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May 22, 2013

In Praise of American Political Dysfunction

March 7, 2013 by

President Barack Obama speaks with Speaker of the House John Boehner during a meeting with bipartisan group of congressional leaders in the Roosevelt Room of the White House in Washington, DC. Photo by Olivier Douliery/ABACAUSA

The lamentable state of American political parties has become common sport amongst the chattering classes in Washington and beyond, although one wonders whether this political dysfunction has really been such a bad thing when considering how united bipartisan “responsible” action always seems to result in yet more budget cuts.  By virtue of the fact that Congress and the Obama Administration couldn’t agree on much for the past few years, America’s deficits got large enough to put a floor on demand. The transfer payments via the automatic stabilisers worked to stabilise private sector incomes and allowed a general, albeit tepid, recovery in the economy.

But since the beginning of the year, Democrats and Republicans have put aside a lot of their differences, and what has been the result? Well, first we got the deal to avert the so-called “fiscal cliff”, the upshot being tax increases (and not just on wealthy people, but via the regressive payroll tax hike) which took around .5% out of GDP. This despite the fact that the deficit as a percentage of GDP had already fallen from 10% to 7% – one of the fastest 3 year falls on record.

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Latvia’s Economic Disaster as a Neoliberal Success Story

January 3, 2013 by

Street in Riga, Latvia. Photo by Pablo Pecora

A generation ago the Chicago Boys and their financial supporters applauded General Pinochet’s anti-labor Chile as a success story, thanks mainly to its transformation of their Social Security into Employee Stock Ownership Plans (ESOPs) that almost universally were looted by the employer grupos by the end of the 1970s. In the last decade, the Bush administration, seeking a Trojan Horse to privatize Social Security in the United States, applauded Chile’s disastrous privatization of pension accounts (turning many over to US financial institutions) even as that nation’s voters rejected the Pinochetistas largely out of anger at the vast pension rip-off by high finance.

Today’s most highly celebrated anti-labor success story is Latvia. Latvia is portrayed as the country where labor did not fight back, but simply emigrated politely and quietly. No general strikes, nor destruction of private property or violence, Latvia is presented as a country where labor had the good sense to not make a fuss when faced with austerity. Latvians gave up protest and simply began voting with their backsides (emigration) as the economy shrank, wage levels were scaled down, and where tax burdens remained decidedly on the backs of labor, even though recent token efforts have been made to increase taxes on real estate. The World Bank applauds Latvia and its Baltic neighbors by placing them high on its list of “business friendly” economies, even though at times scolding their social regimes as even too harsh for the Victorian tastes of the international financial institutions.

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President Obama’s Statement on the Fiscal Cliff

December 29, 2012 by

President Barack Obama said he is “modestly optimistic” that a deal can be reached over the fiscal cliff.

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Brief Thoughts on the Kerry Nomination and US-Lanka Relations

December 28, 2012 by

President Obama is still working on remaking his foreign policy and national security team, but it looks like John Kerry will be the next Secretary of State. Inside Washington, John Kerry has been a leading voice on foreign policy for decades. As a member of the Senate Foreign Relations Committee for twenty-seven years, John Kerry has built up a vast network of contacts abroad. John Kerry understands the politics of the Middle East. And he has already travelled extensively for the Obama administration – going to places like Afghanistan and Pakistan.

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America’s Deceptive 2012 Fiscal Cliff

December 28, 2012 by

Capitol Hill in Washington, DC. Bjoertvedt/Wikimedia

When World War I broke out in August 1914, economists on both sides forecast that hostilities could not last more than about six months. Wars had grown so expensive that governments quickly would run out of money. It seemed that if Germany could not defeat France by springtime, the Allied and Central Powers would run out of savings and reach what today is called a fiscal cliff and be forced to negotiate a peace agreement.

But the Great War dragged on for four destructive years. European governments did what the United States had done after the Civil War broke out in 1861 when the Treasury printed greenbacks. They paid for more fighting simply by printing their own money. Their economies did not buckle and there was no major inflation. That would happen only after the war ended, as a result of Germany trying to pay reparations in foreign currency. This is what caused its exchange rate to plunge, raising import prices and hence domestic prices. The culprit was not government spending on the war itself (much less on social programs).

But history is written by the victors, and the past generation has seen the banks and financial sector emerge victorious. Holding the bottom 99 percent in debt, the top 1 percent are now in the process of subsidizing a deceptive economic theory to persuade voters to pursue policies that benefit the financial sector at the expense of labor, industry, and democratic government as we know it.

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Common Sense Prescriptions for Washington

December 27, 2012 by

President Barack Obama speaks with Speaker of the House John Boehner during a meeting with bipartisan group of congressional leaders in the Roosevelt Room of the White House in Washington, DC. Photo by Olivier Douliery/ABACAUSA

As we collectively prepare to fall off the fiscal cliff, it should be apparent to all that the amount of dysfunction and skewed priorities among our elected officials in Washington is so grotesque that it is clear they have forgotten who sent them there and what their job is. They are so busy jockeying for position and pandering to their political constituencies that they appear to have lost all sense of reason.

The maladies now endemic to politics and politicians in Washington call for radical change if they are to be conquered. They stem from a political system that requires elected officials to spend more time getting reelected than on governing, and in the process catering to routine influence peddling — what is in essence legalized corruption. The reason this state of affairs thrives is because there is too much money sloshing around inside the Beltway, too few restrictions on how money is ‘awarded’ to politicians, and too much apathy among voters to demand more from their elected representatives to encourage the fundamental change needed to turn things around.

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Congressional Self-Assessment Board Necessary to Preserve National Security

December 6, 2012 by

In recent years, political agendas have begun to trump the best interests of the nation. The United States Congress is in a constant state of gridlock and seems unable to put party politics aside to invest in a strategic vision to protect and advance U.S. interests. In order to strengthen U.S. national security, Congress must be a fully functioning and cohesive entity. In the current state of U.S. politics, however, Congress is abdicating its responsibility to play this vital role. Reforming Congress should be a priority in the coming years, spearheaded by an intensive review conducted by its members. Without internal reform, Congressional paralysis will continue to directly threaten U.S. national security.

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Mark Carney to head the Bank of England

November 27, 2012 by

Mark Carney in Davos, Switzerland. Jolanda Flubacher/swiss-image.ch

As a Canadian, perhaps I should feel a surge of patriotic pride now that Mark Carney has been designated the new head of the Bank of England – quite a step up for the current governor of the Bank of Canada. There is no question that Mr. Carney is a market-savvy guy (he did, after all, work for the vampire squid), and his experiences as Chairman on the Financial Stability Board (FSB) suggests that he is sensitive to the ongoing systemic risks present in our increasingly complex global banking system.

That said, his recent attack on the Bank of England’s Andy Haldane in a Euromoney interview last month, does give one some cause for concern, particularly as it evinces the usual complacency that most Canadians seem to feel about the basic soundness of their own banking system, which essentially upholds the universal banking model as a viable one. By contrast, in his famous “dog and frisbee speech” delivered last August at Jackson Hole, Wyoming, Haldane suggested that: “Regulation of modern finance is almost certainly too complex. That configuration spells trouble…Because complexity generates uncertainty, it requires a regulatory response grounded in simplicity, not complexity.”

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The Fiscal Cliff and the American Economy

November 24, 2012 by

Looking at the latest US data, business sentiment and capital spending have been eroding, and given the lagged impact of capex, that trend looks set to continue for the next few months. Against that, a number of consumer sentiment indicators remain upbeat and housing looks like it is in a firmly established uptrend, after a 5 year bear market. In fact, the existing home inventory to sales ratio is as low as it ever gets, and that is with still very depressed sales. If sales pick up further, given low inventories and with new housing starts still below the replacement rate, home prices could lurch forward.

That said, the markets have been fairly upbeat given the rising perception of a deal to avert the US falling off the ‘fiscal cliff’. But even a deal that drains, say, 1-1.5% of GDP will have negative consequences for the US economy. Bear in mind that the U.S. still has a very high ratio of private debt to GDP. Therefore any such fiscal restriction as contemplated by the two parties may result in a significantly lower economic growth rate than the average 3% rate of the last five quarters (which is what the revised economic data of the past few quarters will eventually show).

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A Carbon Tax for Fiscal and Climate Stability

November 18, 2012 by

President Barack Obama and New Jersey Gov. Chris Christie look at Hurricane Sandy storm damage along the coast of New Jersey on Marine One, Oct. 31, 2012. Pete Souza/White House

The White House currently confronts a rare coincidence of environmental and fiscal pressures. Hurricane Sandy has raised the visibility of climate change as a national issue; the storm was the latest in a series of extreme weather events over the past ten years. Ocean surface temperatures have increased over the past few decades, and this trend contributed to Sandy’s gargantuan size and strength. Many scientists attribute this ocean warming to global climate change abetted by human activities.

Meanwhile, the imminent “fiscal cliff” threatens to end the U.S. economy’s recovery.

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President Obama Wins a Second Term for Whom?

November 10, 2012 by

President Barack Obama delivers remarks in the James S. Brady Briefing Room

The Democrats could not have won so handily without the Citizens United ruling. That is what enabled the Koch Brothers to spend their billions to support right-wing candidates that barked and growled like sheep dogs to give voters little civilized option but to vote for “the lesser evil.” This will be President Obama’s epitaph for future historians.

Orchestrating the election like a World Wrestling Federation melodrama, the Tea Party’s sponsors threw billions of dollars into the campaign to cast the President’s party in the role of “good cop” against stereotyped opponents attacking women’s rights, Hispanics and nearly every other hyphenated-American interest group.

In Connecticut, Senate candidate Linda McMahon spent a reported $97 million (including her earlier ego trip) to make her Democratic challenger look good. It was that way throughout the country. Republicans are pretending to wring their hands at their defeat, leaving the Democrats to beat up their constituency and take the blame four years from now.

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The Kardashians voted: Now you have no Excuse

November 6, 2012 by

The ever-preening reality stars, Kim and Kourtney Kardashian let it be known to their millions of fans via social media that they exercised their right to vote. While I find their celebrity status to be undeserved, I will give them credit for exercising their right. Leaving her fans in suspense, Kim Kardashian tweeted her 16,542,488 followers, “Sending in my absentee ballot now!!! Make sure you vote!!!!… I’m filling out my voting card in a room filled w people,everyone is telling me their opinions! Vote how YOU want.” I’ll forgive her butchery of the English language, Twitter only allows for a limited number of characters.

Sadly, the USA Today found that 90 million eligible voters plan to sit this election out. Their reasons vary from too busy, their enthusiasm is lacking or the always popular their vote won’t matter.

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The GOP: Retrograde or Reformist?

November 5, 2012 by

The Republican Party Today and the Romney Campaign

The Republican Party is in a state of disarray and needs to change. Mitt Romney’s presidential campaign, and the extreme positions from which he is now trying to distance himself, provides insights into this situation. It is not surprising that Governor Romney tacked hard to the right during the Republican primary and is now emphasizing a more moderate brand in his latest incarnation of himself.

Nonetheless, I am concerned about a range of public policy issues: the deficit, a disastrously dysfunctional Congress and the rising cost of higher education. I am also worried that there is no overarching strategy that underpins American foreign policy today. Yet, as this election cycle painfully draws to a close, what bothers me the most is the current state of the Republican Party and its dismal prospects for the future.

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Prelude to Election: The Third Presidential Debate

October 23, 2012 by

Mitt Romney and Barack Obama during the debate. Jim Lo Scalzo/EPA

There were no spectacular implosions, no remarkable points of stumbling. The third and last debate between President Barack Obama and contender Governor Mitt Romney was not the most exciting affair, though it showed Obama to be far more accomplished, and the result for Romney acceptable. Sitting down, Obama could assume the role of academic in viva mode, searchingly probing Romney on vulnerable points.

The theme of the debate was foreign policy, a suggestion that irked some commentators.  Ezra Klein, writing for The Washington Post, put it starkly: we shouldn’t be having a foreign policy debate at all. “Gas prices are set on a global market. Flu pandemics with the possibility to kill thousands or even millions of Americans begin on farms in Asia. Food safety is no longer a domestic question when you’re importing your grapes from Chile.”

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US Politics and the Middle East

October 19, 2012 by

President Barack Obama in Florida. Photo by Bill Ingalls

US elections are manifestly linked to the Middle East, at least rhetorically. In practical terms, however, US foreign policies in the region are compelled by the Middle East’s own dynamics and the US’ own political climate, economic woes, or ambitions. There is little historic evidence that US foreign policy in the Arab world has been guided by moral compulsion.  When it comes to the Middle East – and much of the world - it is mostly about style.

The country’s two leading political parties have proven equally to be interventionists. In the last two decades Democrats seemed to lean more towards unilateralism in foreign policy as in war, while Republicans, as highlighted by the administration of George W. Bush, are much less worried about the mere definitions of their conducts.

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