Also, the $900 billion this deal will add to the national debt increases the pressure on Obama and Congress to undertake the kind of tough-love budgetary changes outlined by the presidential commission on deficits.
Y'hear that? Giving billions of dollars to the rich will be a good thing because it will force us to focus more on cutting Social Security! I mean, you cannot make this stuff up. This is almost as good as the Dean's previous musings about rebooting the American economy by starting a war with Iran.
Here are some more goodies:
The divorce from the Pelosi Democrats has been brewing for a long time, but it came visibly into view when so many House members whined about the tax-and-budget deal with the Republicans.
If this wasn't a Sister Souljah moment, it was at least comparable to Bill Clinton's decision to sign the 1996 welfare reform bill passed by a Republican Congress - a step that sank Bob Dole's presidential campaign before it really began.
Obama's tax cut compromise will shower the rich with more money. Clinton's welfare reform bill tore up key pieces of the social safety net. You're starting to get a picture of what Broder's vision of "bipartisanship" looks like: People from both parties coming together to help the rich at the expense of everyone else.
As much as people like Broder love to position themselves as The Adults in the Room, they will happily throw fiscal responsibility out the window if it interferes with their ideological hobby horses of giving more money to rich people and starting wars. When they talk about making "tough choices" what they're really referring to is slashing spending on programs that have benefited the American middle class for generations so that Paris Hilton can afford a new pool. This headline from ABC captures the dynamic perfectly:
Of course, as anyone who can perform basic arithmetic knows, the first thing you should do to "get serious" about the deficit is to let all of the Bush tax cuts expire. But Conrad (who is begging, begging, begging for a primary challenge btw) and his ilk won't do that because they aren't serious about the deficit. Rather, they're serious about slashing whatever remains of our tattered safety net and unleashing a glorious age of neo-Social Darwinism.
Ain't politics grand?
Anyway, on to some of yesterday's key economic news:
- Tim Carney notes that former Obama administration officials are predictably strolling through the Washington-to-Wall-Street revolving door:
Obama budget chief Peter Orszag is now a VP at Citigroup, where his new bosses praise the "tremendous amount of knowledge as well as key private sector and government experience" he will bring, and the Financial Times hears he will be in a position "dealing with clients and top government officials."
Greg Craig, Obama's former White House counsel is at Goldman Sachs.
So, which other Obama intimates will cash out while Obama is still in office. The Business Insider has a "Geithner to Goldman Clock" counting down to when he'll join Craig. If Rahm Emanuel loses the mayor race in Chicago, will he return to the financial sector where he made $16 million in two and a half years?
As these "public servants" cash out, we need to ask whom they were serving when in office, and we ought to re-examine whether Obama's "reforms" crafted by these aids really serve the public interest.
One of the most depressing features of our modern democracy is that politicians aren't really even scared of being voted out of office anymore. What seems to actually frighten them is the thought that they won't get a plum job on K Street or Wall Street once they leave. This is why they're so eager to cut taxes for the rich while pushing for Social Security cuts: They know it makes a nice little bullet point on their résumé that their prospective employer will see as a mark of class solidarity.
- On the obligatory Good News Front -- jobless claims were down this week! And what's more, a survey of CFOs say they plan on hiring more next year:
Companies in the U.S. are poised to increase payrolls next year as revenue picks up, a sign the labor market is improving, an annual survey of chief financial officers showed today.
The share of executives who said they plan to hire new workers in 2011 rose to 47 percent, compared with 28 percent who forecast they would add jobs this year, according to a Bank of America Merrill Lynch survey released today. Sixty-four percent said they expect revenue growth, up from 61 percent in last year’s survey.
We'll see. If the economy improves over the next year it will be through sheer luck. But lots of things -- particularly the mess in the Eurozone -- could sink us right back into recession again.
- Speaking of the mess in the Eurozone, it looks like the Irish government is taking David Broder's advice and tearing up its social safety net:
The Dáil has passed all stages of the Social Welfare Bill.
The Government had comfortable majorities - 80 to 76 and 80 to 75 - in two votes called by the Opposition.
The Bill, which gives effect to the social welfare cuts in the budget, now goes to the Seanad.
Earlier Minister for Social Protection Eamon Ó Cuív today defended planned cuts to welfare payments, including the pension paid to blind and visually impaired people ahead of this afternoon's vote.
Mr Ó Cuív said it was “very hard to make cuts to social welfare in any form”.
I'm sure it was. On the plus side, the Irish are actually implementing a tax on bankers' bonuses, although:
The changes will not affect the €40 million in bonus payments to be paid to Allied Irish Bank executives before Christmas.
So the Irish bankers get to enjoy one last cocaine-and-hooker fest this Christmas before reeling it in for a bit and finding an accountant that can help them get around the tax. It ain't much but it's something.
- And finally, on the Vampire Squid front, it looks like Carl Levin has dug up some more interesting dirt on everyone's favorite bank:
Goldman Sachs ’ trading activities in the credit insurance market in 2007 have come under attack from a US senator after e-mails revealed a senior trader urged colleagues to “kill” some investors’ positions.
Carl Levin, chairman of the Senate permanent subcommittee on investigations, told a hearing on Wednesday that the alleged activity “looks like a trading abuse to me”, although he added that at the time in question the credit insurance market was unregulated.
Mr Levin said that in May 2007, Goldman adopted a “short squeeze strategy” to drive down the price of credit default swaps on troubled mortgage-backed securities. Mr Levin alleged the move, which Goldman denies, would have enabled the bank “to purchase the CDSs for itself at artificially low prices”.
The subcommittee’s probe uncovered a document revealing a second trader stating that Goldman “began encouraging a squeeze” – a strategy that never materialised due to market conditions.
While I'm not smart enough to wade through all the details, I believe what's being alleged is that Goldman execs batted around the idea of driving down the prices of credit default swaps for CDOs so it could scoop them up at bargain prices and then really cash in when the housing market went bust. The best part is that this practice was probably not illegal since the CDS market is the Wild West of asset insurance -- you can take out CDS protection on assets you don't even own.
Levin also released some predictably LOL-worthy emails from Goldman traders:
Mr Levin produced e-mails in which Michael Swenson, an executive in Goldman’s fixed-income trading division, told colleagues to offer cut-price credit default swaps on MBSs. As the housing market collapsed in 2007, investors, including Goldman, were rushing to buy default swaps to short MBSs that were losing value.
“We should start killing the . . . shorts in the street,” Mr Swenson wrote in an e-mail to Deeb Salem, a trader, in May 2007. “This will have people totally demoralised.”
In another e-mail, he said Goldman should reduce prices on CDSs to “cause maximum pain” for existing holders of credit insurance.
Goldman said on Thursday: “This type of language sounds awful and is very disappointing, but it does not reflect the reality of what happened. There was no short squeeze.”
I love it when Goldman apologizes for the language that its traders use in emails. "We regret that some employees in our prop trading department sent messages that described 'LOLing' after 'butt-raping a client.' We can assure you this does not reflect the professional and courteous corporate culture Goldman Sachs works hard to foster."
And with that, have a great Friday!