MAY
03
2008
Bulls in the China Shop

It’s hard to watch the news lately, because it’s just an interminable vivisection and slow broil of the Democratic candidates, thanks to Hillary’s stalwart refusal to do the math. C’mon, folks, it’s all on CNN’s delegate counter game, which has helpfully added a feature which lets you see exactly why Clinton needs a 66% margin of victory in the rest of the contests in order to take back the nomination in the name of bullshit dynasticism.

Giant Gasbags

You can’t get a better illustration of what kind of choices America faces in the race for the presidency than John McCain’s “Gas Tax Holiday” proposed between Memorial and Labor Day.

The relevant graphs from a relevant McClatchy article:

Obama had backed a similar temporary gas-tax freeze as an Illinois state senator in 2000. So Republicans are tagging Obama as a “flip-flopper,” calling his current position “calculating and contradictory.” At a filling station in Indianapolis Friday, Obama said he opposed McCain’s plan because it would leave a nearly $10-billion shortfall in the Highway Trust Fund. “You don’t know that the oil companies are going to pass the savings on to the consumers, or if you’ll just see an increase in prices by the same amount that the gas tax goes down,” Obama said. “And it would deplete the Highway Trust Fund that we need for rebuilding our roads and our bridges.”

“I don’t want somebody to save 25 bucks — that’s what the savings would yield for the average driver — and now they’re potentially driving over an unsafe bridge,” he said.

He’s proposing instead long-term changes — a windfall-profits tax on oil companies and “steps to reduce the price of oil and increase transparency in how prices are set.”

Obama also rejects charges that he’s switched positions since 2000, noting that he voted to keep in place the Illinois gas tax to preserve money for infrastructure repairs.

McCain economic adviser Carly Fiorina called the temporary tax break a “very effective way to give consumers a break when they need it most.”

Obama’s failure to endorse a summer-long gas tax repeal is one of the many reasons Casual Asides is officially endorsing him for President. But don’t you wish he had the temerity to say something like,

"My opponents are guilty of the worst kind of pandering with their proposed 'gas tax holiday' — the kind where they kill you with their supposed kindness. John McCain, who just blamed that tragic bridge collapse on federal spending in New Orleans of all places, thinks that screwing the government out of money it needs to help people is the way to deal with our crumbling highway system. Hillary Clinton's proposal is even more craven because it amounts to making the Federal government launder $10 billion of the windfall tax we've been working on so hard in the Senate and send it right back to the oil companies, and make you the patsy.

If we lift gas taxes for three months when demand traditionally peaks, you can bet your gas cap those oil prices are going to rise more than 18.4 cents a gallon, and there's nothing the government will be able to do about it. This week ExxonMobil posted a record $11 billion profit, which was deemed a major disappointment by Wall Street. They are making more than any company has ever made in history for the last three months, AND THEY'RE NOT MAKING ENOUGH. So what better excuse to raise prices permanently? Come September you'll be paying for all that relief you got, and more."

The average American buys about 500 gallons of gas per year, so three months’ worth of tax relief comes out to $23 in savings. And the truth is, no matter what we do, gas will probably keep heading toward $4 a gallon no matter what we Americans do. That’s because we are no longer in control of the price of oil; Iraq proved that—oil prices dipped abit in 2003 during those two months when the war seemed to be going well, and they’ve been shooting up ever since.

Instead, it’s China which is largely responsible for the surge in worldwide demand, and there is nothing we are going to do about that (unless America follows my suggestion and opens up its renewable energy patents to the world, including China).

And how did we get to this point? In 1993, as Bill Clinton took office, we were importing and producing about the same amount of oil and our trade deficit with China was around $22 billion dollars. By the time Senator Clinton took office in 2000, we were importing 3 million barrels of oil a day more than we were producing, and our trade deficit with China had grown four times over.

Meanwhile, people are gassing up their SUVs and minivans to go to Wal-Mart to buy things made out of oil in China by prisoners. Our trade deficit stood at $256 billion last year, over 11 times what it was in 1993.

In 1994, we were sold a slightly different story by everybody’s pal, Bill Clinton:

Clinton had been the subject of heavy lobbying by American business interests and his economic advisers to continue China’s trade privileges. With China now the world’s fastest growing economy, the United States exports $8 billion a year there, which sustains up to 150,000 American jobs. Many major American businesses see even greater potential in Chinese markets, expecting China to become a massive purchaser over the next decade of the phones, electronic gadgets and thousands of other products made in America. “I think we have to see our relations with China within a broader context” than simply human rights, Clinton said, adding that the link between rights and trade was no longer tenable. “We have reached the end of the usefulness of that policy,” he said.

China gets to intimidate its labor force in ways American corporations can only dream about and not only do we pay the price in trade deficit and jobs going overseas, but we even pay indirectly because of the secondary effects of the massive industrialization we prompted back when everyone was telling us it was a great idea to bring China into the WTO and all that.

Breaking the Bank

Speaking of Bill Clinton and how he screwed us, it ought to be noted that, as I stated before, Clinton’s repeal of the Glass-Steagall Act kicked off this whole speculative mishegas, fueling a series of bubbles which made it appear as though we were building a real economy.

I spent a weekend arguing about this with Elephant, eventually locating a superb article in the American Prospect from last year which made my points as ably as I could about how Alan Greenspan, Sandy Weill, Robert Reich, and Bill Clinton got us in this mess.

Update for the latest financial crisis: the Gramm-Leach-Billey Act which repealed Glass-Steagall is the law which made it possible for our pals the banks to sell and resell the “CDOs” — collateralized debt obligations — which helped bring down a stalwart financial institution like Bear Sterns in a spectacular devaluation/government bailout/takeover by JPMorganChase, a financial hydra created by Gramm-Leach-Billey.

But back when we watched the “New Democrats” plant the seeds for this, you’d hardly hear a whimper of protest. Everybody was buying into this bullshit hook, line and sinker; remember when Wired Magazine put out that issue with the mutant smiley face on the cover saying that America had invented a new kind of capitalism featuring the end of business cycles? It was called The Long Boom; and its cheerful stupidity infuriated me back in 1997—to wit:

We are watching the beginnings of a global economic boom on a scale never experienced before. We have entered a period of sustained growth that could eventually double the world’s economy every dozen years and bring increasing prosperity for – quite literally – billions of people on the planet. We are riding the early waves of a 25-year run of a greatly expanding economy that will do much to solve seemingly intractable problems like poverty and to ease tensions throughout the world. And we’ll do it without blowing the lid off the environment.

Ha! What morons. But this was the the popular story, and Clinton was skillful and lucky enough a politician to make it look like Bush had screwed up the economy single-handedly. Now Bush took the ball and ran with it, but let’s not forget who got us to the Superbowl of economic meltdowns.

The problem isn’t just that the unsustainable growth of the 1990’s was paper-thin; Bush’s America was so fucked up that Clinton became hugely popular after he left office, merely by comparison. Those blue-collar voters who are voting for Hillary because they liked Bill are doing themselves a grave disservice, because the Clintons are going to turn around and screw you again. Really, it does take a remakable amount of skill for the power couple who brought you triangulation, NAFTA, and neoliberalism in America to emerge as the voice of a working class they impoverished.

If they made you, they can break you, I suppose.

Dig Up, Stupid

Speaking of federal fiscal policy, does it bother anyone else that the government’s response to a debt crisis is to make it even easier for the responsible parties to borrow money, and from the Federal Reserve, at that? Part of the gospel of ‘pro-market’ policy is that the government be enjoined from doing anything that might work (see the McCain-Clinton gas tax proposal above—pumping up demand is the only acceptable solution).

I say the government is making a bad investment, and generally speaking, it gets shitty returns on all those bailouts and subsidies. If you’re going to get entangled in the marketplace, just go whole hog and nationalize instead of bailing out failing companies. Britain just did this with the failing Northern Rock bank after a good old fashioned bank run. That ought to put some fire into the marketplace—fail and you get bought out by the guv’mint! (Cue sinister music.)

Recently I was in a bar and was talking to someone who worked for Citigroup in some financial racket, and we got to talking about the economy. He said not to worry, the market is just undergoing a correction and everything will be fine in a while.

I laid out what I think is a more likely scenario: the price of oil and the massive private and public debt weaken the dollar first (check) and then our inability to make payments on the burgeoning debts leads other countries to begin devaluing our national credit rating, the dollar is replaced by the euro or renminbi as the global currency.

“What’s your plan for that?” he asked with indignant smile. “If that happens we’re all fucked.”

Tell me about it.

Draggin’ The Line

My predictions for the upcoming contests:

.................. Clinton ... Obama ... Net Delegates
Guam ............... 50% ...... 50% ..... 0 (wash)
Indiana ............ 50% ...... 50% ..... 0 (wash)
North Carolina ..... 46% ...... 54% ..... +9 Obama
West Virginia ...... 53% ...... 47% ..... +4 Clinton
Kentucky ........... 51% ...... 49% ..... +1 Clinton
Oregon ............. 47% ...... 53% ..... +2 Obama
Montana ............ 46% ...... 54% ..... 0 (wash)
South Dakota ....... 48% ...... 52% ..... +1 Obama
Puerto Rico ........ 60% ...... 40% ..... +11 Clinton

All this goes to show that Obama should have gone to Puerto Rico instead of the Virgin Islands when he went on a mini-vacation a few weeks ago. But I’d say the odds are 50-50 of this going all the way to Puerto Rico.




 

 
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