americans for tax reform, atr.org, Debacle, Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future, Grover, Grover Norquist, health care, John Lott, low tax rate, single payer, single payer health care
That an economist would join forces with someone like Grover Norquist, a man who brags that he bases his life’s work on ideas that came into his head when he was 13, should raise eyebrows.
The arguments presented are mendacious garbage (lies), starting with revisionist history of the 1929 crash. Blaming that and the long road to recovery on excessive regulation? That is just astonishing. What caused it was lack of regulation. That is how bubbles work, and the 2008 crash was caused by lack of regulation and enforcement too. Flim-flam finance is what causes bubbles. Economists call this “Ponzi economy” in which no real new value is created, but prices get bid up. This happened in Beanie Babies in the late 90’s. It happened with stocks in the late 1920’s, and again in the late 1990’s.
That deregulation was the work of both parties. Clinton signed repeal of Glass-Steagall. Bush nearly destroyed the SEC. We haven’t had a Federal Reserve Chairman doing the job right since Volcker retired. The Fed Chairman’s job is to make the bankers quake in their boots. Nobody has done that since Volcker.
Here’s the thing. In the short term, nobody working in finance likes regulation. It constricts their ability to scam. And yes, financial firms (banks, insurance, etc) will scam up a storm if they are allowed to. In the short term, loosening things up so the scammers can play ALWAYS looks fantastic. Money flows, prices on assets rise and rise. But running up prices without creating real value to go along with it is a form of theft. It CANNOT continue forever. It is a form of pyramid scam. And that’s what this book is really about. It’s about convincing you to enable the scammers to continue to steal and make themselves rich.
You see, it’s easy to scam. It’s easy to get the Fed to give you $10 trillion, loan it back to the US government, make a profit on the loan and declare a profit. Any fool can do that. All that takes is connections.
It’s hard, very hard work, to create real things that benefit people. It is that value, from food and housing to iPhones, automobiles, roads and heavy equipment that money is used to measure. Forcing the financial industry to only make money when new, real value is created? Hey, that makes them work as hard as any factory hand in a steel mill has to. That is hard work. Because it requires the scammers to actually learn stuff and figure things out. That is what the Fed Chairman, the Treasury Secretary, and the SEC should be doing. Trust me, or if you don’t, ask any cop what people will do for “free money” hasn’t been invented yet.
The book makes claims that are obviously false, like blaming Obama’s stimulus for the lack of jobs created after the crash of 2008. (Corrected per comment by John Lott. Yes, the book does blame the stimulus for that.) Uh, no. That stimulus has saved our bacon. It is easy to show that the kind of policies Lott and Norquist are pushing would have created a mess. Just look at Hungary, Ireland, etc. And Obama’s extending credit to the automobile industry and at the same time forcing pension reforms that would allow that industry to remain competitive saved a whole lot of bacon too.
These guys also neglect a basic fact. The USA is a sovereign currency, and when it creates money that it spends, that money stays in the system. Yes, I won’t argue that we could spend the money on projects with higher ROI – no question. The Space Program was, oddly enough, one of the highest ROI government expenditures in history. I won’t argue that Obama doesn’t understand that. He doesn’t. The space program was a propaganda tool in his youth, a symbol of white society sending men to the moon while black children went hungry. That has crowd appeal, but the fact is the space program seeded growth that pulled black society out of poverty. Such government spending creates demand. Without demand for high-end jobs (which is seeded by government spending) you have Egypt or Tunisia. Lots of educated people with nothing to do but sell vegetables.
But it’s astonishing to read a book purported to be about economics that doesn’t talk about how banks have to have credit-worthy borrowers in order to loan money – and that is how the private sector (historically) creates money. That’s probably because that is what Keynes was getting at when he said that you could pay people to dig holes and fill them up. That infamous phrase was not intended by Keynes to mean that this sort of thing was the BEST way to get things moving. It’s not. It was a throwaway line to make a point.
Underneath? These two clowns never mention the elephant in the room – taxes and how cutting taxes created the Bush deficits. When they do they just repeat the mantra that lower taxes leads to improved economy because government gets smaller. And that is just garbage. I saw first-hand what a government drowning in a bathtub was like in Russia in the 1990’s. It’s not pretty. Here’s an example. In 5 years, Naberezhnye Chelny, an industrial city on the Kama River of 800,000 people had half its male population over 20 years old die from homicide, suicide and starvation over 5 years. In 1998, an estimated 30% of the adult population had syphilis. Roads, parks and infrastructure broken down. Went into the university, and everything in the building that could be removed had been taken out and sold. Not a toilet, not a sink in the place.
These two clowns apparently don’t believe that: You get what you pay for.
We could easily close our deficit and pay down our national debt. All we have to do is roll back tax rates to what they were under Ronald Reagan. If we roll them back to Eisenhower, we would be swimming in money. If all we did was not extend the Bush tax cuts, we would be in pretty darn good shape.
They make a basic point that is right, but they don’t carry it to the obvious conclusion. Yes, it’s true that Geithner and company were part of the scamming that crashed the world banking system in 2008. That’s true. They and their cohorts should be in prison, and not running the treasury.
But – So was Paulson, and he was Bush’s treasury guy. Paulson is arguably one of the kingpins, a scammer extraordinaire who made Geithner look like a penny-ante hustler. It was Paulson and the Bush administration’s slash and burn anti-regulation ideology that made the 2008 banking crash possible. Without enabling it by refusing to look at problems when they cropped up, without directing the DOJ and SEC to not prosecute and without directing the SEC to settle everything for pittances that made a joke of the law – the 2008 crash would not have happened. Period.
And that is how we come to the egregious (some might say criminal) faults of the Obama administration. The Obama administration, you see, has been even more protective of the banker-criminals than Bush was. Eric Holder repeats the same phrase at news conferences, over and over, “There were bad things, but for the most part not criminal.” One must ask though, since DOJ has simply refused to investigate, how on earth can he know?
Holder’s studied ignorance appears to be a bald-faced lie. We know that a judge threw out an SEC settlement with Citigroup in which obvious criminal fraud was perpetrated by the top executives of the bank – as bank policy. They did things like deliberately make loans to people they knew were terrible risks, by CDS (an insurance policy) on the loans, sell off the loans to investors, then collect the payment on the CDS. This is the equivalent of someone buying insurance policies on thousands of houses, selling the homes, keeping the fire insurance, then setting fire to all the homes in order to make even more money on the insurance payoff. (And leaving the homeowners out on the street.)
But it’s even worse than that. When the insurance company (AIG and others) went broke because of the fraud, the arsonists demanded (and got) the US Government to take over the insurance payments.
No administration in the history of this nation has been as servile and obsequious a servant of a criminal class as this one. I don’t say that lightly. Those guys on Wall Street running the scams are simply criminals. This administration has been their servile servant, doing their bidding. Maybe it’s because Obama is a lawyer and hasn’t really got a clue so he’s depending on people he trusts. Maybe. But it doesn’t change the reality. There is an account of the first meeting Obama called at the White House with the big bank CEOs. They were described as shaking in their boots. And he told them not to worry. He had their back, everything would be just fine.
Bill Black, the prosecutor who ran the S&L crisis investigations, had over 1,000 FBI agents on his team. The S&L crisis of the 1980’s wasn’t 10% of the size of this mess. After 3 years in office, the Obama administration assigned FBI agents to his special Financial Crimes Unit. Obama created this group after the pressure of months of protests in New York had spread all over the country.
How many FBI agents did the Obama administration assign? Ten. That’s right. Ten. That isn’t even a joke.
This book does cite some facts. But it bends them into a pretzel to bolster its propaganda message. It doesn’t hit the issues that are really glaring. And it simply lies about some things like the recovery stimulus.
All that makes this book a waste of time to read.
If you want to understand things, I would recommend:
Steve Keen – Debunking Economics – Revised and Expanded Edition: The Naked Emperor Dethroned?. The book is a tome, but worth reading, and written for laymen. You can also check Steve Keen’s Debtwatch online.
John Quiggin – Zombie Economics.
William Black – The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry You can find his articles at Econtalk and many other places. Google him. He also has youtube videos.