Koch Brothers and Debt Crisis

I am responsible for managing a substantial investment portfolio, and consequently have been watching the government shutdown/debt ceiling discussions with considerable care. As early as late June I was turning some of that portfolio into cash (prematurely, as it happened), out of fear that the Republican radicals would shut down the government and cause a default on the debt, with virtually incalculably bad consequences for the country and the world, as well as the markets.

Noting that the stock market did not seem to share my concern I kept wondering why, and exploring all the possible reasons. The most plausible was that Bernanke's warning of the end of stimulus had caused bonds to drop in value, sending a lot of cash into the stock market seeking returns, while during the summer there were no significant new threats looming, China's slowdown seemed to have halted, and the European economy was gradually improving.

Last week John Boehner stated unequivocally that he would not allow a debt default to happen. I regarded this as a major turning point, because I thought Boehner could not say this without having some reason to believe that the crisis was in the process of resolution. I therefore put some of my cash back into the market. But over the weekend he seemed to reverse course, putting forward a new series of demands, and Eric Cantor voiced confidence that the Republican demands would be met. This made me think that Boehner is not as disciplined in his comments as one might expect of someone in his position.

Over the weekend there was another development, at least for me. A NY Times report detailed the long planning for this "crisis" on the part of the Koch brothers and similarly loony Republican billionaires. I had long thought that discussions of the Tea Party positions were deficient in leaving the money out of the equation and focusing only on the ideology of the radicals, since it was the money that gave them their teeth, convincing saner Republicans that they would lose their jobs if they did not hew the radical line. This article not only confirmed that view, but explained some of the more mystifying sideshows, such as the recently surfaced demand that to lift the debt ceiling Obama had to approve the Keystone pipeline, which the article said was 20% owned by Koch Industries.

My bottom line conclusion for the moment, therefore, is that the billionaires are running the show for the radicals, and dictating Boehner's positions. If so, then I return to a more optimistic view because despite their vicious and repellent views, these people are not actually crazy. They are excellent bluffers, and I believe they are running out a strong bluff here. Then they'll fold, because defaulting on the debt will be ruinous for them and they know it.

Congratulations to WSJ, Koch Bros., Scaife, Murdoch, Limbaugh

Those named above, their genial front men Reagan and W. Bush, and their fellows on Wall St. and in the churches, brought about the current financial mess. Then, with the necessary help of their appointees to the Supreme Court they ensured that they would come to own it, and once Romney defeats Obama, and a majority of the Senate is Republican, it will be their mess to deal with. Congratulations.

Obama and Geithner came into office facing the worst mess since the Depression, and a far more difficult, chaotic political scene than existed even then. They certainly made mistakes in trying to deal with the mess they inherited. But I think that much of the retrospective advice now pouring forth about what they should have done instead seems to me unreasonable, given what they did not know at the time.

In the first months of 2009 they could not know that the Republicans would form a solid and virtually treasonous opposition to everything Obama sought to do, or that any such effort would prove wildly successful and publicly popular. Nor could they expect that Republican operatives and billionaires would successfully gin up the Tea Party movement, or foresee the Citizens United Supreme Court decision. That decision led directly to the suicidal debt ceiling impasse last summer, and the super-committee's failure now. It has opened wide the right wing political spending spigot, forced every Republican politician who is not suicidal to toe the radical right's line (however hateful and imbecilic it may be in terms of the general public interest), and thus destroyed our constitutional democracy. Hence, what was right economically proved implausible politically, and vice-versa. The reality is that Obama and Geithner have struggled cleverly and valiantly against these developments, and won some brilliant victories. But the war is lost. The radical right now gets to deal with the problem--if they even think of it as such. Given their cruel and pitiless nature, I fear that great pain lies ahead for us all.