Obama & McCain – Debate Dizziness

I listened to the debate between Obama and McCain last night just enough to get thoroughly disgusted. It didn't take long.

First there was the issue of taxes. I was disappointed to hear Obama say that he disliked them. It sounds like he's bought into the Republican meme that "taxes are bad, and everyone hates them." I've blogged on this before. It's true that the federal government misspends a huge amount of taxes (the military budget), but taxes themselves are good things, they're really cool, and every year I enjoy writing out the check to the state (though not the feds – see above). This distaste for taxes, born in the myths of the Boston Tea Party and Republican wet dreams of drowning government in the bathtub, is what got us $10 trillion in debt.

So both candidates are going to cut taxes left and right (though at least Obama would raise them on the wealthiest Americans). And balance the budget. Uh, huh. This Republican fantasy has been around for 30 years now, and it's time to get over it. Try it in your personal finances. It doesn't work. If we want to either "fix the problems" this country has, or create the country we want, it's time to raise taxes and cut spending, and the place to start cutting is the military budget – half of the entire world's. I believe in a strong military. So let's cut the military budget by $300 billion, so that we'll have the biggest, most expensive, best trained military in the world. We can start by withdrawing garrisons from dozens of countries around the world, and eliminating Star Wars.

Second, both candidates are fixated on "solving our problems." I bought into this mindset recently, so I can't criticize too much here, but it's recently become clear to me, through watching people like Kristin create her life, and now reading The Path of Least Resistance, by Robert Fritz, that that mindset will not get us where we need to go. We need to switch that mindset to one in which we ask ourselves, what kind of country would we like – and then set out to create it.

Think about that for a second. How would it be if, instead of saying, "Omigod! Look at this horrible economic meltdown! We've gotta rush around madly and fix it right now!" we said, "Okay, what kind of country do we want to create? Let's figure that out, then we'll look at our current economic meltdown situation, and figure out how to create it from here."

Which mindset do you suppose is going to get a better end result? And have more fun getting there?

As Douglas MacArthur once said, "There is no security on this earth. There is only opportunity."

Of course, even with my disappointment with Obama, my support for him remains unchanged. He's obviously less delusional about taxes than his opponent, he's definitely more creative, and he'll select Supreme Court justices far superior to those McCain would choose. If anything happens to him, his vice president is at least competent. And I would SO much prefer that Obama get that 3 a.m. call on the red telephone!

(As an aside, this quote from MSNBC's debate coverage really floored me: "The financial crisis — an unforeseen and unimaginable event, ..." Anybody who's spent any time studying history - especially the economic policies of Coolidge & Hoover - should have been expecting it. Likewise anyone who's studied economics (at least, who's been reading Krugman instead of Friedman). Lots of us were. A guy named Kunstler wrote a book more or less predicting it a number of years ago, called The Long Emergency. Well, perhaps the writer was stuck in a Fox News information vacuum....)

An Open Letter to Congress

Dear Senators and Representatives,
How are you proposing to pay for this $700 billion bailout to the rich fat cats on Wall St.? Especially since you added $100 billion in tax cuts, and our budget is already in deficit, our national debt over $9 trillion? Are you going to put it on the credit card for my kids to worry about?
The tax cuts make this hurt even worse.
Please read Senator Wyden's statement - he's right on the money in his reasons for opposition, except he doesn't mention how to pay for it. I agree that something needs to be done; but please take the time to get it right, to close the loopholes and regulate the abuse, and PAY FOR IT UP FRONT!
Please don't put any more onto the national credit card.
Sincerely,
Seda Collier

Rep. Peter Defazio Gets It

I wrote my congressman and both senators regarding the Bush Bailout, and already got a reply from Mr. Defazio, my congressman.

"Dear Ms. Collier:

Thank you for contacting me about the Bush Administration bailout. I am vehemently opposed to this bailout.

I was the first Member of Congress to take to the House floor and stand up in opposition to this $700 billion bailout. The financial crisis we face today does not need to be resolved by forking over $700 billion from the taxpayer to the "Masters of the Universe" on Wall Street.

The fundamental premise of the $700 billion Bush Administration bailout is flawed, reckless, and foolish. It is flawed because it is not clear it will achieve its stated objective of injecting commercial banks with liquidity and it ignores the needs of main street America, it is reckless because there are better alternatives, and it is foolish because giving away $700 billion will limit our ability to deal with the myriad of other problems we face such as healthcare, energy independence, and job creation.

To put the sheer audacity of this bailout plan in perspective, a compromise has been talked about that reduces the initial payments to "only $250 billion". $250 billion would more than double our investment in bridges, highways, transit, and rail in the United States for five years. Investing in infrastructure creates jobs and stimulates the economy. According to the U.S. Department of Transportation, for every $1.25 billion we invest in infrastructure, we will create over 30,000 jobs and $6 billion in additional economic activity. In President Roosevelt's Works Progress Administration, we invested in building roads, bridges, dams, hydroelectric systems and other public works projects to mend our nation's broken economy. That money trickled up to Wall Street from Main Street and rebuilt our economy. We did not just throw money at Wall Street with the hopes that the taxpayer might some day be paid back.

I think Congress should respond, but the basic premise of the Bush Administration bailout is flawed. Almost 200 economists wrote to Congress stating "As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson"[1]. The letter went on to raise the issues of fairness, ambiguity, and the long-term effects. The former chairman of the Federal Deposit Insurance Corp in the Reagan Administration wrote, "I have doubts that the $700 billion bailout, if enacted, would work. Would banks really be willing to part with the loans, and would the government be able to sell them in the marketplace on terms that the taxpayers would find acceptable?"[2] And James Galbraith, an economist at the University of Texas, has asked "Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises. Is this bailout still necessary?"[3] I believe the answer is No. I have called on my colleagues to slow down this debate and seriously debate the alternative proposals.
For example, many economists have argued that directly helping mortgage holders save their houses would be astronomically cheaper and a more effective in resolving this crisis. And helping working Americans restructure their homer mortgage will increase the value of Wall Street's depreciated assets. As the New York Time opinioned recently:

"We could make a strong moral argument that the government has a greater responsibility to help homeowners than it does to bail out Wall Street. But we don't have to. Basic economics argues for a robust plan to stanch foreclosures and thereby protect the taxpayers ."[4]

Another serious consequence is the $700 billion hole in the budget deficit this bailout will create. The next administration, Democratic or Republican, will be unable to initiate new proposals as it charts a new course for our nation. The Bush tax cuts blew the surplus created by the last Democratic Administration and the Bush Administration bailout will prevent the next administration from implementing its mandate.

My biggest concern of this bailout is who pays the $700 billion tab. The $700 billion is to protect Wall Street investors, therefore the same Wall Street investors should pay for this infusion of taxpayer money. I have proposed a minimal securities transfer tax of ? of one percent. A securities transfer tax would have a negligible impact on the average investor and provide a disincentive to high volume, speculative short-term traders. Similar tax proposals have been supported by many esteemed economists such as Larry Summers, John Maynard Keynes and Nobel prize winners Joseph Stiglitz and James Tobin.

There is considerable precedent for this. The United States had a similar tax from 1914 to 1966. The Revenue Act of 1914 levied a 0.2% tax on all sales or transfers of stock. In 1932, Congress more than doubled the tax to help finance economic reconstruction programs during the Great Depression. In 1987, Speaker of the House Jim Wright offered his support for a financial transaction tax. And today the UK has a modest financial transaction tax of 0.5 percent. This is a reasonable approach to protecting taxpayers and ensuring the federal budget doesn't fall further into the fiscal hole.

I will continue to challenge this bailout every step of the way. Again, thanks for reaching out to me. Please keep in touch.


[1]
http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
[2]
Washington Post. A Better Way to Aid Banks. William M. Isaac. Sept 27, 2008. A19.
[3]
Washington Post. A Bailout We Don't Need. James K. Galbraith. Sept. 25, 2008. A19
[4]
New York Times. Editorial. What About the Rest of Us? Sept., 26, 2008. A26.

Sincerely, Rep. Peter DeFazio
Fourth District, OREGON "

It's pretty cool having Peter representing me in Washington. He's one of the few who voted against the invasion of Iraq right from the start. He's got the guts to stand up to the Bush administration, and he's been doing just that for years. The only downside is, I don't get to vote to throw the bum out.

You bet Peter's got my vote - again.

In a Nutshell

Wild speculation in an unregulated market driven by Republican ideology in the 1920's leads to a stock market crash and the Great Depression.

The Republicans are given the boot in the 1932 election, and Franklin D. Roosevelt presides over regulation that goes a long way to controlling speculation.

Ronald Reagan wins by a landslide in 1980, and promptly begins deregulating, talking about how this will help the middle class. A technology boom begins at about the same time, disguising the fact that the deregulation benefits only the top 10%, the financial elite. He also aborts Carter's baby attempts to begin a transition from fossil to renewable fuels, enabled by cheap oil from Saudi Arabia and mortgaging our future to an alliance with the Saudi royal family.

Subsequent presidents continue the Republican policy of deregulation, setting off another wild speculation surge that raises home prices astronomically. Speculators and bank CEO's make out like bandits, and the middle class goes pitifully deep into debt, i.e., gets screwed.

The natural result of unregulated speculation (previously seen in 1929) occurs simultaneously with Saudi peak oil, while the nation is still suckered by a media entirely controlled by multinational corporate interests, Republican economic policy, and George W. Bush's politics of fear.

I give credit to the Bush administration for realizing instantly that something needs to be done. Hoover sat on his hands for over two years, allowing the last banking crisis to balloon into the Great Depression.

But his plan stinks. It amounts to a direct transfer of wealth from the middle class to the uber-wealthy, while simultaneously guaranteeing a complete lack of oversight and accountability.

Any solution to this financial crisis needs to strictly regulate speculation.

It needs to bail out the homeowner and the middle class, not the uber-wealthy.

It needs to identify where the money is coming from, and pay for it – preferably through cutting defense spending by $300 billion and taxing the wealthy who've enjoyed all the benefits of this "boom" since Reagan took office – in other words, folks making over $250 K per year.

I hope the Republican base – evangelicals – look at this closely, and vote this year based on economic policy. Gay marriage and abortion are done deals, and the GOP won't change them because then their base would be limited to really rich folks. Believe me – if the two women next door get married, it won't affect you. If the woman on the other side gets an abortion, it won't hurt you. They're going to do it in any case, legal or not.

But if you let the GOP continue to make economic policy and deregulate, it will hurt you bad.