Saturday, July 30, 2011

Bleary eyed sense

One morning this week I opened the Washington Post to its op-ed page and as I read, to my astonishment, it all made sense. A columnist had written:
[T]he country is ruled by a cabal... democracy is a sham... politicians and the... newspapers are tools of... financial interests.... The entire system deserves to be overthrown...
American newspapers seldom present this perspective.  I was still only half awake though.  I rubbed my eyes, took another sip of coffee and examined the passage more carefully:
In contemporary America, we also have people who are — and I am inventing this word here — illegitimists: They believe that the president of the United States is illegitimately elected, or that the country is ruled by a cabal that is in turn controlled by some other sinister force or forces. In the past, left-wing illegitimists were quite common, and in fact Marxism is a classic, paranoid version of this creed. The illegitimist Marxist argument goes like this: Bourgeois democracy is a sham; bourgeois politicians and the bourgeois newspapers are tools of shadowy financial interests. The entire system deserves to be overthrown — and if a few people die in the course of the revolution, it’s all for a good cause. 
I had overlooked considerable verbiage, words and phrases such as: "sinister force or forces," "Marxist," "bourgeois" this and "bourgeois" that, "die" and "revolution."   I saw that the idea that had first jumped off the page at me was, in fact, almost completely buried under prolixitous grandiloquence

I saw that in the next paragraph, the columnist proceeded to compare the original argument to the toxic fruits of America's right-wing lunatic asylum:
There is also a right-wing version of this argument, one that has been honed to perfection by novelist Charles McCarry (in Lucky Bastard, he imagines that the Bill Clinton-like American president is a Communist agent and his Hillary-like wife is his controller). More recently, right-wing illegitimism has taken the form of birtherism. The attempt to prove that Barack Obama isn’t American-born was, at base, an attempt to prove that he is illegitimate and that he therefore deserves to be removed from power — somehow. Birtherism is also linked to other forms of illegitimism, such as the belief that Obama is a Muslim,...
Straightforward hypothesis: America is not in the hands of its people, but powerful financial interests.   That hardly seems like an outrageous claim to make in late July 2011.

But if your boss is the corporate media, first you cloak reasonable suspicion in the jargon of Karl Marx.  Second, you juxtapose it with the insane rants and racist conspiracy theories of the far right.   Some days I wonder why I still buy newspapers. 

UPDATE: Last week a columnist for the Independent had a crisis of faith.

Friday, July 29, 2011

A short visit to the heart of the beast

I paid a visit to the gallery of the US House of Representatives Wednesday evening.  Congress was debating a GOP-tabled bill to defund the Endangered Species Act. You're probably wondering what wild animals have to do with the debt ceiling crisis.

Breaking protocol to address the CSPAN television audience, a Democratic Congresswoman asked: "Why are the Republicans forcing us to spend the next 140 hours to debate a pointless and very destructive interior bill at this time? The country is at imminent risk of default on the debt because of the intransigence of Republicans."

The debate that followed was quite astounding. The Republicans were looking for ways to defund parks, forests, and clean water. A Democratic Congresswomen said, "Republicans want to destroy the program that has protected the bald eagle -- the symbol of our great country!" At first it appeared as if the Republicans were willing to cut anything at any long-term cost to reduce the deficit. That's what I thought until the last twenty minutes of my visit. The truth is more disturbing.

The Republicans tabled amendment after amendment intended to rescind funding from federal programs intended to protect species, municipal water supplies, and ecosystems. Anything that wasn’t about fighting forest-fires was fair game. The Democrats were fighting back.

A GOP instigated House rule stipulates that any increase in the budget in one area requires a specified budget cut somewhere else. Members of Congress trying to fund clean water for towns in Oregon or support wetland preservation in Florida have to propose an equal cut in funding for another program. In reply to a Congresswoman from Hawaii, a Congressman from Idaho said, “As much as I would like to fund preservation of your beautiful tropical ecosystem in Kawaii [annual rainfall 180 inches], I believe the best way to save forests is to preserve the budget for fighting forest-fires.”

After a long while, a Republican Congressman from Kansas stood up to propose an amendment to increase spending. I leaned forward in my gallery seat. I wanted to catch every word of this.

The GOP Congressman's argument was the best way to fight forest fires is to reduce opportunities for them to happen. He said that taxpayers can save having to pay for fighting forest fires by reducing the size of the forests. The phrase he used to describe his proposal was “forest restoration” (i.e. logging). This Republican congressman wanted to increase spending to pay corporations to cut down the forests.

Republicans claim the United States is going broke. Yet they are not content to sell-off  America's assets for peanuts, they use tax dollars to pay their friends to take them.  

It doubt the ridiculous bill they were debating has any chance of become law during this Congress. But the spectacle suggested to me that the difference between Republicans and Democrats has never been starker. A widening gap of sensibility between parties coincides with a presidency that downplays differences in the never-ending pursuit of “bipartisanship."  Something is deeply amiss.

Tuesday, July 26, 2011

Loyal servants of oligarchs

Economist Jeffrey Sachs writes:
Who runs America today? The rich and the multinational corporations. Who runs the White House? David Plouffe, whose job it is to make sure that ever word, every action of the president is calculated for electoral gain rather than the country's needs. Who runs the Congress, on both sides of the aisle? The lobbyists, who win in every negotiation. And who loses? The American people, who have said repeatedly that they want a budget that sharply cuts the military, ends the wars, raises taxes on the rich, protects the poor and the middle class, and invests in America's future not just in Obama's speeches but in fact.
Sach's short essay is worth reading.  It sums up my overall reaction to listening to President Obama and Speaker Boehner on national television last night.

Update: To fully appreciate the mentality of the Republican House caucus members who hold the world economy in their hands, this story is must-read

Obama speech written by GOP, S&P, FoxNews?

 I just watched Obama's "speech to the nation" on the debit ceiling impasse.  He said very little I had not heard him say before.

However, I was particularly disappointed by something I couldn't recall having heard Obama say before.  I tweeted my reaction:


Had I heard Obama correctly?  Reuters has posted the text of the speech and I've highlighted the part of the speech I mention in the tweet: 
Defaulting on our obligations is a reckless and irresponsible outcome to this debate. And Republican leaders say that they agree we must avoid default. But the new approach that Speaker Boehner unveiled today, which would temporarily extend the debt ceiling in exchange for spending cuts, would force us to once again face the threat of default just six months from now. In other words, it doesn't solve the problem.

First of all, a six-month extension of the debt ceiling might not be enough to avoid a credit downgrade and the higher interest rates that all Americans would have to pay as a result. We know what we have to do to reduce our deficits; there's no point in putting the economy at risk by kicking the can further down the road.
Originally, it was Republicans who came up with this argument.  The unemployed be damned, the GOP claimed that any failure to significantly reduce the federal debt in short order would lead to economic catastrophe.  According to the right-wingers, if nothing was done about the debt then so-called "bond vigilantes" would start dumping Treasury bills, wreaking havoc on the economy.  The GOP threatened only to lift the debt ceiling if the White House negotiated a deal to reduce the debt.

Obama has since taken the Republicans up on the idea of using the debt-ceiling deadline as an opportunity to negotiate major cuts to the national debt.   However, until tonight, I had never heard Obama echo the Republican assertion that America's Triple-A credit rating was at imminent risk if an agreement was not reached to slash the debt.*  The assertion struck me as spurious and corrupt when the Republicans made it, and hearing Obama say it does not make it any less so.  

In mid-April the GOP found support for its prediction from Standard & Poors.  S&P, of course, is one of the Wall Street ratings agencies that falsely accredited worthless home mortgages; it was instrumental in blowing up the economy in 2008.

Tonight we had President Barack Obama echoing a GOP talking point that was later affirmed by S&P and championed by FoxNews. Something to think about.




__
* The notion that the credit rating of the US is in jeopardy if the government fails to lift the debt ceiling goes without saying.  But Obama wasn't making that point in the above passage.

As I blogged the other day, I find the entire trajectory of Obama's economic policy disappointing.  

Wednesday, July 13, 2011

Obama's fateful choice

Two roads diverged in a wood, and I—   
I took the one less traveled by,   
And that has made all the difference.
- Robert Frost
No sooner did the economy show signs of starting to recover from the Great Recession than President Obama came to a fork in the woods where two roads diverged. The sign by the well-trodden path to his right read "Austerity." The sign by the overgrown trail to his left read, "Invest in Our Future."  Obama chose the path on the right.  The choice was made months ago, and it was a fateful decision.

The path Obama selected had been hacked out of the forest by Herbert Hoover's administration; it's the path that led to the Great Depression of the 1930s.  Recently the path has been popularized by conservatives and their allies in the corporate  media.   It's the path championed by Sarah Palin, Wall Street banks, FoxNews, network news commentators and newspaper columnists, and every presidential contender in the Republican Party.  The path leads to continued high unemployment and low wages as far as anyone who understands the basic principles of economics can see.   Obama chose the path of continued high unemployment.

At least 7% of America's assets is up for grabs
But the path on the right is not bad for everyone.  The catch is that you have to have a lot of money saved up to make the journey worthwhile. The super rich are crazy about the path, because it's deflationary.  By further reducing demand, it makes things cheaper to buy.  The effect of traveling it makes investment dollars go farther.  The path makes it more affordable for the rich to buy up the property, meager stock portfolios, and other assets of the unemployed and struggling worker.  As you can see by the red slice in the chart at right, at least seven percent of the country's total wealth will be up for grabs.   

Republicans may have built the road, but Obama claims he's a better driver.   In the interest of "fairness," the president tells us he will close some loopholes in the tax code, raise some taxes.  It's true this will help to pay for the journey. But as long as Obama leads the country down Austerity Road, raising taxes on the rich won't change the destination.  At best, an overall decrease in government spending that includes a tax increase will spare some jobs.   It means Obama won't need to travel so far down Austerity Road to achieve a given level of deficit reduction.  It doesn't mean the unemployment level will subside. 

In a year, some brilliant pundit will look at Obama's dismal poll numbers and say "it's the high unemployment stupid." Because by 2012 the jobs situation is unlikely to have improved.  It could be worse -- even a lot worse.   Obama won't be able to claim to have been dragged kicking and screaming down the wrong road.   The crux of Obama's problem is that no matter how far Obama travels down the "slash spending" road, he'll be blamed for not having traveled it far enough.   However far he agrees to go, they'll say he didn't go the distance.    For example, supposing Obama negotiates a tax increase, this fact will later be used against him. "Your tax increases slowed our journey down Austerity Road," his Republican opponent will say.  To the typical under-informed voter, the attack will seem reasonable, as Obama approved the destination and route.

Obama took the road well-traveled.  By election time, that will have made all the difference.  

Tuesday, July 5, 2011

Are the banks urging Thailand to drink the Kool-Aid?

Somebody call a physician.  Economists at some of Asia's leading financial institutions are suffering amnesia.  Or worse.

First, some background.  For a long time, economists have been urging leaders of emerging countries in Asia to shift from export-led growth strategies to domestic investment.  They have preached spending on infrastructure and the stimulation of local demand.  Here's an article dated May 2009:
ASEAN: ADB urges Asia to increase domestic spending

The Asian Development Bank (ADB) President Haruhiko Kuroda told ASEAN, East Asian and South Asian officials at the ADB’s annual meeting in Bali, Indonesia that Asia must boost domestic consumption and end its dependence on exports as external demand plunges in the world economic slump....

Although Asian governments have embarked on economic stimulus packages, Kuroda said such measures would not be enough without structural reform to end the region's dependency on demand from rich countries.

Over the longer term, developing Asia is starting the process of rebalancing growth from excessive dependence on external demand to greater resilience on both consumption and investment," he said.
What was good advice in 2009 ought to be good advice in 2011.   This year, nobody expects consumer demand in the US or Europe--regions plagued by unemployment--to rebound anytime soon.  The insatiable appetite of Western leaders for draconian fiscal austerity is reducing consumer demand, and may push the world's richest economies back into recession soon.  Thus, if Asian economies are to prosper, their leaders have never had more reason to focus on stimulating local demand.

Or so one would think.  Today the Wall Street Journal reports that the Bank of Thailand and various international banks are warning that if the incoming government of Yingluck Shinawatra follows through on its plans to increase domestic spending, this will have harmful consequences.  They are sounding alarm bells about a rise in Thailand's national debt and an increase in the rate of inflation:
New Populist Policies Could Harm Thai Economy
BANGKOK—A sweeping electoral victory for Yingluck Shinawatra has allowed Thailand to avoid the immediate risk of social unrest or military intervention, but the incoming government's populist policies may threaten the vibrancy of Southeast Asia's second-largest economy.

The sister of exiled former Prime Minister Thaksin Shinawatra wooed voters not only with her charisma, but with an array of vote-grabbing promises: an increase of 36%-89% in the minimum wage, guaranteed rice prices for farmers, starting salaries of at least 15,000 baht ($492) for university graduates, tablet PCs for students, and high-speed trains across the country.

"Even if they only deliver a fraction of what they promise (on wages), the impact will be significant" on inflation, said Santitarn Sathirathai, an economist with Credit Suisse in Singapore.


A few days before the election—with both parties promising to raise the minimum wage—Mr. Santitarn raised his average inflation target for 2012 to 3.7% from 3.5%.

The way the government implements any minimum-wage increase will be crucial: An across-the-board increase "will be very inflationary," Mr. Santitarn said, but a varied introduction across sectors would limit the impact on inflation, which rose 4.06% in June from a year earlier.

The Bank of Thailand has warned that inflation poses the biggest threat to economic growth this year. Gov. Prasarn Trairatvorakul said during the election campaign that the next government needs to maintain fiscal discipline and that increasing the budget deficit could threaten fiscal stability.


Standard Chartered Bank wrote in a research note that the For Thais party had indicated its economic policies would cost around 1.85 trillion baht over the next five years, a level of spending that could push back plans to achieve a balanced budget by two years, to fiscal 2018.

Although Thailand's public debt of about 45% of GDP "is not yet at alarming levels, the big-ticket investment could imply larger demand for public borrowing over the coming years than markets had expected," Standard Chartered said.

Despite the calls for fiscal discipline, the new government will face enormous pressure to make good on its promises...
Let's hope that Thailand's new government ignores the fear-mongering of international bankers and the Bank of Thailand governor.  Even a substantial increase in a national debt that, as a percentage of GDP, is only half that of the United States, will not spell ruin for Thailand.  Moreover, modest inflation can discourage hoarding and stimulate productive investment. 

Thailand may well be on the verge of pursuing an economic growth strategy that would not only be advantageous for poor and middle class Thais, but good for the world economy.  Thailand might set an example for other countries.

I would tend to chalk up the Wall Street Journal article as a reflection of the present global hysteria for "fiscal discipline now at any price." This economic dogma has been demonstrated to serve bond-holders at the expense of workers.

Incidentally, I found another version of the comments made by Gov. Prasarn Trairatvorakul, cited above, at MSNBC:
Thailand risks slipping into a fiscal crisis as in Western economies, eroding consumer power if the new government substantially expands fiscal spending as many parties are promising, warns Bank of Thailand governor Prasarn Trairatvorakul.
If Gov. Trairatvorakul actually believes that Western economies are suffering from "a fiscal crisis" as opposed to crisis of consumer demand and unemployment, then we can be quite certain he's drinking the Kool-Aid.