The whole thing is nuts. The economy is a shambles, saved from a free fall only by the Federal Reserve's unprecedented promise of free money for banks for at least two years. That's how long a seven-member majority of the Fed's Open Market Committee expects it to take for significant relief to take hold for the 25 million Americans who can't find full-time employment.
The 10-member committee's three dissenters in Tuesday's decision, all unelected Fed regional board presidents, are free-market ideologues who don't believe the government has a role to play in reversing the nation's economic disaster. One is a former Wall Street investment banker and vice chairman of Henry Kissinger's consulting firm. The other two are University of Chicago school of economics disciples long committed to free-market purism and blind faith in the mathematical models that had much to do with radical deregulation and the subsequent collapse of the financial markets.
That view led Minneapolis Fed President Narayana Kocherlakota, before he assumed his Fed position, to sign a petition that the libertarian Cato Institute placed in various newspapers opposing President Barack Obama's economic stimulus plan.
The dissent of the three members is thought to have prevented the Fed from pursuing more vigorous action such as the anticipated "QE3" purchase of additional securities. As New York Times columnist Floyd Norris speculated, "perhaps the dissenters really want to essentially say something like 'We've done all we can, and if the economy is still lousy, that is for someone else to deal with.'"
Meanwhile, Obama has been reduced to an impotent bystander promising vigorous budget cuts in response to Standard & Poor's adverse credit rating. The president's pathetic performance on Monday, as the market crashed, was the low point of his career. Nor did it help that the rush of investors to Treasury bonds validated his bold claim that the United States of America deserves a perfect credit rating. On that point he is right, but Obama's failure to challenge the idiocy demanded by S&P, along with the Republicans -- that government spending be dramatically cut in the face of an economic crisis -- cast his remarks as terminally tepid.
How dare a credit rating agency that got it so wrong, and should itself be investigated for malfeasance in the creation of the banking meltdown, dictate public policy? For S&P to insist on massive government cuts that would only increase joblessness is like a burglar shifting blame for his crimes to the poor quality of locks.
This from a credit rating agency that, as New York Times columnist Joe Nocera points out, "has consistently fallen short." S&P judged Enron to be an exemplary company until shortly before the corporation imploded, and it gave its triple-A seal of approval to the toxic securitized mortgage debt that caused the great recession. There are serious problems with the U.S. economy, but they are not the ones that Standard & Poor's outlined when it sent the stock market into a tizzy.
We don't need draconian cuts in government spending at a time when the economy remains mired in deep unemployment, when state and municipal governments are shedding jobs and when the housing market is on life support. And if some Americans thought that we did and voted to put irresponsible Republicans in charge of the House of Representatives, isn't it the duty of the president and his fellow Democrats in control of the Senate to fight back? That's called democracy, and we need more of it instead of the false unity for which Obama settled.
Sure, it would have been much better if a phony populist movement called the tea party had not been financed by fat cats out to preserve their unseemly tax breaks and thereby gained control of the House. That's what undermined what S&P termed the "effectiveness, stability, and predictability of American policymaking and political institutions [that] have weakened at a time of ongoing fiscal and economic challenges..." But, as S&P acknowledged with its downgrade after the congressional vote on the debt ceiling, the fact that the president caved was of no help.
The result is that Obama has agreed to effectively remove the elected federal government from the battle to restore economic health and instead left us to the tender mercies of the banker-dominated Federal Reserve, which, like the folks at S&P, condoned the reckless Wall Street policies that got us into this mess. At a time when we need a full-throated defense of the role of government in protecting the interests of a majority of Americans suddenly made deeply vulnerable by the chicanery of the financial oligarchy, we are denied even the logical clarity of a former community organizer who once promised hope.
Matthew Dowd: August Takes Its Toll on Obama -- As It Did Bush
Judge H. Lee Sarokin: I Want My America Back -- not the Tea Party's America
Whereas I agree with your assessment of S&P I vehemently disagree that Government spending is the solution to America's economic woes.
You want to see new business start ups and existing businesses flock to America? Cut corporate tax rates to zero, after all taxes are ultimately passed on to the consumer as part of the cost of doing business. More employed Americans equates to more dollars in the government's coffers, it has been demonstrated time and again.
This hate the rich mantra will only undermine our great economy, for only the wealthy are employers. For that sin the government would begrudge them the privileged of their hard earned wealth. For most it did not come casually but through hard work, long hours and years of personal deprivation.
I am not wealthy by a long shot but would like to be so some day. Like home ownership it is a part of the American Dream, it is not a right but an opportunity for those so motivated.
That maybe hitting the nail on the head; S&P may have made this move as political cover if they are investigated. The right would howl in S&P's defence any investigation was political.
How incredibly venial.
would spend it if they had it. Flat tax would be unfair & hurt eceonomy. They should simplify the
tax system & take out most of the loopholes , that the rich use to dodge taxes.
if the guy who makes $40K pays $4K
and the guy who makes $400K pays $40K
that leaves the diff of $36K to $360K
That is why when we buy something that is not made here, we are co-opting our own salaries.
The problem is, without serious international competition, there is little or no incentive to decrease production costs and prices just keep rising. So we need enough competition to keep companies honest but not the unfair competition created by sweat-shop wages.
The commitment of these elites to free trade agreements that suck jobs out of the country and to tax breaks that favor relocation of production, as well as their commitment to the aims of the extra-national financial sector generally, are the means by which we will arrive at banana republic status without ever leaving home.
We have still, the largest consumer base on earth, yet increasingly, as you point out, we are sending a goodly portion of our money away as we buy.
This not 1979. We are not suffering from high interest rates.
But put away your tin-foil hats. The New York Times assures us that the sovereign ratings group is independant.
The greatest obstacle in the U.S. today is lack of information and amplitude of perspective of what is going on in the rest of the world, and what took place in the U.S. before 1980. A guy in Dark Side of the Moon, Miss. opens up a beer in front of Fox News on TV and actually believes what they say.
What is happening today in the U.S. is being presented as "the American way of doing things" or "capitalism" or "the inevitable consequences of a vibrant free market system".
The situation will change when people are much better informed and aware of things. Right now there is a broken system in place and there is no hope.
How about if HP writers started creating articles about how other succesful countries like Germany or Sweden get things done?
By looking at our belly button and philosophising about it we will achieve nothing.
All of this is barking at the moon.
Until there are public financing of elections and a constitutional amendment to provide a level playing field for new political parties, the U.S. is going to continue down to the bottom of the ocean.
It is mechanically impossible fro the U.S. to do well, as things are right now. A recovery to what? to a prelude of another crash?
To go forward in an effective manner, the present U.S. situation has to be seen within two coordinates : what the U.S was before 1980, and what the advanced countries of Europe and the Commonwealth ( Australia, New Zealand, Canada) are doing. There are many other, proven succesful ways of doing things, different from what is being done today in the U.S.
Sweden is growing today at a 5% rate, and has a budget surplus. They tackleld their own financial crisis in the early 1990s by facing the music and doing effective things such as temporarily nacionalizing the banks and writing off bad stuff.
Germany is already out of the recession and roaring ahead. Australia and other countries are also doing well.
It is mechanicalÂly impossible fro the U.S. to do well, as things are right now. A recovery to what? to a prelude of another crash?"
That pretty much says it all right there. It isn't possible for anything else to change until we get the big money out of elections. I'm pretty sure no one is going to like the process for making that happen.
the politicians . The supreme court with Republican majority made it much easier
for the special interests to donate big money & buy politicians. We need to get more
Democrats in supreme court to overturn that bad decision.
Time Obama got desperate and actually use the power he has. But maybe he doesn't really have any and realizes it. Still, he should go for it if he has doing the right thing in his DNA at all.
FDR said he thrived on the hatred he received from The Right and welcomed it. Obama will just be destroyed by it if he stays on the current course. But few of his supporters have much hope for him (or the fate of America) at this stage.
Obama should never have listened to Tim Geithner about not prosecuting the banks because they were to financially weak, he said it could cause more damage. Obama should have taken a hard line in the beginning like, FDR took the banks to task and restored the faith in the banking system. No matter what this group of leaders in Washington does now; nothing is going to work until they address the corrupt banking system and house mortgage problems.
S&P rating was based on a pure political move on their part, they have become lobbying for the banks interest.
I truly can not believe that S&P got through the Enron scandal un-touched by it. Enron’s CPA firm, Arthur Andersen did not have same the good fortune. I have friends that worked at this firm, clients were calling canceling their contracts; it soon became clear they could not financially survive.
We need Government Leaders again----
Men make history and not the other way around. In periods where there is no leadership, society stands still. Progress occurs when courageous, skillful leaders seize the opportunity to change things for the better.
Harry S. Truman