New York's New World

The topic below was originally posted in my blog, the Intrepid Liberal Journal.

For my home state, Governor David Paterson's budget is a window into the future. Simply put, we are witnessing what happens when New York State ceases to be the financial capital of the world. At the moment the world doesn't really have one as the global economy sorts through massive wreckage. Truthfully, the era of financial centers concentrated in western port cities such as New York or London is a relic.

This had long been been predicted because information technology makes it possible to outsource back office functions remotely and utilize cheap labor. Why pay for New York City real estate and labor when a trader can just as easily play with other people's money from a computer in Dubai? However, until the recent economic catastrophe Wall Street stubbornly hung onto its symbolic trappings as the center of the universe.

As a result, Albany could count on revenues generated from Wall Street to finance union pensions, government services, medicaid spending, corporate welfare, our prison industrial complex and so forth. The financial services industry also generated millions of jobs in our region from stock brokers to janitors. Hence, Wall Street's titans were able to leverage their influence with power brokers such as New York State's senior Senator Charles Schumer.

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As many of you know, the New York Times recently profiled the intimate relationship between Wall Street and Schumer. Liberals are justifiably outraged at Schumer's enthusiastic pandering to Wall Street's desire for excessive deregulation and lax oversight in exchange for campaign donations for himself and his party. Instead of a Democrat standing up for working people we elected an enabler of our economic meltdown.

In fairness to Schumer, any New York senator would have to some degree catered to this industry's interests just as Joe Biden championed the banks and credit card industry while representing Delaware. All politics is local as Tip O'Neill used to say and even Wall Street enemy Eliot Spitzer raked in contributions from the financial sector during his 2006 campaign for Governor. That's where the action was that created jobs for New Yorkers and filled the state's coffers.

However, Schumer's excessive pandering to Wall Street has facilitated a calamity for the working people in New York he claims to represent and helped wreck the global economy with it. Figures such as Clinton Treasury Secretary and Wall Street powerhouse Robert Rubin were never Obi-Wan Kenobi.

Today New York is confronted with a $1.7 billion 2008 shortfall and a projected 2009-10 deficit of $13.7 billion while Governor Paterson promotes an "obesity tax." Important government services such as healthcare, education and emergency first responders will take a hit. And New York's Mass Transit Authority ("MTA") with its chronic incompetence in good and bad times will impose painful rate hikes and service cuts in 2009 to make up for its own steep revenue shortfall. As always the working stiffs are hit the hardest.

The pain is no fun and hardships abound for New Yorkers as our manufacturing industry was sucking wind well before Lehman Brothers collapsed, AIG was bailed out and Bernard L. Madoff became a household name. Like all New Yorkers I'm feeling the pain too but thankfully still have a job.

Yet even during this challenging period an opportunity exists. Necessity is a mother to invention and New York needs to reinvent itself. Just as oil is a dangerous narcotic that has arrested the development of petro states the financial services sector and manufacturing industry have undermined New York's ability to retool for the 21st century. Such innovation requires leadership and vision.

Whatever critique one may have with the specifics of Paterson's hardship budget he is at least showing leadership by not ducking the tough choices. Personally though I am dismayed by Paterson's unwillingness to more fairly distribute the pain. He should worry less about taxing millionaires and instead embrace New York's Working Families Party approach of shared sacrifice.

My question though is what sort of people does Paterson listen to as the corporate private sector vies for his favor in New York's new world? Alas, Paterson's consideration of Caroline Kennedy to replace Hillary Clinton in the Senate because of her ability to raise millions from friends such as billionaire Mayor Mike Bloomberg is not encouraging.

Purgatory For Alan Greenspan

The topic below was originally posted on my blog, the Intrepid Liberal Journal as well as the Independent Bloggers Alliance, The Peace Tree and Worldwide Sawdust.

Alan Greenspan belongs to the Club of Emasculated Moderate Elites who enabled corporate theocrats to destroy the American Dream at home and annihilate our moral authority abroad. A prerequisite for membership is to first allow crazy ideologues to exploit their prestige and later disown the disastrous policies their reputations facilitated. Former Secretary of State Colin Powell is a charter member of this club and a pathetic figure who criticizes the Bush Administration about Iraq when it no longer matters. Powell’s domestic policy soul mate, Alan Greenspan, joined him with his new memoir, The Age of Turbulence: Adventures In a New World.



Actually, one could argue that Greenspan was a charter member as early as 2001. The prescient and sagacious Paul Krugman wrote the following for his column entitled “Reckonings; Doing the Wrong Thing” on February 14, 2001:

“Three weeks ago Alan Greenspan, in his now-famous testimony to the Senate Budget Committee, gave decisive aid and comfort to the advocates of huge, irresponsible tax cuts. Rumor has it that Mr. Greenspan himself was taken aback by the feeding frenzy unleashed by that testimony, and that he is now engaged in a backdoor campaign to limit the damage. (Damage to the nation, or to himself? Good question.) The Medley Report, a newsletter on economic affairs, says that ‘many Congressional Democrats have heard Mr. Greenspan -- or his aides -- tell them that he actually favors something like $1 trillion in total tax cuts rather than $1.6 trillion.’

But if those rumors are true, Mr. Greenspan's performance yesterday, in his first official testimony since he let the genie out of the bottle, was a profile in cowardice. Again and again he was offered the opportunity to say something that would help rein in runaway tax-cutting; each time he evaded the question, often replying by reading from his own previous testimony. He declared once again that he was speaking only for himself, thus granting himself leeway to pronounce on subjects far afield of his role as Federal Reserve chairman. But when pressed on the crucial question of whether the huge tax cuts that now seem inevitable are too large, he said it was inappropriate for him to comment on particular proposals.

In short, Mr. Greenspan defined the rules of the game in a way that allows him to intervene as he likes in the political debate, but to retreat behind the veil of his office whenever anyone tries to hold him accountable for the results of those interventions.”

The upshot is that Greenspan’s reputation in 2001 was at stratospheric levels following eight years of prosperity under President Clinton. It was a flawed prosperity to be sure, aided by the Internet bubble and trade policies that rewarded corporate elites at the expense of too many working people. Nevertheless, the fiscal management of the country was far superior under President Clinton and most were better off than they are today. Greenspan and Clinton Treasury Secretary Robert Rubin were regarded as the architects of an economic renaissance.

As Krugman illustrated in his column over six years ago, Greenspan allowed the tax cutting privatization fundamentalists to exploit his reputation so wayward congressional moderates would go along. And when he had the chance to correct the record and prevent the fiscal insanity to follow, he choked. As Krugman put it in that column’s final paragraph:

“Mr. Greenspan faced a test of character yesterday. He didn't have to admit to a mistake; to do the right thing, all he had to do was ‘clarify' his previous remarks. Yes, the headlines would have said ‘Greenspan Makes U-Turn.’ But isn't it worth accepting some brief personal embarrassment in order to head off a looming policy disaster that you yourself have helped create? Apparently not.”

And what a disaster it’s been! Even without 9/11 and the Iraq War, the tax cutting privatization fundamentalists had us headed toward a path of deficits minus meaningful investments. It’s one thing to accumulate deficits if we make investments in infrastructure and human capital that deliver a return such as education, health care, renewable energy, bridges and levies. Contrary to generations of conservative propaganda however, the super wealthy don't "invest" their wealth into the economy and create jobs. Most horde it because they don't need to spend frequently on necessities.

Greenspan's conduct in 2001 resulted in less money for people who truly are the engine of economic growth: small business entrepreneurs, salaried employees earning under $100,000 per year and low wage earners.

Yet Greenspan continues to reject any accountability for his transgressions. According to the New York Times, Greenspan is “chagrined about his role in the Bush tax cuts.” The article describes Greenspan as surprised at how his endorsement of the Bush tax cuts would be perceived even as he recounts how Robert Rubin and Senator Kent Conrad, of North Dakota warned him.

Yet Greenspan’s bewilderment is at best disingenuous. Rather like Claude Raines “shock” at finding gambling in Casablanca. He endorsed Bush’s tax cuts because they empowered the Ayn Rand economic fetishists who promote wealth redistribution in favor of the wealthy while claiming to champion liberty and a culture of work. Indeed, as Harriet Rubin reported in the New York Times, Greenspan was an admirer of Rand’s work.

As a reward for his disservice to the American people, Greenspan’s book will no doubt soon become a best seller as the republic spirals towards fiscal insolvency. That is Alan Greenspan’s legacy unless a true progressive is elected president in 2008. Either way Greenspan’s reputation should be condemned to a special purgatory for so-called moderates such as Colin Powell who mortgaged America’s standing and future for their own self-aggrandizement.