Those who forget their inequality are doomed to repeat it.

On the day the first of Bush’s "economic stimulus" tax rebates hit some citizens’ bank accounts, it should be noted that this is the first federal tax rebate in history in a Presidential election year. No one in Washington previously has had the nerve to so openly pander for votes with money. Many economists believe that this will do little to jump start a recession economy, because any boost in consumer discretionary spending will be so short lived. In these tough times, much of this "free" money will simply go to pay off debt or be eaten up in higher prices for groceries and gasoline. (See update.) As a result of increasing the deficit, the government will then have to borrow the rebate money back from rich investors.

Rather than being motivated to use tax cuts and rebates to revive the economy, Bush and his party have a history of using them to pander. In spite of Republican mythology about the 2001 Bush tax cut, it was not about reviving the economy. It was conceived in 1999, when the economy was booming, as a way of getting votes in the 2000 election.

The main reason we have the 2008 rebates is that Republican are hoping lower income people – who have been economically the worst off during the Bush years – will mostly remember the rebate checks they got in July when they go to the polls in November. This sort of appeal worked for California Republican Governor Arnold Schwarzenegger when he unseated the Democratic incumbent in the 2003 recall election. Schwarzenegger promised to roll back a vehicle licensing tax that had been raised due to the state's poor fiscal health. The tax of up to a few hundred dollars per vehicle hit low income people the hardest. Many minority voters chose a Republican for the first time in their lives.

So why did the Democratic Congress go along with this scam? Because, what could else could they do? Once the President proposed and promoted the rebate, opposing it would have resulted in Republicans campaigning against Democrats on the issue in the Fall. Too bad the Democrats did not have the fortitude to just say no.

A Princeton professor of politics recently described his study of the national economic priorities of the two parties over the past sixty years. Under Democratic Presidents, the actual incomes of the middle-class rose more than twice as fast as they did when Republicans owned the White House. The real incomes of the working-poor increased six times as fast during Democratic administrations! The affluent fared equally well with both parties. If Democrats had held the Presidency continuously since 1948, "incomes would be more equal now" than during even the most egalitarian era of the 1950's. The professor notes that "Every Republican president since Dwight Eisenhower presided over increasing economic inequality, while only one Democrat — Jimmy Carter — did so."

Why do many middle class and working poor voters not reward Democrats for their superior economic stewardship? The professor believes that Republican Presidents’ use of their new mandates to cut inflation and social spending – hurting the least well off – wear off after three years, producing a perceived boost in the next election year for those that have suffered the most. Democrats’ policies helping the poor and middle-class also run their course after three years, creating a perceived decline that coincides with the next election cycle. As Republicans know so well, the public has a short memory.

Subprime meets nonprosecution.

Neatly tying together my previous posts about the Bush Justice Department's use of deferred prosecution agreements (nonprosecution) and the subprime mortgage crisis comes speculation that a Republican controlled Justice Department would not prosecute companies accused of wrongdoing in the subprime scandal. In fact, the existence of this corporate diversion program may have fueled the subprime crisis by encouraging bad corporate actors to believe they would not be held accountable for wrongdoing, says the NY Times.

Not a Gramm of change in credit market regulation expected under McCain

Now that an unprecedented 81% of Americans believe the country is on the wrong path, it’s easy to believe that both political parties will deliver change in the upcoming election.

An amazing interview with former Commodity Futures Trading Commission member Michael Greenberger on the NPR show Fresh Air yesterday described how former Senator Phil Gramm from Texas bears significant responsibility for the subprime mortgage and credit market crises and financial meltdown we now face. He cosponsored the Commodity Futures Modernization Act, passed quickly and quietly in the waning hours of the 2000 Congress as rider on a huge appropriation bill, when everyone’s attention was still on the ill fated election. This and other Graham sponsored legislation deregulated much of the financial sector and hastened the growth of risky new markets based entirely on gambling on how other markets will fare.

Wikipedia describes another role Gramm played in the meltdown of financial markets (also detailed here):

Gramm was partly caught up in the Enron scandal when it emerged that his wife Wendy had part written an exemption for Enron from federal oversight while she was serving on the Commodity Futures Trading Commission. She then accepted a directorship at Enron. Gramm was personally involved further when it came to light that he had helped to turn the exemption into law as well as push through the deregulation of energy markets that led in part to the Enron scandal. During this period Enron was a major contributor to his campaigns.

Gramm started out as a Democrat, but realized it would be more profitable to be become Republican after Reagan was elected in 1981. Operating as a spy for the Republicans until the Democrats cast him out, he resigned his House seat and then was reelected as a Republican in a special election. He beat Ron Paul in the Republican senatorial primary in 1984.

Soon to be Republican Presidential nominee John McCain admits he doesn’t know much about economics. His economics advisor is none other than Phil Gramm, now a vice chairman of Swiss Bank UBS, which lost 19 billion dollars in U.S. credit markets and real estate in just the first quarter of 2008! Gramm is rumored to be McCain’s likely choice for Treasury Secretary. Don't expect much change from Bush's economic policy from that ticket.

Update: Michael D. Donovan, a former S.E.C. lawyer, says, "Phil Gramm is the single most important reason for the current financial crisis." Gramm responded by blaming the crisis on "predatory borrowers" - those without the means to pay their subprime mortgages.

Serving government's customers.

One of the most obscene notions perpetuated by the Reagan legacy is that greater government regulation leads to increased corruption and waste. This mantra is part of the Ron Paul libertarian Kool-Aid® that many have drunk. Just get rid of government, and tranquility and efficiency will reign.

This has become a self-fulfilling prophesy for Republican administrations. In order to service their business constituency, they just fill government regulatory agencies with incompetent or corrupt cronies who believe that government serves no useful purpose higher than their personal gain. (See my previous post.) In short order the resulting corruption and waste proves the "truth" of bad big government. The most recent example is the scandal at the FAA over pressure from the top on inspectors to ignore aircraft maintenance violations. Having gone beyond any notion that it serves the people, the FAA refers to the airlines as its "customers." (See my previous FAA post.)

One has only to look at Europe to see the fallacy of this argument. In Germany, Switzerland, and the Scandinavian countries, businesses and banking are more regulated than in the U.S. and there is relatively little corruption. Their economies are leaving ours in the dust. The Euro, Franc, and Krona are strong in part because people have justifiable confidence in their financial markets and in the products they produce. The greatest risk facing these nations is their investments in the U.S. The British, with a more deregulated banking system, are paying the consequences.

Targeted government regulation can increase consumer safety and confidence and create a stronger economy. The extent of corruption and waste is all about the leadership voters choose to implement regulation.

More corruption in Bush's "Justice" Department.

Lost in the news about N.Y. Governor Spitzer's prostitution scandal was the Congressional hearing about how the Bush Justice Department lets corporations avoid criminal convictions for corruption or for violations of safety, financial or environmental regulations. In short, big companies that already have a very cozy relationship with the Republican Party can buy their way out by paying friends of the administration to monitor their future conduct. The arrangements have been made by U.S. Attorneys using no guidelines and under no bid contracts. Doesn't this sound like something you'd hear about in Russia or some corrupt developing nation?

One of the largest recipients of one of these deals was none other than former Attorney General John Ashcroft. He is being paid between 28 and 52 million dollars to monitor a medical supply company accused of engaging in kickbacks to increase its sales. You may remember Ashcroft as the chief supporter of the Patriot Act, which contained an unnoticed clause that was at the heart of the U.S. Attorney firings scandal. The government official who set up the no bid monitoring contract for Ashcroft? His former subordinate, Christopher J. Christie, the U.S. Attorney for New Jersey and a top fund raiser for George Bush in 2000. Christie is now being criticized for awarding a number of these monitoring deals to his friends and political allies.

There were three dozen of these deals done nationally last year. The day before Ashcroft's Congressional testimony, the Justice Department finally announced that it would that require these contracts (euphemistically called "nonprosecution") be approved by the Deputy Attorney General in the future. Now we can all sleep better.

Regulatory corruption and 9/11

There has been much written about how our civil liberties have been irrationally eroded after 9/11, and how burdensome air travel has become. What seems to have been forgotten is that a significant factor in 9/11 was our corrupt regulatory system. The FAA had become another federal agency largely unable to regulate because of industry lobbying. The airlines resisted pre-9/11 FAA proposals to strengthen cockpit doors, for example. Failing to require those doors be strengthened was one of nine fatal mistakes made by the government that could have prevented the tragedy, according to the 9/11 Commission.

The industry also was not following passenger screening rules, and the FAA was not holding airlines accountable for this. Some of the hijackers paid for tickets in cash at the airport just before their flights, which should have triggered additional screening. What's more, the hijackers did this several times before 9/11 as a test, and none were subjected to additional checks. If regulations had been followed, the hijackers might have been caught, since some were already on watch lists and the FBI was trying to find them.

Our safety has gotten worse, not better, since 9/11, because in the name of security, we vote for politicians who simultaneously promise more security and preach that we'd all be better off if government just left business alone. In contrast to the some of the overreaction in airline security, regulation abdication by government has made us less safe in so many other ways. For example, although we may be less likely to die in a hijacked airplane, our kids and our pets are more likely to die from tainted food or dangerous toys.

Ron Paul & George Bush: separated at birth?

Ron Paul just set a record for the most money raised on the Internet in a single day. What’s going on here? His Presidential bid has been compared to that of Howard Dean’s in 2004, but other than the outsider label, nothing about them is the same. To find the answer, I suggest you read the Newsweek Magazine story on the politics of fear, which reviews how politicians use fear to get elected.

Then compare the platforms of George Bush in 2000 with Ron Paul in 2008. As loyal Republicans, Bush and Paul both have opposed abortion, gay rights, gun control, taxes and nation building. The first three of these issues are about fear. Abortion opponents boast of their moral outrage at killing, but most of them support the death penalty and don’t bat an eye if a lot of innocent people in other nations are killed in order to eliminate a few terrorists. They also don't tend to support policies that would lower the inexcusable U.S. infant mortality rate below its present level, which is higher than virtually all of Europe. (We nose out Croatia.) If they even give lip service to the need for universal health care, they don't tend to support remedies with any teeth.

Opposition to abortion is mostly driven by fear that making abortion easily available leads to sexual promiscuity and women not assuming their proper role in society, thus destroying the social fabric. An excellent book on this subject published by Cornell University Press analyzed the history of laws in all fifty states affecting women's rights and freedoms and those affecting the protection of life. It concluded that the states with the strictest abortion laws also offer the poorest protection of women's rights and worst protection of life in all areas other than abortion, and that restricting women's rights was a much stronger motivator of anti-abortion laws than fetal protection. (The Journal of Christian Ethics described the book as a balanced prescription for a "seamless garment of love for unborn children.")

Homophobes fear that greater rights for gays would unleash the demon of sexual promiscuity. Fear of crime drives opposition to gun control. Support for strict adherence to the constitution and states rights is intended to counter court decisions supporting gun control, gays, women seeking abortions and host of other fear driven issues. Abandoning federal standards would allow states to revert back to their nineteen century policies, including on criminal justice and discrimination, which were the reason Congress and the courts intervened in the first place. In this context, the states rights movement is akin to the U.S. rendition program sending terror suspects to third world nations to be tortured, enabling the U.S. government to absolve itself of responsibility for the resulting horror.

Those who are adamant about lower taxes are mostly people who would much rather make decisions about charity themselves and who don’t want to give their hard earned money away to people they think are a bunch of lazy lowlifes. This includes lowlifes in poor countries, hence the opposition to nation building. (The story of how the opposition to nation building got perverted by fear of terrorists and an opportunity for some loyal Republican to get rich on the war has been recounted at length elsewhere.) The ridiculous rationalization that lower taxes stimulate today's economy ignores the fact that deficit spending irresponsibly shifts the burden to pay for today's government services on future generations. Not exactly family values.

I don’t see a lot of daylight between what Ron Paul is preaching and what George Bush preached in 2000. On global warming, the only other issue that’s big right now, Paul and Bush both agree that government should not do much.

Paul’s talk about abolishing the Federal Reserve, the IRS, and Social Security gives him that radical edge, but the demise of these institutions is a political impossibility and he knows it. So why is Ron Paul a phenom? Some of the right wingers disenchanted with the Republican Party establishment suddenly have found a home. Perhaps he’ll launch a third-party bid and do to the Republicans what Ralph Nader did to the Democrats in 2000 – siphon off votes. Yea!