Regarding national and private bankruptcies

 Ultimately bankers have to take responsibility for making bad loans, not just the borrowers. In national laws, there are rules for bankruptcy, and these rules are in the national interest because it does no good to throw people into debtor's prison, that simply deflates the economy and causes more debts to go bad. A wealthy nation keeps all its people employed as gainfully as possible. That was Adam Smith's real idea which seems to have been lost in the fog created by the very wealthy bankers and merchants he decried.

Furthermore, why should sovereign governments take responsibility for bad private debts? And why should sovereign debts run up by crooks and scoundrels in the government be passed through to the people, who may have had no clue, or may have been mislead by glowing opeds by famous columnists (Tom Friedman, for example). Speaking of which, those pumpers of neoliberal dogma bear as much responsibility as anyone.

Why Social Security is A Very Good Thing

Private investments or retirement pools are risky because any one company, etc., can go broke.  You might think there will always be a GM, but that isn't necessarily true.

Social Security is not a ponzi scheme because it depends on only one thing financially: future workers in the USA earning taxable wages.  That is not a pool with a limited horizon, we hope.  If it ends, there's no hope for anything else either.

Only the whole country can do that.  And given that only the whole country can do that, it must, because it's by far the most efficient and acceptible way to do it.  I've had this argument with extreme conservatives who relent easier than you do because they seem to be able to think.  And you really haven't been keeping up with writings of people like Krugman, Baker, and others; your ideas have a distinctly Goldwater-era smell to them.

We hope that paid work in the future never ends, for if it does end, then everything, no matter how many layers of CDS you have wrapped around it, will fail also.  Because everything, ultimately, depends on paid work.  Even the values of land and gold would collapse.

Now there is one other risk: the political risk that the program will become unpopular, or be canceled or drastically cut despite it's popularity because of the other dimension of politics: big money.

That is precisely why SS must be funded exclusively as it is now and be seen as a social insurance program, not as welfare.  Welfare programs are trashed by those are taxed but see no benefit from them.  We have seen that happen since 1935; social security (a program that ultimately benefits the payees) has kept getting better while welfare programs (unemployment and AFDC) have been decimated or eliminated.

Though SS has a defined benefit, I personally have no problem with small adjustments.  Small adjustments over time are exactly what is required to keep a pay-as-you-go system running (as well as a non-ending pool of future workers) running forever.

Nothing else gives guaranteed numbers either.

Now back to the trust concept.  First, from where we are now it is virtually impossible, almost unimaginable to fully fund SS, unless you were thinking you could get $30T overnight by knocking over Wall Street (they don't have the money either in their smoke and mirror system with quadrillions in nominal value).  So to go from here to fully funding would require drastic cuts in benefits or drastic increase in taxes, neither to any good end.

But suppose anyway that we could scrimp and save the needed $30T (which would become $45T over time) to fully pre-fund social security.  Would that mean we would now be far better off?  Don't we need lots more "saving".  (It seems like I've heard that all my life.)

In short, no.  First you have to understand we basically have Credit Money (and I will explain subsequently why that is a very good thing).  That means that banks actually create money in the first place by lending it.  It doesn't need to be "saved" first.

Secondly you have to understand that "savings" is primarily a personal good, withholding consumption now for planned consumption later.  There may be little, if any, social benefit.  In fact, there could be great harm arising as a result of it.

Start from the assumption of a perfectly efficient market.  (I know this is not true, but it has been becoming more and more true for savers and financial investors.)  Given such a market, two things are automatically true:  (1) there is exactly enough saving in the market as it is right now, and (2) all the benefits that accrue from the act of saving return to the saver him or herself and give no advantage to the rest of society.

Now there was a time when saving returns were comparatively low compared with economic growth and inflation.  That was because when you saved or invested, your money wasn't actually used with perfect "efficiency" for you.  Instead, it built homes in your town or factories in the nearby city.  Those homes and factories brought some benefit to your neighbors as well as you.

Now we have deregulated finance, so that when you save or invest your money may go to other things, such as driving real estate bubbles, or building factories in China where labor is cheaper and workers can more easily be exploited.

This being done, there are potentially higher returns to the individual saver, but less available to society in general, and the local effect may even be negative.  That is what higher returns to savers/investors has wrought.

Robert Reich on the 2010 Election

Just came across this excellent analysis with good history also:

http://robertreich.org/post/1398873669

Long Term Deficit (not a crisis !!!) ideas

There is no deficit crisis right now according to economists like Paul Krugman, Brad DeLong, and Dean Baker and others.  Right now, we are already in an economic crisis, but it is an economic recession, the worst since the Great Depression so far, and that it the opposite of a Deficit Crisis.  The deficit crisis is right wing hype.

However, the US does have a long term deficit problem.  I would propose measures like this:

#1 Single Payer (according to Brad DeLong, rising
     heathcare is 98% of the long term problem)

#2 End wars, close overseas bases, stop funding useless weapons like star wars.

#3 Allow the Bush tax cuts to expire, either en toto or just on Americans who make over $250,000 as Obama promised.

#4 Tax capital gains as income, eliminate the hedge fund manager loophole.  Institute a financial transactions tax (praised by Keynes for helping stability).

#5 Eliminate corporate tax loopholes, tax breaks for big oil and coal; tax breaks for outsourcing.

#6 Tax CO2 emissions.  (If fully refunded, this might be just neutral or positive through increasing GDP.)

#7 Eliminate subsidies subsidies for corn ethanol, a process which produces about the same CO2 emissions as direct use of fossil fuels.

#8 Fully restore the estate tax with exemption at 45%, add new billionaire estate tax at 65%.

Links on the Deficit Commission

Paul Krugman is one of America's most well respected economists.

Here he blasts the deficit commission in his New York Times column.

I consider economist Brad DeLong a centrist for various reasons (including his motto, Grasping Reality with Both Hands).  OK, he's a partisan Democrat, but not a deep left winger like me.  He worked in the triangulating Clinton Administration after all, alongside Larry Summers.  On the Deficit Commission, however, he has had nothing good and lots of bad things to say about it.

Here he quotes Financial Times of London blasting the Deficit Commission.

Here he says that Deficit Reduction needs to be 98% Healthcare Reform.

The Unemployment Election

The midterm elections of 2010 have generated a lot of claims that they represent a hard turn to the right.  Nothing could be farther from the truth.

You can understand the elections almost perfectly by just considering two factors: the worst unemployment since the Great Depression (and actually surprisingly comparable to the Great Depression) and the usual midterm effect (a shift in party turnout that nearly always occurs in midterm elections).  Mathematical models based on past elections have been run, and these two effect explain 98% of the magnitude of the results.

In addition to these two effects, the recent Supreme Court decision Citizens United is allowing corporations to spend unlimited funds on advertising which may influence elections.  And this opened a new floodgate of corporate spending, almost entirely going to Republicans (who are often mistakenly believed to be populists because of their rhetorical style) in this election.

Given all this, one may even be surprised that the outcome wasn't a bigger defeat for Democrats than it was.

But perhaps the biggest question is, why is unemployment so bad?  With a corporate media drumbeat constantly raising unwarranted fears about the deficit and misdirecting the blame for it away from their failure to warn viewers years in advance about the housing bubble, it's not surprising that many people not paying close attention would blame unemployment on the deficit.  That is a crazy idea, and nothing could be farther from the truth.

The large unemployment we face now resulted most immediately from the collapse of a housing bubble which had sustained relatively high consumer spending (relative to wage income) on the basis of perceived housing wealth, which was often borrowed against to maintain or increase spending.  That bubble should never have been allowed to grow so big, but the Bush administration had no desire to take the punchbowl away, in fact they kept on spiking it even more, such as by removing caps on leverage for the largest banks.

But I cannot honestly leave all the blame with Bush, as there is an even deeper problem which has been developing for decades.  The problem really started with financial deregulation during the Carter administration, and which grew especially under Reagan.  All this deregulation pulled out the rug under US manufacturing industries, increased offshoring and outsourcing, ultimately leading to the hollowed out economy of today, run by the giant casinos of Wall Street which make the very rich even richer while the middle class is crushed.

Please Go See Inside Job

Inside Job is a very fair, rational, and accurate accounting of the global financial crisis which began in 2008.  As far as it goes, it is superbly done.  I highly recommend seeing it.  Nine out of ten stars.

However the essential storyline had already been covered by an earlier documentary by PBS Frontline, which has appeared several times with updates, called Inside the Meltdown.  If you haven't seen that, you can watch it free online.

What the Movie does more completely than the earlier documentary is probe various conflicts of interests, personal payouts and excesses, and the corruption of academia.  As a publically funded enterprise, PBS is a bit reticent to peer into those areas.

And also there is the better ambient background music and awesome helicopter views over Manhattan that were momentarily triggering my friend's acrophobia.

Rather than recounting what ought to be a familiar storyline to everyone, but still hasn't gotten through to most Americans, what I want to do is explain how both of these fail to give the complete context (which Michael Moore's Capitalism: A Love Story does somewhat better, while not being so much an explication of the Global Financial Crisis itself).

I think it would be wonderful if somehow we could bring back Glass Steagall, fully regulate like fire insurance or abolish credit derivatives, eliminate the bonus system and cap pay in the financial sector so it pays about the same or maybe less than farm work, and throw the entire crop of banksters into the slammer, and all those are all worth fighting for.  But even all that still wouldn't be enough, and it is important to know why.

It's because the finance system is about more than just finance.  It is the heart of all markets and ultimately capitalism itself.  We have let that heart, rather than our eyes and brains, rule the world.

Stripped to their essence, modern capital markets like Wall Street are like giant casinos where short term speculations are transmuted into long term investments in the real economy of manufacturing and services.  It works after a fashion for the gamblers, particularly the bigger ones, but is disasterous for everyone else.

The greatest economist John Maynard Keynes, himself a brilliant speculator, once said it very well in his General Theory::

Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism which is not surprising, if I am right in thinking that the best brains of Wall Street have been in fact directed towards a different object.

Keynes' entire chapter reads like it was written today, even though it was actually written during the Great Depression.  Keynes suggests a remedy that is still being proposed: a rather stiff financial transactions tax.  That would be very good indeed.  But even that isn't enough.

To see why, we have to make a much larger storyline, back to the industrial revolution and the philosopher Adam Smith, whose essential ideas have almost always been misrepresented, even before his death, in such a way as to justify rule by markets, and therefore to the benefit of the most wealthy who have the tools to dominate them.  In fact this horrified Smith so much that he wrote an entire book on ethics, still, unfortunately, very inadequate to the ultimate question of how the productive enterprises of society should be directed, and to what ends.

To be continued ...

Trickle Down Economics From The Catfood Commission

First of all, we should even not be giving any comfort to the fools
and tools who say there is a Deficit Crisis.  There is no Deficit
Crisis, and there is no Social Security Crisis either.  So the Catfood
Commission, aka the Deficit Commission, should never have been
established to give these Reagan-era crooks a megaphone.  Unless the
idea was to show how foolish and corrupt they are.

If there is a Deficit problem right now, it is that the Deficit is not
large enough to get 25 million americans out of unemployment and
underemployment.  But the political will has not been shown to fix
unempolyment through properly envisioned (building a sustainable
society with green jobs) and adequately funded deficit spending
instead of marginally effective (and probably not cost effective,
says Joe Stiglitz) quantitative easing.

Now it is true there may be a long term problem with the US Deficit.
According to centrist economist Brad DeLong, it has 98% to do with
increasing medical costs.  The best way to get these costs under
control is through better healthcare reform, such as single payer.

But the so-called Deficit Commission is simply waving a magic wand on
medical costs, instead focusing on huge tax cuts for the wealthy,
their largest proposal.  How is that supposed to improve the deficit?
That is their largest proposal, and it also happens to be at the top
of their list of goals.  Actually doing anything about the deficit is
actually at the bottom of their stated list of goals.

Leading economist Paul Krugman says there is tax cuts for the wealthy
do nothing good for the general economy, and this has proven true time
and again.

OK, the deficit commision also recommends tax increases for the poor,
which would further depress the economy, and further add the the
explosion of inequality in the US which mostly began with Reaganomics.

So it appears that's what the real agenda is.  To increase poverty and
eliminate the already decimated middle class.  So banksters
like Pete Peterson can make even more money while everyone else sinks into
serfdom.

Obama: Let the top cuts expire

Please let the tax cuts for above $250,000 expire. According to leading economists, such as Paul Krugman, these tax cuts do nothing positive for the economy, even now. On the other hand, increasing government spending would be very good for the economy. The best thing to do would be to create green jobs and even green industries to prepare for the future. If the private sector won't do this, because it is not seen as sufficiently profitable, the government must. Many have in fact argued that not only are the top tax cuts not helpful, they are positively harmful in accelerating the increasing inequality. Greater inequality leads to a slower economy and unequal political participation as well. Republicans have often argued that taxes should be cut on the wealthy because "it's their money." The have fallen back to this argument because there is no proof, and in fact disproof, for the claim that these tax cuts are good for the economy as a whole. But even that claim is totally false. It is not "their money" either technically or ethically. Ethically arge income and wealth is and cannot be a measure of individual contribution to society. Instead it is a measure of how much a wealthy person has been able to privatize for themselves the wealth created by social processes involving the work of many other people. And technically, "their money" is what is left over after taxes. I would even be willing to see all Bush tax cuts expire, even though I would pay considerably more tax. I believe government and the proper funding of government are very important. We pay much less taxes in the US than people do in other countries. Our economy was doing great under the Eisenhower tax rates.

The Casino Corporate Economics Jig is Up

Huge problems, including building sustainable energy and transportation systems. Huge underutilized resources (unemployment). It looks to me like casino corporate economics (based on short term “casino” speculators and profit-seeking leviathons in an economy based on limited resource scalping and world-destroying externality dumping) has brought us to the precipice with inertia that looks unstoppable.

Looks to me like this jig is up. Start thinking in terms of command economics.

Deconstructing DeGraw

Like other pseudo-leftists, 9-11-conspiranoiacists, and Green Partiers, David DeGraw is a tool of the plutocracy who shouts useless and distracting ideas at his followers.

WRT 9-11, much evidence suggests that the Bush administration showed willful neglect of the impending and happening danger.  At best, they were not doing their primary job of protecting US citizens very well, and it appears that protecting citizens was not actually their highest priority.  Their highest priority, of course, was advancing the causes of the most regressive capitalists in the US, including their cronies.  IMO Bush and his administration should have been impeached immediately thereafter (and there would be many future crimes that would call for that even more).

But that is not the same as making the useless argument that planes did not or could not have taken down the towers.  The latter argument has been disproven by leading professional engineers with endorsement from the leading professional engineering societies.  By getting people to focus on and talk about the bogus argument, 9-11-conspiranoicists distract from the real argument and make it look to others like all the people who ask questions are nuts.  It is quite plausible to believe that 9-11-conspiranoicists were in some ways themselves backed by the plutocracy.  From personal experience, I found them worse than distracting in every political context I found them and all of my comrades had almost the exact same experience.  They were like an army of ants, and there was no way to argue with or work with them, they could only stick to their lines like talking dolls.

This is similar to the way it goes with all the pseudo-leftists.

Let's look at his recent post-election rant.

The Obama referendum came in and he got what he deserved.

 From the outset, you can see this is not about the working class, it is an attack on Obama-the-man and by extension all Democrats and ultimately democracy itself.  From the standpoint of the working class, we don't care if Obama got or didn't get what he personally deserves, or in what timeframe he gets it.  What we care about is our class interests.  Objectively Obama is a very poor representative of our interests.  But he is a much better representative of our interests than the President we had previously, and any other president we had any chance of electing.  Now that he is elected, we can expect he will bow down to the true center of power in capitalist society, and that is Finance Capital, the great virtual casino in which all capitalists play to gain even more power over everyone else.

But at the same time, Obama is playing both sides a little, and he can advance our interests a little if we can use him correctly.  By objective measures, Obama actually has brought us more positive reform in two years than we've had in quite awhile, going back, peculairly enough, to the Nixon administration who brought us the Clean Air Act, Clean Water Act, Endangered species protection, the EPA, and OSHA.  Now no one argues that Nixon was not mainly a tool of corporatocracy.  But he also brought us some serious reforms.  And that was primarily made possible by the continued (though by then quickly fading) existance of a strong New Deal Democratic Party.

You have to understand what makes reform possible.  It is a union between the most progressive elements of the business class and progressive movements represented by progressive organizations.  It can be no other way in a capitalist democracy.  They need us (progressive businesses don't hate regulation, they depend on it to keep unscrupulous competitors at bay) and we need then (there is no possibility of "overthrowing" capitalism in a positive way in the forseeable future; any kind of violent "revolution" now is far more likely to further empower the most regressive elements of the business class as represented by the thinking of Tea Partiers).

Principled Individualism does no good

In fact, it does great harm.  But it keeps grinding on, even after a huge setback like the 2010 elections.

The old my-green-party-or-the-highway set no longer commands the attention that it used to.  Most people rightly see Green Party types as useless elitists.  And they are.  And they cost Gore the election in 2000 but refuse to admit it.  In fact, principled elitists on the left, of which Green Partiers are but a tiny fragment now, are the proximate cause of all Republican victories.  They convince the people who suffer most from Republican policies stay home from elections so Republicans can get elected.

But now, covertly backed by plutocrats or not, and I believe they often are, Principled Individualists assume slightly modified voices to hide their continuing intentions to make democracy fail.  A good example is the rising radio star David DeGraw.  You can see the principled individualism in nearly every line he writes.

Democracy and voting is about coming together, trying to build an actual majority for your working class.  That means 51% or more.  In doing so, you must, you will have to abandon your principles temporarily.  Yes it stinks, like taking a shit, but you ABSOLUTELY HAVE TO DO IT.

Meanwhile Principled Individualists say you might as well vote for Daffy Duck.

It's fine to send messages, all the messages you want, as long as they are good messages that will not dissuade people from doing the right thing.  Write letters to politicians, newspapers, bloggers, whoever.  Get out in the street and wave signs.

But it is not fine to dissuade people from voting their working class interest.  That is pure evil.  Even more evil than voting Republican.  More than just one vote may be at stake.

Voting for Daffy Duck is not evil, it is simply pointless and useless.  It is not sending a message to anyone.  Nobody reads or cares about those sorts of messages.  It is a waste of time.  But convincing other people not to vote their working class interest is worse than that, much worse.

Voting for the lefter leading candidate is not pointless and useless.  Even if our best (ugh!) candidate doesn't win, you will see your vote in every report of the election returns, and so will everyone else.  Yes, dammit, one of those was mine!

Never Trust Profit-Seeking News

At best, entertainment.  At worst, and often, pro-corporate propaganda.

http://dissentmagazine.org/atw.php?id=301

Axing your job to spite your neighbor

That's what debt moralizing is really all about, says Krugman, and I agree.

http://www.nytimes.com/2010/11/01/opinion/01krugman.html?partner=rssnyt&emc=rss

Blue Dogs, Not Progressives, took the Brunt

While a few high profile liberals like Russ Feingold lost, mainly it was Blue Dogs who lost, says Joshua Holland.  One of the best Antiwar Democrats in Congress, Lynn Woolsey, won very big.  The best representative from Texas, Sheila Jackson Lee won.  So this was not really a "throw the progressives out" election as the capitalist media may well claim, but a "throw the bums out" election because, mainly, the electorate is hopping mad about unemployment, low wages, and endless war, the same sentiments that have driven throw-the-bums-out elections since 2006 which previously decimated Republicans because they were in control.

http://www.alternet.org/story/148723/it%27s_not_the_end_of_the_world_--_7_things_progressives_need_to_keep_in_mind_about_last_night%27s_gop_%27wave%27/

Spiritual leader Rabbi Michael Lerner has some good thoughts too

http://www.huffingtonpost.com/rabbi-michael-lerner/10-commandments-to-revive_b_777961.html

The Warshington Post

Today Brad DeLong is excoriating WaPo for two things.  Rosaline Helderman's claim on A-1 that since Robert McDonnel has not put Virginia in a ditch, having Repubs in charge nationally would not do that either.

The second, David Broder is calling for Obama to bomb Iran to get our economy going again.

Brad provides a link for the first, but not the second, so I looked it up myself.  Broder doesn't put it quite so bluntly, but close:

"Here is where Obama is likely to prevail. With strong Republican support in Congress for challenging Iran's ambition to become a nuclear power, he can spend much of 2011 and 2012 orchestrating a showdown with the mullahs. This will help him politically because the opposition party will be urging him on. And as tensions rise and we accelerate preparations for war, the economy will improve."

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/29/AR2010102905810.html

He also says, basically, the President can do nothing about the economy, except start a war, because, "the market will go where it is going to go."

I say we give up on "the market" to do anything much regarding meeting human needs and aspirations.  Markets may provide some useful choice in consumer goods and services, like chocolate.  But the fate of a nation or the whole world should not be left to them, that requires planning and collective action.  When Broder says "the market" what he really means is wealthy individuals, who dominate the markets because they own them.  Letting them make all the important decisions is not democracy.

Centrist Democrat DeLong is often too conservative for my taste, but he correctly labels Broder a "monster".

Just in case you thought WarPo was some kind of "liberal" newspaper.

By the way, over at the other warpaper, the NYTimes, Krugman (the best columnist in the mainstream media) is showing another take on what "the markets" exist for, mainly supplying cocaine and prostitutes to high flying traders:

http://krugman.blogs.nytimes.com/2010/10/30/sex-and-drugs-and-markets-role/

Charles