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Friday, January 30, 2009

Economy worsens as Republicans oppose Obama's stimulus package

The economic signs are really depressing, so I'll spare you the details. Bottom line: our country is in a great deal of trouble. We've borrowed too much and lived beyond our means. Rather than allow a contraction, our government is choosing to intervene. Obama's stimulus bill would create jobs rebuilding America' infrastructure.

Typical of Washington, the earmarks which Obama has protested seem to be finding their way into the bill. However pure the intent of the stimulus package, it's instantly diluted once it hits Congress, as special interest groups, taking a cue from the financial services industry, vie to draw in the most government aid.

Government dispensations flow to the largest corporations. If your employer is sufficiently large and influential, they may be considered too big to fail. Government intervention may or may not save your job. Recipients of the funds may end up downsizing anyway, with or without a bailout.

Channeling sympathy is the job of any good politician; the worse the impact of the recession can be made to seem, and the more vital the industry, the more likely it will be heard, assuming its flock of lobbyists pester Congress as before. Of course federal money can only go so far, which means there will be winners and losers, both among corporations and those who represent them, not to mention the poor people who live in those districts.

The way the game is played matters immensely inside the Beltway. Obama is getting his first lesson in Presidential politics. By pushing so hard for his stimulus, Obama has encouraged every Republican to obstruct the passage. Making matters worse is the Republican predilection to favor TARP spending--which largely benefits banks and the investment class--while disparaging the stimulus bill, which to them is a mammoth pile of pork.

Yes, the Republicans have rediscovered fiscal conservatism, but they're not so populist as to want to cut out their wealthy banker allies. Real economy results appear subordinate to protecting shareholders in financial services companies, which have tanked despite the bailout.

TARP doesn't appear to have increased lending. As a matter of fact, the banking subsidies helped pay out the 6th largest amount of bonuses in Wall Street history. If there's suffering, it's not by those at the top, unless of course you include spoiled office remodeling. John Thain, the fired head of what was Merrill Lynch, retroactively dismantled a $1.2 million office renovation. Alas, the hardships of the chief executive job--and no golden shower rods or reaffirmation parties in Sardinia either.

Obama attacked the bonuses in a video. Today, I saw that the New York Attorney General Andrew Cuomo was investigating the bonuses (Bloomberg article.) I don't see how the government meddling, whether in the form of financial help or moral castigation, will help the industry, if it is unwilling to see the need to change.

As much as the banks might make a juicy target for politicians, the bailout has been embraced by the political status quo. Help for banks made sense then, but maybe less so now. We all know the GOP/super capitalist class nexus socialized losses and privatized profit, to quote NYU economist Nouriel Roubini. These are the fruits of a matrimony between those with influence and the party in power. Into the campaign coffers of Republicans (and Democrats) go mammoth donations from Wall Street, out of Washington comes literally trillions to help the distressed industry, which is showing a remarkable lack of distress. It seems to matter little who is in charge at the top, if the system of patronage continues undisturbed.

Now if the Democrats weren't on the receiving end of so much corporate donations, they'd be more likely to stir populist sentiments, which undoubtedly lean towards support for the stimulus far more than they do for TARP, Act One or Two. The public sees hard-working blue collar stiffs as far more deserving than the banker suits who repossess poor people's homes, drive fancy foreign cars, and remodel second homes.

The Republicans have long been the party of the rich: white, anti-immigrant, reactionary, and greedy, or as they say, "pro-business." Well, if Republican leadership on the economy had been so good for business, why are we in the worst recession since the Great Depression?

None of this should come as a surprise, despite the spin that our elected representatives are on our side, or even represent our best interest. Then again Americans tend to believe what they read in the papers and see on TV. Perception matters more than reality. Sell it long enough, and the people believe.

The 2004 election gave the most glaring evidence of a gap between perception and reality. Many people were convinced that George Bush was more like him than John Kerry. They trusted him more as a result. If however, someone like John Kerry comes along, appearing aloof and oozing eliteness, they distrust them. This is the dumbing down of the electorate reflected in their choice of candidates.

When I was selling insurance--yes, I regretfully inform you that I once did do that--I remember how hard it was to convince people to do something, even if it were as obvious as picking up some life insurance to cover what would be a catastrophe if uninsured. People distrust you if you're in a suit. If however, you can come across as somehow being like the client, and trustworthy, you can sell them.

After so many years of Bush, we are only now waking up now from the nightmare created by this image-is-everything style of identification between voters and the people they elect. This bonding is illusory, encouraged by media saturation, like any other brand. In fact, there is nothing in common, nor any commonality of interests, beliefs, or views. Bush was simply taken to be credible by a majority, enough to let that approach dominate.

Why is this important now? Obama needs to maintain an image in order to sell his stimulus, or anything he wants to get passed. Now with Kerry and Gore, people don't have a problem with politics or positions as much as they object to an image, one that's not compatible with predetermined commonalities, suited in illusion. Preserve your image and stay Presidential, look like anything less than a President, and people will think less of you.

Now Obama needs to turn this Rovian approach to dealing with the electorate to his favor. Essentially he needs to say, "I am President. I make the rules. Everyone obey me." Now of course some people who actually use their brains will oppose this style. But assuming the inner Beltway circle of well-vetted pundits, talking heads, and Insiders remain confident that the status quo will remain preserved, they'll give the President a great deal of latitude.

This is the seat of power we're talking about here people..the center of an empire. An impression of a secure, Big Daddy-type patron in charge reassures the public. We see the best out of Presidents in times of challenge and Obama needs to step boldly forward. This was Bush's bullhorn moment in the ruins of 9/11--it's what the country needed then, just as it needs now.

If image is everything, Obama needs to come off as self-assured, and play on his strengths. He can't hedge, or waffle like a Senator. He needs to come off as knowing what's best. Now unfortunately, Democrats in general take to this role quite awkwardly. Being basically more intelligent, they want to rationalize and calculate, hem, haw and saw towards the best possible course of action, allowing dissent, overcoming objections one-by-one, and going about things in a conscientious, reasonable fashion.

Screw all that. Abandon reason and act as if there's no other way other than the President's. Call a press conference and dominate. Make it so the journalists want to lob softball questions, just so they can get in your graces--punish them if they don't. Push the Presidential aura, 'til it leaves everyone in the room awe-struck by the brilliance and confidence of our new Commander-in-Chief.

A master motivator I knew once said, "never dip." Don't let the client see you hesitate--don't allow yourself to lose control over the situation. To sell, you need to be completely and utterly convinced in your soul that what you are doing is in the best interest of the client. If you so much as blink at the wrong time, hold back a little bit, or hesitate when the time to close the deal comes, you'll lose the sale.

Obama's lack of experience at the chief executive position is becoming clear early in his administration. He's never utilized the real weapon of the office of the President: credibility. He drips with it now, but not if he must conscientiously assemble an agenda, run it before his Cabinet and whoever else wants input, re-form and re-submit it.

This is no faculty committee, it's the United States of America! Get up there, say what needs to be said, and make everyone in the room quiver in anticipation because you, the President, are the most powerful person in the room and can get it done. The mission is accomplished because you say it is! Screw reality--that's what you make. You're President!

Instead, this smart new President is trying to frighten Congress into passing his stimulus. The "be afraid" mantra has grown stale since the days of John Ashcroft's "actionable intelligence." Trying to scare hardened politicians isn't so effective--they're far too jaded and skeptical of motive, or at least the GOP is just not going to go along like the Democrats did under Bush. Bush's great "opportunity" (let's hope Obama doesn't get his 9/11), allowed him to wield dictatorial powers under the President's self-appointed "responsibility to protect the American people under the Constitution."

As it turns out the theory of an all-powerful Executive branch has been revived as a potential legal defense as rumors of a torture investigation into the Bush administration personnel emerge. The "unitary executive" theory is really a construct of conservative Berkeley law prof John Woo. According to Jason Leopold's article, Woo designed the expanded legal authority of the Presidency around Bush's War on Terror aims, which included the legitimatization of torture, rather than codify any pre-existing authority inherent in the Constitution.

Blinking--the act of deciding to do something without thinking the consequences through, was a hallmark of Bush's leadership style. When 9/11 happened, the response seemed proportionate and timely. Never mind that our reaction may have been directed at people who'd had nothing to do with it. It simply felt like the right thing to do (remember: perception is everything.) Never mind that the extradition and prisoner abuse might forever tarnish our nation's reputation--it's not how we reacted that counts as much as that we reacted, strongly, and decisively.

Obama needs the equivalent of a tool box to fix the economy's problems, or perhaps even a well-supplied cache of ammunition to shoot down critics of his relief plan. The chief beneficiaries of government assistance have been bankers and other fat cats, hardly a group which inspires faith that the government's response is 1) working or 2) helping the people who really need help. To craft an effective and popularly acceptable response, the economic problems we face need to be brought down in size, to manageable proportions, so Americans feel that they can deal with them.

Nevertheless, effective presentation is crucial in managing perception. In this era of media saturation, so much clamors for our attention, with so much noise and hype. The President can slice through all the noise only by making a big enough bang or channeling the more primitive instincts of the American public, like the thirst for vengeance after 9/11.

The threat to our economy needs to be posed as if it were on a similar level of threat to our way of life as terrorism, to give it a villainy on par with al Qaeda. Clandestinely, we probably consider job security as important to our way of life than the threat of terror which despite 9/11 has worn off and done little to change the way most of us live our lives.

As it turns out, neither 9/11 nor its reaction have brought the breadth of impact that the economic downturn has, despite the turmoil caused abroad and the disruption in the lives of our servicepeople and their families. A record number of veterans have committed suicide, a direct consequence of failed marriages cause by too long deployments, and untreated Post-Traumatic Stress Disorder.

Obama risks being a one-term President if this economic situation can't be remedied by his stimulus. Now the Republicans, who took a leading role in gutting the regulatory climate--thus precipitating the banking crisis--know that their best chances for victory in 2012 lie with an ongoing economic malaise. In this sense the banking crisis has served as a type of economic bomb, a Trojan horse left in the White House by the departing Bushites.

Guess who doesn't want Obama to cure the economy. The Republicans. If Obama can't solve the crisis, he can't have a second term which I'm sure is the top priority of any new administration.

Political divide

Partisanship has become part of how we are governed, or in the case of the obstructing the stimulus, how we aren't governed. Anyone who opposed Bush and his post-9/11 agenda was pilloried as unpatriotic. This tactic should marginalize anyone who disagrees with Obama's stimulus. Are they real patriots? Do they really want the Chinese to take over--just who are the Republicans working for? Why don't they want us to succeed? They want the economy to fail.

These are the kind of tactless innuendo that Republican aimed at the timid Democrats when they dared oppose Bush's wars. Will they be used to drive the GOP heathen back to their rapidly eroding Red State base of support? No, Democrats will hesitate, quiver in their infirmity, as they lack the dramatic inspiration of 9/11 to bulwark their political agenda.

The Democrats and Obama can't assert their control like the Republicans did. Part of this is the introspective, reconciliatory perspective of most liberals. Liberals tend to be a enlightened lot, a group that takes dissenting opinion perhaps a little too seriously. Once committed to a cause, though, liberals can bring a lot more high ground to their positions, as they tend to be better thought out and more inclusive of a variety of opinions and perspectives.

Perhaps the biggest problem of deliberate liberalism is its intellectualism. In a crisis, solving tough problems requires far more assertive behaviors, requiring tactics that simply aren't very nice. Reason can actually be a political liability. Rather than helping achieve results, building consensus is seen as a willingness to compromise, or be infirm against a dire threat, waiting for committee reports instead of going out there, killing it, and dragging it home.

Tom Tomorrow's cartoon book, Hell in a Handbasket, does a great job showing how weak Democrats are in the face of Republican domination. A couple of his cartoons paint liberals as constantly bending to defend themselves from Republican attacks, no matter how preposterous.

Perhaps the best way to show that liberals mean business is to start a fight. Stick with it to the end, right or wrong, and force people to pick sides. This is the opposite of reconciliation. Once enough momentum build around the position--right or wrong, reasoned or unreasonable--even the opposition will learn that that you mean business.

9/11 succeeded in displacing any trace of obstructionism like the GOP is now showing in standing up to Obama's stimulus. The Republicans in power were able to channel the debate, focus the political argument around concepts like "you're either with us or against us." Or "the terrorists want Bush to lose." Or "support the war President" or else "you want us to lose."

I think the Democrats performed the sin of letting the Republicans steer policy, without criticizing them or behaving like an opposition party. They probably noticed popular support for Republicans was wavering as Iraq devolved, and simply chose to let that trend continue, whatever the impact the war would make or the benefit of standing up to it.

With Democrats in control for less than a month, the Republicans have coalesced around opposition against the stimulus. Never mind that putting off the bill might costs millions of jobs, never mind that we need infrastructure, or that the TARP monies which are essentially part of the same problem appear to have done nothing. The bottom line is that opposition parties oppose. As a matter of fact, the Republicans are doing what the Democrats should have, except without 9/11, the great consensus-builder and dissent-crusher.

Maybe if things get bad enough, enough people will start to question why the government wasn't willing to help. The Republicans probably figure that the ongoing economic fallout will translate into political points. but they do need to be doing something. if they just sit around and complain, I can't see how the ongoing economic deterioration will help them at the polls.

Democrats are eager to paint the Republicans as obstructionists, but there are some real issues with the stimulus package. First it is huge, having bloated to above $900 billion. Second, it's not clear how soon the benefits of spending will really make an impact, despite all the rhetoric about "shovel-ready" projects. Yes, there are clearly plenty of people--not necessarily working man types--drooling over massive infrastructure spending, but just how much unemployment will that erase?

The benefits of federal spending tend to coalesce around insiders who have the most influence to buy and deepest lobbying pockets. Under new You're on Your Own conservatism, created by Reagan but sustained during Clinton by his welfare-to-work, policymakers feel little fiscal obligation to the poor. Little encouragement is offered to the "Little People", who of course suffer disproportionately in any major economic crisis.

While a few million might cling to their jobs, what we have is a massive demographic problem. A lot of people don't have jobs because we've gotten older as a nation. We simply don't need as much stuff. Much of our population is retiring. The economic growth we've experienced during the Boomer years is now having its inevitable reverse impact: the long-dreaded contraction. And the corporate world is taking it very badly. Unlike government, which aims to provide the same services every year, businesses always need to get better, and make more money doing things more efficiently.

Downsizing may have made sense when companies were experiencing large amounts of organic, bottom-line growth. But now as demand falls, people buy less and less is made. Rather than increase productivity, the shrinkage actually decreases sales, or at least the growth in profits. Flatlining profits make investor capital that much harder to attract. Stock prices need to be constantly moving up--if organic growth can't be achieved, an increase in efficiency is sought, but constant reductions in the workforce can't keep companies profitable forever.

The American workforce is the world's most prolific, so it doesn't make a whole lotta sense to simply downsize until we aren't making anything. No one here in American--not investors, nor downsized workers--comes out ahead if that should happen.

Misdirected priorities

We see in TARP One how the Treasury saw fit to buy bank stocks; the fear has been about losing investment appeal, not about saving the economy through more lending. The priorities of the program have been to subsidize the massive losses incurred by de-regulation, too much cheap credit, and eviscerated regulations coupled with bottomless greed of the wealthy.
The Republican agenda has been mirrored in the policies of the past eight years, culminating in the TARP program. TARP has been Robin Hood-in-reverse, a methodology to use public monies to enrich well-placed vested interest within the Republican political hierarchy. Now if the Democrats weren't beholden to the same interests, they might be able to come out and point the finger like they should. But so corrupted has our government become that we really can't have true opposition politics.

The only true opposition there is comes in the form of anti-corporate factions inherent in the legal profession, not-for-profit community, and the labor unions. It's not a coincidence that the Big Three had to fight so hard for just a tiny sliver of the TARP funds, as the Republicans savor the idea of unions busted, whatever the economic price to Rust Belt communities. For Republicans, the loss of Michigan automakers is far more acceptable if the unions are decimated in the bargain. Many foreign automobile manufacturers have landed in Republican districts, where unions have been shut out, so their consituencies are less likely to feel the impact--if anything Detroit's overseas competitors will stand to profit.

What's happening is that our nation is breaking down under the weight of partisan division. The Democrats could do a whole lot better job of attacking the Republicans for not doing enough, but they too may be using the current crisis for their own political aims. As long as the Republicans don't help, the Democrats can claim to be the party actually helping Americans. At some point the two warring parties needed to be dragged, kicking and screaming, into the White House to force a deal. That's where the President comes in.

Contrary to what Larry Kudlow of CNBC might say, the stimulus really will be needed before the second round of TARP. A rich guy, Kudlow likely benefits more from stock market investments if the banks get help, rather than if some bridge gets built. Labor has been, and will likely always be, the enemy of traditional managers, although it need not be that way.

Obama stirred some cages on CNBC today with his talk of strengthening labor unions. Somewhere along the way, the investor class decided that there was no way organized labor could be good for them. Destruction of the middle class has come alongside the loss of manufacturing jobs, so unions are enjoying a resurgence in influence, at least at the White House. Vice President Biden is heading up a Middle Class task force, which shows the White House does share common concerns with the plight of the American worker.

The one-sided Bush years are over. The conservatives that have viewed labor as an impediment to economic growth are no longer in power. The days of easy corporate profitability are also over, replaced with what I guess is a heavily subsidized manufacturing core in those industries that can't compete with foreign producers. Somewhere, somehow, the American manufacturing base can compete and win, but maybe not with so much help for foreign automakers (although their transplants seem to do quite well here.)

To get the economy growing, we need to export and focus on things we do best. Mass producing cars may not be among them. Still, there's no reason why we can't make cars here: we answered the challenge posed by the Japanese in the Seventies, retooled, and made our automobile industry competitive. Ironically it was Detroit's upper management that clung to the idea the SUVs were the future, not labor who may have seen the need to change to more fuel-efficient--albeit less profitable--vehicles.

We could do things differently--our focus needs to be on specialty manufacturing. Let the Japanese and Korean style of car manufacturing dominate; Big Three should be making something else you don't mass produce. The invisible hand of the free market is supposed to redirect manufacturing to those who do it better. Judging by the success of transplants, American labor can fit the bill. I've heard that some of the Japanese cars have actually made their way back to Japan, a promising indicator of the potential of American-based manufacturing. They're doing something right, although the ride in these tricky economic times is hardly steady for them either.

Now if labor unions really can assert substantial influence over Washington, I think they'll be inclined to promote protectionism, although I'm sure even the average factory worker is well aware that we can't win in the global economy if we don't compete. Yes, there might be more employment security if we start slapping tariffs on imports, but surely the same will be done on US-built fire trucks and rescue vehicles, of which I saw many in television coverage of the Szechuan earthquake a few years back.

I think an argument to renegotiate our trade agreements is in the works; we must demand fair trade. Health care is a valuable part of that formula, as the cost adds $1,500 to the price of every American-made car; hardly a level playing field considering we're the only industrialized nation without universal health care. Unconditional, unmonitored free trade without any consideration of extenuating circumstances is a big problem for our manufacturing sector. The ideal is that corporations will adjust, focusing on their specialties, but this can hardly work if government subsidizes failure, either directly or by protecting domestic manufacturers through a tariff.

We'll also need a whole bunch of infrastructure improvement to compete. Our bridges, rail lines, utility infrastructure, and roads are deteriorating. This is a problem that must be addressed. Over the longer term, we need to "internet'o'fy" all of America, allowing high-speed internet into every home. People can learn on the web, re-educate themselves, and prepare for a post-industrial society. Of course the change will be painful, and require substantial investment of time, money, energy, and the popular will. Above all, we must convince ourselves that change is necessary and that we can't keep going on as we have.


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