Yves here. As you will see shortly, I’m not much of a fan of Jackie Calmes.
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posed from New Economic Perspectives
Ms. Calmes is the New York Times’ White House correspondent. Readers who follow finance and fraud may recall her as the object of an epic dismantling in Naked Capitalism. The subject there was Calmes’ dismissive review of Neill Barofsky’s (SIGTARP) book’s criticism of Timothy Geithner.
Calmes is back and writing about economics in an article entitled: “A Dirty Secret Lurks in the Struggle Over a Fiscal ‘Grand Bargain.’”
Calmes thesis is:
But the dirty secret — a phrase used independently, and privately, by people in both parties — is that neither side wants to take the actions it demands of the other to achieve a breakthrough.
That is, many Republicans are no more interested in voting to reduce Medicare and Social Security benefits than Democrats are, lest they threaten their party’s big advantage among the older voters who dominate the electorate in midterm contests like those in 2014.
And Democrats are no more eager than Republicans, with control of both houses of Congress up for grabs, to vote for the large revenue increases that a grand bargain would entail. They do not want to limit popular but costly deductions, as Mr. Obama and past bipartisan panels, like his Simpson-Bowles fiscal commission, have proposed.
When we pull away the camouflage that Calmes deploys to obscure matters, the “dirty secret” that emerges is that key members of both parties realize that the purported “Grand Bargain” actually represents a self-destructive Grand Betrayal that should be opposed by both parties. Her “dirty” secret is actually a “clean” non-secret. Calmes’ quoted passage discusses two of the key planks of the proposal – cut the safety net and increase tax revenues (but not marginal tax rates on the wealthy, which Bowles Simpson propose to reduce). The third plank is to cut (mostly) social program spending.
The most obvious question is also the most important question – would the three planks be desirable to implement today? Calmes neither asks nor attempts to answer the question. She assumes, implicitly, that the three planks would be desirable though she presents information that demonstrates the opposite. Her article implies that the Grand Betrayal would be desirable because “past bipartisan panels, like his Simpson-Bowles fiscal commission, have proposed” [the three planks]. In fact, the Bowles-Simpson commission made no such formal proposal to Congress. President Obama appointed the co-chairs – Erskine Bowles and Alan Simpson. Bowles is one of the leaders of the Wall Street wing of the Democratic Party. Simpson is an ultra-conservative former Republican Senator. They are leading deficit hawks who keep predicting (incorrectly) that debt will cause hyper-inflation. They are fierce proponents of cutting the safety net. They support the partial or total privatization of Social Security – Wall Street’s ultimate dream.
Obama stacked the leadership of the panel to provide him with the political cover to cut the safety net. The panel, however, was the product of a political compromise in which the parties agreed that the panel could make no recommendations to Congress not supported by a substantial consensus of the panel, which the agreement defined as 14 members. The draft plan was supported by only 11 members. Nevertheless, a member of Congress proposed the plan, only to see it overwhelmingly rejected by the House.
Bowles and Simpson, despite the failure of their plan to secure the required consensus, had their plan printed and disseminated as if it were an official plan. Reporters like Calmes ignore Bowles and Simpson’s failure to acquire the required consensus despite the stacking of the panel with so many deficit hawks. Calmes treats the word “bipartisan” as good magic even though the reality is that the Wall Street-wing of the Democratic Party agrees with the Wall Street-wing of the Republican Party that they would love to privatize Social Security and make tens of billions of additional dollars selling investment products to our grandmothers. Washington reporters who bask in and glorify good vibes for such “bipartisan” assaults on our elderly are as common as they are loathsome.
Calmes quotes Jared Bernstein to the effect that the only consistent supporter of the Grand Betrayal is Obama. Calmes is disappointed that “Mr. Obama has not pressed the negotiators from the Democratic-controlled Senate and the Republican-led House to aim higher.” By “higher” she means deeper cuts in the safety net and social programs, which would represent Obama descending “lower” in moral terms.
Bowles-Simpson would cut the safety net and inflict even more destructive austerity on our Nation while cutting taxes on many of the wealthy. That is a trio of terrible ideas, particularly in our current economic circumstances. We have just watched the eurozone suffer through years of a second gratuitous Great Recession (and a Great Depression in its periphery) because of the self-inflicted wound of austerity. The most recent data show that the eurozone’s “recovery” is so anemic that it makes the U.S. recovery roaring by comparison. Austerity has been proven, again, to be a disastrous response to a recession. This is one of the areas where Calmes’ lack of understanding of economics produces incoherent analysis. In her piece criticizing Barofsky’s book she understands that the eurozone’s policies proved self-destructive, but not what those policies were or why they failed. The context is Calmes defense of TARP.
As ugly and flawed as the rescue process was, and as galling as Wall Street’s revived bravado and bonuses can be to most Americans, the fact remains that an economic collapse was averted, and that Main Street is recovering: slowly, but typically so for recessions brought on by credit crises. As Europe’s crisis persists for a fourth year, commentators around the globe have suggested that the Continent should have followed America’s example.
Yes, the eurozone “should have followed America’s example” and provided a recovery program that expanded federal spending rather than inflicting austerity. Indeed, they should have provided considerably more vigorous increases in recovery spending than we were able to do because of the opposition of leaders likes Treasury Secretary Timothy Geithner, Bowles, and Simpson. Calmes, however, seems to think that the key to the U.S. economic recovery was the bailout of U.S. banks and that eurozone nations did not provide bank bailouts. Both assumptions are incorrect. The U.S. bailout made our banks and their owners wealthier, but it did not expand the economy. Many European nations provided bank bailouts – and suffered a second gratuitous recession due to their austerity programs.
Calmes was particularly disturbed at Barofsky’s criticisms of Geithner and emphasized that Geithner had never cashed in. It has just been announced that Warburg Pincus has hired Geithner as its President. Calmes’ heroes have betrayed her faith, but her analytical failure in her 2010 book review was her inability to understand that Geithner’s preferred policy of austerity was the policy that explained Europe’s far more severe economic problems. In her current “dirty secret” article she concedes that austerity in response to the Great Recession is self-destructive.
With the unemployment rate stuck above 7 percent, Democrats are more interested in increasing spending for programs like public works and education, and ending the sequestration cuts, which economists say are costing hundreds of thousands of jobs.
The sequestration, which is only one of several acts of federal austerity over the last two years, is “costing hundreds of thousands of jobs.” Collectively, the multiple acts of federal, state, and local austerity have seriously reduced the pace of the recovery. The real “dirty secret” about the Grand Betrayal is that it would harm the Nation by recreating the self-inflicted wound of austerity that devastated Europe. That means that many Democratic members of Congress oppose the Grand Betrayal for the best of reasons that they are happy to proclaim publicly – he opposite of a “dirty secret.”
It is Calmes who still seems to think it makes sense to adopt even more severe austerity now through cuts in the safety net and other governmental spending, even though it will cost hundreds of thousands of additional jobs, in order to “save” (my characterization of her implicit argument) Social Security in 2033. She quotes this source with apparent approval.
David Winston, a Republican pollster close to House leaders, said that especially in a slow-growing economy, lawmakers have a hard time selling voters on proposals like fixing Social Security to avoid shortfalls in the 2030s.
“That pressure isn’t there,” he said. ‘People are more like, “I’m in a job where I’m clearly underemployed. How did this happen? How do we resolve underemployment as a problem, as opposed to dealing with Social Security in 2033?”
Winston, a “pollster” with no understanding of economics is upset that “voters” and members of Congress are economically literate and realize that Winston’s arguments about “fixing Social Security” now by cutting current benefits is ridiculous. Social Security is currently in surplus. If we cut Social Security benefits today it does not provide any additional real resources in 2033. We can produce additional real resources in 2033 through programs we implement between today and 2033 that increase training, improve health, and produce higher rates of employment. Reducing unemployment today is helpful to reducing unemployment in 2033 because extended unemployment is strongly associated with reduced future employment. There is no inconsistency between working to reduce underemployment today and being able to provide full benefits to Social Security recipients in 2033. Cutting Social Security benefits today would add to austerity and inflict even greater damage on our productive capacity, which is what defines our ability to provide real resources to those in need. Once more, the only “dirty secret” is that the proponents of the Grand Betrayal and their media mavens are economically illiterate as well as callous. If their policies were adopted our Nation would suffer more.
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The White House press corps is there to afflict the afflicted and comfort the comfortable. They are Upton Sinclair creatures. They do not understand what they are paid not to understand. They do not speak truth to power. They mouth the talking points of power. They are more concerned about the camera angle on them than they are about the question they are asking. Just as well since their questions run the gamut from suck up to soft ball to completely irrelevant. The whole of their analysis comes down to whatever the Conventional Wisdom happens to be. In a word, they are propagandists. Of course, most of the media are. I guess what sets the White House press corps apart is that they are more irritatingly sycophantic and entitled than most. Lambert has referred to this kind of journalism as Versailles. Greenwald has called it courtier reporting. It is all about access and position, and these are not achieved by rocking boats or challenging authority.
What we need to understand about Calmes is that she is not a good faith actor. She is representing the kleptocratic view. And from that perspective, it makes perfect sense to gut Social Security and the safety net because these do not benefit the kleptocrats for whom she works. So for her, the only question is should they be cut a lot, a whole lot, or even more? As a journalist with a sweet gig in a kleptocracy, Calmes’ job is not to clarify and elucidate but to confuse and distract. We should never forget this.
Right, Hugh, and the dirtiest secret of all, implicit in your comment, is that propagandists for the Grand Betrayal (MMT for me; austerity for thee) know full well it is counter-productive to a robust economy and full employment. This is intentional Shock Doctrine dispossession and disempowerment, inequaliy and concentration of power by design. IMO, it is malice, not well-meaning incompetence. After so many years, it’s time to stop attributing to stupidity what is clearly evil.
Slightly OT, re ObamneyCare, it is immensely gratifying to see the Great O’s hovering approval finally dropping like Wiley’s anvil, but it’s horrifying to realize the third-world tragedy about to unfold for his victims — that too, by design.
“They do not understand what they are paid not to understand. ”
There are very different classes of journalists but this applies to WH and other journos who have achieved their status through political connections–these people are increasing in number and are pretty much those that get air time and column inches these days. They all carry a little red book of cliches and slogans they repeat ad nausiam. You can see it in the writing style–horrible!
Jackie Calmes says:
Couldn’t Calmes come up with a solution to that problem? It doesn’t even have to be a novel one. It could be something like taking us back to the 18th and first half of the 19th centuries when only the propertied could vote.
We could make it so that only those who make, let’s say, more than $250,000 a year can vote.
I’ll bet that would fix Calmes’ problem.
I.F. Stone once said, “A newspaperman ought to use his power on behalf of those who were getting the dirty end of the deal. And when he has something to say, he ought not to be afraid to raise his voice above a decorous mumble, and to use forty-eight-point bold.”
Stone described himself as an “investigative reader.” He would rather spend a day with official documents than to talk to government officials. Some of his biggest exposés came simply from reading.
How many reporters do that today? It’s too much hard work and it takes too much time.
“All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out.” – I.F. Stone
Too many reporters today don’t want to believe that anyone would deliberately mislead them.
“You’ve really got to wear a chastity belt in Washington to preserve your journalistic virginity.” – I. F. Stone on government manipulation of the media
Far too many reporters today don’t want to be subjected to strong disapproval and criticism for cutting through the fog of manipulative, distorted and lying governmental prose. They don’t want to lose their White House access. [And no more Georgetown cocktail parties!] They much prefer losing their journalistic virginity.
What is the purpose of journalism?
“What is going on – across the street and across the world – is not a trivial pursuit,” writes Gregory Shaya:
“Among the highest powers of the press is the capacity to stand as witness to the unfolding of events and to tell it like it is. Bill Moyers likes to cite the example of Martha Gellhorn. After half a century as a journalist, from the Spanish Civil War to the Nicaraguan Civil War and everywhere in between, one of the great war correspondents of the twentieth century, she had little faith in the promise of journalism to change the world. But she found a different sort of power to the press. “Victory and defeat,” she wrote, “are both passing moments. There is no end; there are only means. Journalism is a means, and I now think that the act of keeping the record straight is valuable in itself.”
http://www.laphamsquarterly.org/roundtable/roundtable/the-myth-of-the-fourth-estate.php
What I perceive as the White House/Washington press corps’ modus operandi is sycophancy, followed by stenography, followed by contemptuous dismissal and outright hostility (not to presidential programs per se, but to the individual–it’s all about personalities). I saw this with George H.W., Clinton, Dubya, and now more and more with Obama. It is entirely based on the press corps’ perception of the power and influence of the man. I think it is also a manifestation of how tired and bored they get with their presidents, and the number of slights they get to count up over an administration.
Some times, pettiness outweighs ideology in tiny minds. And staying a member of “the pack” has its advantages.
Yes, I think that’s true.
They go from sycophantic love to outright contempt on a predictable gradient.
National leaders often have a lifespan of 8 or so years. In the US that starts 2 around years before they become president, and by the second year of their second term they become increasingly lame ducks, with power visibly draining away from them. Debacles they might have survived earlier become terminal.
Nicely worded. You can also replace “reporter” with “blue stater,” “red stater,” or “average voter.”
Well Tom, the sun never shone on a cause of lesser worth than that of our fawning propagandistic press, the crown achievement of the corporate elite in the 20th century; now keeping an entire country entirely confused, jabbing at thin air, sucking the blood of its children, its parents, its sisters and brothers in the 21st.
Allowing intense media concentration was a disaster, matched by acceptance of a false “freedom” argument that enabled pervasive official or elite lying, partisan political assassination, deeply racist war-mongering, malice of all sorts, and worst of all a deliberate effort to destroy a culture of aspiration – to learn, to think, to create, to achieve – and replace it with one that makes ignorance of the world a virtue and Everyman is a greedy, loud, gun-happy, back-slapping small “businessman” engaged in dog-eat-dog competition for claimed “profit”. A new low reached weekly.
The REAL dirty secret is this:
We are talking about a ‘grand betrayal’ instead of eliminating tax advantages and wealth extraction strategies (like bogus gains from bubbles and executive pay) for the wealthy that allow them to buy ever greater influence.
Since 1980 almost all economic gains have gone to the most wealthy. And they have used their growing influence to secure their gains and push for even more.
Some coyishly describe our national transformation as moving toward a ‘banana republic’. Well, that is essentially a slave society, isn’t it? Those who are proud to live in the upper tiers of such a society are heartless bigots and those lower beings that adore their overlords are suffering from a sort of Stockholm syndrome. Anyone who is not an enthusiastic supporter is treated as a risk (they have to be watched).
Throw in the likelihood of increasing societal stress from climate change and continued malinvestment and ask yourself: do I want my kids and grand kids to live in such a dystopia? Anyone with half a brain would be in the streets but our selfish neo-lib-infused culture has gone ‘full retard’ with rampant careerism and consumerism that promote willful ignorance.
/rant
= = =
Consider the strange confluence of ‘the sequester’ and QE. Austerity for the 99% and faux investment gains for the 1%. And now bubbles are ‘officially’ sanctioned by Krugman/Summers!? (By the way, my understanding is that much of the austerity measures on the military have mostly been rescinded or worked around – as
cynicsrealists predicted, it was REALLY about cutting social programs).Then there is the skimming operation known as High-frequency Trading (HFT). After numerous high-profile financial scandals (Subprime, Libor, etc.), how is it that this virtually ignored?
Clawing back bogus gains (from financial bubbles, executive pay, etc.) is not ‘redistribution’. Those ill-gotten gains are akin to stolen property.
Note: Policies that support severe inequality are economically perverse and anti-capitalist. And the further we go down this ‘rabbit hole’, the more difficult it will be to get out. We are already pretty deep.
IMO, negative real rates are NOT an encumbrance that requires finessing with QE, but an important indicator of how much of the bubble-generated faux/bogus investment gains need to be clawed back.
Negative rates stem from an economy where capital gains have gotten ahead of productive opportunities to invest in. The bubble = malinvestment writ large. The bubble promotes waste in the bubble-affected sector and sucks up capital that would’ve been better used elsewhere.
Interestingly, putting a ‘claw-back’ system into place would not only help our post-bubble economy but probably help to prevent bubbles from forming at all. The way things now stand, people who recognize that a bubble is forming have an incentive to participate!
Also, a very small financial transactions tax (aka Tobin tax) would greatly reduce HFT skimming.
= = =
To be clear, the Financial Industry position is simply this: absolutely no ‘claw-backs’ (redistribution!) or transaction tax (free markets!) of any kind. No doubt they had a similarily religious view regarding the imposition of income taxes over 100 years ago.
Financial Industry executives, lobbists, and tit-suckers(media, economists, politicians, etc.) say that such reforms are a ‘non-starter’. Instead of these commonsense reforms, they offer propaganda, redirection, and self-serving theories like: QE, bubbles, and austerity.
Of course we should also eliminate tax give-aways also, like the mortgage deduction on multi-million dollar homes, second homes, etc. and carried interest (taxing ordinary income at capital gains rates).
= =
When you consider such common sense tax reform as I’ve suggested in this comment and the one’s above, it is readily apparent that the REAL problem for our economy and society are the monied interests that block such reforms. The much-hyped left-right divide (‘Washington is broken!) is both a distraction and ploy to enrich the rich.
It occurs to me that my bubble-tax could be considered to be a new form of Tobin tax where bubbles are a ‘macro-transaction’.
Although, in its formulation my primary goal is not to reduce speculation (via a small fixed transaction charge) but to return ill-gotten gains, removing the prospect of these gains, has the same effect: eliminating the speculative interest that drives the activity.
= =
Somewhat reluctantly, I must add that removing the ill-gotten gains from the equation frees policy makers to take actions that would/could blow bubbles, knowing that the social ills would be ‘contained’ (gasp!) by the tax.
OMG
Um, no. Policies that support severe inequality are as capitalist as they come. See Marx (Capital, volume 1, chapter 25) on the creation of a “reserve labor army.”
http://www.marxists.org/archive/marx/works/1867-c1/ch25.htm
Hate to continuously repeat myself:
BRING BACK THE GUILLOTINE!!!!
Does anybody with any keen sense of history believe that this absolutely corrupt economic/judicial/”representative” government is now beyond the pale of “redemption”?
Bring on the revolution.
Yes, things may be worse for some years but this government/system needs to be broken to pieces!
Until the people themselves suffer from a more pressing economic/political cataclysm, nothing will bring them into the streets “en-masse”.
In the end this “capitalist” system we endur will collapse from the old and tired worn, “Marxist” “Contradictions”…which is really happening now.
Cut back social safety nets; crush labor,….etc…..who the hell is going to be left to buy the useless goods that are produced by useless corporation sucking the life out of our economic/political system?
Its time to end this mess.
After Woodward and Bernstein, there was a great rush into Schools of Journalism of young, idealistic types eager to dig out and publish the truth. Did any of those kids make it to the top? Do today’s mainstream “journalists” even come with an education or training in “journalism” anymore? And if they do, what sort of training is it, given the truly awful “professional” results we see? How is it that mainstream “journalists” are able to, in the real world, suspend disbelief in what emits from this Admin, or the CIA or NSA or Pentagon, or the corporate goons of finance or oil, etc., in a way the rest of us reserve for the likes of watching/reading good science fiction, or “suspense” dramas, or comedy or whatever? How on earth does Wolf Blitzer stand up there and seriously tell us something like “The President is of course very aware of the meaning and importance of yesterday’s car-bombing in Beirut, and when we come back, we’ll talk to his top military commander on the ground in Lebanon about what this all means for us in America.”
And what follows is a fairy tale.
Being really simple minded, they are being taught to challenge the notion of “press objectivity.”
The purpose of this, back say in the 1970s when it was still a radical idea, was to enable people to challenge “the official narrative.”
This is not, in itself, a terrible idea. But getting under and around the official narrative really entails investigative journalism, not a challenge to “press objectivity” itself as challenging the official narrative requires some belief on the part of the investigator that there is a reasonably truthful story that should be relayed to the public, and not just the many lesser stories that interested parties want to to give you.
In practice, this primarily just enables young journalistic practitioners who have been (re)indoctrinated into this mess to feel more comfortable in their jobs, putting out whatever drivel is required by their employer. It’s not really their responsibility to sort it out.
This is not an unchallenged perspective in the field, or even among journalism educators. Many see it as an abandonment of the integrity of the profession by those who are supposed to uphold it.
I think the traditionalists are generally right, and the pseudo-intellectuals among them– who generally do not have advanced educations in say history or philosophy in any case, but who have been very busy pissing on the traditionalists– need to seriously rethink their shoddy, plainly half-*ssed epistemology and their role in the decline of public discourse.
Now, I don’t think this is the only factor at work. I think the drivel required by their employers is a bigger factor, but for a profession that is supposed to prepare students to enter a (rather cut throat) field, they are doing about the worst thing they could do in terms of preparing them to maintain professional standards the rest of us can believe in.
The media believes its role is to be ‘fair’. It isn’t, it’s supposed to be objective. Ideally it should have only one bias and that is toward the truth, whatever it may be. There seem to be two main problems with mainstream reporting these days, one is the kowtowing to power and never asking tough questions for fear of losing access and not being invited to all the fancy parties, but the other is “both sides do it”-ism.
They genuinely believe presenting all sides of an issue as equal is proper journalism. It’s what they’re being taught in schools now. The notion that there is one single objectively true position is completely alien to them. As is the very idea that one side in a debate could ever literally be lying, which is why so many absurd talking points continue to circulate.
There is still plenty of good journalism, just very little of it is on TV, or in papers for that matter. You’ll often get old hands in the industry lamenting the rise of blogs and online only news sources, apparently oblivious to the fact that people are turning to alternative sources because the MSM sucks and isn’t doing a good job of reporting the truth.
They’re also scared shitless by people like Glenn Greenwald, who they acuse of being a crusader and having an agenda. And to be honest he rather is, but his agenda is 100% in line with what the Constitution and other laws say. In other words, he’s objectively correct in his positions. They view him as a virtual heretic, actually staking out a position and defending it with facts. He’s an affront to the model of ‘journalism’ they’ve been taught and what’s more he’s successful, while their own viewers and readers continue to bleed away at a steady pace.
Social Security is strengthened with higher employment now.
Duh.
Maybe just enough to meet expenses. Aren’t all the social security cutting plans, plans not to pay back the promises? So more promises (more paid in that spent) isn’t going to help if they plan to default on them anyway.
I can no longer copy & paste any of your posts. Can only send links. Has anyone else complained of this?
I had a problem for a while, since disappeared, copying and pasting text I was quoting from certain sites. I found I could copy and paste to a message box like the one at the end of this post, and doing so, stripped out whatever HTML was gumming up the works. I could then copy the material from the box and export it anywhere, no problems. This, of course, only works for text.