The fragile and faltering state of American democracy.
The US military machine spends around $600 billion a year on national defense, but somehow it couldn’t stop a Florida mailman from landing his airborne protest right on the Capitol lawn. Doug Hughes arrived in a slow-moving, light-weight gyrocopter that he flew right past all the elaborate checkpoints and high-tech security monitors. His message to members of Congress: you and your institution are utterly corrupted by political money and we, the people, are coming after you.
“I’m just delivering the mail,” the Florida postal worker said with a touch of whimsical humor. “This isn’t my regular route.”
The guardians of national security said they saw him coming on their radar screens but thought he was probably a flock of geese. Stand-up comics should have fun with that.
But I expect Hughes’s imaginative assault on politics-as-usual will scare the crap out of a lot of Washington politicians. They have spent trillions to deploy a mighty military and awesome weaponry to protect American citizens from hostile foreigners. But how do politicians protect themselves from the hostile American citizens?
Hughes is not a dangerous fruitcake. In fact, he is a small-d democratic idealist who went out of his way to alert the authorities in advance of his so-called “Freedom Flight.” He shared his plans online and with his local newspaper, the Tampa Bay Times, which wrote about his ambitions and kept police informed.
Hughes may be naïve (or even delusional), but he actually believes citizens can take back their government and drive off the monied interests that have captured congressional politics. “Because we the people own Congress,” says the website called The Democracy Club, where Hughes and others post their critiques. His arguments are rational and he addresses them not to ideological radicals but to “moderates united by faith in principles of democracy.”
A populist fever is rising in the land. That may scare off regular pols, but I have seen and heard from many other discontented citizens plowing similar furrows. I admire them. They are trying to rediscover how people act like citizens. They are conscientiously attempting various approaches. They often make common cause with more established thinker and activists, like legal scholar Laurence Lessig who founded “Rootstrikers” to battle the money influence and get at the roots of democratic decay.
Or Trevor Potter, former chair of the Federal Elections Commission, who is promoting a model reform measure, the American Anti-Corruption Act. Or Wolf PAC, which is pushing in many states to promote a constitutional amendment banning corporate money from elections.
The quality most of the home-grown reformers seem to share is deep skepticism toward both political parties. Democrats and Republicans have both adapted themselves to the necessities of big-money politics and neither shows much appetite for deep reform. Indeed, a potential convergence of left and right is probably more possible among rank-and-file voters at the grassroots. For all their angry differences, Tea Party adherents and working-class Dems share many of the same enemies and same frustrated yearnings.
Doug Hughes, for instance, is clearly on the liberal side of the spectrum, but many right-wing conservatives would be comfortable with his critique. The evidence of corruption, he argues, is obvious in the fact that nearly half of retired members of Congress are subsequently employed as lobbyists, that is, getting paid big salaries for voting right as senators or representatives. They are thus participating in “legalized, institutionalized bribery,” he charges.
Many right-wingers would also agree with Hughes about the complicity of the major media. “I think there’s an alliance between the national media and supporters of the corrupt status quo,” Hughes wrote. “That’s the political parties and the ad money they command and the election industry which runs 365 days a year. The national media is sold out.”
The risk in the rising populist temperament is that some people will take their anger to extremes and people will get hurt or worse. Doug Hughes may make sure that he is not inuring anyone with his gyrocopter antics, but the same techniques could be used to create bloodshed and mayhem—a domestic front for terrorism.
I suspect congressional leaders are pondering these possibilities right now and will take stronger security measures to protect senators and representatives and their staffs. The trouble is, fear-driven protections that is justified for public officials can amount to shrinking free expression and public space for angry citizens. History tells us that, once an ugly cycle of repression gets underway, it can feed a dangerous hostility between the governors and the governed.
Doug Hughes was arrested, as he expected he would be. But he said this would not dampen his enthusiasm for small-d democratic agitation. “I see this as my life’s work,” Hughes said beforehand, “assuming the flight doesn’t kill me and I don’t get a lengthy prison term.”
Read Next: William Greider on a radical agenda for Hillary Clinton
Some of the best minds of our generation’s left-liberal thinkers and political agitators are busy these days composing and publishing “to-do” lists for Hillary Clinton. Their sincere suggestions are worthy ideas for economic and social reforms, nothing very radical but smart measures that will make life better for lots of people. Raise the minimum wage, pay equity for women, reform college loans, abolish usurious lending, paid vacations for all workers and many more similar proposals.
It’s not that these policy advocates are necessarily for Clinton. But if she is to be the Democratic nominee in 2016, they want her to embrace a more ambitious program that might be characterized as a “post-New Democrat” agenda. That is, the stuff her husband dodged when he was the president because these people-friendly propositions were too liberal.
This time, I have a hunch many of these proposals will become part of her program. Hillary Clinton will run on them, reactionary Republicans will denounce her as a big-government liberal and the media will say this Clinton is “running to the left” of the last Clinton. It sounds plausible. If Republicans cooperate by nominating a right-wing nut-bag for president, who knows, she might win.
But here’s the real problem: incremental changes may be worthy, but they have no possibility of curing what are the country’s deeper maladies (or the world’s). The US governing system is experiencing an end-of-era systemic breakdown. Pax America’s far-flung military adventures are mired in a bloody denouement. The onward-and-upward economy that sustained broad prosperity for so many years is over. The political system is dysfunctional.
People at large seem to know this. At least many people understand it better than the political elites who run things. The governing classes are in deep denial, still claiming that the right policy strokes can somehow bring back the good times (sort of) without disturbing the status quo and why it broke down.
The problem is that systemic breakdown is still a taboo subject in American politics. Nobody in the mainstream will talk about it, not just Hillary Clinton and possible GOP nominees for 2016 but both the Democratic and Republican parties as well as the deep ranks of powerful movers and shakers and billionaires who manipulate both politicians and government. When the authority figures and influence peddlers are clinging to the lost past, who will step up and speak for the future?
Gar Alperovitz, an historian and democracy advocate on the left, and Gus Speth, a pioneering environmental leader of long standing, are trying to create a new voice—actually many voices—for the future. Activists and thinkers will be drawn from both the academy and the grassroots where communities are dealing directly with the pain and loss people are experiencing in these new circumstances. The core objective is to encourage people to think anew about deeper structural change but also how to make themselves heard amid the dreary evasions of established power.
Speth and Alperovitz call this new collaboration of intellectuals and organizers the Next System Project. Some 350 reform-minded optimists have signed on to participate. They include many thought leaders whose names are familiar to progressives. To name just a few: Juliet Schor, Herman Daly, Noam Chomsky, Leo Girard, Barbara Ehrenreich, Bill McKibben, Frances Fox Piven, Dean Baker, Roberto Mangabeira Unger, David Korten, Michael Albert and Erik Olin Wright. You can read the founding essay here.
“The first thing we are trying to do is make it okay to talk about this subject,” Alperovitz explained to me. “Because otherwise people talk about projects and policies rather than asking if there’s a systemic crisis and how we can deal with a much larger situation. What would it take to imagine a next system when it is clear now that both corporate capitalism and state socialism are failures?”
The spirit of this venture is captured in the title of Naomi Klein’s new book, This Changes Everything: Capitalism vs. The Climate. Or in Gar Alperovitz’s new book What Then Must We Do? Straight Talk about the Next American Revolution. Or Gus Speth’s new book, America the Possible: Manifesto for a New Economy. I shamelessly mention (without blushing) my own effort published a decade ago, The Soul of Capitalism: Opening Paths to a Moral Economy.
“The project is not about my position or Gus’s position,” Gar said. “There has to be thoughtful, serious discussion and debate. It’s about letting a thousand flowers bloom.” The intellectual critiques are already plentiful on the left and are often conflicting or competing with one another. Normally, I am not much interested in “letterhead alliances” that collect scores of organizations to sign endorsements but in reality do not have much muscle. What makes me think this project might be different and might gain real traction is the generous, open-minded tone of the invitation.
The stated purpose is “a concerted effort to break through the national media silence and to radically shift the national dialogue about the future away from narrow debate about policies that do not alter any significant decaying trends, and toward awareness that what must be changed is the nature of the political system itself.
“We believe that it is now imperative to stimulate a broad national debate about how best to conceive possible alternative modes of a very different system capable of delivering genuine democracy and economic equality, individual liberty, ecological sustainability, a peaceful global foreign policy and a thoroughgoing culture of cooperative community based on non-violence and respect for differences of race, gender and sexual preference.”
People could build a political party around those ideals, though that’s not the idea. Nor can anything so substantial happen until people have developed concrete ways of reorganizing the political system called democracy and the economic system called capitalism. The free-wheeling invention has already started at the grassroots level where suffering and loss are greatest, Alperovitz pointed out, but the process is necessarily slow-moving.
This vision is for the long term, obviously, not for the next electoral season. But it is based on the shared conviction that the US and the world really have entered a new, uncharted era that demands great transformations. Our situation is a little like what happened in the years after the Crash of 1929, but our circumstances are different and more ambiguous, because this time the American system did not collapse totally. “The whole system is decayed,” Alperovitz said. “It’s not collapse like the 1930s. It’s decay. At the top, the systemic reality is stagnation, stalemate and decay.”
The prospects are daunting of course but also exciting, invigorating. The range of disorders suggests a wide field of opportunities for deep change, from worker ownership and self-management to an ecological economy that does not derive its so-called “growth” from destroying nature. Small-scale local economic life versus the suffocating monopolies that feed off government and concentrate wealth at the top. The basic virtues of public ownership, from public schools to public utilities, against the torrent of destructive privatizations engineered by the billionaires. The reinvention of social democracy—a country that learns again to defend life and individual freedom, family and community, against the lusts of rapacious capitalism.
The terrain is vast and largely unexplored in our time. It is the undiscovered future—the place we might choose to create for ourselves or if we get our values right. The covering essay for The Next System reads like an intriguing map of the possible. Gus and Gar are like dreamy explorers, beckoning people to come along and help chart this new territory—discover the better country that lies ahead.
Many Americans will turn away, of course, too wounded or too cynical to believe in this promise. It does sound impossible, given the oppressive confinements imposed on us by the power elites. But what other choice do we have? The present system promises to deliver more of the same, more stagnation, stalemate and decay. That is not going to change unless more of us decide we have to try to change it.
Read Next: William Greider on Israel’s nuclear capability
While the Washington press corps obsessed over Hillary Clinton’s e-mails at the State Department, reporters were missing a far more important story about government secrets. After five decades of pretending otherwise, the Pentagon has reluctantly confirmed that Israel does indeed possess nuclear bombs, as well as awesome weapons technology similar to America’s.
Early last month the Department of Defense released a secret report done in 1987 by the Pentagon-funded Institute for Defense Analysis that essentially confirms the existence of Israel’s nukes. DOD was responding to a Freedom of Information lawsuit filed by Grant Smith, an investigative reporter and author who heads the Institute for Research: Middle East Policy. Smith said he thinks this is the first time the US government has ever provided official recognition of the long-standing reality.
It’s not exactly news. Policy elites and every president from LBJ to Obama have known that Israel has the bomb. But American authorities have cooperated in the secrecy and prohibited federal employees from sharing the truth with the people. When the White House reporter Helen Thomas asked the question of Barack Obama back in 2009, the president ducked. “With respect to nuclear weapons, you know, I don’t want to speculate,” Obama said. That was an awkward fib. Obama certainly knows better, and so do nearly two-thirds of the American people, according to opinion polls.
In my previous blog, “What about Israel’s Nuclear Bomb?” I observed that the news media focused solely on Iran’s nuclear ambitions but generally failed to note that Israel already had nukes. That produced a tip about the Pentagon release in early February.
Yet the confirmation of this poorly kept secret opens a troublesome can of worms for both the US government and our closest ally in the Middle East. Official acknowledgement poses questions and contradictions that cry out for closer inspection. For many years, the United States collaborated with Israel’s development of critical technology needed for advanced armaments. Yet Washington pushed other nations to sign the Non-Proliferation Treaty, which requires international inspections to discourage the spread of nuclear arms. Israel has never signed the NPT and therefore does not have to submit to inspections.
Washington knew all along what the inspectors would find in Israel. Furthermore, as far back as the 1960s, the US Foreign Assistance Act was amended by concerned senators to prohibit any foreign aid for countries developing their own nukes. Smith asserts that the exception made for Israel was a violation of the US law but it was shrouded by the official secrecy. Since Israel is a major recipient of US aid, American presidents had good reason not to reveal the truth.
The newly released report—“Critical Technological Assessment in Israel and NATO Nations”—describes Israel’s nuclear infrastructure in broad terms, but the dimensions are awesome. Israel’s nuclear research labs, the IDA researchers reported, “are equivalent to our Los Alamos, Lawrence Livermore and Oak Ridge National Laboratories.” Indeed, the investigators observed that Israel’s facilities are “an almost exact parallel of the capability currently existing at our National Laboratories.”
The IDA team visited Israeli labs, factories, private companies and government research centers in Israel and relevant NATO nations (details on NATO allies were redacted from the released version). On Israel, the tone of the report was both admiring and collegial. “The SOREQ center,” it said, for instance, “runs the full nuclear gamut of activities from engineering, administration and non-destructive testing for electro-optics, pulsed power, process engineering and chemistry and nuclear research and safety. This is the technology base required for nuclear weapons design and fabrication.”
The IDA team added: “It should be noted that the Israelis are developing the kind of codes which will enable them to make hydrogen bombs. That is, codes which detail fission and fusion processes on a microscopic and macroscopic level.” So far, The IDA estimated, Israel scientists were about where the US had been in the 1950s in understanding fission and fusion processes.
The report does not include a single declarative sentence that directly states the taboo—Israel has nukes—but the meaning is obvious. For many years, scholars and other experts have estimated that Israel has at least 100 to 200 bombs, possibly more.
Some of the IDA’s observations seem to hint at a copy-cat process in which the US government either actively helped or at least looked the other way while Israel borrowed or purloined technologies to establish a parallel nuclear system that looks a lot like America’s. The IDA document does not say anything, one way or the other, on the history of how this happened. But critics of Israel and advocates for banning all nuclear weapons have harbored suspicions for decades.
The Institute for Research: Middle East Policy, Smith said, is pushing another FOIA request aimed at the CIA, hoping to pry open long-secret intelligence investigations about how Israel managed to get the bomb in the first place. The institute is seeking disclosure of a CIA study that supposedly investigated how quantities of uranium were leaked or allegedly smuggled by Israeli agents from a Pennsylvania defense plant to provide seed corn for the Israel bomb.
Smith and others suspect that elements of the US government knew what happened back then or may even have assisted the stealthy transfer. That particular mystery was a hot issue back in the 1970s. It seems likely to get renewed interest now that the pretense of official ignorance has been demolished by release of the 1987 report.
However, the IDA’s most powerful message may not be what it says about Israel’s nukes but what it conveys about the US-Israel relationship. It resembles a technological marriage that over decades transformed the nature of modern warfare in numerous ways. The bulk of the report is really a detailed survey of Israel’s collaborative role in developing critical technologies—the research and industrial base that helped generate advanced armaments of all sorts. Most Americans, myself included, are used to assuming the US military-industrial complex invents and perfects the dazzling innovations, then shares some with favored allies like Israel.
That’s not altogether wrong but the IDA report suggests a more meaningful understanding. The US and Israel are more like a very sophisticated high-tech partnership that collaborates on the frontiers of physics and other sciences in order to yield the gee-whiz weaponry that now define modern warfare. Back in the 1980s, the two nations were sharing and cross-pollinating their defense research at a very advanced level.
Today we have as a result the “electronic battlefield” and many other awesome innovations. Tank commanders with small-screen maps that show where their adversaries are moving. Jet pilots who fire computer-guided bombs. Ships at sea that launch missiles over the horizon and hit targets 1,000 miles away.
I had to read the report several times before I grasped its deeper meaning. The language is densely technological and probably beyond anyone (like myself) who is not a physicist or engineer. The researchers reported on the state of play in electronic optical systems, plasma physics, laser-guided spacecraft, obscure communication innovations and many other scientific explorations that were underway circa 1987.
Finally, it dawned on me. These experts were talking in the 1980s about technological challenges that were forerunners to the dazzling innovations that are now standard. I saw some of these new war-fighting devices in the late 1990s when I wrote a short book on the post-Cold War military struggling to redefine itself when it no longer had the Soviet Union as an enemy (Fortress America: The American Military and the Consequence of Peace).
While reporting on numerous military bases—land, sea and air—I saw some of the early attempts at battlefield communications and guidance systems. A lot of the new stuff didn’t work very well. Soldiers and commanders sometimes had to put it aside or work around it. Drones at that stage were still on the drawing boards, known as UAV’s—“unmanned aerial vehicles.”
The Middle East wars became the live-fire testing ground where new systems were perfected. The consequences of peace were brushed aside by the terror of 9-11. War became America’s continuous preoccupation.
Israel participated importantly in developing groundwork for some of the wonder weapons and, as the IDA survey makes clear, Israeli physicists or engineers were sometimes a few steps ahead of their American counterparts. To be sure, the Israelis were junior partners who brought “technology based on extrapolations of US equipment and ideas.” But the report also observed: “Much Israeli fielded electronic warfare and communications [is] ahead of US fielded equipment.”
On several occasions, the research team spoke of “ingenious” or “Ingeniously clever” solutions that Israeli technologists have found for mind-bending problems of advanced physics. The IDA team also suggested opportunities for American researchers to piggy-back on what Israel had discovered or to team up with one of their R&D centers. Yale’s Office of Naval Research, IDA suggested, should collaborate with the Hebrew University of Jerusalem.
“Scientists at RAFAEL [another Israeli center] have come up with an ingenious way of using the properties of a glow discharge plasma to detect microwave and millimeter waves,” the report said. “The attractiveness of the project lies in the ability of the discharge to withstand nuclear weapons effects.”
This observation gave a me a chill because the earnest defense scientists have yet to find a way for human beings “to withstand nuclear weapons effects.”
It would be good to keep in mind that these extraordinary breakthroughs in technology have one purpose—fighting wars—and are intended to give still greater advantage to advanced nations like the US and Israel that dwarf more primitive adversaries. Many of the new technologies, it is true, will find commercial applications that improve everyday lives (some already have). Yet it is also true that our advances in high-tech killing power have not subdued all the enemies.
They find irregular ways to fight back. They blow the legs off our soldiers. They plant home-made bombs in crowded restaurants. They recruit children to serve as their guided missiles. They capture and slaughter innocent bystanders, while our side merely bombs the villages from high altitude. The victims do not see our way as pristine or preferable. Their suffering becomes their global recruiting.
The highly successful partnership of American and Israeli military science is one more reason it will be most difficult to disentangle from the past and turn the two countries in new directions, either together or separately. But many people are beginning to grasp that lopsided wars—contests between high-tech and primitive forms of destruction—do not necessarily lead to victory or peace. They have led the United States into more wars.
Read Next: William Greider on how Israel’s nuclear superiority affects Middle East conflicts
After Bibi Netanyahu’s provocative speech to Congress, The New York Times provided helpful clarifications in an article headlined “What Iran Won’t Say About the Bomb.” Written by two superbly expert reporters, William Broad and David Sanger, the piece walked through the technical complexities for non-experts (myself included) and explained key questions Iranians have failed to answer.
But this leads me to ask a different question: What about Israel’s bomb? Why isn’t that also part of the discussion?
In the flood of news stories about Iran’s nuclear intentions, I have yet to see mention of Israel’s nuclear arsenal (if I missed some mentions, they must have been rare).
Yet Israel’s bomb is obviously relevant to the controversy. The facts are deliberately murky, but Israel has had nuclear weapons for at least forty years, though it has never officially acknowledged their existence. The Israeli diplomatic approach has been called “nuclear ambiguity.”
I asked a friend who’s a national-security correspondent in Washington why news stories don’t mention Israel’s bomb. He shrugged off my question. “Because everybody knows that,” he said. Probably that’s true among policy elites and politicians, though I am not so sure this is widely known among average Americans.
In any case, if everyone knows Israel has the bomb, why not acknowledge this in the public debate?
I asked another friend (a well-informed journalist sympathetic to the Palestinian cause) why reporters don’t talk about the Israeli bomb. “Groupthink,” he said. “It’s almost as though Israel gets a bye from the media.”
The Iranians, he added, have raised the issue of the Israeli bomb many times in the past, but their complaints were generally ignored in the Western press. Iranian diplomats pointed out that Iran has signed the Nuclear Non-Proliferation Treaty and submits to international inspections as the treaty requires (though Iran still hides stuff, as The New York Times account described). Israel has never signed the NPT and therefore does not submit to inspections.
My point is, the existence of Israel’s nuclear superiority is clearly a pivotal fact of life in the chaotic conflicts and occasional wars of the Middle East. It should not be left out.
Israel’s bomb might be an important factor in motivating Iran to seek a nuclear bomb of its own (though Iran denies that intention). It might also be the subtext for Netanyahu’s bellicose warnings and his occasional calls for bombing Iran’s nuclear facilities.
Bibi’s country would lose valuable leverage if it no longer had a nuclear monopoly in the region. Yet it might be considered a provocative act if Israel bluntly acknowledged its nuclear arsenal.
According to Wikipedia’s account, largely based on scholarly sources, Israel has seventy-five to 400 bombs (others say it is more like 100 to 200). It has never threatened to use them anywhere, though during the Yom Kippur War in 1973 Israeli leaders put eight of its nuclear-armed F-4’s on alert. Its adversaries no doubt got the word.
Other nations with nukes are Pakistan, India and North Korea as well as the United States, Russia, China, Britain and France. The United States is the only nation that has ever used atomic bombs on people in another nation—Japan at the close of World War II.
The Center for Public Integrity in Washington published an article in September 2014 by Douglas Birch and Jeffrey Smith that described the tangled history of Israel’s poorly kept secret. Some scholars, they wrote, complained that the lack of candor complicates efforts to confront Iran, since the US government cooperates in the pretense of not knowing.
Back in 2009, President Obama was asked about whether Israel possessed nuclear bombs. “With respect to nuclear weapons, you know, I don’t want to speculate,” the president said. In US terms, it is an official secret. The government can even prosecute people with security clearance if they tell the truth to the American public.
In a sense, Israel’s nukes have been like an “invisible hand” that warns hostile neighbors and keeps them from going too far. At the same time, however, Israel adopted an “option of pre-emption”—attacking neighbors like Iraq and Syria with non-nuclear bombs if they seemed to be developing nuclear arms.
Israel’s essential rationale was described by various sources cited by Wikipedia: “It cannot afford to lose a single war and thus must prevent them by maintaining deterrence including the option of preemption.”
That brings the story back around to Bibi. For roughly twenty years, Netanyahu has now and then called for bombing Iran to crumple its nuclear intentions. The Obama administration is attempting to accomplish the same result peacefully, through negotiations.
As Juan Cole has written in The Nation, that may be a false choice, because Israeli intelligence and a former defense minister have admitted that Iran has no nuclear weapons program. Cole explained: “Nuclear weapons are in any case defensive, not offensive, and Iran could not deploy a bomb (if it had one, which it doesn’t) against Israel because the Israelis would retaliate by wiping Iran off the map,”
In other words, even if Tehran were to acquire nukes, it could not use them against Israel. Both nations would become prisoners of the stalemate that ruled the United States and Soviet Union for forty years during the Cold War. The doctrine was known as Mutually Assured Destruction, or MAD for short..
That’s an unsatisfying result for the hawks in Israel but also the hawks in the United States. Remember Senator John McCain singing his light-hearted little ditty? “Bomb, Bomb, Bomb, Bomb, Bomb Iran.”
But isn’t talk-talk preferable to risking massive human slaughter and the destruction of nations? The war party in Washington evidently doesn’t think so. Inspired by Bibi, wannabe warriors are brutally trashing their American president. Their logic assumes the mullahs in Tehran are crazy fanatics and that crazy people are not deterred by the prospect of self-destruction.
If Obama’s negotiations fail or Republican meddling derails them, then Americans would face the ultimate question. Do we really want to go to war—again—in the Middle East? Israel might face a different question. Do Israeli citizens really want to bomb Iran if their American friends say, No, thanks—this time you’re on your own?
Maybe the Times reporters, Broad and Sanger, could do another article about the Israeli bomb that has been absent from the debate.
The “Ready for Hilary” campaign has launched a not-very-subtle courtship of discontented Democrats, those leftish liberal activists who yearn for anybody but another Clinton. The not-yet candidate herself spoke to their concerns indirectly when she recently addressed the Silicon Valley Conference for Women. Clinton sketched out progressive goals for family-centered labor-market reforms. They were like love bombs for bleeding-heart liberals.
Meanwhile, the Center for American Progress, the shadow think tank that speaks for Clinton-Obama politics, issued a more substantive agenda in a 161-page report from its self-appointed “Commission on Inclusive Prosperity.” The co-chair was Lawrence Summers, former Treasury secretary under Bill Clinton and senior adviser to Obama. He performed an intellectual conversion equivalent to a double somersault in gymnastics. The new ideas were actually old ideas that progressive advocates have championed for decades to no avail. They were ignored or rejected by Summers himself and the two Democratic presidents he served.
Never mind, the message is: Hillary gets it. She’s ready to confront the inequality thing. She will bring fresh ideas to the campaign on how to reverse the deterioration of middle-class American life. Her list includes everything from parental leave to care for newborn infants to equal pay for women and paid vacations for all working people. The CAP agenda, among many sound ideas, opts for stronger labor unions, worker ownership of corporations, faster growth and full employment, a reformed global trading system that for American working people will become a “race to the top” instead of the bottom. What’s not to like?
But the Clinton seduction encountered a rocky start. In some progressive quarters, the shape-changing rhetoric inspired anger and abiding skepticism instead of applause. Many liberal advocates were reminded why they didn’t want Hillary in first place. Some saw a leopard changing spots into tiger stripes. Still, many policy activists were pleased that their agitation for Elizabeth Warren or other potential candidates was causing serious heartburn in establishment circles. The dissidents intend to do more.
Summers was especially infuriating with his condescending remarks. He has a well-known talent for foot-in-mouth (recall his Harvard speech on why women don’t do well in science and engineering). On economic reform, he offered a warning: “It’s not enough to address upward mobility without addressing inequality. The challenge, though, is to address inequality without embracing the politics of envy.”
“Envy” of the wealthy is a popular trope among the “1 percent” (remember Mitt Romney’s defense of his). In Summers’s case, he may have been thinking of his own grand windfall. A few weeks before his CAP report was issued, Summers hit the jackpot with the initial public offering for Lending Club. As a member of its board of directors, the Harvard economist had accumulated more one million shares in stock and options, priced at 70 cents each according to SEC filings. After the IPO, the stock was trading at $28 a share.
Do the math. The professor reaped something like $28 million for his undoubtedly wise advice to Lending Club. Are you feeling a little envy? (I know I am.) It reminds one of what Elizabeth Warren often says: “There is nobody in this country who got rich on his own.”
The not-yet-announced candidate has a thing about money too. Hillary Clinton’s speech before the Silicon Valley women got a reported fee of $300,000 (the women each paid $245 to hear her). The Clinton family has been smart about raising money for their foundation—foreign interests contributed heavily while she was secretary of state. Her fundraisers are now in a nasty dogfight among themselves over who will get the credit and commissions for raising big bucks for her campaign. “Politics is a dirty business,” as my late friend Hunter S. Thompson used to say.
In normal times, all these maneuvers could be ignored as inside baseball, the usual arguments over messaging that policy wonks and campaign junkies chew over in the run-up to a presidential election year. The masses of voters are not listening at this early stage and not even the intended audience. The insiders are testing out themes and policy proposals, polling the unwashed public on what sells, what upsets.
The Clinton machine’s real target audience, I suspect, are the media pundits and political reporters who will cover the next campaign and inevitably shrink the terms of debate by reducing the substance to a handful of insipid, shorthand clichés. The expressions of what Hillary (maybe) thinks and says as a candidate are meant to assure big media that she truly is a progressive candidate and willing to get beyond the status quo.
This pre-conditioning strategy might very well succeed, at least with the press if not with voters. The makeover has already begun in the establishment press. An op-ed columnist at The New York Times extolled the Larry Summers conversion to liberal economics as significant news headlined “Establishment Populism Rising.” If Clinton is repackaged as a pragmatic “populist,” then the press can cast Elizabeth Warren (not to mention Bernie Sanders and others) as a reckless bomb-thrower. Adjectives like “angry” and “strident” are already being attached to her name.
But these are not normal times. The preliminary skirmishes are more meaningful this time because they reflect the profound crisis of identity that burdens the Democratic Party. What does the party really believe? Whose interests will the nominee truly fight for? Democrats lost their old soul long ago, as critics like myself repeatedly charged. The 2016 election could become the decisive moment that either transforms the party with an aggressively liberal economic agenda or clings to the past and the “corporate-friendly” straddle devised a generation ago by Bill Clinton’s New Democrats.
Trouble is, the New Dems are now the Old Guard. Their center-right program—financial deregulation and “free market” globalization—has not only run out of gas but is rightly blamed for laying the groundwork for financial catastrophe. Yet the New Dem wing still holds the high ground, with big money and loyal supporters as well as Clinton clones populating the key governing positions. The labor-liberal insurgency has a weak bench because for a generation its promising young people were excluded from governing ranks—systematically screened out by both Clinton and Obama administrations—if they showed telltale signs of leaning leftward or embracing non-conformist ideas that resonate with the party’s New Deal values.
By contrast, Republican regimes since Ronald Reagan have always made a point of appointing thousands of young right-wingers to second-level government posts as the training ground for long-term governance. Dems still invoke sentimental rhetoric from the New Deal era, but the practical reality is that the party’s economic policy makers went to school on Wall Street, either before or after their public service (sometimes both).
The gut question is: Can we believe the warm and fuzzy reassurances from the Clinton camp? In politics, after all, it is possible for leopards to change their spots into stripes, and they are often congratulated when they do. On the other hand, it is also true some leopards will change back again after they win the election. I suspect we voters will be arguing this question of credibility right up to the 2016 election.
I am impressed that some well-informed and much-admired economists on the left, like Larry Mishel of the Economic Policy Institute and Dean Baker of the Center for Economic and Policy Research, are congratulating Larry Summers for changing his views. I hope they are right. So why am I not convinced?
Reading the CAP report on “inclusive prosperity,” I began to realize I had heard many of these new ideas long before. Then it hit me. Bill Clinton ran for president on some of the very same stuff back in 1992. His campaign theme in that election year was “Putting People First.” He spelled out his program in great detail, and it helped elect him, though he got less than a majority vote.
Clinton explained he would devote major federal spending to rebuilding the nation’s infrastructure and broadening social guarantees. He promised to protect working people and organized labor who correctly saw their jobs and wages threatened by the new trade agreement called NAFTA. He would go after big-business subsidies and scandalous tax loopholes. Attacking the bloated compensation for corporate executives was the core example of what Clinton intended. What’s not to like?
Within the first months, President Clinton reversed course or abandoned the meat of his promises. He passed NAFTA with Republican votes over labor’s opposition and cut a deal with Federal Reserve chairman Alan Greenspan to let the Fed command a slow-growth economy.
Virtually all of the points made in the Summers report of 2015 could have been made twenty or twenty-five years ago when Bill Clinton was president. In fact, many of them were. Summers is careful to avoid the past, much less even hint at previous views that are now seen as blatantly wrong.
Reading Larry Summers’s report elaborating on how to curb executive pay, I was reminded that Clinton actually did act on that promise. And failed. His solution was a flimsy Treasury rule that didn’t really achieve anything but allowed the fabulous explosion of stock options that has become an even larger scandal. When Democrats lost the House in the 1994 off-year election, the Clinton administration claimed it was because of their valiant but failed efforts to reform healthcare. The truer explanation was his betrayal of working people and other promises.
The spirit and reform ideas Hillary Clinton and the Center for American Progress are now proposing would fit neatly with the old slogan of “Putting People First.” But maybe the new Clinton campaign banner should say: “This Time We Mean It.”
Another source of my skepticism is the practical problem of which political constituencies Democrats must be prepared to abandon this time—working people or financial contributors. EPI’s Larry Mishel pointed out that if Hillary Clinton embraces the Larry Summers agenda this “puts her in a bind, you might say.” She would be going against Robert Rubin, the Clintons’ most influential advisor. The Goldman Sachs and Citigroup banker opened the Wall Street money spigot in 1992 by assuring bankers Bill Clinton’s presidency would be good for the country and especially good for bankers.
Rubin kept his word. Backed up by Summers and Greenspan and of course Bill Clinton, Rubin sold the repeal of Glass-Steagall to Congress (only seven Democratic senators voted against it) then went to work at Citi for $40 million a year. Rubin, Summers and Greenspan brutally trashed Brooksley Born, the only federal regulator who was trying to rein in dangerous derivatives. Rubin arranged a bailout for Mexico’s default crisis that was really a bailout for the New York banks and brokerages that made all the bad loans.
Would Hillary Clinton have the courage to turn on her principal mentor? It seems inconceivable. If she did, wouldn’t that turn off the money spigot?
In a broader sense, the Democratic contest for 2016 is a dramatic collision between outsiders and insiders. The insurgents are rapidly gaining breadth and momentum, but the reigning New Dems are not going to surrender power gracefully. Political machines never do.
Oddly enough, the outlines of this intramural struggle were explained to Elizabeth Warren quite bluntly by none other than Larry Summers. In the first year of the Obama presidency, Warren chaired the Congressional Oversight Panel on the banking bailouts. Summers was in the White House. He took Warren out to dinner and explained with breathtaking clarity how Washington really works.
“Larry leaned back in his chair and he offered me some advice,” Warren wrote in her new memoir. ”I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People—powerful people—listen to what they have to say. But insiders also understand one unbreakable rule. They don’t criticize other insiders.”
Doesn’t that describe the Democrats’ dilemma in a nutshell? The policy elites gain access to the internal debate if only they don’t share things with outsiders, i.e., the people. Thus insulated and isolated, governing elites can’t understand why people are so distrusting and hostile to government. Insiders can’t even talk about real answers they know. Larry Summers’s cynicism is like a crippling disease that runs through the Washington apparatus.
“I had been warned,” Elizabeth Warren wrote. Her exquisite reply to Summers was to tell this story about him in her book. That broke the Summers insider rule, big time. It puts him and other insiders on notice. She intends to do more talking to and for outsiders. We outsiders should honor her courage.
That doesn’t necessarily change the long odds against challengers in 2016. Most players inside the Beltway are already assuming the Clinton nomination is a done deal. Many are either arranging to get on board or are sharpening their attack lines. The Republican Party has its own more visible identity crisis and internal rebellion (the subject for another occasion).
But I wouldn’t bet against the outsiders. Not yet. Rapid change is swirling around politicians in both parties and it’s clear most of them don’t know what to make of it but they’re plenty nervous. These parallel discontents confirm for me that profound wounds and confusion are the shared condition across the nation, far more profound than the standard party differences.
A young friend of mine with working-class sensibilities told me recently that the driving subtext for 2016 will be “anger.” A labor Democrat, he has a keen ear for popular attitudes, and he’s afraid this election could leave the country with a harsh right-winger as president—someone who can skillfully exploit confused and angry citizens by scapegoating the usual target groups.
Democrats, at least most modern Dems, don’t do “anger” very well. It makes them uncomfortable. Most of them would rather talk “hope and change.” Democratic candidates tried to make “hope and change” their theme in 2014 but got shellacked. Their rhetoric was hopelessly at odds with the painful evidence in their own lives.
That is often the problem with the standard party spiel. It’s top-heavy with cerebral abstractions—words like “inequality” or opaque economic statistics—but it’s short on gut-level wisdom.
The rising of insurgents could swiftly create greater authenticity, because most of them are grounded in grassroots realities. They speak the language people can understand, they know well the local texture of anger. Their version of “hope and change” has believable punch to it.
All I know for sure is this: if the Democratic party rejects the watershed potential of 2016 and sticks with the old guard’s way of thinking, they are only adding to their formidable burden for the 2016 election. American society is going to be put through some rough big changes in the years ahead. People know this in their guts, but they are confused and anxious and angry. They need some help understanding things; they need strong new ideas about repairing the damage and restoring hope.
The question is whether the Democratic Party is up to this, whether it wants to be on board.
Read Next: William Greider on the GOP’s plan to send millions of disabled Americans into poverty
Despite their virtues, many conservative Republicans have an unfortunate habit of picking on the weak and disadvantaged, slandering the people least able to fight back. We saw a glimpse of this callousness in Mitt Romney’s disparagement of the “47 percent” who are “takers” living off the hard-working “makers.” The newly empowered GOP majority in Congress is going down the same road—targeting the millions of sick or injured Americans who receive Social Security disability payments.
This is a favorite old canard of self-righteous right-wingers. They label these unfortunate people as shiftless and suggest none too subtly that many are faking their injuries and illnesses. The GOP has been pushing this cold-hearted slander for at least thirty-five years, ever since the glorious reign of Ronald Reagan in the 1980s (who remembers Reagan’s imaginary “Welfare Queen” who drove to pick up her welfare check in a Cadillac?).
McConnell-Boehner Republicans are now reviving the Gipper’s big lie, claiming the Social Security system is in crisis because of swollen disability benefits. Allegedly to save the system, these so-called fiscal conservatives intend to cut benefits and throw out those supposedly able-bodied slackers. Once again, their facts are bogus. Never mind, their story line is concocted to arouse anti-government resentment among people who are themselves strapped for income.
This is why we need “bleeding-heart liberals”—politicians who will stand up to defend the scorned and tell the truth about the Republicans’ propaganda. This season, the country has two tough-minded senators assuming that role—Sherrod Brown of Ohio and Bernie Sanders of Vermont. Sanders is ranking member of the Senate Budget Committee and Brown is ranking member of the Finance Committee’s subcommittee on Social Security. They will be heard in Washington. Given broad public support, they can smash Mitch McConnell’s plot to disable and maybe destroy Social Security.
Some quick facts Senator Brown and Senator Sanders have put before their Republican colleagues: disability insurance goes to nearly 11 million Americans, including more than 2 million veterans and 1.8 million children. Like Social Security retirement, this is an insurance program that workers have paid into with their FICA deductions. Nobody gets rich on disability. The average benefit is less than $1,200 a month, and for 30 percent of beneficiaries that is their entire income. The GOP’s ploy, an accounting rule change already adopted by House Republicans, would set up the disability system for a 19 percent reduction in benefit payments, casting millions into official poverty status.
The legendary fraud that Republicans claim to bemoan is itself a giant lie. The Government Accounting Office and the Social Security’s own inspector general have both found that fraud in this program is less than 1 percent. Compare that to fraud committed by Pentagon contractors, by too-big-to-fail bankers, by auto companies concealing deadly flaws in cars, by elected politicians or by newspaper reporters.
Both Sanders and Brown make the same accusation. The alleged problem with disability funding, Senator Sanders said, is a “manufactured crisis which is part of the long-term Republican agenda of trying to cut Social Security.” Senator Brown said, “Attacking disability insurance is only the first salvo in the Republicans’ plan to attack social insurance and make harmful cuts to Social Security.” The GOP created a false shortfall for disability benefits by blocking an accounting reallocation that is so routine it has been made eleven times in the past under presidents Johnson, Nixon, Carter, Reagan and Clinton.
But here is my question for the Washington press corps. Why aren’t reporters writing about this? Why don’t they examine the Brown and Sanders analysis and determine if their accusations are correct? Instead of writing endless dope stories about a presidential campaign in 2016 and what might happen a year from now, shouldn’t the news media be alerting people to the fight over Social Security the GOP is starting in early 2015?
The dysfunction of Washington involves the failure of major media to examine the gritty politics of issues that truly matter to citizens. Political reporters typically find these subjects boring, and reporters who cover the candidates and campaign usually don’t know that much about how government really works. Both political parties work on warping the subjects by feeding pre-tested clichés and avoiding hot-button issues. The messaging thus reduces campaigns to empty slogans and opacque generalities.
Count up all the thumb-sucker articles you have read about wannabe Republicans touring Iowa. Then count how many stories you saw about the GOP plot to gut Social Security. The answer, I suspect, is none. The media failure pretty much guarantees the vapid content of campaigns and silly debates over whose slogan is more misleading. Reporters are safe to ignore substantive governing issues (except maybe going to war in the Ukraine or bombing Iran), but governing issues are what actual people mostly care about most.
I am reminded of an earlier era when the press was less manipulated by political handlers and reporters were more aggressive about breaking stories without permission from their official sources.
When Ronald Reagan came to town back in 1981, he ran into an unexpected media buzzsaw named Spencer Rich, who was a colleague of mine at The Washington Post. A fellow Post editor dubbed Spencer Rich “the Ferret” because Spencer was a relentless digger of facts who repeatedly drove the Reagan White House nuts. His stories revealed insider details of what programs the new president intended to launch or old programs he planned to destroy. Spencer wasn’t really interested in the political horse race, but he understood the substance of government’s many parts and he did care about how government functioned. As it happens, so do ordinary citizens.
One of Spencer’s front-page exclusives revealed the Gipper’s plan to whack Social Security Disability Insurance. Republicans, he discovered, planned to denounce the liberal program as a scandal of fraud and waste. A fire storm of controversy erupted after his story appeared. The White House first denied it. Then the White House confirmed the story but said the facts were wrong. On the third or fourth day, the White House announced the program was snuffed.
This is what makes a free press so valuable to democracy—that is, if the reporters are truly free. I yearn to see a reporter with the courage to call out liars.
Some white politicians in the state of Alabama evidently want to reopen the Civil War, only this time their “lost cause” is not defending slavery but prohibiting gay marriage. The chief justice of Alabama’s state Supreme Court, Roy “Ten Commandments” Moore, has ordered county judges to ignore the ruling of a US federal judge and refuse to grant marriage licenses to same-sex couples. Fifty-two of the state’s sixty-seven counties obeyed his order.
This is last-ditch resistance against social progress and sure to fail. But it is not a laughing matter. It begs a crucial question that must be asked of all those ambitious candidates who want to run for the Republican presidential nomination in 2016. Which side are you on?
I suggest political reporters of the national press corps—so eager to start covering the horse race twenty-two months before the election—should find out where these guys stand. Do people like Scott Walker of Wisconsin or Bobby Jindal of Louisiana or Lindsay Graham of South Carolina embrace the South’s hoary doctrine of states’ rights on gay marriage? Or do they accept the primacy of federal law and the US Supreme Court in this matter? If reporters don’t ask the question, the press fails its duty to the public.
We do not need another war of rebellion to settle the issue. The press can simply revive President Lincoln’s loyalty oath, the one required of Southern renegades seeking a pardon during the Civil War. Reporters should pin down the GOP wannabes, one by one. In the matter of gay marriage, do you promise to “faithfully support, protect and defend the Constitution of the United States and the union of the states thereunder?”
Tell the truth, no weasel-wording allowed. We know of course that the Republicans are pretty much in agreement in opposing gay marriage. If there are any supporters of gay marriage in their ranks, they apparently keep it to themselves.
But that’s not the question. The question is: Will they accept the law and enforce it if elected president? They should declare themselves now. Before it is too late.
The last-ditch opponents of gay rights who like Chief Justice Moore claim the Ten Commandments as higher legal authority will argue that the US Supreme Court has not yet made a final ruling on the issue. Their point is technically correct but irrelevant. Even Justice Clarence Thomas—Mr. Last Ditch himself on the Supreme Court—has bitterly conceded that his colleagues are going to decide shortly in favor of upholding the constitutional rights of gays.
In the meantime, we should all honor those fifteen probate judges in Alabama who told their state’s chief justice to suck an egg. Let the joyous weddings begin.
Read Next: William Greider on Obama’s path toward economic catastrophe
Disregard the happy talk from the Obama White House. The stagnant global economy remains at the precipice of something worse unfolding—full-blown deflation. And the so-called recovery in the US economy remains shaky, despite good employment numbers. Here and abroad, the governing authorities seem to have forgotten the most basic nature of our situation. We live now in a globalized economy where one nation’s cold can lead to another country’s heart attack. Their ignorance is shocking, but also dangerous.
In fact, the US and other leading economies are beginning to mimic some of the same grave errors governments committed in the distant past, circa 1929, when spreading collapses of banks and financial markets morphed into the Great Depression. I am not predicting such a catastrophic outcome, not yet anyway. But the risk is present. The road to the Great Depression was paved with similarly myopic strategies. This president is not Herbert Hoover. But he might someday be remembered as Wrong-Way Obama.
The misdirection of government power suggests that many leaders don’t believe things were changed that much by the breakdown of 2007. They are still looking backwards, complacently doing the same stuff that failed sixty and eighty years ago.
First, the United States finds itself once again attempting to be the “locomotive” that pulls the rest of the world out of the ditch. America has done this successfully many times in prior decades to help allies get well. The problem is, the American economy is now much weaker and more wobbly itself, deeply indebted after thirty years of trade deficits and costly wars. There’s a lot less US excess to spread around.
Second, important trading partners—Japan, China, others in Asia—are employing a nasty trade strategy from the early thirties known as “beggar thy neighbor.” They are weakening the value of their own currencies (and boosting the dollar’s value) so their exports will be cheaper than competing American products. The US trade deficit is now rising steadily, especially in manufactured goods, and sure to worsen as other currencies weaken. That means losing good jobs and wages for Americans.
Clyde Prestowitz of the Economic Strategy Institute, a longtime critic of the lopsided trading system, observed: “The whole bloody world has somehow figured they are going to recover by selling exports to the US. While the world is depending on American demand, we are shipping more jobs and industry abroad but we can’t keep it going. I fear we are going to keep playing this game because we think we can get away with it.”
Prestowitz ticked off nations whose currencies have fallen in value—some as dramatically as 20 to 30 percent. They include Japan, China, Singapore, Australia, Canada and the European Central Bank. The ECB’s motive is legitimate—reducing interest rates to provide economic stimulus and fend off deflation—but the economic consequences are the same—more downward pressure on US production and employment. Japan’s currency manipulation cost 896,000 US jobs in 2013, according to the Economic Policy Institute.
Third, President Obama appears oblivious to these changed circumstances. The evidence is his insistence that he wants to approve yet another free-trade agreement, this time with eleven other nations in the Trans-Pacific Partnership (some of which are gaming their currencies to increase their exports to America). The administration has made extravagant claims that this will create something like 650,000 new jobs in America. Similar promises were made before previous trade agreements, starting with NAFTA in 1993, and all proved bogus.
The Washington Post, a hearty advocate of free-trade agreements, blew a big hole in Obama’s promise. Glenn Kessler, the Post’s fact-checker, chased down the statistics and discovered that White House experts essentially made up the numbers themselves. It was what you call a “back-of-the-envelope” estimate, but this one was written on toilet paper. Kessler was quite harsh in his judgment. He concluded: “Our advice remains: be wary whenever a politician claims a policy will yield bountiful jobs. In this case, the correct number is zero, not 650,000, according to the very study used to calculate this number. Administration officials earn four Pinocchios for their fishy math.”
Finally, Congress will be asked to approve this new TPP concoction, but many Democrats and some Republicans are resisting on the grounds that it does not include a serious provision for stopping these currency manipulations by other nations. Their real intention, I suspect, is to kill the TPP agreement, since they know other countries would walk away if that issue is included. I am for killing TPP myself. But there are crucial flaws in focusing on currency manipulations as the reason. For one thing, it would shrink still further the sovereignty of nation states (including the United States) to manage their own financial systems. Globalization has already crippled governing rights of people and transferred power to the multinational banks and corporations. The world doesn’t need more of that.
My more fundamental objection is that a far more important imperative at this hour is to generate worldwide recovery and that requires a cooperative agenda for shared relief and aggressive stimulus—not more dog fights between central banks and governments or rival political ideologies. The fundamental problem blocking recovery is the shortage of consumer demand (too many factories, too few customers) and over-bearing abundance of debt. A real program for recovery would have nations joining to confront those two in a big way.
First, bang on the creditors and governments to make them write off lots of debt, especially for folks who need it to survive. The United States did a little of this but not enough. Obama was more generous with guilty bankers than he was with the borrowers they swindled.
Second, create jobs—real jobs with real incomes for real people (not abstract estimates by economists). Governments and stores of private wealth must be coaxed or compelled to finance big-scale projects of many kinds, the projects that create real jobs, real incomes. The Federal Reserve should get credit for staving off collapse but its monetary stimulus did not succeed in generating a genuine recovery. Europe, now in more desperate straits, is attempting to mimic the Fed, but I expect it will not do any better. The financial guys caused this disaster but they have proved they are incapable of correcting their sins or healing the society. Obama, unfortunately, listened to the money guys. This is why I fear the president may get a “wrong-way Obama” judgment from history. Surrounded by Wall Street expertise and conventional political actors, he didn’t understand the larger bonfire raging in the global economy or else was persuaded not to take it seriously.
The next president will have to begin the great task of understanding what went wrong in the global system and reformulating its rules and functions in profound ways. Otherwise, we may limp along like this for quite a long time. Or things could get worse.
I have a legal question citizens of New York might wish to ponder. What is the difference between Sheldon Silver and Jamie Dimon? Representative Silver is speaker of the State Assembly in Albany, and federal prosecutors want to put him in prison for taking kickbacks for doing political favors. Dimon is CEO of JPMorgan Chase, the nation’s largest bank, which has richly rewarded him for political manipulations that saved the megabank billions in regulatory fines for defrauding investors and saved fellow bankers from criminal prosecution.
Something about this comparison doesn’t smell right.
“Shelly” Silver is accused of steering plaintiffs to two law firms who sue big companies in behalf of people injured by asbestos or other cancer-causing substances. He arranged state research money for a couple of nonprofit health projects that deal with such issues, In return, the indictment charges, Silver received $3 or $4 million spread over ten or fifteen years. As political corruption goes, this is pretty small beer.
Jamie Dimon, by contrast, is political nobility, a leader of the Wall Street gang that raped the nation (financially). Trillions were lost by millions of families in the mortgage-securities racket that brought down the US economy. Dimon’s kickbacks were from his board of directors, grateful that he used his skill and influence to dodge the legal consequences.
Yet when it came time to punish financial wrongdoers, the scandal did not go before a grand jury. Dimon instead sent squads of corporate lawyers to negotiate with the government on how much the bank was willing to pay for its misdeeds (Dimon called them “mistakes”). When the negotiations stalled, Dimon traveled to Washington for a personal conversation with the attorney general. The final deal announced by Eric Holder was a bit fraudulent itself. Holder claimed to have won a record penalty of $13 billion, but lawyers who read the fine print and did the accounting said it was actually closer to $6 billion—a pittance compared to the horrendous damage Wall Street bankers profitably did to the nation.
The sordid mismatch of crime and punishment was displayed in the pages of The New York Times, though the newspaper seemed unaware of its contradiction. The Times editorial page demanded Representative Silver’s immediate resignation, never mind the trial and jury verdict. US Attorney Preet Bharara accused Silver of holding “titanic political power.” the Times wanted a prompt hanging. Silver did not resign but did agree to delegate leadership to senior assembly members on a temporary basis. “I hope I will be vindicated,” he said.
Meanwhile, on the same day back in its business section, the Times was reporting that for his efforts Dimon would get “a sweeter pay package in 2015.” The board of directors decided Dimon’s total compensation would remain at $20 million and he would get $7.4 million in “easier-to-access cash” rather than restricted stock shares.
The business story said, “Among the directors, the people briefed on the matter said, Mr. Dimon has been bolstered by a widely held view that he took on a crucial role in JP Morgan’s settlements with the federal authorities.” The story said directors “see the government’s extraction of money from the banking industry as driven more by a desire to take a tough line against Wall Street than any actual problems at the banks.”
In other words, the boys at JPMorgan did not learn their lesson. They did not take the government’s complaints seriously because they assume Washington was just putting on a show to appease angry citizens. After all, $6 billion is a mere asterisk on JPMorgan’s balance sheet, although Dimon continues to whine in public about the unfairness of the government regulators.
In fact, the Morgan Chase directors may be right about the feds. Matt Taibbi of Rolling Stone wrote a blistering critique of Holder’s claim that criminal prosecutions still might be possible. The AG gave a tortured explanation of how difficult it is to pin down individual responsibility in corporations. “Responsibility remains so diffuse and top executives are so insulated,” Holder told an NYU audience, “That any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of any single individual.”
Taibbi responded: “In other words, people don’t commit crimes, corporate culture commits crimes!” Perhaps Sheldon Silver’s lawyers should put the blame on New York political culture.
I should acknowledge my own bias in this matter. I have family (children and grandchildren) who live in Sheldon Silver’s Assembly District 65 on the Lower East Side. They are not naïve and they oppose corruption. But they also see “Shelly” Silver as a pretty good guy. He plays hard ball in behalf of certain interests and issues, they know, but he also involves himself in stuff that matters to ordinary people, like defending rent-control apartments against the ever-encroaching grasp of the real-estate lobby.
Shelly Silver lives in their neighborhood, and not in grand style, contrary to the heated insinuations of editorial writers. During Hurricane Sandy, when power was out, trucks showed up around Grand Street, where people could recharge cell phones and laptops. Without really knowing, residents heard or just assumed that Representative Silver had something to do with that.
In the legislature, he pushed the gay rights legislation, but also the default speed limit of twenty-five miles per hour so old folks and joggers could cross broad streets without getting run over. He demanded more building space for the new downtown high school my grandson attends. Shelly legislated a school holiday for the Lunar New Year (2015 is the Year of the Sheep), so Chinese kids could stay home and celebrate with their families without being recorded as absent. These are small matters, but people notice and remember.
Farther south, Silver’s district also includes the financial district. Like most New York politicians, Representative Silver attends to Wall Street too. But he is an old-school politician, and the tension between neighborhood life and powerful money interests is a very old conflict in New York politics, still very active in current events.
Silver’s reputation as the powerful boss who looks out for the folks is a model descended from the olden days of the Tammany machine but also the great social reform movements that arose on the Lower East Side in the early twentieth century—the popular politics that eventually evolved into the liberal-labor agenda of the New Deal era.
Tammany Democrats used to speak unapologetically of “honest graft,” which meant politicians could take care of the public interest and take care of their own interests without legal contradiction. Of course, many bandits hid gross corruption behind that logic. But determining criminal motivation is not as self-evident as righteous prosecutors assert. The overly zealous pursuit of bad guys might “criminalize” what is the standard practice of bartering and trading in everyday politics.
The US Attorney must have noticed, for example, that a lot of money changes hands in politics—big money given to politicians by private interests—and a lot of that money comes from Jamie Dimon’s gang. These exchanges are called “campaign contributions” but that dodges the real question: What’s being bought and sold? Is Jamie Dimon bartering private deals with our elected representatives over how public funds will be spent or which laws will be altered to benefit Dimon’s bank? Of course he is. We just don’t know what he is buying or selling.
The US Attorney for Lower Manhattan should convene a grand jury to explore these questions, because very little is ever revealed about the dark-side transactions. The FBI, as it sometimes does with criminals it has caught, should put a “wire” on some middle-level bankers and collect recorded glimpses of who’s trading away public assets behind closed doors—deals more secretive than anything Shelly Silver engineered.
Of course, that kind of investigation won’t happen. The corporate justices who control the Supreme Court would never allow it. Examining the private motives behind Wall Street’s political manipulations would violate the free-speech rights of Jamie Dimon and his crowd. Money is speech, the Court says. Therefore, the more money that pours into the hands of politicians from the corporates the better our democracy will become. What a hoot.
My essential question is this: Who gets to decide how public resources are going to be spent or which laws should be altered to satisfy certain private interests? Democracy promises (in theory) that the people have a right to participate in the decisions governing their lives.
But whatever the law and Constitution require, these decisions will in the end always be determined by people, mere mortals who may get things wrong and will always be influenced by self-interested motivations. That applies to elected representatives like Sheldon Silver. But it also applies to private bankers like Jamie Dimon, whose gang expends billions to buy members of Congress and high-level government appointees and to field thousands of lobbyists who help rewrite the laws for us to observe. Democracy’s promise is still unfulfilled, but people are working on it.
In this imperfect world, I would rather have the Shelly Silvers decide things than the Jamie Dimons.
Read Next: Can Wall Street take down Big Pharma?
Here is a man-bites-dog story that might give comfort to those many Americans being gouged by the drug industry’s larcenous prices. A Dallas hedge-fund operator named Kyle Bass who made a fortune attacking over-priced stocks now says he is going to attack Big Pharma for over-pricing drugs. Bass’s announcement set financial industry bloggers aflutter because hedge funds are not usually known for public-spirited motives. Citizen Bass is in it for the money, of course. But he intends to do well himself by doing good for the rest of us.
His firm, Hayman Capital Management, won fame and fortune back in 2008 by “shorting” mortgage securities just before the crash. Bass recognized those packages of mortgage bonds would crash once investors realized the banks were peddling phony paper with false valuations. Now he wants to do roughly the same for fifteen pharmaceutical firms selling drugs based on phony patents.
“The companies that are expanding patents by simply changing the dosage or the way they are packaging something are going to get knee-capped,” Bass boasted. This may make him rich all over again and fellow investors he recruits for Hayman Capital. But Bass added, “This is going to lower drug prices for Medicare and for everyone.”
For industrial sectors like drugs, the mangled US patent system has become a well-known scandal—a sick joke in which lawyers and lobbyists get the last laugh. Through political manipulations in Congress, leading companies win the power to double or triple prices by extending their legal claims to exclusive production of widely prescribed and essential drugs. Normally, the patent expires after twenty years or so and generic substitutes come on the market with much cheaper prices.
Inventive capitalism finds ways to subvert this system. A drug company will reformulate a new version of the old drug and claim a new patent that renews their protection from competition. Or the big company essentially bribes or buys the smaller upstart rival that is threatening to upset its monopoly pricing. This is called “pay for delay”—a reverse patent settlement that gets challengers to postpone their intervention. These gambits are ostensibly legal, but an aggressive government would put a stop to them if it put the public interest ahead of drug profits.
Big, big money is at stake. Bass says the inflated stock prices of fifteen large drug companies reflect a combined capitalization of $450 billion. He wants to poke a hole in that balloon. Short-sellers like himself could reduce that by half, he thinks, as stock market investors begin to grasp that company profits are derived from fallacious patents. Hayman Capital intends to show them.
“We’ve dedicated half of our resources over the past six months to this,” he told an investment conference in Oslo, Norway. “We are going to challenge and invalidate patents through the Inter Partes Review process…[and] we are not going to settle.”
The IPR process was created in 2012 at the behest of big technology companies fighting off copy-cat producers in laborious and costly lawsuits. The new rules create a fast track for challenging dubious claims, instead of the court cases that can take years to resolve, postponing rulings and eroding profits in the meantime. Bass and possibly others have come to realize you don’t have to be a drug company to use this new system to great advantage.
Could Wall Street buccaneers force Big Pharma to clean up its act? Bass is not naming any corporate names or yet revealing his strategy. But he clearly is taking aim at a monstrous public injury. Just the other day, Peter Bach, a physician and director of health policy at Sloan Kettering Cancer Center, had an op-ed in The New York Times bemoaning the pain and injury of outrageous drug prices for patients and healthcare providers.
Drug companies, Bach explained, not only suppress cheaper competitors but keep raising their own prices. In 2001, he said, Novartis charged $4,540 a month for a leukemia drug called Gleevec. Now it charges $8,488. Or drug companies simply buy up cheaper generic brands and raise their prices. Albendazole, a drug for parasitic infections, was approved in 1996 and sold for only $5.92 per day as recently as 2010. Three years later, the wholesale price was $119.
The Obama administration “reformed” the healthcare system to reduce costs but somehow managed to overlook drug prices. Of course, Europeans get the very same drugs, only much cheaper. As Bach cited, prescription drug prices in Europe are 50 percent cheaper than what Americans pay. The Novartis drug Gleevec sells here for $8,488, but costs $4,500 in Germany and only $3,300 in France.
But, hey, we Americans get to have a “free market,” and they don’t.