SYNDICATED COLUMN: Barack Hussein Hoover

It's 1933 Again. But FDR Lost.

NEW YORK—When the economic collapse began a year ago, many Americans took comfort in the historical parallels with the Great Depression. As it had in 1929, the current crisis began under the clueless reign of a Republican, George W. Bush. Universally reviled since his non-response to hurricane Katrina had exposed him and the men around him as both uncaring and incompetent—either one was forgivable, not both—Bush had reacted in the classic cold-blooded Republican form embodied by the president who gave his name to the Hoovervilles.

But all was not lost. The Democrats were coming in! Barack "Yes We Can" Obama was running well ahead in the polls. Soon our new FDR would clean up Bush's mess.

In the late fall of 2008 Bush looted the stripped-bare U.S. Treasury one final time. Hundreds of billions of dollars in "bailouts," this time for the benefit of the banks, insurance companies and automobile manufacturers whose profligate ways had contributed to the crisis, were doled out without pre-conditions. Millions of homeowners who faced foreclosure got no help whatsoever.

The way to stimulate a consumer-based economy is to put money directly into consumers' pockets. Instead, Bush deployed the standard GOP trickle-down approach. Boosting the banks would encourage them to restore liquidity, allowing individuals and businesses to resume borrowing. But the banks weren't stupid. They no longer wanted to lend to people who couldn't repay them. They held on to the cash. Credit markets seized up.

Like his father in 1992, Bush finished his reign as he had begun it: tone-deaf, cheerful, obliviously floating above the mayhem, utterly unconcerned with the fate of the average American staring at a stack of bills (and, in the case of a half a million Americans each month, a pink slip).

We were a nation without leadership. We knew there was no point looking to Bush and his GOP gangsters for help. But we weren't too worried. Obama was coming. He would be the neo-FDR. He would get things rolling again.

During the 1932 campaign Franklin Delano Roosevelt promised that help was on the way. In radio addresses and in speeches across the country, FDR argued against Hoover's trickle-down approach. He spoke on behalf of the "forgotten man at the bottom of the economic pyramid."

In his lucid biography of FDR, "Traitor to His Class," the historian H.W. Brands described FDR's sales pitch: "For too long, he said, government had operated for the benefit of the wealthy, consigning the poor to the margins of public life. The Hoover administration had responded to the crisis by furnishing aid to big banks and corporations. This approach was characteristic of the Republicans, Roosevelt said, and characteristically wrong. It treated ordinary men and women as secondary to the powerful firms that had long dominated American life. And it certainly hadn't done anything to alleviate the Depression, which grew worse with each passing month. Roosevelt advocated "building from the bottom up," as he put it; supplying aid to those who most needed it."

Attacking the 2008-09 Great Recession wasn't rocket science. The causes of the economic collapse were strikingly similar: a real estate bubble feeding a stock market bubble, excessive borrowing and lending. So were the results: by the time Obama became president in January, the real unemployment rate—calculated the way it was calculated in 1933—was the same 20 percent it was when FDR took the oath of office.

Keynesian-influenced economists such as Paul Krugman pushed the incoming Obama Administration to repeat FDR's successful approach. Putting job creation first, FDR's New Deal programs directly put millions of people to work on government projects. The WPA, which employed eight million Americans during its existence, built bridges and highways. The TVA put up dams and the CCC improved national parks. The federal government even hired artists and authors to paint murals in public buildings and write travel guides to the 48 states.

Long after World War II ended the Depression once and for all, Americans made use of New Deal-era labor: "The WPA built or improved 651,000 miles of roads, 19,700 miles of water mains and 500 water treatment plants. Workers built 24,000 miles of sidewalks; 12,800 playgrounds; 24,000 miles of storm and sewer lines; 1,200 airport buildings; 226 hospitals; more than 5,900 schools, and more than two million privies," according to a PBS special about the New Deal. There's plenty of work to do now: the U.S. needs a national high-speed rail system to compete with European and Asian countries, not to mention new mass transit systems and school buildings. Pull out of Afghanistan and Iraq and hire Americans to start building!

Nine months into his presidency, however, it is clear that Obama is more Hoover than FDR. There has been virtually no investment in public infrastructure. There will be no public jobs programs. According to The New York Times, "Obama's economic advisers are sifting options for a new package of tax cuts and other job creation measures to be unveiled in next year's State of the Union address."

No one in Congress has proposed a single jobs-creation bill. Instead, they're working to extend unemployment benefits to 79 weeks. "As Democrats have found, aiding those who have lost their jobs," comments the Times, "is simpler than preventing more layoffs and creating more jobs."

Is Obama stupid? Or is he crazy? More than one out of five Americans is jobless. Many more are underemployed. There are six jobseekers for every job. Inflation is out of control. Yet he thinks we can wait until January 2010? Does he really believe that tax cuts create jobs?

Other ideas include "a tax credit for homebuyers and accelerated depreciation for businesses." There's also "a $3,000 tax credit for each new hire" and "allowing more businesses to deduct their net operating loans going back five years instead of the usual two."

When Bush flew home to Texas, we thought we were getting an FDR to replace a Hoover. Instead, we got another Hoover.

Even if we had a president willing and able to offer the bold and decisive leadership that FDR offered in the 1930s, the challenge posed by the fiscal crisis would be daunting. But we're not as lucky as our grandparents. We're stuck with a small-minded schmuck with the vision of a small-time Chicago alderman. Think about it: this is a guy who thinks tinkering with the tax code is going to save American capitalism!

It's 1933. This time, however, Hoover got reelected. Can we hold out until 1937 for a president who understands that we need 10 million new jobs, and that we need them yesterday?

(Ted Rall is the author, with Pablo G. Callejo, of the upcoming graphic memoir "The Year of Loving Dangerously.")

COPYRIGHT 2009 TED RALL

Cartoon for August 31, 2009

Ah, the economy. It does so well. Yet we don't. How come?

Cartoon for July 25, 2009

And we call the French cowards...

SYNDICATED COLUMN: Heckuva Job, Barry

Obama, Losing Jobs, Soon to Be Shovel-Ready

Pro-Obama political cartoonists have drawn variations of the same cartoon: the president, in the role of badgered parent on a family trip, is driving a car labeled "The Economy." The American public, depicted as Uncle Sam or Joe Average, whines: "Are we there yet? Are we there yet? Are we there yet?"

With official unemployment approaching 10 percent and underemployment at 16.5 percent, Americans are running out of money—and patience. Obama's approval ratings are down between 15 and 20 points, meaning that he has lost one in six Americans. His biggest weakness: the economy.

"I think the public knows three things: We inherited a total mess; we're working hard on it; and we're not going to get out of it overnight," says Chief White House propagandist Rahm Emanuel. That part is true.

The trouble for Obama is that people don't see any light at the end of the tunnel. "The key to what this year is about is rescuing the economy from falling off the cliff and trying to put in place the building blocks of recovery"—i.e., bailing out the banks, insurers and automakers, says Emanuel. That's what 2009 has been about for Obama. But for ordinary Americans, 2009 is about keeping or finding a job.

Creating jobs, unfortunately, doesn't seem to be an Obama Administration priority.

Were the bailouts necessary? Economists won't know for years. What we do know is that the Administration's approach won't give the American people what they want and need more than anything else: jobs.

What's the point of being patient? Even Obama admits help isn't on the way.

Obama's plan is Reaganomics redux. Give trillions of dollars to big corporations, he argues, and they'll use it to capitalize new ventures, hire workers, and unclog the credit markets. Eventually. "We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity," he says.

But even Obama admits it won't unfold "the way it's supposed to."

Obama says his plan "was not designed to work in four months. It was designed to work over two years." But if current trends continue, if everything goes the way he hopes, it will never work. We will have lost 14 million jobs by 2010. That would leave us up 4 million at most—a net loss of 10 million. That's a disaster.

And that's why Joe Public is so antsy. "Are we there yet?" isn't the right question. People think: "We can see how this is going to end: we'll be upside down in a ditch, plucking safety glass from our scalps."

Obama's approach won't work economically, and it won't work politically. Setting bailouts aside, what the United States needs right now—what it needed over a year ago—was a ginormous federal jobs program.

What happened to the infrastructure construction projects, like high-speed rail, that attracted so much enthusiasm during the campaign? Right-wing economic czar Lawrence Summers and a bunch of wimpy Democrats trashed them. "Transportation spending was gutted by Republicans who insisted on more tax cuts—none of whom voted for the measure anyway—and by Obama advisers who shifted priorities to advance policy goals," reported the AP.

Earlier this year the American Society of Civil Engineers said the nation's long-neglected highways, bridges and tunnels require $2,200 billion in repairs just to get them up to basic safety code—not including high-speed rail. Obama's stimulus plan included a mere $42 billion (less than two percent). Rail got $2 billion out of a needed $25 billion. Unless Obama does something soon, nothing is going to get built and unemployment will continue to soar.

Now that Wall Street firms like Goldman Sachs are reporting record profits, it's time to "claw back" the bailouts, pull out of Iraq and Afghanistan, and direct federal dollars where we need them most: jobs. Give tax breaks to employers who add new workers, direct federal agencies to grow in size, and create zero-interest lending programs to laid-off would-be entrepreneurs. And let's build some friggin' infrastructure. Every $1 spent on infrastructure generates a $1.59 payback in the form of increased tax revenues—and creates a lasting legacy.

Speaking of cartoons, the Treasury Department's Bureau of Public Debt recently came under fire for trying to hire a cartoonist to "discuss the power of humor in the workplace [and] the close relationship between humor and stress." A Democratic Senator nixed the idea.

Too bad: at least Obama could have taken credit for creating one job.

COPYRIGHT 2009 TED RALL

Cartoon for April 20, 2009

When everyone's losing everything, those who manage to hold on to what they have look lucky.

THIS WEEK'S SYNDICATED COLUMN: Every Dogi Has Its Day

Americans Lose Their Savings and their Minds

When the revolution comes, the tribunal will turn to two sources to determine who should be arrested: a list of the 500 highest-paid CEOs and the Styles section of The New York Times.

Real unemployment is over 20 percent. Millions of people are losing their homes to foreclosure. We've been at war for eight years, with nothing to show for it but a million-plus corpses and trillions in new debt. The United States, in the midst of full-on economic collapse, is teetering on the brink of political implosion. Which has driven some people to…doga.

"Nationwide," an article in the April 9th Times Styles section explains, "classes of doga--yoga with dogs, as it is called--are increasing in number and popularity."

Doga. The name alone inspires lovely fantasies of firing squads. Above the piece and above the fold are photos of dogs being levitated, stretched, and used as weights. Understandably, they generally look puzzled, if not mystified. The online version has a slideshow chronicling the torment of a yellow mutt, his hind quarters being yanked into the heavens by his ever-so-serious Spandex-clad owner. Downward-facing-dog gone wild. The poor beast wears that Admiral Stockdale look: who am I? why am I here?
Why are you doing this to me?

Times reporter Bethany Lyttle, who probably never dreamed she'd end up writing this sort of thing when the thought of becoming a journalist first crossed her mind, paints a grisly tableau in but 45 horrifying words: "In Chicago, Kristyn Caliendo does forward-bends with a Jack Russell draped around her neck. In Manhattan, Grace Yang strikes a warrior pose while balancing a Shih Tzu on her thigh. And in Seattle, Chintale Stiller-Anderson practices an asana that requires side-stretching across a 52-pound vizsla." One wonders, will she have the animal put to sleep in the event of weight change? Will she buy an entire set of dogs, to cover the weight range as her fitness improves?

During the last few months Times political writers have been wondering aloud why Americans haven't reacted to losing their jobs and houses by rioting. Here, just a dozen ever-shrinking pages away, is the answer. They're freaking out, all right. But being Americans, they're freaking out weirdly.

If you've read this far--and I wouldn't blame you if you'd already thrown this down in disgust--you'd might as well know what doga is. Doga!

"Doga," reports The Times (which doesn't run comics or advice columns because those features aren't serious enough), "combines massage and meditation with gentle stretching for dogs and their human partners. In chaturanga, dogs sit with their front paws in the air while their human partners provide support. In an 'upward-paw pose,' or sun salutation, owners lift dogs onto their hind legs. In a resting pose, the person reclines, with legs slightly bent over the dog's torso, bolster-style, to relieve pressure on the spine."

Ready! Aim! Fire! No need for caskets. A shallow grave will suffice. But there's more.
Skeptics of doga, by taking the idea seriously, unintentionally provide the best quotes. "Doga runs the risk of trivializing a 2,500-year-old practice into a fad," the paper quotes a yogi in, naturally, Portland (the one in Oregon, obviously). Ya think? "To live in harmony with all beings, including dogs, is a truly yogic principle. But yoga class may not be the most appropriate way to express this." She thinks about this stuff. Me, I'm holding out for boga--yoga with bugs.

Doga is the perfect end-of-empire moment for a nation wallowing in self-indulgence. The Romans puked out their engorged guts in their vomitoria; we drop $20 a class to drape our yowling schnauzers over our flabby tummies. And as with every great American trend of mass idiocy, controversy swirls arounds doga.

Brenda Bryan, a 43-year-old dogi and yogi (doyogi? yodogi? bowwowwowyippiyagi?) in Seattle, has written the book on doga. "It's a new field so there can be confusion about what doga is and isn't," she says. Why be confused? I know what doga is. Doga is stupid.

COPYRIGHT 2009 TED RALL

Cartoon for March 8, 2009

The collapse of the New Economy leads to a reversal of the old conservative report to the downtrodden.

Cartoon for February 26, 2009

Even as the economy drags the United States into oblivion, many Americans keep up appearances of normalcy.

THIS WEEK'S SYNDICATED COLUMN: CEO-Bashing for Fun and Profit

Obama, Media Grandstand on Executive Pay

SPRINGFIELD, ILLINOIS--On July 14, 1789 an angry mob invaded Paris' Bastille prison, igniting a chain of events that became the French Revolution. The insurgents may have been provoked by a prisoner, the notorious Marquis de Sade. "They are killing the prisoners here!" he shouted to the crowd two weeks earlier, on July 2nd. The authorities moved him to another prison before the 14th.

The storming of the Bastille was pretty much a BS event. There were only seven prisoners for the revolutionaries to liberate, several of whom were living lives of considerable ease in fully furnished cells with servants. Yet the Bastille remains a symbol of monarchist oppression smashed by righteous people seeking freedom and equality. Sometimes empty symbolism means a lot.

Not so much here or now. Revolution doesn't seem imminent in Obamaland, where polls show people pro-Bama despite losing their jobs, and a government bailout for everyone and everything except the people and institutions who actually need help. But revolution's second cousin--symbolic scapegoating--is all around, like love in the Mary Tyler Moore Show theme song minus the beret toss.

"In 1980, according to a Forbes magazine study, executive compensation was 40 times the average worker's pay; by 2007, that had soared to more than 400 times," CBS News reported on February 25th. Now that the companies those ridiculously compensated executives were charged with running are tanking, CEO pay is coming under attack by pundits and politicians.

President Obama won headlines and plaudits for a $500,000 income cap on top corporate executives--an idea that I and other progressives have been promoting for ages (and that was derisively dismissed as socialism before the U.S. began sliding into oblivion in September). As with the Bastille, however, there's a lot more symbolism than substance here.

First, the $500,000 cap doesn't cover 99 percent of Fortune 500 companies--only those receiving federal bailout cash. Firms like Bank of America, Citigroup, Wells Fargo and AIG, which got the first round of TARP moolah, won't be affected. Only a handful of companies would be covered, and even they'll escape the restriction. First, most CEOs receive relatively low salaries anyway. Most CEO compensation comes in the form of bonuses and stock options, which aren't subject to Obama's cap. And even the income cap cab can easily be evaded; CEOs simply have to notify company shareholders.
That's not all. "[Obama's income cap] excludes the midlevel execs who also received some of those Wall Street bonuses and who in many cases made the risky bets that sparked the crisis," reports The Politico.com. There are more loopholes, so many you could drive a gold-plated Hummer through it if you could afford the gas, but you get the idea.

"America needs to understand that this is cosmetic, that this is to appease taxpayer ire," says "Naked Capitalism" blogger Yves Smith, who has worked on Wall Street for 25 years. But that would be true even if Obama's cap were real and applied to every CEO in America.

Universally blamed for the fiscal meltdown, Wall Street investment bankers are under fire for taking in billions in bonuses in 2008, a.k.a. The Year America Died. Chris Dodd, chairman of the Senate banking committee, grandstanded thusly, vowing to use "every possible legal means to recoup the $18.4 billion in Wall Street bonuses." Vice President Joe Biden said: "I'd like to throw these guys in the brig."

Of course, nothing of the sort will happen. The bankers will keep their bonuses; they won't be checking into the Greybar Hotel any time soon.

What's gotten lost in the populist uprising is why seven-digit CEO salaries were worth talking about in the first place. They're a symbol and litmus test of a bigger problem, skyrocketing income inequality, that has gotten worse and worse since the late 1960s. As the rich have grown richer--not just rich CEOs, but everyone in the top one to five percent of income earners--the poor, and especially the middle class, have become poorer and poorer.

The overall social problem of rising income inequality is at the root of our current economic ills. If corporations had paid the vast majority of workers the raises they deserved over the past 40 years, raises commensurate with increases in efficiency and productivity, people would have saved more and borrowed less. The real estate and credit bubbles wouldn't have grown as big. When they burst, people would have had resources to fall back upon. We are broke, unemployed, and maxed out--not because we bought too much stuff, but because our bosses paid themselves instead of us.

CEO and executive compensation in general aren't the problem, or even the cause of the problem. They are symptoms of a malady inherent in the capitalist system: the tendency of those who gain an early advantage to monopolize assets and aggregate wealth and influence at the expense of everyone else. You can see it when you play the board game "Monopoly." More times than not, whoever gets an early lead wins.

It isn't just CEOs. It's millions of Americans at the top of the income scale, many of whom consider themselves middle class. Because they earned too much, others earned too little.

Insulting CEOs (while letting them keep their perquisites) may be fun. But it doesn't begin to address what's killing the U.S. economy: the rancid notion that one person's hard day's work deserves more pay than another's.

COPYRIGHT 2009 TED RALL

Cartoon for February 14, 2009

Obama's bailout plan helps the corporations who caused the economic mess, and not one of their victims.

THIS WEEK'S SYNDICATED COLUMN: It Couldn't Happen Here

Could It?

PARIS--Most Americans don't care what happens in France. But the oldest country in "Old Europe" remains the Western world's intellectual capital and one of its primary originators of political trends. (Google "May+1968+Sorbonne.")

The French are reacting to a situation almost identical to ours--economic collapse, government impotence, corporate corruption--by turning hard left. National strikes and massive demonstrations are occurring every few weeks. How far left? This far: the late president François Mitterand's Socialist Party, the rough equivalent of America's Greens, is considered too conservative to solve the economic crisis.

A new poll by the Parisian daily Libération finds 53 percent of French voters (68 percent of 18-to-24-year-olds) favoring "radical social change." Fifty-seven percent want France to insulate itself from the global economic system. Does this mean revolution? It's certainly possible. Or maybe counter-revolution: Jean-Marie Le Pen's nativist (some would say neofascist) National Front is also picking up points.

One thing is certain: French politics are even more volatile than the financial markets these days. In yet another indication of How Far Left?, the Communist-aligned CGT labor union is on the defensive for not being militant enough. "We're not going to put out the blazing fires [of the economic crisis]," the CGT's secretary general said, trying to seize the initiative by calling for another strike on February 18th. "We're going to fan them."

Two new entities, a Left Party (PG) umbrella organization trying to unify opposition to the conservative government of President Nicolas Sarkozy (who'd be to the left of Obama in the U.S.) and the New Anticapitalist Party (NPA), have seized the popular imagination. The NPA claims to have registered more than 9000 "militants" willing to use violent force to overthrow the government if given the word.

"Only combat pays," read a banner at the NPA's first convention.

Communism is dead, most pundits--the mainstream, stupid ones anyway--have been telling us since the USSR shut down in 1991. As it turns out, the libertarians were wrong. Half-right, anyway: Human nature may be inherently individualistic, as free market capitalists claim, but it's also inherently social. When economies boom, most people are sufficiently satisfied to leave well enough alone. Who cares if my boss gets paid 100 times more than I do? I'm doing OK. As resources become scarce, however, we huddle together for protection. The sight of a small rich elite hoarding all the goodies violates our primal sense of fairness.

"In Soviet times," a man in present-day Tajikistan told me, "we lived worse than we do today. But we were all the same. Now we live a bit better, but we have to watch rich assholes pass us in their Benzes." Which would he choose? No hesitation: "Soviet times."

In America, a French cliché goes, people are afraid of the government. In France, the government is afraid of the people. With good reason, too: the French have overthrown their governments dozens of times since the Revolution of 1789. The French are hard wired with class consciousness. Strikes, demonstrations and general hell-raising are festive occasions. Only when things spin totally out of control--as when Muslim youths rioted in the suburbs of Paris and other cities--are conservatives like Sarkozy able to make headway.

Riots over police brutality by disenfranchised minorities make the French nervous. But contempt for American-style "harsh capitalism," where citizens pay $800 a month for healthcare and write nary a letter to their local newspaper to complain, is 100 percent mainstream. The French don't think they should have to suffer just because some greedy bankers went on a looting spree.

Even Sarkozy is getting the message. "We don't want a European May '68 in the middle of Christmas," he warned his ministers in December. He shelved proposals to loosen regulation of business. Arnaud Lagardère, CEO of the Lagardère Group, told the financial daily Les Echos: "We're seeing, in renewed form, the most debatable aspects of Anglo-Saxon capitalism called into question."

The French and Americans face similar problems. But their temperamental differences lead them to different conclusions. An average working-class Frenchman possesses a deeper understanding of economics, politics, history and economics than most college professors in the U.S. Go to a bar or café, and sports will be on the television--but not on people's lips. They're talking politics and how to force their leaders to protect their quality of life.

Americans, on the other hand, don't expect direct help from their government. They're giving Barack Obama time to see whether his economic recovery program will work. It won't, of course; economists say so. But indolent hopefulness is less work than chucking Molotov cocktails.

Back in France, the NPA sets off rhetorical bombs Americans wouldn't dream of. "We're not a boutique party out to get votes, or an institutional mainstream party, but a party of militants," says the NPA's leader to the Le Monde newspaper. "We're real leftists, not official leftists." The NPA is currently negotiating a temporary alliance of convenience with the Communists.

A communist revolution in western Europe would be greeted by curiosity and derision in the U.S. state-controlled media. But if such a social upheaval were to protect French living standards from a global Depression spinning out of control, it might also prove inspiring to increasingly desperate Americans.

COPYRIGHT 2009 TED RALL

THIS WEEK'S SYNDICATED COLUMN: Vive la Crise

In France, the Left Returns

PARIS--Two improbable new political parties have been born in France. One claims to already have the support of 15 percent of the population --not merely of the French republic but of the entire European Union. In a multi-party parliamentary democracy, that's big. And mainstream pundits expect that number to double within a year.

France's resurgent left has been born of a movement borne of a level of mass rage and popular resentment the likes of which no one has seen here since the 1930s. Like Americans, French voters are terrified as securities markets falter and companies lay off tens of thousands of workers. They're furious about bank bailouts that cost taxpayers hundreds of billions of euros, with little to no accountability as the beneficiaries spent the money on everything except helping the ordinary people and small businesses who need it most. But unlike the United States, the incendiary rhetoric of France's left has seized the popular imagination and is redefining the acceptable range of political debate.

Jean-Luc Mélenchon quit France's Socialist Party a few months ago, decrying his former comrades as out of touch. Now he's the co-founder of France's Left Party (PG), a coalition of left-of-center parties. A week earlier, Olivier Besancenot formed the New Anti-Capitalist Party (NPA), which he says has 9000 "militants" dedicated to the overthrow of the liberal economic system that has dominated Europe since the end of World War II. Anti-capitalist!

Even in left-leaning France, there wouldn't have been enough wine in all of France to convince a politician that he could successfully market the NPA's battle cry--they want nothing less than "a total break with capitalism"--to the voting public. "The right to happiness," a PG deputy said flatly, "is still a new idea." And that's what they're selling.

The Left Party seeks to unite France's left-of-center factional parties--communists, socialists, greens and members of the New Anti-Capitalist Party--under an umbrella alliance that would preserve their ideological differences while focusing their attention on dismantling the free market system that many agree has brought France to the brink of economic ruin.

To this American's eyes, revolution is in their air. One week ago, labor unions and leftist political parties declared a national strike, forcing schools, banks, transportation links and government offices to close. More than a million Parisians marched in the streets, calling for the ouster of [conservative French president Nicolas] Sarkozy. (Adjusting for France's population, that's the equivalent of five million demonstrators in Washington demanding that Obama step down.)

"There is room for everyone with legitimate political opinions, a PG official said in a radio interview. "This does not include the right." What should French conservatives do, he was asked? "They should leave the country." "Down with Sarkozy," a sign hanging from a city hall in the Auvergne region read, "Death to the capitalists." The Auvergne is one of the country's most conservative regions.

What does "anti-capitalism" mean? Besancenot, head of the New Anti-Capitalist Party, foresees a society where "the majority controls and expropriates wealth. Nowadays, the fruits of one's labor is stolen by a minority; we will ensure that everyone gets his or her fair share."

Communists have always been around, especially in France. But the mainstream Socialist Party (PS) has expressed a willingness to unite with its erstwhile rivals. The PS, PG and NPA all say they're setting aside factionalism. The last time France's Left was this unified was 1936, when a similar anti-capitalist coalition formed the Popular Front government.

Of course, there are cynics...on the left. "I'm not going to close down my shop and waste the afternoon marching in the streets unless it's for real revolution, for a real popular movement," a store manager told me. These demonstrations are just to prop up the official left, which supports the status quo," he continued.

Capitalism is in crisis, both here and in the United States. Is it doomed? No one knows, but the future of minimally regulated free markets is anything but certain.

COPYRIGHT 2009 TED RALL

THIS WEEK'S SYNDICATED COLUMN: Hopelessness You Can Believe In

Why Obama is Scarier Than George W. Bush

Dave Eggers preceded his memoir "A Heartbreaking Work of Staggering Genius" with a section titled "Rules and Suggestions for Enjoyment of this Book." It's a brilliant attempt to disarm the reader and preempt criticism. Among its warnings, referring to chapter four: "The book thereafter is kind of uneven." (Disclosure: Eggers edited my work at two magazines in the '90s.)

Barack Obama shares Eggers' talent for managing expectations. "There will be false starts, there will be setbacks, there will be frustrations and disappointments,” Obama said upon his arrival in Washington. “I will make some mistakes." In other words, don't expect much.

The soaring optimistic rhetoric of the campaign ("yes we can") is no more, replaced by the sober, string-synced cello strains of Yo-Yo Ma. So is Obama's million-dollar smile. The Dour One is demanding patience. And he's getting it, for now: "Most respondents [to the New York Times/CBS News poll taken January 19th] said they thought it would take Mr. Obama two years or more to deliver on campaign promises to improve the economy, expand health care coverage and end the war in Iraq."

Setting the bar low seems to be working. Seventy-nine percent of Americans say they're optimistic about the next four years under Obama.

Sad, pathetic Americans! Like a dog that's been beaten eight long years, they're so psyched about the fact that their new master doesn't drool and speaks coherent English that they'll follow him anywhere. The media is in love with The One and so, therefore, is the public. No one questions him.

Frightening but true: Barack Obama is even more dangerous to liberal ideals than George W. Bush. Obama, who didn't appoint a single liberal to a senior position, has neutered the left. "Protesters, a fixture of every inauguration since President Nixon’s in 1973, were few and scattered on Tuesday as Barack Obama assumed the presidency," reported the Times.

The antiwar types have thrown away their signs. The sight of the first black president has the fair weather pacifists goo-goo-ga-gaing over a man who plans to transfer U.S. occupation troops and the carnage they bring from Iraq to Afghanistan.

No demonstrators in the streets. No reporters asking tough questions. A political honeymoon based on nothing. Didn't we learn anything from 9/11, when 90 percent of Americans, and the media, and Congress, issued George W. Bush a similar blank check?

People think things will be better four years from now, but there's little reason for hope. America faces radical problems. Radical problems require radical solutions. Unfortunately, Obama's proposals, and the moderates and conservatives with whom he has filled his cabinet, are woefully inadequate to the challenges at hand.

Nobel Prize-winning economist Paul Krugman calculates that there's at least a $2.1 trillion hole in the economy--an "output gap" between production capacity and consumers' ability to buy goods. Filling that hole would require direct investment (like Obama's public works proposal) of at least $1.5 trillion. But Obama's plan only contains $355 billion, of which only $136 billion would be spent within the next two years. It's better than nothing, but not by much. Obama wants to plug a gushing artery with a Band-Aid one- tenth the size of the wound.

It's churlish to predict that Obama's approach won't work. But even Obama admits it won't. He promises to create 4 million new jobs by 2011. But we're currently losing 4 million jobs every five months. If Obama delivers, 25 million Americans will have lost their jobs by 2011. (The math differential is due to the fact that population growth increases the workforce by 2.8 million jobs annually.) With unemployment figures like that, no one will doubt that we're in a real Depression: breadlines, suicides, the whole bit.

Obama's order to close Guantánamo and the CIA's secret "black site" torture prisons within a year is heartening. But as with his other initiatives, it doesn't go far enough. The detainees should have been freed, paid a generous compensation package, and received a formal apology by the U.S. government on Day One of his Administration. Gitmo should have been shuttered immediately. All the torture criminals from Bush to the U.S. Navy guards should have been thrown in prison and put on trial.

Instead, Obama's goons (they're his now) will keep torturing the detainees for at least another year. Some detainees may still be subjected to kangaroo courts. And Obama's executive orders contain weasel words that let him take back America's renewed commitment to constitutional rights with the snap of a finger. The orders, reports the Times, "could also allow Mr. Obama to reinstate the CIA’s detention and interrogation operations in the future, by presidential order, as some have argued would be appropriate if Osama bin Laden or another top-level leader of Al Qaeda were captured."

Meanwhile, the Bush Administration creeps who personally ordered the murder and torture of innocents kidnapped by the military, including young children, will not face prosecution.

During the campaign, Obama promised there would be "no more illegal wiretapping of American citizens." He has since changed his mind. Obama will keep the USA-Patriot Act. Habeas corpus, eliminated by the Military Commissions Act, won't come back.

The biggest reason hope doesn't stand a chance is Afghanistan, where Obama plans to send the soldiers he wants to pull out of Iraq. The international community, which understands that the 2001 U.S. invasion of Afghanistan had no more to do with 9/11 than the war against Iraq, will not take kindly to this escalation. Moreover, the war against Afghanistan is even less winnable than Iraq. At a time when we can least afford foreign adventurism, Obama plans to pour billions of dollars and thousands of lives into an Afghan charnel house with no prospect of victory.

Bush faced energetic opposition. Obama, on the other hand, is adored by the very people who should be shouting at him the loudest. Conservatives lost their credibility by supporting Bush, leaving Republican voices out in the cold.

Give the man a chance? Not me. I've sized up him, his advisors and their plans, and already found them sorely wanting. It won't take long, as Obama's failures prove the foolishness of Americans' blind trust in him. Obama isn't our FDR. He's our Mikhail Gorbachev: likeable, intelligent, well-meaning, and ultimately doomed by his insistence on being reasonable during unreasonable times.

COPYRIGHT 2009 TED RALL

Cartoon for January 15, 2009

Bush—er, Obama—can't come up with $1 trillion to fill what Paul Krugman describes as a nearly $3 trillion hole. Yet he, and no one else, ever questions the wisdom of escalating our other doomed war, the one against the people of Afghanistan.

THIS WEEK'S SYNDICATED COLUMN: Eat the Rich

Soak the Rich, Corporations

A moratorium on housing foreclosures and evictions is a good idea. So is making the tax code more progressive. Obama's plan to build new public works is smart. But those are half-measures. Even if they don't come out of Congress watered down and wankified, they'll come too little and too late to kill the rapidly metastasizing disease that threatens to kill the U.S. economy: income inequality.

Employers are shedding jobs at a breathtaking rate: more than 560,000 per month. The rate of job losses could soon hit a million. People who still have jobs are being squeezed by pay cuts and freezes; even those who have yet to be affected are closing their wallets out of fear that they'll be the next to get chopped. So consumer spending, which accounts for two-thirds of economic activity, is plunging. Moreover, millions of individuals and businesses have lost access to credit and thus the movement of capital that might have pulled us out of this tailspin.

"The key is that the consumer is in the worst condition since the Great Depression," retail consultant Howard Davidowitz told NBC News. Boarded-up shops will abound. Experts expect 73,000 retail locations to close during the first few months of 2009. Between 20 and 40 percent of national retail chains will shut down. This isn't a recession. It's a depression, and it could destroy the country.

If broke consumers are the problem, shoveling money into their pockets is the way to get them spending again. Where do get it? The reason Willie Sutton robbed banks, he supposedly said, was because "that's where the money is." These days, the money is the hands of corporations and rich individuals.

(Warning: boring economic statistics and analysis follow. But stick with me. You could get a check!)

Tax returns give only a partial picture of a nation whose riches have been aggregated in the hands of a tiny elite. "The Internal Revenue Service," reported The New York Times in 2007, "captures only about 70 percent of business and investment income, most of which flows to upper-income individuals, because not everybody accurately reports such figures." So actual income inequality is bigger than IRS data indicates.

Even so, the IRS finds a huge pay gap between the very rich and the rest of us. "The wealthiest one percent of Americans earned 21.2 percent of all income in 2005," the most recent year for which IRS data is available, according to a 2007 piece in The Wall Street Journal.

What if we played Karl Marx and left that one percent of the population (people who earn over $350,000 a year) with their fair share--one percent of national income? If we divided the rest of the loot equally, everyone else--99 percent--would get a 20.2 percent pay raise.

I don't know about you, but I could use it. And because I'm a patriot, I pledge to fritter away half of my 20.2 percent windfall on wine, women and frivolous American-made consumer goods.

What would happen if we adopted the communist principle of total income equality? That would require closing the gap between median (the halfway mark of income distribution) income and average income. Due to wage inequality, the average worker earns 40 percent more than the median. Close the gap, and two-thirds of Americans get a raise. One-third gets a cut. But only a small group, the top five or ten percent, would feel significantly pinched. Most of the third wouldn't lose much. And everyone would benefit from the increased economic activity that would result from equal income distribution.

Call it trickle-up economics.

Wouldn't socialism remove people's incentive to work hard? Though not a perfect economic model, the Soviet experience seems to disprove the idea that you can't find good CEO help for under a million bucks a year. Soviet physicists, athletes, filmmakers, novelists, composers and other innovators led their fields, yet were rewarded with little more than a medal and a puff piece in Pravda. Mikhail Kalishnikov invented the AK-47, the world's most popular firearm. He was never paid a dime, and never cared.

Here in the U.S., brilliant people become schoolteachers and priests. Salary isn't the biggest motivation for most people.

Another thing to bear in mind is an aspect of wealth Americans don't usually think about: assets. Eliminating income inequality wouldn't address asset inequality. The rich, who've had years of high income with which to save and invest, and have inherited assets from parents and grandparents who did the same, would still be rich. A truly efficient attempt to put more money in the average person's pocket would require redistribution of these accumulated assets.

If Willie Sutton were still around, however, he might find it easier to go after biggest 4000 U.S. corporations than its richest 40 million households. So let's look at big business income.

After-tax 2007 profits for U.S. corporations totaled $1.8 trillion, up 10 percent since 2001. (Bear in mind: this figure doesn't include CEO salaries, capital reinvestments, and the acquisition price of other corporations.) The effective average corporate tax rate in the U.S. is about 13 percent--one of the lowest in the industrialized world. If we were to double the effective tax rate to 26 percent, the U.S. would remain a tax haven compared to Germany and other major European countries.

Let's say the IRS took that extra 13 percent corporate profits tax and cut a check to the American people. Why not? Without us, the U.S. consumer, these companies wouldn't be in business. In 2007, every worker in the U.S. would have gotten a check for $12,000. That's a lot of xBoxes, not to mention mortgage payments.

There's plenty of cash left in the U.S. economy. Sooner or later, the tiny minority of corporations and rich individuals who are hoarding our nation's wealth will be forced to share it with the rest of us. The question is when, and how.

COPYRIGHT 2009 TED RALL

Cartoon for January 1, 2009

Now that the U.S. is used up like an old crumpled piece of tissue paper, they hand it over to a black guy.

THIS WEEK'S SYNDICATED COLUMN: New Year's Revolutions?

There's Plenty of Money Around. Let's Take It.

What's the difference between you and a corpse? You both contain the same organs, the same fluids--all the same stuff. Inside you, stuff moves around. That's the difference between life and death.

What's the difference between economic boom and bust? Again: movement. The United States of America is just as rich today as it was a year or, for that matter, ten years ago. It still possesses the same rich natural resources, the same enviable geography, and the same productive, innovative and energetic workforce. Our country still has enormous intrinsic value. But money, the lifeblood of any economy, has stopped moving around.

Wealth is still here. But the economy has flat-lined.

We know what caused the problem--the double bursting of the dot-com and housing bubbles, coupled with government regulators who took the last three decades off from work and financial analysts who said the old rules no longer applied. (The old rules always apply.) The underlying meta causes of the Crash of '08 were an unholy trinity of stagnating wages, easy credit and brilliantly executed consumer propaganda that convinced people they were lame unless they bought all the latest stuff. But that's a discussion for another time. This week, let's think about how to escape the deflationary spiral that will reduce the world's richest nation to penury unless something is done soon.

The Fed, having reduced interest rates to zero, is out of ammo. Banks are using the $700 billion bailout to buy each other up, enriching only themselves and a few hundred investment bankers. (In all fairness, Treasury Secretary Henry Paulson told them to do just that.)

President-Elect Obama's plan blends George W. Bush and FDR's greatest hits: a symbolic Bush-style tax cut of $500 per person ($1,000 per couple) and a $850 billion infrastructure construction bonanza reminiscent of the WPA projects of the 1930s. Obama's tax cut won't stimulate the economy; they never do. Due to the "multiplier effect," Obama's economists predict that his public works projects will create 3.2 million new jobs by the first quarter of 2011. "Peter Morici, economist at the University of Maryland, projects that $100 spent on a bridge or school boosts economic activity by about $200," reports the Associated Press. (That doesn't count the benefit of improving Americans' longer-term productivity. For instance, better roads could reduce commuting times or help get goods to customers more efficiently.)"

A public works program is a good idea. But Obama's plan won't be enough to put a dent in the skyrocketing unemployment rate. 3.2 million jobs would be barely enough to replace six months worth of job losses at current rates. And most analysts think those rates will rise. With the federal budget continuing to sink $9 billion a month into the fiscal sinkhole of Iraq, there isn't much cash to make the plan bigger.

"With negative or low economic growth projected well into the future, the economy needs a long-term fix," says Stanford economist John Taylor, who worked in Bush's Treasury Department. Definitely. But what?

Unless something big happens (like every pundit, I should predicate every prognostication with the acronym USH for "unless something happens"), the depression will deepen quickly. Our economy is two-thirds dependent on consumer spending, but consumers are stone cold broke. Decades of attacks on labor and free trade agreements caused wages to stagnate as inflation raged, so Americans have no savings to draw upon. Credit is no longer available as a back-up.

The American consumer has left the building.

Demand will keep shrinking, forcing companies to lay more people off, which will accelerate the shrinkage of their customer bases. Prices will drop to chase the few dollars left in the economy, triggering deflation. It's already begun: Prices fell 1.7 percent in November (20 percent on an annualized basis). Debtors will try to pay off inflated credit card bills and mortgages with deflated money. They will fail. Misery will spread.

What happens next, I think, is that people will do what large numbers of people always do when they need money and food but can't find a job. They will start to think about the rich, who still have all the wealth they accumulated while money was still circulating. And they will take it from them. It might be the easy way, through liberal-style income redistribution. Or it might be the hard way. Either way, it goes against the laws of nature to expect starving people to allow a few individuals to sit on vast aggregations of wealth.

When I was young, I assumed that revolutions resulted from ideology, because idealists wanted a fairer world. Now, as we stare down the barrel of economic apocalypse, I realize that they're carried out by desperate people who have nothing to lose, in Marx's words, and everything to gain. They take stuff from the rich and write the ideological tracts after the fact.

With the economic distress we're likely to see in the coming year or two or three, revolution will become increasingly likely unless money starts coursing through the nation's economic veins, and soon. Will it be a soft revolution of government-mandated wealth distribution through radical changes in the tax structure and the construction of a European-style safety net, as master reformer FDR presided over when he saved capitalism from itself? Or will the coming revolution be something harder and bloodier, like the socioeconomic collapse that destroyed Russia after the fall of the Soviet Union? To a great extent, what happens next will depend on how Barack Obama proceeds in his first weeks as president.

COPYRIGHT 2009 TED RALL

Cartoon for December 27, 2008

Americans keep on keeping on, though the prospects for success aren't looking good.

Cartoon for December 20, 2008

The media reports the truth--after the fact.

THIS WEEK'S SYNDICATED COLUMN: LBO No Mo

Stop Speculators From Ruining Strong Companies

The Crash of '08 offers the incoming Obama Administration a rare chance to rein in the excesses of our economic system. I can think of few better places to start than banning leveraged buyouts.

Leveraged buyouts (LBOs) are Wall Street's solution to American capitalism's dirtiest secret and biggest problem: no one has any money. Really. Working as an investment banker during the 1980s, I was repeatedly astonished when deals would fall apart because would-be buyers of major corporations didn't have enough cash on hand to buy a house in the Hamptons. Many of the wealthiest people in the world, it turned out, have zero or negative net worth. According to The New York Times, for example, one of Donald Trump's biggest sources of income was his job hosting the TV show "The Apprentice." Those buildings with his name on them? He leased his name to developers who liked his brand.

It's true: the rich are different than you and me. But not because they're rich. If most "wealthy" people ever had to settle up with their creditors, they'd be worth less than the average homeless Iraq War vet. What they do have—or, until recently, had—big lines of credit.

LBOs are a way for cash-poor "rich" people and corporations to buy companies they can't really afford. First the would-be acquirer buys enough stock to get controlling interest in the targeted company. A bank lends him the rest of the purchase price, using the purchased company's own assets as collateral. Overnight, a profitable company with a healthy balance sheet can find itself burdened with staggering debt—its own purchase price.

Now the corporate raider owns the company. But the company owes big payments to the bank. The raider has two options. He can use his management skills to make it more efficient and profitable. Or he can sell off pieces of the company. More often than not, "turn around" experts find that they're not much smarter than the management they replaced and end up selling assets and cutting costs. For other acquirers, turn-arounds aren't the point. They're out to gut the joint from the start.

The results are the same in both scenarios. Each sale of a division and each round of layoffs reduces the already cash-starved acquired company's chances of survival. The formerly profitable company is forced to file bankruptcy. Its employees lose their jobs. Because the law inexplicably lets corporations use retirement plans as collateral for loans, they often lose their pensions too. Suppliers are stiffed. Customers suffer higher costs due to less competition.

It's bad news for most people—but not for everyone. The corporate raider sells off his equity stake in the company before the fiscal excrement encounter the fan, then pays himself and his friends millions in golden parachutes. The bank, which collected high interest payments as the company began its post-LBO decline, seizes and sells off what remains of the company's assets.

Here's another way to look at it: Let's say you want to buy a car you can't afford, like a Rolls Royce. You "buy" the fancy hand-crafted auto using the car itself as collateral. When the payments come due, you sell the engine, tires, carburetor, CD player and other parts to a chop shop. You pocket the cash and default on your loan. This, of course, is illegal—yet in this scenario all that's been lost is a nice car.

LBOs inflict much greater damage. They transform profitable companies into bankrupt ones, throw thousands of people out of work, stifle competition and deprive government of the tax revenues it needs in order to build schools, maintain roads, and drop bombs on Muslims. Yet LBOs are legal.

Generally speaking, LBOs succeed under two conditions: an expanding economy and a management team able to radically increase profits in a short time. These conditions are rarely present at the same time, and almost never for very long.

Signs that the LBO model was untenable began appearing 20 years ago, when two of corporate raider Robert Campeau's victims, the Revco drugstore chain and Federated Department Stores, went bankrupt. Federated, which employed thousands of American workers before Campeau came along, had been saddled with LBO debt equal to 97 percent of its net assets.

LBO transactions have since led to scores of bankruptcies and hundreds of thousands of Americans losing their jobs—all to line the pockets of a tiny cabal of greedy speculators. The LBO goons' latest victims, ironically enough, are the media giants lionized by their own business reporters in breathless puff pieces.

In 2007 Sam Zell, described as "a 65-year-old billionaire and president of Chicago-based Equity Group Investments," bought the Tribune Company for $8.23 billion. Tribune was one of the largest media chains in the United States, owning The Chicago Tribune, The Los Angeles Times, The Baltimore Sun, 20 television stations, and other properties—as well as the Chicago Cubs baseball team. Like most "billionaires," Zell didn't have any money. Like most takeover artists, he didn't know anything about the multibillion-dollar business he wanted to run.

Zell invested a mere $315 million (3.6 percent of the purchase price) and stuck Tribune with $8.4 billion in debt, promising to make early debt payments by selling the Cubs and turning around the company's flagging newspapers.

Everyone saw trouble ahead. "The leveraged buyout is making Tribune one of the riskiest newspaper companies, according to John Puchalla, a media analyst at Moody's Investors Service in New York," reported the Bloomberg business wire service at the time. Now, a year later, Tribune has filed Chapter 11. Layoffs are coming fast and furious. After just 18 months under Zell's careful stewardship, Tribune—formerly a profitable company—reports assets of $7.6 billion and debt of $13 billion.

"Factors beyond our control have created a perfect storm—a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt," Zell said, acknowledging the disaster.

Zell is right about the credit crisis. But it would have a lot easier for Tribune to weather the storm if he'd never come along.

COPYRIGHT 2008 TED RALL

Cartoon for October 4

$700 billion? Where on earth could the United States ever find money like that?

Cartoon for October 2

McCain doesn't only have an economic plan. He's leading the way to recovery!

THIS WEEK'S SYNDICATED COLUMN: MAD MONEY

A Broke America Can't Afford Wars, Tax Cuts

Credit has dried up. The stock market is disintegrating. Unless someone pours money into capital markets, everyone agrees, we could wind up like people in Baghdad, fondly remembering the day five years ago when they pushed the handle and their toilets still flushed. Only one "someone" has enough cash to fix the problem: the U.S. government.

The Bush Administration and Congressional Democrats want taxpayers to pay $700 billion to bail out failing banks. Progressives would prefer to bail out homeowners facing the imminent foreclosure of their homes, as well as those in danger of being foreclosed upon during 2009, at a cost of $1.3 trillion.

Never mind which approach is better. Where will the government find the money?

There are two elephants in the room: war and Bush's 2001 and 2003 tax cuts. We can't afford either. Yet, to abuse the animal metaphor, everyone acts like they're sacred cows.

When you think about it, it's sheer madness. The city marshal is at the door, brandishing a shotgun, ready to evict you and your family for nonpayment of rent. But while your kids are screaming in terror, you're at the computer, wasting thousands on online gambling. You could pay off your landlord instead. You could make the marshal go away. All you have to do is stop. But you keep on keeping on. Click, click. More money squandered.

What the hell is wrong with you? What the hell is wrong with us?

In 2007 the non-partisan Congressional Budget Office estimated that the final cost of our biggest national compulsion, the wars against Iraq and Afghanistan, could total $2.4 trillion, or $8,000 per man, woman and child in the country. That's twice as much as the Korean, Vietnam and Gulf Wars combined. It's also two-thirds the cost of World War II. Yet no one--not the Republicans, not the Democrats, not the media, not even the left--insists that we get out.

To paraphrase Lloyd Bentsen, I've studied World War II. World War II was a worthwhile war, one that freed millions from tyranny and set the stage for the U.S. to dominate he global economy and become the wealthiest nation in history. Iraq and Afghanistan? They're no World War II. As wars go, they're not as worthwhile as the invasion of Grenada.

"The CBO estimates assume that 75,000 troops will remain in both countries through 2017, including roughly 50,000 in Iraq," reported USA Today. If anything, that's a low-ball estimate. More than a half century after the fighting ceased, we still have 37,000 troops in one tiny country, South Korea. And both McCain and Obama promise to send more troops to Afghanistan. That means more taxpayer money.

Nearly two out of three Americans think invading Iraq--where the lion's share of war funding is being spent--was a mistake. The Afghan resistance is kicking our butts. Both wars have been a complete, total waste of money, effort and lives. As surely as the sun will rise in the east, we will lose both. At a total cost of at least $2.4 trillion. Ridiculous.

$2.4 trillion is nearly twice the $1.3 trillion it would take to save every home in danger of foreclosure. That would keep many banks afloat, and act as the biggest economic stimulus in history. Can anyone sane tell us why we shouldn't bring our troops back home? Can anyone justify wasting $2.4 trillion at a time when the U.S. economy is staring into the abyss of total collapse?

The other national obsession is the tax cuts Bush pushed through in 2001 and 2003. "The surplus is not the government's money," Bush said at the time, apparently unaware that the economy was already in a recession. "The surplus is the people's money." Remember surpluses? Such a Clintonian word. Anyway, Democrats in Congress--still in full-on wuss mode following 9/11--went along with Bush's tax cuts. But, bless their wimpy little heads, they did manage to extract a concession: In 2011, tax rates would revert to what they'd been in 2001.

Believe a Republican once, shame on you. Believe a Republican twice, what were you thinking? Now so-called conservatives are complaining that "the largest tax increase in history" will occur in 2011 if Bush's tax cuts are allowed to expire.

Making the Bush tax cuts permanent would codify the most regressive tax change in history. "After-tax income would increase by more than six percent for households in the top one percent of the nation's income distribution, two percent for households in the middle 60 percent, and only 0.3 percent for households in the bottom 20 percent," found a Brookings Institution study.

Making the rich richer will cost the Treasury an arm, a leg, and the better part of a torso.

"Combined with a minimal but necessary fix to the government's Alternative Minimum Tax, making the tax cuts permanent would reduce federal revenues by almost $1.8 trillion over 10 years--and that's in addition to the $1.7 trillion of revenue losses already locked into law."

$1.8 trillion. Again, allow me to remind you: $1.3 trillion is the amount we need to stave off imminent financial catastrophe.

That sound you hear is the door breaking down. The marshal is coming down the hall. Get off the computer. Fix the problem. Get out of Iraq and Afghanistan. Let the tax cuts expire.

COPYRIGHT 2008 TED RALL

THIS WEEK'S SYNDICATED COLUMN: BUSH, CONGRESS PARTY LIKE IT'S 1929

Save People, Not Bankers

Seat belt laws embolden drivers to drive faster, causing a net loss of life. It's the law of unintended consequences, also known as the Peltzman effect: the safer you feel, the more risk you take.

Sam Peltzman, the economist after whom said effect is named, says that government bailouts like the Bush Administration's $700 billion attempt to stave off economic collapse are no more effective than "pouring money down a rat hole." Moral hazard--rewarding reckless people and companies while allowing responsible ones to fail (hello, Lehman Brothers) may avert one economic crisis while planting the seeds of a worse one down the road.

"In the long run," says Peltzman, "you're just laying the groundwork for more because you're giving people an incentive to take too much risk, where a big part of the risk gets laid off on the taxpayer."

I don't think much of the laissez faire, magic-of-the-marketplace, let-'em-eat-flat-screens school of Darwinian economics flogged by the University of Chicago, where Milton Friedman once reigned supreme and Peltzman is a professor emeritus. But I think he has a point here--with a twist. Government intervention is appropriate and necessary during tough economic times. But not if you bail out corporations.

The 1979 Chrysler bailout is a perfect example. Jimmy Carter's $1.2 billion loan sent an unwholesome message to Detroit: don't change a thing. If you get into trouble, the government will rescue you. The Big Three kept selling gas guzzlers. Nimble foreign automakers that spent the 1980s and 1990s developing hybrid technology are crushing them now.

More recently, the government bailed out the airlines after 9/11, notably by limiting negligence lawsuits by relatives of victims. It's hardly a coincidence that the major carriers haven't done much to improve security. Similarly, it's hard to see how U.S. taxpayers will benefit by lending my former employer Bear, Stearns $29 billion to facilitate its sale to JPMorganChase. Bear's corporate culture, reeking of the testosterone-drenched arrogance of its seven-figure-salaried executives, led it to fib about the worth of the collateralized debt obligations that supposedly guaranteed the payment of its subprime mortgage hedge funds. When traders learned the truth, confidence in the firm collapsed, sealing its fate.

Or would have, if the feds hadn't come along. Letting Bear go under might have prompted caution among future wannabe Masters of the Universe. If capitalism survives this debacle, we'll see more like it as a result.

Democrats are asking for some laudable amendments to Bush's plan. They want to give bankruptcy court judges the power to reduce monthly mortgage payments, cap executive salaries, and increase Congressional oversight of the financial services companies involved. Good ideas, but none go far enough. Besides, they'd expire at the end of 2009. Does anyone think the economy will be booming by then?

At least four million people--nine percent of all homeowners--have fallen behind on their payments or are in foreclosure. And 6.5 million more could go down the tubes next year. "People with poor credit have been defaulting on mortgage payment in large numbers for more than a year," says Douglas McIntyre, an editor at 247wallst.com. "Now the problem has moved to homeowners with reasonably good credit."

Each family that loses their house creates a ripple effect. Empty homes lower their neighbors' property values. Some dispossessed workers, unable to find a new place near their jobs, become unemployed. Savings are wiped out. Forced to move, parents pull children out of school, disrupting their education in ways that will hurt them and society decades from now. Banks are burdened with the costs of maintaining property they don't want until they can unload it at a reduced price--further depressing real estate prices. Society, even renters, has an interest in preventing foreclosures.

The unpredictable nature of the current real estate price plunge has created another set of problems. Tobin Harshaw of The New York Times sums up a complicated mess as nicely as anyone I've read: "There are a whole bunch of mortgage-backed securities, the value of which is not known, because nobody knows what the default rates on the underlying mortgages are likely to be." Investors can't set prices, much less invest, without reliable information. So credit markets have seized up.

Americans are peering into the abyss, a.k.a. the End of Everything As We Know It. So whom are we counting upon to save the day? The same Bushist dead enders and Congressional layabouts who let Osama bin Laden live and New Orleans die.

So yeah, we're toast. But let's talk about what should be done:

1. Declare a Bank Holiday. As FDR did in 1933, Bush should shut down the financial system--banks, stock and currency exchanges--for a week or so to avoid panic selling, cool down market volatility, and give Congress time to craft carefully considered legislation rather than the spend-a-thon slapped together over the last Black Weekend. It bodes ill that liberals and conservatives alike have so little faith in the plan. Take some time; get it right.

2. Reinstate the Glass-Steagall Act. The current mortgage meltdown couldn't have happened without Senator Phil Gramm, now a key economic advisor to John McCain. In 1999 Gramm led the repeal of the Depression-era legislation that had separated commercial from investment banks, allowing Citigroup and other companies to sell mortgage-backed securities that blurred the line between Main Street and Wall Street. Let the financiers handle derivatives, structured investment vehicles, and other arcane financial instruments. Banking should return to its dull, staid roots as a business that pays interest on deposits and collects interest on loans without imperiling those deposits.

3. Bail out homeowners, not lenders. Stop doling out hundreds of billions, even trillions, of dollars, to a few banks and issue the cash to the disaggregated tens of millions of Americans who will spend the money and stimulate the economy instead. Which brings us to…

4. Abolish predatory interest rates. Millions of people in danger of losing their homes would not be in trouble if their banks weren't charging usurious interest rates. Every primary homeowner should be automatically refinanced to a floating 30-year mortgage, with the interest rate set at 1/4 percent point above the fed funds borrowing rate. Similarly, all consumer credit card debt should be refinanced to prime plus 1/4. The same goes for student loans. Secondary and vacation homes don't qualify. Unemployed homeowners can apply for hardship deferrals, allowing them to skip mortgage payments until they find a job. Payday loans ought to fall under similar guidelines. In Utah, the average interest rate on payday loans is 521 percent! Of course, reforms will cut deeply into lenders' earnings. Many banks would be at risk of going under, which is why…

5. Banks that fail should be nationalized. As should investment banks and any other institution that needs federal taxpayer money to avoid failure. If we the people fund 'em, we the people own 'em. If and when the economy recovers, the Treasury collects the spoils and cuts our taxes.

6. Withdraw from Iraq and Afghanistan, and slash defense spending. Christopher Whalen, managing director of Institutional Risk Analytics, tells USA Today the government may have to cover $1.4 trillion in bad mortgage debt. That's a lot of money, but I have good news: we can get it. In 2007, the Congressional Budget Office estimated that the occupations of Afghanistan and Iraq would cost at least $2.4 trillion through the next decade--even more if Obama or McCain keep their pledges to send more troops to Afghanistan next year. Cutting our losses and cutting the $515 billion a year Defense Department appropriations budget would help finance the clean-up of the mortgage meltdown.

(C) 2008 Ted Rall, All Rights Reserved.