Sunday, February 19, 2012

When will we talk about real isses?

Jack Kelly started out pretty good today, but then he utterly fails to actually talk about real issues and falls back on Republican stereotypes. His topic today is apparently "crony capitalism", although he doesn't talk much about government aid to "crony" corporations.

Kelly does start by complaining that Obama's new chief of staff, Jack Lew, is a millionaire like former chief's of staff Bill Daley and Rahm Emmanuel are. That's actually not a bad point (see Inside Job). All three do have significant connections to banking as well as to the Clinton administration (and Emmanuel had significant Congressional experience). The banking experience leads to reasonable questions about how aggressively they would pursue the Wall Street banks who could reasonably said to be largely (and criminally) responsible for the current financial crisis.

But also let's step back here for a moment. Was there Republican outrage when Dick Cheney was chosen to be George W Bush's Vice President? Was there any Republican comment on Halliburton getting so many government contracts, and contributing to the awful bungling of the occupation and reconstruction of Iraq, and the resulting incredible waste and fraud? And let's be clear, it's no excuse for Republicans to now say that Bush was wrong to do these things. It doesn't give Americans any sort of confidence in Republican's decision making ability if they wait five to eight years to say "hey, wait, that's not a good idea". If Republicans/conservatives want to say they are better than Democrats/liberals, then I think it is fair to expect them at least own up to and apologize for past performance (as Colbert likes to say "George W Bush, great President or greatest President?").

Certainly Kelly has no trouble dredging up the pre-Obama past if it supports his narrative. I should actually say the invented pre-Obama past, implying (clumsily) that Fannie Mae and Freddie Mac were the biggest cause in the financial meltdown (without actually saying that): "Fannie and the Federal Home Loan Mortgage Corp. (Freddie Mac) bought bad loans from firms such as Countrywide Financial -- where "fraud was systemic" -- then resold the toxic mortgages to Wall Street."

Freddie and Fannie did get involved in the trade of subprime loans, although late in the game. Freddie and Fannie were government agencies that were pushed out into the private sector, with originally a mandate to help make low income home ownership possible, a goal they performed admirably for years. But they were also supposed to make profits, and my sense is that at some point (no earlier than 2005, possibly later) Fannie and Freddie looked around, saw record profits already being made by private financial institutions, and decided to get in. They had enormous market share of repurchased mortgages as opposed to originated (essentially all the clean low income mortgages, huge numbers of little mortgages), so they end up having significant impact.

But even the duplicitous Jack Kelly admits fraud was systematic at Countrywide (and implies at other financial firms like Countrywide). Now admittedly when the House was controlled by the Democrats, it did not hold Pecora style hearings, but guess what, when the Republicans took the House, no hearings then either. Again, can the Republicans still claim to be better than the Democrats?

Kelly goes on to assert that since the war on poverty started in 1964 "$16 trillion has been spent on means-tested welfare programs ... more than double the $6.4 trillion (in inflation adjusted dollars) America spent on all its shooting wars combined.". I looked for a couple of hours and found that the 16 trillion figure originated with the Heritage Foundation, but everywhere I saw taht, I never saw a footnote to indicate where the numbers came from or how they break down. It seems these numbers must include not only food stamps (now SNAP) and Medicaid, but also Social Security and Medicare. Remember that those two programs have their own dedicated taxes (that can be adjusted), but it strikes me that Jack Kelly is saying that Social Security and Medicare should be shut down tomorrow, all because there are still Americans who live below the poverty line. Do we really think that if we throw mom and dad under the bus, the poor will magically disappear?

If you know anything about economics, you know that programs that aid the poor reduce that aid as the poor get raises at their jobs. They do this at different income levels, and at different rates for different programs (such as SNAP, housing assistance and the EIC), with the result that a raise at work can leave a poor person worse off. There are real world disincentives to work harder. We need to understand even as these programs reduce as income rises, the EIC in particular is a bell curve that starts low at the lowest level of income. So for some, you need to have a job to get the benefit (the earned income credit) and if you move from a five thousand dollar a year job to a fifteen thousand dollar a year job you get more EIC. In fact, if you are a single mom and you income goes up to twenty two grand, your children will help reduce your tax by thousand for each kid. Now you may also be losing part of your food stamps and if you had got on subsidized housing your rent is likely at least going up (I honestly don't know when or if you get kicked out).

My point being that welfare does deserve a good hard look, but an honest look. None of Ronald Reagan's "welfare queen" or Jack Kelly's other comment "They also deliver less than promised. Medicaid patients are more likely than the uninsured to die in hospitals, researchers at the University of Virginia found." Is that because the uninsured don't go to the hospital if they are seriously ill because they fear the cost, where Medicaid patients are more willing to chance it? Could it be that hospitals send the uninsured home from the ER, while Medicaid patients are admitted? Prove me wrong.

There's things that could be said about the negative income tax research of the 1970's (essentially using the EIC to replace all aid to the poor by increasing it and allowing the poor to optimize their consumption of housing, food and other life essentials and making the reduction in their aid a clear one). There's more to say, such as keeping education credits as a necessary infrastructure investment, but changing higher education status to something like a regulated utility to limit their taking advantage of that government benefit, but ... That is for another time, if this country actually gets serious about real reform that benefits everyone (including making the rich richer by making the whole country richer). This post is about Jack Kelly's column.

Yeah, this a long post in response to Kelly's column (I am reminded of a running joke in the movie "Clue" - someone says "to make a long story short", someone else says "too late"). but I like to try to respond to each point if I can, or at least the major ones.

Kelly suggests that the war on poverty is an actual war we can win, much like the "Global War on Terror" (copyright pending) was declared by George W Bush. Both wars ended up only addressing the symptoms of the problem, meaning they would never solve the root causes (for poverty, education and good jobs would do that).

Kelly goes on to launch on oblique attack on elementary and higher education "To Democrats, teacher unions matter more than children trapped in failing schools. The federal student loan program has saddled thousands of young people with debts they can't repay, but has been a bonanza for colleges and universities." I already suggested a fix for higher education (why doesn't Jack, past his suggestion to vote Democrats out of office and put college out of reach for millions of poor Americans, a suggestion he has made in the past?). Kelly's attack on teacher's unions is a typical Republican attack on teachers - reasonably paid unionized public school teachers working in poor inner cities with students who know the score are less effective than poorly paid non-union teachers at private schools teaching privileged students. Well duh. But would busting unions in public education and perhaps only have private schools in cities actually help inner city students, or only line the pockets of the wealthy? Oh, I think I just answered my question.

Kelly finishes with "Times are tough for most Americans. But Wall Street is making record profits. Members of Congress are getting richer. Crony capitalists reap billions in taxpayer subsidies."

What's Kelly saying? We know he wants the White House to be Republican and both houses of Congress to be Republican, does he think they should all be paid less as a reward? Does he think that conservatives can distinguish between crony capitalists (i.e. solar power companies) that do not deserve aid (because the market does not support them) and worthy companies (like oil and coal companies) that do deserve aid (because the market does support them)? Or does Kelly in fact advocate income redistribution?


But Kelly's parting words are actually not the worst. "If you want to know what's really going on, follow the money" Absolutely, look at Obama's Wall Street affiliated advisers. But also investigate the Kochs and Scaife.

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