Fear

As President Obama recently said to Marilynne Robinson, there is a spike in fear within the US right now. There seems to be widespread disquiet even in our wealthy and sophisticated metropolises. Outside of them, disquiet seems to have turned into outright fear, as the articles about the early death of middle aged white men suggest. And fear seems to underlie the mysterious appeal of the many loony and mean-minded Republican Presidential candidates and governors. Such fearfulness, which paradoxically come at a time of nearly unprecedented peace and well being, causes people to turn ugly and behave exactly contrary to the moral codes of their religions. Fortunately, we are a diverse and democratic nation. Although vicious and greedy demagogues aim to profit by fanning fears and hatred, as in Houston, plenty of us do not let fear shape our behavior, and we have plenty of kind, decent, and admirable leaders in the Lincoln and FDR mode to inspire the better angels of our nature.

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.

After November 2012

The overwhelming financial advantage of the Republicans, their ability to undermine Obama by sabotaging the US recovery, the weak Democratic political campaign, and the grinding problems of Europe ensure a Republican sweep in November. Romney will be the new President, and he will have a majority in the Senate as well as overwhelming control of the House--and they of him. The question, then, is what will happen over the next 3-4 years.

The Republicans believe that economic recovery requires, first, an unpleasant period during which we get our fiscal house in order by cutting back on entitlements and government spending, and second, government support for private investment. They do not believe in government investment as such, apart from the military and police sectors. Consequently, a dramatic remake of the federal budget will be enacted, as they forthrightly promise. A balanced budget without tax increases on the investor class--that is, corporations and the wealthy--will be the goal, and will include increased defense spending. The Obama healthcare bill will be repealed, and the Republicans will seek to replace Medicaid and Medicare with a voucher system whose levels are geared to reducing federal deficits. Most other social programs, including the EPA, welfare, and industrial regulation will also face drastic financial reductions or total elimination. Farm welfare and tax incentives for carbon-based energy production will survive, however, and probably even increase.

Although Democrats will protest and use parliamentary maneuvers to block what they can, and the surviving liberal press will likewise fuss and fume, they will be talking only to themselves, and a continuing din of right wing advertising and media favoritism will largely drown out their objections. Nor can Democrats at local, State, or federal levels realistically hope to regain office, because the Republicans have a permanent and overwhelming monetary advantage, which has been demonstrated to be highly effective with the electorate, and they will also continue to benefit from voter eradication strategies in the States, of which they will control many more in the Romney sweep.

As  economic theory predicts, and the experience of Europe is now demonstrating, the austerity program that Romney promises will not actually restore fiscal order, and it will very clearly increase disparities of wealth. We can expect an increasing number of Americans to become jobless, members of the underground economy, dispirited, disqualified for 21st century jobs, and, in more and more cases, very angry. Although similar trends will grow throughout the world, the highest performing levels of the US economy should be able to sustain their sales and increase profits through their international operations. Similarly, those businesses that cater to the wealthy should thrive, and a flood of people moving down the income ladder might sustain sales and profits at the businesses like Walmart or Dollar Stores that cater to those with low income.

I say that US corporations should be able to sustain international sales, but that possibility would disappear if Romney pursues the beligerant foreign policy he has suggested. Even if he does not start a shooting war with Iran, however, anything like a return to the W. Bush policies would probably trigger international trade wars that could go far toward dismantling the free trade measures that have prevailed since World War II. Since that would, of course, be very problematic for the corporate world I tend to discount the possibility that a Romney foreign policy would resemble his campaign positions.

Some writers have posited that Romney's election and a sweeping Republican triumph in November would lead to something like permanent oligopolistic rule, with the only significant disagreements being within the ruling class. That does seem to me a possible endpoint of what must be a devolution that takes several election cycles. Several conceivable scenarios could seriously derail that development, such as warfare, civil chaos, Democratic resurgence, the formation of an effective new political party, plague or other cataclysmic natural disasters, or technological breakthroughs that overturn the existing economic structure.  So there is always hope.

Either We Hang Together or We Hang Separately

The Nov 2009 elections have little significance in themselves, but they do suggest that if the Democrats fail to enact significant healthcare and climate change legislation, they will face severe defeat, Blue Dogs first. With bad candidates and a depressed economy, the NJ and VA Democratic base hardly bothered to vote, leaving the field to right-wing ideologues and people hoping for change, any change. The Democrats had nothing to offer, and their control of Congress made it seem all the worse.

In reality, on the same day as the election, the business news made it clear that the Obama measures to deal with the economy are working, but as the President has repeatedly said, it takes time. It now seems likely that the economy will be visibly improving by the November 2010 elections.

But if the Democrats get distracted by passing uproars manufactured or capitalized upon by Republicans and the broadcast media, they could still lose. There is a repeating pattern here, folks: Republican Presidents screw up the economy, then Democrats spend all their effort and credibility fixing it up again, with Republican opposition forcing them to sacrifice their other agenda goals to that end. Happened to Carter and Clinton, now Obama.

Will health reform pass?

As I write, at the end of July 2009, the fate of Obama's health bill seems uncertain. Listening to public commentary, the most likely outcomes are either outright defeat of anything, or passage of something that just rearranges the deck chairs on the Titanic. But quite possibly something better is being forged behind the scenes; we won't know until we see it.

If the result is a debacle, I believe that it will again illustrate a hard truth about popular democracy. Liberals, and intelligent conservatives, tend to look at trends, forecast future consequences, and advocate action to deal with those consequences. But most voters do not operate that way; their forward vision stops at the tip of the nose. Given the desire of vested interests to preserve the status quo that enriches them, and the persuasive power of propaganda, this voter orientation towards the immediate makes change very difficult. Change happens only when the problems with the present course of action hit home broadly and forcefully. That's why the villainous Bush and Cheney team got close enough to re-election in 2004 that Kerry's blunders put them over the top. While any thinking person could see how terribly they were governing, the robust stock market and high employment at the time kept their evils from hitting home broadly and forcefully enough.

In other words, if the health plan loses, it will not be due to Obama's errors. He has in fact proceeded with enormous care and skill, building on the brilliant Clinton White House's effort and correcting its errors. The loss, if it occurs, will be due to timing: the fact that not enough voters have suffered sufficiently from the present setup, so that they remain susceptible to the mendacious scaremongering of the Republicans and the special interests who wish to maintain the present lucrative system.

Perhaps the loss will politically cripple Obama. Whether it does or not, though, it will mean that health reform must wait a while longer: until more employers drop the coverage, more obese people lose their insurance, and more people are turned away from overwhelmed emergency rooms to die in the streets.