Statehouse Clown Show

I've been avoiding comment on the California budget situation, which has gone from bad to ridiculous. But my native state is an object lesson in our topic of the last few days - well of this whole blog, really: replace social with market economics, watch everything fall apart. It's an object lesson in this blog's other topic: the failure of the political class worldwide.

The LA Times story today is "Legislature adjourns with no budget; governor prepares to lay off 10,000." The large Dim majority needs more or less one Republican to vote with them to beat the 2/3 limit for tax increases. The Republicans, unable to face the reality that on economics they are ALWAYS WRONG, have taken a no-tax pledge. The result will be the shutdown of every single public project in the state, and mass layoffs to add to the furlong.

Schwarzenegger now gets to star as Herbert Hoover in his own movie called "I, Arnold - Depression Governor." He was cast in the role by his own party, whose rank-and-file is also ignoring their own party leadership.

Here's the circle of geniuses that are holding 40 million people hostage with their ideological narcissism and general lack of a grip on reality.

That's GOP Sens. George Runner, Sam Aanestad, John Benoit and Bob Dutton, from left, and Dave Cox, seated.

Genius, you ask. Is my sarcasm a little harsh? Well here's swing vote holdout Abel Maldonado (R-Central Coast) in his own genius words:

Last week, I sent a letter to the Big 5 demanding that the funding be removed from the budget and allocated to other programs. But instead, the Big 5 ignored my request. If they were truly making a good-faith effort to show the people of California that they were serious about fixing this budget problem, the million dollars would have been re-appropriated to a vital program.

Etc. Seems that Genius Maldonado, self-described son of farmworkers, ran for the Republican nomination for Controller, was shut out by his own party for voting for a budget compromise in 2006, and is mad that the current Controller has $1 million for "office furniture," or whatever. Ergo, no state budget. Ergo, tens of thousands are out of work.

Maldonado to current farm workers (and every other kind): let them eat office furniture! Pure genius!

America the Socialist - you WISH

Fivethirtyeight.com has a nice explanation of the electoral shift in 2008 that appears in the map at the left. Well and good for Dims to win elections. But it misses the big picture.

The big picture is that whites took a look at a Republican candidate who offered tax cuts skewed toward the wealthy investors that had just tanked their middle-class pensions, and who will double their government's deficit, and who are forcing cuts in every public support for middle-class life known to man, and took a look at this candidate who defined the 30-year boom in income inequality and 30-year wage freeze for 80% of Americans as the fountain of wealth, and who trashed tax cuts NOT skewed toward the rich as socialism - and 55% of the dimwits voted for him!

We have to face the fact that when it comes to their own money, white Americans are the dumbest fuckers on earth.

Reality check. Guess who made the middle class. Franklin Delano Roosevelt. Pushed by the labor movement, by Democrats, and by socialists. And by communists! And then by the New Deal's mass public works program that was finally and sadly given its proper enormous scale by World War II, and still later by retaining and expanding it via the Republican Gov Earl Warren in California and even a little by Dwight D. Eisenhower in the Republican 1950s White House, even as McCain and Palin's ideological godfathers were defining socialism as anti-Americanism, and by being expanded yet again by Dem Gov of California Pat Brown and Republican Gov of New York Nelson Rockefeller - before that kind of Republican was drummed out of the party and turned into a Clinton Democrat.

Here's a short, starter list of the socialist government programs that created the middle-class out of the abandoned farmers and union-busted workers and semi-educated fake professional service workers like the folks who bred me.

• Federal Home Loan Bank Act (1932): creates savings and loans to fund mortgages with federal guarantees in case of default
• Home Owners’ Loan Act (1933): cheap credit
  
• Glas-Steagall Banking Act (1933): established Federal Deposit Insurance Corporation and kept banks from blowing all of your money like they did after its repeal in the late Clinton period.
  
• Various New Deal Legislation (1930s): support for farms, small business, home building, credit stability, rural electrification
• Servicemen’ Readjustment Act (1944) (“GI Bill of Rights” - supports education, job training, medical care consumer loans, home loans for vets
• Highway Authorization Acts (1947, 1956): 79,000 miles constructed
  
• Federal Housing Administration: direct loans (4%) and loan guarantees for large-scale housing development

Each of these programs had to be pried open over many years for African Americans and other people of color. But this long civil rights struggle doesn't change the fact that the middle-class, segregated then more integrated, exists only because of mass social investment, now and forever, amen.

Meanwhile, yesterday, mass social investment was indeed taking place, for the t0p 0.01%, and NOT happening for everyone else:

• AIG upped its take of your money to $150 billion. For just one gambling insurance company, that's what it costs for us to cover its lost bets.
• Fannie Mae announced another $29 billion in losses for the 3rd quarter of 2008.
• American Express declared itself a bank so it could feed at the same federal windows.
• Arnold Schwarzenegger, put into office by the white middle-class, and saying every week for years that the state of California spends too much, suddenly declared that the real problem is the state doesn't tax enough. His solution: increase the sales tax, soaking the middle and the poor.
• GM has decided to save its dwindling cash reserves by stopping retiree health benefits for its former white-collar workers.
• The New York Times published data suggesting that 10 million homeowners will soon have their houses "underwater" - worth less than the mortgage they are paying to stay in the house.
• The University of California announced that its pension fund had lost 28.3% of its value since June 30, 2007 - echoing similar losses all over the country.
• The Los Angeles Times reported that the federal bank bailout could cost the state of California $2 billion in lost tax revenues.
  

Meanwhile the war in Iraq, that great murderer of Iraqis and fleecer of the American public, got going again.

Smile as you write those checks, and give thanks to Baal that we have no socialism in America!

To Do Nothing is to Die a Little

The hardest thing about any kind of decline is watching its victims take it lying down.

Lying down also takes the form of sheer ignorance, and standing up can take the form of correcting it. So on Memorial Day it's worth also remembering the teachers and the journalists who devote themselves to setting the record straight. The Sacramento columnist for the LA Times, George Skelton, offers a nice example of the genre today, correcting a few instances of massive middle-class dumbness about taxes and what they pay for.

Speaking of the uncorrected, our Governor has been spreading the myth that private companies will rebuild California more efficiently and cheaply than government can. His ode to public-private partnerships in his State of the State address last January is worth quoting in full:

Now, also over the next 20 years we have $500 billion worth of infrastructure that needs to be met. Now, as we head into this new century, we also need digital infrastructure to keep our economy growing. So the question is: How do we meet all those needs?

There isn't enough money in the public sector, we all know that. Can't do all of it. We need to expand partnerships where government and the private sector work together to meet the needs of the people. These partnerships can often deliver infrastructure faster, better and cheaper.

For instance, in British Columbia, public/private partnerships are common for building highways, bridges, rapid transit, water treatment and so on, and everyone is happy. The political leaders are happy, business is happy, the public is happy, the economy is happy, the future is happy.

Well, bond investors are happy. As Skelton points out, Arnold's champion borrowing has tripled the amount of state money that goes directly to service the states' debt. His latest plan, to increase state revenue by issuing bonds backed by future state lottery revenues, is another in his series of Wall Street Full Employment Acts - the fees and returns on these customized investment vehicles are huge.

In reality, private money increases returns by reducing costs, and one time-honored way of doing that is to externalize costs by getting the public to pay for them. You can make more money with your trucking business if the entire public builds and maintains freeways, rather than putting most of the cost on truckers themselves. The same is true of universities, as our two reports have shown: sponsorships and philanthropy flow to focused activities of interest to the donor, and not to general education. The reason is obvious once you start thinking about it: donors want effective results, and they leverage public money to do it. They use state-funded laboratories, federally-sponsored graduate students, and the like.

Other forms of private "partnerships" spring to mind:

• corporate sponsorships of Gov. Schwarzenegger's public events puts businesses with a financial interest in state decisions into the statehouse
• privatized utilities around the world, including electricity in California: one of the unavoidable cost increases that the University of California can't figure out how to pay for next year are elevated utility costs. Privatization has encouraged underinvestment in the electricity distribution system in many countries, as nicely summarized on page 10 of this book on solar energy. The logic is obvious: you make money by operating a grid that previous generations of taxpayers or fee payers already bought, not by investing in it. The same goes for the once-great British Rail and London Underground systems which pale by comparison with the far cheaper and more efficient SNCF and urban Metro systems in France.
  

What the hey. People do stand up a lot and figure things out. Leading recent examples are the California State Supreme Court decision legalizing gay marriage, which was written by a Republican jurist who said he was inspired by the Black civil rights movement (and the case Perez v. Sharp).

And there was also Barak Obama fighting back when Bush implied in his speech to the Israeli Knesset that the Democrat opposition are appeasers of terrorists. This is the only thing that will allow Obama to win in November - standing up.

And there is the memory of the war dead today - the ones who caught bullets and bombs thanks to the dumbness of the living, neither in vain nor forgotten, we will make sure of that.

Rediscovery For a Change

There are limits to dumbness:

• This weekend I've been at a family reunion in Marin County in honor of my brother's father-in-law Murray Kaufman's 90th birthday. If I were a media anchor I would call him a great American. Murray was a leftist CCNY student in the 1930s, in the US Army in France in World War II, was a printer in New York before becoming a high school teacher in Rossalyn on Long Island, where among many other things he coached the tennis teams and started one of the country's first high school curricula in environmental studies. Murray has never stopped fighting against unfairness and screw jobs in all their stupid forms. This is why his example is so important, why his company is such a pleasure, and why he has lived so long.
  
• I was in Oaxaca during the Obama-Jeremiah follies, where the media finally figured out how to play the race card - the ghost of panther-nationalism. I haven't had time to write about Oaxaca properly. We visited about a dozen frontyard, backyard, and cottage workshops of every kind. Some people make high-end crafts for tourists, some make art so expressive and direct it is hard to imagine it coming from the United States. Some get up before dawn to make animal characters they've invented out of pieces of scrap wood that they spend 12 hours in the local market trying to sell for the equivalent of 2-3 dollars or so. Nobody in the US who doesn't know how the Oaxaca half lives should ever lecture about entrepreneurship again.
• Meanwhile, a vacation did Tom Friedman good. He's got a sense of our royal American screw-ups much deeper than before. Maybe he's less screened by the effects of his regular diet of CEO kool-aid. He even borrows a title from an old book by one of the country's best business journalists, the Nation's William Greider ("Who Will Tell the People" - that their leaders' dumb ideas have sunk them). Here he is: "millions of Americans are dying to be enlisted — enlisted to fix education, enlisted to research renewable energy, enlisted to repair our infrastructure, enlisted to help others. Look at the kids lining up to join Teach for America. They want our country to matter again." That's a good start. He spoils it a bit by adding that America's Youth want it to "be about building wealth and dignity — big profits and big purposes. When we just do one, we are less than the sum of our parts. When we do both, said Shriver, 'no one can touch us.'" Well, no. The big stuff - teaching, research, invention, change - isn't about winning. You can't measure progress with profits. The search for profits is what has largely destroyed our search for purposes. But at least Friedman is starting to see what happened to the country while he was drinking the CEO drink.

The Blood Runs Everywhere

Happy 5th anniversary of the invasion of Iraq - not. I feel the same way I did last Memorial Day. only worse. Inertia is its own momentum. Repeated anger is a form of doom. We do nothing and nothing changes.

The best wrap-up of where we are now comes from outside the US of course, from Patrick Cockburn, who explains why the carnage has dropped and why it's not overall good news.

I was in Paris in December 1998 when Bill Clinton launched Operation Desert Fox, bombing Iraq for several days between December 16 and 19. On December 19, Clinton was impeached - for perjury and obstruction of justice in the investigation of his sexual relation with Monica Lewinsky. Some thought the bombing was a diversion from the impeachment charges. I read an editorial in a French newspaper about Clinton's bombing that began, "It was the most lethal blowjob in world history."

Today is the last day of Eliot Spitzer's governorship. He got cleaned out in about 48 hours. I think the stories only scratch the surface - that he was paying for hookers since college, and went after prostitution rings that he used. Just guessing. But here's the real point: he didn't kill anybody. And he didn't take thousands of people out on his way down. The obvious contrast appeared in French coverage but not here: Spitzer the money-laundering john is gone. The Iraq invader who deliberately commits war crimes is still around. Maureen Dowd is mad - but what's the use?

The big difference between 2007 and 2008 is money: bloody losses, and lots of them. The Fed put up $200 billion six days ago and offered to take any worthless crap a desperate bank still owned as collateral, or words to that effect. It guaranteed $30 billion over the weekend so JP Morgan would touch Bear Stearns with a 10-foot bowl and then buy it - for $2 a share. Bear Stearns stock was aroud $160 a year ago. Then it lost half its value by the end of fiscal year 2007, in November. Now it's down to $2. These are the crash numbers of 1929.

Was Bear Stearns the biggest, meaning the worst is over? No. Merrill Lynch's declared losses are so far $24.5 billion, Citigroup's$22.5 billion, UBS $18.1 billion, and so on. Bear Stearns was number 20. Imagine how rotten its assets are - to people who can make a professional guess at what's in them - if in 4 months they went from $80 to $2.

The world looked at the Federal Reserve tugboat with Bear Stearns in tow and jumped into the water. The best global resume was in Le Monde.

Les bourses de Paris et de Londres sont retombées à leur niveau de novembre 2005, l'indice parisien chutant de 3,51% et Londres de 3,86%. La Bourse de Francfort perdait de son côté 4,18%.

La Bourse suisse baissait également de 5,02%, Stockholm de 4,07%, Amsterdam de 3,79%, Milan de 3,39% et Madrid de 2,81%.

Quant à l'indice Eurostoxx 50, qui regroupe 50 des plus importantes valeurs européennes, il reculait de 3,78%.

Au total, depuis le début de l'année, les Bourses de Francfort, Paris, Milan et suisse ont perdu plus de 20%.

Les places asiatiques n'ont pas été épargnées, l'indice Hang Seng de la Bourse de Hong Kong clôturant en chute de 5,18% et la Bourse de Shanghai de 3,6%. Celle de Tokyo, dégringolant de 3,71%, est tombée sous la barre symbolique des 12.000 points pour la première fois depuis plus de deux ans et demi. Quant à la Bourse de Bombay, elle a chuté de 6,03% à la clôture.

You don't need to read French to see which way the wind is blowing.

The only good news is the end of the fantasy that the U.S. can do any stupid thing it wants and just pile up more money. The Fed is already trying to act like an actual government. The rest of an actual public response will eventually follow. Maybe before we're all broke.

And then here are the Financial Times' headlines for tomorrow:

Scramble to calm markets
Bankers and regulators scrambled to shore up confidence in financial markets as the sudden collapse of Bear Stearns heightened fears that the credit crunch would claim more victims -
Few investors escape shockwaves
Pain expected for investors large and small
Shares plunge as market begins repricing
Lehman, UBS and other banks hit
Chaos echoes fears of worst case scenario
Cause was not predicted but many effects have been
Practised hands capture the prize
Latest deal to capitalise on rival’s collapse
Experts speculate on unorthodox measures
Expands role as lender of last resort
Bankers wonder who will be next
Comparisons to crash of 1929
Fears of cross-border European crisis grow
Questions about Europe’s readiness for crisis
Wall Street quakes as the parade passes by
‘It’s like a funeral’ inside Bear Stearns HQ
Bear Stearns: Winners and losers
Cayne, Lewis and staff all caught short

In the Desert of the Real

Amidst the nonsense of the "real," which I will get to later, there's this excellent review of Roberto Bolano's The Savage Detectives. Imposssible not to quote this from Kunkel''s piece:

One person who never shows up in the reminiscences, except when the recording angel behind the oral history asks unavailing questions, is the teenage poet García Madero. This is because, heartbreakingly, no one remembers or has heard of him. So by the time we get to the third section, we understand that the half-forgotten poets Belano and Lima took with them on their quest for the all-but-forgotten poet Cesárea Tinajero a poet whose name was written on even swifter flowing water. In this way The Savage Detectives partakes, paradoxically, of the general oblivion it describes, since oral histories of undistinguished and out-of-print poets are not assembled in the first place, any more than the diaries of mute inglorious Miltons from Mexico City are ever published. Moreover, because the narrators’ accounts of their own lives as they briefly criss-crossed Belano’s and Lima’s truly resemble oral testimony rather than essays, stories or poems, these accounts would appear (but only appear) to possess no particular literary value worth preserving. No novel I have read is so movingly and appallingly lifelike in its unthematised accumulation of time and grief, and in its un-coordinated march towards oblivion.

The trick is to unremember the ever-present ones, and remember the forgotten ones. Otherwise the march will never stop.

Bush's Iraq War on America

Bush's economic policies are designed to move wealth from the large middle to the small top of the American social pyramid. I have blogged with charts on this before, and will do so again, but it's pretty obvious that these policies continue thirty years of attacks on what I call "majoritarian economics" and that they are succeeding at increasing the gap between the very rich and everybody else.

The war in Iraq has a similar effect, continuing the slow strangulation of the public services - health, higher education, long-term research, social security - on which the large middle classes depend. The occupation of Iraq has no achievable goal, except, that is, the destruction of a useful domestic government, both in Iraq and the United States. Federal uselessness was on grotesque display in Louisiana and Mississippi after hurricane Katrina, and milder, less visible declines in the quality of everyday life are as obvious as the growing wealth and income skew. It's not the Iraqization of the U.S., but it is the Brazilianization - a long, steady regression towards the old plantation ways of the region that continues to control U.S. politics, the American South. If you doubt me, look at income, wealth, health, and education indicators for the Deep South states that remain in thrall to the Republican Right. Hell, look at the indoor plumbing indicators. Back, back, back we go to the Middle Ages. And by the way, the Middle Ages lacked a middle class.

Why the middle class votes for the chuckleheads who undermine their conditions of life - well that's the vote against life and for death that gives title to this invisible blog. We will keep trying to explain it. In the meantime, what will we do in the wake of Bush's Little Surge speech this week?

The Surge is a booby-trap, but not for the Iraqi "insurgents." 20,000 more troops is about a 15% increase. Even if you captured 15% more snipers and bombers that would obviously not solve the problem. On top if this, the surge is actually a series of smaller incoming waves, a few thousand troops at a time. Even John McCain expressed doubts about the military value of this strategy, and the surge was basically his idea.

So who's the booby-trap set for? Congressional Democrats, of course. If they successfully oppose the surge, Bush-Rove will blame failure on them. This kind of fact-free finger-pointing works well in this undereducated country where a lot of people seem to believe their televisions. On the other hand, if the Democrats support the surge, they will squander the issue that gave them control of Congress last November. Since they ARE Democrats, they will dither and splinter and do little good for anybody here or in Iraq. We will get a better minimum wage and maybe some cheaper medications, and that's about it.

The reason is that the Democrats cannot take responsibility for the consequences of their values and choices, since these consequences generally contradict their values and choices. Democrats don't like to cut health care benefits and see mass layoffs - that's their long-standing pro-working class value frame. And yet they vote for forms of free trade, tax cuts, and fiscal austerity that do exactly that. The same is true of the war in Iraq, which the vast majority of them supported. They may not have wanted the invasion, but they felt they had to go along with it - support the president, fight terror, look tough, look good, not be called bad names by Republicans. The war - their Democratic war too - is a horrible failure. Actually leaving Iraq, and not just opposing being there, will make them look bad.

The pundit who faced this fact was, of all people, Thomas Friedman in the New York Times, writing on January 12th. Normally, Friedman is a cheerleader for American deindustrialization with a lemon-twist of safety net programs so the sinking middle doesn't feel so bad. But this time he faced a real reality, and not one he made up. He said Bush should set a firm deadline for withdrawl, and then wrote this:

Of course, just leaving would be bad for us and terrible for those Iraqis who have worked with us. We need to give them all U.S. passports. We have a moral responsibility to them. But it would also be bad for a lot of bad people. They would be left to fight it out with each other. And yes, Syria and Iran would “win” Iraq — meaning they’d win the responsibility of managing the mess there or have it spill over on them. Have a nice day.

Friedman also said some decent stuff about reducing the flow of oil money to oppressive authoritarian leaders in the oil states.

Forget the "make them fight all of us" bravado. Friedman offers two insights that would make the middle-class less self-destructive. First, follow the money, and then be ready to change its course. And second, face the effects of what you do.

The only hope lies in the economic and political majority of this country no longer pretending to look good, and learning to face the bad. Their bad.