Month: November 2013

The public servant payoff and the new normal

by digby

In case you missed the news over the week-end, it was announced that Tim Geithner will be joining private equity firm Warburg Pincus. you will surely recall that months ago Geithner pooh-poohed the idea that he would go to work for financial firms he’s been regulating for over a decade. Who could have ever predicted he’d do it anyway? (Well, everyone of course…)

Anyway, there’s been a lot of discussion of his rather crude payout but this one by Bill Black is especially tart.

Geithner is not a financial expert, but that was no bar to making him the head of the NY Fed or Treasury. The bankers and their political allies put the Geithners of the world in positions of increasing power not despite their weaknesses and failures but because of their willingness to aid the bankers even when doing so will betray their office. Geithner “has been a public servant” as long as one recalls that in this world this means being made a millionaire to lead a mostly private bank (the NY Fed), owned and run by and for the big banks, into its worst supervisory failures in its history at the (massive) expense of the public – which the bankers and the NYT term as being a “servant” of the “public.” Ryan Grim has a nice piece emphasizing that Geithner, as Treasury Secretary, issued the insipid regulation that was weakened to the point that it would please the private equity industry.

Geithner was a Republican who switched to an independent as a fig leaf to ease Obama’s appointment of him as Treasury Secretary, but firms like Warburg Pincus care little about party. They largely backed Obama in 2008 and largely backed Mitt Romney in 2012. What they want from Geithner, as even the NYT admits, is someone who excites wealthy foreign investors about the prospect of using his political connections on their behalf.

But something else intrigued me as soon as I heard that Geithner was cashing in at Warburg Pincus – I remembered that I had debated a former leader of that firm about Geithner. (Details are here, here, here and here.) “Bo” Cutter was enraged that folks like me were criticizing Treasury Secretary Geithner and Obama’s decision to promote him.

Warburg Pincus has had Geithner’s back for at least four years. The revolving door is powered by reciprocity, and Geithner had had Wall Street’s back for a decade.

If you want the perfect, concise overview of just how corrupt this really is, read the whole thing.

Oh, and in case you aren’t quite sure why it matters, check out Krugman today:

Spend any time around monetary officials and one word you’ll hear a lot is “normalization.” Most though not all such officials accept that now is no time to be tightfisted, that for the time being credit must be easy and interest rates low. Still, the men in dark suits look forward eagerly to the day when they can go back to their usual job, snatching away the punch bowl whenever the party gets going.

But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?

You might imagine that speculations along these lines are the province of a radical fringe. And they are indeed radical; but fringe, not so much. A number of economists have been flirting with such thoughts for a while. And now they’ve moved into the mainstream. In fact, the case for “secular stagnation” — a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between — was made forcefully recently at the most ultrarespectable of venues, the I.M.F.’s big annual research conference. And the person making that case was none other than Larry Summers. Yes, that Larry Summers.

(You will notice that there are a few for whom the “new normal” is very, very lucrative.)

Krugman writes a lot of scary columns but this one may be the scariest in a long time. If what he describes is the case, the normal people are in for a rough ride for a long time to come. (That is unless we can convince our leaders to stop obsessing about all the wrong things and start working on the right ones, which seems to be nearly impossible.)

The really scary fact is that this last decade has ushered in a whole bunch of “new normals” from the ongoing slump Krugman’s discussing to the idea of ubiquitous surveillance and casual acceptance of torture. It’s the Shock Doctrine at work in a number of different sectors.

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The glorious, dystopian future envisioned by our libertarian masters

by David Atkins

I’ve written often before about how much of the war between the American left and right is essentially the building of sand castles in the face of the oncoming tide of globalization, deskilling and mechanization of the workforce accompanied by catastrophic climate change. Many of the public policy battles in this country are fought between the one-percenters simply trying to loot what’s left before it all crashes and burns, and neoliberals desperately trying to pump up asset prices and force everyone into engineering programs to disguise the destruction of the regular wage economy. The far right and progressive left, meanwhile, are each trying to bring back the social and economic norms of the 1950s and early 1960s, respectively, in efforts of utter futility.

In this environment it’s rare to find columnists who are asking themselves the right questions. It’s rarer still to find ones who have the right answers. But it’s when conservatives and libertarians ask the right questions and come up with their honest responses that we see the crippling danger of allowing them anywhere near the levers of power. Consider the example of Tyler Cowen, conservative/libertarian economist and pundit, writing in POLITICO Magazine, celebrating a future in which a few technically skilled “economic winners” in cities will lord it over a mass of rubes left behind in an era of mass mechanization:

Less acknowledged, perhaps, is what all this technological change portends: nothing short of a new political order. The productivity gains, the medical advances, the workplace reorganizations and the myriad other upheavals that will define the coming automation age will create new economic winners and losers; it will reorient our demographics; and undoubtedly, it will transform what we demand from our government.

The rise of the machines builds on deeper economic trends that are already roiling American society, including stagnant growth since 2001 and a greater openness to trade and foreign outsourcing. But it’s the rapid increase in machines’ ability to substitute for intelligent human labor that presages the greater disruption. We’re on the verge of having computer systems that understand the entirety of human “natural language,” a problem that was considered a very tough one only a few years ago. We’re close to the point when we can fit the (articulable) knowledge of the entire world into the palm of our hands. Self-driving cars are making their way onto streets in California and Nevada. Whether you are a factory worker or an accountant, a waitress or a doctor, this is the wave that will lift you or dump you.

He’s right about this. As I have written, soon the machines will come for the doctors and lawyers, too. My prediction is that there will be a collective hysteria in elite circles once white collar jobs fall prey to mechanization and deskilling as blue collar jobs have done, and that in turn will necessitate a rethinking of the social contract after a period of intense political acrimony.

Cowen sees it similarly, but instead of a rethinking of the social contract, he sees a glorious libertarian Social Darwinist paradise:

The rise of intelligent machines will spawn new ideologies along with the new economy it is creating. Think of it as a kind of digital social Darwinism, with clear winners and losers: Those with the talent and skills to work seamlessly with technology and compete in the global marketplace are increasingly rewarded, while those whose jobs can just as easily be done by foreigners, robots or a few thousand lines of code suffer accordingly. This split is already evident in the data: The median male salary in the United States was higher in 1969 than it is today. Middle-class manufacturing jobs have been going away due to a mix of automation and trade, and they are not being replaced. The most lucrative college majors are in the technical fields, such as engineering. The winners are doing much better than ever before, but many others are standing still or even seeing wage declines.

These trends will only accelerate in the years to come, rewriting America’s social contract in the process. We will move from a society based on the pretense that everyone is given a decent standard of living to one in which people are expected to fend for themselves. I imagine a world in which, say, 10 to 15 percent of the citizenry (or more, in due time) is extremely wealthy and has fantastically comfortable and stimulating lives, equivalent to those of current-day millionaires, albeit with better health care.

Much of the rest of the country will have stagnant or maybe even falling wages in dollar terms, but they will also have a lot more opportunities for cheap fun and cheap education. Many of these people will live quite well—especially those who have the discipline to benefit from all the free or nearly free services that modern technology makes available. Others will fall by the wayside.

The slogan “We are the 85 percent!” probably won’t sound as compelling as the Occupy Wall Street version. It will become increasingly common to invoke “meritocracy” as a response to income inequality—whether you call it an explanation, a justification or an excuse is up to you. Since the self-motivated will find it easier to succeed than ever before, a new tier of people from poor and underprivileged backgrounds will claw their way to the top—Horatio Algers for the automation age.

This new digital meritocracy will prove self-reinforcing. Worthy individuals will rise from poverty on a regular basis, but that will only make it easier to ignore those left behind. The wealthy class will grow larger over time, and more influential. And the increasingly libertarian values of the wealthy will shape the public debate, strengthening the upper class’s grip on the commanding heights of the economy and society, and pulling policy in their favor.

You might think the 85 percent would rise up in protest. Many commentators, influenced by widening income inequality and the Occupy Wall Street and Tea Party movements, are predicting exactly that scenario: an America torn by unrest and maybe even political violence. I do think we’ll see some outbursts of trouble, but in the long run the picture will be fairly calm and indeed downright ordinary. Expect a society that will be more conservative, both politically and in the more literal sense of that term.

Cowen goes on to argue that all the poors will simply fight and eat each other rather than focus their gaze on the 1%, and that a new dawn of libertarianism tingned with slight neoliberalism will rise in America’s technocratic urban centers. It’s well worth reading his piece in full to appreciate the giddiness with which he anticipates this Malthusian nightmare.

I don’t, however, think it will end that way. The history of middle class societies that lose their footing in an age of mass inequality and labor destabilization suggests that a more progressive social contract will emerge under the threat of revolution. The other, only slightly less likely possibility is a fascist regime that attempts to lay all the blame on “The Other”. A slow, comfortable descent into class-based Social Darwinism seems less likely than either option, though it’s certainly possible.

But these are indeed the questions we will be compelled to answer. The fact that we will have to confront this decision one way or another makes it hard to take seriously the massive fights over, say, Obamacare. In 15 years a natural unemployment rate of 15% accompanied by unimaginable devastation due to climate change will necessitate the sorts of programs, solutions and political turmoil that will render most of today’s arguments utterly obsolete.

The future will belong to those who prepare public policy for that eventuality, and who work to put politicians in power who are ready to enact that policy when the time comes, and when the demographics of the nation have altered enough to make it possible.

Whatever happens, the libertarian fairy dreams of men like Tyler Cowen must not be allowed to become realities.

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Not helpful

by digby

This piece on Piers Morgan’s personal anti-gun crusade is spot on. I think he may be setting back the gon control movement single-handedly simply because of his obnoxiousness. I’m anything but a gun lover and yet his smug, self-righteous approach is rankling me more and more:

Pumped full of a sense of his own mission, he is a caricature of what gun owners imagine their antagonists to be: smug, patronizing urbanites. So he often ends up playing into the anxieties of right-wing extremists rather than puncturing them. He once compared American gun culture to the “racist culture” of previous decades, prompting one liberal guest to reply, “That’s not fair, a Southern gun owner is not like a Klan member—I mean, come on.” Above all, he has reduced one of the most sensitive, knotty issues in U.S. politics into a mere soapbox for the Piers Morgan brand.

He’d be doing a lot more for the cause if he’d let all these pro gun proliferation activists just speak for themselves as he did with Alex Jones. When he starts blathering on he sounds a little too much like his antagonists. It’s not helpful.

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Statistic ‘o the day

by digby

From Think Progress:

Seventeen out of twenty-two Republican members of the House Committee on Science, Space and Technology, or 77 percent, are climate deniers.

Here’s the Chairman, Lamar Smith of Texas:

There is a great amount of uncertainty associated with climate science. These uncertainties undermine our ability to accurately determine how carbon dioxide has affected the climate in the past. They also limit our understanding of how anthropogenic emissions will affect future warming trends. Further confusing the policy debate, the models that scientists have come to rely on to make climate predictions have greatly overestimated warming.

Instead of pursuing heavy-handed regulations that imperil U.S. jobs and send jobs (and their emissions) overseas, we should take a step back from the unfounded claims of impending catastrophe and think critically about the challenge before us.

Right. We wouldn’t want to send our jobs and their emissions overseas. Also too: $%Hpv6Uasflicn%^9jmha>;sjba!

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What’s a little mutual backscratching among One Percenters?


by digby

Jonathan Schwarz gives us some interesting perspective on Mr Geithner’s shameless cashing in:

Here’s Timothy Geithner last January, at the end of his time in office as Treasury Secretary:

Another fiction that has plagued Geithner is the idea that he is a creature of Wall Street…Geithner says it’s “extremely unlikely” he will take a job in the world of finance, but the idea that he is somehow, secretly, working hand in hand with that community persists…

Here’s Timothy Geither now:

Former U.S. Treasury secretary Timothy Geithner, who played a central role in the government’s response to the financial crisis of 2008-2009, is joining private equity firm Warburg Pincus… The firm declined to comment on Geithner’s compensation.

Of course, this is as surprising as the sun rising in the morning. It was inevitable that Geithner would cash in. As a prominent Wall Street banker said in 2009:

“For Washington to not demand anything when it saved us, even stuff we know is good for our long term good was one of the stupidest moves in modern times. … I feel like I should go over and hug Tim. It’s a shame we can’t pay him, ’cause that’s a guy who really earned a big time bonus.”

There’s more.  Much more. The guy might as well be announcing that everything he’s done over the past five years was in anticipation of this day.

Ryan Grim has more

Right wing moneybags organizations are multiplying like rabbits

by digby

Jesus, just how many of these things are there? Jane Mayer introduces us to the State Policy Network:

At the annual meeting, which took place in Oklahoma City this past September 24th through 27th, Sharp explained what she called The IKEA Model. She said that it starts with what she described as a “catalogue” showing “what success would look like.” Instead of pictures of furniture arranged in rooms, she said, S.P.N.’s catalogue displays visions of state policy projects that align with the group’s agenda. That agenda includes opposing President Obama’s health-care program and climate-change regulations, reducing union protections and minimum wages, cutting taxes and business regulations, tightening voting restrictions, and privatizing education. “The success we show is you guys,” she told the assembled state members. “Here’s how we win in your state.”

Sharp went on to say that, like IKEA, the central organization would provide “the raw materials” along with the “services” needed to assemble the products. Rather than acting like passive customers who buy finished products, she wanted each state group to show the enterprise and creativity needed to assemble the parts in their home states. “Pick what you need,” she said, “and customize it for what works best for you.”

During the meeting, Sharp also acknowledged privately to the members that the organization’s often anonymous donors frequently shape the agenda. “The grants are driven by donor intent,” she told the gathered think-tank heads. She added that, often, “the donors have a very specific idea of what they want to happen.” She said that the donors also sometimes determined in which states their money would be spent.

The S.P.N. operates as a tax-exempt nonprofit, allowing it to take tax-deductible contributions that it does not have to publicly disclose. According to the study by the Center for Media and Democracy, the donations include more than a million dollars run through the organizations DonorsTrust and Donors Capital Fund, which serve to erase the donors’ names, operating, as Mother Jones put it, like a “dark-money ATM for the conservative movement.” Numerous wealthy conservative individuals and foundations pass money through those two groups. In addition, according to the Center for Media and Democracy study, corporate donors to the S.P.N. have included many of America’s largest companies, such as Facebook, Microsoft, A.T. & T., Time Warner Cable, Verizon, Philip Morris and Altria Client Services (both subsidiaries of Altria), GlaxoSmithKline, Kraft, and funds from various entities linked to the fossil-fuel billionaires Charles and David Koch. Melissa Cohlmia, the director of corporate communication for Koch Companies Public Sector LLC, told me, “We think State Policy Network is a worthy organization that is focussed on creating more opportunity for everyone, thereby making people’s lives better.”

Asked about the IKEA model and her contention that each state’s think tank was an independent entity, free to pursue its own scholarly research, Sharp answered with a prepared statement. In it, she stressed that “State Policy Network is a 501(c)3 service organization dedicated to providing state-based, free-market think tanks with the academic and management resources required to run a non-profit institution. Because we are legally and practically organized as a service organization (not as a franchise), each of the 64 state-based think tanks is fiercely independent, choosing to manage their staff, pick their own research topics and educate the public on those issues they deem most appropriate for their state.”

The statement went on, “Every think tank, however, rallies around a common belief: the power of free markets and free people to create a healthy, prosperous society. They eschew a top-down DC-centric approach to running peoples’ lives.”

Well, except for the top-down instructions from the billionaires and corporations that are funding this thing. But that’s completely different. Unlike the government, they don’t even have pretentions to democracy so they’re actually much more like drones doing the bidding of their masters. Not that they care, obviously.

I guess it’s to be expected. When you have as much money as the upper 1% have, this stuff is just pocket change. They might as well follow their bliss. And for corporations it’s really great. They can fund their pro-corporate agenda and get a nice tax write-off.

In a way, it makes me feel a tiny bit better knowing about it. After all, you’d think with all that money and all that clout they’d have been able to totally turn the US into a free-market dystopian hellscape by now. That they’ve only partially achieved their vision is a testament to the resilience of whatever democracy we have left.

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They are rarefied beings who breathe toxic air

by digby

I knew the Villagers circled the wagons to protect their own, but this is really something:

What’s Ken Starr up to these days? According to Virginia court documents, the famously pious former Clinton prosecutor recently pleaded with a Fairfax County judge to let a confessed child molester go free. Because he’s a family friend. Here’s the letter.

It was just one of dozens of letters sent by as many Washington, D.C., and New York City power players—including former ABC News anchor Charlie Gibson, a former aide to Laura Bush, a former GOP congressman, and a powerful partner at the insider law firm Akin Gump—who wrote in praise of Christopher Kloman, a 74-year-old retired Potomac School teacher who has pleaded guilty to sexually assaulting several female students under the age of 14. Kloman received a 43-year prison sentence in October.

It seems like only yesterday …

This beautiful capital,” President Clinton said in his first inaugural address, “is often a place of intrigue and calculation. Powerful people maneuver for position and worry endlessly about who is in and who is out, who is up and who is down, forgetting those people whose toil and sweat sends us here and pays our way.” With that, the new president sent a clear challenge to an already suspicious Washington Establishment.

And now, five years later, here was Clinton’s trusted adviser Rahm Emanuel, finishing up a speech at a fund-raiser to fight spina bifida before a gathering that could only be described as Establishment Washington.

“There are a lot of people in America who look at what we do here in Washington with nothing but cynicism,” said Emanuel. “Heck, there are a lot of people in Washington who look at us with nothing but cynicism.” But, he went on, “there are good people here. Decent people on both sides of the political aisle and on both sides of the reporter’s notebook.”

Emanuel, unlike the president, had become part of the Washington Establishment. “This is one of those extraordinary moments,” he said at the fund-raiser, “when we come together as a community here in Washington — setting aside personal, political and professional differences.”

Actually, it wasn’t extraordinary. When Establishment Washingtonians of all persuasions gather to support their own, they are not unlike any other small community in the country.

On this evening, the roster included Cabinet members Madeleine Albright and Donna Shalala, Republicans Sen. John McCain and Rep. Bob Livingston, Federal Reserve Board Chairman Alan Greenspan, PBS’s Jim Lehrer and New York Times columnist Maureen Dowd, all behaving like the pals that they are. On display was a side of Washington that most people in this country never see. For all their apparent public differences, the people in the room that night were coming together with genuine affection and emotion to support their friends — the Wall Street Journal’s Al Hunt and his wife, CNN’s Judy Woodruff, whose son Jeffrey has spina bifida.

But this particular community happens to be in the nation’s capital. And the people in it are the so-called Beltway Insiders — the high-level members of Congress, policymakers, lawyers, military brass, diplomats and journalists who have a proprietary interest in Washington and identify with it.

They call the capital city their “town.”

And their town has been turned upside down.

With some exceptions, the Washington Establishment is outraged by the president’s behavior in the Monica Lewinsky scandal. The polls show that a majority of Americans do not share that outrage. Around the nation, people are disgusted but want to move on; in Washington, despite Clinton’s gains with the budget and the Mideast peace talks, people want some formal acknowledgment that the president’s behavior has been unacceptable. They want this, they say, not just for the sake of the community, but for the sake of the country and the presidency as well.

This is where they spend their lives, raise their families, participate in community activities, take pride in their surroundings. They feel Washington has been brought into disrepute by the actions of the president.

“It’s much more personal here,” says pollster Geoff Garin. “This is an affront to their world. It affects the dignity of the place where they live and work. . . . Clinton’s behavior is unacceptable. If they did this at the local Elks Club hall in some other community it would be a big cause for concern.”

“He came in here and he trashed the place,” says Washington Post columnist David Broder, “and it’s not his place.”

“This is a company town,” says retired senator Howard Baker, once Ronald Reagan’s chief of staff. “We’re up close and personal. The White House is the center around which our city revolves.”

Bill Galston, former deputy domestic policy adviser to Clinton and now a professor at the University of Maryland, says of the scandal that “most people in Washington believe that most people in Washington are honorable and are trying to do the right thing. The basic thought is that to concede that this is normal and that everybody does it is to undermine a lifetime commitment to honorable public service.”

“Everybody doesn’t do it,” says Jerry Rafshoon, Jimmy Carter’s former communications director. “The president himself has said it was wrong.”

Pollster Garin, president of Peter Hart Research Associates, says that the disconnect is not unlike the difference between the way men and women view the scandal. Just as many men are angry that Clinton’s actions inspire the reaction “All men are like that,” Washingtonians can’t abide it that the rest of the country might think everyone here cheats and lies and abuses his subordinates the way the president has.

“This is a community in all kinds of ways,” says ABC correspondent Cokie Roberts, whose parents both served in Congress. She is concerned that people outside Washington have a distorted view of those who live here. “The notion that we are some rarefied beings who breathe toxic air is ridiculous. . . . When something happens everybody gathers around. . . . It’s a community of good people involved in a worthwhile pursuit. We think being a worthwhile public servant or journalist matters.”

“This is our town,” says Sen. Joe Lieberman of Connecticut, the first Democrat to forcefully condemn the president’s behavior. “We spend our lives involved in talking about, dealing with, working in government. It has reminded everybody what matters to them. You are embarrassed about what Bill Clinton’s behavior says about the White House, the presidency, the government in general.”

The complainers aren’t the problem

by digby

I don’t follow education policy all that closely (you can’t follow them all) but I know a lot of people who do. And one of them brought this to my attention:

U.S. Education Secretary Arne Duncan told a group of state schools superintendents Friday that he found it “fascinating” that some of the opposition to the Common Core State Standards has come from “white suburban moms who — all of a sudden — their child isn’t as brilliant as they thought they were, and their school isn’t quite as good as they thought they were.”

Yes, he really said that. But he has said similar things before. What, exactly, is he talking about?

In his cheerleading for the controversial Common Core State Standards — which were approved by 45 states and the District of Columbia and are now being implemented across the country (though some states are reconsidering) — Duncan has repeatedly noted that the standards and the standardized testing that goes along with them are more difficult than students in most states have confronted.

The Common Core was designed to elevate teaching and learning. Supporters say it does that; critics say it doesn’t and that some of the standards, especially for young children, are not developmentally appropriate. Whichever side you fall on regarding the Core’s academic value, there is no question that their implementation in many areas has been miserable — so miserable that American Federation of Teachers President Randi Weingarten, a Core supporter, recently compared it to another particularly troubled rollout:

You think the Obamacare implementation is bad? The implementation of the Common Core is far worse.

I’m not taking a position on Common Core because, as I said,  I just haven’t educated myself about it. But I do know that it’s very politically contentious with the usual partisan divisions dictating at least some of the terms of the controversy. So, i’s to be expected that there would be a strong pushback. But unfortunately, it also seems to be failing at the implementation level, which is very disappointing. Nobody expects perfection and it’s impossible anyway. But it’s important not to flub highly contested government projects to every extent possible and not blame the people when they complain about the result. It’s not as if the other side will give you the benefit of the doubt.

These are complicated projects and I don’t think it’s fair to expect them to roll out completely smoothly. (In the case of healthcare it’s ridiculously over complicated and that’s part of the problem.) But I keep getting the feeling that nobody seriously gamed out the possibility that these new programs might not work all that well in the beginning and would cause a huge backlash because of it. Duncan’s insult sort of betrays that fact and the way the administration seems to have been caught flatfooted with the website does too. Maybe these folks ought to remember that they are in politics not high tech and they need to think through how to properly explain to people exactly what they are getting so they can maintain support when it takes time to implement properly.

This healthcare rollout isn’t just a technical failure, although it is that. There shold have been education campaigns and back-up plans in place.(And yes, I know they were sabotaged by the GOP, which didn’t make any of that easier.)In the end the real failure here was the political failure to anticipate what would happen if their kludgey new systems didn’t work flawlessly.

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Cholesterol funnies

by digby

I predict these new guidelines will come to be seen in the future as absurd as this cartoon shows:

The idea of putting vast numbers of the population on a drug is ridiculous on its face. Obviously, something isn’t right.

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My dinner with Pollock: Spinning Plates