Sunday, January 18, 2009

A sad day

The loss of a great entertainer

British writer John Mortimer, creator of the curmudgeonly criminal lawyer Rumpole of the Bailey, has died at 85, his publisher said. Mortimer combined a career as a lawyer with a prolific literary output that included dozens of screen and stage plays and radio dramas. Among his most famous creations was Horace Rumpole, the cigar-smoking, wine-loving barrister who appeared in a television series and a string of novels and stories.

"It's hard to think he's gone," said Tony Lacey, his editor at publisher Viking. "At least we're lucky enough to have Rumpole to remind us just how remarkable he was."

Born on April 21, 1923, and educated at Oxford University, Mortimer qualified as a lawyer in the 1940s and worked as a barrister in the British courts. A lifelong supporter of the Labour Party - sometimes dubbed a champagne socialist by his critics - Mortimer took up several freedom of speech cases. He defended Penguin, the publisher of Lady Chatterley's Lover, against obscenity charges in the 1960s, and later represented the radical magazine Oz at an obscenity trial.

He combined legal and literary careers, writing early in the morning before heading off to court, and produced novels and radio plays from the 1950s.



Leave the New Deal in the History Books

Cut corporate taxes to zero and create real jobs.

When Barack Obama takes office on Tuesday, his first order of business will be a stimulus package estimated to be close to $1 trillion, including $300 million in tax cuts and the largest new government spending program for infrastructure since Franklin Delano Roosevelt. Sages nod that replicating aspects of FDR's New Deal will help pull the country out of a recession. But the experience under FDR largely provides a cautionary tale.

Mr. Obama's policy plans are driven by the conventional economic wisdom that the New Deal economic programs ended the Great Depression. Not so. In fact, thanks to New Deal policies and programs, the U.S. economy faltered for years longer than it might otherwise have done.

President Roosevelt came to office much as Barack Obama will, shouldering an economic crisis that began under his predecessor. In 1933, Roosevelt's first year, unemployment hit nearly 25%, as people lost jobs and homes in towns across the country. Believing that government played a key role in restarting growth, FDR, within his first 100 days as president, created an alphabet soup of new agencies that mandated actions or controlled public spending and impacted private capital flow within the U.S. economy.

At first, it seemed to be working. After four years of FDR's policies, joblessness declined to 14.3% -- still very high but heading in the right direction. Then things turned for worse again: By the fall of 1937, the U.S. entered a secondary depression and unemployment began to rise, reaching 19% in 1938. By 1939 Roosevelt's own Treasury secretary, Henry Morgenthau, had realized that the New Deal economic policies had failed. "We have tried spending money," Morgenthau wrote in his diary. "We are spending more than we have ever spent before and it does not work. . . . After eight years of this Administration we have just as much unemployment as when we started. . . . And an enormous debt to boot!"

The problem was that neither Roosevelt nor President Herbert Hoover before him grasped the essential nature of the crisis, which was not the stock-market crash, but global deflation. At the end of the roaring '20s, an overhang of intergovernmental war debt from World War I, coupled with falling commodity prices and a currency crisis, had started the decline. Weak credit structures and European banks hurt by wartime inflation worsened it. When the Austrian Creditanstalt Bank failed, it ignited a global banking crisis that slashed across the international financial system cutting down everything in its path. Deflation went into full howl.

The same perils are now confronting President-elect Barack Obama, as the risk of deflation casts a long shadow over the economy. Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson have been correctly focused on shoring up financial institutions to prevent a collapse of the financial system, and stave off a severe decline in the general price level. If that were to occur, the unspoken fear has been that the U.S. and global economy could go into a deflationary death spiral that would cause the collapse of the international financial system.

As a short-term matter, the moves of the Fed and other central banks have been correct, but in the long term a return to growth will depend on dynamic job creation by American business -- not the U.S. government. Under a two-year plan designed to create three million to four million jobs, Mr. Obama's plan would have the federal government begin distributing funds for public-works projects carried out by the states. With government already spending 20% of GDP, federal government, not private enterprise, will become the growth industry. The effect of these policies, like FDR's, will be to lengthen the pain.

Early on, Roosevelt's economic thinking was that laissez-faire competition drove prices and wages down, resulting in unemployment, which in turn collapsed demand for goods and services. To remedy this, his administration passed laws such as the National Industrial Recovery Act (NIRA) that encouraged business to collude and raise prices without fear of antitrust prosecution. The hope was that this would allow business to raise wages.

By the time NIRA was found unconstitutional a few years later, the damage had already been done. For example, the Department of the Interior complained that over two years it had received 260 bids from different steel companies that were identical to the penny and 50% higher than foreign bids. The policy had put chains on every normal free-market instinct and price feedback mechanism needed to restore economic growth. Roosevelt himself rued the decision in the late 1930s as a secondary depression was gripping the economy. "The disappearance of price competition," he said, "is one of the primary causes of the difficulties."

In addition to New Deal spending programs, a series of new taxes were introduced that crushed the innovation, risk taking, and growth plans of entrepreneurs, corporations and investors. From 1930 to 1940, the top marginal income-tax rate rose to 79% from 25% while the corporate income-tax rate doubled to 24% from 12%. In addition, Roosevelt tacked on an excess profits tax and undistributed profits tax. He imposed an excise tax on dividends. Even the new Social Security payroll tax added 2%. As a result, the New Deal forced the allocation of money away from the private sector. As economist Henry Hazlitt wrote back in 1946, New Deal programs prevented the creation of the types of jobs which have the multiplier effect of successful businesses. Creating "work" prevented innovation and new jobs that would create other jobs.

The quickest way to strengthen the credit system and begin the end of this crisis is to get money into the economy for true job creation, and not into government work programs. The way to do this is to slash taxes. The U.S. corporate tax rate, currently the highest in the world, should be cut to 0% (corporate income would still be taxed, of course, when distributed to shareholders as dividends). The capital-gains tax should be cut further.

The positive impact on corporate-credit markets, the stock market, the attractiveness of the U.S. to foreign investors, and the willingness to take business risk and create new jobs would be immediate. Capital-gains tax collections would rise. Capital flows would be in the hands of those who are driven to build businesses and permanent jobs efficiently instead of pushing that capital through a government pipeline with endless amounts of friction. If the U.S. is to lead the international economic community out of this crisis, this is the place to start.

Mr. Obama will come to office next week with plenty of political capital and the faith of a majority of Americans that he can help pull the country out of its economic woes. As he takes over the reins, his success will be judged not on rhetoric but on the numbers his policies can generate. The best thing he can do is leave the New Deal in the history books.



The Blue Dogs: Moderate Democrats may hold the balance of power in the Obama presidency

Sitting in his office a stone's throw from where the festivities will take place, I ask about his role in the big transformation coming to Washington. He's one of the leaders of a gang of moderate Democrats called the Blue Dogs. They're meeting their first Democratic president in a while, and Mr. Cooper may have a big effect on the agenda. He smiles gently and says, "If we were to ally with the Republicans, we could swing any vote in the House of Representatives." He hastens to add, "We don't want to do that, we aren't planning on doing that."

With the victories of a number of conservative Democrats in the last election, the Blue Dogs have grown to 51 in number from 46, with more applications pending. "For a long time we had to limit our numbers because we actually need to be able to fit in one room," he tells me. "So it's been an increasingly popular, and I think influential, group."

Indeed, the way the Blue Dogs flex their muscle may become one of the defining issues of the Obama administration's opening months. If they are inclined to wrangle with Nancy Pelosi and the more liberal contingent in the Democratic Party, they will drive policy, especially as a check on spending. "Ideally the White House will see things our way, so they will present legislation on the Hill that we find acceptable," Mr. Cooper says. "If they stray too much from that or if a certain part of Congress strays too much from that, then we may have to object."

So far, however, the Blue Dogs seem to believe that Barack Obama is one of them, a fiscal reformer, and their last best hope for true change on entitlement spending and economic responsibility. Mr. Obama has announced he will convene a fiscal responsibility summit in February to bring together Blue Dogs and other folks to discuss the long-term problems of the economy, including entitlement spending. "We've kicked this can down the road and now we are at the end of the road," the president-elect told the Washington Post this week.....

The problems of the deficit are staggering, and have been Mr. Cooper's long preoccupation, as well as the essence of his Blue Dog soul. He was among a number of members who once left signboards outside their offices in the Longworth office building tracking the share of the national debt per capita including unfunded Medicare, Medicaid and Social Security costs (now around $180,000). "Then they banned signage," he grumps. "I think it's a free speech issue but they say it's a fire safety issue."

It's even worse than most people think, he says, because of dodgy accounting used by the federal government. While we've been warned about the trillion-dollar deficit Mr. Obama is facing, accrual accounting and properly audited numbers from the U.S. Treasury Department would show the deficit last year was $3 trillion, according to this former Rhodes scholar and investment banker. "The U.S. government uses cash accounting," he says. "That is illegal for any enterprise of any size in America except for the U.S. government. Every for-profit business, every not-for-profit business, every state and local government has to use real accounting except for Uncle Sam." .....

One item likely to hit the agenda during Mr. Obama's early weeks that the Blue Dogs can be instrumental on is health care. Here Mr. Cooper has some history of his own. Back in 1992 and '93, when HillaryCare was in full throttle, he came up with an alternative plan that attracted wide bipartisan support -- eventually garnering 58 co-sponsors in the House and earning him Mrs. Clinton's wrath. Now, the moment for real reform has arrived. He feels Mr. Obama is in a position to get what would be "the signature achievement of a half-century" done in his first few months.

The plan Mr. Cooper favors is the Wyden-Bennett bill -- named after Oregon Democratic Sen. Ron Wyden and Utah GOP Sen. Bob Bennett -- which he says would basically give everyone in American the same coverage Congress has. "There has never been a bill with so much bipartisan support before the swearing in of a new president," he says. "The challenge now for Democrats is whether we let the best be the enemy of the good. There are many Democrats who want a single-payer program."

It's hard to teach old Democrats new tricks. But Mr. Obama didn't campaign on single-payer; he campaigned on a mixed system. Incoming Health and Human Services Secretary Tom Daschle has said in confirmation hearings that he wants a 70-vote majority or better for health-care reform, and not just to squeak by. "Every day we wait risks the end of the honeymoon and failure of this grand initiative," Mr. Cooper advises.

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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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