Friday, December 31, 2010

December 31, 2010--Celebrating

Instead of writing. So I'll see you next year. On Monday. In the meantime, have a very happy 2011.

Thursday, December 30, 2010

December 30, 2010--Lunacy

Here, with windows facing east and south and west and the swing of the tides visible right over the dune line, we live with the moon.

Last week's final full moon of the declined year rose in our east-facing window as far south as we are to see it for some months; and as the earth early the next morning moved in perfect synchronization with the sun and our only natural satellite, the moon was fully eclipsed by the earth's dark shadow.

No wonder, etymologically, lunacy followed as we for a few minutes were transformed, gape-mouthed, by the wonders of La Luna.

So I can't wait to get my hands on Bernd Brunner's new book, Moon: A Brief History. In a review that appeared in Tuesday's New York Times (linked), we learn that our moon formed four and a half billion years ago when a sizable chuck of the earth was jarred loose after a collision with a celestial object the size of Mars. Repeat, the size of Mars!

But beyond a recounting of celestial science, the book, more interestingly, is devoted to how the very existence of the moon has fired the imagination of all of earth's peoples from before historic times to the present, has contributed to the myth hoard of all religions, and haunted the spirits of writers and visual artists. Marcel Proust, our greatest observer, famously wrote of the moon's capacity to inspire, of "the ancient unalterable splendor of a Moon cruelly and mysteriously serene."

A moon that to Siberian shamans adds magical powers while to the Aztecs the moon in its dark phase was thought to bring death. And how both are still true for us today. In spite of our advanced knowledge, regardless of what we know from our science, on a dark and chilly night as the moon breeches the distant horizon, how many of us have not thought about magic and death?

Wednesday, December 29, 2010

December 29, 2010--Play Ball

The blizzard in the northeast disrupted many things. Air traffic most dramatically but also Amtrak and the ever-unreliable Long Island Railroad. And of course the post-Christmas shopping madness was interrupted by one of the worst snowstorms in historical memory.

It also got in the way of various sporting events. After being humiliated by the Green Bay Packers, the New York Giants couldn't slink out of town--they had to hole-up in Wisconsin until their charter flight could get the green light to return them to New York. For all I know they are still stranded.

The National Hockey League managed to get all their scheduled games in. Hockey, after all, is played on ice and most of the players are Canadian and they know about cold and snow and blizzards.

I used to think that American football was also a winter sport. It is played well into and through the winter. The Super Bowl takes place in late January. But come to think of it, it always seems to take place in Miami or some claustrophobic domed stadium. The rest of the games, though, are played rain or shine, in snow, in thick fog, and even blizzards. Actually, some of the game's greatest moments occurred during foul winter weather.

For example, the late December 1958 game between the Browns and the Giants. To advance to the playoffs the Giants had to win. Until the 4th quarter they had been behind but managed to tie the game 10-10 with about two minutes left to play. In a blinding snowstorm they advanced the ball to the Cleveland 34 yard line. Their kicker, Pat Summerall trotted onto the field. He could barely see the goal posts 49 yards from where the ball would be spotted. But he made it and the alcohol-warmed crowd at Yankee Stadium went crazy since it meant that they would advance to the championship game.

Some years later, in December of 1982, the Miami Dolphins were playing the New England Patriots up in Foxborough, Mass. The night before there had been freezing rain and the field was slick when the game commenced. Then a blizzard struck and the referees had to call time out frequently to bring snowplows onto the field to clear the yard markers and the goal lines so the players and referees could see where they were. The game continued in spite of the weather. In fact, with only minutes left, with the score tied 0-0, the snowplows were again summoned out onto the field. While cleaning the yard markers the Patriot fan operating one of the plows veered to the left and "illegally" cleared a patch on the filed which the Patriots' kicker, John Smith, then used to kick the winning field goal. The final score--Patriots 3, Dolphins 0.

The players and fans love games of this kind. While we tend to forget the details of most contests we will never forget Summerall's field goal or how the field was cleared during the legendary Snow Plow Game.

But that was then. A once-upon-a-time time when TV and big bucks didn't rule and we were more intrepid than we now are. So, with a snowstorm approaching, the National Football League this past weekend preemptively postponed Sunday night's game between the Philadelphia Eagles and the Minnesota Vikings, scheduled to be played in Philly, from Sunday night to Tuesday night! (See linked New York Times story.)

Former Philadelphia mayor and now departing Pennsylvania Governor Ed Rendell had it right when he expressed outrage about this sissy move. He said that football games should never be cancelled because of weather. That playing in all kinds of weather is a part of the game. He went on to point out that if the game were scheduled to be played in China, thousands would be mobilized to clear the field and parking lots and fans would figure out how to get to the stadium, which would thus be full. And those walking miles through the tundra to get to the game would all be doing calculus.


Tuesday, December 28, 2010

December 28, 2010--ATM

A friend's daughter, Sally, is home from college for the holidays. Her family is close knit and fortunately affluent. Not rich but they have enough so that they have never had to struggle--both parents are successful professionals--and for the daughter and her sister very little was ever denied.

In fact, neither one of them ever had a paying job. The parents were able to subsidize a series of volunteer "jobs" whenever they were on school break or holiday. It was thought that these were good resume-building experiences, good to list on college applications. The strategy worked--even though neither of them were "scholars" nor did they score off the SAT charts, they did manage to be admitted to good colleges from which Sally is now home until mid-January.

She was proud to tell us about her first paying job--tutoring students in a public school in Boston where she is enrolled as a freshman. She was feeling so good about her experiences that she still had her first paycheck, which she was quick to show Rona. "Look at this," she said standing very tall and displaying a broad smile, "I love what I'm doing and they even pay me."

"That's great, Sally," Rona said, "It is satisfying to do work of this kind and also to make some money." Always trying to offer a lesson or two, she added, "Earning money is the best way to learn to appreciate it. Not take it for granted." She knew Sally had up to this point never felt the need or was pressured to make any money on her own and she has been concerned for as long as we knew her and her family that she would grow up with an unrealistic and entitled relationship to money, its sources, and power.

"So what are you going to do with it?" I asked, curious about how she was thinking about spending it.

"Give to my father," she said.

"As a gift?" Rona asked, "For his help supporting you?"

"No. I mean give him the check so he can put it in my bank account."

Clearly surprised by this, Rona said, "You mean you yourself aren't planning to put it in the bank?"

"He puts my birthday gifts and other money into the bank for me."

"I don't understand why you don't do that yourself. I mean you're of legal age now." She's 19, going on 20.

"This is the way we always do this."

"It's not my business of course, but do you do any banking for yourself? I mean, do you have a bank account, a checking account in Boston?"

"No I don't. I only have the one here that my father puts my checks into. Like I told you."

Sally was not upset with what we had been asking her, so Rona wondered,"When you need cash, you know, for daily expenses, I assume you don't get an allowance like when you were in high school?"

"No, that stopped when I went off to college for my freshman year."

"And so, how do you get cash?"

"I put this card in any ATM machine," she had taken it out of her jacket pocket and showed it to Rona. Her father's name was embossed on the card.


"Money comes out of the machine. It's amazing." She was grinning broadly. "It's like a money machine."

A bit incredulous, Rona continued, "And do you know how the money gets put in the machine?"

"I suppose people in the bank keep filling it up."

"That's not what I meant--how it gets there physically--but where the money actually comes from."

"The machine," she now was showing some annoyance that Rona wasn't getting it. "Like I told you. From the ATM."

"But that's linked to an account. To your father's. He works as a lawyer, makes money, and deposits what he makes in his bank. He then gave you a card for that account and you use it to take money out of it, from his earnings, not from the machine."

It was Sally's turn to look incredulous. "To tell you the truth, I never thought of it that way."

Later that day, when we were alone, Rona said, "You know the discussion we had this morning with Sally?" I nodded. "It could be a metaphor for what has become of us as a people. Her parents can afford to raise and support her in this way, forgetting for a moment what it does to her expectations about money; but think about all the other people with less money who use their bank and credit cards as if they are linked to ATMs that give away 'free money.'"

"Or how so many used the equity in the houses in the same way. Or lived abstractly off of revolving credit until they maxed out or the bubble burst. And now they are middle-aged left with inadequate savings or none at all."

"Any of this could be a metaphor for our times," Rona sighed, "Spend don't save and when you need more just go to the neighborhood ATM where money just appears as if by magic."

Monday, December 27, 2010

December 27, 2010--Recovering

From a bit too much holiday cheer. I will return tomorrow with a cautionary tale.

Friday, December 24, 2010

December 24, 2010--COLA

I just received my annual letter from the Social Security Administration. Yes, from Social Security. I am old enough. Check out my picture to your right.

It said:

Your Social Security benefits are protected [my italics] against inflation. By law, they increase when there is a rise in the cost of living. The government measures changes in the cost of living through the Department of Labor's Consumer Price Index (CPI). The CPI has not risen since the last cost-of-living adjustment as determined in 2008. As a result, your benefits will not increase in 2011.

Obviously no one from either the Labor Department or the Social Security Administration has been in a supermarket lately or bought a tank of gas.

I gassed up this morning in Delray Beach, Florida and paid $3.05 a gallon. Last April, when we filled up before heading back to New York we paid "only" $2.85 a gallon. Yesterday we were in Publix where we stocked up on groceries. My lunchtime staple, yogurt, which last spring was 5 for $3.00 is now 4 for the same $3.00. A dozen eggs were a quarter more than last year. My favorite guilty pleasure, Haagen-Dazs Five Ingredient chocolate ice cream which had been $2.85 a pint was $3.50.

I could go on, but won't. It's Christmas eve day and I don't want to depress you or myself.

My first thought--Thankfully I am fortunate enough not need any Cost of Living Adjustment (COLA) this year. Maybe, since my taxes will not be raised thanks to the Republicans, not getting a COLA will be my little way of helping the government keep next year's deficit to only about $2.0 trillion.

My second thought--how do they calculate the CPI anyway. I looked that up and found that there is a do-it-yourself way. I like do-it-myself things and since maybe you do as well, take a look at this:

(1) Determine the goods and the time frame for which you are interested in measuring the inflation rate. People often want to know how prices have increased over a year. Suppose, for simplicity's sake, that you are interested in the inflation rate for a basket of goods that includes a gallon of milk, a loaf of bread and a paperback novel.

(2) Calculate the number of units you purchase of these goods and the prices you paid one year ago. For example, suppose you buy four gallons of milk, three loaves of bread and a paperback per month and that one year ago, you paid the following prices: $2.75 per gallon; $2 per loaf; and $7 per novel. This means you spent a total of $24 a month one year ago for these goods.

(3) Repeat Step 2, but consider the prices you pay now. Suppose the current prices are $3.50 for a gallon of milk and $2.50 for a loaf of bread, while the price of a paperback is the same $7. This means you now spend $28.50 a month for the same basket of items.

(4) Subtract the amount you spent per month one year ago ($24) from the amount you spend now ($28.50), then take the difference ($4.50) and divide by last year's amount ($24). This gives you a result of 0.188 (with rounding).

(5) Multiply the result you obtained in Step 4 (0.188) by 100 to obtain the percentage rate increase for the selection of goods you're interested in studying. For this example, the results show that the consumer price index for a gallon of milk, a loaf of bread and a paperback novel increased 18.8 percent in the past year.

That 18.8 percent from their example seemed a little high to me. I did the best I could since I don't keep the kind of detailed spending records I would need to do my calculations accurately, but I nonetheless derived a personal CPI of about 5.0 percent. So how did the U.S. Government come up with their zero inflation story?

Here's how:

In recent years when the government hoped that the CPI would rise as little as possible because any increase would have an enormous impact on the total paid out to Social Security recipients, money the government would have to borrow from China, they invented a new way to compare one year with the next.

Instead of doing it the way outlined above--via a literal comparison of year-to-year expenses for the same things (milk, bread, paperbacks)--some brilliant bureaucrat came up with the concept of "fixed standard of living" (FSL).

FSL looks at year-to-year comparisons, not by comparing oranges with oranges, but comparing oranges with less expensive fruit--fruit that costs the same per pound this year as oranges cost last year. To the Labor Department fruit is fruit. Additionally, if as we all know beef is much more expensive this year than last, they assume people who in 2009 were eating sirloin steak at $8.95 a pound are this year eating $7.65 a pound chuck steak. Both years you're eating beef, but this year you're paying less for it, which offsets the dramatic rise in gas prices.

From a fixed-standard-of-living way of looking at things, any kind of beef is still beef.

Thus, zero inflation and no COLAs.

Five years from now the Labor Department and the Social Security Administration will be in big trouble when trying to find a fixed point of comparison for 50-percent-fat-content chopped meat. They will have traded us down to that and there will no longer be any cheaper beef to consider as its equivalent.

So at that time to claim that there is no inflation, in standard of living terms, they'll have to consider comparing chopped meat to dog food.

But I promised to be merry. Sorry.

Be merry.

Thursday, December 23, 2010

December 23, 2010--Home for Xmas

If you are wondering why the U.S. Senate has suddenly sprung to bipartisan life and in a few short days passed--

(1) A massive tax cut that includes much more spendable and thus stimulative money for the middle class than Republicans ever before voted for, including agreeing to extend unemployment insurance which they traditionally call getting something for nothing and which, they claim, discourages people from seeking work and gives lazy people money which they will then then spend on drugs. This latter slander made recently by Newt Gingrich who hasn't had a job in years.

(2) Do-Ask-Do-Tell legislation, something that homophobic Republicans such as John McCain and (here's a joke) the notoriously never-married Lindsay Graham find to be an anathema. What will all our straight-shooting boys, they fear, do when under attack while in their foxholes--fight or fool around? In the meantime, it passed easily with significant GOP support.

(3) The New SALT treaty with Russia that is primarily about allowing U.S. inspectors to return to Russia, after years of being excluded, to monitor if they are cheating on previous agreements. Again, John McCain and his fear-mongering friends see this as evidence that the hated-Obama is soft on communism and will sell out the U.S. for a cheap headline. About cheap headlines he and they are experts.

(4) And then the 9/11 health care bill was passed unanimouslyin the Senate. It will provide a little more than $4.0 billion over five years to allow for the treatment of rescue workers and nearby residents who are lingering victims of the 9/11 atrocity. After not even flinching for a millisecond when they blackmailed Obama into compromising away hundreds of billions in tax cuts for the richest 2 percent of Americans--billions not paid for at all and thus added to the very debt that the GOP daily rails against and blames on tax-and-spend Democrats--they for months refused to appropriate the money for those they, with tears in their eyes, call "heroes," because, are you sitting down, it is not paid for! $4.0 billion not paid for, which these days is mere chump change.

Well, when Mayor Rudy reminded his fellow GOPers that unless they came through with these crumbs of cash for these heroes they would forever cede claim to 9/11 as their exclusive political asset. If they allowed the Dems to capture the issue of being these heroes' patrons what would be left for Republicans to demagogue? Rudy, for one, would have nothing to talk about and would even have to look for honest work. And we know how had it is to find jobs these days.

So, after two years of failed attempts to work in a bipartisan way, colleagueship broke out all over Washington. Happy days must be here again.


More likely two things were at work--

Republican regulars know that in just two weeks they will be joined in Congress by dozens of right-wing radicals and literally crazy people. My personal favorite in both of these regards--about-to-be-senator Rand Paul. And with them in town business as usual will be over. The Tea Party will rule. So mainstream Republicans wanted to get at least something done before full gridlock sets in.

Second, and I suspect more important, (Mormon) Majority Leader Harry Reid threatened to keep the Senate in session right through Christmas, and we know how much being home for Christmas means to John McCain. You know, sitting around the tree and opening presents with Cindy and daughter Meghan and of course having to explain to them why he voted against DADT.

And so I say, Merry Christmas to all!

Wednesday, December 22, 2010

December 22, 2010--Last Minute Shopping

Thus I will return on Thursday.

Monday, December 20, 2010

December 20, 2010--Everything For Nothing

During the 1990s bubble-boom of Internet or dot-com stocks, then Federal Reserve chairman Alan Greenspan, said: "There is an ever increasing conceptualization of our Gross Domestic Product--the substitution, in effect, of ideas for physical value."

As with many things the owlish Greenspan would oracularly proclaim, this requires some translation.

He was commenting on the then almost daily floating of new IPOs to a greed-saturated public, new stock offerings that would sell for hundreds of millions of dollars when the companies offering them had never made a dime of profit. It no longer mattered, Greenspan opined, for a company to actually produce something of value or, God knows, make a profit. All that mattered in the new economy was that a company's ideas had apparent, if unverified worth.

He said pretty much the same thing more recently when the largest bubble in American economic history collapsed--the real-estate/sub-prime mortgage scam--and we know where that has brought us.

It is incredible that Greenspan, a disciple of ober-free-marketeer Ayn Rand, who literally sat at her feet in her Manhattan parlor, ever rose to such a position of power and that he was able to cling to office for 20 years though his predictions and uncontested actions brought down upon us one disaster after another. But here we are.

Last Saturday, over dinner with a bright young cousin, we talked about what Greenspan and a series of federal government enablers, Democrats as well as Republicans, have wrought.

We came to conclude that not only are we as a result faced with the most daunting crisis in a century but our culture as well as our economy may be irreparably damaged.

Everyone has been saying that we have given away that part of our economy that produces things of "physical value." Almost all of it has been outsourced to China and countries many Americans would have difficulty locating on a map. Just take a look at the labels on your clothing to get a picture of how globalized manufacturing has become.

We used to be a nation of tinkerers. People who invented things like the Model T or personal computers in their garages and from there spawned colossal industries that went on to employ millions of hard-working people. Others started small hamburger or dry goods businesses on shoestrings and from that emerged MacDonalds and Walmarts, again changing the American landscape (not always for the better) and providing additional millions of jobs for local folks.

And from many of these innovations giant service industries developed. 107 years ago the Wright brothers took the first sustained flight and not many decades later we had a global airline industry. Basic research at Bell Labs led to the invention of the transistor and wirelessness, both of which changed the world and our economy. And of course from small town and big city banks over time the financial services industry sector of our and the world's economy evolved.

Many are wondering if we have lost the innovative edge that propelled us to the forefront of the world's economies. One never knows, of course, what a young Bill Gates or Mark Zuckerberg might this very minute be concocting in her or his basement in Peoria, but there is still much to wonder about.

Including whether our investment community, our lenders, our government are set up any longer to help catalyze and then support the growth of whatever promising might be incubating. We do know that there is very little lending going on, that there are more patents being awarded to Chinese and Indian entrepreneurs than to Americans, and we know that our education system has slipped to second-world status. None of these are good signs.

What we were speaking about last Saturday was not so much these now widely agreed upon realities but rather whether we are seeing the emergence of a culture that values getting or making something from nothing. A culture spawned from Greenspan's economy based purely on ideas. Ideas of the sort that too often now seem to be more scams than the healthy growth of intellectual capital.

There were two examples that we touched on--the full emergence over the past two decades of an economy largely based on so-called "financial products" and a dinner table case study of what has happened to our once-vaunted airlines industry.

We now know that the recent economic boom was mainly the result of a real estate bubble where valuations came to be based more on a feeding frenzy of greed and fraud than any intrinsic rise in the worth of the properties themselves. And that bubble was inflated by giving "free money" to under-qualified buyers (the sub-prime borrowers) and to the banks and insurance companies that commodified and sliced and diced and sold and resold these hyper-inflated mortgages after turning them into financial products of dubious value.

In effect, the apparent growth of our economy, where it seemed that all boats were endlessly rising, was more the result of a giant Ponzi scheme than anything based on "physical value." And when there was no longer any private or government money pouring in to keep the bubble inflated there was a cataclysmic collapse because everything was based on nothing.

Innovation, American ingenuity had been transformed into scheming.

The creators of these fictive financial products were unduly rewarded, even when their scams were exposed and shown to be the cause of tens of trillions of dollars of lost value.

As I suggested to my cousin, the best-worst example of how corrupt the entire system had become were the tens of millions of dollars of "retention bonuses" that were paid to the employees of AIG's Financial Products Division. The very folks who had brought about the debacle were paid millions in spite of their disastrous performance. AIG's CEO defended these bonuses because without them, he whined, the company would lose their most valuable employees! Their best and brightest. The same people who were among those primarily responsible for the global calamity.

Shifting the subject, my cousin who had just returned from a trip to Hong Kong, was full of fresh airlines stories he was eager to share. How this once proud industry was now in the business of nickel and diming customers. From charging for checked baggage and pillows and peanuts; or how you were held up for cash if you wanted a printed ticket and how much you had to pay if your plans changed and you needed to rebook a flight.

He said that airlines' favorite employees now are not those who come up with innovative ideas for new and improved services but those who figure out how to get us to pay for things that are already a traditional part of the flying experience. Another version of squeezing something out of nothing while charging a premium for it.

I said, "I'm depressed. Let's have another glass of wine." Which we did, actually two, and as a result the conversation veered toward the weather. We wondered, would there be another cold snap next week and . . .

Friday, December 17, 2010

December 17, 2010--Auto Repair Limbo

That's where I spend a good part of yesterday--servicing and (minor) repairing my car--and so I did not get much typing done.

I was planning to write about the obscure Financial Crisis inquiry Commission, a bipartisan group that was asked to look for the causes of the financial crisis in the U.S. Under the radar, in a totally partisan way, they issued their report earlier this week. It is a scandal and exposes, yet again, how bitter ideological disputes cloud even attempts to write history. In this case, history of the recent past.

Better than anything I could have written on the subject, Paul Krugman, in a New York Times op-ed piece, "Wall Street Whitewash," gets its right and so I have reprinted it here:

When the financial crisis struck, many people — myself included — considered it a teachable moment. Above all, we expected the crisis to remind everyone why banks need to be effectively regulated.

How naïve we were. We should have realized that the modern Republican Party is utterly dedicated to the Reaganite slogan that government is always the problem, never the solution. And, therefore, we should have realized that party loyalists, confronted with facts that don’t fit the slogan, would adjust the facts.

Which brings me to the case of the collapsing crisis commission.

The bipartisan Financial Crisis Inquiry Commission was established by law to “examine the causes, domestic and global, of the current financial and economic crisis in the United States.” The hope was that it would be a modern version of the Pecora investigation of the 1930s, which documented Wall Street abuses and helped pave the way for financial reform.

Instead, however, the commission has broken down along partisan lines, unable to agree on even the most basic points.

It’s not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks.

Then the bubble burst, with hugely disruptive consequences. It turned out that Wall Street had created a web of interconnection nobody understood, so that the failure of Lehman Brothers, a medium-size investment bank, could threaten to take down the whole world financial system.

It’s a straightforward story, but a story that the Republican members of the commission don’t want told. Literally.

Last week, reports Shahien Nasiripour of The Huffington Post, all four Republicans on the commission voted to exclude the following terms from the report: “deregulation,” “shadow banking,” “interconnection,” and, yes, “Wall Street.”

When Democratic members refused to go along with this insistence that the story of Hamlet be told without the prince, the Republicans went ahead and issued their own report, which did, indeed, avoid using any of the banned terms.

That report is all of nine pages long, with few facts and hardly any numbers. Beyond that, it tells a story that has been widely and repeatedly debunked — without responding at all to the debunkers.

In the world according to the G.O.P. commissioners, it’s all the fault of government do-gooders, who used various levers — especially Fannie Mae and Freddie Mac, the government-sponsored loan-guarantee agencies — to promote loans to low-income borrowers. Wall Street — I mean, the private sector — erred only to the extent that it got suckered into going along with this government-created bubble.

It’s hard to overstate how wrongheaded all of this is. For one thing, as I’ve already noted, the housing bubble was international — and Fannie and Freddie weren’t guaranteeing mortgages in Latvia. Nor were they guaranteeing loans in commercial real estate, which also experienced a huge bubble.

Beyond that, the timing shows that private players weren’t suckered into a government-created bubble. It was the other way around. During the peak years of housing inflation, Fannie and Freddie were pushed to the sidelines; they only got into dubious lending late in the game, as they tried to regain market share.

But the G.O.P. commissioners are just doing their job, which is to sustain the conservative narrative. And a narrative that absolves the banks of any wrongdoing, that places all the blame on meddling politicians, is especially important now that Republicans are about to take over the House.

Last week, Spencer Bachus, the incoming G.O.P. chairman of the House Financial Services Committee, told The Birmingham News that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

He later tried to walk the remark back, but there’s no question that he and his colleagues will do everything they can to block effective regulation of the people and institutions responsible for the economic nightmare of recent years. So they need a cover story saying that it was all the government’s fault.

In the end, those of us who expected the crisis to provide a teachable moment were right, but not in the way we expected. Never mind relearning the case for bank regulation; what we learned, instead, is what happens when an ideology backed by vast wealth and immense power confronts inconvenient facts. And the answer is, the facts lose.

Thursday, December 16, 2010

December 16, 2010--Paul the Elder

While we are wondering if soon-to-be Kentucky senator Rand Paul in early January will filibuster legislation required to raise the national debt limit and thereby plunge the U.S. economy into technical default and render our treasury bills impossible to sell to China and others, there is no doubt at all about what his father, Ron, will do when he takes over the chairmanship of the previously sleepy House subcommittee on domestic monetary policy which oversees the Federal Reserve, the currency supply, and the value of the dollar.

We know because he has just published a book boldly named, End the Fed. He means to move to eliminate the Federal Reserve. Yes, get rid of it altogether.

In the book he expounds views that are derived from the Austrian School of economic theory.

Austrian School economists generally hold that human behavior is so complex as to make any mathematical modeling of a market extremely difficult. In other words, they toss out all current economic theory, of the left or right, because all contemporary theory is at its heart quantitative.

Since we cannot understand how markets behave, Austrian School followers advocate a laissez faire approach to the economy. They argue for the strict enforcement of voluntary contractual agreements between economic agents and hold that commercial transactions should be subject to the least possible imposition of coercive force. In particular, they argue for an extremely limited role for government and the smallest possible amount of government intervention in the economy.

For Ron Paul this means the effective end to all regulation of the economy because if left entirely to itself it will always self-correct and things in the long run will be fine. Just fine. For evidence from reality of just how fine look at the debris from the last decade of deregulation.

Further, he argues that a government should not have a central bank (no Fed) or dictate economic or monetary policy. And he of course calls for us to return to the gold standard. Never mind that economists on the left (Paul Krugman) as well as on the right (Milton Friedman) consider Austrian School thought to not only be outside the mainstream but, well, crackpot.

Crackpot or not, Paul is now in a commanding congressional position to influence the debate about the role of government in the economy. Up until the recent midterm election he had been kept far away from any leadership role by his Republican colleagues since they too considered him to be too far out. But now with 40 or so new members of Congress entering with the essential political support of the Tea Party (son Rand very much included), they have thrown him this bone--this subcommittee chairmanship.

I can guarantee that he will make the most of it, in large part since he self-confessedly admits that he still has presidential ambitions. (He says it is 50-50 that he will run, which in politician-speak makes it a certainty.) Among other things we can look forward to endless oversight hearings of the Fed and shrill demands for a forensic audit of its past actions. Coming from someone else, this would be fair game, maybe even wise; but coming from Ron Paul, who already has his mind made up about the future of the Fed (and as a consequence of our economy), it is a cable-news-C-Span disaster in waiting. Good theater but dangerous policy making.

The New York Times reports that when son Rand comes to Washington he will be rooming with his father. (Linked below.) Congressman Ron says this is fine with him as long as Rand doesn't expect him to do the cooking, though there is already thought among Tea Party folks that a good team in 2012 to run against Obama and Biden would be Paul-Paul. I hope that Ron will squelch these rumors, come to his senses, and make dinner for his son, who looks to me like he could use a good meal.

Wednesday, December 15, 2010

December 15, 2010--Day Off

I will be back tomorrow, Thursday. Stay warm wherever you are.

Tuesday, December 14, 2010

December 14, 2010--Constitution Worship

In a little more than two weeks Rand Paul and a host of other ideologues will be taking their seats in Congress.

We do not know for sure how he and others, passionate about cutting the national debt, will vote on a piece of legislation vital to the economic future of the American economy: a bill to raise the national debt limit. Unless this occurs the U.S. will fall into technical default (the sort of thing on a much smaller scale Europeans are worried might happen to Ireland) and our treasury bonds will no longer be viable. Worldwide financial panic would likely ensue.

Rand Paul and many of his soon-to-be colleagues are on record as being opposed to it, threatening to vote "no" and let the chips fall where they may.

More seasoned politicians and commentators say that as soon as Paul and company get to Capital Hill they will begin to like their offices and staffs and perks and will behave like everyone else. In other words, they will forget their commitments and promises and will go along to get along. All to secure goodies for their home districts and begin immediately the process of working to get reelected in two or six years.

I am not so sure.

But there is one thing about which I am absolutely certain--every day we will hear from them about the Constitution.

It will be the touchstone for all debate and discourse. If the Rand Pauls do not see something literally enunciated in the Constitution they will use that seeming absence of guidance and founding-father wisdom as enough reason to resist and oppose.

To them the Constitution is the secular equivalent of the Bible. Actually, they view it as a secular document that embodies biblical tenets and principals. To them it is semi-secular or, better, semi-sacred. And as religious fundamentalists who read the Bible literally they are also constitutional fundamentalists who also read Constitution as literally as they can get away with.

I say "get away with" because the "original" Constitution (including to them the equally sacred first 10 amendments or Bill of Rights) for census enumeration purposes treats blacks as sub human (equal to three-fifths of a white man) and of course relegates women to second class status. Even the Rand Pauls, while clamoring for us to revert to first constitutional principals are not arguing for the reinstitution of slavery (outlawed by the 13th Amendment) or for the repeal of the 19th Amendment which extends the suffrage to women. At least not yet.

They are, though, calling for the repeal of the 14th and 17th Amendments. The former, among other things, grants citizenship to anyone born in the United States, including, ah, the children of illegal immigrants; the latter requires the direct election of senators. Originally, senators were chosen by state governments, not citizen voters; and this gave states more power, in Tea Party Think, than the current system.

This fast and loose relationship to the Constitution's amendments reveals the inner contradictions of the Tea Party movement and its newly elected representatives. To which Constitution are they and we supposed to return and revere? Only the unamended Constitution? That would knock out the Bill of Rights. The Constitution that includes the Bill of Rights and presumably the 13th and 19th Amendments but not the 14th and 17th?

You get the point. These folks are thus semi-constitutional fundamentalists. They hold sacred only that part, repeat part, of the Constitution that they consider fundamental. This presents a consistency problem. If nothing else, Tea Partiers see themselves as consistent and unwavering. But by this pick-and-choose, super-market approach to the Constitution they revel themselves to be anything but.

In a recent New York Times column there was an interesting piece about the long history of Constitution worship. (Linked below.) It showed that not only has there been for centuries this kind of constitutional exegesis that parallels biblical fundamentalism but provides an analysis of why so many Americans uniquely among western nations in hold sacred the Declaration of Independence and the Constitution.

Elsewhere nations had state religions--Catholicism, the Church of England, Lutheranism--which helped provide connective national tissue. But this was something our founders, seeking to chart a new course for us separate from the European traditions and institutions they were seeking to overthrow and avoid, explicitly forbid. There would be no monarchy, no nobility, no established religion. So American citizens, from the beginning, sought other things to knit us together as a nation. We have our common language, our flag, our anthem, our patriotic holidays, and other customs. More than anything, though, we have our sacred texts.

And since these texts do not have a translation problem they not subject to the same interpretive needs. Unlike the Bible, which is in Hebrew and Aramaic (Old Testament) and Greek (New Testament), our secular bible is in English and, if we choose, can be visited in the National Archives and read and understood literally.

Sort of.

I say "sort of" because our Constitution, though in clear English, needs lots of interpretation. That is what our courts are there to do. Just yesterday, for example, a federal judge in Virginia ruled that a part of the new Obama health care plan is unconstitutional. He is a conservative of the stripe that a Rand Paul will be eager to confirm, but he needed to interpret the Constitution as he saw fit to came to a conclusion that conservatives, who want to read the Constitution literally, are already applauding.

As they say, we live in interesting times. Come January in Congress, these contradictions and ideological contortions will be on full flagrant display.

Monday, December 13, 2010

December 13, 2010--The Rubber Room

On the same day that we learned that students in Shanghai's schools outscored everyone else in the world in reading, math, and science--even surpassing Singapore--and that public school children in the U.S. have sipped so far down the list that even kids from Estonia are doing much better than ours, we also learned that in New York City scores of teachers who have been judged to be incompetent have not only not been dismissed but they remain on the public payroll, assigned to do literally nothing but collect their paychecks but who are still expected to show up for "work" every day where they are assigned to hang out in what they self-mockingly refer to as "the rubber room." A term usually applied in a mean spirited way to the place in which "crazy' people are confined. (See linked New York Times article.)

At the moment there are 236 teachers who have been taken out of the classroom and assigned to make-work while their cases grind slowly through the review process. In some instances it has been more than two years since teachers have been required to show up each morning for their union-negotiated 6 hour, 50 minute day. A day during which, among other things, they are asked to hand out application forms, clip papers together, and measure the size of classrooms. With salary and benefits they earn on average more than $100,00 a year and thus the total annual cost to the city is about $30 million.

There are more than 100,000 public school teachers in New York so one can surmise that these 236 who have been accused of molesting children, repeatedly leaving them unattended, or year after year failing to produce even mediocre academic results are the literal bottom of the barrel.

The reason there are so few in this form of animated Purgatory is because of the difficulty of taking administrative action against even the most egregiously incompetent. All 236 have tenure, which is easy to achieve (hang in there for three years and one has a job for life) and an exceptionally powerful union (the UFT) which will leap to one's defense and spend many thousands of dollars protecting anyone accused of almost anything that is not a legal felony (though they defend those too). The system is so punishing to school principals and central administrators that almost all are reluctant to bring a teacher up on charges unless external forces force them to. The public school system in New York (and most big cities), where unions are all-powerful, is a case study of go-along-get-along.

So our children languish while suspended teachers are shuttled from rubber room to rubber room, counting the days until they can retire and forever receive $100,000 a year in pensions and other benefits while others, who should be removed, continue in the classroom protected by lifelong employment, administrative timidity, and work rules that make it nearly impossible to make things better for kids so they can compete with the Chinese and Estonians.

Friday, December 10, 2010

December 10, 2010--Snowbirding: Temporarily Suspended

It seemed simple enough. We spend five winter months in Delray Beach as snowbirds and thus need to forward our mail. It also makes sense, and saves money, to suspend our TV-cable and gas service, our wireless computer card since the house we stay in has a router, and our New York City telephone.

So one cold afternoon before heading south we trudged over to the post office to fill out the mail-forwarding forms and I made a round of calls to Verizon (for the wireless card and our phone) and Time Warner to suspend cable service. And, I also phoned Con Edison to ask about turning off our gas.

When I had done all of this I proudly announced to Rona that by my estimate we would save at least $750 while sojourning in Florida. She smiled and said, “That’s good. But of course you know this amounts to less than what we pay for one week at the house.”

“But we love it there,” I retorted, “And we never thought about how much it costs until just now when I figured out a way to save some money.”

“That’s they way I am,” she confessed, “If you raise money as an issue it sets off my money-spending anxieties. But we’ll be more than fine. We can easily afford whatever it costs. You did very well,” she was smiling affectionately at me, “It’s always good to be careful about money. And why give Verizon and Time Warner and Con Ed money they don’t deserve?”

I sensed she was about to go off on a corporate-greed rant, and so I put my arm around her and said, “We’ll have a wonderful drive south and everything we be ready for us when we arrive. You know how much you love the beach and . . .”

“And, I know what you’re about to say, ‘No matter how much it costs!’”

After an easy four days on the road, we are now settled in and as part of our routine, in addition to stocking up on groceries and household goods at Publix and checking to see if last year’s favorite restaurants are still in business (so far, they all are), we have been making a series of phone class to check to see if Verizon and Time Warner did what we asked them to do.

My first call was to our New York phone to find out if the recorded message was correct, especially to see if the forwarding number is as it should be. They did get the Florida number right but the message says that our phone number has been “changed,” not, as I asked, “temporarily suspended at the customers request.” So I called customer service.

The representative agreed that they had used the wrong message for our phone and that she was changing it while we were speaking, though it would take until the end of the day for the proper message to be in place. Ignoring for the moment why one of the world’s leading telecommunications companies with all the latest technology couldn’t do this virtually instantly—I try to relax while down here by the ocean—I thanked her and told her I would check the message that evening.

Which I did and found it still to be incorrect. Over two days, four attempts later, one of the customer service managers told me that, yes, it is true, that earlier in the year when we were in Maine and had our number temporarily suspended the message said that to anyone who called us, but recently Verizon had changed its practice and now there were only two options available—the number has been “changed” or the number has been “discontinued.” “Temporally suspended” was no longer an option.

By now, much less relaxed when this all began, I tried to get them to explain the logic of this seemingly unfathomable change in practice. What, I more and more insistently and heatedly wanted to know, is the logic behind this? It certainly couldn’t be a cost-cutting strategy. Verizon’s systems are all automated. What was the big deal? In fact, as I steamed about it, I thought it probably cost them a few dollars to eliminate the “suspended” option.

No one of course could tell me. So we are living with it. Maybe a person of two who calls us in New York during the next five months will wonder if we have left the city permanently rather than snowbirding for the winter. But then they will also hear about our “new” 561 Florida number and if they call us and wonder what’s going on we will take aggressive pleasure in telling them the story and how, how else to put it, arbitrary and even stupid a company such as Verizon can be.

Verizon had the chutzpah to call us the next day, after my final exasperated conversation with them, to see if there were any additional services of theirs in which we might be interested. I said, “Yes, in fact there is--a call forwarding message that says our number, at our request, has been temporarily suspended.” Needless to say, even for an extra fee, that service is not available.

I next called Time Warner to check about the suspension of our cable service. “Oh,” the first person I managed to actually speak with me said (up to that point I had been routed trough a series of automated option—“To continue in English, press 2; to change service, 3; to . . .”), “weren’t you told, when you called us before leaving that it is only possible to suspend service for 90 days?” No one had. “Or that since your building is a coop in order to suspend your service for even 90 days a board member from your building has to write to us to ask permission to do so?”

“What?” I couldn’t help myself from screaming. Relaxation was out of the question. “Why do I have to have their permission? What does any of this have to do with the coop itself? I’m your customer; not the board or the building.”

“Well,” the well-trained and calm representative, clearly from her accent and the static on the line based in Bangalore, said, “in truth the building is a customer of ours. We offered the building a special rate if more than half the residents ordered their cable service from Time Warner. So, in order to suspend any resident’s service, we need the approval of the board. To give the building the benefit of the special rate everyone has to behave the same way.”

“I was never told that. And by the way what does this have to do be behavior? I find that offensive. The point is that I was never informed about this arrangement. If I had been I would have switched our service to Verizon. [Forgetting for the moment the fiasco with the call forwarding.] Or had a Direct TV satellite dish installed or given up TV altogether. Watching it makes me aggravated anyway. Almost as much as talking with you!”

“I am sorry to hear that sir. But of course you are free to do whatever you want with your TV service. You are in America, aren’t you? The land of freedom.”

I did not sense that she was mocking me or America and decided I needed to hang up before risking a stroke and that it was time for a calming walk on the beach.

When I got back and told Rona what had happened she said, “Why are you aggravating yourself? You know how these kinds of things work these days. It’s all about big companies figuring out ways to make as much money as possible. Actually, to extract as much money as possible from people like us. But I too am trying to remain calm and don’t want to get into one of my rants about the current state of capitalism.” I was pleased to hear that. “So I think I’ll go for the mail. I’ll be right back, I want to check to see if our mail is being forwarded to us.” And with that she left.

By then I was feeling quite calmed down. The beach walk was just what my cardiologist ordered.

But when Rona returned it was immediately clear that she was not the same serene person who ten minutes before had left for the mailbox.

“What’s going on?” I asked as she stomped about the house.

“Here, take a look at this.” She tossed a handful of mail at me.

“What is it?” I was rooting about on the floor to gather all the letter and envelopes. I could tell from the yellow forwarding stickers on the envelopes that the mail was being successfully forwarded. “It looks as if this is mail that was sent to our New York apartment and was then sent on to us by the post office. No? Am I missing something?”

“Indeed you are. Take a look at this.” She ripped a letter from my hand. “It’s from the postal service. Here, read it.”

“I will if you give it back to me.”

Instead, she read, “See what this says. It’s from the postal service: ’A customer temporarily moving may have mail forwarded for a specific time, not to exceed twelve months total duration.’”

“And?” I asked.

“And,” Rona said, they are claiming that by February 17th, our forwarding will have ‘met,’ to quote them, ‘the 1 year maximum duration.”

“This I do not understand,” I said, again feeling my blood pressure rising. “Is there anything we can do about this?”

“Read further. See, down at the bottom.” She was still holding onto the letter and I couldn’t in fact see. “They apparently have something they call Premium Forwarding Service, and there is an 800-number to call to find out how it works.”

“So let’s call them,” I said, trying to sound chipper and optimistic.

“I’ll do the calling this time,” Rona said, “Considering how you did with that person in India, let me handle this one.”

Surprisingly, it took only a few minutes for her to talk with an actual person. Rona, smiling, mouthed to me, “I think she’s an American.”

But then I heard her saying with increasing ire, “What do you mean you don’t know anything about how this works? How the 12 months is calculated? By February we’ll have only been here two-and-a-half months, not twelve.” Rona was rolling her eyes up in her head and in frustration holding the phone about a foot away from her ear.

“But this is the number the letter said to call about Premium Service and you’re telling me that not only can’t you tell me about how the 12 months is calculated—and as I said in February we won’t have been here for even three months—but that you also don’t know about this special forwarding service? I am totally confused.”

I passed Rona a note saying, “Go for it!”

“What do you mean you have to open a ‘complaint file’? I’m not complaining, I’m just trying to understand; but you’re saying this is the only way you can get the information to me? Unbelievable,” Rona exasperated sighed.

“So, OK, open a complaint file.” She covered the phone with her hand and said to me, “Can you believe this? I think I’m going crazy.”

“Remember,” I said, “we’re here to get and remain calm. Now both of us have high blood pressure.”

“I am having the nightmare,” Rona said, holding he head, “that we’ll have to go to the city every week or two to pick up our mail after they stop forwarding it in the middle of February.”

“Or, maybe we’ll have to find someone who can go to the apartment and mail us whatever seems important.”

“This is some way to relax,” Rona said, sounding defeated. “What? Can you say that again?” She was back on the line with the person from the postal service. “I’ll believe it when I see it,” Rona said, and with that hung up.

“See what? Believe what?”

“She told me that I will hear from someone in two working days. That’s how they handle complaints. What are the odds that . . . ?” Rona let her question drift off into space. “I think I need a nap.”

While Rona was napping, tossing and turning on the bed, I masochistically decided to call Con Edison to see about the suspension of our gas service.

“What do you mean it was already suspended?” I was incredulous when the Con Ed customer service representative told me that there was no service to suspend. That we did not have gas service and thus there was nothing to cut off. “We’ve been living in the same apartment for 19 years and we’ve had gas all that time. How else would we cook?” I didn’t tell her that we eat virtually all our meals out and thus rarely do any cooking. But we do do some. Mainly, in truth, we boil water for tea or heat up soup that we take in from our local Ukrainian coffee shop.

“Our records show no gas usage for the past six years,” she said, calmer than I. “So there’s nothing to suspend.”

“That’s not true. That’s impossible.” By then I was shouting and woke Rona who staggered into the living room.

She mouthed, “What’s going on? Why are you yelling?”

I asked the Con Ed person to hold for a moment and, covering the phone, told Rona what they were telling me.

Rona said, ”You’re being silly.”

“What do you mean?”

“You asked them to suspend service so we could save, what, $15 a month and they are telling you it’s already being suspended and we haven’t used any gas for years, whereas we have--at least a little—and thus haven’t been charged for gas for all that time. So, if you convince them we have had service and have used gas won’t they then want to back-charge us for years of service? And who knows, maybe apply additional charges and penalties? You want that?”

We both pride ourselves as being honest and never wanting to take advantage of anyone or anything, but after our experiences with Verizon and the post office and Time Warner, I said to the Con Ed woman who had been holding on the phone, “Sorry to have bothered you. Have a very nice day and a happy holiday season.” She was as nice as could be.

“While we’re on a roll,” I said, “let me make the one last call, again to Verizon, but to a different division, about the wireless card we use with our laptop.”

“Are you sure you want to do that?” Rona solicitously asked, “Haven’t you, we I mean, haven’t we had enough aggravation for one day?”

“As I said, we’re on a roll after Con Ed and the gas so let me take care of this one last thing. How complicated can that be? Though maybe they’ll tell us they haven’t been billing us for five years.” Rona glared at me. “Just kidding I said,” and dialed the Verizon wireless 800-number.

Again I was drawn into the proliferating world of automated responses. I pressed 2 to Continue in English, 4 to Suspend Service, and then 3 to Get Information about it. Zipping right along, feeling pleased and surprised that all was going as I had hoped, I pressed 3. What harm could there be, I thought, to see what I could learn without speaking to an agent, even one based in America.

From recorded messages I learned that there were a variety of options about how to proceed and all, after our previous experiences with Verizon and Time Warner and the postal service, seemed sensible and varied enough to cover all circumstances—there was no 12-month rule, no need to seek anyone’s permission, and no need to file a complaint. All I needed to do, I was directed, was talk to a representative about whether or not I wanted to suspend service with or without billing. Curious about what that might mean, I pressed 0 to talk with an agent.

She was as polite and articulate as I could have hoped. She assured me that my wireless card service was already suspended and that it would be resumed, just as I had requested, in late April. No problem at all with that. “Good I said. I am so happy to hear that all is well. You don’t want to hear about my experiences with another division of Verizon when I tried to suspend my telephone. Or Con Edison or the post office.” I could hear her chuckling knowingly. She was obviously very experienced and had heard it all.

“But, there is one thing I’m confused about.”

“What’s that?” she asked compassionately. “That why I’m here. To answer all your questions.”

“It’s about the billing-no-billing option.”

“Oh that. Many of our customers are confused about that. I can help you understand the differences. It’s all rather simple.” I could feel my blood pressure dropping to the normal range. “With the no-billing option you do not pay any monthly fee; with billing you pay your monthly fee.” She sounded as if she was smiling, satisfied with herself.

I could feel my heart beginning to thump again in my chest. “About this I am now completely confused. You sound like a very nice person and I know it’s not your policy but Verizon’s, but why would anyone opt for the billing option when suspending service? Why would anyone want to continue to pay the monthly fee while not getting the service? That doesn’t make any sense at all.” I paused to let this sink in. “That is,” my suspicions had quickly returned, “unless there is a difference between the two options. Maybe if I choose the no-billing option I’ll lose the dial-up number associated with it?”

“No, sir,” she said, still as chipper as ever, “that won’t happen. There really is no difference from a customer’s point of view. Except,” I could hear her smiling even more broadly, “as I already told you about the monthly fee.”

As nice as she was, I couldn’t control myself. “You, or should I say Verizon, are making me feel that I’ve lost my mind. First you took away my temporarily-suspended option and now there is this crazy billing-no-billing option that makes no sense whatsoever. You understand that since this is so ridiculous on the surface that someone like me, of for that matter any of your customers, would be suspicious that something else is going on since no one in their right mind would want to pay for something they’re not getting when they can avoid paying for the same thing they’re not getting. Am I making any sense?”

By then, hearing me shouting into the phone again, Rona had returned to the living room where I was talking on the phone while pacing about and gesturing wildly. “You’re going to give yourself a stroke,” she whispered to me in an attempt to calm me down. “What’s going on?”

“Here. You talk to her,” I said handing the phone to Rona. “The Verizon customer service person. Ask her about the billing-no-billing option for our wireless card.”

Frustrated with me and my behavior Rona snatched the phone and after a minute she too was stomping about the room and gesturing wildly, “This is crazy,” she said, echoing what I had just been saying, “It makes no sense at all. But to end this once and for all, to retain our health and sanity, we’ll go for the no-billing option and not pay the monthly fee. That’s how it will work, won’t it? The service will be suspended and we won’t be charged for it?” She was nodding her head. “Good. Thank you. And, yes, you too have a wonderful day and happy holiday.”

“Let’s go for a walk,” I said. “We both could use the beach.”

“One good thing,” Rona said with a wink, “when they stop forwarding the mail in February we won’t be getting any bills from Verizon for our monthly charges.”

“But I thought we just took the no-billing option?”

“Dream on,” Rona said. “But let’s forget about all of this. We’re here to relax.”

Thursday, December 09, 2010

December 9, 2010--Obama's Plan C

Yesterday I ranted on about how, without much of a fight, Barack Obama capitulated to the Republicans on the tax deal that they struck, a deal that is of disproportionate advantage to the wealthy.

The part about how much the rich will benefit if Congress approves is still true--more than a quarter of the tax cuts and breaks will go to about 5 percent of the population--but it may be, may be that the overall shape of the agreement is just what the economy right now needs.

Here's the case for that view--

When he took office in early 2009 Obama inherited a collapsed economy and through Plan A, in true Keynesian fashion, he cobbled together a nearly one trillion dollar stimulus program that was designed to pump money into the economy and save or create jobs. It was far from what he wanted but he needed one or two votes in the Senate from Republicans in order to get to 60 and so he compromised.

The idea was that if consumers aren't spending, if corporations aren't spending, it is only the government that can and this is necessary to prime the pump of investment and growth.

Many economists, very much including Paul Krugman in a string of New York Times columns, contended that it was not bold or large enough to pull the economy out of the muck.

Eight or nine months after Congress passed the package, things were looking promising. Though too many were still unemployed, technically the recession was declared to be over and for three months in a row there was positive news on the job-creation front.

But that promising news evaporated quickly as employers continued to lay off workers faster than hire them and all the data again turned south.

What to do?

It was time for Plan B--a second stimulus.

This proved to be politically unfeasible. The Democrats majority had shrunk by one--Scott Brown had been elected to replace Ted Kennedy--and by then the Republican propaganda machine had successfully slandered Obama, labeling him a socialist. And the country was in no mood for more spending. The GOP, again, who themselves had been the biggest spenders and deficit-builders in U.S. history somehow had managed to convince a gullible and fearful public that Obama was about to bankrupt the country through even more unpaid-for spending.

Obama, then, had three choices--ride things out and hope for the best, lapse into an early case of irrelevant lame-duckeness, or come up with Plan C for the economy.

Perhaps it is the latter that we are now witnessing.

Even people who hate him have to concede that Obama is smart and clever and so what I am suggesting may in fact be true.

Here’s how Plan C may be unfolding—

In order to get any economic legislation passed in the Senate Obama knew it had to focus exclusively on taxes. Even before January, when there will be about half a dozen additional Republican senators, there is no way now to do anything else.

After brokering the deal with the GOP, Obama the other day said that what he wanted to do for the middle class and unemployed was being held “hostage” by Republicans who were insisting that all parts of the Bush tax cuts had to be extended, not just those for 95 percent of the population who, Obama, claimed, and many of us feel, are the ones who need to retain more of their earnings.

So Obama decided that since a traditional form of stimulus was not possible he would create one out of tax policy.

And in order to get what he wanted for working people, the ones still suffering from the stalled economy, he would give in to extending the cuts for the rich (about a quarter of the total cost of the package) in order to get more than $700 billion of new money for everyone else. Knowing that the $700 billion would be simulative since the middle class and unemployed beneficiaries will spend it on real things—food, energy, clothing, cars, and of course rent and mortgage payments. All of which help create jobs and enable millions to keep up payments on their houses.

Ironically, Obama may turn out to be the hostage-taker, holding Republicans’ obsession with tax cuts for the rich hostage in order to get the $700 billion he wanted into the hands of the middle class, the working poor, and the unemployed. Citizens the GOP do not care about.

If this works it will in retrospect turn out to be brilliant. A great example of shifting strategy as circumstances change.

If it doesn’t, Obama is cooked since the Republicans will walk away from any shared responsibility, claiming that the only part of the plan that worked, and without socialist Obama in the White House would have been the heart of the plan, was the part that devoted to getting more money to the “job creators”—to their real constituency: the wealthiest 5 percent.

As it always does, time will tell

Wednesday, December 08, 2010

December 8, 2010--Compromise? Capitulation!

The good news--as of yesterday when Barack Obama announced that he had reached a compromise with the Republicans and that he would support the extension of the Bush-era tax cuts for the wealthy for two more years we could all breathe a sigh of relief. By this act he demonstrated that he is not a socialist. If he were a socialist, he would never have agreed to tax polices that contribute to so much more economic inequality.

The bad news--as of yesterday we have a new Republican President: Barack Obama.

Republican President Barack Obama, in spite of what he said at his press conference, has not only embraced Bush tax policy (which now should more appropriately be call Obama-era tax policy) but he is now also presiding over the greatly expanded Obama war in Afghanistan.

He also continues to break his campaign promise by maintaining the Guantanamo prison in Cuba, still the "detention facility" for dozens of untried "enemy combatants."

Republican President Obama, former professor of constitutional law at the University of Chicago, has even expanded the Bush-era domestic surveillance program, which should now more appropriately be called . . .

You get the picture.

As reported widely, including in the New York Times (article linked below), a dispropotiante percentage of the tax deal will benefit the rich. More than one-quarter of the $900 billion cost of the tax cuts will flow to about 2 percent of the population.

He caved in on the centerpiece of his own tax program--to allow taxes to revert to Clinton-era rates for families having a taxable income of $250,000 or more a year (before deductions, incomes much higher than that) as well as allowing estates valued at up to $5.0 million to go totally untaxed (a higher level of tax exemption than when Bush left office), thereby providing another form of tax bounty for the idle rich.

Republican President Barack Obama, also undermined another of his pledges--through this deal he allowed capital gains to remain taxed at 15 rather than the 20 percent he had "fought" for during the campaign and even permitted hedge fund managers, some of whom make more than a billion (with a "b") dollars a year, to be taxed at the capital gains level rather than at the higher individual or corporate rate.

And yes, as another sop to the affluent, he agreed to a significant adjustment in the alternative minimum tax (AMT) so that 4 million taxpayers with incomes in the mid to high six figures will no longer be subject to it.

Then on the other side of the ledger, for the struggling middle class and the unemployed, though the deal does provide some relief (an extension of unemployment benefits for some for 13 months--those unemployed for fewer than 99 weeks), a two percentage point reduction in payroll taxes (which goes to support Social Security and thus the loss of this revenue puts SS in even greater jeapordy than at present), and a continuation, again for some, of the tax credit for college tuition.

But, and this is quite a but, the only people who will pay more in taxes as the result of this "compromise" will be individuals earning less than $20,000 a year or families with incomes of less than $40K.

At his heated news conference yesterday, former-socialist President Obama excoriated progressives for not giving him more credit for his accomplishments (calling us, among other things, "sanctimonious"), but he failed to explain why what he called a compromise extends the tax cuts for a full two years while the benefits for the middle class and unemployed continue only for a year (the payroll tax "suspension") or 13 months (the unemployment payments).

That is not anyone's idea of meeting the opposition half way.

As further evidence that Obama has morphed into a Republican, though he claims that what he agreed to is a form of economic stimulus (and thus will create more jobs) every part of this so-called stimulus is about tax breaks and tax cuts.

Isn't this the basic Republican approach--to fix the economy, cut taxes? And isn't the evidencve clear that this doesn't work? Haven't we had a version of this tax policy for the past 10 years? And isn't it true that during this decade when we have had a version of this trickle-down tax policy literally no new jobs were created? Isn't that why we have an almost 10 percent unemployment rate (with the true figure at at least 17 percent)?

No Democrat would have agreed to this.

Further, President Obama agreed to not pay for any of this almost-trillion dollars in new tax-cut spending. Every penny of it will be added to the deficit, the very same deficit that his Debt Commission this week said will contribute to our ultimate ruination.

Not paying for tax cuts is as Republican as it gets. I don't hear hypocrites John Boehner or Mitch McConnell squawking about how the deal they just struck with Obama will add to our children and grandchildren's burden. Their favorite insincere mantra. Rather, I hear them chuckling with glee about how they rolled him again.

Tax cuts weren't paid for during Republican times. Not during the Reagan era (when the deficit more than doubled) and they weren't paid for during George Bush's two terms (when the deficit nearly tripled). And now they won't be paid for during Republican President Barack Obama's term.

Single term I suggest.

Tuesday, December 07, 2010

December 7, 2010--Millionaires

Americans love millionaires.

There's that TV game show, Who Wants To Be A Millionaire, and plenty of people try to become contestants. Then there are the ones Republicans want to protect, claiming they are "job creators." and thus should be treated better than the rest of us by the tax code.

And then there's Derek Jeter who just signed a new four-year contract with the Yankees that will net him $16 million a year for a part time summer job.

You would think that with so many Yankee fans hurting economically that there might be some resentment about this incredible deal. Baseball is still a game which is fun to play and getting paid anything to do your thing in the new stadium next to the House That Ruth Built should be appealing to pretty much anyone who fantasizes about roaming center field or the infield. So for any Yankee shortstop to get $64 million for four years one would think would raise a few proletarian hackles.

Thus, when I tuned in the other night to WFAN (a 24-hour-a-day sports talk radio station in New York where listening for even one hour would help you understand why the etymology of fan is fanatic) not one caller expressed any feelings whatsoever that could be viewed as envy much less class warfare. In fact, most thought Derek was being underpaid!

So why is it that so many of us cut millionaires so much slack?

Is it because that though we may be stuck in a dead-end job we can always dream the American Dream? Immigrants still come here thinking the streets are paved with a 21st century version of gold. That it is there for the taking. Work hard, get a little lucky, and you too can be a millionaire.

Is there anything more American than becoming one?

Both my father and father-in-law who were never happy with how much they earned or were able to save, when asked why they were so perpetually gloomy, said, "I'd be happy if I was a millionaire."

When asked why that was so, what they would do differently if they had an actual million, neither had a wish list of things they wanted to do or purchase. The best they could come up with was to say it would make them feel better about themselves.

I guess that's why Republicans have such a fondness for millionaires. They want them to feel good about themselves. And now with President Obama's capitulation on taxes, I am certain this morning they are. Derek Jeter too.

Monday, December 06, 2010

December 6, 2010--Ladies of Forest Trace: What's He Made Of?

"Did you see what Paul Kugelman wrote?"

I knew she meant, Paul Krugman op-ed columnist for the New York Times. My 102-and-a-half year old mother is devoted to him but always refers to him that way. I stopped trying to correct her years ago. Her malapropisms can be quite charming. Plus the fact that she always says when I try to correct her about anything, "I'm too old to do any changing. You're still young so you should change. If you want a list I could make it."

"To tell you the truth, I didn't read his column. We've been so busy getting ready to head to Florida, to see you, that I haven't been able to keep up with the paper."

I didn't add that Krugman is not one of my favorites. He's too much of a traditionalist Keynesian for me and I feel he has been hypercritical of the Obama economic team and policies since he was not asked to join them.

"You should. The girls here at Forest Trace have been talking about nothing else over breakfast and just now dinner. For them to concentrate on anything for a whole day is unheard of. In fact, for us to remember from morning to night what day it is unheard of. So stop your packing, turn on your computer, and read it."

"You mean right now? Don't you want us to leave on time so we an get to you on schedule?"

"What's happening with our country right now is more important than anything."

I knew I couldn't convince her there would be time to talk about politics and economics later in the day when we were checked into a motel in Virginia so I booted up my laptop and found the Krugman piece. "I have it, mom. So what's so striking to you and the ladies?"

"I don't have it in front of me. I passed my paper along to Gussie who does the puzzle. Can you believe it, still in ink. She’s remarkable. She fills in all the boxes. With the right answers I am not so sure, but all the boxes at least are filled and this makes her feel good."

While she was talking, I skimmed the Krugman column. "I see what you mean, mom, this time I think he may have it right."

"No ‘mays’ about it. Like I always try to tell you about him. But you are so stubborn. Read me, read me what he says."

"You mean the whole thing? Really, mom, we want to get going."

"You're always rushing even when your country is in terrible trouble."

"OK, I'll read you the whole thing. And then . . ."

"Just the beginning since you're in such a rush. And maybe a little more which in a minute I'll tell you about."
“Here goes. He says . . .”

After the Democratic “shellacking” in the midterm elections, everyone wondered how President Obama would respond. Would he show what he was made of? Would he stand firm for the values he believes in, even in the face of political adversity?

On Monday, we got the answer: he announced a pay freeze for federal workers. This was an announcement that had it all. It was transparently cynical; it was trivial in scale, but misguided in direction; and by making the announcement, Mr. Obama effectively conceded the policy argument to the very people who are seeking — successfully, it seems — to destroy him.

So I guess we are, in fact, seeing what Mr. Obama is made of.

“What’s going on right now?”

“As I said, we’re finishing our packing and . . .”

“Enough about the packing! I mean with Obama. What’s going on with him right now?”

“As I understand it, he’s involved in working out a deal with Republicans to extend the Bush tax cuts for two-to-three years.”

“Which is what Krugman is saying about him. How does he put it?” I scrolled down his column.

“He wrote,” I again read to her,

It’s hard to escape the impression that Republicans have taken Mr. Obama’s measure — that they’re calling his bluff in the belief that he can be counted on to fold. And it’s also hard to escape the impression that they’re right.

“That for me sums it up. I mean, the problem with him.”

“The folding part?”

“Yes, that. Is it necessary at this point for him to be giving away the store? Without putting up a fight?”

Not that I disagreed, but still I asked, “What would you have him do? They have him over a barrel. The Republicans are about to take over the House and in the Senate even now it’s impossible to get the 60 votes needed to get anything done.”

“I’d have him fight. For us. And or what he believes, assuming that’s anything. Which I am beginning to seriously doubt.”

“I can’t disagree with that.”

“Fannie tonight, at dinner, says that all he cares about is getting reelected. That he loves being president, living in the White House, having his own airplanes and that he’ll do anything, compromise about anything, to be able to stay there another six years.”

“I’m not so sure . . .”

“Neither am I. I think it’s worse than that, which is why I’m so upset. That it’s about his character. What Kugelman called ‘what he’s made of.’”

“Again, mom, I think Krugman and you are right. But isn’t it complicated? What would you have him do? I mean if you were Obama.”

“As I said fight. How hard should that be when what he should be fighting for is what the public needs to hear. If I were Obama I’d go on TV and say—‘My fellow Americans . . .’”

I couldn’t restrain myself, “That’s very charming mom. Isn’t that how Ronald Reagan began his speeches? You want him to sound like Reagan? Who helped get us into this economic mess in the first place with his tax cuts and deregulations? But get to the substance. What would you say if you were Obama?”

“If you would be patient for a minute, I’m getting to that—

‘Good evening. I am speaking to you from the Oval Office. [At that I couldn’t help but smile.] Tonight I want to talk with you about something very important—America’s economy and your part of it. Not all of this is going to be easy or pleasant. Though things are looking up we still have a lot of work to do. Especially about the future. Yours, your children’s, your grandchildren’s, and their children after that, when we are all gone.’”

“Do you, mom, always have to talk about ‘when we’re all gone?’”

“At 102 what else do I have to talk about? But, please, let me continue. I’m just getting warmed. ‘Good evening. I’m speaking to you from . . .’”

“Please mom, the substance.”

“All right the substance. But you know people my age repeat themselves. For that matter, I’m noticing you’re getting old enough to do the same thing. But, all right, I’ll get to the substance—

‘The Republicans want to continue the tax breaks for the wealthiest Americans. Just 3 percent of the population. People making many hundreds of thousands a year. Even millions and for some who make more that a billion dollars a year. I want to make the current tax rates for middle class people—people like you—permanent. You’re already working hard enough and slipping behind the richest Americans and you don’t need to send the government any more money.

‘But the Republicans are holding your tax cuts hostage. They won’t agree to vote for them unless we continue the unfair breaks for the wealthy. They claim that it is these rich people who create jobs, which is not true. Middle class Americans, through small businesses, are the ones who create jobs. Wealthy people create jobs for stock brokers and art dealers, which is fine, but not the millions of new jobs we need to get out of the mess the Republicans in the first place created.’”

“Let me stop you for a moment. I like what you’re saying. I mean would have Obama say, but did you write all this? I guess I want to know how much more are you going to read to me? As you know . . .”

“Just a little more. And no, I did not write this. I’m so worked up about this, especially after talking with the girls all day that this is just coming to me. It must be good, no, if you think I wrote it.” I could hear her chuckling to herself. “Let me finish. I don’t have that much more to say. I mean to have Obama say—‘Good evening . . .’ I know, I know, the substance. I’m just having a little fun with you—

‘And, do you know,’ he should say, ‘the Republicans, who claim they want to cut the deficit, which I welcome, can’t look me or you in the eye and tell me or you how they would pay for these tax cuts. The ones in place the last 10 years have cost us, you, a trillion dollars and no new jobs have been created during that time. The cuts went right to the deficit.

'And you know what else, another thing they are holding hostage, is my wanting to extend unemployment insurance to millions who are right now losing it. They’re losing something paid for already. It was withheld from their paychecks when they were still working. So it’s not an entitlement. It’s something they earned. But still the Republicans won’t pass it unless I fold up and agree to those big tax cuts—hundreds of thousands of dollars a year for the wealthiest—and figure out how to pay for the unemployment insurance. They don’t want to see that added to the debt.

‘Can you believe that? I’ll call it what it is—hypocrisy on the Republicans’ part. Add a trillion to the debt for tax breaks for the rich, but let the formerly hardworking middle class sink deeper and deeper into debt and despair.’”

“I like that mom. You’re even alliterating—‘deeper and deeper’ and ‘debt and despair.’”

“Are you mocking me? I’m trying to deal with a serious issue and you’re being your old English-teacher self.”

“Sorry mom. You’re right. I am very impressed thus far by what you would have Obama say. But I’m hoping you’re getting to the end because . . .”

“One more minute. I’ll have him finish now. This would make him a hero to all the old folks. And he needs now all the friends he can find. This one’s for the girls of Forest Trace—

‘I will not giving in to hostage takers. Not overseas and not right here in Congress. So let me tell you what I’m going to do: I’m drawing a line in the sand. I will only agree to tax cuts for hardworking people. Those making less than a quarter of a million dollars a year. All the rest will have to pay more. Their fair share.’”

“Sorry, mom, but what does this have to do with the ladies? How many of them are making more than that?”

“Sadly very few, but give me a minute since again you’re missing my point—how he has to stand up and fight. If you’ll let me, I’ll tell you what he should say—

‘They will fight me like crazy and may even let your tax breaks expire. But they’ll come around when they see how angry Americans will be with them if they don’t agree to put average Americans first. Not last as Republicans did in the recent past. And when they do come around we’ll make your tax cuts retroactive to January 1st 2011. I promise you that.’

“And now for the girls—

‘I also know how hard things have been for seniors. Those living on fixed income whose Social Security hasn’t gone up and if they are fortunate enough to have them, how their CDs and Treasury bonds are paying less than one percent. But they still have to pay regular taxes on any 401(k) money they are required to withdraw. So for struggling seniors [I’m getting good at this alliteration business] for struggling seniors I’m going to fight for a tax holiday on this kind of retirement money until CDs and T-bills are again paying at least 3 percent.’”

And with that she stopped. “So what do you think?”

“I like it mom. Everything you and the girls figured out.”


“And, and I know what you want me to say.”

“So say it.”

“If Obama were to do what you want him to do, and what you’ve written for him, by doing the right thing he’d become popular again, we’d have the president back who we thought we were voting for, and on top of that he’d get reelected and still be able to fly around on that big plane.”

I could sense her smiling as she said, “You had better get back to your packing. I can’t wait to see you and Rona and give you both big hugs.”

Then as she hung up she added, “I hope you didn’t get fat.”

Friday, December 03, 2010

December 3, 2010--On the Road

Snowbirding again. I will resume at the beginning of next week

Thursday, December 02, 2010

December 2, 2010--Keeping Up With the Palins

On Morning Joe the other day, Arizona Republican Congressman John Shadegg began by making a fool of himself and ended by revealing how big a political coward he is.

MSNBC's Mike Barnicle asked him to reconcile GOP opposition to unemployment benefits, because, as he and his GOP colleagues claim, they are not paid for, with their support for extending the Bush tax cuts for the wealthiest, without saying how they would be paid for.

Shadegg ignored this obvious contradiction and went on to disagree with Barnicle's contention that unemployed benefits are "an immediate benefit" to the economy.

"No, they're not," Shadegg said with a smug smile, adding, "Unemployed people hire people? Really? I didn't know that."

Barnicle replied, "Unemployed people spend money, congressman, because they have no money." And jobs are created and economic activity occurs as a result of that spending.

To which Shadegg mockingly said, "Ahh, so your answer is it's the spending of money that drives the economy. I don't think that's right. It's the creation of jobs that drives the economy." And then he made his incredible claim, "The truth is the unemployed will spend as little of that money as they possibly can."

With a look fo disbelief Barncile said that the unemployed have been shown to spend all their unemployment money as fast as they recieve it since they have bills to pay and no other source of funds. And that this is economically stimulative. Two dollars of economic activity is generated by every one dollar spent.

Changing the subject, former Republican congressman and Morning Joe host Joe Scarborough asked Shadegg if he thought Sarah Palin was qualified to be president. Shadegg mumbled something about how that's not for him to say, that it's up to the people to decide. Joe asked again, "Is she qualified to be president?" Shadegg continued to dodge the question as Scarborough asked it again and again. Four times in total.

After Shadegg left Scraborough wondered out loud why so many Republicans are reluctant to say in public what they say in private--that she has great political instincts and enormous charisma but she is totally unqualified to be our commander in chief.

One of Morning Joe's other guests said that this is because they are afraid of her--if she wins the nomination they will have to contend with her as the leader of their party; if she decides not to seek the nomination they will want and need her support in their own campaigns.

"Even Shadegg?" someone asked. "After all he's not running for reelection and has no aspirations for higher office."

No one had a good answer. Fear of her and her power, I suppose, is enough render Republicans mute on the subject.

This got me thinking about the nature of her power. A demagogic power not to be underestimated.

In this age of electronic distractions--from cable TV to Twitter to Facebook and blogs--she is our biggest star.

It is no surpirise that she has a reality show of her own, Discovery Channel's Sarah Palin's Alaska that attracted an unheard-of 5.0 million viewers for its premier, and that she and her family are living a reality-show kind of life. From tabloid headlines when it was revealed that her unmarried daughter, Crystal, was about to have a baby and then moved on to become a highly-paid abstinence advocate and a star in her own right on Dancing With the Stars to a string of made-for-the-mall books that leap right to the top of the best seller list.

A couple of years ago I compared the Palins to the Bundy family from the perverse but hilarious TV sitcom, Married With Children. How this economically struggling family, where the hapless husband-father was an inept shoe salesman, would do anything to get their hands on money and even their neighbor's newspaper.

Sarah Palin's shopping spree at Saks and Neiman-Marcus after she was nominated felt very Bundy-like. And of course it continues. Her remarkable version of success, while thumbing her nose at the educated elite, is one of her great attractions.

But now the Palin phenomenon is no longer a laughing matter. But it remains profoundly entertaining. In fact, I consider her more a political entertainer than a serious politician. But that of course is what people like me said about Ronald Reagan and we know what he managed to achieve.

Wednesday, December 01, 2010

December 1, 2010--Cold Warriors

If you are wondering why an overwhelming majority of Republican senators is opposed to the START treaty Barack Obama negotiated with the Russians, a treaty that calls for additional reductions of both side's nuclear stockpiles and the continuation of on-site inspections to be certain that there is no cheating (from Ronal Reagan's playbook--Trust But Verify), it it because Republicans prefer a return to the Cold War than the quagmire of wars on terror in which we are involved.

For old Cold Warriors to think about the threat to our security coming from just one source--Russia and its nukes--is much more comprehensible and even perversely comforting than having to think about threats emanating from guys who terrorize us with box cutters and underwear bombs.

Conservatives believe we can effectively confront Russia with our high-tech weapons systems whereas, as we have seen since Vietnam, these are essentially useless when attempting to deal with and defeat terrorists and indigenous insurgents. Our fancy drones can track down an occasional Al Qaeda operative but our troops and Times Square are still vulnerable to determined enemies who are willing to blow themselves us when attacking us or carry out their evil missions using cheap, low-tech improvised explosive devices.

Thus, when Republicans hold Obama up for political ransom what do they demand in return for support for a fairly benign treaty which would make the world a little bit safer?

Senator Kyl, the GOP "expert" on these matters, says he will consider voting for the START treaty if and only if it includes hundreds of billions of new dollars to modernize and upgrade our current nuclear arsenal. This from a senator who spends the other half of his time calling for spending trillions on tax cuts for the wealthy and insists that the budget can only be balanced by implementing massive spending cuts.

He is the same Senator Kyl who also opposes extending unemployment benefits because, he absurdly contends, the unemployed will not spend the money but rather save it. The rich,on the other hand, deserve their tax breaks because they are what he calls "job creators." By this I assume he means jobs at Sotheby's and Christie's auction houses where the super-wealth shop for their Picassos.

And then of course there are all the jobs that will be created if we have the guts to again rev up the old Cold War.