Monday, November 24, 2008

A Terrible Mistake?

Today it was announced that Citigroup, previously the largest banking concern in the United States, is going to be bailed out by the government. Upon hearing this, I immediately thought about a phone conversation that I had with a phone salesman in 2006. He had called me up to try to get me to buy gold bullion (pure gold coins) as an investment. I was somewhat interested, but was taken aback by the large mark-ups. The conversation continued in the following way:

Salesman: where do you have your money invested right now?

Jacob: in a savings account at Citibank.

Salesman: banks can go bust at any time!

Jacob: well, it is the biggest bank in the United States, and one of the biggest in the whole world, so I’m just going to stick with that.

Salesman: you’re making a terrible mistake!

Jacob: goodbye

It turned out that the salesman was completely right in doubting the viability of Citibank, although I’m not sure he knew why he was right. At the time, the summer of 2006, his ominous words of financial destruction would have sounded ridiculous to most people. At the time, housing prices had never been higher and the stock market was roaring towards the sky. Gold and savings accounts were only for losers and weirdoes.

The salesman sounded more like someone from the 1800s, when banks were printing their own wild cat money and really did go bust all the time because there was no regulation, and not even a central bank. More surprisingly though, towards the end of the 1800s, banks did get heavily involved in complex securities via bonds, not unlike those we are trying to deal with today. This started off a deep recession across the country in 1873.

Citigroup has a lot of problems right now, and although I suspected that the problems were big, I did not think they were this big. It appears that the estimated value of the toxic assets at Citibank is around $690 Billion! That’s almost the size of the entire government bailout package ($700 Billion). All these firms that have now been bailed out on a large scale have had the same pattern of behavior this year, and it goes something like this:

1. firm’s stock starts plunging 2. firm says that the financial state of the company is totally fine, and in fact, better than ever 3. stock starts plunging more, and firm blames it on short-sellers 4. firm requests government bailout and says it will go bankrupt within a week if it doesn’t get it.

This was roughly the pattern for Bear Sterns, Lehman Brothers and AIG. Last week, Citibank said that short-sellers were responsible for the plunging stock, but a detailed analysis of the trades revealed that only 2% of the volume was made up of short-sellers, so this could not possibly have been the case. In other words, Citibank was desperate. At any rate, the government approved a bailout of Citibank extremely swiftly, and has now injected $45 Billion into the bank, and is guaranteeing over $300 Billion worth of losses. I think this had to be done, but for the future, this must be discussed further. The most important thing to remember is that:

the government has no idea what it is buying

When the government decides to “guarantee” toxic securities for companies such as AIG or Citibank, it does not actually go through what it is guaranteeing. If the government says that, for instance, AIG has $100 Billion in toxic assets that need to be guaranteed, it has no idea whether $100 Billion is the correct number, or what these assets are made up of. The reason is that, because these bailouts supposedly need to happen right away, there is not nearly enough time to go through the books of the companies. If the government were to have gone through AIG’s assets to see what was toxic and what was not, it literally would have taken many months, if not over a year. So, what actually happens when a company like Citibank asks for a bailout, is that government representatives and bank representatives sit down and discuss the assets without actually looking at the books.

Consequently, the government has to take the bank’s word for how many toxic assets there are and simply give them the money. There’s no other way now that things have gone so far. This leads one to the obvious conclusion that there is no way to know: 1. whether the bailout is going to work, or 2. whether more bailouts are going to be needed (which is almost always the case because the banks are lying to protect themselves).

These toxic assets have made their way into almost every diversified investment portfolio in America, from pension funds, college savings accounts, mutual funds, bond funds, and even treasury bonds funds. How did this happen? Well, a lot of these types of investments, such as pension funds, can only legally invest in products that are rated “Triple-A”. That basically means that the product is supposed to be a solid investment. The toxic assets that are now worthless were rated Triple-A, which can be a little hard to believe. The complexity of these toxic assets was the key to getting them this highest of ratings.

Just like the government, the ratings agencies did not bother going through the products that they were rating, because it would have taken too long. Also, the institution that was offering the toxic asset was paying the ratings agency for the rating, and probably bribing it on many occasions. Result: almost the entire American population lost money that it could not afford to lose on this giant pyramid scheme, and after that became clear, the taxpayers had to pay to clean up the mess. Hence, many taxpayers are paying to cover their own losses, and are being hit twice.

Reagan decided to start taking the country back to the 1800s in terms of financial regulation, and by the time Bush and Greenspan had had their say, the country was almost back where it was in the time of Andrew Jackson (a very strong opponent of regulation). It is surprising to me that all confidence in the financial markets is not lost as of yet. The American people still seems to believe that things can go back to the way they used to be. Trust me, for the next 10-20 years, they cannot, and will not. In the meantime, we need to learn a few lessons from the banking customer of the 1800s: be extremely skeptical of banks, and don't invest a dime in the stock market. For the future, we need an enormous amount of new and uniform financial regulation, new taxation on all kinds of investments in financial products, and an entirely new infrastructure for financial oversight.

The good news for Citibank’s customers is that their deposits will be safe, for the moment, through the FDIC insurance. It turns out that I did not make “a terrible mistake” after all, like the salesman warned, but I came pretty close.

Thursday, November 20, 2008

Homeowner Help?

Lately, there has been a lot of talk about helping homeowners who have mortgages that they cannot afford, and risk going into foreclosure. A lot of anger has, rightly, been directed at politicians who authorized $700 billion for a financial bailout, while much less, if anything tangible, has been done for homeowners.

During the course of this year and the last, many different proposals have been thrown around as ways of altering mortgages so that homeowners would be able to pay them. These proposals have usually included measures such as the following:

- negotiating with lenders to reduce interest rates

- negotiating with lenders to switch to fixed interest rates

- negotiating with lenders to reduce the principal of the loan

- negotiating with lenders to allow homeowners to stay in their homes until a payment plan can be devised

None of these efforts have been successful, for one simple reason:

They are unconstitutional

The reason for that is, if banks were to try to alter the lending contracts (mortgages), they would be in violation of the contracts that they have with the people who also own all these mortgages, and by extension, a part of all the homes. This was clearly and eloquently expressed in a Senate hearing yesterday by Senator Charles Schumer. For 20 years, mortgages have been broken up and sold in pieces to thousands of investors, so that lenders don’t own the mortgages anymore. The ones who really own them are hedge funds, pension funds, mutual funds and other Wall Street firms. Trying to force lenders to alter mortgages is useless, because they can’t do it even if they wanted to. If this were 20 years ago, negotiating with banks might have worked.

Imagine if 5 neighbors on a block got together and bought an expensive lawn mower by means of a loan. They don’t really need to mow that often, and by pooling their resources they can get a nicer machine than they otherwise would have been able to get. They agree to make equal payments monthly until the lawn mower is paid for. One day, one of the neighbors tells the others that he does not think the lawn mower is worth what they paid for it, and says that, as a result, he will decrease his monthly payment by 30%. Obviously, the other neighbors are angered by this, because, regardless of the actual value of the lawn mower, the bills still have to be paid based on what the original price of it was.

That is a similar situation to what would happen if banks were to modify any mortgages to make them cheaper for home owners. Because the banks don’t own the whole amount, they cannot unilaterally change the terms of the payments. If they did, it would be a unilateral breach of contract, hence unconstitutional, and the banks would be sued by the hedge funds and other owners of the mortgages.

There is only one solution to the problem of making expensive loans cheaper: to alter the bankruptcy laws, so that when a homeowner files for bankruptcy, the bankruptcy judge can alter the mortgage and make it cheaper. That would not be unconstitutional. This has been suggested by Senator Durban, and supported by Senator Schumer as well as Barack Obama. The present prediction is that, by early next year, this proposal will go through. A bankruptcy judge can do this same thing with other forms of loans today, such as loans for farms, so it’s a procedure that is well established. This could potentially help tens of thousands of homeowners and maybe stabilize the housing market somewhat. At the very least, it would save some houses from being abandoned and eventually torn down.

So what are the problems with this proposal? Well, because the ownership of the mortgages is so spread around the country and around the world, a lot of people would have to take a loss if the values of the mortgages were to be written down. If one day, a certain investment were worth $100, it could be worth $50 the next, after a bankruptcy judge has altered mortgages. Obviously, this will make the stock market go down further, and a lot of hedge funds and other investment firms would go under.

I say, let that happen. These firms are already on the brink of collapse, and Wall Street is so thoroughly corrupt that the solidity of the assets that people in the financial industry sell, can barely even be likened to a house of cards. The United States must move forward without any sort of reliance on Wall Street. That means: no more 401(k)s with stocks in them, no more college savings accounts with stocks in them, higher fees and taxes on buying stocks, no more advertising of financial products and so on and so on.

To illustrate the point of the weak content of financial products these days, consider the following story of a home that was bought in Bakersfield, California in 2005: a Mexican strawberry picker who did not speak any English and made $14,000 per year got a loan to buy a house for $720,000…

Loans such as this one are what make up many “assets” in people’s retirement portfolios these days. Happy retirement!

Monday, November 17, 2008

On the Proposed Auto Bailout

It seems that GM is actually about to go bankrupt. Whether it’s Chapter 7 (liquidation) or Chapter 11 (reorganization) bankruptcy, it would be a disaster for American workers and federal and state tax revenue. It would also be very bad for American competitiveness in the entire industrial sector, as a lot of innovation and technical skills would disappear forever. Some might say that a lot of companies go through Chapter 11 reorganizations all the time and come out fine, but for many reasons, this is rather different.

Should the government bail out GM? That’s a very tough question, because GM’s problems can probably not be solved within a time-frame that is short enough for the bailout to work. In other words: if 50 Billion dollars gives you 1 year to continue operations, are enough of the problems going to be solved after 1 year for the company to be viable and strong again? I believe that GM has three main problems, which I will outline below:

1. Overcapacity in the industry

The American auto industry has, over the years, built up an enormous production capacity. It is currently able to produce 17 Million cars per year in this country. However, the demand for American cars in this country is only about 10 Million per year. Naturally, the 7 million car excess production capacity is costing a lot of money, and is a big part of GM’s problem. The likelihood of demand for American cars nearly doubling so that supply can meet demand must be considered to be almost zero. A lot of customers cannot get car loans, and a renewed focus on public transportation is expected from the new administration in Washington, so if anything, driving in America is likely to go down in the foreseeable future. Nobody knows what’s going to happen to oil prices, but let’s just settle for the fact that they are volatile, and cannot be depended upon to be low. Even if GM were to make it through this crisis through divine or governmental intervention, a lot of people would still have to be laid off around the country.

2. Product line - GM does not build what customers want

It sounds like a cliché at this point, but the reliance on SUVs that GM has had, and still has, is deadly. The SUV will probably one day be almost as iconic to the current economic crisis as the sub prime mortgage. The SUV is a product that depends on the American people’s propensity to indulge themselves through credit when times are good. Consumers were able to buy bigger, more expensive cars, because gas was cheap and because their home values kept going up. GM makes many times more money per SUV sold, as compared to a normal car, so just like consumers got hooked on credit, GM got hooked on SUVs. The SUV market collapsed in 2008 because of high gas prices, and even though gas has become cheap again, the SUV is not likely to return in a big way.

It is more likely that the American consumer, once the dust of the financial crisis has settled, will buy normal cars with much better fuel efficiency. This is very bad news for GM, though, because the company cannot compete with Asian and European automakers in this market. These foreign automakers have spent decades perfecting their product lines of normal, fuel efficient cars as a result of high gas prices in the majority of their markets. In short, the extremely cheap gas in the United States (about 5 times cheaper than in the EU), has crippled the American auto industry for a very long time. If gas prices had been kept high by taxes, as is the case in the rest of the western world, I probably wouldn’t be writing this article right now. European car makers offer normal size vehicles that run on diesel that get 50 mpg, and small vehicles like the Volkswagen Polo that get 70 mpg (not for sale in the U.S.) and Japanese car makers offer hybrids that get 45 mpg. GM doesn’t have anything that comes close to this, and I won’t hold my breath for the Chevy Volt…

GM cannot simply turn around and all of a sudden churn out a whole new line of cars that will click with consumers. This transition would take years, as it has for all the others.

3. GM's quality is poor

Every 5 years or so since 1980, GM has come out and made public statements, saying that GM has finally caught up to, and surpassed its competitors in terms of quality. Lately, the company has increased the amount of times that it publicly insists on this fact. What is often used to “prove” this, is the dubious measure of “initial quality”. That metric only means that, for the first short period in a car’s life, there aren’t that many problems. But who expects a car to last for only one year? I can’t say that I know why GMs quality is so poor, but I’m guessing it has something to do with the corporate culture. It’s not like American autoworkers are unable to build good cars, they’re doing it in Toyota factories for crying out loud! Whatever the problem is, I know only this: it’s not going to be easy to fix. Just like with the product line, you cannot just snap your fingers and have quality. The problems would take years to fix.

In addition to these three problems, something has to be said about the auto unions. The unionization of workers in America has a unique pattern. Whereas most workers are not unionized at all, and efforts to unionize are usually illegally suppressed, the ones who, after all, are unionized make up a kind of “working class aristocracy”. This follows the pattern of “exclusive unions” common in other western countries in the 1800s. These types of unions were based on the medieval tradition of guilds, and would protect and insulate only those inside the unions. When labor movements became successful in Europe in the late 1800s, there was no longer any need for these exclusive unions, and “inclusive” unions were started instead. Inclusive unions would not be restricted to working for the needs of the members of the specific union, but would also have a focus on all working class people in general, and were instrumental in the creation of welfare societies. Some European countries have degrees of unionization in excess of 80% of the workforce, also including non-working class people.

The autoworkers at GM are part of this working class aristocracy, and hence their high cost is choking GM. Why should one working class person, such as an autoworker, make five times as much money as another working class person, such as a restaurant worker??? The autoworkers unions should start over, abdicate from the throne of the working class aristocracy, which is now only to their own detriment, and start working towards the creation of inclusive unions in America.

It would cost billions and billions for GM to go through Chapter 11 bankruptcy reorganization, and I don’t know who would bet so heavily on a losing horse, especially in a climate where nobody is lending any money for deals such as this one. In 2008, wealthy investors from America and abroad, have been convinced to invest in losing businesses, such as Citibank and Goldman Sachs, only to see their billion dollar investments evaporate a few weeks later. When investors are now not even investing in companies that, on paper, are doing extremely well, why would they invest in businesses that are, on paper, doing extremely poorly? For GM to even start going through a bankruptcy process, the company would need government assistance. Although I would very much like to see GM saved by a bailout, I don’t think that it can be done. I don’t even think that GM could be reorganized. Sadly, it seems that the only option that remains is bankruptcy liquidation.

GM wound up in this position because of misguided political policies on energy and financial regulation, and because of poor corporate governance on the part of GM. To make sure that this doesn’t happen again, here are a few more suggestions for the future:

- institute a gas tax in such a way that the price cannot go below $7 or $8 per gallon

- allow the growth of inclusive unions through new legislation so that there is no longer a need for exclusive unions that demand excessive salaries

- dramatically sharpen the regulation regarding fuel efficiency and quality of cars produced in the United States

- build an electrical infrastructure that is fit for a wide adoption of electrical cars

- allow low-sulfur diesel passenger vehicles to be driven in all 50 states

Thursday, November 13, 2008

Advice for Republicans: Split Up!

The recent political developments and the recent election have shown how deeply split the Republican Party is on a whole range of issues. In my view, the Republican Party could very well be split up into five or six different parties. The Republican Party’s internal dynamics has, for a long time, been based on the philosophy that “my enemy’s enemy is my friend”. This has brought together a group of people whose inherent philosophical differences are many, and whose different convictions are sometimes even contradictory in nature.

The merging of the motley crew that consisted of white Southern racists opposed to civil rights, stock brokers on Wall Street opposed to regulation, fundamentalist Christians opposed to science and Catholics opposed to women’s rights, somehow created a powerful formula that would, for the most part, control national politics for four decades. They were all against something that would benefit society as a whole, and united in order to destroy it. The very notion of a “society” was to them a spurious one.

The beginning of the end of the motley crew alliance started with Bush. The complete failure to govern during the Bush years was not isolated to the financial markets, disaster relief, health care or education, it spanned across all the sectors that the government was previously supposed to manage. The Bush administration believed that the government should not govern, and hence did not.

Apart from the politicians in the administration who held these anarchistic views, the administration appointed, throughout the country, administrators who shared these views. Appointing anti-government administrators is like making an atheist the Pope. As a result, banks were told to regulate themselves, food importers were told to inspect themselves and vendors in government procurement deals were told to give the American tax payers a good price without competition. We all know that you can’t have a fox run a hen house, so the outcome was always rather predictable: a government in shambles and a country in deterioration. The fox ate the hens.

This intentional failure made Bush and his administration more unpopular than any administration in history, and put into serious question the oldest of conservative mantras: small government. The intellectual wing of the Republican Party is currently asking itself: why didn’t small government work? The answer they usually come up with is that what we had was not, in fact, small government, it was BIG government, and that’s why it didn’t work. Unsurprisingly, yet another erroneous analysis has come out of an anti-intellectual “intellectual” movement.

Then came John McCain. As a self-styled “maverick” and Republican Presidential candidate, history may judge McCain as the ultimate divider of the Republican Party. McCain was never part of the mainstream of the party, nor was he a part of the fringe on either side. Having a political maverick as a leader of a party is sure to divide a party simply because such a person will inevitably have limited appeal to everyone in it. In a best case scenario, a maverick could have broad appeal, but that broad appeal would probably still be limited in terms of intensity. The social conservatives didn’t like him because he wasn’t socially conservative. The Wall Street conservatives didn’t like him because he didn’t understand, and had no interest in, economics. The fundamentalist Christians didn’t like him because he was lukewarm about faith, and the list goes on.

Then came Sarah Palin. The amazon in the shape of a 1960s culture warrior emerged, preaching small-town values and anti-intellectualism with the eloquence of a 10-year-old. In the end, she appealed only to the least educated, most bigoted and backwards elements of the Republican Party. This obviously turned off tens of millions of voters around the country and greatly upset many elements of the Republican Party. The intellectual wing of the Republican Party was in uproar about Palin, and David Brooks famously described her as a “fatal cancer” to the party. He was probably partly right, but as we have seen, Palin was far from the only problem facing the Republicans. What did Palin actually stand for? I’m not sure, but she seemed to hold in high esteem, activities that included drinking beer and playing ice hockey. There’s nothing wrong with that, ask any Canadian, Swede, Finn or Czech, but most people don’t see these issues as critical to national politics.

Then came the economic crisis. It came down on America like a ton of bricks, and created further divisions between Republicans. A strong division started to show between the social conservatives in the South and the Wall Street conservatives in the North. The Wall Street conservatives argued for an enormous bailout of Wall Street that would save individual companies, individual investors, and enable Wall Street to continue to play a main role in the American economy as a whole. The philosophies of Wall Street conservatives are usually linked to a modern, diluted form of anarcho-capitalism, represented by people such as Alan Greenspan and Larry Kudlow. Although social conservatives and others have usually gone along with these philosophies as a part of the alliance of the motley crew, when the time came to vote for a bill that would endorse these philosophies to the tune of 700 billion dollars, it was too much. Social conservatives in the South who represent poor people with a low degree of education had never benefited from anarcho-capitalist philosophies. Those who actually benefited lived in Manhattan and not Alabama. The split became apparent when the first bailout bill was struck down by the House of Representatives, much as a result of social conservatives in the South.

Then came Obama’s victory. Obama was able to further split up the Republican Party, not by sowing seeds of division in their ranks, but by making people unite and flock around him. He spread an almost entirely positive message and introduced new solutions to problems, problems that the Republican Parties had considered non-issues that could hence be handled by the market. It turned out that voters did not want the market to provide them with health care or infrastructure. Obama’s message was, in essence, that the market could not do this. Obama offered solutions, the Republicans did not.

I’m saying that the Republican Party should split up. I’m saying that conservative ideology is not as much an ideology, as it is the absence of one. If your political goal is to leave most things in place, without having guided them there in the first place, which is in essence what conservatism means, then I would not call that much of an ideology. It is precisely because of that that I don’t think that the motley crew that is the Republican Party can stay together. The crew does not really have anything to rally around as a group, and will be unsuccessful if it tries because of the inherent contradictions and philosophical conflicts within the party. Only as a coalition of different parties can these political elements move forward. Inspiration can come from other conservative parties around the world, and I will now give a few suggestions on the formation of new parties:

- A Christian Conservative Party. There are several examples of these parties all over Europe. It seems to me that a party such as this would be very appealing to a lot of people in the South and mid-west. Social and religious issues are very important to these parties.

- A Moderate Conservative Party. This type of party usually advocates healthy budgets, entrepreneurship, lean government and low taxes. No importance is placed on socially conservative issues. Examples: The Tory Party in England, and Moderaterna in Sweden.

- A Libertarian Party. I know this already exists in America, but it could be re-vamped by the splitting of the Republican Party. There are hardly any examples of these parties anywhere else in the world.

- A Regional Southern/Rural Party. There are parts of the southern United States that have such different views based on regionalism as compared to the rest of the country, that the only way to accurately represent these views would be to create a regional interest party. There are many examples of these parties around the world, some more ”interesting” than others.

The future success of American conservatism hinges on splitting up.

Monday, November 10, 2008

Reverse, Restore, Expand and Punish

A lot of commentators are currently urging Obama to aggressively pursue the policies that he campaigned on. I can only join this choir. As other commentators have also pointed out, conservatives, such as William Kristol and journalists on CNBC, are currently deluding themselves into thinking that somehow, Obama is not the socialist in disguise as they said he was only a few weeks ago; he is actually a conservative in disguise. I’ll believe that when the Pope converts to Protestantism.

George W. Bush’s crimes against the American people are many… so many. Bush squandered American prosperity, he further removed social safety from the most vulnerable Americans, he repeatedly stomped on the American worker, the American retiree, the American poor, and any American who was not fortunate enough to already have his or her needs met beyond most people’s wildest dreams. Bush’s staunch and relentless opposition to providing health care to those who need it has undoubtedly killed tens of thousands of American during the last 8 years. George W. Bush’s presidency can basically be summed up in the following way: it was an unbridled and unforgiving 8-year assault on everybody who was not like him. George W. Bush has, unequivocally, been the worst President in American history. Although not entirely appropriate yet, writing about him in the past tense is positively exhilarating.

Bush started a judicial revolution, putting himself above the law, above Congress, above the courts, and above the world. What were his main objectives with doing this? It was legalizing torture. Bush threw International Law and International Humanitarian Law (which governs Human Rights and prohibits torture), out the window. Bush has a lot of blood on his hands by now, but ending America’s commitment to these principles is what caused the most deaths in total. Thousands of American soldiers have died, hundreds of thousands of Iraqis have died, and tortured, spent and humiliated prisoners have taken their last agonizing breaths in ghost prisons around the world. Bush could have been impeached over a number of these atrocities, but because of the totally spineless politicians in Congress, he was not.

Obama’s first objective must be to stop all the developments that were started during the Bush years, so that the situation does not get worse. Bush is currently trying to deliver a few last kicks in the American groin by further ruining environmental standards, worker rights and more. Bush is now trying to poison the possibilities for his successor, so that the successor will be less successful. This is sometimes done in the world of business. A board of a company will try to make it so that, if a hostile takeover is done, the company will be in such bad shape when the takeover is complete, that there would be no point in trying to buy the company in this hostile way. Compare it to a bug that tastes so bad that no bird will try to eat it. Bush must be stopped now, before he can inflict yet more deliberate harm on the country.

Turning now to what Obama must work to RESTORE. Seeing that Obama is a bona fide constitutional scholar, I have no doubt that he will immediately work to restore the rule of law in America and internationally. America must get out of Iraq, close Guantanamo and all the other ghost prisons around the world immediately. Obama must reverse the Bush tax cuts, and obviously institute a more progressive tax collection formula. He must end the damage to the provision of health care that does exist caused by Bush, such as the barring of bargaining with drug companies for cheaper prices of drugs (I’ve rarely heard of a more stupid idea, by the way). One of the most philosophically atrocious things Bush did was to veto spending for sick, poor children. I seriously don’t think that even Mussolini or Franco would have done that.

Much damage has also been done to the competitiveness of the American economy. Every economy will try to have what is known as a “competitive advantage”, I. e. something that that economy can do better than others. This can be a 2,000 year-old engineering tradition, such as the one in Germany or relentless technological innovation, such as that in Japan. Bush decided that for America, the advantages were going to be, not what America could do well, but how America could be mercilessly exploited. Bush enabled companies to treat workers as they saw fit, squeezing ever more profit out of them while paying them less and treating them worse. Bush enabled companies to treat the environment as a dumping ground and excavation pit while enabling them to spew ever more poisons into the air by going back on the commitment to the Kyoto Treaty. Obama must restore the environmental legislation, end exploitation as a competitive advantage in lieu of expertise and innovation, and focus on local economic growth.

Obama ran on a platform of change. Conservative commentators are, as I said, trying to tell themselves that this “change” basically means “business as usual”. They seem to think that it means appointing lots of Republicans to important posts, reaching across the aisle to the right-wing of the Republican Party that is still left in office after the elections, and basically run a third term for George W. Bush. Any sensible person knows this will not happen. Obama must EXPAND the state and make it work for its citizens and provide the security that they deserve.

No longer must 30,000 American per year die because they don’t have access to health care. No longer must people have to file for bankruptcy because of medical bills. No longer must young kids have to sign up for the military just to get a college degree and then wind up being sent to Iraq. No longer must corporations stomp on the American worker by denying them the right to basic influence in the workplace and a fair wage. No longer must the American infrastructure, and in particular public transportation, be allowed to deteriorate even as the population continues to grow. No longer must people over the age of 70 have to work just to make ends meet. NO LONGER MUST AMERICA BE A SECOND-WORLD COUNTRY FOR ITS OWN CITIZENS!

I am dead serious about the crimes committed by George W. Bush. They must be investigated in the same way that Nixon and his administration was investigated. Bush must be held responsible for all the lies he told, the laws he broke and all the harm he caused. He must be charged as an individual. In addition, similarly to Nixon, Bush has allowed the intelligence agencies to run wild. The CIA was only too happy to torture people when Bush gave the go-ahead, and the FBI happily listened to people’s phone conversations, and so on and so on. There are probably many things that these agencies have done that we don’t know about. That is why we need a Congressional commission like the Church Commission in the 1970s. The Church Commission investigated how these agencies had run wild, and in the end imposed restrictions on them that lasted until Bush’s legal revolution and usurpation of all kinds of powers.

This is a plea to Obama: reverse, restore, expand and punish!!!

Friday, November 7, 2008

Reader Comment: Proportional Representation

The following text is a commentary from a reader, Steven, of the underlying focus of this blog (although so much has happened lately that the subject has been mercilessly brushed aside temporarily). Steven is critical of my suggestion of a U.S. Parliament, and this is why:

Steven writes:

"The focus of this blog is political issues in the United States. I advocate a merger of the U.S. house and senate into one U.S. Parliament with proportional representation, where 10% of the vote for a given party would give that party 10% of the seats in the Parliament."

Over two hundred and fifty years ago, Montesquieu observed in The Spirit of the Laws that a nation's political structure should take into account such factors as its demographics and geography. I think this is precisely what you have ignored.

The creation of a Parliament of the United States would mean the elimination of the states.
You have a better chance of being elected to the Senate as a socialist in Vermont than you would as a Democrat in Texas.

The fact that Wyoming (population less than 500,000) and California (population nearly 34,000,000) have equal voices in the Senate might be incomprehensible to most Europeans but makes perfect sense to Americans.

The Amish people in Lancaster, Pennsylvania have little in common with the Afro-American culture of Harlem, New York. The Cubans of Miami Beach have little in common with Mormons of Utah. Gay constituents in Greenwich Village, New York have little in common with the Hasidic Jewish Community of Williamsburg, New York. Coal miners in West Virginia have little in common with ship builders in Connecticut. The needs of our nation's farmers (access to credit, depreciation of their equipment on income taxes, assistance in times of famine, price supports on milk, etc) have little in common with the needs of the rest of our population.

Also important are the constituent services our representatives perform for us. Someone having a problem with a passport or an emergency visa, seeking information on obtaining a patent, or struggling against a ruling by a social security office has an advocate in the form of his Congressman or Senator. For years, conservative Republican Senator Al D'Amato from liberal Democratic New York kept getting reelected primarily because his rapid and effective assistance in such matters was legendary. People who disagreed with him on everything voted for him because he got their lost passport replaced in a matter of days or had some bureaucratic ruling from some social security office reversed. Government is more than passing laws and spending money. In adopting a national parliament, this free and vital service would be lost.

In our current system, members of these communities have the opportunity to elect men and women to represent their values and meet their needs. However, in a national legislature composed of members elected by proportional voting, any focus on the agenda or unique needs of these constituencies would last about as long as a cheeseburger in a backyard bar-b-que.
Your proposed legislature would make representatives responsible to their political party rather than to any state or town.

You forget that state delegations made up of members of both parties often vote together on issues that affect their states.

Democrats and Republicans representing Michigan collaborate to protect the automotive industry.

Democrats and Republicans representing Nevada collaborate to try to stop the use of federal lands in their state from being used to store nuclear waste.

Democrats and Republicans representing New Jersey collaborate to enact laws preventing ocean dumping, a procedure largely practiced by neighboring New York.

Democrats and Republicans representing Louisiana collaborate to gain federal funding for reconstructing New Orleans.

And the beat goes on.

This country is called the United States of America, not the United People of America. That is why the American flag has fifty stars. That is why on election night you saw the contest between McCain and Obama decided by state electoral votes rather than individual popular votes. And that is why a national legislature modeled on proportional representation based on the strength of the various political parties will not take root here.

Wednesday, November 5, 2008

A Road Ahead For Barack

Since Nixon, the every-man-for-himself society has been said to bring the American dream to every man. It did not.

A large group of political and philosophical scholars subscribe to the idea of a “natural societal progression”, in some form or another. My take on that idea is that, in a reasonably democratic society, you can expect the people to create certain things through electing politicians who favor these things. The theory supposes, like most political theories do, that people are predominantly selfish in their voting habits. The usual story in the West has been that the introduction of democracy has led to the creation of economic security for citizens first, and later, elements of “softer” values such as the environment, feminism and cultural issues have gained in importance. In other words, when citizens are given a right to vote, they tend to see to their own, down-to-earth, “put-food-on-the-table needs” first, and only later move on to really care about whatever philosophical convictions they may have. Generally speaking, the introduction of democracy in Western society has in the vast majority of countries, in the initial stage, created a progression that looks something like this:

1. Labor rights, including laws regarding safety, collective bargaining, vacation time and influence in decision-making

2. Pension rights, guaranteeing all workers an adequate amount of pension beyond the working life

3. Health insurance, free for everyone for life

4. Access to affordable education through MA level

For the most part, these goals were achieved in all Western countries by the 1960s. These innovations and reforms became hugely popular among the citizens of these countries, and to this day, it would be political suicide to try to get rid of them. As in many other aspects of politics, The United States is the exception. The United States has never created a social safety net for its citizens, and for whatever reason, not many politicians are advocating such a creation. The country was on its way of creating a social safety net in the middle part of the 1900s, but after the societal convulsions of the 1960s, “put-food-on-the-table” needs were wiped off the political agenda in favor of cultural issues. This started a process like the “natural societal progression” completely in reverse! Instead of non-wealthy voters desiring more security, they elected politicians who advocated, for them, less security. As the voters got less security, they did not focus on getting more, but they focused more on cultural issues.

This is truly unique in the modern world, but I believe, as many do, that this brand of politics is coming to an end. With the election of Barack Obama, the writing is on the wall.

I believe that Obama represents a return to a focus on social safety for American citizens, and there is no doubt in my mind that that is why he was elected president. If Obama is able to successfully implement reforms that will bring social safety to Americans, it will become political suicide for American politicians to try to get rid of them. Imagine a situation where all inhabitants in a poor constituency in Virginia enjoys free healthcare, six weeks vacation per year, and good pensions. If a politician were to suggest to get rid of all that, in exchange for unfettered gun rights and lower taxes for the rich, what do you think the voters would say?

Barack Obama now has the clearest of mandates from the American people to do what he thinks is right. Obama must implement social reforms step by step, and implement them well. He must reverse the trend that has brought America back to the social situation of the 1920s, and if he does, no matter how Wall Street is doing, he will be elected again. The election of Brack Obama represents the end of an era of a misguided economic philosophy that dictates that an every-man-for-himself society can create wealth and well-being for every man.