Steven Pearlstein: Blame for financial mess starts with the corporate lobby

[Jamie_B]

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[url="http://www.washingtonpost.com/business/economy/steven-pearlstein-blame-for-financial-mess-starts-with-the-corporate-lobby/2011/08/08/gIQA3zMlDJ_story.html"]http://www.washingtonpost.com/business/economy/steven-pearlstein-blame-for-financial-mess-starts-with-the-corporate-lobby/2011/08/08/gIQA3zMlDJ_story.html[/url]

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[size=3]Another great week for Corporate America![/size][/size][/font]
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[size=3]The economy is flatlining. Global financial markets are in turmoil. Your stock price is down about 15 percent in three weeks. Your customers have lost all confidence in the economy. Your employees, at least the American ones, are cynical and demoralized. Your government is paralyzed.[/size][/size][/font]
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[size=3]Want to know who is to blame, Mr. Big Shot Chief Executive? Just look in the mirror because the culprit is staring you in the face.[/size][/size][/font]
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J’accuse, dude. J’accuse.[/size][/font]
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[size=3]You helped create the monsters that are rampaging through the political and economic countryside, wreaking havoc and sucking the lifeblood out of the global economy.[/size][/size][/font]
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[size=3]Did you see this week’s cartoon cover of the New Yorker? That’s you in top hat and tails sipping champagne in the lifeboat as the Titanic is sinking. Problem is, nobody thinks it’s a joke anymore.[/size][/size][/font]
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[size=3]Did you presume we wouldn’t notice that you’ve been missing in action? I can’t say I was surprised. If you’d insisted on trotting out those old canards again, blaming everything on high taxes, unions, regulatory uncertainty and the lack of free-trade treaties, you would have lost whatever shred of credibility you have left.[/size][/size][/font]
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[size=3]My own bill of particulars begins right here in Washington, where over the past decade you financed and supported the growth of a radical right-wing cabal that has now taken over the Republican Party and repeatedly made a hostage of the U.S. government.[/size][/size][/font]
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[size=3]When it started out all you really wanted was to push back against a few meddlesome regulators or shave a point or two off your tax rate, but you were concerned it would look like special-interest rent-seeking. So when the Washington lobbyists came up with the clever idea of launching a campaign against over-regulation and over-taxation, you threw in some money, backed some candidates and financed a few lawsuits.[/size][/size][/font]
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[size=3]The more successful it was, however, the more you put in — hundreds of millions of the shareholders’ dollars, laundered through once-respected organizations such as the Chamber of Commerce and the National Association of Manufacturers, phoney front organizations with innocent-sounding names such as Americans for a Sound Economy, and a burgeoning network of Republican PACs and financing vehicles. And thanks to your clever lawyers and a Supreme Court majority that is intent on removing all checks to corporate power, it’s perfectly legal.[/size][/size][/font]
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[size=3]Somewhere along the way, however, this effort took on a life of its own. What started as a reasonable attempt at political rebalancing turned into a jihad against all regulation, all taxes and all government, waged by right-wing zealots who want to privatize the public schools that educate your workers, cut back on the basic research on which your products are based, shut down the regulatory agencies that protect you from unscrupulous competitors and privatize the public infrastructure that transports your supplies and your finished goods. For them, this isn’t just a tactic to brush back government. It’s a holy war to destroy it — and one that is now out of your control.[/size][/size][/font]
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[size=3]For years you complained bitterly about the uncompetitive nature of an employer-based health-care system, the inexorable rise of health insurance premiums, the folly of medical malpractice and the unfair burden of having to subsidize the uninsured. But when your lobbyists and your bought-and-paid-for politicians had the chance to cut a deal that would have given you most of what you asked for, they walked away.[/size][/size][/font]
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[size=3]For years you complained bitterly about rising federal budget deficits and a corporate tax code that was too complex and burdensome. But when your crew had the chance to strike a grand bargain that would have fixed both those things, they not only rejected it but insisted on creating an unnecessary crisis that triggered a credit downgrade of U.S. Treasurys and a roller-coaster ride for stocks.[/size][/size][/font]
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Please don’t tell me about your mealy-mouthed letter warning Congress not to play politics with the debt ceiling. By that point, the Frankenpols you created were not interested in your advice. The only thing that might have got their attention was a threat to cut off the flow of political money. You didn’t — and now they know they can ignore you with impunity.[/size][/font]
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[size=3]I wonder how many of your fellow members of the Business Roundtable would accept a credible budget-balancing deal that had $10 of spending cuts for every $1 of tax increases. My guess is they all would. And what about the presidential candidates in the new, improved Republican Party that you helped create? In last week’s Iowa debate, every last one of them promised to veto such a deal. Good luck with that![/size][/size][/font]
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[size=3]Remember way back last fall when your big concern was with regulatory uncertainty, which you continue to use as the excuse for letting all those profits build up on your balance sheet rather than investing in equipment or hiring workers. Whatever uncertainty you can pin on the Obama administration and the Democratic Congress now looks like small potatoes given the uncertainty caused by your political shock troops as they challenge every new regulation all the way to the Supreme Court. They’ll try to prevent or roll back implementation of others with appropriations riders, just like they did with the Federal Aviation Administration — and we know how well that worked out.[/size][/size][/font]
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[size=3]In your name, they are also refusing to confirm nominees to dozens of key vacancies in the executive branch and independent agencies. Among them is President Obama’s choice for Commerce secretary, John Bryson, who for 18 years was chief executive of the largest electric utility in Southern California and served as a director at Boeing and Disney. His sin, apparently, is that he was co-founder of a respected environmental organization, the Natural Resources Defense Council, and — get this — actually believes the scientific community when it says global warming is a problem.[/size][/size][/font]
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[size=3]I can just hear it now: “Mr. Bryson, are you now, or were you ever, a member of an environmental organization?” How does it make you feel to know that you’ve helped to revive McCarthyism in American politics?[/size][/size][/font]
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[size=3]Your culpability, however, extends beyond the breakdown in Washington.[/size][/size][/font]
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[size=3]For the past 30 years, there has been a steady financialization of the American economy in which the interests of so-called shareholders have become the single-minded focus of large corporations, to the virtual exclusion of the interests of customers, employees and the society at large.[/size][/size][/font]
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[size=3]Early on, some of your predecessors were willing to put up a fight against the Wall Street cabal, but in time they bought you off with exorbitant perks and pay packages that nearly rival their own. This occupation of Main Street by Wall Street was confirmed again last week as anonymous traders and hedge fund managers went on a riotous spree, wielding false rumors and high-frequency computerized trading to loot pension and retirement accounts and rob consumers and real investors of whatever confidence they had left.[/size][/size][/font]
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[size=3]I suppose there are some schnooks who actually believe that those wild swings in stock prices last week represented sober and serious concerns by thoughtful, sophisticated investors about the Treasury debt downgrade or European sovereign debt or a slowdown in global growth. But surely such perceptions don’t radically change each afternoon between 2 and 4:30, when the market averages last week were gyrating out of control.[/size][/size][/font]
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[size=3]The only credible explanation for that is speculation, herd behavior and market manipulation by traders looking to make a quick million — financial wiseguys who could not care less what impact it might have on the real economy. And other than J.P. Morgan’s Jamie Dimon, I didn’t hear a peep of protest from you on CNBC, or a speech to the Economic Club of Chicago or even a simple letter to the editor of the Wall Street Journal. A cameo appearance at the White House doesn’t quite cut it.[/size][/size][/font]
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[size=3]It’s not just that you have remained silent as the financial sector has sucked away much of the profit generated by the private sector, stolen away much of the nation’s best talent and transformed the process of capital allocation and formation into a casino. Even worse, through organizations such as the Chamber and the Business Roundtable you reflexively provided them with crucial political support that allowed them to beat back regulators who tried to restrict their growth, curb their risk-taking or put a stop to the kind of fraudulent activity that nearly sank the recovery, and from which it will take years to recover. Given your role in society and in the economy, your silence amounts to complicity.[/size][/size][/font]
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[size=3]The truth is you’ve become them. Instead of focusing your attention and ingenuity in developing new products and services, you’re spending most of your own time on financial engineering — buying up companies at one moment because of synergies and cost saving, then spinning them off the next moment because they no longer fall in to your “core mission.”[/size][/size][/font]
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[size=3]The big innovation at Kraft these days is to separate its over-processed food (Jell-O, Velveeta, Oscar Meyer) and unhealthy snacks (Cadbury chocolates, Oreo cookies, saltine crackers) into two companies.[/size][/size][/font]
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[size=3]Conoco-Phillips, which embraced hyphenation when it decided to merge into a vertically integrated oil company, has now decided that the world would be a better place if it spun off its refining and distribution business from exploration and drilling.[/size][/size][/font]
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[size=3]And let’s not forget Medco, the pharmacy benefit manager, which was bought and then spun off by Merck into an independent company again until it was scooped up by Express Scripts, one of its biggest competitors.[/size][/size][/font]
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[size=3]I’m not exactly sure how we’re going to generate more jobs and generate stronger growth in this country, but I’m fairly certain those kinds of bold initiatives aren’t going to do the trick.[/size][/size][/font]
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[size=3]Hey, but don’t worry about us. Enjoy that fly fishing in Montana. You deserve it.[/size]




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[Jim Finklestein]

Love this article

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1313450355' post='1015763']
[font=Georgia, serif][size=1][font=Georgia, serif][size=1][size=3]For years you complained bitterly about rising federal budget deficits and a corporate tax code that was too complex and burdensome. But when your crew had the chance to strike a grand bargain that would have fixed both those things, they not only rejected it but insisted on creating an unnecessary crisis that triggered a credit downgrade of U.S. Treasurys and a roller-coaster ride for stocks.[/size][/size][/font][/size][/font]


[font=Georgia, serif][size=1][size=3]I wonder how many of your fellow members of the Business Roundtable would accept a credible budget-balancing deal that had $10 of spending cuts for every $1 of tax increases. My guess is they all would. And what about the presidential candidates in the new, improved Republican Party that you helped create? In last week’s Iowa debate, every last one of them promised to veto such a deal. Good luck with that![/size][/size][/font]
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I thought, for the most part, a pretty accurate account of the republicans' "ownership" of this dumpster fire... bearing in mind Pearlstein leans liberal.

My question, since I don't know... the first paragraph above - what is he referring to? I wasn't aware of any plans that were actually going to reduce the budget deficit. Not a cut spending down some bill while still spending more than we're bringing in, but an actual "fixed" the deficits bill... I'm just not aware of what the author is referring to there. Does anybody know?

Secondly, what is our spending outlay in relation to our tax revenue now? What it boils down to is... would a $10-$1 cut vs. tax increase get us PAYING down actual debt? Again, I don't know the figures but if so, then any politician opposed to that is an idiot. Again, I don't want to hear about "cuts" when all it does is slow the rate at which we're going into debt. "we cut back, we're only spending $1 trillion dollars more than we're making, blah, blah, blah"... that, to me, is crap. Was there an actual bill proposed of $10 of cuts for every $1 of tax increase that I'm not aware of? Or was this just a hypothetical? Because I'm not aware of ANY politician that would agree to that scenario. Again, don't know and if so would like to find out about it. Lastly, did it spell out what those cuts were going to be in and/or what the tax increase was going to be in?

[Jamie_B]

To be frank, I dont believe we should be making ANY cuts in the short term, Ive gone over this before but a decrease in government spending right now is a bad idea because all other areas of the GDP formula are down last I check, which means government spending should go up to make up for it until the rest go back up, THEN we should cut spending. Cutting spending now isnt going to put people back to work.

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1313497804' post='1015843']
To be frank, I dont believe we should be making ANY cuts in the short term, Ive gone over this before but a decrease in government spending right now is a bad idea because all other areas of the GDP formula are down last I check, which means government spending should go up to make up for it until the rest go back up, THEN we should cut spending. Cutting spending now isnt going to put people back to work.
[/quote]

Are you aware of the proposals or bills that Pearlstein is referencing in the article? I'd like to know what he's talking about with regard to options that were on the table that repubs refused that would fix our deficit problem...

You think the repub candidates in Iowa said they'd veto any $10 - $1 cut vs. increase bill because they think we need to increase government spending right now?

[Squirrlnutz]

[quote name='Vol_Bengal' timestamp='1313495093' post='1015820']

My question, since I don't know... the first paragraph above - what is he referring to? I wasn't aware of any plans that were actually going to reduce the budget deficit. Not a cut spending down some bill while still spending more than we're bringing in, but an actual "fixed" the deficits bill... I'm just not aware of what the author is referring to there. Does anybody know?

[color=#ff0000]I got the impression he wasn't talking about any specific legislature, though he worded it like he was to make his point sound more robust, but rather the opportunity to make an impact by being forthcoming and cooperative during the time leading up to and through the debt discussion, rather than digging in their collective heels and pushing further (with donation $$) against restructuring[/color].

Secondly, what is our spending outlay in relation to our tax revenue now? What it boils down to is... would a $10-$1 cut vs. tax increase get us PAYING down actual debt? Again, I don't know the figures but if so, then any politician opposed to that is an idiot. Again, I don't want to hear about "cuts" when all it does is slow the rate at which we're going into debt. "we cut back, we're only spending $1 trillion dollars more than we're making, blah, blah, blah"... that, to me, is crap. Was there an actual bill proposed of $10 of cuts for every $1 of tax increase that I'm not aware of? Or was this just a hypothetical? Because I'm not aware of ANY politician that would agree to that scenario. Again, don't know and if so would like to find out about it. Lastly, did it spell out what those cuts were going to be in and/or what the tax increase was going to be in?[/quote]

The GOP candidates were against it because they all signed a pledge not to raise taxes and essentially said that as much as $1 more in revenue is not worth any reduction in debt. I believe it was grandstanding and rhetoric that has nothing to do with long term efficacy of the proposed solution. I say that mostly because these people are too stupid to actually understand the sacrifice necessary to get to the zero debt solution they spout off about as if it were a vote that Obama just refuses to have.

I think when we have a terrible stalemate like we have in Washington, multiple wars, and debt projections that give us 1-2 decades of sustainability for vital services (medicare SS etc) before real problems start to unravel, solutions that only slow the rate of debt growth should be considered. Two years spent arguing over a plan designed to reverse the debt cycle that end in stalemate is worse than a compromise reached sooner that slows the rate of debt. Perhaps after the country sees the rate of debt slow down, our leaders will be more empowered to work together for a stable long-term answer.

[Jamie_B]

Yeah he isnt talking about a specific piece of legislature, he's hypothesizing.

[Vol_Bengal]

[quote name='Squirrlnutz' timestamp='1313512473' post='1016012']
I think when we have a terrible stalemate like we have in Washington, multiple wars, and debt projections that give us 1-2 decades of sustainability for vital services (medicare SS etc) before real problems start to unravel, solutions that only slow the rate of debt growth should be considered. Two years spent arguing over a plan designed to reverse the debt cycle that end in stalemate is worse than a compromise reached sooner that slows the rate of debt. Perhaps after the country sees the rate of debt slow down, our leaders will be more empowered to work together for a stable long-term answer.
[/quote]

At the rate our government works to reduce debt... they'd come up with a solution to slow the rate of debt growth, pound their chests telling us how much money they're saving us, and then it would just go away. Nothing more would be done with it. There would be no long-term stable solution.

Out of sight, out of mind... so goes with our political environment.

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1313512626' post='1016013']
Yeah he isnt talking about a specific piece of legislature, he's hypothesizing.
[/quote]
I assume regarding the $10 in cuts to $1 in increases is what you're referring to.

Do you know of any legislation presented that did this:
[quote][font=Georgia, serif][size=1][font=Georgia, serif][size=1][size=3]For years you complained bitterly about rising federal budget deficits and a corporate tax code that was too complex and burdensome. But when your crew had the chance to strike a grand bargain that would have fixed both those things, they not only rejected it but insisted on creating an unnecessary crisis that triggered a credit downgrade of U.S. Treasurys and a roller-coaster ride for stocks.[/size][/size][/font][/size][/font][/quote]

That he's saying repub coattail riders rejected? I'm not aware of anything.

[Jamie_B]

The 10 to 1 yes, the other I'm assuming he is talking about the deal the White House had tried to make with the speaker, as that has been referred to as the grand bargain by the WH.

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1313516851' post='1016046']
The 10 to 1 yes, the other I'm assuming he is talking about the deal the White House had tried to make with the speaker, as that has been referred to as the grand bargain by the WH.
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So... that, in Pearlstein's opinion, was going to "fix" both
[quote][font=Georgia, serif][size=1][font=Georgia, serif][size=1][size=3]rising federal budget deficits and a corporate tax code that was too complex and burdensome[/size][/size][/font][/size][/font][/quote]???

classic. As I said above, agree with a lot of what was said, but acknowledging his liberal stance he saw roses in proposals that were anything but.

[Jamie_B]

Well I would guess that would depend on if he is talking about lowering the rate at which they are rising or stopping them from rising all together. As far as the tax code being complex isnt that what fixing these loopholes is supposed to fix?

But short term deficits are not the problem, the problem is and has always been jobs, this debit stuff is a distraction from that. If people get back to work you get new revenue to aid in the debit, if we end the wars (and yes Obama's Lybia war) we get a massive cut right there.

What I dont think people understand is that this is what is called disaster capitialism for the purpose of eliminating programs that otherwise people would not be ok with eliminating.

Here is the game plan

1. Drum up some war or other disaster that requires the government spend money on (of course its short term money)
2. Scream about how we cant afford the domestic spending we are doing (of course Cheny did say deficits dont matter, but I digress)
3. Cut the domestic spending so we can still have the wars

And the reason its going on is because they want to have cheap labor/oil/ect.. that we wont get here and are willing to use our military to get it, combine that with cuts in programs domestically and you get a long term effect of record profits.

It's neo-liberalism/neo-conservatism run a muck, and it should disgust people.

[Jim Finklestein]

[quote name='Jamie_B' timestamp='1313521231' post='1016084']
It's neo-liberalism/neo-conservatism run a muck, and it should disgust people.
[/quote]

It certainly disgusts me, and I don't even live in the states....still pay income tax there though

[Jamie_B]

[quote name='Jim Finklestein' timestamp='1313524731' post='1016117']

It certainly disgusts me, and I don't even live in the states....still pay income tax there though
[/quote]


Military?

[|Elflocko|]

[quote name='Jamie_B' timestamp='1313525870' post='1016123']


Military?
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Probably not.

Our great country is one of the few in the world that requires its citizens living abroad to file tax returns and pay on amounts over 'X' ([size=3]say over €80.000 if living in the EU).[/size]

[size=4]That's still not as bad as them taxing unemployment pay...[/size]

[Jamie_B]

[url="http://www.youtube.com/watch?v=l8rQNdBmPek"]http://www.youtube.com/watch?v=l8rQNdBmPek[/url]

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1313521231' post='1016084']
But short term deficits are not the problem, the problem is and has always been jobs, this debit stuff is a distraction from that. If people get back to work you get new revenue to aid in the debit, if we end the wars (and yes Obama's Lybia war) we get a massive cut right there.
[/quote]

I'll agree that job creation is necessary, provided that it is done right and the fed doesn't supplement funding for 1 or 2 years and then leave states on the hook for the continued funding of those jobs...

But, at our present growth (read: spending) jobs won't overtake that. Our spending curve far outspans any job growth / consumption that we'll see. There needs to be a mix in the two but there is most definitely going to have to be a MORE significant cut in spending than growth in consumption or we'll be in perpetual borrowing.

[Jamie_B]

[quote name='Vol_Bengal' timestamp='1313580100' post='1016454']

I'll agree that job creation is necessary, provided that it is done right and the fed doesn't supplement funding for 1 or 2 years and then leave states on the hook for the continued funding of those jobs...

But, at our present growth (read: spending) jobs won't overtake that. Our spending curve far outspans any job growth / consumption that we'll see. There needs to be a mix in the two but there is most definitely going to have to be a MORE significant cut in spending than growth in consumption or we'll be in perpetual borrowing.
[/quote]


I agree with Robert Reich here...

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[b] [url="http://robertreich.org/post/9014405465"]How Austerity Is Ushering in a Global Recession[/url][/b]

[url="http://robertreich.org/post/9014405465"]TUESDAY, AUGUST 16, 2011[/url][font=inherit][size=4]
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Not only is the United States slouching toward a double dip, but so is Europe. New data out today show even Europe’s strongest core economies – Germany, France, and the Netherlands – slowing to a crawl.[/size][/font]
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We’re on the cusp of a global recession.[/size][/font]
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Policy makers be warned: Austerity is the wrong medicine.[/size][/font]
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We all know about the weaknesses in Europe’s “periphery” – Greece, Ireland, Spain, Portugal, and Italy. But the drop in Europe’s core is dizzying.[/size][/font]
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Germany grew at an annualized rate of just half a percent last quarter, down from 5.5 percent in the first quarter of the year. France didn’t grow at all.[/size][/font]
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What’s going on in Europe’s core? Partly it’s a loss of confidence due to debt crises in the periphery. But that’s hardly all.[/size][/font]
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Europe depends on exports – especially to Asia, India, Latin America, and the United States. But exports to China and other emerging markets have been dropping. China, worried about inflation, has pulled in the reins on its sizzling economy. Brazil has been pulling back as well.[/size][/font]
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And as the United States economy sputters, exports to America have been slowing.[/size][/font]
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But chalk up a big part of Europe’s slowdown to the politics and economics of austerity. Europe – including Britain – have turned John Maynard Keynes on his head. They’ve been cutting public spending just when they should be spending more to counteract slowing private spending.[/size][/font]
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The United States has been moving in the same bizarre direction. Cutbacks by state and local governments have all but negated the federal government’s original stimulus, and no one in Washington is talking seriously about a second. The pitiful showdown over increasing the debt limit has produced the opposite: a Rube-Goldberg-like process for capping spending rather than increasing it, and a public that’s being sold the Republican lie that less government spending means more jobs. [/size][/font]
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Yes, governments on both sides of the Atlantic are deeply in debt. But policy makers on both sides seem to have forgotten that economic growth is the most important tonic.[/size][/font]
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Public debt has meaning only in relation to a nation’s GDP. When more people are working, more companies are profiting, and economies are expanding, revenues pour into national treasuries.[/size][/font]
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When economies stop growing or contract, the opposite occurs. Economies can fall into vicious cycles of slower growth, lower tax revenues, spending cuts, and even slower growth.[/size][/font]
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That’s what we’re seeing now.[/size][/font]
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What’s worse, nations are so intertwined that when every major economy is slowing the cumulative effect is larger.[/size][/font]
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With anemic growth in America and Europe, the Japanese economy comatose, and emerging markets (including China) pulling in their reins, the vicious cycle could become worldwide. If global demand for goods and services continues to fall behind the potential supply we’ll see unemployment rise further and growth slow even more — especially in Europe and the U.S.[/size][/font]
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Central banks may try to reverse this course. Ben Bernanke and company at the Fed have committed themselves to near-zero interest rates for the next two years (not exactly a rousing endorsement of America’s economic prospects in the near term). Given the sharp slowdown in Germany, the European Central Bank might now feel some pressure to lower interest rates there – or at least delay the next increase.[/size][/font]
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But when growth is slowing so dramatically and unemployment is already high, monetary policy can’t possibly do it alone.[/size][/font]
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Without an expansionary fiscal policy, low interest rates have little effect. Companies won’t borrow in order to expand and hire more workers unless they have reasonable certainty they’ll have customers for what they produce. And consumers won’t borrow money to spend on goods and services unless they’re reasonably confident they’ll have jobs.[/size][/font]
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Fiscal austerity is the wrong medicine at the wrong time.[/size][/font]
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[Jim Finklestein]

[quote name='Elflocko' timestamp='1313526789' post='1016144']

Probably not.

Our great country is one of the few in the world that requires its citizens living abroad to file tax returns and pay on amounts over 'X' ([size=3]say over €80.000 if living in the EU).[/size]

[size=4]That's still not as bad as them taxing unemployment pay...[/size]
[/quote]

Yep. I am a permanent resident in Canada but still have to pay US income taxes.

[|Elflocko|]

Ever given renunciation any serious thought?