Archive for October, 2011

Obama/Clinton in 2012?

If you believe Jonathan Alter, there is a good chance this could happen next year if Obama’s re-election prospects look questionable.   His argument is simple.  Obama, Biden and Clinton all get along well and like each other.    Obama doesn’t want to make a change, but they all agree that the threat of a total conservative take over all three branches is unacceptable.  They will “do what it takes” to win, even if that means what Alter calls a “switcheroo.”

Back in 2008 Joe Biden seriously lobbied to become Secretary of State.  He’s always had a strong interest in foreign policy, and probably had the inside track for the job before Obama offered him the VP slot.   To move from VP to Secretary of State would be something Biden could honestly embrace as a positive career move.   Rather than presiding over the Senate and making speeches at ceremonial events, he’d be in the rough and tumble world of foreign policy.   The Secretary of State position is substantively more important than the Vice Presidency.

Biden's passion has always been foreign policy

Hillary Clinton has already said she plans to retire after the end of Obama’s first term.   The Secretary of State position is especially demanding, and she has been an active and effective top diplomat.    Moving to Vice President would be the one way she’d stay active in the Administration.   First, it puts her a step closer to the Presidency and makes her the odds on favorite in 2016 should Obama win or lose.   In 2012 she turns 65 meaning she’d be 69 if she ran in 2016.    It would probably be her last shot.

Second, it keeps her close to the action without the kind of pace and demands her current job has.  This would allow her more freedom to expand her pursuits yet still be in the center of big decisions.   If Obama loses no one could blame her or the Clintons for any lack of loyalty.  If Obama wins, the odds of her becoming the first woman President increase.

What would it do to the campaign dynamic?   For Obama it could shore up his liberal base and his appeal with women voters.   Women put Obama over the top in 2008 and recent polls show his support in that demographic group is slipping.  If the Republicans nominate Mitt Romney he’ll probably draw a lot of female voters from Obama (Rick Perry or Herman Cain not so many).    Hillary’s supporters, some of whom remain lukewarm to Obama, would be energized even if they remain a bit bitter.

That’s really what Vice Presidential choices are usually about – you try to keep a party united and avoid the kind of collapse that Jimmy Carter suffered late in his campaign.   Carter looked in position to eek out a victory against Reagan in 1980 but a bad debate performance coupled with news that the Iranian hostage situation had no end in sight coming days before the election pushed tepid Democrats to Reagan.  Clinton as VP might be a firewall against that.  Even if Obama loses, the Democrats need to avoid the Senate and House loses that gave the GOP de facto control of all branches of government in the early eighties.    The Democrats lost 33 House seats that year and held a majority — but the conservative southern Democrats sided with Reagan and gave him a working majority.   Hillary as VP candidate might be the best bet at keeping the Senate in Democratic hands.

Beyond keeping the base faithful, the choice of a VP candidate usually doesn’t matter much.   Arguably choosing Sarah Palin hurt John McCain, however, and when McGovern dumped Eagleton in 1972 that hurt him.    This suggests that a candidate can be hurt by a VP choice if it reflects poorly on the candidate’s judgment.    When Roosevelt dumped Wallace in favor of Truman in 1944 that didn’t hurt; Ford was probably helped by replacing Rockefeller with Dole in 1976 (though he narrowly lost the election).

So the big question for Obama is whether or not pulling a switcheroo would make him appear weak or be exercising poor judgment?   The latter would have to be no; very few people would think that Hillary would be a bad Vice President and the fact that Biden would be given his dream job means he won’t be seen as throwing Joe “under the bus.”   But the Republicans would paint that as an “act of desperation” due to Obama’s “failed Presidency.”     He needs Hillary because he’s “in over his head.”

That would be a political problem for Obama, but the people most likely to believe that rhetoric are those who won’t vote for Obama anyway — many of whom still don’t like the Clintons.    Obama could, of course, turn the argument around.  “Given the depth of this crisis, I feel we need to make sure we have the best personnel where they are needed.  The politically easy thing to do would be to avoid criticism and keep things as they are.   I am not afraid to be criticized for doing what is best for the country.”

Praising Hillary profusely, he could argue that her work as Secretary of State has helped guide the US through a dangerous period of draw downs in Iraq, a policy to turn Afghanistan into a success, and on going counter terrorism efforts which netted many top al qaeda targets including Osama Bin Laden.   Now her talents need to be harnessed to address on going economic difficulties.   Biden’s been good in that regard, but his passion is foreign policy.    The subtext would be clear: Bill Clinton’s hand would be present, and we all remember the budget surpluses and low unemployment during his term.

The more I think of it, the more the move makes sense.   If Obama’s team is reasonably confident about the election, they might fear this would muck things up.   President Obama clearly would rather not be seen as being ‘rescued’ by the Clintons, but he’s not the type to let pride get in the way of making a smart decision.    It would certainly bring excitement to the Democratic campaign, especially if this were announced in mid-summer.

At the very least it would bring the bitter 2008 primary feud full circle.   Next year should be entertaining in any event.

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Tweedlemitt vs. Tweedlebarack?

It is a match up that the tea party and Occupy Wall Street will abhor.  An inside the beltway Republican whose Massachusetts health care plan was the blue print for President Obama’s health care reform vs. an establishment Democrat who choose Wall Street insiders as his economic team rather than more radical economic mavericks.   President Obama is among the 1% the OWS oppose.

It’s too early to know for sure that Mitt Romney will be the GOP candidate, but it certainly looks that way as he lines up endorsements.   At this point in 2008 Hillary Clinton looked like a shoe in for the Democratic nomination so there still could be surprises.   Yet none of Romney’s rivals have anything like the campaign juggernaut Obama already had in place in 2007 and in modern politics that’s what matters.

Mitt Romney is everything the tea party supposedly opposed.   He is Mormon (not Christian in the eyes of some fundamentalists), he’s been pro-choice in the past, and he governed liberal Massachusetts in a markedly moderate manner.   Like former President Clinton he seems adept at saying what an audience wants to hear, but once in power his pragmatism will mean he’s unlikely to push for tea party ideas that don’t play well with the majority.  In short, he won’t fight for the right wing, he’ll govern to try to solve problems.   A Romney Presidency may not be that much different than an Obama Presidency!

To both the tea party and OWS it leaves little choice.  Most will vote for the guy on their side out of a desire to prevent the other guy from winning.   But many true believers may sit this out or vote for a third party out of protest.

For the GOP the focus will be negative advertising against Obama, mostly by special interest groups not directly associated with Romney.  That way he’s not tied to the tactics and can even criticize them while they push the tea party to vote Romney out of fear/hatred of Obama.   It would be winning ugly, but a win is a win.

For Obama the goal is to infiltrate the OWS movement and try to direct its energy into participation in the 2012 election, recapturing the fervor of 2008.   The idea is that motivated students and young people, as well as others caught up in the protest, will be more likely to vote than otherwise would be the case.    If they aren’t excited for Obama, they can be lured to vote against Romney through negative advertising, or brought to the voting both for ballot issues or lower ballot races reflecting the movement’s ideals.

Obama looks vulnerable, but given the economy he could be in much worse shape.  His third quarter haul for fund raising was $70 million, down from $80 million in Q2, but above expectations.   This means he already has raised about $200 million overall, and the heaviest fundraising hasn’t even started yet.   He’s likely to top $1 billion, and money matters in modern campaigns.   Moreover, with no primary opponent this time he can focus entirely on defeating the eventual Republican nominee.

The GOP, meanwhile, has been suffering the same kind of let down that the Democrats experienced after 2008.   They took the House, but the tea party’s allure has faded and Obama’s numbers remain just under 50% approval.    Obama’s foreign policy also has turned out to be a strong point.  Besides being generally liked and respected abroad, he’s mixed a tough counter-terrorism policy (killing many top al qaeda leaders including Osama Bin Laden) with a reasonably effective draw down of forces in Iraq.   Even Afghanistan appears more stable than it used to be, and the GOP will have trouble making the argument that Obama is soft or ineffective on foreign policy.

It all comes down to the economy, but Republican success in 2010 gives Obama a tool in 2012.   He can blame the GOP for not passing a jobs bill and standing in the way of compromises that could have moved the economy forward.   This is already being said, Vice President Biden claimed recently that the Republicans want to “sabotage the economy.”  In a close election if doubt can be cast on which party really should be blamed for economic conditions, that helps Obama.

All that said, Romney is a consummate politician who unlike the rest of the GOP field is making no unforced errors and doing nothing that will come back to haunt him in the general election (unlike Rick Perry, whose social security stance will cost him elderly voters if he’s the nominee).    He’s managed to play the tea party favorites off against each other and appeal to the average Republican — those more concerned about competence and beating Obama.   He’s not totally ignoring Iowa this time and has an operation in New Hampshire that is almost sure to bring him a big victory there.    He’s got a better than even chance of avoiding a long, bloody primary battle.

While he seems slick, he also appears calm and competent.   Independents disappointed with Obama won’t be scared away from Romney the way they might be from Cain or Perry (let alone Bachmann or Palin!)   If the economy is still in the dumps, it will be relatively easy for people to say, “well, let’s try Romney, let’s see what he can do.”

The question is whether Romney can inspire support, something I noted awhile back when I compared him to Mondale.  Here is where the left and right “movements” become interesting.   Romney’s capacity to appeal to the center is clear, but can he keep the loyalty and enthusiasm of the activists, people who until now have been very cool to a Romney candidacy?   Assuming no third party candidacy, many tea party folk may decide they can’t stomach Mitt as the GOP standard barrier and wait for 2016 and a chance to nominate a “true Christian conservative.”

OWS has two dangers for Obama.  First, just as the tea party scared off moderates from the GOP, OWS arouses skepticism as well.   Just as Nixon used the 1968 protests in his favor, Romney could argue that the country needs to return to a more stable and predictable government.  Second, OWS could turn on Obama and urge people to sit out the election.   Despite Republican rhetoric, Obama’s policies have been very friendly to Wall Street and the business community.   To OWS he’s shown that he’s not a true progressive, they may feel compelled to sit out and try to nominate someone fresh in 2016.  Romney won’t cause fear based Obama voting in the way that a Perry might.

It’s still very early and things could change rapidly.  But right now the 2012 campaign looks to be fascinating.  In a country that appears divided with rival left and right movements, the probable candidates are centrist and more alike then most people realize.     Comparisons with past elections are of little help — the Obama campaign machine and the nature of this crisis will assure 2012 will be a unique, perhaps historic election.   Let the fun begin!

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Fight the Establishment!

I was too young to be a hippy, but old enough to watch and somewhat understand what was going on back in the early seventies as phrases like “don’t trust anyone over 30″ and “fight the establishment” were brandied about.   By the time I was in college the hippies were morphing into yuppies and their movement gave way to consumerism.

That movement was driven by a number of factors.  First, it was the coming of age of a post-war generation that was experiencing the biggest economic boom in history.   Used to and expecting material comfort they were able to expand their horizons to environmental concerns (earth day and the environmental movement got started in the late sixties), human/civil rights, and of course opposition to the Vietnam War.    They embraced the time tested ideals of love, peace, and community but were unable to translate them into a sustainable movement.   Yet even as they became bankers and board members they radically transformed the culture to one more open, tolerant and questioning of old traditions.   Even conservatives embrace most of the changes that came in the wake of the 1960s counter-culture movement.

They had one enemy: the establishment.   The establishment meant the moneyed elite, materialists who played the game on the inside, cared little about ethics and principles, and made sure that those with power ran the show.   The establishment covered both political parties, the media, and of course corporate America.   In their view (before they joined the establishment) the establishment had seduced their parents generation into servitude, working meaningless 40 hour weeks in order to simply have a house, bills and responsibilities – a rat race grind that pushed aside deeper values of love, spirituality and human connections.  Instead you work hard in a routine and distractions such as television and various material pursuits allow you to avoid really thinking about the meaning of life.   Then you die.   “What’s the point,” they asked.

So instead they offered Jonathan Livingston Seagull, a bird who broke with conventions to pursue his higher self, and look down at the mindless gulls seeking only food and survival.   They offered communes, a sexual revolution, new musical expressiveness, and values that countered those of ‘the establishment.’   Then they went and got jobs, settled into routines, but brought some of that rebelliousness into the new post-hippy world, changing society, even if not in a way that reflected their ideals in pure form.

Now we have two counter-establishment movements.    Will they change society?   One is reactionary, the tea party.   The tea party looks back at an America they believe is lost.   They romanticize the world of the early sixties (such as that depicted in my post yesterday), when America had a clear vision, and life seemed more normal.   They want to take back America, looking at the decay they perceive.  In a sense they believe that the country was changed for the worse by the cultural shift after the early 70s, blaming “liberals” and “government” for destroying the America they grew up with or (for younger ones) imagine it to have been.

At their peak, the tea party launched a "million man" march on Washington.

The left was playing defense at that point, defending the changes of the last forty years, even as the President promised to decrease domestic spending to levels lower than any time since the Eisenhower Administration.   Yet as the two establishment parties moved towards a grand bargain that reflected a shift to the right, Speaker John Boehner of the GOP found that he could not control his party, especially freshman “tea party” members.   They weren’t looking for compromise, the “establishment” solution being proposed, they were anti-establishment, demanding Boehner change.   Now tea party darlings are risking primary challenges if they sided with the establishment GOP on some of these votes.   They want the status quo to change.

Then in September 2011, responding to Republican power, efforts to limit voter participation, and the way in which President Obama seemed impotent in the face of Republican maneuvering, groups on the left decided to launch their own movement, inspired by the pro-democracy movements in the Mideast.   “Occupy Wall Street” started small but grew to the point that almost every city now has a protest taking place, and it’s even gone global.   Republican Representative Eric Cantor worries about “mobs” threatening democracy, and GOP Rep. Peter King openly suggests that unless this movement is stopped it will grow in power to that of the late 60s/early 70s counter culture movement, which he believes dangerous to the ideas he and the tea party stand for.

The spirit of 1968 lives on

This movement is both a reaction to the conservative tilt of US politics, and intense disappointment with President Obama.   One poster seen read “Obama Eats With Wall Street,” and if the tea party is the anti-establishment view from the right, Occupy Wall Street is the same thing from the left.    Reviving the ideals of the past, the focus is on corporate power and the view that greed and inequality breed a system that is not capitalist or democratic, but one by the moneyed elite, for the moneyed elite.

While the left cherry picked tea party racist moments, the right cherry picks wild demands from Occupy, but in reality the two reflect separate anti-establishment movements built on frustration with where the country is going.    Right now Occupy Wall Street beats the Tea Party in the polls (33% approval vs. 26%).   Neither are very popular, but taken together over half the country is sympathetic to at least one.

And though they may seem polar opposites, their motives are often driven by the same core belief: the elites running the country don’t care about the people and have sold out to corporate greed and bureaucratic control.   So what to make of it?  First, this is not completely new, it is a reflection of past movements — just as we had the hippies in the sixties we also had the John Birch society, and many tea party organizers cut their teeth in that right wing organization.

Yet they’re also new, using social media and launching less organized, more diffuse movements, driven by what they sense is wrong with the country rather than a clear view of what is needed to set things right.   In that these movements represent a new kind of politics, one less likely to be easily coopted by the political parties.   Moreover there is no “Vietnam war” driving this; the hippy movement died as President Nixon rapidly withdrew troops from Vietnam.   That movement was built on less solid ground than the movements today are, the problems the US faced then were less foundational.

These movements could pull the country apart becoming radicalized and making compromise more difficult — future Democrats may not be able to offer Republicans the deal they rejected earlier this year.   Or, given the centrism of most Americans, a common element may emerge, a need to expand democracy and weaken the power elite of both big government and big money.    In any event, these movements are real and reflect a new kind of politics — though rooted in a tradition of anti-establishment sentiment dating back from the frustration of the colonies against the British crown.    We don’t know where this is going, but something tells me American politics is going to be anything but boring in coming years.

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Pan Am: Surreal yet Compelling

This post contains spoilers from the first three episodes of Pan Am (ABC – Sunday 10:00 PM EST)

I’ve broken from my usual writing about politics and world affairs to comment on music, today I’ll wade into the territory of network television.

Set in the early 1960s, the new ABC series Pan Am follows the lives of a group of stewardesses (not flight attendants yet) traveling the globe on one of Pan Am’s top of the line international jets.   But the story gets complicated, one stewardess, Kate, works for the CIA.  She’s not a full blown agent, but recruited to run errands — make deliveries, exchange messages and the like.   Yet she is a vehicle for a lot of cold war intrigue, bringing politics and the Cold War at its height back into American living rooms.

So you have gorgeous women (each with their own personality quirks), hot shot pilots, jealousy, romance, rivalry and espionage set in the early sixties.  Isn’t that enough to get you to check it out!?   But it’s more than that.   The series does something that is very difficult to pull off — it uses a kind of soft surrealism to blend together an unlikely mix of characters and situations into a compelling and very entertaining show.

Two of the women, Kate and Laura, are sisters.  Laura left her would be husband at the alter to ultimately join Kate in her career, with her drop dead beauty earning her a cover of Life magazine.    Their mom, who has already appeared (bringing the would be groom to Paris to try to win Laura back) finds this life style dangerous and strange.    Done wrong, that kind of story line would be corny — oh yeah, she leaves the groom at the alter, becomes a stewardess with her sister and gets on Time?   But within the surreal framework of the show it’s perfect.   It works.

Collette, from France, is an intriguing and very likable woman seems to have a kind of ‘old world’ wisdom and perspective that plays off the brimming optimism and idealism of the Americans.    She already was confronted by the wife of a man she had slept with (without knowing he was married), in episode three we learn of her past.    Set in Berlin Germany as the crew took reporters to see John F. Kennedy’s Ich bin ein Berliner speech, it’s revealed her parents were killed in the war and she can’t get over her hatred of the Germans.    In a surreal scene at an embassy party for the President (who had left by then) she starts making accusatory statements to Germans she meets.   She then apologizes, says she’ll make up for it and asks to the pianist to play the German national anthem and sings in perfect German “Deutschland, Deutschland ueber alles.”    She isn’t trying to honor the Germans by doing this!

Maggie and Kate

It’s surreal because a pianist would not have played it, especially once the words of the “forbidden” first verse were sung.  She would have been stopped and kicked out.   Yet somehow they pull it off; in the context of this show, it works.   Another stewardess, Maggie (a free thinking woman with drive and courage), has a crush on the President and spends the whole show trying to get to meet him.  She finally sees Air Force One and tells Laura that she can’t make the return flight and to tell the crew she’s sick.    She gets to the tarmac and when stopped she pleads for a chance to shake the President’s hand.   When that doesn’t work she informs the Secret Service that she has a box of Cuban cigars as a gift for Kennedy.

Impressed by the cigars the agent tells her to wait, and heads to the plane.   The President appears atop the plane’s entrance, somewhat in the distance (it’s dark we can’t see features) and waves at her — close to what she wanted, and she’s enthralled.

Gender issues of the early 60s (before ‘women’s lib’) will clearly be covered by this show.  Maggie’s already gotten in trouble for mocking the “weigh ins” required of stewardesses  (can’t have any chubby unattractive women serving Pan Am!) and even stabbing with a fork a first class passenger who tried to assault her.   He backs off, but it’s clear that if he complains Maggie will lose her job (while he risked nothing for what would now be considered a crime).    The pilot settles him down with some expensive scotch and an apology, but instead of being thankful that her job is not in danger, Maggie steams over the injustice of it all.

Dean (the captain of the airplane) and Collette as he notices she's not herself at the embassy party.

The show is only three episodes old.  So far more emphasis is placed on the women — who are the stars — but the Captain (Dean) and first officer (Ted) are integral parts of the story lines as well.   We’ll see how it develops, but at this point it’s got me hooked.

Pan Am started regular transatlantic flights in 1958, and the show is set in that golden era of flight when service was a premium, especially on international flights.   Given the historical allusions — we’ve already had the Bay of Pigs and JFK’s Berlin speech — those of us who enjoy Cold War history will find that part of the show interesting.   This week Maggie helped an East German spy defect, though it got her in some trouble.   It also clearly shows the Machiavellian nature of Cold War intrigue — the key is to combat the Soviets without risking a ‘hot’ war.  One reviewer suggests that this is “TV for old people,” and being 50 it might well be that there is a nostalgic allure to it.   I’m OK with that!  Anyway, I’ve always liked airline movies (I keep waiting for George Kennedy to show up to do mechanical work).

Another complaint is that it’s “too happy.”  So far the dramas are not the kind of tragedies that hit shows like “Desperate Housewives” (another rather surreal hit that preceeds it on ABC), but that’s OK.  It’s a fun show, and it captures the optimism of the era just before Kennedy’s assassination and the subsequent horrors of Vietnam.    So for the first time in a long time I’ve found an hour long network drama that I plan to watch regularly!

Pan Am suffered financial collapse in early December, 1991 — the same month that the Cold War would end with Mikhail Gorbachev’s announcement that the Soviet Union was breaking up.   In that sense the subject matter is doubly fitting: the Cold War era was Pan Am’s era.

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Global Economic Collapse Imminent?

Alarming words from the head of the IMF: a global economic collapse could occur within weeks if something isn’t done head off the ongoing crisis in Europe.   The warning may seem overblown, but the danger is real.

Here’s the problem: unless investors are convinced that bonds issued by Greece, Spain, Portugal, Italy and Ireland are safe, they’ll start selling them off in the bond market.   That will drive down the price (supply increases, demand will be low).   When the price of a bond falls, that increases its interest rate.    An Italian bond set to pay off 1000 Euros in three years might normally cost 940 Euro, meaning you’d earn 60 Euro (about 2% per year) on your investment.  But if people start thinking the Italian economy is going to tank then the price may drop dramatically — the 1000 Euro bond might cost only 850 Euro, meaning a 5% yield, or go even lower. Right now the Italian 10 year bond has a 5.5% yield rate.

By comparison, US Treasuries have about 2% yield on the ten year bond, as does Germany’s.  This means that if the US and Germany sell bonds to finance government debt, the cost is relatively low — 2% a year.  If Italy wants to run deficits, they pay a much higher interest rates.    Now, guess what Greece’s 10 year bond yield rate is.   23%.   That is simply unsustainable even in the short term.  It shows that people are expecting a Greek default and thus dumping bonds to those who want to take a big risk to potentially pocket a 23% investment gain.

Spain is also at about 5%, but Portugal’s bond yield is 11%, and Ireland’s at near 8%.  Those are getting into very high risk territory.   Now, at this point all these yields are kept somewhat low (relative to what they could be) by the hope/expectation of an EU bailout.   The EU has intervened in Greece, Greece has undertaken a very unpopular austerity program (after all you can’t keep running up debt borrowing at 23%!), and the panic has been minimal.

But what if the EU can’t save Greece?   Then the Greeks will likely default, they simply can’t make payments on their bonds.  The bond holders — banks throughout Europe (including Germany) will then be under stress, as some of their assetts become worthless.  Still, if it stopped there, that wouldn’t be that big of a crisis.  The danger is Contagion.   Holders of Portugese, Italian, Spanish and Irish bonds would realize that the world has changed: default is possible.    Yields on all those bonds would likely rise dramatically creating default threats across southern Europe.   At that point bank assets would be so stressed that credit markets would dry up and the European economy would be hit by a crisis larger than what hit the US in 2008.

US and British banks are relatively unexposed, but the economic impact would be to sink the world deeper in recession.   But it doesn’t end there.

Banks, including those in the US and UK, have been issuing credit default swaps on these bonds.   These swaps can be seen as akin to a life insurance policy.   Let’s say your neighbor confides with you that he has cancer, even though he’s young and fit.  You then go to an insurance agent and buy a life insurance policy on him for $1 million.    You pay a policy of $300 a year, but if the cancer kills him you could get $ 1 million.

Insurance companies sell these policies because statistically they don’t expect to make large payments.  Most of us go through life paying for insurance “just in case.”   But in the world of finance it’s more like a casino.    The credit default swaps are cheap, but have a potentially very large payoff.   It’s like placing a bet on a long shot horse — you’ll probably lose, but if you win the earnings are big.   So if you decide to bet against the EU and Italy, you can buy credit default swaps on Italian bonds.    If the bonds mature and Italy pays their value, you get nothing and lose the “premium” you paid to buy the swap.   But if Italy defaults, you get the value of the bond — potentially a huge pay off.   That happened back in the US when owners of credit default swaps on mortgage backed bonds made a killing when the real estate bubble burst.

The thing is, we don’t know how exposed banks are in terms of credit default swaps.  If they’ve felt confident that the crisis would be contained, they may be very exposed.   So even banks that don’t directly hold bonds might be on the hook if defaults spread.   That would add to the depth of the crisis and could spark a breakdown in the entire financial system of the kind that the bail outs of 2008 managed to avoid.    In such a case credit would be very difficult to come by, even for “safe” auto loans, perhaps even credit cards would be hit.

If the EU doesn’t manage to convince investors that Greece will not default the whole thing could spread quickly — within weeks.   If the EU came up with a very comprehensive package they could allay fears and Greek yields would come back down to earth and overcome the crisis.   It would be a couple years before deleveraging would get them out of the woods, but investor confidence would return and the system would survive.

However, although this may look like a no brainer in those terms, in political terms it’s a tough sell.   Any kind of package that saves the system would appear to be a bail out of countries who had been irresponsible in their borrowing and spending, and protection of banks who made irresponsible loans.    That would be very unpopular in countries like Germany, which would pay a lion’s share of the cost.   But it would also be unpopular in Greece, whose people protest cuts in spending and increases in taxes.   In their eyes they’re being made to suffer for mistakes of bureaucrats and banks, and a mix of spending cuts and tax increases assures a deeper recession and more pain.   They’d rather default than suffer austerity.   So the moves needed to save the global political economy are by nature very unpopular and arose anger.

Most people don’t know how bonds work, wouldn’t know a credit default swap from collaterized debt obligation, and have no sense of just how interconnected the financial industry is world wide.  The argument supporting such “bailouts” is only persuasive if you really work through the intricacies of how the financial system functions.  Most voters don’t do that, so any politician who tries to save the system will probably lose their job.

With so much on the line I think they’ll find a way to avert catastrophe.   The stakes are just too high, and the insiders know what the stakes are, and how inaction could mean utter catastrophe.    Still, the danger is real.   That’s why stories about European bond yields and bailout plans may be the most important news to follow in coming weeks.   Global economic collapse is still unlikely, but quite possible.

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“One Hundred Years From Now” and “Cyclorama”

    

I thought it would be fun to compare the most recent solo album by Dennis DeYoung: One Hundred Years from Now with the most recent studio album of new songs from the band Styx, Cyclorama.   DeYoung’s album came out in 2007 in Canada, and then was released with some changes to the US in 2009.   Cyclorama was released in 2003 and is the only Styx studio album without DeYoung’s presence.   DeYoung’s album apparently did not chart in the US (though it hit number 1 in Canada), while Cyclorama reached 127 on the Billboard chart, selling about 50,000 copies.   I’ll start with the older album.

I believe Cyclorama is an excellent album and I enjoy it more as I listen to it more.   It’s just not really a Styx album for me.  Without DeYoung it seems like a very different band.   Not a bad band, but a different band.   The album has a number of highlights.   James Young shines with These are the Times, his best song since Miss America.   It is a powerful hard rock song that probably could not be written by a young man.  It reflects the wisdom of experience along with the recognition that choices matter.   One with Everything by Tommy Shaw is another of my favorites — on so many levels the song moves and amazes me, the music is one with the lyrics, it is on my list of all time favorite songs.  Lawrence Gowon, who replaced DeYoung, also contributes solidly to the album, especially with the socially and psychologically relevant More Love for the Money.

The album has no clunkers.   Killing the Thing that you Love drags a bit for me, and is the song I most often click past. James Young’s Captain America is OK; the idea is good and the music rocks, but the song itself seems to be missing something.   Otherwise, every song is enjoyable, well produced and well written.    Tommy Shaw’s contributions reflect some of the best song writing of his career, showing that he has grown as an artist.  Rather than following old formulas, he explores new ground and each song is interesting and compelling.

One of my favorites is Kiss Your Ass Goodbye by Glen Burtnik, a song which combined with the Bourgeois Pig bit by Billy Bob Thornton at the start is the kind of break from the norm that compares to Mr. Roboto and Plexiglass Toilet.   It’s a novelty song, but fun.    It also adds to the complex variety the album offers while still seeming coherent and connected.  In that Shaw’s One With Everything captures the spirit of the ablum — diverse, yet a true unified effort.

One Hundred Years from Now by Dennis DeYoung sounds more like a Styx album than does Cyclorama.   In fact, it’s got a collection of songs that rival anything DeYoung wrote either solo or as a member of Styx.   Given that on any given Styx album his contributions represented three or four songs, his ability to put together 12 tunes this good is amazing.  I have since ordered his Hunchback of Notre Dame musical and will listen to that as well!

The title track, done on the Canadian version partly in French in a duet with Eric Lapointe, is done in English by DeYoung alone on the US release.   To me it is up there with Suite Madame Blue, Unfinished Song, Grand Illusion and Pieces of Eight among DeYoung’s best efforts.  It combines a pleasant, catching and powerful melody with lyrics conveying a profound message.

Another song that I find riveting is Rain.   It has DeYoung’s hallmark talent of writing a melody that is intensely powerful yet accessible, evoking images of real devastation (apparently Katrina was an inspiration) as well as being a metaphor for one overwhelmed by life.    Crossing the Rubicon is a deep and almost mystical song that reflects wisdom and experience.  As one ages one has to recognize the need to move on and make changes; instead of ‘waiting for a better day,’ you have to take risks and move onto new ground.   If you’re like Estragon (the character from “Waiting for Godot” to whom DeYoung alludes) you’ll simply be waiting for death.  Each time I listen, the more meaningful the song is for me.

There was a Time is a reflective look back, reminding me a bit of his earlier Goodbye to Roseland, but better.   Private Jones is a hard rock tribute to those who fought in the post 9-11 wars, reflecting the uncertainties and disappointment of those whose patriotism seemed confronted with an ambiguous reality.

There’s also a group of songs that has a spiritual sense of human faith in relationships: Save Me, I Believe in You, and Forgiveness.   Breathe Again rounds off that list, being a very personal song from DeYoung to his wife Suzanne, yet a powerful statement in its own right.  Two of my favorites are social commentaries on the information revolution: I Don’t Believe in Anything and Turn Off CNN.

Any fan of Styx in its heyday will appreciate DeYoung’s solo effort.   He’s allowed himself to create an album with the elements that made Styx one of the most successful bands of its era, but doesn’t do so in a formulaic manner.  The songs show his versatility both as a singer and song writer.    His voice sounds very much like it did in Styx’ heyday; to me the album stands alongside Grand Illusion and Paradise Theater in quality.

The good news, then, is that both Styx related acts have quality.    Like the original band in the early days, both refuse to take short cuts or coast.   Cyclorama‘s songs are fresh, exciting and coalesce a diverse set of elements into a superb album.   Dennis DeYoung captures the spirit and sound of classic Styx in a dynamic, fresh collection of songs.   The bad news is that neither CD sold enough to create anticipation of new material any time soon.   It’s unclear if the current Styx lineup will ever release another set of new songs (songwriter Glen Burtnik has left the band since Cyclorama) and DeYoung has a variety of projects.

The quality of these two CDs hint that a studio album reuniting Styx and DeYoung could be big.  Shaw and DeYoung showed in these albums that they are if anything better song writers than they were in the past, and James Young’s These Are the Times hints at his capacity to contribute a gem.   If they came back together and pooled their creative juices, having the maturity and perspective to realize that product they create is worth not delving into past disagreements and fights, they could not only have a better album than either of these two, but one that might actually sell — Gold, perhaps even platinum.   What a coup that would be for a band that’s been around in some form for almost fifty years!

They need not lose Gowon either.   With CDs running 65 or 70 minutes, he could contribute some songs and an expanded Styx could satisfy and unite a fan base that’s often been split between DeYoung fans on the one hand and Shaw-Young fans on the other.   DeYoung and Chuck Panozzo are the only true original members of the band remaining, it would be a fitting cap to the band’s career to heal the rift.   If DeYoung’s other projects and dislike of heavy touring continues, that would no longer be a problem.  He could perform some big concerts, and Gowon could handle the longer tours.   The band could be reinvigorated and fans would be delighted.

A pipe dream?   Are the egos really too big and the feelings too sensitive?  I hope not.  DeYoung has claimed he’s willing to try it again.   The others might decide its worth a chance for another best seller and spike in their career.   They may feel that it would be a gift their fans deserve.   And maybe, as they shot past age 60 and start to look mortality in the face, they may realize that the collective magic that gave them five straight multi-platinum albums deserves another run.

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Obama Should Go to Wall Street

Pundits used to 20th Century politics are mystified by the growing “Occupy Wall Street” movement, now spreading to other cities.   Like the conservative tea party movement two years ago, its growth comes through new media, a real dissatisfaction with how things are going, and is not centered around specific demands and agendas.    Starting small and overlooked in the media, it has grown in breadth and scope and can no longer be ignored.

This creates a problem for President Obama.   Obama is a centrist establishment Democrat who despite achieving some significant reforms in health care, finance, stimulus spending and repeal of “don’t ask, don’t tell,” has tried to find common ground with the Republicans.   It appeared he was going to succeed too, until the “tea party” movement pushed John Boehner farther right then he originally wanted to go.  Fearing wrath from the right, establishment Republicans are running scared and engage in a more ideological and uncompromising rhetoric than any time in the past, including the years of hostility to President Clinton.

Establishment Democrats have responded to this by shifting right; Obama is no exception.  He embraced lowering domestic spending to that of any time since the Eisenhower administration, calling for closing of loopholes for the wealthy (like Reagan did) rather than an increase in tax rates on the wealthy, and making regulatory calls which infuriate environmentalists and the left.     While his approval rating suffered — probably 15% of the ‘disapprove’ comes from the left — it appeared that liberals had no alternative.  There simply is no pressure from the left:  no movement, no leader and no alternative.

The calculus in the Obama camp is that an intense campaign combined with fear of the GOP will bring the base home.   Republican candidates are weak and vulnerable to negative campaigning that will scare independents into grudgingly vote for Obama as the safer choice.   If there is a strong movement on the left, however, Obama might find hostility growing much like Johnson did in the Vietnam war.   The most intense protests of 1968 were at the Democratic national convention, after all.

But while the protests are dangerous for Obama, they also represent an opportunity for him to harness the emotion and anger on the street and rekindle the kind of energy that brought him to office in 2008.    It won’t be easy — many on the left have become hostile towards a man they believe has drifted to the right of even former President Bush — but it is possible.

The first thing he should do is announce that he is going to Wall Street to talk with the protesters and give a major speech.   This should be scheduled for late October, assuring that the protest movement will continue and grow — they won’t give up if the President is planning to visit.    In the meantime the President should hone his populist rhetoric to support a key argument:  “I tried to meet the Republicans half way, recognizing that we need to work together to solve the problems we face.   They refused, saying it was their way or no way.   So now I’m taking the argument to the people — I’m asking the American people to send a strong message that things need to change.”

On Wall Street, a place where the Obama campaign raised so much money in 2008, and whose banks have benefited from Obama’s reluctance to anger the business elite, he should declare a new agenda:

1) Reform of the tax code to simplify and make more fair a system that currently taxes the middle class and poor too much, and allows the wealthy to use accountants and tax lawyers to evade paying their fair share.   Yeah, he’ll be charged with class warfare, but he should counter by saying it’s not the rich who are at fault, but the politicians.   The wealthy are simply acting rationally by trying to pay the legal minimum tax they owe — that’s what almost everyone does, Republican or Democrat.   If they aren’t paying their fair share it’s the fault of Washington for making a complex, screwed up and often absurd tax system.   The tax system should be made simpler, more fair and clear.

2) A jobs program that aims at rebuilding the middle class and America’s productive capacity.   The poor and unemployed aren’t lazy — they want to work.  The system that benefited unproductive financial industries who built bubbles based on bizarre financial instruments like Collateralized Debt Obligations and Credit Default Swaps should give way to a system that benefits main street businesses and people who want to produce stuff that other people want.    A strong middle class is the determinate of a state’s economic health.   Our middle class is battered and torn, and that damages the country.

3)  Honest talk about debt.   He should tell the young people gathered that their generation will inherit a country that has to sell itself off to foreigners thanks to the massive debt the last generation has built up.   Starting in 1982 the US has embraced “borrow and spend,” ignoring increased debt.   Government has done this, so has the private sector.    For a long time the problem could be ignored because unemployment was low and the bubble economy made it appear wealth was strong.    Now we see that global debt has created a crisis as bad as the last great depression, but one that cannot be cured with more debt or dismissing this as just part of the business cycle.

The US has to rethink its approach to everything from foreign policy to domestic programs; we can’t afford the kind of budget we’ve had in the past, but we also can’t afford to just cut, since spending cuts can slow the economy.    A smart mix of revenue increases, spending cuts, and investments in jobs can turn this around, though it will require global cooperation.

Obama needs to focus on these themes and embrace a populism that can appeal to independents as well as the youth.   The fact is that those who dismiss the protests as meaningless do not understand them.   It’s just like the old hands in the Arab world who couldn’t comprehend the changes being pushed by protesters from Egypt to Yemen.   This is no longer the 2oth Century.   Political activism is changing, and the ideas and energy being generated in New York is not going to dissipate.   Energy and activism may wax and wane, but a new movement is being born.

To win re-election, Obama needs to show the protesters that despite his slow start, he understands that the country needs fundamental change.    While one can say he’s blown the chance by being so establishment in his first four years, in the campaign he won’t run against Obama of ’08 but a real Republican candidate with whom he can compare himself.  He’ll also have a lot of money to get his message out.

Moreover, this message can appeal to independents.  Most aren’t ideological — if they were, they wouldn’t be independent.   They’ve shown they can vote Democratic or Republican, depending on their mood or assessment of whether what’s being done is working.   If Obama can make a credible argument that he stands for simpler taxes, a more ambitious jobs plan, and an honest discussion of debt, then as we get into the dog days of the campaign people currently disillusioned thanks to the economy may decide Obama is their best bet.

But he has to go to Wall Street.   He can’t ignore a movement driven by the same emotions and ideals that brought so much energy to his campaign in 2008.

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Wealth and Society

Fundamental disagreements about taxation and government spending rest on different assumptions about the nature of wealth and of society.  Where one stands on these issues determines ones’ perspective, and while some people may believe they have the most moral or rational point of view, such claims defy objective proof.   People can only look at the arguments and go with what they believe correct.

Arguments that say taxation should be minimal, even on the wealthy, have an assumption that market outcomes are proper, and that markets work in practice as they are supposed to in theory.  I believe these two assumptions to be flawed.

Unpacking the first assumption, one has to ask what determines a “proper” outcome?    To say that any market outcome is proper one requires a materialist and economistic view of reality.    Everything else — concern about human suffering, poverty, exploitation and equal opportunity — gets dismissed as secondary, or at best left up to the individual.   Society in such a view is not a unit connected by shared cultural values, norms, and interdependent relationships, rather it is simply the outcome of a bunch of purely individual choices.    Individuals are seen as rational and self-interested, simply interacting with others.

While all of those assumptions are possible to hold, they are by no means self-evidently true or even persuasive.  Human history has primarily been that of people connected by tradition and custom in social organizations that value spiritual and community bonds higher than material goods or individual self-interest.   Individual identity, purpose and interests came from tradition, culture and social norms.   Moreover, no individual chooses his or her interests, goals and ideals purely on their own.   Humans are in part cultural products; if the same person were born in Cairo instead of Boston he or she would be a different person, with different beliefs, tastes, values and interests.   Finally, no individual is fully responsible for his or her outcomes, including wealth.   Depending on how society is structured, wealth accrues to people in different ways, based on different actions.    Simply, wealth is a by product of social structures as much as it is of individual choices.

Since Freud we’ve known that humans are not guided primarily by reason and rational thought, but other impulses and drives below the surface in our subconscious.   Personality goes a long way to explain different political opinions and points of view, just as it explains ones’ philosophical perspective.   Personality is both innate (we’re born a certain way) and shaped by personal experience in both families and the larger culture.

Thus I reject the first assumption.  I do not think market outcomes are driven by purely individual choices and interactions, but have a cultural component that plays a huge role in whether or not one becomes wealthy.   Moreover, the import of culture also trumps a focus merely on the material and economic.    Values matter, as does social stability. Therefore, market outcomes are not inherently just or proper, nor do they accurately reflect the quality of an individual’s choices.    There is nothing inherently moral about a market outcome.

I also reject the other assumption, namely that markets work well on their own.   Left to their own devices markets break down, and are replaced by pseudo-markets which appear to be capitalist, but instead reflect the interests of the powerful and wealthy — those able to stack the deck in their favor.   The stacking is not a malevolent effort by the moneyed elite to control the country, but rather the result of numerous small rational choices that protect profits.

These small choices can hinder the market because of power differentials.   People who benefit from one market outcome are in a position to have greater opportunities the next time the game is played.  Over time this creates structural benefits to many, and constructs structural barriers to others.   Markets thus do not lead to the optimal outcomes implied in theory, but class divisions where a small group is able to get rich and stay rich across generations.  This inherently limits the opportunities of those who are not well off.   Some can overcome those constraints, most cannot.

Because those core assumptions are flawed, so is the argument that progressive taxation is wrong, or that taxing the wealthy harms the economy.   In reality taxing the wealthy: a) recognizes the role of society in creating that wealth — it is not merely the result of individual choices; b) allows resources to be used to help remove constraints by others to succeed, enhancing true opportunity and fixing market anomalies; and c) allows people to focus on other values a society has, rather than seeing materialist processes as the ethical core of a society.

Moreover, the flaws of those core assumptions also explain why regulation is needed.   Power differentials create incentives for “winners” to avoid the limits a true market would create.   Regulation is needed for the market to operate effectively, create transparency to limit the benefits insiders get thanks to the information and resources at their disposal, and protect market mechanisms.

Note that this argument is supportive of market capitalism.   It is not an argument for socialism or against markets, it is merely a claim that markets are not magic.   The goal of government is in part to compensate for ways in which the nature of society and the distribution of power disrupts how a market would operate “in theory.”   Yes, there are also other values a society might have that trump market processes.   These can be conservative (e.g., protect religious institutions, support cultural values such as marriage, etc.) or liberal (assure everyone has quality education and health care).   But since there is no “answer key” telling the right values to use to govern, such questions of value are inherently political and contestable — and so far democratic institutions are the best way to deal with such issues.

This still doesn’t answer what the proper tax level should be, what kind of government programs are best, or anything like that.   Those questions cannot be answered in the abstract as they are questions reflecting different opinions — there is no right or wrong answer.    That’s why democracy is best when it functions correctly — we can debate, persuade, learn from different perspectives, and over time test policies and change what doesn’t work and embrace what does.

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Occupy USA?

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For over a week protesters have been growing in numbers on Wall Street, with unclear demands but clear rage.  Hundreds have been arrested as they shut down the Brooklyn Bridge and sympathy protests spread to other cities.   Left wing notables such as Chris Hedges, Michael Moore and Matt Taibbi have described this as the start of a new movement (Hedges said it was the ‘best hope’ for America to recover from this crisis) and slowly the media is starting to take note.

So what’s happening?   First, the left has been silent for much of this economic crisis because until early 2011 the Democrats held power in Congress and the Presidency.   As health care reform passed, “Don’t ask don’t tell” repealed and other changes made, most on the left held out hope that Obama would pursue a truly progressive agenda.   To be sure, the Hedges, Moores and Taibbis gave up on Obama long ago.  He stayed in Iraq and Afghanistan, had policies very friendly to Wall Street, and the call for tax increases on the wealthy — something which gets labeled class warfare on the right — is seen as pathetically trivial.    The far left wants real class warfare because, they argue, it’s been waged on the US by Wall Street and the business elite for years.

Students and others whose hope was kindled by the Obama candidacy, and who look at the tea partiers as almost anachronistic, wanting to go back to America like it was decades ago, had drifted towards apathy.   Now a movement is starting that might ignite their interest again — sort of an anti-tea party.

The cause of their ire is clear: Wall Street and big money.   These are firms that created the debacle of 2008 thanks to unregulated derivatives trade and what in retrospect can only be called fraudulent but legal deals.   They raked in hundreds of millions of dollars of bonuses for deals that were setting the stage for a crisis as serious as the Great Depression.   Then when all hell broke loose and Americans were out of work and unable to keep up their mortgages, the government made sure the financial sector did not collapse.   Soon they were back making record profits, even as the world economy sunk.

Beyond that the wealthy have managed to create for themselves a zone of safety where their wealth is not at risk and they don’t have to do anything special to be a top earner.   Just being born in the wealthy class virtually guarantees you will stay there unless you really screw things up.   Meanwhile being born poor assures you’ll remain poor unless you undertake a heroic effort with luck and creativity.   Some accomplish that, but overall class mobility in the US is low.

In the last thirty years as the wealthy have received record tax cuts to the lowest levels in history (and have loopholes and other ways to avoid more), the top one percent have had their income grow by 281%

This chart shows that the more you earn, the greater your income growth.  For the nearly thirty year period the bottom 60% — more than half of the population — had earnings increase by 25%, the bottom 20% only 16%.    Politics is about relative gains and loses, and obviously there has been a relative shift of wealth to the highest earners.   281% for the top 1%, only 25% for the bottom 60%.   For the last thirty years the wealthy have done very well, even as the rest of the country has stagnated.    As unemployment officially lingers at near 10%, but if you took into account everyone who would want to work could be close to 20%, it’s very clear that Americans are hurting, even as the wealthy hold on to their gangs and Republicans scream “class warfare” whenever someone wants to increase their taxes even a little.

This is going to get people mad.    People accepted the massive growth in income disparity over the last 30 years (we were most equal in 1976 in the last year of the Ford Administration, now income distribution is like that of the late 19th Century) thanks to lower prices via foreign goods and the illusion that the economy was a success.   Now that illusion has faded and people are coming to grips with the fact that the US is in decline, with an economy based on consumption rather than production.   Massive debt by both the government (100% of GDP) and the private sector (total debt government and private sector: 400% of GDP) have created a structural crisis, one that can’t be fixed with a quick stimulus or a few policy changes.

The tea party’s rage is real, but they so far have gone for illusory solutions.   If only government spent less and cut regulations, then “job creators” would move in and magically fix the economy.  It sounds so easy, so painless, and thus they are angered by those ignorant Democrats who can’t see that they are standing in the way of a simple, clear solution to America’s ills.  If only it were so easy!    That solution is pure fantasy.   Of course, the Democrats had their painless solution.   Spend more money, save jobs, help out states and don’t worry about the debt — we’ll pay it off when we’re growing again!   They are angered by those ignorant Republicans who don’t understand that cutting spending slows the economy even more than tax increases would!

The “Occupy Wall Street” movement, which is starting to spread, seems to recognize the folly of the “easy solutions” have been fed to us by an elite which wants to protect its advantage and avoid anything that might get in the way of continuing to profit without significant competition.    They call themselves capitalists but they do all they can to avoid having to undertake the risks capitalism is supposed to entail.  They’ve convinced many people that the choice is “capitalism or socialism” and they’re the good side of that false dichotomy, while “big government” (by definition socialism in that world view) is the bad side.

President Obama until now has tried to reform rather than radically alter the system.   As an outsider, he’s been keen to reassure the moneyed elite that he’s not a threat, believing that will be more effective than creating animosity from those who have the power to make or break his Presidency.   While the tea party complains about “establishment Republicans,” Obama remains an “establishment Democrat.”

So the protests grow.   The left is starting to counter the right in both rage and demands for radical change.   Beneath the surface organizations are being built that can be mobilized for political action going forward, the infrastructure of a true progressive movement is starting to grow.   Just as the tea party irritates establishment Republicans, this group will be a thorn in the side of establishment Democrats.

To many people the idea of protesters in a prosperous democracy modeling their movement after protests that overthrew an oppressive dictatorship in Egypt is silly.   Yet they have felt helpless as both parties have courted the business elite, had the same insiders (Clinton’s economic team was more free market than Reagan’s had been, and many of them were brought into the Obama Administration), and stood back as jobs moved off shore, the middle class lost ground, and the country drifted into decline.

These folk are finding their voice as this crisis, now three years old, enters a new stage.

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