Thursday, January 22, 2009

Stirling Newberry On America's Progressive Movement Vs Neo-Conservative Washington-- The Cold Hard Facts

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DWT readers who browse the progressive blogosphere are probably already familiar with Stirling Newberry, one of the most respected voices examining economic, military, technological and political issues from a progressive perspective. He is a business and political consultant and a composer. His work has been a major inspiration for both Ken and myself and we invited him to do a piece at DWT elucidating on his premise that ideas make the Progressive Movement the most dangerous force in American politics. "While much of America is in a euphoric post-Bush haze," he wrote, "the Progressive Movement has already set to work. However long the race, victory in politics is to ideas winged with optimism, and not to polls or even pictures." We are really very proud to present Stirling's latest work here:

Progressivism is now the most dangerous force in American politics, and everything that is being done is being done to push its ideas to the margins, while claiming to be doing something about the problems that those ideas address. At this point Washington DC and the old system have exactly one idea, and that idea is raid social security. The progressive movement is now the movement of ideas, and everyone else is simply trying to figure out how to get to the end game of taking payroll taxes and using them to pay back the bad bets of banks.

That's the only wedge they have to run, because it has sunk in that the Chinese are not going to start consuming quickly, and even Chuck Schumer has gotten that message. Prior to the credit crunch there was 
some vain hope of that. Now, it is clear to the inside that is not going to happen, because the Chinese have no interest which is served by it happening.

What we are going to see until then is an inside that wants a redo on the last decade. Because, while the outside wants different policies, the inside is desperate to prove that the problem is not the Suburban-Industrial Complex and it's politics that alternates between arrogance and terror, but simply that George W. Bush could not manage it very well. Since the Suburban-Industrial Complex is not financially viable, this effort is destined to fail and people should now be thinking long term. Bush was stupid done stupid, now we get stupid done smart.

Obama is not a progressive, and while I don't know about never was, he now never will be. He is not a reactionary as Bush was, and will be better on a host of small issues, but no more than that. He will not appoint the grossly incompetent, he will not let cities sink beneath the waves. Obama's America, is a better, smarter, more robust and honest America. These mark a start, but not sufficiency. It is not enough to do stupid, smarter.

The older generations will give up when they have converted the last rock of coal, into the last barrel of synfuel, to drive the last SUV, to the last development, with the last super-sized order of processed food substitute to bring home to their obese kids. People need to realize that we are riding this bucket all the way down, and that only once there has been a catastrophic freeze over of the financial system, one that cannot be fixed by printing paper money for banks to sit on, then there will be change. They will never give up their suburban-industrial complex where God, "G" essential, put oil on this earth to be turned into green lawns in the land casino.

Presently the larger economic problem is simple: for a generation America has relied on the "paper for oil" economy. America buys oil, turns it into goods for suburbia, and then sells paper backed by the future earnings of the efforts of those suburbanites. This burned through the credit built up by the generation after World War II, and required that the US pursue a global policy of development arbitrage-- we would lend money to developing countries, and use the brute power of the dollar to collect it. The same countries that sold us resources held their own peoples back, and kept their own populations in political darkness.

However, there were two deep flaws in this system The first is that the oil economy cannot, could not, and will not, go on forever. The other is that those buying the paper wanted a greater return on it than the market would allow. And so, four times, we created games that were rigged in favor of those buying the paper. Each time the game broke, and the public was called upon to bail out the game. Each time pain was spread thinly to bail out, but it was noticeable enough to stifle hope and growth.

The first bailout was from the 1970's inflation game. The cost was raising social security taxes, a regressive tax, and cutting domestic programs. We were told there was a social security "surplus," but, in fact, that money was spent like all other money: on tax cuts and tanks.

The second bail out was from an era when we overpaid on treasuries, and allowed a oil, insurance, and export bubble to burst. This came tumbling down on a dark day in October of 1987, even though it had been unraveling for two years before. The cost was a massive binge of debt for a war in Iraq, and the "Savings and Loan" crisis. We are still paying that one off. Social Security was shaved by understating inflation, domestic programs were cut. However, in return, Clinton released defense technology into the wild. This created a new bubble: in the internet, and on globalization based on telecommunications.

When this burst, the bail out of those  who had had a great deal of money in the stock market was accomplished with Bush's tax cutting program. Bush's bubble was to be in US real estate, where we sold mortgage backed paper at interest rates higher than what treasuries could pay, but winked and promised them to be as good as gilt. Combined with a war for oil to drive US manufacturing, the Bush bubble deflated with a long whizzing sound in a "surge" combined with a deflation of housing prices. The third bail out: cheap Fed money, tax cuts for the wealthy, and a war and land bubble. This too collapsed, as the funny numbers, and faith based policies crumbled under the weight of reality.

So now we are at the fourth bailout of the neo-conservative era, Obama is in charge of this bailout, and whipped for the TARP bill which is at the center of "stabilizing" the banking system, and the question is how to pay for it. Before even economic recovery and restructuring are on the agenda, the question of how to pay for buying off the toxic assets of TARP has slammed to the top of Washington DC's agenda. The initial hope was to get China and countries in the Middle East to spend more. When financial types talk of "global imbalances" that is what they mean: Saudi Arabia and other oil rich, people light countries, and China, sell more to the rest of the world than they buy.

However, the very willingness of the previous era of globalization to do business with closed societies means that the US and Europe have no leverage. China also knows that while it has 2 trillion in currency reserves, it needs 40 trillion of infrastructure investments. China runs a yearly surplus, but is deep in the hole of underdevelopment. Thus China told Hank Paulson rather bluntly when he last visited that the bank bail out will not be on the back of Chinese ambitions.

That leaves only one idea in neo-conservative Washington: "entitlement reform" which means regressive taxation to pay for the toxic waste. This idea is Hooverism: telling people in a down turn that their wages are going down, and their risks are going up.

This is not an idea, but the act of a desperate junkie that has always been able to find a way to make the public pay for private mistakes before. This is why the upper echelons have suddenly become enthusiastic about a "carbon tax." The amount budgeted for decarbonizing the American economy is tiny, but the amount that could be made from harvesting another regressive tax is large. In India, the British taxed salt, because nothing moves under the hot sun, without salt.

By contrast the Progressive movement has put forward two simple ideas. The first is that a vast percentage of American GDP funnels into control over the country, rather than for the good of the country: Health insurance profits, neo-colonial wars, subsidies for corporations, and excessive profits for financials. Shifting this from waste to productivity would save 10% of GDP. The second is that the public is as able to determine the course of the country as a cadre of bankers and billionaires who have just created the fourth bust in as many decades. The fear of "Nationalization" is a fear of the few, of the many.

That Washington has not accepted these ideas can be seen by cold hard facts. TARP does not give the government voting control over the banks it has bailed out. At the time of the bail out, the progressive  answer, pushed by economists such as James K. Galbraith and others, was to give the money, not to the treasury, but to the FDIC, and have the FDIC take over banks and open them for lending. It worked for FDR, it can work for us.

That Washington has not accepted these ideas can be seen by cold hard facts. Any universal system of health care will have to have far more doctors and nurses. And yet, the stimulus bill does not have large grants for training new doctors and nurses. It takes roughly 7,000 in tuition for a state nursing school. Even with a 15,000 dollar stipend paid for by doing Nurse's aid work during classes, that is 44,000 dollars over two years for a nurse.

That Washington has not accepted these ideas can be seen by cold hard facts. Last spring, the man who is now director of the OMB testified to Congress about the size of infrastructure spending that could be justified purely on cost benefit considerations in the present. The stimulus bill falls far short of these projections.

That Washington has not accepted these ideas can be seen by cold hard facts. The stimulus bill provides for some renewable energy, most of which is ethanol subsidy. The amount for wind is touted as "doubling" and yet wind provides only a fraction of even the total renewables. Bush's energy department stated that wind could provide 20% of America's electricity by 2030. The stimulus bill falls short of even the Bush Administration's projects of what could be bought and installed without any bottlenecks at all. That is, even the Bush energy department, said this was a no-brainer.

That Washington has not accepted these ideas can be seen by cold hard facts. One road to universalizing care is expanding, not contracting, Medicare. And yet, Obama's first important order of business is to cut, not expand, Medicare.

That Washington has not accepted these ideas can be seen by cold hard facts. Broadband speeds in the US are 1/10th of what they are in tiger economies, who use broadband to save on energy. The stimulus bill provides less for broadband that the coming budget does for F-35 fighters. America just put a down payment on a new nuclear powered aircraft carrier, and ordered a wave of laser guided bombs.

If there is to be a second American Century, it will have to be a Progressive Century, and it will have to be a century of ideas. One cannot cut one's way to prosperity, any more than one can drink one's way to sobriety. What America needs is not to do less, but do more, and do more well.

The Progressive movement is the most dangerous force in American politics, precisely because Progressives are the party of ideas in American politics. These ideas are clear, and effective. Many have been tested in countries around the world, and in states across the nation. The countervailing forces of cost cutting and cramming down, have been tried, and already failed by their own measurements.

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