To Regulate or Not to Regulate?
REGULATE, FOOS!!
It can’t be undone now, but choosing to tackle a resource-demanding issue like healthcare reform in the midst of such a severe economic downturn was just stupid. Helloo? Obama? Pelosi? Agggh, stupid. I’d love to see meaningful, substantive healthcare reform, and especially A PUBLIC OPTION, but it just wasn’t going to go well when there were so many other issues that should’ve taken precedence. How about focusing on a decisive Gitmo solution and probably even torture prosecutions? How about a massive environmental policy turnaround to correct for the Bush years? And the biggest: re-establishing a foundation for an economy that doesn’t list like a drunken sailor every 5-10 years. I am not surprised AT ALL that Brown won in Massachusetts. The Dems have lost focus almost as bad as the Republicans.
The issue that should’ve been first and foremost on the agenda is working to see that the economy remains on solid ground. I’ve written before that we need a sustainable economy. Briefly defined, we need to account for external costs to the environment, move away from measuring success in the form of a gross national product, and establish a stable, sound economy that is not dependent on continuous, unending, unsustainable, resource-depleting, materialistic, consumer-based GROWTH rather than an economy that is balanced in an equilibrium with brief periods of expansion and contraction. (And, yeah, easier said than done. But at a minimum, can we get some accountability from the Fed?!?!?! Cause I’m just not so sure that their goals still reflect the goals of a democracy!)
This is even more relevant today. In a horrible case of life imitating the Onion, we have analysts saying that we may ALREADY be in the next bubble. By taking responsibility for so much bad debt, the US government has eaten the ugly bubble and is now looking like the stink spirit in a Miyazaki film. Result? A populace that sees our government as an over-reaching bloated hogstorm of irresponsibility with deep ties to the ultra-wealthy and little concern for holding fast to the ideals of our democracy. Both parties have sold out hard. Neither one of them is worth the price of socks. All the posturing about Libertarian ideals and the smothering evils of regulation — pshah!
Do we need to increase regulation of the finance industry? YOU BET YOUR ASS WE DO!!! And don’t let any smooth-talking faux Libertarian tell you otherwise. Alan Greenspan relied on the all-knowing invisible hand and just let it keep shaping more exotic financial “instruments,” which is code for “wrapped-up in 27 layers of legalese and fancy bows when we know damn well that there’s nothing in here but bait-and-switch crap.” I’ve read lots of nay-saying about regulation from free-market fools who claim that regulation will strangle financial “innovation.” Helllllooooo??? We don’t need innovation in finance! We need stability and integrity!! If you want innovation go invent a REAL PRODUCT!!
Right. So. Because smarter people than me say everything better, here is a link to an article that you must read: How Supposed Free-Market Theorists Destroyed Free-Market Theory. An excerpt:
The greatest lesson from the crisis that we haven’t yet learned is that “industry interests” and “free-market interests” are not the same. In fact, they are more like oil and water, as the industry profits most in the absence of true market competition. And so it should be no surprise that Wall Street has devoted itself to making contracts indecipherable, building boundless negotiating leverage and fighting for favorable breaks and regulation at every turn. What should be a surprise is that the same scoundrels that killed our markets (and also, mind you, wrecked the global economy and demanded taxpayer bailouts) have so ably sold themselves as natural heirs to von Hayek and Friedman — and that so many of us have let them.
Stay on it. Let your Congresspeople know that you care, and that you vote. (You do vote, right?) In an earlier post I explained that we have a “friend” who was a NY investment broker. He laughed as he explained his job to my husband two years ago, “I bundle up shit mortgages and resell them as prime investments to other banks.” Ha, ha! That’s pretty funny! He still has a house in the Hamptons. A second house. The first one is in a tony area of Manhattan. Some of my hard-working friends are struggling with no jobs and the threat of losing their houses. Not good. Yes, we need financial regulation. Without it, free-marketers will run us into the ground.
Oh the Scary, Scary Debt. Is Obama to Blame?
The Economist has put together an interactive graphic showing public debt worldwide. While it’s fun and colorful and interesting to play with, it’s also a visual illustration of the state of the world’s economies, especially all the developed countries with massive debt.
If you’re an African country (other than Zimbabwe, whose money is basically fictional) your per capita debt is quite low. Because if you live in an African country, you are receiving very few benefits from the government. And your country has no credit rating to finance a debt splurge. The developed nations, on the other hand, are credit maxed to the hilt. All of them, not just the US.
Obama Had Help
It seems that Obama, while he has made some unwise decisions like proposing a massively expensive healthcare overhaul during a nasty recession, or bailing out failed enterprises including auto companies and badly run banks like so much crack to crackheads, he is mostly the victim of bad timing. Republican antipathy toward Obama is misplaced for the most part. Every conversation I’ve witnessed degenerates into “Obama’s socialist policies are spending us into hell,” followed by, “Well, Bush caused the problem in the first place with an unnecessary war and no bank regulation.”
Truth is, both are accurate. Developed nations have been living like there’s an infinite tomorrow and no limits to what the great machine of capitalism can achieve. Our country is experiencing a massive let-down. For many, the bitterness is transparent. They thought the gravy train would eventually reach their lives. Now, the gravy’s gone and people are pissed.
Good News, Bad News on Economic Recovery
One bit of good news is that Americans are awesomely responsible when they need to be. According to the AP, the personal savings rate “fell steadily from 9.59 percent in the 1970s to 2.68 percent in the easy-money era from 2000 to 2008; from 2005 to 2007, it averaged 1.83 percent. Today, that trend is in reverse. From April to June, Americans’ personal savings rate was 5 percent, and it could go higher if the unemployment rate keeps rising.”
The bad news is that the machine needs capital to churn out GDP growth. Banks are keeping more and refusing to lend (good news for recovery, bad news for business and consumers) despite all those bailout dollars. And unemployment is creeping higher as a result.
Can the US Stay on Top?
One huge question when I look at all the debt represented in the graphic is to whom is all the debt owed? And of course, the answer is to each other, so what does that mean? Here’s where my understanding of global finance breaks down. Naively, I assume that it will all work itself out since everyone owes money to everyone else, therefore, can’t we all just call it roughly even? Fact is, the answer could be radically different. Maybe when all the debt is accounted for, new countries will be left at the top of the heap. Like China. Or India. And the US will be left struggling under a burden caused by too many years of fiscal irresponsibility.
This is where we need to take President Obama to task. Yes, he is the victim of bad timing. The bottom line is, blame can’t fix the economy and reduce the debt. Fiscal responsibility will. Our leaders need to rein in the spend-like-there’s-no-tomorrow habit. A weakness of democracy is the constant chasing after public popularity. When times call for painful policies, Congress and the President need to see past the short term pain and lack of popularity and do what’s right for the country. The country needs to stop expecting handouts and do its part, too.
And About that Healthcare Reform…
A final note, if healthcare reform really does have cost control as its main thrust, I’m for it. If healthcare reform has more coverage to more people as its goal, we can’t afford it. Right now, the message is that both goals are covered. I’m having trouble buying that.
Tackling the Cost of Healthcare Reform
In the healthcare debate, everyone seems to agree, at least at a lukewarm level, that universal healthcare is a good thing. While I find the term “socialism” to be an absolute misnomer when applied to a government-backed group package for the uninsured (because strictly speaking it’s only an alternative insurance policy, not a complete takeover of the entire health system), universal coverage will be insanely expensive. The Congressional Budget Office estimates $1 trillion. Where will we find the funds?
In both the California budget and the healthcare debate, something’s got to give. We cannot have the programs without the funds, at least not without overleveraging like irresponsible hedgefund managers. Either taxes must go up, or benefits must come down.
In the healthcare debate, an industry-supported initiative proposes measures to reduce the growth of costs. Apparently not the costs, but the growth of costs:
“The savings would come from standardizing and simplifying all sectors of the health care system; implementing measures to reduce overuse and underuse of health care; investing in effective treatment and prevention; and reducing costs by developing technology and regulatory reforms.” Certainly money will be saved by offering increased preventative care and increasing efficiencies. But it won’t begin to cover the costs of universal healthcare.
So what would?
We could save huge amounts of money and increase coverage by rationing healthcare services to remain within a targeted budget. Translation: maybe terminal cancer patients would be offered fewer options near end-of-life so that more prenatal care could be offered. Would this be devastating? Yes, sometimes it would. But we need to leave behind a mindset that we’re entitled to every ounce of care available when it’s a government administered program. There would still be two tiers: those who could afford to pay privately for extreme measures and those who couldn’t. At least basic healthcare could be had by all.
The Wall Street Journal ran a Democrat-bashing opinion piece entitled How Washington Rations – ObamaCare omen: a case-study in ‘cost-control’. The article argues against a government-funded insurance program by detailing a long description of a “virtual” colonoscopy procedure (a CT scan) which will no longer be covered under Medicare. In an effort to contain costs, Medicare has stopped covering the scanning procedure, though the more invasive traditional colonoscopy is still covered. According to the author, “This is precisely the sort of complexity that the Democrats would prefer to ignore as they try to restructure health care. Led by budget chief Peter Orszag, the White House believes that comparative effectiveness research, which examines clinical evidence to determine what “works best,” will let them cut wasteful or ineffective treatments and thus contain health spending.” Precisely. And everyone will have to stop whining about getting “less than the best.” Unless you’d like to pay for it yourself. Insurance companies, public or private, are not under any obligation to provide services that cost too much for their business plans.
You know what else could cover the costs of universal healthcare for US citizens? Reducing military expenditures ($700 billion per year) and aid to foreign countries (another $34 billion per year). We give billions in aid to Israel (or Pakistan or Albania or Russia) or build more fighter jets ($300 billion) while Americans in poverty go without basic healthcare benefits. Will Obama and the Democratic congress reduce the military budget to reduce the deficits? That remains to be seen. If we are to become a country that spends within its means, we’d better.
Meet Ray Anderson. He’s got something to teach us.
Ray Anderson spoke at the TED Conference in May. Listen as he describes how his carpet company doubled sales and increased profits while promoting a model for sustainable manufacturing and working toward zero climate impact by 2020. Ray is a humble prophet.
American Sustainability Party
So, right, this is what happens when I start thinking too hard. Bear with me though, because good ideas take some time and a lot of feedback to emerge. I’ve been thinking about an ideal political party. I love the liberty part of Libertarian thinking, i.e., if it doesn’t impose on anyone else’s rights, then it doesn’t need to be illegal. We just went down the wrong path when restricitive laws were passed to “save society money.” This fed into the whole liability as the basis for all social relations. If you aren’t just by me, I’ll sue you and cause you money pain. Hate it! But that’s a bit of a tangent. Liberty and freedom, core values.
I am also deeply committed to the entire concept of sustainability. In fact, we’d do much better to base all of our societal relations on sustainable living. As discussed in past duh pookie posts, traditional economics don’t serve the good of the whole since mainstream economic theory fails to account for externalities, especially unforeseen costs of bad production methods, or just plain insanity like anyone anywhere producing plastic that does not decompose. Permanent garbage, yay! For a real example, antifreeze sells at the gas station for $5.99 a gallon. The price reflects the cost of production and distribution. But, the cost of toxicity to the environment after its use is not accounted for in the original price. This is deeply flawed economics and justifies all kinds of nasty business practices. So, environmentalism would be a core value.
Next, I’m a progressive, so I support the idea of government helping people out. This, to me, is another cost we bear for the good of the whole. Miserable, discontented people lead to instability and disorder. Here’s where my dream party would part with Ayn Rand and the Libertarians. We’d need to provide social services to those unable to help themselves. A critical component would be reasonable, limited social services, not something for nothing, not a free-for-all party. Everyone is capable of performing some kind of community service. Except maybe babies. Okay, no work required from babies!! But some kind of useful participation required from everyone else in order to receive benefits. So, civil service and social service, two more core values.
And the last core value is a little hard to articulate. Community not commercialism might come close. Back to basics. An emphasis on learning, collaborative technologies, humanism. Product obsession replaced with some kind of acknowledgment that we should be humble. A desire to evolve into peaceful, creative, humorous people who live without taking more from the environment that it can give.
Look for the American Sustainability Party on your 2012 ballot. I’m sure it will be just that easy. Anyone wanna join?
Libertarians, Tea Parties, and Economic Plumbing
I’ve been on a zero-growth economics kick for some time now, but it’s led me down a few other related paths: the role of Libertarians, the co-opting of Tea Parties, and the need for patching all the “leaks” in our economic plumbing.
Libertarians
First, Libertarians. Free-marketeers are anti-regulation because they feel that government’s role in regulation is a disruptive mechanism in what should be a self-correcting system. I understand this and agree, to some extent, for the reason I explained in this post. I could never be a true Libertarian because I’m big on wealth redistribution. To the poor and the weak, no less. The problem I have is that the current system favors the wealthy so that they are protected against risk. All those bank bailouts — instead of homeowner bailouts — are a clear indicator that the Fed favors saving the system from the top of the pyramid. As David Harvey points out in this most acute assessment of the current situation, the government could have worked to establish a corporation to buy troubled mortgages from homeowners:
DAVID HARVEY: I would take a lot of that [bailout] money, and I would put it into some kind of a national reconstruction corporation. And I would say, “Look, your first duty is to take care of the foreclosure crisis and the people who have been foreclosed upon. So go into cities like Cleveland and so on that have been devastated, and go into sort of areas in California and so on and take care of the foreclosure crisis.”
AMY GOODMAN: How would you do that?
DAVID HARVEY: Well, I think one of the ways you could do that is to start to buy out all of those houses that are about to be foreclosed on and put them into some kind of, I don’t know, municipal housing association or some collective form of that kind, and then allow people to remain in those houses, even though they’re no longer necessarily owners. So the ownership rights would shift.
Libertarians hated bailouts and wouldn’t have approved of bailing out anyone. Supposedly near to Libertarians on the political spectrum are right-wing Republicans, which brings me to Tea Parties…
Tea Parties
Sadly, the initial urge to protest against the bailouts was probably the voice of the regular citizens who objected to the government bailing out that top tier, the bankers who are already ridiculously rich. But the media machines (also corporations) realized this was a flaming fear-mongering opportunity to generate the type of noise that brings in viewers. So, they co-opted the tea parties and turned them into anti-Obama hate parties. It’s really a shame because our federal government could use some push-back for siding so blatantly with wealthy elites. We do need a citizen movement to rein in the power of the federal government. and especially, of Wall Street. Another quote from David Harvey:
Finance controls both the creation of housing, the production of housing, and also its consumption. You lend money to the developers. They go in and gentrify a neighborhood. You lend them money to the people who are going to occupy it. And even if they don’t have—you’ve got to find that market for the gentrification once that process goes on. And so, the connection there in this, the financial operators are working on both ends of this game
David Harvey calls himself a Marxist Geographer, which sounds a little nonsensical, but the man makes some good points simply by looking at things from an outsider’s perspective. And now, for my final gripe of the day, economic plumbing.
Economic Regulation: Patch the Leaks, Stop the Siphoning
Zero-growth economics has no current working model other than communism. Communism is unrealistic, often really ugly. Huge problem with sharing and our competitive nature or something, eh? But we’ve reached the point where we need to stop consuming, so… can we have growth without consumption? Can we have a .05% growth rate and still have a working system? Is a no-growth system possible with a burgeoning global population? Hmmm, lots of questions regarding viability.
In the meantime it would be great to at least improve our current form of mixed capitalism to ensure stability. If you’d like to see our system support jobs, keep our savings safe, and support homeownership again, we need to close up the places in our economy where investors, traders, and hedge-fund managers live: shadow banking, short-selling, currency trading, credit-default swaps, etc. I do not have deep knowledge of how these things work, but I think I understand that these areas of finance and investment are forms of creating wealth where none actually exists. This creation of false wealth devalues the real wealth of labor and goods, in essence, sucking the health out of our system. The trouble with too much financial liberty, ala Libertarians and strict free market capitalism, is that some jerk always figures out how to game the system and screws it up for the rest of us. Sometimes, like, say since Glass-Steagle was repealed, it’s a whole industry of jerks.
Hence the need for industry regulation. Adam Smith’s invisible hand is just too simple a metaphor. What we need is an even more ridiculous metaphor. Plumbing! Money travels through pipes, yeah. And the pipes leak, see? And then the leak grows into a big puddle and fails to… uh… trickle down. And then a bunch of parasites start to live in the puddle. I could go on and on! But hey, you get the idea. Clean pipes, clear channels with observable paths, a fixed, closed system that’s extensible, and begins at the source: real, actual goods and services. True capital.
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