role:
Gramm orchestrated the Gramm-Leach-Bliley Act in 1999 which “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.” He also pushed the Commodity Futures Modernization Act in 2000, which made legal “the mortgage swaps distancing the originator of the loan from the ultimate collector.” The Nation writes that “those two acts effectively ended significant regulation of the financial community.”
So basically, if this chart of Obama’s and McCain’s respective tax proposals hadn’t already convinced you that it’s in your best interest to vote for Obama, then McCain’s surreal ineptitude regarding the economy, as well as his cadre of buffoons, should perhaps be some food for thought.
Is the Globalization Consensus Dead?
Dani Rodrik in Business 24/7:
The world economy has seen globalisation collapse once already. The gold standard era – with its free capital mobility and open trade – came to an abrupt end in 1914 and could not be resuscitated after the First World War. Are we about to witness a similar global economic breakdown?
The question is not fanciful. Although economic globalisation has enabled unprecedented levels of prosperity in advanced countries and has been a boon to hundreds of millions of poor workers in China and elsewhere in Asia, it rests on shaky pillars.
(Via 3 Quarks Daily.)
The Rich Get Richer
A telling graph.
Iraq Private Sector Falters; Rolls of Government Soar
Despite early attempts by the U.S. to turn Iraq into a neoliberal utopia, where government is a hollow instrument used merely to transfer wealth from the masses to corporations through taxes and subsidies, the abysmal failure of this model has led to a huge increase in government jobs, according to the New York Times.
The Times is also right to point out that the impetus behind this policy isn’t completely economic: one advantage of government-based jobs is that they don’t necessarily have an incentive to cut costs, which, in the case of private corporations, creates large swathes of unemployed who have historically been the largest economic bloc to join up with paramilitary brigades like al Sadr’s Mahdi Army. The irony of course being that the so-called “free market” is perhaps the biggest instigator of insurgency in Iraq.
Lou Reed Does Not Care About Dow Jones
Andrew M. Goldstein obviously doesn’t know anything about Lou Reed and also asks stupid questions. Here’s his interview with Lou in New York Magazine:
Sirius’s impending merger with XM is anticipated to boost earnings. Do you own any stock in the company?
What are you, a fucking asshole? I’m here telling you the truth about music and you want to know if I have stock in the fucking radio? You fucking piece of shit. What did I do to deserve that?Moving on. You’ve got a film out, you’ve got your radio show, you’ve got a new book of photography coming up — is there a new album in the works?
No. Nothing I feel like talking about. Good-bye.
(Via Rock & Roll Daily.)