The Limits Of Free-Market Capitalism
Until a few years ago, my spiritual devotions were limited to the free market and the music of Patsy Cline. I’m sorry to say it’s just me and Patsy now.
Karl Marx may have been wrong where it really mattered—communism, to paraphrase Churchill, is government “of the duds, by the duds, and for the duds”—but he was spot on about the pitfalls of capitalism, particularly when it came to the entrenchment of social classes, the fetish of consumption, the frequency of recession, and the concentration of industry. Yet, like trained seals, we continue to leap through the flaming rings of a system that is contemptuous of the public good while rewarding those who feed off “free” markets and the politicians who rig them. Nearly three years after the global economy almost collapsed under the weight of a corrupt and inbred financial order, Washington is still mired between the false choice of the state or private enterprise as the proper steward of the general welfare.
It should be clear to anyone who has lost a cell phone signal in our nation’s capital or been denied health coverage because of a pre-existing ailment that capitalism’s endgame is not freedom of choice and efficiency, but oligarchy. Many of America’s top industries—agriculture, airlines, media, medical care, banking, defense, auto production, telecommunications—are controlled by a handful of corporations who fix prices like cartels. As Marx predicted, the natural inclination of players in a market-driven economy is not to compete but to collude.
Reporting in Asia and the Middle East for many years, I prayed to the same kitchen gods of untrammeled commerce that now bewitch the Republican Party faithful and the neoliberals who inhabit the Obama White House. In Asia more than a decade ago, I covered the liquidation of state assets as prescribed by the International Monetary Fund, perhaps the largest-ever transfer of wealth from public to private hands, as if it were a new religion that would transform economies from the Korean peninsula to the Indian subcontinent. Laissez-faireism, I wrote, would liberate consumers and domesticate once overweening state-owned enterprises.
In fact, privatization merely shifted economic control from corrupt apparatchiks to their allies in business, a transaction lubricated with kick-backs and sweetheart deals. That’s what happened in the Middle East, and it became the spore that engendered the Arab uprising.
The corruption of capitalism in America is all the more appalling for its legality. With the economy still struggling to recover from a housing crisis fomented largely by Wall Street’s craving for mortgage-backed securities, prosecution of those responsible has been confined to a single lawsuit filed by the Securities Exchange Commission against a lone financier. The system is still lousy with loopholes, and the Republican Party, which demographically as well as ideologically is becoming a gated community for white, southern males, is calling for more deregulation, not less.
Which brings us to the central failure of American capitalism: the excoriation of the state.
So deep is the mythology of the free market that we ignore the consequences of starving our schools, libraries, public media, and roads and railways. We expect our teachers to assume the burdens of parenthood and then blame them for failing education. We lament our dependence on foreign oil and the aviation cartels, but we refuse to underwrite a passenger-rail equivalent of the interstate highway system. We disparage the coarse reductionism of corporate-owned news outlets while neglecting public broadcasting, an isolated archipelago of smart, responsible journalism.
Our hostility to the public sector—fountainhead of the Hoover Dam, Mount Rushmore, the Golden Gate Bridge, the Los Angeles Coliseum, our national parks, and countless other public utilities and services in addition to the federal highway system—is inversely proportional to our reverence for private consumption. As the economist John Kenneth Galbraith wrote in his 1958 book The Affluent Society, “Vacuum cleaners to ensure clean houses are praiseworthy and essential in our standard of living. Street cleaners to ensure clean streets are an unfortunate expense. Partly as a result, our houses are generally clean and our streets are generally filthy.” Galbraith also noted the uniquely American conceit of sanctioning debt when households and private investors hold it but condemning it when governments do.
Should the feds nationalize banks and appropriate soy fields? Certainly not. At its essence, there is probably no more efficient way of establishing the price of a particular good or service than market economics. Not all transactions are so simple, however, and there are some services—healthcare, for example, or transportation—that often fare better more as public goods than as private commodities. In order to save American capitalism, we must appreciate its limits even as we struggle to harness its power.
By: Stephen Glain, U. S. News and World Report, June 2, 2011
Walking Away From The Truth: GOP Playing With Matches On The Debt
Just ignore Tuesday’s vote against raising the debt ceiling, House Republican leaders whispered to Wall Street. We didn’t really vote against it, members suggested; we just sent another of our endless symbolic messages, pretending to take the nation’s credit to the brink of collapse in order to extract the maximum concessions from President Obama.
Once he caves, members said, the debt limit will be raised and the credit scare will end. And the business world apparently got the message. It’s just a “joke,” said a leader of the United States Chamber of Commerce, and Wall Street is in on it. Not everyone found it funny.
No matter how they tried to spin it, 318 House members actually voted against paying the country’s bills and keeping the promise made to federal bondholders. That’s an incredibly dangerous message to send in a softening global economy. Among the jokesters were 236 Republicans playing the politics of extortion, and 82 feckless Democrats who fret that Republicans could transform a courageous vote into a foul-smelling advertisement.
The games that now pass for governing in an increasingly embarrassing 112th Congress are menacing the nation’s future. It was bad enough when Republicans threatened to shut down the government to achieve their extreme and extremely misguided spending cuts, but that threat would have caused temporary damage. The debt limit is something else altogether. If the global credit markets decide that the debt of the United States will regularly be held hostage to ideological demands, it could cause significant harm to investment in long-term bonds and other obligations. That, in turn, could damage domestic credit markets and easily spark another recession.
To prevent this from happening, 114 Democrats in April asked for a “clean” vote without conditions. But Republicans were not about to set their hostage free. Knowing that the clean vote would not pass — and imposing a two-thirds majority requirement to ensure its failure — House Republicans gave the Democrats what they requested. They then voted it down, sending their reckless message to the world.
But there was no excuse for so many Democrats to go along with that message, including the leadership. Steny Hoyer, the minority whip, urged his members to vote no so they would not “subject themselves to a political 30-second ad attack” with all Republicans voting no. Apparently Mr. Hoyer did not trust voters to understand what a dangerous and dishonest game the Republicans are playing.
The exercise has prompted the White House to convene talks to discuss the Republicans’ scattershot demands, which have ranged from trillions in spending cuts to the outright dismantling of vital safety-net programs like Medicare and Medicaid. Democrats have hoped to get an increase in revenues out of any deal, but House Republican leaders emerged from a White House meeting on Wednesday spouting the usual discredited claims that higher taxes on the rich would impede job growth.
What Republicans seem unwilling to acknowledge is that the debt-limit debate is not about future spending. It is about paying for a deficit already incurred because of two wars and tax cuts approved by both Republicans and Democrats at the behest of a Republican president. Tuesday’s vote was a chance to do the right thing and educate the public on why it was necessary. Instead, too many lawmakers walked away from the truth.
House GOP Scoffs At The Fact That Taxes Are Lower Under Obama Than Under Reagan
President Obama met with House Republicans today at the White House to discuss ways to move forward on negotiations regarding the nation’s debt ceiling and the budget. During the discussion, talk evidently turned to taxes, and when Obama noted that taxes today are lower than they were under President Reagan, the GOP, according to The Hill, “engaged in a lot of ‘eye-rolling’“:
Republicans attending a White House meeting on Wednesday didn’t take kindly to President Obama telling them tax rates were higher during the Reagan administration. GOP members engaged in a lot of “eye-rolling,” according to a member who was on hand to hear Obama, who invited House Republicans to the White House for discussions on the debt ceiling. […]
“[The President] made a comment like the tax rate is the lightest, even more than (under former President) Reagan,” Rep. Lee Terry (R-Neb.) told The Hill following the meeting. House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) joked that during the meeting, “We learned we had the lowest tax rates in history … lower than Reagan!”
That House Republicans find this preposterous is symptomatic of the hold Reagan mythology has over them. After all, for seven of Regan’s eight years in office, the top tax rate was higher than the current 35 percent. In six of those years, it was 50 percent or more. And every year that Regan was in office, the bottom tax bracket was higher than the current ten percent.
For a family of four, the “average income tax rate under Reagan in 1983 was 11.06 percent. Under Clinton in 1992, it was 9.18 percent. And under Obama in 2010, it was 4.68 percent.” During Reagan’s time, income tax revenue ranged from 7.8 to 9.4 percent of GDP. Last year, it was 6.2 percent and is not projected to climb back to 9 percent until 2016. In fact, in 2009, Americans paid their lowest taxes in 60 years.
Republicans are very fond of saying that the U.S. has “a spending problem, not a revenue problem.” But the truth is that revenue has plunged due to the recession and to continued misguided tax cuts, and revenue needs to be raised to eventually bring the budget into balance. And Reagan knew that taxes were an important part of the budget equation. After all, he “raised taxes in seven of his eight years in office,” including four times in just two years.
By: Pat Garofalo, Think Progress, June 1, 2011
The GOP’s Hezbollah Wing Is Now Fully In Control
I have a guest column at the Daily Beast about the Republican Party’s self-destructive decision to support the Paul Ryan budget and, faced with the disastrous consequences, to dig in deeper. For an example of digging in deeper, check out Marc Thiessen’s column today. In the face of clear evidence to the contrary, he asserts that Kathy Hochul won in New York only because a third party spoiler split the Republican vote.
Having assigned to the Republican 100% of Jack Davis’s third party vote, Thiessen proceeds to argue, “Democrat Kathy Hochul won only a 47 percent plurality — just one point more than Barack Obama got when he lost the district back in 2008. As national referendums go, that is not terribly convincing.” It’s not? If House Democrats beat Obama’s 2008 vote by one percentage point in the next election, who does Thiessen think will control the House? You could argue that Hochul is just one data point and probably an outlier, and I’d agree. But it is a data point with clear negative implications for Republicans.
After asserting that the race proved almost nothing about Medicare, Thiessen then, arguing in the alternative, suggests a solution for Republicans to fight back anyway:
[T]he lesson of the New York special election is that if Republicans want to win in 2012, they need to stop playing defense and go on the offensive.
Why on earth have Republicans allowed Democrats to define the Ryan proposal as a plan to “end Medicare” when it is the Democrats who risk ending Medicare though a policy of neglect? Even the New York Times editorial page warned after the New York vote, “Sooner or later, Democrats will have to admit that Medicare cannot keep running as it is — its medical costs are out of control, and a recent report showed its trust fund running out of money in 2024, five years earlier than expected.”
Democrats have put forward no plan to deal with this fiscal crisis. Quite the opposite, they made it worse by taking $500 billion out of Medicare to help fund the president’s health-care law — robbing Medicare to pay for Obamacare. The time has come for the GOP to take the gloves off. When liberal groups put up an ad showing Ryan pushing Grandma off of a cliff, Republicans need to counter with an ad showing Obama, Pelosi and Reid pushing Grandma off the cliff — because that is where Medicare is headed if we follow their policy of inaction. The message should be: If we do nothing, Medicare will collapse — and millions of retirees will be left without health coverage. Democratic neglect will kill Medicare; Republicans are trying to save it.
Next, Republicans need to expand the debate. The Medicare proposal is just one element of a broader GOP plan to reduce our ballooning debt — which, in turn, is one element of a larger plan to restore economic growth and create jobs.
So, accuse democrats of letting Medicare go bankrupt, promise that you just want to save it, and then try to persuade voters that preserving the Bush tax cuts that have been in place for a decade will stimulate growth. Wow, why haven’t Republicans thought of this plan before?
By: Jonathan Chait, The New Republic, May 31, 2011
Fewer Hangouts For Lobbyists: Senators Propose Closing State Offices To Save On Budget
There may be no better example of how bloated the government is than the number of offices each senator has. First, there’s a senator’s official Washington office in one of three massive buildings on Capitol Hill, especially busy during the 153 days the Senate is scheduled to be in session this year. Add to that a myriad of committee offices. And many senators have hideaways tucked in the Capitol’s corners, where they can hold private meetings with colleagues and constituents or sneak a nap, lunch, or respite. And then there are the 460 state satellite offices.
Back-of-the-envelope math puts the total number of Senate offices at close to 700 for its 100 members. And those 460 state offices are expensive to rent and maintain: $40 million, or nearly one-fifth of the $219 million budgeted to run all Senate offices. That’s why Sen. Ben Nelson, the Nebraska Democrat who chairs the legislative branch panel of the Appropriations Committee is thinking about closing some of those state workrooms as he attempts to impose a 5 percent spending cut to prove the Senate means business in slashing the deficit. “It’s something that needs to be looked at,” Nelson tells Whispers. “There are some economies to be achieved.”
His Republican colleague, Sen. John Hoeven of North Dakota, agrees. Pruning senator’s budgets “may mean that you don’t have as many offices in your state.”
Terrance Gainer, the Senate sergeant-at-arms, says closing down state offices would also lead to savings in IT expenses and other office goods. “I’d ask them to take a look at that,” says Gainer.“We all ought to feel the pain so as we go to kind of zero-based budgeting or zero-based running a state, how many offices do we need?”
Well, many apparently. While the allotment of offices is supposed to be based on state population, it doesn’t always work that way. Nelson has five state offices in Nebraska, the same as Florida Republican Marco Rubio. Nebraska’s population is 1.7 million; Florida’s, 18.5 million. Democratic Sen. Dianne Feinstein of California (pop. 36.9 million) has four state offices; Democratic Sen. Kirsten Gillibrand of New York (pop. 19.5 million) has nine.
Gainer, a long-time police executive, says it’s time for an adult approach to the Senate budget. “If they are given an allowance,” he says of senators and their state office budgets, “they’ll spend an allowance. So if we reduce the allowance, it will force the tough love.” Still, Nelson’s not looking forward to delivering the news. “It will be awkward for us to suggest changes to [senators from] larger states.”
By: Paul Bedard, Washington Whispers, May 31, 2011
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