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Yes, let’s put Goldman back in charge December 4, 2010

Posted by WillardWhyte in Economy, Environment, Justice, Politics, U.S. Budget, Wall Street.
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I’ve been listening very very closely to all the reform talk down in the Swamp, emerging only with confusion.

One group – the bright Red one – rails against an end to what always was limited tax relief for the top 1 percent or 2 percent of earners, now casting any act to not extend this relief as a move that would sap the slow 3 percent recovery we are in the midst of. Can’t take that $80-$100 billion a year out of circulation in what they continue to say is a “recession,” even though the economy stopped receding and started proceeding four quarters ago.

They know that. But they lie because it’s convenient for the narrative.

This group, then, does a wonderful spin with full gainer, and demands an end to extended unemployment benefits and an immediate return to 2008 spending levels, reigning in such stimulus-intended measures as broadened Medicaid coverage, boosted university research grants, various individual tax credits designed to spur household spending on energy efficiency upgrades. This, if put into effect, would take at least $100 billion in spending by individuals out of the economy – spending on doctors, medicines, researcher salaries and equipment purchases and all those things all those people scraping by need to buy. You know, rent, milk, bread, gasoline, spaghetti sauce, mostly from small businesses, if that matters (actually, the Wal-Marts are counting on taking that “market share” pretty soon, so it doesn’t long term).

Somehow, the Red team doesn’t think this will in any way slow down the economic expansion, though study after study show without dispute that the poor and unemployed and even the middle class university research assistant have a much higher propensity to spend than does the individual or couple making $250,000 and up. So if you are going to pull $100 billion out of the economy – and either way you are doing that – and your true intention is to not hurt the recovery, you draw from the top, not the bottom, of the take-home ladder, because the subtraction of spending multiplied down the line is less.

Of course, you MUST cut spending because there is this huge deficit, each year, and a mounting accumulated deficit. A deficit, sans political philosophy, results when the money you are taking in is less than the money going out. The long-term deficit is something quite serious and only an extensive, stripped down to the block assessment is going to address it wisely, fairly and in a manner good for the nation. Doing that is going to mean a lot of pain and adjustment, and some lowered expectations about what our government can do for us. The former is mostly the result of heavy spending to stop the slide following the Financial Market Crash of 2008, and the devastating recession. 15 million people aren’t paying the taxes they did when they were working. Tax receipts of all types are down. And a whole lot more of us are reaching out for help from the safety net programs put in place for just this type of “rainy day.”

When the Recoats want to talk about the spending side of the budget, they say the deficit is the prime enemy. When they look at the revenue side of the budget, it’s maintaining even the modest growth in the economy – no matter what the impact on the deficit, now and into the future. This, as we all know, is known as talking out of both sides of your mouth. In impolite circles, it is called lying; in Washington, it’s is called “clever politics.”

On the other side, the Blue team is totally demoralized and splintered, with no leadership whatsoever, and no coherent governing philosophy to use to counter what becomes an increasingly overwhelming narrative – not so much from the Red, but from the shadow government on Wall Street and in the Corporate media. This latter group – the Kudlows, the Wills, the Tyrells and their ilk – are in full throat for a return to “free-market capitalism,” which in their narrative is not so much a throwback to the mythical “small-government” years of Reagan as it is a complete rewind to the trust-dominated turn of McKinley and Taft. I skip TR on purpose. And I’m going to pick on this Kudlow piece, because it is quite well done, draws from all the old myths and ignores so much undisputed data which belies its very basic tenets. It also reveals the real agenda of the power behind the clowns in the suits in the Swamp – the frontmen in a daily drama that is mainly cover.

In this piece he notes the persistently high unemployment rate of 9.8, and what he terms the “discouraging” loss of 500,000 jobs in the last two months in the “small-business household” segment. That’s half a million jobs people. In two months. Later, he notes that core business investment is rising at a double-digit pace. Profits are at a record high. Commodity indexes are rising at a better than 10 percent rate, year-on-year. … And the stock market’s strong run continues.

But something’s wrong. Big business is booming in most sectors, if investment and profits and a rising stock market are your yardsticks. Small businesses are not. In fact, they are collapsing and shedding 500,000 jobs in just the last two months. They are folding and failing to be the engine of recovery they have traditionally been because they are three years into a severe cash and credit crunch, one that has eased for those dipping into bond or commercial paper markets artificially deflated by Fed policies, but become vastly more demanding and expensive for those relying on banks. And they are continuing to lose out to mega-competitors whose cash-rich budgets allow for advertising, modern inventory and logistical controls and technology and a continuing crush of imported goods.

Mr. Kudlow views this but suggests this remedy:

Now, after the severe financial panic of two years ago, it seems clear that too many tax and regulatory obstacles are blocking satisfactory job creation. And it also seems clear that a number of fresh new incentives will be necessary to spur the kind of prosperity that Americans desire. Following the deep recession, we need shock-therapy, pro-growth, tax-cut and deregulatory incentives.

The tax table on the federal level has not changed since the Bush cuts were made more than half a decade ago, producing tepid growth in most sectors aside from housing.  No new tax “obstacles” have been erected since that would explain today’s job numbers, nor have any “regulatory” obstacles emerged, although Kudlow would have us believe that business leaders desperately eager to hire today to seize a market opportunity are frozen in place by concerns about “Obamacare” costs that will begin to emerge in 2014.  Pure myth, but a song sung loudly enough for long enough that many people accept it as part of some preordained natural background hum. The biggest drag on the economy remains housing – the segment that fell the hardest and that isn’t coming back whether you extend those tax cuts or not. That mean’s construction, real estate, all the folks involved in mortgages, furniture and appliances and HVAC and landscaping and all those industries making all the materials to build houses, and make them over when they change hands. All operating on demand that’s maybe 40% of what it was 3 years ago. Not coming back to parity for another decade.  No tax or regulatory policy coming out of Washington is going to change that. To suggest otherwise is crap.

And the consumer is different, not the same consumer who helped drive past recoveries. Not the one who got so over-leveraged their worlds collapsed, or came too damned close. Not the ones borrowing on bubble equity, buying today with plastic and deferring til tomorrow. No, a consumer setting aside 5% for tomorrow. That alone is a 6% swing in the draw on disposable income. That shows no sign of changing soon since consumer deleveraging is probably only halfway to where its going.

So today’s economy is a different recovery animal. Not that Kudlow cares. He’s not selling solutions to that; he’s spinning his piece of the narrative.  He goes on to hum a few bars from another ditty in the playset:  The anti-business Obama mindset:

Post-election, is the Washington war on business really over? Has the war on successful earners and investors truly ended? Is the class war against capital still being waged by the White House?

The “class war on capital?” The “war on successful earners and investors?” I’m sorry, for I seem to have sat through the wrong movie. Are these “successful investors” the ones who ginned up all those fraudulent mortgages and collateral vehicles, backed by credit default swaps, then bet against them to help drive the global financial system over the cliff, freezing money markets because no one had any faith whatsoever in the collateral that anyone offered? That’s the “success” you’re talking about?

These wonderful captains of “capital” took untold trillions in equity from princes, pension funds, average Joes and towns and cities around the globe and turned it all into crapola. Government didn’t do that. I didn’t do that. The wisest heads did that.

And us? We – governments from D.C. to Dublin to London to Paris to Bonn to Athens — ponied up hundreds of trillions to inject liquidity, saving off what would have been a horrid collapse – “bailing out” that “capital” you refer to, and indirectly thousands of companies large and small heading full-tilt into massive cash flow seizure. Those very same governments then watched as a mild recession turned into a full-scale collapse and pumped trillions more into their economies to try to stanch a runaway contraction. This was “class war on capital?” Since when do you wage war by extending hundreds of trillions of dollars of aid and comfort to the “enemy?”

Around the world, governments have acted with laws, regulations and market leveling measures to prevent a repeat of the frauds, gambling and erosion of long-held capital standards that produced a debacle. Not to throttle markets, not to stifle capital, but to preserve and protect fair and free markets from thieves, hucksters and those whose unbridled greed might again put all at risk.

Your agenda here is clear: The “financial panic” is over. Profits are up. Now, to get us all out of this morass, you want us all to hand you the keys to the kingdom: cut upper-income taxes – and capital gains, wade in “full-throated” splendor into government spending on the very safety net programs that allowed the crash to be halted and partially reversed, and engage also in “deregulation.” This all will totally unleash “capital,” which will then go out and start hiring people left and right and the boom will resume. And by regulatory reform, I assume you mean get rid of all those new laws governing banks and Goldman Sachs and credit card issuers and mortgage brokers and appraisers and investment rating companies so they all can get back to the wonderful things they were doing back in 2006-2007 leading up to … that little “panic.” Such a nice little 1880s piece of phrasing.

Or maybe you mean workplace safety laws governing mines, refineries, and slaughterhouses, or wage laws requiring honest arms-length dealings with “contractors” and honest timecards and overtime pay, or enforcement of laws preventing poisons from being dumped into rivers, lakes, and water tables, or pumped into the air we all breathe, or careful studies of new substances before they are pumped into our food, or vended as remedies for some of the ailments your uncontrolled effluent engender?

That all will make capital’s cost of doing business in the U.S. closer to what capital finds today in India, China, Mexico, Thailand or Indonesia. That will make it easier for capital to “outsource” work electronically from staff to “contractors” paid by the piece and not by the hour and responsible for their own retirement, healthcare, disability and all else – subject to dismissal at any moment.

That’s all a corollary to the “personal responsibility” thread in your fabric, which is central to a concerted strategy to destroy any remaining fragments in the American collective sense. That is, any sense that any of us owe anything to anyone outside of ourselves, that each of us is 100% responsible for our brilliance, success or failure or benefit in any fashion from anything done as community – as a union, to use a word in continuing decline. The core intent – the central soul of this narrative – is to recreate a world in which it is truly every man for himself.

And any voice of opposition to this blitzkrieg is a “liberal” – a co-conspirator in a century-long folly now shown to have been nothing but a lily-livered collectivist aberration that now holds America back from her greatness (one soon to also be forged with your capital in China).

And somehow, people who see through this blatant crap, this naked plutocratic trickle-down Royalism, who even suggest that God shed his grace on this nation with an expectation that it become a place where the hindmost are not left for the devil are dismissed as elitists.

The White House is not “at war” with capital. Nor am I. Nor are the millions who call themselves tea party patriots. Not yet.

But if you seize this largely ill-gotten opportunity and use it to exploit, to further erode the standard of living in this nation to feather an already outrageously comfortable nest, people may tire of the copper you sprinkle on the streets as you pass.

We’ve been there before, sir.



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