The Reality of Shrub's Legacy

Not that facts seem to matter anymore, but the numbers are out on the impact from shrub's domestic policies, and they're dismal. This is no surprise to those of us who paid attention:

On every major measurement, the Census Bureau report shows that the country lost ground during Bush's two terms. While Bush was in office, the median household income declined, poverty increased, childhood poverty increased even more, and the number of Americans without health insurance spiked. By contrast, the country's condition improved on each of those measures during Bill Clinton's two terms, often substantially.

The Census' final report card on Bush's record presents an intriguing backdrop to today's economic debate. Bush built his economic strategy around tax cuts, passing large reductions both in 2001 and 2003. Congressional Republicans are insisting that a similar agenda focused on tax cuts offers better prospects of reviving the economy than President Obama's combination of some tax cuts with heavy government spending. But the bleak economic results from Bush's two terms, tarnish, to put it mildly, the idea that tax cuts represent an economic silver bullet.

http://politics.theatlantic.com/2009/09/closing_the_book_on_the_bush_legacy.php

Along with two wars, and assorted other disasters, this is shrub's legacy. This is what Obama is trying to fix. But the media will fixate on Tea-baggers, liars, and the assorted beltway "tut-tutters". The actual economic realities of real people aren't "news".

Beyond AIG

Ok, I'm throwing my 1.3 cents in on the AIG bonus outrage, the biggest controversy of the week.

Yeah, the bonuses are an outrage. Huge rewards for greed and failure can't be justified in good times, let alone an economic crisis. Collecting millions for losing billions is a hard act to justify. It's an 'in-your-face' action by members of a group of elites who consider themselves above the rules of common decency. And the hard working public has every right to be outraged.

But it's small potatoes. 1/1000th of the bailout money. The bonuses are merely a symptom of the failure of the greater economic Ponzi scheme that came to dominate the past decade. AIG, and a host of other major financial institutions, have engaged in a long running scheme to generate huge sums of money by exchanging paper "obligations" with no regard for actual value, knowing that they wouldn't be subject to any oversight under the shrub administration. Deregulation meant that no one would be held accountable until the house of cards collapsed, and now we're seeing some of the vultures tearing off the last bits of flesh from the rapidly decaying corpse.

The real problem, yet to be solved, is that the overall economic system is now untenable. The value of a dollar is based on a belief system that is no longer realistic, but nobody wants the consequence of the dollar collapsing.

The Obama administration inherited this mess (amongst many), and is now tasked with finding some sort of fix. The current firestorm over the fatcat AIG executives is great theater, and the political and populist outrage will dominate the media for a while, but in the end it's only a distraction. It's a simple story to explain, as opposed to the complexity of the real economic issues ahead. The real challenge will be finding a way to stabilize the current economy long enough to allow repairing the underlying fundamentals and to establish regulations and enforcement to prevent future collapses. And that is going to be a hell of a lot more difficult than scapegoating a few greedy bastards.

(BTW: This doesn't mean that I think the greedheads shouldn't be held accountable-they should. And we have a right to try to recover their ill-gotten gains, although I'm skeptical about the current congressional efforts. I'm just saying that this shouldn't be our focus. The real problems are much larger.)

Added: Congress is trying a new tax...like that has worked in the past.

Consumer Confidence?

Today we got the official report that consumer confidence has reached a 'historic low'. This bit of news would seem rather obvious to anyone out in the 'real' world. There is no confidence; it would be much easier to measure "public panic" although that's not a topic with a historic standard. The forecast is bleak, and getting darker, and "consuming" is becoming a luxury that only the rich can afford. Buying the basic necessities is about all that people are willing to do, as the clouds of uncertainty blanket the future as far as the eye can see.
Over the past few decades America has built it's business system based on a "consumer economy" that depends on the public to buy more stuff, rather than the development or manufacture of real material goods that people need. Our jobs declined as we stopped making things and instead focused on consuming them. An intangible model at best, it's now facing a catastrophic failure.
As we count down the last days of 2008 (and get to my birthday), the prevailing mood is one of "oh, shit, what's next?" Despite the optimism of a new president, the outlook is gloomy.

The Future's Not What It Used To Be

Having ruined everything he touched during his time in office, Shrub is now decimating the next administration, no matter who wins in November. The current Wall Street bailout proposal will balloon the deficit to such an extent that the next president will enter office with their budgetary hands tied by an empty treasury. Forget any new spending on social programs such as health care; that money is already being stolen.
My paranoid side is thinking that this is the republican plan to destroy an Obama administration before he even gets elected. The corporate greedheads see him coming, and have decided that they better steal the nations wealth now, before Obama has a chance to use it to promote the common good. If they don't steal it now, they might not get another chance. As the dollar drops in value, it takes a lot more of them to buy a yacht or a private jet. If that same money were to fall into the hands of working Americans, they're likely to spend it in ways that don't enrich the already wealthy, and the republicans wouldn't want that to happen. Obama might even encourage a functional social economic system that helped average people, and that would be a threat to the oligarchy. In fact, it would be their worst nightmare.
Even before this latest economic "crisis", Sweaterman and I have discussed the mess that will be inherited by the next president. Sweaterman has even gone so far as to suggest that we let St. Sleazy McCain win, in order to permanently destroy the republican brand of economics. While I don't agree (the consequences of such a disaster are too painful to contemplate), I do understand the sentiment. Obama seems like a genuine 'nice guy', and it would be a shame to have him end up taking the blame for the consequences of the republicans corruption. The deck is already being stacked against him.
I suppose there is one positive side to all of this: should McCain win, he'll find it very difficult to afford more wars.

Added: Obama seems to have noticed:

WASHINGTON — Barack Obama said Tuesday that the huge costs of a financial bailout meant that he probably wouldn't be able to deliver everything he was promising in his campaign, at least not as quickly as he'd hoped.
"Does that mean that I can do everything that I've called for in this campaign right away? Probably not. I think we're going to have to phase it in. And a lot of it's
going to depend on what our tax revenues look like," Obama said on NBC.
The Democrat didn't identify which proposals he might delay if the government spends up to $700 billion to shore up the country's financial system, as the Bush
administration has proposed. Congress is negotiating the terms of the bailout this week in hopes of completing action by the weekend.

http://www.mcclatchydc.com/251/v-print/story/52949.html

Socialism Done Wrong

Monkeyfister (http://www.monkeyfister.blogspot.com/) has a great post pointing out how the republicans are even getting socialism wrong: you're supposed to nationalize profitable companies; not bankrupt ones. But this got me thinking about our new taxpayer owned enterprises:
We, the taxpayers, now own (80% of) the nations largest insurance company. But none of us will get insurance out of the deal. I know I'm still uninsured.
We, the taxpayers, now own the nations two largest mortgage brokers. But I doubt that any of us will get help with housing out of the deal. I know I'm still homeless.
If this were a socialist country, at least those things would be guaranteed. But republicans aren't truly socialists; they're oligarchs. And so the fruits of these nationalizations will only go to the rich.
And at the same time that we pour $85 billion into AIG, the people of Houston and Galveston are not getting relief from hurricane Ike. That Federal Emergency Management Agency? Not available in cases of actual emergency. Republicans have to cut spending somewhere, don't you know.

Economics

Watching the Wall Street meltdown, I'm seeing the huge disconnect between classes. Being amongst the poor, I don't have to worry about my stock portfolio falling. Most of the folks I know live paycheck to paycheck, and invest in a night out when they can. We balance our books by paying our bills and spending what's left.
But the major investment banks don't have to follow such simple rules. They can simply inflate the value of their assets to create a false 'bottom line' and if reality intrudes they get a government bailout. At least, that's the way it usually works. After all, the government always has a few extra billion for the rich. Okay, it comes from the taxpayers (us) or an increase in the deficit (us), but it's not like it's real money. The country isn't bankrupt as long as it can borrow more (unlike regular people), and the first rule of Wall Street is "there are no rules." In the circles of high finance greed is good, lying is rewarded, and oversight (regulations) are removed by buying up a few congressmen (St. Sleazy McCain and crew).
Which is why they really wanted to privatize Social Security. All that money going to regular people when it could so easily be stolen for the much more deserving rich. Face it, Grandma won't spend her Social Security check on a congressman or deregulating Ponzi schemes.
It was all a fine system (for the rich) until someone started to notice that all those pieces of paper weren't worth what they claimed. In fact, most of them were beyond worthless. The 'assets' added up to nothing but a very large debt.
Now they're busy trying to figure out how to foist this debt off onto the regular people; the homeowners, the taxpayers, anybody who hasn't bought a congressman. And it's going to hurt a lot of us.
I'm fairly safe, being among the poorest of the poor. They can't get much from me because I haven't got it. I'm only semi-employed (or semi-unemployed), semi-homeless, and completely broke. If my bank failed, the FDIC would laugh at my account. I'm not going to get billions in a federal bailout. Hell, a thousand dollars looks huge to me (please feel free to use the "donate" button on the right if you can spare it, or any other amount) and my economy has been tanking for a long time.
The republican greedheads have had their way for a long time, but reality is starting to piss on their "trickle-down" theory of economics. We can't afford another four years of criminal insanity guiding our economic policy. The question becomes "how badly will people have to be hurt before they realize this?"

Economic Stimulus

(Image stolen from distributorcap, who has a great post up on the same topic)
Isn't it nice to see our government in action, racing to address our economic crisis? Now we can all stop worrying...right?
The problem is that none of the current stimulus plans address the fundamental problems facing the economy. It's a band-aid and some soothing words, when major surgery is called for.
It started with the week on the stock market. Can't have investors in a panic. So the Fed cut rates, effectively punting the market drop to a future date. But the stock market is not the economy. Sure, a lot of people have their retirement invested, but the big money is in the hands of corporate speculators. Most of us paycheck-to-paycheck types are only marginally effected by the Dow Jones numbers (although I actually talked to a tourist woman on Tuesday who was moaning that her "portfolio lost $19,000" in one week. You can imagine how sympathetic I felt). Simply put, the rate cut protected the rich from reality for a while. It doesn't solve anything.
Likewise, the bailout of bond insurers is a short term fix. The bond market is what allows the government (municipal and national) to borrow money. Without the guarantee of bond insurance, the government is bankrupt. Given the decline in the value of the dollar, this, too, is only postponing the inevitable.
Then we have the "stimulus" of "rebates", where a lot of people get some money that the government hopes they'll spend. Given the amount of debt that the average American has, they will spend it quickly. And they'll still have more debt. It's a nice "feel good" tactic that may take the public mind off the problems for a while, but it wont solve anything.
There is only one way to actually repair the American economy, and that is to invest in strengthening the domestic infrastructure. If the billions were poured into alternative energy, reducing the dependence on foreign oil and creating thousands of domestic jobs, it would strengthen the dollar. If a massive WPA style project toward domestic sustainability were initiated, it would create new opportunities for average Americans to improve their quality of life, and their future. In short, we need to be planting, not eating, our "seed corn" to use a native analogy.
Oh, and that $11 billion a month we're spending in Iraq?

The Economic Ride

In spite of today's news, I don't pretend to know much of anything about the economy. Except that it looks like a very big mess right now. While the news seems to be focusing on the stock market today, the actual problem is much more wide spread. Some observations:
The housing/mortgage crisis: It's bad enough that 2 million people could lose their homes. What's equally ominous is that the housing bubble has been the main thing propping up the U.S. economy since shrub took office. Beside those losing their homes, some 44.5 million Americans will watch the value of their homes diminish. That's a lot of lost capital.
Oil and the dollar: While oil is back down to around $88 a barrel, that is still a very high energy price. Coupled with the dollar's drop against other major currencies, the reliance on foreign resources will be impossible to maintain.
The deficit: Even worse than the mortgage crisis is the ongoing U.S. deficit crisis that has soared out of control under shrub's watch. The U.S. national debt now stands at a staggering $9 trillion. That amounts to over $30,000 for every man, woman and child in the country. The Iraq War fiasco will add another $2 trillion to the nation's debt. All of this is being financed by foreign investment, but as the dollar weakens that option will be less available. The financial and stock markets are collapsing as a result.
The Republican philosophy of tax cuts and spending cuts has weakened America's infrastructure, so that there is almost no domestic support system in place for those about to lose the life they've known.
For myself, in the words of Dylan "when you ain't got nothing, you got nothing to lose." While I've been very frustrated by the slow local job market, I don't need very much to get by. I have no dependants or debts. But most of the people I know have a lot more at risk, and I'm worried for them. They are among the huge number of Americans facing a very scary situation.

Death to the Poor

Barbara Ehrenreich explains the current economic turmoil much more clearly than I could:

Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys. The American poor, who are usually tactful enough to remain invisible to the multi-millionaire class, suddenly leaped onto the scene and started smashing the global financial system. Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.

First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were “NINJA” loans, for example, awarded to people with “no income, no job or assets.” Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?

Then, in a diabolically clever move, the poor – a category which now roughly coincides with the working class – stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market
into another Arctic-style meltdown. H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that “it’s no secret that many customers are running out of money at the end of the month.”

http://ehrenreich.blogs.com/barbaras_blog/2007/08/smashing-capita.html

(BTW, does anybody have a link to the "Bedlam Rovers" doing the song "Objectivity"? I can't seem to find one).

Spoke too soon (or didn't search well enough). Here's a sample:Objectivity

Throwing Money Around

I'm no economist, but I'm really having a hard time understanding this:

Aug. 10 (Bloomberg) -- Central banks in the U.S., Europe, Japan, Australia and Canada added about $135.7 billion to the banking system in an attempt to avert a crisis of confidence in global credit markets.

The Federal Reserve, in a second day of action in concert with the European Central Bank, provided $38 billion of reserves and pledged further funds ``as necessary,'' in a statement unprecedented since the aftermath of the Sept. 11, 2001, attacks. The European Central Bank loaned 61.05 billion euros ($83.6 billion) after injecting a record amount yesterday.

``This is a situation of great uncertainty,'' said Alice Rivlin, a former Fed vice chairman who's now at the Brookings Institution in Washington. Central banks ``are all injecting credit in hopes that collectively they can stabilize things.''

Central banks in Japan and Australia also added funds as money-market rates rose. The subprime crisis is spreading after international investors in the past year piled into the U.S. market for debt backed by mortgages.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ah7K.eFz9xiU&refer=home

Where is all this money coming from? Isn't throwing more money into the market really just expanding the problems?

I admit that I really don't pay much attention to the stock market. Having spent most of my adult life only slightly above the poverty level, I'm not part of the "investor class". I have a small 401k from a previous job that I hope to collect on someday, but that's about it. As Mr. Dylan said, "when you ain't got nothing, you got nothing to lose".