Thursday, April 26, 2012


 IT'S ON!!  Mitt Romney will be the Republican nominee for president, and for once you could not get a clearer choice between a progressive President Obama and regressive Romney.  The terms conservative and liberal have lost any relevance in political discussions in the 21st century.  Despite all the debate in the Republican primaries about whether or not Romney is a "true" conservative, it is obvious he is a "true" regressive.  He, and his party, have articulated a vision for the nation which would return us to the days of the Gilded Age around the turn of the last two centuries.  It was the age of a weak federal government, no income tax, no regulations on industry and an income gap between the rich and poor remarkably similar to the one we have today between the 1% and the rest of us.  It is the key question in this election.  Which candidate will do the best job of increasing economic and political progress and move the nation towards its goal of prosperity for all of its citizens?

     In no area is the choice clearer than in the discussion about the future budget of the federal government.  Obama is proposing a budget which would bring spending down to around 22% of Gross Domestic Product and reduce the deficit over the next 10 years.  Romney has embraced the budget proposed by Rep. Paul Ryan which would reduce government spending to 20% of GDP, and also reduces the long-term deficit.  The devil is in the details, and this is where the choice becomes clear.

     Obama has labeled Ryan's budget, which Romney fully endorses, as "...thinly veiled social Darwinism."  Darwin noted in nature the prime engine of natural selection is survival of the fittest.  Ryan and Romney want to apply the same principle to the American economy.  If you are rich and strong, a part of that magic 1%, their proposal will make you richer and stronger.  Under Ryan's plan, tax cuts for the rich would put an extra $150,000 a year in their pockets.  This would be on top of the enormous gains they have achieved during the 12 years of the Bush tax cuts.  Military spending would be increased, according to Romney, who has indicated he would be willing to start a war with Iran while continuing to fight in Afghanistan.  Taxes would be cut, military spending would increase and yet the federal government would reduce its spending to 20% of GDP and reduce the deficit.  This sounds too good to be true.  It sounds like a magic trick or maybe voodoo.  How would Romney and Ryan pull off this amazing feat?

     We can't ask Ryan or even Romney for the answer.  When asked what he would cut in order to achieve the savings he projects, Ryan is mute.  While his tax cuts would cost the treasury $4.6 Trillion (with a T) over 10 years, Ryan says his budget would achieve this enormous transfer of wealth, without increasing the deficit, by closing tax loopholes.  Which ones would he eliminate?  Perhaps he will end the mortgage interest deduction or start taxing health benefits employers provide to employees.  He could prohibit you from deducting what you pay in state income taxes from your federal burden.  He could end the earned income tax credit which rewards people making under $30,000 for finding a job and not being stuck on welfare.  However, unfortunately we are left to speculate, because neither Ryan nor Romney will specify what they would cut to pay for all the largesse they give to the wealthiest of Americans.

     Ryan does give us a hint.  He wants to gut Medicare.  He would dispute my characterization, but it’s accurate.  He wants to change Medicare from an entitlement to a system of vouchers.  You would get a voucher and then you would shop around and use it to buy health insurance from a private company.  There would be no mandate any company has to insure you.  There would be no provision about pre-existing conditions.  There would be no restrictions on what companies could charge for their plans.  Ryan does not explain what would happen if the cost of the plan exceeds the value of the voucher.  What happens if the voucher is not indexed for inflation?  What happens if a future Ryan or Romney wants to cut taxes for the rich again and decides to cut the amount of the voucher?  This is where Darwin rears his head.  Under a voucher system, you make up the difference between the value of the voucher and the cost of the health care plan.   For the rich and strong, this is no problem.  They can afford whatever the care costs.  For the rest of us, we would regress to the days before 1965 when seniors were forced to choose between medical care and pet food for dinner.  If you think I'm engaging in hyperbole, Google the poverty rate for seniors prior to 1965 and read some of the stories from that era about the Hobson's choices they were forced to make.

     This election is the clearest choice yet between a progressive and regressive candidate in the modern era.  In 2000, Bush tried to prevent this debate by disguising his true philosophy under the mantle of compassionate conservatism.  He was going to cut taxes on the rich, increase military spending, cut Medicare and Social Security, but he would be compassionate.  The resulting tsunami of debt, along with an orgy of de-regulation in the financial world, led to the depression of 2008 and left Obama with a broken country.  Since the emergence of Ronald Reagan, regressives have tried to "trickle down" on 99% of us.  It is not lost on anyone, that under Clinton, after raising taxes on the rich without a single Republican vote, the nation enjoyed a period of unprecedented prosperity and job creation unknown for over 25 years.

     IT'S ON !!  This election could not be clearer.  One side wants to cut taxes for the rich again while watching the deficit climb and would gut most of the social programs in a half-hearted attempt to balance the budget.  The other would increase taxes on the top 1% and reduce the deficit by slowing the cost of medical care by radically changing the health care system.  (if the Supreme Court's five regressive acolytes don't gut it first)  Obama wants to cut military spending and end wars while Romney is looking for reasons to fight.  The Ryan budget is no different than the Reagan budget, or the Bush budgets from 2000 to 2008.  The results will not be any different either.  Reagan led the depression of 1983 and raised taxes 8 times to offset his budgets while Bush brought on the second biggest economic disaster in modern history.

     In 2012, voters can vote for Darwin or for progress.  The choice can’t be any clearer than that.....


For years, I have warned you about the siren song of de-regulation.  It is offered seductively as a way to reduce prices and increase competition and always presented as a win/win for both producers and consumers.  De-regulation is a disaster for consumers and there isn't time or space to list all the examples, but radio (think KGO) and energy (think rolling blackouts and ridiculous P.G.&E. bills) are two which leap to mind.

     A while back, I wrote about the crap game which oil speculation has become.  The commodities market has become one giant casino.  Buying oil futures and speculating on oil's future price has resulted in driving up the costs of a barrel of oil even as the actual costs of getting it out of the ground have not increased significantly.  Currently, it costs about $11 to get a barrel of oil out of the ground, where it is then sold at over $100 per barrel on the open market.  I told you as much as 1/3 of the price is the result of pure speculation.  If we were to end speculation, we could dramatically reduce the price of a gallon of gas.

     In the meantime, between my piece and today, a number of interesting events have taken place.  President Obama has publically criticized speculators and announced he wants to reduce their activity and influence on the price of a barrel of oil.  (perhaps he or someone close reads this  It is no surprise Mitt Romney vehemently opposes such a move even as he bludgeons Obama about the price of a gallon of gasoline and labels his energy policy a failure.

     In an op-ed in the New York Times, former congressman Joseph P. Kennedy II takes up this subject and demands the government prohibit pure speculation on oil futures.  (Kennedy runs a non-profit organization which buys oil and subsidizes it and provides it below cost for heating the homes of people who could not afford it otherwise.)  Kennedy asserts eliminating speculation would reduce the cost of a barrel of oil by 40%.  It would immediately reduce the price of a gallon of gas by about $1.00.  This is real savings.  This would happen now and the impact on the economy would be huge.  Energy dependant industries, which have been raising their prices to compensate for the higher oil costs, could reduce these increases.  Inflation would remain cool.  (currently inflation is running higher than wage increases for the average American worker)  Imagine what the affect on the American psyche would be if the nation were to wake up tomorrow to gas at $2.90 a gallon?  Consumer confidence would rise and, since 2/3 of the economy is dependant on consumer spending, perhaps this would be the impetus needed to finally push a solid economic recovery.

     Kennedy points out prohibiting speculation is not a new idea.  The government put limits on pure speculation in grain exchanges more the 75 years ago.  Speculators were manipulating the market during the depression and President Roosevelt saw it was not good for the economy and stopped it.  Prohibiting pure speculation in oil would follow the same logic.

      Pure speculation, according to Kennedy, wasn't a problem 30 years ago when he first started buying oil.  It only became a problem when Goldman Sachs (yes them again) came upon the scene and petitioned, demanded, lobbied, bullied, the Commodity Futures Trading Commission into de-regulating restrictions on pure speculation.  In a surprise to know one, the commission agreed with Goldman allowing it to process billions of dollars in speculative trades.  More de-regulation followed, (the old camel's nose under the tent syndrome) and by 2008, eight investment banks accounted for 32% of the total futures market.  Only about 30% of traders in oil futures actually have some skin in the game and use oil in their industries or it’s a factor in their costs of doing business.

     I told you we needed a complete ban on oil future's speculation.  The president is talking the same language.  The Dodd/Frank Wall Street reform bill limits pure speculation, but not enough.  Kennedy, and others, are now exposing this practice for more to see.  This is not an esoteric exercise.  Once again, the 1% has rigged the game to their benefit under the guise of de-regulation.  Why should grain speculators be prohibited from pure speculation and not oil?  Why should hedge-fund traders be able to drive up the cost of energy just to realize billions in profits at the expense of limiting or stopping a fragile economic recovery?

    When I first wrote about this, it must have sounded far-fetched.  Perhaps you didn't believe me about what the effect would be if we eliminated pure speculation in oil.  However, more and more people are waking up to the fact this is another example of the 1% vs. the 99%.  When they propose a new round of de-regulation, its time to hold on to your wallet for dear life.