Deficits Caused by Oligopolic Control, not Entitlements

Paul Rosenberg at OpenLeft points us to and elaborated on analyses about what's really causing the deficits and what's behind the Catfood Commission and other austerity measures.

http://www.openleft.com/diary/21051/the-real-budget-deficit-comes-from-outofcontrol-oligopolies-not-middleclass-entitlements

http://www.openleft.com/diary/21128/austerity-narratives-from-real-economists-debunked

Just pasting in the links now so I can read them later, and since they mesh well with how I understand what's going on now. It seems like the US economy is dominated by players profiting from economic inefficiencies who then use that money to buy political power to preserve those inefficiencies against the popular will. Not sure how to get out of this bind, and things will likely get much worse before we do. Ian Welsh even advocates getting out of the US if you can.

Berkeley coffee update

When I first moved back to Berkeley a year ago, I was worried about getting coffee from my favorite San Francisco roasters. It quickly became clear that this would not be a problem. Caffe Mediterraneum on Telegraph sells beans from Barefoot, Local 123 sells beans from Flying Goat, and there's a Blue Bottle stand at the downtown Farmers' Market Saturday mornings. I could go on as there seem to be more options every month or two. (There's still nothing in downtown Berkeley, though. In downtown Oakland, there's Modern: Coffee and Cafe Gabriela.)

However, I've started buying coffee roasted at the Coffee Market on Hopkins near the Monterrey Market. The roaster doesn't have a particular "style", but his lighter roasts seem similar enough to those above that it looks to become my much cheaper alternative to them. He also sells his roasted beans in pound bags at the Country Cheese store on San Pablo near University.

Democratic Death Wish

Jane Hamsher and Atrios comment on attempts to make a free trade pact with Korea
and the "budget balancing" (linked by JH) proposals, respectively.

opposing NAFTA-style trade agreements and defending Social Security were the two strongest issues Democrats had in 2010

The Korea FTA text contains the extreme investor rights that promote offshoring; the private enforcement of those rights that had led to serial attacks on domestic environmental, health, and other safeguards; a ban on Buy America; limits on financial service regulation ( recall, this is a 2007 pre-crisis text with all of the crazy extreme dereg language of past Bush FTAs) and more of the most damaging NAFTA-style provisions Obama promised to fix.

For more context, see this post from Mike Lux about the proposals of the National Commission on Fiscal Responsibility and Reform ("Catfood Commission").

Problem: Banks

Detailed yet succinct summary from James Galbraith: Obama's Problem Simply Defined: It Was the Banks.

Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

Team Obama did none of these things. Instead they announced “stress tests,” plainly designed so as to obscure the banks’ true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was “to get credit flowing again.”

The banks threw a party. Reported profits soared, as did bonuses. With free funds, the banks could make money with no risk, by lending back to the Treasury. They could boom the stock market. They could make a mint on proprietary trading. Their losses on mortgages were concealed — until the fact came out that they’d so neglected basic mortgage paperwork, as to be unable to foreclose in many cases, without the help of forged documents and perjured affidavits.

But new loans? The big banks had given up on that. They no longer did real underwriting. And anyway, who could qualify? Businesses mostly had no investment plans. And homeowners were, to an increasing degree, upside-down on their mortgages and therefore unqualified to refinance.

I'm in the earlier parts of JG's Predator State. My impression so far is that the writing's not that great, but is sufficient to convey content I find very interesting.

All My Exes Live in Berkeley

We moved back here about a year ago. Since that time, I have run into four ex-girlfriends in a three by three square block area of downtown Berkeley. I said hi to the one I'm on good terms with and avoided the other three.

K turns 0.75

I've clearly been remiss in not posting that we had a second boy, K. He has three teeth, has just started crawling, and is nine months old today.

Primary Obama

While the Obama administration has been getting testy about those professional leftists disgruntled with them, it's not that much of a mystery why, as partially outlined here by Glenn Greenwald ("The Profound Mystery of the Enthusiasm Gap", Sept 2): broken promises on immigration reform, gay rights, civil liberties, labor rights, protection of Social Security, government transparency, etc. To Glenn's list I would also add a health care "reform" that keeps the useless private insurance companies in charge, guaranteeing them millions more subsidized customers, dealing away a public option in closed-door deals with insurance companies.

Given that all Democratic base constituencies were betrayed, who has the Obama admin been serving? The finance industry. Please read all of this fairly short piece, "The Oligarch's President" by Charles Ferguson (director of "Inside Job", BS Math, PhD Poli Sci). Here, though, are a few excerpts:

Beginning almost immediately, the president consistently opposed any effort to control financial industry compensation -- even for firms receiving federal aid, as most were in 2009. Then came a long period of total inaction, followed by the toothless Wall Street reform bill passed this summer and the appointment of a former Fannie Mae lobbyist, Tom Donilon, as the new national security advisor.

Most tellingly, there has not been a single criminal prosecution of any firm or any individual senior financial executive -- literally zero -- and, of course, no appointment of a special prosecutor. While we can debate the extent to which fraud caused the crisis, and precisely how much fraud was committed, the answer is clearly not zero. We already know that Lehman and other firms used fake accounting to hide liabilities and inflate assets; that lenders and securitizers frequently knew that the loans they sold and packaged were fraudulent or defective; and, of course, we also now know that Goldman Sachs and other investment banks sold securities they knew to be defective...

It is, in short, overwhelmingly clear that President Obama and his administration decided to side with the oligarchs -- or at least not to challenge them.

What to do? Ian Welsh sums it up well here: "The Primary Obama Movement Begins Today":

Obama and Democrats had a historic chance to fix America. The rich who run America, whom the Supreme Court in Citizens United gave permission to outright buy elections, could have been broken when Obama took power. All that was necessary was to force them to take their losses. Contrary to what apologists for wealth have told you, this would not have meant disaster for the economy, there were ways to protect regular Americans while making the rich take their losses.

Instead Barack Obama, as in so many other ways, continued Bush’s policies, and kept the rich bailed out. The end result has not only been the tsunami of foreclosure issues which still threaten to swamp the banks, has not only been trillions in dollars of taxpayer money being used to keep rich people rich (much more money than was spent on the stimulus), it has been the wholesale transfer of money from poor to rich: an absolute decline in total wages, average wages and median wages of ordinary Americans, while Wall Street pays themselves even higher bonuses than before, gives record money to Republicans and the rich pay themselves more.

Obama must be primaried and he must be primaried from the left

The left must be seen to repudiate Obama, and they must be seen to take him down. If the left does not do this, left wing politics and policies will be discredited with Obama. This is important not as a matter of partisan or ideological preference, it is important because left wing policies work. It is necessary to move back to strongly progressive taxation, it is necessary to force the rich to take their losses, it is necessary to deal with global warming, it is necessary to deal with the fact that the era of cheap oil is over, it is necessary to stop the offshoring engine which is destroyin the American middle class.

I have been a supporter of publicly funded campaigns for some time now, since it became clear that Republicans cared only about funneling money to their rich buddies and not dealing with any of the urgent problems our country faces (see Ian's list, above). However, now that it (1) the Roberts court is declaring a key feature of Clean Money Elections unconstitutional (see Davis v. FEC) and (2) Democrats have changed the politics but not so much the policies from the Bush admin, election reform can only be part of a broader effort. I'm not sure how we go about mounting a primary challenge to Obama, but I believe Ian is right. We must.