Friday, October 3, 2008

More Alternatives

As the House is thick in debating the bailout proposal in the form "sweetened" by the Senate, there are still a few strong voices with the chutzpah to speak out against a bad idea. Actually, Marcy Kaptur seems to do a good job of keeping her iron fist in a velvet glove; but Dennis Kucinich is at it again, trying to shock the system as much as the protesters who have been gathering outside the Capitol building. The fact that Kucinich, whom I once called "my 'poster child' for chutzpah with a positive connotation," has not allowed the calculated inattention of the media to blunt the flamboyance of his rhetoric is sufficient reason to present him with his third (by my count) Chutzpah of the Week award for hanging tough and defiant while the powers that be do all they can to build up their votes against him.

Where positive chutzpah is concerned, this is usually the place to extol the recipient for what he has done to earn the award. However, given how critical the vote in the House will be and how likely it will be to turn against the interests of Main Street in favor of those of Wall Street, the best honor than can be given to Kucinich is to make note that the number of alternative strategies continues to increase.

  1. I suppose the first of those strategies came from Senate Budget Committee member Bernie Sanders, but on Wednesday the Senate seemed more united over making sure that Sanders' contribution would pass unnoticed than they were in their vote on their revision of the bailout proposal. This probably had a lot to do with Sanders' own chutzpah in his never being ashamed to call himself a socialist (which never seemed to bother the citizens of Vermont who voted him into office).
  2. The second effort was probably more of a meta-strategy than an explicit strategy. It came from Joseph Stiglitz and appears to have been greeted with similar disregard by both Houses of Congress. Indeed, Stiglitz was so "passed unnoticed" that I did not even come across any accusations of socialism leveled against him. More likely his problem was that he is too good with numbers, and that tends to scare those who like to make decisions about large amounts of money without bothering with troubling details like where the money will come from and where it will actually go. Stiglitz may also have been ignored because he committed a cardinal sin of Congressional deliberation: He tried to reframe the problem. Worse, he pointed out that the bailout would address only one of four serious problems that had to be resolved before economic healing could begin. This kind of thinking is poisonous to a Congressman, even one like Christopher Dodd, who seemed so intent on doing things right, rather than doing them quickly.
  3. The third alternative came from Ann Pettifor, who was enough of a pragmatist to spell things out in a four-point plan in simple language; but she seemed to be disqualified from consideration of grounds of being British.
  4. That brings us to "Black Wednesday." It is unclear whether or not William Greider was formulating his own alternative at the same time that Sanders was going down in flames on the Senate floor, but it was only today that Google Reader found it on the Web site for The Nation. Greider's is a five-point plan, which, according to George Miller, is still within the cognitive capacity that determines what we can keep in our heads. It also has the virtue of being formulated in five simple imperative sentences, each of which is elaborated by Greider as follows:

    1. Stop the easy-money bailout. Instead of buying rotten assets from Wall Street firms with no strings attached, the government should examine their books and decide which banks can be saved with direct infusions of capital in exchange for public ownership--roughly on the terms Warren Buffett got when he aided Goldman Sachs (preferred shares and guaranteed dividends). The failing institutions should get regulatory euthanasia. This approach gives the government direct control over the survivors and ensures that the public is protected from egregious loss. The model is the Reconstruction Finance Corporation of the 1930s, which recapitalized banks and corporations under stern supervision.

    2. Help the folks who are hurting--directly. A homeownership corporation patterned after the New Deal original would have the money and the flexible authority to supervise "workouts" for millions of failing families. This is what bankers do for corporations when they get in over their head. Government can do the same for indebted households: stop the liquidation, stretch out default dates and arrange manageable terms. This is not a bleeding-heart gesture--keeping families in their homes is economic stimulus, and it halts the decay of neighborhoods.

    3. Get serious about economic stimulus. We need a recovery program five or six times larger than the pitiful $60 billion proposed by Democratic leaders. These billions should go for the familiar list of neglected priorities--fixing bridges and schools--but should also jump-start the green agenda for alternative fuels and restoration of ruined ecosystems. The government should subsidize the new industries of our age, just as New Deal spending financed the modern development of aircraft, petrochemicals, steelmaking and other key industries in the 1930s.

    4. Re-regulate the bad actors and indict the criminals. Start by restoring the law against usury--the predatory lending practices that ruin weak and defenseless borrowers. Government cannot wait for a relaxed debate about restoring regulations. We need newly designed controls over the financiers and well-defined public obligations imposed not only on banking but also on hedge funds and private equity firms. These cannot be discretionary rules. If the money guys don't like them, they should get out of the business. Paulson's Wall Street colleagues are already mobilizing lobbyists for this fight, but they may discover that Washington has been changed by events. The easygoing deference to Big Money seems suddenly out of fashion.

    5. Create a new brain for government management of the economy. The crisis and the halting decision-making by the Treasury and the Federal Reserve--not to mention the secrecy and special deal-making on behalf of financial interests--make it clear that deep reform is required. I would start with a special reconstruction and recovery agency, empowered to lead policy and oversee banking regulators and the economic stimulus. The Federal Reserve's so-called independence is an antique concession to the big banks and doesn't make any sense. Monetary policy and fiscal policy must be balanced and decided in the same process. That rational approach might have stopped the Fed from the biases and dereliction that led to this crisis.

We thus see that there is an abundance of well-considered support for Kucinich's persistence in trying to get the House to consider alternatives as part of their deliberations. After all, is it really deliberation is such alternatives are ignored (and each alternative is considered in terms of its consequences)?

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