In a Slap in the Face to Progressives, Biden Appoints Larry Summers, a "Literal Architect of Neoliberalism," to Economic Advisory Role

Joe Biden has chosen as his economic adviser the main Democratic proponent of the China PNTR deal and Wall Street deregulation. Apparently, Biden may really have meant it when he said “nothing will fundamentally change.” https://t.co/UokamnmgyA

— David Sirota (@davidsirota) April 23, 2020

by Thomas Neuburger

Over the past three decades, Summers has amassed a policy record of almost unrivaled social ruin.
—Zach Carter, Huffington Post

In a slap in the face to progressives, Joe Biden, who has already announced that if he's elected "nothing would fundamentally change," has appointed the head of Barack Obama's National Economic Council, Larry Summers, as a key adviser to his campaign.

From Bloomberg, which occasionally still reports the news (emphasis added):

Former Treasury Secretary Lawrence Summers is advising Joe Biden’s presidential campaign on economic policy, including its plans to revive the U.S. economy after the coronavirus pandemic, according to five people familiar with his involvement.

The Obama and Clinton administration veteran’s role roiled progressives who view his past work on the 2009 recovery as too favorable to big banks. That’s awkward for the Biden campaign at a time when it is trying to win the trust of former supporters of Bernie Sanders and Elizabeth Warren.

Five people confirming is a deliberate leak, especially since non of them are said to be "unauthorized to speak about the matter."

Progressive groups are aghast, of course:

Two Sanders-aligned groups, Justice Democrats and Sunrise Movement, said Friday they “hope Biden publicleconomic y rejects Summers’s role as an economic adviser to better earn the trust of our generation.” They said they also plan to start a petition calling on Biden to pledge to exclude Summers from his transition team or administration.

“Larry Summers’s legacy is advocating for policies that contributed to the skyrocketing inequality and climate crisis we’re living with today,” the groups said in a joint statement.

Summers is such a bad choice for the campaign to be aligned with that The American Prospect writer Robert Kuttner put Summers at the top of his "do not re-appoint" list. 

But as Rising's Saagar Enjeti points out, the real group that Biden needs to assure isn't Progressive Avenue, or even Main Street — it's Wall Street — and leaking via five sources to Bloomberg News that Summers is now in Biden's inner circle does just that. As Bloomberg put it, with this move Biden has "offered some reassurance [to] Wall Street that Biden is not moving too far to the left from the centrist positions that earned him his establishment support."

I'm not if sure this will get him elected, but it is certain to be noticed, even by not-well-read voters who nonetheless care about the direction of the country. Summers was a marquee name in the Obama administration. As Robert Kuttner points out:

Under Clinton, Summers was a prime architect and huge enthusiast of what proved to be fatal financial deregulation. He was also in charge of Clinton’s economic policy for post-Soviet Russia, and was responsible for pushing for early and catastrophic privatization of state assets, a fire sale that led directly to the creation of Russia’s oligarchs. As president of Harvard, he proved to be both arrogant and sexist, to the point where he got himself fired. ...

[As Obama's chief economic advisor, Summers] not only lowballed the necessary economic stimulus and ended it prematurely, but he successfully fought for rescuing the biggest banks rather than taking them into temporary receivership. Back at Harvard, Summers earns over $600,000 as a university professor but also moonlights at the hedge fund D.E. Shaw, where his compensation is well into the seven figures. (Some would say he moonlights at Harvard.)

There are so many ways that Summers is a bad choice, it's difficult to enumerate them, though both Kuttner and the HuffPost's Zach Carter try. (Carter: "Over the past three decades, Summers has amassed a policy record of almost unrivaled social ruin." Then he lists the ways.)

It's sufficient to say that his appointment is the economic-policy equivalent of bringing in Rahm Emanuel, who famously called liberals "fucking retarded," to handle the Biden's relationship with progressive groups.

If Larry Summers' appointment is part of the mainstream Democratic plan to unite the Party and rally "change voters" behind the Biden candidacy, good luck.
 

Not All Democrats Are The Same

Conservatives opposed Social Security and have been trying to undermine it since it was signed into law August 14, 1935, Right from the day it was proposed Republicans and conservative Democrats were howling at the moon that it was deepen unemployment-- their standard false argument against everything under the sun. The same crew also accused Social Security of being socialism-- since the words have many letters in common. Southern conservatives threatened to tank it if blacks were included and Republicans also worked hard to keep women from being covered.

The program has been successful and popular and has made it much more difficult for Republicans and conservative Democrats to attack it. But that doesn't stop them. Although, the conservative establishment Democrat running for president has not committed to to Social Security expansion, most Democratic lawmakers side with Bernie Sanders on this one-- as do nearly 80% of American voters, across the party spectrum.

Conservative Democratic Party leaders have overseen the loss of nearly 1,000 state legislative seats and 70 congressional seats because they implement insipid messaging as part of election strategies built around their fear of standing with the majorities who demand the rich pay their fair share of taxes and that Social Security expansion be a focus of Democratic electoral strategy. Instead you find mealy-mouthed New Dems sounding exactly like the Republicans who opposed FDR's original proposals. As Social Security Works reminded its supporters yesterday, "When Democrats run on milquetoast policies, such as opposing privatization instead of taking bold stances such as expanding Social Security, they fail to inspire voters and fail to truly address the major economic issues facing our country." Today's big NY Times story that everyone was talking about, For the Wealthiest, a Private Tax System That Saves Them Billions by Noam Scheiber and Patricia Cohen, lays out one of the ways how the super-rich, particularly billionaire hedge fund-operators, have systematized not paying their fair share of taxes. "The trick," they ask? "Route the money to Bermuda and back." And they finance the careers of shady politicians, crooks like Mitch McConnell and Paul Ryan on one side of the aisle and Chuck Schumer and his Schumercrats on the other side, to make it all legal.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune.

All are among a small group providing much of the early cash for the 2016 presidential campaign.

Operating largely out of public view-- in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service-- the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”

Some of the biggest current tax battles are being waged by some of the most generous supporters of 2016 candidates. They include the families of the hedge fund investors Robert Mercer, who gives to Republicans [and just dropped a tidy $30 million on Ted Cruz's SuperPAC], and James Simons, who gives to Democrats; as well as the options trader Jeffrey Yass, a libertarian-leaning donor to Republicans.

Mr. Yass’s firm is litigating what the agency deemed to be tens of millions of dollars in underpaid taxes. Renaissance Technologies, the hedge fund Mr. Simons founded and which Mr. Mercer helps run, is currently under review by the I.R.S. over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade, according to a Senate investigation. Some of these same families have also contributed hundreds of thousands of dollars to conservative groups that have attacked virtually any effort to raises taxes on the wealthy.

You see former Treasury Secretary Larry Summer's opinion piece in today's Washington Post? He's not from the Bernie Sanders/Elizabeth Warren wing of the Democratic Party but his point was that "Sanders is right in his central point that financial policy is overly influenced by financial interests to its detriment and that it is essential that this be repaired... Sanders is right that Fed governance has been and is overly tied up with the financial sector. Each of the 12 regional Feds has a board of directors that is made up of nine people-- three banking representatives, three private-sector non-banking representatives and three public interest representatives. The fact that a member of Goldman Sachs’s board at the time of the 2008 crisis was the “public interest” chairman of the New York Fed board is, to put it mildly, indefensible." Don't get too excited though; he then takes a more conservative, establishment, Hillary-oriented "we better not do much of anything" approach, the approach that has made the Democratic Party so worthless to most Americans in recent decades.

Not all Democrats are the same-- nor have they ever been. There have been conservative Democrats working against American families with Republicans for generations. The Democratic Party may be going into a dark period, as Wall Street-owned New Dems take over more and more of the House leadership and the Senator from Wall Street, Chuck Schumer and his pack of vile Schumercrats prepares to take over leadership of the Senate Democrats. The only hope for Democrats in the short run is nominating Bernie Sanders and dedicated progressives who are running on his platform. You can find them here. But not on the 7 second video of the deceitful, wormy little Schumercrat below:

Why Do Catastrophically Failed Economists Keep Getting Recycled By Establishment Politicians?

I was happy for the U.K. last week when I read that the newly elected leader of the Labour Party, Jeremy Corbyn, had selected two of the world's most brilliant economists as advisers, Thomas Piketty and Joseph Stiglitz. Corbyn's comment to the media on his selections: "I was elected on a clear mandate to oppose austerity and to set out an economic strategy based on investment in skills, jobs and infrastructure. Our economy must deliver security for all, not just riches for a few."

How different from that are the grotesquely failed economic advisers most of the U.S. presidential candidates are recycling, self-serving garbage like Glenn Hubbard, Robert Rubin, Lawrence Summers, Kevin Warsh, Tim Geithner, Alan Greenspan, Ben Bernanke (oh, this is convenient), Arthur Laffer, Stephen Moore...?

I have no doubt Jeb, Rubio, Trump and Fiorina would try to bring back Andrew Mellon, clueless Treasury secretary from 1921 to 1932 under Warren G. Harding and Calvin Coolidge, if they could. Cruz, on the other hand, might opt to resuscitate Roger Taney, who was Treasury Secretary-- also the first nominee to any Cabinet position to be rejected by the Senate when his recess appointment failed-- before becoming the worst Chief Justice of the Supreme Court in 1836.

Let's start with an excerpt from NY Times economics columnist Jeff Madrick's book Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World:

Economists were indeed set back on their heels by the financial crisis of 2008 and by the depth of the recession and the levels of unemployment that followed. Though not well implemented, the aggressive financial rescue efforts of the government in 2008 nevertheless kept matters from getting far worse that year. Were it not for the social programs started in the New Deal of the 1930s and expanded in the 1960s, including Social Security, unemployment insurance, and Medicare, and those adopted later, including the earned income tax credit and food stamps—the great embrace of government, not its denigration—the nation would likely have entered a full-fledged depression by 2009. For all the criticism, President Obama’s roughly $800 billion stimulus package of government spending and tax cuts was also a vital contributor to a softer landing for the economy in 2009. Non-laissez-faire economics saved the day.

... In 2001, after the Clinton administration had left office, Lawrence Summers, a Harvard professor and Bill Clinton’s third Treasury secretary, endorsed this new faith in free markets and opposition to government intervention as a victory of new ideas. By contrast, in the 1930s John Maynard Keynes had advocated aggressive government spending—outright budget deficits—to stop recessions and support vigorous recoveries. “The political debates take place within a universe that is shaped by the development of new ideas,” Summers told an interviewer, attributing the change to good, fresh thinking, not merely the return of an old laissez-faire ideology in a more politically conservative time. “Of those new ideas, none is more important than the rediscovery of Adam Smith and the idea that a decentralized system relying on price signals collects information and provides much more insurance than any kind of centrally planned or directed type of system.” Summers, a onetime Keynesian, had for the moment changed his tune, and in this he represented economists generally.

Economists basically discarded Keynesian policy and relied on a narrow version of monetary policy: the manipulation of interest rates by the Federal Reserve, the nation’s central banking system. “We thought of monetary policy as having one target, inflation, and one instrument, the policy rate,” conceded Blanchard. “So long as inflation was stable, the output gap [the difference between potential and actual GDP] was likely to be small and stable and monetary policy did its job.” He noted that “old-style Keynesian stimulus,” by which he meant more government spending, was now “secondary.”

During this period, Clinton, the first Democratic president since 1981, chose to act on the advice of Summers and Robert Rubin, his second Treasury secretary and a former head of Goldman Sachs, and pay down the nation’s debt before seriously raising public investment. The federal deficit was widely thought to deter growth, limiting the money available to private businesses to distribute the nation’s savings. In Clinton’s last year in office, the level of federal public investment as a proportion of GDP was lower than in Ronald Reagan’s last year in office, especially for physical infrastructure and education spending. It was also substantially lower for research and development. The policy was part and parcel of the laissez-faire revolution.

Had economists been fully dedicated to their free-market views, they would also have been up in arms over the glaring lack of regulation of the new and deliberately opaque derivatives market on Wall Street. Based on securities that could be bought and traded with little down payment, these derivatives were at the heart of the financial crisis. If someone is selling a good or a security, competitors cannot offer it for less if they do not know the price asked. Yet the Clinton administration, following the new economic thinking, prevented regulators from setting federal standards of openness in this market.

The most damaging of the new financial derivatives were credit default swaps, a technical name for insurance sold by financial firms to protect investors against price declines of securities. The insurance to protect against losses on mortgage securities became especially popular as the housing boom progressed-- particularly insurance for securities based on subprime mortgages. Because the prices of these insurance-like derivatives were traded secretly, however, there was not adequate competition to keep prices sensible. Economists should have rallied in opposition to the lack of rules, but I could find no research papers done on the phenomenon until it was too late. Some investors and professional traders bought the insurance at high prices, some sold at low prices. Moreover, there were no legal requirements to hold a reserve to ensure that someone selling insurance could pay off—as is done with traditional life and property insurance. When the value of mortgages collapsed as the housing bubble burst, those who sold such insurance-- notably the insurance giant AIG-- could not pay off, making the crisis far worse. Investors who thought they were protected against falling mortgage securities were now losing fortunes, forcing them to sell other securities to meet their liabilities. This drove the prices of other securities still lower, and market prices fell further in a vicious spiral.

Economists also said little when they should have proverbially shouted about the obvious conflicts between those who issued securities and the agencies they hired to rate the securities they sold. These agencies, Standard & Poor’s and Moody’s, were inclined to make their clients happy and gave their securities high ratings, even those based on subprime mortgages. Giving unjustifiably high ratings to the securities of clients who were paying for them seems, well, almost inevitable. After the collapse, the agencies sharply, and with at least temporary embarrassment, reduced their ratings for the large majority of securities they had previously given their highest ratings, the value of which had often fallen to zero.

“Get the incentives right” had become a cliché for economic reform, especially in poorer developing nations. But financial incentives were awry on Wall Street. Traders were paid lavishly when they were correct but were not penalized commensurately when they were wrong, thereby incentivizing them to take risks. Much of the profits earned on trading the new derivatives were kept secret from buyers and sellers so that customers could not seek a better deal elsewhere. It was said that the very high compensation of bankers and traders reflected their unusual talents and that high profits for financial institutions meant they were contributing ever more to the nation’s prosperity. Economists were barely disturbed by such implausible nonsense. Meanwhile, by contrast, laws to set higher minimum wages, it was argued by many economists, would only distort labor markets and result in lost jobs.

Wall Street itself exhibited the characteristics of a monopoly. Commissions were fixed at abnormally high levels for most financial transactions, suggesting the lack of true competition. Fees earned by bankers on transactions were always high but did not fall as a percentage of the soaring value of financial assets, which under normal competitive conditions should likely have been the case. Blanchard, looking back, wrote: “We thought of financial regulation as mostly outside the macroeconomic policy framework.” The silence of so many economists when even their most bedrock conservative principles were violated was disturbing. They had spoken up as a group before, sometimes vociferously, about the benefits of free trade, for example. Their current views on laissez-faire economics, including financial deregulation, were now markedly sympathetic to big business and Wall Street.

In the 1980s, 1990s, and 2000s, the prices of stocks, bonds, and housing rose to untenable levels on the watch of free-market economists who preached deregulation. During this period, over-speculation led to serious financial crises at home and abroad as free-market advocates successfully reduced controls on lending and investing around the world. A series of major financial crises affecting America began with a 1982 Mexican financing debacle involving U.S. banks and climaxed with the 2008 crisis. Mexico had borrowed significantly from U.S. banks in the 1970s and early 1980s, the careless banks essentially speculating on the future strength of the Mexican economy with loans to the government and for spurious industrial projects. With no guidelines from government or international institutions, the banks had recycled petrodollars through loans especially to Latin America; a favorite recipient was Mexico. When interest rates were pushed up sharply by Paul Volcker’s Federal Reserve in order to stanch U.S. inflation, interest rates on Mexican debt also rose sharply. At the same time, a resulting worldwide recession undercut Mexico’s oil exports. The nation declared that it could not pay its debts to American banks. The Fed and the International Monetary Fund, a world lending organization, helped bail out the banks.

Ensuing financial crises were variations on this theme. The investors in equity incurred huge losses because of overly optimistic speculative investments that initially earned a lot of money and then went bad, but banks were often bailed out. Economies typically slid into recessions when inflation rose and the prices of these financial assets fell. The 1982 recession in the United States, for example, was the worst since the Great Depression-- until the recession of 2008. Despite wide-eyed assertions by well-schooled economists that Americans were now enjoying the Great Moderation, the financial collapses and ensuing recessions had, as noted, cost Americans trillions of dollars in lost wealth and jobs, diminished investment, and failed companies. The U.S. housing crash that began in 2006, along with the accompanying collapse in stock prices, reduced the wealth of Americans by roughly $8 trillion by the time it hit bottom. This crash was also of course the result of overspeculation fueled by borrowing-- homebuyers and investors in complex and hard-to-understand mortgage securities kept buying at ever-higher and less sensible prices. While average wealth rose again in the years after the crash, the money essentially went to the wealthy. Banks had been rescued, stock prices came back, and the well-off held the large majority of stocks; housing prices rebounded only partially. The high-technology stock plunge that occurred in the early 2000s resulted in comparable losses for most Americans. Most high-technology stocks did not recover. Many economists insisted such speculation was necessary to encourage risk taking.

...The free-market economics that had been in vogue were now failing badly. The old remedy advocated by John Maynard Keynes to cure recession—federal spending that would lead to a temporary budget deficit-- had been accepted momentarily but was again soon disdained by many. Since the inflationary 1970s, a federal budget deficit was increasingly seen as the culprit, even among Democratic economists, and this view has been hard to shake completely even after the major recession. The thinking was that a deficit often, even usually, created too much demand for goods and services, thus pushing up prices. It created more demand than the wages and profits the economy itself was generating, requiring borrowing to do so. Once slack was taken up, it was believed, a deficit resulted in an overheated economy. Keynesians typically argued with the new free-market orthodoxy over whether full employment had been reached and whether the capacity of the economy was fully utilized. It was said that the debt financing that pushed up interest rates also left less room for businesses to borrow.

To call economists overconfident during the modern laissez-faire experiment understates their hubris. The susceptibility of economists to new fashions in thinking, their opportunistic catering to powerful interests, and their walking in lockstep with the rightward political drift of America are disturbing for a discipline that claims to be a science.

Larry Kudlow- renowned economist (and deranged drug addict)

The kind of advice Corbyn-- and presumably President Bernie-- will get from Stiglitz is entirely different and from an entirely different, people-oriented perspective. Friday Stieglitz and Adam Hersh, senior economist at the Roosevelt Institute, published a decidedly non-establishment piece on the TPP-- which is nearly negotiated now-- and "free trade" in general. Details are being ironed out in Atlanta. "The biggest regional trade and investment agreement in history," they wrote, "is not what it seems."

You will hear much about the importance of the TPP for “free trade.” The reality is that this is an agreement to manage its members’ trade and investment relations-- and to do so on behalf of each country’s most powerful business lobbies. Make no mistake: It is evident from the main outstanding issues, over which negotiators are still haggling, that the TPP is not about “free” trade.

New Zealand has threatened to walk away from the agreement over the way Canada and the US manage trade in dairy products. Australia is not happy with how the US and Mexico manage trade in sugar. And the US is not happy with how Japan manages trade in rice. These industries are backed by significant voting blocs in their respective countries. And they represent just the tip of the iceberg in terms of how the TPP would advance an agenda that actually runs counter to free trade.

For starters, consider what the agreement would do to expand intellectual property rights for big pharmaceutical companies, as we learned from leaked versions of the negotiating text. Economic research clearly shows the argument that such intellectual property rights promote research to be weak at best. In fact, there is evidence to the contrary: When the Supreme Court invalidated Myriad’s patent on the BRCA gene, it led to a burst of innovation that resulted in better tests at lower costs. Indeed, provisions in the TPP would restrain open competition and raise prices for consumers in the US and around the world – anathema to free trade.

The TPP would manage trade in pharmaceuticals through a variety of seemingly arcane rule changes on issues such as “patent linkage,” “data exclusivity,” and “biologics.” The upshot is that pharmaceutical companies would effectively be allowed to extend-- sometimes almost indefinitely-- their monopolies on patented medicines, keep cheaper generics off the market, and block “biosimilar” competitors from introducing new medicines for years. That is how the TPP will manage trade for the pharmaceutical industry if the US gets its way.

Similarly, consider how the US hopes to use the TPP to manage trade for the tobacco industry. For decades, US-based tobacco companies have used foreign investor adjudication mechanisms created by agreements like the TPP to fight regulations intended to curb the public-health scourge of smoking. Under these investor-state dispute settlement (ISDS) systems, foreign investors gain new rights to sue national governments in binding private arbitration for regulations they see as diminishing the expected profitability of their investments.

International corporate interests tout ISDS as necessary to protect property rights where the rule of law and credible courts are lacking. But that argument is nonsense. The US is seeking the same mechanism in a similar mega-deal with the European Union, the Transatlantic Trade and Investment Partnership, even though there is little question about the quality of Europe’s legal and judicial systems.

To be sure, investors-- wherever they call home-- deserve protection from expropriation or discriminatory regulations. But ISDS goes much further: The obligation to compensate investors for losses of expected profits can and has been applied even where rules are nondiscriminatory and profits are made from causing public harm.

Philip Morris International is currently prosecuting such cases against Australia and Uruguay (not a TPP partner) for requiring cigarettes to carry warning labels. Canada, under threat of a similar suit, backed down from introducing a similarly effective warning label a few years back.

Given the veil of secrecy surrounding the TPP negotiations, it is not clear whether tobacco will be excluded from some aspects of ISDS. Either way, the broader issue remains: Such provisions make it hard for governments to conduct their basic functions-- protecting their citizens’ health and safety, ensuring economic stability, and safeguarding the environment.

Imagine what would have happened if these provisions had been in place when the lethal effects of asbestos were discovered. Rather than shutting down manufacturers and forcing them to compensate those who had been harmed, under ISDS, governments would have had to pay the manufacturers not to kill their citizens. Taxpayers would have been hit twice-- first to pay for the health damage caused by asbestos, and then to compensate manufacturers for their lost profits when the government stepped in to regulate a dangerous product.

It should surprise no one that America’s international agreements produce managed rather than free trade. That is what happens when the policymaking process is closed to non-business stakeholders-- not to mention the people’s elected representatives in Congress.

But how could we do a post about economists and leave Paul Krugman out-- or Republican voodoo economics? On Friday, Krugman looked at the Trump-Jeb-Rubio tax plans in terms of Republican voodoo orthodoxy. They all passed with flying colors: "lavish huge cuts on the wealthy while blowing up the deficit."

[T]here’s the recent state-level evidence. Kansas slashed taxes, in what its right-wing governor described as a 'real live experiment' in economic policy; the state’s growth has lagged ever since. California moved in the opposite direction, raising taxes; it has recently led the nation in job growth.
True, you can find self-proclaimed economic experts claiming to find overall evidence that low tax rates spur economic growth, but such experts invariably turn out to be on the payroll of right-wing pressure groups (and have an interesting habit of getting their numbers wrong). Independent studies of the correlation between tax rates and economic growth, for example by the Congressional Research Service, consistently find no relationship at all. There is no serious economic case for the tax-cut obsession.

Except one:

Republicans support big tax cuts for the wealthy because that’s what wealthy donors want. No doubt most of those donors have managed to convince themselves that what’s good for them is good for America. But at root it’s about rich people supporting politicians who will make them richer. Everything else is just rationalization.

... [N]ever forget that what it’s really about is top-down class warfare. That may sound simplistic, but it’s the way the world works.

The Wall Street Dems-- Rising Or Falling?

Barney Frank is no longer a Member of Congress and his influence on the House Democrats' fiscal agenda has been largely supplanted by that of former Wall Street executive Jim Himes (New Dem-CT). As we saw last week, the New Dems have been boasting that a quarter of all House Democrats are now Members of their caucus. 53 Democrats, including DNC head Debbie Wasserman Schultz, have joined the New Dems, a caucus dedicated to-- above anything else-- sucking legalistic bribes from Wall Street and corporate America by backing their toxic economic agenda. And, unlike the Blue Dog Caucus which is nearly extinct, the New Dems have grown, thanks largely to the recruitment policies of Steve Israel and the DCCC, and includes 20 freshmen. (In contrast, the Progressive Caucus only includes 11 freshmen. In fact, the newest recruit into the bowels of the New Dem Coalition was Anne Kuster who quit the Progressives to move over to the Dark Side.)

This year the New Dems have teamed up with the Republicans-- they are, after all, the "Republican wing of the Democratic Party" or, as many joke, "your father's Republican Party"-- to dismantle Barney Frank's efforts to curb Wall Street's predatory excesses. New Dems on the Agriculture Committee-- Kuster, Pete Gallego (TX), Sean Patrick Maloney (NY), Mike McIntyre (NC), David Scott (GA) and Juan Vargas (CA)-- and on the Financial Services Committee, have made common cause with the GOP to undermine regulations--to the point of deregulation-- on derivatives. Support for the scheme to reduce Social Security via a Chained CPI came from just two places: the GOP and the New Dems. The Chained CPI scheme is a Wall Street priority.

Yesterday, conservative Democratic operative Peter Beinert tried making the case at the Daily Beast that the Democratic Party has turned against Wall Street. He's incorrect. His initial assertion that the forced withdrawal of Larry Summers for the Fed Chair proves the congressional Dems hate Wall Street, assumes, incorrectly, that Wall Street was unified in its desire to see Summers get the job. Not only did the Dow spike up yesterday when the news of Summers' withdrawal hot the floor, but Forbes also begs to differ: The Best News for the U.S. Economy This Year: Larry Summers Drops Out of Fed Chairman Race. "As Mark Leibovich has pointed out in This Town, a hilarious new book on the Washington eco-system of show-boating, self-aggrandizement, and financial conflicts, the nation’s capital is noted for a tendency for people to 'fail upward': those who fail in one job suddenly re-appear-- often within months-- in bigger jobs where they are unleashed to do even more damage. Even by Washington standards, however, the idea that Summers had any claim on the job of Fed chairman was straight out of Through the Looking Glass. Certainly had he got the job, it would have been the ultimate proof of John Maynard Keynes’s cynical maxim that 'worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.' Thus it is heartening that Summers has just announced he is withdrawing  from the contest (albeit it took three Democratic members of the Senate Banking Committee-- Jon Tester, Sherrod Brown, and Jeff Merkley-- to stare him down)." Fingleton, a former editor for Forbes and the Financial Times, goes on to cite Joe Stiglitz's NY Times column proving Summers' unsuitability and then explains that Summers' connection to Wall Street is to its "seamier side... Summers’s net worth as of 2009," he points out, "was at least $17 million, more than 40 times the figure he reported in 1999. What made the difference was  Wall Street’s unerring generosity towards those public intellectuals whose ideas sell the American public interest down the river."

Am I being too harsh? Not at all. Those of us who criticize Summers’s record aren’t all merely wise after the fact.  A lot of people over the years have insisted on comprehensive financial regulation, not least the architects of the late 1930s Glass-Steagall system, which kept the U.S. banks out of trouble for more than four decades-- the best four decades in  American economic history. If you want to find contemporary policymakers who have understood all along the case for financial regulation, you need go no further than Canada, which did not follow the United States down the road to deregulation. In contrast with the repeated crises which have rocked U.S. finance for more than three decades, the Canadians have been rewarded with a consistently efficient, crisis-free financial system.  It is a similar story in much of central and northern Europe, where for the most part financial regulators have maintained a firm grip in the face of constant exhortations from the United States and the United Kingdom to deregulate.

Or maybe Beinert meant that the Dems are just moving away from that "seamier side of Wall Street," although the gusher of legalistic bribes to the New Dems wouldn't indicate as much. It was after all, that "seamier side of Wall Street" that got former New Dem Chair Joe Crowley, one of the three most corrupt Democrats in the House, put into the caucus leadership this year. And it is seamy Wall Street cash that has fueled the upward career of a second of the 3 most corrupt House Democrats, DCCC Chair Steve Israel, who has relentlessly recruited Wall Street-friendly New Dems to run for House seats.

Beinert's main premise is that the main reason Summers "dropped out is that he became identified with deregulatory policies that were far more tolerated inside the Democratic Party in 1999-- or even 2009-- than they are today. Four of the twelve Democrats on the Senate Banking Committee, and 19 Democrats (plus one independent) of the 54 in the full Senate, had already expressed their public opposition meaning that Obama would have had to rely for Summers’ confirmation on Republican votes. The AFL-CIO had come out against Summers. So had MoveOn, Daily Kos, Chris Hayes, Paul Krugman and the editorial page of The New York Times. By contrast, Summers had barely any high-profile defenders outside the administration. When people did speak up in his defense, it was often on background." You'd think Beinert had never heard of the New Dems, even though he's straight from that DLC wing of the part they crawled out from.

What the Summers’ fight shows is how dramatically the financial crisis has reshaped the economic debate inside the Democratic Party. In 2008, Summers’ patron and ally, Robert Rubin, was rumored as a potential Obama running mate. Today, Rubin has largely disappeared from public view and given his role in the deregulatory policies of the 1990s, any defense he offered of Summers would have hurt his cause. In 2006, an ambitious Democratic policy wonk like Gene Sperling could write a book that criticized liberals for being insufficiently pro-business without worrying that it would hurt his chances of getting a top government job. No one would do that today.

It’s not that Wall Street no longer wields influence among Democrats. The party still relies on the financial services industry to help fund its campaigns and its lobbyists can still shape legislation. But the danger of being too publicly associated with Wall Street has increased. Democrats who want to pass their time between government gigs and earning millions at an investment bank now have to think harder about the political risk. And regulators who coddle Wall Street have to worry more about becoming props in an Elizabeth Warren YouTube video gone viral.

Ironically, Warren may be the political loser in Summers’ decision to drop out. Had he come before her banking committee, their duel would have dominated cable news. And he would have served as the perfect foil for her populist challenge to the Wall Street branch of her party. Hillary Clinton, by contrast, would have had to explain on the stump whether she supported confirming as Fed Chairman the man her husband had picked to run the Treasury Department.

The Democratic rebellion against Summers, like the Democratic rebellion against military action in Syria, bespeaks a deep frustration that party elites still share the economic and foreign policy assumptions that helped cause the disasters of the last decade. The next battle may the Obama administration’s desire for “fast track” authority to help push through giant new trans-Atlantic and trans-Pacific free trade deals. If I were Hillary Clinton, I’d come out against it now.

I'm glad Beinert feels Elizabeth Warren speaks for the Democratic Party and represents its future-- and I wish it were true. As for Hillary coming out against the toxic trade agenda promulgated by the Bushs, her husband and Obama... well good idea, unless it's just a political calculation and not a real break with... Wall Street.

The Fed Chair, Inequality And Barack Obama

In his searing and incisive book analyzing the Cheney presidency, Angler, Barton Gellman goes into how Cheney was able to neutralize his old crony, Fed Chair Alan Greenspan when he decided to cripple the American economy with a catastrophic tax cut for the wealthy, specifically designed to foster and accelerate economic inequality. They violated a principle that keeps a country's central banker independent of partisan politics. Greenspan never met with Al Gore one on one in eight years and visited the White House to see the Secretary of the Treasury one a month. He and Cheney huddled together weekly in the White House, something that led directly to the Great Recession Cheney (and Bush) left the country on their way to the exit.

Having studied his record in the Senate, I was reluctant to vote for Obama in 2008 but I was still buying into the "lesser of two evils" framing of American politics at the time, and I loved the very meaningful and inspiring symbolism of America with an African-American president. His first appointment, Rahm Emanuel, guaranteed I wouldn't make the same mistake twice. Last year I voted for Jill Stein, another kind of symbolism. Most of Obama's most important appointments have been uninspired, at best (Kerry), wretched and as bad as Bush's at worst (Pritzker). Larry Summers' likely appointment to the Fed chair will be Obama's worst of all. Someone like Robert Reich, Paul Krugman or Joseph Stiglitz would be my own choices but over the weekend, the NY Times allowed Stiglitz to explain why he thinks Janet Yellen makes a lot more sense than Summers.

The controversy over the choice of the next head of the Federal Reserve has become unusually heated. The country is fortunate to have an enormously qualified candidate: the Fed’s current vice chairwoman, Janet L. Yellen. There is concern that the president might turn to another candidate, Lawrence H. Summers. Since I have worked closely with both of these individuals for more than three decades, both inside and outside of government, I have perhaps a distinct perspective.

But why, one might ask, is this a matter for a column usually devoted to understanding the growing divide between rich and poor in the United States and around the world? The reason is simple: What the Fed does has as much to do with the growth of inequality as virtually anything else. The good news is that both of the leading candidates talk as if they care about inequality. The bad news is that the policies that have been pushed by one of the candidates, Mr. Summers, have much to do with the woes faced by the middle and the bottom.

The Fed has responsibilities both in regulation and macroeconomic management. Regulatory failures were at the core of America’s crisis. As a Treasury Department official during the Clinton administration, Mr. Summers supported banking deregulation, including the repeal of the Glass-Steagall Act, which was pivotal in America’s financial crisis. His great “achievement” as secretary of the Treasury, from 1999 to 2001, was passage of the law that ensured that derivatives would not be regulated-- a decision that helped blow up the financial markets. (Warren E. Buffett was right to call these derivatives “financial weapons of mass financial destruction.” Some of those who were responsible for these key policy mistakes have admitted the fundamental “flaws” in their analyses. Mr. Summers, to my knowledge, has not.)

Regulatory failures have been at the center of previous crises as well. At Treasury in the 1990s, Mr. Summers encouraged countries to quickly liberalize their capital markets, to allow capital to flow in and out without restrictions-- indeed insisted that they do so-- against the advice of the White House Council of Economic Advisers (which I led from 1995 to 1997), and this more than anything else led to the Asian financial crisis. Few policies or actions have greater culpability for that Asian crisis and the global financial crisis of 2008 than the deregulatory policies that Mr. Summers advocated.

Supporters of Mr. Summers argue that he is exceptionally qualified to manage crises-- and that, while we hope that there won’t be a crisis in the next four years, prudence requires someone who excels at those critical moments. To be fair, Mr. Summers has been involved in several crises. What matters, however, is not just “being there” during a crisis, but showing good judgment in its management. Even more important is a commitment to taking actions to make another crisis less likely-- in sharp contrast to measures that almost ensure the inevitability of another one.

Mr. Summers’s conduct and judgment in the crises was as flawed as his lack of commitment in that regard. In both Asia and the United States, he seemed to me to underestimate the severity of the downturns, and with forecasts that were so off, it was not a surprise that the policies were inappropriate. The performance of those in the Treasury who were responsible for managing the Asian crisis was, to say the least, disappointing-- converting downturns into recessions and recessions into depressions. So, too, while the banking system was saved, and the United States avoided another depression, those responsible for managing the 2008 crisis cannot be credited with creating a robust, inclusive recovery. Botched efforts at mortgage restructuring, a failure to restore the flow of credit to small and medium-size enterprises, and the mishandling of the bailouts have all been well documented-- as were the failure to foresee the severity of the economic collapse.

These issues are important to anyone concerned with inequality for four reasons. First, crises and how they are managed are real creators of poverty and inequality. Just look at what havoc this crisis wrought: median wealth fell by 40 percent, those in the middle still have not seen their incomes recover to pre-crisis levels, and those in the upper 1 percent enjoyed all the fruits of the recovery (and then some). It is ordinary workers who have suffered most: they are the ones who face high unemployment, who see their wages cut, and who bear the brunt of cutbacks in public services as a result of the budget austerity. They are the ones who lost their homes in the millions. The Obama administration could have done more, far more, to help homeowners, and to help localities maintain public services (for instance, through the kind of revenue sharing with states and localities that I urged at the beginning of the crisis).

Second, deregulation contributed to the financialization of the economy. It distorted our economy. It provided greater scope for those who manipulate the rules of the game for their benefit. As James K. Galbraith has forcefully argued, as we look around the world, bloated and underregulated financial sectors are closely linked with greater inequality. Those, like Britain, that emulated America’s deregulation have seen inequality soar, too.

Third, the most invidious aspect of this deregulation-induced inequality is that associated with the abusive practices of the financial sector-- which prospers at the expense of ordinary Americans, through predatory lending, market manipulation, abusive credit card practices or taking advantage of its monopoly power in the payments system. The Fed has enormous powers to prevent these abuses, and even more since the passage of the Dodd-Frank Act of 2010. Yet the central bank has repeatedly failed at this, systematically focusing on strengthening the banks’ balance sheets, at the expense of ordinary Americans.

Fourth, it is not only the case that America’s financial sector did what it shouldn’t have done, but it also didn’t do what it was supposed to do. Even today, there is a dearth of loans to small and medium-size enterprises. Good regulation would shift banks away from speculation and market manipulation, back to what should be their core business: making loans.

Whoever succeeds Ben S. Bernanke as the Fed’s leader will have to make repeated judgment calls about when to raise or lower interest rates, the levers of monetary policy.

Two elements enter into these judgments. The first is forecasting. Wrong forecasts lead to wrong policies. Without a good sense of direction of where the economy is going, one can’t take appropriate policies. Ms. Yellen has a superb record in forecasting where the economy is going-- the best, according to The Wall Street Journal, of anyone at the Fed. As I noted earlier, Mr. Summers’s leaves something to be desired.

Ms. Yellen’s superlative performance should not come as a surprise. Janet Yellen, whom I taught at Yale, was one of the best students I have had, in 47 seven years of teaching at Columbia, Princeton, Stanford, Yale, M.I.T. and Oxford. She is an economist of great intellect, with a strong ability to forge consensus, and she has proved her mettle as chairwoman of the President’s Council of Economic Advisers (she succeeded me in that role), as president of the Federal Reserve Bank of San Francisco, from 2004 to 2010, and in her current role, as the Fed’s No. 2.

Ms. Yellen brings to bear an understanding not just of financial markets and monetary policy, but also of labor markets-- which is essential at a time when unemployment and wage stagnation are primary concerns.

The second element of Fed policy making is risk assessment: if one steps on the brakes too hard, one risks excessively high unemployment; too gently, one risks inflation. Ms. Yellen has shown herself to be not only excellent in forecasting, but balanced. Legitimate questions have been raised: Would Mr. Summers, with his close connections with Wall Street, reflect financiers’ single-minded focus on inflation, and be more worried about the effects on bond prices than on ordinary Americans? In the past, central banks have focused excessively on inflation. Indeed, this single-minded focus, with little regard to financial stability, not only has contributed to the crisis, but as I argued in my book Freefall, it has also contributed to the declining share of total income that is earned by ordinary workers.

Though the willingness to take actions to prevent crises, and good judgments in a crisis, are undoubtedly critical in the choice of the next Fed chair, there are other important considerations. The Fed is a large organization that has to be managed-- and Ms. Yellen demonstrated her management skills at the San Francisco Fed. One has to obtain consensus among a diverse group of strong-minded individuals, some more worried about inflation, some more worried about unemployment. One needs someone who knows how to build consensus, not someone who excels in bullying, who knows how to listen to and respect the views of others. When I was chairman of Economic Policy Committee of the Organization for Economic Cooperation and Development, I saw how effectively Ms. Yellen represented the United States, and the respect in which she was held. In the ensuing years, she has gained in stature, and today has the enormous respect of central bank governors around the world. She has the stature, wisdom and gravitas one should expect of the leader of the Fed.

Finally, the Fed is an enormously important institution, but regrettably, its conduct in the years before Ms. Yellen took up her role in Washington-- both its failures in dealing with the bubble and certain aspects of its conduct in the immediate aftermath of the crisis (like the lack of transparency)-- has undermined confidence in it. It is important that Mr. Obama’s nominee not be-- or even be seen to be-- acting at the behest of financial markets. That person cannot be someone who can be tainted even by an accusation of conflict of interest, which is inevitable with the “revolving door” that has too often been associated with the regulation of this sector. Nor should it be someone who suffers from “cognitive capture” by Wall Street. At the same time, the person has to have the confidence of the financial markets, and a deep understanding of those markets. Ms. Yellen has managed to do this-- an impressive achievement in its own right.

One might say that the country is fortunate to have two candidates who, as the Harvard economist Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, writes, are “brilliant scholars with extensive experience in public service.” But brilliance is not the only determinant of performance. Values, judgment and personality matter, too.

The choices have seldom been so stark, the stakes so large. No wonder that the choice of the Fed leader has stirred such emotion. Ms. Yellen has a truly impressive record in each of the jobs she has undertaken. The country has before it one candidate who played a pivotal role in creating the economic problems that we confront today, and another candidate of enormous stature, experience and judgment.

So, pretty clear why Obama should pick, right? If you've followed his decision-making since he was elected president, you know he will make the wrong choice once again.

How About Real Change And Hope In Obama's Second Term-- Like Bob Reich For Treasury Secretary?

I was just watching President Obama speaking at UNLV. I'm not exactly an alumnus but I did take courses there-- and write for the student newspaper-- when my van broke down in Vegas and I couldn't afford to repair it and leave town. That was a lot of years ago. Today the President was saying so many of the right things-- things Romney will never say-- like "no one who fights for this country should ever have to fight for a job when they come home." I heard that while I was putting on my socks upstairs.

And earlier this week, on Air Force One, when a reporter pressed Jay Carney, the Press Secretary on whether Obama would support a temporary extension of the Bush tax cuts for the rich, Carney said: "He will not. Could I be more clear?"

But the problem is that while he talks like a real Franklin and Eleanor Roosevelt Democrat, he hasn't governed like one. Remember he once said he's a Blue Dog Democrat? That's what he governed as-- starting with his first absolutely horrendous appointments-- like Wall Street operatives Rahm Emanuel as Chief of Staff, Larry Summers as Director of the National Economic Council and Tiny Tim Geithner as Treasury Secretary. A high school teacher of mine once told the class that no matter who the president is, Wall Street always gets one of their own as Treasury Secretary. That started with Alexander Hamilton.

FDR's first Treasury Secretary was William Woodlin, a Republican hereditary industrialist who had served on the Fed starting in 1927. Henry Morgenthau, Jr. took over in 1933 when Woodlin resigned due to an illness than killed him within months-- and he served the whole time Roosevelt was president. He was born into wealth; his dad was a NY real estate mogul. Although conservatives were enraged that Roosevelt appointed him, Morgenthau was a vocal anti-Keynesian and was known for utterances like "We have tried spending money. We are spending more than we have ever spent before and it does not work. [...] After eight years of this administration we have just as much unemployment as when we started [...] and an enormous debt to boot!" He worked hard to persuade FDR to give up on deficit spending, although in 1937 he finally got Roosevelt to focus on balancing the budget through major spending cuts and tax increases... and brought on the 1937 Recession.

After Morgenthau, Truman appointed one of his closest friends, Fred Vinson-- who had served as head of the inflation-fighting Office of Economic Stabilization. He wasn't really a Wall Street person but he was soon kicked upstairs to serve as the Chief Justice of the Supreme Court and was followed by John Wesley Snyder, an Arkansas banker. He was the last Secretary of the Treasury that wasn't an actual Wall Street person.

Eisenhower's first Treasury Secretary, George Humphrey was a conservative steel industry tycoon was against aid to the poor and fought for a balanced budget, tight money, tax cuts to the rich that would "trickle down" and drastically curbing federal spending. Next came Robert Anderson, a Texas investment banker and alcoholic who was trial and convicted of tax evasion and of laundering huge sums of money for drug dealers in a typical Ayn Rand-like offshore banking scam that Republicans admire so much. He was disbarred and sentenced to prison.

The next president was JFK but he wasn't going up against Wall Street either-- quite the opposite. His Secretary of the Treasury was C. Douglas Dillon, another hereditary one-percenter and notorious Wall Street investment baker (Dillon, Read & Co.)... with pretensions towards Scottish nobility. He was close personal friends with every high end financial predator in New York. LBJ's first Treasury Secretary was Henry Fowler, a conservative who's primary interest was an immense tax cut, primarily for the rich. Upon leaving the cabinet he was rewarded with a partnership in Goldman Sachs. He was followed by Joseph Barr, who was serving as the Chairman of the FDIC and the Undersecretary of the Treasury before LBJ appointed him Treasury Secretary for the last month of his presidency. He went on to head the American Security and Trust Company and then the Federal Home Loan Bank of Atlanta.

After Barr, they could have just moved the Treasury Department to Wall Street itself. Nixon appointed Mormon bankster David Kennedy, followed by Texas con-man John Connally-- a paid shill for right-wing Texas oil tycoons Sid Richardson and Perry Bass-- and Bechtel CEO George Shultz, whose policies brought on one of the worst inflation spirals in contemporary American history. He was followed by William Simon (who Ford held onto once Nixon resigned in disgrace). Simon, a venture capital predator and Wall Street bankster with a series of shady companies, was an Ayn Rand fanatic, "free market" extremist and was responsible for the revitalization of the term "czar" in American politics (having been Nixon's "energy czar"). Carter had two Treasury secretaries, Michael Blumenthal, a NYC corporate guy, and William Miller, a former Textron CEO and Federal Reserve Chair.

The came the veritable bankster boardroom brought to you by the most Wall Street-centric series of presidents since the Roaring '20s: Reagan, Bush I, Clinton, Bush II and Obama. Reagan gave us Merrill Lynch chairman and CEO Donald Regan, the Carlyle Group's (and bin-Ladens') James Baker, and, briefly Peter McPherson, later Chairman of Dow Jones (and the man who made sure Rupert Murdoch could buy the Wall Street Journal). George H.W. Bush, from a Wall Street bankster clan himself, named Nicholas Brady (former Chairman of the Board of Dillon Read & Co.). Clinton found one of the most conservative Democratic taxcut fanatics around, ex-bankster, Senate Finance Committee Chair & all around Wall Street patsy Lloyd Bentsen. When Bentsen resigned, Clinton appointed an outrageous bankster, Frank Newman who had worked for (and still served) Citicorp, Wells Fargo, and BankAmerica. (After his turn at Treasury-- 4 weeks-- he went to work first for Bankers Trust and then as CEO of Shenzhen Development Bank.) Then can the really bad guys, Wall Street's dream boys, Robert Rubin (Chairman of Goldman Sachs before Treasury, Chairman of Citigroup after Treasury) and Lawrence Summers, an academic who has always groveled in the face of a few bucks held under his nose. His purely Wall Street-oriented deregulation policies were as key to the current worldwide economic meltdown as were Phil Gramm's.

Bush II gave us Alcoa Chairman Paul O'Neill, CSX Transportation's CEO and Chairman of the Business Roundtable John Snow, who later went on to head Cerberus Capital Management, and finally-- and worst of all-- notorious bankster Henry Paulson, CEO of Goldman Sachs. Obama couldn't have done worse than Paulson-- but Geithner, former President of the NY Federal Reserve Bank, isn't much better.

If the mistakes Obama made in his first term don't saddle us with Mitt Romney-- in other words, if Obama gets a second term-- he can do something really historic and become a real agent for Change (and Hope). That would be appointing former Labor Secretary Robert Reich Treasury Secretary. Wall Street might grumble a little commit mass suicide, but Reich, as you can see in the video above, would use the office in a way it has never been used before-- for the good of ordinary working American families. I bet the 18 Members of Congress who proposed raising the minimum wage from $7.50 to $10/hour this week would support the nomination!

In introducing a key chapter, "Tax Cuts Aren't A Solution To Every Problem" in his book, The Fifteen Biggest Lies About The Economy, Joshua Holland quotes Mitt Romney explaining a Republican alternative to stimulating the economy. Rather than the government spending money on public works and rather than putting money in consumers' pockets by increasing the minimum wage, the GOP wants to give more tax cuts to the wealthy. "There are two ways," says Willard, "you can put money into the economy, by spending more or by spending less. But if it's a stimulus you want, taxing less works best. That's why permanent tax cuts should be the centerpiece of the economic stimulus." As Holland points out, he's wrong, gigantically wrong. In fact, he writes, "it's difficult to know where to start deconstructing conservative rhetoric on taxing and spending. This is such a central part of their worldview, and it’s informed by a whole slew of falsehoods. In order to make sense of it all, it’s necessary to understand four key concepts behind the Right’s rhetoric." Here are Holland's 4 key concepts that unwind the basis of the Republican Party ideology of selfishness and greed:

1. Shrink the Government and Drown It in a Bathtub

Conservatives believe in small government as an ideological end unto itself. They believed Reagan when he said, “Government is the problem,” and they think that shrinking that problem down so that it becomes small enough, in the words of antitax activist Grover Norquist, to “drown in a bathtub,” is a virtue.

They naturally tend to assume that their political opponents must take the opposite view: that liberals want to expand government and raise taxes because they prefer bigger government and higher taxes. That’s a serious distortion; progressives see policy goals and aren’t afraid of pursuing solutions to problems through government, the private sector, or a combination of the two. When a real problem can’t be addressed by the private sector-- poor kids lacking health insurance is a perfect example-- then we look to the public sector for the answer.

And then we pay for it, rejecting the reckless “borrow-and-spend” approach that George W. Bush used to turn a tidy budget surplus left by Bill Clinton into a deep sea of red ink. The bottom line is that progressives and liberals couldn’t care less about how big or small the government may
be in the abstract, only whether it functions well and solves the problems we ask it to address.

2. Conservative Programs Don’t Count as Wasteful Spending

Despite conservatives’ ideological devotion to limited government, make no mistake that when they say “government,” they are talking about limiting corporate regulation and reducing the amount of money spent on the relatively meager social safety net that takes the hard edges off America’s brand of unbridled “turbo-capitalism.” In practice, almost everybody, from across the political spectrum, is happy to spend money and expand government in pursuit of his or her own objectives. Spending projects are wasteful “pork” only when they’re in another lawmaker’s district. Republicans rarely object to spending tax dollars on the military, our intelligence agencies, law enforcement, or border security, to name a few. To state the obvious: these things cost money, too-- a lot of it.

3. The Poor Don’t Pay Taxes

Contrary to the right-wing narrative, everyone pays taxes. Conservatives insist that the tax system is highly progressive and that anyone who suggests otherwise is just whining. Rush Limbaugh put it this way: “The bottom 50 percent is paying a tiny bit of the taxes, so you can’t give them much of a tax cut by definition. Yet these are the people to whom the Democrats claim to want to give tax cuts. Remember this the next time you hear the ‘tax cuts for the rich’ business. Understand that the so-called rich are about the only ones paying taxes anymore.”

That’s true, however, only when you do a little sleight of hand. You have to look at the federal income tax in isolation and then pretend that it represents the government’s entire take. It’s true that the bottom 40 percent of U.S. households don’t pay much in federal income taxes. And, according to a Congressional Budget Office (CBO) analysis, the wealthiest 1 percent do pay more in federal income taxes than the bottom 90 percent combined.

Yet that’s a far cry from the claim that the “poor don’t pay taxes.” Rushbo won’t tell you, but the CBO also said that if you look at state and local taxes, the top 1 percent of Americans paid 5 percent of their incomes, while the bottom 50 percent (many of them among those who paid no federal income taxes) shelled out 10 percent, twice as much proportionately. In addition, the CBO found that the bottom 80 percent of the pile paid around 9 percent of their incomes in Social Security taxes, while the top 1 percent paid only 1.6 percent of theirs. After the income tax, Social Security taxes represent the largest share of the federal take.

A 2009 study by the nonpartisan Institute on Taxation and Economic Policy looked at state taxes (including sales taxes) and concluded, “Nearly every state and local tax system takes a much greater share of income from middle- and low-income families than from the wealthy. That is, when all state and local income, sales, excise and property taxes are added up, most state tax systems are regressive [emphasis theirs].” The top 1 percent of earners paid around 5 percent of their incomes in state and local taxes, while the poorest fifth of the population paid almost 11 percent of theirs.

When the institute looked at excise taxes-- on gas, cigarettes, alcohol, and other goodies-- they found that the “average state’s consumption tax structure is equivalent to an income tax with a 7.1 percent rate for the poor, a 4.7 percent rate for the middle class, and a 0.9 percent rate for the wealthiest taxpayers.

When you add it all up-- state and local taxes, federal taxes, and excise fees-- it turns out that the rich, the poor, and those in between all end up with about the same tax rate. That’s the conclusion of a 2007 study by Boston University economists Laurence J. Kotlikoff and David Rapson. They summarized, “The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.”

That brings us to an important point: It wasn’t always that way. According to a 2010 study by Wealth for the Common Good, an organization of deep-pocketed progressives, “Over the last half-century, America’s wealthiest taxpayers have seen their tax outlays, as a share of income, drop by as much as two-thirds. During the same period, the tax outlay for middle-class Americans has not decreased.” The study found that the nation’s “highest earners-- the top 400-- have seen the share of their income paid in federal income tax plummet from 51.2 percent in 1955 to 16.6 percent in 2007, the most recent year with top 400 statistics available.” Between 2001 and 2008 alone, tax cuts for the wealthy cost the U.S. Treasury $700 billion.

4. Tax Cuts for the Rich Will Also Help the Rest of Us

Republicans use the lie that the poor don’t pay taxes to justify big cuts for the wealthy. The bad news is that those cuts raise taxes for everyone else. You won’t read that in the legislation, but it’s the real-world result of cutting taxes without taking on the politically unpopular task of identifying services to be cut.

Even when revenues drop, people expect the cops to come when called and the streetlights to burn. Budgets become stretched, and communities tighten their belts-- perhaps laying off some workers. But then-- and this is key-- state and local governments also make up much of the shortfall with higher fees for various services, higher tuition at public colleges, and increases in sales, excise, and property taxes, all of which fall disproportionately on the poor and the middle class.

Most government spending is locked in-- for Social Security and Medicare, the defense budget, and a host of other programs that would be politically unpopular to cut. The Right has done an excellent job of pushing the notion that they’re for tax cuts, but remember that they are talking about corporate taxes, capital gains taxes on investments, and taxes for the top earners. When those revenues dry up, the rest of us have to pick up the tab.

So keep in mind that the Right actually loves to raise taxes, just as long as they’re hiked on the backs of ordinary working people. Barack Obama’s first budget made the Bush tax cuts permanent for every couple making less than $250,000 and every individual taking in less than $200,000, while allowing those cuts targeted at the richest Americans to expire. This effectively cut the tax bills of about 98 percent of the population. The response from House Minority Leader John Boehner, a long-time advocate of tax cuts? “The era of big government is back, and Democrats are asking you to pay for it,” he told the Washington Post.

The president makes what looks to be one of his best appointments -- and the Senate GOP devils don't get to say word one

Dartmouth College President Jim Yong Kim, President Obama's surprise choice to head the World Bank, is seen here giving Conan O'Brien an honorary doctor of arts degree at last June's commencement.

"This is a huge step forward. If Kim becomes World Bank President, he'll be the first qualified president in 68 years. Kim's nomination is a victory for all the people, organizations, and governments that stood up to the Obama administration and demanded an open, merit-based process."

-- Mark Weisbrot, co-director of
the Center for Economic and Policy Research

by Ken

We have the answers to two questions, it appears. Earlier this week I wondered: "Come Friday, is Larry Summers really going to be our World Bank guy?" And in an American Prospect piece I quoted extensively, "Pick Me! Pick Me!," Robert Kuttner asked: "Why does Larry Summers have more lives than a cat?"

The answers appear to be: (1) amazingly, no; and (2) at least one fewer than he -- and the rest of us -- thought.

Today, you'll recall, was the deadline for nominations to succeed the retiring Robert Zoellick as president of the World Bank. Oh, other countries are allowed to make nominations too. They just don't count, under the standing agreement between us and the European lords of the economic universe that they get to pick the IMF head and we get to pick the World Bank head.

Actually, that's why I didn't really think Larry was going to get this job, which he seemed to want rather badly. I guess when you're goods as damaged as he is, those high-profile jobs don't come as easily as they once did. It has something to do with burning your bridges behind you -- or, increasingly, while you're still standing on them. (I'm thinking particularly of his inelegant departure from the presidency of Harvard.) And from what I've been reading, probably more important than the considerable amount of anti-Larry outcry that's been cried out domestically over the last couple of months has been the apparently unexpected blowback the White House has been receiving from those European partners, whose cooperation is required to proceed with the coronation.

Still, it's one thing to have not expected Larry S to get the nod. I assumed the president would find some other establishment stooge for it. But as usual, I may be getting ahead of the story. So let's back up. From the Washington Post:

Jim Yong Kim, Dartmouth College president, tapped by Obama to head World Bank

By Howard Schneider and Zachary Goldfarb

President Obama on Friday nominated Dartmouth College President Jim Yong Kim to head the World Bank, a move that would turn the organization over to a physician and development expert as opposed to the bankers, corporate leaders and political officials who have run it since its founding.

At a morning Rose Garden ceremony, Obama said Kim was the right person to lead the bank, a source of development aid and loans for both poor and developing countries, when current President Robert Zoellick leaves office in June.

"It's time for a development professional to lead the world's largest development agency," Obama said, with Kim, Treasury Secretary Timothy F. Geithner and Secretary of State Hillary Rodham Clinton standing next to him.

Despite growing frustration from developing countries over the United States's historic hold on the nominating process, Obama's decision to choose Kim all but guarantees he will be appointed to the post by the World Bank board.

Citing Kim's global experience and work on expanding HIV treatment, the president said the Korean-born physician would further the work of an institution that was important to the health of the world economy.

"When we reduce hunger in the world, it strengthens the entire world economy," Obama said. "Ultimately when a nation goes from poverty to prosperity, it makes the world stronger and more prosperous for everyone." . . .

Kim drew quick support, and one other candidate for the job, Columbia University professor Jeffrey Sachs, withdrew from contention in praise of Obama's choice.

Kim "is a superb nominee," Sachs said, a "world-class development leader." Sachs had campaigned openly for the job, arguing that the bank’s next leader should be a development expert rather than someone who had spent a career in finance. . . .

Kim, Dartmouth’s leader since July 2009, is a physician by training and an anthropologist. His background is in global health, and he has worked extensively on health issues in the developing world.

Kim directed the Department of HIV/AIDS at the World Health Organization and led the agency's "3 by 5" initiative, which sought to treat three million new HIV/AIDS patients in developing countries with antiretroviral drugs by 2005. (The goal was accomplished in 2007.)

Before coming to Dartmouth, Kim held professorships at Harvard Medical School and the Harvard School of Public Health. He was born in Seoul, South Korea, and moved to the United States at age 5, eventually earning degrees from Brown University and Harvard.

Kim co-founded the global health organization Partners in Health. When he took the helm at Dartmouth, he became the first Asian American president of an Ivy League institution. . . .

President Kim had this to say to those of us in the "Dartmouth Community" (I may not be the most cherished of alumni, but I still get the e-mails):

March 23, 2012

To the Dartmouth Community,

I write to share the news that President Barack Obama has asked me to stand for nomination as president of the World Bank. This is one of the most critical institutions fighting poverty and providing assistance to developing countries in the world today. After much reflection, I have accepted this nomination to national and global service.

When I assumed the presidency of Dartmouth, I did so with the full and deep belief that the mission of higher education is to prepare us for lives of leadership and service in our professions and communities. While President Obama's call is compelling, the prospect of leaving Dartmouth at this stage is very difficult. Nevertheless, should the World Bank's Board of Executive Directors elect me as the next president, I will embrace the responsibility.

As Chair of the Dartmouth Board of Trustees Steve Mandel ’78 and I have discussed, if I am elected, our Board will take appropriate steps to ensure continuity of leadership and determine the timing of a search. For now, I remain president of Dartmouth. Steve and I will keep you informed of the nominating process and timing of a final decision by the World Bank next month.

Sincerely,

Jim Yong Kim
President, Dartmouth College

This is from the CEPR release that contains the enthusiastic response to the appointment of co-director Mark Weisbrot (the other CEPR co-director, you probably recall, is one of our chief go-to economists, Dean Baker):

Weisbrot noted that much of Kim's career was with Partners in Health, which Kim co-founded. "Partners in Health is a uniquely dynamic and enormously capable organization that has implemented important changes in approaches to preventing and treating diseases and other health problems, and Kim deserves much credit for that."

Weisbrot noted, "However, the Bank's process is still deeply flawed because the majority of the world's countries are not really involved and I hope that for the next presidency, they will come together long in advance to agree on a candidate."

Weisbrot noted the importance of Jeffrey Sachs’ candidacy as having busted open the process and raised the bar for whom could be nominated. Sachs’ campaigning for the Bank's presidency was unprecedented in its openness, in Sachs' platform of reform for the Bank, and in terms of Sachs' qualifications as an economist with extensive experience in economic development and as a health expert, who, like Kim, has worked to fight diseases such as HIV/AIDS and tuberculosis.

"Once Sachs was nominated, it was clear it would be very difficult for the Obama administration to follow past practice and simply choose, again, a political insider or a banker," Weisbrot said.

It appears to have been Secretary of State Clinton who suggested Kim to the president for the World Bank job. And since this nomination doesn't require Senate confirmation or input of any kind, for once the president doesn't have to play his familiar (and not very successful) game of footsie with "Miss Mitch" McConnell and his pack of Senate GOP jackals. Good going, Secretary Clinton -- and you too, Mr. President.

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