Time For Some Good Ole '60's-Era Hallucinations?

I never understood why, but one of my nicknames in college was "Tripmaster. I only took something like 65 or 75 trips. I had friends who took tons more. I never thought of it as anything beyond a journey into my spiritual side but now Paul Tullis wrote about a medical aspect relevant to the age of pandemics. And, I guarantee you, this coronavirus won't be the last, whether it was made in a lab-- now viewed as likely-- or not. He reminds his readers that "Switzerland is the only place in the world where use of psychedelics in limited cases-- as medicine-- is allowed... That would be for cluster headaches, based on research being done at Matthhias Liechti’s institution, the University Hospital of Basel. Though LSD has been illegal in the U.S. (and, effectively, everywhere else) since 1970, Liechti and a few others, in Basel and at the University of Zurich Psychiatric Hospital, have since the 1990s been ­quietly researching how psychedelics act on the brain, looking at LSD specifically since 2012. And that is why New York–based MindMed is working in Basel. "In March it became the first among several psychedelic pharmaceutical companies to go public, listing on Canada’s NEO exchange. You are not hallucinating: Psychedelic drugs, demonized by politicians, prosecutors, doctors, parents, and virtually everyone else for the last 50 years, are showing remarkable promise as a treatment for a host of significant health conditions, including depression, PTSD, addiction, inflammation, and more." But not specifically COVID-19.

Venture capital is rushing in. [Billionaire Trump crony] Peter Thiel’s Breakthrough Ventures, and Able Partners, an investor in Gwyneth Paltrow’s wellness brand, Goop, are behind a London-based company that has patented a formulation of psilocybin, the active ingredient in magic mushrooms, for use with treatment-resistant depression. The evidence for psychedelics as medicine far exceeds the evidence for CBD, a compound in marijuana that companies are selling, based on basically nothing, to relieve ills ranging from Parkinson’s to Crohn’s diseases.

Liechti hopes to collaborate with MindMed soon to test whether sub-perceptual doses of LSD are an effective treatment for ADHD in adults-- and there is actually some indication that it might work. “We’re using chemicals to enhance neuronal connectivity in the brain, opening different parts of the brain to talk to each other,” Freeman says.

...MindMed is also working on a compound derived from ibogaine, a psychedelic that comes from the bark of a tree that grows in central Africa, to treat opioid addiction. Ibogaine was extolled by the late banking heir and Bitcoin billionaire Matthew Mellon, ex-­husband of Jimmy Choo co-founder Tamara Mellon; he said it cured him of his opioid addiction.

Meanwhile ketamine, which at certain doses is used as a general anesthetic for children (and as a club drug by slightly older children), is already available by prescription for-- treatment-­resistant depression. MDMA (aka ecstasy or molly) has been used illegally in psychotherapy for decades, but it can now legally be given to select patients with PTSD outside a clinical trial-- even though it’s still a DEA Schedule I drug “with no currently accepted medical use.”

...Compass Pathways, the London company testing whether psilocybin helps with ­treatment-­resistant depression, seems to be on the brink of something too. “The best available evidence” of whether it works, or whether previous studies conducted without a control group taking a placebo were a fluke, “will come from this study,” says Metten Somers, a psychiatrist who runs one of the trial’s 21 sites, at University Medical Center–Utrecht in the Netherlands.

...In 1953, British author Aldous Huxley took mescaline, a compound that occurs in peyote and other cacti and has effects similar to those of LSD, and he described his experience as overwhelmingly positive. Two years later Manhattan banker and mushroom fanatic R. Gordon Wasson traveled to Oaxaca, Mexico, having heard reports from a Harvard ethnobotanist of a species that caused “visions.” He wrote up his experience in Life magazine.

Reading reports that sounded similar to descriptions by the severely mentally ill of what was going on in their minds, researchers began to wonder if what drove mental disorders was chemistry—a question that eventually led to the development of Prozac and other antidepressants, which have helped millions. By 1961 researchers at Stanford and other universities were studying the effects of LSD and mescaline on healthy volunteers under permits from the FDA.

Could these compounds be the key to unlocking the mysteries of psychosis? Sandoz supplied LSD to researchers all over the U.S., from Maryland to California, and Hofmann would go on to identify psilocybin as the active ingredient in magic mushrooms and synthesize it.

But psychedelics would quickly spill out of academic and institutional control. In 1960, LSD started showing up as a street drug. The same year, Harvard psychologist Timothy Leary and Beat poet Allen Ginsberg took mushrooms together. Leary and a colleague (Richard Alpert, aka Ram Dass) began to evangelize about psychedelics and their potential to expand human consciousness.

As hundreds of thousands of young people decided to see for themselves, media reports, many of them false, started telling horror stories about kids who had taken the drugs and ended up in hospitals, or dead. In 1966, Sandoz withdrew its supply from scientists, and the FDA ordered 60 psychedelic researchers to halt their work. The first wave of psychedelic research came to an abrupt end nearly everywhere. California banned LSD that year, and the federal government followed in 1970.

...When scientists started looking at psychedelics, it was for insights into the mechanisms of mental illness, but they soon discovered that the substances could also be cures. Psychedelics had been studied as treatments for alcoholism, depression, anxiety, and OCD, among other conditions. Though not well designed by today’s standards, many early studies showed impressive results.

Moreover, there appeared to be no such thing as a lethal dose-- something that cannot be said even about many over-the-counter medications. People who freaked out and went to a hospital after taking too much acid walked out several hours later. Wellness guru Andrew Weil, volunteering at the Haight-Ashbury Free Clinic in 1968, developed a protocol for San Franciscans on bad trips: Leave them alone.

...[I]n light of the fact that the latest class of psychiatric drugs, a category that includes Prozac, are ineffective in 30 percent of the patients who take them, and rates of serious mental illness and suicide are climbing, it will be hard, as the data accumulates, for the FDA to deny patients access to psychedelics-- whatever middle-aged guys are selling on the Santa Cruz wharf.

“When I was a resident, if someone had told me there could be a treatment you could take once and immediately feel better from severe depression,” Woolley says, “I would have said that’s impossible.”

Why bring this up now? Depression. I don't get that and "cabin fever" hasn't been a problem for me during this pandemic. But it seems to be a big problem for millions of Americans. I wonder if we'' ever see them tripping their brains out and listening to-- well even to early Ted Nugent-- instead of running around dressed as terrorists with assault weapons.

Everybody Wears A Mask-- But They Won't Stop A Recession Or A Depression

Yesterday, on top of historically high unemployment insurance filings, NBC News reporters Kasie Hunt and Alex Moe had some more bad news on the personal financial front-- Trump Regime incompetence on full display: "The first Americans to get relief payments from the government under the coronavirus legislation signed into law last month won’t see the money until at least the week of April 13, according to new estimates from the Trump administration provided to House Democrats and outlined in a memo circulated this week by Democrats on the House Ways and Means Committee. Many people who don’t have direct deposit information on file with the IRS might have to wait months to get the money."

That's a drag... and yesterday, the NY Times reported that "The speed and scale of the job losses is without precedent. Until last month, the worst week for unemployment filings was 695,000 in 1982." Pray it's only a recession that Trump has brought us-- even a horribly long one. Peter Goodman: "The world is almost certainly ensnared in a devastating recession delivered by the coronavirus pandemic. Now, fears are growing that the downturn could be far more punishing and long lasting than initially feared-- potentially enduring into next year, and even beyond-- as governments intensify restrictions on business to halt the spread of the pandemic, and as fear of the virus reconfigures the very concept of public space, impeding consumer-led economic growth.

The abrupt halt of commercial activity threatens to impose economic pain so profound and enduring in every region of the world at once that recovery could take years. The losses to companies, many already saturated with debt, risk triggering a financial crisis of cataclysmic proportions.

Stock markets have reflected the economic alarm. The S&P 500 in the United States fell over 4 percent on Wednesday, as investors braced for worse conditions ahead. That followed a brutal March, during which a whipsawing S&P 500 fell 12.5 percent, in its worst month since October 2008.

“I feel like the 2008 financial crisis was just a dry run for this,” said Kenneth S. Rogoff, a Harvard economist and co-author of a history of financial crises, This Time Is Different: Eight Centuries of Financial Folly.

“This is already shaping up as the deepest dive on record for the global economy for over 100 years,” he said. “Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises.”

The situation looks uniquely dire in developing countries, which have seen investment rush for the exits this year, sending currencies plummeting, forcing people to pay more for imported food and fuel, and threatening governments with insolvency-- all of this while the pandemic itself threatens to overwhelm inadequate medical systems.

...The sense of alarm is enhanced by the fact that every inhabited part of the globe is now in trouble.

The United States, the world’s largest economy, is almost certainly in a recession. So is Europe. So probably are significant economies like Canada, Japan, South Korea, Singapore, Brazil, Argentina and Mexico. China, the world’s second-largest economy, is expected to grow by only 2 percent this year, according to TS Lombard, the research firm.

For years, a segment of the economic orthodoxy advanced the notion that globalization came with a built-in insurance policy against collective disaster. So long as some part of the world economy was growing, that supposedly moderated the impact of a downturn in any one country.

The global recession that followed the financial crisis of 2008 beggared that thesis. The current downturn presents an even more extreme event-- a worldwide emergency that has left no safe haven.

...Between now and the end of next year, developing countries are on the hook to repay some $2.7 trillion in debt, according to a report released Monday by the U.N. trade body. In normal times, they could afford to roll most of that debt into new loans. But the abrupt exodus of money has prompted investors to charge higher rates of interest for new loans.

The U.N. body called for a $2.5 trillion rescue for developing countries-- $1 trillion in loans from the International Monetary Fund, another $1 trillion in debt forgiveness from a broad range of creditors and $500 billion for health recovery.

“The great fear we have for developing countries is that the economic shocks have actually hit most of them before the health shocks have really begin to hit,” said Richard Kozul-Wright, director of the division on globalization and development strategies at the U.N. trade body in Geneva.

You think that sounds bad? Washington Post economics columnist Robert Samuelson was envisioning a depression yesterday. Obama made it look so easy, didn't he. So why not give a dumb, crooked loud-mouthed TV game show host a chance? This is why.

Samuelson wrote that when he "began writing about economics in the early 1970s, I made a private vow that I would never use the word 'depression' in describing the state of the economy. The economists and politicians who occasionally did so were, I thought, engaged in partisan hyperbole. Their game was to scare people into thinking the end of the world was at hand or to pressure Congress to enact a favored piece of economic legislation. Well, times change. I revoke my vow. It’s not that I’ve concluded that we’re already in a depression. But we could be. For the first time in my life, I think it’s conceivable. This obviously would be a big deal. It implies permanently higher levels of unemployment (though joblessness would still fluctuate), greater economic instability and a collision between democracy and the economic system."

So how are the Trumpists taking all this news? I picked this up from People For the American Way last night: "Anthony Fauci-- the nation’s leading expert on infectious diseases who has served six presidents of both parties and is arguably the most trusted voice in America right now on the coronavirus pandemic-- is now facing DEATH THREATS from the Right Wing thanks to social media conspiracy theories and headlines like the one from the right-wing American Thinker that referred to Fauci as a 'Deep-State Hillary Clinton-loving stooge.'"

This just in from the Cutting Edge of Science: Do cats cause depression?

Can't dog people and cat people just get along?

by Ken

It would be oversimplifying to suggest that the world is divided between dog people and cat people. After all, there are also none-of-the-above people, even within the pet-owning community, which includes such odd ducks as bird people and fish people and monkey people and ocelot people and (yuck!) lizard people and (God help us) reptile people. Oh, and there are also the occasional strange souls who straddle the dog and cat world.

It takes an intrepid spirit indeed to go public against either the dog or the cat lobby. Then again, it may be that dog people don't give a gosh darn what cat people think or say, and vice versa.

For the record, I'm Switzerland on this great divide. I grew up with dogs, but I later made my peace with cats. There was even a time when the pussycat who inhabited my workplace of the moment came over to me late one night when, in despair over the cruelty of the universe, I was doing some more-pointless-than-usual work and cuddled. Of course it might just have been his way of copping a cheap cuddle, but he really seemed to be responding sympathetically to my dark mood. Anyway, that was my story and I'm still sticking to it.

The point being that I'm emphatically not taking sides in the matter of this latest communiqué from the Cutting Edge of Science, namely: "Depressed? Blame It on Your Cat," the title of a post on "The Frisky" by Ami Angelowicz, the author of a previous "Relationship" column entitled "Confessions of a Woman Who Won't Date a Male Cat Owner," where she owned up to being "what you would traditionally consider a dog person," but also noted, "Sometimes I don't even like dogs." (This was no. 2 of her -- count 'em -- eight "reasons why I am thoroughly incompatible with male cat owners.")

Depressed? Blame It On Your Cat



Ami Angelowicz

I’ve never liked cats. I know this is an unpopular point of view, but the heart wants what the heart wants. And this heart wants everything of the feline persuasion to stay away from her. It’s the allergies, but also, I just don’t like the way they look at me. Should you want to join me in the pursuit of catless-ness, you might be interested to know that new research published in the PLOS ONE journal discovered a link between cat bites and depression.

In a study of 1.3 million people over the course of a decade, researchers found that there was a strong correlation between those who  sought treatment for a cat bite and those who sought treatment for depression. Although I hate to fuel the crazy cat lady trope, I should probably mention that a whopping 86 percent of those suffering from both a cat bite and depression were women. That means that about one half of female cat owners who’ve been bitten by a feline will become depressed. Help! I’m picturing a bad horror film featuring a bunch of feral cats and depressed women with festering bite wounds. Frightening, but why? Researchers have a few possible explanations.

Which came first the cat or the depression? It’s hard to say, scientists explain. Because having a cat as a pet has been shown to improve mood, which means it’s more likely that a depressed woman would own a cat for companionship. And because cat owners are more likely to be bitten than non-owners, that makes female cat owners the highest risk population for both afflictions. Researchers also theorize that cats may bite depressed owners more frequently as a reaction to their mental state because some animals “may bite more in response to changes in their owners’ mental state or level of responsiveness.” Last but certainly not least is the parasite theory. T. gondii, carried by cats and transmitted through their feces, can cause changes in the human brain. Infections from the parasite have been linked to increased self-harm, elevated suicide rates in women and depression.

So yeah, cats. Not so great.

Just as a reminder, the question we're concened with here is this Important New Scientific Revelation linking cats with depression. It gets pretty heavily mixed here with the question of what difference(s) there may be between male and female cat owners. For that matter, since the men in Ami's dating sample are all (presumptively) hetero, should the cat-ownership caution apply only to (presumptively) hetero male cat owners, or should this be of concern to anyone who may have occasion to date men?

On these questions I don't know whether the Cutting Edge of Science has weighed in.

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Bulletin: In the wake of the economic meltdown big-time policy mistakes were made! Paul Krugman reports from U.S. economists' annual confab

Brian McFadden (August 2011) [click to enlarge]

"A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall -- and unemployment will soar."

-- Paul Krugman, in his NYT column "The Big Fail"

by Ken

Paul K, reporting from the annual meeting of the American Economic Association and affiliates in San Diego -- an affair he describes as "a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.'s in search of jobs), books and ideas" -- notes that, while in recent years "the ongoing economic crisis" has dominated discussion:

If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we'd be talking about how the great slump ended, not why it still continues.

So what went wrong? The answer, mainly, is the triumph of bad ideas.

Of course this is a theme that Paul has been sounding regularly since the Bush and Obama administrations and Congress were thrashing out what the federal government's response to the economic meltdown would be. He bristles at the argument that "the economic failures of recent years prove that economists don't have the answers," insisting that, worse still, "in reality, standard economics offered good answers, but political leaders -- and all too many economists -- chose to forget or ignore what they should have known."

The story, at this point, is fairly straightforward. The financial crisis led, through several channels, to a sharp fall in private spending: residential investment plunged as the housing bubble burst; consumers began saving more as the illusory wealth created by the bubble vanished, while the mortgage debt remained. And this fall in private spending led, inevitably, to a global recession.

For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall -- and unemployment will soar.

As Paul has been writing since the immediate aftermath of the meltdown, this collapse was far too severe to be manageable by means, like lowering interest rates, that served in such lesser ones as the late='90s dot.com bust.

At that point governments needed to step in, spending to support their economies while the private sector regained its balance. And to some extent that did happen: revenue dropped sharply in the slump, but spending actually rose as programs like unemployment insurance expanded and temporary economic stimulus went into effect. Budget deficits rose, but this was actually a good thing, probably the most important reason we didn’t have a full replay of the Great Depression.

But as we know, in Europe as well as the U.S., the crazy idea of "austerity" as a solution for recession or depression took hold.

Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that "the idea that austerity measures could trigger stagnation is incorrect."

Well, someone was incorrect, all right.

(What Paul doesn't point out this time out is a connection he has made frequently enough: that the most enthusiastic merchants of austerity, here and abroad, have been major financial players whose interest wasn't combatting the meltdown at all but using it as an opportunity to dramatically accelerate the transformation of the industrial world's economies to the latter-day "Rich Take All" format.)

For Paul, the loudest splash in San Diego came from a paper by Olivier Blanchard and Daniel Leigh of the International Monetary Fund.

Formally, the paper represents the views only of the authors; but Mr. Blanchard, the I.M.F.'s chief economist, isn't an ordinary researcher, and the paper has been widely taken as a sign that the fund has had a major rethinking of economic policy.

For what the paper concludes is not just that austerity has a depressing effect on weak economies, but that the adverse effect is much stronger than previously believed. The premature turn to austerity, it turns out, was a terrible mistake.

I've seen some reporting describing the paper as an admission from the I.M.F. that it doesn't know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, it's also saying that everyone else (except those skeptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.

And "the really bad news," says Paul, "is how few other players are doing the same."

European leaders, having created Depression-level suffering in debtor countries without restoring financial confidence, still insist that the answer is even more pain. The current British government, which killed a promising recovery by turning to austerity, completely refuses to consider the possibility that it made a mistake.

And here in America, Republicans insist that they'll use a confrontation over the debt ceiling -- a deeply illegitimate action in itself -- to demand spending cuts that would drive us back into recession.

The truth is that we've just experienced a colossal failure of economic policy -- and far too many of those responsible for that failure both retain power and refuse to learn from experience.

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Paul Krugman on "the depression we're in": "We could end it both more easily and more quickly than anyone imagines"

NYRB caption: "An unemployed man selling
apples during the Great Depression, circa 1930s"

"The depression we're in is essentially gratuitous: we don't need to be suffering so much pain and destroying so many lives. We could end it both more easily and more quickly than anyone imagines -- anyone, that is, except those who have actually studied the economics of depressed economies and the historical evidence on how policies work in such economies. . . .

"With a boost in spending, we could be back to more or less full employment faster than anyone imagines. . . .

"[T]he experience of Obama's first term suggests that not talking about jobs simply because you don’t think you can pass job-creation legislation doesn't work even as a political strategy. . . ."

-- Paul Krugman, in "How to End This Depression,"
in the May 24 New York Review of Books

by Ken

First, notice that Paul K carefully uses the word "depression." Indeed, later in the piece he carefully distinguishes between this depression and the recession that has gone with it: "It has been more than four years since the US economy first entered recession -- and although the recession may have ended, the depression has not."

The crux of the argument won't be surprising to anyone who has been following PK's writings:

The truth is that recovery would be almost ridiculously easy to achieve: all we need is to reverse the austerity policies of the past couple of years and temporarily boost spending. Never mind all the talk of how we have a long-run problem that can't have a short-run solution -- this may sound sophisticated, but it isn't. With a boost in spending, we could be back to more or less full employment faster than anyone imagines.

But don't we have to worry about long-run budget deficits? Keynes wrote that "the boom, not the slump, is the time for austerity." Now, as I argue in my forthcoming book [End This Depression Now; Norton, 2012] -- and show later in the data discussed in this article -- is the time for the government to spend more until the private sector is ready to carry the economy forward again. At that point, the US would be in a far better position to deal with deficits, entitlements, and the costs of financing them.

Meanwhile, the strong measures that would all go a long way toward lifting us out of this depression should include, among other policies, increased federal aid to state and local governments, which would restore the jobs of many public employees; a more aggressive approach by the Federal Reserve to quantitative easing (that is, purchasing bonds in an attempt to reduce long-term interest rates); and less timid efforts by the Obama administration to reduce homeowner debt.

Even in the quick-take, studiously nontechnical version of his case that Paul offers in this NYRB piece, he has a good deal more to say about two broad subjects:

* the evidence for his insistence "that more government spending would actually promote growth and employment," even though "many politicians fiercely reject that idea, insisting that the government can’t create jobs," and "some economists are willing to say the same thing."

* a counter to the argument that what he's proposing is politically undoable. He has different answers for the three different 2012 election scenarios: Obama reelection with Democrats holding onto the Senate and retaking the House; a Romney victory; and Obama reelection with Republicans controlling one or both house of Congress.

My favorite line concerns the Romney-victory scenario:

if Romney adhered to Republican orthodoxy, he would of course reject any government action along the lines I’ve advocated. It's not clear, however, whether Romney believes any of the things he is currently saying. His two chief economic advisers, Harvard's N. Gregory Mankiw and Columbia's Glenn Hubbard, are committed Republicans but also quite Keynesian in their views about macroeconomics. Indeed, early in the crisis Mankiw argued for a sharp rise in the Fed's target for inflation, a proposal that was and is anathema to most of his party. His proposal caused the predictable uproar, and he went silent on the issue. But we can at least hope that Romney's inner circle holds views that are much more realistic than anything the candidate says in his speeches, and that once in office he would rip off his mask, revealing his true pragmatic, Keynesian nature.

Of course, a great nation should not have to depend on the hope that a politician is in fact a complete fraud who doesn’t believe any of the things he claims to believe. . . .

My favorite political argument in the piece, one I think will resonate with all DWT readers:

[W]hat about the fairly likely case in which Obama is returned to office but a Democratic Congress is not? What should Obama do, and what are the prospects for action? My answer is that the president, other Democrats, and every Keynesian-minded economist with a public profile should make the case for job creation forcefully and often, and keep pressure on those in Congress who are blocking job-creation efforts.

This is not the way the Obama administration operated for its first two and a half years. We now have a number of reports on the internal decision-making processes of the administration from 2009 to 2011, and they all suggest that the president's political advisers urged him never to ask for things he might not get, on the grounds that it might make him look weak. Moreover, economic advisers like Christina Romer who urged more spending on job creation were overruled on the grounds that the public didn’t believe in such measures and was worried about the deficit.

The result of this caution was, however, that as even the president bought into deficit obsession and calls for austerity, the whole national discourse shifted away from job creation. Meanwhile, the economy remained weak -- and the public had no reason not to blame the president, since he wasn’t staking out a position clearly different from that of the GOP.

In September 2011 the White House finally changed tack, offering a job-creation proposal that fell far short of what was needed, but was nonetheless much bigger than expected. There was no chance that the plan would actually pass the Republican-led House of Representatives, and Noam Scheiber of The New Republic tells us that White House political operatives "began to worry that the size of the package would be a liability and urged the wonks to scale it back." This time, however, Obama sided with the economists -- and in the process proved that the political operatives didn’t know their own business. Public reaction was generally favorable, while Republicans were put on the spot for their obstruction.

And early this year, with the debate having shifted perceptibly toward a renewed focus on jobs, Republicans were on the defensive. As a result, the Obama administration was able to get a significant fraction of what it wanted -- an extension of the payroll tax credit, not an ideal stimulus but nonetheless a measure that puts cash in workers' pockets, and maintenance for a shorter period of extended unemployment benefits -- without making any major concessions.

In short, the experience of Obama's first term suggests that not talking about jobs simply because you don’t think you can pass job-creation legislation doesn't work even as a political strategy. On the other hand, hammering on the need for job creation can be good politics, and it can put enough pressure on the other side to bring about better policy too.

I should note that PK makes his case in the opposite order: the politics first, and then the economics. So that in his conclusion he's referring specifically to the shorthand case he has just made for the known soundness of increased spending to right the economy.

There’s much, much more evidence, but I hope this brief overview gives a sense of what we know and how we know it. I hope in particular that when you read me or Joseph Stiglitz or Christina Romer saying that cutting spending in the face of this depression will make it worse, and that temporary increases in spending could help us recover, you won't think, "Well, that's just his/her opinion." As Romer asserted in a recent speech about research into fiscal policy:

The evidence is stronger than it has ever been that fiscal policy matters -- that fiscal stimulus helps the economy add jobs, and that reducing the budget deficit lowers growth at least in the near term. And yet, this evidence does not seem to be getting through to the legislative process.

That's what we need to change.

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Will A Worldwide Depression Cause Fascism To Rise In Europe Again? Can It Be Stopped?

Europe moves right... again

I've had friends who have been saying we've been in a Depression since the last year of Bush's disastrous term. But they don't have Nobel Prizes in economics. NY Times columnist/Princeton economics professor Paul Krugman is a Nobel laureate and he's managed to not call it a depression-- until this week. And not just a depression, but one that is already starting to inspire a fascist reaction, the way the Great Depression of the 1930s did in much of the world. He points out that the euro crisis "is killing the European dream. The shared currency, which was supposed to bind nations together, has instead created an atmosphere of bitter acrimony." Spain just elected a far right government. Italy and Greece had far right governments imposed on them by banksters backed by Germany.

[D]emands for ever-harsher austerity, with no offsetting effort to foster growth, have done double damage. They have failed as economic policy, worsening unemployment without restoring confidence; a Europe-wide recession now looks likely even if the immediate threat of financial crisis is contained. And they have created immense anger, with many Europeans furious at what is perceived, fairly or unfairly (or actually a bit of both), as a heavy-handed exercise of German power.

Nobody familiar with Europe’s history can look at this resurgence of hostility without feeling a shiver. Yet there may be worse things happening.

Right-wing populists are on the rise from Austria, where the Freedom Party (whose leader used to have neo-Nazi connections) runs neck-and-neck in the polls with established parties, to Finland, where the anti-immigrant True Finns party had a strong electoral showing last April. And these are rich countries whose economies have held up fairly well. Matters look even more ominous in the poorer nations of Central and Eastern Europe.

Last month the European Bank for Reconstruction and Development documented a sharp drop in public support for democracy in the “new E.U.” countries, the nations that joined the European Union after the fall of the Berlin Wall. Not surprisingly, the loss of faith in democracy has been greatest in the countries that suffered the deepest economic slumps.

And in at least one nation, Hungary, democratic institutions are being undermined as we speak.

One of Hungary’s major parties, Jobbik, is a nightmare out of the 1930s: it’s anti-Roma (Gypsy), it’s anti-Semitic, and it even had a paramilitary arm. But the immediate threat comes from Fidesz, the governing center-right party.

Fidesz won an overwhelming Parliamentary majority last year, at least partly for economic reasons; Hungary isn’t on the euro, but it suffered severely because of large-scale borrowing in foreign currencies and also, to be frank, thanks to mismanagement and corruption on the part of the then-governing left-liberal parties. Now Fidesz, which rammed through a new Constitution last spring on a party-line vote, seems bent on establishing a permanent hold on power.

The details are complex. Kim Lane Scheppele, who is the director of Princeton’s Law and Public Affairs program-- and has been following the Hungarian situation closely-- tells me that Fidesz is relying on overlapping measures to suppress opposition. A proposed election law creates gerrymandered districts designed to make it almost impossible for other parties to form a government; judicial independence has been compromised, and the courts packed with party loyalists; state-run media have been converted into party organs, and there’s a crackdown on independent media; and a proposed constitutional addendum would effectively criminalize the leading leftist party. [Sounds like he's describing the Republican Party in states like Wisconsin, Ohio and Florida.]

Taken together, all this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe. And it’s a sample of what may happen much more widely if this depression continues.

It’s not clear what can be done about Hungary’s authoritarian slide. The U.S. State Department, to its credit, has been very much on the case, but this is essentially a European matter. The European Union missed the chance to head off the power grab at the start-- in part because the new Constitution was rammed through while Hungary held the Union’s rotating presidency. It will be much harder to reverse the slide now. Yet Europe’s leaders had better try, or risk losing everything they stand for.

And they also need to rethink their failing economic policies. If they don’t, there will be more backsliding on democracy-- and the breakup of the euro may be the least of their worries.

Uh, oh-- is America in any kind of shape to stand up to the rise of fascism overseas, the way FDR did in the 1930's and '40's? This calls for someone who understands the reactionary mind. Who better than The Reactionary Mind author Corey Robin? In 2002 Corey wrote a paper, Remembrance of Empires Past: 9/11 and the End of the Cold War for a conference at NYU, "Cold War Triumphalism." He starts out talking about three of the most prominent contemporary reactionary minds, William F. Buckley, Irving Kristol, and Norman Podhoretz. Buckley and Kristol told him in interviews that the problem with the triumph of "free" markets was not that it promoted instability or dissolved tradition; "it was that it did not provide the passion and élan, the gravitas and authority, that the exercise of American power truly required, at home and abroad. Simply put, the free market was too bloodless a notion upon which to found a national order, much less a global empire.

Kristol confessed to a deep yearning for an American empire: “What’s the point of being the greatest, most powerful nation in the world and not having an imperial role? It’s unheard of in human history. The most powerful nation always had an imperial role.” But, he continued, previous empires were not “capitalist democracies with a strong emphasis on economic growth and economic prosperity.” Because of its commitment to the free market, the United States lacked the fortitude and vision to wield imperial power. “It’s too bad,” Kristol lamented. “I think it would be natural for the United States... to play a far more dominant role in world affairs. Not what we’re doing now but to command and to give orders as to what is be done. People need that. There are many parts of the world-- Africa in particular-- where an authority willing to use troops can make a very good difference, a healthy difference.” But with public discussion moderated by accountants-- “There’s the Republican party tying itself into knots. Over what? Prescriptions for elderly people? Who gives a damn? I think it’s disgusting that... presidential politics of the most important country in the world should resolve around prescriptions for elderly people. Future historians will find this very hard to believe. It’s not Athens. It’s not Rome. It’s not anything.” Kristol thought it unlikely that the United States would take its rightful place as the successor to empires past.

Though Kristol and Buckley do not represent the entire conservative movement, much less elites as a whole, their anxious meditations about the tensions between imperial politics and market ideology speak to a genuine problem that America’s leaders have been wrestling with since the end of the Cold War – a problem, these leaders hope, resolved by the events of September 11. The collapse of communism left the United States defending the most powerful empire in history with an ideology-- the free market-- resolutely hostile to all forms of politics. According to its visionaries, the free market is a harmonious, virtually self-reproducing order, promising an international civil society of voluntary exchange and non-coercive rule, requiring little more from the state than the occasional enforcement of laws and contracts. Reconciling this free-wheeling vision with the reality of imperial over-reach-– the United States today has a military presence in more countries than at any time since the Second World War-- has proven to be an inordinately difficult task for America’s leaders. Not only does the idea of a global free market fit uneasily with the coercive exercise of imperial power, but it also fails to provide the home population of that empire with a compelling reason for participating either in its defense or in the reproduction of its civic life. Perhaps for that reason, the lead item of American intellectual complaint throughout the 1990s has been that the United States is insufficiently civic-minded or martial, that its leaders and citizens are too distracted by glittery prosperity and showy affluence to take care of its inherited institutions, common concerns, and world-wide defense.

It's very much worth reading Robin's whole book, or at least this entire paper, which you can find here.

Do Conservatives Like Ken Buck Want To Destroy America? Who Knows, But The Sick Policies They Espouse Will Do Just That

After Amato bet me that Obama would fire McCrystal-- I took the position Obama didn't have the intestinal stamina to do it-- I'm a little wary of these pool sharks taking advantage of me. So when one of my friends wanted to bet that he could name someone running for the Senate even more bizarre, extreme and perhaps even more psychotic than Sharron Angle or even Rand Paul, I hesitated. A case could certainly be made about that creepy bribery and coercion guy in Wisconsin. And Vitter's up for re-election. Of course, there's the former Wall Street derivatives trader, Pat Toomey, who's stark raving mad, and that pasty, pudgy guy who hasn't been able to stop eating cane-glazed pork chops with apple chutney since being caught embezzling Republican Party funds with his magic credit card. But then I remembered-- just in time... Ken Buck, the nutroots candidate, straight from Teabaggerville in Colorado.

What I remembered about Buck, another fringy DeMint candidate, wasn't just the ordinary far right claptrap he's been screeching about getting rid of Social Security and ending the whole separation of church and state thing. (These super Constitutionalists actually hate everything about the Constitution except the their interpretation of the Second Amendment.) It's his despicable comments about student loans and the mindset behind that.

Yammering on to a bunch of selfish wingnuts about the evils of Social Security, he recited usually carefully disguised GOP dogma: “I don’t know whether it’s constitutional or not; it is certainly a horrible policy. The idea that the federal government should be running health care or retirement or any of those programs is fundamentally against what I believe. And that is that the private sector runs programs like that far better.” And he threw in government backed student loans in to boot, adding, "over time, we have to wean the American public off those." Like Rand Paul and Sharron Angle, he would like to abolish the Department of Education (but then so would the Republican Party hack he's running against in the primary, Jane Norton).

I want to say something about these Republican greed-mongers, many of whom-- like both Buck and Norton-- have been sucking at the government teat all their lives. Basically they're nihilists and law-of-the jungle, anti-social suck-ups to the ruling elite. Before I retired I was paying nearly a million dollars a year in taxes. I didn't love writing those big checks but I love my country and when you pay that kind of money in taxes, it means you're doing pretty damn well. America did a great deal for me and I was proud I could give back. I couldn't have gone to college at all if not for the state university system-- opposed by conservatives, as too costly from the day they were proposed-- and I still wouldn't have been able to go without grants and loans. And then there was a time in my life when I couldn't quite make the ends meet and I don't know what would have happened to me with food stamps. I don't quite know what the government investment in me was. But I bet it worked out really well, considering I started a business, employed people, paid taxes and eventually generated many millions of dollars in income for American companies. And my taxes in any single month more than paid back the year of food stamps. And the student loans Buck and shortsighted conservatives like him want to do away with! What a bleak vision for our country these blinkered, greed-obsessed conservatives have!

Sunday you may have read Paul Krugman's harrowing column, The Third Depression, something the economics Nobel laureate thinks is descending on us because of a repeat of adopting as policy the same kind of conservative ideology that have caused past depressions.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline-- on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost-- to the world economy and, above all, to the millions of lives blighted by the absence of jobs-- will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world-- most recently at last weekend’s deeply discouraging G-20 meeting-- governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment-- especially long-term unemployment-- remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

And his conclusion as to why the ruling elites are headed down this road again? Even more chilling: "the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times. And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again." If you're a regular DWT reader you're certainly aware that we don't want to single out Ken Buck-- or even a raving sociopath like Sharron Angle-- as if the real toxicity were coming from anyplace else other than the very nature of conservatism itself. And since the fish rots from the head, let's take a look at the most recent random sociopathic utterances of the little orange man who would be Speaker, John Boehner. There's a wealth of information about the conservative mindset in those videos but the two most astonishing takeaways is that Boehner thinks she should cut back on Social Security-- in fact, keep Americans from retiring until they're 70 so that we can afford to pay for the foolish wars the ruling elites want to fight-- and that Financial Regulation is an overreaction, like killing an ant with a nuclear weapon.

The actual Speaker didn't seem especially amused by Boehner's boneheaded remarks. "An ant, Mr. Boehner? It was the worst financial crisis since the Great Depression-- Americans lost 8 million jobs and $17 trillion in retirement savings and net worth. The irresponsible fiscal policies of George W. Bush and Congressional Republicans were much bigger than an ant to American workers, their families and small businesses."

Justin Coussoule is the Democrat running for the seat Boehner is occupying. Earlier today he told us that this kind of shameless grandstanding is par for the course for Boehner. "While protecting bankers and careless polluters he blocks desperate unemployed workers from receiving essential compensation and now suggests that to pay for corporate giveaways and endless war that we balance the books by doing a bait and switch on Social Security recipients. Once again Boehner defends the powerful and tells the most needy in our society that it is time for them to suffer so that his benefactors can continue to wade in shallow water while those who have suffered from his trickle on economics gasp and drown in the deep and treacherous economic waters." Contributing to Coussoule's campaign seems like an exceptionally good idea-- unless you approve of Boehnerism.

Meanwhile, my friend Jill Richardson, author of Recipe For America: Why Our Food System Is Broken And What We Can Do To Fix It, put a very human face on this looming macro-economic crisis, asking a simple question about how, as a society, we treat our own children: Tate Tots Aren't Vegetables: Why Do We Feed Our Kids Crap?

Those who say the deficit must be addressed now via PAYGO ignore the basic principles of Keynesian economics. John Maynard Keynes, the economist most credited with bringing the U.S. out of the Great Depression, encouraged increased government spending-- even deficit spending-- during economic downturns. Recall that GDP is calculated as consumer spending plus investment by businesses plus government spending plus net exports. When consumers and businesses tighten their belts and spend less, the government can increase spending to jumpstart the economy once again. That was the very idea behind last year's stimulus package, which provided for targeted spending on infrastructure, food stamps and other programs that would most create jobs and result in immediate spending to help the economy recover.

Keynes knew that in a downturn, people are earning less so they also pay less in taxes. Simultaneously, more people qualify for entitlements (like food stamps or Medicaid), pushing up government spending. An austerity budget to fix the deficit now will prevent the government from spending what is necessary to bring back our economy. Once the economy recovers, the opposite will be true, and we will be more able to fix the deficit then.

In the specific case of school lunches, an austerity budget (and unhealthy food) now will result in massive increases in spending in the future when a generation of children raised on unhealthy food becomes a generation of unhealthy adults with costly, chronic illnesses. Some say they don't want to pass the deficit onto their children. But what child, when they are diagnosed with diabetes at age 25, would say "Thank you for balancing the budget by saving money on my school meals"?

I don't mean to single out John Boehner but his scary little world, is the conservative mind:

It's possible to be as stupid as Evan Bayh, but does anyone in his position have the right to be? PLUS: Jay Leno on Obama vs. Bush

Senator Evan with one of his prominent admirers

by Ken

Longtime DWT readers know that Indiana Sen. Evan Bayh is not a favorite here. Howie and I have fairly often been driven to fairly extreme vituperation. There's no evidence I'm aware of that the guy has a working brain, because if he does, the only use he makes of it is to process his intake of prevailing-wind measurements.

He is to all appearances the worst kind of gutless panderer, and I do mean the worst kind, because he is not only willing but happy to pander to voters' deepest ignorances rather than attempt to exercise the tiniest bit of leadership and attempt to educate them. When it comes to a grasp of social and economic issues and the backbone to exercise leadership thereon, his model appears to be a leftover dish of tapioca pudding.

It's all the more distressing because his father, former Sen. Birch Bayh, was a genuine statesman of the '60s and '70s -- and since being thrust out of elective office has continued to champion the values he espoused in government in other sectors. Is there not some eerie symbolic resonance to the fact that Senator Birch was ousted from his seat by that poster boy for idle-rich imbecility Dan Quayle in 1980, in the same election that installed Ronald Reagan, the man who made the U.S. officially a country built on and devoted to imbecility? Is there any reason to think that Senator Evan is anything other than a (nominally) Democratic version of Dan Quayle?

But this is an old story. Granted, it became topical during the last presidential election cycle, when first candidate Hillary Clinton and then nominee Barack Obama seemed perfectly prepared to make this giant lunk of nothingness her/his running mate. Still, we dodged that bullet -- and while Joe Biden may not be my all-time favorate U.S. politico, every time I hear "Vice President Biden," I still remember only too vividly how close we apparently came to, well, a different outcome.

This is still old news, though. Well, Senator Evan has popped up again. He's one of 14 Democrats, as counted by stalwart progressive Mike Lux in a stirring HuffPost exhortation, "Dems Need To Drop Culture Of Caution," who were identified in a Wednesday Politico piece "as having concerns with [President] Obama's policy plans." It seems the Politico 14 are trying to counsel caution to the White House.

It's an exciting piece from our colleague and friend Mike, stressing that the great Democratic victories for social progress have never come from being cautious. Everyone should read this piece. (This seem an appropriate place too for a plug for Mike's new book, The Progressive Revolution: How the Best in America Came to Be.) But the quote from our boy Evan still has me spluttering. Here's a post I churned out earlier to a list on which Mike's post was circulated:

At the risk of belaboring the bleedingly obvious, Politico quotes that great thinker and crack economist Sen. Evan Bayh as saying:

"The American people and businesses are tightening their belts. I think we need to show that the government can economize, as well."

Much as I admire Mike Lux's exhortation for Dems to rise above caution, this isn't even a "caution" issue, is it?

(1) Isn't the fact that NOBODY IS SPENDING a functional description of how we have sunk into, and are mired in, a depression (still masquerading in polite society as recession)? (Hence the logic for "economic stimulus"?)

(2) I know that Senator Bayh isn't very bright. I've called him things like "imbecile." But is it really possible that a prominent Democratic U.S. senator -- a man who came this close to being nominated for the vice presidency -- DOESN'T GRASP THIS? I understand that he's got a serious and apparently incurable case of panderitis, but still . . .

QUOTE OF THE WEEK:
JAY LENO ON PRESIDENTS BUSH AND OBAMA


"Secretary of Defense Robert Gates was on Meet the Press yesterday. And he said that Barack Obama is more analytical than President Bush. Well, there's a shock, huh? I think Tickle Me Elmo is more analytical than President Bush."

#

Will Obama Be Able To Save Us From Depression-- Even With Lunatic Fringe Republicans Like Jim Bunning Screaming "Bring It On!"

Jim Bunning, senile extremist hellbent on bring on another Depression

It sounds like Obama has some solid plans in store for turning the economy around, although he'll probably be unable to implement them without... Snowe

President-elect Barack Obama committed Saturday to the largest public works construction program since the creation of the interstate highway system a half-century ago as he seeks to put together a plan to resuscitate the reeling economy.

With unemployment on the rise and no end to the recession in sight, Mr. Obama began highlighting elements of the economic recovery program he is trying to fashion with Congressional leaders in hopes of being able to enact it shortly after being sworn in on Jan. 20.

Mr. Obama’s remarks sought to expand the definition of traditional work programs for the middle class, like infrastructure projects to repair roads and bridges, while also pushing a federal effort to bring in new-era jobs in technology and so-called green jobs.

In short this is what he's proposing:

Ø  Embark on a large-scale effort to make public buildings more energy-efficient;
 
Ø  Make the single largest new investment in our national infrastructure since President Eisenhower established the Interstate Highway System in the 1950s – creating millions of jobs and compelling states to act quickly and make smart investments;
 
Ø  Create jobs and help our children compete by launching the most sweeping effort to modernize and upgrade school buildings that this country has ever seen;
 
Ø  Renew our information superhighway by boosting broadband deployment in communities across America;
 
Ø  Modernize our health care system so that every hospital and doctor's office is using cutting-edge technology and every American has access to electronic medical records.

Let's assume for a minute, as Gail Collins did in today's Times, that reactionary Democrats like Landrieu, Nelson and Pryor (not to mention Holy Joe) stay on the reservation and that a couple of Republicans can be moved to abandon partisan warfare (against America) now and then. How will the Republican Party-- determined to move the sundial back in the direction of 1200 AD in 2012-- define itself while Obama is trying to rescue America from the catastrophe their policies have caused?

Tom Curry at MSNBC took a stab at it by looking at the likely scenario for the reactionary party in 2010. He spoke with Democratic economist Rob Shapiro who explained that “GOP opposition to the bailout seems to embody the general Republican approach of ‘no matter how bad things are, you’re on your own.’ Even though the public may oppose this bailout, they are going to even more strongly oppose deterioration in the economy without a bailout... If the economy turns significantly worse after the failure of the auto companies, the public will blame it on those who helped create the conditions that let the economy deteriorate further.” And Curry points to the 2010 Kentucky Senate race as the perfect test case.

When he ran in 2004, Sen. Jim Bunning, a Republican, won his seat by only by only 1.4 percent-- and the Cook Political report rates his 2010 race as a “toss-up.”

Although he did not show up for Thursday’s Banking Committee hearing, Bunning said two weeks ago that the essential issue is “whether the federal government should intervene in the private-sector economy. And I believe it should not.”

He added that if Chrysler and General Motors went into bankruptcy or liquidation, “I think that’s probably the best thing that can happen. Then there will be a reorganization and they’ll be able to jettison things they couldn’t ordinarily jettison, like health care benefits, like pension benefits and there will be someone to pick those up like the Pension Benefit Guaranty Corp.”

The firms would “may come out of bankruptcy a heck of a lot better off than they go into it.”

If Bunning is a crazed far right extremist-- and he certainly is, one of the craziest of them all-- then Republican George Voinovich (R-OH) is what you would call a mainstream conservative. He doesn't see the world in neat little black and white prepackaged boxes like Bunning (who is also severely senile and barely able to function-- not that that prevented him from being elected in 2004). A couple weeks ago Voinovich, who must also face the voters in 2010, acknowledged that "bankruptcy could trigger a deep recession and send us over the cliff. If these companies are allowed to fail, taxpayers will wonder why Congress failed to act."

We're already in a deep recession and probably close to depression territory. Voinovich, unlike Bunning and the extremists from his party, favors a responsible rescue plan. He and Arlen Specter (R-PA) are co-sponsors of legislation seeking to rescue the Big 3 automakers. Here's President-elect Obama talking about his plans this morning:

How Bad Will The Bush Depression Be?

It looks like Bush is racing in his final days as occupant of the White House to see if he can beat Herbert Hoover's economic record as the most disastrous U.S. president for American families. Today's employment report puts Bush in good shape to go down as the worst of the worst.

With the economy deteriorating rapidly, the nation’s employers shed 533,000 jobs in November, the 11th consecutive monthly decline, the government reported Friday morning, and the unemployment rate rose to 6.7 percent.

The decline, the largest one-month loss since December 1974, was fresh evidence that the economic contraction accelerated in November, promising to make the current recession, already 12 months old, the longest since the Great Depression. The previous record was 16 months, in the severe recessions of the mid-1970s and early 1980s.

The alarming job decline suggests that consumers and businesses have pulled back sharply on spending in response to the worsening credit crisis. That has put pressure on Congress and the White House to come up with a stimulus package that would substitute for the missing private sector outlays.

Over all, the losses since the recession began now total about 1.9 million, with most coming in the last three months.

“We have gone from recession into something that looks more like collapse,” said Ian Shepherdson, chief domestic economist at High Frequency Economics, referring to the accelerating job losses in recent months.

The losses in November far exceeded the 350,000 figure that was the consensus expectation of economists.

And real unemployment numbers are far worse than what is being reported! Meanwhile, the Republican Party has every intention of using it's last dying gasps of power-- in the White House and in the Senate-- to deal the economy a real death blow. Let's hope to God if that happens, it falls particularly hard on Georgia voters who decided that what the country needs is more Republican orthodoxy and more narrow partisan obstructionism. Barney Frank came as close to anyone today to predicting that if GOP extremists are allowed to force the auto manufacturers into bankruptcy, as they have vowed to do, we will soon be wishing it was just a deep recession we are facing.

Although the GOP has been exceedingly generous about some things, when it comes to ordinary working families, all they're willing to extend is the middle finger. Robert Shapiro, chief economist for progressive think tank, the New Democratic Network (NDN) explored the nexus between the current financial crisis and the kind of crony capitalism that has become the defining hallmark of Republican Party economic policy-- and of much of our corrupt, self-serving Insider political class.

Crony capitalism is usually associated with the way many governments in Africa, Asia and Latin America conduct public business, where government contracts, budgets and other public activities are routinely channeled to the families, friends and associates of political elites, rather than being allocated through some open bidding or other democratic processes. Variants of crony capitalism occur in the United States, too. In one infamous example, Halliburton “won” billions of dollars in no-bid contracts for Iraq while its former CEO was Vice President; and crony capitalism lurks behind billions in pork barrel appropriations passed every year by Congress. But when it begins to infect huge government operations taken to deal with an emergency, it has more serious and insidious effects. Japan famously practiced crony capitalism in its multi-trillion-yen “rescue” operations for its failing banking system in the 1990s, and bought itself a decade of stagnation and at least another decade as the worst-performing advanced economy in the world.

he terms of the Citigroup deal raise the specter of crony capitalism. The taxpayers will invest $20 billion in the company, receiving preferred stock that will pay 8 percent dividends, and Citigroup will bear the first $29 billion in losses from its current portfolio of $306 billion in troubled loans and assets. After that, the taxpayers absorb 90 percent of any additional losses in exchange for another $7 billion in preferred stock. The likelihood that Citigroup’s losses will far exceed the first $29 billion is disturbingly high. The financial crisis almost certainly will deliver additional shocks, because the current policies have done little to address the forces driving the crisis. The housing market continues to unravel; and with business investment, consumption and jobs all contracting rapidly, foreclosures continue to rise. As they do, more mortgage-backed securities and the derivatives based on them will go bad, and the consequent losses could claim much of the capital infusions that taxpayers have already provided. As the IMF and others have warned, large additional losses also could come from other sources. Most notably, the spreading global recession, on top of national banking crises in other countries, are producing enormous pressures on government financing operations in a number of nations, including some in the Eurozone, which in turn may produce sovereign debt defaults. And most of the sovereign debt that could well default in coming months is held today by financial institutions, especially ours.

Obama has to do better, much better. And universal health care is a good way to start. Daschle hits the nail on the head when he says that "high health costs hurt the ability of U.S. businesses to stay competitive and create new jobs, making it a 'high priority.'"

Oh Dear! Jeff Koons "Art" Judged A Little Closer To It's Real Value

No, no healthcare here-- just a fancy Richard Prince picture

Steve, my realtor-- and former Senior Vice President of Promotion-- told me today that one of the banks he's helping unload foreclosed properties for will not entertain anything below their asking price... at least this week. They're doing their little part, he told me, to hold up California's collapsing property values. I suspect that it only will be this week.

I've been helping my friend Roland look for a house. He's a school teacher in Compton and... well, he's not looking for deals in Beverly Hills or Malibu. We are getting to brush up on our Spanish though. One house we technically bought-- or almost bought-- was an approved short sale owned by T. and his wife and their 4 children, one of whom was born while we were in the process of buying the house. We were in escrow and suddenly T., who speaks no English, decided he couldn't afford to sell. There was no place his family of 6 could go. Theoretically Roland could start legal proceedings against them and force them to vacate. He doesn't want to do that. But T. will soon be evicted by the bank. That's because he bought the house for $509,000, put down $10,000 and his mortgage payments went into outer space.

He hasn't made his mortgage payments for several months and he hasn't paid his property taxes. We offered him more than he asked for the house (which was about half what he paid originally). The bank was so delighted not to have to take possession that they OK-ed the short sale in a couple days, a process that until recently usually took at least 4 months, sometimes double that.

T. doesn't read the NY Times or the Wall Street Journal and I feel certain no one he hangs out with will mention that the wild days on Wall Street that have wrecked the U.S. economy for people like him are over. Nor will they mention a story by Carol Vogel in this morning's edition of the Times about how dreary the contemporary art sale at Sotheby's was last night. They barely managed to sell $125.1 million worth of the stuff, "well below the low estimate of $202.4 million." Almost a third of the lots failed to sell at all! Unlike houses in L.A., which seem to sell at 1992 levels, Sotheby's claims contemporary art is selling at 2006 levels. I suspect they have a long way to go before the market bottoms out.

Lucky Mr. Broad gets his bargain basement Koons, Wishing Well

“It was a half-price sale,” said Mr. [Eli] Broad, who went on his first shopping spree in several years. In less than 90 minutes, he dropped more than $8 million (including Sotheby’s fees) on works by Ed Ruscha, Jeff Koons, Robert Rauschenberg and Donald Judd.

...Philip Guston’s “Beggar’s Joys,” for instance, went on the block with a big guarantee, an undisclosed sum promised the seller, in this case Donald L. Bryant Jr., a New York collector.

Mr. Bryant, watching the auction in a skybox above the salesroom, looked intent when his work came up for sale. Executed in 1954-55, the abstract canvas of lush reds and pinks attracted only one bidder, Mary Zlot, a San Francisco art adviser. Prices have soared since 1996, when Mr. Bryant paid a record $1.7 million for the work at Christie’s in New York. Sotheby’s experts estimated it would bring around $15 million. So confident were they that it is said they gave Mr. Bryant a guarantee of around $18 million. In the end, Ms. Zlot paid $9 million, or $10.1 million with fees.

Another big-ticket item, and the cover image of the sale’s catalog, was “Half Face With Collar,” a comic-strip painting from 1963 by Roy Lichtenstein, but it was one of the evening’s many casualties. Gian Enzo Sperone, an Italian dealer, was the seller. Estimated at $15 million to $20 million, it had no takers. Sotheby’s is thought to have guaranteed it for about $15 million.

...Buyers were clearly careful about parting with their cash, wondering if better bargains were around the corner. “I don’t think we’ve reached the bottom yet,” Mr. Broad said as he was leaving Sotheby’s after the sale. “We may be close.”

I think he's wrong. Yesterday's Bob Herbert column, Beyond The Fat Cats was written before the Sotheby's misfortune. In it Herbert explains why Obama and his political party need to bring back a sense of fairness and equity to the economy. And he doesn't mean everyone should be able to buy the bargain basement Koons that Mr. Broad got last night. "Fat cats," he writes, "who placed the entire economy at risk with their greed and manic irresponsibility are trying to lay claim to every last dime in the national Treasury. Meanwhile, we’re nowhere close to an economic recovery program that will help the people who are hurting most." You think anyone had that in mind when they were reaching for their smelling salts as a Richard Prince nurse painting that had been estimated to go for between $4 and 6 million, sold for a mere $3 million (well... $3.4 with fees)?

Back in September, with the credit markets frozen and the stock markets panicking, the treasury secretary, Henry Paulson, was telling anyone who would listen that his $700 billion bailout package had to be passed with lightning speed-- no time to look at it too closely, no time for dissent.

The package was modified, but hurriedly. Now we learn that while all eyes were focused on this enormous new burden for American taxpayers, Mr. Paulson’s department was also engineering-- separate and apart from the bailout-- what the Washington Post described as “a quiet windfall for U.S. banks.”

With virtually no public attention, and without the input of Congress, Treasury made a change in an obscure tax provision that benefited banks to the tune of well over $100 billion. Was this good policy? In the absence of proper scrutiny, how is it possible to know?

We’ve also learned that the government bailout of the giant insurer, the American International Group-- already more than $100 billion-- is apparently insufficient. Tens of billions more are needed.

When the Champagne and caviar crowd is in trouble, there is no conceivable limit to the amount of taxpayer money that can be found, and found quickly.

But when it comes to ordinary citizens in dire situations-- those being thrown out of work or forced from their homes by foreclosure or driven into bankruptcy because of illness and a lack of adequate health insurance-- well, then we have to start pinching pennies. That’s when it’s time to become fiscally conservative. President Bush even vetoed a bill that would have expanded health insurance coverage for children.

We can find trillions for a foolish war and for pompous, self-righteous high-rollers who wrecked their companies and the economy. But what about the working poor and the young people who are being clobbered in this downturn, battered so badly that they’re all but destitute? Can we find any way to help them?

I would bet Rahm Emanuel wasn't at the Sotheby's auction; he's probably too busy trying to figure out a strategy for bailing out the people who were. After all, in the last cycle Mr Broad donated $35,000 to the DCCC, another $10,000 to the DSCC and tens of thousands more to a wide array of business-friendly Democrats from Mark Warner and Max Baucus to... well, Rahm Emanuel, of course. Nothing to scary actual socialist Bernie Sanders, of course. Of course not; as we pointed out Monday, he means business-- and not the Rahm Emanuel kind either.