News and Features
(With apologies to Stephen Foster)
The Enron hearings stretch ahead,
Until the final soundbite's said.
Oh, doo-dah day.
Pols will posture night,
Pols will posture day.
They'll show the voters just how tough they are,
Browbeating some CPA.
They'll talk of all the laws they'll make,
And meanwhile they're still on the take.
Oh, doo-dah day.
Pols will posture day,
Pols will posture night.
The guy who's shmeered them for a dozen years
Now is the guy they'd indict.
George W. Bush must be feeling an acute sense of déjà vu these days, as the dubious dealings of the accounting firm Arthur Andersen, LLP take center stage in the Enron scandal.
What would Jesus do? It's a no-brainer; he would leave the Christian Coalition, take a consulting job with Enron and then use his divine power to make George W. Bush president.
To the economy, September 11 now appears to have been a transient shock. Sales, confidence and the stock market plunged, but then returned. As the dead cat bounced, optimists declared recovery to be near. The so-called stimulus package died. And so we now face a classic test of the predominant economics: Either recovery will happen, or it won't.
I'm betting against it. For the aftermath of September 11 also boosted the economy in several equally transient ways. Lower interest rates spurred mortgage refinancing. The tax rebates added to personal income and savings. Oil prices fell sharply. Good weather extended the building season. And the automakers took heroic losses to clear their inventories, as did retailers at Christmas. All of this, so to say, fanned the embers. None of it provided new fuel.
Meanwhile, larger depressive forces remain in place. Investment continues to fall; unused capacity continues to rise. The automakers are shutting down and laying off. Consumer spending has slowed. Exports slump as recession deepens around the world. Enormous deficits are opening in state and local budgets, with spending cuts or tax increases already estimated at nearly $100 billion for next year. About 8 million Americans are jobless now, 2.5 million more than a year ago.
Last year's tax cut was supposed to keep America growing. It failed. The Republican goal remains, naturally, to get another tax cut. This is not really economic policy, merely another tactical variation on a permanent agenda. Call it ripoff as a philosophy. Enron writ large.
Democratic strategy has been to help the wounded and hope for the best. Extended unemployment insurance and healthcare would be useful. But they're not enough. Democrats are having trouble leaving their illusions--budget surpluses, debt reduction, "fiscal responsibility." In truth, budget deficits are normal. Right now large budget deficits are necessary. The job is to end the recession, to restore full employment, to recreate conditions for growth. If small steps won't achieve this, large ones are demanded.
Alan Greenspan, meanwhile, has lost relevance. He may cut interest rates some more. It won't hurt, but it won't give us recovery. "Pushing on a string," they used to call it. Business investment won't return until profits do, and that won't happen until consumers have paid down some of their debt. That will take time--maybe a lot of time.
What, then, are the choices? Just two. Temporary, progressive tax cuts may still be considered. One might extend the earned-income tax credit or roll back payroll taxes for three years--meanwhile freezing the 2001 tax cut at present levels in order to reimburse the Social Security trust fund. That would be useful, but the effect would be limited by the need of households to raise their savings and reduce their debts. Half of last year's rebates were saved, not spent. Even good tax cuts would now face the same problem. The egregious 2001 tax cut, meanwhile, should be frozen at current levels, partly to reimburse the Social Security trust fund.
The other choice is: Increase public spending. All now agree that spending, in general, is needed. It follows that if households won't, government must. We need spending not just to provide a temporary boost but to sustain activity until the private sector is ready to spend again. This is the time for schools, transportation systems, housing, the environment, a real energy policy based on conservation and mass transit to cut our dependence on oil, and prescription drug benefits. Why not a new home-health-aide program for seniors? There's work to do. There are people to work. Bring them together!
The most immediate crisis, deserving attention before any other, is in the states and cities. State and local budgets should not be cut. But how to prevent this? By recreating a revenue sharing program for the states, with a pass-through to cities, on a scale sufficient to plug the budget gaps. How much? Let's say $100 billion in the first year. Pass it with very few strings, as a block grant, and get past the Washington gridlock. Revenue sharing has Republican lineage; it ought to be a bipartisan cause today. The federal government should also make it easier for states to borrow in support of their capital programs.
This slump may well get much worse before it gets any better. Accordingly, we must save ourselves. There is no danger in doing too much. This is not a moment for caution. It is not a moment for faith. It is a moment, surely, for action.
The Supreme Court has made a decision that is wrongheaded, and wrong.
It was a mistake--and a beaut--in Matt Bivens's piece "The Enron Box" where he confused the Houston Astros and the Texas Rangers. It is hereby duly acknowledged and regretted. But what really astonished us was the way it unleashed a slick triple play by the Right-Wing Conspirators (a Class C club that plays the Washington-New York corridor). You've heard of Tinker to Evers to Chance? Well, this was Wall Street Journal to The Weekly Standard to Fox News's Brit Hume. The WSJ caught Bivens's blooper; then The Weekly Standard grabbed amd waved it long enough to say "Nyah, nyah" before Brit (Mr. Inside) Hume gobbled up the ball and hinted darkly of cover-up (or something) on Fox News. This dazzling play illustrates how the opposing team will seize on a minor miscue and use it to clear George W. Bush of any involvement in the Enron scandal. OK, we admit the error shows we are sometimes sports-challenged; next time we'll check with a baseball expert like George Will. Lest the real issues be lost out in right field, however, we bring you a comment on Bush and baseball posted by the witty sportswriter Charles Pierce, a commentator on NPRs Only a Game and the author of Sports Guy: In Search of Corkball, Warroad Hockey, Hooters Golf, Tiger Woods, and the Big, Big Game. He posted it on Jim Romenesko's Media News (www.poynter.org):
"As to The Nation's unfortunate collision with the national pastime--the passage ought to read:
'When George Bush co-owned the Texas Rangers with a bunch of businessmen who had all the real money, construction began on The Ballpark At Arlington, after the ownership group finagled the eminent domain laws in order to swindle some property owners out of the market price for some valuable land. The property owners sued and won, but The Ballpark arose anyway, enabling Mr. Bush to cash out his original investment several times over without ever having done any actual work. This helped launch the successful portion of his political career, culminating in his becoming President of the United States, a job from which he took an evening off last spring in order to be the guest of Kenneth Lay for the opening of Enron Field in Houston. Mr. Lay was CEO of Enron and a well-known political supporter of the president who, these days, of course, would not recognize him from a box of turnips.'
"The Nation, I am sure, regrets the error."
Indeed we do.
For weeks, conservative commentators and Bush White House defenders have been huffing that the Enron matter is a corporate scandal, not a political controversy--that it is an affair of business sku
One of the major falsehoods being bandied about by apologists for the Bush Administration is that while Enron may have bankrolled much of the President's political career it got nothing for those
Concerned about potential taint from the metastasizing Enron scandal, George W. Bush met with reporters recently to distance himself from Enron's chairman, Ken Lay (nicknamed "Kenny Boy" by W. before the scandal). It is testament to how indelible that taint may become that Bush found it necessary to lie about his friend. He claimed that Lay supported Ann Richards in 1994 when Bush ran for governor of Texas and that he only got to know him later. In fact, Lay was a leading contributor to Papa Bush's re-election run in 1992, and by his own account was "very close to George W." Enron's PAC and executives pumped $146,500 into W.'s 1994 race (while Richards received all of $12,500 from Enron sources). Bush "was in bed with Enron before he ever held a political office," reports Craig McDonald, director of Texans for Public Justice.
W. has good reasons for trying to minimize his relationship with Lay and Enron in the dying days of his father's presidency. After Clinton's 1992 victory, Enron pushed hard to exempt its energy futures contracts from regulatory oversight before the new Administration took office. The lame-duck chairwoman of Bush's Commodity Futures Trading Commission, Wendy Gramm, wife of Texas Republican Senator Phil Gramm, brought the exemption to a final vote on January 14, 1993, six days before Clinton took office. Enron, a leading contributor to Phil Gramm's campaign coffers, then named Wendy Gramm to its board of directors, where she pocketed about $1 million in payments and stock benefits over the next nine years. She served on the company's audit committee and helpfully turned a blind eye to the shady private partnerships Enron set up off the books to hide debt and mislead investors. In 2000, as the Supreme Court was naming Bush President, Senator Phil Gramm slipped a bill exempting energy trading from regulation into Clinton's omnibus appropriations act, avoiding hearings, floor debate and notice. Enron was all set to operate in the dark.
What is the Enron saga about? Enron's bankruptcy, the largest in history, exposes the decay of corporate accountability in the new Gilded Age. No-account accountants, see-no-evil stock analysts, subservient "independent" board members, gelded regulators, purchased politicians--every supposed check on executive plunder and piracy has been shredded. Enron transformed itself from a gas pipeline company to an unregulated financial investment house willing and able to buy and sell anything--energy futures, weather changes, bandwidth, state legislatures, regulators, senators, even Presidents.
It is Enron's rise that lays bare the hypocrisy of modern conservatives--call them Enron conservatives. Enron conservatives fly the flag of free markets but actually use political and financial clout to free themselves from accountability, rig the market and then use their position to ravage consumers, investors and employees. These are not the small-is-beautiful compassionate conservatives George Bush advertised in the election campaign, or the tory conservatives who protect flag, family and honor. Enron conservatives make the rules to benefit themselves. "They have clout and the ability to get the rules written their way," said Stephen Naeve, chief financial officer for Houston Industries, Inc. about Enron in 1997. "They play with sharp elbows."
Ken Lay learned about regulation while working at the Federal Energy Regulatory Commission (FERC). After he created Enron, he lavished millions on lobbyists and campaign contributions to free Enron from regulation and to push energy deregulation. His lobbyist stable has included James Baker, Bush I's Secretary of State; Jack Quinn and Mack McLarty of the Clinton White House; and Marc Racicot, current head of the Republican Party.
Enron's lobbyists played a large role in California deregulation--setting the state up for a hit. Most experts believe that Enron, controlling about a quarter of wholesale trading in electricity with no regulatory oversight, was central to the market gaming that led to last year's "energy crisis," which cost Californians about $50 billion. For six months Pat Wood, Enron's handpicked head of FERC, refused to impose price controls. The White House, led by economic adviser Lawrence Lindsey, a former Enron consultant, ridiculed the very notion. In those six months, Public Citizen reports, Enron posted increased revenues of nearly $70 billion. When the price controls were finally enacted, the "crisis" disappeared. Spencer Abraham, Bush's clueless Energy Secretary, now informs us that this is a triumph of deregulation.
Enron conservatives prefer plunder to production. Enron's twenty-nine top executives cashed in a staggering $1.1 billion in stock in the three years before the firm went belly up. Small investors got soaked, and faithful employees got stiffed. In August, after Lay and CEO Jeffrey Skilling had cashed in more than $160 million in Enron stock, Skilling abruptly resigned. Lay personally e-mailed his employees to assure them that "our growth has never been more certain." Enron then maneuvered to ban its employees from selling the Enron stock in their retirement accounts as its value plummeted, leaving thousands stripped of their life savings.
Enron conservatives aren't limited to the Houston boardrooms. Enron conservatives in the Administration pushed through the $15 billion airlines bailout that included zero for workers. Enron conservatives in the House passed the "stimulus" package that featured tax cuts for corporations and the wealthy while scorning unemployment insurance and healthcare assistance for those losing their jobs. Enron itself was slated to receive $254 million from retroactive repeal of the minimum corporate tax. Enron conservatives in Congress passed the President's tax cut, which showered almost half its benefits on the wealthiest 1 percent. And they even repealed the estate tax, insuring that Lay and his fellow executives could pass along their ill-gotten gains intact to their heirs.
Enron conservatives aren't all Republicans. Enron's deregulation plans, and its contributions, were popular with the Clinton White House. Enron gave $10,000 to the New Democrat Network, the money wing of the Democratic Party. With his employer, Citigroup, owed at least $750 million by Enron, Clinton Treasury Secretary Robert Rubin didn't hesitate to call Treasury to suggest it intervene to forestall the downgrading of Enron's credit rating.
But the leading Enron conservative is W. himself. After all, Bush made his own fortune with inside connections while other investors in his company were getting soaked. Lay and Enron were Bush's leading supporters, contributing $113,800 directly to his campaign and another $888,265 to the Republican National Committee, an arm of the campaign, according to the Center for Responsive Politics. Bush repaid Lay and other "Pioneers"--those who raised $100,000 or more for his campaign--with his shameful tax plan. He continues to push for a stimulus plan that benefits corporations over workers. He is pressing Congress to pass the Enron energy plan, which features massive subsidies to energy companies and further deregulation. And while the White House has begrudgingly admitted to six meetings between Enron representatives and the Cheney energy task force, it continues to stonewall efforts by the General Accounting Office to find out who met with Cheney to draw up the plan.
Public Citizen reports that Enron set up a staggering 2,832 subsidiaries, with almost a third located in the Cayman Islands and other tax havens. On taking office, the Bush Administration announced that it was abandoning Clinton efforts for a multilateral crackdown on these havens, saying, in Treasury Secretary O'Neill's words, that the Administration will not "interfere with the internal tax policy decisions of sovereign nations."
The Administration crows that there is no smoking gun vis-à-vis Enron. We'll see. But the real scandal is not what was done illegally but what was done under cover of law. Enron conservatives don't violate the rules; they change the rules to suit themselves.
As Bush was distancing himself from his old friend Kenny Boy, one of the President's first regulatory acts in office went into final effect: the repeal of the Clinton rules that allowed the government to deny contracts to companies that are repeat violators of workplace safety, labor, environmental and other federal laws. Enron conservatives don't see why corporate lawlessness should get in the way of federal largesse. After all, in this Administration Enron's rise and fall are seen, in the words of Treasury Secretary O'Neill, as a "triumph of capitalism."
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