January 16, 2009

Bush in the Rear View Mirror

With any luck, George W. Bush will simply disappear into the gated suburbs of Dallas, ride his bike around his ranch, pretend to stock his library, play golf in his sweat-soaked shirts and stay out of the way.  His astonishing ego has compelled him lately to make the rounds, burnishing his "legacy," rewriting history, and distorting a clear recent public record, still fresh in everyone's mind, with ludicrous fantasies about his "competence."  I think he argued that FEMA's handling of the Katrina disaster in New Orleans was actually first-rate, just as one example.  The most stupendous screwup in U.S. military and foreign policy history, invading a country to disarm them of an arsenal which they absolutely and completely lacked -- Bush called this a "disappointment."  Bush is that most tiresome of human specimens, a dull and slow-witted man who for reasons known only to himself thinks he's the smartest guy in the room.

Everyone is ready to turn the page.  Various liberal commentators have urged that investigations and/or prosecutions of members of Bush's "team" move forward under the Obama Administration, given the manifold (and manifest) prima facie felonies under the FISA law and the War Crimes Statute. Regardless of Alan Dershowitz's opinion as a "criminal trial attorney" that Bush/Cheney could beat the rap on the basis of national security (just like Jack Bauer), I doubt that's the case.  (Having watched Alan get his clock cleaned by Johnny Cochran in a mock trial a few years ago, I think Alan must have meant to say a "criminal appeals attorney.")  Once the full extent of the gratuitous abuse of prisoners came to light, the rampant, sadistic torture for no reason other than the appearance of being tough guys, an inflamed jury would go to town on those two erstwhile cowboys.

Dershowitz misses the salient point -- Bush's secret weapon, what (real) lawyers call an "affirmative defense."  Bush's unwatchable, intolerable person. Prosecuting Bush would mean that W would not go quietly into that goodnight.   He'd be in our living rooms for years to come, doing his girlish mincing and head-ducking, slaughtering the English language in front of an array of microphones, strutting from the court house with a splayed-finger wave of his little right hand.  And we'd have to watch. After eight interminable, awful years, eight full years of my life as an American tarnished and devalued by the incompetent bumbling of this pretentious goof-off -- and we still wouldn't be done.  More Bush, all the time.  

I don't think I could take it.  So okay, O.  You're right again.  You're really a smart kid, I'm starting to see that.  I'm going to check my own ego at the door for awhile.  I was over-employing it, trying to figure out too much, because I knew I could trust absolutely nothing that Bush ever said.  If I wanted to have any grasp of objective reality in these United States Under Bush, I had to build that comprehension from the ground up, because Bush went to work every morning (well, maybe half the mornings, whatever was left after deducting his 77 vacations while in office) with the express determination to mislead, obfuscate and lie.

It's true that not dealing with Bush's crime spree will leave the country with a damaged collective psyche.  We're not going to think of ourselves in quite the same way ever again, not after eight years of this guy and his gang.  That's part of the price of Bush.  But for a little peace, a break from all that he stood for, maybe it's for the best.  Dealing with the problems he left us will remind us everyday of his true legacy.  That's inevitable.  But at least we won't have to look at him, or listen to him, or watch him fake his way through another Presidential day.  That's pretty good.  Ordinarily, I never wish any part of my life away.  Every day is precious.  But man -- is it Tuesday yet?

January 12, 2009

Collective American Denial and the Prior Japanese Experience

I have mused over the parallels between the imploding American economy and the deflationary spiral which gripped Japan in the early 1990s.  The considered opinion of most American economic experts is that our fast and massive response to the bursting of the housing bubble will avoid the prolonged malaise in the Land of the Rising Sun.  To put the Japanese problem in perspective, to this day the real estate market in Japan has only recovered to a level of about 40% of the 1989 high (when land around the Imperial Palace was said to equal all the real estate in California), and the Japanese Nikkei Index is still only 80% of its value for the same year.  This is a very long time to get stuck in deflationary quicksand.  

One frequently-voiced criticism of the Japanese approach is that the banks were "enabled" in their perfidy by the government; instead of forcing the bad real estate loans to the surface, the government helped hide them.  This simply prolonged the damage to financial liquidity.  I suppose sometimes the cultural mandate to "save face" can be counterproductive.  Here, of course, any sense of honor is completely irrelevant to the banksters who brought on our own mortgage-backed security catastrophe. Instead of committing sepuku, they were more likely to pay their bonuses early before the federal regulators could seize the money.

Anyway, the analogy fascinates me, probably a sign that writing this blog is making me increasingly weird.  Japan is the second largest economy in the world, despite its difficulties over the last twenty years, and the world's largest creditor nation. It has many of the same "structural" problems of the U.S., e.g., a reliance on imported oil and an aging work force, but is in much better shape in terms of its balance of trade and its national savings. Nevertheless, it has a large national debt, larger than the U.S. in terms of a fraction of GDP.  To say the least, however, America is going to close ground fast once we start posting those $1.5 trillion annual budget deficits, as we seem fated to do.
"One more thing: even with the Obama plan, the Romer-Bernstein report predicts an average unemployment rate of 7.2 percent over the next three years.  That's a scary number,  big enough to pose a real risk that the U.S. economy will get stuck in a Japan-type deflationary trap."

Thus spake Paul Krugman in his Monday opus.  So everyone seems to have Japan on the brain because, when you get right down to it, we can of course draw distinctions between ourselves and the Japanese (they speak Japanese, we speak English, for example), but the actual determinative factors seem more favorable to the Japanese situation, not less.  The Japanese have a vibrant export economy, as one factor, which allows them to earn money in international trade.  72% of our economy depends on consumerism, and a lot of that is based on domestic trade in imported goods.

So I understand that the U.S. has "aggressively" tackled the problem of its failing financial institutions by appropriating colossal sums of money to recapitalize the banks and shore up the insurance and mortgage guarantor companies.  Now Obama promises to follow that up with a large "stimulus" program to "jump start" the economy.  What I still don't get is this: how is all this supposed to help in the long run?

I sometimes think that the quality of national discourse on matters of profound importance has become so impoverished by a culture of sound-bites and cheesy political sloganeering that public dialogue has simply parted company with logic and coherence.  "Jump starting" the economy sounds swell, as one example, but does the phrase have any meaning?  

Prior to the accelerating collapse of the economy in mid-summer 2007, we inflated a huge housing bubble with cheap mortgage loans and used the "income" derived from lines of credit and refinance to supplement inadequate earnings.  Nothing about the "recovery package" is going to change that much.  As I've said before, putting people to work rebuilding a lot of failed and failing infrastructure is in and of itself a good thing.  It's miserable to be broke, for one thing, and our tax-cutting mania over the last 28 years has left us with a severely underfunded public realm.

What Congress is slapping together is a public works program (and direct subsidies to state and local governments which are also broke and have no means to borrow the deficits) based on borrowing massive amounts of cash wherever the Treasury can get it.  They're doing this not because anyone necessarily believes this is an optimal approach but because they can't face the Awful Truth: this is a crash program designed to conceal the underlying reality that the fundamental basis of the economy is shot.  A consumer economy doesn't work unless the consumers have cash to buy stuff with, and now, because wages have been stagnant for the great majority of Americans for the last thirty years, the wherewithal to keep the "growth economy" going has disappeared.  Can't earn it, can't borrow it?  Okay, the government will borrow it for you, based on "taxpayer" money, and then you can repay us with...with...Look, don't ask so many questions.

I've been reading an enlightening book called The Bridge at the End of the World by Richard Gustave Speth, who teaches environmental science at Yale.  His thesis is that an ecology-based sustainable economy is possible now using renewable energy and green technology, and that unless we move in that direction life on Earth will simply be unlivable by the end of this century. Books such as Prof. Speth's, when written in the 1970s by Barry Commoner and others, were of course laughed off as alarmist fantasies, especially by people heavily invested in the old regime of extractive industries and heavy pollution.  Now the things he describes are part of our day-to-day reality; on January 12, 2009, it was 82 degrees in downtown San Francisco.  We now have heat waves three weeks after the winter solstice, which is nice since it never rains anyway.  So we should have used the last 30 years to move in the direction of a transformed energy economy, as President Carter urged us to do.  Our predilection for basing opinions on the limited cranial space alloted to public affairs sealed Carter's fate: he couldn't rescue the hostages from Tehran.  He was therefore wrong about everything. Ah, what a frivolous people!

Oh, and I suppose it's worth asking what the Japanese themselves think about our immediate future:

"I don't think the Americans quite realize yet that behind this hill lies the Himalayas," said Takashi Watanable, a top official at the Bank of Japan in the 1990s and now a professor at Tokyo's Bunkyo University. "The U.S. is going to go through a lot more before this is over." 

Deft, spare, evocative - just like Japanese line art.

Free Bernie Madoff

I'm tired of all this piling on where Bernie Madoff is concerned.  I understand that there are those who are perhaps justifiably angry about his $50 billion Ponzi scheme, but a lot of the criticism has gone way over the top.  For example, he's been called a "sociopath," and among the reasons for this serious allegation is that he cheated his own sister out of $3 million, and she is now faced with the prospect of selling her Palm Beach house at a major loss.  I admit that this does not look good, on the surface.

Yet there is a pack mentality about the public outcry which I find personally unsettling.  Even the cable financial programs are joining in the lynch mob stuff, calling for Madoff's bail to be revoked, for the book to be thrown at him.

Is this really the time to be focused so intently on things which happened in the past?  Bernie Madoff did not kill anyone, at least not in a sense which any penal code actually defines as "murder."  Many, many rich people gave their money to Bernie in hopes of becoming even richer, in the expectation that because of their connections to this maven of Gilded Age Investment they could "outperform" the paltry returns of the ordinary market available to shlubs like, you know, you and me.  I'm not sure that's a compelling narrative; for my money, it lacks the essential elements of a long-running media scandal, unlike a disappearance of a Southern coed from a Caribbean Island.

But returning to the major point (and I'm heartened by the New York judge's ruling a moment ago that Bernie's bail will NOT be revoked and Bernie will be allowed to live in his $7 million penthouse while he awaits trial), anything that Madoff did, by definition (as suggested by my use of the past tense "did"), occurred before now, and our focus needs to be prospective, not retrospective.  

This sick, self-absorbed, self-indulgent obsession with things which have already happened ties up valuable intellectual and material resources which could otherwise be used in the serious battle to restore America's economic health, which, lying as it does in the future, has yet to occur.  Is anything likely to be recovered from Madoff?  No, of course not.  That $50 billion is gone, and we are simply throwing good money after bad in a futile attempt to "make an example" of Bernie Madoff, and the mood of the country, and more importantly, the mood of its political leaders, is impatient with such "nostalgic" indulgences as investigating crimes or "singling" people out for persecution.

So I think I would go beyond today's ruling allowing Bernie to remain free on bail.  I urge the dismissal of all charges against him.  In the largest sense, the problem is "self-contained;" only those who specifically represented that they could withstand a total loss of their capital were allowed this special opportunity to place their bets with Bernie in the first place.  The fact that, technically, there were no actual stocks, bonds or anything else in which they were investing does not materially change this crucial factor.  They said they could handle losing everything; they lost everything; and now they're all complaining.  

So the equities of the situation also favor an exoneration of Bernie.  It seems to me the investors are trying to change the rules of the game simply because they don't like the outcome, and the outcome, as I've pointed out, has already happened, which is a point on the space-time continuum where we simply can't afford to lavish our attention.  

January 11, 2009

This Week Under the Big Top

So I watched my president-elect this morning with George Stephanopoulos on This Week.  L'il Georgie was his usual amiable self.  I think I would have learned a lot more if they'd simply gotten out a B-ball and gone one-on-one.  

O worried me a little with his meandering answer about Guantanamo; turns out the issue is a "lot more complicated than people think," and closing it in the first 100 days is not realistic anymore.  I think he means that now that he's this close to the Oval Office, the campaign issue about American honor has lost some of its prior urgency.  He discussed the difficulty of trying some prisoners at Gitmo because of "tainted" (i.e., produced by torture) evidence, while at the same time recognizing the danger of simply letting them go in cases where that evidence, tainted or not, suggests they represent a threat.  So we need some "special" process to decide whether they can be released or detained even without a formal trial where they might actually have a chance to prove their innocence (or, in the language of due process, where the government could succeed or fail in proving guilt beyond a reasonable doubt).  Someone's really gotten to this guy, I'm afraid.  Why not try these desperadoes in federal criminal court, as has been done with numerous other terrorists?  Convictions were obtained without compromising national security, and the American system of justice was both honored and vindicated. Unless, of course, the idea is to keep the torture under wraps...

This Week then transitioned to the panel, where the Resident Hysteric of the New York Times, Tom Friedman, gave his prescription for the recovery of the economy: credit must get moving again to business entrepreneurs, or nothing else can happen.  Friedman was wearing his trademark black turtleneck, which gives him a kind of techie, Steve Jobsy look, but with his bellows-like throat, it makes him look like an actual turtle.  I believe that if a contest were held to elect that human who takes himself most seriously in all the known universe, Friedman would win by acclamation.

The "recovery plan" was of course the hot topic of discussion.  Should it be $700 billion, $1 trillion, $2 trillion?  The general feeling is that it must be huge.  Newt Gingrich had the audacity to point out that of the first 50% of the TARP money, about $350 billion, no one can actually say where it went or what it's doing to help the economy.  That's a peculiar state of affairs; if the House of Representatives initiated the appropriation, as they must under the Constitution, didn't they include some process to see where the money went?  Apparently not.

This reinforces my view that the Congressional Clown Troupe, more than ever, spends its time at the Capitol Hill Big Top practicing juggling, slipping on banana peels and squirting seltzer down each other's pants.  It is for this reason that it seems highly unlikely that they will actually be able to devise a spending program to "jump start" the American economy, a strange phrase that O used over and over with George S.  The economy has a dead battery?

Or, more ghoulishly, using defib paddles on a corpse.  The principal idea seems to be that the fed government is ideally placed to do what private enterprise cannot do now, put people back to work or keep them employed (such as with state and local government).  While the fed govt. does not have the kind of money on hand to fund this kind of recovery, and must raise it by borrowing, the fed can do this because of its unique status as the issuer of the world's default currency and its triple A rating as a borrower, which comes embossed with a seal stating "backed by the Full Faith & Credit of the United States [see other side for details]."  

Supposing that Mr. Gingrich's reasonable objection can be overcome.  (By the way, with the imminent departure of W, I find myself more open to any idea from anyone on the political spectrum as long as it makes sense, i.e., sounds true.  I realize that I had gotten so sick of Bush that I just couldn't stand to hear any idea associated with him, even if, down deep, I agreed with it. For example, I always agreed with Bush that the world is better off without Saddam Hussein.  How could anyone seriously argue with that?  Yet among Bush's many pernicious effects was that he drove liberals to such desperation that they began reminiscing about the "good ol' days" of the Baathist regime in Iraq.)  The basic problem with the American economy is not that there aren't jobs; it's just that a huge percentage of them are crap jobs in the consumer economy, and it's that economy which is beginning to hemorrhage and die because consumer spending is plummeting.

I'm not an economist (although I play one on my blog). However, it seems to me you can roughly divide recent American economic history into three distinct eras, from 1930 to the present.  Era I is the Depression, which lasted roughly from 1930 to 1940.  War production (a form of government stimulus) got the economy moving at last, in ways that the alphabet soup of Roosevelt's social engineering did not.  For example, a serious recession hit in 1937-38, which the Stimulus Hawks (such as Paul Krugman) attribute to Roosevelt's temporary reduction in govt. spending; still, this tends to prove that five years of govt. tinkering had not pulled the nation out of its morass.

After the rest of the world's industrial bases were destroyed (Europe, the Soviet Union, Japan), America rose to unchallenged preeminence.  We held this position for about 30 years, until the first oil shock.  It was at that point, as President Carter warned us, that a transition to renewable energy (the lifeblood of the economy) was necessary.  Brilliant environmental thinkers, such as Barry Commoner, were writing the same thing.  Carter put solar panels on the White House roof.  

The American people then conducted their first experiment in Government by Idiot and elected Ronald Reagan, who promptly removed the solar panels and all hope for a transformative energy economy.  For 30 years we've been heading steadily downhill.

You can't do 30 years of work in two or three years, and the net effects of this Recovery Program will be (1) a temporary blip downward in unemployment, (2) some new highways and overpasses and (3) a large increase in the national debt.  It's good to put people to work, for whatever length of time, but America can't attend the equivalent of an EST weekend and come home transformed.  We borrowed the economy into a hyperinflated bubble, well beyond our means of sustaining it with wages,  and now the air is leaking out.  The Congressional Clown Troupe would rather not tell you that; so watch, intead, while 535 of them climb out of a yellow Volkswagen.