Is Boenhner Trying to Save Obama from Himself? or Just Chicken? or Both?

The recent big news on the debt ceiling death spiral is that Republican Speaker of the House John Boehner has walked away from the talks with President Obama.  The usual take on this is that it reflects the usual Republican intransigence in all dealings with Democrats, and particularly, with the current occupant of the White House.

My somewhat contrarian view is that Speaker Boehner is in fact appalled at the cuts in social programs being offered by the President, and wants no part of any deal which includes them.

In this sense, he is saving the Republican party from Armageddon -- since the proffered cuts are in Social Security and Medicare, both of which are extremely popular with Republican voters.   Also, by inadvertance (or unwelcome necessity) he is saving the President from his own misguided attempt to cut those programs.

Call it a failure of Republican nerve, or call it a political calculation which mixes a good dose of self preservation with the knowledge that those programs are more useful to Republicans as propaganda targets on the hoof, then they would be if extinguished.  Either way -- I think Boehner's withdrawal from the talks might signal, in an odd way, the best good sense we've seen from Washington in several months.

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.

Obama's Liberal Nominations: Failure by Design

Nobel Laureate economist Peter Diamond announces, in a NY Times Op Ed piece, that he is withdrawing his name from candidacy for the Federal Reserve Board of Governers.  He was nominated by the President in April of 2010, but the Democratic Leadership -- Senate and Whitehouse -- were unable to push through his confirmation, even when they held a strong majority in the Senate.  Apparently an recess appointment was never considered; certainly never acted upon.

James Fallows has some thoughts on the broken confirmation process, and the idiocy of Senator Shelby -- sure a candidate for an "Ow the stupid! It Burns!" award.  Hat tip to Brad Delong here, who also has some worthwhile observations on what it means for the nation and the economy.

My personal view is that this is failure by design, an elaborate Kabuki  Obama nominated a strong progressive to shore up support from his progressive base -- then let the nominee twist slowly in the wind -- and never intended to push ardently for confirmation.

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.

Ripping a New One in Education Secretary Arne Duncan

I have not paid much attention to Secretary Duncan, but a recent post over at Big Orange rips him quite severely.  I hadn't realized that Race to the Top was a brainchild of his, but I am in principle opposed to all programs that purport to improve public education by applying carrot/stick methodologies according to performance metrics based on standardized testing.

Anyhow, the above-referenced link, from a high-school Biology teacher in Oklahoma, frames the problem of education reform in stark yet eloquent terms. Go read it.

Big Dog on the Dark Side

An news item today quotes former President Bill Clinton -- the Big Dog, as he is fondly called by his old admiring constituents -- warning Democrats, not to turn away from Entitlement Reform, in the wake of last night's special Congressional election (NY 26th District) in which the Democratic challenger won a traditionally Republican seat, by hammering the incumbent with her support for Paul Ryan's plan to end Medicare as we know it.

Unfortunately, Bill was speaking at Fiscal Summit sponsored by the Peterson Foundation, the infamous kleptocratic think tank that stood behind President Obama's nefarious Catfood Commission, which was charged with gutting Social Security.

For myself, I am truly sorry to see the Big Dog lending his weight and prestige to the Peterson enterprise, which is aimed ultimately at ripping off middle class entitlements to engorge the (already overstuffed) plutocracy.

Food and Karma

I cannot vouch for the provenance or authenticity of this, but the conceit is irresistibly attractive:  That is, I recall reading somewhere, in a discussion of Buddhist doctrine, the statement that the total amount of food in any given world is a direct consequence of the entire sum of accumulated Good Karma, of all sentient creatures inhabiting that world.  This would include all animate beings, from humans down to sea-slugs and gnats (to name but a few.)  Obviously people will argue over who or what is good or evil, and simple dichotomies like Ghandi vs. Stalin won't illuminate much; nonetheless, I believe a certain rough consensus exists that starving people to make money is bad conduct, and therefore bad karma.


It is therefore particularly striking to me when a perceived evil action by some human agency is aimed directly at lowering the availability of food for profit.  Or, in terms less stark, action by some human agency with the perceptible and likely consequence of lowering the availability of food while turning a handsome profit.    The journal Foreign Policy recently devoted a full issue to food, and includes an article blaming Goldman Sachs for the current spike  (or bubble, if you prefer, though the two sound incompatible) in wheat prices globally.  These have added about 25 cents to the price of a loaf of bread in America, but have doubled that price in places like Indonesia, where the average percentage of household income spent on food is far higher than in America.


I am not an expert on financial derivatives, although as a worker in an industry that actually makes and exports things, I have a certain moral horror of (not to mention supercilious disdain for) business enterprises that make money from money, without serving any real purpose in capital formation.  I am assuredly not against capital markets; but to me, derivatives are as parasites on the body of an industrial economy; nonetheless, I will defer that soap-box rant for another day.


So as I understand the substance of the FP article, two factors have been operative.  First, in 1991, GS creates a commodities index product (GSCI), in which different commodities (hogs, soy , wheat, metals etc.) sliced and diced and re-assembled into a composite index.  This didn't lead to much, until de-regulation entered the picture.  From FP:

For just under a decade, the GSCI remained a relatively static investment vehicle, as bankers remained more interested in risk and collateralized debt than in anything that could be literally sowed or reaped. Then, in 1999, the Commodities Futures Trading Commission deregulated futures markets. All of a sudden, bankers could take as large a position in grains as they liked, an opportunity that had, since the Great Depression, only been available to those who actually had something to do with the production of our food.

Goldman's system was designed so that one can only buy; when time comes to roll over a futures contract it can't be sold short in a falling market.  This creates an inevitable upward pressure on commodities prices, including food.  


As other speculative bubbles (Tech, Real Estate) have burst, more and more money has flowed into commodities derivatives, hence we now find ourselves with a global food bubble -- not overly noticeable in the G7 perhaps, but disastrous in poorer countries.


So, am I being to hard on GS? pulling out the moral and rhetorical stops on them, and unleashing the impotent fire and brimstone of an obscure commentators, even whose friends are careful not to ask for the URL when this blog is mentioned conversationally?


Certainly there are countervailing opinions, by those who think that grain prices are responding rationally to the simple mechanics of supply and demand.  On the evidence I disagree.  Goldman has the global economic bit in its teeth, and is running wild.  They are altogether unchastened by their recent escapes from annihilation in 2008; and God help us all if they are not brought under control.