Reflections on the Budget Crisis: The Panic of 2008

When my generation was taught history in high school and college, we were taught not merely about the depressions that have plagued this country, but also about periods which could only be characterized as panics. Panics took place in 1819, 1837, 1857, 1873, 1893, 1901 and 1907. The Panic of 2008 did not display the classic historical pattern of runs on savings banks with hordes of frightened depositors storming their doors. New Deal reforms eliminated that dangerous prospect after the Great Depression. Instead, the recent panic took place in the corridors of the most powerful. That 600 trillion dollars in I.O.U.s that even Republican legislators now blithely reference in their speeches was enough to bring down so venerable a firm as Lehman Brothers and initiate the biggest bailout of the financial system in American history.

There is the temptation to characterize the panic we are currently experiencing even now, some three years after the initial shockwaves took place, as a "quiet" panic, which is to say that everyone is feeling it, but we do not have as yet, (with some exceptions such as the demonstrations that grew out of the application of the right wing remedy in Wisconsin and that are taking place on a small scale all the time across the country), a frightened and angry working class taking to the streets. The irony, of course, is that Republicans have the liberal reforms of the New Deal to thank for the relative calm that has marked American economic life for the last eighty years. The American working class is no longer accustomed to overt expressions of class warfare. Nevertheless, there is a palpable panic just beneath the surface of our collective consciousness at this historical juncture.

Another irony is that if there is a single parallel for what Americans are now feeling it is what took place among the millions in the former Soviet Union when their way of life collapsed around them. We have our own version of what is called Soviet nostalgia with millions of Americans longing for a return to a period of unbridled consumption, carefree debt accumulation and the confidence that the pre-eminent symbol of private ownership, their homes, would not only keep its value, but grow in value and serve as a bulwark against all economic perils. When Soviet communism fell, the quip was that "the party is over," well, it appears that our party is over as well, and there is the inevitable, lingering hangover and accompanying butterflies in the stomach.

Even before the Panic of 2008, there were economic elder statesmen taking to the Charlie Rose Show and other such venues sounding the alarm about U.S. deficits and growing debt. When the recent bubble was finally pricked, or more accurately shattered with a huge club crafted of the greed manifest among financial wizards who invented overly clever, esoteric investment "products" such as derivatives and collateralized debt obligations, or CDOs, it merely hastened a crisis many observers had been warning us about for years.

In the brief interlude after World War II, the incredible but stubborn delusion arose that the U.S. had accumulated so much wealth that it could have as much guns and butter as it wanted, bascially forever, and had, at the same time, ended for all time the prospect of depressions and panics. By 1969, President Nixon was taking us off the gold standard, and within a few short years, Reagan and Thatcher were proving to the world that the growing clouds of economic crisis, which is to say, the growing awareness that capitalism was once again falling apart, could be dispersed by a frontal assault on Soviets abroad and social democrats closer to home.

As it turned out, communism in the U.S.S.R. and Red China proved to have been paper tigers. In fact, we needed them more than we realized, and were forced to create another global threat to take their place when the Russian regime proved to be completely moribund and the Chinese reverted to their traditional preoccupation with wealth even before Mao's body had had time to cool. By the year 2000, Chinese wags were observing that America had become its own economic back yard. The action was all overseas where millions of smart young men and women were leaving the farms for factories where they were "happy" to work for pennies an hour.

To be continued: Next, "Confessions of a Social Democrat"

Obama Meeting Leaders From Congress on Stalemate

By MICHAEL D. SHEAR

President Obama asked House Speaker John Boehner and Senator Harry Reid, the majority leader, to come to the White House on Wednesday to discuss the stalemate over the budget.

228. Vincent Amato

New York City

April 6th, 2011 8:40 pm

I have seen "the rapture" before, but never so virulently as in the aura being projected by Representative Ryan and his acolytes. That this faction was elected by the American people while the dust of the 2008 financial collapse was still swirling about is truly frightening for the fate of our republic. This writer expected--apparently out of sheer ignorance of who many of my fellow Americans are--that the bungling and greed of the financial masters of the universe would have had exactly the opposite reaction among voters. Instead, (and I can't help but blame the president's timidity for this), the impression was allowed to take hold in the American heartland that poor blacks, school teachers, retirees and the ill were responsible. The bad guys engineered a free ride for themselves.

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Moment of Truth

By DAVID BROOKS

Published: April 4, 2011

Vincent Amato, morning of April 5, 2011:

Well, David, you burnt the midnight oil on this one, covered all the bases, doled out the mandatory praise to various Republican leaders and apparently paid your dues to the Party for at least the next twelve months. It is interesting that you restrict your comments to "domestic programs," omitting any reference to the trillion or so spent on a war machine that even the sitting Republican Secretary of Defense argues is too fat. (Republican fretting over spending stops at the doors of the Pentagon.) Although this article, with its praise of Mr. Ryan, would seem to enhance his chances for a presidential nomination, I don't think that is going to happen. Ryan with his altar boy wholesomeness and intellectual patina is a bit too monastic; we'll probably see a Chris Christie candidacy; his is the perfect populist approach.

The substance of the changes you foresee and that you credit Mr. Ryan with introducing seem taken out of the pages of one of Orwell's dystopian novels. Having Ryan "grasp reality with both hands" is a nice novelistic conceit. Just whose reality is that? Even the notion that what the Republican Party is about is "reform" hearkens back to the by now long litany of right wing perversions of language and political metaphor. This is out of the same play book that in the late nineties fancied Soviet communists as conservatives, Republican strongholds as red states, and organized groups of right wing thugs as members of a Tea Party. (The last notion having stronger echoes of the South's confederates making claim to the events which took place prior to our own revolution than the original event.) Most historians trace the origins of social democracy back to the Bismarck regime in Germany. Bismarck, of course, only instituted his social welfare programs as a means of undercutting what he saw as the threat of socialism. With the demise of the Soviet Union, latter-day conservatives obviously sense the opportunity to roll back reforms that date to the 1870s, let alone our own New Deal reforms of the 1930s. The obvious goal is to completely privatize and put on a profit basis all human affairs.

The great irony in all this is that it is precisely the profiteering that goes on in our nation that is responsible for the exorbitant costs of programs that are more government inspired than government run. Our medical costs are twice that per capita of any other nation on Earth while our level of general health is far worse. Republicans conjure up citizens getting expensive CAT scans for bruised knees and otherwise taxing the medical system, while, in fact, the exorbitant cost of the American health care system is a byproduct of a moral set and a value system that finds it okay to profit--and profit enormously--from sickness. Remove the profit motive from the medical and pharmaceutical "industries" in the U.S. and the actual costs would diminish dramatically. Similar savings could be realized by once again empowering regulators at the much diminished FDA or OSHA, for example, to resume their roles as protectors of citizens' health.

And, finally, stop the charade of entitlements going to the rich as well as the poor in some false notion of equality that parallels the distorted distribution of wealth that our grossly unfair tax system has promulgated and encouraged.

(Posted to the New York Times, morning of April 5th. Will indicate later should it be printed.)

The Truth, Still Inconvenient

The Truth, Still Inconvenient

By PAUL KRUGMAN

The climate deniers can’t handle it when one of their own goes off script.

237. Vincent Amato

New York City April 4th, 2011 1:01 pm When Republicans acquired a House majority, the House hearings that came to take place took on a new aura--oddly for a group that is largely white, Anglo-Saxon and Protestant--reminiscent of nothing so much as meetings of Catholic cardinals in the Middle Ages. They are convened not to probe the truth, but to suppress it. And, yet, the Earth does go around the sun.

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Living in the Age of the Shark

We are living in the age of the shark. Most Americans, both the employed as well as the unemployed, are bleeding money, and the feeling grows ever stronger that as our economic life’s blood issues forth, the sharks have begun to circle, and, in many cases, have already taken big bites out of us. It is the subject of conversations taking place everywhere. In spite of the fact that we are told that inflation is under control, still at historic lows, the price of everything seems not just to be going up, but going up a lot. Wholesome Americans, ever prone to being trusting to a flaw, are beginning to blink. Put aside Pilgrim’s Progress ladies and gentlemen, and take out Melville’s The Confidence Man. That characteristic wholesomeness, bordering on naïveté, actually leads some of us to believe that those who set prices will proceed gently, taking into consideration the impact of The Great Recession on the average man and woman and their families. Instead, we have begun to notice that when prices rise—on everything from bananas to well, you name it—it is not by a percentage point or two but in double-digits. Without wanting to single out any one sector of the business world, this phenomenon seems particularly outrageous among service providers—whether it is a plumber, a carpenter, an electrician or even your bank or your gas and electric providers. Relationships with service providers are often of long standing and the (apparently illusory) feeling has long existed that these people are almost family. A family member, one would hope, would show some sympathy for one’s plight, but charges have become so rapacious that the suspicion grows that many business people are convinced that tougher times inevitably lie ahead, and that it is imperative that they get as much as they can while the getting is still good or even possible.

Needless to say, the fear that this has produced has played into the hands of Republican policy makers whose constant agenda it is to blame government spending for our economic plight. No mention is ever made of the wholesale profiteering that goes on in the private sphere for the obvious reason that it is the private sphere that butters their bread. And, while this panic is on, might as well at least try to take down such small-ticket items as National Public Radio and the Public Broadcasting service, especially since NPR and PBS, (though they are not as free from business interests as some like to think they are), are still just independent enough to alert the public to the existence of sharks and their unique focus on eating. Sharks don’t attend ethics seminars.

One working girl who seems now to especially need God’s protection is Elizabeth Warren, a Harvard Professor who made a name for herself exposing the exploitative policies of such as the credit card companies. Consumer advocates were pleasantly surprised when President Obama called on Professor Warren and Brooksley Born, a former Clinton appointee who tried to alert the nation to the dangers of derivatives trading, to important posts. With Republicans now heading House committees, however, these ladies get essentially mauled by cranky Tea Party types, treated more or less the way Senator McCarthy related to individuals he suspected of being Commie traitors.

Yes, I am afraid we are in for it. And while we’re waiting for the sky to fall, anyone in a position to set a price on a commodity or a service must feel they would be foolish not to take advantage of this window of opportunity. It may not last forever. Joe the Plumber may soon find that most people will have no choice but to snake out their own clogged pipes. No choice at all. Get it while the getting’ is good, Joe.