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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Are We Solving the ROOT CAUSE of our Economic Problems?

Politics / US Politics Jan 06, 2010 - 01:35 AM GMT

By: Rudy_Avizius

Politics

Best Financial Markets Analysis ArticlePicture yourself in the following scenario: you are visiting your doctor complaining of abdominal pains, the doctor gives you a prescription for a strong pain killer. Certainly the pain medicine will help you feel better, but does it really solve the problem that caused the pains in the first place? Could this be the result of appendicitis or some other serious condition? You would rightly question the doctor’s judgment. The doctor is treating the SYMPTOM of the problem, not the ROOT CAUSE.


Yet collectively we are doing exactly the same thing on a national and even international level. Consider the following scenarios:
  • During the health care debate, we witnessed the spectacle of Mitch McConnell (Republican Senator from Kentucky), worrying about the effect that the emerging health care bill would have on health insurance companies. This was coming from a Senator who represents a state with the 5th highest level of poverty in the nation. Why is he so worried about the insurance companies? Would the majority of his constituents have called his office asking him to protect the insurance company profits?

  • When it was discovered that telecommunications companies were illegally spying on citizens of the United States, Jay Rockefeller (Democratic Senator from West Virginia) voted to give these same companies “retroactive immunity” to protect them from the lawsuits that were working their way through the legal system. If no crime was committed, why did they need to receive retroactive immunity? If a crime was committed, why did they receive retroactive immunity? Would the majority of his constituents have called his office and asked him to authorize corporate spying on Americans with no judicial overview?

Of course, these are not the only elected representatives who did this and the examples just cited are only 2 of literally thousands of such efforts by members of both political parties on behalf of the well connected insiders. These efforts worked directly against the interests of the vast majority of their constituents. So, why would these seemingly intelligent people work so blatantly against the interests of the people who they are supposed to represent?

The answer is that all of these people received significant amounts of campaign money from the very corporations who would benefit from their efforts. It turns out that Senator Mitch McConnell received $932,207 from the insurance industry and $2,758,468 from medical professionals over his career. Senator Jay Rockefeller received $42,000 from the telecommunications industry in 2006 while the lawsuits and the bills for immunity were working their way through the legislative process. (Mitch McConnell also strongly supported retroactive immunity for the telecoms and received siginificant sums from them).

Does anyone really think that a regular citizen has the same access to their elected representatives as those corporations who contribute thousands and millions to these campaigns? If you showed up at your elected representative’s office at the same time as a lobbyist, who would get to meet with the elected official first? When it comes time to allocate access, priority will always be given to those with the money. In 2008, the telecommunication industry contributed over $9.4 million–from January 2007 to June 2009, and the insurance industry contributed $46,720,000 in 2008 to politicians in both political parties. In the aftermath of our financial meltdown, we certainly need significant financial regulatory reform, but realistically we cannot possibly hope to have effective financial reform when in 2008 the banking industry contributed $37,242,212, hedge funds contributed $16,993,557, and so on and so on. You have a situation where we have elected representatives sitting on the committees that have jurisdiction over specific industries or issues where these same representatives are receiving huge contributions from those very same companies they are supposed to be regulating.

Like drug addicts, our politicians have become totally dependent and addicted to these large campaign contributions for their political survival. It is an illusion that we have a government of the people and by the people. Instead, we have devolved into a government of the corporations, by the corporations, and for the corporations. We are moving further and further towards centralizing power and wealth into the hands of fewer and fewer people with inside connections. Our elected representatives are not truly our decision makers, but have become mere figureheads on the stage providing a fig leaf of cover to perpetuate the illusion that this government represents the interests of the people. The situation has become so bad that Senator Dick Durbin, Senator from Illinois remarked: "And the banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."  How else could we have seen the most massive transfer of wealth in human history from the poor and working classes to the same people, banks, and corporations whose bad decisions brought the world economy to its knees?

Think back to the doctor who only prescribed a solution to the SYMPTOM of the problem. In this economic situation, the ROOT CAUSE of the problem is money in politics and any attempt to “fix” the problem without addressing the ROOT CAUSE, is doomed to failure because any “fix” will only address the SYMPTOMS of the problem. Until we have public financing of all political campaigns, without any private or corporate funding we will always have these problems. There are those who might say, that we do not need any more spending since this would add to the deficit and cost more money to the treasury. However, consider how much the “influenced decisions” have cost the nation so far. How many bills were recently passed that were obviously designed to favor a single special interest? Just ponder this very incomplete list:

  • The nation passed deregulation bills such as:
    • The Gramm, Leach, Bliley Act which repealed the Glass-Steagall Act which tore down the firewall banning the banks from gambling with depositors funds. Do you really think that a majority of constituents called their representative’s office and asked to have these protections removed?
    • The Commodity Futures Modernization Act which explicitly banned regulation of derivatives, allowing banks like JP Morgan Chase to become the largest derivative holder in the WORLD at $87,362 BILLION! There is not enough money on this planet to bail this out if these gambling debts go bad. Do you really think that a majority of constituents called their representative’s office and asked to allow these “financial weapons of mass destruction” to remain totally unregulated and opaque to regulators?  

  • The gutting of America’s manufacturing sector because of one sided trade agreements and tax policies that allow companies to defer and often never pay taxes on foreign-earned profits. So foreign profits of U.S. companies end up taxed at a lower rate than their U.S. income, creating an incentive to invest in foreign factories. The jobs left the country along with the factories. Do you really think that a majority of constituents called their representative’s office and asked to have these perverse incentives implemented to move the foundation of economic base to foreign countries?

  • The nation committed over $1,202 BILLION dollars to bailout, backstop, and guarantee the banks and financials.  (I like to use $1000’s of billions, rather than $trillions since it is easier to grasp the unbelievable scale of these numbers.) Do you really think that a majority of constituents called their representative’s office and asked them to use their tax dollars to reward the same corporations and people who created the economic mess?

  • How can we have had over a year pass since the economic meltdown, and yet no meaningful regulation of the financial industry has been passed?  Do you really think that a majority of constituents are calling their representative’s office and asking them to refrain from regulating the banks and financials?

  • The “too big to fail” banks have been not only been bailed out, but encouraged to become even bigger. Do you really think that a majority of constituents called their representative’s office and asked them to allow these big banks to buy up the smaller ones at pennies on the dollar and to provide taxpayer guarantees on any loses they might incur?

  • Almost 2/3 of Americans opposed the TARP bailouts, yet the bailouts passed anyways. We KNOW that a majority of constituents did NOT call their representative’s office and ask them to use their tax dollars to reward the same corporations and people who created the economic mess.

  • A bankruptcy bill passed in 2005 that forced people to pay credit card and private student loan debt before unpaid child support. The politicians had the audacity to call this the Consumer Protection Act of 2005. Do you really think that a majority of constituents called their representative’s office and asked them to protect the big banks' already obscene profits?

  • Milk producers were banned from labeling milk as free from Monsanto’s artificial growth hormone rBST also known as rbGH (synthetic or recombinant bovine growth hormone). I find it hard to believe that a majority of constituents called their representative’s office and told them that they did not want to know if there were any artificial growth hormones in the milk their children drank.

  • Efforts to label genetically modified foods have been blocked from passage. Do you really think that a majority of constituents called their representative’s office and said that they preferred to be uninformed as to whether the food their families eat have been genetically modified?
  • The people on the economic team in the current administration such as Larry Summers, Timothy Geithner, John Dugan, Gary Gensler, to name just a few, not only missed predicting this economic collapse, but were complicit in enabling the deregulation that made it possible. I doubt that the majority of people who called the White House asked that these industry insiders be part of the decision making team.

  • The Federal Reserve has provided over $2,000 BILLION in free money to the “big” banks by allowing them to “borrow” money at 0%. These banks then “deposit” this money with the Federal Reserve as a “savings account” for which they collect interest, while paying no interest on the “loan”. I would think that a majority of people would like to have sweet deal such as this for themselves.
  • There is very limited transparency as to how the alphabet soup of bailout program funds that were distributed. This invites fraud and corruption. We have a situation where the financial corporations do not even fear the government because they know that their paid off politicians will not call them on this. Even Elizabeth Warren, the chair of the Congressional TARP Oversight Panel cannot get the information she needs and is frustrated by the lack of transparency. Do you really think that a majority of constituents called their representative’s office and asked them to give these big financial institutions a break and allow them to ignore even congressional inquiries?

How did any of the above help most Americans? Would the majority of any elected politicians’ constituents have supported any of the above decisions? Of course not! It was money that influenced these decisions that benefited a small inside group without regard for the vast majority of the workers in this country who actually produce the wealth of the nation. By not having public financing of campaigns, the nation is paying a huge price with the legislation that is being influenced by the private money. To illustrate this point, the big financial companies contributed over $2,300,000 to both presidential candidates during the 2008 campaign. These companies hedged their “bets” by contributing to both candidates, so they would “win” no matter who won the election. When you consider the $thousands of billions committed to these financials, that $2 million was truly a great return on their “investment”.

The cost of running publicly financed or at least significantly reformed fund raising in campaigns is miniscule compared to these numbers. The need to build walls between lawmakers and those private interests looking to buy votes is obvious and unfortunately too many of the currently elected politicians are against this because as long as this system is perpetuated, incumbents are at an advantage. This money in politics is the ROOT CAUSE of all of the bad decisions listed above and many, many, more.

There currently limits on the amounts of “hard money” that can be contributed directly to a campaign, however “soft money” can be contributed without limits to organizations that do not directly support specific candidates. An example of soft money is: an ad that says Tom Smith supported cutting Medicare benefits and accepted contributions from some special interest, call Tom Smith and tell him what you think of this. Political Action Committees (PACS) are where unions and corporations provide contributions, but they are limited to $5,000 for a single candidate.

A WARNING

There are dark storm clouds on the horizon. There is currently a case before the United States Supreme Court, The Citizens United v. Federal Election Commission, where the current federal prohibition against corporate campaign contributions could get struck down. Most court observers expect that this ban will be struck down. If this happens, we will see a situation where the level of corruption and influence will go from the current very bad, to even worse. This will mark a pivotal turning point in this nation’s history where corporate spending on campaigns will notch up exponentially. If this prohibition is struck down, it will inevitably result in even more bad legislation influenced by the huge increase in corporate campaign spending, and sideline most citizens even more from the political process. Using first amendment arguments, the Supreme Court could actually give corporations equal protection to that of individuals. Where in the constitution did our founding fathers give corporations the same 1st amendment rights as individuals?

So what can you do?

  1. Call your representatives and DEMAND public financing of all political campaigns with strict limits on private funding. Let them know you are a voting constituent and will be watching their actions closely.

  2. Support organizations such as Common Cause, Public Citizen, followthemoney.org, opensecrets.org, youstreet.org, to name just a few.  These organizations are fighting to bring transparency and responsiveness to our government and need your support.

  3. Protest the bailouts, lobbying, as well as the bonuses, by moving your money from the big banks to a small community bank. Can you imagine the effect this would have on congress and the big banks when literally $billions would be withdrawn from their system. Vote with your pocketbook!

  4. Send AIG a message about their lobbying and bonuses by cancelling any policies you have with them and insuring with another more responsible company. Be aware that they have changed their name to 21st Century auto insurance to mask the tarnished image that the AIG name has. It is the same company! Vote with your pocketbook!

  5. Minimize the use your of credit cards. Every time you charge something, the issuing bank makes money from BOTH you and the merchants. With the widespread use of credit cards, the average 2-3% charge to the merchants by the credit card companies amounts to a BANK TAX on all purchases since the merchants have to pass this cost on to the consumer. This BANK TAX is a huge source of income for the big banks. Remember the merchant that charges you less for cash is actually doing you a favor by passing the BANK TAX savings on to you. Patronize merchants who offer this discount. Ask those who do not offer the discount to provide it. Vote with your pocketbook!

  6. If the current federal prohibition against corporate campaign contributions does get struck down by the Supreme Court, get geared up for a massive campaign to DEMAND real reform legislatively before the situation becomes even worse than it is now.

Remember, that any “reforms” that do not address money in politics are only nibbling at the edges by treating the SYMPTOMS of the problem like the doctor giving you pain killers,  rather than getting at the ROOT CAUSE of the problem. If enough people follow through with the steps outlined above, we will have the beginnings of a true populist revolt against our current corrupt system that is fueled and sustained by private money.

By Rudy Avizius

http://www.endtheillusion.org/

Email: rudy@endtheillusion.org

Rudy Avizius is a retired school district administrator and a former Director of Technology who has been following economic and political news very carefully for the last 2 decades. He has recently become active in trying to make sure that the government spends taxpayer money wisely with long term benefits to the nation.

© 2010 Copyright Rudy Avizius - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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