Stealth Coup
Stealth Coup
By J.M. Hamilton (7-31-11)
“The chamber and other business groups have pressed with increasing urgency for Congress to raise the maximum amount that the government can borrow.” - NY TIMES, 7-26-11
The country continues it’s seemingly inexorable tilt to the right and mayhem, despite Americans living with the lessons, daily, that markets do not self-regulate and that the vast majority of us are but a pink slip away from humility. It’s like the financial disaster in 2007-2008 never happened; and both parties, Republicans and Democrats, and apparently even the President, are attempting to exceed one another in learning just how far they can shift the political center and discourse further right. It seems to have been that way since Reagan came to power. And while the man of the eighties talked a great “conservative game,” the fact that he raised taxes eleven times during his presidency, and perhaps was one of the greatest Keynesians ever to enter the White House (perhaps second only to George Bush - W), seems to have been lost altogether on the Tea Party movement, and recalcitrant freshmen congressmen (who appear to be doing their best to level the national and world economies). It is as I have long suspected, namely, that certain elements of the Republican Party would like to destroy the Federal Government. What else is one to conclude from the comments of Dick – Deficits Don’t Matter –Cheney, and recent happenings?
The Koch brother's stealth coup seems to have taken hold … all the better to let the law of the jungle take over and monolithic commercial interests call the shots, without the gadfly of the federal government nipping at their heels. Of course when you’re a member of the plutocracy who really needs government anyway?
As for the poor, “Are there no workhouses?”
And just so you don’t think this blog has finally and completely gone off the rails… a couple of observations to back my premise:
$$$ Roughly 50% of discretionary Federal outlays goes to military spending, but despite having finally brought down the arch nemesis of the free world, the U.S. is still neck deep in Afghanistan with 100,000 or more boots on the ground to tackle what? As the New York Times reports, 100 to 200 Qaeda, and yet, nary a word from our elected leaders about reigning in the biggest barrel of pork known to mankind, the military industrial complex. The fact that this nation spends more on defense than the G-20 combined seems lost on fiscal conservatives and budget hawks, within both parties. Perhaps the Department of Homeland Security should dust off the recently retired multi-colored terror alert chart, so that we can all be properly afraid again? All the better to justify the insanity that is the defense budget. Apparently cutting back on government welfare only applies to benefits allocated to the weak and infirm.
$$$ Closing revenue loopholes on personages and entities, so that instead of paying no taxes, the same actually pays taxes, apparently constitutes tax increases to the radicals who are calling the shots in the House, and holding the nation’s economy hostage. Demagoguery at its worst, and yet where are the Democrats to expose this fallacious reasoning? And when did paying ones fair share of taxes become a source of derision or scorn? To hear the tax and accounting department at General Electric tell it, or as one is to discern by their actions, apparently anybody who pays taxes is a sucker, and all one needs to do, to right the wrong of paying taxes, is to hire former Treasury officials to chart the loopholes, and game domestic earnings and the tax code. The fact that Reagan actually closed loopholes, when he learned that his former employer, General Electric, was paying few if any taxes in the eighties, shows just how selective the collective memory of the res publica can be.
$$$ Allowing the Fed to devalue the dollar and therefore, allowing the Fed to make weak and only slightly effective attempts at addressing fiscal, trade, domestic and foreign policy, so that the legislative branch doesn’t have to --- is a cop out. The Fed, and Mr. Bernanke, is effectively carrying our elected leaders on its back so that they do not have to address the issues of the day, and can abdicate responsibility. The Fed should stop providing aid and comfort to the Charlatans, and begin to raise interest rates, which would force our elected officials to govern. With an interest rate rise the harmful effects of QE1 and QE2 might soon vanish as well: inflation might wane; the saving class would enjoy more income to spend in the economy and have a greater incentive to save; some of the banks that should have failed three years ago might finally go under – helping to clear markets; and it would provide a signal to many in the stock market that it might be time to move on, before the inevitable tumble occurs. Most importantly, rising interest payments on the national debt may create the - up until now - missing sense of urgency for elected leaders to deal with budget deficits and national debt.
Funny, one hasn’t heard about either party complaining about the Fed recently. Apparently, trashing the world’s fiat currency is perfectly acceptable when it provides cover for political failure to perform!
$$$ Even the Chamber of Commerce is starting to sweat bullets. Having helped the Koch brother ensconce the freshmen class, they have been rather reluctant to push the ideologues. Mr. Axelrod, a chief political advisor to the President, had the following to say in the Times last week: “I just think that there was, at least on the part of the chamber, a reluctance to tangle with, or pressure, the same group in the House that they’re depending on to gut financial reform and undo environmental regulation and so on. But I think the gravity of the situation is now clear.” Yeah, it’s all good when your pit bull is mauling the opposition, but when your monster starts to glare at you, hungrily, look out.
Running the world’s fiat currency translates into great responsibility. If the U.S. defaults because of political theatre, there will be a lot of oligarchs, who are going to quite possibly find the business environment and the economy less conducive to making money, perhaps globally. Of equal or greater importance, expect a new outcry from world leaders for a new global currency to replace the dollar, especially if the rating agencies down grade the U.S.
The right thing would be for the Congress to pass the debt ceiling, and then enter into good faith negotiations with the Democrats that embraces both spending cuts, and tax reform; but doing the right thing and the “political thing” are as often as not diametrically opposed. There’s always the next election cycle around the corner, scheming and contrivance trumps prudent action, and the public always seems at the mercy of the politicians and the elite who pull their strings. Of course, if this novice class of politicians trash the world economy, and do reparable or irreparable damage to the dollar and the U.S. credit rating, they will quite possibly have the shortest political careers, as a group, in the nation's history. And the Koch brothers and the chamber may lose this, present, political round. There's a happy thought.
Let us weep for the Koch Brothers and the Chamber of Commerce, and let’s remember, who they put in office, come November 2012. This might be a very short lived coup. The question is will the Democrats learn from their 2008 mistakes, and govern more effectively and efficiently? And will President Obama be given a second chance?
P.S. One wonders how many of the freshmen class, including their staff and wealthy supporters, took out CDS and derivative bets against the dollar in advance of the spectacle that lies before us. By having a transparent derivatives market, on open exchanges, we could quickly learn if some of the faux patriots in Washington, and their money men, have a vested financial interest in political stalemate, a U.S default, and in shorting the dollar, at the expense of us all. Another argument for free and open derivatives exchanges? Perhaps.
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