Originally posted by: ProfJohn
I wonder how many of Obama's fans will skip this thread...
Not this one. Nor do I disagree with Samuelson's points.
So here is my epilogue-comment.
A good part of our post-war (WWII) political history has involved a basic struggle over:
1) The need for and amount of public goods, and how to finance them.
2) Property rights, cast in the perspective of measurements such as the Gini index of wealth and income distribution, and who bears what share of responsibility for the taxation needed to fund those public goods.
3) A tug of war between guns and butter.
Conservatives, and especially right-wing conservatives, only want to spend money on the guns. They tend to vote their self-interest, with a much narrower view of a public interest. I know about this: In the early 1980s, I contributed several $200 checks to the Republican National Committee. So I know something of the conservative mindset.
But even before Roosevelt, we lived in a mixed economy. The mixed economy provided a larger share of butter -- domestic program spending -- after the New Deal. Today's neo-cons want to deny that the New Deal brought the country out of Depression, and they construct revisionist arguments to insist that it was only the war spending of the 1940s that turned things around. Facts provide a stark basis to prove the contrary.
While we raise the topic of historical revisionism, we should also examine Cold War defense expenditures -- the guns, so to speak -- in light of more recent document declassifications and agency histories published in their wake pertaining to the National Security Apparatus.
With the passage of the 1947 National Security Act, Congress faltered in funding the CIA for at least a couple years. Instead, Wall Street provided funding. They not only provided funding, but they provided staff. At the same time, while we imported the Third Reich's rocket scientists for use in the Cold War, we also imported their sociologists, social-psychologists, and some intelligence officers, and we set up an intelligence apparatus that included Reinhard Gehlen's network in Germany and Eastern Europe. CIA funded and pursued exotic research projects -- propaganda and psy-war alone involved spending at a rate of $1 billion annually between 1945 and 1960. Some will recall the Church Committee hearings of the 1970s, which revealed some 200+ "assassination" projects under CIA auspices.
Early on, CIA became the biggest money-laundering operation in the world, outstripping the Mafia and the various drug-cartels of more recent history. There was no accountability. A CIA station-chief could walk into a US Embassy, and walk out again with a suitcase containing millions of dollars, to be distributed to who knows who and winding up who knows where.
We -- that is Kermit Roosevelt and the CIA -- overthrew the Mossadegh regime in Iran in a well-organized covert operation. This was sold to the public as a thrust against "communism," because Mossadegh was a "socialist." In reality, the British wanted to continue extracting oil from Iran without paying for it, and insisted they wouldn't help us in Korea unless we helped them in Iran. Mossadegh would've accepted a reasonable share of oil-royalities, but Britain refused. Iranian oil-workers were being paid at the rate of $0.60 per day.
We don't remember this; citizens who lived under Shah Pahlavi and his secret-police known as SAVAK still do. And it has shaped all the history that still followed.
But what is the point here of this long digression of stale history?
The declassified archives here, and declassified KGB archives -- including 20 boxes of documents smuggled out of the Soviet Union before it fell by KGB's chief archivist of some 25 years -- show that the Soviet economy under Stalin, and as it continued under Khruschev, was a total shambles. Further, CIA "informed" the country and the administrations of Eisenhower and Kennedy that USSR had 1,000+ nuclear missles pointed at us, when in fact, there were only in excess of 80.
So a good part of the Cold War's defense spending -- about $6 Trillion -- was unnecessary. Especially, a lot of people made money off it. We might have spent half that much (lessening both the deficit and its accumulation in the national debt), still managing to spend the paltry $2 billion on Charlie Wilson's War in Afghanistan -- to throw another $6 or $10 billion at "the end game" to avoid "having the crazies gather in Kandahar."
This only addresses the "guns" aspect. Obviously, there would be those who pay individual and corporate taxes, who would think that it is still "their" money, to be taken back in lucrative defense contracts with certain "cost-plus" profit margins built in. They've been doing it for decades. Note that I've said nothing about Vietnam. Don't get me started.
Now let's look at the dynamic of public goods domestic spending. These are often "collective goods," because the private sector cannot adequately address the need for them. For instance, Eisenhower's national highway system; or the three-tiered system of funding public schools. "Private" investment in collective goods cannot occur, because there is no direct profitable opportunity in such investment. It must be undertaken as a collective -- and public -- initiative, even if, as in the example of public highways, it involves private contractors (who again -- seek to have profit-margins assured and built-in to their contracts. This is not the "operation of competitive (emphasis) free markets;" it is "rent-seeking.")
It is the tug-of-war between domestic spending needs and the "guns," coupled with the log-rolling and vote-trading in Congress, which has resulted in chronic deficits. And even if voters choose an increase in public spending for domestic programs, it would seem that demand is understated. It is understated because nobody wants to pay for something that is shared -- as much as they want to pay for their own ice-cream cone or I-pod, which they can enjoy -- first-hand, and exclusively. Add to this behavior the rent-seeking we've mentioned and the fact that public waste-fraud-abuse scandals are "public" knowledge, and we can see how bridges may crumble in Minnesota; schools will fail in New York, LA or Chicago; FBI intelligence failed to prevent 911; FEMA didn't respond adequately to Katrina.
Public goods for many only offer indirect benefits. So the public seems to associate domestic spending with "welfare" to the poor, who are told to be "self-reliant." In fact, there are agricultural subsidies to agri-business and other interests which are also "welfare." We keep the defense industry "on-line" -- to assure security against any threat. We subsidize Big-Oil.
Corporate bail-outs didn't just start with AIG, Bear-Stearns or GM and the auto industry. They began sometime before the big Lockheed bailout of the 1970s, following massive cost-overruns on the C5A transport. Lockheed was getting 95% of its business from the government, while Boeing and other tin-benders were getting less than 50%. So Lockheed was given $500 million to keep it afloat.
But there is something deeper than that, my friends.
We have built The Great Petroleum Culture. The Great Petroleum Culture assumes that the supply of oil would be plentiful in the short-run, still evidencing a total denial of our situation with the Arab oil-embargo of the early 1970s and the Iranian oil-embargo of 1979. And if you examine the Cold War more closely, a good part of it was fought over the "property-rights" of American companies in foreign countries -- for oil, copper and other strategic minerals. We installed a fascist dictatorship in Chile -- denying it to the public for some 20 years -- overthrowing THE oldest democracy in the hemisphere, at the behest of ITT and Kennicott Copper.
The bargain made to support the oil habit -- our "Jones" -- involved incorporating the oil industry into our national security apparatus. This, again, is NOT "perfectly competitive free-markets." You can count the number of oil companies -- all based in Texas and California -- on one hand. Such a number is an implicit cartel, and small enough such that there is not any incentive for any cartel member to defect if price-fixing really occurred. A perfectly competitive industry would have no profits -- zero profits -- when raw-material input prices rise. Yet Exxon-Mobil posted the highest profits in American history last year.
There is no prevailing substitute for oil, but a "substitute good" is necessary for competitive markets and independence. We drive "on" it; we drive "with it." We heat our houses with it and fire our electric generators with it. It supplies raw-materials for the pharmaceutical industry. The entire economy depends on oil. For this, we have placed our fate in the hands of certain majority stockholders holding certain ideological and delusional beliefs. They can front their own congressional and presidential candidates; they can buy elections; they can run elections; they can pave highways of influence directly into the Oval Office.
And this is what the American voter preferred in 2000 and 2004. And if you examine the presidential administrations -- in both terms and term-years -- between 1960 and the present, you find that about 55% of terms and 60+% of term years (or vice-versa) derived from political careers originating in Texas and California. Yet, Texas and California only had 19% of the population and congressional districts in 1960, and 19% of the population and congressional districts in 2000. Are we to assume that most of the talent in America can be found in Texas and California?
The national debt (accumulation of deficits yet-to-be-paid) was 29% of GDP when Carter left office. Reagan and Bush-41 spent it up to 51% of GDP through increased military spending, and fairly paltry increases in domestic spending through 1992. The debt remained at 51% in 2000, while implementation of the Gramm-Rudman Deficit Control Act resulted in almost closing the deficit by the time Bush took office.
What I call the criminality of the Bush administration consists of this: They committed us to in excess of a trillion-dollars in spending for Iraq, as they were implicitly given over to the advice of their largest financial supporters. Their biggest supporter was a board member of Halliburton, and owned his own family oil company. You may guess, or simply hunt the web for his name.
At the same time -- continuing with my "J'Accuse" indictment here -- they cut taxes, continued a long tradition beginning with Reagan of deregulating industries and markets where regulation and a watchful eye should have remained in place. Meanwhile, incomes have lagged far behind housing markets massively bubbled from easy credit and the unregulated sub-prime mortgage fiasco. All of this served to choke the "butter" side of public spending, as they engaged in the totally delusional practice of excluding military spending in Iraq from the annual budget.
In essence, they attempted to kill domestic program spending entirely in these taxation and spending policies, while contributing to the greatest wave of corporate and political corruption in American history.
Americans are lucky: if I had been elected President, I'd have had Randy Cunningham and Jack Abramoff shot in front of their kids on Christmas Day at high noon. I'd give Bush and Cheney about sixteen life terms in a maximum security prison.
Forbes Magazine, December, 2003, featured comment from Milton Friedman (conservative) and James Buchanan (populist, democrat) -- both Nobel Laureate economists. They said that Bush would "kill the goose that laid the golden egg" with his public spending choices. They were implicitly referring to the profligate war spending under the absurd tax reductions of the Bush administration.
Now, for the first time in decades, we have a President who is neither venal, delusional, a womanizer, nor an Idiot. I don't have heroes. I want to write the man a sympathy card, because nobody who isn't "on the take" or representing the sorts of special interests and mega-money I've mentioned -- would want that job.
In 1953, Hollywood released Brando's third movie -- an historical docudrama, with screenplay by John Steinbeck. Steinbeck wrote the following script-lines for it:
"This land is yours. But you'll have to protect it. It won't be yours for long if you don't protect it. And, if necessary, with your lives. And your children with their lives. Don't discount your enemies. They'll be back. But if your house is burned, build it again. If your corn is destroyed, replant. If your children die, bear more. And if they drive us out of the valleys we will live on the sides of the mountains. But we will live.
"You've always looked for leaders. For strong men without faults. There aren't any. There are only men like yourselves. They change. They desert. They die. There's no leader but yourselves."
This is all about perception. The American economy has become so complex, that any attempt to fix things appears as a distortion of simple justice, while the status-quo itself is a hypocritical affront to justice anyway. "Free Markets?" Don't kid yourselves. Get your heads out of the sand.
Meanwhile, what's good for the goose is good for the gander. Those who remember the W.R. Grace commercial of the 1980s, featuring the "Deficit Trials: 2020," should accept responsibility for putting Obama's predecessor in office in the first place. California now has a 10.5% unemployment rate. The security of retired people is threatened. Schools are laying off teachers. People are gathering in droves at a tent-city in Sacramento -- a "Hooverville" -- having vacated their foreclosed homes to join the ranks of the homeless.
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