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Yesterday I promised "Rational Responses to Stolar and Global Finance," September 20, 2008. I may or may not have satisfied you with the rationality of my response to Stolar. But I left you hanging with regard "global finance," since other things intervened before I could get back to it.
Now I've seldom if ever been charged with being a man of few words -- "turn on a light bulb and he'll make a speech," my critics say -- but the events of the past two weeks (or has it only been one week?) have been so totally appalling that I really am close to speechless.
One can just sputter and scream, of course; but having done that what more is there to say?
I'm wishing we still had Woodie Guthrie around to sing to us about it. Do you remember his "The Ballad of Pretty Boy Floyd" (March 1939)? The last two stanzas of lyrics read:
Yes, as through this world I've wanderedLyrics as reprinted in Woody Guthrie, American Folksong, New York, NY, 1961 (reprint of 1947 edition), p. 27. © 1958 Sanga Music Inc., New York, NY.
I've seen lots of funny men;
Some will rob you with a six-gun,
And some with a fountain pen.
And as through your life you travel,
Yes, as through your life you roam,
You won't never see an outlaw
Drive a family from their home.
T. Boone Pickens has been urging us to convert our cars to run on natural gas to avoid (or at least reduce) the "transfer of wealth" represented by our purchase of foreign oil. As he notes: "Over 700 billion dollars are leaving this country to foreign nations every year . . . The largest transfer of wealth in the history of mankind."
Well, ol' T. Boone has just been one upped by Secretary of the Treasury Henry M. Paulson, Jr.
Secretary Paulson -- with the support of President Bush, candidates Senators McCain and Obama, the leadership of the U.S. House and Senate, and the urging of their campaign contributors -- is about to provide "the largest transfer of wealth in the history of the United States," $1.3 trillion, to their wealthy friends in finance, banking and real estate, ultimately to be paid by our grandchildren.
"Campaign contributors"? Yes, campaign contributors. OpenSecrets.org, which tracks this kind of thing for us by industry sectors, has calculated that the "finance, insurance and real estate sector" has been the largest single sector providing support to both McCain and Obama. (It was the leading source of Senator Hillary Clinton's contributions as well.) Massie Ritsch, "Bundlers for McCain, Obama Are Among Wall Street's Tumblers," OpenSecrets.org, September 18, 2008.
How dumb do these bandits think we are? Unlike those who play by the rules of Pretty Boy Floyd, these are outlaws who not only would "Drive a family from their home," they've already done it.
Think about it. We're roughly six weeks from a presidential and congressional election. McCain is having a tough enough time distancing himself from President Bush. He darn sure doesn't want to have to distance himself from President Hoover as well.
Nobody knows the details of what's in Secretary Paulson's $1.3 trillion proposal, or the packages of worthless debt he's offering to buy from his friends. All we know is that (a) we're going to end up paying for it, and (b) he's got a provision in there that no one can oversee or challenge what he does. He himself acknowledges he can't guarantee it will work.
Appropriately, it's a strategy comparable to the "short term gains from long term risks" strategy that the financial geniuses undertook to enrich themselves and impoverish us and create this mess. So long as we aren't dealing with the next "Great Depression" on the day we go to vote -- November 4 -- who cares what happens between then and inauguration day?
If the McCain forces had access to enough troops they could have salvaged this thing by starting a war. See, "Wag the Dog." The Iraq War is going to end up costing us $2 or $3 trillion. But we could wage a third war for far less than this $1.3 trillion bailout if we could get it over with in something between six weeks and six months -- something like the promise regarding Iraq, or the reality with Granada. The problem, as I say, is that we don't have enough troops for the two wars we're already in; and besides with two wars going on a third wouldn't give McCain that much of a bounce in the polls.
So scaring the Congress into capitulation is the best short term strategy for the next six weeks. Anything to keep Obama out of the White House.
Besides, it's a way to pay back those campaign contributors in the coin they know best.
The problem for the taxpayers is the contributors' rate of return. We're used to campaign contributors being given a 1000-to-one to 2000-to-one return on their contributions -- from us, whether as taxpayers or as consumers. That's bad enough. But the payback on this corrupt deal is more like 30,000-to-one.
Warren Buffett has been candid enough to recognize that “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
A $1.3 trillion transfer of wealth from the poor and middle class to the wealthiest class has got to be a record-setting "shock and awe" attack in class warfare.
Now I'm not saying that there may not be some problems in the financial sector of our economy. I'm not even saying that this unprecedented robbery may not produce some small benefit.
But I do see a lot of hypocrisy when those who've been most vocal in advocating free, unregulated markets -- while ridiculing socialism -- suddenly welcome the latter as an alternative to free private enterprise when their going gets rough.
It really is "heads I win, tails you lose." "If I'm lucky and make a profit, I get to keep it. If I'm not, I still get to keep my profits, salary, bonuses, stock options and golden parachutes, but I don't have to worry about the losses -- because I can just hand them off to you and all the other taxpayers." It's the very sweet deal called "socialism for the rich and free private enterprise for the poor."
By what rationale should taxpayers' money be going onto the bottom line of any for profit business at any time -- whether tax breaks, TIFs, subsidies, earmarks or bailouts? But even if you can answer that one, why should businesses be rewarded by taxpayers for their greed, risky behavior and stupidity when they fail? Isn't that just going to encourage them to continue the path of "short term gains from long term risk"? Whatever happened to Secretary Paulson's observation that "Market discipline is best served when shareholders bear both the risk and the reward of their investment"?
Consider the alternatives -- and what they say about the priorities of our elected officials who are funded by this "finance, insurance and real estate sector."
How else might we have boosted our economy with $1.3 trillion?
o We could have spent it upgrading and building infrastructure: roads and bridges, hospitals and schools -- providing employment for those 600,000 who lost jobs this year, and who would have put most all of that $1.3 trillion to circulating in our economy as well as paying off mortgages and credit card debt.Now I'm not willing to undertake the burden of demonstrating that these expenditures would be wise either. We need more savings, not more expenditures. There is no secret slush fund from which this $1.3 trillion comes. We have a nearly one-half-trillion additional federal debt (expenditures greater than income) for just this one year. We are running our government, and country, on a credit card we never pay off with loans from the Chinese. The $1.3 trillion payment will run just our current debt to nearly $12 trillion -- the long term, unfunded obligations will now be more like $55 trillion.
o We could use it to create T. Boone Pickens' plan: convert our cars, and build the natural gas infrastructure, to run our cars on natural gas -- plus, as he proposes, getting 20% of our energy from wind.
o We could use it to virtually eliminate future economic losses from flooding by moving homes and businesses from floodplains, and converting the floodplains to parks, pastures and prairies.
o As many acknowledge, if you really want to improve our economic position in the world, invest in education: K-12, college, graduate schools, research. The economic return on the post-WW II "GI Bill" (paying for veterans' college education) was enormous. The Sputnik "Defense Education Act" boosted our students' learning and preparation.
o If you want to use it to pay down debt, or eliminate bad debt, give it to those who have the debt: provide relief to those struggling under the weight of near-usurious interest rate credit card debt, buy up their debt, or the debt of those trying to get a college education -- or who got one, now can't find a job, and are unable to pay off their debt.
No, all I'm saying is that it's kind of obvious what's going on here with this "fountain pen robbery" in terms of priorities and it's shameful.
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