An Election of Superlatives

Consider the unprecedented nature of the decision we have to make on November 6th between the two major-party candidates.

On the one hand, we have an incumbent President who is also a Nobel Peace Prize winner.  This man, lauded for his efforts to bring “peace” to the world by the perhaps-naive Nobel Committee, is also presiding over the expansion of apparently perpetual secret/shadow wars to kill “terrorists/enemy combatants” on what appears to be a virtually unlimited battlefield through the use of unmanned drone strikes.

Among senior Obama administration officials, there is a broad consensus that such operations are likely to be extended at least another decade. Given the way al-Qaeda continues to metastasize, some officials said no clear end is in sight.

“We can’t possibly kill everyone who wants to harm us,” a senior administration official said. “It’s a necessary part of what we do. . . .We’re not going to wind up in 10 years in a world of everybody holding hands and saying, ‘We love America.’ ”

On the other hand, we have a fabulously wealthy financier whose belief in “American exceptionalism” is so great that he made (and continues to make) quite a bit of his money through offshoring American jobs to foreign nations, including China, a country that he has vowed to “get tough on.”

Right now a company named Sensata is moving equipment out of a factory in Freeport, Ill., and shipping it to a factory in China. Sensata will be laying off all of the American workers, but first they are making the workers train their Chinese replacements. The workers' last day is the day before our election. Here's the thing: This company is owned by Bain Capital, and Mitt Romney -- who says he is against shipping jobs to China -- will make a fortune from the move to China.

The Sensata employees have set up a camp outside the factory that they call Bainport and are trying to stop the Bain trucks that are moving the equipment out for shipment to China. These soon-to-be-jobless workers have asked Romney to come help them.

This is a tremendous opportunity for Mitt Romney. As the former head of Bain Capital and with all the visibility of a presidential campaign, he could step in and help these workers. It offers him the chance to demonstrate to voters that he means the things he says on the campaign trail, and is not just saying these things to get votes. But Romney has refused.

And one more bite at this bitter offshoring apple:

"Romney's campaign did not deny that he profited from the auto bailout in an email to The Hill, but it said the report showed the Detroit intervention was 'misguided.'"

The truth? On June 1, 2009, the Obama administration announced that Detroit Piston's owner Tom Gores, GM and the US Treasury would buy back Delphi.The plan called for saving 15 of 29 Delphi factories in the US.

Then the vulture funds pounced.

The Nation discovered that, in the two weeks immediately following the announcement of the Delphi jobs-saving plan, Paul Singer, Romney's partner, secretly bought up over a billion dollars of old Delphi bonds for pennies on the dollar.

Singer and partners now controlled the company - and killed the return of Delphi to GM.

These facts were revealed in a sworn deposition of Delphi's Chief Financial Officer John Sheehan, confidential, but now released on the Web.

Sheehan said, under oath, that these speculators threatened to withhold key parts (steering columns), from GM. This would have brought the auto maker to its knees, immediately forcing GM's permanent closure.

The extortion worked. The government money that was supposed to go to save jobs went to Singer's hedge fund, Elliott Management Corporation and its partners, including the Romneys.

Once Singer's crew took control of Delphi, they rapidly completed the move to China, sticking the US taxpayers with the bill for the pensions of the Delphi workers cut loose.

Dan Loeb, a million-dollar donor to the GOP, who made three-quarters of a billion dollars off the legal scam, proudly announced that, once he and Elliott took control, Delphi kept "virtually no North American unionized labor."

In all, three hedge funds run by Romney's million-dollar donors have pocketed $4.2 billion, a return on their "investment" of over 3,000 percent - all care of the US taxpayer. The Romneys personally earned a minimum of $15.3 million, though more likely $115 million - a range their campaign does not dispute.

So there you have it.  Perpetual war from a Nobel Peace Prize winner, and a history of profiting off of job offshoring from the man who claims his business acumen makes him uniquely qualified to lift the American economy out of its doldrums and create jobs.  These are the two candidates who will receive the vast majority of votes in less than 2 weeks’ time.

There are other candidates out there, of course.  There is Gary Johnson, the standard-bearer for the Libertarian Party, and there is Jill Stein, the candidate for the Green Party.  And beyond those two (the most prominent of the third parties, due to their being on the ballot in most states) there are countless other candidates to choose from.

It is notable that the two major party candidates would both bring with them more war, and the two primary third-party candidates would both not only end the wars the U.S. is currently engaged in, but cut the military budget and global footprint further than even proposed under the dreaded “sequester”.  Why do we never hear from the third party candidates in the mainstream media (even when one of them gets arrested outside the second presidential debate for “disorderly conduct” for trying to enter the building and participate)?  Could it be that war is always good for business, particularly for the media?  Are Americans not “ready” to hear what these other parties have to say, or is the game rigged to only operate in black-and-white mode, and thus deny a real choice?

I’m certainly not the first person to notice the conundrum that what we view as American “democracy” is truly a carefully-curated pageant that restricts the amount of political choice Americans are presented with.  According to the Commission on Presidential Debates (the CPD, itself a product of a bipartisan agreement between the two major parties) a candidate must receive 15% of support in national polling to be allowed to participate in the prime-time televised presidential debates:

The CPD's third criterion requires that the candidate have a level of support of at least 15% (fifteen percent) of the national electorate as determined by five selected national public opinion polling organizations, using the average of those organizations' most recent publicly-reported results at the time of the determination.

And how, one might ask, does a candidate receive 15% of public support outside of being involved with the two major party apparatuses?  MONEY!  It certainly worked for billionaire (and anti-NAFTA economic nationalist, I might add) Ross Perot, didn’t it?  He ended up with 18.9% of the vote in the 1992 election, to Bill Clinton’s 43% and George H.W. Bush’s 37.5% after appearing onstage with the two major party nominees – having a well-funded 50-state operation can make outcomes like that happen.

“But we have a public financing system for the presidential race!” you might say.  And you would be right, we do.  But again, you get to the chicken-and-egg difficulty of trying to make an impact on the national electorate without the aid of money, which can help one buy media coverage (or without media coverage, which can help one to raise more money):

Minor or third party nominees may also be eligible for federal funding, but the process is a bit more complex.  A minor party candidate's public funding grant is based on a formula subject to the percentage of votes the party received in the previous presidential general election. The candidate is only eligible for general election public funds if the party's candidate received at least 5 percent of the vote in the previous presidential election.

How does one get one’s name and message out to the public without media coverage, so as to achieve polling and electoral support needed to gain access to both the debates (which again, serve to further get one’s name and message out to the public) and to public financing?  How does one raise money without media support, in order to show electoral viability?  How does one get media coverage without money to run ads, which, again, portray a sense of viability? 

Five percent of the national vote may not sound like a high bar to hurdle, but consider that in the 2008 election, approximately 127 million votes were cast.  Thus, you’d need about 6,350,000 votes to make the 5% threshold that would enable your party to access public financing. 

A useful Wikipedia page detailing the 2008 Presidential election fundraising totals shows the overall fundraising and spending breakdowns for the candidates (I’ve only left in the two major party candidates and the Libertarian and Green Party candidates for brevity:

 

Candidate (Party)	Amount raised	Amount spent	Votes	Avg $ per vote
Barack Obama (D)	$778,642,962	$760,370,195	69,498,215	$10.94
John McCain (R)	$383,913,834	$358,008,447	59,948,240	$5.97
Bob Barr (L)	$1,383,681	$1,345,202	523,713	$2.57
Cynthia McKinney (G)	$240,130	$238,968	161,680	$1.48
*Excludes spending by independent expenditure concerns.	Source: Federal Election Commission

To say that the third parties were outgunned in 2008 is a massive understatement.  The Libertarian candidate received about 8% of the 6,500,000 votes he would have needed to cross that 5% threshold to achieve public financing for the next election cycle, and the Green party candidate received about 2.5% of the number of votes needed to achieve 5% of the national vote.  Clearly there is a lot of ground to be made up!

If you view the realm of politics as a market, you will notice that the choices presented by our media and the official apparatus that governs presidential debates comprise a duopoly – there are only two choices, we are told. 

And yet, are there no worthwhile policy ideas beyond the Democratic and Republican 2012 party platforms?  If you care about enhancing the peacefulness of our world, it does not appear that you have a great option among the two major parties this year.  If you care about holding Wall Street accountable for the massive frauds perpetrated on the American public, and want to see the perpetrators go to jail, well you’re not going to find your candidate in the major parties this cycle either. 

Let me be clear: I am in no way, shape, or form arguing that there are not differences between the Democratic and Republican candidates for president this year; such arguments are a frequent meme among political cynics, but they are without merit.  The differences are stark, in terms of foreign policy, fiscal policy, social policy, etc.  Those differences ought not to be glossed over.  I am also not arguing the relative value of one or the other side’s polices at this point, despite my fairly obvious leanings.  Those arguments are for another time.

My point is simply that there are other ideas out there, other voices, and other constituencies that our political system, our democracy, is at present set up to exclude, rather than include.  This amounts to an undermining of free speech, of the free flow of ideas that theoretically characterizes the superiority of a representative democracy over other forms of government.  Let the two major parties have their ideas and policies challenged in an open debate; let the American public be offered something more than a two-party choice. 

Such changes clearly will not happen this election cycle, but through organizing and building constituencies, positive changes can be made for the future to break the two-party hold over political discourse in this country.  I have some ideas on this topic to expand upon at a later date, given the time.

Ask and ye shall receive

As a follow-up to my post from last week regarding polling on the question of whether the GOP is purposely sabotaging economic recovery in order to defeat President Obama next year, I thought I’d bring my dear readers’ attentions to the results of two new polls released today that cover similar territory.  I had mentioned that the Suffolk University poll from last week was just crying out for additional data to help discern a trend or not, and it appears we have some further data to work with now.

First off, a Washington Post/ABC News poll of 1,004 adults, with a 3.5% margin of error asked the following question:

Which of the following statements comes closest to your point of view? Statement A: (President Obama is making a good faith effort to deal with the country's economic problems, but the Republicans in Congress are playing politics by blocking his proposals and programs.) Or Statement B: (President Obama has not provided leadership on the economy, and he is just blaming the Republicans in Congress as an excuse for not doing his job.)

Compare the wording to that of last week’s Suffolk University poll:

Do you think the Republicans are intentionally stalling efforts to jumpstart the economy to insure that Barack Obama is not reelected?

The WaPo/ABC poll is not as clear with respondents about the political intent of any perceived economic sabotage on the GOP’s part – referring to “playing politics” rather than “to insure that Barack Obama is not reelected” – but the underlying message is essentially the same: do you think the GOP is purposely making the economy worse for political purposes?  The results:

Which of the following statements comes closest to your point of view? Statement A: (President Obama is making a good faith effort to deal with the country's economic problems, but the Republicans in Congress are playing politics by blocking his proposals and programs.) Or Statement B: (President Obama has not provided leadership on the economy, and he is just blaming the Republicans in Congress as an excuse for not doing his job.)

Obama making a good effort: 50
Obama has not provided leadership: 44
Both (vol.): 2
Neither (vol.): 2
No opinion: 1

And once again, the results of the Suffolk poll:

Do you think the Republicans are intentionally stalling efforts to jumpstart the economy to insure that Barack Obama is not reelected?

Yes 49
No 39
Undecided 12

Okay then!  Seems like there could be something more to this meme now.  Greg Sargent pulls out the internals of the WaPo poll, providing more points of interest:

The toplines: Americans agree with the first statement over the second one, 50-44. According to numbers sent my way by the Post polling team, this is more pronounced among moderates and independents:

* Independents favor statement one over statement two by 54-40.

* Moderates favor statement one over statement two by 57-37.

The overall number is lower, at 50 percent, because a hilariously meager nine percent of Republicans believe this to be the case.

Who likes to have their side accused of “playing politics” with anything?  It just sounds offensive when we’re talking about real peoples’ lives and the overall economy, no wonder only 9% of Republicans agree with statement #1.

Our third poll of the day, which Talking Points Memo’s Brian Beutler argues constitutes a “trend,” (I would agree) is one commissioned by the liberal blog DailyKos:

Also on Monday, liberal blogger Markos Moulitsas publicized the top lines of a PPP poll he commissioned, which closely mimic the the Post/ABC survey: “50% think GOP intentionally stalling economy, incl 51% of Indies, & 15% of GOPers. Details Tuesday.”

So here we have three polls showing broadly similar results to similarly-worded questions (although the exact wording of the DailyKos poll will be out tomorrow) and which also show that a majority of independents ascribe to some version of the notion that the GOP is deliberately sabotaging the economy.  As we are all surely aware now, the vast and growing “middle” of the electorate is where the true electoral battleground lies for 2012 (and virtually every modern election) so it would appear that President Obama has the upper hand with this crucial slice of the populace, no?  Steve Benen, echoing Greg Sargent, notes the inherent danger of the polls’ findings for the President:

Though in theory, it should, this won’t necessarily give President Obama a boost. The degree of national cynicism is so intense, many Americans may simply assume Republicans are sabotaging the national economy, but take their frustrations out on the president anyway. As Greg noted, “The number who see Obama as a strong leader is now upside down (48-51), suggesting yet again that even if Americans understand that Republicans are deliberately blocking Obama’s policies, they may conclude that his failure to get around them just shows he’s weak or ineffectual.”

Voters’ understanding of the political process is severely limited, and many Americans likely fail to appreciate the role Congress must play in policymaking. There are no doubt plenty of voters thinking, “Sure, Republicans are sabotaging the economy, but why can’t Obama just go around them?” unaware of the fact that, on a grand scale, this isn’t an option. (emphasis added)

Indeed, President Obama’s failure to “get around” Congress is the true reason why he’s embarked on his “jobs tour” the past couple months – taking his message directly to the people of America, urging them to contact their Congressmember and tell them to act on jobs and the economy.  In a broad sense, it appears the efforts are paying off, according to Josh Marshall.  Furthermore, the amount of braying from the GOP about “class warfare” from the President has increased proportionally as his jobs message has caught on.  Witness Rep. Eric Cantor’s aborted speech about “income inequality” (note: he canceled the speech when it was revealed that Occupy protesters planned to respond to him by exercising their free speech rights) and Rep. Paul Ryan’s speech to the conservative Heritage Foundation largely predicated on the notion that America needs to preserve its heritage of economic mobility through surprise! not raising taxes on the wealthiest among us.  (Note: he’s wrong about our economic mobility rates compared to other countries.) 

So where does all of this data leave us now?  Well it would seem that President Obama needs to work closely with the Democrats in Congress to present a focused message (not easy with Democrats, ever) regarding the GOP’s obstructionism.  Pushing the “sabotage” message, in concert with more polling data showing similar results to those presented here, will force the media to cover the sabotage meme more widely and thus put the Republicans on defense on job creation – exactly the situation they hope not to find themselves in heading into a still-very-unsettled GOP presidential primary season and an election year.  President Obama’s rather limited moves last week on student loan reform, homeowner relief and jobs proposals for veterans might represent a good-faith show of effort for those skeptical independents and moderates doubting his leadership, and they could marginally influence his standing with those key constituencies.  But overall, those moves show the Presidency’s economic weakness vis-à-vis Congress, and the relative ineffectiveness of the Executive branch’s sprawling bureaucracy to help improve peoples’ lives in a truly meaningful way.  Coordinated actions between the Executive and Legislative branches are what is needed, but until Obama and the Democrats can find leverage points to force the Congressional GOP’s hands on job creating legislation, it is unlikely the President will be able to do much more than chip away at the margins of the economic problems facing this country, winning message or not.

#OccupyWallStreet: The precursors to the occupations?

I was just reading Christina Romer’s very well-done piece in Sunday’s New York Times, making the case that announcing nominal GDP targeting should be the Federal Reserve’s next policy move (I encourage you to read the article for the details).  Here’s the key section I’d like to highlight:

HOW would this help to heal the economy? Like the Volcker money target, it would be a powerful communication tool. By pledging to do whatever it takes to return nominal G.D.P. to its pre-crisis trajectory, the Fed could improve confidence and expectations of future growth.

Such expectations could increase spending and growth today: Consumers who are more certain that they’ll have a job next year would be less hesitant to spend, and companies that believe sales will be rising would be more likely to invest.

--

Though announcing the new framework would help, it probably wouldn’t be enough to close the nominal G.D.P. gap anytime soon. The Fed would need to take additional steps. These might include further quantitative easing, more forceful promises about short-term interest rates, and perhaps moves to lower the exchange rate. Such actions wouldn’t just affect expectations; they would also be directly helpful. For example, a weaker dollar would stimulate exports.

How many of you reading this article feel that our government is “willing to do whatever it takes” to get us out of this persistent unemployment crisis, with all of its attendant suffering and economic misery?  I’d bet not a one of you – I certainly don’t think our government is trying its best to fix things.  Of course, it depends on how one defines “government” I suppose, but if you initially think of our elected branches, since we voters have the most direct control over the executive and the legislative, then no, the “government” in that sense is definitely not working on our behalf! 

And really, how ridiculous is it that the government of the wealthiest country that has ever existed can’t even act in a coordinated manner to stem the suffering of a massive segment of its population?  Or perhaps even more sinister, it appears that the government won’t act to stem the suffering.  Our elected officials have abdicated virtually any and all responsibility until after November 2012 in order to best position themselves politically and rhetorically for the electoral battles to come.  Sure the President is still hammering away on his newfound populist message, his “jobs proposal,” and is taking actions on behalf of homeowners, student loan borrowers, and prescription drug patients, among others, but let’s be honest folks, his track record on the “following-through-on-populist-sentiments” score ain’t that great…(see option, public for an example).

So now we face the absurd reality that the Federal Reserve, the quasi-governmental entity that is perhaps the least-democratic, most-opaque, and most removed from the basic economic reality of most Americans is being pushed to solve our jobs crisis through pure monetary policy.  The Federal Reserve has a dual mandate of preserving price stability as well as maintaining full employment, and the main critique of the Fed for many years has been that it has focused virtually exclusively on the former (in the form of interest rate targeting) while wholly neglecting the latter.  Despite the fact that it has been broadly apparent that allowing interest rates to rise somewhat would facilitate the creation of more jobs, the interest rate hawks within the Fed have consistently put a stop to any of those practices, warning of mythical “bond vigilantes” who will decide that US Treasuries are no longer worth investing in if the interest rate rises even a smidge, despite massive evidence to the contrary.  (The counterpoint, of course, is that investing in Treasuries represents the safest investment one can make in the troubled and volatile world markets, as while the state of the US debt and economy overall might cause debt holders concern if the rest of the world were in better shape, the relative position and strength of the US economy in the current world economy makes it a better investment vis a vis other sovereign bonds.)  But I digress.

Why are people occupying so many public spaces in so many cities across the United States and abroad?  I think it is precisely as a response to the massive systemic failure we’ve witnessed at all levels of our government to actually make a positive impact on the vast majority of Americans’ lives.  This is not to say that Americans en masse are waiting for government aid or action or anything like that, rather that the silliness we are witnessing playing out on Capitol Hill and in the White House, the constant tit-for-tat, is leading Americans to see their government as willfully sitting on its perfectly-capable hands, rather than deigning to lift a finger to tilt the scales of justice even minutely back on their side. 

A significant portion of these Occupiers likely played a large role in electing President Obama in 2008 – the sense of triumph in that election was not simply due to the historical nature of electing the first African-American president, but because Obama appeared to represent a turn of the page, or perhaps, a close of the book, from the utter depredation of the Bush Administration, hollowed out to a shell of itself in the end due to its sheer lack of competence.  Post-Katrina America had scars, deep scars affecting the national sense of whether the government was truly acting in our interests or not if it could bungle emergency management so completely. 

Obama represented a shift towards competence, towards smart folks who looked at the data to get things done and make decisions…and yet, after the health care debate, the pyrrhic victory of an apparent giveaway to the health insurance industry, combined with the Wall Street-friendly nature of the new Administration, and the declaration that many of the high-level prosecutions that many desired for actors both inside and outside of government were to be strictly off-limits by Obama and Attorney General Holder marked a certain continuity between the Bush and Obama Administrations: elites are coddled, bailed out, and constantly regaled, no matter their transgressions.  The little people, the 99%, have no place in this insular Washington-Wall Street-Pentagon calculus.

The election of Obama, in this narrative, represents not the shift, the hope, the change that people were hoping for, but the continuation of the perpetual insult to the nation’s sense of values and fairness – an insult that, prior to the rise of the Occupy movement was largely undefined and nameless for many Americans.  Guantanamo, Abu Ghraib, bank bailouts, auto bailouts, the death of the public option, no Wall Street prosecutions, no torture prosecutions, warrantless wiretapping, unmanned drone strikes on countries and civilians we aren’t at war with, wars that are declared against enemies that are largely undefined…whose heads roll for any of these awful decisions? 

The failure of our institutions, and the growing widespread understanding of that fact, as I alluded to a few weeks ago, and more obliquely, in the title of my last blog post “Don’t think it’s not bipartisan, it is,” is profoundly bipartisan.  It had to be to manifest itself so clearly to so many at just this point in time.  Just as you would likely not have a Tea Party had John McCain won, the nature of the Occupy movement, if it were to exist in an alternate world under a McCain Administration, would be very different to what we see today.  It took the failure of Obama, the landslide-elected change agent to bring justice, to bring accountability to the corrupt elites of this country, for the Occupy movement to spring up.  In this case, perhaps the Change that is thus far unrealized will be the catalyst for the realization of the true Change, whatever that may be. 

The bipartisan failure is a wholesale indictment of the entire construct of democracy in this country, and has likely soured many in the Millenial generation on the act of voting itself.  Perhaps democracy, as it is now constructed, is not in fact the method for enacting the change we wish to see in the world?  Could it be that the leverage points upon which the entrenched interests and powers can bring their influence to bear on candidates and nominating parties in our democratic system are simply too numerous and too porous?  The vast constellation of special interests funding candidates these days ensures the ascendance of a certain type of candidate: one who must be conversant in the ways of money, though preferably not “of” money (they’re easier to control with the promise of high-paying post public service jobs, you see) and who have hewn lines that conform to the dominant economic and social memes of the day, thus ensuring the continued preservation of the entrenched classes.  Any “change” will thus be marginal, minimal, the scraps thrown to those too poor to afford their own public affairs divisions or hired-gun lobbyists to press their case in the halls of power. 

Ultimately, though, it doesn’t matter whether Obama speaks the right words, or even whether he follows through on his newly populistic leanings with actual substantive legislative victories; the narrative is no longer his to drive, nor is it the GOP’s or the Tea Party’s.  They are reacting, all of them.  Consider:

Occupy Wall Street has already achieved a stunning victory – a victory that is easy to overlook, but impossible to overstate. In just one month, the protesters have shifted the national dialogue from a relentless focus on the deficit to a discussion of the real issues facing Main Street: the lack of jobs -- and especially jobs with decent benefits -- spiraling inequality, cash-strapped American families' debt-loads, and the pernicious influence of money in politics that led us to this point.

To borrow the loosely defined terms that define the Occupy movement, these ordinary citizens have shifted the conversation away from what the “1 percent” -- the corporate right and its dedicated media, network of think-tanks and PR shops -- want to talk about and, notably, paid good money to get us to talk about.

What were you reading about daily in the newspapers as recently as 6 weeks ago?  Austerity austerity austerity.  What did the Occupy movement bring to the table?  Non-manufactured talking points that actually speak to people.  Something you can bring home to your family and discuss at your kitchen table as a concept that everyone understands, intuitively.  Fair wages, decent jobs, non-criminal banks, supporting your neighbors and your community.  These are American values, no matter what the cable news pundits say who myopically search for the “demands” of the Occupy movement despite the hundreds and thousands of protest signs shouting demands right at them. 

People want a fair shake, for themselves, their children, their coworkers, their neighbors, their fellow churchgoers.  That’s pretty much all I’ve come up with, at the end of the day, and it’s pretty simple.  How we get to the fair shake for all is the more complicated problem.

Max's November 2 California Voting Suggestions

In a few prior elections I’ve provided relatively informal election guides to my friends and family as a small service to those who may not follow the news, and particularly politics, as closely as I do.  Given that these midterm elections on November 2 are shaping up to provide a veritable cornucopia of answers to some of the fascinating open questions bouncing around in our nation’s collective consciousness (Can crazy Tea Partier candidates really win contested seats?  Will the first-time voters that Obama brought out in 2008 return to the polls this year?  Will a 7-1 Republican advantage in spending by third-party groups, fueled by the Supreme Court’s heinous Citizens United ruling dramatically shape the election outcome?  Will Texas oil companies and Koch Industries roll back California’s progress on building a clean energy economy?  Will pot be legal?)

To me, the overarching question facing our nation is whether we will meet the collective challenges we face with courage and a willingness to continue to trod towards the new direction President Obama has outlined for us, or whether we will return to the policies of the previous administration.  Make no doubt about it, this election is about fear versus courage, and the forces that benefit from the continued economic, social, and health-related misery of Americans have been working nonstop to stimulate that fear in our country.  It is about standing up and facing the challenges put before us (climate change, an economic recovery without jobs, ongoing fraud at the highest levels of our financial and banking sectors, resource scarcity, increasing foreign economic competitiveness, etc.) with a clear understanding that setting ourselves up for long-term gains and prosperity may require some short-term sacrifices. 

Okay, so on with the candidates and ballot propositions, with the propositions’ ballot language quoted in the text below:

Ballot Propositions

Prop 19 – Legalizes marijuana under California law but not federal law.  Permits local governments to regulate and tax commercial production, distribution, and sale of marijuana.  YES

This was a tough one for me, because while I’m not wholeheartedly in favor of legalization, as I believe there could be unintended consequences, and I don’t use the stuff personally, so I won’t be directly affected, but nevertheless, there are three reasons I’ll vote for Prop 19.  1) A vote against the “War on Drugs” that has been a massive failure at the federal level; 2) Potential extra tax revenue for the state – whether it’ll really be $2 billion as proponents have claimed is doubtful due to simple supply and demand issues (if there’s more pot available on the market and buyers no longer have to pay a premium to compensate their suppliers for the risks they run, prices will go down) however anything helps California’s budget at this point; 3) A vote against the “incarceration-first, maybe-rehab-later if we have the budget for it” mentality that reigns in this country – once we can treat addictions as the diseases they are, rather than as simple crimes, I believe that will lead towards a far more humane crime control policy.

Prop 20 – Redistricting of Congressional Districts.  Initiative Constitutional Amendment.  YES

Another tough vote, as the political support and opposition to this particular initiative is a by-product of California’s Democratic-heavy political leanings.  In 2008, California voters passed Proposition 11, which instituted a Citizens Redistricting Commission, taking the power to draw the lines of state Assembly and Senate districts out of the hands of the legislators themselves and placing it in the Citizens Commission.  Prop 20 would extend the power of the Citizens Commission to redraw the lines for federal Congressional districts as well – something the Democrats in the state are wholly opposed to, due to the fact that, with non-gerrymandered districts, Democratic seats could be put at risk.  As a Democrat, I’m obviously not terribly interested in seeing Democrats lose seats in Congress; but as a citizen, I believe that we need to force politicians to actually fight for their seats, not just win by virtue of the proportion of registered Democrats to registered Republicans in their districts.  This is an anti-incumbent protection act, and therefore, I wholeheartedly urge a YES vote.  For more on the Proposition 20 opposition’s fairly anti-democratic campaign, see this article from LA Weekly.

Prop 21 – Established $18 annual vehicle license surcharge to help fund state parks and wildlife programs.  Grants surcharged vehicles free admission to all state parks.  Initiative statute.  YES

This one’s fairly straightforward – if we want to have the state supply services, we have to pay for them, plain and simple.  Gov. Schwarzenegger had to cut a lot for our budget to pass this year, and a YES vote on this proposition would help restore some needed services, including state parks.

Prop 22 – Prohibits the state from borrowing or taking funds used for transportation, redevelopment, or local government projects and services.  Initiative Constitutional Amendment.  NO

This is another tough one.  I strongly disagree with the State government swooping in and taking funds that are earmarked for local governments and using them on State priorities, however, I also am opposed to placing more budgetary restrictions on the State government.  The amount of discretionary budget that the State has authority over has shrunken over the years, and I’m afraid that placing more restrictions could have far-reaching implications.  I support local governments wholeheartedly, but sadly, on this one I have to recommend NO.

Prop 23 – Suspends implementation of Air Pollution Control Law (AB32) requiring major sources of emissions to report and reduce greenhouse gas emissions that cause global warming, until unemployment drops to 5.5% or less for full year.  Initiative statute.  NO

This is the one proposition I”m most concerned about, and I strongly STRONGLY urge a NO vote on it.  The Texas oil companies claim that stopping AB32 would create jobs, when the fact is, oil is a dying industry, particularly in California, where most of the oil has been extracted already.  If our economy is going to grow stronger, we need to ensure that we’re investing in new and innovative technologies, as that’s where the job growth is going to come from.  The LA Times ran an article today that essentially comes down to Valero (the primary oil refiner funding Prop 23) attempting to extort Californians for money: “But whatever the cost [of the regulations], [CEO] Klesse said, "it will all be passed through to the consumer. The companies aren't going to able to absorb this or they're going to go out of business."”  Of course, after being asked what happens if Prop 23 gets defeated, Klesse relents a bit: "We'll let the voters vote," he said."We're in business in California and it'll just continue. And we'll see what the actual regs look like, and then we'll take actions around them."

Let’s vote to stop the oil monopoly over our transportation sector – the oil companies couldn’t threaten us with such economic harm if our energy portfolio were diversified.  Let’s vote to send a message.  NO on 23.

Prop 24 – Repeals recent legislation that would allow businesses to lower their tax liability.  Initiative statute.  YES

Our state needs revenue, and everyone’s got to pay their fair share – yes, even businesses.  California’s already seen as an anti-business state, is this going to be the straw that breaks the camel’s back for a lot of business owners?  Unlikely.

Prop 25 -  Changes legislative vote requirement to pass budget and budget-related legislation from two-thirds to a simple majority.  Retains two-thirds vote requirement for taxes.  Initiative constitutional amendment.  YES

It’s time to be done with the 2/3 majority for passing the state budget each year.  The process enables the Republican minority in the state Legislature to wield outsize influence in budget negotiations, which leads to individual lawmakers sneaking pet projects in as bargaining chips, and a generally wasteful process.  This proposition should have been on the ballot many years ago, but things are at a point now where it’s long past time to get rid of the special-interest welfare that is the 2/3 budget majority.

Prop 26 – Requires that certain state and local fees be approved by two-thirds vote.  Fees include those that address adverse impacts on society or the environment cause by the fee-payer’s business.  Initiative constitutional amendment.  NO

Reread that proposition again...”Fees include those that address adverse impacts on society or the environment cause by the fee-payer’s business.”  See, this is a backdoor way for big polluters and/or other businesses that may pollute to make it harder for communities that are affected by their pollution to charge them for it.  This reduces the autonomy of local governments and is a way for polluters to sneak in a way to not have to pay for their messes – the way BP was poised to do until President Obama intervened. 

Prop 27 – Eliminates state commission on redistricting.  Consolidates authority for redistricting with elected representatives.  Initiative constitutional amendment and statute.  NO

This is the evil twin of Proposition 20, plain and simple.  This is a ballot measure that was put on the ballot by the folks who have been gerrymandering California political districts for years (see the above LA Weekly article for more) and it is a direct effort by the federal Congressional delegation to wrest power from the hands of the Citizens Redistricting Commission, so they can continue to protect themselves from having to face real competition.  I may be a Democrat, but corruption is corruption.  Definitely vote NO on this one. 

 

Statewide Candidates

Okay, small disclaimer here: I follow politics pretty closely, but I will admit that when it comes to a lot of these candidates, I honestly don’t really know too much about them.  Rather than make statements about candidates, I just say to vote what your conscience tells you.  Below I’ll just run over my reasons for voting for the few statewide races I really DO know something about (and for expediency’s sake, I’ll only do the major-party candidates, so sorry third-partiers, I support your efforts, I really do!)

 

US Senate – Senator Barbara Boxer (D) vs. Carly Fiorina (R)

My Recommendation: Vote Boxer

Here’s the matchup: a longtime liberal California politician against a successful corporate CEO from Silicon Valley.  In this “anti-incumbent” mood the media keeps telling us our country is in, one would expect Californians to go for the businesswoman, right?

Now, what if I told you that that businesswoman had outsourced thousands of jobs while she was CEO of Hewlett-Packard?  Boxer hit this note with what I think is one of the most effective ads that I’ve seen in this LONG campaign season:

What happened to all of those workers laid off due to the merger of HP and Compaq, and those other workers laid off because Fiorina outsourced their jobs?  Well it’s certainly conceivable that they ended up on state unemployment rolls – it’s easy to claim you’re a “fiscal conservative” when you have the state to cover for the destruction you leave in your wake…Fiorina has that attitude in common with Wall Street: privatize the profits, socialize the losses.  And she’s a patriot how exactly?

Boxer, on the other hand, is the Chairwoman of the Senate Environment and Public Works Committee, a position that gives her a major hand in shaping our country’s environmental priorities.  She is an avid supporter of a woman’s right to choose and for promoting the common good more generally.  I’ll be proud to vote for Boxer tomorrow. 

Governor – Attorney General Jerry Brown (D) vs. Meg Whitman (R)

My Recommendation: Vote Brown

This is Jerry Brown’s second go-round attempt as California Governor (he was Governor before California voters imposed term limits, so he can try again legally) and I strongly believe he’s a great choice for Governor.  Brown is off-the-cuff, a relatively fiscally conservative Democrat, and he also pioneered some visionary environmental policies in his time as Governor in the 1970s.  As he’s said recently, he’s old, and he’s not running for Governor as a stepping-stone to another office, but as an end unto itself.  This fact in and of itself gives me hope that he’ll be bold in his actions (as he doesn’t need to worry about future voters looking askance at his unorthodox approach to governing) and yet he’ll have the best interests of Californians in mind (again, not running for another office means he doesn’t need to please campaign donors, so he may well upset both the unions and the corporations). 

Beyond all of that, though, Meg Whitman would be a disaster for California.  Why is this woman running for office?  What does she want?  Who the heck is she really?  After spending $140 million of her own money on this campaign, Californians don’t really have any answers to those questions, and that speaks to a fundamental problem with Meg Whitman herself.  Some commentators have said that she hasn’t “connected” with voters, but I think there’s a simple lack of trust from voters, since it’s unclear what she’s even running for – many have suggested that she just wants to give herself and her rich friends a massive tax break by eliminating the California state capital gains tax (estimated at between $8 million and $40 million for eMeg) and it appears she didn’t bother to vote for 28 years of her life.  She’s flip-flopped all over the place in her policies from the Republican primary against Steve Poizner to the general election against Jerry Brown – after winning the Republican nomination, coming out claiming that she’s not that different from Brown on illegal immigration, but after it was revealed that her housekeeper of 9 years (whom she called a “part of the family”) to now last week claiming the maid, Nicky Diaz Santillan, should be deported.  I guess “family” ends when the political going gets rough, eh? 

So enough about this nastiness.  Meg Whitman is just not what this state needs right now, and Jerry Brown, while surely flawed, at least has a sense of public duty after all these years of service, and appears to have the right intentions in his heart.

Lieutenant Governor – Gavin Newsom (D) vs. Abel Maldonado (R)

My Recommendation: Vote Newsom

Secretary of State – Debra Bowen (D) vs. Damon Dunn (R)

My Recommendation: Vote Bowen

Debra Bowen has done some great things as Secretary of State, including attempting to revamp the state’s voting system and implement long-overdue reforms.  This may seem like a random office, but it’s incredibly important for the preservation of democracy and the security of our votes.

 

Controller – Controller John Chiang (D) vs. Tony Strickland (R)

My Recommendation: Vote Chiang

Chiang has shown some surprising backbone in fighting Schwarzenegger’s draconian cuts the past few years, and I think he’s got a good thing going.

 

For Treasurer, Attorney General and Insurance Commissioner, I really can’t say that I know enough about the candidates or their histories to make a strong recommendation either way.  Plus, this posting is getting way too long, and it’s late.  I don’t know if anyone will even bother to read this, but oh well, I wanted to at least get something out there for those who happen across this blog.

Vote well, all.

New layout, and some good reading

I’m experimenting with a new site layout to try and make my blog more reader- and user-friendly (and more orange!)  Please feel free to comment and/or make suggestions about the design in the comments section if you’re so inclined.

While I have a more substantive post in the works concerning my personal suggestions for the upcoming November 2 elections here in California to be posted later this week, I figured I’d throw some great articles/blog posts I’ve been reading out there in case people are interested.

Election Polling: For the past couple months this election season I’ve been closely following DailyKos’ Steve Singiser for his nightly Polling and Political Wrap.  As I’ve noted previously, there is no doubt that DailyKos is a liberal site, but the fact is, Singiser provides an invaluable service in collecting the day’s polling data and providing some analysis of the results in an easy-to-read format.  From what I can tell, Singiser posts the Wrap each evening (aside from weekends) around 7-8PM PST, so if you’re excited about/dreading the elections this year and you’d like to follow the polling action as it develops, I can’t recommend a better source.

Speaking of election polling, the Pew Research Center for People & the Press released a groundbreaking study today documenting the fact that many pollsters rely on a fairly outdated polling methodology that tends not to contact voters whose sole telephone in their home is a cell phone (including yours truly and many other young voters).  This may be skewing polling data in favor of Republicans by 4-6 percentage points according to Pew’s research.  Josh Marshall at Talking Points Memo picks up the thread:

I would strongly recommend that Democratic enthusiasts not start adjusting the polls they're seeing by a 4-6 point margin. I will, shall we say, believe this one when I see it. It's also important to note that a number of national pollsters are already incorporating cell phones. Where the real vulnerability comes is in state and district polls and robo-pollsters -- like Rasmussen, PPP and SurveyUSA.

Again, in the past the differences usually seemed too small to figure significantly into the prediction equation. But this could be the cycle where that changes.

So yes, we’ll see what happens this election, and if pollsters have to make major alterations to their sampling models going forward.  It may seem trivial, but there’s nothing like polling to set the tone of an election season, and if those polls are incorrect (think Dewey defeats Truman) people could stay home because they think their team will lose, when in fact the opposite may be true.

Honoring our fallen heroes

Image by Beverly & Pack via Flickr

It was a poignant moment for me, if a bit flustering.  My grandfather and I were sitting at breakfast last Monday morning, Memorial Day, following a cousin's wedding over the weekend, and my grandfather asked me why the news never shows videos of flag-draped caskets returning our fallen soldiers from battle anymore?  His remark was a simple one, that those soldiers deserve to be honored for their sacrifices, and that it seems that everyone has forgotten that we're still at war these days.  I didn't have a good response for him, beyond my wholly unsatisfying initial reaction that most likely the news media didn't see any profits in devoting airtime to returning caskets from our wars overseas.  My grandfather asked me that I do some investigation into the matter, and that I post whatever I found on my blog, since he's a subscriber, and would be interested to see what I dug up.

First, a bit of background.

My grandfather, William G. Moir, or "Fahtie," as we grandchildren know him, is a Navy veteran who served in the Pacific theater in WWII.  Like many veterans, Fahtie has never spoken much about his experience in the war, or at least, he has never volunteered information about his service.  Since my childhood I have always felt as though he was a man who served his country proudly and bravely, but that when he returned to civilian life, he dedicated himself to providing a good life for his family (which later grew to 7 children) and never much sought to relive his experience through retelling it to his offspring.  More likely, Fahtie just never had the time nor inclination to turn his personal war story into a shared family story; working as a traveling salesman, raising many children, putting himself through night school for an MBA from the University of Chicago...it sounds like he had plenty else to do.

But nevertheless, the sheer lack of Fahtie's war story over the course of my childhood created a situation where even his glancing references to his experience, or to topics surrounding the military, elicit a feeling of import, of significance, for me.

And so it was this past Monday morning; Fahtie's seemingly simple question as to why we never see images of the fallen returning home from war struck me to the quick, and I felt...shame.  Shame for our consumerist modern culture that has neither the time nor the attention span to honor those who have sacrificed on our collective behalf; shame for the fact that a solemn event has been politicized in our hyper-partisan world.  I wanted to honor the fact that Fahtie had entrusted me with his feeling of outrage at the lack of honor accorded to our fallen heroes, to somehow find a way to redeem his faith in modern America, and thereby to redeem my own and future generations in his eyes as we collectively move further away from the historical and proper treatment of the war dead...but there was no way to do it.  Our world, our culture as it is constructed today, can never offer the kind of respect and dignity that is deserved by those who sacrificed all, and yet, I believe that we're doing slightly better these days.

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Tonight I began searching around online to find out what exactly the story was behind President Obama's decision to allow the media to film returning caskets when they arrive at Dover Air Force Base in Delaware.  What began as a simple Google search has taken me far beyond what I initially had imagined.

First, CNN's initial report announcing President Obama's decision from February 2009:

The Pentagon will lift its ban on media coverage of the flag-draped coffins of war victims arriving at Dover Air Force Base in Delaware, Defense Secretary Robert Gates said Thursday.

But the families of the victims will have the final say on whether to allow the coverage, he said. President Obama asked Gates to review the policy, and Gates said he decided after consulting with the armed services and groups representing military families to apply the same policy that is used at Arlington National Cemetery.

"I have decided that the decision regarding media coverage of the dignified transfer process at Dover should be made by those most directly affected -- the families," he said at a news conference.

The report mentions the controversy surrounding the decision to lift the ban and covers both sides, but further searching revealed a nuanced article from the Columbus Dispatch:

The arrival of war dead at Dover has long pitted free-speech advocates against the government, which had been accused of using the ban to hide the horror of war from the public.

In 2004, Vice President Joe Biden, then a U.S. senator from Delaware, said, "The idea that they are essentially snuck back into the country under the cover of night so no one can see that their casket has arrived, I just think is wrong."

This year, the Obama administration sought a middle ground. Defense Secretary Robert Gates lifted the ban but said families should decide whether the media cover the homecomings of the fallen: "We ought not presume to make that decision in their place."

The fact that military families are now at least afforded a choice of whether they wish for media to be allowed to cover the arrival of their loved one appears to me to be a step in the right direction, however with the lifting of the ban, the expectations for media coverage appear to have left some families slightly surprised:

So Gloria Crothers of Edgewood, Md., was a little taken aback when just two news crews appeared for the arrival of the bodies of her son, Army Sgt. Michael Heede, and another soldier from Maryland. She wasn't so much disappointed as surprised, she said. "I was told there could be quite a few" news crews.

But a few is the norm, said Maj. Carl Grusnick, an Air Force spokesman. Often the only professional journalist is a lone AP photographer. 

"The feeling is that somewhere there is a hometown, a family, a newspaper for whom the homecoming of the soldier is very important news," said Paul Colford, an AP spokesman. "So we have made the commitment to covering each and every one of those at Dover."

The AP is doing an honorable thing, covering each and every arrival (that they are allowed to) which is as much of a public service as anything else.  Further searching turned up the AP's online archives of all of their images of caskets returning from overseas - they refer to them as "casualty returns." The images are there for commercial purchase and use, but as a rough guide to the procedures and ceremonies around the casualty returns, they are quite poignant.

Continuing from there, the Columbus Dispatch ends its article on a far more upbeat note that I believe sums up exactly why we ought to film the casualty returns in the first place:

Since the media ban was lifted, the military also started paying for families to travel to Dover to welcome their loved ones home. More than 70 percent of families have made the trip.

That's what mattered to Shane Wilhelm of Plymouth, Ohio: being there for the quiet, white-gloved military rite. Wilhelm said it made him feel proud of his 19-year-old son, Army Pvt. Keiffer Wilhelm, and of his country.

"It was representative of the United States, that's the way I viewed it," he said. "It shook me to the bone, but it made me feel proud instead of having all that grief. All these people are here all because of my son."

The ritual, the honor afforded to the dead is presumably a key element in a family's grieving process, and if it helped Mr. Wilhelm to be able to attend his son's arrival in person, then that would appear to be a great addition to the military's services to surviving family members.

But all that aside, why aren't we seeing more coverage on TV, as Fahtie asked me to investigate?  A CNN article ominously entitled "Interest in photographing return of war dead to U.S. wanes" gives some insight:

Of those 472 (casualty returns), about 260 -- or 55 percent -- have been open to media coverage, according to statistics from the Mortuary Affairs office. And over the past year, the media attendance has dropped off to a trickle.

"Those numbers reflect that the interest in covering the story diminishes as the story becomes repetitive," said Ralph Begleiter, a former network correspondent and now professor of communications at the University of Delaware....

...Many major news organizations rely on the fact that The Associated Press is covering these events, and will keep the images as they are brought in, but often they are still not used.

"Just because things are covered does not mean the public sees it. Lots and lots of things are covered [by news organizations] but then never actually end up on the air," Begleiter said.

So we see that the majority of families are opting to have their loved ones' arrivals open to media coverage, yet the media isn't covering the arrivals beyond perhaps buying the AP's photos of the event.  My hunch, borne out by the facts over the last 9 years of war, is that there is not a shared sense of loss among the public because there is not a shared burden from the wars we are fighting among the public.  In the days of an all-volunteer military, with the prospects of a draft being negligible (barring catastrophe,) the vast majority of the suffering and the hardships of war will fall on those families whose loved ones chose to serve.  And yet, there are striking reminders of the private tolls endured by families out there in the world if one looks for them.

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If it's not apparent, all throughout this article I've been interspersing links to various other websites, photo archives, and news reports, and those various resources out there led me to the conclusion I've finally come to: while our society may be too stratified, too hectic, too narcissistic in the aggregate to honor our returning war dead in the unified way we used to when there were only three major news networks, the sheer volume of information and resources out there far exceed what was possible in the Vietnam era.  Beyond that, there are amazing communities of people who gather online (and in person, naturally) to share stories, remembrances, and to honor the dead, far more than I have represented here.

And just to show that the world is full of "surprises," I would like to make note that at the infamous liberal website DailyKos.com (itself founded by Markos Moulitsas, a military veteran) there is an ongoing series of diary posts entitled "IGTNT" meaning "I got the news today," which honor those who have died serving in our armed forces.  The description of the IGTNT series follows below (note that there are a number of online avatars/usernames sprinkled throughout, which makes for awkward sentences if you're not familiar with the use of avatars):

I Got the News Today is a diary series intended to honor, respect and remind. This series, which was begun by i dunno, is currently maintained by Sandy on Signal, noweasels, monkeybiz, silvercedes, MsWings, greenies, blue jersey mom, Chacounne, Wee Mama, twilight falling, labwitchy, moneysmith, joyful, roses, SisTwo, Avila,a girl in MI and me, SpamNunn.

These diaries are heartbreaking to write, but, we believe, an important service to those Americans who have died, and to our community’s respect for and remembrance of them. If you would like to volunteer, even once a month, please contact Sandy on Signal, monkeybiz, or noweasels.

As you read this diary, please consider that the families and friends of those profiled here also may read it and that many members of our community have served in the Armed Services of the United States of America.  I hope that our comments tonight will demonstrate our respect for the sacrifices of our fallen military and our compassion for their families, whatever our personal or political feelings about the current war or any war happen to be.

While the vast majority of DailyKos users oppose the wars in Iraq and Afghanistan, this just goes to show that even peaceniks can rally around our troops and honor their sacrifices.  A particularly touching diary post is here, about the recently-identified remains of two WWII pilots who were lost over Germany.

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So ultimately, Fahtie, I don't have a good answer for you.  I've spent quite a few hours working on this blog posting now, and I suppose the topic of how we honor our war dead, and why it is different than before, will be one I will have to investigate further and return to in the future.

The future of finance?

My schedule has not permitted me to post anything fully-developed for quite a while, but tonight I have a few multimedia treats for you, building off of the news themes of recent weeks.

First off, "Quants, The Alchemists of Wall Street."  A film made about the mathematical geniuses who created the models that have been largely running the financial world for a number of years now.  While that may not sound like the most interesting subject matter, I highly recommend taking 45 minutes and watching the film, there's lots to learn:

I thought this was an interesting little film as it stood, however the second half takes a surprisingly prescient turn in that the interviewees (or "quants," short for "quantitative thinkers," I assume) begin to discuss "high frequency trading," a term that sprang into the wider international consciousness following last Thursday's as-yet-unexplained 1,000 point drop in the Dow.  The idea of high frequency trading (or HFT) is that arrays of computers are set up to catch any variations in a stock's price that exceed or fall below certain parameters, or that follow Google search terms and will buy or sell stocks based on what's "hot" on Google at that moment.  Those parameters are set by mathematical models created by quants.

There are a host of scary implications that result from high frequency trading (not least of which is that these computers essentially set up parallel market structures that operate outside of public scrutiny) however there is a somewhat more mundane detail that the film raised that I'd like to focus on.

One of the quants notes that the NYSE is going to be (or perhaps already has by this point) setting up a warehouse in New Jersey that will house huge arrays of computers, each belonging to the various financial firms, where they will engage in further HFT.  The idea is that the computers will be closer to the NYSE than before, and therefore they will have a faster data connection to the stock market.  A further implication is that certain firms will get "privileged" connections that will afford them a tenth of a second advantage over the other firms; how those firms are chosen, be it through lottery or through financial transactions with the NYSE (read: bribes), is unclear.

There are certain industries in the world that are capital-intensive, in the sense that those industries required a large amount of resources, be it money, physical inputs, or large areas of land, to operate.  Steel is a capital-intensive industry, as is telecommunications, which requires the development of a significant amount of infrastructure to operate.  Clearly the world of finance is a capital-intensive industry, as a firm generally requires large amounts of money to operate, however "boutique firms" have always existed that were able to operate with smaller amounts of cash.  With this impending shift to a computer- and geographically-dominated business model, I wonder if finance is becoming more capital-intensive too?

Consider that if you're a small player, you're going to be forever outmaneuvered by the big firms who have prime locations for the fastest connections for their computer servers in New Jersey, plus offices full of top-quality quants figuring out the most accurate (or at least, the least wrong) algorithms that are then fed into the computer systems constantly.  How is a small firm supposed to compete against that?  This sort of situation can only lead to further consolidation of the financial sector into fewer firms controlling more of the wealth in this country.  As I discussed in my previous post, further consolidation of wealth is a very bad thing indeed.
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And now for something only slightly different...

A further interesting implication of the film was the concept put forth by a couple of the quants that economists in recent years have begun to regard themselves as "scientists;" that their models predicting financial market movements and concepts were "laws" that would be proven correct no matter the circumstances.  This, despite the fact that economics has, since its inception, been considered to be one of the social sciences, these economists who were running the world of finance believed themselves to be masters of the financial universe.

There is a small problem with the underpinnings of these economists' views of the world, however: humans are messy.  To the extent that any sort of "science" is based on looking at human behavior in the aggregate there will always be room for inputs that simply break one's perfectly-calibrated model of the world.  So to the extent that finance is based off of the actions of many individual stock traders and firms run by financiers, perhaps it, too, should be considered a social science?  At least the world of theoretical finance, such as the world in which these quants operated should be, as they're modeling human actions in the aggregate, much in the same way that economists do.  Therefore, as even the quants recognize in the film, their models may not have failed, but the ways that the models were used and manipulated by the non-quant stock traders to make money is at least one part of what contributed to the financial meltdown in 2008.  Humans are unpredictable, and while it's a valiant effort to try to model human behavior, the more I read and the more I learn, the more futile, ultimately, I think it may be.  Just a small observation...

__________________________________________________________________________________

Finally tonight, the terrible, terrible story of what happens when the financial markets run out of subprime mortgages to invest in: they turn to "commodities."  Commodities markets trade derivatives of actual, physical goods, such as corn/maize futures, oil futures, or gold.  I don't wish to get into how the derivatives contracts work (partly because this post is already long enough and partly due to the fact that they're bloody complicated) but suffice it to say that firms betting on the futures markets can drive the prices of commodities up in a way that is completely unrelated to the underlying supply and demand fundamentals of that commodity.  Witness the continued high price of oil despite the fact that oil consumption is the lowest its been in years (see the link above for more on that).

These effects can be devastating for the poor and middle classes around the world, and sadly, the financial reform bills currently being debated in the Senate may do little to nothing to halt the devastation.

For Rounds 2 and 3 of the feature films tonight, I bring you an interview with Indian economist Jayati Ghosh, who explains to us that when finance gets its hands on the very food you seek to feed your family with, prices often will go up, to everyone's detriment.  This interview will infuriate you, and you'll want to yell at your computer screen "how can humans be so immoral as to create food bubbles and starve the poor???"  Well having seen "Quants" now, and gaining a bit of access into the mind of the modern financial mathematician, I can see, to an extent, how that might happen.  When you're dealing only in abstract numbers, looking for the most promising market to invest in, with no concept of the fact that your actions will increase the price of corn to be used for tortillas in the slums of Mexico, then it's very easy to buy into that bubble.  Does modern finance add any social value to our society?  It's really hard to tell these days, but I guarantee I'll come back to that theme.

Part 1:


Part 2:


I have been working on more complex postings having to do with the nature of the financial/political nexus that has developed and subsumed our political life in this country, and I hope to post those soon.  Furthermore, the oil spill in the Gulf of Mexico and the Greek debt crisis are all fodder for future postings, if there's time...

The Continuing Scourge of Too Big To Fail

Image by Getty Images via Daylife

I had the distinct pleasure of hearing Simon Johnson, an economist and professor of entrepreneurship at MIT's Sloan School of Business (and former Chief Economist for the International Monetary Fund) speak last night at a wonderful event produced by Zocalo Public Square, a local LA non-profit public affairs forum.  Johnson also is the author (with James Kwak) of the recently published 13 Bankers, about the financial crisis and how to stop another crisis from occurring again, and blogs at the Baseline Scenario, a blog I've been following for months and have linked to several times previously.

Johnson spoke quite emphatically about the need for fundamental financial reform, not as a partisan of any stripe (indeed, he claims to be a free-marketer more than anything else) but because the current financial system we have is not actually "capitalism" per se.  Why is that?  Well the phrase "too big to fail" (TBTF) signifies the problem at the center of our financial crisis, and within TBTF lies the potentiality for a future crisis even larger than the current one.  

First of all, what is "too big to fail"?  While we've certainly all heard the term bandied about since September 2008, I imagine there is some confusion out there.  The concept is that the financial institutions that were bailed out through the Troubled Assets Relief Program (TARP) instituted by former Treasury Secretary Hank Paulson, Federal Reserve Chair Ben Bernanke, and President Bush, among others, simply held too many assets in our economy, and were too interconnected, to be allowed to declare bankruptcy.  If the financial institutions (banks, such as Bank of America, and investment houses, such as Goldman Sachs) were allowed to fail, as Lehman Brothers was, then those failures would lead to an unprecedented breakdown of the global financial markets.  Furthermore, due to the interconnectedness of the various players in the markets, the thinking goes, the failure of one of the financial institutions could lead to the failure of others.  Why the institutions were all so interconnected is perhaps beyond the scope of what I'd like to say here today (in interests of length), but suffice it to say that AIG is one of the primary sources of the interconnectedness, and Goldman Sachs is another.

How did we get to this point where the banks were so big and interconnected that they could not fail without bringing down the global economy?  Well, I could try to explain, but I think I'll let Prof. Johnson explain, with the help of Steven Colbert:

The Colbert Report	Mon - Thurs 11:30pm / 10:30c
Simon Johnson
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Prof. Johnson raises a few points that are worth elucidating in that segment; first of all, the idea that the TBTF banks have an incentive to act recklessly and to take foolish risks with their investors' money.  This concept is known in economics terms as "moral hazard," and is essentially the idea that if you have a guarantee that the risks you face have been either eliminated or severely reduced by another party, then you will be inclined to take larger risks than you would without that guarantee.  Take, for instance, driving a car without auto insurance versus driving with auto insurance; you're likely to drive far more slowly and carefully without insurance than you would with insurance, because with your insurer's guarantee that they'll pick up any financial losses you incur through poor driving, you are not "on the hook" for your mistakes in the same way you would be without insurance.

The implicit backing of the government that came with the TARP bailouts of the largest financial sector players creates a moral hazard scenario in just the same way.  If a TBTF investment firm received a government bailout, then the individual managers and employees at that firm will be liable to take risks that they would not otherwise, as whatever they do, the government will ensure that their poor decisions don't cause the firm to go bust.  So, far from reducing the incentives of financial firms to reduce their exposure to risky investments, the bailouts in fact increased the incentives of firms to take massive risks, and to leave taxpayers to foot the bill.

A second point to discuss that is a corollary to the first (and which Johnson spoke at length about last night) is that the TBTF firms, with their implicit government backing, are receiving preferential treatment in the financial markets that are creating advantages for the banks to become even larger.  Essentially, because the government will not allow the TBTF firms to fail, they receive reduced interest rates when borrowing from private lenders.  Because the lenders perceive the TBTF firms as "safer" investments than firms that don't have government backing, they are willing to reduce the interest rates they charge the TBTF firms compared to other firms.  Naturally, this situation distorts the market's functioning, and gives the TBTF firms an advantage over their competitors that allows them to gain even larger market shares.  Hence, the failure of capitalism due to government intervention in the marketplace.  Johnson estimated the interest rates of the TBTF firms were reduced by approximately .7-.9% compared to their non-TBTF competitors, which may not sound like much, but when applied to loans and trades of billions of dollars at a time, those fractions of percents add up to large sums of money.  

So what is Prof. Johnson's solution?  To break up the TBTF firms into smaller, more manageable (and less economically dangerous) firms.  Johnson and a number of other significant economists estimate that a $100 billion limit on total assets under a firm's control is an ideal target to aim for.  What does that figure mean?  Well the current combined holdings of Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo are approximately $7.4 trillion, and there are 23 institutions in the US that have assets over $100 billion.  Therefore, there will have to be a lot of division of these large institutions into smaller ones (simple arithmetic reveals that the $7.4 trillion of the four megabanks noted above, if divided into $100 billion sub-banks, would create 74 new institutions) and it is in the process of "breaking up" the banks that a lot of complication will occur, as in any complex transaction.  Furthermore, these firms are all multi-national, meaning that the US acting alone will not achieve any significant regulatory reforms unless those reforms are accompanied by international agreements.  It will be difficult enough for Congress to pass any semblance of meaningful financial reform (as evidenced by the Republicans' continued obstinacy) without having to deal with cross-border issues as well.  

I think I'll stop there for now.  There is still lots more to discuss about the financial crisis, as my understanding of the causes and the (proposed) solutions has been growing and evolving rapidly in recent months, and I'm eager to share what I've gained with you, my readers.  Despite not being a "finance guy" in the least, I believe that the simple fact that our financial sector has become such an integral part of the world economy requires that I attempt to understand what happened and how to prevent a recession of similar scale from ever happening again.  Any understanding I gain I'll attempt to pass on, since it's such a complex topic, but worthy of understanding by many.

In this posting I've focused only on the TBTF firms and the threats they pose to the financial markets and the world economy.  In future postings, I'll look at the political implications of such concentrations of wealth and power, as well as how it is that the financial sector got to have such power and influence as it does today.  If you have any further questions or a need for clarifications (or if I've totally bungled some facts in this posting) please comment on this piece below, or email me at generationalnavelgazing -at- gmail dot com (trying to protect my account from spammers, you know).

Additional programming note: I plan on returning to the subject of the Tea Party movement soon in an additional posting following up on my post from two weeks ago, so stay tuned for that.