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Nov. 28 2009 - 3:04 pm | 423 views | 5 recommendations | 52 comments

The Faux Deficit Debate

However, since taking office Mr. Obama pushed through a $787 billion stimulus, a $33 billion expansion of the child health program known as S-chip, a $410 billion omnibus appropriations spending bill, and an $80 billion car company bailout. He also pushed a $821 billion cap-and-trade bill through the House and is now urging Congress to pass a nearly $1 trillion health-care bill.

via Karl Rove: Voter Anger is Building Over Deficits – WSJ.com.

President Obama laughes with aides aboard Air Force One on November 14 (Pete Souza/White House)

President Obama laughs with aides aboard Air Force One on November 14 (Pete Souza/White House)

Some of you may have read the above quote — from an editorial written by Karl Rove this past week in the Wall Street Journal – and thought to yourselves, “Karl Rove? Is he still alive?” A very natural question to ask, given the events of the past few years, which saw the Bush administration (and its accompanying historical legacy, or lack thereof) reduced to rubble thanks in large part to the horrific decision to put a purely political animal like Rove in charge of White House policy.

We’d also watched last fall as Rove acolyte Steve Schmidt entered the all-time Hall of Campaign Managerial Shame thanks to his ignominious bungling of the McCain run for the presidency, during which time Schmidt had pulled the trigger on two of the more nakedly cynical vote-getting ploys in our recent electoral history — the last-minute addition of dingbat bible-thumper Sarah Palin to the ticket in a transparent ploy to snatch up votes from the Limbaugh demographic McCain himself reviled, and the late-stage decision to use Palin to run a race-baiting campaign painting their black opponent as not “one of us.”

Not only did neither ploy work, but Schmidt may have ruined race-baiting/guilt-by-association campaign strategies at the national level for a whole generation of corrupt politicians, so badly did all his harping on Bill Ayers blow up in his face.

Karl Rove may have won George Bush the White House two times in a row, but since then he and his minions have been on one of the worst political losing streaks ever, surrendering both houses of Congress to the Democrats and the presidency to a black “community organizer,” to say nothing of how badly all of the policies he encouraged Bush to pursue have fared in reality, i.e. the world out side the voting booth (if there’s any justice, he and Dick Cheney will stand next to each other on the dock in the next world for getting us into Iraq).

And yet here is Rove, talking about the deficit problem in the Wall Street Journal, and watch and see if he doesn’t get some traction with this reappearance on the policy stage. As bizarre as it sounds, the stage is set for Barack Obama, supposedly the most liberal president in history, to march into his second year in office behind a banner being waved by Karl Rove, a political corpse.

The early warning signs on this first popped up a few weeks back, when Obama surprised reporters during his trip in China with an offhand remark about getting deficits under control. That was followed by a carefully orchestrated series of leaks and quotes from senior officials to the effect that Obama’s next State of the Union address was going to be focused on reducing the deficit. Included among those was a quote by Peter Orszag, Obama’s budget director, who said:

“The President strongly believes that as the recovery strengthens and job growth returns, we will have to take the tough steps necessary to return our nation to a fiscally disciplined and sustainable path. We recognize that the projected medium-term deficits are too high, and as part of the FY 2011 budget process, we are committed to bringing them down.”

Anyone who was paying attention might have noticed that almost simultaneous to these pronouncements from the White House came a series of releases from Democratic congressional leaders like Nancy Pelosi promising just the opposite — another deficit-fueled jobs program planned for launch next year. Pelosi openly dropped a turd on all the White House fretting about deficits:

“The American people have an anger about the growth of the deficit because they’re not getting anything for it. … If somebody has the idea that the percentage of GDP of what our national debt is will go up a bit, but they will now — and their neighbors and their children — will have jobs, I think they could absorb that, and then we ride it out and bring money in.”

This divide within the Democratic Party is very notable and is a signal that a lot of Democratic leaders outside the White House have gotten tired of Obama’s economic team, comprised as it is largely of people close to former Clinton Treasury Secretary Bob Rubin.

Rubin is the quintessential “new Democrat,” a Wall Street oligarch who believes strongly in balanced budgets, free trade and a laissez-faire deregulatory posture toward big business but sees himself as a political liberal because he favors minimal social safety nets of the sort dreamed up in cherry-paneled offices at the Brookings Institute, i.e. expanded unemployment insurance or wage insurance. In other words, repeal Glass-Steagall by day, give eight bucks to the soup kitchen by night. The more recent Rubinite legacy has been the push for huge and unrelenting bailouts of Wall Street companies followed by ameliorative and comparatively much smaller one-off bailouts of actual human beings, spread out over the entire population.

I have more about this in the current issue of Rolling Stone, but the Obama administration is filled with people connected to Rubin, including Orszag (who headed Rubin’s Hamilton Project, an economic think-tank founded by Rubin*), NEC director Larry Summers (who worked under Rubin in the Clinton White House), Tim Geithner (ditto), NEC deputy Jason Furman (also from the Hamilton Project), Mike Froman of the NEC and the NSC (tied to Rubin through Citigroup), and others.

This team has stepped in and helped Wall Street rebound thanks to massive government assistance, but now appears to want to pull back on spending. In other words, now that Wall Street is back collecting huge bonuses thanks to the big welfare check they spent most of this year forking over, the Rubinite school in the Obama White House can go back to believing in a capitalist economy that, for everyone else, is wonderfully self-correcting. A hand up, not a hand out!

This is where the new propaganda meme that has been offered by Rove and will now be followed by the White House comes in. There is going to be a lot of noise about how the White House is suddenly responding to voter anger over “deficits,” which of course grew monstrously throughout the Bush administration and spiked to previously unimaginable levels after last year’s rescue of AIG, Citigroup and other banks, but somehow managed to avoid inspiring broad outrage among the conservative talk-radio crowd until last February, after Obama announced his stimulus plan.

Note that in his essay decrying all the deficit spending, Rove lists the stimulus, the child health care bill, and cap-and-trade, but manages somehow to leave out the Wall Street bailouts, which dwarf these other programs combined by a factor of ten at the least (not just the TARP but the whole universe of other lending facilities, including those involving the Fed and the FDIC). That’s probably where this debate is going: the press is going to agree to call the stimulus and health care “spending,” while pundits who discuss the bailouts will just shrug and say, “What was the alternative — letting the economy fail?”

At this point the size of the national debt is so absurd, i.e. has drifted so far in the direction of incomprehensible fantasy, that it’s hard to imagine what the real effect of further bailouts (be they of banks or, through a jobs program, of people) might be. In fact, any economist who claims to know the precise answer to that question, given the number of moving parts to consider, seems to me almost guaranteed to be full of shit.

I do think, however, that it’s time to stop talking in coded language about this stuff and just admit that we’re in a survival drama, with too many mouths and not enough food in the lifeboat. Last fall, when Lloyd Blankfein’s bonus was at stake, the economy was an urgent international emergency and no limit was placed on how much money could be borrowed to stave off The Unimaginable. But now, when unemployment in the general population is soaring and the middle class is quickly turning into an underclass, suddenly we’re putting on our tweed jackets and talking in professorial tones about the dangers of deficits and fiscal irresponsibility.

That’s bad enough, but what’s going to be even worse is when the Obama administration starts pointing to all the Teabagger rallies and waving the “voter anger” card the discredited schmuck Karl Rove is bleating about as an excuse for why the spigot has suddenly been turned off.

When the White House does that, and it will, it’s going to be a lie, and pretty transparent one at that. Obama’s handlers surely know that they’re not going to win so much as one teabagger vote by shaving a few decimal points off this or that stimulus program. They just don’t want to admit what the plan is, which is to save one group of asses, and not another.

* Jonathan Schwarz over at Tinyrevolution.com alerts me to this very interesting footnote — when the Hamilton Project was launched a few years back, only one Senator attended. Guess who? (Video clip included).


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  1. collapse expand

    Since obama used the first stimulus to bailout and buy off the teacher segment of government, who got the magority of the stimulus…whose votes are the democrats going to buy next with the next stimulus?

  2. collapse expand

    Oxymoron: pelosi creating jobs

    We are still waiting in America for the first private sector job to be created by the stimulus.

  3. collapse expand

    Rove and his Republican minions didn’t win the White House twice. It was stolen, in Florida, in Ohio, and in the Supreme Court.

  4. collapse expand

    Mr. Taibbi,

    The simple fact of the matter, all political posturing to contrary, everyone loves deficits. Deficits means government spending, which everyone also loves, without taxes, which nobody likes. It is the best of both worlds. Since 1975 conservatives have been telling the electorate that they could have it all if we “just cut taxes and spending”. Here we mean cutting spending on “their projects” not “our projects” and taxes the other way around.

    Conservatives love deficits because it generates huge profits and cripples the ability of government to get anything done like occupational safety or environmental protection. Liberals hate it but are scared to death of proposing tax increases, the only alternative to deficit spending.

    One day a man jumped off of the Empire State Building. As he passes the 44th floor a man leaning out a windows shouts “How’s it going”? The jumper replies “So far, so good”. This has been the history of the US economy since 1980. Perhaps Reaganomics has reached the ground floor.

  5. collapse expand

    When I saw that it was Karl Rove who had the huevos to lecture President Obama’s deficit, I had to rub my eyes like a cartoon character.

    As one of the architects of the biggest deficit our country has ever known over the last 8 years, Rove has a lot of chutzpah criticizing an administration less than a year old, on anything.

  6. collapse expand

    Mr. Taibbi,

    When Obama assembled his White House team it seemed that everyone had voted for Hillary because it is another era of Clinton policies and it is a huge mistake and future migraine for the democrats in 2010. I believe it could easily turn into a fatal error for Obama. It was Clinton who turned the party away from the labor movement, from the populist stance it once held. This might have been pragmatic when the country was in the midst of bubbles but now it is suicide when the voters are pissed at what the banks and wall streeters have done to our economy.

    Congress or at least the House seems to understand this but the White House and Senate are tone deaf to any tune from the streets of America.

    We desperately need an industrial policy and a huge infrastructure project, a smart grid and upgrade is essential for any green economy. Will it come? Doubtful because it would require more federal money not less.

  7. collapse expand

    Being in my mid-twenties, it’s hard not to be concerned about the growing national debt, particularly when it is forecasted to exceed $20 trillion by 2020, pushing the annual interest to close to $700 billion. 2025 hits and the mandatory spending bombs hit hard. This is a major problem for my generation…not so much for the 50+ generation right now. Go figure.

    I’m not surprised that people, magically, decided to be concerned about this now (Republicans in particular…who happened to steal and ruin the tea party symbolism from Libertarians), as opposed to paying attention throughout the past 5-10 years. The problem with this selective memory is that it’s making it a partisan issue. The reality is, this eventually will have to be taken care of, through monetization, taxation, selling public assets, or simply repudiating the debt, and games and acts of spite are just going to aggravate things. “You’re spending too much, but we want to keep our tax cuts!”

    People want to live in a fantasyland where everything is paid for (on their agenda) but nobody gets taxed. Let’s be real. The dollar of my generation is being sacrificed by both parties. And let’s be honest, these policies right now are irresponsible.

    Here’s a great video of Juan Enriquez that illustrates the proper concern one should have about the national debt, as opposed to republican clamor:

    http://vimeo.com/2089382?pg=embed&sec=2089382

  8. collapse expand

    I agree that Obama is on the wrong track with some of his economic policies but was is there to do really? In post after post on this blog you discuss how entrenched in the political sphere Wall St and these other leeches are, regardless of party. I’m also not sure exactly what the government would do to ‘create jobs’. It seems many of them are lost through manufacturing and other industries heading overseas and even those with a college degree and some experience aren’t immune. The losses are really due to how the whole system works aren’t they? To show a profit or some growth to their shareholders, companies cut the most expensive part of their business – labor. So what’s to be done? I think that if unemployment increases and people continue to stay out of work longer there will be some real anger but I doubt it will be taken out on the true culprits but instead be taken out on citizenry at large.

    We’ve overextended ourselves, spend hundreds of billions on fighting useless wars, and have gained nothing from it as a nation other than checking the pay phones when we visit the UN. Maybe it’s time for the IMF to step in and give us an audit like they did Iceland. Obama needs to take the kid gloves off and actually fight for the people that elected him. Even if he fails, the next ones in line will still be minions of the corporations as long as we continue to allow their funding of political campaigns. Campaign finance reform and getting a real turnout for the Congressional elections will help at least a little (mid-term elections typically only draw 30% of the voting population).

    Sorry for the long comment but I think that the foundations of our problems are ones that are rather difficult to fix. I would’ve preferred an Obama more akin to Attila the Hun slashing and burning wherever he found stupidity but it seems that a lot of his team isn’t very solid all around, with too much outside influence from the money people.

  9. collapse expand

    Why does Rove bother mentioning the $33 billion expansion of S CHIP? Compared to the stimulus and health care bill, that’s chump change. I guess it makes sense that he’d bitch about giving money to sick children. But yeah, Karl, who got us into this massive deficit (and into massive debt to foreign governments) in the first place?

    That said, Obama’s economic policies have been troubling. From capitulating on reforms for Wall Street to placing cronies and insiders in key federal positions. He needs to get rid of Geithner, Bernanke and Summers ASAP.

  10. collapse expand

    Matt,
    You don’t mention military spending, particularly relevant in the case of Karl Rove, as his administration’s spending on multiple wars is a large part of the deficit problem. But your main rant is well-taken. As always, California leads the country, and we can see here that a legislature of term-limited amateurs quickly falls into paralysis, handcuffed by intransigent political purity, and incapable of the dirty work of actually governing.
    None dare call it conspiracy, and perhaps we shouldn’t, perhaps the ultimate failure of our government is the curse of its success.

  11. collapse expand

    I generally agree with the thrust of your complaint, Matt, but where I come off the rails is that there’s always a powerful group pulling strings in every situation and there’s no end to it. Ok, so it’s the Rubinites now. Previously it was the Goldman Sachs group (which shares a big chunk of a Venn Diagram with the committee to save the world). Before that it was PNAC and many other powerful conglomerations of eggheaded self-appointed-do-gooders. This is relatively undisputed.

    I’m not buttering your muffin here when I say I have a lot of respect for the light you and others managed to bring to GS, but at the end of the day other than some uncomfortable PR moments I’m not seeing a major change. Just like with the PNAC crowd, everyone seems to pretty much have a job somewhere making policy or opinion still. All the while the average voter is busy arguing behind the reality distortion field that is ginned up after the decisions are made and the money is doled around – all the smoke and mirrors in the media about Republicans and Democrats and liberals and conservatives that bears only a vague resemblance to reality. Everyone in a while someone can hold up another shiny thing that distracts people into paying attention to what’s actually going on, but for the most part it quickly degenerates back into terms people are comfortable arguing on based on identity politics. The fact that the bailout and stimulus are now falling back into a common socialism/deficit debate would be staggering if you hadn’t lived in America and weren’t ready for the obviousness of it.

    So the question, as the guy mentioned above, is “What do you do about it?” Obviously you can write stories that attempt to strike a chord with the media and the public – that’s a good way of marketing a point of view, though I doubt you would think of it as marketing. I can forward around things to friends and family, vote and talk to people, but when it’s all said and done there seem to be a few more people actually paying attention to what’s going on while the vast majority are locking horns again re-fighting the same old fights that enrapture the public year after year only this time the chicanery has reached such epic proportions that it’s no longer a threat to the future of our way of life, we’ve now managed to make it to the point where we’re in that future and all this monkeying around has become a giant guillotine blade hanging over our collective necks. Yet, still, there’s no sense of urgency about the problems writ large, just a sense of discontent and unhappiness with the direction of our country that’s more like an outrage seeking missile prone to aiming itself at anyone who shows up holding a target for it.

    What, practically, do you think can be done to shake things up? Sure, the Democrats will suffer election defeats and lose their impotent majorities in the House and Senate, but they’re hardly doing anything with them anyway. And where the Democrats tend to be crony capitalists with the occasional capacity for empathy, the Republicans tend to be crony capitalists with the occasional capacity for unbridled destructive force. We’re just letting the bad be the enemy of the awful and switching between the two as if it makes a difference. Even if some of these third party or primary challenges go through, they’ll be going through on behalf of a group of people who are so out-of-their-minds deluded about policy that they think the bailouts handed out to banks were too “liberal” and the cast of characters they’re backing is damn near terrifying.

    What happens next and how does anyone do anything about it? You’re not a guru or a cult leader, but realistically speaking what can you imagine happening that changes things in any positive way other than an inevitable economic crash that re-orders society through its severity (if that happens)?

    • collapse expand

      Nothing CAN be done about it unless people organized. Matt is really doing phenomenal work, especially with the financial stuff, and making it easier for the average person to really understand what the fuck is going on.

      But at this point it would make sense to take a page out of the Howard Zinn playbook and try to get some sort of movement started. We saw it with Civil Rights, Women’s rights, etc…

      Let me give you an example. I live in Los Angeles and we’re crippled with a massive budget problem. Recently (as I’m sure you’ve heard) the University of California system has upped tuition by 32%. Sure there were sit ins, even some riots up north, but nothing will come of that because the students voiced their concerns and have now bent over. One of my friends that happens to be a professor at one of the UC schools said that the students should just refuse to pay. I hadn’t thought about that but it made sense. If one or two refuse they’ll just get kicked out…but what if say, 90% of the UCLA students simply refused to pay the increase? Would they flunk out thousands of kids? Of course not…it’s strength in numbers.

      That might not be a bad comparison but it seems like a microcosm of what is happening on a national level. Everyone has been lost to apathy and people aren’t willing to organize and hold some of these assholes in government responsible. In Paris, the youth would be out burning cars….here? Why do that when we can watch reality tv?

      In response to another comment. See in context »
      • collapse expand

        dharmabum,
        Great idea but the reason this would never work is because most of the students would never go for it. In the US we don’t have the type of young people who stand up to authority because in schools and the rest of childhood society, you get rewarded for sucking up to authority. Think back to grade school – who got the best grades? Normally the asskissers. This trend continues into adulthood. Ever been at a job and tried to argue for better conditions? I tried to get my co-workers to unionize and the most overworked/underpaid were the most resistant to the idea. Either afraid of losing their shitty job or because they had some sort of weird deference for authority. Students groomed for years to please their teachers will never go against the school administration for fear it will be on their “permanent record”. Even if no such threat exists, their reflexive brownnosing instinct is too strong. US is not France. I wish it were though, I could have used a good student revolt in my college days.

        In response to another comment. See in context »
        • collapse expand

          You’re right. I thought similar things to dharmabum when my university was raising tuition nearly every year but on a lesser scale.

          “What if students just didn’t show up to class?”

          But even given that most students probably would have been happy at the prospect most would still have even put in that little bit of subservience rather than boycotting. Not paying tuition would not work that well as I doubt many students actual handle their own finances – it either goes through parents, financial aid, or some other system that most have no idea about.

          In response to another comment. See in context »
      • collapse expand

        Forget a movement, I am ready for a third party.

        In response to another comment. See in context »
    • collapse expand

      Expat,
      Your post mirrors the exact feelings I have had since the beginning of TARP. With some serious frigging (read:country destroying) problems looming on the horizon I am at a loss at what to do as a citizen.

      Once you’ve been put over the barrel so many times by both parties that only seem to be intent on drilling holes in our boat, just using different methods, what the hell do you do then?

      When the crazy libertarian “down with the FED” candidates like Ron Paul start looking like the only sane and rational individuals you see running around washington, what the hell do we do?

      When elections start being chosen on issues like gay marriage and abortion not on the serious issues like financial accountability of government and the rule of law you know there is a problem

      I suppose when the gay couples show up to get married and the city hall has been closed for 6 months due to furlough days and when your loved one is not getting the surgery they need due to massive lay offs then MAYBE people will start seeing the problems this country has from the proper angles.

      Maybe I am wrong. Maybe most of the people in our country see the same problems I do. They just choose to ignore it. After all, with the amount of anger and resentment towards the financial and governmental entities that have been systematically screwing people since forever there is only so much a person can take before you flip out or your appendix bursts.

      Maybe that’s the reason The Dark Knight and other movies that give you some escape from reality into a world where you see someone bopping heads of the bad men sell so well.

      I don’t think disconnection from the world is a result of our society or from being raised on cable TV where only the violence in movies are real. I think we choose disconnection and escapism as a survival tactic. When things are so screwed up and no one is helping the situation, sometimes the best thing to do is walk away. Or is it?

      What does a person like me do?

      In response to another comment. See in context »
  12. collapse expand

    As an outside observer, who also works in the ‘alternatives’ sector (hedges, ETFs, managed futures, etc…) the problem remains regulation, specifically the consistency of its application, who gets targeted and how they are held responsible. Foreign funds are very wary of the US now precisely because of these issues. As it pertains to public debt, the US has long lectured other countries on the size of their debt because it effects the currencies and economic conditions of countries where there’s often sizable US-based investment. In its own case, of course, it gives itself a pass and has done since Reagan.
    The US financial system is a hopeless tangle of vested interests, all of them apolitical, whose lone ideology is ensuring control of returns. One way of ensuring returns is to make sure that even when things go belly up, and especially when it’s largely by the firms’ own making, there are people in place who can ‘network’ to get the public purse to soften the blow or wipe out the loss entirely.
    However (and this is a big however) the biggest anchor around the US economy remains military expenditures. ‘Peace dividends’ from the end of the cold war, a phrase championed by Bush Sr., were never more than a slogan to placate people who wanted big cuts to the Pentagon; and because there are now two active engagements, plus virtually no concerted effort towards the elimination of nuclear weapons, there have been no real savings for the public purse. So despite all the bad noise over the deficit, no one is talking about military cuts, or cuts to the huge security apparatus now in place, or cuts to the vast agriculture subsidies, or foreign military aid spending, etc.. So many justified places to cut, but zero political will to do so. Instead, the country freaks out over a public option healthcare system that will actually create jobs by relieving businesses of huge insurance overheads.

    The warp that’s now embedded in the US system has to be addressed, firstly with the big money and influence that causes the warp. Until then, it’s just so much sound and fury, signifying nothing.

  13. collapse expand

    The outcry over the health care plan is interesting. I mean, the plan itself isn’t all that it could be; in fact, it’s almost a bad bill, but it’s something. And it will cost about $900 billion over the next ten years (and it may actually save money, but that remains to be seen). Obama recently signed a military budget for FY 2010 for $664 billion (and even without the money for the two wars it’s still over $500 billion). That’s for one year. At this pace, over the next ten years we will spend about $7 trillion on the military. Any words on that deficit-driven entitlement program? None at all. In fact, you had Joe Lieberman, who’s very concerned about the deficit right now and the prospect of a public option, saying it was a shame that Secretary Gates had decided to scrap the laser plane program, saying it was “very important” and all that. In fact, the scrapping of a few military programs was reported in the media as a “cut,” even though the overall budget actually increased. Meanwhile, No. 2 on the list is China, which spends about $60 billion a year on its military.

    But the largess to the Pentagon is off limits. It can’t be discussed or even noted in the media. To a lesser extent, this is also true of the bailouts. As you pointed out, in rifling off a list of deficit-fueled social programs, he left out TARP. But these are “necessary” expenditures for the overall health of the economy. Because as they well know, the free market is a myth. It doesn’t work without Keynesian stimulus. Look at every industrialized economy since WWII. Heavy state intervention all over the place. During WWII, the US government essentially had a command economy, and growth exploded. The lesson from this was simple: have a permanent war economy.

    Of course, taxpayer money doesn’t have to go to the military. It can be used on social spending or infrastructural projects with similar effects. But the problem with that is, the people are going to want a say about where they think the money should go. Should we build a school? Should we fix the local highway? Etc. It would have a mobilizing and democratizing effect. And you can’t have that. So it’s much better to funnel money into the private sector via the Pentagon, and stimulate the economy THAT way, because not many people are going to have an opinion about the F-22 fighter jet or something like that.

    America has a great system for the marginalizing the general of the population. It’s almost flawless, actually.

    • collapse expand

      Max,

      I agree with pretty much all of that, only I think the financial services sector is becoming to this economy what the Pentagon was to the America of the second half of the last century. It’s a method for funneling tax money to the right people without getting much of an argument — just as people don’t have an opinion about which fighter jet is better, most don’t really understand the finance world.

      You put the matter better than I did: if people were to understand that we have a command economy and were willing to openly fight over who got what, that would be better than what we have now, which is a phony argument about deficits and spending mostly being pushed by people who don’t want to believe or admit that they’re dependent on state largesse.

      In response to another comment. See in context »
      • collapse expand

        Matt, you may be right about the financial services sector. And that’s even scarier than the military industrial complex because at least with the MIC you pretty much know what you’re getting for your money. X number of tanks and Y number of Kevlar vets for Z dollars and so on. It’s a boondoggle for sure, but at least it’s somewhat out in the open. Not so when you give billions to gigantic financial institutions whose primary job is to irrigate capital (some might say “launder”) in mysterious ways. Who knows what they’re doing with that money? I remember in the run up to the TARP passage there was all this talk about how the program was going to have strict oversight, which there was; it was just that Hank Paulson and not Congress was overseeing everything. And as you know, months later when these companies were asked what they did with their bailout money, they flat-out refused to say. And why wouldn’t they? Incredibly, they were under no real obligation to do so.

        I hate to say it, but we’re in kleptocracy territory here. The taxpayers exist to subsidize the elites and their business enterprises. Of course, that’s another thing you can’t say. You can’t talk about “class warfare,” lest you be dubbed a Marxist. Meanwhile, Wall Street is waging class warfare all the time on the American people. But you can’t talk about that. So popular frustration manifests itself in attacks on illegal immigrants, gays, and other nonsensical scapegoats. Conservatives such as Mark Sanford and Glenn Beck are already saying we need to look at Ayn Rand for guidance, as if they have no memory of anything before January 20, 2009. The whole thing is completely insane.

        In response to another comment. See in context »
        • collapse expand

          Max and Matt – your comments along with “caradoc”’s above make eminent sense – the financial sector is equal to and may have surpassed the military sector in its command upon our resources. Where is all the money going? It may be relatively little in the trillions-scheme(s) (and scams) of things, but billions is going to bonuses and pay to the plutocratic elite of the too big to fail banking behemoths. This administration is fully neoliberal in the Robert Rubin tradition of Bill Clinton. I’m looking forward to Matt’s article in “Rolling Stone” to see how pockmarked the administration is with Rubin-Goldman Sachs “agents” (beyond the huge boils we already suffer under known as Messrs. Geithner and Summers). “caradoc” is right – the remedy is re-regulation, but don’t look for any meaningful re-regulation of the financial industry (meaning breaking up the too-big-to-fail banks, reinstating Glass-Steagall separation of investment, insurance and commercial houses, putting back strong regulation of derivatives and other exotic casino instruments [taken away by the Credit Modernization Act of 2000], (and if I had my wish aboloshing The Fed and replacing it with a National [People's] Bank) from this administration.

          P.S. Alexander Cockburn currently has a good take on this administration in his post “The Auld Jingle Jangle” at counterpunch.org.

          In response to another comment. See in context »
      • collapse expand

        Matt, I love your writings, but you can’t believe we are a planned economy? What we have here is exactly what we, as a society, asked for, total representation. We want to live beyond our means, i.e., spend more than we make, and we don’t want to suffer the consequences. The reality is that Washington follows social mood. Politics react at the end of a trend, they don’t lead it. Take financial regulation. Financial regulation via the Glass-Steagull was enacted in 1933 at the end of the Great Depression, and reform of that act occurred when it was repealed in 1999 at the end of the Great Bull Market. Legislation follows, it doesn’t lead. Washington will stop their profligate ways only when society makes an endogenous shift towards fiscal prudence.

        Society wants all this health care, bailout, stimulus, keep-the-money flowing stuff. that’s the real cause of the deficit. You are right on though when you said, “We’re willing to openly fight over who got what, that would be better than what we have now.” You are right because the only way things are going to change is when social mood changes. In my opinion though, smart guys like you stating your mood shift isn’t enough. To get that kind of change, it’s going to take the after-effects of our crushing private and public sector debt load.

        In response to another comment. See in context »
      • collapse expand

        Nationwide Stockholm syndrome…

        In response to another comment. See in context »
  14. collapse expand

    Great link… but think that’s just an image of Obama not an actual video clip unless my browser has issues.

    Looking at it, you can tell right away who the Hamilton Project is for: Wall Street Democrats. Or as I like to call them, “The Party of Gay Investment Bankers and Corporate Lawyers Whose Grandfathers Worked in the Roosevelt Administration.” (In fact, by my count, its advisory council includes twelve investment bankers.) They’re people who should naturally be Republicans, but just can’t bear having to hang out with Pat Robertson.

    oh angels of mercy…

  15. collapse expand

    So why is it that whenever Republicans are screaming that Obama’s $1-2 Trillion healthcare program will destroy the economy and turn us all into wards of the Communist State, everyone totally forgets how George Bush personally pushed through the Medicare Prescription Drug Benefit (“Part D”), which will ultimately cost anywhere from $1.2 Trillion to $2.4 Trillion?

    • collapse expand

      Because the reality is largely irrelevant to the politics. This is team sports for most folks. The thing I can’t answer is how you get mommy and daddy to stop yelling at one another any pay attention to the road before the car goes off a cliff. There seems to be almost no way to penetrate the overpowering white noise of our politics without jacking gas prices through the roof or flying planes into buildings. When you consider the nexus of unemployment/underemployment, household debt, health coverage, bankruptcies, foreclosures and various other pocketbook factors and then note that only the political fringes are in open revolt over perverted versions of reality you gotta think that nothing short of total collapse is going to get anyone’s attention in any real way.

      I mean, my God, there are third world mobile health clinics touring America and people living in tent cities and our current national debates center on things like whether giving trillions in free money to Wall Street while they declare massive profits and bonuses is a Soviet era attempt to nationalize the banks. Forget the high-minded rhetoric about appropriations and deficits, you can’t even get people to focus logically on the shit at the bottom of Maslow’s Hierarchy.

      Maybe once everyone’s tugging on Rosasharn’s tit for dinner things will straighten out a bit, but even that’s not guaranteed.

      In response to another comment. See in context »
  16. collapse expand

    Deficits are fine as long as you go in the hole for your pet program, it seems. Mostly this topic just depresses me.

    The general population is either too busy scraping up money to pay bills or too weary of ignored protests over progressive action (and those who participate are categorized as loonier, or they’re simply marginalized) to storm D.C. and Wall Street until policies help the working class.

    I agree wholeheartedly with those who disparage the U.S. rush to fund wars and destruction and balking at funding health care and create jobs.

    Thus my fantasy of a viable progressive 3rd party. If nothing else it would take away the plausibility of Obama as a (gasp) liberal or (double gasp) socialist. He’s a moderate, and the Democrats in congress are legislatively impaired, getting small fixes from tweeting policies and requesting donations.

    It doesn’t have to be so either/or, high paid execs/working class stiffs, but there has to be some way of injecting energy into a progressive movement. As much as I feel that libertarianism is folly since businesses are concerned about their bottom line over quality output, I do feel that the government $ that went to bail out those “too big too fail” should have been withheld. There should have at least been some common sense regs on bonuses and future takeovers if you’re going to argue that large companies abroad would have just taken the spots that GS and their ilk held.

    So excuse me while I get out of this black hole and try to improve a small corner of my yard. Potential wildflowers are about as good as any action I can take. Oh and there’s a city council run-off on Tues.

  17. collapse expand

    Matt, what’s so horrifying about this, and your RS piece this week (brilliant, BTW, again) is that nobody KNOWS apparently this is all going on.

    Obviously the tea party fools are fighting their “culture” war as this all goes on, and Dem voters apparently… well I don’t know WTF they’re doing. I voted for Obama, but I don’t approve of any of this. Why not have Bush back in office then?

    The other thing I find interesting about your definition of people like Rubin: they’re flat-out plutocrats, but with a sense of noblesse oblige. Yeah, we’re stinking rich, but hey let’s toss some crumbs to the poor so we can call ourselves “liberals.”

    Hmmm, let’s see. Upper class? Check. Lower class? Check. Who’s dramatically missing from that equation? Thanks for keeping us all informed of the real war going on here in this country, if it weren’t for you I wouldn’t know about this stuff (save for maybe Arianna).

    Keep up the good fight. You deserve a Pulitzer for your reporting on this.

    -Tony Healy

    • collapse expand

      >”Why not have Bush back in office then?”

      The small solace in all of this is that it’s better to have Obama and company over Bush II or McPain. Obama is a more logical, which, while a plus, is also problematic. He needs to inject some emotion into his proposals if ANYthing is to progress. The fact that it ain’t liberal enough for vocal Democrats is a sign of how far to the right the politics of the U.S. has gone.

      In response to another comment. See in context »
  18. collapse expand

    Hi, Matt. I enjoy reading your columns and your occasional appearances on Bill Maher.

    Earlier in the year, I posted about the overinflated hype over the National Debt on my own blog (which, when I’m not ranting about politics, mostly involves me ranting about pizza and cheeseburgers and posting food pr0n pictures).

    http://virtualcheeseburger.blogspot.com/2009/03/national-debt-dont-believe-hype.html

    Except for the debt being about a trillion higher now than when I wrote this, I think my thoughts about zeroing out the public debt (mortgages and credit cards) are still valid. Since you’re hip deep in the research about things like this, I would appreciate your opinion about what would happen to us if we just tacked on a few more trillion to the national debt (that we will be passing on to our grandchildren… again) and kinda sorta “started over”. Any economists reading this are also welcome to comment.

    Ed H.
    Chicago, IL

  19. collapse expand

    With possible climate changes, being heavily indebted to china (who are beating us like a gong with cheap labor) as well as very serious food and water crisis on the horizon, moves like these by the government transferring large sums of wealth to the upper crust of society make me feel like the powers that be are well aware of just how fucked we all soon may be and thus their only priority is funneling all power and resources to they and their ilk.
    or am i just way too paranoid for my own mental well-being?

  20. collapse expand

    Call me a pragmatist or merely a simplistic thinker, but it seems to me that if the power-that-be want endless streams of money to spend they would want to take good care of the Middle Class. Why? Tax revenue. If the spigot gets turned off or the flow is seriously impeded, then how will the Mucky-mucks reward their cronies? The well will eventually run dry or the sheep will tire of being sheared. Does 18th century France under Louis XVI and Marie-Antoinette ring a bell?

  21. collapse expand

    Matt, what I hardly ever see in discussions such as this is a mention, however brief, of how some of that ‘bailout’ money was to be paid back and some already has been paid back. Do you have a handle on that or do you just feel that it is insignificant? Please provide support–I think there is a new story here.

    Oh, and as some of the posters have indicated, we might have to talk about raising taxes. I agree. I don’t see how Cali is going to get home without a tax hike.

    • collapse expand

      Whatever bailout money has been paid back has been restricted almost entirely to the TARP, which at $700 billion is just a fraction of the total bailout commitment — which is somewhere between $11 and $23 trillion, depending on who you’re listening to (and the latter number comes from the Inspector General).

      The banks have access to a giant galaxy of other programs, most of them under the Fed, like the TALF, the Temporary Liquidity Guarantee Program, the PPI, and so on, which offer them a chance to unload toxic assets, or borrow money virtually for free from the government, or get government backing to otherwise very expensive borrowing. Goldman, for instance, was able to issue almost $30 billion in FDIC-backed debt last year under the TLGP. Repaying the TARP is nice, but it’s just a fraction of the problem.

      Also take note of the fact that we could have paid off every subprime mortgage in the country for under $1.5 trillion, and instead gave eight-ten times that amount to Wall Street, mainly to pay off derivative bets on those sorts of loans.

      In response to another comment. See in context »
  22. collapse expand

    Excellent comments throughout (and hat tip to racetoinfinity for mentioning Alexander Cockburn…are there any real conservatives left?).
    What is referred to as a ‘command’ economy already exists in reality and does quite well throughtout Europe, in Canada, Australia, etc. But it’s referred to as a ‘mixed economy’, in that certain areas (healthcare, defense, regulation, environment, mass transit) are all largely government run because, well, the private sector has a habit of gouging in all these areas and providing poor (and in some cases downright immoral) levels of service.
    Banks need to fall into this category because (as someone much more intelligent than I has pointed out) they are literally a utility…a hot water tank if you will for every citizen’s money. The need is to provide public banking that is kept separate from all the other exotic investment enterprises…in Canada, these are called credit unions and each depositor becomes a shareholder and is consulted each year at an annual general meeting. Investments beyond mere deposits and withdrawals aren’t handled by the bank, but loans, mortgages and credit cards are available. If nothing else, it keeps the banks small and focused and leaves the latter-day alchemy to private ivestment concerns.
    At the end of the day, though, the fact remains that western democracies court far too much money, and it warps the system…all problems derive from this, and its undermining the credibility of democracy as a whole.
    As it pertains to ‘reform’, conservative measures tend to be overly general (one size fits all, but allows lots of specific exemptions), while liberal legislation tends to be overly specific (leaving out the worst offenders). Neither works effectively because neither actually deals with the issue, but is used more as a way to say ’see, we’re doing something about it’.
    Get the money out of democracy…then we all might see some improvements.

  23. collapse expand

    I am surprised that you give Rove credit for winning Bush’s two elections. Instead, the evidence is clear that he can be credited with stealing and rigging those elections. As our site, http://www.RoveCyberGate.com, shows, Rove, with the assistance of Bush cyber guru Michael Connell, used computer programs to route voting results through GOP servers and alter the results. And after Connell indicated that he was ready to talk, he was killed in plane crash. Recently, Connell’s family has indicated that they believe that Rove et al had a hand in Connell’s death.

    You are right that Rove is a corpse. But he should be prosecuted before he is entirely written off.

  24. collapse expand

    Thought you and your readers might like the artwork my friend created for Lloyd “God’s Work” Blankfein. You can check it out by clicking here.

    Thanks for continuing to hammer on these crooks.

  25. collapse expand

    Matt,

    You’re usually on point when it comes to financial/ecomomic issues, but you’re too easy on the Republicans. In 1980 they inherited a deficit of less than a $ trillion. Then they implemented “Supply Side” Economics and proceeded to ruin a country which for 200 years had prospered.

    You seem to forget that in addition to the phony debt figure you read about, our entitlements are about $100 trillion underfunded. Medicare itself is $50 trillion in the red.

    As an actuary, I have been talking to my shoes about this for decades, but no one wants to hear.

    Hunter Thompson would have said: “Matt, you’re a great guy, but get angry. The snakes are winning and all we are doing is whining.

    Call them out. They hate themselves and their children, and they will multiply if they can.”

    If you need an actuary, let me know..paradigmactuaries.com.

    Lee

  26. collapse expand

    (if there’s any justice, he and Dick Cheney will stand next to each other on the dock in the next world for getting us into Iraq).

    Ah Matt, you’re losing it.

    If there’s any justice they’ll be doing it in THIS world.

  27. collapse expand

    “I do think, however, that it’s time to stop talking in coded language about this stuff and just admit that we’re in a survival drama, with too many mouths and not enough food in the lifeboat.”

    The US elites have been pumping and dumping other countries economies for decades, it must be somewhat uncomfortable for Americans to see it done to them.

    In those countries where the people actually have a pair, violence erupts.

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