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October 24, 2008

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Mr Talton wrote:

"Now the reckoning. America can recover, but only if it understands the damage done -- and who did it. And says, 'Never again.' "

Bravo, Mr. Talton, for yet another excellent essay which ought to be required reading. Alas, it is not. Mr. Talton does not own a chain of newspapers: and most of those who do (including the odious Arizona Republic and other Gannett instruments of mass destruction) are already performing spin control in an attempt to head off the resurgent spirit of regulatory responsibility.

The essence of the new line is this: the economic problems which occurred were a freak, once in a century event; culpability can be narrowed down to credit default swaps, and outright fraud -- never mind that a lax regulatory environment encouraged both, and much else as well -- meanwhile, card-carrying partisans on the Right will maintain that the emergency was *caused* by government interference with a "free market"; that the system can be fixed by modest tweaking, such as requiring institutions selling mortgage-based derivatives to keep an (unspecified) portion of such financial securities themselves, in future, to further tie their institutional concerns to the performance of these instruments.

In other words, it's business as usual, much as it was shortly after the Savings & Loan crisis. You should know the drill by now, Mr. Talton:

Step 1: Denial.

Step 2: Public outrage and legislative circuses to satisfy that outrage.

Step 3: Spin control: propaganda to explain away the facts and set the stage for more "fun, fun, fun" lest Daddy take the T-bird away. Since both political parties are implicated, and both parties rely for campaign funding on the very culprits they are supposed to be investigating, investigation and remedies run skin deep.

Step 4: Party on, capitalist dude! That whole financial fiasco thing is SO yesterday!

It's much the same for scandals involving the CIA, FBI, or U.S. Army, whether with respect to the domestic citizenry or to foreign nations and citizens. "We never did that, and we'll never do it again. This isn't your father's apparatus of repression. We're the new, reformed us." Then, a decade or two later, the very same kinds of things happen.

I'll hold the ball, Charlie Brown, and you kick it.

Here's an item that involves issues directly referenced in both this and the preceding blog article:

http://query.nytimes.com/gst/fullpage.html?res=9B05E5DE1F31F93BA35755C0A9629C8B63&sec=&spon=&pagewanted=1

I refer specifically to "Mr. Reagan's second tax increase...the Social Security Reform Act of 1983, which followed the recommendations of a commission led by Alan Greenspan. Its key provision was an increase in the payroll tax that pays for Social Security and Medicare hospital insurance."

This was to date the largest tax increase in American history, despite his anti-taxation rhetoric where income taxes are concerned.

The measure was not only incredibly regressive, and not only incredibly hypocritical, but also incredibly deceitful: its central argument was the need to "pre-fund" these programs by increasing trust fund balances ahead of increases in beneficiary claims expected to take place decades in the future.

However, anyone with a rudimentary understanding of federal trust funds understands that they are pay-as-you-go: the so-called "trust fund balances" are absolutely meaningless in both a legal and an accounting sense. The only thing accomplished by raising payroll taxes on these programs was to allow the government to use the consequent cash excess (since income from payroll taxes was greater than outgo to beneficiary payments) to offset and disguise the increasingly large budget deficits run up by the Reagan administration. (You may recall that it was massively increasing the military budget even while cutting domestic social programs.)

You can cut President Reagan whatever slack you like: but even if you don't believe that he understood this, it can scarcely be argued that Alan Greenspan did not. And this is the individual that the nation now looks to for explanations and analysis of the current financial crisis -- its implications and remedies?


Wasn't it funny when Greenspan then recommended cutting Social Security benefits decades later!

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