The Obama Budget: And Why the Coming Debate Over Spending Cuts Has Nothing to Do With Reviving the Economy

Published on Monday, February 14, 2011 by RobertReich.org

The Obama Budget: And Why the Coming Debate Over Spending Cuts Has Nothing to Do With Reviving the Economy

by Robert Reich

President Obama has chosen to fight fire with gasoline.

Republicans want America to believe the economy is still lousy because government is too big, and the way to revive the economy is to cut federal spending. Yesterday, Republican Speaker John Boehner even refused to rule out a government shut-down if Republicans don’t get the spending cuts they want.

The President has to reframe the debate around the necessity of average families having enough to spend to get the economy moving again. He needs to remind America this is not 1995 but 2011 — and we’re still in a jobs crisis brought on by the bursting of a giant debt bubble and the implosion of total demand. The answer: progressive taxation. Today Obama poured gas on the Republican flame by proposing a 2012 federal budget that cuts the federal deficit by $1.1 trillion over 10 years. About $400 billion of this will come from a five-year freeze on non-security discretionary spending – including all sorts of programs for poor and working-class Americans, such as heating assistance to low-income people and community-service block grants. Most of the rest from additional spending cuts, such as grants to states for water treatment plants and other environmental projects and higher interest charges on federal loans to graduate students.

That means the Great Debate starting this week will be set by Republicans: Does Obama cut enough spending? How much more will he have cut in order to appease Republicans? If they don’t get the spending cuts they want, will Tea-Party Republicans demand a shut-down?

Framed this way, the debate invites deficit hawks on both sides of the aisle to criticize Democrats and Republicans alike for failing to take on Social Security and Medicare entitlements. Expect Erskine Bowles and Alan Simpson, co-chairs of Obama’s deficit commission, to say the President needs to do more. Expect Alice Rivlin and Paul Ryan, respectively former Clinton hawk and current Republican budget hawk, to tout their plan for chopping Medicare.

It’s the wrong debate about the wrong thing at the wrong time.

To official Washington it seems like 1995 all over again, when Bill Clinton and Newt Gingrich played a game of chicken over cutting the budget deficit, the hawks warned about the perils of giant deficits, and the 1996 general election loomed over all. Washington politicians and the media know this playbook by heart, so it’s natural for them to take on the same roles, make the same arguments, and build up to the same showdown over a government shutdown and a climactic presidential election.

But the 1995 playbook is irrelevant. In 1995 the economy was roaring back to life. The recession of 1991 had been caused (as are most recessions) by the Fed raising interest rates too high to ward off inflation. So reversing course was relatively simple. Alan Greenspan and the Fed cut interest rates.

In 2011 most Americans are still in the throes of the Great Recession, which was caused by the bursting of a giant debt bubble. The Fed can’t reverse course by cutting interest rates; rates have been near zero for two years.

Big American companies are sitting on almost $2 trillion of cash because there aren’t enough customers to buy additional goods and services. The only people with money are the richest 10 percent whose stock portfolios have been roaring back to life, but their spending isn’t enough to spur much additional hiring.

The Republican bromide – cut federal spending – is precisely the wrong response to this ongoing crisis, which is more analogous to the Great Depression than to any recent recession. Herbert Hoover responded the same way between 1929 and 1932. Insufficient spending only deepened the Great Depression.

The best way to revive the economy is not to cut the federal deficit right now. It’s to put more money into the pockets of average working families. Not until they start spending again big time will companies begin to hire again big time.

Don’t cut the government services they rely on – college loans, home heating oil, community services, and the rest. State and local budget cuts are already causing enough pain.

The most direct way to get more money into their pockets is to expand the Earned Income Tax Credit (a wage subsidy) all the way up through people earning $50,000, and reduce their income taxes to zero. Taxes on incomes between $50,000 and $90,000 should be cut to 10 percent; between $90,000 and $150,000 to 20 percent; between $150,000 and $250,000 to 30 percent.

And exempt the first $20,000 of income from payroll taxes.

Make up the revenues by increasing taxes on incomes between $250,000 to $500,000 to 40 percent; between $500,000 and $5 million, to 50 percent; between $5 million and $15 million, to 60 percent; and anything over $15 million, to 70 percent.

And raise the ceiling on the portion of income subject to payroll taxes to $500,000.

It’s called progressive taxation.

The lion’s share of America’s income and wealth is at the top. Taxing the very rich won’t hurt the economy. They spend a much smaller portion of their incomes than everyone else.

Sure – take some steps to cut federal spending over the longer term. Cut the bloated defense budget. Tame the growth in healthcare costs by allowing the federal government to use its bargaining clout — as the nation’s biggest purchaser of drugs and hospital services under Medicare and Medicaid and the Veterans Administration – to get low prices. While we’re at it, cut agricultural subsidies.

But don’t believe for a moment that federal spending cuts anytime soon will get the economy growing soon. They’ll have the opposite effect because they’ll reduce total demand.

The progressive tax system I’ve outlined will get the economy growing again. This, in turn, will bring down the ratio of the debt as a proportion of the total economy — the only yardstick of fiscal prudence that counts.

But we can’t get to this point – or even to have a debate about it – if Obama allows Republicans to frame the debate as how much federal spending can be cut and how to shrink the deficit.

The President has to reframe the debate around the necessity of average families having enough to spend to get the economy moving again. He needs to remind America this is not 1995 but 2011 — and we’re still in a jobs crisis brought on by the bursting of a giant debt bubble and the implosion of total demand.

© 2011 Robert Reich

Memo to Congress: Show Us the M-O-N-E-Y!

Part 1 of 3

by Geraldine Perry / February 12th, 2011

Cuba Gooding Jr. became an overnight sensation when his character, pro football player Rod Tidwell, pithily directed his high-minded but needy agent Jerry Macguire, played by Tom Cruise, to “Show me the money!” Tidwell’s terse directive is as practical as it is memorable and luckily for Tidwell, Macguire delivers.

Whether out of extraordinary resolve or sheer desperation, a “show me the money” policy is exactly the course Fed Chair Ben Bernancke is pursuing at full throttle. Faced with the unenviable task of reflating a deflating and uncooperative economy, the Fed opted last fall to take the “easy money” quotient a notch higher by formally initiating a second round of quantitative easing, while tacitly acknowledging the possibility of QE3, QE4, and so on into the undefined future. With Fed Fund rates effectively at or very near zero and a trillion dollars already in reserves, the Fed is in other words doing all it can to get the “credit-as-money” spigot flowing.

While hardly a ringing endorsement of the Fed, the truth is that the Fed has few other “money spigot” tools at its disposal.¹ So it was that – in an op-ed appearing in the November 4 issue of the Washington Post – the beleaguered Bernancke reminded the nation that the Fed cannot, by itself, solve all the problems rippling through the American economy. That process said Bernancke “will take time and the combined effort of many parties including the central bank, Congress, the administration, regulators and the private sector.”

Although the Fed for its part has shown unusual resolve to go the distance, the stimulative activities of the private sector – disconcertingly led as they are by a handful of big banks – are mostly focused on overseas “opportunities” in the emerging markets and not stimulative activities here at home. This combination of “cheap” dollars and cheap emerging market prices has of course enabled the financial sector to do quite well, despite increased risk. Meanwhile even those regulators not previously captured by special interests find themselves increasingly hobbled by a complex matrix of old, new and proposed regulations interlaced with a variety of deregulation schemes which together dilute the likelihood of effective action – and maintains the regulatory environment for “rogue Wall Street firms to kill small American businesses for profit.”

That leaves Congress and the administration. While both are also arguably captured by special interests, they are clearly feeling the intense pressure of a cash-strapped public. Hence the recent tax-cut bill which will add nearly a trillion dollars to the federal debt but do little to stimulate adequate money (as credit) creation where it is needed most – not in the financial economy headquartered on Wall Street but in the real economy, here on Main Street. Now caught between the proverbial rock and a hard place, the Fed, by its own admission and despite its high minded goals, appears every bit as needy as the erstwhile Jerry Macguire.

Main Street’s Woes Belie Wall Street’s Gains

For the moment, the Fed’s “easy money” goal of raising asset prices seems to be working, albeit not necessarily in sectors – such as real estate – where it would do the home economy the most good. Capitalizing on stockpiles of cash, good credit and “cheap money” secured by uber-low interest loans and back-stopped by TARP, the big banks and large corporations – together with a small army of investment funds – have been having a field day speculating in potentially lucrative but nevertheless risky ventures, inflating as they go various commodity prices such as wheat, corn, hogs and similar commoditized foods, as well as health care, precious metals and oil – and raising the possibility of igniting dangerous currency wars through revved up currency speculation.

Surging prices for necessities such as food, oil, and health care send mixed signals to ordinary Americans because inflation in the U.S. economy (after stripping out volatile food and energy prices) is actually at the lowest level it has been since 1957. Clear evidence of this phenomenon appears in the retail sector where for months retailers have been slashing prices on a seemingly endless supply of goods. While bargain hunters and incurable sentimentalists appear to have responded for the holidays at least, one has to wonder how the slimmest of profit margins can sustain not only retailers but their suppliers – and in turn, the myriad of producers and raw materials providers needed for finished goods, even if these are sourced from cheap-labor countries.

Ominously, job growth (with the exception of part-time jobs) is also going mostly nowhere, a fact which – however contra-indicative of an apparent holiday spending spree – does nothing to reverse the troublesome downward spiral in prices and wages. Consensus also has it that higher-than-normal unemployment will be with us for years to come. All of which affirms Bernancke’s preoccupation with stagflation and deflation – and bodes poorly for the Main Street economy inasmuch as “falling prices often also mean falling wages, as businesses respond to declines by cutting output and jobs.”

Wall Street gains make it clear that the banks and investor class are doing very, VERY well, thank you very much. Another portion of the population, perhaps as much as a third overall, is doing reasonably well – or at least well enough to keep up appearances. We have in other words, two Americas which, if understood, helps us make sense of conflicting economic data. The top 20% of Americans are prospering and spending handsomely despite carrying the major share of the tax burden, while the next 20% represents a fragile middle class that has become “mostly a figment of nostalgia and/or political illusion.” In real terms, the bulk of Main Street, including drop-off portions of the shrinking middle class, is bleeding profusely with one of every six Americans unemployed and countless more chronically “underemployed.”

Unfortunately for those most severely affected, the level of suffering is masked by the fact that there are “wide variations of hardship in the 50 largest metropolitan areas” – and official estimates do not always paint accurate pictures. As but one example, Detroit’s mayor and local leaders maintain that Detroit’s unemployment rate actually hovers near 50%, a figure far above official estimates of 30%.

Contributing to the probability of an increase in Main Street woes is the likelihood of a second dip in the housing recession – meaning home prices have yet to hit bottom. This translates into progressively fewer Americans who will be able to tap into home equity as a means of getting themselves through tough times – and it could bring about another tsunami of foreclosures. In turn, local real estate and other tax revenues will continue to decline even as demand for social services increases. This spells additional trouble for state and local governments, with states themselves collectively facing a $140 billion dollar operating budget shortfall next year alone.

Big Trouble Ahead for State and Local Budgets?

Indeed, state and local operational budgetary problems are becoming serious enough to threaten the inviolability of once “super safe” municipal bonds – which heretofore have been considered an attractive investment that comes with the added benefit of providing state and local government with funds for community improvements. Because bonds are essentially loans which the issuer (be it corporate or governmental entity) must pay back with interest, income streams of the issuer must be adequate enough to satisfy the terms of the loan. Unfortunately, low tax revenues and weak economic outlook are now compromising the bond issuer’s (borrower’s) ability to meet the terms of the loan – so much so that municipal bond defaults have been running triple the usual rate.

Economic forecasts that are tepid at best lead anaylsts to “fear that at some point, investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones.” Big name financial analysts such as Meridith Whitney and bond experts such as Marilyn Cohen go so far as to pose the possibility of widespread muni bond defaults.

While not everyone believes state and local budget problems are severe enough to create a ripple effect of bankruptcies, it is nevertheless unsettling to recall that the Great Depression actually began – and was prolonged – as various municipalities, mostly in the South and Midwest, began cutting services and defaulting on bond debt. A re-play of the Great Depression notwithstanding, the one thing most agree on is that states and communities with high levels of debt and poor revenue prospects will at the very least see the cost of borrowing head skyward, as investors head for cover.

Compounding muni market fears is the fact that, while investors of muni bonds may at one time have been lucky enough to have ended up with the equivalent of a piece of Central Park in satisfaction of debt defaults, today many such investors may not fair so well. This is in part because the states themselves are ill-prepared to help themselves much less troubled municipalities, and in part because, in the words of SEC Commissioner Elisse Walter, “investors in municipal securities [have become] in many ways ‘second-class citizens’ who [do] not receive the protections customary in many other sectors of the U.S. capital markets.”

Although states themselves cannot declare bankruptcy and typically look to other ways to satisfy their debt obligations including recasting pension contracts, increasing taxes and slashing programs, they can, at their discretion, help municipalities in trouble. States are, however, much less likely to provide such help when they themselves are in financial trouble. So what happens when a state refuses to rescue a troubled municipality? The municipality can potentially be forced into bankruptcy, leaving bond holders holding the bag.

As fiscal pressures have mounted, states seem to be turning to unorthodox methods in order to remain operational. This is verified by new evidence – emerging as a result of SEC investigations of New Jersey, Florida, California and elsewhere – which suggests that many states may be papering over their fiscal troubles by providing fraudulent information about their finances to muni bond investors. The states do this in a variety of ways, including keeping liabilities under wrap through delayed filings or by burying them in opaque documents. They also may resort to deferring payments of obligations and re-characterizing bond debt as revenues.

In the case of Illinois, for example, heavy borrowing and a history of deferring bill payments has led three major credit-rating agencies to rank Illinois as one of the two riskiest states for bond investors, California being the other. In his final quarterly report, published January 7 (2011), former Illinois Comptroller Dan Hynes warned that “the state could face $7 billion to $10 billion in unpaid bills by the end of the current fiscal year… Any use of bonds to deal with the state’s fiscal condition will continue to impact the state’s cash management practices in the future, as the state must adjust to those higher debt service obligations.”

Despite such warnings, “Illinois plans to borrow more than $3 billion to pay the bills for FY2011 and in June 2010, the legislature permitted the university systems to borrow millions more to make up for the fact that the state has not made the payments it had promised them.” In other words, Illinois is not only borrowing more to pay its own bills (by floating bonds) but it also has begun allowing other entities within its purview the new privilege of borrowing as a means of helping that entity to meet the state’s portion of obligations to it. This according to the non-profit Sunshine Review, which is a collaborative research organization dedicated to state and local government transparency.

The Sunshine Review further reports that: “As of the end of August 2010, Illinois had borrowed $9.6 billion in the prior 12 months.” For Illinois residents this means that as much as $551.3 million extra will have to be shelled out for the state’s borrowing over the last year alone. In addition, “more than half the state’s additional borrowing costs, amounting to approximately $301.2 million, will come due in the next five years.” And adding still more salt to taxpayer wounds, “the cost of insuring five-year Illinois bonds to protect $10 million of debt against default in June 2010 rose to $370,000, a record, from a low of $155,000 in January, 2010. The price fell back to $281,000 at the end of July 2010.”

In addition to the myriad problems associated with borrowing to pay obligations (about which we have only touched upon here), there is another problem connected to the budgetary process – and it lies in current accounting practices which rely on the cash basis method (also referred to as modified accrual basis). This according to the Institute for Truth in Accounting, a professional group of financial and public policy experts dedicated to reform of the GAAP accounting practices now used under the Comprehensive Annual Financial Reports (or CAFRs). For example, “the state of Illinois routinely delays Medicaid payments to healthcare providers. Each year the budget appears balanced on a cash basis even though the state does not provide sufficient funding for the Medicaid program.”

While arguing that “objectively better” accounting systems are universally employed in the private sector, the IFTA said that its research found that the current accounting system “does not give all stakeholders an accurate diagnosis of the financial health of state governments because the accounting principles recommended are biased towards the interests of government officials. The current structure and funding mechanism of the GASB make it difficult for members of this board to not be influenced by constituency groups that represent governmental officials and their staff.”

Thus, says former SEC Chairman Arthur Levitt, “At the core of the [muni] problem are questions about how governments manage pension funds, what investors know, and when they know it. The case against New Jersey revealed that the state has made unfunded pension fund promises to its employees, and compounded the problem by not being forthright with bond investors.”

In ideal circumstances, pension funds are supposed to keep up with benefit promises through a combination of employer and worker contributions, together with market returns from a fund’s investment portfolio. But, says Levitt, those revenue streams have slowed to a trickle as states have cut back on their own contributions, employees have contributed too little, and hoped-for investment gains have shriveled up. If investors discover that the muni market has instead become a way to paper over irresponsible promises, they will flee it, and that could spell disaster.

Investor anxiety has become significant enough that “some analysts have suggested that the Fed could ease muni market worries by purchasing muni debt or lending to struggling borrowers.” But on January 7, Fed Chair Ben Bernancke nixed the idea on legal, political, and practical grounds, saying “that if municipal defaults did become a problem, it would be in Congress’s hands, not his.”

But assuming that Congress will bail out any state in terminal trouble is itself a very risky gamble. Why? Because “[a]nything that the feds do for one state they’d have to do for others, which would turn into a bottomless and politicized spending pit.” With balance sheet problems of its own to contend with, the federal government is hardly in a position to bail out a string of troubled states, this fact being reinforced by growing taxpayer objections.

All of which brings us back to the unchartered waters of quantitative easing. Will QE2 and beyond be able to provide the kind of economic relief so desperately needed by Main Street? This is likely to remain an open question for some time to come because the money spigot used by the Fed can only create money as bank credit – and credit becomes far more expensive, indeed sometimes altogether unobtainable, for those in financial distress. Which of course translates to a “tight” money (as credit) supply – right where it is needed most, here on Main Street.

Should QE2 (or maybe 3 or 4) somehow ultimately work well enough to satisfy squeaky wheels, there’s still that pesky question forever lurking in the background: Can we REALLY keep borrowing our way into prosperity – or is there a better way? ²,³

Stay tuned.

1. While Fed tools may be limited, its options within that framework of tools are less so. In this video presentation prepared for the American Monetary Institute, ex-marine and long time AMI board member Dick Distelhorst explains that the Fed actually has the ability to issue “money,” based on reserves, directly to the American people instead of to the banks as it has been doing, thereby bailing out the people instead of the banks. While this interesting option would still be based on debt (that is to say, creating money at interest based on bonds held in reserves), it does nevertheless raise the important question as to why the Fed chose to support the errant banks instead of the people who are forced to pay for the bailout. Answers to that question may potentially be found in 13 Bankers by Simon Johnson and James Kwak and similar books along with articles such as this, this, and this. But particularly for the purposes of this article, the present author has charitably conjectured that the Fed unwittingly over-looked this option in favor of fractional reserve monetary (that is, credit/debt) expansion – which of course can only be done by the banks, but which could potentially get more money (as credit) into the system. [↩]
2. Monetary expert Will Abrams explains Canada’s experience under two types of monetary systems, one built on debt – the other on the creative and consumptive activities of the people. [↩]
3. For an abbreviated, step-by-step explanation of our current monetary system see “Money Owed and Owned.” Or see this more technical description. [↩]

Geraldine Perry is co-author of The Two Faces of Money and creator of its related website which includes recent reviews. This website also has an abundance of related material and links, along with a free, down loadable slide presentation describing the two forms of money creation and the Constitutional solution, which is not the gold-backed dollar as popularly believed. As a means of imparting accurate information on health and nutrition to as broad an audience as possible she developed the web site The Health Advantage. Read other articles by Geraldine, or visit Geraldine's website.

This article was posted on Saturday, February 12th, 2011 at 8:00am and is filed under Economy/Economics, Finance, Housing, Labor, Social Security.

Update: Palantir apologizes for proposal to attack WikiLeaks

Update: Palantir apologizes for proposal to attack WikiLeaks

By Eric W. Dolan
Wednesday, February 9th, 2011 -- 1:33 pm

The data intelligence firm Palantir Technologies apologized Thursday for its involvement in developing a proposal to Bank of America to attack secrets outlet WikiLeaks.

Two other data intelligence firms, HBGary Federal and Berico Technologies, helped to concoct a plan for a coordinated cyber assault against the website.

"I have directed the company to sever any and all contacts with HB Gary," Co-Founder and CEO of Palantir Alex Karp said in a statement.

"Palantir Technologies provides a software analytic platform for the analysis of data," he continued. "We do not provide – nor do we have any plans to develop – offensive cyber capabilities."

The plan was revealed after members of "Anonymous" hacked the email account of HBGary Federal CEO Aaron Barr and published its contents to the web.

"The right to free speech and the right to privacy are critical to a flourishing democracy," Karp's statement added. "From its inception, Palantir Technologies has supported these ideals and demonstrated a commitment to building software that protects privacy and civil liberties. Furthermore, personally and on behalf of the entire company, I want to publicly apologize to progressive organizations in general, and Mr. Greenwald in particular, for any involvement that we may have had in these matters."

Original story continues below.

Three data intelligence firms concocted a plan to attack WikiLeaks on behalf of Bank of America, according to a published report.

The three firms, Palantir Technologies, HBGary Federal and Berico Technologies, planned to "disrupt" Salon.com columnist Glenn Greenwald's support of WikiLeaks, create a disinformation campaign to discredit the secrets outlet, sow discord among WikiLeaks volunteers, and use cyber attacks to target the website's infrastructure.

The proposed assault on WikiLeaks, The Tech Herald reported, was revealed after the "non-group" of hacktivists known as "Anonymous" gained access to more than 44,000 emails from HBGary Federal's COO, Aaron Barr, after he said he had identified "core leaders" of the group. Barr also said he had information that could potentially lead to their arrest. The emails were released to the public in a 4.71 gigabyte Torrent file.

The emails show the proposal was developed at the request of the Hunton and Williams law firm, which had a meeting with Bank of America on December 3 to discuss legal action against WikiLeaks.

"They basically want to sue them to put an injunction on releasing any data," an email between the intelligence firms said. "They want to present to the bank a team capable of doing a comprehensive investigation into the data leak."

On November 30, just hours after Raw Story first unearthed evidence that WikiLeaks held data exposing corruption at Bank of America, bank executives held a late-night conference call to discuss damage control, the New York Times reported.

The bank's chief risk officer Bruce Thompson has since led a team of 15 to 20 senior officials at Bank of America to probe which executive's hard drive the anti-secrecy outlet might possess. The Times reported that the investigation involved "scouring thousands of documents" and tracing computers that had gone missing or were vulnerable to cyber-attacks.

The leaked emails also revealed that HBGary Federal planned to meet with Booz Allen Hamilton, the firm brought in to help manage the bank's internal review, a month after the proposal for attacking WikiLeaks was created.

The emails do not show what the fate of the proposal was, aside from a message that vaguely expressed hope HBGary was going to "close the BOA deal." Nor is there any information at the time of this story's publication to suggest that Bank of America was directly involved in developing the plot against WikiLeaks.

In addition to releasing internal emails to the public Sunday, "Anonymous" also hijacked HBGary Federal's website and associated Twitter accounts.

Their website was reduced to a single page that said the company was "working with federal, state, and local law enforcement authorities and redirecting internal resources to investigate and respond appropriately" to the cyber attacks against them.

"Do I regret it now? Sure," Barr told Forbes Monday. "I knew some folks would take my research as some kind of personal attack which it absolutely was not. I thought they might take down our Web site with a DDoS attack. I did not prepare for them to do what they did."

Barr added that he had to unplug his home router because "Anonymous" was trying to crack it.

Raw Story attempted to contact Barr and Bank of America, but emails and phone calls to both companies' offices went unreturned at time of this story's publication.

A copy of the companies' report is available here (pdf file).

With prior reporting by Sahil Kapur.

The Egyptian Revolt Is Coming Home to Roost

The Egyptian Revolt Is Coming Home

by John Pilger / February 11th, 2011

The uprising in Egypt is our theatre of the possible. It is what people across the world have struggled for and their thought controllers have feared. Western commentators invariably misuse the words “we” and “us” to speak on behalf of those with power who see the rest of humanity as useful or expendable. The “we” and “us” are universal now. Tunisia came first, but the spectacle always promised to be Egyptian.

As a reporter, I have felt this over the years. In Cairo’s Tahrir (Liberation) Square in 1970, the coffin of the great nationalist Gamal Abdul Nasser coffin bobbed on an ocean of people who, under him, had glimpsed freedom. One of them, a teacher, described the disgraced past as “grown men chasing cricket balls for the British at the Cairo Club”. The parable was for all Arabs and much of the world. Three years later, the Egyptian Third Army crossed the Suez Canal and overran Israel’s fortresses in Sinai. Returning from this battlefield to Cairo, I joined a million others in Liberation Square. Their restored respect was like a presence – until the United States rearmed the Israelis and beckoned an Egyptian defeat.

Thereafter, President Anwar Sadat became America’s man through the usual billion-dollar bribery and, for this, he was assassinated in 1980. Under his successor, Hosni Mubarak, dissenters came to Liberation Square at their peril. Enriched by Washington’s bag men, Mubarak latest American-Israeli project is the building of an underground wall behind which the Palestinians of Gaza are to be imprisoned forever.

Today, the problem for the people in Liberation Square lies not in Egypt. On 6 February, the New York Times reported: “The Obama administration formally threw its weight behind a gradual transition in Egypt, backing attempts by the country’s vice president, General Omar Sulieman, to broker a compromise with opposition groups … Secretary of State Hillary Clinton said it was important to support Mr. Sulieman as he seeks to defuse street protests …”

Having rescued him from would be assassins, Sulieman is, in effect, Mubarak’s bodyguard,. His other distinction, documented in Jane Mayer’s investigative book, The Dark Side, is as supervisor of American “rendition flights” to Egypt where people are tortured on demand of the CIA. He is also, as WikiLeaks reveals, a favourite in Tel Aviv. When President Obama was asked in 2009 if he regarded Mubarak as authoritarian, his swift reply was “no”. He called him a peacemaker, echoing that other great liberal tribune, Tony Blair, to whom Mubarak is “a force for good”.

The grisly Sulieman is now the peacemaker and the force for good, the man of “compromise” who will oversee the “gradual transition” and “defuse the protests”. This attempt to suffocate the Egyptian revolt will call on the fact that a substantial proportion of the population, from businessmen to journalists to petty officials, have provided its apparatus. In one sense, they reflect those in the Western liberal class who backed Obama’s “change you can believe in” and Blair’s equally bogus “political Cinemascope” (Henry Porter in the Guardian, 1995). No matter how different they appear and postulate, both groups are the domesticated backers and beneficiaries of the status quo.

In Britain, the BBC’s Today programme is their voice. Here, serious diversions from the status quo are known as “Lord knows what”. On 28 January the Washington correspondent Paul Adams declared, “The Americans are in a very difficult situation. They do want to see some kind of democratic reform but they are also conscious that they need strong leaders capable of making decisions. They regard President Mubarak as an absolute bulwark, a key strategic ally in the region. Egypt is the country along with Israel on which American Middle East diplomacy absolutely hinges. They don’t want to see anything that smacks of a chaotic handover to frankly Lord knows what.”

Fear of Lord Knows What requires that the historical truth of American and British “diplomacy” as largely responsible for the suffering in the Middle East is suppressed or reversed. Forget the Balfour Declaration that led to the imposition of expansionist Israel. Forget secret Anglo-American sponsorship of Islamic jihadists as a “bulwark” against the democratic control of oil. Forget the overthrow of democracy in Iran and the installation of the tyrant Shah, and the slaughter and destruction in Iraq. Forget the American fighter jets, cluster bombs, white phosphorous and depleted uranium that are performance-tested on children in Gaza. And now, in the cause of preventing “chaos”, forget the denial of almost every basic civil liberty in Omar Sulieman’s contrite “new” regime in Cairo.

The uprising in Egypt has discredited every Western media stereotype about the Arabs. The courage, determination, eloquence, and grace of those in Liberation Square contrast with “our” specious fear-mongering with its al-Qaeda and Iran bogeys and iron-clad assumptions, bereft of irony, of the “moral leadership of the West”. It is not surprising that the recent source of truth about the imperial abuse of the Middle East, WikiLeaks, is itself subjected to craven, petty abuse in those self-congratulating newspapers that set the limits of elite liberal debate on both sides of the Atlantic. Perhaps they are worried. Across the world, public awareness is rising and bypassing them. In Washington and London, the regimes are fragile and barely democratic. Having long burned down societies abroad, they are now doing something similar at home, with lies and without a mandate. To their victims, the resistance in Cairo’s Liberation Square must seem an inspiration. “We won’t stop,” said the young Egyptian woman on TV, “we won’t go home.” Try kettling a million people in the centre of London, bent on civil disobedience, and try imagining it could not happen.

John Pilger is an internationally renowned investigative journalist and documentary filmmaker. His latest film is The War on Democracy. His most recent book is Freedom Next Time (Bantam/Random House, 2006). Read other articles by John, or visit John's website.

This article was posted on Friday, February 11th, 2011 at 8:01am and is filed under Activism, Egypt, History, Revolution.

The DLC Is Dead

The DLC Is Dead

Ari Berman

Ben Smith of the Politico reported yesterday that the Democratic Leadership Council (DLC), the mainstay of the New Democrat movement for thirty years, is on the verge of bankruptcy and has decided to immediately “suspend operations,” likely for good.

I’ve followed the DLC closely over the past decade and wanted to share a few thoughts on its passing (it’s such a solemn funeral). The DLC, under the leadership of former Congressional aide Al From, grew quickly in the 1980s and early 1990s, as aspiring Democratic politicians—most notably, Bill Clinton—gravitated to the organization, which existed to break the power of liberal interest groups inside the Democratic Party and attract support from the business community. By associating themselves with the DLC, Clinton and other New Democrats were able to shed the “big government, tax and spend” stigma of the McGovern/Mondale years, raise big dollars from corporate America and pick up establishment support in the Washington media. Inside the White House, Clinton largely followed the DLC program of balanced budgets, free trade and financial deregulation, relying on DLC aides like Bruce Reed, William Galston and Elaine Kamarck to implement domestic policy. A top aide to Jesse Jackson groused of the Clinton-era Democratic Party, “The DLC has taken it over.”

But the DLC’s influence began to wane in the Bush Administration as its accommodation instincts, an asset politically in the Clinton years, came to be viewed by many rank-and-file Democrats as doing more harm than good to the party. For example, at a Rose Garden ceremony announcing the Congressional resolution to authorize the war in Iraq, current and former DLC chairman Evan Bayh, Joe Lieberman and Dick Gephardt flanked George W. Bush. New leaders like Howard Dean and new groups like MoveOn.org emerged to challenge the DLC, and the arrival of a fresh liberal power center posed a major threat to the organization. Even former New Democratic stalwarts, like Kamarck and New Democrat Network President Simon Rosenberg, began to distance themselves from the DLC’s harsh attacks on Dean supporters and liberal Democrats. I wrote about the DLC’s loss of power in a feature article in The Nation in 2005 entitled "Going Nowhere: The DLC Sputters To a Halt." I think it holds up pretty well today.

Here’s a short excerpt:

After dominating the party in the 1990s, the DLC is struggling to maintain its identity and influence in a party beset by losses and determined to oppose George W. Bush. Prominent New Democrats no longer refer to themselves as such. The New Democratic movement of pro-free market moderates, which helped catapult Bill Clinton into the White House in 1992, has splintered, transformed by a reinvigoration of grassroots energy. A host of new donors, groups and tactics has forged a new direction for Democrats inside and outside the party, bringing together vital parts of the old centrist establishment and the traditional Democratic base. The ideological independence of the DLC, which pushed the party to the right, has come to be viewed as a threat rather than a virtue, forcing the DLC to adapt accordingly. Corporate fundraisers and DC connections--the lifeblood of the DLC--matter less and less: Witness the ascent of MoveOn.org and Howard Dean's election as chair of the Democratic National Committee (DNC). "It's not that the DLC changed," says Kenneth Baer, who wrote a history of the organization. "It's that the world changed around the DLC."

The group’s support for Joe Lieberman in the 2004 Democratic primary and fierce opposition to Dean, in particular, backfired rather spectacularly. As I wrote:

No candidate embodied the New Democrat ethos better than Lieberman, whose moral purity, hawkish views and name recognition earned him early Beltway supporters. Thus, when Howard Dean came into view, the DLC was quick to underestimate Dean's potential resonance with Democratic voters, misjudge the transformative nature of his campaign and mischaracterize the ideological bent of many of his supporters. After supporting a losing candidate in Lieberman, the unpopular war in Iraq and an outdated platform, attacking Dean was the only way the DLC could shift the Democratic debate.

"What activists like Dean call the Democratic wing of the Democratic Party is an aberration; the McGovern-Mondale wing, defined principally by weakness abroad and elitist, interest-group liberalism at home," From and Reed wrote in a fiery memo titled "The Real Soul of the Democratic Party" on May 15, 2003. Four days later, after Dean won the endorsement of the 1.5 million-member public employees union AFSCME, the DLC denounced the union as "fringe activists." But others were having second thoughts--about strategy and the DLC. As Dean surged ahead, DNC chairman and Clinton confidant Terry McAuliffe told From to quiet the attacks. All nine Democratic contenders skipped the DLC's annual convention in Philadelphia.

For his part, Dean became the first serious presidential candidate to challenge the DLC openly since Jesse Jackson. But along with his clear antiwar stance, Dean frequently invoked his record of balancing budgets and his A rating from the NRA. (In fact, in 1996 the DLC had praised re-election of "the centrist Gov. Howard Dean" as indicative of a blossoming "New Democratic leadership.") This led many analysts to wonder whether the DLC's animosity was more about power than ideology. "Mr. From fancies himself a kingmaker," wrote then-Wall Street Journal columnist Al Hunt, "and Dr. Dean hasn't supped sufficiently at his table."

Major fissures emerged within the New Democratic movement as the DLC lost longstanding ideological and organizational support. Elaine Kamarck repudiated her "Politics of Evasion" argument--which laid out the policy blueprint for Clintonism--in a series of Newsday columns, arguing that the Dean campaign rendered the DC establishment "pretty much irrelevant." After Kamarck endorsed Dean in early January 2004, the DLC-friendly New Republic wrote: "Al From's Head Explodes." "The Democrats are not where we were fifteen years ago," Kamarck now says. "I think it's great that there's been a resurgence in grassroots activism on the left side of the party."

There were more recent problems for the DLC. The group suffered additional credibility blows during Joe Lieberman’s independent Senate candidacy in 2006 and DLC chairman Harold Ford Jr.’s quixotic and short-lived bid for the Senate in New York. What was left of the New Democrat base gravitated toward the new group, Third Way, which boasts close ties to centrist members of Congress and the Washington press corps. When From retired in 2009, the DLC’s state and local chapters began to disappear. It seemed like only a matter of time before the Washington office closed as well.

To be fair, the DLC was also a victim of its own success. Former DLC CEO Bruce Reed ran the Obama Administration’s deficit commission and is now Vice President Biden’s chief of staff. Former White House chief of staff Rahm Emanuel was a devotee of the organization, as are many members of the administration’s economic team. Obama, though never close to the DLC, nonetheless appears to share the group’s pro-corporate inclinations and philosophy of compromise. “DLC is not out of business,” blogger Max Sawicky tweeted to me yesterday. “HQ has moved to 1600 Pennsylvania Ave.”

Ari Berman

Ari Berman is a contributing writer for The Nation magazine and an Investigative Journalism Fellow at The Nation...

10 Things Conservatives Don't Want You to Know About Reagan

Think Progress

RADICAL RIGHT-WING AGENDA

By Alex Seitz-Wald on Feb 5th, 2011 at 12:00 pm

10 Things Conservatives Don’t Want You To Know About Ronald Reagan

Tomorrow will mark the 100th anniversary of President Reagan’s birth, and all week, conservatives have been trying to outdo each others’ remembrances of the great conservative icon. Senate Republicans spent much of Thursday singing Reagan’s praise from the Senate floor, while conservative publications have been running non-stop commemorations. Meanwhile, the Republican National Committee and former GOP House Speaker Newt Gingrich are hoping to make a few bucks off the Gipper’s centennial.

But Reagan was not the man conservatives claim he was. This image of Reagan as a conservative superhero is myth, created to untie the various factions of the right behind a common leader. In reality, Reagan was no conservative ideologue or flawless commander-in-chief. Reagan regularly strayed from conservative dogma — he raised taxes eleven times as president while tripling the deficit — and he often ended up on the wrong side of history, like when he vetoed an Anti-Apartheid bill.

ThinkProgress has compiled a list of the top 10 things conservatives rarely mention when talking about President Reagan:

1. Reagan was a serial tax raiser. As governor of California, Reagan “signed into law the largest tax increase in the history of any state up till then.” Meanwhile, state spending nearly doubled. As president, Reagan “raised taxes in seven of his eight years in office,” including four times in just two years. As former GOP Senator Alan Simpson, who called Reagan “a dear friend,” told NPR, “Ronald Reagan raised taxes 11 times in his administration — I was there.” “Reagan was never afraid to raise taxes,” said historian Douglas Brinkley, who edited Reagan’s memoir. Reagan the anti-tax zealot is “false mythology,” Brinkley said.

2. Reagan nearly tripled the federal budget deficit. During the Reagan years, the debt increased to nearly $3 trillion, “roughly three times as much as the first 80 years of the century had done altogether.” Reagan enacted a major tax cut his first year in office and government revenue dropped off precipitously. Despite the conservative myth that tax cuts somehow increase revenue, the government went deeper into debt and Reagan had to raise taxes just a year after he enacted his tax cut. Despite ten more tax hikes on everything from gasoline to corporate income, Reagan was never able to get the deficit under control.

3. Unemployment soared after Reagan’s 1981 tax cuts. Unemployment jumped to 10.8 percent after Reagan enacted his much-touted tax cut, and it took years for the rate to get back down to its previous level. Meanwhile, income inequality exploded. Despite the myth that Reagan presided over an era of unmatched economic boom for all Americans, Reagan disproportionately taxed the poor and middle class, but the economic growth of the 1980′s did little help them. “Since 1980, median household income has risen only 30 percent, adjusted for inflation, while average incomes at the top have tripled or quadrupled,” the New York Times’ David Leonhardt noted.

4. Reagan grew the size of the federal government tremendously. Reagan promised “to move boldly, decisively, and quickly to control the runaway growth of federal spending,” but federal spending “ballooned” under Reagan. He bailed out Social Security in 1983 after attempting to privatize it, and set up a progressive taxation system to keep it funded into the future. He promised to cut government agencies like the Department of Energy and Education but ended up adding one of the largest — the Department of Veterans’ Affairs, which today has a budget of nearly $90 billion and close to 300,000 employees. He also hiked defense spending by over $100 billion a year to a level not seen since the height of the Vietnam war.

5. Reagan did little to fight a woman’s right to choose. As governor of California in 1967, Reagan signed a bill to liberalize the state’s abortion laws that “resulted in more than a million abortions.” When Reagan ran for president, he advocated a constitutional amendment that would have prohibited all abortions except when necessary to save the life of the mother, but once in office, he “never seriously pursued” curbing choice.

6. Reagan was a “bellicose peacenik.” He wrote in his memoirs that “[m]y dream…became a world free of nuclear weapons.” “This vision stemmed from the president’s belief that the biblical account of Armageddon prophesied nuclear war — and that apocalypse could be averted if everyone, especially the Soviets, eliminated nuclear weapons,” the Washington Monthly noted. And Reagan’s military buildup was meant to crush the Soviet Union, but “also to put the United States in a stronger position from which to establish effective arms control” for the the entire world — a vision acted out by Regean’s vice president, George H.W. Bush, when he became president.

7. Reagan gave amnesty to 3 million undocumented immigrants. Reagan signed into law a bill that made any immigrant who had entered the country before 1982 eligible for amnesty. The bill was sold as a crackdown, but its tough sanctions on employers who hired undocumented immigrants were removed before final passage. The bill helped 3 million people and millions more family members gain American residency. It has since become a source of major embarrassment for conservatives.

8. Reagan illegally funneled weapons to Iran. Reagan and other senior U.S. officials secretly sold arms to officials in Iran, which was subject to a an arms embargo at the time, in exchange for American hostages. Some funds from the illegal arms sales also went to fund anti-Communist rebels in Nicaragua — something Congress had already prohibited the administration from doing. When the deals went public, the Iran-Contra Affair, as it came to be know, was an enormous political scandal that forced several senior administration officials to resign.

9. Reagan vetoed a comprehensive anti-Apartheid act. which placed sanctions on South Africa and cut off all American trade with the country. Reagan’s veto was overridden by the Republican-controlled Senate. Reagan responded by saying “I deeply regret that Congress has seen fit to override my veto,” saying that the law “will not solve the serious problems that plague that country.”

10. Reagan helped create the Taliban and Osama Bin Laden. Reagan fought a proxy war with the Soviet Union by training, arming, equipping, and funding Islamist mujahidin fighters in Afghanistan. Reagan funneled billions of dollars, along with top-secret intelligence and sophisticated weaponry to these fighters through the Pakistani intelligence service. The Talbian and Osama Bin Laden — a prominent mujahidin commander — emerged from these mujahidin groups Reagan helped create, and U.S. policy towards Pakistan remains strained because of the intelligence services’ close relations to these fighters. In fact, Reagan’s decision to continue the proxy war after the Soviets were willing to retreat played a direct role in Bin Laden’s ascendancy.

Conservatives seem to be in such denial about the less flattering aspects of Reagan; it sometimes appears as if they genuinely don’t know the truth of his legacy. Yesterday, when liberal activist Mike Stark challenged hate radio host Rush Limbaugh on why Reagan remains a conservative hero despite raising taxes so many times, Limbaugh flew into a tirade and demanded, “Where did you get this silly notion that Reagan raised taxes?“

Update Salon has more in their series "The Real Reagan," including how he cared more about UFOs than AIDS and how Reagan destroyed respect for the social compact that rebuilt America after World War II.

Celebrating a Drug Lord's 100th Birthday

Sunday, February 06, 2011

Celebrating a Drug Lord's 100th Birthday

40th US President Ronald Reagan image [stolen from here]

I am currently watching one of the corporate/bankster US Gov propaganda networks, CNN, and the subject of the broadcast is Ronald Reagan's 100th birthday.

If Reagan knew that cocaine was being smuggled into America from South America by CIA and Military transports for black bag operations and to make operatives rich, he's a drug lord scumbag. His name should be taken off any ship or all American honors. Do you remember Ollie North and Iran Contra? [videos and more]

If Reagan knew that the Jimmy Carter military operation was sabotaged, Reagan is an untried felon. Do you remember the US hostages held by Iran. They were purposely held past the election so Reagan would be ensured the election. That is election rigging and treason. Collaborating with a foreign government against a current US administration is treason. Do you remember the October Surprise?

The Reagan legacy is he brought to power one of the biggest scumbags of the last century, CIA Drug Lord and Master Thug, George H. W. Bush.

Ronald Reagan C-SPAN 100th Birthday Airing

I am currently watching C-SPAN. What was aired Thursday is being re-aired.

Senator Orin Hatch from Utah was talking about General Electric and other Ronald Reagan nostalgia. It was blatant Republican propaganda, equal to the crap the Democrats spew.

It is amazing what is being said is so far from reality. If you were alive, paid attention, and knew how to decipher what is really being said when "the news" is aired. Cocaine being brought into the US by CIA and Military transport is Ronald Reagan. Word Search "Iran Contra Cocaine" not in quotes.

Richard "Dick" Cheney is as disgusting a human being as is possible in my opinion. Did Cheney make 9 billion dollars from his war corporation stock options while Vice President? If so, we know what type of crap was perpetrated and know it is still being perpetrated under Obama.

Dick Cheney can say all he wants about US President Jimmy Carter, but Carter hadn't sold his soul and the CIA, FBI, NSA, and the Military Industrial Complex couldn't operate as it had. Carter couldn't be bribed and was a truly decent human being. This blogger didn't appreciate him at the time, was leaning Republican, and believes that one can change their minds when presented with facts.

I believe Ronald Reagan was nothing more than a war and drug lord. He helped usher in the George H. W. Bush CIA dominance of the world, more so, than anytime in previous history. So now we've got what we have.

Now the US is under [armed occupation].

Tuesday, February 01, 2011

NYC under armed Military Occupation

I was in Grand Central Train Station in the AM of January 31, 2011. I have been seeing armed military personnel, who co-ordinate with police, patrolling Downtown New York City train stations. I thought this was against our US Constitution.

Are we under armed military occupation and most of us don't know it?