Thursday, August 23, 2012

Big Scary Money

The wealthy are not only powerful, they can frighten otherwise sensible people into a state of blubbering impotence. Take Shrillionaire Mayor Mike Bloomberg, the 12th richest ($20 billion) person in America. How does he get away with his autocratic program of police brutality on Occupiers, stopping and frisking minorities, spying on Muslims both inside and outside city limits, and until recently, making food stamp applicants get fingerprinted as though they were common criminals?

 Not only does he run New York City as his own private fiefdom, he owns a vast media empire -- and he is constantly threatening to expand it. Journalists are afraid to cross him, lest he own them one day -- say, at The New York Times. David Sirota of Salon lays it all out, and suggests we just stop sucking up to the sanctimonious prick.

Money Honey

Easier said than done. Bloomberg  also wields his influence inside the Beltway and inside the White House, where after a long lunch with the president earlier this year, he was reportedly offered the presidency of the World Bank. He turned down the job, because he already owns the World. And his World View happens to revolve around the cult of centrism -- an elite world in which the little people must sacrifice a lot and the plutocrats pay only a little, and where the meltdown of '08 was caused not by Wall Street psychopaths, but by the government making it too easy for greedy people to buy homes they couldn't afford. President Obama gratefully sucks up to this sanctimonious little prick and the rest of the oligarchy by fully embracing Grand Bargainism and pretending that the Deficit is the original sin. He and Bloomberg are on the exact same austerian page in calling for trillions of dollars in cuts to government programs, and raising the retirement and Medicare eligibility ages.

Ordinary people do not care about the deficit, and outright reject the austerity meme. A recent Ipsos poll reveals the majority of Americans (including Democrats, Republicans and independents) want more, not less, government spending in such areas as food safety, veterans' affairs, and medical device and drug safety. The same poll also revealed that most people were not only unaware that federal employees have been subject to a wage freeze for the past two years, but that the president has just extended it indefinitely. The majority believe that the rich should be taxed to pay for government agencies that serve and protect everyone. We're all a bunch of raving socialists.

Meanwhile, the middle class is shrinking. A new report by Pew grimly lays out the facts -- America is in a Lost Decade. I don't think we needed another poll to tell us that. 

And Mayor Bloomberg gets invited to the White House and liberal think tanks even as he gets away with criminalizing hungry people. He would sooner spend millions of dollars investigating them than feeding them.

Money rules. The class war is real. It's them against us, and as Uncle Warren Buffett famously said, they're winning.


Zee said...


I can't disagree at all with your analysis of Mayor Bloomberg, and the threat that he and his wealth pose to journalism and civil liberties.

However, I have to disagree with your remark--and associated link-- that essentially absolve Fannie Mae and Freddie Mac, and their so-called government overseers, from guilt for causing the 2008 meltdown.

Fannie Mae in particular—along with their government overseers—were at least equal partners in causing the meltdown.

If Fannie Mae didn't make loans, it bought them up and then guaranteed their soundness at potential taxpayer expense. Talk about creating a moral hazard.

Moreover, Fannie Mae not only did not perform due diligence in understanding the trash that it was buying up and insuring, but its army of lobbyists—along with targeted political contributions—actually encouraged Congress to further relax lending standards at large, encouraging the subprime lenders to be ever more brazen in their criminal actions. If the subprime lenders issued most of the bad loans, well, Fannie happily helped them along in their criminal enterprise.

And in doing so, Fannie set itself up to buy even more garbage loans, ultimately increasing the costs of bailing Fannie out in a self-induced death spiral.

After publishing their book, Reckless Endangerment, Gretchen Morgenson and Joshua Rosner have been accused of being too hard on Fannie as the primary cause for the 2008 financial crisis. I am inclined to agree. But it is not going too far to conclude from their findings that Fannie Mae were equal partners in creating the subprime loan disaster through its efforts to relax lending standards in furtherance of its own corrupt goals, such as huge executive bonuses.

IMHO, the reason that Progressives like Steve Benen are so eager to absolve Fannie and Freddie from almost all guilt is their fear that by acknowledging this fact they undermine their fundamental article of faith that government is an almost un-alloyed force for good.

It's not.

Fred Drumlevitch said...

Zee has a point --- though I think that some portions of that point should be tempered by other considerations.

For instance, while some people were poor mortgage risks from the get-go, others were more reasonable risks until the economy collapsed around them, and compared to the other players in the debacle, they were little culpable for the collapse.

Furthermore, I'll reiterate a point I made several years ago in a New York Times comment, and again probably within the past year either here at Sardonicky or over at RealityChex: Participation by the broader public in the real estate bubble (and the dot-com bubble prior to that) was the direct consequence of corporate labor policies, and governmental regulatory, trade, and tax policies for decades prior to those events.

With regard to the most recent bubble, yes, the American public did engage in way too much outright real estate speculation, or its lesser cousin, wishful thinking and imprudent purchases of primary residences at prices above long-term true asset values.

But I contend that such behavior was significantly driven by a need among the broad public to obtain some financial security, and a desire for "the good life" that was obviously becoming the exclusive province of the wealthy. Decades ago, many in the lower and middle classes could, thanks to organized labor and governmental policies, live decently, obtain higher education for their children at relatively low cost, and retire with social security plus a company pension. In recent decades, not just such expectations but even the hope of such a life disappeared; in its place, outsize rewards for corporations and the top few percent, and the rest of us were given --- notably, by both major political parties --- the song and dance of the supposed wisdom of the free market and free trade, and the benefit of unfettered capitalism. Many people ultimately decided that they wanted --- actually, needed --- to engage in certain speculative economic behavior as the only possible open pathway to improving their current economic position and, in simple self-protection, to assure their future economic security. And they did, and the rest is history. Yet the decades-long influence of regressive corporate and governmental policy on public psychology is an issue that I still do not see discussed anywhere.

In other but related matters, the new Christian ethics:

Never mind about how much feeding, clothing, housing, health care, or education of the less-fortunate could occur with even a modest reduction of "defense spending". For at least some modern "conservative" Christians, "defense" spending must take precedence! Disgusting.

Pearl said...

Fred: Your point about why people invested in homes makes sense. When my husband retired we invested money in a home in Florida to spend winters in because he felt that money in the bank, even with interest, was going nowhere and that property was always worth something. We also built a larger retirement home than the one we had lived in for 27 years in Canada for the same reasons.

Our house in Florida when it had to be sold a few years ago, lost me 30 % of the value and I was lucky to sell it at all. Our retirement home in Canada was a good investment and allowed me to move into a condo development when I sold it a few years ago since the housing market here was not in crisis, although it is beginning to slow down now.

Many other people did as we did and not because they were rapacious but because investment wise had things not gone to pot so rapidly it made sense. But many others were misinformed and misguided and may have made rash decisions but for the same reasons we did.

A tragedy all around and the real culprits were the agencies that misrepresented the facts to gullible people and now do not assist the victims even when money has been earmarked for them. But the powers that be refuse to recognize that by not helping others who are suffering will eventually bite them back since the market place will not function properly without the input from the huge numbers of people who can no longer buy many things anymore. I wonder if the problem with the buildup of unsold goods in China has something to do with this situation and if the domino affect will continue. One doesn't have to have an economics degree to figure it all out.

Valerie said...

Good government, @Zee, is a force for good. Corrupted government, like we have right now, is a force for evil.

The problem is that whenever we admit something we normally support – such as a government agency designed to help the less fortunate members of our society - has been corrupted or has behaved badly, the other side (in this case, the Republican media) jumps on it and spins it to their advantage. I am sure it has been all over Faux News that Fannie and Freddie caused the meltdown – as if deregulation had absolutely nothing to do with it. When the truth is, if we had had sound and strong regulation and laws, AKA good government, and people who broke those laws lost their entire fortunes and were sent to jail, a good justice system, the crash probably wouldn’t have happened.

Fannie and Freddie - because they were being run with the same careless, reckless disregard for common sense as the "investment" banks - imploded, just like the banks did. THAT should not be a big surprise to anybody. Both were reckless, expecting to be bailed out: Fannie and Freddie because they were under the auspices of government and the banks because by merging with commercial banking they had the whole FDIC and too big to fail thing to fall back on. The Republicans want to blame the whole crisis on Fannie, Freddie and the little guy who bought over his/her income level. The Democrats want to blame the investment banks and bankers who got the ball rolling and who have lobbied and corrupted the regulatory agencies and elected government officials who should be protecting the system. The bottom line is that all three groups are to blame – but TO A POINT and TO DIFFERENT DEGREES. Let's face it, the investment banking crowd knew exactly what they were doing - the Fannie/Freddie crowd knew exactly what they were doing - the little guys flipping a house or the couple buying over their income level might not have really understood what they were doing. So, in order to keep on track with this particular argument, I am going to let the little guy off the hook.

You won’t get any argument from me that Freddie and Fannie had blame, but let’s not ignore the biggest players in our rush to condemn a government agency that because of de-regulation was allowed to act recklessly.

The biggest thing we have to keep in mind - is that the Fannie/Freddie thing is in the past. They are no longer doing what they did. Unfortunately, the same cannot be said for the "investment" banks.

While I think all the big players who crashed the economy – be they associated with Freddie, Fannie or the big banks - should be charged as criminals, made to pay huge fines that wipe out their personal fortunes and not allowed to take part in any future financial markets, the thing that worries me the most is not what happened before the crash - we survived the crash - it is what they are doing now to create an even bigger, future crash. The U.S. and European economies are wounded animals; another even bigger crash is going to put both economies into a depression. Kicking the can down the road instead of addressing the hard truths is only making the situation worse in the long run.

So your question should not be why Fannie and Freddie are not being given their fair share of the blame by Progressives, it should be why aren’t we as a nation of reasonably intelligent individuals, aren’t trying our hardest to keep the same thing from happening again?

Valerie said...

@Fred - Might I make a suggestion? Would you consider writing a more expansive essay on this theme and cross publishing it on both the Sardonicky and Fred Drumlevitch sites? Not to sound like too much of a "suck-up" but you write so beautifully and have a really profound point I haven't read elsewhere - and Karen is always open to guest essays. Just a suggestion.

Denis Neville said...

Zee said “Fannie Mae were equal partners in creating the subprime loan disaster”


Fannie and Freddie, rather than being equal partners, got into subprime mortgages only after the horse had left the barn. They were becoming irrelevant in the most profitable segment of the market - subprime mortgages - and were only then swept up in the frenzy created by Wall Street Gordon Gekkos rather than helping lead the charge.

It must be in the DNA of conservatives to keep repeating Big Lies.

Gretchen Morgenson helped perpetuate this Big Lie. Her work has been latched onto by those whose goal is to shift blame for the subprime-mortgage generated crisis from the mortgage lenders and financial institutions to the government itself.

How the Big Lie works

Peter Wallison, the American Enterprise Institute [one of the oldest and most influential of the pro-business right-wing think tanks], and the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis. Wallison claimed that the government’s effort to encourage homeownership among low- and moderate-income Americans is what led to the crisis. It caused them plunge into “risky” subprime mortgages. It was their entry into subprime market that pulled in the rest of the mortgage industry.

Contrary to Wallison’s Big Lie, Fannie Mae and Freddie Mac leaders were trying to reclaim lost market share, protect themselves, their incomes and maximize their bonuses.

Jeff Madrick and Frank Partnoy, “Did Fannie Cause the Disaster?” provide a more balanced view and counter the mainly undocumented conclusions of Morgenson:

“Rather than leading the way, Fannie’s market share of the low-income home buyers fell behind private industry’s far riskier lending to poorer home owners and others…

“[They] did generate large losses, but their bad investments in housing loans followed rather than led the crisis; most of those investments involved purchases or guarantees made well after the subprime and housing bubbles had been expanded by private loans and were almost about to burst…

“[Their] overall purchases and guarantees were much less risky than Wall Street’s: their default rates were one fourth to one fifth those of Wall Street and other private financial firms.

“The book’s unjustified thesis that Fannie and Freddie were major causes of the financial crisis is being used by politicians and pundits to soften criticism of private business and by lobbyists and others who would water down the new regulations passed by Congress under the Dodd-Frank Act. The book is also being exploited by those who believe the federal government should have little if anything to do with support for the mortgage market.”

Valerie said...

And to get back on topic, Karen. I can't believe Bloomberg is considered a centrist - kinda like Hitler was a centrist.

Pearl said...


I just had a phone call from my friend in Florida who lost her home. She is struggling to survive and now her car broke down and she said she feels like never getting out of bed anymore. The political atmosphere in Florida is soul killing and she said many others feel the same way. I told her about Karen's blog and how concerned you all are about what is happening to our country and that eventually, hopefully, one day something will change.
She is truly a good human being and cannot comprehend the insanity going on anymore. This is what pushes me forward to keep trying to be heard through Sardonicky, comments to journalists, hoping it will reach and hopefully inspire others to carry on the fight that will have to be faced eventually.
Anti anxiety and anti depressant medications are at an all time high in the U.S. and the damage to people's psyche's along with financial losses are a permanent blot on our country. I read articles about social disintegration and unrest in many reports of concern by experts beyond the immediate unresolved problems, and which create deep worry about what the future will bring.
So we have to continue our work, sign petitions, voice our opinions and try to help others someway or other even in small ways which can add up to big things one fine day. Maybe the hurricane will disintegrate the Republican party and we can start over.

Pearl said...

All your comments with important and well researched information about the
housing catastrophe, as to who was the most responsible or not, whether lax
controls are to blame, etc. only leads to one conclusion at least for me.
Capitalism, which operates on the profit, free enterprise system whether
with regulations or not, will poison the entire system and destroy its own
nest eventually. Not unless everyone holding power becomes a saint which is
highly unlikely, even if they attend church regularly.

The corruption is so pervasive that no really knows how to resolve the
issues, even by dividing everything into categories with fair blame allowed
all around. And deregulating the deregulations are not possible once the
mindset and methodology is set in stone and followed.

All the criticisms you all have are legitimate but we must think
about why, how, when and by whom the system we live under has to be changed.
Events will begin to unfold as time goes on which will force decisions to be
made that are being avoided by everyone - leaders as well as followers.

So what, you say? The dialogue must be kept going even when it seems no one
is listening. I have lived through enough changes in our country to know
that there continues to be action and reaction on different levels and
different intensities and opportunities for real change can occur when least
expected and we must be prepared to seize the opportunities when they
present themselves, even if comparatively small.

Keeping informed and informing others as Karen and all of you are doing,
even with your comparatively minor differences is of vital importance to
ourselves and others. I would give up completely otherwise if I did not see
my views and concerns echoed by people I trust and respect.

I know too many people now that are depressed and discouraged and become
"obedient" as Zinn's recent comment indicated, allowing the powerful to set
the rules. He also said in another quotation how important it is to live a
life of purpose, no matter how small. He too was often discouraged but
continued working and writing and speaking till his last days. I have
written this e-mail because I have had to counsel several friends and
acquaintances here and in the U.S. these past weeks who are struggling with
depression, anxiety and self worth. It isn't easy, because I share their
feelings and have to know how to communicate fairly and honestly and
constructively. But I am trying, and all your comments are helpful in that
regard with Karen as the catalyst for honest and courageous thoughts in so
many areas of our lives.

There is an article in the N.Y.Times today, Should we cancel the election? (a Socratic dialogue) which is no better than a coin toss, that looks interesting.

Zee said...


If you read my prior remark carefully, you would have noticed that I stated that:

“ is not going too far to conclude from their [Morgenson’s and Rosner’s] findings that Fannie Mae were equal partners in creating the subprime loan disaster through its efforts to relax lending standards in furtherance of its own corrupt goals, such as huge executive bonuses. --Zee, Sardonicky, 8/23 (Bold emphasis added by Zee.)

As nearly as I can tell from my reading of Reckless Endangerment, Morgenson and Rosner make it quite clear that the efforts of Fannie’s Executive Directors to increasingly involve Fannie in subprime mortgages were strictly to increase Fannie’s “market share” and thereby to increase said Directors’ obscene bonuses: including such liberal luminaries as Jamie Gorelick:

Fannie’s Directors didn’t give a damn about increasing home ownership amongst the poor; they just wanted to feather their own nests, and they didn’t care who they hurt or what risks they took to do it.

This, as I understand it from my reading of Joe Nocera’s column, is exactly what Nocera himself is saying:

“But the S.E.C. complaint makes almost no mention of affordable housing mandates. Instead, it charges that the executives were motivated to begin buying subprime mortgages — belatedly, contrary to the Big Lie — because they were trying to reclaim lost market share, and thus maximize their bonuses. --Joe Nocera (Bold emphasis added.)

So I don’t see Morgenson and Rosner as perpetuating a “big lie” that it was entirely “government mandates” that drove Fannie to do what it did; rather, it was the perversion of the government’s lofty goals to suit the ends of its Directors that led to Fannie’s downfall--along with all of Wall Street, who picked up on the “golden goose” that Fannie was wringing dry, and ran with it.

I think that it’s called “The Law of Unintended Consequences,” which exercises its authority all too often when government imagines that it always knows best, and the public is suckered into the hallucination.

Now, I don’t know exactly when, or to what extent, Fannie became truly “in over its head” in subprime lending. The George Washington University “research paper” is difficult for a layman to understand, and it appears to me to be merely a draft of something that might have been--or is about to be--submitted to a scholarly journal. Let me know when--and if--it has been published by a reputable journal and I’ll try to give it more consideration.
Alternatively, you might attempt to explain it to us laypeople out here.

But let’s consider further what Bethany McLean and Joe Nocera--himself--had to say about Fannie as interpreted by Wikipedia:

“In All the Devils Are Here, Bethany McLean and Joe Nocera paint a detailed portrait of the GSEs, including Fannie. Fannie had been aggressive in its political fights with Wall Street and Congress in the 1980s. In the 1990s Fannie ramped up the 'cut them off at the knees' strategy against political enemies. Tactics included a massive lobbying effort, neutering the OFHEO (its 1992-created regulator), creating a "partnership office" network to court the politically powerful with pork, giving high level employment to the well connected, giving out campaign contributions, creating a charity foundation, and threatening critics like FM Watch with retaliation. One of McLean & Nocera's sources even compared Fannie's activities to Tammany Hall.”

Sounds to me like Fannie and its Directors were busy laying the groundwork for their ultimate collapse well before the 2006-2007 timeframe that Thomas and Van Order (draft) assert that Fannie became involved with the subprimes. Just as Morgenson and Rosner have asserted all along.

Zee said...


I can't disagree with a word that you say.

Still, we are a nation and government composed of people, not angels.

"If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions." --James Madison,
Federalist No. 51

We can have all the "sound and strong regulation and laws" that you might wish for, but as long as people are involved, these laws and regulations may or may not be enforced, or, worse yet, may even be used to the self-serving advantage of the so-called enforcers and their "friends."

Fannie worked overtime to weaken both the processes and regulations, and seduced or bought off or intimidated the enforcers. Which brought its directors and friends great wealth, and, well, helped the nation down the path to financial ruin.

Where then is "good" government?

I interpret Madison's "auxiliary precautions" as a government having only explicitly limited and enumerated powers; after all, what else is there beyond "the people" that can serve as a "control?"

It is difficult enough to keep "men" (read: "people," in this modern day) from using government to their own greedy and selfish ends even when the limitations on their powers are nominally explicit.

The instant that a government's objectives and powers become fuzzy, government itself becomes the devil's workshop, figuratively speaking, of course.

"Good government" can only exist when its powers are carefully and clearly enumerated, and the people are willing to enforce those constraints at the ballot box.

It's my conservative, humble opinion that we, the people, have failed on both counts. We are no longer a nation of enumerated and limited powers thanks largely to the courts and politicians, and the people have a distinct disinterest in controlling and limiting the ever-increasing power of the government over ourselves via the ballot box.

Good luck to all of us, because we will need it.

Fred Drumlevitch said...

@Zee (and @all):

"Fannie worked overtime to weaken both the processes and regulations, and seduced or bought off or intimidated the enforcers. Which brought its directors and friends great wealth, and, well, helped the nation down the path to financial ruin." --- Zee

True. And by the way, the same might be said about the military-industrial-security complex, though for the military portion of the complex, the payoff was more likely to be advancement and power rather than wealth.

National military policy, national housing policy, indeed, national anything policy, are all too important to be run that way.

But the imperfections of government do not lead me to the "conservative" conclusion that such failures are inevitable and that the minimization of government is the only solution. In fact:

1) One might conclude that the failure of Freddie and Fannie was the consequence of those quasi-governmental agencies behaving too much like private businesses, with their top officials receiving incentive payments like many a CEO. And throughout the corporate world, boards of directors have become little more than rubber stamps, allowing substantial management incompetence and obscene personal enrichment to continue almost indefinitely, and only acting quickly against a CEO for public relations fiascos such as sexual harassment.

2) There are countless needs in our complex society that can and will only be addressed by government. There are other functions that might be done by private enterprise, but if those functions become, in effect, private transactions between citizens and business, there is no income-based cost progressivity as is the case when they are funded by taxes, and they will likely be unaffordable to many citizens. (Three examples, off the top of my head: pharmaceutical safety and efficacy, the national parks, and the interstate highway system. Imagine a world where information about that medicine was available, but only as a subscription service, undoubtedly at a hefty price. Imagine the cost to visit a national park if its operation received no tax funding but was instead completely turned over to private business. As far as the highway system is concerned, there's no need to imagine; toll roads in this country are high priced and often in poor condition.

I believe that government can function properly, with the right goals, structure, and people. Nowadays, all three are often deficient, but they don't have to be. As @Valerie said, "Good government... is a force for good. Corrupted government, like we have right now, is a force for evil". And as @Pearl said, "...we must think about why, how, when and by whom the system we live under has to be changed".

Valerie said...


I grow frustrated with this line of argument about good government. Obviously, good government means good regulation that is enforced. That means the regulatory agencies are completely independent of the corporations they regulate. The big argument the banking industry used against Glass-Steagal was it was old fashioned and too outdated to deal with sophisticated financial “products.” Well, turns out it wasn’t so old-fashioned. It was just good common sense that commercial banking, which our economy needs to keep on ticking and thus should be FDIC insured, and investment banking, where the people getting the profits and taking the risks should be the only ones who suffer the consequences of the losses, should be kept totally separate. Does good regulation interfere with profits? Damn right! It keeps corporations from behaving recklessly and in a way that threatens the economy as a whole and prevents the whole “too big to fail” scenarios from happening. Does anyone honestly think the big banks would have gambled so recklessly if they didn’t think the government would bail them out? Not a chance. Nor would investors have tolerated that kind of risk with their portfolios.

As for Fannie and Freddie, I defer to @Denis who is far more well-read and well-informed on the subject than I am. "
Fannie and Freddie, rather than being equal partners, got into subprime mortgages only after the horse had left the barn. They were becoming irrelevant in the most profitable segment of the market - subprime mortgages - and were only then swept up in the frenzy created by Wall Street Gordon Gekkos rather than helping lead the charge." Fannie and Freddie jumped on the bandwagon AFTER the investment banks had led the way in order to keep themselves profitable. This is what happens when you meld a government program with private enterprise and expect that program to turn a profit in order to justify its own existence. A government program should always remain a non-profit – a service that ultimately benefits the public at large. And that is socialism in the eyes of most Republicans.

Fred Drumlevitch said...


Thanks for the compliment above, and your suggestion that I expand my comment about the public's increasingly risky investment actions being to a significant degree a consequence of an economic system that rewarded the already-wealthy and made life more insecure for the average person. Unfortunately, I think I'll have to leave that to someone else. It's a subject that really cries out for more than my speculative (pun intended) hypothesis. Someone should pull some hard data that tracks the decrease in job security, pensions, and economic well being for the masses, as well as public perceptions and psychology, and economic risk taking by different classes over the years. Unfortunately, that is beyond my expertise, as well as something of a greater scope than I would have time for. And it may have already been done in some academic paper or scholarly book. It may even have been done in a popular article or book that I'm not aware of. I certainly have no recollection of it being part of the discussion of the causes of the financial collapse, but it should be, because it could establish social and economic injustice as a direct risk factor for systemic economic instability.

Zee said...


Thanks once again for your thoughtful remarks.

Please don't misunderstand me. I am NOT a Grover Norquist-type who believes that the federal government should be “reduced to a size small enough to be drowned in a bathtub” (or words to that effect).

I like knowing that my food and drugs have been inspected or tested by an independent federal agency. I like my national parks and interstate and U.S. highways. I like the fact that the U.S. Government underwrites basic scientific research at the nation's universities via the National Science Foundation using a peer-review process. I like and believe we need a strong, national defense. I even like the the U.S. Postal Service, and believe that it should be strengthened, not strangled as we are currently doing. And the list could go on and on and on...

But there are still large sectors of the federal government that could and should be done away with. We've already discussed many of them in this forum: social engineering activities such as Fannie and Freddie, and loans and loan guarantees to companies such as Solyndra. Why should the federal government have bailed out GM, and rewarded unions while screwing bondholders? (Could it be that the unions are hefty political contibutors who can be expected to turn around and reward their patrons, while the bondholders are just a bunch of disorganized individuals?)

These activities have socialized risk and privatized profits, and then allowed the subsidized corporations or entities to turn right around and offer favors and political contributions back to their lapdogs in the federal government, creating an endless cycle of corruption.

And when found out, who in either the corporations or government have gone to jail?

Do we really need huge subsidies to big agribusiness? Do we want a federal government that can coerce state activities in one area by threatening to withhold federal funding in another?

Fred, I'm just a "small el" libertarian. I'm really not a Libertarian loon who believes that every government function can and should be privatized. I agree with you and Valerie that government can be a force for good when populated by honest and hard-working people.

But I also believe that our current government is bloated and corrupt, and that until the American people wake up and send the entire current crop of crooks packing—and, maybe, sends some of them to jail—we are destined only for even greater bloating and corruption.

If I sound despairing, well, it's because I am. Because I don't believed that the American people will wake up until the entire system collapses. And then it will be too late.

Fred Drumlevitch said...

@Zee (and @all)

part 1:

I agree to a large extent with some of your points and their implications, but disagree just as much with some others. (And I understand that you are “NOT a Grover Norquist-type”, and are attempting to be a “small el libertarian”).

You’ll get little dispute from me on your assertion that our government is bloated and corrupt, or on the implied principle that government should generally operate competently, efficiently, and incorruptibly. (Note that I said LITTLE dispute, not none, for it depends on the activity in question. Let’s not forget that Mussolini may have made the trains run on time, but was nevertheless a fascist dictator; and Eichmann sought to carry out extermination of the Jews as efficiently as possible. Competence, efficiency, and incorruptibly cannot be the only metrics, nor are they even universally beneficial. Beyond the historical totalitarian examples, consider the U.S. government’s current grossly excessive public surveillance and data collection, and attempts to shut down dissent and prevent revelations of governmental abuse of power. I think we would both agree that such governmental actions pose grave threats to liberty; and I for one certainly hope that such actions when they occur will be highly incompetent and inefficient!)

Government bloat or not, though, certain services will not be performed by private enterprise unless it is given a profit incentive that either negates supposed cost savings, or creates a conflict of interest. Medicare, for example, provides better service at lower cost than private plans.

You ask: “Do we really need huge subsidies to big agribusiness? Do we want a federal government that can coerce state activities in one area by threatening to withhold federal funding in another?”

With regard to big agribusiness, the answer is certainly no. Many of those programs were sold as stabilizing Great Depression era farm prices and helping smaller farmers, and have grown into monstrosities. (There is also recent evidence that they are leading to grossly-inefficient agricultural exploitation of marginal-quality land, clearly a bad idea. Beyond the dollar cost is the reduction in wild lands and potentially, biodiversity.

But with regard to withholding funding in one area to get compliance in another, that may be the only effective method. If, for example, a state refuses to provide certain services to Medicaid patients, what leverage is there in withholding funds for a service that the state will not provide? Even withholding other Medicaid monies makes no sense, as that would harm the patients receiving those other services. And as parents know, if a child does not eat his peas, withholding his spinach is not likely to evoke compliance; one needs to withhold dessert.

Fred Drumlevitch said...

part 2:

With regard to social engineering activities by government, well, my opinion of them depends on the activity. Clearly, expanding home ownership can be viewed as a social good, increasing not just personal equity but also neighborhood pride and social stability. (It could even have cascading benefits for the national economy, as dollars spent on mortgages, home improvements, and upkeep are more likely to remain in this country than would dollars spent on a new electronic gadget that is probably imported from China). Clearly some people recruited for home ownership should not have been, but many others who defaulted would have been fine had the economic system not been collapsed by absurd investment banking system activity.

Solyndra was a fiasco, but such funding was unjustified not because it attempted to jumpstart a potentially beneficial company or industry, but rather, because of political favoritism in who got the money, and disregard for other factors. For economic development just as with scientific grants, whether the money will ultimately be considered to have been wisely spent is highly dependent on an objective pre-award analysis of the proposal and the competitors. If a reasonably workable solution is possible for scientific research awards, it should also be possible for the economic sphere. And finally, consider that private enterprise operating independently of government does have a high failure rate in attempting the new; for every blockbuster product that a Sony or a Merck create, many others fall by the wayside. In light of that, the track record of government-funded development should not be viewed as badly as Republicans tar it.

Our problem is often that government farms out too much to private enterprise, not too little. Blackwater (first renamed “Xe”, and now, perversely, “Academi”), anyone? Money to that company, whatever its name, was/is a waste against which Solyndra’s waste was nothing. But consider something completely different as example, government underwriting of basic scientific research at the nation's universities via the NSF, which you brought up. That research is often largely funded by the federal government, and the salaries of the lead researchers when at public universities often largely paid by state government. Yet most results are then disseminated by publication in journals that are for-profit products, and priced outrageously, making them effectively inaccessible to the average person who doesn’t have university or corporate library access. Why?