A Tale of Two Banks

Everybody is aware that the great and powerful banking institutions run by the new class of “masters of the universe” have failed, and now exist only by their privileged access to the public purse. And you will no doubt be happy to know that they are once again profitable and paying big bonuses. Of course, they are not profitable due to their lending activities, which largely they aren't doing, but by the same sort of financial speculation that got them—and us—into this mess in the first place. The banks won't lend because they can't find borrowers who will pay them back, and the borrowers can't pay them back precisely because of the way the banks wrecked the financial system and the economy along with it.

Yet through all this there is a bank that did not fail, that is not in trouble, that has no difficulty in finding borrowers and in getting repaid. That bank is the Grameen Bank, the institution that practically invented micro-finance. I had the distinct pleasure last night of hearing an address by its founder and guiding light, the Nobel-laureate Dr. Muhammad Yunus. The Grameen banks lends 100's of millions of dollars to poor people in Bangladesh and around the world. The good doctor now heads a vast organization which employs 27,000 bankers in Bangladesh. Yet he was not a banker, but an economist. So how did he learn to run a bank, to set up the complex procedures and safeguards that such institutions require? It was very simple, he explains. They just went to the existing banks, the experts who have been in the business for a long time and who know how to get they job done. They examined all their practices and procedures, and then did exactly the opposite.

The banks lend to the rich; Grameen lends to the poor. The banks require collateral; Grameen's borrowers have none. The banks require complex legal documents and teams of lawyers; Grameen has no such documents, nor any lawyers. The banks lend mostly to men; Grameen lends mostly to women. But there is an even more fundamental distinction between Grameen and Citibank. The too big to fail banks are mostly in the business of creating money and investing it in financial speculation; their activities have only a remote connection with the real economy, the economy of production and jobs and the creation of real wealth. Yet their speculative activities have the power to wreck the real economy. Grameen, on the other hand, is connected with the real economy. When they lend $50 to a women, she buys chickens, or goats, or a sewing machine, or some actually productive asset, something that actually adds to the real wealth of the borrower and the nation.

There is of course another distinction. Grameen is not in business to make a profit. It does in fact make a profit, but that is not the point. Making a profit only allows it to continue in being so that it can continue to fulfill its function, which is to bring people out of grinding poverty into self-sufficiency and self-reliance. It aims at building strong families, strong communities, a strong economy, one centered on the lowest rather than the highest. That is to say, it is a social business, a business that has a social point and helps to create a particular kind of social environment.

Looked at in that way, all businesses are social businesses; they all contribute to a particular kind of social order. But different kinds of businesses presume—and build up—different kinds of social order. Citibank has its own view of what a just society ought to be. Of course, they would never articulate this vision in polite company. They will fall back on the libertarian rhetoric of “freedom,” even as they work to destroy the material basis of that freedom. Liberty in this view is a commodity like any other, one that has a price. Think of our Supreme Court, which has ruled that “money is speech,” and hence those with more money have more rights to free speech, and the corporations, with nearly limitless access to money, have nearly infinite rights to “free speech,” surely more rights than any mere citizen, any real person.

Dr. Yunus is familiar with talk. He was formerly the Chairman of the department of economics at Chittagong University. Yet it was contact with the villages surrounding his university that made him realize that all the complex formulas, all the high finance and foreign borrowing were not working. Or rather they were working, but only to increase the poverty and misery of the people. He discovered that he could solve the dependence on loan sharks in one village with a mere $27 in capital. For a man who was used to working in millions and billions, this was a real revelation. And that was the beginning of the Grameen Bank.

What Dr. Yunus came to realize is that all economic theory was built on considering only half of what men really are. It is built on the fact that men are selfish. And so they are. But that is not all that they are. Men are also unselfish, because without that, no social order—and no economy—would be possible or sustainable. So the good Dr. set out to found an economics, and a bank, built on the whole man, and not just the half-human.

In his most recent encyclical, Caritas in Veritate, Benedict insisted on the Principle of Gratuitousness as a necessary principle of economic order. This makes no sense, indeed, has no meaning, to the economist. Business and economics is merely about wealth creation, and no principles of love and gift are involved. Further, the introduction of such a principle can only compromise the “scientific” basis of economics, and only hamper the “efficiency” of the business. And yet, it is Grameen that is standing on the strength of its borrowers, while Citibank stands on the public purse. Citibank grinds us all down with their debts; Grameen lifts up its borrowers to real freedom.

I believe that Dr. Yunus, and Pope Benedict, are right and the bankers are wrong. Man is indeed selfish, but he is more than that. A banking system that is built only on selfishness will only build up a social order of selfishness. But this order will turn out to be disordered, and in constant danger of collapse. Further, this disorder privileges the possessors of capital, who must always be few, and sets them at war with those who possess only their labor, who will always be the many. But Grameen unites capital with labor to make the person and the family productive and self-reliant. Like other businesses, it makes a profit, which it distributes to its owner-depositors, but its purpose is to make a gift. The gift is funded by an exchange, but is not reducible to that exchange.

The social order needs to be funded; we all need to eat. But it cannot be reduced to mere eating, or soon we will be eating each other. Indeed, banking reducible to greed alone is a kind of eating of the other, or at least eating their substance and reducing their livelihood. But there is not the slightest reason it has to be that way, and the distinction between Citibank and Grameen Bank proves this. Indeed, it is the difference between greed and gift; between business understood as a taking of all you can get, and business as a means of giving all that you can.

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Consumer Confidence or Consumer Recklessness?

Note: Apologies to those readers who have seen it elsewhere, but given the recent reports of recent consumer confidence lows, I thought a rehash of this issue was warranted. This provides further proof of the point, though; consumers are apparently not only lacking in confidence, but also incredibly fickle, their willingness to waste money on things they can't afford constantly waxing and waning based on the most transitory news. I hope these considerations provoke as lively a discussion as they have in the past.

The current economic crisis is often blamed in part on a "crisis of consumer confidence." The essential problem, according to those who place such blame, is that consumers just aren't confident enough. Because they're not confident enough, they're not making lots of purchases, which cuts down on orders from retailers, which cuts down on transportation orders for distributors, which cuts down on orders from manufacturers, and thus hits everybody. The important thing, it's said, is to get consumers confident again so that they'll start spending again.

Along this vein is the oft-repeated statement that "the consumer is two-thirds of the economy." Since the consumer is two-thirds of the economy, we need to get him spending his money, or the other one-third won't work anymore. What's more, that single two-thirds will shrink, thus costing everybody, consumer and otherwise.

Let's think about those statements for a moment, however. First, let's take "the consumer is two-thirds of the economy." Let's take care to ensure that we're understanding this statement properly, and that I'm communicating my own thoughts about it clearly. The statement reflects the fact that consumer spending makes up about 70% (rather more than two thirds, really) of America's Gross Domestic Product (GDP). GDP, in turn, is the market value of all goods and services made in a country in a given year. It can be calculated in a number of ways; however, because of easy availability and good reliability of figures, the "expenditure approach" is generally used. This approach simply sums the total consumer spending, investment spending, and government spending within that country, adding in also the difference between exports and imports.

Investment spending is a bit counterintuitive in this case, because it doesn't refer to what we normally think of when we think "investment", which is the purchase of stocks and the provision of venture capital. Investment spending for GDP purposes, in fact, specifically excludes such spending. Rather, it includes money spent on clearing fields; building factories; buying better equipment; upgrading old equipment; digging new mines. In other words, it includes money spent on production, either improving ongoing production or beginning new production.

Consumer spending, on the other hand, includes just about all other private spending. Money spent on goods, whether durable or nondurable, and all services are included. So every time we go out to eat; buy a computer; get some new clothes; this is all consumer spending.

So when we consider this "two thirds of the economy" figure, what we're looking at is a stark and worrisome fact: our spending on consumption is well over twice what we're spending on improving and sustaining our production; it vastly outweighs government spending and investment in production, and even partially offsets (though only unsustainably) our dismal import-export ratio. We'll always spend more on consumption than production, for the simple reason that productive assets tend to be more enduring; but while our consumer spending has risen, our net exports have fallen drastically (indicating reduced domestic production), and our investment spending has dropped precipitously in the last few years (The Changing Composition of GDP).

Think about this for a moment. If we're spending so much more simply consuming stuff than we are on actually making it, who's spending money on producing the things that we so voraciously consume? The answer is China; Japan; Europe. In short, people other than us. And because we're spending so much on consumption and so little on production, and because production is the real and original source of wealth, we're spending much more than we really have. Where does the extra money come from? The answer is China; Japan; Europe. In short, from people other than us. In other words, we're borrowing to cover for all the consumptive expenditures that aren't balanced by proportional appropriate investments in our productive infrastructure. And, as a corollary, we're accumulating a great deal of debt and paying a great deal of interest on it.

And that leads us to thinking about the other notion now, that the problem here is one of "consumer confidence." Don't we really mean "consumer recklessness?" The problem, such people say, is that consumers just aren't spending their money like they used to; they're saving it instead. Tightening their belts. Never mind that once this great country prided itself on the thrift of its hard-working citizens, noting that said thrift and hard work are the elements which made it economically great. Such people, though, want us "consumers" to just keep spending our money, even though we really need to save it. Even though, in the past, the money that we've spent is often money that we didn't have, and that we had to borrow to spend. We need to retrench; pay off our past debts; save up a cushion in case of a fall. That means that we, as consumers, are not "confident."

In reality, though, it means that we, as consumers, are not reckless. We're being wise for a change; we're being careful only to spend money that we actually have; we're foregoing present pleasures for the sake of future safety; we're actually, horror of horrors, paying off some debts instead of constantly racking up new ones. This is terrible! Consumers aren't confident! Can you imagine what might happen to the economy if this spreads? What horrible disasters might befall our nation if such ludicrous practices spread, and our government adopted such an insane scheme so lacking in "confidence?"

Modern economics have led us to a strange place. Though this country was built on working hard, producing goods, foregoing unnecessary consumption, taking debt as rarely as possible, and paying off necessary debt as quickly as possible; though the wealth of every country has been based on these perennial, thrifty, and diligent practices; we have nevertheless convinced ourselves that our wealth is based on spending as much as we can, racking up as much debt as we need to in order to get everything we currently want, and letting other countries bother with the annoying hard work, production of useful goods, and delayed gratification.

Here is national suicide. We need to return to the basic principles of sound economic management. Namely, that it is production which is primary, not consumption; that it is better to save than to buy what we don't need; that it is better to be free of debt than to have debt; and that gratification of our present desires need not be immediate, or even occur at all. Thrift; moderation; looking to the future. There is national prosperity. There, and there alone, is the solution to our economic crisis.

Praise be to Christ the King!

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.

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Should I Laugh or Cry?

If you need a good break from things, spend some time at James Howard Kunstler's "Eyesore of the Month" page, wherein he documents a different architectural abomination each month. This month's eyesore is particularly disturbing, an art gallery for people who hate art. What kind of exhibits suits this kind of building?

"CBC News spoke to Reed Clarke at an exhibit that allows visitors to experience being in an abandoned Japanese dentist's office during a storm. He said the exhibit was very realistic."

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Cairo's Christian Entrepreneurs

The Zabaleen are the Christians of Cairo, and as Christians they are a marginalized people doing a marginalized job: collecting garbage. The solid waste they recycled, but the organic waste they fed to their pigs. Muslims can't keep pigs, since pigs are "unclean," but the pigs were what kept Cairo clean. The government learned this to their sorrow, when they had all the pigs slaughtered, supposedly to prevent "swine flu." Now the Zabaleen have no incentive to pick up the organic wastes, which now pile up in the city.

The government thought they could farm the job out to big western companies, but the Zabaleen consider themselves entrepreneurs, and weren't going to do the job for wages, much less for foreigners. The western companies couldn't hire the Zabaleen, and the Muslims consider the job beneath them. Now the big companies have to negotiate with the Zabaleen.

PBS did an interesting report on this situation:

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St. Augustine on the Liberal State

Comparisons of the modern state to the Roman Empire are common enough but Brad Littlejohn of The Sword and the Ploughshare brings this passage from The City of God to our attention. It is, I think, particularly relevant to the modern state:

'So long as it [the republic] survives,' they say, 'so long as it prospers, rich in resources, self-confident in victory, or, better still, secure in peace, what difference does it make to us? What matters is that there is money to be made to support our lavish style of life, and to give the stronger their hold over the weaker; that the poor treat the wealthy with compliance, to ensure their daily bread--the poor depending on the patronage of the wealthy for a quiet life, the wealthy calling on the poor for support to boost their public standing. Popularity should accrue not to those whose policies promote public welfare, but to the big providers of public entertainment.

Law should not be rigorous; low indulgences should not be proscribed. Rulers should not bother themselves with getting virtuous subjects, simply quiescent ones. Territories should view their rulers not in the light of moral educators, merely as economic managers and purveyors of satisfactions. It does not matter if they do not seriously respect them, so long as they treat them with a calculating and subservient fear. No one should be liable to court proceedings if he has not infringed or done harm to the property, real estate, or physical safety of another person without consent;* but everyone should be free to do with himself, his dependents, and consenting associates exactly what he likes. Sexual satisfactions should be freely available on the open market for those who want them, especially those who cannot afford to maintain facilities privately. Domestic architecture should be expensive and ornate, to accommodate large and lavish parties where anyone may game and drink all day and night, if he pleases, till he brings it up or sweats it out. The sound of dancing should be heard in every neighborhood, and theaters should be humming with excitement at their coarse amusements and their various brash entertainments.

Should someone disapprove of this perfect contentment, he must expect to meet public hostility; and should someone attempt to reform or abolish it, the spirit of popular freedom must know what to do with him: shut him up, pack him up, beat him up! Religion ought to make a case for itself by guaranteeing and perpetuating these conditions of life for the greatest number of people. Let the gods have all the worship they want, and all the games that they want, to enjoy them with (and at the expense of) their worshipers, just so long as they ensure this satisfactory state of affairs against threat from enemy, plague, or disaster.' (Book II, 20, Brad's italics)

It seems to me that this is a perfect description of the modern liberal state and its conception of law and economics. The idea of virtue in general, and the specific virtue of justice in particular, have been exiled from our notions of politics, law, and economics. But a political order divorced from justice can only be about power; a legal order divorced from justice is merely a contradiction; an economic order divorced from justice is always on the verge of collapse (as ours is.)

Distributism is about restoring justice to the political and economic orders (orders which we refuse to separate), and especially distributive justice. In thinking about these questions, we can take another passage from The City of God:

Remove justice, and what are kingdoms but gangs of criminals on a large scale?

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About Those "32,000 Skeptical Scientists..."

One would hope that in the "Information Age," there would actually be more information. And there is. The problem is that there is also more disinformation, and better means of disseminating it. Those who are well-organized and well-funded can easily spread out-right lies long before the truth has a chance to catch up. Nowhere is this more evident than in the global warming debate, an issue that excites a peculiar passion on both sides, but particularly (in my experience) on the side of the deniers.

One bit of nonsense circulating the blogosphere is the tale that 32,000 "leading scientists" are skeptical of climate change. This charge is so easy to debunk, for anybody actually interested in the facts, that you wonder how it could of gotten so much play. But that assumes that anybody is actually interested in the truth, rather then in defending some pre-packaged ideological position. For what it's worth, here is a film that deals with this particular claim:



What saddens me about this debate is that this is an issue where genuine conservatives--meaning those who actually wish to conserve something--should be the leaders and not the deniers. Reverence for the natural order is conservative, or else "conservatism" means nothing at all. The idea that our God-given dominion over the natural order can be expressed as a tyranny, as a bending of nature to our will, no matter how mis-directed that will is, strikes not just at the natural order, but at the moral order as well.

Last week, I published a post which contained some sexual innuendos, which scandalized some of my readers. I suspect, however, that the howls of protest will be much louder in this case. That's okay, so long as we can start a reasonable conversation, one that deals with real issues, and not with trumped up charges from phony "institutes." Let's see how it goes.

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Update - The Distributist Review

Dear Friends of The Distributist Review,

For some time our readers have asked us when we would leave the shadows of Google Blogger and move on to greener pastures. What you are looking at is an image file of the site currently in development. Promising to pack a punch, the new Review will offer commentary on economics, politics, history, philosophy, and even book/movie reviews. A launch date will be announced soon and we hope all of you will continue to follow us and spread the word.

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Catholicism Lite vs. Taliban Catholicism?

The following is reprinted from the National Catholic Reporter

by John L Allen Jr on Feb. 05, 2010

In Georges Bernanos' Diary of a Country Priest, the elderly Curé de Torcy gives his young priest friend a bit of advice about proclaiming the Gospel: "The Word of God is a red-hot iron," he says. "Truth is meant to save you first, and the comfort comes later."

One could probably craft a meditation on the state of the Catholic soul today in terms of the tension between those two values -- truth and comfort. We want the church to offer comfort, which among other things implies that Catholics shouldn't brutalize one another in internal tribal warfare. Yet we also want the church to be bold in proclaiming the truth that saves, which inevitably means that sometimes lines have to be drawn and feelings may be bruised.

The $64,000 question is, can we do both? Can the Catholic church be both the "sacrament of the unity of the human race" and a fearless evangelical force?

One place to watch these tensions play out is the University of Dallas, where I took part in a panel discussion Monday night devoted to "the identity of a Catholic university." The point of departure was Bishop Kevin Farrell's commencement address last May, in which he warned against "dogmatism, closed mindedness, judgmentalism, [and] suspicion of another's motives" in the life of a Catholic university.

Here's what makes the situation especially interesting.

A strong current in Catholic life these days is what I've called "evangelical Catholicism," meaning a drive for clarity and courage about Catholic identity. It's both top-down, the most important policy-setting instinct in Catholicism, and also bottom-up, especially palpable among a cohort of younger Catholics usually tagged the "John Paul II generation."

Dallas has just such an evangelical ethos. Given its recent history and the kind of person it tends to attract, the university is popularly regarded as a "conservative" alternative to Catholic institutions sometimes seen as more secular and liberal. (I chatted with one young man Monday night, for example, who told me there's a cluster of students at UD from California who came here because they didn't feel they could find a "serious" Catholic university back home.)

In other words, if you're looking for an experiment as to whether it's possible to be both unapologetically Catholic and yet civil in engaging disagreement, the University of Dallas represents a mighty interesting laboratory.

Moreover, the powers that be seem to understand that. Back in 2001, the staff of what was then called the "Institute for Religious and Pastoral Studies" defected to the new Ave Maria College, and then-Bishop Charles Grahmann called their exodus a "blessing." (The bishop of Dallas is also the chancellor of the university.)

Grahmann said the leaders of the institute had become "advocates of an ideal orthodoxy and built walls that no one could penetrate." When the dust settled, the result was a new School of Ministry self-consciously designed to be more mainstream.

Farrell's commencement address last May forms part of the same picture.

"We need to be self-critical and realize that no one of us has the only approach to Catholicism," Farrell said. (His address was published in Origins in August). "Honest debate, not confrontation -- true dialogue where we seek to understand the other, not facile condemnation -- should be the overarching way we move forward."

"The word 'heretic' has been reserved for precious few people in our Catholic tradition," Farrell said, rejecting what he called "verbal fratricide" and a tendency to become "smug, dismissive and righteous" about the Catholic intellectual tradition.

"No theologian, or professor or pope, has ever had or ever will have all the answers to what it means to be authentically and fully Catholic," Farrell said.

Obviously, Farrell didn't craft these remarks in a vacuum. He challenged "verbal fratricide" because, at least in the eyes of some, that occasionally describes the climate at the University of Dallas. As one insider put it to me, the official motto is "The Catholic University for Independent Thinkers," but in practice it can feel like a university for people who think only one way about being Catholic.

To be sure, Farrell is no milquetoast on Catholic identity. Recall that he and Bishop Kevin Vann of Fort Worth issued a joint pastoral letter on Catholics and politics in October 2008, calling abortion "the defining moral issue, not just of today but of the last 35 years." It was widely seen as a warning to Catholics about supporting Obama (or, at least, doing so uncritically), and led to protests outside the chancery.

Yet Farrell's commencement address amounted to a plea to blend orthodoxy with openness, clarity with generosity of spirit. That's a beguiling vision, but just because somebody decrees it doesn't automatically make it so.

I spoke with a few students and faculty on Monday night who embody the evangelical outlook, and who told me they feel stigmatized by some elements in the university's leadership. They worry that what's precious to them about the university, meaning its robust Catholicity, may be at risk. Meanwhile, others told me they're weary of feeling that their orthodoxy is constantly under a microscope, and that someone always seems ready to question their Catholic credentials over any disagreement, however trivial.

In other words, things are still messy. Yet the reality is that there are precious few places where what we might call the "evangelicals" and the "moderates" in the Catholic world actually live cheek by jowl in significant numbers, and the tensions at UD are therefore also an index of possibility -- the possibility that the university could offer an object lesson in how truth and comfort, clarity and dialogue, can coexist.

Especially with a new university president taking over on March 1, the "Dallas experiment" bears watching.

* * *

As a footnote, I may have inadvertently added fuel to the fire by introducing something new to fight over: My phrase "Taliban Catholicism" to capture a certain trajectory within the church. (At least I think I coined the term, though for all I know somebody else got there first.)

In my brief remarks Monday night, I applauded Farrell's vision, underscoring it with a bit of rhetoric that's become part of my standard stump speech. A defining challenge for the church these days, I said, is to craft a synthesis between entirely legitimate hunger for identity on the one hand, and engagement with the great social movements of the time on the other.

That synthesis, I said, has to involve striking a balance between two extremes. Here's how I described them:

"On the one extreme lies what my friend and colleague George Weigel correctly terms 'Catholicism Lite,' meaning a watered-down, sold-out form of secularized religiosity, Catholic in name only. On the other is what I call 'Taliban Catholicism,' meaning a distorted, angry form of the faith that knows only how to excoriate, condemn, and smash the TV sets of the modern world."

Some in the audience chuckled, but others weren't so amused. One younger faculty member rose during the Q&A period to offer a thoughtful, and heartfelt, challenge:

"To say things with clarity is not to be the Catholic Taliban," she said, adding that she found the phrase "profoundly offensive."

"There are no suicide bombers in the Catholic church," she said, "but we have had an epidemic of Catholicism Lite for the last 30 years." Younger Catholics, she insisted, should not be dismissed as fanatics simply because they seek "fidelity and clarity."

Her remarks were met with applause, suggesting she had struck a chord, though others later pulled me aside to say they found them strident. (By the way, it turns out the questioner is a relative of a friend of mine in Rome ... small world.)

For the record, she's not the first person who's objected to the term "Taliban Catholicism," just as others protested when Weigel first started talking about "Catholicism Lite." Of course, when pundits employ such sound-bites, part of the point is to provoke a reaction, so it would be disingenuous to proclaim shock that anyone could take offense.

That said, let me offer two clarifications that may help.

First, at least when I use them, the phrases "Catholicism Lite" and "Taliban Catholicism" are not intended to describe real people. Instead, I understand them as states of mind, instincts, and psychological tendencies -- potential distortions in Catholic life that can flare up anywhere if we're not careful.

To be honest, there's probably a little Catholic Lite and a little Taliban in all of us.

Second, I suspect many people assume that by "Catholicism Lite" I mean the Catholic left, and by "Taliban Catholicism" the church's conservatives. Not so.

In fact, there's a right-wing form of Catholicism Lite that's just as watered-down and sold out to secularism as its kissing cousin on the left. In the States, it can take the form of a country club Republican Catholicism -- untroubled by the inequities of global free-market capitalism, quite at home with anti-immigrant rhetoric, the death penalty, and the use of armed force.

At least in my mind, the defining feature of "Catholicism Lite" is not a liberal or conservative outlook, but rather taking one's cues from secular culture rather than the faith. No ideological camp has a monopoly on that.

Similarly, there's a Taliban instinct on the Catholic left that can be just as noxious as its right-wing version. It generally includes paranoia about almost any exercise of authority in the church, coupled with derision of any attempt to defend traditional Catholic thought, speech or practice -- a liberal "hermeneutic of suspicion" that can easily shade off into rage. Try telling a certain kind of Catholic liberal that Benedict XVI isn't actually "rolling back the clock" on Vatican II, for example, and you'll want to duck and cover before the shooting starts.

Bottom line: When I talk about "Taliban Catholicism," I know I'm playing with fire -- but the point is to invite an examination of conscience across the board, myself very much included, not to slur one side or the other in Catholic debates.

[John Allen is NCR senior correspondent. His e-mail address is jallen@ncronline.org.]

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Sarah Palin's Hand Job

There has been much buzz in the blogosphere about Sarah Palin's Hand Notes. After criticizing Obama for using a teleprompter, it was discovered that she had crib notes written on her own hand to answer a rather simple, straightforward and indeed "softball" question. This means that she was given the question in advance, but still needed help in answering it.

But missed in all the merriment is what she had actually written, because that tells a story all its own. She wrote "Budget cuts" and then crossed out "budget" to write "tax" cuts. This is the hallmark of the "gimme" generation, the problem with the Politics of Ingratitude. She wants to cut taxes, but is unwilling to talk about cutting the budget. She wants the wars without the cost. She wants the National Security State without paying the cops. She wants the services, but not the expense.

This by now is a time-honored tradition, dating back to Ronald Reagan, who convinced the public that he could finance his tax cuts by eliminating "waste, fraud, and abuse." That is, no one need fear that their subsidy was in any danger. Anybody who actually advocates a particular service cut will not be elected, and anybody who actually makes a cut will not be re-elected. But even a person who needs crib notes for simple questions can understand that you cannot cut taxes without cutting expenses. That just drives up borrowing, and borrowing is also a tax, just a tax shifted to the next generation. The Tea Baggers are perfect representatives of this mentality. While I certainly respect their righteous anger, I marvel at their incoherence.

We are all taught by the consumerist mentality, a mentality reinforced by the relentless propaganda known as advertising, to seek instant gratification, to live beyond our means, to live our lives on credit and not let anything stand in the way of our pleasures, to demand tax cuts without budget cuts. It is unfortunate that the Tea Party movement is not the antidote to this mentality, but just another sign of it.

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Well Fed Neighbors

People always ask, "What can we do?"

This is what we can do:

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Obama Agonistes

Revised, 2/6

The forgettable State of the Union speech occupied the press a few news cycles, and its place was quickly taken by the new budget, a document which has a certain entertainment value of its own. But the really significant thing that happened caused only minor comment: it was that Ben Bernanke was reappointed. This did gather some brief commentary because there were a total of 30 votes against him, an unprecedented number when dealing with a Fed Chairman. This raises the question of why the congress should be so kind to Fed chairmen in general, and this Chairman in particular. In a town were everything is contentious, and in a Senate where everything requires a super-majority but nothing gets it, the re-appointment got it with room to spare.

The President who promised change could not even change the Chairman, not even one who had failed so badly, and who continues to fail. The Senate for its part admitted that they were united in one thing only: their cluelessness on economic policy. Because the Fed provides the reserves to the banks, and because the banks provide credit to the economy, and because the economy cannot function without credit, the Fed is the most important institution in the economic life of the country, arguably more important than the Congress or the President. Yet both have been reluctant to control the Fed. This is not new. Banking and credit is supposed to be a “technical” matter, best left to the technicians and isolated from the politicians. This means that in our democracy, the democratic institutions have little control over the institution that makes the most difference in the economic life of the country.

The same problem has afflicted presidents back to Carter, at least. They felt they were not able to confront the Fed Chairmen. Volcker single-handedly wrecked the Carter administration, and nearly did the same to Reagan, until the White House finally found the guts to get him to stop. Both Volcker and Bernanke are Monetarists, who believe (believed, in Volcker's case) that money problems could be cured by controlling the money supply. Volcker tried to cure inflation and Bernanke deflation using the same philosophy, and both failed. Volcker raised the fed funds rate to 20% in an effort to reign in lending; it failed. Bernanke has created unimaginable piles of money to get banks to start lending again, and he has failed. You would think by now that Monetarism would be thoroughly discredited. But Bernanke got 70 votes.

Without making substantial changes at the Fed, there is little change that Obama—or the congress—can make. But then Obama has found that he has little enough room for maneuver. The Senate requires a super majority which he cannot command, the Fed is out of his control, and the Supreme Court has formally turned the political process over to the plutocrats. He has nowhere to go and nothing to do, save have lunch with Pelosi and fly about the country in Air Force one. He has the trappings of power, but none of the substance. He can make speeches about bipartisanship, but he knows that no one is listening. His own base has abandoned him, and his administration seems clueless about the crises.

The new budget is a sign of his impotence. He boldly proclaims an austerity program, which turns out to concern at best the 17% of the budget that is deemed “discretionary.” At what point, we may ask, did the bulk of our budget escape our control? But it has certainly escaped Obama's, and he hasn't a means to take the reins of power. The Democratic Party has proven a weak support at best; even with majorities larger than any that Bush or Reagan could command, they have not been able to impose their will upon the country, for the simple reason that they have no will. As Paul Craig Roberts noted,

Obama and the Democrats cannot be an opposition party, because Democrats are as dependent as Republicans on corporate interest groups for campaign funding.

The Democrats have to support war and the police state if they want funding from the military/security complex. They have to make the health care bill into a subsidy for private insurance if they want funding from the insurance companies. They have to abandon the American people for the rich banksters if they want funding from the financial lobby.

Now that the five Republicans on the Supreme Court have overturned decades of U.S. law and given corporations the ability to buy every American election, Democrats and Republicans can be nothing but pawns for a plutocracy.

Most Americans are hard pressed, but the corporations have only begun to milk them.

So far, the President has nothing to show for his tenure but a failed stimulus and an empty Peace Prize. The recent job numbers were revised to show that the economy lost 1.2 million more jobs than was previously thought. And the unemployment lines are getting longer, not shorter. That the stimulus has failed must come as a great surprise to his economic team, since stimulus has generally worked in the past. However, that past was one in which we made more of the goods that we consume. In an economy that imports so much, much of the stimulus leaks off-shore. If stimulus was going to work, it would have worked for Bush, who ran up $6 trillion in debts, but all we got for that was two wars and a housing bubble.

Obama came to Washington as a Samson, ready to do battle with the Philistines who controlled all the levers of power. Or so his supporters imagined. They invested all their hope in him as a person capable of rousing the Democrats to battle and the country to real change. Yet, instead of doing battle with the Philistines, he invited them into his cabinet, he gave them what they already had. It is possible, I believe, to locate the precise moment when Obama failed: it was the moment that he appointed Timothy Geithner and Larry Summers to head his economic team. These men have their fingerprints all over the crash, Summers by being a strong advocate of financial deregulation and Geithner as the primary engineer of the AIG bailout. This is to say that Obama stacked the deck against himself even before he took office. He abandoned the change he had promised to embrace the policies of his predecessors. I'm pretty sure he didn't see it like that; he thought that these were technical matters and he got the best technicians he could. Indeed, this is probably the best set of resumes ever to serve in government, but their skills are in all the wrong areas; they are trying to solve the problem with the tools that created it. Obama has no workable economic plan; he can only hope that the recession runs its course. But this is unlikely.

Nor will he get much help from the Republicans. One, they don't have any plans of their own, and two, they understand that their success depends upon his failure. There is simply no incentive for cooperation. As the economy sinks, their fortunes will rise; they expect, not without reason, a sweeping victory this year and a return to power in 2012. But when President Palin, or Brown, or Cheney, or Jindal takes office, he or she will find that power ain't what it used to be. They will be in a somewhat better position than Obama, since they will be able to command super-majorities in the Senate based on blue-dog Democrats, or else they will simply ignore the rules. But lacking any plans, they will not have much they can do. They will get some income and corporate tax decreases and some payroll tax increases; they will find new privileges for the powerful and new subsidies for the rich. In return, they will receive endless benefits and lifelong employment. And their campaign coffers will never run dry.

I cannot recall a president who has made himself so irrelevant so quickly, one who so easily took a haircut. He lacks a base, he lacks a party, he lacks a program. It will be interesting to see how Obama responds to his own impotence, to the realization that he is the prisoner of powers he cannot control, powers he himself invited into his administration. Samson became the laughingstock of his captors, but found the strength to pull the whole wicked structure down upon both himself and his enemies. The best Obama can propose is to appoint a commission to study the problems, a commission that will, no doubt, consist largely of the Philistines. This will not move the pillars of power very much, but it will amuse the Philistines.

Obama's accomplishments will be limited to things like “don't ask, don't tell.” On other issues, he will be a mere observer, like everyone else. The real rulers of the land, represented by Geithner and Bernanke will continue to loot the country, until there is no country left to loot. Unless something changes, he is likely to be a one-term President who will leave office with a Peace Prize and a wrecked economy. And gays in the military.

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