SCOTT BROWN’S U.S. SENATE VICTORY;

“BARBARIANS AT THE GATE?”

         The build-up, or prelude, to Scott Brown’s seemingly astonishing United States Senate electoral victory in Massachusetts last week is long, complicated and confusing…to anyone, I mean anyone, who has tried to put it all together.  I shan’t retrace all of the steps.  But the factual situation, as I believe almost all of us will agree, has developed pretty much as follows.  And if one looks back realistically, something like the chaos we now see might be understood as having been inevitable.

 

THE RECENT BUSH/OBAMA HISTORY

 

          Our newly minted President Barack Obama inherited a real mess. The United States was fighting two wars overseas and essentially another  “war” at home seeking a higher level of national security, and it was enduring tremendous negative feed-back internationally over the issue of torture engaged in by United States troops and other sanctioned operatives in the pursuit of those three wars, all related to one another.  The “standing” of the United States in World Affairs had never been lower.  Obviously, many Americans do not care about such things, preferring to believe that it is only we who matter–which pretty much reflects the Teddy Roosevelt and George W. Bush mentality!  Others believe our reputation and concern for other Nations and their opinions is requisite to our ability to carry out innumerable programs and moves in the interest of the United States around the Globe.

 

          When it became clear in January 2008 that a recession had actually begun (formally) in December 2007, President Bush started the first “stimulus” program to pull us out of the doldrums.  By February 13, 2008 President Bush had actually pushed through his “Economic Stimulus Act,” given a public “price tag”, or cost, of $157 Billion which resulted in persons all over the Country receiving those $600.00 checks, or $1,200.00 if married, and which cut capital gains taxes for by fifty per cent–evidencing major concerns with the economic failures of his Administration to that point.  This program resulted in a 3.5 % temporary increase in consumer spending, but the effect of the Republican infusion of capital was very short-lived.  And then, in September 2008, just before the November Election, the Bush Administration, with the approval of the Republican Congress, began a so-called “bail-out” program aimed at saving most of the larger Wall Street investment banks and A. I. G. Insurance Company.  

 

          This Bush program, or one very much like it, was by that point, beyond question, necessary.  Significant aspects of the Bush program necessary to its understanding were: 

 

          i.) the investment banks (not “retail banks” like the ones on the corner) are, in fact, the very “lynchpin” to the economy of the United States…and to the world as well, and they were quite properly determined by President Bush, Treasury Secretary Hank Paulson and most economists as “too big to fail.”  A failure of these banks, some of the very largest in the world, or the failure of the government in getting the weakest ones purchased by or merged into the relatively stronger banks, would have unquestionably led to financial chaos…the world over…one much, much worse than the current world wide recession we are still enduring.  It could have become, and might still turn into, the second Great Depression.

 

          Treasury Secretary Paulson–formerly Chairman of the Goldman, Saks investment bank–had set up what was formally called the “Troubled Asset Recovery Program” (”T.A.R.P”–approved by Congress and President Bush) whereby billions of Federal dollars were allocated for the specific purpose of purchasing “troubled real estate derived securities” from these firms.  These were the so-called derivatives resulting from the “bundling” together of all sorts of real estate mortgages (Sub-Prime Mortgages and Adjustable Rate Mortgages–the acceptance of which was pushed by President Bill Clinton and forced upon Fannie Mae and Freddie Mac–as wholesale mortgage purchasers–to make housing available to otherwise non-credit-worthy purchasers) which were sold to the Public as securities.  But these mortgages, the background of the “derivatives,” were failing at a dramatic rate due to the burst of the nationwide “housing bubble.” 

 

          There is much irony in this quite predictable crisis (to an “old-school” retail mortgage lender lawyer such as this writer).  And to most people it is a fully disgusting one, in that while many of the investment banks were selling these “bundles”, or shares in them, to the public, they evidenced knowledge that the value of them was very problematic and obtained “catastrophic” insurance for their own possible losses–such insurance coming mostly from the giant New York-based insurer A. I. G.  Unfortunately, however, A.I.G. “bit off” entirely too much exposure and was itself looking at a pending financial collapse because of its excessive exposure on the derivatives insurance written out of its brand-new London-based Exotic Financial Products Division;  and

 

          (ii)  Paulson ignored the intent of the law giving him control of the billions of dollars, i.e., he did not arrange for the Government to purchase the troubled assets, and he did not take proper steps toprotect the interests of the People!!!  He simply sent “truckloads” of cash to the investment banks and to A. I. G. ( and we have just learned in the last several days that some of A.I.G.’s  money to be used to pay on its policies, was actually just trucked directly to the investment banks!!!) to increase capital and to allow them to get their “houses in order,” to increase their capital bases and reserves, and thereby bring the net worth on their balance sheets back up to an acceptable level for such high-risk institutions.  

 

          Paulson had a clear personal conflict of interest at the time he took these actions because of his personal ownership of much Goldman, Saks stock, yet he made certain that A.I,G. would be able to pay Goldman (the world’s largest dealer in derivatives) any losses it might incur.  (It should be noted out of fairness to Mr. Paulson, that the existence of a conflict of interest does not mean that the action ultimately taken by an officer or official is the “wrong” action to take.)  He provided for almost no accountability by the bankers, and, in fact, the only “string” Paulson chose to use as control over the recipients of this aid was to retain some power to control matters such as employee salaries and bonuses (which has proved almost totally ineffective to date), some input on the choice of new officers, etc.–all to end when the companies were able to pay the money back to the Government.  Many investment banks have now paid thier loans back because of enormous profits in 2009, and enormous bonuses have again been paid, as if the investment bank higher executives are totally “tone deaf.”  (This, of course, has caused an enormous back-lash around the Country and in Congress for rewardiing employees who take the greatest risk with the peoples’ money!!–all of which is now, almost unbelievably, being blamed entirely on the Obama Administration!)

 

          Then, just as the new Obama Administration and a Democratic Congress were struggling to close the infamous Guantanamo prison, draw down troops in Iraq, turn that war over to the Iraqis, and pursue a “surge” in Afghanistan (and Pakistan) to try to deprive the Islamic militants of their “safe havens,” General Motors, Ford and Chrysler all came to the Administration and Congress with “hat in hand!”  Each of these companies was described as “hemorrhaging money,” clearly as a result of mismanagement over many years and their paucity of quality-built and market-attractive products in comparison to the German, South Korean and Japanese competition.  This move by the “Big Three” was met with outrage in Congress but especially on “Main Street!”  Not only had the Public been angered by all of the money (their tax dollars) being “given” (not an accurate description, but, nonetheless, the one the Public adopted) to the big bankers (”Wall Street“), here was another so-called “socialistic giveaway” of the Nation’s money through the largesse of a new President and Congress that they were beginning to doubt, or question.

 

          As matters initially rolled out, although it is clearly an ongoing process that is by no means over, General Motors and Chrysler were loaned many billions of dollars in consideration of stock pledges, leaving the Government effectively but temporarily in control of each of those manufacturers–trying to keep them from failing in the short term, and, in the longer term, to use an oversight panel to assist and, hopefully, make them competitive once again.  When the loans are paid back, just as in the pattern of the Bush Administration’s Economic Stimulus Act, the stock would be released and government control (interference?) would cease.  Ford chose not to take loans but, rather, to exact only a letter of credit upon which they can draw if it is needed down the road.

 

          The design and motivation of Congress and the Administration to undertake this “saving and remediation plan” was required not only because of the auto manufacturers and the coming damage to them and the loss of their millions of employees’ employment, but also because of the same species of damage to the millions and millions of jobs in, in their parts vendors and in their sales dealership networks.  To this writer’s personal knowledge, the plan has not done away with the pain on the retail end with many dealerships having to shut down, but many of the parts suppliers that had shut down have re-opened and re-hired personnel, but often only on a part-time basis as they go forth with considerable timidity to see how the economy reacts.  With the millions of “automotive” jobs at risk in addition to the millions of jobs lost in other areas of the economy…particularly retail as consumer spending is down so much…, it is difficult to question the logic, (or desperation?) behind the plan.  The Nation was facing the stark alternative of the largest industry and the largest employers in the United States shutting down and of tens of millions of employees being placed upon the street, or stepping up and trying to help.

 

          By way of review as to the overall economy, it should be noted that the current recession (defined as commencing after two quarters of negative GDP)  began in December 2007.  At that point in the Bush Administration the unemployment rate in the United States stood at 5.0 % and the actual number of unemployed stood at approximately Seven Million Four Hundred Thousand persons.  Then, at the time of the first Economic Stimulus Act passed at the instance of the Bush Administration in February 2008, there was a relatively unchanged officially-recognized unemployed number of Seven Million Seven Hundred Thousand persons, while the official unemployment rate had dropped slightly to 4.8 %.  But by the time President Obama took office in January 2009 the unemployment rate had jumped to 7.6 % (the highest since 1992!), and the number of unemployed stood at Twelve Million Seven Hundred Fourteen Thousand persons--almost DOUBLE what it had been at the beginning of President Bush’s last year in  office!!! 

 

          I would surmise, since I am without specific statistical back-up on this at the moment, that most of the lost employment came at the expense of the almost total shutdown of residential building in the United States as well as the devastation caused by the loss of much of the Nation’s industrial capacity in the “near collapse” of the automotive industry!  (I have a son and a son-in-law in businesses related to the building industry and am kept well-informed about the trials affecting that industry and in all businesses related thereto or dependent thereupon.)

 

          Now we near the end of the summary which I truly believe every American MUST understand.  When the Obama Administration entered office, not only did it i.) undertake three wars, ii.) have the burden of restoring the Nation’s international image, primarily by conducting diplomacy in a civil manner, iii.) try to counter the devastation of the automobile business–very much still a work in progress, iv.) enact its own Stimulus package (a $787 Billion “price tag”–now questioned by many as having been too small) to help re-build the Nation’s infrastructure, v.) make fiscally attrative and encourage the creation of energy efficient industries, vi.) improve education by dramatically going to a results oriented approach to youth achievement, and vii.) create a wealth of new tax cuts and restore a fair graduated income tax system, it also took on the collosal burden of attacking the vast, most expensive and yet least efficient healthcare delivery system in the Western World.  Notably, the United States is the only Nation among the thirteen Western Industrialized Nations that does not recognize healthcare as a basic right of citizenship!  And it does the job of health care less well than any other developed Nation.

 

DON’S OPINIONS

 

          As of December 2009, just last month, the Bureau of Labor Statistics reported that: a.) the unemployment rate had increased from 7.6% when President Obama took office to 10.0%, and b.) a total of Fifteen Million Two Hundred Fifty Seven Thousand persons unemployed, i.e., an additional three million persons, had been added to the official unemployment list in one year.  Also, the stimulus the Democrats enacted in early 2009 had as one of its objects the possible creation of Three Million Five Hundred Thousand jobs–and did add some but not did not create nearly that many and certainly not enough to overcome the losses noted.   And, sadly, once you add the “underemployed” (e.g. Ph D’s “flipping hamburgers”)  and those persons only “marginally attached” to the workplace, the “real” number of unemployed is closer to Twenty Four Million persons–out of the total civilian workforce of but One Hundred Million One Hundred Fifty Three Thousand.   

 

          It could easily be argued, therefore, that 2009 was, in fact, the wrong time to tackle a divisive project such as Universal Healthcare–no matter how very important it is. But it is equally logical to argue that reforming healthcare delivery, so economically important itself, and representing approximately one-seventh of the entire United States economy, should have been the first target in the larger war of placing the economy on a sound footing. 

 

             Despite the possible justifications either way, the fact remains that the path chosen did result in the most divisive and contentious debate, actually battle, imaginable between the Obama Administration, the Democratically-controlled houses in Congress on the one hand, and the entrenched Republican operatives in the House, Senate and on K Street on the other whose admitted sole purpose (as stated by the entire Repubican Caucus on the Floor of the House of Representatives), was to impede anything and everything the Administration attempted to do–regardless of merit.  Because they, as their favorite spokesman Rush Limbaugh said, they  “…want the Obama Administration to fail.”   And no matter the cost to the Country, they would not even offer alternative ideas on how to solve problems.  This ill-tempered partisanship prevented the actual accomplishment of almost anything requiring Congressional approval after February last year.  The economic situation is in such a state now that while the war was the task that very properly required the strongest efforts of government in the past year, hindsight suggests that the most important legislative item on the agenda should have been the creation of jobs!!!  But it must be admitted that the enmity was so great with  Limbaugh, Beck, Steele, Stoerner and other “leaders” that even if the focus had been different the odds are that the opposition would have been just as virulent–since all that matters to the Republicans is power–not the welfare of the Country.  

 

          The Obama Administration will succeed, but it likely must alter emphasis…not course.   And if the Republicans continue to simply act as a roadblock to everything, they will be shown to even the most dull Republican voter precisely what their leadership is really all about.

 

          James Carville, while heading President Clinton’s Campaign in 1992 coined the expression, “It’s the Economy, Stupid.”  And it is pretty obvious from the new demographics spawned by the dramatic changes in our economy over the last six to eight years, that the reality is that the slogan must be quickly resurrected…or the United States political system will turn into a roller coaster of ever changing policies by reason of the inescapable facts that:

 

          i.) too many elected politicians (Republican and Democratic) within the “Beltway” are there for what they can get more than for the honor of serving the people.  That is, they are not the “citizen-legislators the Founders evisioned; they, instead prefer lifetime re-election, feeding at the “trough” as long as possible, and the even more vast sums of corporate money now available to them (see the United States Supreme Court case of Citizens United vs. Federal Election Commission , slip opinion of January 21, 2010), over everything else; and,

 

          ii.) the self-serving Congressmen and Congresswomen will, unless these most severe problems are solved quickly, walk in “lockstep” with the ever-changing cast of “disaffected” Americans, and they will likely, to their surprise, ”turn over” every two, four, or six years–depending upon the term of the office they hold–BECAUSE IT IS IMPOSSIBLE TO MAKE ALL OF THE PEOPLE (EVEN ALL OF ONE PARTY)HAPPY ALL OF THE TIME. 

 

              And there would be no coherent policy within our National government, and individual, minority rights will also come under attack by persons who question the majority, no matter how inane or irrational the disaffected majority’s opinion might be.  Many failed administrations and even civilizations have gone down that particular road in the past…and who is to say ours will not?

 

          That is but another way of saying that things have gotten so bad for the “populace” that “populism without direction, but of disgust” has set itself up as a roadblock to doing the things most important to the Nation.  A “populist” movement such as now exists–without a leader or a coherent agenda, can be destructive, and such a discombobulated movement inevitably leads to appeals to our Leaders demanding that they cave in to irrational passions of the moment.   Such a phenomenon would inevitably consume American politics.  My belief, regardless of the political structure, is that if we have serious financial reform, we will be able to get back to healthcare delivery and other still “tier one” issues.  With even more passion…when we can afford it…whether it be now or six months from now.  Equity, and caring for ourselves as a People demand it. 

 

          Due to the malignant nature of the Bush-Cheney Administration and the obvious obvious intent of the McCain-Palin ticket, I believed, and still believe, that the Presidential Campaign of 2008, was actually a battle for the “soul” of America.  That battle was won by a well-coordinated campaign of Democrats, both liberal and main-line, and many independents, but the loyalty of those out of work now, or who know or who are related to persons out of work, is gone.  Thus we have experienced the Dick Armey and FreeAmerica “tea parties” and the already “lockstep” partisan Republican opposition in Congress to every single proposal of the Obama Administration.  Most Americans, a clear majority, back during the primaries were literally reeling from the mounds and mounds of disgrace heaped upon the Nation by the Bush-Cheney Administration (which was clearly responsible in part for the election of President Obama), but they have now, for illogical yet still understandable reasons, become fed-up with “everything Washington,” although there are certainly many well-meaning persons in the District acting on behalf of all of us.

 

          But that disgust and disaffection with Washington is why unknown “pin up” (literally!) Scott Brown was elected to Ted Kennedy’s old seat over the “inanimate” and sadly unimpressive Martha Coakley–and signaled quite clearly the deep worries abroad in our great country.  If we do not watch out and lead the populace out of its current ”swamp of uncertainty and disgust”, we might well have 535 “pin ups” and “poster boys” running the Nation by responding to every cockeyed whim one hears.

 

Don Switzer, BA, JD

Rogers, Arkansas

WWW.PoliticsandWhimsey.Com

(c) January 25, 2010