Default by Design?

As the kabuki dance of fiscal death spirals towards its uncertain conclusion, amidst conflicting reports of deals made (or not made) to raise the ceiling of the US national debt -- thereby staving off a default on same --it becomes permissible to ask whether or not certain powerful parties view fiscal default as a positive outcome, and if so, why.

There is off course the Tea Party caucus in the US House of Representatives, who are the most visible agitators for default, and in my view, the least interesting.  Their gestalt is best summarized in a quotation from the great Sam Rayburn, who (reportedly) said, "Any jackass can kick a barn down, but it takes a carpenter to build one."  The comparison to the Tea Party caucus is of course insulting to jackasses, but my point is simply that the Teahadists are puppets, incapable of much independent thought, essentially cannon fodder in a larger Class War now being fought in our once-great nation.

Of greater interest to me is the anti-tax oracle and agitator Grover Norquist, who famously declared his desire to shrink the US federal government to a size small enough to permit its being drowned in a bathtub. Although he perhaps does not pointedly attack the great social contract programs of the New Deal and Great Society -- most notably Social Security and Medicare -- both are surely in his gunsights, because of their size and scope.

So how does default work towards his benefit?  Through the medium of Bond Vigilantes.  These mythical beasts -- financial unicorns I call 'em -- are supposed to magically appear in these troubled times of bloated government spending, and magically enforce fiscal discipline by driving up the interest on US government debt.  The only problem is, they haven't.  US government debt remains cheap by historical standards, and would easily permit (were policy makers in Washington but to will it) expansion of the national debt, to finance entitlements, but also anti-recessionary stimulus measures.

However, it doesn't take a rocket scientist, a brain surgeon, or a Nobel laureate in economics to see that a default on the US national debt -- or even the threat of default -- could drive up interest rates over the long term, thus effectively conjuring into existence the heretofore imaginary bond vigilantes.  Therefore from Norquist's viewpoint (and that of like-minded individuals) a default is desirable; and I have little doubt that he is stirring the  congressional pot to this end, through every resource of undercover private lobbying.

Another curious fact has recently been noticed: big banks are not actively lobbying against default.  This is odd on the face of it, since banks have much to lose should default occur.  Have the banks gone over to the Norquist camp, despite the obvious dangers to them of a further financial crisis?

Another point.  Why has not President Obama strongly asserted his right to  unilaterally raise the debt ceiling under the 14 Amendment of the US Constitution?  To the cynics, the answer is of course obvious.  It has been clear, ever since he convened the infamous catfood commission, that the President's much vaunted notion of 'bi-partisanship' means simply helping the GOP accomplish its long-held goal of destroying the Social Contract in America -- or any functional equivalent.  This means Social Security and Medicare must be cut, hopefully with such severity that they will bleed to death.

He has therefore, instead of insisting on a clean bill to raise the debt ceiling, pursued the chimera of a 'grand bargain' with congressional Republicans, to reduce the deficit, and cut social entitlements.  To call this a fools' game is to be unkind to fools.

Breaking! Sarah Palin will NOT Run for President.

Lawrence O'Donnell has the story here.

Oh, and by the way, Rolling Thunder doesn't like her hangin' around, either.

Owww! The Stupid! It Burns!

Here.

There will be no test, so you needn't read it in full.

Lacking only teh Kneepads

We begin with a famous episode in Medieval History, in which the Holy Roman Emperor Henry IV walked barefoot across the Alps as penance for having offended the Pope.  To wit:

In the year 1075 AD, the conflict between Pope Gregory VII and the Holy Roman Emperor Henry IV, gave rise to the Investiture Controversy. The Investiture Controversy was the power struggle between high ranking church officials and the kings of Europe, regarding the appointment of the regional church officials, such as the bishops or abbots. This controversy led to a civil war in Germany and the adjoining regions, and was also responsible for the disintegration of the Holy Roman Empire. In 1077 AD, Henry IV took a long and dangerous journey, barefoot, through the Alps to the Fortress of Canossa in Emilia-Romagna, Italy, to meet Pope Gregory VII and beg forgiveness. It is rumored that the Pope left Henry standing in the snow for three days before opening the gates of the fort to forgive Henry.  (My italics.)

Well, my professional life in topdown organizations has taught me a good bit of grovelling, so that when I need something from management, my first step is to visit a local Builder's Supply Emporium, and invest in a new set of kneepads.  (Or as one former colleague of mine (a machinist) once addressed another, who was kneeling down working on some conductive screening, "Hey you look cute in those things, Vladimir; Jeez, maybe I should get my old lady a pair!")  But I digress....

The real point about penance and debasement and prostration is to be found in today's NY Times, describing President Obama's walk from the White House to the U.S. Chamber of Commerce, to exhort the nation's business leaders to loosen their monetary sphincters and let some of their great reserves of hoarded cash flow out into a river of job creation.  (The prepared text of the President's remarks is here.)

It is beyond me what the President hoped to achieve by making nice with a group which seems bent on destroying him.  The response from progressive and liberal groups was in any case tepid to negative.  All that was lacking was bare feet in the snow.  And of course, the kneepads.

A Brief, Belated Assessment of the Reagan Legacy

Dear Reader:  This post, originally written as an obituary notice in 2004,  is devoted to a brief appreciation of our departed fortieth President, Ronald Reagan.  Given the massive publicity machine still at work buffing his image, we feel that the countervailing view cannot be too often stated.

He was an important president, but not a great one, as his major accomplishments were all negative: He destroyed our social contract.  He bankrupted the national treasury. He replaced fact with fantasy in the national discourse. He ended twenty years of progress in civil rights and race relations. He was an ardent union-buster. He gave us homelessness and tuberculosis resurgent.  He promulgated the pipe dream of space-based missile defense. He supported the Afghani Mujahadeen, who later became the Taliban and al-Qaida.  He traded arms for hostages, and used the proceeds of arms sales to Iran to illegally fund the Contra War in Nicaragua.  There is credible evidence that his agents negotiated with Iran during the 1980 presidential campaign, to insure that the American embassy  hostages in Teheran were not released prior to the election. This, if proved, would constitute (I believe) the sole instance of treason by an American president, although not precisely during his term of office.  

In lesser matters, he used then President Carter's own briefing book (stolen from the White House) to prepare for a campaign debate. He had the White House redecorated at the expense of private donors,  which elicited the comment by William Proxmire that he had never in public life seen so egregious a conflict of interest.  Reagan also claimed to have been present (as a member of Army signal corps)  at the liberation of Dachau, when in fact he spent the entire Second World War stateside,  making propaganda films in Hollywood. He committed perhaps the most notorious gaffe of the Cold War era, joking in front of a live microphone that bombing of the Soviet Union was to about to begin.  As early as  1986, he suffered prolonged episodes of mental black-out,  as recorded contemporaneously (but never much publicized)  in the memoirs of journalist Leslie Stahl.

He is said by his supporters to have held strong beliefs; but  the question of belief must remain moot in a man of such limited intellect.  Nonetheless, I will admit that he governed by two tightly-held principals: that he would act always to increase the wealth and power of those already wealthy and powerful, and that policy to this end must always  play well as theatre, must indeed  obey a dramatic logic, if no other.  (Witness the firing the air-traffic controllers.) He was, after all, an actor playing the role of president, and he understood this part of his professional responsibility quite well enough.  In this light, the example of his letters, cited as evidence of his broad intellectual engagement in policy questions, is not convincing.  As an actor, he understood the importance of good lines, and was a good enough wordsmith to string together sonorous platitudes in a convincing manner.  The act of writing probably served as a form of rehearsal as well, a means saturating himself in the role.    

In the end his most important achievement was the creation of the modern conservative movement -an unlikely alliance of populists and elitists, proletarians and plutocrats, fundamentalist Christians and intellectual Jews - a collection of disparate parties sharing little save the capacity for hatred, which was to be much exercised during the Clinton Presidency.

Beyond that, his most important contribution to American politics was to show that the truth in any situation can be made to matter less than people's perceptions - a lesson certainly put into practice by George Bush, in the run-up to the Iraq war, but which (lest we forget) was also the leitmotif of the entire Republican party in their assault upon the presidency of Bill Clinton.  

In the end Reagan embodied a model of governance in which a plausible (but essentially hollow)  front man serves as a puppet for hidden interests.  George Bush and Arnold Schwarzenegger are the latest examples.  They are, in that sense, the true heirs of his mantle.  

Moving on: it is fashionable to credit Reagan with winning the cold war, and to cite the testimony of Mikhail Gorbachev, who has  certainly been kind in assigning credit to his former negotiating partner.  But two points should be borne in mind:  first, that Gorbachev was smart enough to see that  the Soviet model had become untenable,  and that the Soviet empire was collapsing;  and second that Reagan's impulsive offer -- essentially  to eliminate all nuclear weapons -- was so devoid of sense and calculation as to be laughable.   What it accomplished was to tip Gorbachev that Reagan was sufficiently malleable to be led in a productive direction, which Gorbachev succeeded in doing.  I believe it is as a matter of form that he credits Reagan (most recently on the op-ed page of the New York Times) as a peacemaker. Reagan's record is indeed unimpressive when compared to those of his Cold War predecessors.  

In sum: far from being a great president, I would argue that he will eventually be assigned the place of worst president in the history of our Republic.  He will outpace George W. Bush for that title by virtue of his having essentially enabled the latter's ascent.  In broader historical terms, the political polarization that we now experience nationally  appears to me as a belated skirmish in the American Civil War: those old wounds had been healing for over a century, but Reagan succeeded  in re-opening them.  It is up to us to re-commence the healing, if indeed that be possible.

Eleven Dimensional Chess We Can Believe In!

For starters, I tend to invoke Occam's razor when evaluating the plausibility of any particular morsel of journalistic political analysis; and a number of examples of supposedly brilliant strategizing by the current administration have failed that criterion, despite being hailed as examples of eleven dimensional chess -- incomprehensible to us mere mortals with dirt under our fingernails, but proof positive of the President's prescient brilliance.

However a a post up at Angry Bear (The 2% solution) proposes a sinister if complicated rationale for the Payroll tax holiday of 2010 which I find altogether plausible and frightening in the extreme, despite its possible failure of the Occam test.

In brief, the idea is that the payroll tax (despite fears to the contrary on the Left)  will  indeed be re-instituted in a year's time, but with the slick proviso that it is now destined to form the basis of a private retirement account (PRA) for each individual worker.  Therefore it is not (Ha Ha!)  a new tax increase, and a Republican House will willingly vote for it.  Brilliant, eh?

 Of course this goes against the whole premise of Social Security -- that  your current  payroll tax goes towards the maintenance of other people's retirements, not to direct savings for your own retirement, which will in fact  be paid by the payroll taxes of future workers, when you are yourself retired.

The idea that some portion of this revenue stream could be diverted into a private account disrupts the entire funding model which has functioned so well since its inception under FDR.  It also puts us on the path towards privatization of Social Security.  This may sound sinister to some ears; to me it is eleven dimensional chess I believe in.

The NYTimes and the Obama tax-cut deal.

An editorial in the Sunday NY Times (Dec. 19 2010) seeks to have it both ways on tax cuts.  Having earlier praised the deal, the Grey Lady now awakens its deficit-busting potentialities, noting that extension of the Bush era tax cuts through 2012 "...will account for roughly 40% of today's deficit."

Then continuing in the vein that the President must lie in his bed as he has made it, the Times adds: "When deficit reduction begins in earnest, tax increases and cuts in big-ticket programs — Medicare, Medicaid, Social Security and defense — will be the focus."  (My italics.)


OK, let me get this straight.  Tax cuts for high bracket individuals are deficit busters, and must be paid for by sacrificing the cornerstone programs of the New Deal and Great Society.


Am I missing something here?  Wouldn't it have been easier to let the Bush tax cuts expire?  Does anyone realize that top marginal rates are at historically low levels now, far lower than during the great era of post-WW II American prosperity?


Just askin'.