Open Letter to President Obama and Congressional Democrats

Feb 21, 2010

The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear President Obama,

Thank you for being one of the most important figures, and more importantly being among the most positive influences we’ve ever had. I hope I can assist you in becoming the most effective agent for a fairer future for a barely middle-class father like myself. As an Adjunct Economics Professor at several California Community College, I would like to share with you a partial overview of my progressive vision for 2010 and beyond.

MARKET POWER

As an economics professor, the biggest elephant in the room on the health care debate is that no one ever mentions the basic economic concept of market power. Count up the number of buyers and sellers; if there are very few sellers and oh, say, 300 million buyers, then the sellers have market power. If there are many sellers and a few buyers, better yet, one buyer, then the buyers have market power. Whoever has market power gets something closer to their preferred price (not to mention quantity). I’m disappointed this point hasn’t been made a central plank of the health care reform message.

So it is basic economic theory that medical costs will decline the closer we can get to single-payer. This is closely related to the useless waste of the entire private insurance industry’s existence. Every dollar of their money spent denying care, denying coverage, executive bonuses, marketing, and profits are a waste adding to over $400 billion per year. The many sellers should be those who have a role in the system: doctors, nurses, and hospitals – those who actually provide care, not someone who sits in an office trying to devise new ways to DQ Americans from receiving care.


FILIBUSTER

Clearly the filibuster is a roadblock. Everything should be done to abolish it at the start of the Congressional Session, as Joe Biden can request with a majority vote (you know, the way it’s supposed to work in the Constitution). In addition, a majority vote should be held now to lower the filibuster and require our esteemed Republican colleagues to read the phone book to delay things like unemployment benefits and health care.
I don’t know how many times one can use reconciliation, but if that’s the way to get the requisite national healing contained in hundreds of progressive policies passed with a majority vote, then please do everything you can to get Congress to use Reconciliation a dozen times per day for the next seven years.
In addition, and in the meantime as we wait for a return to majority rule, propose piecemeal legislation that really puts the GOP on the spot like unemployment extensions, and the key idea in the current health care reform, a mandated minimum care-payout ratio for insurers, the figure I’m usually hearing being around 80%.

BANKS

The biggest bank robbery in history took place under the Bush Administration (it was also the biggest Golden Parachute), and not just the Fed bank bailouts of non-transparent trillions spent, lent, or guaranteed. By the way, how much money is the Federal Reserve out for their involvement with the banks? Plus there’s the Treasury’s spending. I’ve heard much or all of this money is paid back, in the Fed and Treasury’s case. If that’s true, please let me know where I can see a summary of how all the trillions in lending facilities and other programs set up by the Fed under Bush has all been repaid, and the TARP has all been repaid. Have the $300+ billion in guarantees for Citibank/Citigroup been rescinded? For the toxic and other assets given to the Fed as swaps for cash, has the Fed gotten all that cash back and those assets back into the hands of the banks/ private sector? How can we really know this – isn’t that the type of thing some are asking for when they say the Fed should be audited/ more transparent?

I know a deeper crisis was averted, a crisis induced by worshipful adherence to laissez-faire purist free market ideology. A crisis that would have been lessened had Bear Stearns received the same Fed lending facilities their competitors immediately received. Adherents to deregulated idealized capitalism that ignores the presence of monopoly power and asymmetric information made many mistakes.

We should never pay for toxic assets. For the amount the Fed and Treasury have at times offered to pay banks for these poison derivatives, we could have paid off every single subprime mortgage in the country. And at this point I think that’s what we should have done. We definitely should have proposed (and still could) as Joseph Stiglitz did, that we have, not a “bad bank,” but a good bank, taking the private assets of value and leaving them to unload the toxic instruments they created.

I was told that my earlier letter against the PPIP (Public-Private Investment Program) was conveyed to you by a Stanford Professor who has or has had contacts with your Administration, Benham Tabrizi. I was relieved when it was announced that the program was to be downsized to 50 billion from the original 2 trillion (ProPublica.org reports it is down to 30 billion), and I hope it will be fully eliminated or rendered nearly impossible for banks to get any money for toxic assets. They are not toxic when foreclosures stabilize. The whole key is stabilizing the borrowers and the housing market. And if some instruments are so convoluted that they are still illiquid after housing has stabilized, it’s not the taxpayers’ problem. We should not spend one cent ever to try and detoxify toxic assets. Just worry about the underlying main street side, in this case, the troubled borrower of the predatory loan.


CORPORATIONS

Corporations are not people. Money is not speech. The laws that say otherwise should be reversed by legislation. Only complete public financing will restore to the American people their rightful voice in politics. Please aggressively support unions before their anemic counterweight to corporate power is totally eviscerated.

GUNS and CRIME

Focus for a moment on the right’s demand that we have a race to the bottom with state gun laws – the policy they want says: if you’re registered in the lowest-requirements state, you are legal in all 50 states. THEY HAVE A PLAN; right-wing anti-liberal and/or white supremacists will more easily transport guns, crime will go up, and they can blame you for the chaos that ensues.
Also many cities, in the midst of this terrible recession, have seen unexplained steep decreases in crime, murder, and violence. I think these need to get into White House regular talking points in some form. And I have not heard much to explain this yet, except, something about improved policing strategies. My hypothesis is so subversive and non-pc it might just be right: could the crime rates and murder rates be falling all over the country due to the Obama effect? Inner-city youths are inspired to achieve and seek mainstream livelihood, abandoning violence in droves, measurably soothing the long-festering wound of inner-city violence. I wish some friendly journalists could at least try this hypothesis. For heaven’s sake, Bush paid Armstrong Williams a quarter of a million dollars to print propaganda; the least we could do is give journalists a nudge.

IDEOLOGY

The GOP will continue to obstruct in every way they are allowed to do so. If the Democrats capitulate and declare the Republican minority the winners for the next few years, they will have rolled over and played dead the way Democrats usually do (see Florida 2000 –Gore’s attorney’s pathetic performance when the opposition invented case precedents – and Ohio 2004’s arguably worse multitude of voting and registration irregularities – capped by the censored from the media death of whistleblower and experienced pilot Michael Connell in a December 2008 plane crash) until the GOP officially does take power in the next elections.
Everyone who wants to represent people over corporations, and 99% of the people as opposed to the richest one percent, must push their side much more aggressively. I’d love to see you rattling off failings of the private sector and offsetting with things the state does well. For example:

- Private contractors in Pennsylvania bribed judges to systematically send children to harsh juvenile detention camps for minor infractions
- Wackenhut, now called GEO Group (always change the company name when embroiled in scandal, right?) has a long-documented history of just exemplifying horrid the privatized prison concept. Minimum wage teenaged guards with lower staffing ratios face increased riots and prisoner escapes when jailing is privatized.
- Blackwater, now called XE, forced the US military’s hand in Fallujah, massacred at Nissour Square and throughout Iraq, and a Blackwater guard committed point blank murder inside the green zone several Christmases ago, as usual to no punishment.
- A British company was caught providing coalition troops with useless “bomb detectors”
- KBR’s faulty wiring electrocuted US troops
- Multiple layers of private busing companies and subcontractors led to inaction during Katrina when it came to deploying emergency bus transit out of the city, as documented in Michael Eric Dyson’s book, “Come Hell or High Water”
- Companies that buy roads and highways in certain states have an array of strategies to hurt the drivers to benefit the company. By the way, these highway-buying firms are invariable not American companies.

We should collect, publish, and loudly publicize a running tally of the tremendous waste, fraud, and criminality private companies enact. We have an encyclopedia of everything that goes wrong when government uses private companies to do things it should do itself. Stake out a progressive angle, and when you get some type of outcome, push for an even more leftist position. Execute this pattern and repeat. This is what the right does so successfully and the Democrats just lay there dormant and ineffective, even when in total power with a loud mandate for action. The right stakes out a far-right position, they either get their way or some compromise, and then they stake out even more far-right positions.

I’m happy to contribute my ideas about policy, framing, messaging, and economics. Please translate your tremendous personage and the enflamed middleclass populism into unabashedly effective progressivism.



Sincerely,




David J. Moglen, MA

Download Raven EP

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Raven - MC, lead writer on all tracks


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http://www.myspace.com/ravenodin
www.soundclick.com/ravenodin

Thanks all and have a GREAT Holiday!

2009 updated top MC list

I always saw this as a blog where hip hop, politics & economics could all be discussed, even if overlaps were few and far between. So in the spirit of integrating the overlooked interest, here is the updated list of my favorite MCs
for 2009.

Top MC's:

1 Qwel
http://galapagos4.com/release_view.php?release_id=85

2 Sage Francis
3 Aesop Rock
4 Eligh
5 Slug (Atmosphere/Rhymesayers)
6 Abstract Rude (Haiku d'etat/Project Blowed)
7 Mikah Nyne (Haiku d'etat/Project Blowed)
8. Josh Martinez (Camobear)
9. Sleep (Oldominion)
10. Grouch (llcrew.com)
11. Lyrics Born (Latyrx)
12. Busdriver (Project Blowed)
13. Lateef (Latyrx)
14. Mos Def
15. Coley Cole (Lost and Found Generation)
16. Ex-I (Thunderhut Project)
17. Aceyalone (Haiku d'etat/Project Blowed)
18. Gift of Gab (Blackalicious)
19. Common
20. Breez Evahflowin
21 MF Doom
22 2Mex (Project Blowed)
23 Immortal Technique
24 Nas
25. Tupac
26. Redman
27. Eminem
28. Chino XL
29. Promoe (Looptroop)
30. RZA (Wu-Tang)

I'm sure there are some omissions and the order may be a bit rough, but it's enough to get you started (obviously you can google any of these names) if you're looking for an answer to the conundrum of monotonous graphic commercial mainstream rap and are willing to experience the artistry of underground hip hop. That Qwel link allows you to hear the first 2 minutes of every song on each of his 13 full-length albums.

Banks, Insurers, and PMCs receive hundreds of billions in subsidies to cover their lack of efficiency relative to the government doing the same task

Think About This:

1. Banks receive subsidies to the tune of about 80 Billion dollars per year to make student loans.

2. Private Health Insurers receive 50 Billion in Medicare/Medicaid subsidies as extra money beyond how much it would cost the government to provide the same coverage.

3. Private Military Contractors (PMCs, or mercenaries) are paid much more per person than a soldier to do the same job. They each usually make more money even than David Petraeus when he was running the entire war.

What do these cases have in common? In each case, in the pursuit to transfer as much of what might be a public good as possible over to the private sector, in the rush to idolize the market and kill off the government, 50-100 Billion dollars per year has to be paid to private companies to do the same thing the government could do itself without paying all or most of that money. So what does it say that Banks, Insurers, and Military Contractors all require such massive infusions of billions of taxpayer dollars on a constant IV drip, all in order to do the same thing that the government could do (lend to students, pay doctors, fight a war) for much less? It says that A) there is such a thing as market power and B) there is such a thing as economies of scale and C) Government doesn't pay bloated executive salaries. Therefore, among many other reasons, government is more efficient than the private sector in the delivery of these public goods, to the tune of hundreds of billions of dollars wasted per year, in checks written to banks, insurers, PMCs, private prison companies like the GEO group, charter schools, and on and on in a failed pursuit of ideological purity, despite this being the perpetration of an ongoing fiscal disaster.

Health Care Key Points

Please see my key points on Health Care, concise and with references, at:

http://salsa.missioncollege.org/files/moglen/HealthCareKeys1.doc

Private Equity Parasites and the Lesson of Mervyn’s

Private Equity Parasites and the Lesson of Mervyn’s


This month Mervyn’s, a popular chain of middle-class retail clothing stores, is just about finished with its going-out-of-business sale, its departments so ransacked the hottest deal-making is for their shelves and display tables. We can and must glean economy-wide universal lessons from this unnecessary bankruptcy, lessons with concrete policy implications.

Was Mervyn’s worthless when Cerberus Capital Management bought it from Target in 2004 for $1.2 Billion? Was it a doomed entity in 2005 and 2006 when it had a combined 300 million in profit, even despite being hit by Cerberus’ vastly increased lease payments they forced the retailer to pay for its own buildings?

You see, when the three Private Equity (PE) firms, Cerberus Capital Management, Sun Capital Partners, and Lubert-Adler acquired Mervyn’s, they split it into two entities, the retailer, and the real estate. Then they bled Mervyn’s dry with increased lease payments, debt, and dividend payouts. As an introductory proposition we should expect PE firms to layoff workers when they make an acquisition. But another common practice is to load it with debt.

This is being played out in the Sam Zell-Chicago Tribune parasite-victim relationsip, where that media company was also saddled with disproportionately enormous debt and quickly driven into bacnkruptcy.

To give you some idea of the debt’s disproportionality, “At their peak in 2006 they (PE firms) acquired 667 companies worth $372 billion. But debt levels soared: From 2005 through the third quarter of 2008, private equity firms loaded a staggering $741 billion of debt onto their companies' balance sheets.”

Besides layoffs and debt, the strategy includes high dividend payouts to the acquirer and/or other forms of forced extractive payouts (e.g. the real estate entity in the Mervyn’s deal). According to BusinessWeek, the “private equity firms took a total of $137 million in "distributions" directly from company coffers” in the Mervyn’s deal.

Overall, Mervyn’s charges the PE firms “stripped it of real estate assets, nearly doubled its rent, and saddled it with $800 million in debt while sucking out more than $400 million in cash for themselves.”

And Mervyn’s is not alone: Linens ‘n Things, Sharper Image, Goody’s Value City, and many others went bankrupt shortly after being bought out. “Of the 105 big U.S. companies that have filed for bankruptcy this year, 66 have been owned by buyout shops or been spun off by them.”

So one can safely say that easily half the major corporate bankruptcies are of firms recently bought and owned by PE firms.

So, what gives? Is the PE firm a parasite that buys firms with real products, real customers, profits, employees, and real estate, and systematically shuts them down? In a word, yes. Exactly. They favor short-term gain over long-term viability. Mervyn’s has laid-off 30,000 workers since 2004, when Cerberus acquired the store.

Is there a difference between how Cerberus (who also own Chryler) ran Mervyn’s and how Mervin G. Morris, who founded the company in 1949, ran Mervyn’s? Think about the time periods: Mervyn’s went through lean times and fat for almost six decades before they were fatefully acquired by a crony company that had no intention to run it, only a zeal to gut it for quick personal gain – sending them careening into bankruptcy.

The broadest point is this – in the Public vs. Private sector comparison, we can stipulate that the private sector will run some activities more efficiently than the government, despite infinite case studies to the contrary (Medicare and Social Security program administrative costs being vastly less than their private counterparts, public vs. privately owned prisons, the military vs. the mercenaries, etc).

However, if the laissez-faire/ privatization proponents want to put forward the private sector as a replacement to some government-run activity, they will have to first admit that the private sector can not possibly do a better job than government unles they first actually run the business, as opposed to buying it with the purpose of systematically bleeding it dry as quickly as possible, as if job one was firing all employees and closing all retail branches.

And these PE firms’ business practices are not unique in the narrative of businesses being bought in order for the private sector to destroy them and shut them down as fast as possible. General Motors went around the country in the first half of the last century, bought out and shut down major municipal streetcar systems (in what is known as The Great American Streetcar Scandal) for the purpose of replacing clean efficient public transport with dirty, smelly buses and more importantly, profitable passenger cars. Battery patents key to the electric car have been owned at various times by big car companies and oil companies, both of which just lock away technology so that it never will see the light of day.

Now, what is left of Mervyn’s is suing their former owners, Cerberus. This will be an important case to see if the courts will put curbs on PE firms’ behavior. If they fail to do so, it will be left to Congress and, conceivably, State Attorneys General to quell these destructive parasites.

Is there something else lost in this unnecessary bankruptcy? Mervyn’s was a place middle-class shoppers could pick up clothes that were above the quality you often find in Target or Ross, at prices that were reasonable. In many cities and towns, there is no close replacement. Even here in populous San Jose, I can’t name an interchangeable source. Macy’s is much higher priced, and mall boutique stores are worse. Target and Ross, as mentioned, are, like Marshall’s, hit-and-miss and harder to navigate for what you really want, and Wal-Mart is multiply objectionable.

But these are the concerns of real people in the real economy, like the 30,000 Mervyn’s employees tossed aside by Cerberus. People who own and manage Cerberus like Bush I’s VP, Dan Quayle, and Bush II’s former Treasury Secretary John Snow have other concerns: short-term extraction and personal enrichment at the expense of long-term sanity, equity, or widespread economic health.

My most apt analogy to the two roads diverging before us

My most apt analogy to the two roads diverging before us:

We are facing a choice that I think is best described by this story.

You, representing yourself and all Americans, have just seen half your neighborhood burned down by a crazed arsonist.

You must now choose between two agents to solve the crises in flames all around you.

One is the fireman, hose in hand and backed up by a fleet of fire trucks.

The other is the crazed arson, eyes glinting with the imminent power to set more infernos, in his hands a can of gasoline and matchbook.

As half our country looks to the fireman, we also look on the other half, baffled, unable to comprehend how they actually want to turn to the same forces that unleashed our nation's destruction. And all we can think is, are these people crazy? Are they on crack? Are they insane crackheads?

*********************

It is an amazing time we are living in, and all the more so an amazing time to be teaching economics at the college level. Where one year ago, five years, ten, twenty years ago regulation was always a bad word, now everyone regardless of their political-economic leanings calls for more regulation, be they left, right, center, Democrat, Republican, they all say regulation of the financial sector is superior to the anarchic deregulatory environment that has been pressed by the laissez-faire (L-F) crowd. Today I would not be surprised if Ron Paul starting calling for some sort of regulation.

And it is a sign of the times that it was announced today, October 13th 2008, that Paul Krugman, one of my favorite Economists (Sorry Paul I think the illest is still Joseph Stiglitz) was awarded the Economics Nobel Prize. The same award was given in 1976 to Milton Friedman
http://nobelprize.org/nobel_prizes/economics/laureates/.

Friedman is of the "Chicago School" L-F free-market purist school. In fact he was a pillar of that school and much of the inspiration behind Naomi Klein's groundbreaking book and tour about "The Rise of Disaster Capitalism." In other words, Friedman's theories and Krugman's could not be any more diametrically opposed. Krugman's Nobel prize is a pure reflection of the recognition that the "drown the government in the bathtub" philosphy is an abject failure.

I've often said we should try every extreme right wing idea in politics and society short of direct ethnic cleansing. We should try their ideas deregulating the economy, privatizing government out of existence except as a power to enforce authority through military, prisons, and police (the first two of which are already highly privatized as it is).

We should deport all the illegal immigrants, criminalize abortion, put away every offender of a victimless-crime to multiply our prison system by ten. We should do all the things the right-wingers want. Why? To see what type of third-world country we then will become. Privatize education like they do in Nigeria so only the paying rich can attend school. Kids fit well in the mines anyway.

I've often said we should implement their every right-wing policy, just to see how much of a banana republic we can become and realize that we should never ever try any of those ideas again. And I've often hoped we wouldn't have to run such a terrible experiment because we can see how the Washington Consensus (L-F/ right-wing/ destroy government/ privatize/ induce IMF riot) has destroyed every economy and society it has touched, with zero success stories. In other words, can we learn from the the essence of the turning from Friedman-ism to Krugman-ism?

But now I realize I don't have to invest such schadenfreude http://dictionary.reference.com/search?q=schadenfreude
in that risky rightist fantasy proposition. Because we've had the last eight years in which exactly that experiment was being conducted on our society, and we have the disastrous results, the final verdict, burning our economy, safety, and standing in the world, all around us.