Friday, August 26, 2011

I Should Live So Long

I found this Thursday afternoon and thought you might be interested. It's a screen shot. Click on it.

"Sign up to get a free Obama 2074 bumper sticker before they're gone." By 2074 they should be.

Thursday, August 25, 2011

Eric Cantor's Rhetorical Deniability

An important part of being a politician is to keep your name before the public in the press. House Majority Leader Eric Cantor (R-VA) did a lot of that recently in the debt ceiling hostage taking by the Tea Party wing of the GOP as its articulate spokesperson and rising star. While congress is on vacation, to keep his name in the press, Cantor has signed off on an opinion piece in the Washington Post, “Removing the obstacles to economic growth.” He says there are two: “The first is the federal government’s debt crisis” and “The second is the jobs crisis.” He should know since his majority is responsible for creating the first one and for doing nothing about the second one. Cantor blames President Obama for each.

The so-called “debt crisis” is a product of the previous Republican administration that decided to wage two wars and to finance them with deficit increases instead of tax increases. “In fact, you need a war to really get a big deficit,” Christopher Chantrill says on “The peak deficits came during World War I (16% of GDP in 1919) and World War II (24% in 1945),” he says. Moreover, “The deficits of the Great Depression only came to about five percent of GDP, and the big $1.4 trillion deficit for FY 2009 amounted to 13% of GDP.”

The real problem with extreme government debt would be the interest burden it would create. If interest payments reached 12% of GDP, that could cause a government default. The US is far from reaching that point. However, it was using the debt ceiling to extort political concessions that made a routine financial process look like the crisis it became. Cantor kept his name in the press then by walking out of negotiations with Vice President Biden.

In his Washington Post opinion Cantor writes, “Republicans passed a budget this spring, written by Rep. Paul Ryan, that would address our challenges head-on by putting in place common-sense reforms to manage our debt over the short and long term.”

That is not what the nonpartisan Congressional Budget Office's analysis says. The CBO found “that by the end of the 10-year budget window, public debt will actually be higher than it would be if the GOP just did nothing.” In addition to requiring additional raises in the debt ceiling, the CBO also acknowledged “that seniors, disabled and elderly people would be hit with much higher out-of-pocket health care costs.”

Who needs facts when rhetoric will do?

“President Obama is wrong to think that the answer is to increase spending or raise taxes when so many millions of Americans are out of work.” Cantor’s interpretation of what the president thinks is not what the president says. In a televised address on July 25, 2011, President Obama petitioned for a "balanced" approach that includes spending cuts as well as revenue increases from tax increases for wealthier Americans. In that speech Obama also debunked the Cantor/GOP rhetoric about the debt ceiling allowing the congress to spend more money.

As to jobs, Congress has offered only one piece of legislation that has the word “jobs” in its title, but that is all. It is HR 1745, the ‘‘JOBS Act of 2011.” Cantor does not mention it in his op-ed piece, probably because it does not have anything to do with jobs. What it does is to allow states the option of using federal unemployment-benefit dollars to repay federal loans to help balance their budgets or provide tax breaks to businesses.

According to Cantor, however, “the Obama administration’s anti-business, hyper-regulatory, pro-tax agenda has fueled economic uncertainty and sent the message from the administration that ‘we want to make it harder to create jobs.’” HR 1745 takes money away from the long-term unemployed. Where is the job creation in that?

While Representative Cantor keeps his name before the public, with such rhetorically inflamed publicity as his Washington Post piece, he deserves consideration as one of Congress’s rising stars.

The Treasury Department used $267 million of taxpayer funds to buy preferred stock in a private banking company that employed his wife, Diana Cantor. As part of a Treasury Department program to boost "healthy banks" with extra capital, New York Private Bank and Trust (NYPBT) received its bailout money in January 2009. NYPBT is the holding company for Emigrant Bank, a savings bank with 35 branches in and around New York City. She ran the Virginia branch of the wealth-management division of Virginia Private Bank & Trust, a subsidiary.

To be fair, Cantor's deputy chief of staff Rob Collins said the congressman didn't know the bank was seeking bailout money and never interceded on the bank's behalf with government regulators. Additionally, a spokesman for the bank said Diana Cantor had nothing to do with the operation of NYPBT and was "never aware that the parent bank was seeking or received [bailout] funding."

Last year the Wall Street Journal reported, “Eric Cantor, the Republican Whip in the House of Representatives, bought up to $15,000 in shares of ProShares Trust Ultrashort 20+ Year Treasury ETF last December, according to his 2009 financial disclosure statement. The exchange-traded fund takes a short position in long-dated government bonds. In effect, it is a bet against U.S. government bonds—and perhaps on inflation in the future.”

The Huffington Post picked up the story when it obtained information that said Cantor "stands to profit from U.S. treasury default, which thereby raises the appearance of a conflict of interest," and that he "may be sabotaging [debt ceiling] negotiations for his own personal gain."

Again, to be fair, Cantor spokesman Brad Dayspring said, "The insinuation is so outrageous that it shows a fundamental lack of understanding about how the markets work, how the U.S. economy works." Dayspring added, "Any member of Congress who would seriously identify themselves with this would reveal a complete inability to understand the United States economy and basic investing."

Maybe, but such ignorance does not stop people from acting, especially for personal gain.

Rhetoric and deniability are common in politics and in court. The Department of Justice is investigating the US credit downgrades by rating agencies Standard & Poor and Moody. The downgrade is a direct outcome of the debt ceiling crisis which congressional Tea Party members and House Majority Leader Cantor championed. The credit downgrade also spooked the markets. Cantor’s piece may keep him in the public eye, but it obfuscates the fact that the crisis and the downgrade cannot be laid at the president’s feet. They can be laid at Mr. Cantor’s.

Article first published as Eric Cantor’s Rhetorical Deniability on Blogcritics.

Thursday, August 11, 2011

The Tea Party and RICO

Having fulfilled their purpose of dumping the vulnerable US economy back into the toilet of recession, the Tea Party wing of the GOP has a final job: to flush it using the president as a commode handle. However, in bragging about it as some kind of ideological triumph, they admit ownership of creating a lucrative opportunity for profiteers to engage in short-selling the United States. As Republican sympathizers and media pundits attempt to divert public attention almost apologetically for this blatant racketeering, the Republican Tea Party members have breached their Congressional oath of office knowing that they cannot be impeached nor be recalled. But they are not above the law. It is called RICO.

“We're going to make sure Barack Obama is a one-term president!” Michele Bachmann (R-MN) proudly exclaimed in Iowa. Next to an actual default, which she sought to enable by voting against raising the debt ceiling four times, the founder of the Tea Party Caucus and declared presidential candidate tells her audience that Standard & Poor's lowering America's bond rating from AAA to AA+ is a triumph. "What we saw last week is the markets agreed with me," Bachmann proclaimed. "It [US bond rating] was lowered for the first time in American history!"

Put another way, the way to defeat the incumbent president is by manipulating the market and then blaming the administration.

Earlier this year, the new Republican Majority Leader Eric Cantor (R-VA) told the 87 freshmen who had given the GOP control of the House, “I’m asking you to look at a potential increase in the debt limit as a leverage moment when the White House and President Obama will have to deal with us.” Having recently received money and support, they listened as their leader told them, “Either we stick together and demonstrate that we’re a team that will fight for and stand by our principles, or we will lose that leverage.” As CNN reported, the message from Cantor to House Republicans was "to stop grumbling and whining and to come together as conservatives and rally behind the speaker and call the president's bluff."

They stuck together and refused to compromise on ending tax breaks for corporations and the wealthy. Put another way, the way to gain power is through extortion.

That may all look and sound merely political, but it is not. The behavior has less to do with proclamations about ideology and principal than it does about money. In this regard there is an argument that has not yet been made. That argument is that allegedly these Tea Party Representatives in Congress have deliberately conspired to devalue the US credit for political and/or personal benefit. Whether it has to do with preparation for an election or not, allegedly they have knowingly or otherwise been party to committing the following actions punishable under the RICO Act: securities fraud, obstruction of justice and extortion.

Originally written to go after the Mafia in 1970, Congress passed the Racketeer Influenced and Corrupt Organizations (RICO) Act [Title 18, United States Code, Sections 1961-1968]. However, RICO is almost never applied to the Mafia today. RICO is applied to individuals and businesses. In addition to criminal claims, Section 1964(c) of the RICO Act allows civil claims to be brought by any person injured by reason of a RICO violation. Tea Party members of Congress are not immune.

Their behavior looks like that of racketeers. As such they could be seen as an ongoing criminal organization subject to the federal law (RICO) that provides for extended criminal penalties and a civil cause of action that focuses specifically on racketeering and allows for the leaders of a syndicate, such as the Tea Party appears to be, to be tried for the alleged crimes which they ordered and assisted. Violations of the RICO laws can be alleged in civil lawsuit cases. It is important to bear in mind that a RICO-related charge focuses on patterns of behavior as opposed to criminal acts. Additionally, a civil RICO action can be filed in state or federal court. Both the federal and civil components allow for the recovery of triple the amount of actual and compensatory damages.

Look at the provision for private parties to sue. For example, stock holders whose stocks lost value can be considered as a "person damaged in his business or property." They can sue one or more "racketeers", Tea Party members. As plaintiffs, the stock holders, including people with 401(k)s must prove the existence of an "enterprise", that they are victims of the racketeers. What needs to be shown is that the defendants conducted or participated in the affairs of the enterprise "through" the pattern of racketeering activity.

The crimes punishable under the RICO Act alleged here are securities fraud, obstruction of justice and extortion.

Tea Party members committed securities fraud in several ways. They made and publicized misstatements on the financial report of United States and the US debt as elected public officials. That resulted in driving down stock prices. As a stock manipulation scheme, that allowed for insider trading. Those fraudulent schemes that have been perpetrated in the securities and commodities markets can ultimately have a devastating impact on the viability and operation of those markets at home and abroad, which is what Tea Party Representative Bachmann bragged about in Iowa.

Tea Party members have obstructed justice by interfering with the work of other government officials, such as the Secretary of the Treasury and members of the Securities and Exchange Commission. Obstruction can include crimes committed by elected officials. In this regard, they were aware that their actions could manipulate markets for the purpose of financial gain of others or themselves. It was obstruction of justice that the House used to impeach President Clinton and brought about President Nixon’s resignation from office.

Tea Party members, as elected government officials, have practiced extortion under color of authority. That includes false pretenses, like Cantor’s charge to stick together and “demonstrate that we’re a team that will fight for and stand by our principles.” Their extortion has included promises and representations as well as the deprivation of the right of citizens to the honest services of their elected officials. While extortion is more commonly practiced by and associated with organized crime groups, it is defined as a criminal offence which occurs when a person unlawfully obtains money, property or services from a person(s), entity, or institution, through coercion.

There is no excuse for the Tea Party members of Congress deliberate effort to drive down the credit worthiness of the United States, let alone to do as elected public officials. There is no defense for participating in actions by which people can make money on the resultant market manipulation which is unfolding. That their pattern of behavior has hurt both investors and consumers in the false claim of principal is calumny. Seeking the political defeat of the president by purposely trashing the US economy is criminal.

The administration may feel its hands tied and not unleash the Justice Department to prosecute the alleged criminal activity, but that does not prevent the private sector from bringing these seeming racketeers to justice severally and jointly. The harm that has been perpetrated by the Tea Party cannot be justified. Both criminal and civil litigation under RICO can at least marginalize the Tea Party’s willful and destructive influence in Congress and defeat its members.

They are not above the law.

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Article first published as The Tea Party and RICO on Technorati.

Wednesday, August 10, 2011

History and Consequences

With all of the information that is available, the public remains confused. It may have to do with the sources of their information, but the latest polling data says that 47% of Americans say their greater concern is that raising the debt limit would lead to higher government spending and make the national debt bigger, while 42% say their greater concern is that not raising the limit would force the government into default and hurt the economy. Additionally, 74% of Republicans and GOP leaning independents who agree with the tea party faction of the party say their bigger concern is that raising the debt limit would result in more spending, compared to 58% of those who do not agree with the faction.

According to the Congressional Research Service, the debt ceiling has been raised 74 times, since March 1962, and 10 of those times have occurred since 2001. Theoretically, the debt ceiling limit is supposed to help Congress control spending. In practice, the debt limit has been ineffective in controlling spending and deficits because politicians and reality remain as strangers to one another. History shows that it has been that way for quite a while.

The fact is that the debt ceiling doesn’t regulate anything, believe it or not. The Budget Control Act of 1974 created a process that requires Congress to vote on aggregate levels of spending, revenue and deficits every year. That makes the debt limit redundant.

Five years after the 1974 Budget Act passage, a combination of a failure to increase the debt limit in time and a breakdown of Treasury’s machines for printing checks caused a two-week technical default and a short term failure for the government to meet its obligations. That raised interest rates by six-tenths of a percentage point. Over time that percentage hike translated into billions of dollars in increased interest payments on the nation's debt, which became a cost passed on to taxpayers.

In other words, default increases the debt service which increases the deficit.

President Franklin Delano Roosevelt (FDR) questioned the meaning of a legal debt limit, according to Time Magazine on January 20, 1941. The President “hinted that there should be no legal limit.” In its coverage of the FDR’s Budget for the fiscal year 1941-42, Time noted, “Last July's Democratic platform made no mention of that fiscal dodo, that old museum piece: a balanced budget. Franklin Roosevelt held to precedent—he didn't mention it, either.” The Newark News remarked, “Like the budgets of Mr. Average Citizen, it was full of unjustifiable errors of judgment, of expenses borne out of habit, of big installments still being paid on past mistakes.”

FDR signed the first Social Security Act into law in 1935. Thirty years later, that part of FDR’s “New Deal” became part of the President Lyndon Baines Johnson (LBJ) “Great Society” and established Medicare when LBJ signed the Social Security Act of 1965 into law.

Only half of American's 65 and older had any health insurance at the time. The bill LBJ signed also created Medicaid, the public health insurance program that today covers over 60 million people, including one in three children, eight million people with disabilities and nearly six million low-income seniors. Each state administers its own Medicaid program. Republicans have scorned the entitlement programs of the Great Society ever since, now more so than ever.

Here is how we pay for those programs. Social Security and Medicare entitlements are paid for by the FICA [Federal Insurance Contributions Act] tax. The rate is 7.65% of our pre-deduction [gross] earnings. 6.2% goes for OASDI [Old-Age, Survivors, and Disability Insurance]. 1.45% goes for Medicare. The Social Security system pays for old-age, survivors, and disability. Hospital insurance is funded by Medicare. Income tax funds the government. It is called revenue and is a separate and different issue. Republican rhetoric obfuscates that point.

While the public may be somewhat divided about the debt ceiling, they are not so confused when it comes to entitlements. “The public decisively supports maintaining the status quo,” according to the Pew Research Center. “Six-in-ten (60%) say it is more important to keep Social Security and Medicare benefits as they are; only about half as many (32%) say it is more important to take steps to reduce the budget deficit.”

LBJ argued that helping the poor was in the best interest of business by providing stability to society. GOP disdain for Johnson’s Great Society and its War on Poverty continue. Republicans demand sharp cuts to Medicare and Social Security. Programs for the poor and the aging are the “reckless spending” recitations of Republican rhetoric that compound the deficit conundrum that confronts House Speaker John Boehner.

At a recent press conference Boehner said, “I agree with the president we cannot allow our nation to default on our debt.” He added, “But to prevent a default, a bill must pass the Congress.” For that to happen, “the bill must include spending cuts in excess of the increase in the debt ceiling.” He faced a similar challenge in April with the government shut-down threat. He also faces factional opposition within the Republican House majority and its fame-seekers, like Representatives Cantor and Ryan.

"I don't think the majority of Congress is so stupid as to visit an actual default on the United States," said David Kelly, chief market strategist at JPMorgan Asset Management. "Their constituents would never forgive them for playing fast and loose with the credit-worthiness that it took 230 years to build up." Meanwhile, Standard and Poor's told Reuters last week it would “waste no time cutting the top-notch U.S. credit rating” if Treasury missed a $30 billion debt payment on August 4.

The consequence of default would crank up borrowing costs for consumers and businesses, and flush the vulnerable US economy back into the toilet of recession.

The Speaker of the House is responsible for ensuring that the House passes legislation supported by the majority party, in this case the majority of the majority. Mr. Boehner was a teenager when LBJ ushered in the Great Society in 1965. [President Obama was 4.] Majority leader Eric Cantor (R-VA) was a 2-year-old. GOP Budget author Paul Ryan (R-WI) wasn't even born. . It is their short-sighted ignorance of history and consequences, coupled with the ideological intransigence of the freshman tea party faction, which threatens Boehner’s speakership, the Republican Party and the United States.

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Article first published as History and Consequences on Blogcritics.