Tuesday, October 07, 2008

Manufactured Crisis

Honestly, I tried to follow the debate between The Precious and My Cranky Friend, but it was turn it off or throw up. Tom Brokaw presents the interests of the Very Serious People and wants to know what the candidates are going to do to cut spending, "entitlement reform," now that we have to give all of the money to Wall Street. Social Security, Medicare and Medicade are mentioned by name as prime candidates to cut.

The completely predicatable and ignored until warp-core meltdown manufactured crisis on Wall Street is used to bolster the perennial manufactured crisis of how are we going to kill off that pesky New Deal and Great Society stuff that only helps the little people. Pull up the ladder, Bo'sun, I'm aboard.

In lieu of actual presidential discussion, I present Hillary's cheeky and deliciously insulting letter to The Chimperor and his Hanky Panky today. She knows who created the problem and isn't afraid to rub Bush's nose in it, with a delivery all the more effective because of its politeness:

The ongoing credit crisis has severely restricted bank lending. The dramatic decline in the Dow Jones Industrial Average Index underscores the lack of liquidity in virtually all markets except U.S. Treasuries. At the same time, global market turmoil is creating more uncertainty and anxiety here at home, when what is needed at this time is confidence to bolster the credit markets.

Our economy runs on credit and credit is in too short supply. As a result, many small businesses cannot receive the loans and lines of credit they need to make payroll, stock inventory, or expand. This is having a dramatic impact on jobs with 159,000 lost this past month alone, the ninth straight month of job losses and the greatest single month loss in five years. Banks’ restrictive lending terms will make securing college loans more difficult, while also increasing the pressure on colleges and universities who lost access to funds maintained by distressed financial institutions to raise tuition.

The municipal bond market has taken a huge hit as investors flee and financing costs skyrocket. Several states and municipalities are at risk of failing to maintain important government functions.

Shorter Hillary - Look at the mess you made, you bozo, so bad even your base is in deep doo-doo (as Poppy would say). Nine straight months of job losses, Chimp, way to go!

I love the patient lecture to these two - See, kids, this is how the economy actually works. This is how it affects ordinary people, the kind invisible to you. You are not going to be allowed to sit around and dither, running down the clock while your uber-rich golf-buddies manipulate the markets to extort maximum benefit from the bailout. Unlike the guy the DNC handed the nomination to, she's not afraid to talk about social justice:
The Treasury has already become a lender of last resort for large financial firms and banks. We must extend that same help to small businesses, students, colleges, local governments and all those who are bearing the brunt of the same widespread credit crisis. It is a matter of necessity and a matter of fairness: we are helping to keep large Wall Street firms stay afloat with lines of credit. We should do the same for small Main Street businesses as well.

It matters how you frame arguments. If you accept the terms that there are no choices except to "fix" social programs by gutting them in hard times, the times when they are most needed, then that is probably what you will end up doing. Sympathy for them, even belief in them, is toothless if not backed by the willingness to fight for them exactly when it is least popular among the Very Important People. The argument to make is not one about morality (good people do this, we are a better people than that), but an appeal to justice (What we do for the powerful must also be done for the ordinary.). You don't need an appeal to innate goodness or the charity of someone's heart if you are willing to write something into law and put the full force of the government behind it. This applies just as much to healthcare and equal pay as to financial protection in times of crisis.

Social justice does not happen because we are good. It happens because we are willing to legislate and mobilize power on behalf of those too far from the levers of power to dictate what they want. Paulson has tried to dictate what will be done for the sake of his personal friends but even more for his socio-economic class and their world-view - a world-view Brokaw is repeating as Conventional Wisdom as he moderates the debate. What Hillary does with this letter is interrupt the world view with an alternative argument of how social goods and resources must be allocated. Justice is not just about voting the black guy into office. It's also about defending the ability of small businesses, the kinds most likely to be owned by people who are not part of the ruling class, to get venture capital and use debt constructively, businesses more likely to keep money in localities and regions, helping shore up the economy. It's about ensuring that access to higher education is not quietly shut off by denying credit to the many, many applicants who are not independently wealthy and to the schools that may not make money themselves, but which are the engines of wealth creation.

I propose that we set aside $150 billion of the $700 billion rescue plan for an “Emergency Stabilization Fund” to make emergency loans and establish temporary lines of credit for small businesses; to allow colleges and universities to have short-term access to funding to reduce the pressure on tuition; and to increase direct loans to students as private lending has dried up. The Small Business Administration and the Department of Education could be temporarily empowered to implement these loan programs until the market has stabilized.

Think about that. 21% of the bailout to be reserved for something else. $150 billion to stabilize the economic food chain where it will have immediate effect. Talking about the needs of small businesses and education as equally important as the golden parachutes of the Merry Banksters. This broad is talking as if these people are entitled to some support from the government! The nerve! Doesn't she know that there's no credit, no loans for people who can't repay? If they were creditworthy, they'd have other ways to finance their lives than sucking off the government teat, heaven without end, Amen! Don't they know we need that $150 billion to fund our retirement villas in the south of France? Socialists, all of 'em...

Hillary's bit about municipal bonds is important as more and more municipalities have had to rely on them to cover the loss of Federal money for things like infrastructure and support services. The entire thing reads like tutorial in government finance - and now you do this, and then you do that, are you following me, boyz? It lacks the grand rhetorical flourishes and deep econo-geekitude of Roubini's recent writings, but it gets to the same place - the credit crisis will not be solved on Wall Street, though it must be addressed there. It can only be solved by intervention in the localities where wealth is generated and capital replenished.

She concludes with two items. First, her signature statement about the power relationship inherent in the financial meltdown:

By failing to tackle a mortgage crisis, we ended up with a credit crisis. If we fail to take on this credit crisis, we risk deepening a looming economic crisis.

As Gulliver discovered, ignore the little people and you are toast. Her final line is a challenge to more people than Bush:

But if necessary, Congress should be called to return to consider additional authority to implement this plan.

This is directed at more than the White House. Where is the Democratic leadership on this issue? Why are they not waging this battle on behalf of Main Street?

The crises we are facing are things of our own creation - manufactured right here at home. While there are a number of way to solve these problems, it matters what path is chosen and whose interests are defended.



CMike said...

No one who voted for the $700 (to $850) billion bail-out package will ever be the political leader of the working class left in the future. Frankly, under our current Constitution, the working class left may not have a prominent national leader ever again.

Astoundingly, Sen. Clinton may have believed that the variation of the Paulson plan was what was best for America. She might have wanted to preserve her status as a serious figure in the minds of mainstream economists; the brilliant centrists who have been predicting a soft landing for the American economy for years -- the experts.

Sen. Clinton may be jockeying for a leadership position in the Senate. She may think that by going along with the heist now she will be in a position to fix it later ... which would just go to show you the woman is incapable of learning the most obvious lessons of the last eight, or twenty-eight, years.

Whatever her thinking was, Sen. Clinton has convinced me she will never be the leader the working class left desperately needs. Her passion is for maintaining her political prominence, not for
overthrowing Reagan-Bushism.

Anonymous said...

We know that Hillary gets it; there is nothing new there. It's clearly started from the housing bubble and the mortgages that are associated with The sky high house values.

Unless we fix the main problems we will stay in the mud. All this is common sense. You don't need a degree in economics to understand. But then, common sense is a misnomer; it's quite rare.

To the debate: we had a 2000 year old senile man debating an average guy from Chicago. The old man looked like an angry and irritated clown. The younger man answers were long and lacking verbal/mental acrobatics one can hear even in faculty meetings. He was, nevertheless, way better than the pathetic old man.

Life with Wall Street and corporate Democrats is not fun. It's laborious, clumsy and downright demeaning.

Falstaff said...

Among the many things your commentary has provided -- most notably clear, big-picture economic explanation -- it has also been good dramatic criticism. You understand the speakers as well as their words -- and the fact that the affect, personality and character of those speakers matter. That's drama, that's politics, that's integral with human society and real action.

But one glass-half-full demur. You say "manufactured crisis" as though it's something bad. Hey, we we've been worrying about manufacturing fleeing our shores! A growth industry -- in this case, a heavy industry -- is born!!

Unknown said...

I suggest this post for a look at what really needs to be done.


Pretty discouraging when you see what we have to work with. I think when historians look back they will see the 'selection' of the empty suit Obama as the crucial turning point where America took the road to disaster.

Hillary was our last chance to vote for someone who could set us on the right road. By the time Obama gets done....

It may very well be too late.

show me said...

I fell asleep during the vaunted debate, as I did during Obama's acceptance speech at the convention. I seem to be immune to his charisma.He is dull,he dulls my brain.

Despite what commenter cmike says it becomes increasinly obvious why the DNC did everything in their power to put Hillary down. She is very uncomfortably a Democrat.