The President’s re-election (Discussion)

I posted my last commentary "The President’s re-election" on November 18.

As coincidence would have it, I received an inquiry from one of my subscribers that relates to it even before I posted my commentary, so allow me to share that exchange with you.

The inquiry came from Barbara Valentino Crowley Baptiste Moreus, of Port St. Lucie, Florida, who asked:

How does one rebut Senator Marco Rubio’s comment that: there isn't much point in raising taxes on the wealthy because they have the money to hire people who would help them get out of paying taxes. The billionaires and millionaires that are going to be impacted by higher rates, they can afford to hire the best lawyers, lobbyists and accountants in America to figure out how NOT TO PAY those higher taxes. Obama's approach will fail and therefore the problem of the huge annual deficit still remains. The President doesn't seem to understand that he is not going to get the "Bang for the Buck" by taxing the wealthy.

To which I responded:

“This is true as long as we have a tax system that has a million loopholes that clever lawyers can exploit. We really do need to close the many loopholes that are now in the tax system, e.g. look at my post "Romney is worse than I thought!" and look at the loopholes that Romney exploited. These need to be closed. Republicans are right that this kind of tax reform probably would raise more revenue than raising tax rates. But are they really prepared to eliminate them. I don't think so. The biggest loophole is that taxes on capital gains are taxed much lower than ordinary income. This needs to be changed. There is absolutely no reason why income from working should be taxed higher than income derived from investment. If we believe in the work ethic then we shouldn't punish people who work and reward those who get passive income by investing. But Republicans are adamant against this change.

But look at the many other loopholes that Romney exploited. When he gave assets to charity, he got a deduction for the value of the assets at the time of the contribution, rather than the price he paid for them, thus avoiding even the smaller capital gains tax. That is wrong. He should have to pay the capital gains tax when he gives to charity, as though he had sold the asset.

Inheritance tax. Aside from being too low under the Bush tax rates they allow a decedent to escape capital gains taxes altogether, since the law now says that assets of a deceased are exempt even from the very low capital gains taxes.

I can go on and on. Yes, Republicans are right that there is more money there than in increased tax rates, but they are phony when they suggest that they really favor tax reform. They will not support any of these reforms.

Extending the Bush tax cuts on the wealthy on the basis that at some time in the future we will have real tax reform is offering a bird in the bush. (No pun intended.) They will never let it happen. But if they have specific ideas along this line, I would like to hear them, and so would the President.

However Rubio is right about how much simply extending the Bush tax cuts for the wealthy will bring. 

To make a real dent in the deficit we would have to extend The Bush tax cuts for all, as Allan Greenspan has been advocating. If none of the Bush tax cuts were extended the deficit would be reduced by approximately $3 trillion over a decade, but extending them, in accordance with Obama's plan, only for those making more than $250,000 per couple, $200,000 for singles, would increase revenue by only 3/4 of a trillion over ten years, not nearly enough. But politically Obama can't be for extending all because he has made a pledge not to do so, and at this point in the recovery, it is not desirable. After we have recovered it would make sense. See here.

The amount that Obama is seeking in additional revenues is 1.6 trillion. See here. The 3/4 trillion achieved by the proposed elimination of the cuts is less than half of what we need in additional revenues. So not extending the Bush cuts for the wealthy gets us less than halfway there. Additional revenue beyond that must be found. The article, which I referenced in US News, is not realistic as to other sources.

This addresses the point made by Rubio.

The other points generally made are that taxing the rich will hurt job creation because it hits small businesses. This is not true. Small businesses and the wealthy are not the same. Please read the article which you can find here.

Finally the argument that taxing business at all will hurt job creation is also nonsense. There is a super abundance of cash in businesses, large and small, that is not being invested. Having more is not going to make a difference. There is only one reason businesses are not hiring, and that is that they have no need for additional employees because there is a lack of consumer demand. When consumer demand picks up, they will start hiring. It is well established that 70% of the economy comes from the consumer. That is why putting money into the hands of people who will spend it on consumer goods is by far the most effective way to move the economy. The stimulus worked, despite all the denials. Look at the figures. Before the stimulus, jobs were being lost at a rapid clip. Right after job losses declined rapidly, and then jobs started being created at an ever faster clip. It is true that the stimulus was too small and did not last long enough, but that is not Obama's fault. The size of the stimulus was the best that could be gotten out of Congress. 

Republicans are right that the best way to deal with the deficit is by growing the economy, but wrong about the way to grow the economy. The economy grows from the bottom up, not from the top down, i.e. consumers drive the economy, not supply side economics. Compare the economy under Bush I lower taxes, Clinton's higher taxes, and with Bush's II lower taxes.

Joel Wiener of Boca Ratan Florida, had this observation:

I found Krugman's earlier column (November 8th - Let's Not Make a Deal) on the Fiscal Cliff interesting, especially his conclusion:  

“Meanwhile, the president is in a far stronger position than in previous confrontations. I don’t place much stock in talk of ‘mandates,’ but Mr. Obama did win re-election with a populist campaign, so he can plausibly claim that Republicans are defying the will of the American people. And he just won his big election and is, therefore, far better placed than before to weather any political blowback from economic troubles — especially when it would be so obvious that these troubles were being deliberately inflicted by the G.O.P. in a last-ditch attempt to defend the privileges of the 1 percent." 

"Most of all, standing up to hostage taking is the right thing to do for the health of America’s political system. So stand your ground, Mr. President, and don’t give in to threats. No deal is better than a bad deal.”  

I just don't think the Obama has the nerve to see what happens. I recall that in the third debate, when asked about the Fiscal Cliff, he said: "It will not happen." That was before the election, however.

To which I replied:

In a sense this is like the confrontation with the Russians in the Cuban Missile Crisis. Don't act too tough; don't overplay your hand, but be tough and offer the other side some kind of concession.

The military wanted Kennedy to immediately order the invasion of Cuba. Kennedy said NO! That would definitely lead to war. But he ordered a blockade. He then contacted Kruschev and said take your missiles out of Cuba and we will take ours out of Turkey.

That’s what we need here. Tough and a signal that we are willing to face disaster (falling off the cliff if we have to) but not so tough as not to offer concessions and to make a deal unlikely.

                       

No deal may be better than a bad deal, but what is the definition of a bad deal. Is a bad deal any that makes painful concessions?

I trust Obama's judgment. This is where Krugman and I part. He does not.

And Rick Pereira of North Adams, Massachusetts chimed in with:

I totally agree with you that gerrymandering continues to be, if not the primary, then at least the fundamental, cause of our perceived political instability. It may well be part of why we have effectively only two parties. In my belief, it will take one or more states to take action against gerrymandering as a political message against it and to raise public awareness of it.  I have long complained of the lack of the words "accountability" and "transparency" in politics (national as well as state) and although I'm encouraged by Cuomo's efforts, I've been very disappointed in New York's lack of transparency in its election laws.  Furthermore: if there is any contingent of citizens concerned enough about this issue, one strategy may be to promote enlarging of political districts in the name of saving money, because technology is now easily able to handle larger districts. This should obviate gerrymandering on a zipcode-by-zipcode basis.

To which I responded:

We need to revise the Constitution as difficult as that may be. We are spending too much time on elections, so that as soon as one election is finished, fund raising begins for the next. I would suggest that both members of the House and the Senate should be elected every four years to coincide with Presidential elections and that state elections for Governor and state legislatures be held at the same time. One election every four years is more than enough and the Presidential election brings out more people voting, so the results are more democratic.

An override of United needs to go with it, saying specifically that the Congress shall have the power to regulate the manner of raising and spending money in elections and the extent to which the government shall finance it. Fewer members of Congress and larger districts are desirable. 

Then Congress needs to legislate how Districts are to be drawn, setting forth the criteria, e.g. contiguous, no more population variation than 5%, geometrically concise such as a square, etc. and that these criteria are to be fed into a computer by the US Census Bureau. That may not be perfect, but I can't think of a better way. The type of voting machine to be used and how many voting machines per registered voter also needs to be mandated.

As for state elections, the above will improve these, but under our federal system, anything beyond this will have to be a state matter, though I would like to see a mandate that judges must be appointed by the governor and not be elected.

And finally I had an extensive exchange with Roger Streit of West Orange, NJ who opined:

I do agree with Paul Krugman’s argument as set forth in his November 11 column  “Contrary to the way it’s often portrayed, the looming prospect of spending cuts and tax increases isn’t a fiscal crisis. It is, instead, a political crisis brought on by the G.O.P.’s attempt to take the economy hostage.” 

Why do you “take it from this that Krugman would be perfectly happy for taxes not to go up, even on the very rich, as the President wants, because … he doesn’t specifically say so”? 

From previous columns, it is very clear that he is in favor of raising taxes on the rich. He doesn’t have to make that point in every column. He was debunking the right’s supposed concerns of reducing the deficit. He identified the hypocrisy and also pointed out that they have been consistently wrong in their prescriptions and predictions. 

In short, you have to read Krugman on a consistent basis in order to appreciate his columns. I suggest that you read his blog as well as his columns before you criticize him. IMO, he has been right much more often than not. See also here.

To which I replied:

It is both a fiscal crisis and a political crisis. As I pointed out in numerous posts, the deficit is a phony issue when Republicans raise it, because they are totally insincere. Ryan's budget doesn't even attempt to close the budget gap. All it does is to destroy the safety net and all kinds of other governmental functions and cuts taxes on the higher incomes.

                       

But that doesn't mean that the looming deficit, which is a Bush creation, having inherited Clinton's balanced budgets and surpluses as far as the eye could see, isn't real. The Supreme Court's denial of the election to Gore was one of the greatest tragedies in American history.

                       

It is real. Not immediately. But down the road, but we can't wait till it is an immediate problem. That is too late. We need to put a long-range plan in place now. The President has been trying to do that for quite a long time with his proposals of tax increases and cuts, but the G.O.P. has been adamant for no revenue increases. That has changed. Now it is only how much and how. But cuts must be and will be part of the equation.

                       

Yes, Krugman wants taxes to go up, but he undermines the need for this when he argues that the deficit is irrelevant. If it is irrelevant, then we can just meet the nations needs without tax increases and let the deficit keep going up.

                       

Krugman is simply sloppy in writing his column and columns. Look back on my blog where I have time and again criticized him for undermining our President. He has no sense of political realities, and he is too often more of a polemicist than a thoughtful economist. I hope he does a better job in teaching his economics classes.

And then added:

Roger, let me add that I agree with much of what Krugman says. Erskine Bowles would be a terrible choice for Treasury Secretary, but I am not aware that he is being considered. When he says, "the deficit-scold movement was never really about the deficit. Instead, it was about using deficit fears to shred the social safety net," I agree with him, and I have been saying that all along. But when he says they "don’t even deserve a seat at the table." that is downright silly. The President can't deal with the "fiscal cliff without dealing with 'deficit scolds' in Congress!! To say they shouldn't have a seat at the table is ludicrous. Just because he rightly advocates for  ‘Keynesian economics’ as I do, doesn't give him a license to say silly things.

To which Roger replied:

I agree with you that you have to negotiate with the crazies, but you don’t have to give their arguments any credence. President Obama has given much too much weight on deficit reduction and has not focused enough on reducing unemployment. As Krugman has pointed out, the U.S. can borrow money for free and we have massive unemployment. Why not focus on putting these people to work?

And my rejoinder was:

That is an old but dangerous argument. Our debt has to constantly be refinanced. Three years from now interest rates may suddenly go up sharply, and will if the debt is large and growing. Then we are suddenly faced with a major crisis. We cannot just focus on now. We must also look to the future.

Comments, questions, or corrections, are welcome and will be responded to and distributed with attribution, unless the writer requests that he/she not be identified.

Speculators and the Price of Gasoline - Discussion

This is an issue that I had not originally intended to discuss. But since it is one of the favorite hobbyhorses of the Left and since Eric Offner of Manhasset Hills, NY has been raising this issue forcefully, I discussed it in my post of March 29, under the heading "Control of the Weather (Discussion)." Offner has now chosen to pursue this, which prompted me to do a fairly long dissertation on the subject. I now want to share my analysis with my readers.

Offner wrote:

First see the article in Business Week entitled "Why Obama's Crackdown on Oil Speculators Won't Work." 

Then answer these questions:

1.) If a crackdown on oil speculators won’t work, does it not imply that there are oil speculators?

2.) Is it possible that Wall Street oil speculators affect the price of oil?

3.) The bigger question is whether speculation on food, water and other necessities exists and whether such action is ethical?

4.) Is failure to restrict unethical behavior unethical?

My response to his questions is set forth under corresponding numbers:

1.) Yes of course there are. The question should not be whether there are speculators but whether it is ever possible to eliminate them and whether they are bad. The answer is that it is not possible to eliminate them and in many cases not even possible to regulate them. Sometimes they are bad, sometimes good, most often neither.

2.) It is not only possible, it is probable. But that is not necessarily bad. Look at the article you sent me. He argues convincingly that speculators even-out the speed at which prices change. Without them, as happened some years ago the price can quadruple almost over-night and a more gradual rise is better for the economy and consumers.

3.) Yes and Yes. Let me take this down to basics. There is a rumor that sugar, or for that matter water, will be in short supply. Most people, i.e. consumers upon hearing this will head for the markets and hoard it. The result is the price goes up and soon the shelves are empty. A self-fulfilling prophecy. Now let us suppose a larger speculator wants to take advantage of the situation and so he goes out and buys many tons of sugar, puts them in a ware house (or he buys futures) and then taking advantage of the rising prices resells it at a hefty profit. As he and others begin to sell the price goes down. Is he/she now a good speculator? How do you stop this? Do you make it illegal for anyone to buy more than a certain amount? How do you determine the amount? How would this effect a legitimate store or a legitimate wholesaler, who by the nature of their trade must buy large amounts?

The way to stop this is price controls and rationing which brings about a black market, where the price is even higher and even less sugar in the stores. We are now seeing this in Venezuela.

Are there times when rationing and price controls are appropriate? Yes!!! But only in extreme cases, such as war-time, when the evils of the black market are preferred to letting hoarding control, but it is always a close question. Where the hoarding is by a limited group, intent on creating shortages and raising prices, it falls afoul of the anti-trust laws and definitely should be prosecuted.

Is Obama's approach sound? I don't know, but it is good politics. He is doing something!!!

Raising the margin price on commodities speculation seems like a sensible thing to do, but it takes someone more knowledgeable than I to analyze the consequences. The article you sent me seems knowledgeable and objective.

I will say this. When Allan Greenspan talked about the stock market suffering from irrational exuberance, the obvious thing to do, as far as I could see and still believe, was to raise the margin requirement, which was within the power of the Fed, but because of Greenspan's hostility to all regulations this was not done - ditto for so many other things that could have headed off the crash.

But I don't know the commodities market - We apparently have regulations but we need money to enforce them. Everything else is shooting in the dark. Simplistic answers whether from Left or Right rarely have any merit.

The article in Business Week appears to be an intelligent one. It recognizes that regulations are important and need enforcing by the CFTC. Thus it is apparent that we have regulations in place that are not being enforced, or at least not being enforced adequately. But the Republican Congress will never appropriate the money needed. Instead, they will make sure that what can be done is not done, and then blame the President, who can only do so much without Congress' help.

There are many problems with the world's food supply that are exacerbated by US policy.

The use of US ethanol as an additive to gasoline has created a shortage of corn and driven the price higher, but the corn lobby will prevent Congress from changing this.

Our foreign aid program with food is counter-productive. The law requires that we not give money to aid organizations for food aid, but rather buy the food from American farmers at much higher prices than we could buy it on the world market and it must be shipped in US vessels. If the law would allow our aid to be by buying the food from African farmers, we would save money both in the price of the food and in the shipping costs and we would aid the African economy. Now it enriches the American corporate farmers and hurts the African economy because it competes with the African grown food and drives that price down.

4.) No and the question is irrelevant since I have said such action is not unethical. But even where it is unethical there is always a weighing of unintended consequences. Simplistic questions and simplistic answers to complex problems are, well, simplistic.

I then added:

The oil market is a world market. How do you regulate trades made outside the US? If you rationed gasoline in the US, it would have no effect on the price of oil on world markets. If you had price controls on gasoline that were below the world price of oil, no one could afford to sell gasoline, since they would lose money on every gallon. World markets and globalization make a new ball game. But we can no more change it than we could stop the industrial revolution and now the technological revolution that brought about globalization.

Furthermore a high price of gas is not bad. It makes clean energy and conservation much more competitive

Even boycotts have limitations. We put a boycott on Iranian oil. But if China does not join the boycott, can it be effective? The boycott might force the price of Iranian oil to go down, in which case China gets a windfall. How do you stop this? Only with a full fledged blockade of Iran, an act of war, which would put us in conflict with China and get Iran to try to close the Straight of Hormuz. Can you imagine what the price of oil would go up to? Speculators will make a lot of money, but they are not causing the price rise - they are taking advantage of it. Is there anything we can do - yes, but I am not smart enough to know what. Ask Barney Frank - he understands these things better than I do, and while I am talking about Barney Frank I commend to you an interview of him, which appeared in New York Magazine.

Also we do have laws on the books and the Commodities and Exchange Commission, which needs more funding as recommended in the article you sent me to enforce the laws and regulations. But the Republicans will never authorize this. What can we do? Get rid of them to whatever extent we can.

But I get tired of the Left and their "it’s the speculators.”

Finally allow me to add that while normally a two party system benefits the country, now a defeat of the Republican Party to the point where we have only one party has the best hope of reforming the system. Now it is broken and can't be fixed. In our system a one party system would not last long. The Democratic Party would split in two.

Talk of a third party in our system is very counter-productive. It would make sense if we had run-offs as e.g. the French and most of the world do.

Comments, questions, or corrections, are welcome and will be responded to and distributed with attribution, unless the writer requests that he/she not be identified.

The Trojan Horse - Comments

I posted my commentary "The Trojan Horse" on August 6, 2011. Those who may want to re-read it can find it by clicking on the title above.

I received a concise comment from Pam Tisza who wrote:

Probably should not reply this morning because I am so disturbed by the loss of 38 of our young people in that foolish war in Afghanistan. Anyway, the polls show that 36 per cent (I think that is correct) of people do not approve of Obama's handling of the debt crisis. I think that is pretty much his liberal base--and Krugman speaks for that base. I am old enough to remember the last bad depression from Mt. Hoover, and I see it all happening over again.

Which prompted a rather long response from me that I want to share with my readers:

The poll figures are 48% disapproval of Obama's handling of the debt crisis and 71% disapproval of the GOPs approach. 48% is hardly the base. It undoubtedly includes those who think that he compromised too little, and those who think he compromised too much, with the vast majority not really having any opinion, except a general feeling that all must be to blame.

What I am trying to accomplish, and I am not sure I am succeeding, even with the relatively small audience that I have, is for people to get the facts before forming opinions. Nobody seems to care about the facts. It is as though all approach the issues of the day with, "I have made up my mind, don't bother me with the facts.”

This is something I have railed about for a long time against the Right, but now I find the Left is no longer interested in the facts either. Obama has been criticized for caving in to avoid a shutdown of the government. I have searched the media - I cannot find any description of what was conceded to avoid the shutdown. Some Right Wing sources have been grumbling that the GOP got nothing, that they caved completely and settled for bookkeeping gimmicks, but nowhere can I find what if anything Obama conceded. But the left criticizes that he gave up too much and nobody even attempts to get the facts, or if they have them they aren't sharing them with the public.

Now in connection with the debt ceiling compromise, I searched the New York Times and the Washington Post pages and found almost nothing on what the details of the compromise were. I finally found a good summary in CNN Money and the Wall Street Journal, but the facts are entirely at variance from what is represented in Krugman's and other "liberal" columns and in the e-mails I got from liberal organizations the facts are completely misrepresented. This is what I was trying to get across in my last blog. I am not sure anyone is hearing me.

All I am urging is Facts First, then opinions based on those facts. Krugman and the others are blatantly misrepresenting the facts. I am not sure whether they speak for the base, or are leading the base, or rather misleading the base.

You say you are old enough to remember the great depression and I see that at 88 you are indeed old enough. I came to the US in 1939, well past the worst of it, but I have read enough about it and seen enough documentaries, that I think I am as familiar with it as anyone. But there is no comparison between that and what we are experiencing now. Now we have an unemployment rate or 9.1%. In 1933 we had an unemployment rate of 37%. It is often said that we didn't get out of the depression until the war got us out of it, but by 1940 the unemployment rate was 13.9%, far worse than we have now, but a hell of an improvement over 37% which is what the Roosevelt Administration inherited. See my commentary on my blog entitled: "Roosevelt and the Great Depression."

What I am trying to get across is that the attacks are not only unfair, but they are based on either a misconception or a deliberate misrepresentation of the facts. What will it accomplish? It can only accomplish one thing, and that is to elect the real villains of the piece. Do we really want a President Bachman, or not much better a President Romney, who will run on a platform that he was a businessman who knows how to create jobs, but the dirty little secret will be that all he ever did was eliminate jobs.

All these Pundits seem to think that the President has the powers of a dictator. That he can sign an executive order that would have eliminated "Don't Ask Don't Tell.” That he could have simply invoked the 14th amendment and kept borrowing. They are not living in the real world. Aside from the fact that the Public (and the Left is not the public) would not have supported such high handed behavior, the chances are that the markets would have questioned this, and quite likely refused to lend, except at much higher interest rates, almost as great a disaster as going into default. The President lives in the real world, one in which no other President in American history has had to deal with. An opposition party that will resort to every tactic never before used. To filibuster everything that they don't like in the Senate, resulting in an unheard of situation where 59 to 41 in favor, defeats any bill, to using the debt ceiling as a weapon, which also has never been done before. Both Roosevelt and Johnson had huge majorities in both houses. Obama has had to work with slim margins. The legislative branch does count.

And almost from day one, the people who should have had his back, like Krugman, instead buried their dagger in it.

Now with all these obstacles has Obama accomplished anything? He has kept an incipient major depression form occurring and so instead of an unemployment rate of 37%, as we did in 1937, we have an unhappy 9.3%. Not good, but thank God.

Despite all the criticism of Obama from both the Right and the Left he has had more major achievements than any President before him since Lyndon Johnson.

We have universal Health Insurance. To be sure it is not single payer and does not have a public option. But it is more than any other President has been able to achieve, and to boot it is will lower the deficit according to the CBO, which Republicans cite if they like its findings, but ignore when it doesn't.

The left was very impatient with Obama because he was too slow to get rid of " Don't Ask, Don't tell," but he has now succeed where all his predecessors failed, and where the policy was adopted under the aegis of the last Democratic President, Bill Clinton. Under his Administration we have now in place some stern (yes, they could be sterner) bank regulations. If he had accomplished nothing else, this would be a brilliant record of achievement but he has accomplished much more.

$19 billion has been allocated to help implement an electronic medical record system.

On infrastructure the Department of Transportation has approved 2,500 highway projects.

A $2,500 tax credit to help offset the cost of tuition (among other expenses) for those seeking a college education has been enacted. Nearly five million families are expected to save $9 billion.

He saved the auto industry and untold millions of jobs in the process.

He allocated $2 billion in stimulus cash for advanced batteries systems. One high-ranking Hill aide called battery technology "the next big frontier" in the automotive world.

Set up an office of Urban Policy in the White House

Through the Recovery Act, DOJ secured $2 billion for Byrne Grants, which funds anti-gang and anti-gun task forces. The money, cut during the Bush years, should have massive ramifications on inner-city crime and violence.

Signed Schip legislation giving health coverage to millions of children by a bipartisan vote.

Pushed for and got unemployment insurance extended more than once on bipartisan votes.

The Omnibus Public Land Management Act of 2009 put under federal protection more than two million acres of wilderness, thousands of miles of river and a host of national trails and parks.

He signed into law the Lilly Ledbetter Fair Pay Act, designed to make it easier for workers to sue over gender-based pay discrimination.

He cut taxes for 95 percent of American workers in his stimulus package.

Tightened limits on interrogation tactics by Central Intelligence Agency officers.

Removed financing restrictions on groups that provide or discuss abortion overseas.

Granted California a waiver to regulate automobile tailpipe emissions linked to global warming.

The day after pill to stop unwanted pregnancies was approved by a new science based FDA.

Dealt effectively with a standoff with Somali Pirates.

Changed Cuba policy allowing Cuban Americans unlimited travel and money transfers to relatives there.

Signed an executive order reversing the ban on federal funding for embryonic-stem-cell research.

Restarted nuclear arms reduction talks with Russia.

Released the Bush Torture Memos, almost without redactions.

Announced a new policy on medical marijuana raids by the federal government.

EPA's adopted the position that carbon dioxide and other greenhouse-gas emissions pose a danger to the public's health and welfare.

Got rid of ineffective missile shield in Poland and Czech Republic.

Negotiated a treaty with the Russians to reduce the nuclear arsenal of both countries and managed to get it approved by the Senate.

Put Sonia Sotomayor and Elena Kagan on the Supreme Court

Despite the rise of the Right and the Tea Party we are making more progress on DOMA than anyone could have hoped.

Oversaw the elimination of Osama Bin Laden, an objective that had totally escaped the Bush Administration.

Set a new standard, which will eventually require a 54.5-mpg fleet average (roughly 163 grams of CO2 per mile), will effectively double the average fuel economy of US vehicles by 2025.

Set new standards for commercial trucks to reduce by up to 20 percent fuel consumption and pollution emissions, beginning with 2014 models. Heavy-duty pickups and vans, will need to curb fuel use and emissions to achieve up to a 15 percent reduction by 2018. So-called "vocational vehicles," such as garbage trucks or fire engines, will have to cut emissions and fuel use by about 10 percent by 2018.

By executive order eliminated expensive copays for birth control.

And I am sure I missed many achievements.

Clinton did a terrific job in raising taxes early in his term, which together with an agreement with Fed Chairman Greenspan, to lower interest rates, brought on the eight most prosperous years in a very long time and wiped out the deficit. But he was lucky to get it passed. It passed by a tie vote in the Senate with the VP breaking the tie, which by the way shows that bringing prosperity is not a sure fire way to win a mid-term election.

Nevertheless, Clinton after losing the midterms, swung Right, employed that hired gun, Dick Morris, became famous for triangulation, and presided over, among many other things, the repeal of the Glass–Steagall Act, which probably was largely responsible for the bank crisis, presided over the abolition of Welfare, signed into law the "Don't ask, Don't Tell" and couldn't stop the enactment of the Defense of Marriage Act (DOMA).

Yet the base never savaged him. Somebody tell me why these Presidents are treated so differently?

Well, maybe because Obama unrealistically promised both to be a post-partisan and a transformational President, which are contradictory and impossible to achieve. But it should have been obvious that these are aspirational goals, not achievable ones.

In Defense of the Banks

The title probably makes the blood pressure go up for quite a few people. The banks after all are the villains that brought our economy down, and that is undoubtedly true.

But it overlooks one cogent and vital point and that is the nature of our capitalist system. Now some of my audience may react that this is exactly why we need to get rid of the capitalist system, but I say to them, nobody has as yet come up with a better one. China, India, the USSR and a number of other countries have tried planned economies, and all they got were shortages, a low standard of living, and more poverty than any capitalist system has ever seen.

So as far as I am concerned I am for a capitalist system, or more accurately, a mixed economy with regulations that prevent inappropriate risk taking, and unethical behavior. Regulations have been the US model going back long before Roosevelt’s New Deal, and as least as early as 1890, when the Sherman Anti-Trust Act was enacted. A mixed economy goes back to the founding of the Republic, when the Constitution mandated that certain businesses, such as the delivery of the mail shall be a government function. Since then the US government has taken on innumerable business functions, from building canals, to land grants, to subsidizing the railroads, building highways, developing a widely envied (at least it used to be) public education system, establishing our National Parks, creating unemployment insurance, Health Insurance in the Medicare, Medicaid, CHIP, and VA programs and Social Security, to name just a few.

But why would I defend the banks? Well, they did what all businesses do in a capitalist system. They try to make as much money as they can, and that is what the banks did. So where was their fault. They used overly risky, ill considered and even unethical means toward their end of maximizing profits. But as long as what they did was not illegal, they did nothing wrong under our system of laws or even ethics.

Some, particularly in Republican circles, joined to some degree by left wing organizations, such as moveon.org, decried the bank bailout, and felt that they should reap the consequences of their reckless behavior. On a level of pure theory they are right, but we live in a real world, and the consequences of a melt down of our banking system would have had disastrous consequences for the whole economy, indeed the whole world. The failure to save Lehman brothers, which shook the economy, gives some indication of the abyss, which we were facing. Let us remember that F.D.R. dealt first with the banking crisis when he was inaugurated and despite unprecedented actions still had a 22% unemployment rate after 5 years in office.

In my opinion the fault lay in a misconceived believe that the capitalist system is self-regulating. Some, despite all evidence to the contrary, still believe that. Fortunately, many, among them the great apostle against regulation, the former Chairman of the Fed, Alan Greenspan, have recognized that they were wrong, or as the conservative British newspaper, the Guardian, said:

“… Alan Greenspan has conceded that the global financial crisis has exposed a "mistake" in the free market ideology that guided his 18-year stewardship of US monetary policy.

“A long-time cheerleader for deregulation, Greenspan admitted to a congressional committee yesterday that he had been "partially wrong" in his hands-off approach towards the banking industry and that the credit crunch had left him in a state of shocked disbelief.”

Even former President Bush, in his last year in office recognized the crisis and urged a bailout of the banks which was authorized by the Congress in a display of bipartisanship not seen since, with both Presidential candidates, McCain and Obama, voting for it along with a majority of Democrats, and a minority of Republicans, who clinging to their faith that the markets would right themselves, were willing to risk a total meltdown in pursuit of their ideology, and now oppose regulating the banks, having learned nothing from this crisis, or for that matter earlier crisis, and the people who through their votes support such irresponsible behavior.

We now see similar behavior from the Toyota company who resisted recalls and an emphasis on safety for fear that it would have a negative effect on their bottom line and we saw it during the Savings and Loan crisis of the ‘80s and ’90 which like this crisis was caused by the removal of regulations that until then prevented the calamity and would have prevented it had they remained in force, or as About.com explained it:

“Savings and Loans were specialized banks that used low-interest, but Federally-insured, deposits in savings accounts to fund mortgages. In the 1980's, the popularity of money market accounts reduced the attractiveness of savings accounts, so the banks asked Congress to remove restrictions. In 1982, the Garn-St. Germain Depository Institutions Act was passed, which allowed S&L's to raise interest rates on deposits, make commercial and consumer loans, and removed restrictions on loan-to-value ratios. At the same time, the Federal Home Loan Bank Board regulatory staff was reduced thanks to budget cuts.

“In an attempt to raise capital, banks invested in speculative real estate and commercial loans. Between 1982 and 1985, these assets increased 56%. In Texas, 40 S&L's tripled in size, some growing 100% each year.

“By 1983, 35% of the country's S&L's weren't profitable, and 9% were technically bankrupt. As banks went under, the state and Federal insurance began to run out of the money needed to refund depositors. However, S&L's kept remained open, making bad loans, and the losses kept mounting.”

Unfortunately, the lessons of that crisis were not learned, particularly since that too resulted in an essential bailout under a Republican Administration. Or as About.com puts it:

“By 1989, Congress and the president knew they needed to bail out the industry agreed on a taxpayer-financed bailout measure known as the FIRREA provided $50 billion to close failed banks and stop further losses. It set up a new government agency called the Resolution Trust Corporation (RTC) to resell Savings and Loan assets, and use the proceeds to pay back depositors. FIRREA also changed Savings and Loan regulations to help prevent further poor investments and fraud.”

But why any of this should be a surprise is difficult to fathom. Sport analogies are so very popular in our culture, and here there is one that is at much on point as any could be. Our capitalist system works on competition. Competition is the heart and soul of sports. But can anyone imagine sports without regulations and umpires to enforce them. With the Super Bowl just behind us, can anyone imagine that game without rules, among them unnecessary roughness, holding or other tactics considered unfair.

          The President has introduced legislation that would begin to repair this situation. The banks and their protectors in the Republican Party want to block these. They are essential if we are to avoid endless repetition, but even they are not enough. We need to once again separate investment from commercial banking, by reenacting the Glass-Steagall Act, as ably set forth by Thomas Frank in the Wall Street Journal: We need to cap usurious interest rates, whether disguised as fees, or in the form of charging interest for a month when the loan is in fact for a day.

          The idea that competition, the heart and soul of our capitalist system, can function without regulations and strict enforcement should by now be self-evident. The villain is not the banks, but the government that fails to set up regulations, the agencies that fail to enforce them, and the people who through their vote create such a government.

Obama Walks on Water

Many thought Obama walked on water as in November of 2008 he swept to an election victory by the greatest margin in the popular vote in twenty years, gaining his victory by a margin of 53.41% compared to George H.W. Bush's victory of the hapless Michael Dukakis by 53.9%, though Obama brought out a far larger total vote, gaining almost 57 million votes compared to Bush’s just short of 49 million. 

His resounding triumph was not entirely due to his charisma or his political appeal, for he ran at a time when the incumbent President and his Republican majority in the Congress had brought the country to the brink of a repeat of the great depression of ’29, where the unemployment rate had gone from 2.5% in 1926 to 35.5% in 1933, when Roosevelt took office. When Roosevelt finally took measures to stem the downturn it took four years to bring the unemployment rate down to just over 20%. See my post from March 12, 2009 and the graph displayed.

Now let us imagine what would have happened if like in the period preceding and following the market crash of ’29 the same policies had been followed as they had in the ‘20s. It is not inconceivable that similar disastrous unemployment would have resulted. Fortunately, it was recognized even by the incumbent President Bush that we were having a banking crisis, which in many ways resembled that of the 20’s, and Bush, who had always preached laissez faire capitalism, took vigorous steps to stem the looming disaster despite his own party in the Congress deserting him. At the same time the long time Chairman of the Fed, Allan Greenspan, long an apostle against regulation, said with disarming frankness “ I was partially wrong" and "I have found a flaw,” but the members of The Republican Congress who correctly have a reputation for “ having never forgotten anything” and “having never learned anything” show that they have learned nothing.

Last week the unemployment rate hit 10.2% and the public has discovered that Obama does not walk on water and has no magic wand. He is being hit with a populism from both left and right that denounces him for helping the banks instead of main street, ignoring the fact that the first thing Roosevelt dealt with was also the banking crisis, with his bank holiday and then guaranteeing deposits. Unfortunately, unlike in Roosevelt’s time when banks were many and small, we now have the behemoths that are “too big to fail.” But of course he is helping main street when he helps the banks, and his stimulus program directly aids main street, its principle weakness having been that it did not allocate enough money to the states to help them out of the crisis, forcing them to either raise taxes or cut back on programs desperately needed in this recession. 50 billion dollars was cut from the stimulus program to aid the states to get the three Republican votes needed to stop the Republican filibuster.

Both Left and Right denounce Obama for not having stopped unemployment from rising as though there were a magic wand that would turn things around by the mere waving of it. As Obama has pointed out the Ship of State does not turn like a motor boat and measures taken nine month ago, which is when the stimulus bill was passed, can not be expected to already affect the unemployment rate, since as all economists tell us that the employment always lags in an improving economy. While for the moment it is little comfort to those unemployed (of course those unemployed take little comfort even when unemployment is low) the economy has now turned around and Reuters, among others, reports, “Productivity surge signals Job Growth to follow. But the agitation about the high unemployment rate is difficult to understand in any case, for the unemployment rate under the Republican hero, Ronald Reagan, was even higher, and I don’t remember the hand wringing then, nor is there much emphasis in our media (Liberal media?) that Reagan presided over a slightly higher unemployment rate, with the unemployment rate then having reached 9.7% more than a year after he was inaugurated, as compared to Obama in office a mere nine month. See the graph and comments on Mark J. Perry's web site.

But as I said he is being attacked from both Left and Right with, e.g. David Brooks in the New York Times of November 6, writing he is doing too much and Paul Krugman writing he is doing too little. It may be that what he is doing is just right, though I would like to see the $50 billion cut from aid to the states restored.

But Obama is also being hit with complaints from the Left that his promises during the campaign are not being fulfilled fast enough, which ignores that our system of government is not designed for fast action with its checks and balances (See Anna Quindlen in Newsweek of November 2) and the non-constitutional requirement of 60 votes in the Senate, a Clinton era Republican invention. But the extent of the obstacles facing Obama are misunderstood and understated even by the above referenced article of which, e.g. incorrectly states with respect to the military policy dubbed, “Don’t Ask, Don’t Tell, Transformation is within his grasp, in a pen, a signature, an executive order” which is patently untrue, for it is enshrined in a statute of the Congress which was passed on November 30 1993 in response to President Clinton’s attempting to abolish discrimination against Gays in the Armed Forces by executive order.

As for Obama’s paucity of accomplishments in his first nine months, that too is an invention, or at least a misconception, that I will address hereafter.

   As for understanding why the voters turned to Republicans in New Jersey and Virginia in the the last election, thus turning to the very people responsible for the present crisis, I leave that to the pundits.

   I can analyze issues. I do not pretend to understand voters.