Michael Moore: The Most Feared Film-Maker in America Strikes Again

Michael Moore, the most feared film-maker in America. The trailer for his latest film:

Buy American

I do not understand the "free traders." They are legion and on all sides of the ideological spectrum. They say that protectionism is entirely bad, and that so-called "free" trade is the economic panacea for all nations.

It's pure bunk.

If you did not catch last night's 60 Minutes with Nucor Steel, a steel recycler in America whose workers' salaries are tied to production, then I will try to find You-Tube footage for you tomorrow.

Any American with any heart or sense of patriotism at all could not watch this segment and come away feeling like a "free trader." As the CEO says basically, "Free trade is not free. It's an academic luxury. If you want to study it at Harvard, go ahead. But it has no practical application in the real world."

I agree. I don't understand how a system that causes our nation to have unending trade deficits year after year after year after year can be such a fantastic phenomenon. I'm so glad that the "Buy American" provisions in the stimulus bill the president will sign in Denver on Tuesday contains this provision for bill-authorized acquisitions of steel.

You see I have studied free trade at Harvard. And I agree with steel-workers that it has no practical application in the real world as currently practiced. We have a right, more a patriotic duty, to advance our nation's economic interests where possible. To say otherwise is simply un-American.

The Surging Populist Rage

In this morning's New York Times, the invaluable social critic Frank Rich writes about a familiar theme on this blog, namely the catastrophic policies set forth by both parties in the 1999 repeal of the depression era reform bill "The Glass Steagall Act" and the even more disastrous foundation for our current crisis, "The Commodities Futures and Modernization Act of 2000." From Rich:

Key players in the Obama economic team beyond Geithner are also tied to Rubin or Citigroup or both, from Larry Summers, the administration’s top economic adviser, to Gary Gensler, the newly named nominee to run the Commodity Futures Trading Commission and a Treasury undersecretary in the Clinton administration. Back then, Summers and Gensler joined hands with Phil Gramm to ward off regulation of the derivative markets that have since brought the banking system to ruin. We must take it on faith that they have subsequently had judgment transplants.

Truly any American should be concerned that the usual suspects of the 1990's whose policies caused so much international turmoil at the time, and whose policies (along with Chairman Alan Greenspan) set the stage for the gathering storm of the past eight years that culminated in this crisis of our own making we face today. Chillingly, Rich suggests that these players may not be fully rehabilitated.

A welcome outlier to this club is Paul Volcker, the former Federal Reserve chairman chosen to direct Obama’s Economic Recovery Advisory Board. But Bloomberg reported last week that Summers is already freezing Volcker out of many of his deliberations on economic policy. This sounds like the arrogant Summers who was fired as president of Harvard, not the chastened new Summers advertised at the time of his appointment. A team of rivals is not his thing.

Americans have had enough of such arrogance, whether in the public or private sectors, whether Democrat or Republican.

My greatest concern is about "the arrogant" Larry Summers. And while I have to honor a confidentiality oath, I can say that Summers is one of the creepiest people I have ever met and listened to in person, when he was President of Harvard University. One gets the sense that this man's sense of self-supremacy is unlimited and untempered even by recent years' evidence of his past failures. He is brilliant, the youngest professor ever to be tenured at Harvard University, practically at the moment he received his PhD. But academic brilliance does not translate into policy brilliance, which is fraught with unintended consequences if implemented poorly. This man rose too far too fast and was handed policy reigns when he should have been relegated to an advisory position and nothing more.

In 1999, he succeeded Rubin as Secretary of the Treasury. A year later, he was, with Alan Greenspan and Rubin, a leading advocate of the derivatives deregulation. Also during his stint in the Clinton administration, Summers was successful in pushing for capital gains tax cuts.

Larry Summers also deserves credit for advocating Washington Consensus policies during the Asian Financial Crisis. He eschewed Keynesian policies in favor of fiscal austerity, forcing the Korean government to raise its interest rates and balance its budget in the midst of a recession, policies criticized by liberal economists such as Paul Krugman and Joseph Stiglitz.[2] According to the book The Chastening, by Paul Blustein, during this crisis, Summers, along with Paul Wolfowitz, pushed for regime change in Indonesia. On May 4, 1998, when the Indonesian government began to raise fuel prices as part of an IMF program in exchange for hard currency, students started to protest, and in the ensuing riots, hundreds burned to death as blazes swept shopping centers in Jakarta.[2]

During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[4] Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets. [5] It was later conclusively revealed that Enron traders were the cause of the California electricity crisis.

Here's a taste of the 1990's shenanigans by Summers and his ilk, and now ask yourself whether you want these "thinkers" in charge of turning around the American economic crisis we face.

Many critics of trade liberalization... see the Washington Consensus as a way to open the labor market of underdeveloped economies to exploitation by companies from more developed economies. The prescribed reductions in tariffs and other trade barriers allow the free movement of goods across borders according to market forces, but labor is not permitted to move freely due to the requirements of a visa or a work permit. This creates an economic climate where goods are manufactured using cheap labor in underdeveloped economies and then exported to rich First World economies for sale at what the critics argue are huge markups, with the balance of the markup said to accrue to large Multinational corporations. The criticism is that workers in the Third World economy nevertheless remain poor, as any pay raises they may have received over what they made before trade liberalization are said to be offset by inflation, whereas workers in the First World country become unemployed, while the wealthy owners of the multinational grow even more wealthy.

[C]ritics further claim that First World countries impose what the critics describe as the consensus's neoliberal policies on economically vulnerable countries through organizations such as the World Bank and the International Monetary Fund and by political pressure and bribery. They argue that the Washington Consensus has not, in fact, led to any great economic boom in Latin America, but rather to severe economic crises and the accumulation of crippling external debts that render the target country beholden to the First World.

Bear in mind that all the globalization of that decade still led to unending massive trade deficits that helped mushroom the national debt more in the last eight years than in all prior American history combined. Now our foreign debt is held by Japan and China, and our economy is subject to enormous economic and political threats by our adversaries. To me, that is not good policy, Professor Summers.

I had the good fortune to hear a small-room lecture by a past-president of a small Latin American nation, a man who experienced the ravages of the IMF first-hand and was ousted from his position because of his own country's crisis. This stuff is not theory.

Further alarming is Rich's claim that Paul Volcker, Alan Greenspan's predecessor whose leadership of the Fed laid the policy groundwork to save America from its last economic crisis in the late 70's to early 80's, is being "shut out" by Larry Summers today. Here's Volcker's previous work:

Paul Volcker, a Democrat[4], was appointed Chairman of the Federal Reserve in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan.[5]

Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983.

While our current crisis is different in nature to be sure, it is no less urgent and its eventual solutions will be no less controversial than the policies Volcker implemented in the early 80's to arrest the inflationary spiral of that time.

The New "1/20" Rule
Here's where the new "populist rage" enters, as millions of Americans find themselves very recently out of work in the last three months alone. Again from Rich:

But we do know that the system has been fixed for too long. The gaping income inequality of the past decade — the top 1 percent of America’s earners received more than 20 percent of the total national income — has not been seen since the run-up to the Great Depression.

Yes, it's hard to believe, harder to fathom, that only 1% of the American population received more than 20% of the entire national income. When candidate Barack Obama said inartfully that he wanted to "spread the wealth," he wasn't talking about socialism. He was talking about this issue, about the need to rebuild the middle class, which brought this country to the peak of its economic and global power in the 20th century, so that more people can earn a better share of the nation's "pie," and so we can make it as big as we possibly can, together. That's not welfare. It's not socialism. It's how to build a healthy, diversified, and strong national democratic capitalist economy.

The strongest punch and thematic statement from Mr. Rich comes in his opening paragraphs this morning. And if the president, the senate, and the congress do not come to terms with this warning soon, it won't just be "the president's best-laid plans" that get "maimed."

SOMEDAY historians may look back at Tom Daschle’s flameout as a minor one-car (and chauffeur) accident. But that will depend on whether or not it’s followed by a multi-vehicle pileup that still could come. Even as President Obama refreshingly took responsibility for having “screwed up,” it’s not clear that he fully understands the huge forces that hit his young administration last week.

The tsunami of populist rage coursing through America is bigger than Daschle’s overdue tax bill, bigger than John Thain’s trash can, bigger than any bailed-out C.E.O.’s bonus. It’s even bigger than the Obama phenomenon itself. It could maim the president’s best-laid plans and what remains of our economy if he doesn’t get in front of the mounting public anger.

And the Losers Are.....

This morning brings the frightening news that the U.S. Senate defeated the auto "rescue" bill passed handily by the House and negotiated with the White House. Make no mistake, this was pure political posturing on multiple levels.

And let's be clear also that Washington's politicians are gambling with the jobs of an estimated three million American middle class JOBS. And we've already discussed that there will be no economic turn-around without a turn-around in J-O-B-S. So what gives?

First, the pure politicking. Senate Republicans are taking credit for defeating the bill, and Minority Leader Mitch McConnell was quoted this morning on The Today Show blaming the unions' refusal to lower their wages by about $4/hr (from $27 to $23) immediately as a condition for the loan. Let's take a moment to appreciate how hypocritical and destructive this posturing really is.

American auto unions, despite their politics, are all about American working middle-class jobs. Period. And that is all you need to know in this current economic crisis. That means those jobs must be protected. Period. Period. And that doesn't include the other 2.5 million American jobs threatened by Congress's abject failure to lead.

Seriously, is congress going to destroy, or even threaten right now, 3 million jobs over $4/hour after the obsceneties of greed being subsidized by congress already? (Think AIG.) Really?

Furthermore, surely I'm not the only one who sees the hypocrisy of "small government" Republicans in the Senate trying to micro-manage private enterprises whose biggest political sin was to get "too big to fail," but who have been aided and abetted by congress for decades. This is crass partisan opportunism, and I don't care who does it, it is unAmerican and it is wrong, and it is a threat to us all.

Now is not the time to put the American auto manufacturers under a political microscope to try and diagnose and force change that has not occurred in the last 30 years. Now we are in an overall economic crisis, and we need every job we can keep. It is far more efficient to keep jobs than to create new ones. We are shooting ourselves in the thigh if we let any industry in America fail right now. Once the crisis is under control, then I have no problems with Congress revisiting its regulatory posture in any industry it chooses.

Should unions be scrutinized? Yes. Are American unions part of the car companies' problems? Probably. But they're not all of it. And to think that forcing a drastic wage cut -- in this economic crisis -- is somehow smart politics or smart business, without forcing a comprehensive change plan that is impossible to create in any reasonable amount of time in this crisis (GM says it may be out of cash by the end of the month), it is just the height of political stupidity or opportunism or both. And it disgusts me, not as a partisan, but as an American.

Without a turnaround in jobs, there will be no turnaround in the economy, and that includes housing.

The ironic part of this is that the failure of the bill may put political pressure for the president to use TARP funds (the $750 billion authorized in October with oversight required but still not yet enacted) for the auto companies. With AIG executives fighting for multi-million dollar "retention" incentives (aka "bonuses") all with taxpayer money, I don't see the problem giving the car companies $15 billion of the $750 billion for a bridge loan to keep them in business and 3 million Americans at work. And ironically, a Republican president may use those funds to cover the failure of congress to respond, over the objections of Republican senators, which will result in virtually no restrictions at all on the auto-makers in exchange for the government funds.

And frankly, that's the correct way to go..... if Wall St needed $750 billion with no questions asked and no restrictions, as the Treasury argued in September, then why in the world does it not make sense for the auto-makers to need $15 billion to maintain America's manufacturing base that underpins 3 million American jobs? Bottom line: the government can and should put the auto-makers under a microscope when the economy has stabilized again. It is the failure of congress that they haven't cared about American manufacturing for 30 years now. And now is not the time to put 3 million American jobs in that political crucible.

To even posture that it is that time is obscene, unAmerican, crass, opportunistic, partisan, and downright spiteful toward the dwindling and suffering American middle class.

If the auto-makers fail from political malpractice and economic treason, nobody should be surprised when Wall Street is flooded with 3 million unemployed Americans bearing pitchforks and torches.

What I Want to Know Is...

Here's what I want to know: Why in the world is congress giving American car makers such a hard time over a $35 billion loan, when the government has already allocated about $1 trillion for financial companies including American banks?

For instance, about $20 billion last week was allocated to Citigroup to prevent the failure of that massive bank. There was no public debate, no congressional approval... just an announcement. And make no mistake, Wall Street rallied, and it was the right thing for the government to do for the sake of America, and not for Citigroup's executives (jail them for all I care).

So why are the American car companies being publicly flogged for requesting a combined $35 billion -- less than 5% of the federal bailout law -- to get through this historical economic crisis?

Well, here's part of the answer, I think. Why does America only have 3 car companies to begin with, and all of them headquartered in the same failed midwestern city of Detroit? Isn't that odd for these modern times? There are no auto headquarters in California, or Texas, or Ohio, or Missouri? I could make a strong case for each.

If the Japanese and Koreans are going to force our industry out of business, and if we're going to let them do so, and largely with manufacturing plants even on our own soil, then why in the world can't America produce American competitors to beat the Japanese and Koreans? Maybe there's not enough competition within America and between American firms. Why would that be?

The thrust of the problem, I think, is that America has become hostile, even prejudiced, against American manufacturing. That's why it's held on in the city of Detroit, no innovation, no expansion, just old... thinking... and old... organizations.

Our primary concern as Americans right now needs to be American jobs. Without confidence in our jobs, America can never recover from this economic morass. Frankly, I don't know anyone right now who does not fear their job security at some level or another.

A rule of thumb is that a tenth of a percent of the unemployment rate equals about 100,000 jobs. Analysts suggest that a failure of "Detroit" could lead to a total loss of 2 million American jobs. That means unemployment would skyrocket by 2 entire points -- to maybe 8% (bear in mind that new calculation methods of unemployment make 8% equal to maybe twice that several decades ago).

So why is there a debate? I think Americans are tired of being ashamed of their auto industry. The truth is that Detroit has been making good cars in recent years, actually. Most people blame the unions. However if the unions did not exist at all, then Detroit would have to face the fact that their "failures" are really due to executive failures and a collective lack of imagination in design and understanding of market demand more than anything. To wit: GM and Ford decided just a couple of years ago that their best strategy was to create the big gas guzzling line of bland SUV's that had been so profitable for them. (There's not much room for a profit margin in a small, entry-level car.) Well, that was just the wrong decision and terribly short-sighted.

Global players such as Japanese and Korean firms have long marketed to European and Asian markets, of course, where highly dense metro areas require small, small cars. Even Mercedes produces the "Smart" car that is exotic in these parts but common on the streets of any major European city.

Maybe we need more than just 3 American auto companies. Maybe we need more competition. Maybe a California start-up will take a chunk of the market with advanced hybrid and electric technologies. Whatever happens, now is a time not for destroying our auto industry, but for paving the way for serious American innovation. History shows that when America innovates, the world has no choice but to follow.

I think it's time that America realizes that it's just as serious and worthy to have leading manufacturing sectors as it is to have leading technology and professional service sectors.

And congress should stop playing games with millions of jobs that underpin America's challenged middle class.

The Moderate Fringe

Thanks to Brad DeLong for leading me to this eloquent piece from Paul Musgrave about the progressive agenda and the plight of the rural U.S.

The tragedy of rural American life has gone mainly unmentioned, even as some of us have waxed rhapsodic over, say, the exportation of McDonald's to Asia. Why are we more concerned with the loss of "authentic" cultures in Thailand or Indonesia than with those of rural America?

Having interned in a declining rural area of western Massachusetts in grad school, I've become keenly attuned to the haunting silence of drowning rural cities. Paul hits the nail on the head.