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Getting it all wrong in Washington

Posted on July 28th, 2011 in Economy,General,Politics by Robert Miller

A House Republican?Who would have imagined that the election of 2010, as bad as it was for Democrats and Obama, would lead to such absurd behavior on the part of resurgent House Republicans for something generally considered to be routine–raising the debt ceiling? On top of it of course, Republicans want to plant the seeds so that one day a little sprout will emerge that says “the entire national debt was created by the Obama administration;” they say it now, but people still have short-term memories about the real source of the problem. Just to reiterate–nearly half of the current public debt was created by the Bush tax cuts. And the Republicans of course, steeled by their ideology and their taste for what seems like total victory in 2012, are resolved to push the country into a worse recession just so Obama doesn’t get re-elected. When the 2012 election heats up, the Republicans are banking on the “win by redundancy” and with the jobs picture once again in the tank, they are hoping to bank on a trifecta sweep and have complete control of our national policies. Along the way, there are many features of their behavior that are puzzling and troubling because their own constituencies must be suffering as a result of their actions.  What is truly astonishing about the Republicans is  how they can talk about creating jobs and focus instead on increasing the unemployment, especially for those that work in state, local and the federal governments. These are real jobs too; they serve important, indeed essential social functions. A lot of what government does, or is supposed to do, is protect us from corporate excess.  Who said “an educated consumer is our best customer?” That was long ago and far, far away. All the utterances coming out of congress are double-talk with opposite meanings, like “cutting taxes creates jobs.” Not really, that’s the result of demand, not tax breaks. Besides our overall tax rates are smaller than they have been since the 1950s. Doesn’t this mean the Republicans have already met their obligations? The San Francisco Fed, as reported in the NYT, has determined that today, the average person is spending $175 less each month compared to what they spent before the recession–a very concrete  demonstration of a drop in consumer demand. At a time when government and home construction should be adding jobs, government jobs are shrinking and the housing industry is bogged down in the created surplus of foreclosures, when we should have forced banks to restructure loans rather than foreclose on them. Most of these risky, sub-prime loans were given out to poor blacks and Latinos, so the essence of losing their homes is a giant transfer of wealth from these lower classes (many of whom were beginning pulling themselves out poverty by their boot strings) to the wealthy. Naomi Klein predicted this in her book “The Shock Doctrine: The Rise of Disaster Capitalism which points out that this is a theme of big business, pushing through wealth-grabbing policies and transferring wealth from the poor and middle class to the wealthy. The reason that banks want to foreclose rather than make a new loan and keep the family in their home?– they make more money from foreclosure.

There is no language being used in our government today that has linguistic identity with that which we use in our daily lives. The Republicans want to cut spending, even though that will eliminate jobs at a time when they have promised to create them. They are the new  impostures. Young people are in a depression: there are no good jobs available and those that infrequently come along have ferocious competition. I see people with PhDs apply for positions that require a BA or BS college degree. Have you seen this congress do anything about creating jobs? Is there a jobs bill that we haven’t heard of before or is that the “jobs-killing” plan not to raise the debt ceiling, which will translate into higher interest payments for everyone who has almost any form of loan? And Economics 101 tells us that when a recession hits, and this is a very bad one–the worst since the Great Depression–the government should create jobs by spending money and hiring people, keeping state and local workers on the job so that they in turn will spend and create more demand, which encourages companies to hire more workers and those workers in turn create a new level of demand as the snowball turns into an avalanche of jobs. Yes, along the way, we have to create a new economy, because we sent the factories for the old jobs to China. And who did that?

The stimulus package Obama engineered in 2009 worked, but it wasn’t big enough–it was too small and had too many tax breaks to keep the target of unemployment at 8%. The  $ 1.2 trillion spending bill that Romer talked about would have worked, but the $700 billion that got generated allowed the unemployment to go higher than predictions and it was loaded with tax breaks which don’t provide the same level of economic stimulation. Republicans knew this when they passed the bill. What we need is another larger stimulus package, one implemented by more progressive economists, not those who engineered our disastrous deregulation of the banks. It worked that way during the Great Depression and our job numbers, especially among the young, are in the same territory as we had in that era. So if creating jobs is so important and cutting the deficit is not something to think about until you have good job creation conditions, why does Congress concern itself with the issue of the debt ceiling?

The answer is pretty simple: the Republicans are acting in unison because they believe they can defeat Obama in the 2012 election and that, in addition to taking over the Senate and keeping the House, will give them a trifecta to carry out the complete dismantling of our social  safety net and destroy the new healthcare system before it can be fully implemented. These Republicans are not leaders, but an army of soldier ants out to destroy whatever is in their pathway and even if that means further destruction to our weak recovery. To further appreciate the captivated ideologue brain that substitutes for thinking in Washington these days, you should read Robert Reich’s blog this week, “Why Washington is About to Make Things Worse” to get reinforcement for the lost principals of E 101, as well as to explore the maddening hypocrisy of Standard and Poor’s threat to downgrade America’s credit rating, when this agency, together with the other credit rating agencies (Moody and Fitch) was giving out triple-A ratings to some of Wall Street’s riskiest experiments, including mortgage-backed securities and CDOs (collateralized debt obligations). That kind of rating continued until the eve of the meltdown in 2007. Is this what they mean by reform? Protect banks and investment firms but hold countries accountable? True reform is a long way off.

The Republicans were shocked to see that not only did America elect a black man in 2008, but they elected a competent black man, so there is double concern here. Why can’t the Democrats nominate an incompetent white guy, like the Republicans generally do? Then too, there’s the question of who will pay for all of our debt once we decide we want to do something serious about it, like Clinton did? After all, Obama proposed the most far reaching debt contraction of anyone in Washington. But, the Republicans want to take it out of Medicare, Medicaid, Social Security, education and other benefits that go to the shrinking Middle Class and with only an election trifecta to stop them, you can bet that the 2012 electoral race will bring out all the Republican bag of tricks, like those we saw in Florida in 2000 and Ohio in 2004. Many Republican-controlled states are already gearing up for 2012 by passing photo ID requirements for voting. What kind of photo ID will be required? From now on, seat belts are required. In the meantime, the one method that knocked some sense into the Republican Congressmen and women was to light up their phone system and saturate their emails, as happened after Obama’s speech on Monday.


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A few thoughts for the day….

Posted on July 21st, 2011 in Culture,Government,Politics by Robert Miller

E.J. Dionne Jr., opinion writer for the Washington Post, has a column today in which he characterizes the disintegration of the House Tea Party members into a wanton destructive force and points out how the House Republican leadership is unable to develop a cohesive strategy for dealing with the debt ceiling,  because the Tea Party coalition seems far more interested in blowing up the government. Just for fun.  He frames his conclusion in terms of Tea Party idol Ayn Rand (from his article), “When the hero of Rand’s breakthrough novel, “The Fountainhead,” doesn’t get what he wants, he blows up a building. Rand’s followers see that as gallant. So perhaps it shouldn’t surprise us that blowing up our government doesn’t seem to be a big deal to some of the new radical individualists in our House of Representatives.” I don’t think this is Mendelian genetics speaking to us, but there could be a deficiency in oxygen reaching the brain.

Meanwhile, on the other side of the Atlantic, Rupert Murdoch and his son James, together with former editor Rebekah Brooks of the now defunct tabloid News of the World, appeared before an investigating committee of the House of Commons (Home Affairs Select Committee) and claimed they knew nothing about the many phone hacking episodes that apparently ran rampant within the British version of the Murdoch empire. In addition, payments to the police and other employees of the tabloid who did some of the phone hacking are all claimed by Murdoch to have gone on at much lower levels of the organization, or when others were in charge.  Andy Coulson, who was the editor of the tabloid when payments to the police were arranged, became the Director of Communications hired by David Cameron when he became Prime Minister. He has since been fired and Cameron is trying to do a delicate dancing act that most males were not trained to do. So, we have the Murdoch empire in Britain, the closed Murdoch tabloid and the connections from the Murdoch empire to payments to police and other reporters, but Murdoch, his son and Brooks claim complete ignorance, despite the fact that they were running stories based on phone-hacked information (let’s see, did you check and double check your sources?). This problem is unlikely to go away anytime soon and if it spreads to Murdoch’s American empire, with possible action taken by the Justice Department and additional rumors about hacking into the phones of victims of 9/11, there is much more that will be played out on both sides of the Atlantic, but so far the scandal seems to be of entirely British origins. I think the rule of thumb is that if you square denial, you get approximately the number of new questions that need to be answered. I don’t think Shakespeare commented on this but he should have. As writer William Pfaff points out in his article today, this scandal is only getting started and we all need to stay tuned. Could it possibly, eventually reach into the ethics of Faux News reporting techniques?


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Surely, you don’t want Tim Pawlenty as your President!

Posted on July 12th, 2011 in Politics by Robert Miller

Tim Pawlenty, twice elected Governor of Minnesota, is now running for President of the United States. If you believe his candidacy has merits, then you need to look at the record of his governorship while serving in that capacity for Minnesota from 2002-2010. He is not the growth presidential candidate he talked about in a recent campaign speech, but the anti-growth, disinvestment, cut your taxes at any cost performer whose political philosophy begins and ends with his idolatry of Ronald Reagan. Although in his recent national speech he talked about magical financial growth for the country, his record in Minnesota is quite the opposite and includes failed budgetary gimmicks that left the state with a downgraded bond value and a $6.2 billion deficit (the fourth largest state deficit in the country), the solution to which is unresolved and has forced the state government into a shutdown. The Republican party he shaped and left behind is far more interested in implementing cultural war issues and denying voters rights than solving the state’s fiscal problems. Indeed, the Republican Party of Pawlenty delayed discussions of the budget while they fashioned a constitutional amendment against gay marriage. Tim Pawlenty tried to convert Minnesota into Mississippi and I think he managed to float our state about half way down the river. His record as Governor is arguably the worst example of government leadership in the history of the state, because he actively pursued a policy of state financial destitution. Assuming the leadership of a state that is always naive about political motivations, Pawlenty was able to freely exercise his “starve the beast” philosophy that is the modern mantra of the current iteration of his party. His poor leadership qualifies him to enter the super bowl for how not to run a state government. In that contest he might actually win but his governorship of Minnesota has made most citizens of the state feel like a bunch of losers. If you want to elevate delusional government to a national level, Tim Pawlenty could be the candidate of your dreams.

Under Pawlenty, a state that once prided itself on its K-12 public school system, public education funding was suddenly reduced to a point where it fell below the national per pupil average; in the 2010 election, nearly one in four school districts had to ask voters for additional support to meet their basic education expenses. While a law student at the University of Minnesota, Pawlenty took advantage of enhanced state support for higher education (which created small tuition college costs) but as Governor, he severely slashed state support for the institutions of higher education, which led to double digit increases in tuition and made an affordable college education out of reach for many in the shrinking Middle Class. State support to reduce college tuition costs was fine for Tim Pawlenty as a law student, but he denied that opportunity for his children and grandchildren.  The Law and Business Schools at the University of Minnesota have recently announced that they receive so little support from the state that they are considering going private. Privatization is one of the key objectives of Republicans, but what will a state do when its only research university becomes privatized? Could Massachusetts make do if it only had Harvard University? This is where Pawlenty tried to take the system of higher education in Minnesota–to a more elite, more expensive, privatized system, one which would hopefully generate more Republicans to continue with his failed policies;   there is a good chance that the state may never recover from his poor leadership and his dangerous, radical philosophy of economics (making government smaller at any cost). His influence will last for many years as a toxic by-product of failed economic policies that were tried in the 1930s and were thankfully swept away by The New Deal.  His sole inspiration seems to have come from Ronald Reagan, who once said “Government is not a solution to our problem, government is the problem.” Pawlenty incorporated that silly statement as the lead motivation for his eight years as governor and now the state is paying a heavy price for his budgetary gimmicks, coupled with a decrease in the one thing that helped the state–the American Recovery and Reinvestment Act–passed under the Obama administration, but lambasted by Pawlenty, though he quietly accepted the funds to cover his budgetary shortfalls.

Like GW Bush’s concurrent behavioral example, political leaders in Minnesota learned they couldn’t bargain or debate issues with Pawlenty: it was his way or the highway.  Pawlenty even managed to divert the use of Federal funding for bridge maintenance and it was during his administration that a major highway bridge within the city of Minneapolis, on Interstate 35 W, collapsed, falling into the Mississippi River and killing thirteen people while injuring dozens more. The local news reporting in Minnesota is so weak that very little discussion of Pawlenty’s responsibility for the bridge collapse took place, yet his fiscal policies left the Minnesota Department of Transportation (MNDOT) lacking funds for bridge maintenance. Pawlenty vetoed transportation bills in both 2005 and May 2007, just months before the 35W Bridge collapsed. Many others have raised questions about Pawlenty’s responsibility, as he was in charge of state policy when the bridge went down. In other states that would carry some meaning. However, Minnesotans have an odd sense of idolatry towards their political leaders: they rarely challenge their decisions and often come to their defense, particularly if challenged by someone who is not a Minnesotan. If an interstate bridge like Minnesota’s I 35 had collapsed in New York City, it would have been an entirely different story. Unfortunately it was treated like a ho-hum event here in Minnesota, and Pawlenty escaped without ever facing serious criticism. His reaction to the collapsed bridge was to claim personal exoneration from this tragic event, rather than help educate Minnesota and the country on what they should do to prevent similar disasters. Under such circumstances, one would hope that public servants with more integrity might have become something of poster child on what needs to be done to avoid such disasters in the future. Just imagine what Hubert Humphrey would have done under the same circumstances. Given the I 35 bridge collapse in Minneapolis, Pawlenty had an opportunity to express leadership on matters like the dangers of delayed infrastructure support and maintenance, based on a rigorous system of inspections and appropriate responsiveness. Pawlenty completely failed in this opportunity–he was too narrowly focused on the issue of assigning blame and pinning the tail on the donkey as long as it wasn’t pinned on him. It was a shameful display by someone who claimed to be working for the public interest. If our legal system applies stiff penalties to set examples for future violations of the law, why shouldn’t we demand stiff penalties for those in charge when neglect and violation of a public trust has taken place?

When Pawlenty took office, he promised no new taxes, but then promptly slashed the budget to cities and counties; they were forced to raise property taxes to meet their needs, leading to a nearly 90% (40% adjusted for inflation) average increase in property taxes, driving some Minnesotans into selling their homes or pushing them closer to bankruptcy. His policies against taxes forced the state to take out short-term loans, the first time this had been done since 1984.  Recently, Moody’s downgraded Minnesota’s bond rating and cited the high number of one-time fixes and lack of cash reserves as the core reason. As reported by Moody’s, “given the one-time actions already incorporated in the adopted budget, including payment delays, fund balance transfers, use of federal stimulus money and depletion of budget reserves, the state has reduced flexibility to address continued budget challenges.” These are signs of failed leadership, not successful management. Pawlenty even took money away from the tobacco settlement, some of which was earmarked for research into tobacco related illnesses at the University of Minnesota. You might argue that Pawlenty’s self-serving action on tobacco funds cost people their lives  by robbing from a settlement that was agreed to long before he became governor. He cut health care spending to help “balance the budget” and, through executive order, rejected federal funds related to the Patient Protection and Affordable Care Act. As the Minneapolis Mayor, R.T. Rybak, a Democrat, has said, “If the tea party really knew how much Tim Pawlenty raised taxes in Minnesota, they would throw him in Boston Harbor.”

One trick Pawlenty used as a budget gimmick was to delay state funding for schools, making it appear as though the state had more money on hand, or giving the appearance of a “balanced budget,” since the money would be in the state coffers at the start of the new fiscal year;  in 2009 the delayed funding amounted to $1.8 billion, which is now one of the problems that the state has to deal with in its current fiscal crisis–it is one of the reasons why the disagreements on how to meet Pawlenty’s hangover budget has caused a government shutdown, now the longest state government shutdown in the history of the United States.  Only one other state used this same delayed budget gimmick for more money than Pawlenty and that state was Alaska.

Figure 1 Pawlenty's Disinvestment Record

Figure 1 illustrates the fiscal outcome for the kind of devastation that Pawlenty launched for the State of Minnesota. You can see a copy of this report and learn more about it here (the information was released by Minnesota State economist Dr. Tom Stinson, together with officials of the Department of Management and Budget as part of their February 2011 revenue forecast). It illustrates what happens to a state that stops investing in its future and does a nosedive in maintaining the quality and access of its once vaunted educational system. The data were compiled from U.S. government sources, including the U.S. Census bureau, the U.S. Bureau of Labor Statistics and the U.S. Bureau of Economic Analysis. It covers the range of 2002-2008, the period during which Pawlenty ruled the state and imposed gimmicks and hidden taxes (property taxes, increased tax on cigarettes) and benefited from Federal money provided through the stimulus package passed under Obama. This data compares Minnesota with the other states. The green column shows that Minnesota was the highest of all fifty states for percent decline in per capita state revenue (OK, so taxes went down and that was supposed to be associated with job growth–that’s what the Republicans say–right?). But Minnesota ranked 35th in the rate of total employment growth, 30th in the percent growth of state GDP, 36th in the relative growth of personal income and 42nd in the relative growth of median household income. These are the standard econometric indices of state economic growth, prosperity and stability and the numbers are relevant to a state’s future.  If this picture looks more like Mississippi than what you have heard about Minnesota, you get my point. Many additional and relevant points about Pawlenty’s performance as a governor can be found here. In only eight years, Pawlenty built a lasting legacy.

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