Hitting the Iceberg on Purpose

The simplest summary of President Obama's State of the Union message is that the Wall Street bailout was a success, and the Main Street bailout must stop.  Why else would he point out ongoing suffering and then call for a 3-year freeze in the federal funding that is the only meaningful source of support and social development money in the United States?

For the pre-limbic thought processes that are leading the Democrats into a deliberate steering of economic recovery and their own political power onto the iceberg, see this dismal collection  of inane forgetting of basic politics and economics not to mention the basic purposes of the Democrat party.

The Dismal Collection gets to the backstory behind Krugman's excellent slam of Obama's "deficit-peacock strut." Obama has produced too small a jobs program and too weak a health-cost containment because "our political system doesn’t seem capable of doing what’s necessary." Behind the political failure is mass mental failure: learned and extremely astute people like Obama have their options shaped by 8th grade arguments and personal attacks that wouldn't score any points at all on most issues in most educated countries.

Afghanistan is a good example, and the NYT's London bureau chief John Burns perfectly articulates the incoherent strategy for which Obama is risking his presidency.  "Winning" Afghanistan means winning hearts and minds, but the actual US strategy is to win on the battlefield by killing a lot of Taliban, thus demoralizing them, at which point they will accept our money to switch sides forever to the Stars and Stripes.  This is as dumb as it gets, but Obama is racing down this road because of dimwit beltway concerns about "Obama the man."

Obama is letting himself get blown around by the gale-force winds generated by airhead Repubs and Dims all calling for him to move to a center that is well to the right of Richard Nixon.  He went from the US inventing the world's cheapest solar cells to "building a new generation of safe, clean nuclear power plants in this country" from one paragraph to the next.

Obama's former enthusiasts are getting desperate.  Cenk Uygur says that if the Dims reappoint Bernanke the great Titantic captain  "there’s no helping them and there is no hope in them."  The great summary of this dead end is Jon Stewart's:  "No matter what you do, the Republicans are not going to let you into the station wagon. . . .and you're the majority party. It's your car!"  Later Assif Mandvi explains, "The Democrats are going to need bipartisan support if they're ever going to see Bush's agenda enacted."

Finally: "you can't hurt us anymore. We're already dead."

Stewart's stuff about the Repubs not letting the Dims into their own car gets at some deep Democrat yearning for approval from authoritarian dickheads on the Right, and from the same elements in their own constituencies.  How can their survival do more that degrade us further?

Obama Takes the Wake-Up Call

My hope for Barack Obama always rested on the fact that he was a smart politician in the old school sense - that he would listen to majoritarian pressure and respond to it.  He may have figured out via the loss of Kennedy's seat via a "centrist" Dim to a Republican that economic oligarchy isn't popular.  There seems to be supportive polling data that Coakley didn't lose because she's too liberal.

This week, Obama offered a direct attack on the Supreme Court's neo-feudalist decision to give corporations the free speech rights of citizens, calling it "a major victory for big oil, Wall Street banks, health insurance companies and the other powerful interests that marshal their power every day in Washington to drown out the voices of everyday Americans.”   And his "populist" shift against banks, read as a shift from Geithner to Volcker,  upset the moderate Financial Times (which called Obama's move both a "declaration of war" on Wall Street and a "Maginot line", and the trading of bank stocks. (Sen. Barbara Boxer also announced her opposition to the reconfirmationl of Ben Bernanke at the Fed.) Again there was strong language:

My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout.  It is exactly this kind of irresponsibility that makes clear reform is necessary.

Still, the proposal itself has no specifics at all.  Obama has never had trouble making a good speech. The trouble is always whether anything comes next to back it up.  I'm doubtful that he has any interest in turning banks back into something more like a service to the public economy.  But at least he's not still asleep.

ADDENDUM.  See this good overview of Bernanke's two failures  - to have seen the housing bubble for what it was and helped deflate it, and to continue to privilege "fighting inflation" over fighting unemployment.

- Fr. Frank offers a definitive summing-up of where Obama is right now.  Offering many useful details, he says, "The president is no longer seen as a savior but as a captive of the interests who ginned up the mess and still profit, hugely, from it."  His muddled non-direction, Fr. F notes, is Dim party is adding to the existing weight of Dim centrist pro-biz confusion and pulling it under  "the Obama administration is so overstocked with Goldman Sachs-Robert Rubin alumni and so tainted by its back-room health care deals with pharmaceutical and insurance companies that conservative politicians, Brown included, can masquerade shamelessly as the populist alternative."

Rocket to the Bottom

The loss of Teddy Kennedy's Senate seat to a Republican is being greeted in France a clear sign of Obama's fall from grace and perhaps from influence.  In the midst of the avalanche of commentary came this poll about how Americans think Obama has done with improving race relations and the position of African Americans.  The WaPo reports that "On the eve of President Obama's inauguration a year ago, nearly six in 10 Americans said his presidency would advance cross-racial ties. Now, about four in 10 say it has done so."

There's far more agreement about this between the right and left than between black and white.  70 percent of "Americans" think Black folks have achieved social parity.  11 percent of Blacks folks agree.  The existential gap persists between those who actually experience being American while Black and those who don't.  So does a deficit in cultural capacity, which I define here as the majority's ability to credit "minority" experience.  The U.S. majority is bad at this, though it must be said that the majorities of most countries also are.

The main race debate in Obama's first year revolved around the arrest of the Harvard professor Henry Louis Gates, Jr. in his own home in Cambridge Massachusetts.  Obama retreated from his initial explicit outrage at police behavior, leaving the outcome as a public teaching moment murky at best.

But race relations are obviously also at stake in Obama's escalation in Afghanistan and inability to reduce the meddling and swaggering and support for tyrants that intensifies rather than suppresses the violence. He's maintained what is widely perceived as a war on Islam, a war on Arabs and on other middle eastern peoples - on non-Western brown folk who object to U.S. sovereignty over their own region of the world. 


The saddest example in the U.S. rescue effort in Haiti.  Haiti is the litmus test of Black conditions in the world as a whole - the first and last successful slave revolt created it as the first Black republic, and its neighbors starting with the U.S. haven't given it a break since.  When Port-au-Prince and many other Haitian cities were flattened in last week's earthquake, Iceland arrived first, and Cuba and Venezuela were there, and France sent various planes including one with field hospitals. The U.S. then arrived, took over the airport, turned back the French plane with field hospitals among others, injected 11,000 heavily-armed troops into the country, with the visuals looking a lot like the U.S. a military occupation. The mainstream media has copped to the fact that the U.S. is not really helping the rescue effort so much as policing an effort that "needs gauze, not guns."  Obama's most visible moment was appearing with former Presidents Clinton and Bush II in a weird show of solidarity not with Haitians but with the white presidents who meddled constantly in Haitian political affairs.  Bush backed the current government's perverse privatization efforts, which resulted in the closing of the country's only cement company and the closing of the country's only flour mill.  That was the kind of American support Obama reflected in posing with those two guys in his ride to the rescue.


It's no wonder Black racial optimism is back where it was before Obama's election.  I still see those lines with hundreds of people waiting in the rain at 5 in the morning to make sure their vote got to count.

Financial Crisis as Mental Problem

The financial crisis continues to foreground a crisis of knowledge: what are people allowed to know? When is what they know allowed to be true?

The financial industry has never faced the extent to which its analyses are skewed by its own financial interests, or how completely the uses of bailout money remain secret.  AIG remains a black box, and more generally we have no idea what any of it is worth once semi-detached from the government guarantees that float it now, and sink the rest of us.

Anne Enright has a nice piece in the London Review of Books on the universal mental unreality.  Called "Sinking by Inches," she writes about Ireland's meltdown as caused in part by Ireland's mental paralysis.

I can understand the denial at the end of the boom; what worries me is the denial that made it. From 2001 to 2007 it was not possible to be off-message about the Irish economy or, especially, about the housing market. You would barely be published. . . . It was no fun being informed, either then or later. People don’t like you for it, and why should they?
One of the strangest feelings, living through a housing boom, is that you are rich or poor not because of the money you earn, but the year you started earning it. It is not a question of effort, but of luck. This was part of the impotence and panic that drove Irish people to buy overvalued houses towards the end of the boom; it was the feeling that we were running up a down escalator and had to grab hold of whatever we could, to stop being swept away. . .
Telling the truth was, in the circumstances, not just boring, it was also unlucky, hexed, taboo. It might even be unclean. Careless talk costs jobs. If the bubble burst it would be your fault for calling it a bubble, because, at the end of the day, it’s not an economy, it’s a mood.

 This is still where the U.S. leadership seems to be, new bank tax or not.  Its main goal is to make the mistakes of the past into something bearable - at least for them.  While they continue to foucs on this, the country as a whole won't be able to tell the truth because it is still afraid of making it all worse.   And so we'll stay stuck with the combination of "impotence and panic" that got us where we are.

Ticking Time Bomb for 2010

There isn't enough commentary out there about how the "recovered" sector of the American economy - the banks - are recovering through continued and massive taxpayer subsidies.  One of my Capitalist Pals had a good piece on it earlier this week. Healthy balance sheets are coming from (1) free money guvmint money (effectively zero interest) for which the banks can charge 5% or whatever; (2) the use of higher-yield Fannie Mae and Freddie Mac securities, although these agencies are floated by bailout funds; and (3) the declaration of actual losses as income:

many of the same banks that received TARP funds were deliberately allowed to mask big losses in the 1980s after their loans to Latin American countries went bust.

Today, banks are doing the same thing by underreporting losses and delinquencies. This means that, even if banks aren't collecting, they can keep counting interest they're owed as if they are getting paid. This allows them to delay the write-down process, and casts doubts on their financial statements.

 The fact that the author of this piece depicts his view as controversial suggests we're living again in Kool-aid World, and that unpleasant surprises await.

Be sure to read the even scarier Part II.

HNY quandmême!