On the Contrary

Did this nation break international law and engage in torture?  That is what Senator Leahy wants to explore in his “Truth Commission” hearings.  Meanwhile the Obama administration would rather “look ahead” than look backward.  Clearly any attempt to investigate the last administration’s torture and illegal incarceration would certainly turn into a partisan food fight.  It is understandable that President Obama would want to avoid this and move the country forward on a new agenda that would really reflect change.  But I would argue that this approach to sweeping it under the rug will not only continue to dog us as our moral failure, it is a violation of international law, and will certainly set up a scenario where it can be repeated in the future.

The part I find most entertaining about finding out what really happened is that for the most part we know exactly what happened and it is disgusting.  Anyone who has read Jane Mayer’s The Dark Side: The Inside Story of How The War on Terror Turned into a War on American Ideals knows most of the details.  It is all there from the direction of White House on the exact methods of “enhanced interrogation techniques” to be used and their complicity in authorizing torture, to the ignoring of gathering wealth of evidence that their program was counterproductive, that they had many innocent detainees, and that their methods were producing unreliable information.  The book chronicles the amateur hour approach to interrogation driven by Cheney’s lawyer, David Addington, self-serving and ultimately unsustainable legal opinions by John Yoo, to George Tenet’s willingness to serve the administrations needs for justification instead of being an honest broker of intelligence. The level of incompetence and lack of legal integrity is stunning.

Sunday we found, as Ms. Mayer had chronicled, that the Red Cross had written a report documenting the war crimes that were committed by the United States and gave detailed information about exactly what was done and included excruciating and painful details of our depravity in this report (not suppose to be released to the public).  Mark Danner, a journalism professor published extensive excerpts in the April 9 edition of the New York Review of Books, released Sunday.  The amazing thing is that Ms. Mayer had it right on the mark.  But she even took more time and did the research to question claims of reliable intelligence gathered by these techniques and chronicled how traditional approaches were working (gaining trust and understanding their language and culture) and then the CIA came in, having no expertise in interrogation, Arab culture, or their language, took over the interrogations, and began the abusive techniques that shut these people down.  It is important and critical reading for every American, but of course, they won’t and that is why hearings and prosecutions are mandatory.

One of my favorite stories is the interrogation of  al-Shaykh al-Libi who gave evidence during torture in Egypt where we had rendered him of WMD and of a connection of al-Qaeda and Saddam Hussein that President Cheney relied upon as irrefutable evidence of this connection and Secretary of State Powell used in his testimony to the UN.  Later he recanted this confession and when asked why he made it, his answer was simple:  “They were killing me, I had to tell them something.” The whole episode is the epitome of how we got the intelligence so wrong.  We knew what answers we wanted and we tortured people until we got them.  It was amateur hour in cowboy land.

It is extremely important to get all of this out into the open.  Does torture work?  We will never know for sure until we find out exactly what was done and if in fact it really did lead to actionable intelligence.  My reading of all the material is no it does not, and is so counterproductive as to cause us irreparable damage.  This also seems to be the opinion of most of the knowledgeable and experienced intelligence professionals that are familiar with what really happened. The downside, besides getting false or unreliable information, was that we lost the moral war and the reason for standing up for justice.  We provided the other side the biggest recruiting tool we could have ever imagined.  We also tainted any prosecution of those truly culpable so that we may never see justice in the courts.  Ms. Mayer points out that the British, with their lesson from interrogating IRA subjects, warned the administration that this would result if they perused this counterproductive path.  But it was cowboy time at the OK Corral.

We have committed war crimes and we have violated the very basis of our Constitution and the values for which we stand.  The Bush administration did this in your and my name.  If we want to cleanse our souls, find out what really happened, and understand how this could have happened, we need to hold those accountable who have destroyed everything we stood for.  So as messy as it is going to be, we have no choice.  Not if we are the United States of America. Not if we stand for our principles.  Just following orders was not an acceptable excuse at Nuremburg and it is not now.  Bring on the investigations.  It won’t be pretty but it is so necessary.

For those of you who are repeat readers you know that I like to sum up the Sunday talk show chatter and see if anything besides the usual Washington echo chamber is on anybody’s agenda.  So I started with Meet the Press who had White House Chief Economist Christina Romer and House demagogue Eric Cantor (R-VA).  It was two interviews you could fast forward through.  Dr. Romer pitched the administrations way forward and Representative Cantor told us they had it all wrong.  Yawn.  Once again we had politicos pitching their politics instead of a reasoned discussion about the way forward.  Let’s face it, if Christina thought we ought to be more aggressive she would never say it since she must push the administration plan, and Cantor, while full of criticism, had no plan of his own.  This interview is a reflection of the chattering classes on cable.  No new ground or any rational look at the policies and the way forward, just the same old dueling political ideologies.  No wonder we never make any progress.

I then ran through (DVR) Reliable Sources (no transcript available) because I knew they were going to talk about John Stewart’s roasting of CNBC and Jim Cramer in particular.  The reason the Daily Show and John Stewart are so important to this country is that he takes the obvious, points it out, and makes fun of it.  Mainstream media is locked in their echo chamber and they are missing the real stories that are staring us in the face.  Enter John Stewart.

Well the panel discussion was interesting with most of panelists recognizing that Stewart was calling out mainstream media for not paying attention to the real story, how did all the experts miss the coming downturn.  Of course, there was Tucker Carlson claiming that this was just a liberal hack job on Cramer.  My how the Right continues to be blinded by their politics.  Sooner or later one would have to ask how this coming major catastrophe in our economic lives was so ignored by the financial community.  But Tucker can’t go there since all he sees is liberals ruining his perfect country.  Why do they have this guy on anything?

To me this story was the epitome of all that is wrong with our media.  The conventional wisdom is that nobody saw the economic disaster coming, but this is belied by a little research on the actual reporting which shows that there were financial journalists (and economists) who were warning of this coming meltdown.  But what became painfully obvious in the Camer interview is that most of the mainstream financial journalists were tools of the financial community.  Their reporting depended on access to the movers and shakers in the financial community and their access was dependent on their echoing what their masters were telling them.

Sadly this same dynamic is at work in the mainstream media as well and is why reporting is so much an echo chamber.  What we get are media talking heads who are tools of the political parties.  Their talking points, questions, and criticisms are part of the carefully crafted political dialogue that they just parrot.  So what we get for news is that same old arguments with no real factual or rational basis to judge them.  I guess the best way to say it is that our news has degenerated into a game of spin with the media nothing more that echo chambers for that spin.  Puppets driven by their puppet masters.  At least it is cheaper than doing real research and background.

Then there was Dick Cheney on CNN telling us that we are less safe today because of the Obama administration following the rule of law and even more important, that the administration is using this economic crisis as an opportunity to expand government.  I have a feeling that you need to watch John Stewart tonight, because the irony here is unbelievable and John King (CNN correspondent) just went along for the ride instead of questioning any of these highly dubious claims from a man who has almost destroyed law and order.  Is it just me or did waiving habeas corpus, rendition, torture, warrantless wire tapping, enemy combatants, and military tribunals not expand the power of government beyond anything we have ever seen?  Did attacking Iraq and now seven years of unending war while al Qaeda rebuilt in Pakistan make us more or less safe?  It is incomprehensible that we still give this man deference instead of challenging his “facts” every step of the way.

There was as usual a bright side and it was once again from Fareed Zacharia on GPS.  I cannot say enough about his approach to discussing important issues.  He rarely ever has on political flacks pitching their spin, but international subject matter experts to give their perspective on various issues.   I won’t bore you with the details, but this is one show where you can really learn something and question some of your own preconceptions.

Alas, this morning the news was all about public anger over AIG and the bank bail out.  Anger, anger, anger.  Although it is a real emotion that many of us are feeling, emotion is not what is going to solve this crisis and I have yet to hear (except on blogs such as the Baseline Scenario) what our real options are.  Do we have an option to public spending for stimulus and is what we have done enough?  What does history from the Great Depression or the Japanese lost decade tell us?  What are possible scenarios to bailing out the banks and what are the pros and cons?  What happens if we do nothing?

Oh, I agree we have heard these arguments, but only as political talking points.  Where are the economists (mainstream) and what can they teach us?  We are not being educated by our press.  They are failing as journalists.  How many of you know the real crisis in Europe that could make our problems infinitely worse?  The press once again are simply acting as an echo chamber of the political spin.  Oh by the way did I mention that the financial analysis and advice for our way forward is being giving by the same talking heads that missed the whole economic crisis?  When will it ever end? When will we ever learn?  Where have all the flowers gone?

President Obama laid out his plans for reforming education on Thursday.  There are many things in his plan to like, but as always the devil is in the details.  Since the federal government has only a funding role in education, not a policy role that is left to the States, it is hard to see how many of these proposal could come about.  I am all for a national curriculum and a national standard for achievement.  But our friendly Congress will fight this tooth and nail since local interests (all politics are local) will outweigh the national good.  But well-meaning people who want to reform the system are usually those that have not actually taught (not administrate, teach) in the system.  Their management reforms do not usually deal with the complexities of the real classroom.

Having said that, let’s look at some of the proposals to understand these complexities.  President Obama indicated that we need a system to identify, help, or remove bad teachers.  David Brooks in his column on Friday (No Picnic for Me Either) indicated that “… what matters most is the relationship between one student and one teacher.”  So if we can just find the bad teachers, usually by testing achievement we can identify our problems.  Oh really?  In this article he started off by showing how President Obama’s mother use to get up at 4 a.m. to tutor him before school.  I would argue that a good teacher may, and I emphasize may, be able to overcome a poor home environment, but a good home environment can overcome a bad teacher every time.

Look at this another way.  A teacher’s performance in most cases is strongly affected by a student’s home environment.  So when we start looking at achieving teachers we have to consider if we are comparing apples to oranges.  Do some teachers just get the dregs?  Does a teacher’s reputation or seniority impact the makeup of their classrooms? These kids are not clean slates that come to a class where a teacher, if competent, can mold their minds.  They come with amazing amounts of baggage from home that in some cases makes some of them unreachable.  Let’s face it, kids today are not the kids we knew when we were kids.  Their life choices, arrogance, propensity to violence, and expectations driven by our modern society are not what we faced as kids.  We are asking a lot of teachers to handle all these problems and teach.  And should I remind you that we pay them poorly?

Another point about the “relationship between one student and one teacher” that David said in his article (I am picking on David because he is representing the convention wisdom about how to reform schools) is that in a classroom with 40 students, many disruptive, some handicapped mentally or physically, but mainstreamed into the regular classroom, one-on-one relationships are a pipe dream if you are going to cover the subject material.  So once again is a teacher teaching with gifted students to be rated with the one who has all the kids from the trailer park (no offense intended to trailer parks)?  The other point that no one wants to recognize is that these one-on-one emotional relationships with troubled children has an emotional toil on teachers.  It is a rare person who can do this year after year and not finally burn out.

This idea goes directly to the idea of merit pay.  I am not against it, but unless it is thoughtfully employed, it could be more demoralizing than incentivizing if the playing field is not leveled.  This happens when teachers, who really understand the problems, are not part of the program of designing these evaluation and merit pay systems.  Just this Friday I was reading an article in the Washington Post (Disorder in Merged Washington D.C. Classrooms).  Teachers who have to deal with some of the most disruptive and violent students are being stigmatized if they send too many out of class to the office.  They are afraid to speak up about their problems because the administration then looks at them as poorly performing teachers.  It is the classic example of how top-down management, not using the cooperation and expertise of the people on the front lines, becomes counterproductive.

Now let’s look at charter schools.  This is infinitely better than the voucher system that just bankrupts public education and favors the wealthy, but one has to ask why not make every school a charter school?  The main advantage of charter schools are that they can wave many rules/procedures/curriculum that other schools have to follow.  They can be more selective about their students.  Most schools are weighted down with these requirements that have been dictated from the top down.  So the obvious question is why not loosen up these requirements for all schools and then rate them by some fair measure of achievement?  Well I guess we would need a fair measure of achievement.

So my point here is not that I disagree with the conventional wisdom, just that the devil is in the details.  If these reforms are going to have any impact at all then two things have to happen.  First recognize that parents are the critical factor in student achievement and hold them, along with teachers, accountable.  Second when instituting achievement measures, merit pay, charter schools, understand that it is not a level playing field and that these measures have to implemented in a fair way that involves teachers every step of the way so that the system can address the realities of today’s classroom.

David Brooks, a reasonable conservative, one might even say moderate Republican, gave a five point plan for how the G.O.P. could not only help their country, but begin the resurgence of their party (Taking a Depression Seriously).  So I thought I would look at this plan and ask a few questions/comment on the five points.

1. “First they take the current economic crisis more seriously than the Democrats.” -  What David is arguing here is that the Obama administration has been too rosy in its economic forecasts and therefore all focus should be on the economy.  Okay so far, but then he says that focusing on other priorities such as education, health care, energy is too distracting.  In other words this is not an opportunity to reinvent these failing policies but we should be focusing only on the economy.  Uh, David?  Isn’t health care, energy, and education intrinsically linked to our economic well being?  For us to have a vibrant economy in the future, we need to be leaders in these fields.  Somehow David is implying that these, although important, are side issues to fixing the economy.  He doesn’t say what investments or strategies he does recommend for “focusing” on the economy so one is left to wonder if this is more tax cutting.  I think David knows government must play a role here, but he is not going out on a limb so say what that role should be while the G.O.P. continues with its tax cuts fix everything chant, and cap all federal spending.
2. “Republicans could admit that they don’t know the future holds, and they’re not going to try to make long range plans based on assumptions that will be obsolete by summer.” – This to me is just another attempt at saying we should not be investing in our future now.  What he is really saying is we need to restore the market to where it was before, then we can consider our way forward.  I also reject this.  First the markets were fundamentally flawed.  Part of restoring the market is to fix it in a way that does restore our future.  Secondly, as noted above, if stimulus is required, and that is what most of us believe, shouldn’t we be spending in things that have long term strategic value instead of whatever gets the market going again, but doesn’t give us any long term assets for our future?
3. “Republicans could offer the public a realistic appraisal of the health of capitalism.” – In other words instead of pushing the market place solves all problems, recognize that it is the best innovative force but has serious problems that have to be addressed.  I couldn’t agree more with him here, although I have a feeling that the Republican’s idea of regulation and the Democrats idea are very different.  Their last go round left holes you could drive Mack trucks through as the Republicans led the charge on deregulation although the Demos went along.
4. “Republicans could get out in front of this crisis for once.  That would mean being out front with ideas to support the wealth-creating parts of the economy rather than merely propping up the fading parts.” – Now here David gets a little more specific to include encouraging the global community not to depend on just the U.S. stimulus, but to put pressure for them to also join in.  He also calls for an end to populist talk about letting Citigroup and others fail as this would be counterproductive.  I would agree with both points here. It would appear that David is supporting the stimulus package, or some sort thereof, since he thinks other countries ought to join in.
5. “Republicans could make it clear that the emergency has to be followed by an era of balance.” – I am not sure what this means, but I think I agree with it.  It says once we get the vehicle back on track we need to start reducing the debt.  I think President Obama has already said this, but the devil is in the details.  If you take this in light of #1 & #2, it means getting the economy running again and then little progress on health care, education, or energy which most of us think are the way forward.

David does not expect Republicans, at least in the near term, to shift to these priorities.  It appears to me that David is showing his moderate Republican stripes because it is clear to me that he does support federal (and international) stimulus support.  The critical question is what kind of stimulus spent on what.  Republicans, both moderate and red state maniacs, don’t want to see investments in health care, education, and energy research because of their belief that government programs are inherently inefficient.  But many of us think these investments are the key to reviving our economy.  This is the real battle ground.  We have followed their lead for the last eight years and we are at least eight years behind in where we could have been reviving our nation.  David will be forever hobbled in his thinking by failing to see that the government has to be an important partner in our economic future.

It is becoming clear now what the Republican strategy is for resurgence.  Did I mention the word fear?  It is quite apparent they want to derail any attempt to restart the economy and then claim the other side failed, obviously those policies don’t work, and then reinstitute the old order and preserve the status quo.  And deep in their hearts they know that they can’t afford to give progressive ideas a chance, because if they succeed, the Republican Party is dead.  At the most basic level, they are not interested in what works, only in upholding their ideology. Warren Buffet gave some straightforward criticism of the Obama administration when he pointed out that we were in a war for our economic lives and we need to be totally focused on winning this effort.  But then he had some advice for Republicans.  Get behind this President and help instead of hindering (he supports the stimulus package).

This is a war for our economic lives.  If it was 9/11 and Democrats had disagreed with President Bush’s rallying cry, they would have been (and some were) branded un-American.  Now that the tables are turned, they have no problem doing whatever they can to obstruct the President’s plan and calling themselves patriotic defenders of the true ideology. Now Republicans have rejected Rush Limbaugh’s wish that the President fail, weasel wording it to rejecting his policies and saying his policies are destined to fail.  It is the same thing.  They lost the election, people said they wanted a new direction, and instead they are doing everything possible to see that nothing does change.  Was it just a romantic ideal that we fight a good fight, but if we finally lose the argument, we get behind our leaders and try to make the thing work? But lets look at some of the Republican tactics and do some thinking about them.  Most of them involve some form of claims of socialism:

• The new budget is a radical departure from capitalism and redistributes wealth taking us into socialism – This is about taking the top tax rates of income earnings and returning them to the Clinton era rates when the economy was booming.  Oh those Clinton socialist days.  There actually has been a redistribution of wealth, but it has all been upward while the average person has lost ground in the economy.  So any change to this policy is socialism?  With more and more people fearful of the economic future, I don’t think this will sell since it was the rich who got us into this mess.  There is also the issue of raising the capital gains tax from 15% back up to where you and I pay taxes on our income.  This only seems fair to me, but Republicans will argue that they need this lower rate to incentivize investments in the stock market.  Since most of this investment went into the financial industry, we might have been better not to have incentivized this.  By-the-by they are also shocked, shocked, shocked that Obama is simply letting the tax cuts on the wealthy expire even though their fearless leader (Bush) recommended this when he sign the tax cuts in the first place.  It would appear that their ethics are situational.
• We are becoming more and more like socialist France – Be afraid of the French.  They have universal health care and eat sissy food.  Really what they are raising here again is a nebulous fear of socialism in the guise of health care reform.  What they are really saying is I am bought and paid for (so are a lot of Democrats) by the health care industry and I will be darned if I will learn anything from the way the rest of the modern world approaches this problem.
• Cap all federal spending, get the deficit under control, and cut taxes (Boehner and Cantor) – This one does not make any sense.  Not one economist will tell you to cap federal spending right now as this would march us right into the Great Depression.  The part I really like is that we can still reduce revenues to the treasury by cutting taxes (usually for the wealthy) and reduce the deficit.  See, less is more.  Note that all these Red state ideologues get more money from the federal government than they put in as taxes.  They have been on the dole for years.
• Earmarks are a disaster and Obama is just business as usual – First President Obama never promised to get rid of earmarks, just get them under control.  Misstating the other side is a great Republican tactic.  Second, the earmarks in this package are less than 3%, less than last year, and totally visible.  If you look at what is truly “pork spending” (See Are Earmarks Really So Evil) it is less than .5%.  Earmarks are a side issue and most are for spending that does create jobs.  Our economy is contracting at an ever increasing rate and these buffoons are focusing us on 3% of the budget?  It is a sideshow.
• Let the banks fail – Let’s see here, McCain and Shelby are against nationalizing the banks and then just letting them fail.  Did they forget that all banks are FDIC insured and that banks don’t just fail?  FDIC comes in, takes them over, hires private management, sells off pieces and then reconfigures them as smaller whole entities.  This is nationalization as we know it in this country you morons.  Don’t you even know how this actually works?  And these people are making decisions for our country?
• We are not being obstructionists, these are just honest differences of opinion – Sounds reasonable until you consider that these “honest differences of opinion” are really the minority trying to stop all action in the Senate because they can not accept the voters rejection of their policies.  There is nothing wrong with a debate on the pros and cons of an issue, but if the minority holds sway through the filibuster it is really tyranny of the minority.  So honest differences of opinion really do become obstructionism.

You know, in a perverse way I wish we could put them back in charge.  Although it would end our country as we know it, it would also end the Republican Party and we would finally be rid of this pestilence once and for all.  But alas, the cure would be worse than the disease.

The media is being led around by its nose.  I listened to a Republican operative on MSNBC call the new spending bill pork laden with earmarks and the media just rolled over on this wild exaggeration.  Let’s examine the facts.  The media itself thinks that the the earmarks are 2% of the budget.  So first you have to ask yourself why we are spending hours and hours discussing a very minor contribution to the overall spending package.  Second, if you look at a breakdown of the earmarks, most are for construction projects near and dear to a congressman’s district.  This would be called job creating infrastructure improvements if they were in the stimulus package.  See a problem here?  See a more reasoned discussion of earmarks in my blog Are Earmarks Really so Evil?

In the meantime the nation is starting to recognize that the first stimulus package was not enough.  Not that many of us didn’t blog that already.  But these “pork earmarks” are spending that will stimulate the economy.  Granting I would like to see these more consistently applied, but the noise that is being raised about these earmarks is all out of portion to their real import or impact on our problems.  Media, please wakeup and don’t get distracted by the latest conservative spin that you have fully played into.

On Monday, David Schuster of MSNBC’s 1600 Pennsylvania Avenue had Paul Krugman on to discuss his column in the New York Times on Monday (Behind the Curve).  In this column Professor Krugman took the Obama team to task on their economic plan.  Specifically that the stimulus plan was not near bold enough.  He has consistently argued that the Obama plan is not keeping up with the degrading economy and is not nearly bold enough.  He also feels that their approach on the banks is really dithering and is causing further turbulence in the markets.

Apparently this criticism is grating on the West Wing as David read a quote from Rahm Emanuel, President Obama’s Chief of Staff:  “How many bills has he passed?  Now my view is that Krugman as an economist is not wrong.  But in the art of the possible, the deal, he is wrong.  He couldn’t get his legislation.  No disrespect to Paul Krugman, but has he found a way to seat the Minnesota senator?  Write a (explicative) column about how to seat (explicative).  I would be fascinated with that column, O.K.?  Anytime they want, they can have it.  I give them my chair.” (Interview)

In other words, that’s nice, but not practical and we are doing what is practical.  It reminds me of an ongoing argument I have with my spouse about Abraham Lincoln.  Lincoln, who in my estimation was a truly great man is challenged by my wife who saw him as some historians do, of equivocating what was right with what was politically expedient.  I would argue that Lincoln was a man of his times and he knew that even small steps were progress.  My wife would find that morally reprehensible.  If it is wrong, it is wrong.  He should have stood for equal rights for slaves from day one because it was the right thing to do.

Professor Krugman wisely did not enter into this argument, but I will.  In this case I have to take the side of Professor Krugman.  If what you are doing is not going to help, and may lend ammunition to your enemies to say your policies are ineffective, then half-way, what is possible, will be self-defeating in the end.  This is different from the Lincoln argument in that he was moving inexorably forward and moving the nation as they would move.  To be morally pure is nice, but if it helped no one, it was counter productive.  But in this case, doing not enough, but some, may in fact just empty the treasury and not resolve the problem.  Worse, it will empower those who disagree with this approach and stymie progress for years to come.

The argument boils down to this simple idea:  If what is practical is not sufficient, why are you wasting your ammunition?  I think this comes down to a “War on the Economy”.  Decide what is the appropriate course of action, lead by selling it, and don’t compromise away success.  Democrats, sadly, need to get a pair.  This fight may be more important than the war on terror as our whole economic future is at stake.  So take the fight directly to the Republicans and some conservative Democrats.  Don’t be afraid to actually fight a filibuster.

I understand Rahm Emanuel’s frustration, but he is failing to see the forest for the trees.  Half measures are not progress in this war on the economy.  There is a great story told by Stephen Covey in The Seven Habits of Highly Effective People and I will paraphrase it here.  It is the difference between management (managing legislation through Congress), and leadership (standing up for the right approach).  There were a group of managers that were hacking their way through a thick jungle.  They had come up with a way to change leads often so there were always have fresh hackers and they were making excellent progress.  But one in the group wanted them to stop so he could climb up in a tree to see their progress.  There was great dissention in the group because they were making such great progress and did not want to stop. The point is that it makes no difference if you are making great progress if you making it in the wrong direction.  In this case Rahm is a hacker and Paul is a tree climber.

Every now and then you have to take a step back from rushing forward and see the direction you were rushing in.  As our economic life as we know it may be changing forever, maybe it is time to step back and take stock.  Even if you are foolish enough to think the old order can be restored and this is some minor blip on the economic radar screen, it doesn’t hurt to look at what we have wrought.

In my blog, Macroeconomics, I tried to take a layman’s look at where our capitalist economy is going and the reality that it is basically an unstable system.  But having said all that, one thing we have to realize is that the capitalist system and markets have brought more wealth to more people, raising millions out of poverty, than any other system.  China is a case in point.  As far as we know, and with all its problems, it is still the best system we have for creating the most wealth for the most people.  So what do we really understand about this system?  The answer to that question is not very much and is the cause of our present political circus about what to do as it goes into free fall.

Ever notice that the people who are telling us how to fix these problems we are facing all look the same?  Now this may seem like a frivolous observation, but when people wear the same type of suits, ties, hairstyles, and wire rimmed glasses, they are conforming to an expectation.  And their advice and ideas also conforms to an expectation.  That expectation is based upon how they think or believe the market works.  They spout what they believe, but what they believe is based mostly on faith in the system, past experience, wishful thinking, and not in rational thought about the markets as we have seen them operate recently.

Yes, for many conservatives, adhering to market fundamentals (low taxes, small government, little regulation, and let the marketplace decide) is a religion.  We all saw Rick Santelli’s rant on the commodities market about bailing out homeowners.  But if one stood back for a minute and really thought about the whole rant and the context within which it was given, the question that comes to mind is does the market serve us or as Mr. Santelli implied, do we serve the market?  If, as I believe, for most conservatives, it is a religion, then we serve the market.

I mean if you really want to step back and think about this basic question, what is our ever expanding population here for?  The market, producing goods and services, gives everybody something to do and lets them earn a living at it.  We call it employment, but if you consider that for most of us it is a means to subsistence, then goods and services we produce are not so important as the fact that producing them supports our ability to make ends meet.  Is that what we are really about, servicing a market?  Produce whatever so we can subsist?  Well it does produce amazing amounts of wealth for some, so is that what we worship?

Well, for some that is what they worship.  And that is why challenges to the existing conventional wisdom on the markets are so disturbing to them.  It’s like pointing out to Evangelical Christians that Jesus was a Jew, and even worse, quite possibly an Arab in the sense of place.  The kind of things you are hearing from Republicans right now, a spending freeze, deficit reduction, and tax cuts (don’t know how you can cut taxes and reduce the budget deficit, but it is not my theory) are so illogical, as to defy reality.  Like the rest of us, they really don’t know how the market works, and they falling back on their faith.  “Prey hard enough and we will be saved.  Trust in the “magical” market when we lack understanding of how to control it.”  Pretty tribal when you get right down to it.

Sadly we do know enough, or should know enough, to know this is a recipe for disaster.  This is exactly what Herbert Hoover did in 1929 to disastrous results.  Appeals to how Ronald Reagan saved the world ignores that the interest rate, self-induced by the Fed, was about 18% and we were trying to control inflation (stagflation actually).  Today there is a mountain of debt, most of it worthless, and the interest rate is at 0.5%.  We are living in a different time, with a very different problem brought on by how the world has changed the way capitalism and its complexities impacts us all.

So what is my point to all this?  Capitalism is a powerful tool to feed the world.  But as it becomes more and more complex, it gets less and less stable.  Old ways of doing business won’t suffice.  Once we have wrung out the bad debts in the system, and this will take a long time so hang on to your hat for the ride, and we restart our economy (think world economy here), we may want to spend some time thinking about how the capitalist system we employ can be more controlled.  We can’t afford many more of these deep cycles and we need to remove some of the risk.  We also may want to consider exactly what we are producing that is burning up our precious resources.  We may even want to consider how we level the playing field so that all share more fully in this system.

I think most importantly, if you are a thinking person, you know at some basic level that the expansive growth in the last few years and its comensurate utilization of our natural resources cannot be sustained in a global economy indefinitely.  When basic resources, like energy or water become limited, political instability may lead to global conflicts.  So what level of growth can be sustained that is healthy to both our economic and our ecological well-being?  The present conventional wisdom is that we should not be asking these questions because the marketplace will determine that for us.  That is why you need to quit listening to people who are still spouting this conventional wisdom about just getting back to where we were.  First and foremost we need to stabilize our system.  Then we need to seriously think about what we should be using this production system for instead of letting it run amok.

What is on everybody’s mind, the Economy, was the focal point of discussion this Sunday morning, but the discussion was more political than policy based.  On Meet the Press we had Lindsey Graham and Chuck Schumer laying out familiar political positions.  Yawn.  The round table discussion was a little more interesting in that they included Liaquat Ahamed, the author of Lords of Finance, who raised the issued that back in the 1920’s the failure of a major European bank was really the beginning of the Great Depression.  He raised the issue of the collapse of the Eastern Europe Economies and the fact that while we are looking inward, this is a global crisis and focusing on saving us may not save us even if we do all the right things.

On GPS we had an eclectic group led by Niall Ferguson (Assent of Money) who was arguing that our expanding of the deficit to solve the slow down in our own country will actually exacerbate the problem as it robs capital from the rest of the world.  What they didn’t tell us was that if that is the case, what is the way forward.  David Frum was trying to make the point that this wasn’t the Republican’s fault.  I do think they made a very valid point that the real problem is global, but decisions on how to solve it, whether in China or America, is political and thus locally focused.  Meanwhile John McCain is railing against the earmarks in the budget (less than 3%) as though this is our problem.

Reliable Sources took on the real issue of whether the press and CNBC were trying to use instantaneous market fluctuations as unfair evaluations of the President’s policies.  The answers were sadly predictable based upon the pundit’s political persuasion.  The automaton from the Washington Times (conservative Washingtown voice) thought it was just fine, while the rest of the pundits thought we may need to step back and wait and see.  She (the Washington Times blogger) even tried to play down the Jon Stewart satire of CNBC’s financial predictions that went bust (See Two Pieces of Wisdom from Jon Stewart).  Sad that politics blinds us to our own failures in logic, myself excluded of course.

So what have learned?  Not much.  Apparently most Americans are looking for a quick fix in America for a global problem that will probably get much worse before it bottoms out.  What we really need is to understand just how serious the problem is, that the problem and the solution are global, and a general agreement on the way forward.  The political arguments we are having are the cart before the horse when we should first listen to dueling economists and historians so we understand the problem. What we are getting now is moderate steps in one direction, amid political arguments that we are all tired of.  When the Sunday shows start bringing in historians and economists, maybe then the political babble will end and we can have a rational discussion about the way forward.

For what it is worth here is my two bits:  Ignore the Republicans.  Doing what Herbert Hoover did in 1929 is not a way forward.  They are locked in their political ideology and their ideas, or lack thereof, are a result of mental constipation.  It is a global problem, but I am not sure that the U.S., even if we knew the correct solution, could bring the EU and China along.  The one example we have of getting out of this is the Keynesian solution, which is deficit spending.   When we did massive borrowing to run World War II, we did it all internally by borrowing from our own citizens.  The conventional wisdom is that we will be borrowing from the Chinese this time and they may redirect their money to their own problem, forcing us to raise interest rates to get the required cash.  Unless you haven’t noticed things are getting very bad in China and unrest is quite possible.

Having said that, we could always print money which causes inflation, which if things get bad enough, may not be such a bad idea since inflation forces people to buy things since they need to spend their money before it is devalued.  At any rate I think we need to proceed with the Obama solution which has three legs; stimulus, banks, and housing, only much more aggressively.  As Tom Friedman wrote in one of his columns when he described the scene in Jaws where one of the major characters (Richard Dryfus) sees the shark for the first time and tells the boat captain, “we need a bigger boat”.  Well, we need a bigger stimulus package.

The next stimulus package will be about the size of the last one, but forget the tax cuts and focus on investments that will create jobs that will be about the economy of the future.  That would be infrastructure, education, energy, and climate.  We need to get that in place right now and the only infrastructure spending would be either repairing what has to be repaired or new green transportation systems.  Continuing to build transportation systems that are petroleum centric is counterproductive.

For the banking system, ditherating is not an answer.  The fear of a domino effect must be overcome (or ameliorated) and we have to identify and remove the bad debts out of the system (along with the present management structure).  Investors, bondholders, and taxpayers must all share in this burden (read pain).  Whether this is some form of the bad bank/good bank scenario or nationalization, it must be done quickly.  One aside here:  One guest on GPS raised the issue of class anger in the United States.  We let the rich get richer because we believe the lie that we would all profit and they squandered everything.  It will be imperative that those who profited from our downfall are seen to pay dearly in fixing the system or there will be rioting in the streets.

Finally the same medicine is going to have to happen in the mortgage industry.  Decide on a reasonable interest rate for all loans, say 4%-5% and establish it.  Then re-evaluate the market worth today of the property and reset the principle balances.  Use a liberal value assuming some middle ground between the present principle balance and a realistic actual worth.  Those that can qualify for these new loans, then fine.  Those that can’t get foreclosed on.  Waiting for the marketplace to do this under foreclosures just extends our problems.  Note that this is almost a double-edged sword because once this is done, much of the banking problem settles at what those toxic assets are really worth and what the federal government should insure them for.  This not only settles the worth of the Collateral Debt Obligations (CDOs) but the Credit Default Swaps (CDSs) and allows us to estimate the real worth of these investments.

Okay, maybe these ideas are a little naïve considering the complexity of the problems, the interconnectiveness of our economies, and the impact of global problems, but why aren’t we having this discussion instead of endless discussion about what is politically possible instead of what needs to be done and making it politically possible?

As much as I see this as a global crisis, and although we need to stay engaged and try to work with the EU and China to solve the problems, the real place where our actions can make a difference is at home.  The critical issue is that this must be our focus and we need to get on with it, aggressively.  Any other delay or Republican obstructionism, and we are doomed. Note there is a bright side.  If we have a global depression, Iran won’t be able to afford nukes, North Korea will starve, and Al-Qaeda will be broke.  This says to me it is really time to start solving our own problems instead of saving Iraq and Afghanistan from themselves by emptying out our treasury.

Change is so damn hard.  Watching the Health Care Summit was a case in point.  Many of us have been arguing for years that health care system was a disaster waiting to happen, but only now are we going to have a real discussion.  The change that is allowing this discussion is that all the problems we have been pointing out (high cost, poor coverage, poor outcomes) are starting to be felt by our entire population.  Unless you are rich, you are now the recipient of either higher cost for your insurance with lower coverage, or no coverage at all.  Businesses are being priced out of the market providing health care to their employees.

Sadly there is only one answer and I wonder how many years it will take until we finally get there, and that is a single payer system.  Socialized Medicine!  Socialized Medicine!  I hear Rush Limbaugh has already started to beat that drum of fear.  So let’s consider this two part problem; why single payer, and is it socialized medicine, and why is that bad?

Why a single payer system?  Because medicine for profit (private insurers) puts all the incentives on lots of enrollees and few payouts.  Remember that private insurance is primarily not about providing health care, but profit for the owners/stockholders.  So ask yourself how one would do this:  Enrolling healthy people and denying claims.  I won’t belabor the details which I did in my blog Issues – Healthcare.  The reality is that that is how they operate today and their administration costs in this pursuit adds 30% to the cost of medical care delivery.  It has to go.

Now for the really scary part:  Socialized Medicine!  This terrifies everyone because they see some Soviet hospital with limited access and mediocre to poor care delivery.  But that view is a result of our own myopia.  This model is one of the government owning and employing all health care modes of delivery.  This is the model used by the British and, although not one I would recommend, is not the envisioned horror by the Republicans.  One the other hand we have the model of the Japanese where health care delivery systems are maintained in private hands, but there is only one insurer, the government.  There are pros and cons to both these systems, but both do a better job than our system does.  Needless to say there are plenty of other models out there to study if we could just overcome our panic attack at the thought of government provided health care.

So the solution is obvious, but we can’t say it out loud because the Republicans, the people who have kept us in the dark ages, especially the ones with Southern accents, will go ballistic.  President Obama is employing an old management trick right out of Project Management 101.  If you want to bring about real change, invest the opposition in it and instead of letting them sit on the sidelines taking pot shots, have them face the hard choices as part of the process.  If they are part of the solution it is hard to criticize.  My guess on this one is the answer is obvious, but it will take years of iteration to get there because most people can’t just face up to the change required and as we are seeing now, it will take harsh reality to force the inevitable changes.  As some sage person said, politics is the art of possible and for the near term in the political world the possible will be some bastardization of a single payer system and insurers.

Here are a couple of other things that are high on my frustration index:

• Proposition 8 in California that denied gays and lesbians equal rights – California must be proud of itself being led around by the Mormons and the Russian immigrants (top contributors to the Yes on 8).  If you don’t believe in gay marriage, don’t marry a gay.
• Super Majorities for anything but constitutional amendments – With the filibuster in the Senate and the two-thirds requirement for budgets in California, we have handed ourselves over to the radical minority.
• As an adjunct to this, Cuba politics – Two Hispanic Senators. one Democrat, one Republican, sent the budget bill down (keeping it from getting 60 votes) because they want to strip out the loosening of travel and commerce restriction on Cuba.  How long do we have to tolerate these morons?
• Adjusting Mortgage interest rates and principal in bankruptcies – Let’s see, we can do this in any bankruptcy proceeding except for personal bankruptcy.  Don’t you think lenders would be more willing to deal if they faced this possibility?
• Understanding the Economic downturn is global, not local – Until the debt and over valued assets are wrung out of the system, there will be continued bad news.  It is time to bite the bullet and admit that most of the crap Wall Street is selling is worthless and reboot the system.
• Listening to Republicans do nothing but criticize – Next time a Republican says no, ask them what their plan is and ask how they will address our real problems of a lagging middle class and failing infrastructure.  They are all about the status quo because it made them rich.

But change, even when reality tells us everything we having been doing is wrong, is not going to be easy.  Then there are those morons out there (usually wealthy Republicans who don’t want a change to the status quo that has been so good to them) who are now blaming everything on the Obama administration.  This is the ultimate in denial.  I wonder how much longer we have to tolerate these people?