Check It Out for Friday, March 13th
Check It Out on a rainy Friday has the following:
William Greider at The Nation writes about fixing the Federal Reserve.
"Congress and the Obama administration face an excruciating dilemma. To restore the crippled financial system, they are told, they must put up still more public money--hundreds of billions more--to rescue the largest banks and investment houses from failure. Even the dimmest politicians realize that this will further inflame the public's anger. People everywhere grasp that there is something morally wrong about bailing out the malefactors who caused this catastrophe. Yet we are told we have no choice. Unless taxpayers assume the losses for the largest financial institutions by buying their rotten assets, the banking industry will not resume normal lending and, therefore, the economy cannot recover.
"This is a false dilemma. Other choices are available. Throwing more public money at essentially insolvent banks is like giving blood transfusions to a corpse and hoping for Lazarus--or, as banking analyst Christopher Whalen puts it, pouring water into a bucket with a hole in the bottom. So far Washington has poured nearly $300 billion into the bucket, and Treasury Secretary Timothy Geithner has suggested it may take another $1 trillion or more to complete the banks' resurrection. The president has budgeted $750 billion for the task. Morality aside, that sounds nutty.
"Here is a very different way to understand the problem: to restore the broken financial system, Washington has to fix the Federal Reserve. Though this is not widely understood, the central bank has lost its ability to govern the credit system--the nation's overall lending and borrowing. The Fed's control mechanisms have been severely undermined by a generation of deregulation and tricky innovations that have substantially shifted credit functions from traditional banks to lightly regulated financial markets. When the Fed tried to apply its old tools, starting in the 1980s, the credit system perversely produced opposite results--an explosion of debt the policy-makers could not restrain. In its present condition, the Fed may even make things worse.
"Instead of frankly acknowledging the problem, Fed governors proceeded in the past two decades to engineer exaggerated swings in monetary policy--raising interest rates, then lowering them, in widening extremes. This led to the series of bubbles in financial prices--first stocks, then housing and commodities--that collapsed with devastating consequences, climaxing in the present crisis..
"This analysis is drawn from the work of Jane D'Arista, a reform-minded economist and retired professor with a deep conceptual understanding of money and credit....
"To understand D'Arista's reform ideas, start with her devastating critique of the central bank. The Federal Reserve, she explains, has failed in its most essential function: to serve as the balance wheel that keeps economic cycles from going too far. It is supposed to be a moderating force in American capitalism on the upside and on the downside, the role popularly described as "leaning against the wind." By applying its leverage on the available supply of credit, the Fed can slow down a boom that is dangerously overwrought or, likewise, stimulate the economy if it is sinking into recession. The Fed's job, a former chairman once joked, is "to take away the punch bowl just when the party gets going." Economists know this function as "counter-cyclical policy."
"The Fed not only lost control, D'Arista asserts, but its policy actions have unintentionally become "pro-cyclical"--encouraging financial excesses instead of countering the extremes."
Liliana Segura at Alternet has an interview with Howard Zinn: "Last month in San Francisco, I had the opportunity to attend a performance of Voices of a People's History, the groundbreaking show conceived by historian Howard Zinn, author of A People's History of the United States, and Anthony Arnove, co-editor of Voices of a People's History and author of books including Iraq: The Logic of Withdrawal (New Press). Blending historical narrative with spoken word -- and some spunky bluegrass performed by the San Francisco-based Stairwell Sisters -- it was an event that, in one brisk hour, celebrated the power of protest and made manifest the best traditions of radical American thought, creativity, and dissent..
"The show is brilliant for its simplicity: Take a handful of famous American texts (and several more obscure ones), some movies stars with radical politics (and a few non-actors), mix in some rabble-rousing music, and make sure the audience includes students, activists, and people who believed in hope and change before Obama came along...
"Howard Zinn, himself an icon of radical history at 86, kicked off the evening with humor and warmth, explaining that, as a historian and an academic, he never wanted to retreat into the past. "I wanted the voices of the past to come to the present," he explained. "You go into the past and get lost. I want to get out of the past....
"LS: Much of the performaces have to do with war -- and the direction we're headed in Afghanistan instantly leaps to mind. What do you think about Obama and the fact that he's following the trajectory of the Bush administration with the whole "war on terror"? You endorsed him, right?
"Howard Zinn: Endorsed Obama? (Laughs.) Yes -- I endorsed Obama, I wanted him to win. I wanted Bush and Cheney out of there. I wanted change -- and the truth is I didn't have much choice. It was Bush or Obama. I chose Obama. And, in fact, I was hopeful. Not too hopeful, because I know something about American history. I know how much hope has resided in presidents, and I'm aware that presidents are political animals. I'm very much aware that Lincoln was a policitian and Roosevelt was a politician and, in fact, you might say the theme of my work is that we cannot depend on people in the White House. We can depend on people picketing the White House. So my attitude towards Obama has been watchful from the beginning in the sense that, okay, it's good to have Obama in there, I'm glad that he aroused a lot of people getting people involved in politics -- now I hope these people who have been aroused and energized will use that energy to push Obama in a direction different from the one he seems to be going in right now."
Robert Reich on his blog as the question: "Is Obamanomics Conservative or Revolutionary?
"What about those tax hikes on the wealthy? Obama merely restores the top two marginal income tax rates to what they were in the 1990s, the capital gains rate to its lowest level during that same prosperous decade, and the rate on dividends to a level even lower than it was in the 1990s.
"So there we have it: Obamanomics as pragmatic, incremental, centrist, even conservative.
"But there's another way to view Obamanomics -- as an economic philosophy exactly the opposite of the one that's dominated America for more than a quarter century.
"The basic idea of Reaganomics was that the economy grows from the top down....After George W. Bush's tax cuts for the wealthy, the median wage actually dropped. Meanwhile, most of the income went to the top. In 1980, just before the Reagan revolution, the richest 1 percent took home 9 percent of total national income. But by 2007, the richest 1 percent was taking home 22 percent.
"Obamanomics, by contrast, holds that an economy grows best from the bottom up. Obama's program increases taxes on the top, and uses the proceeds to raise the living standards of average Americans by giving them lower taxes, better schools, and more affordable health insurance. That may not seem very radical, but compared to the last quarter century it's revolutionary.
"Reaganomics didn't believe in public investment, except perhaps when it came to the military. Everything else was considered government spending, which was assumed to be wasteful.
"But Obamanomics is a commited to these forms of public investment....
"If you look only at the small print, Obamanomics looks conservative. If you look at the big picture, it's revolutionary."
Daniel Luban and Jim Lobe at IPS News write that the Freeman brouhaha has put the Israel lobby in the spotlight.
"Although the successful campaign to keep Amb. Charles "Chas" Freeman out of a top intelligence post marked a surface victory for the pro-Israel hardliners who opposed him, the long-term political implications of the Freeman affair appear far more ambiguous.
"Freeman’s withdrawal has provoked growing - if belated - media scrutiny of the operations of the so-called "Israel Lobby", and aroused protests from a number of prominent mainstream political commentators who allege that he was the target of a dishonest and underhanded smear campaign that, among other things, accused him of shilling for the governments of Saudi Arabia and China.
"For the neo-conservatives who led the charge against Freeman’s appointment, his withdrawal may therefore prove to be both a tactical victory and a strategic defeat.
"At the same time, the Freeman affair has highlighted the yawning disconnect between the career professionals in the intelligence and diplomatic communities, from whom Freeman enjoyed strong support, and political leaders in Congress and the White House, none of whom came to his defence publicly.
"Freeman, a former ambassador to Saudi Arabia who has been a vocal critic of Israeli policies in the occupied territories, withdrew from consideration as chairman of the National Intelligence Council (NIC) on Tuesday. He did not go quietly into the night, however, releasing a statement in which he struck back at his critics.
" 'I do not believe the National Intelligence Council could function effectively while its chair was under constant attack by unscrupulous people with a passionate attachment to the views of a political faction in a foreign country,' Freeman wrote.
" 'There is a special irony in having been accused of improper regard for the opinions of foreign governments and societies by a group so clearly intent on enforcing adherence to the policies of a foreign government - in this case, the government of Israel.'
"The motives for the anti-Freeman campaign are themselves a matter of debate. Virtually all of his chief attackers were neo-conservatives, whose views generally reflect those of the Israel's right-wing Likud Party, and other reflexive defenders of Israeli government policies. Many observers viewed it as self-evident that their hostility to him was based on his often bluntly-spoken belief that U.S. and Israel's interests in the Middle East were not necessarily convergent.
"In the end, the attempts by Freeman’s critics to make the story about anything but Israel may have backfired. Instead, discussion of the role of the Israel lobby in forming U.S. foreign policy appears to have acquired more mainstream legitimacy than ever before.
"The long-taboo subject became a matter of public debate in 2006, when two prominent political scientists, the University of Chicago's John Mearsheimer and Harvard University's Stephen Walt, published their article "The Israel Lobby", later expanded into a book. The two argued that a powerful lobby, centred on but not limited to AIPAC, exerts a "stranglehold" on U.S. foreign policy debates and stifles any criticism of Israeli policies, to the detriment of both the U.S. and Israel."
William Greider at The Nation writes about fixing the Federal Reserve.
"Congress and the Obama administration face an excruciating dilemma. To restore the crippled financial system, they are told, they must put up still more public money--hundreds of billions more--to rescue the largest banks and investment houses from failure. Even the dimmest politicians realize that this will further inflame the public's anger. People everywhere grasp that there is something morally wrong about bailing out the malefactors who caused this catastrophe. Yet we are told we have no choice. Unless taxpayers assume the losses for the largest financial institutions by buying their rotten assets, the banking industry will not resume normal lending and, therefore, the economy cannot recover.
"This is a false dilemma. Other choices are available. Throwing more public money at essentially insolvent banks is like giving blood transfusions to a corpse and hoping for Lazarus--or, as banking analyst Christopher Whalen puts it, pouring water into a bucket with a hole in the bottom. So far Washington has poured nearly $300 billion into the bucket, and Treasury Secretary Timothy Geithner has suggested it may take another $1 trillion or more to complete the banks' resurrection. The president has budgeted $750 billion for the task. Morality aside, that sounds nutty.
"Here is a very different way to understand the problem: to restore the broken financial system, Washington has to fix the Federal Reserve. Though this is not widely understood, the central bank has lost its ability to govern the credit system--the nation's overall lending and borrowing. The Fed's control mechanisms have been severely undermined by a generation of deregulation and tricky innovations that have substantially shifted credit functions from traditional banks to lightly regulated financial markets. When the Fed tried to apply its old tools, starting in the 1980s, the credit system perversely produced opposite results--an explosion of debt the policy-makers could not restrain. In its present condition, the Fed may even make things worse.
"Instead of frankly acknowledging the problem, Fed governors proceeded in the past two decades to engineer exaggerated swings in monetary policy--raising interest rates, then lowering them, in widening extremes. This led to the series of bubbles in financial prices--first stocks, then housing and commodities--that collapsed with devastating consequences, climaxing in the present crisis..
"In this crisis the central bank has so far flooded credit markets and financial institutions with trillions of dollars in new liquidity and loan guarantees, which may help to stabilize credit markets. But the Fed has been unable to engineer what the economy desperately needs--renewed lending to companies and consumers that can finance renewed growth. The confused purpose of monetary policy stands in the way. The Fed could not restrain credit expansion when it was exploding, and now it cannot stimulate credit expansion when it is frozen.
"This analysis is drawn from the work of Jane D'Arista, a reform-minded economist and retired professor with a deep conceptual understanding of money and credit....
"To understand D'Arista's reform ideas, start with her devastating critique of the central bank. The Federal Reserve, she explains, has failed in its most essential function: to serve as the balance wheel that keeps economic cycles from going too far. It is supposed to be a moderating force in American capitalism on the upside and on the downside, the role popularly described as "leaning against the wind." By applying its leverage on the available supply of credit, the Fed can slow down a boom that is dangerously overwrought or, likewise, stimulate the economy if it is sinking into recession. The Fed's job, a former chairman once joked, is "to take away the punch bowl just when the party gets going." Economists know this function as "counter-cyclical policy."
"The Fed not only lost control, D'Arista asserts, but its policy actions have unintentionally become "pro-cyclical"--encouraging financial excesses instead of countering the extremes."
Liliana Segura at Alternet has an interview with Howard Zinn: "Last month in San Francisco, I had the opportunity to attend a performance of Voices of a People's History, the groundbreaking show conceived by historian Howard Zinn, author of A People's History of the United States, and Anthony Arnove, co-editor of Voices of a People's History and author of books including Iraq: The Logic of Withdrawal (New Press). Blending historical narrative with spoken word -- and some spunky bluegrass performed by the San Francisco-based Stairwell Sisters -- it was an event that, in one brisk hour, celebrated the power of protest and made manifest the best traditions of radical American thought, creativity, and dissent..
"The show is brilliant for its simplicity: Take a handful of famous American texts (and several more obscure ones), some movies stars with radical politics (and a few non-actors), mix in some rabble-rousing music, and make sure the audience includes students, activists, and people who believed in hope and change before Obama came along...
"Howard Zinn, himself an icon of radical history at 86, kicked off the evening with humor and warmth, explaining that, as a historian and an academic, he never wanted to retreat into the past. "I wanted the voices of the past to come to the present," he explained. "You go into the past and get lost. I want to get out of the past....
"LS: Much of the performaces have to do with war -- and the direction we're headed in Afghanistan instantly leaps to mind. What do you think about Obama and the fact that he's following the trajectory of the Bush administration with the whole "war on terror"? You endorsed him, right?
"Howard Zinn: Endorsed Obama? (Laughs.) Yes -- I endorsed Obama, I wanted him to win. I wanted Bush and Cheney out of there. I wanted change -- and the truth is I didn't have much choice. It was Bush or Obama. I chose Obama. And, in fact, I was hopeful. Not too hopeful, because I know something about American history. I know how much hope has resided in presidents, and I'm aware that presidents are political animals. I'm very much aware that Lincoln was a policitian and Roosevelt was a politician and, in fact, you might say the theme of my work is that we cannot depend on people in the White House. We can depend on people picketing the White House. So my attitude towards Obama has been watchful from the beginning in the sense that, okay, it's good to have Obama in there, I'm glad that he aroused a lot of people getting people involved in politics -- now I hope these people who have been aroused and energized will use that energy to push Obama in a direction different from the one he seems to be going in right now."
Robert Reich on his blog as the question: "Is Obamanomics Conservative or Revolutionary?
"What about those tax hikes on the wealthy? Obama merely restores the top two marginal income tax rates to what they were in the 1990s, the capital gains rate to its lowest level during that same prosperous decade, and the rate on dividends to a level even lower than it was in the 1990s.
"So there we have it: Obamanomics as pragmatic, incremental, centrist, even conservative.
"But there's another way to view Obamanomics -- as an economic philosophy exactly the opposite of the one that's dominated America for more than a quarter century.
"The basic idea of Reaganomics was that the economy grows from the top down....After George W. Bush's tax cuts for the wealthy, the median wage actually dropped. Meanwhile, most of the income went to the top. In 1980, just before the Reagan revolution, the richest 1 percent took home 9 percent of total national income. But by 2007, the richest 1 percent was taking home 22 percent.
"Obamanomics, by contrast, holds that an economy grows best from the bottom up. Obama's program increases taxes on the top, and uses the proceeds to raise the living standards of average Americans by giving them lower taxes, better schools, and more affordable health insurance. That may not seem very radical, but compared to the last quarter century it's revolutionary.
"Reaganomics didn't believe in public investment, except perhaps when it came to the military. Everything else was considered government spending, which was assumed to be wasteful.
"But Obamanomics is a commited to these forms of public investment....
"If you look only at the small print, Obamanomics looks conservative. If you look at the big picture, it's revolutionary."
Daniel Luban and Jim Lobe at IPS News write that the Freeman brouhaha has put the Israel lobby in the spotlight.
"Although the successful campaign to keep Amb. Charles "Chas" Freeman out of a top intelligence post marked a surface victory for the pro-Israel hardliners who opposed him, the long-term political implications of the Freeman affair appear far more ambiguous.
"Freeman’s withdrawal has provoked growing - if belated - media scrutiny of the operations of the so-called "Israel Lobby", and aroused protests from a number of prominent mainstream political commentators who allege that he was the target of a dishonest and underhanded smear campaign that, among other things, accused him of shilling for the governments of Saudi Arabia and China.
"For the neo-conservatives who led the charge against Freeman’s appointment, his withdrawal may therefore prove to be both a tactical victory and a strategic defeat.
"At the same time, the Freeman affair has highlighted the yawning disconnect between the career professionals in the intelligence and diplomatic communities, from whom Freeman enjoyed strong support, and political leaders in Congress and the White House, none of whom came to his defence publicly.
"Freeman, a former ambassador to Saudi Arabia who has been a vocal critic of Israeli policies in the occupied territories, withdrew from consideration as chairman of the National Intelligence Council (NIC) on Tuesday. He did not go quietly into the night, however, releasing a statement in which he struck back at his critics.
" 'I do not believe the National Intelligence Council could function effectively while its chair was under constant attack by unscrupulous people with a passionate attachment to the views of a political faction in a foreign country,' Freeman wrote.
" 'There is a special irony in having been accused of improper regard for the opinions of foreign governments and societies by a group so clearly intent on enforcing adherence to the policies of a foreign government - in this case, the government of Israel.'
"The motives for the anti-Freeman campaign are themselves a matter of debate. Virtually all of his chief attackers were neo-conservatives, whose views generally reflect those of the Israel's right-wing Likud Party, and other reflexive defenders of Israeli government policies. Many observers viewed it as self-evident that their hostility to him was based on his often bluntly-spoken belief that U.S. and Israel's interests in the Middle East were not necessarily convergent.
"In the end, the attempts by Freeman’s critics to make the story about anything but Israel may have backfired. Instead, discussion of the role of the Israel lobby in forming U.S. foreign policy appears to have acquired more mainstream legitimacy than ever before.
"The long-taboo subject became a matter of public debate in 2006, when two prominent political scientists, the University of Chicago's John Mearsheimer and Harvard University's Stephen Walt, published their article "The Israel Lobby", later expanded into a book. The two argued that a powerful lobby, centred on but not limited to AIPAC, exerts a "stranglehold" on U.S. foreign policy debates and stifles any criticism of Israeli policies, to the detriment of both the U.S. and Israel."
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