Thursday, November 27, 2008

Only Select Few Are Thankful for Trillions

November 27, 2008, 8:25 a.m.

Who's the Most Thankful?
How to Create an "Upward Spiral" Economy

Americans have much to be thankful for this Thanksgiving Day, 2008. For almost all of us things could be much worse than they are.

But those who have the most to be thankful for are the day traders who bought stock at the market's current bottom, and watched President-Elect Obama talk it up 1500 points for four trading days in a row before they sold. Or the CEOs who greedily either knowingly, or stupidly, drove their corporations and the nation's economy into the ditch -- but are still enjoying multi-million-dollar salary/bonus/benefit packages, flying around the country in corporate jets, and holding corporate meetings at five-star spas.

Then there's that unlucky 95-99+% of Americans that includes the rest of us who are not CEOs, do not earn between $250,000 to millions a year, and aren't personally involved in buying and selling stocks in our own accounts.

Obama has certainly brought together a group of economic advisers with experience and the ability to warm the hearts and fill the pockets of Wall Street financiers and bankers. But their combined economic wisdom for our new president has, so far, been a continuation of the old "trickle down" philosophy.

The wealthy who have made colossal multi-hundred-billion if not trillion-dollar blunders with bad investments need not worry. We, the taxpayers (or rather our grandchildren), are silently accepting the obligation to express our sympathy for what would otherwise be their personal hardship, let bygones be bygones, and agree to give them what is now estimated to have been something on the order of five trillion dollars over the past month or so.

What would have happened if that five trillion gift had been part of a real "spread the wealth" program instead? With roughly 100 million American families, that would have meant $50,000 per family; $50,000 to help banks by our making regular mortgage and credit card payments, $50,000 to help the auto industry by buying cars, $50,000 to help retail sales by buying year-end holiday gifts, $50,000 to help students (and their parents) pay increasing college tuition.

I'm not seriously suggesting that should have been done. But it helps make the point. Wouldn't that have done more to turn around our economy than giving trillions of dollars to Wall Street investors, bankers, and corporate CEOs of failing corporations? Indeed, isn't it obvious that the quickest way, indeed the only way, to "spiral up" this economy is to get money (hopefully by way of wages for jobs improving the nation's infrastructure rather than handouts) into the hands of 299 million Americans -- rather than the one million wealthiest?

Where is the voice for that 95% of the American people for whom Obama has promised a tax cut? Not the tax cut; this may or may not be a good idea right now. I'm just asking who is speaking for the unemployed, those who are -- or are about to be made -- homeless, whose credit cards are maxed out, who can't afford essential medical services, or who have had to drop out of college?

Oh, you answer, but isn't that the purpose of the latest $700 billion proposal from the new administration-to-be?

Not quite.

Not everyone who is jobless is "unemployed." A single mother, limited to part-time employment, is not eligible for unemployment compensation when she's let go. A laid-off worker now working for half his or her former salary is not "unemployed" -- and we don't offer "under-employment" compensation. Someone who was "unemployed" is no longer entitled to unemployment compensation once their benefits "run out." A jobless person who has become so discouraged from months of unsuccessful looking for work that they've simply given up is not considered "unemployed."

Generously providing banks trillions of dollars, whether to buy their worthless "toxic assets" or their stock, was supposed to solve the problem and make them more willing to make loans to each other and their customers. Instead, many have used the money to continue the lifestyles to which their executives feel a sense of entitlement, buy more banks, or to simply hold as cash reserves.

But even if they were to use the money for the purpose for which intended, how is that going to be of any assistance to those who need it most? Their problem is not that the banks don't have money to loan, it's that they wouldn't qualify for the loans -- or be any better able to pay off those loans than the loans they already have.

Consider these excerpts from what the New York Times has to say this morning (November 27) about the latest taxpayer giveaway ("U.S. Consumer Loan Aid Will Trickle Only So Far"):

If you’re buying a home, refinancing a mortgage or seeking an auto or student loan, the new government plans to make borrowing cheaper and easier sound like a gift.

One problem, however, is that whole categories of people may be ineligible. If you are refinancing, you could be out of luck if your mortgage balance is more than your house is worth. And for all kinds of new loans, lenders have raised their standards even as their customers’ credit records are deteriorating because of late payments and other problems.

And then there is the fact that the government’s efforts may take a while to start working — if they do at all. Once again, the government hopes that the benefits to consumers will trickle down. It is not simply lending to them directly. . . .

The federal government made two big moves on Tuesday [November 25]. The first, already known as TALF, for Term Asset-Backed Securities Loan Facility, is a $200 billion program that will lend money to private investors who buy securities backed by student and auto loans, credit card debt and small-business loans guaranteed by the Small Business Administration. . . .

In the second part of the program, the Fed has agreed to purchase $500 billion of mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae. . . .

But that does not necessarily mean banks will be any more likely to oblige. Another complication is that the value of many homes — even those owned by people with stellar credit — have declined, making refinancing difficult.

“At the end of the day, it still comes down not to just a rate discussion, but a discussion about qualifications as well,” said Cameron Findlay, chief economist at LendingTree. “There are fundamental elements of qualifications for loans that will inhibit the ability of this program to have any meaningful, significant impact.”

Lower mortgage rates do little when unemployment rises and wages stagnate, he added.

To qualify for the best rates, borrowers will need to have a credit score of at least 720 and a down payment of at least 10 percent and probably closer to 20 percent. Borrowers seeking to refinance will need to have the same amounts in home equity. . . .

The efforts to loosen the purse strings in other areas of consumer lending may take longer, however, if they work at all. Most of the big credit card companies are parts of banks with billions on deposit. They can already use those deposits as a ready source for new credit card loans.

“Banks may want to fund fewer of these loans out of their deposits,” said Odysseas Papadimitriou, who worked in the card industry at Capital One . . .. It is possible, he said, that they will . . . not increase the total amount of loans that they are willing to make. . . .

But none of the government’s moves alters some unfortunate facts. Lenders want better credit scores from consumers in every category. At the same time, millions of people are much less creditworthy than they used to be, because of the damage they have done to their credit scores through late or missed payments.

Lenders themselves have contributed to the downturn in creditworthiness by lowering the credit limits on huge numbers of customers’ credit cards. This has the effect of raising the percentage of available credit that a consumer is using, which usually causes their credit scores to fall.

Clearly, the banks do not have the confidence in how consumers will handle credit that they might have had six months ago. It is not clear whether a new source of funds will cure this skittishness.

Nor is it certain how much untapped desire to borrow exists. The fact that consumer spending fell an entire percentage point last month, as the Commerce Department reported Wednesday, may reflect something other than a lack of capital.

“If consumers are afraid to make purchases, it doesn’t really matter how much available credit you have,” said Mr. Papadimitriou of Evolution Finance.
Ron Lieber and Tara Stegel Bernard, "U.S. Consumer Loan Aid Will Trickle Only So Far," New York Times, November 27, 2008.

In short, we've yet to do anything really meaningful for the only Americans who hold the power to create an "upward spiral" in our economy -- that 95% Obama refers to as "the middle class."

Someone wrote a comment on my Citigroup blog entry that puts the contrast between the Wall Street and banks bailout, on the one hand, and the loans you and I get, on the other, much more succinctly. (And no, I don't know who either "Me" or "D" is.):

"Me said...

I like D's comment to me this weekend: "Sure, we'll lend them [Wall Street investors and the bankers] money. At 15.9% over prime, and if they miss a payment it will raise to 29.9%. . . . " And they'd better get the check in the mail a week ahead of time or it might be late anyway due to our reasonable processing time.
11/26/2008 07:37:00 AM"

Nicholas Johnson, "Citigroup Deal Stinks," November 25, 2008.

Indeed, both the Citigroup deal and this new "consumer" effort are but two more classic illustrations of how "the Golden Rule" has become "those who have the gold make the rules." For elaboration see the new book, Nicholas Johnson, Are We There Yet? Reflections on Politics in America (2008), Part IX. Gold; or the earlier blog entries, Nicholas Johnson, "Golden Rules & Revolutions: A Series, Part VIII: Money and Lobbyists in Iowa: Smoke and Mirrors," April 19, 2008 (with links to Parts I-VII).

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Tuesday, November 25, 2008

Citigroup Deal Stinks

November 25, 2008, 9:00 a.m.

Change? Pocket Change, Maybe
But the Reality is Worse than the Stinking Citigroup Deal
Because It's Only Symptomatic

The Citigroup deal stinks to high heaven.

[Photo credit: Washington Post; "In this 1999 photo, then-Treasury Secretary Robert Rubin, right, addresses the media with Citigroup co-chairmen and co-CEOs Sandy Weill, center, and John Reed. Rubin joined Citigroup management after resigning as Treasury chief."]

Let's start with Steven Pearlstein's column in the November 24th Washington Post. Steven Pearlstein, "A Bailout Steeped in Irony," The Washington Post, November 24, 2008, p. D1.

He concludes:

What is indisputable is that all of the decisions that have led to Citi's recent troubles were taken while Rubin was chairman of the executive committee, and made by executives with whom he worked closely. He defended them repeatedly and unequivocally, and as a director, he approved compensation packages that rewarded them (and himself) handsomely for judgments that proved disastrous.

Now, the government has been forced to save Citi by investing $45 billion in new capital and by putting a floor under its losses. By any measure, it is a sweetheart deal for shareholders, who will suffer minimal dilution of their shares. Most startling of all, however, is that Rubin and other directors and top executives have been allowed to remain at the helm. You have to wonder how much more money this crew would have to lose before the Treasury and the Fed would demand their resignations -- $100 billion? $200 billion? $1 trillion? Why weren't they dispatched as were the executives at Fannie Mae, Freddie Mac and AIG?

The ultimate irony is that just as Rubin & Co. were being bailed out at Citi by the Bush administration, President-elect Obama was announcing a new economic team drawn almost entirely from Rubin's acolytes.

That's not to take anything away from the qualifications of Tim Geithner, the new nominee for Treasury secretary, who owes his appointment as president to the New York Fed to Rubin's aggressive lobbying; or Larry Summers, who was Rubin's deputy secretary at the Treasury and whose appointment as president of Harvard was championed by Rubin as a member of the university's government board; or Peter Orszag, the soon-to-be-named nominee for budget director, who was hired by Rubin to head a Democratic think tank on economic policy that he founded.

No doubt about it -- it's a fabulous team. But perhaps the next time Obama thinks about assembling his group of wise men to give advice on the economic crisis, he might at least have the good sense to leave Rubin out of the mix. At a minimum, it's a glaring conflict of interest. More significantly, it sends a terrible signal about accountability and corporate governance.

So what brought on our current, ever-increasing economic collapse? Many things, including either a greed bordering on criminality, or exceptional ignorance, on the part of leading financial CEOs and regulators. But what made it all possible was the repeal of a structural/regulatory protection that wiser heads put in place following the 20th Century's Great Depression: banks were forbidden to get into the investment business. It was called the Glass-Steagall Act.

Pearlstein reports:

The combination of Citibank with Salomon Smith Barney under the bright red umbrella of Travelers Insurance was accepted with a regulatory wink and nod by the Federal Reserve until Fed Chairman Alan Greenspan could persuade Congress to make it legal. The hurdle was the Glass-Steagall Act, put in place during the Great Depression to prevent another market crash like that of 1929. Now that another market crash has required the government to rescue a commercial bank done in by its investment banking subsidiary, there will certainly be those who wonder whether the New Dealers didn't have it right all along. . . .

As Treasury secretary, Rubin joined with Greenspan in supporting Citi's campaign to repeal Glass-Steagall.


While it was [Sandy] Weill who created the modern Citi, it was his handpicked and hapless successor, Chuck Prince, who steered the company into the ditch. . . .

[W]hen he resigned from the Treasury in 1999, Rubin accepted Weill's offer to become what amounted to vice chairman of Citi, where he has quietly worked the back channels to Washington and other international capitals while serving as strategic counselor to the chief executive and the board of directors.

Rubin has been cagey about defining his role at Citigroup -- and at one point he got caught making a phone call to the Bush Treasury in a bid to help out Enron, a Citi client, during its death throes.
Here's more from the Post: David Cho and Neil Irwin, "Familiar Trio at Heart of Citi Bailout; Rubin, Paulson, Geithner's Shared History Paved Way for $300 Billion Federal Guarantee," Washington Post, November 25, 2008, p. A1.

The bailout of Citigroup, which put the government at risk of hundreds of billions of dollars of losses, was set in motion by three men whose professional lives have long been intertwined.

Treasury Secretary Henry M. Paulson Jr.; Citigroup board member Robert E. Rubin; and Timothy F. Geithner, the president of the Federal Reserve Bank of New York, have for years followed one another in and out of jobs in government and industry. Their close relationships helped pave the way for one of the largest and most dramatic government interventions to date in the financial crisis. . . .

Once Citigroup's stock price plunged 60 percent last week, Rubin, an old colleague from Goldman Sachs, told Paulson in phone calls that the government had to act, according to industry sources familiar with their discussions.

Geithner, too, shared a close relationship with the pair. He worked for Rubin at the Treasury Department in the 1990s and now is President-elect Barack Obama's nominee to follow Paulson as Treasury secretary.

As Citigroup's lead regulator, Geithner was deeply involved in the rescue of the firm, participating in meetings and conference calls with Paulson through the weekend. . . .

The government is guaranteeing a total of $306 billion of Citigroup's assets against losses greater than $29 billion. In exchange, it is requiring the firm to hand over $7 billion worth of preferred stock, essentially paying the government an insurance premium. . . .

Regulators also prohibited Citigroup from paying dividends to common shareholders of more than a penny a share in the coming three years and required a dividend payment of 8 percent on the government's preferred stock -- higher than the 5 percent dividends that it required of institutions that took rescue money from the Treasury Department over the past few weeks.

The Treasury also has the option of buying warrants in Citigroup if the firm's shares recover. If that happens, the government would end up owning slightly less than 8 percent of the bank's shares.

"It strikes me as unbelievably generous," said a former Fed official who has been in touch with Citigroup. "I'm sure it will be controversial. . . ." . . .

Rubin called Paulson several times to make the case for intervention on behalf of Citigroup and the banking system as a whole, said two sources familiar with the conversations.

In an interview, Rubin explained his involvement by saying that, since arriving at Citigroup in 1999, he has had "a dual role of providing strategic advice or managerial advice and also to work with clients. And that's what I've done."

"I had operating responsibilities for 33 years. And I simply didn't want any operating responsibility, and that's been the case since I've been here," he said.

On Friday, Citigroup approached the Treasury and the Fed with a plan of its own, essentially asking the government to take on the risk of hundreds of billions of dollars in troubled assets on its books, but with little compensation for the government. . . .

[T]hey [federal regulators] could have enacted a highly punitive complete bailout, like that of American International Group, requiring terms that strongly punish existing shareholders and give the government control of the Citigroup board, as well as firing the chief executive. They rejected that approach, preferring to try to give the existing Citigroup leadership team time to work through their problems. . . .
The New York Times editorializes:

Both men [Larry Summers and Tim Geithner], however, have played central roles in policies that helped provoke today’s financial crisis. Mr. Geithner, currently the president of the Federal Reserve Bank in New York, also has helped shape the Bush administration’s erratic and often inscrutable responses to the current financial meltdown, up to and including this past weekend’s multibillion-dollar bailout of Citigroup.

Given that history, the question that most needs answering is not whether Mr. Geithner and Mr. Summers are men of talent — obviously they are — but whether they have learned from their mistakes, and if so, what. . . .

As treasury secretary in 2000, Mr. Summers championed the law that deregulated derivatives, the financial instruments — a k a toxic assets — that have spread the financial losses from reckless lending around the globe. He refused to heed the critics who warned of dangers to come.

That law, still on the books, reinforced the false belief that markets would self-regulate. And it gave the Bush administration cover to ignore the ever-spiraling risks posed by derivatives and inadequate supervision.

Mr. Summers now will advise a president who has promised to impose rational and essential regulations on chaotic financial markets. What has he learned?

At the New York Fed, Mr. Geithner has been one of the ringmasters of this year’s serial bailouts. His involvement includes the as-yet-unexplained flip-flop in September when a read-my-lips, no-new-bailouts policy allowed Lehman Brothers to go under — only to be followed less than two days later by the even costlier bailout of the American International Group and last weekend by the bailout of Citigroup.
Editorial, "Mr. Obama's Economic Advisers," New York Times, November 25, 2008.

So What Can Be Said About All This?

Citigroup Only Symptom The Citigroup deal stinks. That's for sure, and by now well documented. But that's not the most important point. It's merely symptomatic of what's going on and who's doing it.

Obama to Govern From "Corporate Right" Candidate Obama may have tried to woo us and wow us with a rhetoric designed to make many of us think he would govern as a progressive populist. But when called on it he replied, accurately, that he never said so explicitly and that indeed his past history should have alerted us to the fact he would likely govern from the corporate center-right.

We Are to be Ruled by the Eastern Establishment's Elite Much of the nation's power, however measured, is to be found in a corridor running south from Boston, along Interstate 95, and the Amtrak line, to Washington. That's where you'll find a goodly number of our most prestigious colleges and universities, corporate headquarters, wealthiest Americans, most powerful politicians, most influential media, military brass, manufacturing, those who make or influence foreign policy, and the financial community. That is where you'll find much of America's "elite," or "Establishment" (what C. Wright Mills titled his book as The Power Elite) -- in the descriptive, rather than the pejorative, sense of the word.

For President-Elect Obama (Columbia undergrad; Harvard law) to "go east, young man" as he looks for some of the 7,000 individuals to whom he will give presidential appointments is both naturally to be expected and to some extent commendable. But he has, so far, overdone it a wee bit. As David Brooks observed, after analyzing the schools attended by his appointees, "If a foreign enemy attacks the United States during the Harvard-Yale game any time over the next four years, we’re screwed." David Brooks, "The Insider's Crusade," New York Times, November 21, 2008.

Nowhere is this more of an incestuous problem, as the two excerpted items, above, demonstrate than in his choice of an economic team.

"What Did You Do With the Last Nickle I Gave You?" My father told the story of a farmer in the area of Kansas where he grew up. Sitting on the porch with him one afternoon, the farmer's young boy approached them and asked his father for a nickle, to which the farmer responded, "What did you do with the last nickle I gave you?"

That's kind of how I feel about Citibank.

I didn't support the initial auto industry bailout plan for a variety of reasons, not the least of which was the failure to provide anything resembling a business plan demonstrating how the $25 billion would be used, and why it could reasonably be believed to be the answer to their problems. Nicholas Johnson, "Auto Bailout: An Open Letter to Congress," November 19, 2008.

But Congress ultimately came around to that view and is now demanding something like what I was asking for.

What's the Citigroup story? Was a business plan demanded before the initial $25 billion bailout? If it was, it obviously wasn't a very good one; if it wasn't, it should have been. Was one demanded before this weekend's additional $20 billion -- and $300-billion-plus taxpayer guarantee of the bank's worthless loans?

Shouldn't the banks and Wall Street cronies at least be held to the same standards as the auto industry?

"What did they do with the last 500 billion nickles we gave them?"

Massive Debt's Costs and Consequences I have yet to see or read of anyone from the President-Elect, through his advisers, or members of Congress, provide a thorough overview of the downside of ever-escalating debt by the trillions. In addition to the $55 trillion in unfunded obligations, "The Debt Clock" reports that, as of the morning of November 25 our current national debt is at least $10.7 trillion. I say "at least" because I'm not sure it includes the $1-plus trillion we know the government has recently put on our credit cards, or the $2 trillion the Fed has added to that without telling anyone, or the additional $300 billion provided yesterday to Citigroup.

I'm not saying we shouldn't have run up this debt -- though my instinct is that we shouldn't have, and certainly not without exacting more conditions from the recipients and returns to the taxpayers. All I'm urging at the moment is that we are entitled to be able to confront, squarely and honestly, the fact that this is not free money, that there are consequences of running up such a debt whether for nations or individuals, and that we need to know some independent experts' predictions of what some of those consequences could turn out to be.

What's Your Share? Assume we have something like 120 million families or living units in America. (I'm going to use 100 million to make the math easier.) Assume all accumulated debt ($55 trillion, plus $11 trillion, plus, plus) is near $70 trillion headed for $100 trillion. The interest on $100 trillion, at 5%, is $5 trillion a year. Your family's share? How's $50,000 a year -- just for the interest alone -- sound? Your family's share of the entire debt? About $1,000,000. So what's happening is that these folks who've come from, and will be returning to, the Wall Street financial community, have decided to give you responsibility for paying off the mortgage on a one-million-dollar home -- but one you'll never get to see or live in (not incidentally because they're already living in it).

[Update: It turns out the nation's -- our, my, share of -- debt increases by the hour. Jeff Zeleny and Jack Healy, "U.S. Unveils $800 Billion Credit Program," New York Times, November 25, 2008 ("The United States government unveiled $800 billion worth of new loan programs and debt purchases on Tuesday, hoping another massive infusion of cash would smooth troubled credit markets . . ..").]

Priorities Note that this economic team from Wall Street is advising the President-Elect, as they've already advised President Bush, that the top priority in times of economic distress is to rescue Wall Street and the banks. That's understandable. Indeed, they may even believe what they're saying.

But it's like "the six blind men and the elephant." Ask farmers and the solution is price supports. Ask auto executives and it's a "bridge loan" for the auto industry. Ask trade unions and it's a "living wage," more favorable laws for union organizing, a jobs program, and extended unemployment compensation. Ask the working poor cleaning hotels and hospitals, or those working for less than the minimum wage in restaurants, and they'll say food stamps and help with rent and utility bills.

President-Elect Obama has chosen to ask Wall Street executives.

Franklin Roosevelt and Abraham Lincoln are not the only politicians and presidents to whom our new President-Elect can look for guidance and example.

The 18th Century political philosopher Edmund Burke is another. As he put it, "Society is indeed a contract [that] becomes a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born."

Those who are dead not only paid cash, they were thereby able to leave money for their children. Those who are living have substituted consumption and debt for frugality and savings. To leave only that debt, with substantially more to come, to "those who are to be born" is not a partnership of which we can be proud.

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Monday, November 24, 2008

Gays, God and Plaques

November 24, 2008, 10:00 a.m.

Iowa City History

The Press-Citizen has editorialized about the value of recognizing and maintaining Iowa City's historic homes and buildings. Editorial, "Iowa City's Rich History is Worth Efforts to Save," Iowa City Press-Citizen, November 24, 2008, p. A9. I agree.

Historic preservation is always a balance between nostalgia and history on the one hand and cost and "highest use" on the other. But all too often the lure of the latter is permitted to outweigh the former, such that our search for profit ends up producing our loss.

But there are even simpler, and ever so much cheaper, things to preserve our architectural history that ought to be supported by everyone from the Chamber of Commerce and Downtown Association to the Johnson County Historical Society and Iowa City Historic Preservation Commission.

Some years ago I wrote a column noting how little most UI students (and new faculty for that matter) know of those for whom, say, the buildings on the Pentacrest are named, and the history of their construction and use over the years. I suffer no illusion that the column had any impact on anyone's subsequent decision, but I did notice some plaques ultimately sprung up.

The same sort of thing could be done for Iowa City's downtown business buildings. What was the first business to occupy this location? What were the subsequent businesses? Where was that ice cream shop on Iowa Avenue near Clinton? The Iowa, Varsity and Pastime theaters? Winter's Barbershop? The Co-op grocery store on Clinton in the 1940s, long before New Pioneer? How many people recognize that the sculpture near where 9 East Market Street used to be was originally a part of the wading pool in the yard outside the building containing one of the world's first institutions devoted to the study of normal children, the Iowa Child Welfare Research Station?

There's a plaque on the west end of the Benton Street bridge with some interesting history about early travel over the Iowa River, and on the Coralville end of the footbridge about Coralville's early history.

So it's not like we haven't done this at all; I'm just suggesting we do more of it.

Is a plaque the equivalent of the historic preservation of a building? Of course not. But it will cause at least some people to pause for awhile, learn a little bit more about their town, and maybe be a bit more willing to support historic preservation when the time comes.

Gay and Lesbian Marriage

That gay and lesbian couples should be permitted to enjoy the status of "marriage" has always seemed such a no-brainer to me -- whether as a matter of constitutional law, public and social policy, basic fairness, or even economic policy -- that I've not bothered to comment about it.

Now that the Iowa Supreme Court case is putting the issue back in the local news -- including Editorial, "A Case of Civil Rights," The Gazette, November 23, 2008, p. A9, and Jeff Charis Carlson, "Don't Listen to Straw Men," Iowa City Press-Citizen, November 23, 2008, p. A9 -- it's probably appropriate to remove any possible ambiguity as to my position.

Any of those of us heterosexuals who are truly concerned about "family values" and "the sanctity of marriage" should reflect upon Pogo's wise observation: "We have met the enemy . . . and he is us" -- up to and including some of our heterosexual public officials and even those ministers who seemingly find it easier to preach than to practice "family values."

There are two separate issues and institutions here -- the state, and religion -- and it is equally important for the integrity of both that their role in "marriage" be kept separate.

This is not just a matter of finely parsed constitutional provisions and language from Supreme Court opinions -- though I believe they support my interpretation. (The First Amendment prohibits the state from either "establishing" or preventing "the free exercise" of religion.) Even without this constitutional protection, as a matter of social and public policy religious institutions should have the right to admit and exclude whomever they choose -- however abhorrent their standards may be. None should be required to provide marriage services for anyone.

Similarly -- and for reasons not limited to constitutional guarantees -- the state (that is, any unit of government) should not be permitted to discriminate on the basis of sexual preference when it comes to the dispensation of basic civil rights and human rights. Any denial of a marriage license by the state should have to be grounded in significant and legitimate (and constitutional) interests of the state -- such as, say, a minimum age requirement, or waiting period, equally applicable to all.

Many of our disagreements regarding acceptable behavior could be at least moderated, if not eliminated, if we could focus on, and agree that there are distinctions between: (a) this is the behavior required of those who belong to our religion, and if you are unwilling to behave that way we will ban you from our religious organization, and (b) this is the behavior required of those who belong to our religion, and we believe so deeply in the importance of these standards that we insist the state to adopt and apply them to everyone on pain of fines and imprisonment. It is a distinction embodied in the bumper sticker: "Opposed to abortion? Don't have one."

In sum, gay and lesbian couples should have the right to obtain a marriage license from the state, but should not have the right to insist that a reluctant religious institution perform a marriage ceremony for them.

Which brings us to the use of the word "marriage" rather than, say, "civil union" -- in a case in which the substantive legal rights granted by either would be identical. Words do matter; wars are fought over them. And I can understand (while rejecting, and not sharing) the feelings of those who feel threatened by gay "marriage" but not by gay "civil unions."

Nonetheless, I guess on balance I think it's a little silly -- and even a bit mean-spirited -- if we are going to grant gays and lesbians the rights of married couples (by whatever name), as I believe we should (and believe the constitution says we must) -- to deny them the added primarily social benefits that flow from being able to characterize their relationship as "marriage."

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Sunday, November 23, 2008

Satisfactions of Lively Learning

November 23, 2008, 9:15 a.m.

In Praise of Alternative Education

I learned something of "alternative education" while serving as a school board member and K-12 education newspaper columnist for three years -- but mostly as the husband of someone who has played a national role, helped create and taught at one for 25 years in Cedar Rapids, and then helped plan one for Iowa City ("Tate") where she continues to volunteer after having retired from the Cedar Rapids' payroll.

This morning's Gazette contains an op ed column of hers that you, too, may find both moving and informative regarding alternative education. I've reproduced it, below.

"Alternative education" has no universally agreed upon definition. Here's are some excerpts from a column I wrote in 2001 regarding why we needed an alternative high school in Iowa City (since provided) that give a sense of my own definition:

“Alternative,” or “non-traditional,” just tells us what the school is not.

And since “traditional” also evades precision it doesn’t even tell us that. . . .

In one sense, every high school student is a unique blend of experiences, abilities, interests, needs, goals and ways of learning – an “alternative.” . . . .

[W]ith 1500 students in each of our high schools . . . most students survive four years in traditional high schools. Many thrive. They work at their studies and aspire to college. They demonstrate ability in organized athletic, music or other activities; they have supportive homes and friendships. They are the examples we cite as evidence of the quality of our schools.

Unfortunately, there are others who not only don’t thrive, they don’t even survive.

They drop out, either literally or figuratively. Some are among our brightest and most talented. Others are not.

Some are the children of upper socioeconomic parents. Others have no parents, or abusive parents. Some are parents. Some may be the target of school bullies, or simply shunned as loners.

They may never have read Paul Goodman’s Growing Up Absurd or Jonathan Kozol’s Death at an Early Age, but they could tell you the equivalent.

Look past the green spiked hair and pierced body parts. Listen to what these kids have to say. . . .

We sometimes confuse learning with deportment. But among our most creative and intellectually accomplished students are at least some of those who are not in their seats -- self-motivated learners bored with the lesson, those who ask embarrassing questions and organize student protests of irrational rules, the disruptive clowns who enliven the day. . . .

There is a subset of education’s many “alternatives” that is a sensitive, and successful, response to the opportunity these kids offer. These alternative high schools are what “alternative” means to me.

Cedar Rapids’ Metro High School is one. It’s been recognized twice by the President, and is visited by educators from as far away as Singapore and Latvia. . . .

Alternative schools have their own diplomas, their own buildings -- but they needn’t be elaborate. Metro started in an abandoned fire house.

Schools that are more manageable [mean that] with fewer students each can have . . . home visits by teachers – for students with homes. Each student is known by name and feels valued. There are fewer rigid rules about dress and hair style; fewer absences; and virtually no violence. Students want to be there. . . .

We [in Iowa City] lose track of our dropouts. Metros’ teachers [in Cedar Rapids] scour the malls, parks and bridges looking for theirs. . . .
Nicholas Johnson, "We Need Alternative High School," April 10, 2001, p. A9; and see Nicholas Johnson, "Learn From Alternative Schools," Iowa City Press-Citizen, May 22, 2001, p. A9 ("Alternative schools’ lower enrollments are central to their success. The buildings are more manageable for students and teachers. The Carnegie Task Force, Coalition of Essential Schools, National Association of Secondary School Principals, and former Secretary of Education Richard Riley agree. Most recommend high schools under 600.").

Coincidentally, after I wrote this I discovered in the Des Moines Register this morning an entire section largely devoted to how one country -- Finland -- has applied many of the qualities I associate with "alternative education" throughout its entire K-12 system -- something I was advocating for the U.S. in the 2001 column, "Learn From Alternative Schools," linked above. See, Linda Lantor Fandel, "An academic star: Finland's focus on education translates into top achievement," Des Moines Register, November 23, 2008, p. OP1 -- with links to the 15 or more additional stories on the subject in the special section. The section provides considerable insight into why our miserable comparisons with the educational results in other industrialized nations bears some relationship to our failure to apply the lessons from our alternative schools.

Mary succeeds in putting a human face on these comments about "alternative education," with her exploration of the brains and hearts that can make "no child left behind" a reality, rather than just a fight over text scores:

Why Involve At-Risk Students With Theater?

Mary Vasey

The Gazette, November 23, 2008, p. A10

Why do it? Why theater with so-called at-risk students?

Here, with fictional names, but real-life events, is a composite answer drawn from one teacher’s 25 years of experience.

Imagine you are working with alternative school students. You are putting together a play, a performance. There is no stage or auditorium in their building, so you arrange to have the performance in a local professional venue.

You take the bright, the tough, the sad, the turned off, the uncontrollably creative and find they are really interested in being in a play.

You find parts for 15 actors and you suffer through weeks of frustration. The drama in their lives sometimes gets in the way of the drama on the stage.

They complain about having to memorize so much and find fault with the script. Pete, the male lead, is sent to a detention center and you have to negotiate with the probation officer to let him stay after school to rehearse.

Jen and Al fall in love, then break up. They refuse to occupy the stage at the same time. The problem is that they are playing a loving brother and sister. Cindy calls Jen a “ho” and they come close to fighting.

The space for construction and painting of the set is shared with the bicycle shop so you have to move large flats out of the way every other day. The new lighting board hasn’t arrived, and it looks like the old one will have to do.

Two weeks before the play opens, they all have their lines memorized and the blocking down. It is beginning to look like a real production. One week later, they are stumbling over their lines and turning their backs on the audience.

Jen and Al fall in love again. Pete gets out of detention.

You bring wigs and costumes to rehearsal. They go crazy.

The boys dress up in girls clothing and wigs. They ask if they can take their bows in drag.

The stage is available the day before the performance.

You order pizza and hope they will all show up. They all do. The dress rehearsal is a disaster. Pete forgets two full pages of dialogue and they all freeze and just stare at one another.

The flats have just been painted and Al backs into one. Somebody eats the stale potato chips from the prop table, thereby ruining Jen’s potato chip scene.

The people who run the theater look worried. You vow never to do this again.

After the dress rehearsal, you hear the students planning to get together. You pray no one gets drunk, takes drugs or gets arrested.

You are sure someone will.

Instead, they gather at Jen’s house and practice.

The night of the performance they all show up. They look clear-eyed. They look excited. They look like kids.

Pete remembers his lines and delivers them as if they are second nature. The chips are crisp and available. The old lighting board works and the paint on the flats is dry and bright. It is better than anything you might have imagined.

The boys take their bows in drag and all the actors bask in the approval and attention of the audience. They laugh and hug and smell the roses somebody got them. The tough, the used, the abused, the worldly, the sad are transformed.

They are kids, teenagers.

They are silly, giggly and happy.

It is beautiful. They are beautiful.

They know how it feels to be young, innocent and proud and they deserve that feeling.

Years later, when you run into the actors, they tell you that their play was the highlight of their high school experience. They wonder if you can get a copy of the video for them.

And that is why we do it.
Mary Vasey of Iowa City was a teacher of language arts and theater and has been active locally and nationally in alternative education for more than 30 years, including 25-plus years at the Cedar Rapids School District’s award-winning alternative high school, Metro. She volunteers with the theater program at Tate High School in Iowa City.

# # #

Friday, November 21, 2008

FromDC2Iowa's Weekend Edition

November 21, 2008, 4:00 p.m.; November 22, 2008, 6:00 a.m. (addition of "The Answer to Global Economic Collapse")

Odds, Ends and Updates from

"Live From Prairie Lights" Cancellation.

Program supporters use United Nations' "shock and awe" in war on Iowa Public Radio executives. See, Nicholas Johnson, "Public Radio's Self-Inflicted Wounds," November 11, 12, 18, 20, 21, 2008.

The High Price of Peremptory Firing: Jones sues for $2.25 million

Phillip Jones, 68, was dismissed as vice president for student services Sept. 23 by UI president Sally Mason. In his [$2.25 million wrongful termination] claim to the Iowa Board of Appeals, Jones claims the firing was inappropriate and that it caused emotional distress and damaged his personal and professional integrity. . . .

"The wrongful termination of Dr. Phillip E. Jones has caused him irreparable harm," his claim states. "He was placed in a false light in the professional community by the allegations adopted from the Stolar report and redistributed by the (Iowa state) Board of Regents and (UI) President (Sally) Mason." . . .

The claim . . . identifies more than $680,000 in professional losses. It states that from Sept. 24 to June 30, 2009, Jones would lose more than $180,000 in earnings, UI contributions, health insurance, flexible spending account, accumulation of vacation payout and other incidentals.

The claim also identifies $500,000 in potential earnings losses, saying Jones planned to retire from UI and work as a higher education consultant.
Brian Morelli, "Jones files $2.25 million wrongful termination claim with state," Iowa City Press-Citizen, November 21, 2008, p. A1. See generally, Nicholas Johnson, "University of Iowa Sexual Assault Controversy -- 2007-08."

The Answer to Global Economic Collapse
Looking for the answer to the global economic depression toward which we seem to be headed with ever-greater acceleration?

"Look North, young man, look north."

["'Go west, young man' [was] a favorite saying of the nineteenth-century journalist Horace Greeley, referring to opportunities on the frontier. Another writer, John Soule, apparently originated it." The New Dictionary of Cultural Literacy, 3rd ed., 2002.]

It turns out that delivery of basic health care to an entire nation's population at reasonable cost is not the only thing Canada has to teach us.

Let's hope our new Secretary of the Treasury designate,Timothy F. Geithner, currently president of the Federal Reserve Bank of New York [Jackie Calmes, "For Treasury, Geithner Said to Be Choice," New York Times, November 21, 2008] -- the mere rumor and announcement of whom boosted stock market measures by 5 to 6 percent -- who has plenty of credentials of his own, is willing to listen to one of the youngest financial regulators of the G-7 and G-20, Mark Carney, Governor of the Bank of Canada.

If he wants to literally listen, I'd recommend Carney's participation in the BBC's current "The Interview" program -- being Internet-broadcast as I write this (I listened to it being broadcast live earlier), but soon to be available for streaming or download. If Geithner wants to read what he's written, I'd recommend Carney's recent talk in London to the Canada-United Kingdom Chamber of Commerce, Mark Carney, "Building Continuous Markets," November 19, 2008.

Carney avoids sounding either critical of his peers, or unduly self-promotional. But facts are facts, and he doesn't hide them. Here is an excerpted paragraph describing Canada's current position:

Canada's experience is instructive. While Canada's financial system has been affected by the crisis in global financial markets, the impact has been significantly less than in many other major economies, not least because Canada is further along than others in implementing the G-7 Action Plan. Canada starts with financial institutions that are healthier than their international peers. Not merely have losses on structured products of Canadian banks been modest, but more importantly, their absolute leverage is markedly lower. As a simple illustration, major Canadian banks have an average asset-to-capital multiple of 18 on a consolidated basis, which is slightly below the regulatory maximum of 20. The comparable figure for U.S. investment banks is over 25. For . . . some major global banks, it is over 40. While foreign banks are in the process of moving towards Canadian levels, our banks obviously face no such pressures. In addition, the quality of Tier 1 capital of Canadian banks is among the strongest in the world.
There is no "executive summary" or "take-away" from his remarks that encapsulates all of his observations and suggestions. You need to read it all. But as we all spiral down during the next two to five years I suspect he will continue to be someone whose words are very much worth your time.

Auto Bailout: "Show Me the . . . Plan"

On November 19 I offered an "open letter" to my Senators and Congressional representative. I identified five categories of questions for which I requested their response. Not incidentally, that blog entry has now been sent to the three of them (as recommended by a reader who included that suggestion in a comment); if and when I get responses I'll include them in that blog entry.

The last of the questions was: "Where on the Internet can I find the business plan that you are presumably relying upon that documents, precisely, how this $25 billion is to be used, and how, why and when it will solve these three companies' problems, revive the industry, and why it will eliminate any need for them to regularly return to you for more taxpayer money?" Nicholas Johnson, "Auto Bailout: An Open Letter to Congress," November 19, 2008.

Two days later the New York Times reports that apparently the same question has now occurred to Congress -- days after they signed on the line their support for the $25 billion bailout, plan or no plan. Speaker Nancy Pelosi is now quoted as saying, "Until we can see a plan where the auto industry is held accountable and a plan for viability on how they go into the future — until we see the plan, until they show us the plan, we cannot show them the money.” Majority Leader Harry Reid adds, "The executives of the auto companies have not been able to convince Congress or the American people that this government bailout will be its last.” David M. Herszenhorn, "Detroit’s Bid for Aid Fails — For Now," New York Times, November 21, 2008.

Conflicts Over Conflict of Interest

As of this afternoon (November 21) it is looking increasingly likely that Senator Hillary Clinton will be President Obama's Secretary of State. Peter Baker, "Clinton Decides to Accept Post at State Dept., Confidants Say" New York Times, November 21, 2008.

That being the case, there are serious potential conflict of interest issues surrounding her husband's activities.

The Obama transition team is focused on the wide array of Mr. Clinton’s postpresidential activities, some details of which have not been made public. This list includes the identity of most of the donors to his foundation, the source of some of his speaking fees — he has earned as much as $425,000 for a one-hour speech — and his work for the billionaire investor Ronald W. Burkle.

The vetting of Mr. Clinton’s myriad philanthropic and business dealings is “complicated, and it may be the complications that are causing hesitation on both sides,” said Abner J. Mikva, one of Mr. Obama’s closest supporters and a White House counsel during the Clinton administration. “There would have to be full disclosure as to who all were contributors to his library and foundation. I think they’d have to be made public.” . . .

“It’s not just what he does or says — it’s the fact that the foundation is involved with foreign countries, some of which might well be in conflict with U.S. policy,” Mr. Mikva said. “It’s more than a legal problem — there are ethical problems and appearance problems.”
Don Van Natta Jr. and Jo Becker, "Many Dealings of Bill Clinton Are Under Review," New York Times, November 17, 2008.

Nor is that the only potential cabinet appointment raising such issues.

President-elect Barack Obama’s selection of former Senator Tom Daschle for secretary of health and human services posed new questions on Wednesday about how broadly the new administration would apply Mr. Obama’s campaign promises to limit potential conflicts of interest among his appointees. . . .

Former Senator and Majority Leader Tom Daschle's "firm represents dozens of [health care] concerns including pharmaceutical companies, health care providers, and trade groups for nurses and nursing homes" and notes that it "has the significant advantage of including two former U.S. Senate majority leaders — Senators Bob Dole and Tom Daschle." Daschle also serves on the board of the Mayo Clinic, which "is itself a major health care provider, research institution, and recipient of grants from the National Institutes of Health." Moreover, Daschle's "wife, Linda Daschle, is a prominent lobbyist for aerospace and military concerns."
David D. Kirkpatrick, "Obama's Pick of Daschle May Test Conflict-of-Interest," New York Times, November 19, 2008.

Et tu, NPR? Gardiner Harris, "Radio Host Has Drug Company Ties," New York Times, November 21, 2008: "An influential psychiatrist [Dr. Frederick K. Goodwin, a former director of the National Institute of Mental Health] who served as the host of public radio’s popular 'The Infinite Mind' program earned at least $1.3 million between 2000 and 2007 giving marketing lectures for drug makers, income not mentioned on the program. . . . In October, [Senator] Grassley revealed that Dr. Charles B. Nemeroff of Emory University, one of the nation’s most influential psychiatric researchers, earned more than $2.8 million in consulting arrangements with drug makers from 2000 to 2007, failed to report at least $1.2 million of that income to his university and violated federal research rules.

How to Manipulate Media

And while we're on the subject of the media, for a very inside and insightful explanation of how celebrities control what we think of them, and how and why the media goes along, take a look at Brooks Barnes, "Angelina Jolie's Carefully Orchestrated Image," <i>New York Times, November 20, 2008.

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Thursday, November 20, 2008

A Trillion Here, a Trillion There

November 20, 2008, 7:50 a.m.

Where Have All the Dollars Gone?

(With credit and apologies to Pete Seeger's "Where Have All the Flowers Gone?"; and for the title to the line "A billion here, a billion there, and pretty soon you're talking real money" -- attributed, though without substantiation, to former Senator Everett Dirksen of Illinois.)

[Photo credit: Jay Mallin/Bloomberg News]

Somehow, while we were focusing on the $25 billion bailout request from the private-jet-flying Big Three Auto CEOs, roughly 100 times that amount disappeared from this building (the Federal Reserve), notwithstanding the security guard pictured here near the entrance.

That's right. While we were assuming that the debt Secretary Paulson and our frightened elected representatives were handing off to our great grandchildren was limited to Paulson's $700 billion gift to his friends, it turns out that the Fed's Bernanke had friends of his own to whom he was providing another Two trillion dollars!

Now Bernanke is refusing to reveal who his newly-wealthy friends are or what kind of collateral he was willing to accept for these "loans."

It's all reminiscent of another song Pete Seeger made famous that will soon be coming round again, "Banks of Marble":

I've traveled 'round this country
from shore to shining shore
It really made me wonder
the things I heard and saw

I saw the weary farmer
plowing sod and loam
l heard the auction hammer
just a-knocking down his home

[chorus] But the banks are made of marble
with a guard at every door
and the vaults are stuffed with silver
that the farmer sweated for
And so on through "the weary miner, scrubbing coal dust from his back."

It is our money. We have worked for it. We paid it in taxes to support social and other legitimate programs of our federal government. And now it is being given away by the trillions, by two individuals to friends of theirs, friends who bear much to most of the responsibility for the greed that has created our current economic collapse.

In case you missed the details, read on:

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return. . . .

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

``It's your money; it's not the Fed's money,'' said billionaire Ted Forstmann, senior partner of Forstmann Little & Co. in New York. ``Of course there should be transparency.''

Federal Reserve spokeswoman Michelle Smith declined to comment on the loans or the Bloomberg lawsuit. Treasury spokeswoman Michele Davis didn't respond to a phone call and an e-mail seeking comment. . . .

The Fed's lending is significant because the central bank has stepped into a rescue role that was also the purpose of the $700 billion Troubled Asset Relief Program, or TARP, bailout plan -- without safeguards put into the TARP legislation by Congress.

Total Fed lending topped $2 trillion for the first time last week and has risen by 140 percent, or $1.172 trillion, in the seven weeks since Fed governors relaxed the collateral standards on Sept. 14. . . .

Before Sept. 14, the Fed accepted mostly top-rated government and asset-backed securities as collateral. After that date, the central bank widened standards to accept other kinds of securities . . ..

Banks oppose any release of information because it might signal weakness and spur short-selling or a run by depositors, said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group. . . .

The nation's biggest banks, Citigroup, Bank of America Corp., JPMorgan Chase, Wells Fargo & Co., Goldman Sachs Group Inc. and Morgan Stanley, declined to comment on whether they have borrowed money from the Fed. They received $120 billion in capital from the TARP, which was signed into law Oct. 3.

In an interview Nov. 6, House Financial Services Committee Chairman Barney Frank said the Fed's disclosure is sufficient and that the risk the central bank is taking on is appropriate in the current economic climate. Frank said he has discussed the program with Timothy F. Geithner, president and chief executive officer of the Federal Reserve Bank of New York and a possible candidate to succeed Paulson as Treasury secretary.

``I talk to Geithner and he was pretty sure that they're OK,'' said Frank, a Massachusetts Democrat. . . .

The Bloomberg lawsuit argues that the collateral lists ``are central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression.'' . . .

``As a taxpayer, it is absolutely important that we know how they're lending money and who they're lending it to,'' said Lucy Dalglish, executive director of the Arlington, Virginia- based Reporters Committee for Freedom of the Press.

Ultimately, the Fed will have to remove some securities held as collateral from some programs because the central bank's rules call for instruments rated below investment grade to be taken back by the borrower and marked down in value. Losses on those assets could then be written off, partly through the capital recently injected into those banks by the Treasury.

Moody's Investors Service alone has cut its ratings on 926 mortgage-backed securities worth $42 billion to junk from investment grade since Sept. 14, making them ineligible for collateral on some Fed loans.

The Fed's collateral ``absolutely should be made public,'' said Mark Cuban, an activist investor, the owner of the Dallas Mavericks professional basketball team and the creator of the Web site, which focuses on the secrecy shrouding the Fed's moves.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).
Mark Pittman, Bob Ivry and Alison Fitzgerald, "Fed Defies Transparency Aim in Refusal to Disclose (Update2)," Bloomberg, November 10, 2008.

A trillion here and a trillion there and pretty soon you're talking real money.

# # #

Wednesday, November 19, 2008

Auto Bailout: An Open Letter to Congress

November 19, 2008, 10:15 a.m.

An Onion That Will Make You Laugh as Well as Cry
Followed by an Open Letter To My Senators and Congressman
Brought to You by

[Credit: The Onion; Source: In The Know: Should The Government Stop Dumping Money Into A Giant Hole?]

Open Letter to My Senators and Congressman
Regarding the Big Three Auto Bailout

[Note: This letter has been sent by mail as well as published here. Such responses as I may receive from these three officials -- or the fact that I get no response from one or more -- will be reported here.]

Dear Senators Grassley, Harkin and Congressman Loebsack:

Thank you for your willingness to address one of the toughest sets of economic challenges any Congress has ever confronted, and to search for governmental responses that will produce more good than harm.

I do not believe the proposed auto bailout is such a response.

Press reports indicate you intend to support it anyway. See, e.g., Thomas Beaumont, "Grassley tells auto execs: Cut your pay to $1," Des Moines Register, November 17, 2008.

So I have some questions for you that I hope you will be good enough to answer -- as well as providing me with sources on the Internet where I can find the reports and data you have relied on in coming to your position.

1. Overview. All data I know of suggests that major indicators -- manufacturing output, consumer confidence and purchasing, unemployment, mortgage foreclosures -- are all going to continue to get worse, and probably at an accelerating rate, for the foreseeable future. Indeed, I know of no scenarios indicating how, when or why things will turn around.

Questions: Under these circumstances, don't you think it would make more sense for Congress in general, and you in particular, to be examining, and proposing solutions for, the entire economy rather than the industry-by-industry approach currently in vogue? If you, or others, have in fact already done this please refer me to sources on the Internet I could also examine.

2. Costs. Keynesian economics, and many of today's economists, urge the benefits of government spending in times of economic recession. But benefits are usually accompanied with costs, which is why we have benefit-cost analysis. It's one thing to ramp up government spending when national debt is low and budgets are nearly in balance. But we currently have $55 trillion in unfunded future obligations, a $12 trillion debt, and an annual budget deficit currently adding $1 trillion a year (or more) to that national debt.

Questions: Accepting that there may be benefits from government bailouts, what are the short and long term costs -- perhaps in runaway inflation, deflation, third-world-style national bankruptcy, or other comparable economic calamities, and where on the Internet might I find the independent reports and analyses that you and others have access to regarding these risks? My three great grandchildren -- whom you and I are asking to pay the debts we've run up -- have asked me to find out from you.

3. Consumers. We currently have 10 million unemployed -- with monthly increases, and even increases in the rate of increase. Two-thirds of our economy is driven by consumer spending. I have written of my problems with the $700 billion bailout you supported (problems which even Secretary Paulson now acknowledges) as well as the auto industry bailout (and the $25 billion you earlier provided the Big Three). We have yet to see any economic turnaround from those unprecedented massive expenditures.

Questions: Why do you believe that "trickle down" -- giving money to corporate CEOs, with or without conditions, to operate their companies -- is more effective than "trickle up" -- a jobs program and prevention of mortgage foreclosures, putting money in the hands of consumers?

4. Infrastructure. The New York Times reports that the Chinese "government said [its $586 billion] stimulus would cover . . . low-income housing, electricity, water, rural infrastructure . . . environmental protection and technological innovation — [to] incite consumer spending and bolster the economy." David Barboza, “China Unveils Sweeping Plan for Economy,” New York Times, November 9, 2008. Including roads, bridges, schools, hospitals, flood prevention, disaster recovery -- our own list of priority public projects is seemingly endless.

Questions: Why, to the limited extent that you and your fellow members of Congress have concerned yourselves with the needs of individual American people (as distinguished from our corporations), have you focused on unemployment insurance and food stamps rather than a massive jobs program that would not only put money into the hands of the only people who can improve the economy, but would buy us a rebuilt America as well?

5. Problem. The multi-million-dollar-a-year auto executives who profess to be concerned about the "three million unemployed" if you don't bail them out are very wide of the mark. In an economic depression with no end in sight, 10 million unemployed with more every passing day, automobile sales are down and will undoubtedly decline further. And many to most of such automobiles as will be sold will not be sold by the Big Three anyway.

This depression has produced pain for those who work in automobile manufacturing, dealerships and suppliers -- already 500,000 lost jobs in Michigan alone -- as well as in every other major sector of our economy, including retail. It is going to produce more pain in the months and years to come. Whether you provide the $25 billion bailout, or not; or the companies go through Chapter 11, or not, consumers are not going to buy more cars and layoffs will continue.

As we've recently seen with CitiBank, you gave them $25 billion and what did they do -- they laid off nearly 100,000 workers. Whatever else you may call it, clearly your approach to the auto industry is highly unlikely to end up being a jobs program.

GM has gone through $185 billion in cash over the last few years; its stock has declined 90%. A full year ago it reported losing $39 billion in one quarter ("the second largest quarterly loss in U.S. history. . . . GM is hemorrhaging money . . . and the outlook for 2008 and beyond is bleak." Associated Press, "GM posts huge $39 billion net loss," MSNBC, November 7, 2007.) Its problem is not a temporary "cash flow" problem that will be resolved by next January or February; and it cannot be solved with a temporary loan that will be repaid by January or February.

Although even Secretary Paulson now agrees that you were wrong to vote for the plan he put before you, I am giving you the benefit of the doubt: I assume you are applying the wisdom of "fool me once, shame on you; fool me twice, shame on me," and that you have had access to, studied, and been persuaded by a detailed business plan for the auto industry bailout you apparently support.

Questions: Where on the Internet can I find the business plan that you are presumably relying upon that documents, precisely, how this $25 billion is to be used, and how, why and when it will solve these three companies' problems, revive the industry, and why it will eliminate any need for them to regularly return to you for more taxpayer money?

Thank you for your assistance and for working on our behalf.


Nicholas Johnson
Constituent and Taxpayer

# # #

Monday, November 17, 2008

"Hats Off" to Register for Money in Politics Expose

November 17, 2008, 2:40 p.m.

Register Wins "Hats Off" Award for Expose:

Tawdry Impact of Campaign Contributions on Iowa's Nursing Home Public Policy

We're all familiar with the role of big money in Washington. See, e.g., Nicholas Johnson, "Campaigns: You Pay $4 or $4000," Des Moines Register, July 21, 1996, p. C2 (documenting the details of how major campaign contributors get benefits from the federal government roughly 1000 to 2000 times the value of what they contribute).

We like to believe that the elected officials representing the honorable folks living here in bucolic Iowa are a cut above all that.

Well, sadly, they're not.

But making the case isn't easy. Last April I wrote, "Unfortunately, . . . investigative reporting of money in Iowa politics and governing is all too rare. Occasionally there will be stories regarding which legislators have raised how much money. There may even be a reference to where some of that money came from. Very rarely is there an effort to investigate the extent to which there is a relationship between the sources of campaign funds and the votes of the recipients -- let alone a routine reporting of these relationships for every single member of the Iowa legislature." Nicholas Johnson, "Golden Rules & Revolutions: A Series, Part VIII: Money and Lobbyists in Iowa: Smoke and Mirrors," April 19, 2008.

Occasionally ("rarely" would be more accurate) this blog gives a "hats off" award for journalistic excellence. And the Register earned it yesterday for two pieces by Clark Kauffman: Clark Kauffman, "Nursing home groups donate to lawmakers," Des Moines Register, November 16, 2008, and Clark Kauffman, Industry Courts Legislators," Des Moines Register, November 16, 2008. (As it happens, Kauffman was also the author of the earlier article, on this same subject, that prompted my earlier blog entry last April: Clark Kauffman, "Culver won't part with nursing home industry's donations," Des Moines Register, April 7, 2008.)

Here, then, are excerpts from Kauffman's November 16 stories, followed by additional excerpts from my earlier April 19, 2008, blog entry.

At 4 o'clock on a Wednesday afternoon last year, a group of Iowa nursing home officials gathered at the South Dakota home of Tim Boyle, the owner of Grinnell's Friendship Manor and several other Iowa care facilities.

It was one of 12 legislative fundraisers . . .

The 12th, at Boyle's residence, was for Rep. Christopher Rants, then the minority leader of the Iowa House [who] collected 15 checks totaling $3,090.

The contributors included Boyle; two of his relatives; the political action committee of the Iowa Healthcare Association; Steve Ackerson, the association's executive director; and Richard Allbee, the chief executive officer of a company that operates four dozen care facilities in Iowa.

Boyle is now the president of the board of the Iowa Healthcare Association, which is telling lawmakers that the Iowa Department of Inspections and Appeals is overly aggressive in policing the state's nursing home industry. His Friendship Manor is facing a $112,650 federal fine for alleged neglect that resulted in 89-year-old Ruth Louden losing part of one leg. . . .

Here's a look at some of the biggest recipients of money from the Iowa Health Care Association Political Action Committee during 2008:

Iowa Democratic Party: $12,500

Iowa Senate Majority Leader Mike Gronstal, D-Council Bluffs: $12,500

Gov. Chet Culver: $10,000

Republican Party of Iowa: $7,500

Senate Minority Leader Ron Wieck, R-Sioux City: $5,000

House Speaker Pat Murphy, D-Dubuque: $4,500

House Majority Leader Kevin McCarthy, D-Des Moines: $2,500

Former House Minority Leader Christopher Rants, R-Sioux City: $2,000

Rep. Jo Oldson, D-Des Moines: $2,000

Senate President Jack Kibbie, D-Emmetsburg: $2,000
Clark Kauffman, "Nursing home groups donate to lawmakers," Des Moines Register, November 16, 2008.

State Rep. Dave Heaton thinks Iowa's nursing home industry is getting a raw deal from the Department of Inspections and Appeals. . . .

[T]he Mount Pleasant Republican has suggested moving the regulation of Iowa's nursing homes from the state inspections department to the Iowa Department of Elder Affairs. . . .

Elder Affairs . . . did oversee assisted-living centers until 2002 when it was reported that the agency had never issued any penalties against any Iowa care facilities and was keeping two sets of inspection reports - a confidential set that detailed problems within the facilities, and a public version that omitted any mention of those issues. . . .

Senate President John "Jack" Kibbie, D-Emmetsburg, says he'd like to see the inspections department take what he calls a "softer approach" to regulating nursing homes. . . .

In 2007, Kibbie and Heaton each traveled separately to Washington, D.C., with their travel expenses paid for by the Iowa Healthcare Association, the organization that lobbies state legislators on behalf of Iowa's nursing homes.

Heaton said he sees nothing wrong with private industry paying for such trips. . . .

Steve Ackerson, executive director of the Iowa association, said the . . . association paid for the lawmakers' airfare and lodging expenses . . ..

Heaton said he doesn't recall spending the night or attending the convention.

Association records indicate Kibbie traveled to Washington with Ackerson two months later. In a newsletter sent to Iowa nursing home officials after that trip, Ackerson said . . . Kibbie "really went to bat" for the industry.

Kibbie said he and his wife went back to Washington this year at the association's expense. While there, he was given an award from the American Healthcare Association.

"They just offered to take us out there and bring us back," Kibbie said. . . .

"Where am I going to get the money?" he said.
Clark Kauffman, Industry Courts Legislators," Des Moines Register, November 16, 2008.

So a big "Hats Off" to the Register and Clark Kauffman for performing this central obligation of the mass media, and central purpose of the First Amendment: a "checking value" on all major institutions in general, and on the role of money in politics in particular. Those "Washington politicians" are not the only ones Iowans need to keep an eye on -- a task made possible only with this kind of assist from the media.

See also, Jay Christensen-Szalanski, "Following the Campaign Money," Iowa City Press-Citizen, October 16, 2008 ("For years, non-partisan groups like the League of Women Voters have documented the corrupting effect of lobbyist money and out-of-state campaign contributions like those cited above. When our legislators respond with the standard, 'These gifts don't affect my voting,' ask yourself why smart lobbyists still give them money and then think back to the common-sense examples at the beginning of this article." Some of the cited examples for Iowa City's legislative representatives included "lobbyists for hospitals, nursing homes, drug companies, insurance companies and health provider interest groups" giving to two legislators who publicly "advocate affordable health care." Riverside Casino and a payday loan company contributed to another. A New York investment firm CEO gave $10,000, plus $3000, plus $3000 to two others.)

From the April 19, 2008, blog entry:

Former Governor Tom Vilsack took "campaign contributions" from the nursing home industry. Iowa's present Governor, Chet Culver, received $15,500 from the nursing home industry during the last two years -- at a time when lax state inspections of nursing homes have been criticized. I don't mean to suggest a connection, and neither did the Des Moines Register story, but the governors' responses to these observations remind me of the Queen's line from William Shakespeare's Hamlet: "The lady doth protest too much, methinks."

A former Iowa legislator, Democrat John Tapscott, a critic of the industry, asked both Culver and his predecessor, Tom Vilsack (both Democrats) to return the payments.

Vilsack wrote to Tapscott and said: "[I]f you believe that the taking of this contribution in some way affects my ability to do that job, I can assure you it does not." . . .

Culver spokesman Brad Anderson said, . . . "The idea that contributions have affected in any way the regulation of the nursing home industry by the Department of Inspections and Appeals under this administration is patently false . . .."
Clark Kauffman, "Culver won't part with nursing home industry's donations," Des Moines Register, April 7, 2008.

Unfortunately, this kind of investigative reporting of money in Iowa politics and governing is all too rare. Occasionally there will be stories regarding which legislators have raised how much money. There may even be a reference to where some of that money came from. Very rarely is there an effort to investigate the extent to which there is a relationship between the sources of campaign funds and the votes of the recipients -- let alone a routine reporting of these relationships for every single member of the Iowa legislature.

Nor has there been much reporting about the use of money as legislative power inside the legislature. To what extent is "leadership" purchased? What of those legislators who raise "campaign funds" far in excess of reasonable need in order to pass them along to the leadership, their relevant state parties -- or to their less prosperous colleagues. Is there any correlation between their "generosity" and the fact they end up chairing committees?

Understand, I'm only raising questions, not providing answers. Indeed, my point, my complaint, is that we don't have the answers, answers I think are necessary in a democracy, answers we can rightfully expect the media to provide for us. Iowa's springtime legislators may well be as pure as Iowa's wintertime snow. But it is possible -- just barely possible -- that they may share some of the practices that have been a part of American politics during the past century in the other 49 states and Washington.

For example, where are the current news stories tying campaign contributions and lobbying expenses to the otherwise rather bizarre votes of Iowa legislators banning smoking throughout the entire state of Iowa -- except for gambling casinos?

As Rekha Basu reports, "The result came out of political deal making, not logic. The exemption was put in after hard lobbying by the casino industry." Rekha Basu, "Logic takes detour with smoking-ban exemptions," Des Moines Register, April 11, 2008.

When I say "where are the stories" I don't mean to suggest there are no such stories -- with the details of dates (over time as well as last 12 months), amounts ("in-kind," trips and entertainment as well as cash), names of donors (gambling and tobacco industry individuals as well as PACs) and recipients (political parties as well as legislators and their leadership), Nevada and other out of state money, and so forth. I just mean the question literally: if you've seen them please put a comment on this blog entry as to where they are so I can make reference to them.

Can those legislators who insisted on the casino exemption give us equal, governor-quality assertive assurances that their votes were not in any way influenced by campaign contributions, lobbyist pressure and favors, or other benefits?
Nicholas Johnson, "Golden Rules & Revolutions: A Series, Part VIII: Money and Lobbyists in Iowa: Smoke and Mirrors," April 19, 2008.

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Friday, November 14, 2008

Trust Your Instincts, Auto Bailout 's Terrible Idea

November 14, 2008, 10:45 a.m., 3:20 p.m.; November 15, 2008, 10:20 a.m. (video of Peter Schiff's prescient predictions during last couple of years); November 16, 2008, 11:00 a.m. (Sunday Register's consistent editorial; bottom of blog entry)

"Workers of the World Unite
You Have Nothing You Need Use But Your Brains"

Forgive the distant play on "workers of the world unite, you have nothing to lose but your chains;" the point is that the observations of workers and all the rest of us are worth something when evaluating the judgments of the "experts."

On balance, I'm a proponent of a meritocracy, expertise, graduate and post-graduate education, and looking to scientists and experts rather than ideologues for solutions to public policy challenges.

But it's also reassuring when ordinary folks like myself, relying on instincts, intuition and such limited information and understanding as we possess, can come to the same conclusions ultimately adopted by the experts.

(And I won't even note the instances when the "experts" prove to be not all that expert -- except to provide you the following video look-back on how Fox's "experts" trashed the prescient predictions of Peter Schiff.)

That amateur's instincts can often prove right is fortunate for a blogger like myself, since I enjoy expressing opinions on dozens of public policy topics for which I have neither formal educational training nor the expertise of "experience."

But there may be a lesson here for the experts as well. In a variation on "when the people will lead their leaders will follow," when the public says "the emperor has no clothes" it might well behoove the experts to at least take a second look at their naked proposals.

So it is with the coming global economic collapse.

Please note that my point is precisely the opposite of "we're smarter than the experts." My point is that even though many of us are not smarter than the experts, even though we don't have the educational credentials or experience that they do, doesn't mean that we aren't capable -- drawing on what we do have -- of coming up with positions and understandings that ultimately prove to be correct.

When I wrote the op ed column, "Ten Questions for Bush Before War" in February of 2003 (along with many similar analyses at that time), I wasn't the only "non-expert" who was able to predict, pretty much step-by-step, the disasters for America that would result from our invasion and occupation of Iraq.

When Secretary Paulson announced his three-page $700 billion bank bailout plan many noted that if we were going to go down that road we should at least give the taxpayers some equity in return for being bilked, rather than just buy up the banks' securitized worthless mortgages. I was among them: Nicholas Johnson, "Better Alternatives to Congress' Bailout Plan; Senate Bill: Wrong Plan, Favoring Wrong People, at the Wrong Time," October 2, 2008. Now even Paulson has reversed course and acknowledged we were right.

Today's issue involves the automobile industry bailout being pushed by the Democratic Party leadership -- President-elect Obama, Speaker Pelosi, and Senate Majority Leader Reid. Indeed, apparently Obama made this among his top priorities during the limited time he had with President Bush (who has opposed the idea) during their visit. Declan McCullagh, "Big Three Bailout? Not So Fast,", November 12, 2008 ("The labor movement spent, according to Financial Week, a whopping $385 million to elect Obama and other Democrats last week. Nobody writes such large checks without expecting something: now it's payback time.").

To many observers this proposal looked nuts. Nicholas Johnson,"Jobs, Not Unemployment, Key to Recovery; Why America Needs a Jobs Program: Because When Your Automobile (Industry) is in the River It Makes More Sense to Go For the Shore Than to Continue Bailing it Out," November 8, 2008 ("GM went through nearly $7 billion in cash in the course of losing over $4 billion during the last three months! Pouring more billions of taxpayers' money into this bottomless pit can do little more than postpone the agony for three or four more months.").

GM's problems are fundamental and have been for decades.

Management has been unimaginative, resistant to change, and bureaucratized beyond belief. It has opposed progress of all kinds: seat belts, air bags, and bumpers that might withstand a crash at more than two miles per hour; small cars when customers wanted them and foreign car manufacturers were gaining an increasing share of our domestic market by providing them; efforts to reduce greenhouse gases and climate change; their lobbying for tariff protections rather than confronting competition in an open marketplace; dragging their feet on hybrids and alternative fuel vehicles or even improving the gas mileage of conventional vehicles; continuing to manufacture trucks and SUVs in the face of rising gas prices. See, Declan McCullagh, "Big Three Bailout? Not So Fast,", November 12, 2008 ("Detroit's problems aren't caused by a one-time slump. They can't be fixed by another infusion of cash. One cause is that union labor and legacy costs are too high and make the so-called Big Three companies uncompetitive. Another is that their profitability is tied to large, heavy trucks and SUVs that Americans no longer want to buy, at least in such large numbers. That's just common sense.").

The company has permitted itself to assume liabilities (for employees' health care and pension plans among other things) far beyond its ability to pay. And now it's burning through cash at a rate that will bring it to bankruptcy by early next year. Sales of internal combustion vehicles are down dramatically around the world -- but far more so for GM than for those made at American plants by American workers by Toyota, Honda, BMW, and Kia. "Sales of cars and auto parts plunged 23.4 percent from last year, . . . and 31.9 percent in October . . . the lowest recorded in 25 years and analysts predict the market will remain weak into 2009." Jack Healy, "A Record Decline in October’s Retail Sales," New York Times, November 14, 2008; Declan McCullagh, "Big Three Bailout? Not So Fast,", November 12, 2008 ("Honda kept its focus on smaller cars such as the Civic and Accord, and saw its sales continue to increase this summer while GM, Ford, and Chrysler have slid.").

And today we learn European insurers are now refusing to provide insurance to suppliers of the Big Three.

There would seem to be little justification for a bailout -- nor does there seem to be a realistic business plan in place regarding what the money will be used for, what it will accomplish (especially in this economy), where it will get us and when and why.

To the extent the earlier, special $25 billion taxpayer gift is to be used for re-tooling and design of new, more "green" vehicles, (a) is that a business the taxpayers really want to get in? (b) isn't the market (e.g., Toyota) responding to that desire? (c) if not, is there a point to doing it if customers won't buy the cars (e.g., how many Volts will sell at $40,000 a copy?) (d) if we want any private institution to undertake such research, why on earth would we pick GM -- whose executives have had decades to provide this response and have fought doing so? (e) even if some GM employees had the ability to pull this off, what is the likelihood the company will be able to do in the next few months what it has been unwilling to do for years? and (f) if it takes three years to bring a car from design to showroom, how is that going to save a company that is less than six months from bankruptcy?

So what, exactly, is going to be done with the near-$100 billion the Democrats want to give the (formerly) "Big Three" besides continuing excessive executive compensation and payments to shareholders? Workers are going to continue to be laid off -- which won't make it any easier for them to buy cars (a principle that Henry Ford understood in setting his workers' wages in the early 20th Century). There's little point in the few who will be retained making cars for dealers who are closing their showrooms and don't want the inventory, or potential customers who have lost their jobs and can't pay their mortgages.

Slowly, these seemingly obvious facts appear to be coming to the attention of "the experts" as well as all the rest of us. David M. Herszenhorn, "Dodd Says Auto Bailout Lacks Votes in Senate," New York Times, November 13, 2008.

And this morning one of my favorite conservatives (because he's smart, rational, and rarely ideological or mean spirited), David Brooks, sums up the situation as well as anyone. David Brooks, "Bailout to Nowhere," New York Times, November 14, 2008. Here are some excerpts:

Not so long ago, corporate giants with names like PanAm, ITT and Montgomery Ward roamed the earth. They faded and were replaced by new companies with names like Microsoft, Southwest Airlines and Target. The U.S. became famous for this pattern of decay and new growth. Over time, American government built a bigger safety net so workers could survive the vicissitudes of this creative destruction — with unemployment insurance and soon, one hopes, health care security. But the government has generally not interfered in the dynamic process itself, which is the source of the country’s prosperity.

But this, apparently, is about to change. Democrats from Barack Obama to Nancy Pelosi want to grant immortality to General Motors, Chrysler and Ford. . . .

It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. . . .

It is all a reminder that the biggest threat to a healthy economy is not the socialists of campaign lore. It’s C.E.O.’s. It’s politically powerful crony capitalists who use their influence to create a stagnant corporate welfare state. . . .

G.M. and Chrysler . . . are not innocent victims of this crisis. To read the expert literature on these companies is to read a long litany of miscalculation. . . .

There seems to be no one who believes the companies are viable without radical change. A federal cash infusion will not infuse wisdom into management. It will not reduce labor costs. It will not attract talented new employees. . . .

In short, a bailout will . . . just postpone things. . . .

[T]he most persuasive experts argue that bankruptcy is the least horrible option. Airline, steel and retail companies have gone through bankruptcy proceedings and adjusted. It would be a less politically tainted process. Government could use that $50 billion — and more — to help the workers who are going to be displaced no matter what. . . .

Is this country going to slide into progressive corporatism, a merger of corporate and federal power that will inevitably stifle competition, empower corporate and federal bureaucrats and protect entrenched interests? Or is the U.S. going to stick with its historic model: Helping workers weather the storms of a dynamic economy, but preserving the dynamism that is the core of the country’s success.
There you have it.

We have a mechanism in place to deal with the auto industry's problem: Chapter 11 bankruptcy reorganization. It's clearly a preferable "least-worst solution" to bailouts. Some corporate executives will be out of work, but they deserve to be -- indeed must be if the companies' prospects are to improve. Shareholders will suffer a loss -- but their stock has already declined some 90% in value, so it's not like Chapter 11 is their biggest problem. "Shares in American automakers, the Ford Motor Company and General Motors, have fallen to multi-decade lows as the companies reported billions in losses." Jack Healy, "A Record Decline in October’s Retail Sales," New York Times, November 14, 2008.

Economic support should go to workers, not named, pre-existing corporations. (That means jobs programs, unemployment compensation, food stamps, healthcare and retraining programs.) The corporations' physical assets aren't going anywhere. As Brooks points out, they can (and will) continue to be operated either in Chapter 11, or by whatever other companies may acquire them at market value. (As a sidenote, our largest local mall, Coral Ridge, will probably be in Chapter 11 by early 2009; the theater, big box stores, restaurants and skating rink will continue to operate -- or, if not, they will be reacting to their own economic conditions, not those of the mall owner.)

See, Amitai Etzioni, "Bail Out the Workers, Not the Plants," The Huffington Post, November 11, 2008; Declan McCullagh, "Big Three Bailout? Not So Fast,", November 12, 2008 ("The better solution is a simple one: Allow automakers to declare bankruptcy. Contrary to popular belief, that will not mean the end of a company such as GM, which has indicated it may run out of cash by the end of this year. Under Chapter 11, a bankruptcy judge will weigh the different interests of GM's creditors, labor unions, shareholders, and so on, and the resulting company will emerge leaner and stronger. Many current customers of United Airlines, Texaco, Global Crossing, and Pacific Gas and Electric probably don't even know that those companies once filed for Chapter 11."). Micheline Maynard, "G.M.’s Troubles Stir Question of Bankruptcy vs. a Bailout," New York Times, November 12, 2008 ("But not everyone agrees that a Chapter 11 filing by G.M. would be the disaster that many fear. Some experts note that while bankruptcy would be painful, it may be preferable to a government bailout that may only delay, at considerable cost, the wrenching but necessary steps G.M. needs to take to become a stronger, leaner company.").

Robert Reich, "The Real Difference Between Bankruptcy and Bailout," November 11, 2008:

"Under it [Chapter 11], creditors took some losses, shareholders even bigger ones, some managers' heads rolled. Companies cleaned up their books and got a fresh start. And taxpayers didn't pay a penny.

So why, exactly, is the Treasury substituting government bailouts for chapter 11? . . . Wall Street's major banks and insurance giant AIG . . . [don't] have to be bailed out. They could be reorganized under bankruptcy protection. . . .

And what a tragedy it would be if the government spends so much on these bailouts there isn't enough money left for the next administration to help average people get affordable health insurance, send their kids to good schools, and find good jobs -- including jobs rebuilding the nation's crumbling infrastructure and finding alternative sources of energy.

It's not the big guys who need rescuing. It's the small. Right now, the government has its priorities upside down.
As a final, not insignificant comment note that this ill-considered, seeming capitulation to the auto industry and UAW is not an example of "reaching across the aisle" to serve the interests of Obama's oft-heralded "United States of America" (as distinguished from our "Red States" and "Blue States"). Whatever the red state Republicans' motives may be, they are opposed to this idea. (Not incidentally, they give many of the same reasons for their opposition as the rest of us.) Coupled with Obama's earlier support for the original $700 billion bailout, and his prior vote supporting immunity for the telephone companies that spied on us in violation of law, it does not bode well for the new Administration's ability to offer "change" (beyond freeing up stem cell research) to a "broken" Washington, subservient to corporate power.

November 16: Register's Consistent Editorial

Editorial, "Be bold: Start a WPA-style jobs program," Des Moines Register, November 16, 2008, p. OP1. You will want to read it all, but here are some excerpts:

The U.S. unemployment rate hit a 14-year high of 6.5 percent last week. The fear of losing a job is compounded by the difficulty in finding another if you're laid off. . . .

Iowa State University economist and professor emeritus [Neil Harl] said it's not out of the realm of possibility that the United States could see unemployment rates [of] some 25 percent . . . and "there's nothing to indicate [employment rates] are going to improve." . . .

What has been tried so far hasn't worked so well.

Tax cuts pushed by the Bush administration didn't trickle down to create sustained job growth. Rebate checks didn't sufficiently stimulate the economy. Recent investment-bank bailouts haven't done enough to boost lending.

It's time for a better, bolder strategy. President-elect Barack Obama should make job creation his No. 1 priority. . . . Spending dollars to create jobs benefits workers directly and boosts the overall economy. . . .

The federal government could quickly infuse money into states to fund projects that are already planned -- including roads, bridges, sewers, parks and trails. That would create jobs for unemployed Americans, [send] money rippling through the economy [and] this country would get more of its infrastructure updated [strengthening] the economy against global competition for years to come. . . .

In the summer of 1932, Franklin D. Roosevelt . . . began putting the country to work through the Works Progress Administration.

Within a few years, millions of Americans were working to build infrastructure -- improvements that are still around today. . . .

Create jobs. Boost consumer confidence. Put the country on track for a brighter economic future.

It makes more sense than pouring more billions into bailouts.

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