Tuesday, February 24, 2009

Fiscal Responsibility

So they got together at the White House yesterday to go over the concept of Fiscal Responsibility and Entitlement Reform. Everyone had a grand time and Republicans got to bloviate the way they do about how Democrats are Spending Our Children's Future!!!, which is always good for a teevee soundbite or two.

Digby and Jane have been keening and rending their garments about how this whole thing is all about cutting Social Security, which doesn't have any kind of fiscal problem for decades, if then, while the Boy's Club, including Josh Marshall who did yeoman work to prevent the Bush Regime from fucking with Social Security, have either been silent or have been telling the Girls to pipe down, nothing is going to happen to Social Security. It's about reforming Medicare and Medicaid.

Only Helen Thomas broke the silence in the White House Press Room when she said, "Why are you messing with Social Security now?" And Gibbs, the White House spokesman, was tongue tied. Could not even issue a denial-denial.

We are so screwed, as they say.

See the chart up top? It's been making the rounds for some time now, and it shows how after World War Two, the Big One, wages and productivity tracked one another pretty well until about 1978. It was during that period that the Great American Middle Class was established on the premise that workers who were paid enough to make a decent living would in turn boost economic well-being for all. And so it was.

Then around 1978, wages and productivity diverged sharply, the gains from increasing productivity suddenly no longer reflected in paychecks. You will note that the wages graph is essentially flat after about 1978, with some periods of decline, especially during the Reagan/Bush years, while productivity gains continue to rise.

American workers were not being rewarded at all for their productivity increases, yet productivity continued to rise. This would ordinarily indicate that Americans were facing a reduction in their standard of living, but in fact, that isn't what happened, at least for most households. Instead, they mostly maintained their standard of living or even improved it during this time of flat or declining real wages.

They did so by putting more and more people into the workforce. The two income household is now standard, whereas during the Post-War period it was a rarity. One income, during the period that wages and productivity gains were tracking fairly well, was generally sufficient for a household's decent standard of living.

It's almost impossible now.

And now that we are deep into an economic recession that looks fair to become a global depression, two income households are becoming less and less feasible as employers shed workers by the millions.

Maintaining a decent standard of working- and middle-class living is becoming more and more difficult.

And yet the rich are still swimming in more money than they know what to do with.

It happened because all the economic benefit of the productivity gains of the last 30 years have gone to the upper 2% or 3% of the wealthy. Everyone else has been taking it in the shorts. Or going very deeply into debt (a problem I have addressed in other posts.)

Most have never grumbled, never complained, but now that it's becoming harder and harder for workers to find work of any kind, and it is more and more difficult for workers to maintain -- let alone improve -- their standard of living in any way, grumbling is starting.

And the Rich, for their part, see a Disaster Capitalist way to improve their own economic standing at the expense of everyone else, how drôle, by stealing Social Security funds outright, and by restricting or reducing access to entitlements like Medicare and Medicaid. In Crisis there is Opportunity.

The fact that workers allowed the situation to deteriorate this far is telling. The union movement ground to a halt and reversed course, workers didn't demand better pay for increased productivity, and too many became content to use debt to finance what their incomes didn't allow them to pay for right away. So long as the illusion could be maintained that they weren't really being robbed, workers were happy enough most of the time.

But now that the veils are falling away, workers are feeling put upon. The fact that reductions to Social Security and Medicare/Medicaid are On The Table for discussion and potential action, while there is no talk at all of redressing the historical imbalance of wages vs productivity gains is illuminating.

There is an active generational theft going on, but it is not theft by the boomers from their offspring, far from it. It is theft by the rich from the present and from the future of everyone and for many generations to come.

Rather than discussing cutting Social Security and other benefits at a time like this, the discussion should be focused on increasing benefits substantially, doubling SS payments for example, and extending Medicare-type coverage to everyone.

This would start the process of recovering the productivity gains that have been stolen from workers during the last 30 years.

The economy would not necessarily "recover" -- which is to say, go into another unsustainable bubble phase -- but would start to settle down and stabilize. There would still be a problem of excess workers which could be partially addressed by lowering the retirement age to 55, and increasing wages for workers.

Two things are called for: confiscatory taxation for the rich, significantly increased wages and benefits for workers.

And an end to boom-and-bust bubble economies.

Americans would be consciously reducing the workforce to reflect and respond to a changed economic reality; they would be ensuring that the generational theft of productivity gains we see reflected in the chart above was recompensed by increasing Social Security payments and extending basic medical care benefits to all Americans. They would ensure economic stability over the long term by increasing wages immediately and maintaining wage levels in the future that track with overall productivity gains.

Saturday, February 21, 2009

Bovine Indifference

After a while, it all becomes completely surreal.

I think it is fair to say that the economic situation is perilous for millions of Americans and becoming so for millions more by the day. Our Betters are very busy looting whatever remains of the treasury before the final crash. They are doing it with the active connivance and contrivance of the Congress of the United States of America, an institution which long ago lost any viable connection with the People of the nation. It serves its own interests first, the interests of the Plutocrats and Oligarchs second, the Presidency third. The People? Not at all. Well, except to fool them and pretend to be their friends.

And for the People's part?

Bovine indifference.

Except for the little sparks of faux populism, like the foolish ranting of CNBC's boy on the trading floor, Rick Santelli. Oh, that gets plenty of play, all over the cablenets, broadcast teevee, the hate radio dial, and the blogosphere both left and right, because this is the ONLY form of "populism" anyone will be allowed to see or express.

You have to hate the Middle and Lower-Class Losers, even if you know you're being robbed by the Plutocrats.

It's a brilliant ploy and it is working.

Maybe bovine indifference to it all, and airy surrealism to boot, is the right answer to the chaos forming all around us.

Dali, anyone?

Tuesday, February 17, 2009

Next up on the NeoLiberal chopping block

Social Security and Medicare, of course.

There is an Entitlement Reform confab hosted by the White House on February 23, featuring such long time friends of Social Security as Jim Cooper, Judd Gregg, Kent Conrad, and so forth, to be spearheaded by Peter Orszag, OMB Director, whose plan for SS has long been to cut benefits and raise retirement ages.

No doubt the privatizers will re-emerge from their long hibernation (at least since George Bush's failed effort at privatization in 2005), and once again, Josh Marshall will lead the charge to "Leave Social Security Alone!" Right? Right?

This "Reform" confab has been on the agenda for quite some time, and yet, oddly, Josh has been almost completely silent on the issue. Quite the contrast to his constant drumbeat against the Bush Privatizers. Digby and Jane have been the clearest and loudest -- and most suspicious -- voices in the Blogosphere regarding the Obama campaign for "reforming" entitlements.

But the NeoLiberal plan pretty much requires the gutting of Social Security, the elimination of Medicare. It's all part of the package of Restructuring.

The bovine indifference to what is going on -- despite all the people running around with their hair on fire -- is truly astonishing...

More to come.

Monday, February 16, 2009

So the Big Guys are finally figuring out

that there's a Big Problem at the American Household level. (h/t to bystander at Greenwald's Place).

Reference material:
  • Krugman's NYT clolumn "Decade at Bernie's"

  • "Tracking the Household Balance Sheet" at the Baseline Scenario

  • Bill Moyers' disscussion with Simon Johnson

    [It's really impossible to overstate the blind indifference and the gross incompetence of what passes for most of our Economic haute monde.]

    Throughout this economic meltdown, it has been astonishing to me how utterly and completely -- and apparently deliberately -- ignorant economists and economic policy makers and general commentary about the economy in the blogosphere has been about the growing plight of American households.

    That plight is easy enough to quantify, and it's been in plain view to anyone who would deign to look for years: household income has been flat or declining, household savings has been zero or negative, household debt has exploded -- based largely on phantom assets in real estate and pensions.

    Real estate foreclosures have been a leading indicator of the household debt problem for years. And years.

    And nothing is done about it. Nothing (much) is in the works.

    Yet trillions and trillions and trillions of dollars are being paid or pledged to bail out the banks, and now hundreds of billions are pledged to be paid directly to corporate contractors as part of the "stimulus."

    It is alleged that $50 billion is being set aside to deal with the foreclosure problem, but we've heard similar allegations over and over and over again throughout the tumult, and ultimately nothing is done on behalf of homeowners facing foreclosure, except that many of them get fleeced yet again. So people have a right not to believe any promise they hear now that "help is on the way." More than likely it isn't and it won't be.

    And yet, as some are coming to realize -- too late, oh well, ha ha -- had there been help at the household level when the crisis first emerged, many of the titanic global issues (not all of them by any means) that we're facing now would have been mitigated or eliminated.

    Of course Americans have to reduce spending, and they have done that smartly and substantially. Lack of household spending will continue for so long as households are crushed under a massive debt burden with no increase in income and no debt relief in sight.

    That's where we have been stuck for (seemingly) years.

    What to do about it? Easy:

  • increase household income substantially ($7.50 a week won't do it), and/or

  • relieve household debt.

    Neither of which is in the cards in our lifetimes.

    Or so the graybeards insist. And why is that?

    Is there a serious economist in the building who can explain why household incomes cannot rise substantially (say so that they can make up, even partially, for the productivity gains of the last 30 years?) and why household debt cannot be substantially relieved (say on a scale equivalent to the gambling debt relief being applied to the banks and Wall Street?)

    Most economists won't even deal with the question at all let alone provide an answer. The notion of doing something to ease economic distress at the household level doesn't even occur to them, so they have no answers, cannot rationally contemplate the issue.

    It is too foreign to them.

    And that, ladies and gentlemen, is largely due to the Triumph of Milton Friedmanism and Neoliberalism -- which, in circular fashion, has brought us to this crisis.

    And that is why conditions will continue to deteriorate for the middle and working classes, and why the economic predators will continue to be fed and funded and treated like Royalty.

    Well, they are. Aren't they?
  • Saturday, February 14, 2009


    photo by Brett Kaffee for MRzine, 2005

    During the Bush regime, we were under constant assault by the NeoCons whose world-view and principal interest was frankly imperialist, corporatist, and warmongering. The United States was attacked by shadowy forces, whether domestic or foreign (ie: the Anthrax Attack was almost certainly domestic, and from within the government itself, no less; the whole question of what really happened on 9/11 is so filled with murk and mystery, we'll probably never know, any more than we "know" the full story behind the assassination of President Kennedy.) The United States thence entered into an overt imperialist phase, which strangely and strongly resembled the nation's late 19th Century imperialist adventure, including mindless torture and slaughter of Natives, mass detention camps, and the overthrow by force of foreign governments.

    Corporations thrived as never before; the stock market soared, no-bid contracts to service the various wars ensured favored companies enormous profits, and pallets of $100 bills were flown around and handed out with abandon, the fabled "Money for Nothing."

    Back home, American households seemed to do relatively well, though not quite as well as during the Clinton Era, but much of the seeming prosperity at home was driven by two things: immense government deficit spending on war and security, and an almost unprecedented housing bubble that enabled millions of people to either purchase homes (that subsequently they found out couldn't be paid for), or to take out equity that had built up in their homes as prices rose to help them afford to maintain a "decent" lifestyle.

    Interest rates were low, unemployment was relatively low, wages were pretty much static, inflation stayed low (except for a number of energy price spikes that foretold what was to come), taxes were cut again and again, the defict ballooned, the wars were far away and plasma teevees kept the masses entertained and passive.

    Economic trouble was on the horizon. Many observers in and out of the dismal profession of economics issued dire warnings, but few were listening, and even those that did listen were trying to cash in before the crash.

    And now the crash has come.

    We're in the opening scene of what looks to be a very long play. Where's Eugene O'Neill when you need him?

    Neocons managed to get us into imperialist wars, and for all practical purposes, they succeeded in changing our form of government to an Autocracy with dependent though ostensibly co-equal legislative and judicial branches.

    Now that we're well into the crash, however, the Neoliberals are on the rise, and just as the Neocons got away with murder, so will the Neoliberals attempt to.

    And so far, they're doing just fine.

    Rather than having me go into a long dissertation on the Neoliberal transformation of the United States, I'll let some others explain it better than I can.

    The picture above is from a 2005 article that describes how the defeat of the Sandanistas in Nicaragua enabled the imposition of Neoliberal economic "restructuring" which led to the delightful scene above. It's well worth reading to brush up on Neoliberal practices in the Americas that caused so much disress and fostered so much evil in the name of "freedom," until the People had had enough and mostly threw off the shackles of privatization and reclaimed the social good.

    To follow on, watch or listen to this Democracy Now! segment from Friday, February 13, 2009, featuring Robert Kuttner and Michael Hudson discussing how the United States' "financial recovery" really depends on the institution of Neoliberal economics, and how at root, it is all completely fraudulent.

    And then, take some time -- quite a bit of time -- and digest this long article by Michael Hudson in Counterpunch, from February 12, 2009, that very clearly describes how we got here, who many of the players were, what is planned for "recovery," and what will really be necessary to revive and stablize the economy.

    We're in a fine pickle.

    Friday, February 13, 2009

    All this high stepping and baton twirling....

    ...for what?

    Public enthusiasm continues to be constrained for this Stimulus Bill. In fact consumer confidence has plumeted. And people expect the Depression to last at least five more years.


    Could it be that this Stimulus simply doesn't acknowledge the dire straits so many households are facing. All it provides is (perhaps) $15 a week this year and $7.50 a week next year to workers who can't qualify for the AMT "fix".

    But AMT "fix" beneficiaries will receive anywhere from $500 to $5,000 (in addition to the $400 in payroll witholding reduction); first time homebuyers, $8,000; $2,500 tax credit for college tuition and expenses.

    The Earned Income Tax Credit will be increased $600 in 2010.

    There is no incentive, at all, for working class people to spend significantly; in fact, given the way this stimulus is set up, all the incentive is concentrated at the high end, primarily in corporate board rooms, secondarily in the households of the upper-middle class. The working class, if they are smart, will hold on to every dime they can get their hands on for absolutely as long as they can.

    Combine that with the bailout of the Financiers, to the tune of several trillion dollars, mostly to pay off their gambling losses, and we have a perfect storm of -- continued decline, right into Depression.

    How is it that the Stimulus Managers completely missed the plight of the working class and the lower middle class? How could they be so blind?

    Much cleverer people than me point out that they didn't miss anything. They don't want to give any kind of spending support to the working class right now, they don't want average household spending to pick up for the most part, because it would be inflationary.

    Furthermore, macroeconomists insist that substantial payments to households do not spur spending; instead, such households typically pay down debt or squirrel the money away in savings. The brainiacs use the experience of last year's stimulus payments as examples.

    Only their example is flawed. At least in my own household, I can tell you exactly what happened to the $1,500 we got in stimulus funds.

    $300 went to pay debt (primarily incurred to cover previous house and car emergencies -- some of which were documented on this blog.)

    $1,200 (and quite a bit more) went to pay increased expenses, including doubled cost of gasoline, higher insurance premiums, and 30% - 50% higher food costs.

    In other words, there was inflation last year, substantial inflation of gasoline and food prices -- basics for most households -- and people had to pay the higher prices, they had no choice. As it happens, they had some money to do it with.

    Nothing was added to savings in our household; more than $3,000 net was taken from savings last year to pay higher expenses, despite our efforts to economise, and we've still got a substantial debt load -- though not as high as many people's because we have always lived rather frugally.

    Yet macroeconomists will insist -- no matter what -- that the $15 a week per worker starting in July will have the greatest simulative effect of any of the other tax breaks in the stimulus bill because workers will spend the money immediately without thinking.

    The unemployment insurance extensions, the food stamp supplements, the welfare supplements, the state stablilization funding, the educational funding, and some of the other direct program support in the stimulus will all help individuals -- as they fall through the holes in the shredded safety net -- and that's a good thing for those who have the opportunity to make use of those things.

    The spending and infrastructure programs in the stimulus will help the economy keep going at a reduced but potentially sustainable level (cf: Japan) for some time, barring the unforseen (Israel attacks Iran, an asteroid collides with Colorado, etc.)

    But there will be nothing substantive to encourage spending by households, at least not any time soon, so as to at least try to curb the inflationary pressure increased spending would have at this time. Also, nothing substantive will be done to relieve household debt loads, at least not in the near term.

    And many more trillions are still going to be paid to the banks and the Wall Street swindlers.

    So despite all the high stepping and baton twirling by the administration and the Congress over the Wonderful Stimulus they've managed to craft and pass, the People are not buying it.

    Most of them won't see or feel any benefit.

    Nothing to cheer about.

    Wednesday, February 11, 2009

    $10 $7.50 a Week!


    Geithner's "Plan" to give more trillions of dollars to the banks and Wall Street to pay off their gambling losses is a real dud, apparently. It is a Big Rock Candy Mountain for the economic predators who have been effortlessly feeding on the passive American People, but it comes with some strings, including "transparency," and -- as we know -- the Masters of the Universe cannot stand exposure of any kind.

    The markets tanked.

    The reviews were one big Raspberry.

    Meanwhile, you and I will be privileged to accept the $10 $7.50 a week in payroll tax withholding reduction as our share of the Recovery. If we can keep a job, that is. And assuming the reduction remains in the Congressional bill once the conference committee gets through cutting out more pork and nonsense.

    "Entitlement Reform" is next on the chopping block, meaning that the Social Security and Medicare problems will be dealt with, no doubt through some form of privatization and benefits cuts and restrictions that will help ensure the continued impoverishment of the masses for the benefit of the rich and the well-connected.

    The wonder of all of this Neo-Liberal economic restructuring that's proceeding apace is that the American People are so passive, whereas peoples all around the world are rising in anger, bringing down governments, forcing the Masters of the Universe -- so intent on further looting and pillaging -- to back off.

    Even if it is only temporary, it is something. Naomi details some of the turmoil below.

    But in the United States, it's become almost unheard of to take action of any kind against the predators who believe they have a Constitutional and God Given right to plunder at will.

    The Geithner "plan" will ensure these people have endless plunder so long as the nation endures, and the Obama "Recovery plan" will ensure that favored corporate and financial interests will have guaranteed profits for the forseeable future.

    Some people will be put back to work or will stay on their jobs to be sure, but many more will not. There simply will not be enough work for so many people to do. Wages will likely decline further, yet consumer level prices may continue to increase, even though producer prices may fall more than they already have. One of the ironies of this situation that is barely noticed by the economic brain trust that's operating the levers of the Machine is that despite all the falling wages, falling demand, and falling producer prices, the cost of living -- consumer prices -- which started up in earnest last year, continues to rise. So the average household is getting squeezed from both ends: falling income, higher costs.

    The fallout is terrible and is spreading. In my own neighborhood, numerous small businesses have closed, and a whole slew of car dealers are simply gone. For Lease signs are everywhere, and finding retail and office tenants is almost impossible.

    Unlike many areas around here, the foreclosure crisis hasn't severely impacted housing in this neighborhood. Most of the impact here happened a year or more ago, when a few houses went to foreclosure and auction, but everything else stayed relatively stable. Home prices in this neighborhood have actually increased slightly despite the downturn, but that all may change suddenly if the State of California continues its spiral into insolvency, which looks to be certain given the intransigence of the Republican caucus in the Legislature.

    It may be a financial tightrope for those who have homes, but the number and the presence of homeless is growing substantially. Little encampments are springing up everywhere there's any shelter from the weather, and there are far more ragged people trudging the streets. Services are being cut back everywhere, despite the charitable inclinations of so many people who still have money and time to give.

    The city and county are laying off people; the State has instituted unpaid furloughs two days a month and will send out layoff notices to 20,000 or more workers starting next week -- assuming there still is no budget.

    The State budget is expected to be cut in all sorts of areas -- if there ever is a resolution to the impasse in the Legislature -- and one of the most prominent areas of cuts is expected to be in In Home Support Services, a program that provides needed services to the elderly and disabled throughout the State at relatively small cost to the State and localities. Workers are paid between $8 and $12 an hour, depending on locality, to take care of people who can't take care of themselves in their own homes rather than in institutional care. It costs something like $10,000 a year or so on average to provide In Home Support Services to elderly and disabled residents in their homes, whereas institutional care costs $55,000 a year per patient or more.

    But for some reason, the Governor and members of the Legislature -- and the media -- have glommed on to this program as a money drain that must be plugged. They want to cut the hourly rate of pay, further restrict the number of hours workers can be paid for, and they want to make qualifications much stricter for individuals who use the program.

    It's part and parcel of the Neo-Liberal Restructuring, no doubt. The old and the incontinent are simply a drain on everyone else. If they can't carry their own weight or pay their own freight let's let nature take its course.

    Still, as more and more individuals and households are pushed out into the cold, I'll bet the People will not rise.

    One of the most astonishing aspects of the Reagan Revolution and its aftermath is that the People of the United States, once feisty and obstreperous, became pacified, to the extent that even when they took the streets in great numbers -- as they did in 2002 and 2003 to protest the coming Iraq War -- they did so with extraordinary courtesy so as not to disrupt the comfort and convenience of their rulers.

    Practically no other people on Earth are as passive as Americans today.

    But why should they get upset? $10 $7.50 a week adds up, you know. And that Big Rock Candy Mountain could be just around the corner.

    Sunday, February 8, 2009

    Oh Moon of Alabama

    What Naomi said:

    Its message was simple enough. You--politicians and CEOs huddled at some trade summit--are like the reckless scamming execs at Enron (of course, we didn't know the half of it). We--the rabble outside--are like the people of Argentina, who, in the midst of an economic crisis eerily similar to our own, took to the street banging pots and pans. They shouted, "¡Que se vayan todos!" ("All of them must go!") and forced out a procession of four presidents in less than three weeks. What made Argentina's 2001-02 uprising unique was that it wasn't directed at a particular political party or even at corruption in the abstract. The target was the dominant economic model--this was the first national revolt against contemporary deregulated capitalism.

    ...Here in Canada, politics is markedly less YouTube-friendly--but it has still been surprisingly eventful. In October the Conservative Party won national elections on an unambitious platform. Six weeks later, our Tory prime minister found his inner ideologue, presenting a budget bill that stripped public sector workers of the right to strike, canceled public funding for political parties and contained no economic stimulus. Opposition parties responded by forming a historic coalition that was only prevented from taking power by an abrupt suspension of Parliament. The Tories have just come back with a revised budget: the pet right-wing policies have disappeared, and it is packed with economic stimulus.

    The pattern is clear: governments that respond to a crisis created by free-market ideology with an acceleration of that same discredited agenda will not survive to tell the tale. As Italy's students have taken to shouting in the streets: "We won't pay for your crisis!"

    Greenwald suggests on Bill Moyers' program that "disruptive" tactics might be necessary in the face of the burgeoning economic crisis.

    And I put up a video of a Kurt Weill classic, "Alabama Song", to get us into the mood...

    Show us the way to the next whiskey bar.
    Oh don't ask why...


    The Susan Collins Plutocrats' and Kleptocrats Rescue and Relief Bill of 2009 is wending its way through the Senate with passage expected by Tuesday. Conference committee with the House is already meeting, so it is expected to be approved by the House with only minor tweaks the same day or by Wednesday, then go to the White House for the President's signature with much fanfare, bi-partisan comity, and everybody will pat themselves on the back for a Job Well Done and go on Holiday.

    And of course, this bill won't solve the economic crisis. But we're told it is better than nothing, a first step only, and we should get behind it.

    More and more citizens are saying, "No."

    As I've explained many times, the problem is very simple: the economic crisis is largely the result of the collapse of household spending that is due to households' crushing debt burden, flat or declining household income, job insecurity and/or job loss, and for many people, housing insecurity. Households can't and won't spend on non-essentials under the circumstances even if they have disposable income, which fewer and fewer do.

    The first step in fixing this problem is to "rescue" household finances. I have proposed it be done through a substantial direct payment -- a minimum of five figures, six figures would be better -- to every household to be used for specific purposes, including paying down debt, purchasing fuel efficient vehicles, weatherizing and improving energy efficiency of homes, etc. Any amount not spent for these purposes in six months reverts to the government for recommitment.

    Macroeconomists insist that paying down household debt doesn't serve any useful -- ie: stimulative -- economic purpose, and they would be right if only small amouts are ever made available to households for that purpose. I'm proposing a large amount be made available per household, enough, hopefully, to clear most if not all debt households currently struggle under. Assuming these households still have income (not an easy assumption in times like these), clearing all or most of their household debt would then free up hundreds or in many cases thousands of dollars a month now spent on debt service to be used to purchase goods and services that these households cannot purchase now due to their debt burden and other matters.

    If individual household spending increases by hundreds or thousands of dollars per month quickly, the overall benefit to the economy would be massive and immediate. The plunge we're experiencing right now would halt and quite possibly would begin to reverse. Relieving household debt starts the process of recovery. It isn't the recovery itself, nor is it the entirety of what needs to be done.

    The objection that increasing household spending power quickly is inflationary has some merit. Last year, for example, households received varying amounts of stimulus payments, from $300 to $2000 or so, and during the period these payments were being distributed, commodity prices, food prices, and particularly gasoline prices went up by substantial amounts. For many people, these higher prices for food and fuel, generally considered necessities, consumed the entire stimulus payment and then some. Yet despite those facts, economists insist that most people actually used their stimulus amount to pay down debt or squirreled it away in savings. Maybe when those checks came, that's what they did with them, but they were spending an equivalent amount or more to cover the higher costs of food and fuel. In other words, inflation was eating up all the stimulus payments and more.

    And there is certainly a risk that providing much larger additional payments to households will be even more inflationary.

    But we're in a deflationary spiral right now, and from a Keynesian point of view, that's much worse, both short term and long term. Inflation can often be controlled. Deflation is another matter.

    Ironically, deflation has not reached the household level, where many prices for goods and services are still rising. Yet household income is declining, and household spending has collapsed.

    Susan Collins' Plutocrat and Kleptocrat rescue bill will cut taxes for people on top of the economic pyramid (again!) but will do almost nothing for the masses in the short term, and it will provide only the potential for improving the lot of the masses in the long term through reemployment on some of the infrastructure projects that will be funded, or through derivative reemployment. What it ensures is that certain reliably Republican sectors of the economy (ie: the rich, big business, heavy construction, nuclear power, coal, etc.) receive substantial tax cuts, contracts and subsidies in both the short and the long term, while the People are allowed to Hope things will get better for them... eventually.

    The most economically disastrous features of Mrs. Collins scrub bill are the removal or sharp reduction of funding for education and supplementing budgets of states and localities, which, if not corrected immediately, will cause additional millions to be thrown out of work and cause many educational, social service and medical programs operated at the state and local levels to shut down.

    I assume Mrs. Collins knows these are the immediate disastrous consequences of the removal or reduction of state and local educational and budget supplement funding, and I assume those are the consequences Mrs. Collins wants. But lets not just blame Mrs. Collins. The White House had a hand in this revision, too, and it is said that Rahm Emanuel, Chief of Staff to the President, personally rewrote the bill to remove or substantially reduce state and local budget supplement funding. Thanks Mr. President!

    That being so, the bill that will emerge next week, hailed as a Bi-Partisan Rescue and Recovery bill, will actually be an economic restructuring plan, a Shock Doctrine project, intended to shift as much wealth as possible as quickly as possible from the masses to the Plutocrats and the Kleptocrats while doing as little as possible to relieve the suffering of the masses, and in many cases actually deliberately increasing that suffering on the theory that doing so will make them even more domesticated and compliant.

    When people realize what's really going on here, the anger that is seething under the surface may well explode. Our rulers believe that there is nothing the People will ever do, nothing they can do, to overcome the Powers That Be, and so far, they've had no reason to think otherwise. But as the economic pressure grows on the masses, the ruling class could be in for a real surprise.

    What's so very disheartening about all of this is that the Obama administration and the President himself, have so badly bungled leadership, and they have shown themselves to be fully and completely in the tank for the interests of Plutocrats and Kleptocrats. To some people, that's not a surprise. To many others, it's devastating.

    This is not the Change we can believe in.

    Thursday, February 5, 2009

    Oh Fiddle De Dee

    It's sad.

    The so-called stimulus plan has stalled in the Senate where, as we speak, Susan Collins is leading a crack bi-partisan team of Senators to "scrub" the bill of all "unnecessary" spending, pork, and frivolity.

    Meanwhile, public support for it has collapsed, and a desperate plea has gone forth from the White House to activate the Obama List and generate massive grassroots support to call and fax and email the Senators to back the bill. Please.

    A little late. In fact, probably too late.

    Some sort of bill will pass, to be sure, but given the way the stars are aligned, it will be a Republican bill primarily designed to protect the rich and to enhance corporate interests, secondarily to screw The People.

    Same as it ever was.

    Yesterday, I spent some time at various sites putting forth my considered opinion of what was wrong with the so-called stimulus bill and what was necessary to gain public support for doing something.

    The problem, as I see it, is that the bill -- whether the House or the Senate version, and most definitely what will emerge from Republican (erm, excue me, "bi-partisan") surgery -- doesn't deal with the situation millions of households are facing, more every day, as the economy tailspins into oblivion. They are being crushed under a increasing burden of debt -- even if they don't buy anything else on credit -- and they fear losing their jobs, their homes, and any shred of dignity they might have left.

    No bill so far proposed does anything about that in the short term.

    Meanwhile, more trillions are proposed and pledged and paid to the banks and to Wall Street to pay off their gambling losses -- essentially without strings.

    The People see this and throw up their hands in dismay.

    I was accused of being an ingnernt slob for proposing that the priority should be household debt relief not banker and Wall Street debt relief. I was told that anything the Government spends is "stimulus" by definition. I was told that because I obviously knew nothing about macroeconomics, and therefore could not appreciate the beauty and truth of the stimulative properties of the massive spending programs in the stimulus bill, I had nothing to contribute to the discussion but "more BS."

    "More BS" because I was focusing on the situation American households are facing, and how to deal with that to gain substantial public support, and not on what economic theorists believe is the "best practice" -- which generally ignores households and ordinary people in favor of a Grand Plan of some sort.

    There's nothing necessarily wrong with the spending plans that are being proposed, as long as we understand they are essentially long-term economic restructuring programs, not "stimulus" programs for the short term.

    Household economic distress has been building for years, ever since the forclosure crisis reared its ugly head, and for all these years, despite repeated and growing pleas, nothing has been done about it. Nothing is being proposed in the current bills to do anything about it, apart from a really insignificant payroll tax witholding reduction amounting to about $10 a week. That's it.

    People who are burdened with crushing debt, in danger of losing their jobs, their homes -- or maybe they've already lost them -- rightly say, "WTF?!"

    Especially when the Congress and the President are preparing to unload yet another few trillion and change on the banks and Wall Street and they are rightly furious.

    The brainiacs who put together the programs under consideration have no clue.

    What is needed is to deal with the household situation first, and they won't do it. They want their Grand Plan for Economic Restructuring adopted, and then, "maybe next year," they'll consider household relief.

    Or maybe not. No, make that "probably not," because macroeconomic theory says that "debt relief" is not stimulative and doesn't help in economic restructuring in any case. Macroeconomic theory doesn't deal with households (even though their spending is 70% of the overall economy), consequently, what happens to American households is of no immediate interest or consequence for Grand Planners.

    When I pointed out to one of these brainiacs that household debt relief (as opposed to banker/Wall Street debt relief) can potentially free up thousands of dollars a month per household immediately for them to spend on goods and services they can't purchase now, and that this is a priori "stimulative", I was told that stimulating spending at the household level is absolutely not what is wanted right now. That would run the risk of "reinflating the bubble," in other words, inflation, and we can't have that. No, what is wanted is the overall restructuring of the economy, and the Best Practice is to spend massively on programs and infrastructure that will serve the eventually restructured economy -- and let households drown.

    At least a shred of honesty appeared for a moment.

    This explains rather clearly why there has been no substantive effort at all at the policy level to stem the tide of foreclosures, to maintain employment, to relieve household debt, and so on, while there has been extraordinary effort to make sure that the gambling losses of the banks and Wall Street are covered, and to ensure that only certain aspects of the economy are propped up -- ie: those that support the rich and corporate interest, first; favored affinity groups second.

    And now the Senate bill is being massaged to take out even the affinity group support, and it will probably pass and then be reconciled with the House bill, on Senate Republican parameters, and then go to the White House, where with much fanfare, the Incoming will declare a Bi-Partisan Triumph, and no one will be happy (except the rich and the powerful, who will chuckle at how they once again pulled the wool over the rubes' eyes), and the economy will continue to be sucked into the typical corporate Shock Doctrine Black Hole.

    plus ça change, plus c'est la même chose...