Digby's Hullabaloo Posts

Coming For The Social Security Checks, Again

by dday

How interesting that the Washington Post, in the midst of this Great Recession, decides that the biggest fallout of the loss of millions of jobs is not the health and welfare of those unemployed themselves, but the concurrent depletion of the Social Security Trust Fund, with a not-so-subtle inference that benefits need to be cut.

The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.

With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund’s annual surplus is forecast to all but vanish next year — nearly a decade ahead of schedule — and deprive the government of billions of dollars it had been counting on to help balance the nation’s books.

While the new numbers will not affect payments to current Social Security recipients, experts say, the disappearing surplus could have considerable implications for the government’s already grim financial situation.

Considerable!

Since the WaPo doesn’t make it clear, Dean Baker can explain what they’re talking about. Payroll tax revenue may be coming into balance with current payouts from the system during this recessionary period, but the article conveniently sidesteps the $2.5 trillion dollar surplus the system has generated over the years.

While those seeking to cut Social Security benefits are highlighting these new projections, in reality they have very little significance for the program. Under the law, Social Security benefits are paid out of its trust fund. This trust fund has accumulated a surplus of almost $2.5 trillion. The lower projected surpluses for the next few years will have some impact (if the projections prove correct) on the date at which the fund is projected to be depleted, but the projected depletion date will almost certainly be beyond 2040, even after CBO adjusts its numbers for the downturn.

Remarkably, this piece alludes to plans to cut benefits without ever noting that older workers and retirees have just lost close to $15 trillion in wealth due to the collapse of the housing bubble and the plunge in the stock market Presumably this would be an important factor in any debate over reducing benefits.

The issue here is not the successful administration of Social Security, but the historic maladministration of the economy and the rest of the budget by the “deficits don’t matter” crowd. Of course, to them deficits only matter with respect to Social Security, not the magic doesn’t-cost-any-money military budget.

By the way, I don’t know why this wasn’t heavily pushed all that much by the White House, but as part of the federal stimulus, beneficiaries of Social Security will receive a one-time $250 payment, beginning in May. This puts money into the hands of those who need it, for the most part, and goes a little way to strengthening the social safety net and helping out those who are collateral damage to this economic storm. We need more of it, not the Village nonsense about how benefits have to be cut based on misleading fiscal projections.

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Major Leagues

by tristero

From Seymour Hersh’s latest New Yorker article:

The Obama transition team also helped persuade Israel to end the bombing of Gaza and to withdraw its ground troops before the Inauguration. According to the former senior intelligence official, who has access to sensitive information, “Cheney began getting messages from the Israelis about pressure from Obama” when he was President-elect. Cheney, who worked closely with the Israeli leadership in the lead-up to the Gaza war, portrayed Obama to the Israelis as a “pro-Palestinian,” who would not support their efforts (and, in private, disparaged Obama, referring to him at one point as someone who would “never make it in the major leagues”)

This from Cheney, a bozo so, so…bozo-ish, it truly defies belief:

In his book It Doesn’t Take a Hero, retired U.S. Army Gen. Norman Schwarzkopf describes the evolution of the plans he and his staff made following Iraq’s 1990 invasion of Kuwait… Following one White House meeting at which he’d asked for more time and more troops, Stormin’ Norman reports, Joint Chiefs of Staff Chairman Colin Powell called to warn the Desert Storm commander that he was being loudly compared, by a top administration official, to George McClellan. “My God,” the official supposedly complained. “He’s got all the force he needs. Why won’t he just attack?” Schwarzkopf notes that the unnamed official who’d made the comment “was a civilian who knew next to nothing about military affairs, but he’d been watching the Civil War documentary on public television and was now an expert.”

And then, twenty pages later, Schwarzkopf casually drops the information that he got an inspirational gift from Secretary of Defense Dick Cheney right before the air war finally got under way. Cheney was presenting a gift to a military man, and he chose something with an appropriate theme: “(A) complete set of videotapes of Ken Burns’s PBS series, The Civil War.”

But that wasn’t the only gift that Dick Cheney had for Norman Schwarzkopf. Having figured out that the general was being too cautious with his fourth combat command in three decades of soldiering, Cheney got his staff busy and began presenting Schwarzkopf with his own ideas about how to fight the Iraqis: What if we parachute the 82nd Airborne into the far western part of Iraq, hundreds of miles from Kuwait and totally cut off from any kind of support, and seize a couple of missile sites, then line up along the highway and drive for Baghdad? Schwarzkopf charitably describes the plan as being “as bad as it could possibly be… But despite our criticism, the western excursion wouldn’t die: three times in that week alone Powell called with new variations from Cheney’s staff. The most bizarre involved capturing a town in western Iraq and offering it to Saddam in exchange for Kuwait.”

Remember the clowns in the Bush administration, people. They really were that bad.

No. They were worse.

Let’s Do The Time Warp

by digby

Oh goody:

Tim Kaine, the Virginia governor and President Barack Obama’s hand-picked choice as the head of the Democratic National Committee, infuriated abortion-rights groups Monday by signing legislation that gives abortion foes an important symbolic win.

Kaine brushed off intense lobbying by abortion rights supporters in Richmond to sign a bill that allows Virginia motorists to advertise their anti-abortion views by sporting “Choose Life” specialty license plates.

[…]

Kaine defended the move by pointing out that Virginia has a “long-standing program” allowing customized license plates and said that if Planned Parenthood applied for a plate he would grant it.

“I sign this legislation today in keeping with the Commonwealth’s longtime practice of approving specialty plates with all manner of political and social messages,” Kaine said in a statement.

“Furthermore, if Planned Parenthood—an organization that is already a recipient of state budget funds—or another similar organization ever chooses to seek a specialty license plate in Virginia, I believe the Constitution would require the state to approve that plate to protect against any viewpoint discrimination.”

I wonder what the chance is that Plannet Parenthood could get a bill through the legislature that says “Choose Condoms.” Not much, I’d guess.

Kaine is being too clever by half and it’s really unfortunate. (He’s apparently going to ban stem-cell research in Virginia too.) There’s absolutely no good political reason for the head of the Democratic Party to advance the conservative movement’s social agenda right now. It seems strangely anachronistic in this new era and gives gro0und at a time when it’s completely unnecessary. In fact, it’s lame on all levels.

Theater Critics
by digby
Speaking of the latest kerfuffle over Seymour Hersh’s reporting on Cheney’s assassination squad, Emptywheel quotes ex-official John Hannah on CNN today explaining why it would be perfectly legal:

Hannah: There’s no question, in a theater of war, when we are at war–and there’s no doubt, we are still at war against Al Qaeda in Iraq, Al Qaeda in Afghanistan. and on that Pakistani border–that our troops have the authority to go out after and capture and kill the enemy, including the leadership of the enemy.

This fellow might quarrel with that seeing as how he’s just been convicted of murder for capturing and killing the enemy in Iraq:

An American army sergeant faces up to 35 years in prison after admitting his involvement in the summary executions of four bound and blindfolded Iraqi prisoners. US Sergeant First Class Joseph Mayo told a court martial in Vilseck, southern Germany, that he thought the shootings were in the best interests of his troops because he feared the prisoners would attack them if released. The 27-year-old and fellow soldiers killed the four men with pistol shots to the head before pushing their bodies into a Baghdad canal in spring 2007 after fatal attacks on their patrol. His lawyer claimed that American troops on the ground in Iraq received insufficient support but military prosecutors said Mayo had demonstrated a “total lack of moral courage”. Mayo, from Fort Bragg, North Carolina, told his court martial at the US Army’s Rose Barracks that he was guilty of murder and conspiracy to commit murder. Asked by the judge whether he thought he had the authority to shoot the prisoners, he replied: “I thought it was in the best interests of my soldiers.”

Turns out there are all kinds of laws that forbid such things even in the “theater of war.” And there are laws that forbid assassinations and torture too. Cheney and his minions just believed those laws didn’t apply to them.

Keeping It Quiet

by digby

Over the week-end, I wrote a bit about the latest torture revelations concerning Abu Zubayda and the fact that everything they got from him under “enhanced interrogations” turned out to be garbage. I mused that they didn’t really care what the torture revealed, merely that they got lots of “metrics” that could show they were making progress in the GWOT with their macho tactics. Reader Sleon pointed me in the direction of this post by Bmaz at Emptywheel which adds another intriguing bit of speculation along the same lines:

Such is the clincher as to why the torture tapes had to be destroyed. It wasn’t just that Bush/Cheney et. al wanted to keep evidence of their torture program secret, there was never any complete way to do that. But there was only one thing that could prove they tortured for nothing and got nothing – the tapes. Cheney and his coterie of fellow Torquemadas were fiends proud of their handiwork; if they had evidence that it worked, they would have kept it. They burn spies for fun, crow on television about their willingness to torture and what they have accomplished, do you really think for one second they wouldn’t retain proof if they had it? And let us not forget just who we are talking about here – it is the White House Principals group:

The so-called Principals who participated in the meetings also approved the use of “combined” interrogation techniques — using different techniques during interrogations, instead of using one method at a time — on terrorist suspects who proved difficult to break, sources said. Highly placed sources said a handful of top advisers signed off on how the CIA would interrogate top al Qaeda suspects — whether they would be slapped, pushed, deprived of sleep or subjected to simulated drowning, called waterboarding. The high-level discussions about these “enhanced interrogation techniques” were so detailed, these sources said, some of the interrogation sessions were almost choreographed — down to the number of times CIA agents could use a specific tactic. The advisers were members of the National Security Council’s Principals Committee, a select group of senior officials who met frequently to advise President Bush on issues of national security policy. At the time, the Principals Committee included Vice President Cheney, former National Security Advisor Condoleezza Rice, Defense Secretary Donald Rumsfeld and Secretary of State Colin Powell, as well as CIA Director George Tenet and Attorney General John Ashcroft. As the national security adviser, Rice chaired the meetings, which took place in the White House Situation Room and were typically attended by most of the principals or their deputies.

Cheney, Rice, Rumsfeld, Powell, Tenet and Ashcroft. Means, motive and opportunity. Who could have imagined? This certainly explains why it was top White House lawyers including Gonzales, Addington, Bellinger and Miers, with “vigorous sentiment”, assisted the CIA in the decision and process to destroy the torture tapes of abu-Zubaydah and others.

(Every time I am reminded of that principles group watching “choreographed” torture before signing off on it, I am shocked and appalled all over again. )As to the question at hand, considering the fact that Cheney and Rummy spent their entire careers trying to correct what they considered the sins of the Nixon administration, Bmaz’s speculation makes sense. After all, they believed that Nixon’s catastrophic error was failing to destroy the … tapes.
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Bad Timing

by digby

Well it looks like we may get a little inkling of what would have happened if the GOP’s social security privatization plans had been implemented:

Just months before the start of last year’s stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent – and all of its stock-related investments were down 23 percent – as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

No statistics on the fund’s subsequent performance were released.

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

“The truth is, this could be huge,” said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. “This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities” in pension plans that would be passed on to the agency.

[…]

Asked whether the strategy was a mistake, given the subsequent declines in stocks and real estate, Millard said, “Ask me in 20 years. The question is whether policymakers will have the fortitude to stick with it.”

But Bodie, the BU professor who advised the agency, questioned why a government entity that is supposed to be insuring pension funds should be investing in stocks and real estate at all. Bodie once likened the agency’s strategy to a company that insures against hurricane damage and then invests the premiums in beachfront property.

Millard could be right that his diversification of the fund will result in a good return over 20 years. For all of our sakes, let’s hope so. But putting pension fund money into the inflated real estate market in 2007 was just stupid and in retrospect entering the stock market at that point was a case of very bad timing at the very least. It will probably take years for the fund to recover what it lost in the crash. That is a very big “oops.”

There has been no doubt for years that the fund was going to come up short with guaranteed pension plans going belly up, even in the good times. (See: airlines.) But instead of changing the agency’s conservative investment strategy, they could have lobbied to change the law to allow them charge higher premiums to the companies they insure or find some other less risky way to boost their returns. Of course, in the Bush years, that was the kind of thing that could get you kicked out of the Big Boyz club.

But even the original Bush appointee was a prudent investor who didn’t just start gambling with the pension insurance. Then they hired a Brownie:

In the early years of the George W. Bush presidency, the agency took a conservative investment approach under director Bradley N. Belt, who favored putting only between 15 and 25 percent of the fund into stocks.

Belt said in an interview that he operated under “a more prudent risk management” style and said he “would have maintained the investment strategy we had in place.” Belt left in 2006 and Millard arrived in 2007.

Under Millard’s strategy, the pension agency was directed to invest 55 percent of its funds in stocks and real estate. That included 20 percent in US stocks, 19 percent in foreign stocks, 6 percent in what the agency’s records term “emerging market” stocks, 5 percent in private real estate and 5 percent in private equity firms.

The PBGC is all that stands between a lot of retired people and penury, after a lifetime of paying into a guaranteed pension plan. Is it even remotely reasonable that a major change in investment strategy of an insurance fund like this could be done without any oversight or input? And yet it did. As usual, the best and the brightest were all partying 24/7 and nobody wanted to call the cops.

This could be a huge problem before long. And one of the saddest, yet inevitable, consequences of the opaque trillion dollar financial system bailouts and million dollar bonus pools for greedy bankers will be that when average pensioners need bailing out there will be no political capital left to do it.

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Foreclosure Waves

by digby

There are more ahead. And it’s got some ugly consequences:

According to Robinson, those victims of foreclosure who do wind up being pushed out of their homes can be roughly divided into two waves.

The first wave consists of those who lost their homes because they were unable to keep up with payments on poor mortgages, often with cripplingly high interest rates. There’s no hard research as yet, but anecdotal evidence indicates that, although these people didn’t have the financial resources to keep up with their mortgage payments, most were able to rent apartments or even homes in their same communities.

But for the second wave, the transition hasn’t been nearly so seamless. These are the people who are unable to make mortgage payments because they’ve lost their jobs. They no longer have the incomes to afford rentals.

This second wave is creating a strong demand for social services, including homeless shelters — a demand that far exceeds supply. Again, as yet there is no hard data, but anecdotal evidence indicates a far higher percentage of these people are winding up in hotel rooms, with friends and relatives, in shelters, or even sleeping in cars or on the street.

Here in California, the effects of this are going to be huge:

California’s unemployment rate will soar to between 12 percent and 15 percent by next spring and remain in the double digits until at least the beginning of 2012, according to forecasts released by two teams of University of California economists.

The state’s unemployment rate has not reached those heights since the Great Depression.

And California isn’t alone.

I’m sure the fiscal scolds will be putting the hammer down on anyone who wants the government to step up with direct aid — and the GOP presidential hopeful club will be posturing and preening on this. But even if the economy were to turn around tomorrow (and it doesn’t look hopeful) the displacement from all this is going to be felt for some time to come.

Play Money

by dday

From the Boston Globe, a terrifying report about how the Pension Benefit Guaranty Corporation, the agency that insures retirement funds, decided to play in the stock market at precisely the wrong time:

WASHINGTON – Just months before the start of last year’s stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent – and all of its stock-related investments were down 23 percent – as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

The PBGC is a backstop against major losses by private pension funds and the parent companies slipping into bankruptcy. Especially at this time, with the economy struggling, the PBGC could be called on more than ever to help protect pensioners. Just as an example, a structured bankruptcy by GM or Chrysler would mean that huge liabilities would be passed on to this agency. Which apparently gambled and lost tons of money. That’s exactly the opposite investment strategy that should be taken by what amounts to an insurer.

David Kurtz is blunt and right on the money.

A finance professor who had previously advised the agency not to make the switch away from bonds compared the move to an insurance company writing policies to cover hurricane damage and then investing the premiums in beachfront property.

Bush was able to do for the PBGC what he tried and failed to do for Social Security.

Josh Marshall concurs. These were Bush Administration officials who, in the wake of losing their battle to privatize Social Security, had this big pot of money – close to $64 billion – that they sunk into stocks, providing more money to Wall Street for them to keep pushing asset values higher. The timing of it happening just at the time before the market began to crash suggests that the Administration viewed this as perhaps a last-ditch effort to prop up Wall Street. The director of the PBGC, who advised and directed this strategy, is Charles E.F. Millard, a former managing director at LEHMAN BROTHERS, just to give you some more assurance. In the article he practically admits that he was just taking a whirl at the casino with public money:

He said the previous strategy of relying mostly on bonds would never garner enough money to eliminate the agency’s deficit. “The prior policy virtually guaranteed that some day a multibillion-dollar bailout would be required from Congress,” Millard said.

He said he believed the new policy – which includes such potentially higher-growth investments as foreign stocks and private real estate – would lessen, but not eliminate, the possibility that a bailout is needed.

Asked whether the strategy was a mistake, given the subsequent declines in stocks and real estate, Millard said, “Ask me in 20 years. The question is whether policymakers will have the fortitude to stick with it.”

I don’t think policymakers will be sticking with it, because there’s probably almost no money left in that portfolio. Money that was designed to insure pensions.

This is a crime.

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Escape Artist

by digby

Yesterday I referred to Chrysler chief Nardelli in passing as an example of the failed CEO who consistently fails up. Today, I read in the NY Times that the Obama administration is insisting that GM CEO Rick Wagoner step down before the taxpayers agree to give GM another dime. But Nardelli, whose record of failure is at least as great over the years as Wagoner’s, stays.

According to the NY Times:

In deciding to urge Mr. Wagoner to step down, the Obama administration seemed mindful of the public’s growing outrage over bailouts of private companies, as well as the bonuses paid to employees of A.I.G.Mr. Obama is well aware that he cannot afford to give the appearance of using tax dollars to reward executives who have done a poor job, and he began signaling as early as last week that he would take a tough stance with the automakers.In a question and answer session at the White House on Thursday, the president said there had been “a lot of mismanagement of the auto industry over the past several years,” and declared that more government help would be contingent on the companies’ “willingness to make some pretty drastic changes.”

They’d certainly better watch the taxpayers wallet with Nardelli in the room:

Nardelli will be on a very short leash, and look for Congress to question his every move.

You see, he has a compensation problem.

When Nardelli resigned as CEO of Home Depot in 2007, he was essentially run out as a result of his pay. Not only that, he was criticized by shareholder activists for ignoring investor concerns about his pay. Indeed, at a May 2006 annual meeting, he refused to answer questions from shareholders and gaveled the meeting to a quick close, ignoring shareholders who wanted to exercise their rights by asking questions and making comments to the board. Nardelli and Home Depot would later apologize for the spectacle.

When Nardelli quit Home Depot in 2007, he drew more ire by walking away with a $210 million golden parachute – even though his tenure did little to boost Home Depot’s stock price.

In fact, House Financial Services chairman Barney Frank, D-Mass., was critical Nardelli back then, calling the severance package “out of control.”

Frank’s words back then echo now in the controversy over bonuses paid to AIG executives and any compensation going to CEOs of financial-services companies that have taken federal bailout dollars.

Perhaps Nardelli has learned from the experience. He was, after all, the first of the Big Three auto execs to agree to take just $1 in pay.

How Nardelli structures his future compensation will judge how hard a time the government gives him – and Chrysler – in the coming months.

If the administration were to make an example of someone, this would seem to me to be the logical guy. Or if Wagoner really needed to go for other reasons, it’s hard to see why Nardelli escapes the guillotine as well.

This man has more lives than an alley cat. Then again, maybe Nardelli just has friends in high places who are protecting him. As Julia reminded me, Nardelli is a long time Big Money Boy who, along with other Home Depot execs, did everything in his power to pay back Eliot Spitzer for his attempts to clean up Wall Street as NY Attorney General:

New York Attorney General Eliot Spitzer’s challenger for the state’s Democratic gubernatorial nomination received hundreds of thousands of dollars from people with ties to Home Depot Inc. founder Kenneth Langone, a registered Republican and target of a Spitzer lawsuit.

Langone, a defendant in Spitzer’s suit over ousted New York Stock Exchange Chairman Richard Grasso’s retirement pay, supports Nassau County Executive Thomas Suozzi for governor. Suozzi’s campaign received at least $300,000 from Langone, his wife, Elaine, and two adult sons, and present and former business and charity group associates, Suozzi campaign records on the state Board of Election Web site showed.

“I’ve found a substantial number in the business community inside and outside New York who feel that Spitzer as governor wouldn’t be friendly to business,” Langone said in a Jan. 12 interview. Earlier that day, he had a lunch with 15 business associates, nine of whom promised to help Suozzi, Langone said.

[…]

He also has said Spitzer sought “headlines, not justice,” when he named Langone a defendant in a May 2004 suit over his role heading the stock exchange compensation committee that awarded Grasso a $187 million retirement package.

[…]

An examination of campaign records found Suozzi’s donors include Home Depot Chairman and Chief Executive Officer Richard Nardelli, who gave $16,200. Walter Buckley, an original Home Depot shareholder and his wife, Marjorie, contributed $32,000. Home Depot co-founder Bernard Marcus and his wife, Billi, gave $32,000, while Steven Holzman, who Langone named in 2001 as chief executive of his Invemed Associates LLC, donated $16,000.

Why Wagoner and not Nardelli? Who knows.
Maybe he’s got some pals protecting him. But it seems to me that if they wanted to “send a message” Nardelli is the poster boy for worthless, overcompensated losers.

Update: Fergawdsake.

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French Dread

by digby

Boo hoo:

“I must say I’m disappointed,” Senate Minority Mitch McConnell of Kentucky said Sunday on CNN’s State of the Union. “After two months, the president has not governed in the middle as I had hoped he would. But it’s not too late. He’s only been in office a couple of months. Still before him are the opportunities to deal with us on a truly bipartisan basis,” the Republican told CNN Chief National Correspondent John King.

Bipartisanship is a one way street, dontcha know.
McConnell is also afraid that we are going to turn into a banana republic. Oh wait, sorry, he supports turning us into a banana republic. Obviously. He’s a laissez faire, K-Street lackey after all. It’s the US turning into France that has him petrified:

Obama’s administration “is going to be the furthest to the left of any government . . . certainly in my lifetime,” McConnell also told King. “I’m not sure that’s what people voted for. I mean they were angry with President Bush. They were not happy with the economy…. Whether they intended to see America kind of turned into a Western European country as a result of an explosion of spending and debt and regulation is another matter.”

Quelle horreur!