Evaluating the Reagan era

It's been a while since St. Ronny was elected in 1980 and the conservatives used that opportunity to really begin what they called "the Reagan Revolution." It was revolutionary, and it has had a long run dominating American national politics, but the banking crisis last Fall led Forbes magazine to declare "R.I.P. the Reagan Revolution. The announcement that the Recession started in December 2006 was the final nail in the Reagan Revolution's coffin.

Now it is time to evaluate the effects of the Reagan Revolution. Sam Pizzigati at uture.org/blog-entry/2009010205/final-report-card-reagan-years">Campaign for America's Future has done a good job at doing that.

Go read it at the link.

America's economy is suffering from a severe infection of conservatism

There's a good reason why economics is called "the dismal science." Want to know what is wrong with traditional pre-Keynesian economics? When there are jobs that need to be done, willing people ready to do the jobs, and more than enough consumers ready to buy the output if they had jobs that gave them the money to buy what they need, what stops them from getting together and expanding the economy? Bankers and traditional economists, that's what. The following is from Robert Reich:

Before Keynes, economists were gloomy naysayers. "Nothing can be done," "Don't interfere," "It will never work," they intoned with Eeyore-like pessimism. But Keynes was an unswerving optimist. Of course we can lick unemployment! There's no reason to put up with recessions and depressions! The "economic problem is not — if we look into the future — the permanent problem of the human race," he wrote. [Snip]

Keynes' basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That's because the private sector won't invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.

Keynes had a hard sell, even in the depths of the Depression. Most economists of the era rejected his idea and favored balanced budgets. Most politicians didn't understand his idea to begin with. "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist," Keynes wrote. [Snip]

As the Depression wore on, Roosevelt tried public works, farm subsidies and other devices to restart the economy, but he never completely gave up trying to balance the budget. In 1938 the Depression deepened. Reluctantly, F.D.R. embraced the only new idea he hadn't yet tried, that of the bewildering British "mathematician." As the President explained in a fireside chat, "We suffer primarily from a failure of consumer demand because of a lack of buying power." It was therefore up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation."

Yet not until the U.S. entered World War II did F.D.R. try Keynes' idea on a scale necessary to pull the nation out of the doldrums — and Roosevelt, of course, had little choice. The big surprise was just how productive America could be when given the chance. Between 1939 and 1944 (the peak of wartime production), the nation's output almost doubled, and unemployment plummeted — from more than 17% to just over 1%.

Never before had an economic theory been so dramatically tested. Even granted the special circumstances of war mobilization, it seemed to work exactly as Keynes predicted. The grand experiment even won over many Republicans. America's Employment Act of 1946 — the year Keynes died — codified the new wisdom, making it "the continuing policy and responsibility of the Federal Government ...to promote maximum employment, production, and purchasing power."

And so the Federal Government did, for the next quarter-century. As the U.S. economy boomed, the government became the nation's economic manager and the President its Manager in Chief. It became accepted wisdom that government could "fine-tune" the economy, pushing the twin accelerators of fiscal and monetary policy in order to avoid slowdowns, and applying the brakes when necessary to avoid overheating. In 1964 Lyndon Johnson cut taxes to expand purchasing power and boost employment. "We are all Keynesians now," Richard Nixon famously proclaimed. Americans still take for granted that Washington has responsibility for steering the economy clear of the shoals, although it's now usually the Fed chief rather than the President who carries most of the responsibility.

Keynes had no patience with economic theorists who assumed that everything would work out in the long run. "This long run is a misleading guide to current affairs," he wrote early in his career. "In the long run we are all dead."

Today America's conservatives have (again) run the American economy aground, and the solution is (again) anathema to the Republicans and the Blue Dog Democrats.

They'll bail out the banks (which they deregulated into ruin), but as they look at the American automotive industry, all they see is the opportunity to destroy the United Auto Workers Union. They really think that the economy will get better on its own, and that they can play their class-warfare political political games and complete the destruction of effective unions with impunity. That's the kind of thinking that has created the current and worsening economic crisis.

America is really suffering because of the conservative Reagan Revolution, and George Bush is once again AWOL as he was when he was in the Texas Air National Guard. Conservatism has failed (again.) It's time to drag it out of the shadows, put a stake through its heart and allow the American economy to once again become productive.

Republican conservatism is dead. Rove was a key architect of its death.

James Moore has written an open letter to Karl Rove, a key architect of the current set of disasters that afflict America. As a part of that letter, he explains why the conservative philosophy as applied by Rove, Gingrich and Bush is so very wrong. Rove and his crew are all about gaining power, not making government work.

See, here's the deal, Karl buddy, government is about service not power. If it doesn't serve the people, they reject it. When Katrina happened, the country saw what you and W had been doing. You used every institution of government to acquire more political power. All of the institutional knowledge from experienced employees and all of the non-believers were kicked out. Government agencies became largely dysfunctional and Katrina was the first time the covers were pulled back to show what you had done. All of that suffering, too, will be your legacy.

If you were so smart, you would have seen that politics, politics, politics, and no policy were bound to lead to your destruction. The only policies you and your people instituted were those that eliminated regulation and allowed near chaos to unfold. I'd put your pal Phil Gramm's Commodity Futures Trading Act under that heading.....the law that led to unregulated credit derivative swaps and has, consequently, led us to an economic precipice. I don't want to bring up Enron, but, what the hell? Remember how Gramm got energy futures trading deregulated and all of those people lost their investments but Bush got energy policy advice and campaign cash from Enron CEO Ken Lay and all of the other big dawgs on the bayou?

The truth is, Karl, every damned thing you did was wrong. It was for the wrong reasons and led to the wrong results. And half of what you did was based on lies. You still seem to think that if you lie loudly and long enough you will sound authoritative and people will begin to believe. But now not even Bill O'Reilly is buying your crap any more. Look back at your decisions and then try to tell yourself Bush and you are not responsible for the current crisis that threatens our very republic. It's all yours. We may have the leader now who can turn this around but it will be difficult. At a minimum, you are no longer a meaningful voice in the American political discourse and that gives me more hope.

I'd add one more thing to Moore's letter. The conservatives want more than power. They also want profit, and they see government as a massive source of money from which they can personally profit. Of course, that's easier if you get power over the government and do not recognize that government is about service to the people. That is the Libertarian strand of conservatism.

The point is that Rove, together with Bush and Cheney and so many like them, have placed a stake into the heart of Republican conservatism. It is now dead. The election of Barack Obama means the end of conservatism, and the Republicans know it. Why else would the Congressional Republicans ask their constituents for ideas to recreate an effective conservatism for the twenty-first century?

It's time for the media to stop claiming America is a center-right nation. It's not. It's a centrist pragmatist nation that is much to big for the limited ideology of conservatism to deal with, and Karl Rove is a key architect is proving that fact.

The modern move to conservatism began in 1978.

Kevin Drum asks a really interesting question - "When did the liberal expansion of the state that began in the early sixties end?"

Referring to Paul Pierson at Crooked Timber he answers 1978. It's what I mean when I write about the Reagan Revolution. I think he is right. I am just not sure why it happened that way. Go read Drum and Pierson.

Pierson is right (Or so I think.) The deregulations began in the late 70's, and so did the tax revolt represented by Proposition 13 in California. What caused those events?

If you can explain it, leave a comment. Or if you disagree. But any disagreements need to account for the deregulation of airlines and the truck businesses. Why then?

My bet is that there are a number of factors, including the backlash to the Civil Rights Movement, the backlash to Nixon's resignation and the backlash to the opposition to the Vietnam War. These social attitude factors were probably combined with and used by very wealthy individuals who objected to taxes on wealth (inheritance tax, taxes on capital gains, and progressive income tax) as well as to the regulations of financial institutions.

Add to that the social conservatives of the the Christian Coalition who became a critical part of the Republican Party in the 1980's and who completed the alliances that made up the Reagan Revolution. The evangelist Christians never liked the birth control pill, and abortion was anathema to them. Roe vs. Wade was a major issue that combined them politically. The extremely well-financed Discovery Institute has become a very powerful force.

These appear to me to be the combination that has been the Republican Party since 1978. This would make a great history dissertation. It would also quickly become a book.

But I haven't done the historical research that would confirm these speculations. As I say, let me hear from you , both agreements and disagreements.

Rejected Republican Conservatives react by exposing their Fascist - McCarthyite roots. They provoke a backlash

The Republican Party has come face-to-face with the fact that the American voters are rejecting conservatives and the Bush administration. With slightly over two weeks remaining until the election, the Republicans are resorting to their Fascist - "Joe McCarthy" roots to try to scare voters into electing John McCain and right-wing extremists.

This has always been an undercurrent of Republican campaigns, but in their desperation they are now making the Fascist - McCarthyite campaigning their primary effort to defeat Obama. It is resulting in a massive backlash against the conservatives. A prime example of the Fascist - McCarthyite rhetoric was Republican Congresswoman Michele Bachmann's rant on Matthew's Hardball the other day.



The reaction to Bachmann's extremist rant was swift. Steve Benen explains:

While many have condemned Bachmann's embrace of what can fairly be described as bordering on fascism, many of those offended by Bachmann have also thrown considerable support to Bachmann's opponent, former state transportation chief Elwyn Tinklenberg. The Democrat posted an item to Daily Kos last night, talking about the outpouring of support his campaign has received since Bachmann's shocking comments.

The last few hours have been nothing short of astounding. Since Congresswoman Michele Bachmann appeared on MSNBC's Hardball earlier tonight, there's been a deluge of support unlike anything we have seen. [...]

Our phones haven't stopped ringing. Many have called in to say they're sorry they can only send money and wish they could be here to help.

What kind of help are we talking about here? Tinklenberg raised over $488,000 in just 24 hours. That's pretty impressive.

Bachmann's rant is not an isolated case. The McCain campaign has begun a series of extreme robo-calls targeted at voters in swing states that even the New York Times has taken notice of. While McCain campaign spokesman Tucker Bounds is reported as defending them saying, “These calls are based on hard facts," they have received bipartisan criticism. One notable critic is Maine Senator Susan Collins whose spokesman Kevin Kelley stated "These kind of tactics have no place in Maine politics. Senator Collins urges the McCain campaign to stop these calls immediately." Yet the McCain camp has focused much of its entire campaign on Obama's alleged connection to Bill Ayers because of Ayers' connection with "The Weatherman" four decades ago. Today America is facing an economic crisis that closely resembles the Great Depression, and yet the Republicans and the McCain camp want to focus on Ayers.

The reaction to the incompetence and extreme nastiness displayed by the McCain camp is showing in the "dollar campaign." According to the Associated Press:

WASHINGTON – Barack Obama raised more than $150 million in September, a stunning and unprecedented eruption of political giving that has given him a wide spending advantage over rival John McCain.

This money has allowed Obama to spend four times as much as on TV advertising as the McCain camp.

The Republican voter suppression efforts (such as this effort to intimidate newly registered voters in Ohio and this effort by the politicized Department of Justice to investigate the voter's registration efforts of ACORN.) are being widely reported. Again, the conservatives cannot win over the voters, so they are trying to stop them from voting.

The ability of the Obama campaign to raise unprecedented amounts of money is one example of the backlash against the conservatives. Another is this morning's announcement by Colin Powell on Meet the Press that he is going to vote for Barack Obama.

The Presidential campaign based on issues, never seriously engaged by the McCain camp, ended with the worsening of the credit crisis demonstrated by the failures of the major Wall Street investment banks and the Wall Street bailouts several weeks ago. McCain has not seriously addressed either the credit crisis or the no longer deniable Recession. The only Republican conservative campaign in October has been the Fascist - McCarthyite attacks on Obama that exposes the core nature of the Conservative ideology that has dominated American politics since 1980.

The backlash to the failure of the Reagan Revolution is already clear in the Presidential money campaign and the abandonment of support for McCain by prominent Republicans like Colin Powell. Much of this is currently a result of the extremist nature of the McCain campaign, but the current extremist nature of the McCain campaign is a result of the recognized failure of the Reagan Revolution and the conservative ideology.

It's going to be an interesting 16 days until the election. But that's just political froth. For two more weeks we will focus on the election, but after that the real fun is going to start. We are going to have to face the reality that the Reagan Revolution has created.

Here's why the politicians fought against regulation of Wall Street banks

The $700 billion taxpayer giveaway to the Wall Street banks was passed and signed into law yesterday in hopes that throwing money at the problem will solve it.

"In hopes..." Yeah that's all it is because no one really knows what's in the bailout bill or how it is supposed to work. All the politicians know is that when they objected to handing out large gobs of taxpayer money to no one knows who for no one knows what last Monday, the Dow Jones Industrial Index chastised them by dropping $777 the same day. So they got scared they wouldn't be reelected and handed out the taxpayer funds as fast as they could.

How did Congress and Wall Street let this mess get so bad? Wall street fought regulations that would have prevented it tooth, nail and with many, many dollars to politicians, and the politicians happily played along and let themselves be bought. Here's the story from McClatchy News:

Since 2001, eight of the most troubled firms have donated $64.2 million to congressional candidates, presidential candidates and the Republican and Democratic parties, according to data from the nonpartisan Center for Responsive Politics.

The donors include investment bankers Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, insurer American International Group and mortgage giants Fannie Mae and Freddie Mac. Since March, with the exception of Goldman Sachs and Morgan Stanley, all of these companies have been bailed out by the government, sold to other companies at deeply discounted prices or simply failed.

Both political parties have become beholden to Wall Street.

Legislators failed in several instances to conduct oversight hearings or to raise concerns as the Bush administration adopted rules that fed the mortgage frenzy and set Wall Street on a path to disaster. [Snip]

Some state regulators, recognizing early signs of trouble in housing markets, sought help from Congress when the Bush administration adopted rules barring states from enforcing tough laws targeting predatory lending — the practices that were enabling unqualified applicants to obtain subprime mortgages.

With Wall Street serving a key role in buying, bundling and reselling subprime mortgages, state officials couldn't get Congress to intervene, said John Ryan, the executive vice president of the Conference of State Bank Supervisors.

"You could say that the finance industry got their money's worth by supporting members of Congress who were inclined to look the other way," said Lawrence Jacobs, the director of the University of Minnesota's Center for the Study of Politics and Governance.

"When the spotlight's on, sometimes reason carries," Ryan said. "But when it's not on, all of the influence is overwhelming." [Snip]

"It's unusual that Congress lets a major new program go through without at least oversight hearings," Coffee said. "And they didn't happen."

After the SEC changed its rules, Coffee said, Merrill Lynch's and Morgan Stanley's debt-to-equity ratios soared to 40-to-1 and 37-to-1 respectively from the old limit of 12-to-1, leading to Bank of America's $50 billion purchase of Merrill and contributing to calls for a bailout to rescue Morgan Stanley and other Wall Street giants.

The banking committees also took no action when the Department of Housing and Urban Development adopted a rule change that made it easier for mortgage brokers to collect hefty incentive payments for arranging loans with above-market interest rates for marginal buyers.

The panels also watched from the sidelines when the federal Comptroller of the Currency preempted more than 30 state attorneys general from enforcing state laws holding investment banks liable for predatory lending practices on subprime mortgages.

Ryan, of the Conference of State Bank Supervisors, said he was "cut off at the knees" when he tried to fight the Bush administration's ruling on predatory pricing regulation.

He said the state officials agreed to "make as much noise as we can," but recognized that they were facing banking and securities industries with enormous influence from years of financial support to members of Congress.

This is the Reagan Revolution at work. Anyone trying to get a loan today can see the inevitable result of the Reagan Revolution so-called "free market."

Thomas Frank shows where taxpayer taxes now flow - and they don't benefit of the taxpayers

Thomas Frank takes a short tour of the Washington D.C. metropolitan area to show where government power has moved. Power no longer resides in government buildings.

As you look at the palaces that Frank videos, remember that is our tax money going to build them. Most of the fortunes are not the result of contractors bidding for contracts. They result from contractors hiring lobbyists to bribe and cajole short term government employees to hand out no-bid contracts as they did to Halliburton and KBR. Then once the government employees hand the contracts out they move to jobs with the contractors at multiples of their government salary.

Is it any wonder that the Bush administration White House has presided over the most incompetent federal government since the 1920's?

Why Obama won't push the Bush/conservative catastrophe of Katrina in this election

Digby explains it.

I'm seeing Katrina become the Abu Ghraib of 2008, and there's undeniably a racial component to that. We have a disaster that completely discredits conservative theories of governance, but because it disproportionately affected poor black people in New Orleans, our African-American nominee, who has to play by the Jackie Robinson Rules, would be presumed by a clueless media to be stirring up racial warfare, or "playing the race card," or whatever.
[Highligting added - Editor]

And so what? Go read Digby.

The conservative-created Predator State described

Jay K. Galbraith, author of The Predator State explains why the American economy is currently collapsing.

As I got to know the free-market, supply-side crowd, the hard money, low-tax, Wall Street Journal deregulate-and-privatize team, I came rather to like them. I never thought they were right. Far from it: on matters of economic policy they were in my view mostly nuts. But I did think - and do think - that they held their views in good faith. They were, by and large, willing to argue the merits of their ideas. And they had behind them the authority of a vast academic establishment, ranging from Friedrich von Hayek to Milton Friedman to such contemporaries as Gary Becker and Robert Mundell - all just as nutty in my view. (For those who would be amused by it, my 1990 debate with Friedman on his TV show, "Free to Choose" can be found here. )

The academic economics of the 1970s lined up behind the right-wing politics of the 1980s for a reason. Reaganomics had a logic. Each policy would aim at one problem. Tight money would cure inflation. Low taxes would stimulate saving and work effort. Small government and balanced budgets would 'crowd in' investment; free trade would make us efficient. Corporate executive pay should be tied to the stock market, as this would cure the "agency" problem and make the firm work for its owners; "market discipline" would instill a new competitiveness in the enterprise. Deregulation, above all, would substitute the invisible hand of the "efficient market" for the dead hand of bureaucracy.

This was a modern version of the economics of David Ricardo, of which Keynes wrote long ago:

That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely... to do more harm than good, commended it to authority.

It was very interesting to me that some of the first to sense this loss of public purpose were the very conservatives who had swept in with Reagan. The nemeses of my youth, people like Bruce Bartlett, Paul Craig Roberts, the late Jude Wanniski, went over into hard opposition. This was compounded by their opposition to Bush's assaults on civil liberties and the war in Iraq, but at the core they felt that Bush had no conservative convictions. And so, at least as far as broad politics go, we were suddenly on the same side. As I put in on Marketplace on Thursday: "Had I gone crazy? Or had they gone sane?" Either way, there seemed to be a book in it and The Predator State is the result.

Reality soon barged in. Following the steep recession of 1981-82 and the victory of the congressional Democrats that year, economic policy became much more pragmatic. Monetarism was abandoned. Social Security was not privatized. The income tax cuts kicked in, and while they never stimulated saving or work effort, they did increase purchasing power in the usual Keynesian way. Later on, Congress took back quite a lot of the initial Reagan tax giveaways, and enacted a comprehensive tax reform. Reagan's trade policies were quite protectionist- notably on cars and steel -drawing stern protests from libertarians. And after the fiasco of the savings and loans, that industry was re-regulated while many perpetrators of financial fraud went to jail.

Still, though the free-marketeers lost many battles, their propaganda machine remained very strong. And historians have so far largely accepted their story. Global events helped: the fall of communism in Europe reinforced Milton Friedman's argument that capitalism meant freedom (something that many Chileans and Argentines in those years found hard to swallow).

But liberals and Democrats also abetted the triumph of the right. They mostly stopped arguing over theory. "The age of big government is over!" Bill Clinton declared. Liberals accepted the virtue of balanced budgets, of low tax rates, and of deregulation in many spheres, of leaving the fight against inflation solely in the hands of the Federal Reserve. In alliance with big business, Democratic presidents became aggressive advocates of what they called "free trade" - though it was really just the use of diplomacy for political payola. Democrats and liberals won some policy battles and some elections, and they presided over a prosperous moment. But they did it by selling themselves as Reagan-lite, by overselling small social advances, pilot projects and placebos, and by riding the crest of a credit boom that could not be sustained.

The judicial coup of December 2000 that installed Bush and Cheney brought back some of Reagan's men and his most extreme policies - tax cuts for the wealthy, big increases in military spending, aggressive deregulation. But it didn't bring back the ideas. Instead, it became clear that Bush and Cheney had no real ideas, no larger public justification. They cut taxes to enrich their supporters. For the same reason, they outsourced to Blackwater and Halliburton and pursued military pipe dreams like Missile Defense. They were willing to have the government spend like a drunken sailor in 2003/4 to boost the economy before the election. They placed lobbyists in charge of the regulators, representing, in every case, the most extreme anti-regulation perspective. (Not so long ago, Bush's financial regulators showed up at a press conference with a chainsaw.) Under Bush and Cheney, oil and gas, drug companies and defense contractors, insurers and usurers control the government of the United States, and it does what they want. This is the predator state.

The blurb that accompanies the Barnes & Noble offering says

The real economy is not a free-market economy. It is a complex combination of private and public institutions, including Social Security, Medicare and Medicaid, higher education, the housing finance system, and a vast federal research establishment. The real problems and challenges -- inequality, climate change, the infrastructure deficit, the subprime crisis, and the future of the dollar -- are problems that cannot be solved by incantations about the market. They will be solved only with planning, with standards and other policies that transcend and even transform markets.
[Highlighting added by Editor]

As a student of economics and of accounting, I very much agree with this statement. Government is critical to the effective operation of an economy.

But at the same time, the only semi-reliable measure of value is what is developed in a fair market between an independent and equally powerful buyer and seller. Markets are critical to setting value in the economy, although real markets are quite rare. But markets only record the current value. They do not have any predictive power beyond the best guess of the buyers and sellers. Markets reflect what the buyers and sellers can agree is fair value right now. Plans, economic infrastructure, research in progress, financial and governmental institutions and long term developments are not accounted for in markets except on a historical basis.

Here's more from Jay K. Galbraith:

I have never accepted that the United States fits the mold of a "free market economy." If we ever did, that model collapsed in the Great Depression. What was built in its place was a remarkable mix of public and private. There was, of course, plenty of room for enterprise. But it came in a framework, of a government that was, at its best, competently concerned with research, infrastructure, national security, the workplace and the environment, that provided Social Security and a large share of education, health care and housing. Part of the accidental genius of the system was that the public-private mix in those three areas, especially, created "soft budget constraints" that caused higher education, the medical sector and the mortgage market to grow very large - far larger than they ever could have, under either the free market taken alone or under socialism. While many notorious problems remained (especially our lack of universal health insurance), this enriched the middle class and was an immense source of growth.

The Bush-Cheney years should have taught us that today's right wing understands this very well. They are not interested (if they ever were) in reducing government. On the contrary, they are perfectly willing to expand it. But the goal, in every case, is to expand government in such a way as to benefit, first and foremost, political friends and supporters at the expense, mainly, of the middle class. And while a rich country can survive a fair amount of this, it cannot withstand the complete control of government by predators. For what happens then, is a population crash of the prey. This, as a result of the sub-prime mortgage crisis and the systematic deregulation of securities and futures markets, we now confront in the financial crisis and the speculative commodities bubble. And if we do not reclaim and rebuild the capacity of our government to act, with purpose and on a large scale, we will eventually see far worse as the climate crisis unfolds.

Galbraith also explains what is going to be needed to survive the current set of crises that the Bush administration and the conservative movement have created. Suffice to say that it does not involve shrinking government, cutting taxes, or "starving the beast and drowning it in a bathtub." Neither the conservative nostrums nor the strange acquiescence by Clinton and Blue Dog Democrats will help America survive the increasingly disastrous economic problems the Reagan Revolution, conservative movement, and Bush administration have left us to suffer through.

The Predator State looks like it will be a very important book for government, politics and the economy in the near future.

Republicans - the party of the stupid

Paul Krugman gets it right - again.

Republicans, once hailed as the “party of ideas,” have become the party of stupid.

Now, I don’t mean that G.O.P. politicians are, on average, any dumber than their Democratic counterparts. And I certainly don’t mean to question the often frightening smarts of Republican political operatives.

What I mean, instead, is that know-nothingism — the insistence that there are simple, brute-force, instant-gratification answers to every problem, and that there’s something effeminate and weak about anyone who suggests otherwise — has become the core of Republican policy and political strategy. The party’s de facto slogan has become: “Real men don’t think things through.”

Krugman's immediate focus is on the idiotic campaign “Drill here! Drill now! Drill here! Drill now!" which is widely known not to provide results anytime within the next decade and even then is not going to provide any significant lowering of fuel prices.

But as Krugman points out, this is not a new strategy for the Republicans.

Remember how the Iraq war was sold. The stuff about aluminum tubes and mushroom clouds was just window dressing. The main political argument was, “They attacked us, and we’re going to strike back” — and anyone who tried to point out that Saddam and Osama weren’t the same person was an effete snob who hated America, and probably looked French.

Let’s also not forget that for years President Bush was the center of a cult of personality that lionized him as a real-world Forrest Gump, a simple man who prevails through his gut instincts and moral superiority. “Mr. Bush is the triumph of the seemingly average American man,” declared Peggy Noonan, writing in The Wall Street Journal in 2004. “He’s not an intellectual. Intellectuals start all the trouble in the world.”

It wasn’t until Hurricane Katrina — when the heckuva job done by the man of whom Ms. Noonan said, “if there’s a fire on the block, he’ll run out and help” revealed the true costs of obliviousness — that the cult began to fade.

What’s more, the politics of stupidity didn’t just appeal to the poorly informed. Bear in mind that members of the political and media elites were more pro-war than the public at large in the fall of 2002, even though the flimsiness of the case for invading Iraq should have been even more obvious to those paying close attention to the issue than it was to the average voter.

Why were the elite so hawkish? Well, I heard a number of people express privately the argument that some influential commentators made publicly — that the war was a good idea, not because Iraq posed a real threat, but because beating up someone in the Middle East, never mind who, would show Muslims that we mean business. In other words, even alleged wise men bought into the idea of macho posturing as policy.

The politics of stupidity (meaning refusal to think things through logically) is easier to use on people who depend on authority to do their thinking for them. That is what Dr. Bob Altemayer shows is demonstrated in the research on Authoritarians. John Dean also wrote about it in his book Conservatives Without Conscience.

It's not that Republicans themselves are in fact stupid. It's that they rely on stupid or simplistic arguments to win political elections. There may be an advantage to this if they want a lot of people to perform the same simple act of casting a vote for a Republican candidate. Simplistic arguments cannot be argued with in a simple way. The Sophists knew that 2500 years ago. That led to the modern use of the term "sophistry" to mean "a confusing or illogical argument used for deceiving someone."

Why would intelligent people buy into simplistic arguments? Expressing the simplistic arguments become a badge of membership in the "club" rather than a way of proposing real government actions. The argument becomes a mantra of membership. It works great for getting a majority of the votes and getting elected.

Unfortunately, in a democracy it also commits the candidate to actually implement the simplistically described policy or be rejected for failure to support the "Club" mantra. So what we see in the modern conservative movement is large groups of people who have bought into simplistic statements of proposed government policy which they resist analyzing carefully because if they do, they are likely to be rejected by the group they want to belong too. Instead the conservatives defer to the conservative think tanks which work out plausible but simplistic ideas to use as membership mantras.

That gets the conservative politicians elected, and then instead of thinking through the probably results of the simplistic ideas, they implement them feeling sure they will lead to a conservative paradise. It is only when finally the long term effects of implementing poorly thought out plans leads to disaster that the flaws in the mantras become obvious.

At that time, many who committed themselves to the mantra suffer from Cognitive Dissonance, often resulting in Cognitive Dissonance. Since individuals have a basic need to reduce cognitive dissonance, they will generally either modify their beliefs or reject one of the two conflicting ideas. But modifying their beliefs means leaving "The Club" so conservatives are more likely to reject evidence that their mantra is wrong.

This leads to rejecting the clear facts that show tobacco smoking often leads to cancer or that human use of fossil fuel is leading to Global Warming. Conservatives really, really do not want to leave the group they belong to, so they will be the last to admit that the conservative mantras are wrong.

The bubble of the Presidency or of the Presidential nominee will accentuate this refusal to acknowledge the facts that show a conservative mantra is wrong. Ron Suskind describes the bubble that George Bush lives in as part of the opening of his new book.

Bush is a guy who needs to make things personal — it’s how he’s always organized a complex world — and he felt that he’d developed a bond with Putin. When CIA made its offer, [to bug Putin's hotel room] his response was that you don’t wiretap a friend. Condoleezza Rice said it was “too risky, it might be discovered.” CIA said that if it was, it would probably heighten Putin’s respect for Bush. Bush settled it — it was a gut decision. No dice.

This was an early sign of an extraordinary dilemma, one that would come to define America’s posture in the world: Bush’s powerful confidence in his instinct. It might be called a compensatory strength, making up for other areas of deficit. He’s not particularly reflective, doesn’t think in large strategic terms, and he’s never had much taste for the basic analytical rigors embraced by the modern professional class. What he does is size up people, swiftly — he trusts his eyes, his ears, his touch — and acts. While he has an affinity for stepping inside the shoes of others, his métier is often brutally transactional rather than investigatory or empathetic: he is looking for ways to get someone to do what he wants, and quickly. This headlong, impatient energy fueled his rise, as anyone knows after watching him strong-arm a big-money contributor, parse friend from foe, or toss a script and preach, heart to heart, to supporters in the Republican base. It’s how Bush — like many bullies who’ve risen to great heights — became the president. Once he landed in the Oval Office, however, he discovered that every relationship is altered, corrupted by the gravitational incongruities between the leader of the free world and everyone else. Everything you touch is velvety, deferential, and flattering. To fight this, presidents have been known to search furiously for the real, for the unfiltered, secretly eavesdropping on focus group sessions far from Washington, arranging Oval Office arguments between top aides — a Gerald Ford trick — or ordering policy advisers, as Nixon often did, to tell them something the advisers were sure they didn’t want to hear. These men, even with their overweening confidence, embraced a unique kind of humility, recognizing they were in a bubble and fearing they would make historic mistakes.

Bush, with his distaste for analysis and those who contradict him, didn’t go down those paths, and he seemed unconcerned, unlike other presidents, that isolation would prompt errors in judgment. Instead, he began taking policy advice from old cajoling friends whose relationships predated his ascendancy or from visiting pastors speaking frankly in their everyman voices of faith. A man who trusts only what he can touch placed in a realm where nothing he touches is authentic.

So here we see the interaction of simplistic ideas as serious policy proposals for government which are actually poorly thought out mantras used by conservative as badges of membership in the conservative club, together with the way using those mantras locks the conservative political leaders into having to actually implement those mantras to keep their power. Then finally, when the poorly thought out mantras inevitably fail as government policies, we see why the conservative political leaders face cognitive dissonance and have to choose to ignore the evidence of the failure of those policies if they wish to remain as conservative leaders.

It is a set of negative feedback loops which, after almost eight years of the most actively conservative President every, the failures in foreign policy, domestic policy and the economy are all becoming so obvious that they can no longer be ignored by individuals who are not strongly committed to belonging to the private club of Conservatives.

All of that does not mean that McCain will lose the race for President. But it certainly does lengthen the odds against him, especially as the economy goes deeper into the tank and as the occupation of Iraq becomes more and more difficult to maintain.

Anarcho-Libertarianism - the core idea of the Reagan Coalition and of movement conservatism

First, I consider Anarcho-Libertarianism to be a philosophy that combines the Anarchistic concept that rule by hierarchy is inherently illegitimate with the similar Libertarian concept that no hierarchy is legitimate unless it is established by a formal contract between the leader and his followers. Libertarians generally reject the theory that government is based on an implied contract between the people and government since that means accepting a decision made by others. Implied in Libertarianism is also the Free Market idea that government regulation of private enterprise is inherently illegitimate and inefficient. Both ideas reject compulsory obedience to authority and the right of government to enforce such authority though for slightly different reasons. They agree that government is inherently authoritarian and illegitimate.

This is not a nuanced description of Anarcho-Libertarianism. It extracts core principles, but the result is one that many Anarchists and Libertarians will take issue with. Still, the ideas are at the base of most conservative government and political policies. Those ideas are behind much of the set of philosophies that express movement conservatism, Goldwater conservatism, and the Reagan Revolution. The Bush administration has seen the most consistent application of the ideas that represent movement conservatism and the Reagan Revolution to modern American government. After eight years of this, the Bush administration has also been the most spectacularly failed Presidency in American history, and it is primarily through the effort to apply these ideas and force reality to bend to the ideology.

As the failed Bush administration ends, we can see where teh practitioners of these ideas are going next. Digby describes how the conservative oppositional Republican Party is preparing the political ground for the total Republican obstructionism and ongoing character assassination they will practice against President Obama beginning 12:01 pm January 20, 2009. It’s clear that the conservatives/Republicans cannot govern. But they are brilliantly organized and led to obstruct government. They don’t solve problems, they stop government efforts to identify and solve them. It’s what they do and they do it superbly. These are the ideas that have held the Reagan Coalition together for the last three decades.

The conservatives have built an institution of obstructionism. It is frequently called the right-wing noise machine, or sometimes “the right wing Wurlitzer.” The current project is to create the image of Obama as “a phony, messianic, presumptuous, vapid, anorexic starlet who ruthlessly plays the race card.”

These themes all work together to delegitimize their target, Democratic leader. The process works against the presumed legitimization that winning an election supposed to give to the winner.

The power of democracy is the legitimization that elections give to government by the winner and which allows the winner the presumption that their efforts to identify and solve large social problems. This is the great strength of a democracy. Government leaders who are legitimized by elections are in direct contrast to the older process of government leaders legitimized because of the presumed superiority of their social class.

But it seems unlikely that the practitioners of the politics of delegitimization want to substitute democratic government by a presumed legitimate social class for government by leaders legitimated by popular vote. More likely the Anarcho-Libertarianism of movement conservatives is an expression of the absolute rejection of government and hierarchy that is characteristic of both Anarchism and Libertarianism. It is this world view that motivates the efforts to totally obstruct government functions while making effective use of government almost a total impossibility when they get into control of it.

The philosophy of Anarcho-Libertarianism would explain conservative corruption in government. Since the conservative movement Anarcho-Libertarians do not consider government a legitimate function in the first place (except for the military, and for limited police functions to protect Natural Law Property Rights from burglary and such low-level theft) they consider that each individual has the Natural Right to possess any property they can get control of from any source whatsoever. They see nothing illegitimate or immoral about considering the (illegitimate) government to be nothing more than a giant ATM which their personal success at gaining access (getting government office) allows them to plunder at will.

The shared acceptance of an Anarcho-Libertarian world view would also provide a unifying theme between the major branches of the Reagan coalition. Big business and big banks reject as illegitimate any government regulation in their property-gathering activities, as do Libertarians of all stripes. The social conservatives agree with the free marketers and Libertarian efforts to delegitimize government, but they don’t accept the part that considers hierarchical government itself inherently illegitimate. They want secular government delegitimized because they to replace it with a government legitimized to enforce laws established by God.

This unifying theme of Anarcho-Libertarianism would explain one puzzling apparent inconsistency in conservatism. Why do members of the conservative movement reject government control by government hierarchy yet proudly support the identical authoritarian hierarchy operated within business organizations?

I think the difference is that conservatives consider the authoritarianism in business to be an expression of property rights which are (supposedly) based on individual negotiation as opposed to the kind of authoritarian hierarchy based on the legitimate functions of government. Both free marketers and Libertarians consider property rights to be at the level of an individual Natural Right and transfer of property rights to naturally occur in markets through negotiation.

Another element of movement conservative control of government that is clear in the Bush administration is their ability to ignore the Rule of Law. If movement conservatives consider government and its hierarchy illegitimate, then they also consider the government’s hierarchical function of enforcing laws illegitimate. That's why we see them simply ignoring the Rule of Law. Laws themselves are OK, but an illegitimate government has no Right to enforce them. Enforcement of laws should be conducted only on the basis of formal contracts between individuals. Social conservatives disagree here. Social conservatives simply reject laws based on democracy and popular sovereignty. They are happy to delegitimize secular government. But they want to replace it with a government that enforces laws which are based on the Word of God. [This may be a characteristic of all kinds of religious fundamentalists, regardless of religion.]

If these are the ideas at the core of the Reagan coalition, then why did the Reagan coalition fall apart in the effort to nominate a Presidential candidate in 2008?

It wasn't from lack of agreement on the illegitimacy of most government. It was based on the clear failure of all the candidates to express a theme that could lead to winning the Presidency in 2008 in the face of an economy that is going bad, a current President with unprecedented low approval ratings and the continuing failure to win the highly unpopular war in Iraq. The coalition failed to coalesce around a single Presidential candidate because none of the groups thought the candidates from the others were offering to apply the shared conservative principles in ways they could all agree with.

That collapse in the Republican Presidential Primary is summed up in the often heard claim "Conservatism hasn't failed. There is simply no candidate who is sufficiently conservative to make it work." The old policies of "No new Taxes. Small government. Strong military. Anti-Abortion. Anti government regulation." have each been shown to have failed according to a majority of the voters, and conservative politicians have not been able to field test new policies with similar power to attract voters.

The result is the McCain campaign for President. He goes around expressing all the old conservative polices in a disjointed and highly inconsistent way. The inconsistent presentation is not important to conservatives. Unfortunately McCain cannot find new and powerful messages he can use to rebuild the Reagan coalition. But the Republican Party is still trying to win the Presidency because without it they will suffer a severe setback in organizing when they lose the patronage powers of the White House. Much of the strength of the Bush administration has been based on those patronage power combined with strong enforcement of the conservative ideology.

So we are seeing the first post-Reagan Coalition Republican Presidential candidate, McCain, who has no effective strategy for winning other than painting Obama as "an illegitimate leader, unworthy of the presidency, a fluke, a phony (and a fascist."

So the Republicans expect to lose the Presidency in November. But they have a fall-back position, one that Digby points to. It is the strategy they used effectively against the Democrats beginning January 20, 1993. They are going to mau-mau Obama from day one as an illegitimate President who stole the election.

Who cares if the conservatives cannot organize and operate an effective government. They don't want one anyway, except as a source of political patronage and as a magical ATM machine that takes tax money from average Americans and hands it off to the most wealthy Americans. The conservatives will, once removed from the White House, revert to what they do best - they will obstruct every effort of Democrats to solve national problems and they will do their best to delegitimize Obama as President.

Why not? It worked against Clinton in the 1990's.

Are we currently in a recession? If so, for how long?

Mark Davis of the Kansas City Star offers this answer:

Is this a recession?

"The answer is yes," said Dave Anderson, a money manager at Financial Counselors Inc. in Kansas City.

Anderson cited slowing measures of industrial production and personal income as evidence of decline.

Those measures along with employment and retail sales reports will ultimately drive the official answer, which is dictated by an elite group of economists charged with making recession calls.

Many observers say those who doubt we're in recession simply need to be patient.

"We haven't seen the end of layoffs," Anderson said.

Many job hunters are struggling to find work. [Snip]

Some recession believers suggest these troubling times may prove to be more persistent than the mild recessions in the 1990s and early 2000s.

One key difference is debt, which has exploded in recent years as we tapped credit cards and home equity to sustain our lifestyle.

"The reason this one will be … at least longer lasting is because of all the leverage built into the economy," said Owen McPherson, president of CFW Capital Management Inc. in Prairie Village.

And it's not just the credit cards, subprime mortgages or the ballooning federal deficit. It’s also the nation’s appetite to consume more than it makes.

By importing so much oil, America is transferring its wealth overseas. Essentially, we're spending the national nest egg to keep our cars running.

Higher oil prices along with rising prices for other raw materials also threaten to rekindle the sort of inflation that racked the economy of the 1970s and early 1980s.

In at least one way, economist Peter Morici contends we may be heading toward something akin to the Great Depression.

Morici is not predicting the sort of massive unemployment and deflation that marked the 1930s. But he does believe this sluggish economy won't improve much for a long time.

"The thing about the depression was that no matter what Roosevelt did he couldn't get us out," Morici said. "A series of policy mistakes made it very deep, and then once you were in the funk you couldn't reverse it."

So unemployment is increasing and retail sales are dropping.

Add to this the series of mistakes ( described in
Until America admits that conservative economics has failed, the economy will continue to be bad.) that brought America to this point. The current and increasing economic problems are a direct result of a lot of bad political management and financial including

• the politically inspired diversion of the profits of higher productivity to the very wealthy instead of sharing it with labor in the last three decades,


• The sharply increasing the price of higher education combined with making the higher priced dependent almost entirely on loans which cannot be discharged in bankruptcy,


• Alan Greenspan's Federal Reserve lowering interest rates so low that savings was discouraged and the Housing Bubble was created in order to allow Bush to be reelected in 2004, then sharply increasing the interest rate right after the election,


• Bush's tax cuts for the wealthy combined with out of control spending and an unnecessary and badly managed war in Iraq,


• America's banks pushing for financial deregulation, then upon getting it building a massive financial house of cards based on highly leveraged financial instruments that required constant increases in continuously increasing revenue and profits to avoid failure,


• The financialization of America's economy in which banking and insurance replace industrial production jobs that build a healthy middle class. The industrial jobs are still being exported by bankers and investors who are searching cheaper labor rather than training and supporting more productive American workers.,
  


• The Bush administration replacement of trained and experienced government workers with political cronies who have the right ideological anti-government attitudes, along with the outsourcing of as much of the government as can be done rapidly,


• The negative leverage caused by increasing debt, especially credit card debt, and


• All of this combined with increasing demand for foreign oil as the supply ceases to expand - a shortage caused in part because of the refusal of automotive companies to develop higher gas mileage vehicles and the refusal of conservative politicians - both Republican and Democratic - to take actions to prepare for the well-anticipated shortage of oil supply.


• Add to all this the conservative "No New Taxes" movement which has left us with roads and economic infrastructure that are literally falling apart like the bridge in Minnesota did, and which will require more money over a long period of time before it can be rebuilt. It has also left America with a patchwork health system that increasingly provides inadequate service for those with insurance and leaves nearly 50,000 people of our 330 million people without health insurance, depending at best on the overstressed and shrinking American emergency medicine system.

This is a series of bad management decisions almost all of which came out of the Reagan Revolution and the conservative movement.

The toxic results of the Reagan Revolution took nearly three decades to bring America to this current economic crisis. They won't be reversed soon, even if the obstructionist Republican Senators lose their ability to filibuster any effort solve America's problems by losing their 40 + Senate minority.

The housing crisis hits close to home

For the last five years my next door neighbor has been a very nice early middle-aged Black woman. She bought the three bedroom 50-year-old house next door after the previous owner died. She has been very good about keeping it nice and has grown really a really nice set of flowers and hedges out front. So it surprised me when suddenly there was a "For Sale by Owner" sign out front and then she got a bunch of people over and moved all her stuff out.

The "Owner" who put the signs up, it seems, was the investor who bought her home in foreclosure. I later learned that my neighbor had bought the house for about $60,000 (prices are low in Texas - that is a 1300 square foot house with front and back fenced yard.) Some rip-off artist put her in an adjustable rate mortgage. She had been paying $650 a month, and last Summer the rate reset. The new monthly payment was about $1050 a month.

She couldn't pay it, and the out-of-state mortgage holder simply would not work with her. That was silly because they had $58,000 in the mortgage and the house sold for $38,000. By not working with her, they walked away from a third of the value of the mortgage when Dallas-Fort Worth has been the second most stable metropolitan area in the U.S. after Charlotte, North Carolina.

Now the investor is getting worried. They buy foreclosed homes and flip them quick for a fast profit. Only they have had several very good potential buyers, and none of them can get a home loan.

Now I have an empty home next door, and my property resale value has dropped because of the value of the foreclosure next door. I'm still about 50% above what I paid in 1999, though - assuming that I could find a buyer. But there are two other homes in this same short block with For Sale signs and no occupants. I'm probably trapped here until the economy improves nationally.

The rogues gallery of my enemies includes George Bush, Alan Greenspan and his fellow Libertarian, Phil Gramm, and I have begun to understand why the Depression was simply another very predictable result of unregulated banking running the economy. Boom and bust; boom and bust; each time a bigger boom, each time a bigger bust. Economic stability is the direct result of effective bank regulation; Boom-and-bust is the direct result of unregulated banks.

With economic stability you get a thriving middle class, but the get-very-rick-quick boys are frustrated. Since Reagan was elected we have seen a rapid growth in the number of American billionaires together with a reduction is the percentage size of the middle class as big business and the banks shift the risk of loss to individuals and keep the profits to themselves.

Industrial nations build a stable economy and a strong hard-working middle class. America has been shifting towards the Latin American model of a small, very wealthy elite, an anemic middle class and a large number of very poor people. Why not? That's the Republican wet-dream. A few very wealthy people who own most of the country, a desperate and ununionized powerless work force, and a few favored proles who are allowed to pretend they are being paid what they are worth as long as they suck up to the wealthy owners and the bankers.

McCain is running on the Reagan Revolution and the Bush war. If he wins America is in deep shit.

McCain offers a "Herbert Hoover" non-action to those being foreclosed

According to TPM Reader YA McCain, representing the elitist Republicans, asked two weeks ago

"how 4 million mortgages [could] cause this much trouble for us all," and suggested that if those borrowers just took fewer vacations and managed their budgets more effectively, they wouldn't be in trouble."

Let's remember now, he was a fighter pilot and a war hero forty years ago, but he graduated 6th from the bottom in his class of Annapolis. Not quite as bad as George Custer who graduated at the very bottom of his West Point class before leading his 7th Cav troops into disaster at the Little Big Horn, but this certainly indicates that McCain is not the sharpest tack in the box.

McCain parleyed his war hero status and a second marriage to a wealthy woman into a career in politics, but there is no indication that he ever got a lot smarter. Apparently he did catch some flack for his indifference to those who are having their homes foreclosed, so YA says he offered a new non-plan that conceals his indifference, but does nothing significant for the people being foreclosed. Here is YA's report on the new plan:

Today, he promised to help "every deserving American family or homeowner." So how many American families are deserving? McCain's top economic policy adviser, Douglas Holtz-Eakin, places the number between 200,000 and 400,000 households; just those families "who really need help."

Great. So to be clear, McCain thinks that millions of Americans are going to lose their homes, and all but a few hundred thousand are just getting what they deserve. Specifically, he's prepared to step forward and help only those who:

-Took out a subprime loan after 2005

-Can prove they were "creditworthy" at the time

-Are unable to pay that subprime loan

-But could pay a 30-year fixed rate loan

Of course, pretty much all those folks already qualify for assistance under the existing FHASecure program. McCain's proposal offers greater leverage over recalcitrant lenders, and shoulders some of the cost of restructuring the loans, but virtually everyone who meets his guidelines is already eligible for help. [Snip]

it's typical Republican bamboozlement. McCain says that perhaps a few hundred thousand homeowners deserve ever so slightly more help than they're already receiving, but that millions of others should lose their homes. And
it's worth pointing out that most analysts agree that the number of folks who would be helped by this plan is probably much smaller than Holtz-Eakin estimates. There's really not much difference between his initial position and his bold new plan - they both amount to inaction.

There it is. McCain has moved from indifference to the people being foreclosed to a refined plan that can be used to conceal the indifference but still does nothing effective.

Nothing effective to deal with the housing crunch and the Recession. That's Bush's position, also, and both are channeling that great conservative, Herbert Hoover, who similarly watched America sail into financial disaster and refused to act.

YA adds one more comment:

"John McCain says he'd be happy to see our troops in Iraq for another hundred years," the Democrats would do well to add, "John McCain says that millions of Americans deserve to lose their homes."

In the America that the conservatives are working hard to create there is no America, just a lot of individuals who are each on their own to fight, steal, rob and screw those around them to get ahead economically. The elite are the wealthy (like McCain) who are protected by their wealth. This is the Reagan Revolution, also known as the YoYo economy. That's "You're on your own," something demonstrated when Katrina hit New Orleans.

The World War II generation must be rolling in their graves as they watch Bush and his clone, McCain working to destroy America and pick its bones for their own wealth. But hey! The news media (especially FOX) has declared McCain a Maverick and he is a well-known war hero, so maybe he's good enough to elect President, right? Here is the example:



He'll just move in to the White House in time for his nap, I guess. He doesn't plan to take any actions, but at his age, he probably shouldn't exert himself too much anyway. A lot like Bush, who doesn't have the excuse of age, but has the same elitist idea that government is for and of the wealthy elites and the rest of us are here at their sufferance.

Here's the reason why the Bear stearns crisis occurred

Let's look at Bear Stearns to see why it failed. Then we need to see why the federal government is bailing the bankers out even though by law, they're not supposed to.

Bear Stearns is a bank. Banks borrow money and then lend it out, making their profit by paying lower interest rates on the borrowed money than they charge on the loans they make.

The borrowed money is of two kinds. Retail banks take deposits from savers. Those are the savings accounts we know that the government insured for up to $100,000. Financial banks, like Bear Stearns, get loans from investors. But as far as the bank is concerned in both cases they are borrowing money to lend.

The difference between what the bank pays for borrowed money is rarely more than one or two percent. The bank only has to keep enough money on hand to cover repayments to the depositors/lenders who supplied the funds in the first place. This is the reserve requirement. The greater the reserves the bank keeps, the less likely that bad loans will prevent it from repaying depositors/lenders who provided the money in the first place. Currently the Federal Reserve requires commercial banks to keep a 10% reserve behind all loans made for working capital and transactions loans for which there is no security other than the borrower's signature.

As long as the borrowers pay the bank its loans, borrowing money to lend at a higher interest rate is a money machine. What's the flaw? Well, loaning money to borrowers always runs the risk that the borrowers won't pay it back. Then the bank loses not only the interest they were expecting, but also some or all of the money they loaned out. Remember, this money was from depositors or lenders, who are also in danger of losing the money they deposited with or loaned to the bank.

Here is where the government steps in. If the bank can't repay its depositors, the government guaranteed repayment of up to $100,000. That makes lending to a commercial bank (depositing money savings accounts) a lot less risky than lending to a financial bank. (A side effect is that such deposits, being loans to the bank that have no risk, pay a low interest rate.) But the government is not in the business of handing bankers money to lend at a profit and then covering the bank's losses when it makes bad loans. So they demand that the bank have "reserves" - money kept on hand and not loaned out that will be the bank's first source of funds to cover bad loans. A 10% loans means that the bank borrows $100, but can only lend out $90. The bank loses the interest on the $10 kept in reserve, but those funds permit it to repay depositors/Lenders when they demand their money back. It is when those depositors/lenders demand their money back and the bank cannot provide it that a "Run on the Bank" occurs.

But reserve requirements only apply to banks that expect the government to repay its depositors if it can't. Bear Stearns was not a retail bank and had no insurance from the government. By giving up the insurance, Bear Stearns was given the privilege of not keeping reserves and not being subject to bank inspections. It was assumed that the lenders who provided the funds would be sufficiently knowledgeable and informed so that they could measure the risk Bear Stearns was bearing on its loans. For every dollar of capital the company had, it loaned out $32 which amounts to about a 3% reserve. They could make a lot more money than a regulated bank that had to keep a 10% reserve and was prohibited from making the most risky (and most profitable) loans. There was no expectation that the government would step in and save the bank when it underwent a Run.

Only - Bear Stearns was so large, and so deeply embedded in the entire financial system, that it was decided if they went under they could take a number of their lenders with them. The entire financial system was at risk when Bear Stearns failed. So the Federal Reserve provided guarantees of a lot of taxpayer money to Bear Stearns' lenders and then sold it off to J. P. Morgan.

So now the financial banks are on notice that they, too, are protected by government guarantees. Only they don't have to avoid the risky loans and the low capital ratios that made Bear Stearns so vulnerable.

That set the financial bankers up to be able to make the riskiest and most profitable loans, knowing that if the loans go bad the government will bail them out, and if the loans don't go bad, they get the profits.

Even the financial bankers are now saying that some regulation and reporting requirements need to be imposed on the riskiest high-flying financial banks.

Oh, and what caused the credit crisis? These high-flying financial banks were supposedly very knowledgeable about the risks they were taking when they loaned money. Residential mortgages were supposed to be the safest of loans with a very low rate of default. So they were bundled together in great securities with thousands of individual mortgages. The rating agency looked at them, assumed that the good mortgages would cover the risky sub-prime mortgages, and sold the whole package as very safe AAA securities.

When it was learned that the number of bad loans were much higher than previously known, suddenly the lenders providing funds to Bear Stearns and other did not know if they could get back money they loaned those banks. So they quit loaning to anyone depending on such massive mortgage-backed securities. And that turned out to be almost everyone.

Worse, when the mortgage-backed securities were first created and sold, the original documentation did not go with the security. Just a computerized summary of each mortgage. The cost of finding that original paper documentation and having someone review it was impossible to imagine. So no one knows just how risky any mortgage-backed security is.

Since Bear Stearns had only about $3 reserve behind every $100 of loans they had made, no one who loaned money to them had any reason to believe they would get their money back. So all lending to Bear Stearns stopped and all lenders with loans already made wanted their money back - all at once. That $3 reserve was smoke in a high wind.

Bear Stearns was bankrupt and the offer of $2 a share was a gift to the stockholders. There was nothing of any value to back even that $2 per share price. That's what a run does to a bank. But it was too big to fail, so the government had to provide taxpayer money to bail out the bankers who made the bad loans.

Congrats, taxpayers. The American financial industry now owns you.

Paul Krugman has a lot to say today, but the conservative mismanagement of the economy has given him a lot to talk about.

Don't forget, the Reagan administration and deregulation gave use the Savings and Loan bail-out. That was nothing.

if history is any guide, the coming taxpayer-financed bailout will end up costing a lot of money.

The U.S. savings and loan crisis of the 1980s ended up costing taxpayers 3.2 percent of G.D.P., the equivalent of $450 billion today. Some estimates put the fiscal cost of Japan’s post-bubble cleanup at more than 20 percent of G.D.P. — the equivalent of $3 trillion for the United States.

If these numbers shock you, they should. But the big bailout is coming. The only question is how well it will be managed.

Let's say it again. The big bailout is coming. You and I, fellow taxpayers, are going to bail out the wall street bankers who, with their Reagan Revolution allies, created this mess.

How many of us taxpayers does it take to support one financial manager in the style to which he is accustomed?

This is what the conservative movement has brought America to. The Bush administration pushed through the tax cuts for the wealthy so that they could afford their $5000 an hour hookers, and the Republican Congress deregulated Wall Street so that they would be free to get even richer. That's what it meant when now ex-Senator Phil Gramm forced through the repeal of the old FDR era Glass-Steagall Act that separated retail banks from investment banks. Glass-Steagall wouldn't have prevented the financial mismanagement that has created the current credit crisis, but it sure would have lowered the ultimate cost.

Watch what is going to happen, though. The bailout is going to pump a lot of money into the failed Wall Street banks andleave the current managers who brought the failure on in place, still drawing their multi-million dollar salaries and even larger year-end bonuses.

And who is going to pay for all this luxury in the yacht-owning bank-mismanaging class?

You and me, fellow taxpayer, you and me and our kids and grandkids. A significant portion of the value we taxpayers each create from now on is going to the undeserving wealthy to pay for their mismanagement of their banks and our economy. Hey! If it doesn't, they might actually have to move out of their gated communities and give up their luxury cars and expensive vacations.

That's the Republican Reagan Revolution at work. Ain't conservatism great??

Conservative America - where wealth and power is rewarded instead of work

Work hard and you will be rewarded in America. We still get taught that in school - but under the Reagan Revolution you will only get part of the reward for your work. The rest is siphoned off and redistributed to the wealthy and the powerful. That's what is meant by the statistics showing greater disparity between the wealthy and the superwealthy and the rest of us. It's not better educated workers getting paid more in the global economy for economic reasons. It's the power-based redistribution of income upwards from the workers who produce the wealth to the wealthy and powerful who define the rules of who gets the rewards.

Part of this results from the changes in tax codes that make the middle class pay a larger percentage of their income after family support than is true for the wealthy and especially the superwealthy. But even more comes from the redistribution of power away from workers and from the government to the investors and top management class. The Reagan Revolution is building a Latin-American style plutocracy in America by shifting power from the workers and their government to the wealthy and the superrich.

This is bad economics in the first place since it rewards position and class rather than effort, but it also has social consequences as the connection between effort and the reward for that effort is severed.

For all the conservative rant that America should be a nation based on "free enterprise" what has happened in America since the 1960's is that people get wealthy primarily by getting a government contract or a government-protected monopoly. The ideal of the American economy used to be that the people who did the productive work that created wealth were rewarded more for their productivity than were the managers who organized the work, and the investors who merely contributed money to the enterprise were the least rewarded because their effort was the least productive. That's the ideal of a middle class nation. It is the skills and efforts of the middle class that actually produce more and better goods and services, and the efforts of those who merely reorganize those productive efforts should not be rewarded more than the efforts of those who actually do the final productive work of wealth creation.

How do you get the most wealth creation and greatest productivity from a society with a modern economy embedded in it? You provide the greatest reward to those who do the real work rather than to the managers, investors and politicians.

In the last thirty years especially American has changed. The rewards for productive effort have been distributed away from those who actually create the final goods and services towards those with the power and money to decide who gets rewarded and who does not. David Cay Johnston's new book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill) provides numerous examples of how our society now rewards wealth, power and position rather than productive effort.

Contrary to the fictions the Reagan conservatives keep spouting, this redistribution of wealth from the workers and families up to the very wealthy is a political function, not an economic one. Every time a big-box store like Wal-Mart or Costco arranges with local governments to not have to pay local taxes for a decade or more to locate a story in a community, they gain an economic advantage over the local stores which still have to pay those taxes. I used to trade at two local hardware stores where I got good service and advice along with the hardware, tools and parts I needed, but home Depot and Lowe's opened up, cut the prices because of the tax benefits the County gave them, and sucked up the business that had gone to my local hardware stores.

I'm not getting lower prices because now I have to drive ten miles instead of two, and park half a mile from the big box store in a dangerous anonymous parking lot instead of right in front of my local store. I also can't find anyone who can help me figure out how to deal with my plumbing or lawn problem. And oddly enough, the amount of product that Home Depot and Lowe's make is roughly the same as the amount of tax incentive they got the County commissioners court to give them to open in the first place. That money is sucked out of my community into the pockets of those wealthy and powerful enough to get the special government privileges that makes the big-box business model profitable in the first place. So Our community is poorer, we have fewer total jobs and the ones we have pay less than when we had local hardware stores, and the only winners have been the wealthy and politically connected investors. Welcome to the Reagan Revolution - the revolution in which plutocrats, investors and top managers of big business conglomerates are disproportionately rewarded because of the positions they occupy instead of the actual wealth they personally produce.

Rick Perlstein quotes Tom Geoghegan who describes the social and economic results of this failed economic structure in See You in Court: How the Right Made America a Lawsuit Nation :

It took ten years—almost all of the 1990s—for the median family income to get to the same level that it was, in real terms, in 1989. But in 1999, when we got to the same income level we had in 1989, the "median" family had to work six more weeks a year.

To keep from falling, the 1999 middle class had to work six more weeks a year for free. Not a few more hours—six more weeks! By the way, maybe it's worth pausing to say this: No wonder our FDP keeps shooting up, if the middle class is being forced to work for free.

But all this unpaid extra labor tends to undermine the Rule of Law.

Why? The economist John Maynard Keynes put it best: "Nothing corrupts society more than to disconnect effort and reward." That's what did in the old Soviet Union: no matter how hard one worked, one could not get ahead of someone who did not work at all. All that is what is happening in the United States, too. Of course, in a certain way our country would seem the very opposite of the Soviet Union. Here, if people don’t' work, they're going to end up homeless. Then again, if they do work, they may end up homeless, too.

That's the point. Like the USSR, we are slowly breaking the connection between effort and reward. And in terms of the Rule of Law, that's a dangerous thing to do. It's dangerous to push the middle class into questioning the fairness of the rules.

The danger is that people in the middle class will begin to see the world as arbitrary and unfair—unpredictable, a matter of luck, a chance of catastrophe around the corner. It does not matter if they work the extra hours. Over 40 percent of American families have less than $5,000 in savings. One bill, a hurricane out of the blue, can blow everything away.

So, quietly and to themselves, people at the median or below have to wonder, as the country becomes fabulously wealthy: Why play by the rules?

I may even understate the case. The disconnect between effort and reward is much greater than it seems. Some families lost income, though they worked harder. But they became wealthier. How? They made money off their homes. But this is not "effort." It's not even savings. It's just something that happened arbitrarily, to me, but not to many others. The moral is: Hard work doesn't pay.

Let's go back to my earlier example. I doubt many people did actually get back to the same 1989 level of income in 1999. Think of pensions. Fewer working people had pensions, though they worked longer. Or they had bigger administrative fees. Think of health insurance. Fewer people had it. Or they had bigger deductibles. They lost out, even with six more weeks of work. Perhaps our moral character can survive one decade of that kind of thing, but it keeps going.

Why is this so dangerous for the Rule of Law? It's simple. If we do not expect the world to be reasonable and fair, then sooner or later we do not demand or expect those qualities from the law, either. We get used to arbitrariness and unfairness. Sometimes we take a certain glee in it—at least when arbitrary things happen to others. Worse, as fewer of us vote, or even watch the news, we experience the legal system not just as arbitrary but as alien. It's something that is imposed on us. We did not consent to it. We didn't vote.

Worse, the more we drop out, the more arbitrary and unpredictable the Rule of Law becomes. The unions, political parties, and other institutions such as the liberal churches helped us shape a certain legal system. When they began to weaken, the law itself begins to change. It became less rational and predictable. It is not just that people now perceive the law as less rational and predictable. It really is.

Maybe the country will survive it. Maybe the less rational and predictable the law becomes, the more people will go along. They will accept it up to a point, as in backward societies, because they will experience the Rule of Law in the same way they experience the world.

America became a wealthy and powerful nation because the availability of free land severed the connection between rewarding land ownership and rewarding hard work. Individuals who wanted to get rewarded for their own work merely had to open new land and put their effort into the enterprise.

When the wealthy landowners tried to get government to tax the new middle class for reasons that did not contribute to their economic success, they used their numbers to change the way government was controlled. The shock expressed by many who had been leaders during the American Revolution when Andrew Jackson took control of the government is clear in history, but the Jacksonian Democrats were people who were used to being rewarded for their effort and weren't going to let a few large landowners (A.K.A. "The Right People") take the rewards away from them.

The fact that the American South with its plantation culture and slavery did not participate in the early stages of the Industrial Revolution (and has yet to get fully with the program) is a clear demonstration of the economic superiority of rewarding the efforts of labor more than land, capital or that strange, mostly ideological economic concept, Entrepreneurship. [Land, Capital and Entrepreneurship are not unimportant economic factors, but the rewards to those who do the final job of creating goods and services are the most powerfully productive rewards in the system. That's what the statement that "a business' most important assets are its workers" really means.]

The reason why laissez faire economics does not work is that it assumes that the social and power structures of society will somehow automatically gravitate to those which produce the best good, services, and social benefits. Unfortunately, there is no automatic pressure or mechanism that makes that true. In fact, in some markets such as a private insurance-dominated national health care system, the assumption that somehow the market will give the best results at the lowest possible cost is clearly false.
America needs to seriously reconsider the reward structure in has in place and that will include, but not be limited to, the tax structure. What social benefit is returned from the super-rich that justifies their failure to pay a greater percentage on their incomes in taxes than those with the least income? The super-rich get proportionately more form society, they should support it proportionately more. Is there any social benefit at all in allowing great wealth to be inflicted on the descendants of wealthy families? Is that not simply an incentive for them to NOT be productive and instead play power politics for the sole purpose of protect their social position?

America has had a three decade experiment with the Reagan Revolution. The Reagan Revolution and the conservative movement that has inflicted in on America has clearly failed our society and our nation. It needs to be rethought and re-worked.

A major element of that rethinking is how work is rewarded. Today it is more likely for most people to become wealthy by hitting the lottery than by the results of their hard work. That is simply wrong, and destructive on any society that is supposedly built on the rule of law and also wants to be an economically productive nation that can compete in the world economy.

Conservative thought is based on the assumption that the nation exists to support business and reward the rich and powerful. Somewhere in the Reagan Revolution the idea that the heart of our nation is its families, and that business and the economy exist to improve life for the workers and their families, not for the CEOs, the investors and the politicians who enable them. Conservative thought and actions have failed America.

It's time for American to return to its roots as a middle class nation not dominated by an aristocracy. Instead, work needs to be properly rewarded and families supported by the economy.

Unregulated and unobserved banking results in ...

From the Wall Street Journal:

WASHINGTON – Federal investigators have opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the subprime mortgage crisis, focusing on accounting fraud, securitization of loans and insider trading, among other areas, the Federal Bureau of Investigation said.

The FBI wouldn't identify the companies under investigation but said that generally the bureau is looking into allegations of fraud in various stages of mortgage securitization, from those who bundled the loans, to the banks that ended up holding them

This is just Wall Street, right? Uh, well, you know that French bank where a single rogue trader lost over $7 billion last week? Here's the report I expected:

Trader who lost $7 billion says bosses approved:

PARIS - The trader accused of causing about $7 billion in losses at Societe Generale told investigators that he believes his bosses were aware of his massive risk-taking on markets but turned a blind eye as long as he earned money, a judicial official said Tuesday.

Societe Generale, which said last week that Kerviel’s actions cost it nearly 5 billion euros, quickly accused Kerviel of lying. In another twist to the multifaceted case, France’s financial markets authority opened an investigation into the bank, France’s second-largest.

Kerviel, a 31-year-old junior trader, told investigators of efforts to mask his massive transactions, but said the bank must nonetheless have noticed something suspicious, according to excerpts of his police testimony published in Le Monde newspaper. Kerviel’s remarks were confirmed by Isabelle Montagne, a spokeswoman for the Paris prosecutor’s office.

“I can’t believe that my superiors were not aware of the amounts I was committing, it is impossible to generate such profits with small positions,” Kerviel said, according to the account confirmed by Montagne.

If you want a stable economy, then you have to have honest, trustworthy bankers.

But Bankers are not honest and trustworth unless there are outsiders carefully watching every move they make. An unwatched banker cannot be trusted. The potential profits in banking are simply too big, the biggest profits come from the greatest risk of loss, and the damage that can be done to the overall economy by such massive bank losses are too big to trust bankers.

Score another failure for the Reagan Revolution and Sen. Phil Gramm's deregulation of banking together with the elimination of the Glass-Stegal act.

What to expect from the Recession and what to do about it.

The Pollyanna days of denial by financial professionals and Economists abruptly ended last week, and now no one is ignoring the economic downturn the bursting of the housing bubble and the resulting credit crunch have brought us. The most optimistic of the financial professionals are reduced to objecting that the current economy is not officially in recession, because the committee of economists (a grizzly concept in itself) that officially determines the beginning and ending dates of recessions does not yet have enough data to make an official pronouncement of what happened in reality.

Only most of us live in reality and do not need a conclave of economists to tell us what that reality is. Even the Bush administration economists, with their vested interest in not admitting to a recession during an election year, have hit rock bottom and convinced their political masers that they simply have to stop trying to convince others of their irrational denial and actually try to look like they are doing something. Unfortunately, they are trapped in the same conservative ideology that President Herbert Hoover was from 1929 to 1933. Conservative free market ideology states that there is nothing the government CAN do to alleviate a recession, so they choose to permit only government actions that look good politically while the continue to work to enrich the wealthy. That's why the stimulus program is a fraud. So let's face it. The Recession has begun, and for political reasons rather than economic, there really is nothing the government is going to do about it that is effective.

So a recession has started. So what? What does it matter? John Schmitt and Dean Baker of the Center for Policy Research have published a paper telling us what to expect.

A recession is officially two quarters in which total gross domestic production is lower than previously. A mild-to-moderate recession would last either two or three calendar quarters or roughly six to nine months long. A severe recession can be expected to last about two years.

The two most recent recessions, those of the early 1990s and early 2000s, were mild recessions. Each was kept from getting more severe because the federal reserve lowered interest rates and created the conditions for an economic bubble, first the dot com bubble and then the housing bubble. The "double-dip" downturn of 1980-82 was a severe recession, one created by then Fed Chairman Paul Volker by sharply increasing interest rates in order to wring inflationary expectations out of the economy. But the reduction of overall gross domestic product (GDP) only measured national economic product. The most important effects on the economy are the labor effects, and those last longer than the production effects do.

The unemployment rate in 2008 can be expected to increase somewhere between 2.1 percent in the case of a mild-to-moderate recession up to 3.8 percentage points if the recession is severe. That means somewhere between 3.2 million and 5.8 million unemployed Americans. But that's not the end of it. The unemployment rate outlasts the official economic downturn. In the case of a mild-to-moderate recession unemployment can be expected to rise up to 6.7 percent through 2010, and in the case of a severe recession we can expect unemployment to rise to 8.4 percent and last through 2011.

The unemployment rate among Blacks, and especially Black teenagers, will go significantly higher than those average figures, and even in the case of a mild recession an additional 4.2 million people will lose health insurance coverage. And the loss of income? In a mild-to-moderate recession the median family will lose about $2,000 per year by 2010. The median family loss in a severe recession would be almost $3,750 per year by 2011. These numbers are in constant, inflation-adjusted dollars. Obviously the national poverty rate will increase, going up between 1.6% and 3.5% from the 2006 level of 12.3%. That's an increase of between 4.7 million and 10.4 million people living in poverty.

So the next logical question is whether we should expect a mild, moderate or severe recession. That will depend on how the economy comes out of it.

The last two recessions were mild because the interest rates were lowered to the level that a boom was created. But they didn't last primarily because workers didn't get any significant level of the new income that was created. That new income all went to making the wealthy richer. But 70% of economic demand comes from consumption.

If the economy is going to grow, then economic demand has to increase, and that means consumers have to get increased wages for their labor. The dot com bubble was created in large part by Alan Greenspan as he eased interest rates to keep the American economy buying. The Southeast Asian financial bust threatened to put the entire world into recession, so Greenspan pumped up American purchases to protect the world economy. He overdid it. The dot com bubble was allowed to last too long because it was the only major source of increased wages for consumers, but when the projects that were making financial deal-makers rich got too irrational the bubble collapsed.

So Greenspan lowered interest rates again, prompting irrational increases in housing prices, and he encouraged Americans to refinance their homes to get the artificially inflated wealth out of those homes and into consumption. Essentially the first recession was kept mild by low interest rates and the dot com bubble, but it created the second recession which was kept mild by low interest rates, the housing bubble, and consumption pumped up by wealth extracted from the artificially increased home prices. Like the dot com bubble, the housing bubble was extended by making irrational and non economic deals.

The result is the collapse of home prices (still to go down 20% to 30% in the most effected areas), the collapse of the credit system when bankers and investors found that no one knew they were undervaluing the risk they invested in, and now the recession which will be validated later as it is proven that GDP has declined. The clear symptom of unemployment is already recognizable.

This is the normal boom-and-bust cycle of an economy in which all the rewards of productivity are passed to the wealthy owners and investors while wage earners are not rewarded for their increased productivity.

A strong, stable and growing economy requires a strong, well-paid middle and laboring class in order to avoid the recurring boom-and-bust events. It has been obvious since 2000 that the consumers were not getting real wage increases, so they had to be somehow artificially provided with funds to increase consumption. Those funds have come in the absence of savings and in new and more efficient methods of extracting wealth from (artificially over-valued) homes. In short, the financial community and the government have artificially pumped up consumption by getting consumers to borrow future income. They had to, since consumers were not getting increased income from the economy!

But even that had to end, and now it has. So lets recap.

• Since the Reagan Revolution America's economic structure has been changed so that the rewards from the economy have flowed to the wealthiest individuals.
• American labor has not had real increases in wages since 1970. Increased consumption came about because
  • Housewives entered the labor market to increase household wages.
  • Households have stopped saving.
  • Credit has been eased so that almost everyone can borrow money.
  • Usury laws were eliminated so that banks could make more loans to riskier customers.
  • Mortgages laws and procedures were eased so that consumers could get access to the increased value of their homes caused by lower interest rates.
  • Credit standards were eased, making it easier to make loans to more people.
  • Regulations of businesses were eased or eliminated so that no one was in a position to question irrational or exploitative transactions.
• Since 1980 the U.S. has undergone three recessions and is now heading into the fourth.
• While the recession of 1980 - 82 was caused by Paul Volker of the fed tightening interest rates to depress the economy until inflationary expectations were eliminated, both of the two since then were caused by a combination of excessively low interest rates by the fed and by a failure of consumers to consume enough to keep the economy growing.
• The redistribution of wealth in America since 1980 has redirected the gains in the economy to the wealthiest Americans and away from the workers who are the consuming class.
  
• Investments do not boost consumption.
  
• Investments are made when demand for a product or service (demand is both desire for the product or service together with the necessary money to buy it) is recognized. When demand does not exist, any additional money will be invested in bonds or other international economies with better prospects.
  

So the redistribution of money from the working classes to the wealthy investor classes in America has resulted in a series of recessions. This is the inevitable result of the Reagan Revolution and the Conservative movement.

What's the cure?

• Vote the conservatives out of office at all levels.
  
• Invest in the single most productive factor of production in America - its labor.
  • Subsidize more education. Give grants instead of loans. Fund more K to 12 education from general revenue rather than property taxes.
  • Provide Universal health care.
  • Generally rebuild the safety net for unemployment and illness.
• Reregulate banks and financial businesses so that the excesses that have created and extend the last two bubbles cannot happen.
• Stop shifting economic risk from businesses to individuals, and reverse the trend so that families can predictably raise and educate their children.

And that's a start.