Bill Clinton And Derivatives

Bill Clinton, whose Administration set the ball rolling on a lot of the structures that ultimately led to ruin in the financial markets, gives a pretty honest take of where he feels he went right and wrong:

Mr. CLINTON: Now, there basically have been three charges, if you will, laid at our doorstep, because everybody recognizes that I vetoed the securities reform bill and that we had a very different economic philosophy. But they — the three charges are one, because I enforced the Community Reinvestment Act for the first time and over 90 percent of all lending done under that law was done when I was president, $300 billion, that part of that was a lot of little banks made loans to people they had no business making loans to to buy houses so they could check the box for the Community Reinvestment Act. That’s the right-wing argument.

Then there’s the argument from the left that I shouldn’t have signed the bill that got rid of the Glass-Steagall law because that enabled banks and investment banks in effect to merge their functions.

And then there’s the argument that I make, which is that I should have raised more hell about derivatives being unregulated. I believe the last one is by far the most valid, although I don’t think that the Congress would have permitted anything to be done because Alan Greenspan was against it [...]

But I do believe on the derivatives they made the argument, the people who were against regulating it, that people like you weren’t buying derivatives. It wasn’t like you were investing your 401(k) in derivatives. You were investing your 401(k) in mutual funds, which were subject at least under normal times to the jurisdiction of the S.E.C., which was supposed to be minding the store. And so because we had a hostile Republican Congress which threatened not to fund — I don’t know if you remember this but we had a huge knock-down fight when they threatened not to fund the S.E.C. because of what Arthur Levitt was doing to try to protect the American economy from meltdowns. They said, “Oh, he’s interfering with a free market” and all that. This is what he’s supposed to do.

They argued that nobody’s going to buy these derivatives, we’ll do it without transparency, they’ll get the information they need. And it turned out to be just wrong; it just wasn’t true. And once you got that massive amount of money invested in derivatives that people thought — it’s like these credit default swaps, where people thought, the Lehman people talk about it, they thought, or the A.I.G. people, they thought it was 100 percent safe investment, they thought there would never be defaults on these mortgage securities. So of course you wanted insurance there because you got the insurance premium, you make the profit and you couldn’t possibly lose money, right? Well, it turned out to be all wrong. That rested on a lot of assumptions, including the fact that the ratings agencies would do a good job, which didn’t happen, in evaluating risk. So I very much wish now that I had demanded that we put derivatives under the jurisdiction of the Securities and Exchange Commission and that transparency rules had been observed and that we had done that. That I think is a legitimate criticism of what we didn’t do.

Clinton doesn't buy the arguments about Glass-Steagall or the Community Reinvestment Act. And much of his argument rests on the fact that the Bush Administration just gutted the regulatory apparatus, particularly the SEC, and so he was operating under a different environment. And David Leonhardt makes another very good point - the Clinton Administration allowed the run-up of the dot-com stock bubble, so thinking they would have charged in and stopped the housing bubble doesn't really hold water. They were lucky to get out of office when they did.

But this is pretty honest, and points to Clinton's instincts on this, which were always more finely attuned than his advisors. The derivatives market took off after Clinton left office, when the stock bubble popped and the relationship between housing and mortgage-backed securities started to realize itself. At the same time, Long-Term Capital Management, which invested heavily in derivatives, failed during Clinton's tenure (he couldn't come up with the name in the interview), and apparently this led Clinton to approach Alan Greenspan on the subject, who predictably said that derivatives were a niche market. In other words, Clinton deferred to Greenspan. So how would he have stopped the bubble from inflating, then? I can't see Clinton having bungled the issue as much as Bush, but while his instincts were solid, the follow-through, not so much.

Meanwhile, we have the benefit of hindsight now, and certainly a desire to regulate derivatives. Which makes the banksters unhappy:

For credit-default swaps, information about intraday trades and prices has long been controlled by a handful of large banks that handle most trades and earn bigger profits from every transaction they facilitate if prices aren't easily accessible.

For example, credit-default swaps tied to bonds of companies such as General Electric Capital and Goldman Sachs typically have a pricing gap of 0.1 percentage point between the bid and offer price. That translates into a $40,000 margin for every $10 million in debt insured for five years. Greater price transparency could narrow that gap, lowering costs for buyers and sellers but reducing fees for banks.

Just so you know who's looking out for you. Now, if the banksters still run the place, as Dick Durbin said, then everyone can be right about the dangers of the financial markets and it wouldn't amoung to a hill of beans.

The Hiccup

The big story of the day is the Washington Post's rendering of Timothy Geithner's last-second switch on the bank plan, away from a "bad bank" aggregating worthless assets:

Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.

According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.

They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled.

The sharp course change was one of the key reasons why Geithner's plan -- his first major policy initiative as Treasury secretary -- landed with such a thud last Tuesday. Lawmakers, investors and analysts expressed dismay over the lack of specifics. Markets tanked, and fresh doubts arose about the hand now steering the country's financial policy.

They should have delayed the rollout, then. It might have caused some churn in the markets, but so did a poorly-explained, light-on-details half-measure. Geithner lost the trust of the markets by failing to explain his plan fully. Considering that the biggest thing the Obama Administration has to offer right now is confidence, that's devastating.

The other issue is what K-Drum describes:

Say what? After nearly two years of crisis and weeks of work, they suddenly discovered that buying up toxic assets from banks was problematic because the assets were expensive, hard to value, and risky for taxpayers? That's not exactly rocket science. Hell, someone who had only casually browsed through the blogosphere over the past year would know that. And not even the financial blogosphere. Just ordinary lay blogs like this one.

I really don't know what to think of this. Maybe the Post has it wrong. (Though their account matches others I've read.) Maybe the problems were actually more subtle than the Post lets on. But it sure sounds as if the Treasury team spent months discovering little more than that the world is round. WTF?

I think that's the problem of a self-sustaining closed loop. They believed their own bullshit, in short, until they couldn't anymore and had to fact reality. In addition, the Treasury Department has a critical lack of staff at the moment, making it easier for Geithner and Larry Summers to have control of the policy without dissenting voices or really any other voices. Josh Marshall explains why this is.

From what we can tell, one of the big issues is that it's actually hard to find people with the requisite knowledge of banks and the capital markets who aren't also compromised -- either in policy or business terms -- by the housing bubble and the rest of the financial collapse. And that raises again as a question: why have none of the people who were financial orthodoxy dissidents and saw what was coming been brought in to the administration. I know I'm hardly the first one to bring this up. And we know that the big appointees -- Summers and Geithner -- were part of the mix. But there aren't even any of them further down into the appointment structure. They're all still on the outside.

There's a groupthink problem here that Obama needs to address. The economy is meltng down in record proportions and we can't afford to rest the recovery on the backs of basically two people. As Krugman says, Geithner and Summers are smart but they need to get out more. They also might do by having some more friends.

Summers Eve

I am definitely worried that Lawrence Summers is acting as a kind of mole inside the Obama White House, defining economic policy in the most neoliberal of ways. I think he is mostly responsible for the mix of tax cuts, particularly corporate tax cuts, in the initial pre-compromised stimulus bill. And he's certainly responsible for the terrible "bad bank" idea, which I haven't gotten around to writing about recently, but which would basically hand over maybe trillions in taxpayer money to the very bankers who got us into this mess. Obama is cautious and certainly listens to varying points of view, but my fear is that Summers was winning the arguments, at least until the past couple days, when the President could no longer abide the right-wing attacks and came out in a forcefully partisan manner.

The question is who will be the counterweight to Summers in the White House? Chris Hayes thinks it could be the Vice President.

Summers has already come to dominate the White House economic policy shop. One person close to Obama's economic team told me that on economic policy, "it's looking like it's Larry's show." This leaves a disconcerting vacuum in the White House for a labor-liberal voice equal in stature and clout. Enter, perhaps, Joe Biden.

In December he named Bernstein, formerly of the labor-friendly, stoutly progressive Economic Policy Institute, to be his chief economic adviser, a position with no recent precedent. Bernstein then co-wrote the first economic report released by the transition team, which attempted to quantify the benefits of the president's proposed stimulus. He is one of the people present for the daily economic briefings to the president.

In the weeks before inauguration, Biden reached out to labor leaders, including the AFL-CIO's John Sweeney, confirming that he would be a strong advocate for them in the White House. And he has publicly supported "Buy American" provisions in the stimulus package that would require participating firms to purchase their materials from domestic companies--a measure that Summers pointedly refused to endorse during a recent briefing with reporters.

Biden is "really pushing hard" on "a more progressive populist approach to economic policy," says Mike Lux, the transition's liaison to the progressive movement. "I'm just delighted that there's somebody with his clout that's doing this, otherwise our side would be in a lot worse shape."

Indeed, Biden's appearance yesterday at a Maryland train station was a signal of his growing progressive populism on domestic issues, as is his task force on the middle class. I didn't think Biden would end up being the champion of any of this, but I hope he can keep Summers from dominating.

Summers?

Aside from the fact that he was partially responsible for the deregulation pushed by the Clinton Administration and in that respect just represents the past, why would you want to choose Lawrence Summers for Treasury Secretary and immediately put yourself into a controversy, given his statements about women and science while President of Harvard? This is terrible politics, aside from everything else. He's going to have a bad confirmation hearing and the talk of "early trouble in the first 100 days" will be pounced upon by The Village.

Steve Clemons has a good piece on this. Here's an excerpt:

I have been surprised about the quick rehabilitation of Summers in Obama Land -- particulalry given Obama's promises to the labor community and his strident position during the campaign against the kind of trade deals that Summers and Rubin promoted.

If he is appointed over Geithner, Tyson, and others -- we need to quickly get a sense of whether or not the economic views of Summers have changed. Can he embrace a smarter version of globalization than he helped create? Can he help promote an alternative to the winner takes all capitalism that Summers helped to reify and which made people like Robert Rubin mega-wealthy? Can he embrace a genuine re-write of the American social contract that pushes forward the rights and position of labor? Can he abandon the fiscally conservative ideology of the Brookings Institution's Hamilton Project that he and Rubin helped hatch?

We need to know the answers to these questions. I find it strange that Obama is seriously considering someone whose previous work and profile is so at odds with the goals Obama has proffered in his campaign. If Summers is appointed, we have to hope that he is not the Summers we knew eight years ago.

There has been some convergence with the neoliberals of the Clinton years and progressive economists in responding to the present crisis. Robert Rubin and Jared Bernstein penned an op-ed acknowledging that now is the time for a massive stimulus, finding many points of convergence on public investment in infrastructure and health care. The economist's letter in support of a new stimulus package will likely have multiple co-signers from across the political spectrum. It's simply a different environment than it was in 1992. People understand how to meet this historical moment.

But why would you feed a narrative that there's trouble in the early going? It makes absolutely no sense.

...Josh Marshall shares my concern.

...I just signed this petition.

The Washington Note is reporting that former Clinton official Larry Summers is one of the leading nominees to become the Treasury Secretary for the Obama administration. In 1999, Summers was one of the key proponents of the banking deregulation that led to the rise of 'mega-banks' and the current financial crisis. At the time, Senators like Byron Dorgan and policy advocates like Public Campaign were warning the financial deregulation, but Summers did not listen. In addition to this remarkable lapse in judgment, Larry Summers has argued that women are innately less gifted in science than men, that 'Africa is Underpolluted', that child sweatshop work in Asia can be justified, and that energy used to oppose job destroying trade agreements was "very, very badly mispaced".

President-elect Obama spoke eloquently and often about the perils of deregulation and trade agreements that do not include worker and environmental protection, and excesses on Wall Street due to governance failures. Let's ask him to put someone in charge who did not actually help cause the current crisis, who did not contribute to the bleeding of America's industrial base, and who is not part of the corrupted failed elite that has ravaged our country.

The Bigger Economic Fish To Fry

As stocks tank today on news of terrible retail sales that may only get worse right before the holiday shopping season, the reality that the greater economy is in terrible shape is starting to sink in. The market is especially jittery so that news is being more harshly reflected, but it's at least based in some truth. We don't make anything in America, and consumer spending props up the economy, and if jobs are slashed and you can't borrow against your home or your plastic anymore, those sales are going to drop, and that's the ballgame.

As Robert Reich says eloquently today, the problem is not people "living above their means" but wage stagnation which forced people to borrow just to maintain their lifestyle.

It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.

The "living beyond our means" argument suggests that the answer over the long term is for American families to become more responsible and not spend more than they earn. Well, that may be necessary but it's hardly sufficient.

The real answer over the long term is to restore middle-class earnings so families don't have to go deep into debt to maintain what was a middle-class standard of living. And that requires, among other things, affordable health insurance, tax credits for college tuition, good schools, and an energy policy that's less dependent on oil, the price of which is going to continue to rise as demand soars in China, India, and elsewhere.

In other words, the way to make sure Americans don't live beyond their means is to give them back the means.

What we need is a major stimulus program - bailing out the banks will not be enough. This is in direct contrast to neo-Hooverists like Ruth Marcus who think that a recession will somehow work itself out as long as you don't use the power of the federal government to do anything. That's blinkered thinking. Nobody will invest during a slowdown EXCEPT the government - nobody will create jobs, nobody will stimulate the economy, and nobody at all will look after poor people and give them the opportunity to succeed.

The question is whether Obama will listen to the clucking of the Neo-Hooverist chattering class or come up with a solution commensurate to the problem. He's been playing footsie with the Blue Dogs and talking about reinstituting PAYGO rules. Of course, they are already IN PLACE in the House, they just are routinely ignored, as they were during the bailout.

Did you get that part? The Senate has "more or less ignored" the few actual measures of fiscal restraint the Blue Dogs tried to keep in place. Kind of makes you wonder how such a group is still described as so powerful, if the few aspects of their fiscal retraint are "more or less ignored." In fact, one has to wonder how such a supposedly powerful group committed to fiscal responsibility has managed to co-exist with a federal government that has overseen the least fiscally responsible spending regimen in history.

Could it be that the power of the Blue Dogs is not actually in maintaining fiscal responsibility, but in threatening to throw their lot with the demographically compatible Republicans in a narrow divided Congress and pass legislation that will then be signed by George Bush? And, could it be that when that threat is no longer applicable--which it almost certainly won't be once the Congress is no longer narrowly divided and George Bush is no longer President--that their demands will go from "more or less ignored" to almost entirely ignored?

I should hope so. Austerity budgeting is not what we need right now - this is not 1993, the recession is much wider and deeper, there's still a financial crisis on Wall Street, and there are major public investments that are desperately required. We can argue about the form a stimulus package could take - I think it needs to be a lot bigger than the $150 billion dollar number being tossed around right now, and it needs to go to infrastructure like building a new clean energy grid, wiring America for broadband, high-speed rail and mass transit - but we cannot argue about its necessity.

There are of course questions about Obama. His policies are pretty middle-of-the-road and not necessarily up to the challenge of the moment. There is reason to be concerned. There is also over the last month a keen understanding that these are abnormal times. The question is how Obama will adjust. Will it be like this?

How does a liberal do these things? Well, first a liberal decides to take away the inflation problem, that whenever people get money they spend it on things that cause the demand for oil to increase. He does so by making a huge multi-hundred billion dollar investment in fuel efficiency by buying up all the least fuel efficient vehicles, by spending massively on public transit, by doing a massive fiber build-out and encouraging businesses to telecommute. He reduces the speed limit to 55 on all roads. He starts charging people for driving during rush hour. He encourages businesses to have workers work 9 hour days and take off a long weekend every two weeks. He massively invests in green energy. He sets up a program to refit every building in the US so that it uses as little energy as possible, or even produces energy. He changes the energy network so every American can sell power to the power company. In doing all these things, he actually reduces US demand for oil and increases its energy output. And all this activity creates jobs, a lot of jobs, which can't be offshored or outsourced.

And while the liberal may give a tax credit here, or a tax credit there, a lot of things he just has the government do, or has it spend the money directly. When you refit your house you don't get a tax credit, you get someone to come and do the work, then a government inspector checks it's done properly, then the company that refitted the house gets paid you get a reduced bill and share in some of the savings by actually receiving a check every month for as long as you live in the house. When new networks are set up, the government exercises eminent domain and encourages municipalities to set up their own networks. It forces large cable and phone companies to let anyone sell time on their networks, just like in the old dial up days and just like in countries like Japan that are far ahead of the US. Governments build the networks themselves, and run them themselves, since the major telecom companies have proven they wont' give the US good broadband [...]

Oh, I know all of this is a dream. Obama's not a liberal, despite all the screaming. That's not his fault, there's hardly a liberal left in America. As I like to joke, "Americans wouldn't know a liberal if he gave them universal health care". And some will say that if Obama was a liberal, he couldn't be elected, though frankly, after this campaign, I think that's a weak argument.

But, because Obama isn't a liberal, what he's going to do is do neo-liberalism, aka:Reaganomics, one more time. One more roll of the dice at the land casino. It won't work, and in a few years we'll be back here again.

And then we'll find out whether or not Obama can learn from experience. Most people can't, really, they just repeat the same mistakes over and over again. But some can. FDR did, he tried something and if it didn't work, he tried something else, and it was something genuinely different. Obama, it is said, models himself after the Kennedys, but I hope he'll learn something from FDR as well.

I'm not totally convinced of Welsh's argument vis-a-vis Obama, but he's absolutely right on the liberal response. There's a role to play for citizens who want to see a new economy, who want to grow up in a country with good paying jobs building things at home, who want advances in education and health care and the environment. There's a moment to push Obama to do what's needed.

The Royalist And The Neoliberal

The New York Times takes a look at the economic programs of both Barack Obama and John McCain and finds them both to hold doctrinaire ideological positions.

For all the efforts of Senators John McCain and Barack Obama to portray themselves as willing to break with party orthodoxy to get things done, the economic debate that opened their general election campaign this week previews a classic clash. It is a battle between Republican supply-side economics and a Democratic tradition that uses government levers to try to reduce inequality and spur the economy.

Mr. McCain, who once opposed the Bush tax cuts in part because they favored the wealthy, has now made extending those cuts a central plank in his economic plan, which is based largely on the Republican credo that tax reductions stimulate the economy. And he is pushing another strain of fiscal conservatism that has not been much in evidence of late: a call for smaller government and a vow to cut pork-barrel spending.

He often adds a dash of populism, speaking against excessive corporate pay packages on Tuesday, and has pushed for a gasoline-tax reprieve. And while Mr. McCain has portrayed his tax cuts as benefiting the middle class, most of the benefits would go to the wealthy and to corporations, including his calls for the elimination of the alternative minimum tax.

Mr. Obama often speaks of the traditional liberal goal of trying to redistribute the tax burden to reduce economic inequality, and at least in his public pronouncements has not emphasized the market-friendly, deficit-reduction aspects of the economic approach credited to former President Bill Clinton and former Treasury Secretary Robert E. Rubin in the 1990s. Mr. Obama’s plan would raise taxes on those making more than $250,000 by allowing Mr. Bush’s tax cuts on top earners to expire, and he has signaled that he would consider increasing the current cap on income subject to the Social Security payroll tax.

He has also proposed, for instance, more spending on providing access to health care, which critics say would widen the deficit when coupled with tax cuts. While Mr. McCain asserted in a speech in Washington on Tuesday that under Mr. Obama’s tax plan Americans of every background would see their taxes rise, Mr. Obama’s plan calls for cutting taxes on people earning less than $75,000 a year and for eliminating federal income taxes on elderly citizens who make less than $50,000 a year.

I think they get it half right. McCain is certainly following in the economic royalist tradition of the hard right. He wants massive tax cuts based on - not a credo - the myth that tax cuts add revenue by spurring the economy. He believes in wealthy corporations getting wealthier, and he thinks that a $200,000 annual salary is not rich. He's going to use the same tired refrain that "my opponent will raise your taxes" while he seeks to redistribute wealth upward. His sensitivity to runaway spending masks the fact that he himself has requested and taken $60 million in porkbarrel projects, and that he wouldn't touch the sacred defense budget, the biggest source of waste that the government funds. It's more of the same profit taking for the rich under a McCain Administration.

The Obama economic philosophy is a little harder to understand. He's not a populist, and he sits pretty squarely in the Robert Rubin tradition of neoloiberalism, at least in part. He's trying to maintain the free market but make sure that, in a time of great economic dislocation and disruptive change, that there is some measure of protection given to those in the middle who suffer because of that disruption, and that the "burdens and benefits of globalization are fairly distributed." Matt Stoller explains it further.

The central challenge of his strategy is that while he believes that we are undergoing a fundamental structural shift in our global economy, the changes he is proposing, with the exception of health care, are somewhat small-bore. This makes sense when you examine his economic team in a bit more detail. The big news on that front is that Hamilton Project denizen and neoliberal economist Jason Furman is Obama's newest economic advisor. Steve Clemons a noted, "To some degree, Furman manifests the interests and perspective of perhaps the leading neoliberal force in politics today, Robert Rubin." Furman is not Rubin, but Clemons thinks that he is "an essential spear-carrier of Rubinomics."

Furman's defense of Walmart as a 'progressive success story' provides an element of caution to the good news about Obama's strength as a candidate. I am not ringing alarm bells about Obama as a NAFTA loving centrist, or suggesting that Furman is a bad choice for an advisor. I know and like Austan Goolsbee, and Furman is probably a highly intelligent and open-minded policy advocate. Additionally, the economic debates have moved far beyond that, and he's likely to pull as much of his policy ideas from Cass Sunstein and Richard Thaler's Nudge with its behavioral economics frame of 'choice architecture', or 'libertarian paternalism' in which the government gently slopes the choices we face in ways that are good for us, without banning bad choices outright. Opt-in, opt-out, and default choices, for instance, are significant and substantial forces in governing our society, and my guess is that Obama believes strongly in making small adjustments for big impacts.

Furman's appointment has raised the ire of some on the left, but it's worth noting that Republicans have gone so far to the right and shown the ultimate failure of an unregulated free market that the Rubin forces and the more liberal economists have moved substantially leftward. When you have Senate Republicans filibustering any energy bill that doesn't solely address the crisis through drilling, when you have Republicans in general only interested in tax cuts without paying for them, I can understand why the NYT would say that both sides are ideological. Only the Obama camp represents about 99% of the spectrum of economic opinion, and McCain that tiny 1%.

Some of those mainstream Democratic ideas, like extending unemployment insurance, are mainstream because they work. In fact, Republicans know they work, because half of them are about to break and vote for the bill. Common-sense measures like this, like a windfall profits tax on oil companies, like a donut-hole approach to Social Security, like fairness in trade, like the Employee Free Choice Act, fit into a coherent argument because the right has retreated to a small, radical corner on the economic front. So Obama can get away with rhetorical brilliance like this.

... We did not arrive at the doorstep of our current economic crisis by some accident of history. This was not an inevitable part of the business cycle that was beyond our power to avoid. It was the logical conclusion of a tired and misguided philosophy that has dominated Washington for far too long.

George Bush called it the Ownership Society, but it’s little more than a worn dogma that says we should give more to those at the top and hope that their good fortune trickles down to the hardworking many. For eight long years, our President sacrificed investments in health care, and education, and energy, and infrastructure on the altar of tax breaks for big corporations and wealthy CEOs – trillions of dollars in giveaways that proved neither compassionate nor conservative.

And for all of George Bush’s professed faith in free markets, the markets have hardly been free – not when the gates of Washington are thrown open to high-priced lobbyists who rig the rules of the road and riddle our tax code with special interest favors and corporate loopholes. As a result of such special-interest driven policies and lax regulation, we haven’t seen prosperity trickling down to Main Street. Instead, a housing crisis that could leave up to two million homeowners facing foreclosure has shaken confidence in the entire economy.

I understand that the challenges facing our economy didn’t start the day George Bush took office and they won’t end the day he leaves. Some are partly the result of forces that have globalized our economy over the last several decades – revolutions in communication and technology have sent jobs wherever there’s an internet connection; that have forced children in Raleigh and Boston to compete for those jobs with children in Bangalore and Beijing. We live in a more competitive world, and that is a fact that cannot be reversed.

But I also know that this nation has faced such fundamental change before, and each time we’ve kept our economy strong and competitive by making the decision to expand opportunity outward; to grow our middle-class; to invest in innovation, and most importantly, to invest in the education and well-being of our workers.

If that's not liberal enough for people, I don't know what more he can say.

Senator Dodd: Cut off Chinese imports until they stop poisoning us

This is the greatest blow to the neoliberal consensus I have seen in a long time. And it's a courageous call to action from Senator Dodd.

This is an issue of safety. Parents should be confident that the toys and food that they give their children have been inspected and are safe. That's why I am calling on the President to use his authority to immediately suspend all imports of toys and food from China. It's not enough to simply talk about working for fair trade agreements. We need leadership that will act to enforce fair trade. We have the legal right and power under the WTO to keep products out of our country that threaten the health and safety of our families, and I'm going to do all I can to ensure we do so.

Only in our similarly poisoned political culture would this be seen as controversial. The Chinese have been operating for years with virtually nonexistent labor standards, allowing them to overpower our manufacturing base by producing goods at rock-bottom prices. They have not created a flat world, but one completely tilted in their favor, which uses what amounts to slaves to give us complacent Americans 99 cent packs of tube socks. Predictably, this inattention to any kind of human rights or quality control has led to poisoned food, poisoned toys, foodstuffs made out of cardboard, toothpaste with antifreeze, and probably a hundred other various depredations we just haven't heard about yet. In this situation, the only sensible thing to do is to not allow such items into American homes until we can get a handle on how wide and deep it actually goes. Senator Dodd's call is Common Sense 101.

But, as HTML Mencken notes, this will be met with howls of "protectionism!" and "you want to kill our economy!" And those howls will be coming from a particular source:

The problem here is the 21st Century version of The Jungle, with the Chinese government in the place of the meat packers, the Chinese people being the Lithuanian immigrant workers, and the American public… is still the American public, being poisoned by Corporatist pigs defended, now as then, by a complacent and complicit intellectual class (back then, stodgy laissez-faire men; and now, neoliberal economists and globalization cheerleaders) whose anger is only aroused by the muckrakers and dissenters whose position Dodd, to his immense credit, echoes [...]

While the current FDA is amazingly incompetent and corrupt even by normal Bushite standards of incompetence and corruption (which is saying a lot), even the “best” Clintonoid FDA couldn’t possibly inspect all the food imports. The problem can only be solved by insisting through trade pacts that imported food is produced according to American environmental, labor, and safety standards. They want our market, fine; they must treat their workers, the environment, and consumers by our rules (which admittedly aren’t all that great right now, either, also largely in thanks to Corporate-whorish Sensible Liberals, but better by far than China’s). However, demanding such a remedy requires moral courage, something economics textbooks don’t teach — though there is apparently an esoteric chapter in them that instructs in the fine art of dishonestly using moral language.

If you want to see trade and globalization rocket up to the top of the public consciousness, you'll join with me in broadcasting Senator Dodd's call to action far and wide. I don't think he's the most populist candidate in the Presidential race; he's not calling for the cancellation of NAFTA or the WTO, for example. But he's bringing to light a very pervasive issue in completely rational and sensible terms, namely that we shouldn't let poison into our homes. This would be a bold first step into unmaking the ridiculous economic consensus that globalization is a net positive and "wouldn't you rather have lead paint in your toys than have to pay a dollar more for them?"

Senator Dodd's going to take a lot of heat for this one, let's get his back.

The End of the Poodle

Does this mean the end of the Clinton Era or the end of the Bush era?

Tony Blair said Thursday he would step down as prime minister on June 27, closing a decade of power in which he fostered peace in Northern Ireland and followed the United States to a war in Iraq that cost him much of his popularity.

In a somber farewell, Blair made way for Treasury chief Gordon Brown to take the top post. The British leader looked overcome with emotion, struggling to retain his trademark broad grin as loud cheers rang out.

Following the Sept. 11, 2001, terrorist attacks in the United States, it was right, Blair said, to "stand shoulder to shoulder with our oldest ally, and I did so out of belief."

"Hand on heart, I did what I thought was right," Blair told party workers and supporters at Trimdon Labour Club in his Sedgefield constituency in northern England. "I may have been wrong, but that's your call. But believe one thing if nothing else. I did what I thought was right for our country."

You really need to watch The Queen to see Blair's sleazy cozying up to power in action. He's a firefly to power, and his lasting legacy is going along with whoever is the most powerful person in the room. He combined the most destructive elements of Third Way-neoliberalism with the imperialist ends of neoconservatism. He's a neo's neo. And he will not be remembered well.

At least he had the sense to walk away at some point. Unlike the Attorney General, you know.

Joe Klein, Ideological Extremist

The pooh-poohing of those who say poo-poo in the blogosphere continued today with this completely ridiculous post by Joe Klein, where he labels "left-wing extremists" as unnamed people who share an imginary set of characteristics in his own head ("corporations are fundamentally evil," "believes the United States is a fundamentally negative force in the world"). He's so dishonest about this that he has to go all the way back to forced busing in the 70s to find an issue that supports his thesis.

Joe Klein is fighting a war in his head with hippies that haunt his nightmares. He has not updated his take on liberals with any empirical observation since approximately 1972. And as Scott Lemieux brilliantly notes, this leads to ridiculous behavior like this:

To get something constructive out of this, perhaps we can create a more specific typology: the characteristics you're likely to have if you're the kind of respectable pundit who can be the token "liberal" at prominent national publications and Sunday talk shows:

• During the run-up to an exceptionally disastrous war when prescient anti-war voices are scarcer in the mainstream media than people of color at a Nader rally, you can never get around to using your prominent media outlets to clearly disagree with the war, you do find time to suggest that you agree with the war, and yet years after the fact when the war is both an abject disaster and highly unpopular you suddenly start patting yourself on the back for having courageously opposed the war all along.

• Even as you nominally opposed the war after it became easy to do so, you can somehow never find anybody else who opposes it in the right way--"it's easy to assume that they are rooting for an American failure," you claim, never naming any names or giving any quotes--and maintain that another Freidman is somehow always required for people to be Serious.

• You claim that people who oppose the Bush administration's illegal warrantless wiretapping program are as "out of the mainstream" as people who think that Terri Schiavo was three days away from walking out of the hospital, despite easily available public opinion data that shows the opposite.

• You make the transparently illogical assertion that the increasing insecurity of the contemporary job market makes the privitization of Social Security more desirable. (I guess this kind of reactionary and unpopular position isn't outside the mainstream--and certainly not comparable to the Schiavo wingnuts--but is "speaking truth to power" or something.)

• You claim, based on inferences gleaned from George Bush's alleged "authenticity," that the result of Bush's election would be "'a quiet, patient, and persistent bipartisanship,' with no big tax cuts or Supreme Court ideologues" and suggest that "Bush could easily retain Lawrence Summers at Treasury and Richard Holbrooke at the United Nations."

• You dismiss fundamental economic issues that might matter to people not in your highly elevated income bracket as "jobs, health-care, and blah-blah-blah."

Nobody could hit every one of these, could they?

I'm a little embarrassed to be taken enough by Klein's engagement with the blogosphere to have given him credit. He's clearly a milquetoast hack masquerading as a house liberal while reinforcing deeply conservative ideas about military and economic affairs. And he defends it by separating himself from imaginary "liberal extremists" who pretty much only exist at socialist food co-ops. There are millions of legitimate people who disagree with the neoliberal economic consensus and the neoconservative foreign policy consensus, which are backed up by decades' worth of evidence and data, and they can't be explained away by virture of their saying the word fuck every once in a while or wearing Birkenstocks. Get a clue, Klein.