Wednesday, January 07, 2009

Obama Cabinet Report Card - Part One

Thought I was going to bag it, didn't you? Honestly, I considered it. I've been putting it off because, as I said in the last post, there are over 30 cabinet selections and I'm really not that familiar with many of them. For some reason, I felt like this had to be an exhaustive, definitive statement on Obama's cabinet - one that would lead to a specific conclusion about his political orientation at this moment in time and a prediction of what we can expect from his first four years. I guess I thought that would be the sexy vtkesque thing to do. But the reality is that I don't have a degree in economics, I don't work in public policy, foreign policy, environmental or constitutional law. I don't have a highly educated understanding of health care, education, or transportation or energy policy. And I really don't know anything about Agriculture, the GAO, or Small Business Administration (Except what I know about the administration of my small business, which is so small that it can hardly be classified as a business. I'm a step above a Junior Achievement corporation selling knick knacks door to door). Another thing I'm not: a journalist. (ah, the amateur blogger's journalism complex...)

Further weighing down the anticipated (by some, at least) report card post is the fact that the term hasn't started yet so we can't really judge the performances of the cabinet. Beyond being a rhetorical point, this is significant because we don't know what impact the players will have on the team captain and the team's performance. We don't know who will have the ear of the president, who will drive policy, in what direction, or what events will happen that will force changes or realignments of policy. Elucidating these points, Harvard University's Stephen Walt presents a reasonable case for witholding judgement on Obama's foreign policy picks. The question before us is this - if we can't yet judge the individuals' performance, can we judge the individual who chose the individuals?

In answering this, I'm casting aside a few arguments: Forget about the beltway etiquette that says that a president should be afforded the courtesy of his cabinet selections; that etiquette saw the Democrats approve Ashcroft, Rumsfeld, Gonzales, Bolton, etc, each of which was a shameful confirmation with regrettable consequences (understatement). Forget about the benefit of the doubt - these are the big leagues and I doubt everyone who has risen to this level of political power. Forget about the politics of the picks which explain that certain selections were token picks to allow the Administration to present a diverse face, and forget about the politics of picking people in order to guard against future political attacks. At what point do we move beyond the politics? ever?

So discarding these obstructions to judgment on cabinet selections, I see no reason why we shouldn't look at all Barack Obama's selections and criticize or praise him for them. He may not have been sworn in yet, but his presidency is well under way, and therefore open to debate - open even to lefty, hack bloggers like me who haven't done enough research. I'm inspired by John Nichols' article for The Progressive, How to Push Obama, which reviews Obama's progressive roots and his migration to the center, and suggests a strategy for pushing him leftward through reasoned, proactive opposition:

The way to influence Obama and his Administration is to speak not so much to him as to America. Get out ahead of the new President, and of his spin-drive communications team. Highlight the right appointees and the right responses to deal with the challenges that matter most. Don’t just critique, but rather propose. Advance big ideas and organize on their behalf; identify allies in federal agencies, especially in Congress, and work with them to dial up the pressure for progress. Don’t expect Obama or his aides to do the left thing. Indeed, take a lesson from rightwing pressure groups in their dealings with Republican administrations and recognize that it is always better to build the bandwagon than to jump on board one that is crafted with the tools of compromise.

I may not live up to this (particularly in the proposing alternatives department), but I reserve my right to hack away (and hopefully open a forum for the readers of this blog).

OK, let's get going. This is a long one. Keep in mind that this is a report card of Obama's cabinet selection choices, not a report card on the performances of the cabinet members - they all get incompletes so far. This also shouldn't be read as a prediction about how Obama is going to rate as a president; it's just an honest taking-to-task of the team with whom he has chosen to surround himself, and unless he turns out to be the greatest micro-manager of all time, they're going to have a big impact. To start you out, here is a mostly-commentary-free biographical breakdown of the team from Huffington Post. And without further ado, here's your VTK Team of Rivals Report Card:
  • VP: Joe Biden - B+ - (not sure if VP is cabinet or cabinet-level, but Huff puts him here so I'll follow suit) - clearly a good pick by Obama insofar as Biden helped him to get elected (which is a good thing). Joe had more Joe Sixpack cred than the Hockey Mom or the Joe the Plumber in the end. Am I the biggest Joe fan in the world? No, but I'm not a hater either. It was a smart, effective pick by Obama and I think Biden will sensibly scale back the role of the VP in US governance, which will further highlight Cheney's criminal power usurpation. I wish he were a little less hawkish.

  • Sec. of State: Hillary Clinton - C- - readers of this blog know where I stand on Hillary. I think she's a hawk, I think her foreign policy experience has been greatly exaggerated, and I think there were better people for this prestigious post. How about the junior senator from MA, John Kerry? This is a purely political pick and as such, it's irritating to me. But she's far from incompetent. Time will tell how she does.

  • Sec. of the Treasury: Timothy Geithner - C? - Here's where my ignorance comes into play. I don't really know anything about Geithner. I know even less about what the right diagnosis for what the country's economic illness is. So I'm about to hit the internet and search my favorite radical lefty sites for an unbiased assessment that will surely leave me outraged. Please hold [insert elevator music]. Ok, I'm back. And still unsure what to think. I found an informative discussion on DemocracyNow!, in which Naomi Klein calls the selections of Geithner and Larry Summers (director of National Economic Council) "a profound disappointment". She calls Obama hypocritical for picking them after all his campaign criticism of deregulation: they "played key roles during very important economic crises in other countries, in Russia, during the Asian financial crisis, during the Mexican peso crisis. And when these countries were suffering a profound economic crisis created by deregulation, they preached more deregulation, more privatization and—this is key—they preached economic austerity to disastrous results."

    The American Prospect's Robert Kuttner agrees but is less pessimistic: "I can point to a couple of silver linings here. Number one, in Obama’s own speeches on the subject, he’s been very much on the side of stringent re-regulation of financial institutions as the price of recapitalizing them and also as the necessary policy. There’s a very good person who is going to be in charge of the specifics of what banking regulation should be going forward. That’s Dan Tarullo, who’s one of the two or three real progressives at fairly senior levels inside the Obama administration ... I do think Geithner is a competent technocrat. He’s not an investment banker himself. He’s been a civil servant for almost all of his career. And secondly, when he was pursuing these failed policies, he was doing so as part of a threesome that included Bernanke and Paulson. And of the three, Geithner was the most inclined to tough regulation as the price of bailout."

    Amy Goodman hedges Kuttner's optimism by reading a piece from William Greider in The Nation, with which Kuttner agrees: "Geithner was busy executing the government’s massive rescue of Citicorp--the very banking behemoth that Geithner and Summers helped to create back in the Clinton years, along with Federal Reserve [chairman] Alan Greenspan and Robert Rubin, Clinton’s economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protégé (Geithner) with the taxpayers’ money ... Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks.”

    Read (or listen to) the whole discussion here, but it seems that they're more concerned about Summers than Geithner. Lastly, is it notable that stocks soared when the news broke about his appointment as Treasury Secretary? Should we trust the market? Fuck if I know. William Greider provides his opinion in the aforementioned article: "[Geithner has] been seen as a weak and compliant regulator of Wall Street firms, someone who did not seem [sic] the storm coming. Occasionally, Geithner would anguish publicly about the accumulating time bombs like credit derivatives and urge bankers to do something, but he did not use his supervisory powers to compel action. In bailout negotiations with Wall Street titans, Geithner and the Federal Reserve were spun around like a top more than once. No wonder the stock markets rallied explosively when they heard Geithner would be their new boss in Washington. They think he is their guy." So, what should we expect? As I said - fuck if I know.

  • Sec. of Defense: Robert Gates - D+ - My biggest problem here is that Obama ran as the change candidate on a consistent message of opposition to the Iraq War and consistent criticism of Bush and his foreign policy, and then he decides to invite the Republican (served under both Bushes) Secretary of War (of two wars) to continue on as the head of the Pentagon. I don't want to hear about the politics of this pick, the wisdom of ensuring a smooth transition, the success of the surge, or the relative moderation of Gates compared to his predecessor. The change here shouldn't have been the decision not to change. There must have been capable, qualified candidates who would have signaled a decisive change in the bellicose direction of this country. I don't accept that this is a "defensive" move to prevent Republicans from criticising whatever happens in Iraq while waxing nostalgic about the success of the surge. Frankly, I'm a little sick of hearing about the success of the Surge. So too, I imagine, are the friends and family of the 40 people killed in a suicide bomb in Iraq on Sunday or the friends and family of the 23 people killed in a suicide bomb in Iraq on Friday. So too, I imagine, is former US-backed Iraqi Prime Minister Iyad Allawi who recently described the Bush Administration's policies as an "utter failure".

  • Attorney General: Eric Holder - B - Let's not let the fact that the Republicans have chosen him to be the subject of their token nomination fight define him as a leftist. He may be, but the fight in the Senate is about the GOP fighting Obama, not Holder. And it's on. Holder's a former Clintonista. On the basis of that alone, I'm tempted to label him a centrist, but I'm wary of assigning guilt by association. The conservative US News and World Report calls him part of the cabinet's liberal core and writes that Democratic officials are saying that he will "serve as a liberal advocate on social issues important to minorities, feminists, abortion-rights advocates, organized labor, and gay-rights activists." Clearly, it's relative, but let's hope they're right. Was there a better pick available? Don't know.

  • Sec. of the Interior: Ken Salazar - F - In case you didn't know what the Secretary of Interior did, according to the Center for Biological Diversity, "As the overseer of the National Park Service, the Bureau of Land Management, the Minerals Management Services, the U.S. Fish and Wildlife Service, and the Endangered Species Act, the Secretary of the Interior is [the] most important position in the protection of America's lands, waters, and endangered species." Here are a few bullets from the CBD about Salazar:

    - voted against increased fuel efficiency standards for the U.S. automobile fleet.
    - voted to allow offshore oil drilling along Florida's coast.
    - voted to allow the Army Corps of Engineers to ignore global warming impacts in their water development projects.
    - voted against the repeal of tax breaks for Exxon-Mobil.
    - voted to support subsidies to ranchers and other users of public forest and range lands.
    - threatened to sue the U.S. Fish and Wildlife Service when its scientists determined the black-tailed prairie dog may be endangered.
    - fought efforts to increase protection for endangered species and the environment in the Farm Bill.


    Some would describe the Environmental community's response as mixed. DemocracyNow! hosted a debate between CBD's Kieran Suckling and the National Audubon Society's Brian Moore. Salazar sounds like a fox in the henhouse to me. As far as Obama picking him? Politics - "thanks for voting for me, Colorado; thanks for your support, West." Crappy pick for a crappy reason.

  • Sec. of Agriculture: Tom Vilsack - D+ - I don't know much about Agriculture or Vilsack, so I'm going back to the internet. Ronnie Cummins writes for Counterpunch that this pick "sent a chill through the sustainable food and farming community" DemocracyNow! hosted a debate between Cummins and Moore. You decide. Counterpunch points out that this is part of larger divisions within the environmental community. The Vilsack pick also notably drew the criticism of food writer/activist Michael Pollan. I dislike Pollan. But only because he's usually right. And I want to eat cheeseburgers all day.

  • Sec. of Commerce: Bill Richardson - INC - He recently withdrew himself from nomination due to untimely questions about some of his contributors. Too bad. This may have gotten a decent grade from me.

  • Sec. of Labor: Hilda Solis - A - This from John Nichols of the Nation in his 2008 superlatives list: MOST VALUABLE CABINET PICK Hilda Solis: It has been a long time since the United States had a Secretary of Labor who had a record of walking picket lines. That's what makes California Congresswoman Hilda Solis, Obama's pick to fill this Cabinet post, so remarkable. ... She is the right person for this job, and her selection serves as the single best signal from Obama that he intends to serve as a pro-worker president. Let's hope that Solis is allowed to renew a Labor Department that has been neglected – and disempowered -- by Democratic and Republican presidents.

  • Sec. of Health & Human Services: Tom Daschle - A - I'm hopeful about this pick and Daschle's desire and ability to push progressive change in American health care. Perhaps the best way to highlight Daschle's liberal credibility is to point out the vitriolic reaction of the Christian Conservative Right: Daschle has a consistent pro-abortion, pro-homosexual, pro-judicial activist voting record. While in the Senate, Daschle voted against schools requiring voluntary prayer; voted no on banning human cloning; voted no to prohibit flag burning; voted no on school vouchers in Washington, DC; voted no on permitting drilling in ANWR and much more ... Daschle was a key leader in blocking Bush’s judicial nominees. During the 2003-2004 session, Daschle and his liberal cronies blocked 10 of Bush’s nominees from getting up or down votes in the Senate ... Daschle was honored by the National Gay and Lesbian Task Force (NGLTF) for being the “architect of the defeat of the Federal Marriage Amendment” in the Senate ... “Daschle can be expected to gut any pro-life, pro-family policies in HHS and will aggressively push his pro-abortion, pro-homosexual agenda,” said TVC Executive Director Andrea Lafferty.

  • Sec. of Housing & Urban Development: Shaun Donovan - B? - I haven't found much reaction online worth quoting. I don't know anything about him, but he hasn't sparked any outrage so far as I can tell and there are a lot of people on the internet looking to be outraged at something. I'll give it an ignorant "B".

  • Sec. of Transportation: Ray LaHood - C - WTF do I know (or care) about Transportation or Ray LaHood. Well I do take the subway frequently and drive on the Pike and I95 occasionally. And I do know that LaHood is a Republican from Illinois - from the same district Lincoln was from. Sounds like Obama killed two birds with one stone: a political pick (allowing him to present himself as bi-partisan) and another Lincoln connection to remind people that he's the next Lincoln. Didn't you hear? Obama's the next Lincoln. Anyways, environmental advocates Friends of the Earth had this to say: While his overall record on energy and environment issues is poor, LaHood has in recent years broken with many in his party to support crucial investments in passenger rail and public transportation, and he is a member of the Congressional Bike Caucus. These are reasons to hope that he may be open to the visionary transportation policy that is needed to move our country forward.

  • Sec. of Energy: Steven Chu - A - Alright, I'll give Obama one benefit of the doubt pick. I don't know Chu but he sounds alright. He won the Nobel Prize in physics. Andrew Revkin, award-winning science reporter with the New York Times, had this to say on DemocracyNow!: [Chu] knows the science, and he knows it pretty deeply, and he knows how hard it is to get sometimes an idea from a laboratory and to become the new norm for energy ... in the last five years or so, Dr. Chu went to the Lawrence Berkeley National Laboratory to create—and he came there with this—his mandate for that lab was that energy is our new frontier. And he started to develop programs there that are very much aimed at trying to sort of have big breakthroughs on non-polluting forms of energy that we’ll need as the world heads toward nine billion people, more or less, with everyone wanting a decent life. We need more energy than we have now, even if you set aside the climate problem. But when you add the climate challenge with these building greenhouse gases, that creates this even bigger imperative. So he’s got the—he clearly has the grounding in both the science and how the science has to translate into products. You know, how do you interface with private sector? How do you make this all happen? So I think the combination shows some possibility of breaking through.

  • Sec. of Education: Arne Duncan - C+? - I don't have kids and haven't been involved in any type of organized education for about 14 years. I don't know who Arne Duncan is. Here's another DemocracyNow! debate (which seems more like a tepid conversation really). Lefty Fireballer Greg Palast "slams" the pick.

  • Sec. of Veterans' Affairs: Eric Shinseki - A - because he was right. From DemocracyNow!: Shinseki made headlines in February 2003 when he testified before Congress that the US would need several hundred thousand soldiers to stabilize Iraq after the invasion. At the time, Shinseki was Army chief of staff. Defense Secretary Donald Rumsfeld and other high-ranking Pentagon officials publicly rebuked him, while insisting that Iraqis would welcome the Americans as liberators.

  • Sec. of Homeland Security: Janet Napolitano - C - Napolitano appears to be drawing an array of reviews from all sides. This liberal calls it a "terrific choice" and this conservative rag doesn't like it. This liberal academic is concerned about her, saying "on the state level, she pushed some of the most right-wing agendas on immigration enforcement. She went full speed ahead with the Bush agenda to move immigration enforcement from federal to local hands." And this conservative Arizona blogger finds a silver lining in that her nomination virtually assures that AZ's 2 senators will remain Republican for another 7 years (not to mention that her replacement as governor will be chosen by AZ GOP Secretary of State). And of course, centrist PA governor Ed Rendell said she'd be perfect for the job because she has no life. So, is she a hawk? Relativity strikes again. I'm thinking I would have preferred a less hawkish person - with a life - to head security of my homeland. But then again, do we even know what Obama has in store for the Homeland Security Department?

  • United Nations Ambassador: Susan Rice - C - According to DN!: She opposed the US invasion of Iraq but has advocated for military action in case of humanitarian crisis. Two years ago, Rice co-authored an article advocating for US attacks against Sudan. She wrote that the United States should consider unilaterally striking Sudanese airfields, aircraft and other military assets. Rice wrote, “If the United States fails to gain U.N. support, we should act without it.” Is that really the best Obama could have done in selecting his ambassador to the UN? Really? Maybe not as bad as Bush picking Bolton, but not great.

  • Environmental Protection Agency: Lisa P. Jackson - C? - I know nothing about Jackson but it appears that she's getting mixed reviews from "the left" - mixed between wary and negative. This isn't exactly a glowing report from the Huffington Post. Nor is this from dailykos.

And roughly 3200 words later, there's your report card, Part One. Coming soon: Part Two - Cabinet Rank Members & Top Officials. Find out the VTK take on such fantastic/outrageous selections as Chief of Staff Rahm Emanuel, National Security Adviser James Jones, National Intelligence Director Dennis Blair, and National Economic Council Larry Summers.

Teaser: Dennis Blair aided the perpetrators of 1999 church killings in East Timor. (part 2 of that report)

12 comments:

akboognish said...

Great run-down, VTK, and for the most part you aren't going to get arguments from me on your grades.

I see why you went with the cabinet posts first, and then will cover the other high-level appointments in the second post, but for some of the posts it's hard to split up the teams.

This is particularly true with the economic team, discussed here regarding Giethner (I unfortunately don't regard the Sec. of Labor as "part of the economic team" although she really should be. If Solis is as good as suspected, and is actually confirmed, perhaps she'll get Labor it's cabinet-level power it's just about never had. You can say a similar thing about Commerce--like Labor, it's not at the "economic team table" as it's currently regarded, which might have been a bummer if Richardson was still in the running, although that's debatable). Geithner is bad, and so is the rest of the "dream team": Larry Summers and Christina Romer.

My biggest problem with these three picks (and the other names who get mentioned with them) is that there is no "team of rivals" at the table; they all have the same political and economic perspective. They are all cut from the same cloth, which just so happens to be the cloth that got us into this mess.

Specifically, not only are they anti-regulation, but they are all deficit hawks, to boot. Dewey24's favorite economist Paul Krugman (along with just about every other sensible economist out there) has been sounding the alarm that these guys were going to lead Obama down the road to an ineffectual recovery plan, laden with tax cuts and fear of deficit spending. And that's exactly what they did (as Krugman complains in today's NYT).

We've got the foxes watching the henhouse; the mass-murderers are the cops. Why should we have faith that they'll get it right?

But beyond that problem (which perhaps they could overcome, finding religion and becoming fans of regulation and new deal-style deficit spending stimulus), this team is not going to solve the bigger problem that we face: the total failure of our economic system. I hate mainstream economists almost more than I hate any other academic discipline. They act as if their field is a quantifiable science with strict predictable laws of markets and money and trade. But they ignore that the underlying premises upon which they base their "science" are all, for the most part, just functions and portions of a specific economic system (capitalism), created by humans and run by humans and very far from a physical absolute or constant.

Sorry to digress, but that's the basic problem with Geithner, Summers, Romer, and the rest of them (and Obama): they don't have a criticism of the system in which we're playing. They might think that more regulation could solve the problem, or better oversight. But they fail to recognize that the system is designed to create these booms and busts, and that these are going to happen regardless of the degree of regulation. It's not just an oversight problem.

There are plenty of non-mainstream economists out there, critical ones who think about the fundamental structural problems with our economic system. None of these folks are on the economic team let alone will have a seat at the table.

For christ's sake, I'm no economist and yet I recognize that an entire economic system built around short term profit (driven primarily by the stock "market" (i.e., casino) and double-digit growth is a recipe for absolute disaster. In the past 30 or 40 years, but mostly in the past 20, we've somehow all agreed to gorge ourselves as fast as possible on every resource (natural and human) at our disposal, all so we can convert these resources into "tangible assets" (money) and put this money in the pockets of 1% of the population (or fewer). We've been gorging way beyond our means, borrowing like crazy from our future resources to sustain the beast.

And none of these guys has said a word about all of that. I'm sick of hearing about better regulation. How about getting rid of Wall St. and stock speculation entirely and instead rewarding stability, long-term health, employment, production, and value-added service? What about taxing the hell out of short-term profit and short term capital gains? What about imposing consumption taxes on use of natural resources, so the true costs of production can be factored into the equation and true efficiency will be rewarded? None of these guys will touch these things. Instead, they'll stay stuck in their own little reality, created and fostered in the elite private school, ivy league, Wall St., country club scene they all have risen to the top of, surrounded themselves with, and been so heavily rewarded by.

Good luck finding any change with that crew. What's the next bubble? What's left to rape and pillage and profit from?

Which brings me to the Interior, Agriculture, and EPA picks. I (perhaps mercifully) don't have as much to say on these, as you've pretty much covered it already. They're disasters. The agriculture secretary, in addition to what you highlighted, also runs the Forest Service, which is a major player in environmental issues. It's been an unmitigated disaster for the past 8 years, but sucked during Clinton, too. Same with Interior. I'm upset and disillusioned with these two picks, but when it comes down to it it's probably a good thing. True change was not going to come from these agencies. It's important that we get the signal now, and don't let our guard down, and maintain the pressure and activism on behalf of the environment that we've built up in the last 8 (16) years.

Energy is pretty interesting as I've heard great things about Chu. Also Jane Lubchenco (NOAA) and John Holden (science advisor)--you'll get to those two next post. All three are well respected scientists and very good on global warming issues. I have one climate scientist friend who said the field was shocked by those appointments--both that Obama would make them and that they would say yes. But given the appointments of Salazar, Vilsack, and Jackson (I confess to not knowing enough about Jackson, but good link, VTK), I doubt the scientists will have any power to shout down the economic team of all-stars.

It's going to be a bloodbath and the environment is going to lose, to all of our peril. Larry Summers already signaled that when he said that we had to be careful of regulating carbon while trying to rescue the economy. That pretty much says it all.

Last but not least, the foreign policy team suffers from the same problem that the economic team does: no dissent. They're all hard-core hawks and unless Obama is a superhero, they're going to be setting too much of their own agenda. You said it well enough already, VTK so I'll stop ranting and get back to work.

Anonymous said...

I have to say after I read through your report card I think we are both on the same page.

I know Gates seems like a magor fuck up but I think he will be there only until Obama gets up to speed on the war and then Gates will get the boot,I hope sooner than later.


I know its to soon to make judgements but if these picks
are not making feel to good.

Dan Nolan said...

Joel - problem is that I don't think Obama is planning on keeping him in there only until he's up to speed and then giving him the boot. And I doubt Gates would have taken (kept) the job if he didn't receive assurances that that was not the plan. I think Stephen Walt is right when he identifies the Gates selection as political insulation for Obama. In that respect, he'd need to keep him there for at least for 4 years. Unless he fucks up big time.

akboognish - first of all, given the size of this report card project, I had to pick a way to do it, and splitting it up between the actual cabinet and the cabinet level was the winner. Maybe I'll include some group/team observations in Part 2.

Second of all, wow. I anticipated a strong condemnation of many of the cabinet selections from you, but that's even more extreme than I had expected. I agree with much of the first half of your comments on the economic team and I find Krugman's article to be pretty reasonable. Obama's economic advisors during the campaign were centrist to conservative (U of Chicago's Austan Goolsbee and Robert Rubin protege Jason Furman) so it's not entirely surprising that he would follow suit with his Cabinet team and would continue supporting the same system as he has been a proponent of all along. The heavy campaign talk about re-regulation looks to have been opportunistic rhetoric. That's unfortunate. I wish he would be a genuine hawk on economic regulation, if not out of ideological belief, out of politically insulatable pragmatism. And I hope he takes advantage of this opportunity (the economic emergency) to push liberal initiatives (health care, environmental, etc) the same way that the Bush Administration used 9/11 to push their conservative agenda. He could get away with it.

You start to lose me right around "the total failure of our economic system ... (capitalism)". It's not inconceivable to me that we could have avoided our current economic mess, and remained in the more manageable "booms and busts" that we've endured over the last 75 years, if the economic system were handled differently over the last 25 years or so. I don't think this current collapse/recession/depression/whatever points to a total failure of the system. maybe to a failure in the American execution of the system, but that doesn't extrapolate to a total failure of capitalism in my mind. Would I prefer to see a more socialized, heavily regulated, version of capitalism not completely dependent on the invisible hand? yes. Do I think Obama should have included some economists who were more critical of the fundamental structures of the system in his cabinet, his touted Team of Rivals? yes. You say that "an entire economic system built around short term profit (driven primarily by the stock "market" (i.e., casino) and double-digit growth is a recipe for absolute disaster." Is it inconceivable to you that regulatory structures could have been in place within the economic system that would have prevented it from being so vulnerable to the swings of short term profit? And I'm struggling to see how you would accomplish your suggested goals without real total economic collapse: "getting rid of Wall St. and stock speculation entirely". Seems extreme to me. Wouldn't this be disastrous to investment and create an even more uneven playing field for smaller economic engines? Wouldn't it interfere with "rewarding stability, long-term health, employment, production, and value-added service"? Maybe I'm just ignorant of the details of how your plan would work on an economy as big and as intertwined with the world's economy as the US economy is at this point in history. Who are the non-mainstream economists that you are suggesting that would be proposing total overhaul of the capitalist system? What would that transition look like? What are the long term implications of that?

Anonymous said...

I know you have heard it before and I guess I will say it again, but if this president is to be effective he need s to address the our trade deficit.

If this country is get on it s feet again we need to start building shit that americans can buy top to bottom!

To propose federal funds to fix our roads and bridges is essential but not to modify our trade agreements with China & Nafta is stupid and careless.

The UAW and the auto industry are for the first time at a level playing field and why won't Obama put them all in same room and say ." Can we build a car top to bottom from steel from the USA and electrical not from Mexico but from Pittsfield or Akron or whatever and make it good on gas and a low carbon footprint?)

Roosevelt signed off on the Manhattan Project??

I am going to have a wait and see approach before I indict my new president, I just hope for all us he is who said he was.

Maybe I still have my Obama "Hangover"

-joel

Dan Nolan said...

Well, I agree that a reexamination of our "free trade" agreements are in order. I don't know if a return to the golden age of US manufacturing is the panacea though. The last thing places like Pittsfield need is for the people to be reinforced in their convictions that industrial manufacturing is their only economic avenue. Short of a complete reversal of free trade globalization, I don't see us being juggernaut in the future as an industrial/manufacturing nation. So how do we address the trade deficit? Increasing reliance on local food industry and alternative energy? I don't know. Like I said I'm no expert.

But in honor of the industrial cities of the US, I'll be rooting for the Steelers this afternoon. Go Steelers!

akboognish said...

Strong response, VTK. I'll try to handle what I can at the moment.

The total failure that I referred to is to our (American) economic system, whatever it might be called. Laissez-faire capitalism? Cleptocratic capitalism? As such, we might be in agreement here. It's the form of capitalism that modern US economic policy, virtually every mainstream U.S. economist, and virtually all U.S. private banking/investing/finance/insurance industry ("Wall St.") firms have been assuming as a natural, god-derived constant in life for the past 4 or 5 decades or longer.

I don't believe that mere regulatory structures could have avoided this collapse; changing the rewards and incentives would have been required. Our economic system over-values short-term profit, excludes many true costs (social, environmental, political), and rewards destructive speculation unrelated to true value (societal, structural, etc...). I don't think that these rewards can be altered through regulation: changing the rules of the game is different than changing the whole purpose/goal of the game. We need to change the goal (and then a change in the rules will necessarily follow).

That's mostly what I'm talking about when I suggest that one idea worth considering is "getting rid of Wall St." The vast majority of the world that revolves around the value of stocks (which I'm calling "Wall St.") contributes little to nothing of true value to our society, as it is almost singularly focused on casino-like gambling on stock prices, which more than not reflect this internal and artificial valuation. This speculative market then drives the management of these companies, who need to perpetually seek double-digit growth, short-term profit, and false "efficiencies" in order to satisfy this class of gamblers.

I'm not advocating the elimination of investment, banking, finance, etc... Just stock speculation based on the limited factors currently allowed to be considered when assessing stock value.

I think this reward system is also what's to blame for the crazy complex financial instruments (like mortgage derivatives) that have been developed and that are largely to blame for the most recent collapse. Perhaps those could be taken care of by simple regulations (taxing the hell out of the derivatives, for example, so there is no incentive to create them and trade them, or perhaps requiring the derivatives to fully disclose everything that was considered in determining their trading value, which may reveal that such disclosure is impossible, lowering or killing their value). This "regulation" doesn't appear to be on the table with Obama's team, but I don't think it would be sufficient anyway. Whatever rule was imposed for these instruments would just cause some other instrument to be invented that wasn't subject to that rule. That cycle needs to be stopped completely, not perpetuated.

I'm with Joel--we need to control the trade deficit if we want to do anything with our economy. We can't be an entire nation of borrowers; we have to produce something of value. While I agree with VTK that classic industrial manufacturing may not be the only answer, local production, local employment, and local consumption are all good (probably essential) for the social, environmental, and political goals I'd like to see emphasized. Fortunately, many of those foreign cars are actually made here in the US (Toyota and Honda). I say let the big three fail and let their pieces get snatched up by Toyota, Honda, and Nissan.

We had a chance with the car companies. We could have offered to take over their health care costs and their pension agreements (helping re-write their union contracts). We'd guarantee them contracts worth x billions of dollars to build light-rail vehicles and electric cars (for gov't fleets), and wipe all of their state-by-state dealer franchise agreements that are apparently such a problem. In exchange, they would have to agree to a minimum overall MPG of 40, 50, 60, etc..., a minimum number of electric, hybrid, and other green vehicles for sale to the public, they'd have to agree to rational limits to executive pay, and we would take the companies off the stock market to halt speculative trading and false valuation. Their employees' health care could be covered by either the VA or the Medicare/Medicaid systems (or both), creating a nascent national health care system that is essential to competing with just about every other country in the world. Instead, we threw them a bit of money, no real strings attached, and will get nothing in return.

Steelers kicked some butt today, as did Philly. I'm officially rooting for an all-Penn Super Bowl, with Philly taking the trophy.

Anonymous said...

Dan & Akboognish,

In know that the next incantation of our domestic manufacturing model will look a lot of different than the post WW2 version,

But there are valuable lessons to be learned from that time.
And I think the most important one is how can Management & labor come together with fair and reasonable plan to make quality widgets in this country we as consumers can buy.

As you said Dan and I agree we need get those roads and bridges fixed and we need to subsidies alternative energy initiatives that will stick and not get bogged down in the house and senate.

But thats not enough, Americans can't go to Walmart and buy a bridge or a road or purchase Solar panels that won't cost them 20,000.00 to install on there roof.

Green energy at the consumer level is very expensive even with the federal purchase tax credits(30%).
Most people can not afford the 15,000.00 to 20,000.00$ to install solar arrays on there homes and thats shameful.

And akboognish you mentioned let big three automakers fail,I agree with that but what about the UAW should we let them fail too, or where they just acting on the behalf of the rank file not knowing that maybe there policies could have a stake and taking down the big three?

I don't want to come off as being pro management here but there as some valuable lessons to be learned from this terrible situation.

And you also mentioned the Asian car makers, good example.
The glaring difference is most of the parts that make up a Honda or Toyota are fabricated in Japan and then shipped here to be assembled on a frame in a plant in Kentucky, great idea for Honda & Toyota but bad for the US manufacturing.

I am not economist I am just one of many small employers in this country who pays his payroll tax, employee health benefits, workman's comp insurance e.t.c... and I know how hard it is to do it at my level.

And after what I witnessed on Wall St. these past few months and our governments reaction it makes me sick as a business owner.

The bottom line in all of this is if our country does not start making products that John Q Public can buy we will remain service economy and that can only spell more economic turmoil for the future.

akboognish said...

Great points, Joel. I hadn't thought of the difference between the foreign auto makers and the US ones in terms of parts, but that does make a big difference. You're right that we need to be able to make things and sell them from the bottom to the top in this country and our economic policy should be geared toward making that happen.

As for the unions, I don't think they are to blame for the auto companies' failure. Detroit had a choice in the 50's on whether health care and pension costs should be government burdens (with higher corporate taxes to pay for them) or should be negotiated between the company and the unions. But the executives were so irrationally anti-communist and pro-"free market" that they refused to consider socializing those costs and instead gave away the farm in terms of benefits to the workers. (I'll admit that the union officials were just as anti-commie, and were more than happy to have the whole thing remain private). How those companies couldn't see that the rest of the world was going to be their competitors, and that the rest of the world was doing it differently, is beyond me. The auto companies have fought national health care ever since.

Add that little strategic error to the whole SUV / gas mileage fiasco (a story we all know well, but is summed up by the fact that Detroit has actively fought every effort to raise the fuel economy of their cars and has consistently preferred short-term profit over long-term health and earnings (caused, no doubt, because of their obsession with their stock price and their speculator "owners" ie, shareholders)) and I stop having any sympathy for those bozos. I'm all for American cars and an American car industry, but not if those guys are going to be in charge.

U.S. companies are never going to be truly competitive with the rest of the industrial world unless and until we socialize the health care, pensions, workman's comp, amd family leave costs that are now privately funded.

I read a quick thing someplace this weekend pointing out the odd nature of our stock market. When a company sells stock, it pockets the capital and the purchaser gets a "share". The share allows the purchaser to vote in board elections and on an occasional resolution, and allows the purchaser to receive dividends when, and only if, the company awards them. Again, the company got all the cash and can do with it what it wants (pay its exec's millions of dollars, whatever). It didn't borrow the money, it pays no interest, and owes practically nothing to the purchaser, unless the purchaser happens to be big enough to affect board elections. If and when the purchaser wants to "cash out" and get their value for their share of stock, all they can do is sell it to another purchaser. The company has nothing to do with it (unless they want to). In recent history, that's where all the money is made in owning stocks: buying and selling for a profit, as opposed to purchasing and being rewarded by long-term sharing of the company's profits. But the buying and selling of the stock have hardly anything to do with the operation or profitability of the company and everything to do with speculative gambling and herd mentality. This is the reward system that I mentioned earlier that needs changing.

Dan Nolan said...

Akboognish – ok gotcha. you said “total failure of our economic system” and then “economic system (capitalism)” in the same paragraph, so I thought you were talking about the larger concept rather than the American execution of it. So, beyond that confusion, your response to my response is that regulatory structures would not have prevented the current collapse and that rewards and incentives need to be changed in order to reorient the system. Well, beyond regulation and taxation, how do you accomplish such a reorientation? Having short-term profit and false “efficiencies” as goals of businesses is clearly unhealthy, but what non-regulatory change of the system would deincentivize this? You suggest the elimination of “stock speculation based on the limited factors currently allowed to be considered when assessing stock value.” Not sure I’m following, but is your solution then the removal of limitations on factors that are allowed to be considered in assessing stock values? Wouldn’t that be a regulatory strategy? I ask not to make a point, but because I’m ignorant about these limitations on considerable factors.

As for mortgage derivatives, I think we’re in agreement. My understanding is that they’re a bullshit mechanism that allows financial institutions to avoid regulations by renaming mortgage packages that are subject to regulation - they’re designed to evade the regulations and taxations of the system. So an adjustment to the laws and terms of the regulations (or possibly an actual application of existing regulations) could shut down this evasive renaming strategy. You point out that the institutions would then simply find another way of evading the regulations. Well, you can have all the regulations in the world but if no one is policing them, if there’s not a conscious effort to enforce not just them, but the spirit and ideology of them, then they’re useless. But the fault there is not with the regulatory structures, it is with the people and the ideologies that do not support them. That’s like having a law against murder and then having all the cops sit on their asses in donut shops drinking coffee and farting while people are getting murdered all around the coffee shop. Put down the fucking jelly donut, take out your gun, go outside, and enforce the fucking law. It’s not a failure of the law, it’s a failure of the enforcers of the law.

I think you probably agree with this and that we’re just having a semantic disagreement. I’m in agreement with your criticisms of our economy’s reliance on the casino-like nature of the stock market, but I’m not seeing the alternative. How do you have healthy growth without investment? How do you have investment without speculation? And how do you deincentivize (or criminalize) manipulation of the speculators? This is why I’m not an economist. (it’s one of the reasons anyway)

Joel – you make a good point about the solar panels, but subsidizing alternative energy does not have to be limited to selling solar panels to homeowners at Walmart. It doesn’t have to be limited to solar. What about wind and water. What about investing in research. What about converting federal properties to solar power to set an example and help create the consumer demand that will help create the creation of companies that will compete to create affordable alternatives. Creating jobs, decreasing reliance on foreign trade for fossil fuel energy sources. This is why I’m not an energy expert.

As the grandson of a Detroit UAW auto worker, I’m glad they had insurance and benefits provided by the Union negotiated contracts and I’m always hesitant to blame the unions for the tangled mess that is the Detroit auto industry, a mess that is highlighted by the emergence of the Kentucky/Tennessee/etc auto industry down the road. It would have been nice if we had taken advantage of the opportunity that akboognish points out and covered their health care in the bailout, thus getting the ball rolling towards a national health care system, which we should be doing anyway, which would immediately make them competitive with the foreign companies that are taking advantage of our labor. It also would have been nice if the bailout subsidized the creation of a fleet of electric cars, which would have bypassed Detroit’s hesitancy to invest in a market that has questionable demand. Again, I (perhaps naively) think that green demand can be created by exposing the public to actual cars on the road – demonstrate to them that it’s a feasible alternative. The more people that buy them, the more companies will want to build them, the more the price will come down, the more people will buy them. Maybe I’m oversimplifying the mechanisms of supply and demand, but it seems that there was (is?) an opportunity here for the government to use the bailout/economic stimulus money to give a massive push to the rolling of the ball here. Obama has the political capital and the climate to push some serious liberal agendas, like universal health care and proliferation of alternative energy. Will he? We’ll see.

Anonymous said...

Dan,

I agree with you with regard to solar not being the only option but from a consumer stand point it would be the most cost effective means to get off the grid and at this stage of the game it still just to expensive for the average working family to afford, maybe that will change within the next few years but for now it is seen as more of a luxury and should be a necessity !

As far as the UAW is concerned I am really not qualified to get into a discussion about the economics of unions vs. management but I do know the system is broken and needs a serious overhaul if we are going to be able to compete with likes of China & India.
Maybe are system is totally fucked and beyond repair but I have to think there are some smart sensible business people that can chime in on this one and not that gaggle of do nothing lay about politicians.

I think the first place to start is our steel industry,it is shameful proud US cities like Pittsburgh, Youngstown, Detroit have had their steel industries
decimated from imported steel from China and Poland.

Make it mandatory that any US auto maker that takes federal funds has to buy US steel or make sure that 100% of that car has to comprise of all US made parts, not front ends from Mexico and electrical systems from China.

Maybe I am a bit idealistic but I can't be the only person in this country that wants to protect its markets.

We make up 5% of the worlds population and consume about 50% of the worlds products, it does not take an Ivy league economist to add up those numbers and make them work in our favor again.

Dan Nolan said...

none of us are really qualified, Joel. That's the beauty of it! I agree that steel and other raw materials should be produced locally. I'd like to see the US scale back it's involvement in globalization and free trade agreements.

in breaking news, looks like the Geithner nomination discussion may end up being moot: http://politicalticker.blogs.cnn.com/2009/01/13/obama-team-defends-geithner/

Dan Nolan said...

apparently not. according to pbs, the head of the Senate Finance Committee said that his confirmation is "a given".