DOJ blocks AT&T offer for T-Mobile

The Department of Justice filed an anti-trust challenge  in court today blocking a $39 billion deal by communications giant AT&T to acquire wireless giant T-Mobile. The move is part of recent efforts by the Obama Administration to enforce financial and anti-trust regulation after the dearth of enforcement that characterized the Bush years and encouraged a climate of dangerous speculation leading to the financial collapse of the sub-prime housing market. The challenge to AT&T’s merger with T-Mobile follows a recent decision by the DOJ to block NASDAQ’s bid for its European counterpart, NYSE Euronext.

“Consumers across the country, including those in rural areas and those with lower incomes, benefit from competition among the nation’s wireless carriers, particularly the four remaining national carriers,” said Deputy Attorney General James Cole. “This lawsuit seeks to ensure that everyone can continue to receive the benefits of that competition.”

However, the DOJ made clear that it was in talks with both companies and that there is room for making changes in order to settle the anti-trust challenge. In anticipation of making some compromises AT&T announced it would return 5,000 call center jobs to the U.S. as part of the T-Mobile acquisition. AT&T says its merger will provide improved wireless service to 97 percent of the nation, underscoring the question whether its merger with a competitor will decrease competition for wireless service, increase costs to consumers, and consolidate a well-established monopoly over communications AT&T. ::KPS::

FED stands ready, but does not make a change

In a closely watched speech in Jackson Hole, WY this morning, FED Chairman Ben Bernanke tried to boost investor confidence without announcing a new round of anticipated “quantitative easing” (QE). QE is an unconventional and controversial monetary policy in which central banks infuse a fixed quantity of newly created reserve cash into the economy by buying the assets of banks and “synthetically” inflating their value. In effect, this increases the money supply, and so long as banks begin lending again, stimulates economy activity. The policy is unconventional because it is a policy of last resort, and it has become the preferred way of central banks including the FED to address the ongoing financial crisis.

Quantitative Easing Explained (6 min. video)

The cartoon explanation is funny, but the facts on the ground are not so funny. Whether the FED has too much power over the economy, and whether it is good that its chair is insulated from democratic accountability, is a good independent question. After all, many people accused former FED Chair Alan Greenspan of having too much power.

However, in today’s political climate this means more direct politicization of this position, which is dangerous for the economy and American democracy. Gov. Rick Perry of Texas is now publicly brow beating and belittling Bernanke’s policies of economic stimulus. While on the campaign trail in Iowa last week, Perry said that if Bernanke “prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas.” He went on to say that if Bernanke printed more money, the act would be “almost treasonous in my opinion.”

Bernanke made clear in Jackson Hole that the FED stands ready to assist, and investors jumped at the news with the DOW climbing steadily all morning and the NASDAQ seeing some forward momentum. But with anemic job growth and investors wary of the political impasse in Washington, the economy continues to falter. The news swings both ways from day to day, leaving investors and markets in the schizophrenic position of changing their minds with the news cycle. Perhaps Bernanke’s speech has made investors excited about the prospect of more public aid in the service of private profit? Depending what’s on the news tomorrow, only time will tell. ::KPS::

The Golden State’s Tarnished Anti-Tax Image

According to the U.S. Labor Department’s monthly household survey released today, unemployment and joblessness in California officially stands at 12 percent. That number is, of course, an underrepresented sample. It counts only those who are actively looking for work and qualify for federal unemployment insurance. It does not count the millions of people who no longer qualify for benefits, and therefore “officially” have “given up” looking for work. Never mind that millions of people need work and are still looking for work without federal assistance, because they are not counted in official unemployment figures.

The Golden State now has the second-highest unemployment rate in the country, following the dismal likes of Nevada, where even the luxury-gaming-entertainment-recession-proof juggernaut called Las Vegas has downsized noticeably thanks to the recession. California’s economic woes are further compounded and prolonged by the political morass in Sacramento. The state’s government has slashed spending heavily over the last year, but it has failed to resolve the biggest sticking point:  an anti-tax bias against balancing budgets sensibly that is crippling the public sector. Then again, the national debate over raising the debt ceiling, and the rather crappy compromise made by Congress, highlights the fact that it is primarily to blame for compounding and prolonging the economic woes of the nation. (Though one would think the Constitution gives the President the duty to run the economy, given the finger pointing and finger wagging of Tea Party and Republican rhetoric.)

States like California face a choice that is unpleasant but also unnecessary. Cutting deficits is unpleasant but doing so without raising taxes is unnecessary. Resolving the state’s $25 billion deficit required a huge disinvestment in the public sector:  education, roads, police and fire services, parks, and public health all suffered deep cuts. The fiscal year began on July 1 and the projected deficit shortfall over the next year will be well-above $10 billion. That means more unilateral cuts hurting millions of Californians unless Gov. Brown and the California Assembly can find a way to bring an end to the anti-tax bias that is enshrined in the State Constitution and hamstrings legislators from raising taxes without a super-majority vote.

California needs a new social compact in which the tax system is clear, fair, and protected from market failures, and where the public sector is transparent, well-funded, and protected from the failure of moral and economic leadership in the private sector. Whether the Assembly gets smart and finds a legislative solution to the initiative-driven policy of direct democracy? Only time will tell, and Gov. Brown has an uphill battle against another looming deadline to convince Californians it is time for substantive reform to the politics of taxation. ::KPS::

In debt ceiling compromise, we are all losers

Negotiations to raise the debt ceiling came down to the wire Monday night with the winners and losers striking a compromise deal. President Obama proved he can “kind of” stand over above petty recriminations to encourage a politics of compromise from the moral high ground. The Democrats proved they cannot govern and achieve their goals at the same time, a truly contradictory skill they have come to master. The Republicans proved that an opposition party can control public policy, and that they can do so only by ceding authority to an even smaller, shriller fringe element like the Tea Party. In short, there are winners and losers in this “second great compromise,” but in the end we all are losers.

How did we get here?

The American economy has been hijacked for decades now by Wall Street, political elites, and their technocrat cronies. (Is no one else disturbed that most U.S. Treasury Secretaries are former CEO’s of Goldman Sachs?) Starting with deregulation under the Carter Administration that accelerated under Reagan, Bush the Elder, and Clinton, we arrived at the 2000 Presidential Election just in time for Bush the Younger to hi-jack an election in Florida and institute his economic policy of capital robbery. What Clinton started in 1999 by signing the Gramm-Leach-Bliley Act, which repealed part of the Glass-Steagall Act of 1933 that regulated the banking, insurance and the financial sectors after the Great Depression, Bush the Younger finished by signing the Commodity Futures Modernization Act in 2000. The stage was now set and the actors were in place for the great financial collapse of 2008:  bankers could be their own insurers, insurers could be their own bankers, auditors could cook all their books, and speculation on futures for sub-prime mortgages and other technical financial “instruments” could be traded with impunity.

Proof of the lie that Obama stands for big government and Republicans are fiscal conservatives.

The financial collapse could therefore not only be predicted, it had been predicted before. One only has to look closely at similar financial mechanisms in deregulated environments that caused the Great Depression, the Savings and Loan scandal of the early 80’s, Black Monday in 1987, and the global currency meltdown of 1997. In all these cases, the money changers were put in charge of the Temple by their political hacks, and in all cases their economic policies of “liberalization” and “modernization” spelled doom and gloom for the rest of us.

What does this compromise mean?

The debt deal in Washington DC amounts to nothing more and nothing less than a continuation of the economics and politics of this status quo. Under Reagan’s administration the debt ceiling was raised 200 percent to accommodate the insane policy of a nuclear arms race, and in 1988 after eight years of military build up the national debt stood at $3 trillion. On this day in 2000 the national debt was almost $6 trillion; today it is $14.5 trillion and rising faster than any previous time in history. One can conclude that raising the debt ceiling is not helping matters, and indeed this is the nugget of truth in the caterwalling  of the Tea Party.

The fact is that U.S. economic policy is not sound. It is predicated on three things:

1. profit maximization for global corporations and their share holders that disinvests in U.S. production and labor in search of cheaper commodities that can be made abroad and sold at home.

2. hyper-sustained consumption to fuel the U.S. economy despite the fact that we are increasingly a nation of debtors and an economy without good-paying jobs.

3. lack of vision for a greener, more sustainable future (see 1 and 2 above).

These factors are fixed  by an even more pernicious set of factors at the nexus of economics and politics:  lack of political will to reform campaign financing, an ideological chimera that believes money is free speech, and a Supreme Court decision ironically called “Citizens United” that permits unlimited corporate contributions to elections. With these pieces in place, it is clear that the puzzle is all but finished. There will little to no change of the dominant economic policy that is, in fact, the great problem of the 21st century.

What’s next?

In all this doom and gloom there is not much of a silver lining. Reaching a compromise on the debt ceiling means a smaller less social-capital-friendly government in which the middle class and the poor shoulder more social responsibilities that private markets are likely to capitalize on. For example, health insurance companies will make more profit on an increasingly unhealthy and aging population, while Medicaid and Medicare benefits shrink. The unemployed will receive less help in a job market that increasingly shrinks around them. Students will pay for more of their education as government financial aid decreases. And the poor will suffer the most as institutional forms of assistance evaporate.

Although the Tea Party juggernaut appears to be the winner by forcing a $2.1 trillion spending reduction over the next 10 years, the fact remains that by the end of that period the national debt will be even larger than it is now and America will be a less “kinder, gentler” nation.  The “second great compromise” has won us nothing but a short-sighted and mean-spirited political victory. Moreover, it is doubtful that either the economic policy to blame for this or the ideological fixation that drives it will change any time soon. In 2021, what will America look like? The answer is the same as it ever was:  more economic inequality, less democracy, more desperation, less hope. ::KPS::