The horizon is not so far as we can see, but as far as we can imagine

Month: August 2010 Page 1 of 3

What Can Obama Really Do?

A zombie argument is going around about why Obama hasn’t accomplished liberal and progressive ends to the extent many would have liked him to:

Obama can’t do anything because he needs 60 votes in Congress and he doesn’t have them because Republicans and Dems like Lieberman and Nelson won’t vote for his programs.

This argument is misleading in one sense and incorrect in another.  It is misleading in that it misrepresents how things get done in Congress.  It is incorrect in that many liberal policies do not require the consent of Congress.

Let’s examine the misconceptions this zombie argument is built on.

Negotiation 101

Let’s look at how things get done in Congress. Obama apologists make the excuse that Obama couldn’t have passed a larger stimulus because he was forced to reduce the stimulus by $100 billion as it was.  This line of reasoning demonstrates a misunderstanding of how negotiation (or Congress) works.

If Obama had wanted a $1.2 trillion stimulus, say, he should have asked for a $1.6 trillion stimulus.  Then “moderate” Republicans and Dems could have negotiated him down $400K.  This is basic negotiation, which anyone who has ever negotiated in a third world bazaar knows—you start off with an offer far higher (or lower) than what you’re willing to accept, and leave room for the inevitable haggling.

The same is true of health care reform.  If you’re negotiating for a public option—if you actually want one, then you don’t throw single payer advocates out. You act as if that’s something you’re seriously considering, you talk about polls showing it has majority support, and you then “compromise” to a public option.

This sort of self-defeating, pre-negotation concession has been a repeated pattern for the Obama administration (assuming that Obama does seek Liberal ends).

Force It Through

Many liberal policies do not require the consent of congress.

The Bush tax cuts were pushed through under reconciliation.  Most of health care reform, including a public option could have been accomplished the same way.  The tactical choice was entirely at the discretion of the Democratic leadership.

If Obama and Reid can’t hold 50 votes, then the problem is them, not the policies themselves, or “how congress works”.

Congress: Who Cares about Congress?

Now, let’s talk about other issues.  There are many areas where Obama does not need Congress’s approval.

Don’t Ask, Don’t Tell: Obama can issue a stop loss for any soldiers any time he wants. Bang, that’s it, at least for as long as he’s President.

HAMP (the program supposedly intended to help homeowners, which hasn’t):  This program is totally under administrative control.  If Obama wanted it to work, there’s nothing to stop him.

Habeas Corpus: Obama can give everyone in Gitmo their day in court.  Restoring habeas corpus is totally at his discretion, and he has chosen not to.

Social Security: After Congress voted down a debt and deficit commission, Obama went ahead and created one anyway–and stacked it with people with track records of wanting to slash Social Security.

In short, Obama has managed to side-step Congress in order to work against Democratic policy positions (e.g., Social Security), but otherwise has ignored executive privilege when he wanted to continue Bush-era policies (e.g., detention without trial at Gitmo) or to ignore the rights and needs of everyday Americans (e.g., HAMP and DADT). To the Obama administration, Congress is a very selective obstacle.

Going Forward: What Obama Can Still Do

Not only could Obama rectify DADT, HAMP, Habeus Corpus, and his Social Security commission with a stroke of his pen, he can still do a great deal to help the economy. If he wants to.

TARP: Obama has complete control of the TARP funds, the majority of which have not been spent. (We’re talking over $500 billion in slush funds.) $ 500 billion is a lot of stimulus, if it’s done right.  Cash for Clunkers, representing a tiny fraction of the total stimulus funds, massively goosed GDP while it was in effect.

Leaving aside direct stimulus, there are plenty of other helpful things Obama could do.  For example, as a friend of mine noted, most distressed debt today is selling to collection agencies for less than 10 cents on the dollar (often under 5 cents).  The Treasury could buy up $100 billion of that distressed debt at 10 cents on the dollar.  Reclaim the money at 15 cents on the dollar through the IRS, and otherwise just write it off.  You won’t make 50% profit, because some people can’t pay even 10%, but you’ll almost certainly make some profit.  Roll the money over and buy up more debt.  Keep doing it.  (N.B. In the past such debt didn’t sell so cheap, mainly because in the past, pre-Bankruptcy “reform”, people who really couldn’t pay would declare bankruptcy, but now they can’t.  Obama never made fixing that horrible bankruptcy bill a priority at all.) Folks would be absolutely thrilled by a way to deal with distressed debt.  With the debt off their backs, they could spend again, so it would also be stimulative.  There are plenty of other things that could be done with over 500 billion dollars to help ordinary people and goose the economy.

Breaking the Banks (and getting lending going again): The banks have been pretty ungrateful for the massive bailout they received.  They have unilaterally increased credit card rates to gouge customers, have been gaming the market (so much so that one quarter many banks didn’t lose money on their trading operations even one day of the quarter), have fought against financial reform, and have generally acted against the interests of the majority of Americans.  One might say “well, now that they’re bailed out, there is nothing we can do about it.”


The Fed still holds over $2 trillion in toxic waste from the banks.  The banks still hold trillions of dollars of toxic waste.  If sold on the open market this stuff would sell for, oh, about 5 cents on the dollar.  If forced to mark the assets they are keeping on their books at inflated prices to their actual market value, I doubt there is a single major bank in the country which wouldn’t go bankrupt.  Including Goldman Sachs.

So here’s what you do.   As the Federal Reserve you sell $100 billion of the toxic waste on the open market.  Set an actual price for it.  Then you make the banks mark their assets to market value.  They go bankrupt. You nationalize them. (Why not?–They are actually bankrupt after all, and they haven’t increased lending like they were supposed to;  in fact, they have decreased it.)  You make the stockholders take their losses and the bondholders too, then you reinflate the banks. (If the Fed can print trillions to keep zombie banks “alive” it can print money to reinflate nationalized banks.)  The banks lend under FDIC and Fed direction, at the interest rates the Fed directs.  The FDIC and Fed eventually break the banks up into a reasonable size.  And while they’re at it, they get rid of the entire executive class which caused the financial crisis, and have the DOJ go over all the internal memos and start charging everyone who committed fraud. (Hint: that’s virtually every executive at a major bank.)  Again, this is completely up to Obama–the DOJ answers to him.

Think Obama can’t do this without Bernanke?  Wrong.  Obama can fire any Fed Governor for cause and replace them during a Congressional recess with no oversight.* (“Cause” is never defined, but Obama can note that the Fed’s mandate includes maximum employment and not stopping the financial crisis in the first place is certainly plausible as cause as well.)

Obama had the power. Obama had the money. Obama has the power–and the money.

The idea that Obama, or any President, is a powerless shrinking violet, helpless in the face of Congress is just an excuse.  Presidents have immense amounts of power: the question is whether or not they use that power, and if they do, what they use it for.

Obama has a huge slush fund with hundreds of billions of dollars and all the executive authority he needs to turn things around.

If Obama is not using that money and authority, the bottom line is it’s because he doesn’t want to.

Putting aside the question of what Obama could have accomplished already, if he wants to help everyday Americans, turn around Democratic approval ratings in time for the midterm elections, and leave behind him a legacy of achievemant, he can still do it. If he wants to.

Liberals aren’t real people—or crazy

As Bill Scher points out, Beck’s rally was pathetic:

Glenn Beck: 87,000Louis Farrakhan 837,000 ’03 anti-war protests 1,000,000

But the media chooses to massively highlight Beck’s pathetic numbers.  Why is that?

The two answers I see are as follows.  The media has a right wing bias and Beck’s followers include a number of crazies, his movement has the implicit cloud of violence hanging over it, and it’s smart to pay attention to idiot ideologues with guns.

No, the Fed doesn’t need to “press” Credit Card companies to live up to the law

This is exactly wrong mindset:

Time and again, the credit card industry has demonstrated its disdain for its customers. The Fed needs to press these companies to live up to the law.

No, they need to FORCE them.  And if they don’t, it needs to PUNISH them enough that it’s not worth their while.

Which comes down to this: in most cases, paying fines is fine by such businesses, it’s worth it, they make more money breaking the law than the price of the fines.  So you either have to change the law to allow for executive prison time, or you need to get passive-aggressive, which is to say the Fed starts making their lives really unpleasant in other ways and so does the DOJ.  The Fed can make any financial firm buckle.

If it wants to.

The “Mosque” controversy and bigotry

Ok, enough.  As Glenn Greenwald points out, this ginned up controversy is now about bigotry.  Or, to put it another way, it’s about who the acceptable out-group to hate is in America.

Apparently it’s Muslims.

This is turning into a propaganda coup for Islamic fundamentalists, who are able to point at this controversy and say that Americans hate Islam.   And, frankly, from what I’ve seen, with even some of my readers saying they oppose the “Mosque” (really a chapel in a community center), they’re right.  Americans do hate Muslims.

As many people have pointed out, even George goddamn Bush made sure that this sort of bigotry didn’t burn out of control, but lacking his leadership, it is now acceptable to hate Muslims and say they shouldn’t exercise their constitutional rights.

Meanwhile, employment is sucking wind, the economy is heading into a second downleg of the Depression, the war in Afghanistan continues its disastrous course, Mexico is turning into a failed state and on and on.  America has a 1,000 real problems it isn’t dealing with, but it has time for a ginned up bullshit controversy of a “Mosque”.

This is a step down from the usual celebrity gossip and missing blondes who usually serve as American escapism from reality because it reveals something really fucking ugly about Americans and their hatred of a religious minority. Glenn’s right about that.  Let’s let him have the last word:

Obviously, not all opponents of Park51 are as overtly hateful as those in that video — and not all opponents are themselves bigots — but the position they’ve adopted is inherently bigoted, as it seeks to impose guilt and blame on a large demographic group for the aberrational acts of a small number of individual members. (my emphasis)

State of the Economy

Let’s have a chat about the economy, starting with a couple articles.

The first is an article from the NY Times noting that small investors have been moving out of the market in droves: 33.12 billion out of mutual funds this year, so far.  This is entirely rational, not only is the market currently fixed (major movers do not make a profit every single day of a quarter in a free market), but inflation is low and deflation threatening.  When risks are high and inflation is low, the smart thing to do is store your money under a mattress since it will lose little value.

Of course, this is only partially true, since inflation numbers are cooked, and it’s not clear that prices of the things which matter most – food and energy (aka. heating) are actually dropping.

The second article I want to highlight is a column in the Financial Times, by Michael Pettis.  Pettis argues that the surge in exports from China and Germany , which has lead to an explosion of the US trade deficit, is dangerous.  He notes that the fall of the Euro plus austerity in Europe, and the availability of extremely cheap credit to Chinese manufacturers, has increased surpluses in China and Germany.  As European countries that have trade deficits try and lower those, this leaves the US as the designated consumers for the surplus since trade deficit countries in Europe can’t afford to borrow due to the European credit crisis.

This isn’t sustainable, and Pettis fears it will lead to a backlash from America, with actual tariffs and trade quotas.

The larger point is simpler: the countries being punished by “bond vigilantes” are countries running balance of payment deficits.  Countries whose finances are in no better shape than, say, Spain, are not getting hit.

But everyone can’t run a surplus.  It is impossible.  As a simple matter of math, the accounts must balance.  The idea pushed by Germany, that everyone should be more like them, and have positive balances of payments, is nonsense.  It is literally impossible.

Everyone fears a massive decline in trade, as in the 30s.  They should, because we are in a Depression.  However, the fact is that if surplus countries refuse to moderate themselves, then the balance will be fixed some other way. It may be through actual protectionism in the US, it may be through a collapse of US demand, but it will happen.

That which cannot go on does not go on.

In terms of the US economy, it’s pretty clear we’re in a second downleg of the Depression, as predicted.  The key issues are that States and municipalities are essentially bankrupt, and that corporations aren’t hiring.  Corporations aren’t hiring because their profits are fine, and because they don’t see where the sustained growth would come from.  States and municipalities are having income issues because the incomes of median taxpayers have not recovered and the number of employed is not increasing (ignore the “unemployment rate”, what matters is how many people are employed and that hasn’t recovered worth a damn.)  Since States and municipalities have limited ability to borrow and can’t print money, in both cases, unlike the Feds, this means they must cut or raise taxes and in general States are ideologically opposed to raising taxes and municipalities don’t feel they can.  Housing prices remain depressed, which is the main source of money for municipalities.

Since there is no chance of a real stimulus being passed (and if there was, Obama would do it badly, like he did the last one) and since Obama refuses to spend the TARP money on the economy until it’s his reelection on the line rather than Congressional Dems, and since there’s no obvious source of new jobs in the US economy, I see little reason to expect the US economy to recover.  Even if the world economy somehow does, it will route around the US, since the US is a high cost domicile and there is no good reason to produce in the US.  In the old days you produced in the US because that was where the next big tech boom occured, the skills were there, and you needed in.  With the deliberate strangling of innovation in the US due to the oligopolization of the economy, the next tech boom (if there is one) is unlikely to occur in the US.

Overall, there isn’t a lot of reason to be cheerful.  If the economy does manage to pick itself up off the floor, that would mean an increase in the price of oil, and inside of two years (and probably inside of one, if it was a good recovery) that increase would spike the recovery in any case.

None of this was necessary, but Obama chose to not just ask for too little money in his stimulus, but spent the money very badly even outside of the hugely useless tax cuts.  The money did not give the economy an obvious medium term direction: either a huge telecom build-out or an energy and conservation build-out, and the huge bailouts for financial firms created a more concentrated financial sector full of zombie banks with no intention to lend money.  The failure to create a workable cram down on housing prices which also rescued underwater home owners has left housing prices underwater and credit markets still sclerotic.  With the House either going Republican in the fall, or if it remains Democratic with the Democratic margin being controlled by hard-core Blue Dogs, even if Obama did buy a clue, there is little chance that a decent restructuring stimulus bill could get through Congress and the actions of regulatory bodies like the FCC, the Justice department, as well as Obama’s implicit recognition of the health oligopoly, make it clear that his administration has no intention of challenging, let alone dismantling, the oligopolies which are draining the life blood of the US polity.

Plus ca change…

An excerpt from January 5th, 2009:

I’ve long observed that the only economic policy that Obama really really believes in is tax cuts. During the election, even when no one really cared, he would keep repeating, over and over and over again, that he was going to cut taxes.

The problem is that giving money to people without pricing power (most middle and working class people) is pointless. People with pricing power, like health care providers, credit card companies (who can and will raise rates) and employers (who will take into account that their workers are now taking home more money and thus don’t need as much from them) will simply take the money away. And at this time workers and ordinary consumers just don’t have pricing power.

Likewise corporations are not going to create real new jobs if there’s no demand. Who wants to invest into this economy? This isn’t an economy where you hire new people, it’s an economy where you take any money you’ve got and you use it to buy up distressed competitors and properties at generational lows. Then you rationalize your new acquisition with your own company by laying people off. We’ve just spent the past few months watching this play out in the banking industry, heavily subsidized by the government, now we’re going to have to watch the government subsidize buyouts of non-financial companies. If at first giving money to corporations (banks) doesn’t work, why not try it with even more companies?

Stimulus at this time should not be tax cuts, it should be spending. Rewire the country’s energy infrastructure, make every building energy efficient, rebuild roads, build high speed train corridors on the west and east costs, then connect them to each other. Give cities money to build the trams or subways they’ve been wanting to build. Push high speed internet out to everyone, and at the same time increase its speed to international standards (i.e. 10x as fast as the crappy “high” speed internet North Americans get). Move to single-payer healthcare and buyout the health insurance companies. Extend UI to 12 months, and create a bunch of programs that folks can work in as was done in the Great Depression.

Spend money and that money will create demand—for all the products needed for all those projects, for the workers to build all the trains, rail lines, roads, power lines, high speed internet, and so on. And you won’t just be giving money away to be spent in all the same ways that got us where we are, you’ll be refitting the economy. The key thing that hasn’t got through the thick skulls of the elites is that the old economy didn’t work for the majority of people. It was broken. Even the “prosperity” which the elites had (and they did, they are richer than they have been in a century) was fake—it was based on profits that didn’t exist. Wall Street’s losses weren’t losses, they were the revelation that every profit they made for the last 10 years was fake and based on fraud.

The economy needs to be restructured, and that means spending on restructuring, not giving money to people to spend in the same patterns as they did before. That doesn’t mean no money shouldn’t be given out, it should. Relief for those who need help should be generous, but the majority of money shouldn’t go to handouts, it should go to creating a new America and creating jobs that Americans can work in to help create that new America.

Idiots get around to noticing that Dems may have problems in mid terms

Seriously. You read the mainstream press or even many blogs, and they notice things only after it’s too goddamn late to do much about it.

I covered this in January and April and July and August of 2009.  Yeah, I told you so is declasse, but goddamn it, I told you so.

Tai Chi better for Fibromyalgia than drugs

Imagine that.

What’s remarkable, actually, is how often some form of exercise is better for a variety of conditions than pharmaceuticals.  From depression to osteoperosis to preventing the effects of Alzheimer, getting active generally works as well or better than drugs.

In terms of societal health, doing everything we can so that people eat healthily and get exercise would probably do more than anything else.

Instead we subsidize corn syrup and build suburbs without sidewalks.

Oh for God’s Sake: US combat troops have NOT left Iraq

This is positively Orwellian, and people on the progressive side should not be cooperating with it. There are still 50,000 US troops in Iraq and they include brigades which are, absolutely, combat troops.  Call them “advisers”, but nothing has changed, they are combat troops.

Update: Oh hey, the plan is to double the number of mercenaries in Iraq, as well.

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