The Decision to Bomb Syria

By Robert E. Prasch

Congress Gets to Vote on a War!

Our most gracious sovereign – Barack Obama — has condescended to allow the elected representatives of the American people to engage in what his Administration openly states is a “non-binding” vote over whether or not the armed forces of the United States should enter into hostilities with yet another Middle East nation. This, it goes without saying, is a significant development. After all, our representatives have never been asked to debate or authorize the ongoing bombing campaigns being conducted in Pakistan, Yemen, Somalia, or any other of a number of nations with substantial Muslim populations. No wonder the Washington establishment is all aflutter.

The Principle at Stake

What has brought about this historic occasion? Well, if we can believe the Administration (and given this Administration’s penchant for prevarication, this is a big “if”), Syria has broken a long-standing taboo. Indeed, the Syrian government may have violated a long-standing principle that is well-known among nations. What is this principle?  It is that only nations working in concert with the United States, and advancing an agenda pre-approved by the United States, may deploy lethal gas against its enemies (or alternatively, against its own civilians as occurred in Halabja). If we can believe the Administration, Syria has violated this taboo.

While Saddam Hussein conducted the gas attacks described above, he was neither then nor now deemed to have been in violation of the principle as stated. Why? Because at the time he was de facto allied with the CIA and the upper echelons of the Reagan Administration in a conflict with the Islamic Republic of Iran. The United States was, then as now, preoccupied with weakening Iran for having had the temerity to overthrow the ruler the CIA had installed after orchestrating a coup in 1954. By the logic of the Washington foreign policy establishment, the Iranians had displayed arrogance on a grand scale. For that reason the CIA was complicit in the Iraqi Army’s deployment of lethal gases against the Iranian Army in the 1980s. Emboldened by what he could only perceive to have been a “green light” from the Reagan Administration, Saddam Hussein later gassed approximately 100,000 Kurdish civilians, whose transgression was to either be in the wrong place at the wrong time (that is to say their own villages) or for taking an anti-Saddam Hussein stance before such a position had been formally sanctified by the United States.

Three Options in Syria

This brings us back to what should be done about Syria’s transgression. In effect, the Obama Administration has indicated that we have three options: (1) do nothing other than express outrage, (2) engage in a serious bombing effort, one designed to significantly reduce the fighting capability of the Syrian Army so that it becomes vulnerable to succumbing to the several rebel forces now in the field, or (3) engage in “limited strikes” wherein targets are selected in a manner that “teaches a lesson” without disturbing the current balance of power of the ongoing civil war (although interestingly, the actual wording of the letter sent by the President to Congress requesting authorization is very open-ended on the use of force). Before continuing, let us take a moment to think through option (3). Given the size and severity of the rebellion it is hard to imagine what targets would actually qualify. Perhaps the United States could bomb some lonely outposts or check-points outside of the combat zones, military vehicles or aircraft that are undergoing repairs and/or about to be replaced, or perhaps we would demolish Syria’s Department of Motor Vehicles office. Seriously, it is hard to say which targets would fall under this third category.

As things stand, if we care about bringing an end to the war and the stopping the death and destruction along with the alarming rise in the number of refugees, choice (1) or (2) should almost self-evidently dominate (3). After all, (3) simply brings the United States into another conflict in a manner designed to ensure that nothing is done that might change the situation on the ground and thereby move the combatants toward a resolution of the war. Again, by design, the point of such a bombing campaign would be to solely and singularly express the United States government’s willingness to uphold the less-than-glorious principle expressed above. Worse, it defends this principle by killing or maiming a number of low-ranking Syrian Army troops and whichever civilians happen to be in the wrong place at the wrong time. My guess is that neither of these groups would have been enthusiasts of gassing civilians in the event that they had been asked. However, Bashar al-Assad has shown that he is as inclined to be as concerned with the public’s position on decisions related to war and peace as … well, never mind.

But what of the principle being upheld?  Surely it is important to establish that only regimes working to advance ends pre-approved by the United States government have the right to deploy lethal gases. Not many people living outside the United States support the principle summarized above. True, many people across the globe do favor a complete ban on the use of lethal gasses as weapons, but if the United States were to adhere to this latter principle, it would be necessary to mount an investigation and prosecution of the Reagan-era officials and agencies that actively assisted and/or covered up for Saddam Hussein’s use of lethal gas during the Iran-Iraq War. The Obama Administration has demonstrated that it can be feckless on its campaign promises, but no one can claim that they have not vigorously stood by the principle that any and all American officials who engage in war crimes should be favored with absolute legal impunity. If we believe the news reports, this last decision was taken because the Administration was pained to discover that there was low morale amongst those who claimed that they were “just following orders” when they knowingly committed war crimes.

Why Does the Administration Favor a “Limited Strike”?

Let us assume that a decision to bomb Syria has been or will be taken. Why would the Administration elect to limit the scope of such a strike before it begins? The answer is actually right in front of us – the Obama Administration, like the Bush Administration before it, wishes to preserve the Assad regime or something that looks and acts very much like it. Why? The reason is that, despite formal enmity, the United States has something of a “working relationship” with Assad. We also know that a genuinely democratic Syrian government, even if largely free of fundamentalist influence, would want the return of the Golan Heights (and the all-important right of access to water from the Jordan River and the Sea of Galilee that comes with it), support Palestinian claims over substantially more of the Occupied territories than the current Israeli government is inclined to cede, and will generally take “awkward” or “unsettling” positions on a variety of other regional issues. Worse, it could do so with all of the legitimacy that the world tends to confer on democratically elected governments.

Moreover, Assad has long proven his willingness to work with the United States on what might be described as “delicate matters.”  One could say that the United States and Syria share an implicit understanding about several matters of mutual importance. For example, we rarely hear of attacks on Israel from Syria, even by irregular forces (Israel, by contrast, periodically bombs Syria). Consider another example. In September 2002, the United States government was anxious to have a Canadian citizen of Syrian descent questioned under torture. At the time it was thought that it would be awkward for the United States government to do the job, so the intended victim was flown by private plane to Jordan where the wonderfully cooperative and “enlightened” King had Maher Arar transferred to Syria for a year of utterly inhumane treatment accompanied by extended torture. A year later Syrian officials apologetically reported that, despite their best efforts, they had found Arar absolutely innocent of any wrongdoing. Needless to say, the Bush and Obama Administrations, along with the US judiciary, will never forgive Arar for being innocent, which explains why to this day he cannot enter the United States and remains on the No-Fly list despite a formal apology and $10 million settlement from the Canadian government.

This, I submit, is the crux of the problem. Barack Obama probably doesn’t like Assad. As well, it is likely true that Sec. of State John Kerry really believes that the President of Syria is like Hitler (although not so much like him as to ruin the lovely dinner that then Sen. Kerry and his wife enjoyed with President Assad and his wife). We can safely assume that they would like to see a world in which Assad did not play a part. But, as with the case of Egypt, the Washington foreign policy establishment generally and the Obama Administration in particular have a deep and visceral fear of the Syrian and Egyptian publics. Their concern is that the peoples of the Middle East have shown a disconcerting tendency to make up their own minds when voting for representatives, rather than selecting those whom the United States government wants them to want. Until the peoples of the Middle East learn to vote “correctly,” the United States government can be counted upon to resist the emergence of democracy across the region.

This, ultimately, is the logic of Option (3). The United States government, when push comes to shove, wants Assad or someone very much like him to rule over Syria. A disdain or contempt for public opinion across the Middle East is the underlying reason why there has long been a bi-partisan consensus in support of military rule in Egypt, in support of the violent repression of the people of Bahrain, in support of the extreme fundamentalists who have long miss-ruled Saudi Arabia, and in support of a policy of relentless hostility directed towards Iran.

Worse of all, from the perspective of the Washington establishment, Assad fully understands the situation and the leverage that it inadvertently grants him. This was the reason that Assad demonstrated his contempt for President Obama’s implied threat of a “Red Line” by deploying lethal gas. The Administration is especially angry because in their hearts they already know that they are going to let Assad get away with it.

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Robert E. Prasch is Professor of Economics at Middlebury College.

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A “Roadmap” to Restoring Our Constitutional Liberties

Hi, folks–FS here. Apologies to followers of this blog for not having posted for a while. The term knocked the wind out of my sails, as the saying goes. I hope to have a new piece sometime in the next day or so. In the meantime, TransEx blogger Robert E. Prasch proposes a set of reforms to address the latest wave of news concerning NSA leaks and the general encroachment upon Constitutional protections.

From Bush to Obama: Continuity You Can Believe In

Edward Snowden’s revelations have collectively stripped away the last shred of hope that the Obama Administration or the Congressional Democratic Leadership have established or intend to establish any meaningful changes from the dangerous precedents laid down by the openly and unabashedly anti-Constitutional Bush Administration. Indeed, the actions of this Administration arguably represent an even greater betrayal of American values, as they have provided the imprimatur of bi-partisanship to the shredding of our long-standing Constitutional rights. Unsurprisingly, the Obama Administration now finds that its greatest cheerleaders and apologists are the former consigliore of George W. Bush’s disgraced Administration. No less than former White House flak Ari Fleischer has happily tweeted that “Drone strikes. Wiretaps. Gitmo. O[bama] is carrying out Bush’s 4th term.”  The Administration’s newfound friends confirm the old adage, “If you lie down with dogs, expect to wake up with fleas.”

How bad is it?  Consider the stance now being taken by The New York Times, a newspaper that once worked hand-in-glove with the Bush Administration to amplify its pro-Iraq War propaganda and then, less than a year later, cooperated in covering up that same Administration’s massive and illegal domestic wiretapping program until after the 2004 elections were safely over. Yet these new revelations are so bad that the Times, despite its long and pitiful record of subservience to executive power, claims to be shocked. Its editors have concluded that the Obama Administration “has now lost all credibility on this issue.” (The phrasing of the sentence suggests that the Administration retains credibility on other issues. We can only speculate as to what issue or issues they have in mind. Prosecuting fraudulent bankers? Supporting meaningful financial reform? The 49 State Mortgage Settlement? Closing Guantanamo? Renditions? Bush-style “Free Trade” Agreements? Drone Warfare? The restoration of due process of law to Americans that the executive branch suspects of terrorism? But I digress). In the same editorial the Times also, and correctly, dismissed Sen. Dianne Feinstein’s pathetic justification of the these massive surveillance programs as “absurd.” Happily, they refrained from implying that Sen. Feinstein retains credibility on other issues.

What Should Be Done?  Lessons from the Democrats’ Undermining of “Financial Reform”

But, one might ask, how should we proceed?  This is an important question.  While it is impossible to formulate a detailed answer so soon after these revelations, it is not too early to sketch out a strategy. As we consider our way forward, it would be useful to remember the hard lessons learned in the course of an earlier episode in which the Obama Administration and the Democratic Congressional Leadership felt compelled to act in a situation where “success” would mean taking substantive action against their largest donors, their personal ambitions as politicians, and their deepest political instincts as so-called “Centrists” or “Clinton Democrats.” That issue was the reregulation of the financial system in the wake of the greatest financial debacle since 1929. The bill that emerged, a veritable monument to doing nothing while presenting the appearance of attending to the public’s interest, was the Dodd-Frank Act of 2010.

Let us briefly recall how that process unfolded. Immediately after the crash occurred, the public was repeatedly told that the debacle was the consequence of a “panic,” and for that reason we should rest assured that nothing was wrong with either the nation’s financial system or its most prominent firms. All that was needed was some “temporary liquidity,” after which all would be well. Remarkably, Timothy Geithner’s Treasury Department and the Too Big To Fail banks never wavered from this story, and regularly deployed “creative accounting” to support it.  To their regret, the public failed to be persuaded despite the best efforts of the financiers, their kept politicians, and industry-friendly regulators.

Seeing that this initial ruse had failed, their second ploy was to stall for time. To that end, they argued that the system was “complex,” and for that reason “rushing to enact reforms” would be unwise. Time would be required, and the crisis would have to pass, before the nation should even start to consider reregulation. Translated into plain speaking, the Administration and its Congressional allies wished to postpone any push for reforms until such time as the public’s outrage had died down and Wall Street’s political hegemony had been restored. Massive and ongoing bailouts greatly facilitated the latter goal. As to the former, American incomes continued to decline, unemployment remained high, housing prices continued to tank, and constituents remained angry.

With the 2010 mid-term elections approaching, and with the Democrats dominating Congress for the two years immediately following the Crash of 2008, it became evident that the Party leadership would have to do “something” if they were to retain any standing with a public whose anger remained palpable. This was the basis of their third and final ploy – passing a regulatory reform bill that was designed to fail, conjoined with a public relations blitz proclaiming a great victory that would end Too Big To Fail while greatly stabilizing the financial system and its most prominent firms. In Washington, appearance is substantially more important than performance. This, in the final analysis, explains why the Congressional Democratic Leadership gave the nation the Dodd-Frank Act instead of substantive financial reform.

Looking to the Future: The Obama Administration vs. Meaningful Reform of Surveillance State

With the above understanding of the politics of futility in mind, we can now turn to formulating a strategy for achieving some meaningful and lasting reforms. We can begin with their first step – denying that a problem even exists.  Those following the news will have observed that the Administration and its Congressional allies have already embarked on this line of argument. The President and leading Democratic Party senators, most prominently Harry Reid and Dianne Feinstein, are already telling us that this week’s revelations are “overblown,” that it is all “hype,” and that “nothing is amiss,” etc. Check that box.

As they are unlikely to be believed, we can anticipate that they will soon move on to phase two. Again, and in parallel with the effort to not reform the financial system, we should expect to be told that intelligence-gathering programs and agencies are “complex,” that their “mission is sensitive,” that we need to “slow down,” that we must “deliberate carefully” so as to bring about “the best possible reform”, etc. As a wrinkle on this theme, we should expect to see a major effort made to distract us with long-running debates or disputes over the personality or quirks of Edward Snowden (In this, David Brooks has taken the lead with an Op-Ed that is idiotic even by his standards, and that is really saying something). The point of such stalling techniques, as it was with financial reform, is to allow the scandal to become “old news.” If this should come to pass, Congress will be able to talk the issue to death, and perhaps even get away with doing nothing at all (the failure to reform the gun laws despite the public’s outrage after the massacre of schoolchildren and their teachers in Newtown nicely illustrates the power of this approach).

A time-honored variant of this venerable strategy is to form an “official” study group to examine reforms. Assuming that Congress and the Administration pursue this approach, we should expect a “bi-partisan” commission featuring “sound” persons who can be relied upon to discover that nothing is amiss. Ideal candidates for such a commission would be Sec. of State John Kerry, Sen. Dianne Feinstein, former CIA and DoD heads Leon Panetta and Robert Gates, and any of a large number of potty-trained “experts” from the usual beltway think tanks, all of whom will solemnly promise to “look tirelessly into possible abuses.”  If, thereafter, sufficient political pressure remains, expect a bill that is long, complicated, and vaguely worded. For performance, it will call for intelligence agencies to be monitored by, at most, deeply conflicted parties in opaque processes. In short, it will be legislation resembling Dodd-Frank.

Four Guidelines for the Achievement of Meaningful Reform

The failure to reform Wall Street provides several lessons that collectively point to four necessary components of any successful strategy to bring our nation’s bloated and overreaching intelligence agencies (and their contractors) to heal.

First, and of most importance, it must be understood that the Obama Administration and the Democratic Congressional Leadership will resist any and all meaningful reform with every means at their disposal. To that end, we can expect them to continue to prosecute and vilify whistleblowers while libeling critics and reformers. They will also continue to stir up fears that are, to be blunt, as beside the point as they are beneath the dignity of anyone who thinks of themselves as the citizen of a free nation.

Regrettably, such fear-mongering is so prevalent that it must be addressed directly. Since 9/11 we have been repeatedly told that giving up our liberty and privacy is worthwhile as it enables the government to “Keep Us Safe.” Those who make this argument should be reminded that the best-fed, healthiest, and safest animals live in zoos. Seriously, folks, living and thriving as a free people in a free nation involves a degree of risk. But is there anyone out there who thinks that it isn’t worth it? Everyone who has ever volunteered for the armed services has already answered this question. I would submit that it is well past time for the citizenry at large to honor the commitment of our young servicemen and women by agreeing to live with the immeasurably small risks we must shoulder to live as free people in a free nation. Let us recall that our heritage is not one of bowing to fear. Two hundred and forty ago Americans willingly took up a substantial risk. They fought the world’s largest empire so that they might live as citizens rather than subjects. Does their sacrifice mean nothing to us today?  Has July 4^th been reduced to one more great day for a BBQ?

The second condition we must take into account is the fact that the public’s attention span is limited.  No one is more aware of this than the Administration and its Congressional allies. To achieve meaningful reform we cannot allow the process to be diverted into endless “hearings,” “commissions,” “inquiries,” etc.  This is especially the case if these hearings are exclusively staffed by the usual suspects. We can only allow such an investigation to take place if it is short in duration and led by former Senator Russ Feingold or one of the Oregon Senate delegation.  Otherwise, forget it.

Third, we must demand simple laws featuring bright lines and clear performance criteria. Rules that are simple and clear can be easily and readily monitored by any interested citizen or group of citizens. An example from finance was the Glass-Steagall Act of 1933 that separated investment banking from commercial banking. If you were in one business, you could not be in the other. Full stop. It was simple to state and simple to regulate (the lines only became grey after the banks induced the Federal Reserve to make them grey, but that is another story).

In spying, we developed equally simple rules after the Church Committee hearings of the 1970s. NSA and CIA could conduct their activities overseas, but not in the United States. Americans could not be investigated without a warrant from an independent judge (although the secrecy granted to the FISA court and its opinions must be wholly and radically rethought). Again, we want simple laws that are easy to monitor and thereby difficult to elide or evade.

Fourth, we must be ever mindful that the intelligence agencies being subjected to reform will not like it and can be expected to put up a powerful and unceasing resistance. The reason is simple.  As with the equally pathetic “War on Drugs,” there is a massive amount of easy money to be “earned” in the course of spying upon one’s fellow Americans.  Moreover, it is a line of work where one is primarily rewarded for who one knows, not what one knows. What this means is that meaningful reform will undermine comfortable and highly lucrative careers in the “Making Us Safe” business.  With so much at stake we should anticipate vigorous resistance, not limited to highly damaging smear campaigns against any persons or groups pushing for meaningful reform. Also, in the event that binding rules are passed, the leadership of these agencies will almost immediately begin reaching out to their political allies, and especially to their contractors, to have any substantive rules repealed, “reinterpreted” (a task that now appears to be a specialty of the Office of Legal Council), or reworked.  Happily, while blocking the ability of these agencies and their allies to unravel reforms may be difficult, it is not impossible. But, success requires that we be pro-active.

The place to begin is by significantly, and I do mean significantly, reducing the resources available to these agencies. This immediately shrinks the size of the prizes to be gained and thereby the interest in going after them. And let us be clear, these agencies are effectively the “anchor firms” of enormous private sector industries with substantial political reach. Any reform that fails to reduce the bloated budgets of these behemoths will not stick for long. As speed is of the essence, the process of cutting back should resemble the manner with which one deals with a massively overgrown hedge. Begin by hacking back the overgrowth with large indiscriminate swings. Only after the bulk of the trimming is accomplished should one return to the task with an eye to shaping its appearance. So, for example, cutting NSA’s budget by 33% the first year, followed by another 10% over each of the next three years would be a great start. Again, the point of such cuts is to substantially reduce the political power of these agencies and the innumerable contractors who feed at the trough of their porcine budgets. Half measures will be insufficient if we are to get the genie back in the bottle. I should add that publishing the actual budgets of these agencies is essential. Despite the shrill claims that will undoubtedly be made to such a suggestion, publishing these budgets will in no way or manner put the public at risk. Why? Because in this world of doubt and uncertainty one of the few things about which we can be sure is that the Chinese, Russians, Israelis, and all major European powers already know just how much money each of these agencies have been allocated. Only American citizens remain in the dark.

The CIA, we should briefly note, is a qualitatively different problem.  The reason is that they field what is essentially a small army.  The problem with this force is that it is solely and exclusively accountable to the President. That Presidents like having a small army that they can use on a whim should not come as a surprise. Nevertheless, an army that can be deployed at the behest of a single individual goes strongly against every known or imagined notion of  “checks and balances.” To make matters worse, our experience with CIA special operations has in no way or manner validated this Constitutional loophole. The record has not fluctuated between good and bad. On the contrary, it has been a continuous string of disasters. The blowback and loss of moral authority that the United States has experienced from CIA misadventures in Guatemala, Iran, the Bay of Pigs, Cambodia, Afghanistan, El Salvador, the Iran-Contra scandal, “Black Site” prisons, rendition programs, ongoing Drone Wars in at least a dozen nations, etc., have been individually and collectively intolerable.  It must end.

The CIA’s record of repeated failure suggests a problem, one that runs to the core of that institution and its lack of accountability. Which is the reason that it must go. In 1991, Senator Daniel Patrick Moynihan introduced the “End of the Cold War Act” that would have abolished the CIA altogether while moving its (very) few useful functions into the State Department. He tried again in 1995 with the “Central Intelligence Agency Abolition Act.”  Now would be an excellent time to revisit this wonderful idea. Moreover, the successful closing of that agency would send a clear message – one that is nicely designed “pour encourager les autres.” To repeat, the CIA does not need to be reconfigured or reformed, and its leadership does not need to be reviewed or reshuffled. It needs to be shut down. Period. It is of particular importance that its special operations branch be closed. Again, not reformed or recalibrated, but closed. If the President wishes to have a war with another nation, or a particular group within another nation, let him or her argue for and receive explicit Congressional authorization.

Related to this is another essential precondition to the achieving, and especially the sustaining, of substantive reform of our intelligence agencies. We need to eliminate any and all “contractors” (a.k.a. mercenaries) from the payrolls of every branch of the United States government. This includes the Pentagon, all intelligence agencies, and the State Department. The rule should be simple – if you are authorized to carry or operate a weapon in the service of the United States government you will wear an appropriate United States military or police uniform (unless you have been specifically and temporarily assigned to undercover duties).

Likewise, everyone working for an intelligence agency should be an employee of the United States government and earning a government salary. This is important for three reasons. The first is that private firms can and do give political donations, lobby our representatives, and provide our elected officials and their staffers with cushy post-electoral sinecures. Now, it is one thing to lobby for a padded no-bid contract to provide copy-paper to the Pentagon, but it is another thing altogether to lobby for the initiation or continuation of a state of conflict. The second reason is that government employees are considerably harder to fire than private sector employees (although the rules are substantially more lax in areas such as intelligence and Homeland Security – a fact that must be changed). With greater job security, lower-ranking employees who witness wrong-doing have more protection in the event that they attempt to talk to superiors, inspector generals, or members of Congress about what they have seen. The third reason is that uniformed military and intelligence agents are paid considerably less than the fat-cats working for their private-sector counterparts. Contrary to the collective wisdom of the District of Columbia, this is not a fact to be deplored. On the contrary, it is to be proclaimed from every rooftop. When these professions earn below “market rates” we can be certain that everyone who opts for the job must be motivated by something other than the salary. Being “believers” in the importance of their mission, such persons will be more likely to speak up or, as a last resort, become whistle-blowers in the event that the leadership of their agency is heading down the wrong path. Whistle-blowing, as we have seen, is often the last – and for that reason a critical — check on out of control government programs and agencies.

So, to reprise, a successful strategy to restore our Constitution must, (1) recognize that the Obama Administration and its Congressional allies are firmly on the wrong side of the issue, (2) push for immediate and substantial reforms without allowing the process to be stalled by talking it to death in Congress or waiting around for pointless reports from commissions staffed by the usual Washington sycophants, (3) place an emphasis on clear, simple, transparent, and easy-to-monitor rules, and finally (4) significantly defund the beast, with special attention to eliminating the CIA and all outside “contractors” and mercenaries. By design, this list avoids speculating on the specifics of the rules we will need to put in place to restore our privacy and liberties against an overreaching government. Nor does it cover what penalties should await those who violate such rules. But achieving and sustaining meaningful reform requires more than good ideas, it needs a strategy for getting there. If the disappointing outcome of the effort to reregulate the financial system has a silver lining, it is that it has given us some insight into how we should proceed against well-entrenched interests.

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Robert E. Prasch is Professor of Economics at Middlebury College. Click here to read more of his posts.

The Marathon Bombings and the Lockdown of Boston: Was it really a Vindication of the Surveillance State?

 By Falguni A. Sheth and Robert E. Prasch

 

The sub-text of the official state view and media coverage coming out of Boston over the last week carried a crucial message to the American public: it was a vindication of the Counter-Terrorism Surveillance State and its massive expenditures and the associated erosion of American constitutional liberties.

To that end, the several days since the bombing of the Boston Marathon showcased a mesmerizing display of reality television mediated by the unquestioning officiousness of the fourth estate.   On vivid display was “proof through performance,” a validation, that the laws passed and massive expenditures incurred over the last decade were essential to the state’s  “protection of the public.”

Multiple banners flashed across the scene with short exciting spins about the status of the manhunt for the bombing suspects; they were accompanied by endlessly repeated images of Boston and Watertown police, SWAT teams and FBI officers, all carrying a dazzling array of complicated weapons, bordered by police cars.  There wasn’t a civilian in sight, since they all appeared to have accepted the ‘command’ (which was in fact a request) to stay inside. These images alternated with breathless images of reporters ‘at the scene,’ filibustering inanely, occasionally offering proud announcements about how they were asked to ‘move back’ as the focus of the police search for the suspects shifted. It was as if they were children proudly reporting how they were asked by their teacher to help clean the blackboards.

The past decade has seen Presidents, politicians — conservatives and liberals alike — champion pre-emptive policing laws such as the USA PATRIOT Act, FISA, NDAA 2012 and 2013, to TSA security practices and searches, to “See Something, Say Something” practices—all in service to fighting the War on Terror.  As a cable-news talking head cooed Friday morning: “There are cameras and social media everywhere. There is nowhere to hide!” That statement seemed indisputable: store cameras, street cameras, private cellphone cameras and videos could be integrated to give an astonishingly wide record of the tens of thousands of people who were at last Monday’s event.  Yet, the most important truth of that day seemed to be lost in the gush of self-congratulation: the explosion of the bombs confirmed that a massive extension of the surveillance-state did NOT protect people in Boston.

Remarkably, this message of the paramilitarized surveillance state was in no way challenged merely because it was inaccurate. By the time Massachusetts Governor Deval Patrick ended the “shelter in place” request, the second suspect had still not been found. Suddenly, the Boston public was supposed to believe that they were magically safer after the lock-down ended than before.   But lest one come to conclude that this suggested a failure of the militant and closely watchful surveillance state—Rachel Maddow, Erin Burnett, and other cable news heads happily rushed to its vindication—by triumphantly exclaiming the insightful fruits of the years-long “See Something, Say Something” campaign by the DHS.

The rough description that the media had in common was this: A guy walked out to his boat to smoke a cigarette, saw something moving, and lifted the tarp—only to find the injured suspect. At which point, he retreated and called the police!  Would the boat-owner have acted differently prior to the “See Something, Say Something” campaign?  Never mind.

Indeed, the vaunted magic of (decades-old) infrared technology, increased surveillance, and the absence of restraints on law enforcement, of this massive martial state could be all be justified through the lens of the state itself, a breathless and supine media, and an ostensibly cowering but now relieved public. Yeah! The War on Terror is so successful! See?

But the show did not end there.  As Erin Burnett crowed: “They took him alive! This proves that there is justice in America! Innocent til proven guilty.” Despite its nonsensical meaning, this oblique message was reiterated by the President, who cautioned us against a “rush to judgment”—certainly about groups of people. Apparently, “[t]hat’s why we have courts.”  Hmmm. That’s going to be news to some folks still languishing in Cuba.

Not to be outdone by an illusory call for order by a President who has supported multiple renewals of FISA and pressured the Senate into the approving an expansion of executive power to arrest and detain any suspected terrorist (US citizen or foreign national) anywhere in the world (in NDAA 2012 and 2013), Sen. Lindsay Graham insisted that we were seeing proof that the homeland was the battlefield. And indeed, it’s hard to disagree with him—even if one is critical.  Moreover, according to Graham and Sen. McCain, even a 19 year old naturalized citizen (vaguely fingered as Chechnyan and Muslim) CAN and should be treated as an enemy combatant.

What further cements this view of the Homeland as a Battlefield– is the public, collective, and casual insistence that a 19 year old should not be read his Miranda rights—because an asserted “public safety exception” can be invoked in view of the fact that other IED’s or pressure-cooker bombs might have been set.  With this, we are halfway to Alan Dershowitz’ favored fantasy: next, let’s torture him–because we ‘know’ a bomb might be set somewhere by him that threatens to hurt Americans. However—shockingly–even Dershowitz refuses to be fear-mongered, arguing instead that that the only logical outcome was a civilian trial, insisting that “It’s not even clear under the federal terrorism statute that this qualifies as an act of terrorism.”

Moreover, there was nearly no element of the recently reinforced surveillance state that contributed to the capture or killing these two suspects.  As an example, let’s assume every detail of the attack is the same except that it occurred in 1977 (to pick a random date prior to our ubiquitous Counter-Terrorism surveillance state; remember how we used to have “bad guys” before September 11?). If the “bad guys” had put together such a plan in 1977, would events have unfolded any differently?  Would there have been a lot of photography at the finish line of such a prominent public event?  Yes, although in the pre-digital age, it would have taken a little longer to gather and sort through the pictures.  Hence, this aspect of this past week’s outcome can’t be ascribed to the massive expenditures and “federalization” of “homeland security,” but rather to a change in consumer electronics.

Would the two brothers have been flushed out by the police response to a nearby and unrelated robbery that led to the tragic shooting of a MIT police officer, the carjacking and ensuing chase that ended with the shootout in Watertown?  It is hard to credit this sequence of events, which were initiated by a mere coincidence, to the success of the modern surveillance state.  Would the initial shootout in Watertown, the escape of one of the brothers, and the eventual spotting of blood on the side of a boat and the calling in of that observation have unfolded in more or less the same way in 1977?  Probably.

Where is the added value?  In what way have the massive expenditures, intrusive surveillance practices, and stripping away of our liberties been vindicated by the events of this past week?  In fact, no one can truthfully say “Aha!  This is where these new practices have made a difference!  Thank goodness George W. Bush and Barack Obama have so little regard for the American Constitution or everything would have really gone badly at that particular point in these events.”

What we witnessed was a tragic — but sadly – too familiar sequence of events.  In a nation of over 340 million, we have a few demented or damaged souls with real or imagined grievances that cause them to wish to harm people whom they do not know.  We also have good, brave, and competent local and state police forces that are able and willing to solve these crimes.  It was true back in 1977—and long before–and remains true today.

So what in fact did change? We now have a “War on Terror” that permeates every public news event and action. The immediate leap to the familiar “Terrorists In Our Midst” narrative is facilitated and amplified by a bovine mainstream media amped up by endless alerts issued by a Department of Homeland Security and two Presidential Administrations about insane foreigners here, there, and everywhere. In other words, what’s changed is the presence of a fear-mongering narrative of the War on Terror, along with the billions in expenditures that are used to justify it, that reframe a centuries old story about crime.

The events of the past week in Boston do not vindicate the rise of the Homeland Security bureaucracy and certainly do not vindicate the stripping of our liberties, the shutting down of a major city, or the instantiation of a police state. But they certainly affirm the future as it was perceived by George Orwell.

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This article has been republished on Salon.com.

 

American Politics and the Blurred Distinction Between Principles, Policies, and Personalities

Apologies for posting less frequently than usual. I’ve been traveling, which has made it difficult. Robert E. Prasch fills in today with an insightful post on the misapplication of categories. And I’ll have a new column within the next couple days.

One of the difficulties in following American politics is that words often lose their meaning in the course of partisan argumentation.  But thinking clearly, requires attending to the meaning of words and the concepts to which they refer.  One area where much work is needed is in the distinction between principles, policies, and personalities.

Principles, by definition, are “hard and fast rules.”  As such, they are not subject to negotiation.  Not for money, momentary political advantage, monetary reward, or any reason at all short of the direst of emergencies – and perhaps not even then.  In the political realm, our society has sought to elevate certain moral and procedural principles to the status of “rights.”  Long and painful experience has shown that we regret the consequences that follow, almost inevitably, from setting aside those rights.  Knowing this, we have deemed these rights to be “inviolate.”  This, as American schoolchildren used to know, is the idea underlying the Constitution, the Bill of Rights, the several ensuing Amendments, etc.[FS1]   This special status is also important because we know, again from hard experience, that in the midst of emergencies, tragedies and panics (real, imagined, or induced), that the citizenry can be induced to set them aside.    We also know, again from hard experience, that our elected officials can be counted upon to lead the call for the suspension of our rights.

For example, consider that there is no Constitutional Amendment forbidding our elected officials from banging their heads against the nearest wall.  This is probably because history, experience, and introspection, all suggest that they are disinclined to do it, and that little of importance is at stake for our society or polity in the event that some of them decide to pursue such an activity.

By contrast, our Constitution forbids “unreasonable searches and seizures,” while insisting on a positive right to a “speedy and public trial,” along with a right “to be confronted with witnesses.” The reason is that circumstances have appeared and reappeared in which a majority of voters and elected officials insist that “this time is different.”  Hence they claim that “in this exceptional case” there are reasons to violate these principles (otherwise known as the 1^st, 4^th, 5^th, 6^th, and 14th Amendments to the Constitution).  As  principles, these Amendments cannot and should not be set aside to appease the roar of a crowd, or because an influential person or group persons believes that doing so might be an “expedient” or “pragmatic” way to achieve a particular and popular end (one invariably advantageous to the party making the argument).

In contrast to principle, policy is about the government’s approach to a particular problem or issue.  For example, the government may enact a policy designed to reduce the use of gasoline in that hope that doing so will improve the balance of trade while aiding the environment.  As with all policies, some will “win” and others will “lose,” but it is important to observe that no principles are at stake, just interests.  Policies cover a range of approaches to problems that can be discussed reasonably by reasonable people.  It is understood that, as a consequence of differing interests and perhaps political philosophies, different people may arrive at different conclusions.

The same cannot be said about principles.  So, when the minions of a sitting President of the United States work diligently behind the scenes to craft and then enact legislation granting the executive branch the authority to seize, imprison indefinitely, and kill United States citizens without “due process of law,” then what we are seeing is not a “policy difference,” the merits of which reasonable people may reasonably debate.  Rather, we are seeing the violation of our core principles as they are clearly described in the Constitution.  Only two positions can be taken on this issue: (1) ally with those who believe that we should live in a republic governed by laws, or (2) ally with those who do not.  By clear and distinct contrast with the Bush and Obama Administrations, I count myself as among those who wish to live in a free republic.

Moreover, I maintain this position unapologetically.  Most damning of all, by the standards of the District of Columbia, the White House, and the mainstream media, I am unashamed by my dogmatism.  But, the situation is even worse.  I fully, and with every ounce of contempt I can muster, dismiss the idea that we are living through a period of history featuring such unique, unprecedented, and extreme dangers that Constitutional protections can, and should, be abrogated.  Living as a free citizen in a free republic involves risks.  But, as we look around, it is evident that the risks are minimal and the costs – in lost liberties and out of pocket expenses — are massive (We can begin with the 230,000 employed by Homeland Security and the approximately 200,000+ employed at various “intelligence” agencies such as NSA, CIA, and others).

Let’s turn to personalities.  For the past several decades, we have been asked to judge political candidates exclusively on the basis of their personality.  Are they optimistic?  Do they have a lovely wife?  Have they had an affair?  Have they ever transported the family dog on the roof of the family car? I do not care.  I do not care about a politician’s family, their love-life, or the travel arrangements of their pets.  As a citizen, I just don’t care, and neither should you.  Adherence to the Constitution and an ability to formulate and “sell” compelling policies should be the foundation of political success in a well-functioning polity.  Not personal foibles or failings.

Why, then, does personality play such a role in our politics?  Two reasons come to mind.  One is that matters of principle and policy may be difficult to interpret, especially in a world featuring massive expenditures on disinformation and partisan “spin.”  Another, more disconcerting reason, is that the major parties represent the same elite interests and for that reason are not all that different on a wide range of issues.  For example, both parties are committed to establishing and maintaining U.S. hegemony across the Middle East.  Both parties are anxious to set aside Constitutional protections so as to further concentrate power in the executive branch.  Both parties are fully committed to protecting the nation’s largest and most useless financial institutions.  Both parties are anxious to pursue any and all “Free Trade” agreements designed by and for the Fortune 500 companies.  Both parties are committed to rolling back the meager income security that Americans receive from Medicare and Social Security.  Both parties understand that they will respond with alacrity and zest to the needs expressed by the upper 7-10% of the population as measured by income and wealth, even as they essentially neglect or assault the interests of the rest.  The leadership of both parties are fully aware of this convergence, and I would submit that they have not fooled as many Americans as they think.  However, just because they share a broad consensus should not be interpreted to mean that each party’s leadership is not anxious to garner the spoils of governing to themselves, their sponsors, and their camp followers.

In short, the focus on personalities, and the partisan bickering that follows from it, is not symptomatic of divergence, but rather signifies the convergence of political perspectives between the major parties.  Moreover, this convergence of the parties behind an agenda designed largely by and for economic elites can be more readily masked if differences of personality can made to substitute for discussions of substantive content.  So we should expect to see even more excited discussions about marital affairs and the travails of family pets as we witness the continuance of the bi-partisan push to set aside the core principles of republican government and the pursuit of economic policies designed to benefit a privileged minority at the expense of the rest of us.

Holding Their Feet to the Fire: Are We or Aren’t We Serious?

Robert E. Prasch

The reelection of Barack Obama has induced two responses from liberals and progressives.  On the one hand, there is palpable relief that Mitt Romney and the Republican Party will not be running the show.  On the other, multiple voices are saying,  “It’s time to hold their feet to the fire.”  Liberals and progressives, it seems, are belatedly willing to admit a truth that was literally unspeakable before the election – that the record of the Obama Administration has not met expectations, and that Republican obstruction can account for only a portion of the shortfall.

Holding some person or institution accountable is an act of power.  Many liberals and progressives believe that the recent election has brought about some – as yet undisclosed — change in the American political landscape that grants them a measure of influence over the leadership of their party, including the White House.  This is a leadership, let us remember, that has resolutely turned its back on the entreaties of its own supporters for most, if not all, of the past decade.  In some way or manner – again undisclosed — we are to believe that the second Obama Administration will find itself obliged to adopt an agenda that more closely coincides with the people who voted for “hope and change” in 2008.  That is to say, those millions of voters who thought that they had restored their nation to a degree of sanity, but were instead disappointed to find George W. Bush’s foreign policy and surveillance state greatly enhanced, corrupt and failed bankers were granted a free pass at home, and whistle-blowers facing criminal charges even as the war criminals they exposed were excused or promoted to high office.

Were the Obama Administration to take up even a portion of its 2008 platform, it would certainly be a welcome turn of events.  Unfortunately, and despite the implicit claim of so many, I have yet to hear a single compelling reason why this Administration would wish to become responsive to the hopes of liberals and progressives.  After all, the elections are now done, so why change?  Let us recall that Robert Gibbs refers to liberal and progressive critics as the “loony left,” David Plouffe calls them “bedwetters,” and no family newspaper can print the adjectives favored by Rahm Emanuel.

So again, why would the Grandees of the Democratic Party suddenly change direction?  Why would they now turn to a more liberal or progressive legislative agenda?  What is in it for them?

Nevertheless, we are told that liberals and progressives will hold the Administration’s “feet to the fire.”  I applaud this new-found commitment to hold Democratic officials accountable, but would it be unreasonable to ask “how” they intend to accomplish this end?  Given that they have offered the party leadership, no matter how odious, unconditional support in the 2004, 2006, 2008, 2010, and 2012 elections, are they planning to change their strategy now?  If so, to what?  What leverage will they be bringing to the table?  Any specifics?

To clarify the issue, let us consider it from the perspective of those at the heights of the Democratic National Committee.  What lessons have they learned over these past five elections?  Specifically, what lessons have they learned from spurning the hopes of their liberal and progressive base?  Let me put this another way:  which penalty or penalties has the leadership of the Democratic Party incurred by knowingly, deliberately, and intentionally voting and governing in a manner that has been largely anathema to the party’s disproportionately liberal and progressive base?  Let us review:  their actions (as opposed to their periodically moving speeches) have been systemically pro-war, pro-drug war, anti-Civil Liberties, in favor of shameless pandering to Wall Street, in favor of any and all shamelessly pro-corporate “free trade” agreements, largely anti-immigrant, and indifferent (at best) to organized labor.  So, to ask again, what has been the penalty?

The leadership of the Democratic National Committee has learned, over and over again, that once they ascend to office that they will incur no penalty from liberals or progressives no matter how poorly they serve their supporters or the nation.  They have done more than learn this lesson, they have acted on it.  I suggest that they will continue doing so until the strategy ceases to work for them.

For this reason, I offer a suggestion.  If liberals and progressives would like to change the behavior of the senior leadership of the Democratic Party, they will have to modify the incentives.  It will be necessary to deny, or at a minimum threaten to deny, the DNC something they ardently desire.  What they desire is elected office and the perks that normally accrue to those who have used the offices they have held to serve well-placed firms and industries.  Yes, they talk about hope, change, and other ideals, but their record is long enough, and persistent enough, to reveal their true priorities.

Now, at this point in history, liberals and progressives do not have the ability to change the Party’s leadership as they are too entrenched.  But we can deny them electoral victories until they learn to grant us at least a portion of what we want.  In a previous post, I outlined an approach to strategic voting based on elementary game theory.  I am open to the idea that other strategies might be more effective.  The essential point is that liberals and progressives need to find a way to make their voices heard in the Democratic Party that promises a greater degree of success than compliantly voting for whatever right-of-center hack is currently being advanced as “the lesser of two evils.”  By now, our current predicament should be clear.  We may not be a majority of the nation’s voters, we may not even make up a majority of registered Democrats, but our voice is almost unheard in the national debate, and this must to change.  What we need is a concrete proposal to take us somewhere else.  That, and nothing less, will put us in a place to “hold their feet to the fire.”

Is this, one might ask, a risky strategy?  Yes.  Might it cost the Democrats a few elections because of disunity?  Yes.  Is it unpleasant to rebel against the leadership of a party to which so many have had, and so many still harbor, long-standing emotional and political attachments?  Yes.  But holding the powerful accountable has never been easy.  If it were, we would not be in this conundrum.  However, if the liberals and progressives are serious about “holding their feet to the fire,” they will be willing to take these risks and bear some costs, including some losses at the polls.  Over the next couple of years, we will find out if liberals and progressives are serious about changing their relationship to their party’s leadership by holding them accountable in the only way that matters.

The Progressive Retreat from Obama: Who is to Blame?

As you may be aware, Matt Stoller’s most recent Salon column and other progressive critical perspectives, including my own, have met with some heavy outrage when they suggested the possibiity that the Democrats and POTUS weren’t exactly interested in addressing the demands or needs of those liberals and progressives who voted them in. TransEx blogger Robert Prasch weighs in on the controversy.

By Robert E. Prasch

Those following the political blogosphere are, no doubt, aware of vitriol being directed at some long-respected progressive voices who have concluded that it is time to vote third party.  Fatigued by being again, as they were in 1996, 2000, and 2004, asked to vote for the “lesser of two evils,” they are tired of the “same old song and dance.”  And it is old.  Some readers may remember the bumper stickers beseeching us to vote for the Neo-liberal pro-Iraq War Senator John Kerry over the Neo-liberal pro-Iraq War George W. Bush: “Kerry Sucks Less.”

But I want to raise a related issue.  What, exactly, were these now-vociferous supporters of the President doing and saying in late 2008 and early 2009 when the administration was setting in place the personnel, policies, and decisions that laid the groundwork for today’s dispute?  Is it unreasonable to ask how it is even possible that a president, who garnered such fierce and passionate enthusiasm a few short years ago, could even be in such a close election?  After all, he is running against an individual who has spent almost the entirety of his adult life acting as the quintessential predatory capitalist.  Let’s remember that this is occurring even as most Americans outside of the top 10 to 20% tax bracket are continuing to suffer through the worse economic times in anyone’s living memory.  Can we at least agree, Richard Nixon excepted, that this precipitous drop in popularity, despite the “hot hand” he was dealt, represents one of the greatest failures in the history of postwar political leadership?

The reason underlying this monumental failure is not hard to find.  President-Elect Obama and his inner circle fundamentally misjudged the political moment.  The nation was clearly demanding significant change – so much so that they were willing to elect an unseasoned—Black—politician (remarkable given the U.S.’s unflinching history of racism).  Yet Obama and his inner circle somehow convinced themselves that recycling the tired old idea of “triangulation” from the Clinton first term would be their best play.  To that end, Barack Obama and his senior advisors immediately set about alienating their core supporters.  Within two weeks of election day, the Administration announced that Lawrence Summers and Timothy Geithner–the individuals whose previous records individually and collectively defined what it meant to be monumental failures as public servants–would be placed in charge of the economic recovery.  Their appointments indicated, and their performances amply confirmed, that whatever “hope and change” meant as a slogan, it would in no way apply to the president’s economic policies.  They have, without a doubt, restored Wall Street’s fortunes – what they have not done is restore the fortunes of anyone else.

On December 1^st, 2008 the Obama Administration announced that Robert Gates would be retained as the Secretary of Defense.  Gates, let us recall, was more than simply the man George W. Bush appointed to direct his pointless, endless, and immoral wars along with extending them to the rest of the globe via the nascent drone program.  No, as the former Deputy Director of the CIA, Gates narrowly escaped prosecution over his role in the Iran-Contra Scandal.  Even if we allow that the 1991 investigations into his actions were above-board (a stretch), he was far too closely associated with the rampant criminality of the Reagan regime to warrant appointment to dogcatcher, much less to Secretary of Defense.  That he did not belong in a Democratic Administration goes without saying.

What about financial reform?  Did the appointment of Goldman Sachs and Citibank impresarios to innumerable offices at the CFTC, SEC, and elsewhere suggest to any of these die-hard Obama partisans that “hope and change” would play a fleeting role in the Administration’s governing agenda?  If so, when did they come to that realization?  Just to ground the point: Did any of them really think that Rahm Emanuel would lead progressive change within the Democratic Party?  We know that Emanuel spent his entire career as a Clinton-era operative fighting against progressives within the Party.  Did anyone expect that to change when he became the president’s Chief of Staff?  Anyone?  Let’s not even get started on Obama’s vigorous pursuit of Bush’s “free trade” agenda or his not-so-secret plans to cut Social Security and Medicare benefits.

To repeat: all of the appointments listed above were announced before the inauguration.  They were announced before the president revealed that he had no intention of keeping a broad range of campaign promises.  Before he began to prosecute the brave whistle-blowers who reported upon Bush-era war crimes and unconstitutional surveillance.  Before he dropped charges against all of those who actually committed these crimes.  These latter inconsistencies, we now know, made sense because the Administration was on the cusp of doubling-down on the very worst – really grotesque — Constitutional abuses of the Bush era.  Let us be clear, no president has ever claimed the right to kill American citizens, at its own discretion, for reasons untold, and without any outside review of its decision.

My point is a simple one: a betrayal has indeed occurred.  It was not instigated by Glenn Greenwald, Matt Stoller, the Black Agenda Report, or any other progressive voice.  All these writers have done is put these betrayals before the public.  The people who betrayed the once-vibrant and hopeful 2008 coalition that elected Barack Obama president are lodged in the White House.  Their betrayal was not a consequence of circumstance.  It was the inevitable playing out of decisions taken before January 20^th, 2009.  The above list of appointments amply affirms that Barack Obama and his leading advisors knew, at the moment that the oath of office was taken, that their priorities and agendas would be in many, if not most, instances antithetical to the priorities and agendas of its supporters.  There was to be, neither then nor later, a glass “half-full” or even a “quarter-full.”  If anyone tells you otherwise, just ask him or her to show you the glass.

The fact is that the Obama Administration, like the Clinton Administration before it, knowingly engaged in a cynical wager.  They bet that they could pursue a host of policies fundamentally odious to their core supporters and yet be reelected.  The calculation depended on the premise that rank-and-file Democrats would have no other option.  Unsurprisingly, the Obama Administration and its surrogates have invested considerable time and energy convincing its former supporters that there is no option.

Anyone who has ever gone shopping knows that their bargaining power depends ultimately upon his/her willingness to walk away.  The ability to walk away explains why the service we get from our local dry cleaner is significantly better than what most of us get from our local cable provider.  When you have a choice, and demonstrate a willing to take that choice, you become empowered as consumer (I might add that the same is true of labor markets, which explains why most employers prefer a higher level of unemployment than their employees).  Right now, a deeply cynical reelection campaign is betting that progressives will be too afraid of Romney to seek to empower themselves.  This, let us remember, has been the strategy pursued by an increasingly right-wing Democratic National Committee for close to thirty years.  Every four years we are asked to vote for the lesser evil.  In a couple of weeks we will all learn if this plea will pay off again.  The question is, will we learn?  Will we learn to bargain with a faithless leadership of the Democratic Party?  If not this election, then when?

But, let us be clear.  Win or lose, Rahm Emanuel, Robert Gibbs, David Axelrod, David Plouffe, Bill Clinton, and Barack Obama will all be fine.  They win either way.  Lucrative lobbying, banking, and advising jobs await all of them.  “Speaker fees,” often six-figures, will be plentiful.  The gravy awaits, and it’s all good.  Of that we can all rest assured.  What of the economic fortunes of the vast majority of the American people?  Obama’s former supporters?  The unemployed?  Underwater homeowners?  The victims of fraudulent foreclosures?

Well, here’s some news: He’s just not that into you. We’re adults.  It is time to get over it.  You owe him nothing because he has done nothing for you and plans to do nothing for you – unless you count the positive harm of cutting Social Security and enacting the Trans-Pacific Partnership.  If voting for such a person “rocks your boat,” feel free.  But surely it can be understood why more than a few people may feel differently.

The Business of Health Insurance and “Obamacare”: What Can We Expect?

Pretty dangerous to be over at Hofstra last night; there were alot of reckless numbers and false statements flying around.  I’m sure there are plenty of excellent rehashes that will be posted, if they haven’t been already. So instead of rehashing the spectacle or valorizing the aggression, I’m just going to post a relevant piece by TransEx‘s very own Robert E. Prasch, who also blogs at New Economics Perspectives and Huffington Post.

Prasch breaks down the myth that Obamacare is about health-care reform. Originally posted over at New Economic Perspectives (the website for the Kansas City School of Economics) yesterday, his column is a clear description of what the ACA in fact is.  It can be printed out and put in your back pocket for easy reference the next time you run across Nicholas Kristof or Andrew Sullivan. Check it out.

And if you want to read some other analyses by Prasch on some of the issues discussed during the debate, links are below.

By Robert E. Prasch

Over the past couple of years there has been considerable back-and-forth over what has been accomplished by the Patient Protection and Affordable Care Act of 2010 (PPACA).  While a short post cannot survey the entirety of this multifaceted law, several elementary confusions have been repeated in public discussions and should be addressed in the interest of clarification.  The most urgent of these is to point out that, despite the Act’s (deliberately misleading?) title, it addresses neither the practice of medicine nor its cost.  At most a government-sponsored institute has been authorized to find and make suggestions.  The Act, then, is not about making health care affordable, but an effort to make health-care insurance affordable – a related but separate topic.  To understand the implications of this, we must consider the business of health insurance.

Private Health Insurance is a Business

The health insurance business is–it cannot be overemphasized–a business.  While its advertising may suggest otherwise, we would do well to remember that business differs from charity in ways that matter.  Being private for-profit businesses, health insurance companies are engaged in the pursuit of profit.  If the health insurer is a corporation, and many of them are, their profits are expected to show steady growth over time so as to satisfy “Wall Street expectations.”  This is not always easy, and firms must be vigilant if they are to achieve these targets.  As is the case for any and all businesses, revenues must be greater than expenses if health insurance companies are to show a profit.  Without profits they will soon cease to exist.  But before this occurs, senior management will be fired.  As they understand this, we should expect these managers to make every effort to avoid this outcome. None of this, it should be noted, implies that health insurers are more or less moral than other firms.  Business is business.  With that point cleared up, let us turn to specifics.

The revenues of health insurers come from customer premiums and the returns on their portfolio of earlier premiums that have been invested.  Their usual portfolio can vary, but it generally consists of government and corporate bonds (about 65%), corporate stock (about 10%), mortgages (including some mortgage-backed securities), cash and other liquid items, and other assets.  Expenses can be broken down into essentially three components.  The first includes all marketing costs, paperwork, and related overheads.  The second is wages for workers and bonuses for bosses.  The third, and by far the largest expense, is the payment of claims.

From the above list it is evident that insurance company profits can rise in one of four ways: (1) revenues from current premiums or past investments can rise (which may imply higher premiums and/or riskier investments),  (2) marketing, paperwork and overhead costs can be reduced, (3) wages and bonuses can be reduced, or (4) payments for claims can be reduced (or at least rise more slowly than revenues).

Given that the payment of claims are, by far, an insurance company’s largest single expense, it is reasonable to suppose that they will work diligently to control or even reduce them.  To this end, they hire staff to negotiate with hospitals and others over the appropriate charges for services provided.  Similarly, they employ a staff to direct customers into lower cost options, assert that the “normal and standard cost” for a given procedure is lower than the bill presented (which means that the patient must shoulder a disproportionate share of the payment even if their insurance contract suggests that they always pay a fixed percentage), or find some grounds to decline care altogether which in the past has included finding grounds for cancelling the policy.

For patients and their families, these cost-reducing decisions can be, as innumerable stories and research has shown, medically and financially devastating.  It is clear to everyone with a beating heart that these – essentially business decisions — are fraught with moral implications.  Yet, of necessity, insurance companies must think of them as part of their normal business operations.  One is reminded of the cliché line uttered by mafia movie assassins, “Sorry man, it ain’t personal, its just business.”

This difference in perspective raises a crucial observation.  Every society must decide, by some process, how goods and services are to be distributed amongst the population.  Most of us would agree that some items, such as ice cream or the vagaries of current fashions in clothing, are best left to markets.  The difficulty, and this is the largely unmentioned issue, is that most of us also believe that decisions fraught with profound moral implications – such as life and death — should not be left to the vagaries of the market.

If this supposition is correct, then the problem with privately-provided health insurance is less with the specific performance of the firms involved than with the fact that many, if not most, of us consider basic health care to be closer to a right than a commodity to be distributed according to the contingencies of price and income.  As such, we find the normal business decisions of health insurance firms, decisions that are necessary and essential to their business operations, to be at best amoral if not immoral.  That people are awarded bonuses for denying care to people they have not met, and on the basis of little more than a cursory look at a chart and some statistics based on national averages, strikes most people as wrong.  Again, if this were the market for ice cream or fashionable clothing, our response to the cost control efforts of for-profit health insurance companies would be very different.  But it is evident that firms are routinely making decisions that are fraught with the deepest moral significance.

Obamacare: What Does It Do?

As mentioned, when reading popular discussions, blogs, and more than a few newspapers, one is left with the impression that many people are confused about the distinction between health care and health insurance.  Stated simply, the PPACA does not grant anyone, anywhere, a guarantee of adequate health care.  The Patient-Centered Outcomes Research Institute that has been founded as part of the Act may, at best, fund investigations designed to uncover and publicize inefficiencies in the delivery and cost of health care.  But they cannot mandate changed practices.  At best, these revelations can be accompanied by exhortatory language.  Someone, somewhere, somehow, is then supposed to do something.

What PPACA does do is require that every American find a way to acquire health insurance.  Most likely, as in Massachusetts, this will be enforced through the tax code.  This suggests that those without health insurance will have to pay for insurance out of pocket and then await compensation in the form of a tax rebate.  If this is indeed the plan, it should raise important questions concerning the liquidity or credit-worthiness of America’s poorer households and the many well-known issues surrounding predatory lending that were not addressed in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Perhaps it is obvious, but it also needs to be stated, that on its own the health insurance mandate modifies neither the incentives nor the profit motives of private health insurers.  That said, some useful changes are embodied in the Act.  For example, in exchange for the law’s producing just under 50 million new health insurance customers through its mandate, health insurance companies will be required to spend 80-85% of the premiums they receive (depending upon the firm’s size) paying for health care and, additionally, to cease terminating contracts after the disclosure or revelation of “pre-existing conditions.”  Now, with the additional revenues anticipated from millions of new customers, the first of these requirements may or may not prove to be an imposition.  I would, however, caution everyone to be wary of the accounting rules used in calculating what is known in the industry as the Medical Loss Ratio.  It is often, and correctly, said that the devil is in the details (this is especially the case when an industry can employ legions of lobbyists).

As to the second requirement, it speaks only to the grounds by which a proposed course of care may be refused.  Let us consider the problem logically and from the perspective of a profit-seeking firm.  If there are potentially grounds, from A to Z, by which to deny or modify a proposed course of care, and grounds A are excluded, that still leaves grounds B to Z.  Perhaps none will be found applicable and the care in question will be duly authorized.  But perhaps alternative grounds can be identified, and it should be evident that the incentive to find such grounds remains.  Maybe the insurance company will find the course of care proposed by a patient’s doctor to be “overly experimental” or “unlikely to be effective” in light of statistics based on national averages that they may have on hand but whose source or author they will refuse to disclosure (believe me, I have tried).  Alternatively, they may declare that the “normal and standard cost” of the course of care proposed is one-half of what the hospital charges, thereby forcing a family to “chose” between a course of care and penury.  These problems can be expected to remain.

According to the American Journal of Medicine, 62% of all the people who declared bankruptcy in the year prior to the financial crisis, 2007, were ruined by an illness they could not afford.  Worse, the majority of those who declared bankruptcy that year were covered by heath insurance.  Stated simply, health insurance, even assuming that it actually becomes affordable to everyone, will not end of the dread of financial ruin in the event of a severe illness.

This brings us to the matter of the how much assistance will be provided to help families meet the mandate.  We are told that everyone up to 400% of the poverty level will be eligible for a subsidy (based on a sliding scale).  Given the current political environment, with its bi-partisan vogue in favor of austerity, I will leave it to the reader to speculate whether or not these subsidies will remain adequate as health costs and thereby health insurance premiums continue to rise.  We can be certain, however, that the mandate will remain in place long after the subsidies become inadequate.  And, what of the days when American families had to chose between adequate care and penury?  Such dire choices will remain a part of our reality the day after the PPACA has become fully operative and every day thereafter.

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Other relevant posts by Robert E. Prasch:

“What to Look for After the Election: Social Security Under Assault”

“The Obama Administration, the 49 State Mortgage Settlement, and the Spin: A Study in Shamelessness”

“Dealing With the Unemployment Problem”

Guest Post: The Middle Class Makes $200k Annually? Romney’s Wall Street Perspective

By Robert E. Prasch

Contempt can take many forms, but one of the most vicious is ignorance.  It suggests that the reality of a large group of persons is unworthy of reflection.  Unsurprisingly, as this nation takes on more and more of the characteristics of a plutocracy, we see this contempt-as-ignorance exhibited in more and more fora.  The latest installment occurred in the course of a much-touted September 12^th dialogue between the former Democratic Party operative and now TV personality George Stephanopoulos and the Republican Presidential Candidate Mitt Romney.  Context is important:

GEORGE STEPHANOPOULOS: But his [Martin Feldstein’s] study, which you’ve cited, says it [Romney’s tax proposal] can only work if you take away those deductions for everyone earning more than $100,000.

 

MITT ROMNEY: Well, it doesn’t necessarily show the same growth that we’re anticipating.  And I haven’t seen his precise study.  But I can tell you that we can lower our rates–

 

GEORGE STEPHANOPOULOS: Well, you cited the study, though.

 

MITT ROMNEY: Well, I said that there are five different studies that point out that we can get to a balanced budget without raising taxes on middle income people.  Let me tell you, George, the fundamentals of my tax policy are these.  Number one, reduce tax burdens on middle-income people.  So no one can say my plan is going to raise taxes on middle-income people, because principle number one is keep the burden down on middle-income taxpayers.

 

GEORGE STEPHANOPOULOS: Is $100,000 middle income?

 

MITT ROMNEY: No, middle income is $200,000 to $250,000 and less.  So number one, don’t reduce– or excuse me, don’t raise taxes on middle-income people, lower them.

 

 Let’s grant George Stephanopoulos and Mitt Romney the benefit of the doubt, and assume that they mean household instead of individual income.  According to the Tax Policy Center, the median income of an American family in 2011, i.e. the earnings of the family in the exact middle, the 50^th percentile of the distribution, is $42,372 (this is cash income, excluding non-wage benefits).

$100,000 would place a family just above the 90^th percentile and $250,000 would put one at the 94^th percentile.  So, in fact the back-and-forth between Stephanopoulos and Romney really is a discussion about whether the latter’s tax policy proposals are of concern to the upper 6% or 10% of the income distribution.

Ah, but perhaps the Tax Policy Center has calculated the numbers in a biased way?  Happily, we can garner another perspective by examining the 2012 edition of the annual report compiled by the Council of Economic Advisors, what is called the Economic Report of the President.  There, in Appendix B-33, one will find a data series on Median Money Income in 2010.  Calculated upon a broader and more inclusive basis, it shows that 2010 median income for a household was $60,395 – still substantially less than $250,000.

This chart reveals another trend that speaks to the ignorance and complacency exhibited above.  It shows that household income peaked at $64,518 in 2007.  This means that the income of the median American household has fallen 6.4% since the peak of the housing bubble and as yet shows no sign of stopping.  This decline in American household income is both fascinating and disturbing because, according to the authoritative National Bureau of Economic Research, the recession that began in December 2007 ended in June 2009.  If the U.S. Gross Domestic Product has been rising for all but the first four months of the time that the Obama Administration has been in power, and the median household income is continuing to decline, then the revenues associated with the economic revival must be going somewhere.  The answer isn’t too surprising.   Corporate profits have hit new highs this summer.

Guest Post: On Voting Strategically in 2012: The Ultimatum Game

Today, I’m putting up another guest post by Robert Prasch, analyzing the “ultimatum” politics of the Democratic Party, more specifically, of the Democratic National Committee. Important, timely, provocative. Read on…

 

On Voting Strategically in 2012: The Ultimatum Game

By Robert E. Prasch

Department of Economics

Middlebury College

Over the past year, many disappointed progressives and liberals have resigned themselves to voting for the president’s reelection, despite their full understanding that the Administration has nothing but contempt for all that they hold dear. They ask, “Well, what can we do”?  This is a reasonable question and it deserves a thoughtful answer.

What Can We Do In Light of the National Democratic Party’s Tilt to the Right?

Before formulating the answer, let us recall that this question has emerged on multiple occasions over the past thirty-five years.  Some might believe that this has been an unfortunate series of accidents, but it was not.  It can be ascribed to the strategy laid out in the early 1980s by Rep. Tony Coelho, who was then the head of the Democratic Congressional Campaign Committee, and to the powerful influence of the Democratic Leadership Council (DLC), founded in 1985.  Each of these groups worked long and diligently to end the Democratic Party’s long association with New Deal-type legislation so as to increase its appeal to economic elites.  Additionally, they worked hard to sever the Democratic Party’s association with anti-war causes and the extensive 1970s effort to expose and place limits on the executive branch’s capacity for war-making, covert action by the CIA, domestic spying, and associated “dirty tricks.”

By 1996, this effort had come to full fruition.  That year liberals and progressives were asked to support the reelection of a president who had spent his first four years working tirelessly to promote corporate-dictated “Free Trade Agreements,” the irresponsible de-regulation of finance, the vigorous privatizing of any and all government functions, the Defense of Marriage Act, and ever-more punitive measures against the poor and undocumented.  That candidate was, of course, Bill Clinton.  In 2000, we were asked to again validate these rightist policies by electing Clinton’s vice-president, with the sole modification being a commitment to forgo sexual antics with the interns.

In 2004, Senator John Kerry firmly promised a return to Clinton’s Neoliberal agenda while repeatedly telling us that, despite everything that had occurred or been revealed in the interim, he remained steadfast behind the 2002 vote that he, Hillary Clinton, Joseph Biden, and so many other Senate Democrats gave to support of George W. Bush’s Iraq adventure.  It goes without saying that Kerry was and remains an enthusiast for any and all corporate-directed “Free Trade” agreements, financial deregulation, imperial expansion, and – of course – the stripping away of Constitutional protections.  Believing that they had no choice, millions of anti-war voters nevertheless validated the script laid out by the now-DLC controlled Democratic National Committee (DNC).  It is, I would suggest, past time for liberals and progressives to question this learned response.  Despite the rhetoric coming from Washington, it is NOT true that liberals and progressives owe their vote to whatever pseudo-liberal figure happens to be favored by the major donors and associated grandees of the DNC.

On Voting Strategically

The good news is that we do have a choice.  The bad news is that it may not be the one that we would wish for, but it is a choice nevertheless.  Moreover, handled adroitly, it could pave the way to better choices in the future.  Stated simply, I believe that we should “vote strategically.”  However, strategic voting necessitates that we begin by analyzing the structure of the “game” that constitutes the elements of the increasingly-bitter contest between American liberals & progressives and the leadership of the DNC.  As it turns out, this rivalry mimics what is known as the “Ultimatum Game.”  Once the contours of this game are understood, we can revisit our strategies, and begin to think of a way out of our current dilemma.

The rules of the Ultimatum Game can be readily described.  Consider a game with two players and one round. The first player is given $10.00 in one-dollar bills to split with the second player according to any distribution selected solely at the former’s discretion (i.e. $10 & $0; $9 & $1; $8 & $2; … $0 & $10).  The second player’s sole decision is to “accept” or “reject.”  If the second player “accepts,” the distribution proposed by first player becomes the final distribution of the cash and the games ends.  If the second player “rejects” each player is awarded $0 & $0.  That is the game.  Now, what is the predicted solution?

If the game is known to be of only one round in duration, and the players are motivated solely by self-interest, then the “dominant strategy” of the first player is to offer a $9 & $1 distribution, and the “dominant strategy” of the second player is to “accept.”  Why do they accept?  Well, accepting renders the second player “better off” as $1 is unambiguously greater than $0.  Undoubtedly they will be irritated by the first player’s lack of generosity, but as their only way to express that irritation is to petulantly “reject” the offer, thereby causing a distribution of $0 & $0, they find themselves without a substantive alternative to “accepting.”  So far, so good.

Now, let us reexamine the Ultimatum Game in the event that play is extended beyond a single round.  Let us suppose that all players understand that the game will be played for an indefinite number of rounds.  Under this changed situation, the second player has an opportunity to “discipline” the first player for treating her unfairly.  If the first round offer is an ungenerous $9 & $1, the second player can say “reject.”  Yes, she will give up $1, but her refusal “costs” the first player $9.  Ouch.  The first player, recognizing the possibility of a punitive refusal, and knowing that they will be playing against the same rival for the foreseeable future, has a clear incentive to improve the initial offer they make to the second player.  Depending upon her aversion to risk, traded off against her desire to earn as much as possible before the game ends, she may initially offer $7 & $3, or even $6 & $4.  If she is anxious to achieve a rapid agreement, the first player might even appeal to our widely-shared ideal of “fairness” by offering an initial distribution of $5 & $5.  Please note, as this is important, that the improved offers made in a repeated game are not induced by a commitment to “fair play,” but by self-interest.

The Ultimatum Game in Practice: The DNC vs. Rank-and-File Democrats

With the above in mind, let us return to the “game” played between the grandees and donors who dominate the DNC and the overwhelming majority of registered party members whose preferences, interests, or dispositions are liberal, progressive, anti-war, anti-Too Big To Fail financial institutions, or simply pro-U. S. Constitution and supportive of the rights of habeas corpus.

The DNC, as we have repeatedly seen, is pre-disposed to neglect or despise the hopes and wishes of their core voters.  Nevertheless, the DNC must retain their votes if they are to win elections, which is a necessary condition for achieving plum executive branch postings and the lucrative post-political careers as lobbyists and deal-makers that follow seamlessly to those who have been blessed with such appointments.  For that reason, they must convince anyone who will listen that all elections are – in the language of game theory – contests featuring a single round.  For this reason, the Administration, its spokesmen, and their proxies on MSNBC are “playing the game” correctly as they try to convince wavering or disappointed liberals and progressives that this election is the most critical in living memory.  Once this premise is established, any and all discussions with malingerers and discontents can be devoted to highlighting the relatively modest differences between the major party candidates.  And, let me be the first to agree, there may be some differences.  Drawing again from the example above, $1 is unambiguously greater than $0.  But, let us be honest, how big are these differences?  On the Constitution?  On Overseas Wars?  On corporate-scripted trade agreements?  On ongoing criminality and malfeasance within our bloated and broke Too Big To Fail banks?  Seriously, does anyone who is not a senior executive at a failed and corrupt financial institution benefit from keeping Timothy Geithner or Eric Holder in office?  I think not.

This, then, brings us to the 2012 election.  What should we do?  In light of profoundly right-wing tilt of the DNC and the Administration on such a vast range of the nation’s most pressing issues, how can liberals and progressives avoid wasting their vote?  I submit that we should recognize that the DNC has long been playing the “Ultimatum Game” with its supporters.  Moreover, in an era of big money politics they will be playing this game for the foreseeable future.  In all honesty, it is past time for liberals and progressives to refuse to cooperate with the DNC’s powerful political insiders who have repeatedly demonstrated nothing but contempt for them, their ideas, and their ideals.  We did not set up this “game.”  The DNC did.  But that does not mean that we have to play along with them.

Consciously turning our back on the Neoliberal, pro-war, and anti-Constitution DNC does not mean that we should stay home this fall.  On the contrary, we should devote our energies to rebuilding the base of liberal and progressive politics in our towns, cities, and states by working ONLY for local candidates that we like, admire, and trust.  If the above analysis of the game is reasonably accurate, and I believe that it is, the DNC will forced to present us with better “distributions” in future years once they come to learn that substantial number of liberals and progressives are willing to “reject” bad offers (but, before that occurs, expect a torrent of abuse from them).  This year, as with so many times in the recent past, we will be expected to participate willingly and happily in our own political irrelevance.  Enough is enough.  This time, make your vote count.  Don’t play along.

Guest Post: Robert Prasch, “The Economics of the SOTU”

Here is another guest column by economist Robert E. Prasch that translates several of the issues that President Obama raised during his SOTU the other night. It’s a clear, comprehensible, and calm discussion of manufacturing and jobs; taxes and offshoring of jobs; education and technology; and the banks and the bailouts.

 The Economics of the State of the Union Speech

By

Robert E. Prasch

President Obama was correct to focus the substantive parts of his speech on the economy.  Undoubtedly he is aware that his re-election prospects depend greatly upon the public’s satisfaction with the economy.  Since the Second World War, only Ronald Reagan has been reelected with the unemployment rate over 7% (it was 7.4% in November 1984, down from 10.8% two years earlier).  Thus far, at 8.4%, the current rate is off its highs, but those who have given up searching for work are responsible for too much of this “success.”  With his fairly modest stimulus plan largely over, banks sitting on money they won’t lend, consumers still overly indebted, and Europe in too much disarray to provide much of a market, there is some doubt about who will provide the spending necessary to drive a recovery.  Obama knows this, his advisors know this, his campaign people know this, and so do many of the people who heard or read his speech.

This, then, was the reason that the State of the Union Speech emphasized economics and economic policy.  However, to be candid, even if the President had free rein to enact a perfect economic policy tomorrow morning, the lags between action and result are such that it would probably not have much impact before Election Day.  To an important degree, the President has already (or not) set in motion the policies that will (or will not) set the economic conditions upon which he will ask to be re-elected.  If this were the only issue on hand this fall, he would likely be in trouble.  The race seems to be the Republicans to lose, but they appear to be up to the task.

But, that said, what can — or should — we make of the President’s assessment of his performance and the new programs he proposed?  In the interests of brevity, I will address four broad areas of the speech.

(1) Manufacturing Jobs in America.  The President made much of his “rescue” of the American automobile industry.  This was and remains an important industry and he was correct to bail it out.  However, one should be skeptical of the claim that these firms failed as a consequence of inefficiency and high labor costs.  On the contrary, their problems were not all that different from the banks.  General Motors, for example, was heavily dependent upon relatively short-term financing that ceased to be available when credit markets dried up as the financial crisis unfolded.  Worse, when people experience or anticipate a decline in income, they tend to postpone the purchase of “consumer durables” such as cars.  Unsurprisingly, this is exactly what occurred during the financial crisis and car sales duly plummeted.  By contrast, Ford Motor Company had the foresight to negotiate and pay for a substantial line of credit in 2006.  Its customers also disappeared with the onset of the crisis, and the firm reported losses of $2.7 billion in 2007 and $14.1 billion in 2008.  But its line of credit enabled it to survive.  GM and Chrysler failed.  But let us note that the ultimate cause of this failure was poor planning on the part of the front office.  Of course, following a time-honored script, labor was blamed and the Obama Administration forced the unions to reopen settled contracts and agree to large givebacks before signing off on government assistance.  You might recall that when the banks that actually caused the crisis needed massive federal support, Lawrence Summers explained to a shocked public that this aid would be granted without asking anything of senior management “because contracts are sacred.”  Summers did not elaborate, but it would appear that some contracts are more sacred than others.

(2) Taxes and the Offshoring of Jobs.  Undoubtedly this part of the speech played well.  But it was largely symbolic or meaningless.  A few exceptions aside, American corporations no longer pay enough in taxes for comparative rates to constitute the “make or break” element of the decision as to where to locate their production.  More important is the structure of “free trade” agreements, which are really agreements concerning the treatment of overseas investment, intellectual copyright, and financial flows.  During the 2008 primaries candidate Obama suggested that he would renegotiate a number of these proposals including NAFTA, but the campaign was soon forced to admit that had no intention of doing any such thing.  In fact, Obama is as passionate as George W. Bush and Bill Clinton in his support of these agreements.  This explains why he spent the early fall orchestrating the passage of three free trade agreements negotiated by George W. Bush (not exactly what one might call “hope and change”).

In Tuesday’s speech, the President had the audacity to suggest that these trade agreements would be net creators of jobs.  Ten minutes reflection and access to Google should be adequate to refute such a claim.  Before we start, let us recall that international trade that is balanced will only change the variety of goods available and the types of jobs we have.  To have more or better paying jobs requires a trade surplus.  Now, the chances of the U.S. running a trade surplus with South Korea over the next several years is very remote.  For one thing, the Koreans understand the link between their trade balance and the level of employment, and can be counted upon to protect their current surplus.  We, of course, will only attend to the interests of the financial sector, big agriculture, and the rentier interests behind TRIPS (trade-related intellectual property).  But, what of Columbia and Panama?  We have a trade deficit with Columbia that is likely much larger than the official tally as it does not account for the most valuable product traded — cocaine.  As to Panama, one might begin by reflecting on the fact that their Gross Domestic Product is larger than Vermont’s but smaller than Rhode Island’s.  Even if we were to run a trade surplus with Panama worth 20% of its GDP every year, it would (a) be hard for them to finance and thereby difficult to sustain over time, would (b) not amount to much anyway, and would (c) certainly not make a dent in our current economic doldrums.

(3) Education and Technology.  Classical and Neoclassical economists are known for their nostrum claiming that “supply creates its own demand.”  John Maynard Keynes famously taught us that when the economy is operating at less than full capacity the opposite is true.  Under such conditions “demand creates its own supply.”  Conservatives, of course, never liked Keynesian economics and for that reason have continued to champion “supply side economics” (For a criticism of this theory, read http://www.commondreams.org/view/2011/05/07-7).  Unfortunately, the Democrats have long championed their own notion of “supply side economics” and this is “education.”  While education is a wonderful thing in itself, and well worthy of public expenditure, Democrats are strangely committed to the demonstrably false belief that the problem of mass unemployment in the wake of a financial crisis is a mismatch or absence of skills.  This is simply untrue.  The millions who are currently unemployed are not a hopeless rabble lacking ability.  Far from it.  Americans who have become unemployed and underemployed in the course of this recession are generally a well-educated and talented group.  Moreover, even before the recession, about 30% of college graduates were working in positions that did not require a college degree.  Worse, for over a decade it has been well-known that American engineers are leaving their profession in disturbingly large numbers – suggesting that the supply of engineers has been persistently larger than the demand.  The problem, then, is not on the “supply side” of talented young people; it is on the “demand side.”  The United States simply does not demand a lot of talented young people in engineering, math, and the sciences.  This is, of course, in keeping with the fact that we have become something of a “casino economy” that has become dependent upon serial financial bubbles to spur employment while remaining unable (or unwilling) to develop a sustained capacity to build things that people here and abroad would actually like to buy.  The point is that an economy that grows at a brisk rate on the basis of sound innovation and production would require lots of talent, and profit-seeking firms would be willing to train that talent on the job.  Naturally, CEOs and Human Resources departments are always and everywhere anxious to have the government or employees shoulder the costs of training, but in periods of rapid growth and labor shortages they will be happy to pick up the tab – let us remember that the “Rosie the Riveters” that the President referred to in his speech learned their skills on the job.

(4) The Banks, Bailouts, and Financial Fraud.  The President claims that the nation will “never again” bail out large financial institutions.  To be blunt, this is very premature as many of the most important rules associated with the Dodd-Frank Act have yet to be written.  Moreover, even after this occurs, it will be unlikely to work as the core problem – the overarching economic and political influence of the largest of the Too Big To Fail banks has not been checked and the resolution authority supposed put in place simply isn’t credible.  President Obama and Timothy Geithner did have a marvelous opportunity in 2009 to do what all thinking adults understood had to be done – break up these large, inefficient, and terribly insolvent institutions.  Instead, they worked tirelessly to protect them both at that time and throughout the negotiations leading up to the signing of Dodd-Frank.  Jamie Dimon and his 1% friends should be very thankful for this stoic service.  Former OMB director Peter Orzag has already left the government to collect his portion of gratitude from Citibank, and it has just been announced that Geithner will soon be leaving government “service,” no doubt to settle into very green pastures at a major banking institution that he helped deregulate under Bill Clinton, bailed out when he was at the Fed, and protected from being broken up or substantially reregulated while with Obama.  He has been a true and valiant servant of the plutocracy and they owe him a very nice sinecure.

But, let us revisit the claim made in the speech.  No more bailouts?  The irony is that the Fed is continuing its ongoing bailouts even as the speech was being presented.  This can be affirmed with a glimpse at the Federal Reserve’s balance sheet.  Its enormous size, as they themselves explain, is a direct reflection of its ongoing, if indirect, bailout policy.  Large sums of next to free cash are being placed with the banks every business day.

Recently, Mitt Romney casually referred to the ongoing accounting games that allowed the banks to continue marking the failed loans on their books as if they were worth their full face-value.  Romney suggested that it was past time for the banks to recognize their losses and write down the value of these assets.  For once, he is correct.  Of course, such recognition would immediately being into question the capital adequacy of several of the nation’s largest banks, and return the public’s attention to questions concerning their solvency when the banks revisit the Fed or the Treasury for more bailout funds.  CEOs know that this would then induce more awkward questions around bonus time.  In sum, since it is an election year do not expect the Congress, the Fed, or the administration to reestablish anything like sound accounting practices, to say nothing of transparency, at our nation’s largest banks.

Finally, before closing, we should all applaud the beginnings of Obama’s commitment to investigate and actually penalize the fraud at the heart of the crisis.  But, one wants to know, why did we have to wait for three years after the election of “hope and change”?  Why was this not pursued soon after the new administration took office?  On September 17, 2004, more than three years before Obama took office, the F.B.I. publicly presented a report claiming that there was “an epidemic” of fraud in the mortgage industry, so it is very difficult to believe that the administration is only now discovering the existence of a problem.  So again, why now?  Is it because the administration is anxious to head off the more substantial investigations that have been initiated by the Attorney Generals of California, New York, and Nevada?  Let us hope that this is not the motive underlying this extremely belated proposal, but the timing induces one to wonder …

Guest Post: “Where is My Half Glass?”

The brilliant Robert E. Prasch, an economist at Middlebury College, reflects on the Obama Presidency.

President Obama, Where Is My “Half Glass”?

By Robert E. Prasch

Since deftly managing the Congressional “debate” over health care to eliminate the public option, the White House has found itself criticized increasingly by voices from within the Democratic Party. President Obama and his spokespersons were irritated to discover the following: those Democrats who wrote the checks, pounded the pavement, and got out the vote for “Change You Can Believe In,” really wanted change.  Who knew?  Robert Gibbs, David Axelrod and the President himself have all made it clear that they view such critics as childish “purists” unsatisfied with a “glass half full.”  I have only one question.  “Where is my half glass”?

Let us briefly review the administration’s performance on four areas of great concern to those who supported Barak Obama in 2008.  These include the financial crisis & economy, the endless Bush wars, the shocking erosion of civil liberties, and increasing unaffordable health care.

Less than one month after the historic November 2008 election, we were informed that “Hope and Change” would include neither the financial sector nor the economy. This occurred on November 28^th with the announcement of two critical appointments.  The first was that of former Clinton Treasury Secretary Lawrence Summers, a chief architect of the policies that set the groundwork for the 2007-2009 financial crisis, to head President Obama’s National Economic Council.  The second was that of Timothy Geithner, former Clinton Undersecretary of the Treasury and then President of the New York Federal Reserve Bank (NYFRB), as the new US. Treasury Secretary.  Geithner informed the US. House of Representatives –very truthfully– that he “had never been a regulator.”  The sad part is that the Federal Reserve and specifically the NYFRB has a substantial role in bank regulation and regulatory policy, a role in which he clearly and most publically failed. Several months after taking office, President Obama declared that he would reappoint Ben Bernanke to chair the Federal Reserve System.  With these three leading the way, can we be surprised that the Obama Administration never devised serious policies or took substantial action on financial reform, “Too Big To Fail” banks, rampant mortgage and bank fraud, high and persistent unemployment, or mortgage relief?.  Can we be surprised to learn that his idea of a “jobs program” was to push through President Bush’s “Free Trade” agreements?  Is anyone surprised to learn that he is now considering cuts to Social Security?

By contrast to the economy, candidate Obama frequently stated his commitment to Bush’s Middle East wars.  His attachment to the status quo was signaled the day after the Summers/Geithner announcement when it was revealed that he would reappoint Bush’s Defense Secretary Robert Gates (This, of course, was the same Robert Gates who narrowly avoided indictment for lying to Congress over his role in the Reagan Administration’s Iran-Contra Affair).  Officially, the US war on Iraq ended this past summer, but that event occurred according to a timetable set up by Bush–and only because Obama could not negotiate blanket immunity for US soldiers in the wake of the Wikileaks revelations.   Before shifting to another topic, I would also advise readers to take a moment to review the size of the “training” and “security staff” that have been left behind in Iraq, along with the size of the forces stationed in Kuwait and the other Gulf States.  Do not think for a millisecond that anyone in the Middle East is unaware of the size and lethality of the army and naval armada the US has stationed in their midst.  (For those who may imagine that this is about “promoting democracy” in the region, I have a one-word refutation – Bahrain.  YouTube has numerous videos featuring Bahraini police, and their ally, the Saudi Arabian army, shooting peaceful protestors.  And let us refrain from discussing the almost daily atrocities occurring in Egypt, or the out-of-control predator drone program).

What of civil liberties?  Here the record is genuinely appalling.  The prisoners of Guantanamo Bay continue to languish without proper judicial hearings, and the extended pre-trial treatment of Bradley Manning is criminal by any standard of measure.  Obama’s vigorous attack on whistleblowers who shed light on the idiocy and mendacity of the bloated bureaucracies associated with the national security apparatus is an ongoing scandal.  In fairness, candidate Obama did “tip his hand” on these issues when he suspended his campaign so that he could fly to Washington to vote in favor of retroactive immunity for the telecommunications companies that violated the law, and profited mightily from, working with Bush and Cheney on illegal wiretapping programs.  Moreover, he has never deviated from Nancy Pelosi’s early insistence on blanket immunity for all Bush administration officials who lied to Congress, promoted or engaged in torture, war crimes, etc. The record, apparently, is not sordid enough.  On December 23^rd 2011 Obama signed a bill co-sponsored by Sen. John McCain granting the President, on his own whim, the ability to imprison anyone, anywhere — American citizen or not — for an indefinite period without an attorney, charge, jury trial, or any other kind or variety of review.  Goodbye 4^th Amendment, you will be missed.

Finally, a word about “health care reform.”  This bill neither “gives” nor “provides” anyone with health care or health insurance.  On the contrary, it mandates that everyone purchase his or her own policy.  There is a some commitment to providing subsidies to those who cannot afford a policy – but anyone who has ever followed politics knows what will happen to it when budget cutting season returns (they also know that when the subsidies go, the mandate will surely stay).  The bill also embodies a vague commitment to reducing health care costs that is not worth the paper upon which it was written.  Elementary economics tells us that if health insurance policies are subsidized they will rise in price.  This tendency will be even more pronounced if people are forbidden from deploying their single greatest negotiating tool – the threat to leave the market altogether.  Obama’s “accomplishment,” if we can call it that, is to provide even more money and market power to the single largest obstacle to affordable health care – the private insurance companies.

Alarmed by trends in the then-new administration, columnist Bob Herbert called attention to them while identifying a core flaw in the thought processes of its apologists, “Policies that were wrong under George W. Bush are no less wrong because Barak Obama is in the White House” (New York Times, June 22^nd, 2009).  Two years have passed since Herbert wrote these words.  So I ask again, if Obama’s 2008 supporters have received a “half glass” on the four issues summarized above, then where is it?  At this point, I can’t even see the glass.

Robert E. Prasch is Professor of Economics at Middlebury College where he teaches courses on Monetary Theory and Policy, Macroeconomics, the History of Economic Thought, and American Economic History.  His latest book is How Markets Work: Supply, Demand and the ‘Real World’ (Edward Elgar, 2008)