Guarding the Family Fortune

NY Times Editorial, April 8, 2009

Last week, as the unemployment rate hit a 25-year high and nearly one in 10 Americans was receiving food stamps, 10 Democrats in the Senate joined all 41 Republican senators to cut estate taxes for the wealthiest families. The provision would funnel an additional $91 billion over 10 years to the heirs of megafortunes, money that would otherwise have been paid in federal taxes or donated to charity.

With economic pain and suffering on the rise, how do the senators justify a big tax cut for multimillionaires? By asserting that an estate tax cut is just what struggling Americans need.

Senator Blanche Lincoln, a Democrat of Arkansas, co-sponsored the measure with Senator Jon Kyl, a Republican of Arizona. She said it was critical to creating jobs through small businesses. “With all the money we’ve spent to help the economy, very little of it has filtered down to Main Street and family-owned businesses,” she said.

The implication is that upon the death of an owner, estate taxes typically devastate small businesses and the jobs they provide. That is swill.

Under today’s estate tax, which is retained in both the House version of the budget and in President Obama’s version, 99.8 percent of estates will never owe any estate tax. That’s because the tax applies only to estates that exceed $7 million per couple or $3.5 million for individuals, and a vast majority of American families are not and never will be that wealthy.

Of the tiny number of estates that are taxable, almost none are small businesses. A new analysis by the Tax Policy Center found that under 2009 law, only 100 small businesses and family farms would owe any estate tax in 2011. And almost all such estates are able to pay the tax bill without having to sell business assets, according to a report by the Congressional Budget Office. The Lincoln-Kyl tax cut would raise the estate-tax exemption to $10 million per couple ($5 million for singles) and, in an even bigger giveaway to the superrich, lower the top rate from 45 percent to 35 percent.

That sure would enrich the heirs of America’s biggest fortunes. It would not jump-start job creation on Main Street.

In addition to Ms. Lincoln, other Democratic senators voting for the estate tax cut were Max Baucus and Jon Tester of Montana, Evan Bayh of Indiana, Maria Cantwell and Patty Murray of Washington, Mary Landrieu of Louisiana, Ben Nelson of Nebraska, Bill Nelson of Florida and Mark Pryor of Arkansas.

Carcieri Plans to Cut Taxes: Uses Obama's Stimulus Bill to Bridge Shortfall

I read in the Newport Daily News and Providence Journal that Governor Carcieri, who criticized Obama's stimulus bill, intends to use the "Bush policy" of cutting all taxes to corporations, the wealthy, while facing an $866 million deficit.

Carcieri's plan is to follow Bush's "trickle down" policy, which seems to have gotten us into the trouble we're in with the entire country. Caricieri would

• Cut the corporate tax rate to drop, from 9 percent to 7.5 percent, increasingly each year, until it is eliminated completely


• The top personal tax rate will drop by nearly 1/2 from 9.9 percent to 5.5 percent.


• Reduce the inheritance tax by Increasing the amount to be deducted from inheritances to $1 million before facing a tax

How will Carcieri make up the shortfall with an already $866 million deficit and nearly no taxes available in the future? Initially he will:

• Cut $55 million in funding to cities and towns


• Refuse to repay money to the rainy day fund


• Tap , temporarily, to replace (for 2 years) $31 million to cities and towns, from the Obama stimulus fund, that Carcieri criticized heavily (But this will still leave a funding deficit to cities and towns of $24 million per year, and it will only last 2 years, causing further problems, stated below)

This will cause cities and towns to lose money for their operating expenses and for schools. Carcieri belives his "black box" ideology will magically create jobs.

Even so, the cities and towns, without funding, would almost have to increase taxes, institute a city income tax, or increase already high property taxes significantly. They could not do any of these things, but there would be no money then for police, refuse pickup, fire departments, and other city services, as well as no money for schools. All of these would, of course deteriorate quickly.

City services and school quality would decline OR real estate taxes would increase dramatically. Even IF corporations settled here.. and at 0 percent, I am sure they would... it is unlikely anyone could afford to LIVE here. Living over the border in Connecticut or Massachusetts would be desireable at that point, while working on any "black box" jobs created for corporate tax havens.

So perhaps our tiny state of Rhode Island COULD be the Republican "stimulus package" (read no, stimulus - eliminate taxes to coroporations and the wealthy, cut off funding to cities and towns and social services, and "hope for the best").

With no funding to cities and towns, as stated, and no funds to the state, I simply wonder how the state would decrease their already $866 million deficit. Creating jobs in the state with the 2nd highest unemployment rate in the country is desireable, but if everyone has to move to Massachusetts for city services, schools that are funded and any quality of life needs that any human being would want, what is Rhode Island?

It will be a haven for Corporations, the wealthy, and those who have made deals with them, and it will not house anyone under a $300,000 income, or more.

Carcieri's hypocrisy in using the Obama funds he criticized to make his plan "look presentable" for 2 years until it is too late, is quite sad.

Now.. expand this to the U.S. Where will everyone with under $300,000 salaries live? Mexico?

I look forward to the "Republican black box plan" taking effect in such a small state as ours. If it succeeds, certainly, the Republicans can "show everyone the way". But if it fails... while we here in Rhode Island will suffer (or become Massachusetts residents)...the country will have had its second test of the "Bush economic doctrine". The past 8 years were the first test. But if it takes us to remind you all of why we're in this trouble, it's the least we can do.

But if we DO suffer in order to test it once more for the rest of you... will you please use your stimulus package to help out a neighbor?

Smothering the American dream

By BOB HERBERT
SYNDICATED COLUMNIST

Working families were in deep trouble long before this mega-recession hit. But too many of the public officials who should have been looking out for the middle class and the poor were part of the reckless and shockingly shortsighted alliance of conservatives and corporate leaders that rigged the economy in favor of the rich and ultimately brought it down completely.

As Jared Bernstein, now the chief economic adviser to Vice President Joe Biden, wrote in the preface to his book, "Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries)":

"Economics has been hijacked by the rich and powerful, and it has been forged into a tool that is being used against the rest of us."

Working people were not just abandoned by big business and their ideological henchmen in government, they were exploited and humiliated. They were denied the productivity gains that should have rightfully accrued to them. They were treated ruthlessly whenever they tried to organize. They were never reasonably protected against the savage dislocations caused by revolutions in technology and global trade.

Working people were told that all of this was good for them, and whether out of ignorance or fear or prejudice or, as my grandfather might have said, damned foolishness, many bought into it.

They signed onto tax policies that worked like a three-card monte game. And they were sold a snake oil concoction called "trickle down" that so addled their brains that they thought it was a wonderful idea to hand over their share of the nation's wealth to those who were already fabulously rich.

America used to be better than this.

The seeds of today's disaster were sown some 30 years ago. Looking at income patterns during that period, my former colleague at The New York Times, David Cay Johnston, noted that from 1980 (the year Ronald Reagan was elected) to 2005, the national economy, adjusted for inflation, more than doubled. (Because of population growth, the actual increase per capita was about 66 percent.)

But the average income for the vast majority of Americans actually declined during those years. The standard of living for the average family improved not because incomes grew but because women entered the workplace in droves.

As hard as it may be to believe, the peak income year for the bottom 90 percent of Americans was way back in 1973, when the average income per taxpayer, adjusted for inflation, was $33,000. That was nearly $4,000 higher, Johnston pointed out, than in 2005.

Men have done particularly poorly. Men who are now in their 30s -- the prime age for raising families -- earn less money than members of their fathers' generation did at the same age.

It may seem like ancient history, but in the first few decades following World War II, the United States, despite many serious flaws, established the model of a highly productive society that shared its prosperity widely and made investments that were geared toward a more prosperous, more fulfilling future.

The American dream was alive and well and seemingly unassailable. But somehow, following the oil shocks, the hyperinflation and other traumas of the 1970s, Americans allowed the right-wingers to get a toehold -- and they began the serious work of smothering the dream.

Ronald Reagan saw Medicare as a giant step on the road to socialism. Newt Gingrich, apparently referring to the original fee-for-service version of Medicare, which was cherished by the elderly, cracked, "We don't get rid of it in Round One because we don't think it's politically smart."

The right-wingers were crafty: You smother the dream by crippling the programs that support it, by starving the government of money to pay for them, by funneling the government's revenues to the rich through tax cuts and other benefits, by looting the government the way gangsters loot legitimate businesses and then pleading poverty when it comes time to fund the services required by the people.

The anti-tax fanatic Grover Norquist summed the matter up nicely when he famously said, "Our goal is to shrink the government to the size where you can drown it in a bathtub." Only they didn't shrink the government, they enlarged it and turned its bounty over to the rich.

Now, with the economy in free fall and likely to get worse, Americans -- despite their suffering -- have an opportunity to reshape the society, and then to move it in a fairer, smarter and ultimately more productive direction.

That is the only way to revive the dream, but it will take a long time and require great courage and sacrifice.

The right-wingers do not want that to happen, which is why they are rooting so hard for President Barack Obama's initiatives to fail. They like the direction that the country took over the past 30 years. They'd love to do it all again.

Bob Herbert is a columnist with The New York Times. Copyright 2009 New York Times News Service.

Obama Riding the Wave

By BOB HERBERT

Listening to President Obama, I was struck by how well he understands that most voters are not driven by ideology and are not searching for politically orthodox leadership. Most want leaders who speak to their needs — especially in this time of economic crisis — and a government that works.

Republicans in Congress — all but completely united in their effort to build a wall of obstruction in the path of President Obama’s economic revitalization effort — seem to be missing this essential point.

In a conversation with a small group of columnists aboard Air Force One on Friday, the president discussed the fight over his stimulus package, which was in the process of gaining final passage as he flew from Washington to Chicago for a brief rest with his family.

He said that the fact that he’d been rebuffed so far in his quest for bipartisanship would not stop him from reaching out for Republican support.

“Going forward,” he said, “each and every time we’ve got an initiative, I’m going to go to both Democrats and Republicans and I’m going to say, ‘Here’s my best argument for why we need to do this. I want to listen to your counterarguments. If you’ve got better ideas, present them. We will incorporate them into any plans that we make, and we are willing to compromise on certain issues that are important to one side or the other in order to get stuff done.’ ”

When I asked him if there was any reason to believe that the G.O.P. had made a good-faith effort at bipartisanship, given the fact that only three Republicans voted for the stimulus plan in the Senate and none in the House, he said he did not want to question the motives or sincerity of those who opposed the plan.

But he made a point of adding, “Now, I have to say that given that they were running the show for a pretty long time prior to me getting there, and that their theory was tested pretty thoroughly and it’s landed us in the situation where we’ve got over a trillion-dollars’ worth of debt and the biggest economic crisis since the Great Depression, I think I have a better argument in terms of economic thinking.”

He also made it clear that he won’t let his desire for bipartisanship undermine important initiatives. “I’m an eternal optimist,” he said. “That doesn’t mean I’m a sap.”

Mr. Obama’s tone and demeanor during the nearly hourlong interview was a duplicate of his nationally televised press conference last week.

He was relaxed and had complete command of a range of complex issues, including the troubled banking sector, health care reform and the need to do more in terms of innovative education initiatives.

But beyond his specific policies (and whether one supports them or not), Mr. Obama is emerging as the very model of the type of person one would want in high public office. He is intelligent, mature, thoughtful, calm in the face of crises and, if the nation is lucky, maybe even wise.

When asked about the sharp drop in the stock markets after Treasury Secretary Tim Geithner announced an expanded bank bailout plan last week, Mr. Obama replied:

“I am not planning based on a one-day market reaction. In fact, you can argue that a lot of the problems we’re in have to do with everybody planning based on one-day market reactions, or three-month market reactions, and as a consequence nobody was taking the long view.

“My job is to help the country take the long view — to make sure that not only are we getting out of this immediate fix, but we’re not repeating the same cycle of bubble and bust over and over again; that we’re not having the same energy conversation 30 years from now that we had 30 years ago; that we’re not talking about the state of our schools in the exact same ways we were talking about them in the 1980s; and that at some point we say, ‘You know what? If we’re spending more money per-capita on health care than any nation on earth, then you’d think everybody would have coverage and we would see lower costs for average consumers, and we’d have better outcomes.’ ”

Near the end of the interview, the president said that there are certain moments in history when significant change is possible.

“It’s not a certainty,” he said, “but it’s possible.”

He said he believed that it’s very difficult for any single individual to actually set that kind of “momentum” for change in motion. But when that historical wave is there, he said, “I think you can help guide it.”

When asked if we are in one of those moments now, he said, “Yes. I firmly believe that.”

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Herbert Hoover Lives

By FRANK RICH

HERE’S a bottom line to keep you up at night: The economy is falling faster than Washington can get moving. President Obama says his stimulus plan will save or create four million jobs in two years. In the last four months of 2008 alone, employment fell by 1.9 million. Do the math.

The abyss is widening. Of the 30 companies in the Dow Jones industrial index, 22 have announced job cuts since October. Unemployment is up in all 50 states, with layoffs at both high-tech companies (Microsoft) and low (Caterpillar). The December job loss in retailing is the worst since at least 1939. The new-home sales rate has fallen to its all-time low since record-keeping began in 1963.

What are Americans still buying? Big Macs, Campbell’s soup, Hershey’s chocolate and Spam — the four food groups of the apocalypse.

The crisis is at least as grave as the one that confronted us — and, for a time, united us — after 9/11. Which is why the antics among Republicans on Capitol Hill seem so surreal. These are the same politicians who only yesterday smeared the patriotism of any dissenters from Bush’s “war on terror.” Where is their own patriotism now that economic terror is inflicting far more harm on their constituents than Saddam Hussein’s nonexistent W.M.D.?

The House stimulus bill is an inevitably imperfect hodgepodge-in-progress. Obama’s next move, a new plan to prevent the collapse of America’s banks, may prove more problematic still, especially given the subpar record of the new Treasury secretary, Timothy Geithner, in warding off calamity while at the New York Fed. No one should expect the Republicans to give the new president carte blanche, fall blindly into lock step or be “post-partisan.” (Though that’s exactly what the G.O.P. demanded of Democrats with Bush: You were either with him or with the terrorists.)

But you might think that a loyal opposition would want to pitch in and play a serious role at a time of national peril. Not by singing “Kumbaya” but by collaborating on possible solutions and advancing a policy debate that many Americans’ lives depend on. As Raymond Moley, of F.D.R.’s brain trust, said of the cross-party effort at the harrowing start of that presidency in March 1933, Hoover and Roosevelt acolytes “had forgotten to be Republicans or Democrats” as they urgently tried to rescue their country.

The current G.O.P. acts as if it — and we — have all the time in the world. It kept hoping in vain that the fast-waning Blago sideshow would somehow impale Obama or Rahm Emanuel. It has come perilously close to wishing aloud that a terrorist attack will materialize to discredit Obama’s reversals of Bush policy on torture, military tribunals and Gitmo. The party’s sole consistent ambition is to play petty politics to gum up the works.

If anything, the Republican Congressional leadership seems to be emulating John McCain’s September stunt of “suspending” his campaign to “fix” the Wall Street meltdown. For all his bluster, McCain in the end had no fixes to offer and sat like a pet rock at the White House meeting on the crisis before capitulating to the bailout. His imitators likewise posture in public about their determination to take action, then do nothing while more and more Americans cry for help.

The problem is not that House Republicans gave the stimulus bill zero votes last week. That’s transitory political symbolism, and it had no effect on the outcome. Some of the naysayers will vote for the revised final bill anyway (and claim, Kerry-style, that they were against it before they were for it). The more disturbing problem is that the party has zero leaders and zero ideas. It is as AWOL in this disaster as the Bush administration was during Katrina.

If the country wasn’t suffering, the Republicans’ behavior would be a laugh riot. The House minority leader, John Boehner, from the economic wasteland of Ohio, declared on “Meet the Press” last Sunday that the G.O.P. didn’t want to be “the party of ‘No’ ” but “the party of better ideas, better solutions.” And what are those ideas, exactly? He said he’ll get back to us “over the coming months.”

His deputy, the Virginia congressman Eric Cantor, has followed the same script, claiming that the G.O.P. will not be “the party of ‘No’ ” but will someday offer unspecified “solutions and alternatives.” Not to be left out, the party’s great white hope, Sarah Palin, unveiled a new political action committee last week with a Web site also promising “fresh ideas.” But as the liberal blogger Markos Moulitsas Zúniga observed, the site invites visitors to make donations and read Palin hagiography while offering no links to any ideas, fresh or otherwise.

For its own contribution to this intellectual void, the Republican National Committee convened last week under a new banner, “Republican for a Reason.” Perhaps that unidentified reason will be determined by a panel of judges on a TV reality show. It had better be brilliant given that only five states (with 20 total electoral votes) now lean red in party affiliation, according to Gallup. At this rate the G.O.P. will be in Alf Landon territory by 2012.

The Republicans do have one idea, of course, but it’s hardly fresh: more and bigger tax cuts, particularly for business and the well-off. That’s the sum of their “alternative” stimulus plan. Obama has tried to accommodate this panacea, perhaps to a fault. Mainstream economists in both parties believe that tax cuts in the stimulus package will deliver far less bang for the buck than, say, infrastructure spending. The tax-cut stimulus embraced a year ago by the G.O.P. induced next-to-no consumer spending as Americans merely banked the savings or paid down debt.

We also now know conclusively that the larger Bush tax cuts, besides running up record deficits and exacerbating income inequality, were also at best a placebo on our road to ruin. In a January survey of economists, including former McCain advisers like Douglas Holtz-Eakin and Mark Zandi, The Washington Post determined that the job growth the Bush administration kept bragging about (“52 straight months!”) was a mirage inflated by the housing bubble. Job growth — about 2 percent — was in fact the most tepid of any eight-year period “since data collection began seven decades ago.” Gross domestic product grew at a slower pace than in any eight years since the Truman administration.

But even if tax cuts alone could jump-start a recovery, they couldn’t do the heavy lifting that Obama has promised and the country desperately needs: a down payment on a new economy to replace our dilapidated 20th-century model and bring back long-term growth. The Republicans don’t acknowledge the need for this transformation, or debate it in good conscience, preferring instead to hyperventilate over the contraceptives in a small family-planning program since removed from the stimulus bill. All it takes is the specter of condoms for the party of Vitter, Foley and Craig to go gaga.

The Republicans’ other preoccupation remains Rush Limbaugh, who is by default becoming their de facto leader. While most Americans are fearing fear itself, G.O.P. politicians are tripping over themselves in morbid terror of Rush.

These pratfalls commenced after Obama casually told some Republican congressmen (correctly) that they won’t “get things done” if they take their orders from Limbaugh. That’s all the stimulus the big man needed to go on a new bender of self-aggrandizement. He boasted that Obama is “more frightened” of him than he is of the Republican leaders in the House or Senate. He said of the new president, “I hope he fails.”

Obama no doubt finds Limbaugh’s grandiosity more amusing than frightening, but G.O.P. politicians are shaking like Jell-O. When asked by Andrea Mitchell of NBC News on Wednesday if he shared Limbaugh’s hope that Obama fails, Eric Cantor spun like a top before running off, as it happened, to appear on Limbaugh’s radio show. Mike Pence of Indiana, No. 3 in the Republican House leadership, similarly squirmed when asked if he agreed with Limbaugh. Though the Republicans’ official, poll-driven line is that they want Obama to succeed, they’d rather abandon that disingenuous nicety than cross Rush.

Most pathetic of all was Phil Gingrey, a right-wing Republican congressman from Georgia, who mildly criticized both Limbaugh and Sean Hannity to Politico because they “stand back and throw bricks” while lawmakers labor in the trenches. So many called Gingrey’s office to complain that the poor congressman begged Limbaugh to bring him on air to publicly recant on Wednesday. As Gingrey abjectly apologized to talk radio’s commandant for his “stupid comments” and “foot-in-mouth disease,” he sounded like the inmate in a B-prison-movie cowering before the warden after a failed jailbreak.

“It’s up to me to hijack the Obama honeymoon,” Limbaugh soon gloated, “and I’ve done it.” In his dreams. He has hijacked what’s left of the Republican Party; the Obama honeymoon remains intact. The nightmare is that we have so irrelevant, clownish and childish an opposition party at a moment when America is in an all-hands-on-deck emergency that’s as trying as war. To paraphrase a dictum that has been variously attributed to two of our most storied leaders in times of great challenge, Thomas Paine and George Patton, the Republicans should either lead, follow or get out of the grown-ups’ way.

The Same Old Song

By BOB HERBERT, NY Times, January 28,2009

What’s up with the Republicans? Have they no sense that their policies have sent the country hurtling down the road to ruin? Are they so divorced from reality that in their delusionary state they honestly believe we need more of their tax cuts for the rich and their other forms of plutocratic irresponsibility, the very things that got us to this deplorable state?

The G.O.P.’s latest campaign is aimed at undermining President Obama’s effort to cope with the national economic emergency by attacking the spending in his stimulus package and repeating ad nauseam the Republican mantra for ever more tax cuts.

“Right now, given the concerns that we have over the size of this package and all the spending in this package, we don’t think it’s going to work,” said Representative John Boehner, an Ohio Republican who is House minority leader. Speaking on NBC’s “Meet the Press,” Mr. Boehner said of the plan: “Put me down in the ‘no’ column.”

If anything, the stimulus package is not large enough. Less than 24 hours after Mr. Boehner’s televised exercise in obstructionism, the heavy-equipment company Caterpillar announced that it was cutting 20,000 jobs, Sprint Nextel said it was eliminating 8,000, and Home Depot 7,000.

Maybe the Republicans don’t think there is an emergency. After all, it was Phil Gramm, John McCain’s economic guru, who told us last summer that the pain was all in our heads, that this was a “mental recession.”

The truth, of course, is that the country is hemorrhaging jobs and Americans are heading to the poorhouse by the millions. The stock markets and the value of the family home have collapsed, and there is virtual across-the-board agreement that the country is caught up in the worst economic disaster since at least World War II.

The Republican answer to this turmoil?

Tax cuts.

They need to go into rehab.

The question that I would like answered is why anyone listens to this crowd anymore. G.O.P. policies have been an absolute backbreaker for the middle class. (Forget the poor. Nobody talks about them anymore, not even the Democrats.) The G.O.P. has successfully engineered a wholesale redistribution of wealth to those already at the top of the income ladder and then, in a remarkable display of chutzpah, dared anyone to talk about class warfare.

A stark example of this unholy collaboration between the G.O.P. and the very wealthy was on display in the pages of this newspaper on Jan. 18. The Times’s Mike McIntire wrote an article about the first wave of federal bailout money for the financial industry, which was handed over by the Bush administration with hardly any strings attached. (Congress, under the control of the Democrats, should never have allowed this to happen, but the Democrats are as committed to fecklessness as the Republicans are to tax cuts.)

The public was told that the money would be used to loosen the frozen credit markets and thus help revive the economy. But as the article pointed out, there were bankers with other ideas. John C. Hope III, the chairman of the Whitney National Bank in New Orleans, in an address to Wall Street fat cats gathered at the Palm Beach Ritz-Carlton, said:

“Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

How’s that for arrogance and contempt for the public interest? Mr. Hope’s bank received $300 million in taxpayer bailout money.

The same article quoted Walter M. Pressey, president of Boston Private Wealth Management, which Mr. McIntire described as a healthy bank with a mostly affluent clientele. It received $154 million in taxpayer money.

“With that capital in hand,” said Mr. Pressey, “not only do we feel comfortable that we can ride out the recession, but we also feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”

Take advantage, indeed. That, in a nutshell, is what the plutocracy is all about: taking unfair advantage.

When the G.O.P. talks, nobody should listen. Republicans have argued, with the collaboration of much of the media, that they could radically cut taxes while simultaneously balancing the federal budget, when, in fact, big income-tax cuts inevitably lead to big budget deficits. We listened to the G.O.P. and what do we have now? A trillion-dollar-plus deficit and an economy in shambles.

This is the party that preached fiscal discipline and then cut taxes in time of war. This is the party that still wants to put the torch to Social Security and Medicare. This is a party that, given a choice between Abraham Lincoln and Ronald Reagan, would choose Ronald Reagan in a heartbeat.

Why is anyone still listening?

Stop Being Stupid

By BOB HERBERT

I’ve got a new year’s resolution and a new slogan for the country.

The resolution may be difficult, but it’s essential. Americans must resolve to be smarter going forward than we have been for the past several years.

Look around you. We have behaved in ways that were incredibly, astonishingly and embarrassingly stupid for much too long. We’ve wrecked the economy and mortgaged the future of generations yet unborn. We don’t even know if we’ll have an automobile industry in the coming years. It’s time to stop the self-destruction.

The slogan? “Invest in the U.S.” By that I mean we should stop squandering the nation’s wealth on unnecessary warfare overseas and mindless consumption here at home and start making sensible investments in the well-being of the American people and the long-term health of the economy.

The mind-boggling stupidity that we’ve indulged in was hammered home by a comment almost casually delivered by, of all people, Bernie Madoff, the mild-mannered creator of what appears to have been a nuclear-powered Ponzi scheme. Madoff summed up his activities with devastating simplicity. He is said to have told the F.B.I. that he “paid investors with money that wasn’t there.”

Somehow, over the past few decades, that has become the American way: to pay for things — from wars to Wall Street bonuses to flat-screen TVs to video games — with money that wasn’t there.

Something for nothing became the order of the day. You want to invade Iraq? Convince yourself that oil revenues out of Baghdad will pay for it. (Meanwhile, carve out another deficit channel in the federal budget.) You want to pump up profits in the financial sector? End the oversight and let the lunatics in the asylum run wild.

For those who wanted a bigger house in a nicer neighborhood, there were mortgages with absurdly easy terms. Credit-card offers came in the mail like confetti, and we used them like there was no tomorrow. For students stunned by the skyrocketing cost of tuition, there were college loans that could last a lifetime.

Money that wasn’t there.

Plenty of people managed their credit wisely. But much of the country, including many of the top government officials and financial titans who were supposed to be guarding the nation’s wealth, acted as if there would never be a day of reckoning, a day when — inevitably — the soaring markets would crash and the bubbles explode.

We were stupid in so many ways. We shipped American jobs overseas by the millions and came up with the fiction that this was a good deal for just about everybody. We could have and should have taken the time and made the effort to think globalization through, to be smarter about it and craft ways to cushion its more harmful effects and to share its benefits more equitably.

We bought into the dopey idea that you could radically cut taxes and still maintain critical government services — and fight two wars to boot!

We were living in a dream world. The general public, and to a great extent the press, closed its eyes to the increasingly complex and baffling machinations of the financial industry, which kept screaming that oversight would ruin everything.

We should have known better. It didn’t require a genius (or even an economics degree) to understand a crucial point that popped up some years ago in a front-page article in The Wall Street Journal: “Markets are a great way to organize economic activity, but they need adult supervision.”

Did Alan Greenspan not understand that? Bob Rubin? Larry Summers?

Now that the reality of a stunning economic downturn has so roughly intervened, we at least have the option of being smarter going forward. There is broad agreement that we have no choice but to go much more deeply into debt to jump-start the economy. But we have tremendous choices as to how we use that debt.

We should use it to invest in the U.S. — in a world-class infrastructure (in its broadest sense) to serve as the platform for a world-class, 21st-century economy, and in a system of education that actually prepares American youngsters to deal successfully with the real world they will be encountering.

We need to invest in a health care system that improves the quality of American lives, enhances productivity, puts large numbers of additional people to work and eases the competitive burden of U.S. corporations.

We need to care for our environment (if long-term survival means anything to us) and get serious about weaning ourselves from foreign oil.

And, finally, we need to start living within our means and get past the nauseating idea that the essence of our culture and the be-all and end-all of the American economy is the limitless consumption of trashy consumer goods.

It’s time to stop being stupid.

A Race to the Bottom

By BOB HERBERT

Toward the end of an important speech in Washington last month, the president of the American Federation of Teachers, Randi Weingarten, said to her audience:

“Think of a teacher who is staying up past midnight to prepare her lesson plan... Think of a teacher who is paying for equipment out of his own pocket so his students can conduct science experiments that they otherwise couldn’t do... Think of a teacher who takes her students to a ‘We, the People’ debating competition over the weekend, instead of spending time with her own family.”

Ms. Weingarten was raising a cry against the demonizing of teachers and the widespread, uninformed tendency to cast wholesale blame on teachers for the myriad problems with American public schools. It reminded me of the way autoworkers have been vilified and blamed by so many for the problems plaguing the Big Three automakers.

But Ms. Weingarten’s defense of her members was not the most important part of the speech. The key point was her assertion that with schools in trouble and the economy in a state of near-collapse, she was willing to consider reforms that until now have been anathema to the union, including the way in which tenure is awarded, the manner in which teachers are assigned and merit pay.

It’s time we refocused our lens on American workers and tried to see them in a fairer, more appreciative light.

Working men and women are not getting the credit they deserve for the jobs they do without squawking every day, for the hardships they are enduring in this downturn and for the collective effort they are willing to make to get through the worst economic crisis in the U.S. in decades.

In testimony before the U.S. Senate this month, the president of the United Auto Workers, Ron Gettelfinger, listed some of the sacrifices his members have already made to try and keep the American auto industry viable.

Last year, before the economy went into free fall and before any talk of a government rescue, the autoworkers agreed to a 50 percent cut in wages for new workers at the Big Three, reducing starting pay to a little more than $14 an hour.

That is a development that the society should mourn. The U.A.W. had traditionally been a union through which workers could march into the middle class. Now the march is in the other direction.

Mr. Gettelfinger noted that his members “have not received any base wage increase since 2005 at G.M. and Ford, and since 2006 at Chrysler.”

Some 150,000 jobs at General Motors, Ford and Chrysler have vanished outright through downsizing over the past five years. And like the members of Ms. Weingarten’s union (and other workers across the country, whether unionized or not), the autoworkers are prepared to make further sacrifices as required, as long as they are reasonably fair and part of a shared effort with other sectors of the society.

We need some perspective here. It is becoming an article of faith in the discussions over an auto industry rescue, that unionized autoworkers should be taken off of their high horses and shoved into a deal in which they would not make significantly more in wages and benefits than comparable workers at Japanese carmakers like Toyota.

That’s fine if it’s agreed to by the autoworkers themselves in the context of an industry bailout at a time when the country is in the midst of a financial emergency. But it stinks to high heaven as something we should be aspiring to.

The economic downturn, however severe, should not be used as an excuse to send American workers on a race to the bottom, where previously middle-class occupations take a sweatshop’s approach to pay and benefits.

The U.A.W. has been criticized because its retired workers have had generous pensions and health coverage. There’s a horror! I suppose it would have been better if, after 30 or 35 years on the assembly line, those retirees had been considerate enough to die prematurely in poverty, unable to pay for the medical services that could have saved them.

Randi Weingarten and Ron Gettelfinger know the country is going through a terrible period. Their workers, like most Americans, are already getting clobbered and worse is to come.

But there is no downturn so treacherous that it is worth sacrificing the long-term interests — or, equally important — the dignity of their members.

Teachers and autoworkers are two very different cornerstones of American society, but they are cornerstones nonetheless. Our attitudes toward them are a reflection of our attitudes toward working people in general. If we see teachers and autoworkers as our enemies, we are in serious need of an attitude adjustment.

The World According to Cheney

Vice President Dick Cheney has a parting message for Americans: They should quit whining about all the things he and President Bush did to undermine the rule of law, erode the balance of powers between the White House and Congress, abuse prisoners and spy illegally on Americans. After all, he said, Franklin Roosevelt and Abraham Lincoln did worse than that.

So Mr. Cheney and Mr. Bush managed to stop short of repeating two of the most outrageous abuses of power in American history — Roosevelt’s decision to force Japanese-Americans into camps and Lincoln’s declaration of martial law to silence his critics? That’s not exactly a lofty standard of behavior.

Then again, it must be exhausting to rewrite history as much as Mr. Cheney has done in a series of exit interviews where he has made those comments. It seems as if everything went just great in the Bush years.

The invasion of Iraq was exactly the right thing to do, not an unnecessary war that required misleading Americans. The postinvasion period was not bungled to the point where Americans got shot up by an insurgency that the Bush team failed to see building.

The horrors at Abu Ghraib were not the result of the Pentagon’s decision to authorize abusive and illegal interrogation techniques, which Mr. Cheney endorsed. And only three men were subjected to waterboarding. (Future truth commissions take note.)

In Mr. Cheney’s reality, the crippling budget deficit was caused mainly by fighting two wars and by essential programs like “enhancing the security of our shipping container business.”

Well, no. The Bush team’s program to scan cargo for nuclear materials at air, land and sea ports has been mired in delays, cost overruns and questions about effectiveness. As for the deficit, the Congressional Budget Office has said the Bush-Cheney tax cuts for the wealthy were the biggest reason that the budget went into the red.

Some of Mr. Cheney’s comments were self-serving spin (as when The Washington Times helpfully prodded him to reveal that even though the world might have seen Mr. Bush as insensitive to the casualties of war, Mr. Cheney himself made a “secret” mission to comfort the families of the dead.)

Mr. Cheney was simply dishonest about Mr. Bush’s decision to authorize spying on Americans’ international calls without a warrant. He claimed the White House kept the Democratic and Republican Congressional leadership fully briefed on the program starting in late 2001. He said he personally ran a meeting at which “they were unanimous, Republican and Democrat alike” that the program was essential and did not require further Congressional involvement.

But in a July 17, 2003, letter to Mr. Cheney, Senator John Rockefeller IV, then vice chairman of the Senate Intelligence Committee, said he wanted to “reiterate” the concerns he expressed in “the meeting today.” He said “the activities we discussed raise profound oversight issues” and created “concern regarding the direction the Administration is moving with regard to security, technology and surveillance.”

Mr. Cheney mocked Vice President-elect Joseph Biden for saying that he does not intend to have his own “shadow government” in the White House. Mr. Cheney said it was up to Mr. Biden to decide if he wants “to diminish the office of vice president.”

Based on Mr. Cheney’s record and his standards for measuring these things, we’re certain a little diminishing of that office would be good for the country.

Hope Amid the Gloom

By BOB HERBERT

Is the end of the war in sight?

I don’t mean Iraq. I’m talking about the war against working people in the U.S. that has taken such a vicious economic toll over the past three decades.

Even as Americans by the thousands sign up for jobless benefits in this horrendous holiday season, or line up to declare bankruptcy, or stand sorrowfully aside as their homes are foreclosed upon, there are some slender reasons to hope.

On Friday, George W. Bush, in the slapstick final weeks of his disastrous presidency, grudgingly announced that, yes, emergency loans would be made available to prevent the collapse of the U.S. auto industry. He looked like a boy who had been forced to eat his spinach, or drink his castor oil.

But the economy is in such an awful state that even the most backward administration of our lifetime recognized that risking the chain reaction of a complete auto industry meltdown was not an option. (The Bush deal is unfairly onerous to auto workers, but the loans will serve as a bridge to the Obama era, when, presumably, a more equitable arrangement could be worked out.)

Mr. Bush’s announcement came a day after it was learned that President-elect Obama had chosen Representative Hilda Solis of California, a fierce advocate of workers, to be his labor secretary. The Obama administration also is committed to moving quickly on an economic stimulus package that could reach $1 trillion over two years.

These are developments that portend a radically different environment for the nation’s workers. From Ronald Reagan’s voodoo economics to Henry Paulson’s $700 billion Troubled Asset Relief Program, we’ve put the mighty resources of the national government overwhelmingly on the side of those who were already rich and powerful.

Ordinary workers have suffered. It took years to get a lousy little boost in the minimum wage for the working poor. Attempts to expand health insurance coverage were fought almost to a standstill. Guaranteed pensions vanished. And the maniacs who set fire to the economy with their incendiary financial instruments (yet another form of voodoo) were hot to privatize Social Security.

As Andy Stern, president of the huge Service Employees International Union, told me on Friday: “We’ve had a 25-year experience with market-worshipping, deregulating, privatizing, trickle-down policies, and it has ended us up with the greatest economy on earth staggering, and with the greatest amount of inequality since the Great Depression.”

The contempt for workers over this long period has hardly been hidden. Until Mr. Bush was forced by circumstances to tap the TARP program for the auto industry loans (small potatoes compared with the gargantuan Wall Street bailouts), the administration had gone out of its way to keep the program’s hundreds of billions of dollars reserved for the elites of the financial services industry and their associates.

These elites, of course, were the geniuses who ruined the most powerful economy on earth. When Citigroup went into yet another swoon last month, the rush to rescue it was breathtaking. Posses don’t come more elegant: the outgoing treasury secretary, Hank Paulson; the incoming treasury secretary (and president of the Federal Reserve Bank of New York), Timothy Geithner; and a former treasury secretary (not to mention Citigroup board member), Robert Rubin.

They materialized magnificently, armed with hundreds of billions in taxpayer bailout cash.

Leo Gerard, president of the steelworkers union, summed up the government’s attitude nicely when he said: “Washington will bail out those who shower before work, but not those who shower afterwards.”

Working people have been treated like enemies, a class to be preyed upon. Labor unions were ferociously attacked. Jobs were shipped overseas by the millions. People were hired as temps or consultants so benefits could be denied.

All of this may finally be changing. It remains to be seen how strong a voice Ms. Solis will have in the Obama administration, but she is pro-worker to her core, a politician who actually knows what it’s like to walk a picket line.

And there have been other promising developments. More than 200 laid-off workers staged a successful six-day sit-in at a factory in Chicago this month, demanding and eventually getting severance pay and benefits that they were owed by law.

A more substantial victory occurred in Tar Heel, N.C., last week when workers, after a brutal 15-year struggle, succeeded in organizing the notorious Smithfield Packing slaughterhouse, the largest hog-killing and processing plant in the world.

These are shaky steps in the overall scheme of things, to be sure. But at long last, they are steps in the right direction.

Gail Collins is off today.

Video Dog: Henry Paulson on How He'll Protect the Taxpayers

From Hype to Fear

January 7, 2008
Op-Ed Columnist, NY Times

By Paul Krugman

The unemployment report on Friday was brutally bad. Unemployment rose in December, while job creation was minimal — and it’s highly likely, for technical reasons, that the job number will be revised down, showing an actual decline in employment.

It’s the latest piece of bad news about an economy in which the employment situation has actually been deteriorating for the past year. It’s no longer possible to hope that the effects of the housing slump will remain “contained,” as one of 2007’s buzzwords had it. The levees have been breached, and the repercussions of the housing crisis are spreading across the economy as a whole.

It’s not certain, even now, that we’ll have a formal recession, although given the news on Friday you have to say that the odds are that we will. But what is clear is that 2008 will be a troubled year for the U.S. economy — and that as a result, the overall economic record of the Bush years will have been dreary at best: two and a half years of slumping employment, three and a half years of good but not great growth, and two more years of renewed economic distress.

The November election will take place against that background of economic distress, which ought to be good news for candidates running on a platform of change.

But the opponents of change, those who want to keep the Bush legacy intact, are not without resources. In fact, they’ve already made their standard pivot when things turn bad — the pivot from hype to fear. And in case you haven’t noticed, they’re very, very good at the fear thing.

You see, for 30 years American politics has been dominated by a political movement practicing Robin-Hood-in-reverse, giving unto those that hath while taking from those who don’t. And one secret of that long domination has been a remarkable flexibility in economic debate. The policies never change — but the arguments for these policies turn on a dime.

When the economy is doing reasonably well, the debate is dominated by hype — by the claim that America’s prosperity is truly wondrous, and that conservative economic policies deserve all the credit.

But when things turn down, there is a seamless transition from “It’s morning in America! Hurray for tax cuts!” to “The economy is slumping! Raising taxes would be a disaster!”

Thus, until just the other day Bush administration officials were in denial about the economy’s problems.

They were still insisting that the economy was strong, and touting the “Bush boom” — the improvement in the job situation that took place between the summer of 2003 and the end of 2006 — as proof of the efficacy of tax cuts.

But now, without ever acknowledging that maybe things weren’t that great after all, President Bush is warning that given the economy’s problems, “the worst thing the Congress could do is raise taxes on the American people and on American businesses.”

And even more dire warnings are coming from some of the Republican presidential candidates. For example, John McCain’s campaign Web site cautions darkly that “Entrepreneurs should not be taxed into submission.

John McCain will make the Bush income and investment tax cuts permanent, keeping income tax rates at their current level and fighting the Democrats’ plans for a crippling tax increase in 2011.”

What “crippling” tax increase, which would tax entrepreneurs into submission, is Mr. McCain talking about?

The answer is, proposals by Democrats to let the Bush tax cuts for people making more than $250,000 a year expire, returning upper-income tax rates to the levels that prevailed in the Clinton years.

And we all remember how little entrepreneurship there was, how weakly the economy performed, during the
Clinton years, right? Oh, wait. (I’ve put some charts comparing job performance during the Clinton and Bush years on my Times blog, krugman.blogs.nytimes.com. It’s pretty startling how comparatively weak the Bush era looks.)

Never mind. The whole point of scare tactics is that they can work even in the face of inconvenient facts.

And what I’m not sure about is whether the Democrats are ready for the fight they’re about to face.

Not to put too fine a point on it, Barack Obama won his impressive victory in Iowa with a sunny, upbeat message of change.

But there’s a powerful political faction in this country that understands very well that any real change will create losers as well as winners. In particular, any serious progressive reform of health care, let alone a broader attempt to reduce middle-class insecurity and inequality, will have to mean higher taxes on the affluent. And members of that faction will do whatever it takes to scare people into believing that change means disaster for the economy.

I don’t think they’ll succeed. But it would be a big mistake to assume that they won’t.

Winter of Our Discontent, The Rising Inequality of 2 Americas

November 26, 2007
By PAUL KRUGMAN
Op-Ed Columnist , NY Times

“Americans’ Economic Pessimism Reaches Record High.” That’s the headline on a recent Gallup report, which shows a nation deeply unhappy with the state of the economy. Right now, “27% of Americans rate current economic conditions as either ‘excellent’ or ‘good,’ while 44% say they are ‘only fair’ and 28% say they are poor.” Moreover, “an extraordinary 78% of Americans now say the economy is getting worse, while a scant 13% say it is getting better.”

What’s really remarkable about this dismal outlook is that the economy isn’t (yet?) in recession, and consumers haven’t yet felt the full effects of $98 oil (wait until they see this winter’s heating bills) or the plunging dollar, which will raise the prices of imported goods.

The response of those who support the Bush administration’s economic policies is to complain about the unfairness of it all. They rattle off statistics that supposedly show how wonderful the economy really is. Many of these statistics are misleading or irrelevant, but it’s true that the official unemployment rate is fairly low by historical standards. So why are people so unhappy?

The answer from Bush supporters — who are, on this and other matters, a strikingly whiny bunch — is to blame the “liberal media” for failing to report the good news. But the real explanation for the public’s pessimism is that whatever good economic news there is hasn’t translated into gains for most working Americans.

One way to drive this point home is to compare the situation for workers today with that in the late 1990s, when the country’s economic optimism was almost as remarkable as its pessimism today. For example, in the fall of 1998 almost two-thirds of Americans thought the economy was excellent or good.

The unemployment rate in 1998 was only slightly lower than the unemployment rate today. But for working Americans, everything else was different. Wages were rising, yet inflation was low, so the purchasing power of workers’ take-home pay was steadily improving. So, too, were job benefits, including the availability of health insurance. And homeownership was rising steadily.

It was, in other words, a time when Americans felt they were sharing in the country’s prosperity.

Today, by contrast, wage gains for most workers are being swallowed by inflation. In fact, the reality for lower- and middle-income workers may be worse than the official statistics say, because the prices of necessities like food, transportation and medical care are rising considerably faster than the Consumer Price Index as a whole. One striking statistic: the cost of a traditional Thanksgiving turkey dinner was 11 percent higher this year than last year.

Meanwhile, the percentage of Americans receiving health insurance from their employers, which began to decline in 2001, is continuing its downward trend. And homeownership, after rising for several years on a tide of subprime mortgages — well, you know how that’s going.

In short, working Americans have very good reason to feel unhappy about the state of the economy. But what will it take to make their situation better?

The leading Republican candidates for president don’t even seem to realize that there’s a problem. A few months ago Rudy Giuliani, denouncing Hillary Clinton’s economic proposals, declared that “she wants to go back to the 1990s” — as if that would be a bad thing.

In fact, memories of how much better the economy was under Bill Clinton will be a potent political advantage for the Democrats next year.

But simply putting another Clinton, or any Democrat, in the White House won’t ensure that the good times will roll again. President Clinton was a good economic manager, but much of the good news during the 1990s reflected events that won’t be repeated, including low oil prices and the great medical cost pause — the temporary leveling off of health care spending as a percentage of G.D.P. that took place in the 1990s despite his failure to pass health care reform.

And there are good reasons to think that the negative effects of globalization on the wages of some Americans are larger than they were in the ’90s. That’s a hugely contentious issue within the progressive movement, with no easy resolution. I’ll write more about it in the months ahead.

Despite these caveats, Democrats have every right to make a political issue out of the failure of the Bush economy to deliver gains to working Americans — especially because conservatives continue to insist that tax cuts for the affluent are the answer to all problems.

But Democrats shouldn’t kid themselves into believing that this will be easy. The next president won’t be able to deliver another era of good times unless he or she manages to tackle the longer-term trends that underlie today’s economic disappointment: a collapsing health care system and inexorably rising inequality.