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Friday, December 29, 2006

Feeding Frenzy

Robert Reich looks back at 2006:

2006: The Year of Feeding at the Trough, by Robert Reich: It was perhaps the worst congress of the twentieth century -- not a do-nothing congress, a do-awful congress. It was a congress that dispensed so much lard you’d think they had a pig-slaughtering house in the cloak rooms. At last count, the 109th Congress handed out over $50 billion in earmarks to lobbyists who bundled campaign contributions on their behalf. This congress also spent billions more in corporate welfare for Big Oil, Big Pharma, Big Telecom.

And don’t forget the congressmen who put both their hands into the trough and got back corporate gifts, junkets, and outright bribes. The Congressional Hall of Shame grew bigger this year with the notable additions of Tom DeLay, Bob Ney, and Duke Cunningham, all of whom got caught up in the Abramoff scandal. There was also that $90,000 that turned up in Congressman William Jefferson’s freezer.

Also feeding at the trough this year were defense contractors like Haliburton, who were found to have been wasting tens of billions of taxpayer dollars in Iraq and Afghanistan...

In addition, the chief executives of some of America’s biggest companies who handed themselves the largest salaries and bonuses on record, and – we now know – stock options back-dated to maximize their value.

It was a year when investment bankers on Wall Street raked in even more. ... How did they make all this money? Some, by timing trades. Others by taking companies private, loading them up with debt, cutting their payrolls, and then taking them public again. Others by monopolizing Initial Public Offerings and getting in on the juiciest ones before the rest of the public.

Most of the cost of this feeding frenzy by politicians, defense contractors, and Wall Streeters was borne by average workers, normal taxpayers, and small investors. Most of them did only modestly in 2006. Median wages rose slightly but adjusted for inflation were still below what they were in 2000, and health and pension benefits shrank, overall. ...

But the biggest cost of all this has been to our democratic-capitalist system itself. When people at the top abuse their power, the average person loses trust in that system. The result is widespread cynicism. And if most people are cynical, how can anything ever change?

Next, his forecast for 2007, or at least one potential scenario:

2007: there may be trouble ahead, by Robert B Reich, Comment is Free: In an effort to prevent domestic social upheaval and to appease the Bush administration, which has asked it to spend more money domestically, China embarks on a large-scale program to improve its environment and social services. This, along with rising world oil and commodity prices, leaves China with less money to lend to the United States. ...

US interest rates rise considerably. Millions of American homeowners are unable to pay their mortgages, resulting in a wave of bank foreclosures. Housing and auto sales plummet and unemployment rises. Median wages drop, but America's global rich, who have hedged their savings in foreign currencies, are richer than ever. This fans the flames of economic populism and nationalism. In June, Congress refuses to renew Bush's fast-track authority to make trade deals.

Meanwhile, the carnage in Iraq worsens.... President Bush says he seeks "peace with honor" and asks for more time but congressional Democrats threaten to withhold further defense appropriations unless American troops are withdrawn by the end of the year. ... Polls show that only 15% of Americans approve the job Bush is doing. He says he "doesn't care".

At the start of September, Senator Hillary Rodham Clinton officially announces she will run for president..., but polls show her trailing Senator Barack Obama among Democratic voters although Obama has still not yet announced. At the same time, Senator John McCain, the Republican front-runner, lays out a plan to make the US "energy independent" by 2020, and says China is a greater long-term threat to the US interests than al-Qaida.

In October, Lou Dobbs ... declares he will run for president as a third party "America First" candidate, promising to revive the economy and recreate good middle-class jobs by shrinking the size of the US military and forcing other nations to pay their "fair share" of policing the world, blocking the flow of illegal immigrants into the U.S., and preventing American companies from outsourcing jobs abroad. Early polling shows Dobbs with a surprising 35% of likely voters.

    Posted by on Friday, December 29, 2006 at 03:51 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (10)

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