Tuesday, December 27, 2011

The Curse of the Job Killers

Once upon a time, there was a group of people, Congressmen and business owners, who didn’t want government to be regulating business. They wanted companies, no matter whether mining, oil exploration, or financial, to be able to do whatever they wanted to do.

But they had a problem because years ago when business had that freedom, they abused it and paid no heed to the negative impact of their actions on the welfare of the general public or their workers. As a result laws and regulations were passed over the years that protected the general public and workers … things like the Clean Air Act, the Clean Water Act, and the Occupational Safety and Health act.

Then an economic crisis came upon the land. Unemployment was high and people were worried about their jobs. “Aha!” thought this business-friendly group, if we say that laws and regulations that impact business are job killers, the public will support our effort to do away with these rules, even though they are there for their protection.

And so they started calling all regulation, especially environmental regulation, job killers. And the people were afraid and said that they were against government regulation.

Unfortunately, this is not a fairy tale. This is actually happening. And what’s most amazing, no one … not anyone in Congress or any editorial writer … has to my knowledge called this Republican scam for the lie that it is.

Government regulations, as a general rule, are not job killers. They certainly often reduce corporate profits, but they are not job killers.  And that’s because all these companies will continue in business, regulations or no. No existing or contemplated regulation is so onerous that it would encourage a business to fold up shop.

Now if a mining company wants to remove a mountaintop to get at coal and is told, “no,” by the government, or if hydro-fracking would be prohibited, those would indeed be job killers in the sense that new jobs would not be created. But the public’s health cannot be held hostage to the need to create jobs. When something so endangers the public health, is so egregious, that it’s not a matter of regulating a business but actually prohibiting it, then that is the duty of government. It is the only protection we have.

All this hue and cry by the Republicans and by business interests is solely a matter of enabling businesses to maximize their profits. It has, with the narrow exceptions noted, nothing to do with jobs. Democrats must destroy this myth or we will all suffer the consequences.

Tuesday, December 13, 2011

The Coming Democratic Landslide of 2012!

Contrary to all the gnashing of teeth in Democratic quarters about the bad outlook for 2012, I think it can be argued that the outlook looks great … at least if the campaigns are run well.

Republicans have been doing a good job of shooting themselves in the foot. They are so high on their ideological mission and bent on pleasing their Tea Party base that they seem to have forgotten that there are other voters out there who they need to be reelected. Perhaps that’s because at least some freshmen Republicans in the House have indicated that they have no interest in whether they get reelected; they’ve said they are there to do a job.

Recent polls have consistently shown that Republicans in Congress are held in even worse regard by voters than Democrats.  Even in strong Republican districts that elected Tea Party candidates in 2010, support for the Tea Party and for the Republican Party has fallen way off … to less than 50%. And then there’s the general anti-incumbent sentiment, which will fall more heavily on Republicans in 2012 since they have a clear majority in the House.

And what about Obama? Yes, the economy will be a challenge. If the Republicans nominated a strong moderate, I think an Obama win would be almost impossible under these conditions.  However, that is certainly not in the offing. Romney may in fact be a moderate Republican, but he has worked so hard to paint himself as a Tea Party conservative in the primary race that he will be an easy target for Obama in the election campaign. Gingrich is a moderate in many ways. But Gingrich comes with his own problems that make him an unlikely victor.

Given the disgust of the American public towards the failure of Congress to deal with recent major economic issues, and their placing primary blame for this failure on the Republicans, the Democrats have a real opportunity if they run a smart campaign. And what is a smart campaign?

A smart campaign is first running a very positive campaign that tells people clearly where Democrats see the country going and how they propose to get us there … a clear vision statement with legislative particulars, communicated in a way that the average voter will get. This must be the main thrust and the counter to Republican laissez faire policies.

But at the same time, Democrats cannot let the public forget who has kept our current economic problems from being solved; the public could care less at this point who caused the problems, but they do want them fixed. And Democrats must nail Republicans for being the hypocrites they are … they pose as the party of the people but really are the party of big business and the rich. Those are the interests they are protecting.

This election could be the biggest Democratic victory since Johnson v Goldwater in 1964. The question is whether Obama, the other Democratic candidates, and very importantly the consultants that fashion the campaign, have the right stuff.

Saturday, December 3, 2011

The Lords of Finance Are Today's Money-Changers in The Temple

At least since the time of Christ, there has been some degree of moral opprobrium in Western culture against making money solely from the use of money.  First he drove the money-changers from the temple (as well as other businesses, but the image remains a classic) and later he spoke against lending money at interest. This opprobrium was so strong that for centuries Christians were prohibited from lending money at interest. That task, so crucial to commercial life, was left to the infidel Jews, who were nevertheless frequently sanctioned for their practices.

In more modern times, the opprobrium has lapsed as we all know, but there remained both a moral opprobrium and a legal sanction against lending at usurious rates … such as the practice of loan sharks. Currently all states have laws against usury that set a maximum legal rate of interest and federal law criminalizes charging twice that amount and attempting to collect it. Making a reasonable profit from ones money was deemed respectable and moral; but making too much was beyond the pale.  In the latter case, one was thought to take advantage of people who were in difficulty.

After the stock market crash of 1929, Congressional hearings revealed that the mixing of commercial and investment banking activities during the 1920s had created conflicts of interest and fraud, which helped bring about the 1929 crash.  To prohibit such practices, Congress passed the Glass-Steagall Act in 1933.

Until its repeal in 1999 by a Republican Congress (and yes, unfortunately signed into law by President Clinton), commercial banks had been prohibited from engaging in speculative investment by being prohibited from owning other financial institutions, such as investment banks. The act basically limited commercial banks to helping individuals and businesses in every-day activities such as holding deposits and making loans.

After the repeal of Glass-Steagall, commercial and investment banking activities could again be combined (that’s how the “too big to fail” banks came into being) and banks were free to play the market for their own benefit.  And have they played! Both before the 2008 financial crisis and since, the large banks, such as the iconic Goldman Sachs, have made fortunes from playing the market … and not in the sense that the individual investor might play the market. They have acted unethically if not illegally.

They have created questionable financial instruments often only to then bet against their own clients who purchased these instruments. They have undermined the global financial system through their enabling countries, such as Greece, to assume huge debt levels off the books and then undermining those same countries by betting against them. They have manipulated the market to the detriment of individual investors, countries, and the general public and they have made fortunes in doing so.

This is an example of capitalism run amok. I think that everyone should be able to make a reasonable profit from the use of their assets. And if someone is producing something unique of value to society, then they should be able to make more than what might otherwise be considered a reasonable amount … such as is allowed by virtue of the patent laws.

But the money made by today’s large commercial investment banks and the way in which they make it add up, in my mind, to ill-begotten anti-social gains. They are beyond the pale. Not only should practices such as derivatives trading and credit default swaps be closely regulated for the safety of the broader economy … which the banks are fighting against tooth and nail … but those gains should at a minimum be taxed at a very high rate to discourage such activity and preferably be made illegal.

The modern-day lords of finance are a cancer on the structure of our economy and as such they need to be controlled with laser-like precision.