Fixing Democracy by Revamping Lobbying

To me the biggest problem in American politics is lobbying. Lobbying is legalized bribery. And I am not talking about Jack Abramoff - that was REAL bribery. Lobbyists have more say in legislation than voters possibly can under that system - unless the voters get their own lobby. Some do. AARP, NRA, AFLCIO are all examples of lobbies that represent a collection of voters. The more voters they get, the more clout they have. But grassroots organizations cannot pony up the bags of cash that entire industries can offer. The American Bankers Association, the National Association of Securities Dealers, and the Bond Market Association all represent entire industries with very, very deep pockets. If AARP goes up against, one of these giants they will most likely lose.

“Lobbying” is the attempt to influence public policy by petitioning government. Petitioning government is a cornerstone of democracy and appears in such diverse documents as the Magna Carta, Declaration of Independence, and the Bill of Rights. But, none of those documents envisioned a future that included multi-national corporations who have more money than most countries. In Colonial times, individuals would petition the government by writing letters. But there are now too many citizens and politicians have too many complex issues to have ongoing contact with individual constituents (unless they are campaign donors). So the original concept of lobbying - to allow citizens to directly contact and influence legislators - has been bastardized. Now you get access and influence with money. The more money you have, the more access and influence. Bribery.

The bastardization of lobbying has led to a bastardization of the political landscape. It seems that all politicians care about anymore is getting reelected. As this paradigm grew, it created an "arms race" of campaign financing. Races used more radio and television, costing more money, needing more contributions. This need made lobbyists more important to the politicians, giving them more influence.

I have less of a beef with lobbying efforts from groups. AARP and the NRA have become powerful lobbies that get politicians' attention. But these groups have clout moreso because they can mobilize their members, not because of giant bags of cash. They can promote a politician and their members will donate to and vote for that candidate. I many not agree with the organization's agendas, but I agree that their lobbying efforts are a good example of democracy in action, and I think the founding fathers would agree.

I have more of a beef with corporate lobbying. Corporations are able to push though so much legislation that is good for them, but bad for the individual voters. For example, Democrats recently tried to push through legislation to further regulate the $40 Billion "payday lending" industry. These predators charge interest rates that, when annualized, amount to almost 400%. Not wanting to lose their loan shark businesses, the industry ponied up over $1Million to fight legislation that would limit the interest they could charge. When consumer groups condemned a bill as full of loopholes and favoring the industry, bill sponsor Rep. Luis Gutierrez, D-Ill., said, “While they may not be JP Morgan Chase or Bank of America, they’re very powerful. Their influence should not be underestimated.”

What? You cannot defend against them, Luis? Why not? The answer, of course, is that if he didn't do what he was told, the lobby would give their money to Gutierrez's opponent in the next election. That is when bribery becomes blackmail, and neither one is good for the country. This scenario plays itself out over and over. Play along, and the lobbyists are your best friends. Oppose them and they are your worst enemy.

Yesterday, the Senate failed to pass a bill that would have allowed judges to enable certain homeowners to renegotiate mortgages. Big banks didn't like this idea one bit. Of the 59 Democratic Senators (including new GOP turncoat Arlen Spector), only 45 voted for the bill. A leading supporter of the bill, Sen. Dick Durbin (D-Ill.), concluded that banks "frankly own the place." How sad. He stood up and said that the banks owned the Senate. I guess that explains all that bailout money flying around without accountability.

So what do we do? I think the first thing is to stop giving corporations the same rights as individuals. Lobbying is considered a right, but it is a right of citizens. Corporations are not citizens, despite their protestations to the contrary. This idea is not new. Over 20 years ago the NY Times ran an editorial entitled Corporations Are Not Persons. The piece points out the example of tobacco companies arguing that advertising to children was their right under the first amendment. As the editorial points out: "Equality of constitutional rights plus an inequality of legislated and de facto powers leads inevitably to the supremacy of artificial over real persons."

As long as corporations have the same rights as individuals, they will own our political system. They have too much money and voters or voter PACs can't compete. The political system should belong to the people, the voters, the citizens. The NRA, made up of individual citizens, should have every right to fight against gun control. The gun manufacturers, should not. The citizens are fighting for thier rights, the manufacturers for their profits. It's our country, not the corporations.

Once it is established that corporations do not have the same rights as individuals, we can start to chip away at their influence. Lobbyists can be prevented from making donations on behalf of any corporations. Only individuals would be allowed to donate. If that would ever happen, Gucci Gulch would become a ghost town and politicians would have to think for themselves instead of do what they are told. We could return to the concept of "citizen legislators" rather than professional politicians.

There are few politicians in Washington who have the guts to take this on. Introduce a bill that denys corporations the same rights as citizens and you will see the mother of all lobbying efforts. I think President Obama just might take this on, if he can clean up some of the current messes taking up his time. My hope is that the GOP will continue to shoot itself in the foot, and the Democrats make even more gains in 2010. Then, armed with that super-majority in both houses and leveraging on his popularity, Obama takes it on. If and when that happens, it will require a massive grassroots campaign. Politicians still repond to voters if enough of them speak out. If it happens, jump in. Donate, volunteer, write, canvass, do whatever you can to help the cause. Our democracy just might depend on it.

Curbing Corporate Evil

Corporations are evil. Corporations profit from war and make unsafe products, they spill oil and coal ash, they encourage children to smoke and deny heath care to the sick. They use third world child labor and pay them pennies, all the while claiming that the kids are better off. Even corporations whose motto is “don’t be evil,” do evil.

Consider this list…AIG, Merrill Lynch, Blackwater, Enron, Haliburton, Philip Morris, Wal-Mart, Dow, Pfiser, Diebold, Exxon…this group of companies has a history that includes fraud, unsafe products, dumping of toxic chemicals, deforestation, union busting and war profiteering. And those are just the easy ones…the low hanging fruit…the ones whose evil you really don’t need to explain. For each on this list there are hundreds of other corporations who are taking more from society than they give.

These corporations are not in the business of evil. They are in the business of profits. But the pursuit of profit without any other consideration sets the stage for some pretty evil stuff.

Corporate wrongdoing is a byproduct of greed. Greed is what makes capitalism work. I am a big believer in capitalism. I have not seen a better system, certainly not the communist model with their five year and ten year plans. Greed and the thirst for profits have led to the creation of some of my favorite possessions. Were it not for this greed, I would not have my cell phone, my laptop computer, my flat screen TV. Yay, profits. Yay, greed.

Not everyone is greedy for money alone. Some lust for power. We call those people politicians. They play a big part in enabling Corporate evil. Corporations lobby politicians. If the politicians vote for bills that aid the corporations, then the corporations give them bribes that they call “campaign contributions.” It’s a cozy relationship – great for the corporations, great for the politicians, but not so great for the citizens of the US…you know, the customers of the corporations and the constituents of the politicians. Politicians are fond of saying “get government off the backs of business.” They claim that aiding business aids the economy, which aids us all. In some cases that’s true. In many cases it is not.

Take, for example, the 1999 repeal of the Glass-Steagall Act. This act, signed at the height of the Great Depression, separated commercial and investment banking. Commercial banks tend to be very conservative while investment banks take on risk for higher returns. When Glass-Steagall was repealed, it eventually led to commercial banks taking on huge risks as well in pursuit of the kind of profits the investment banks were getting. The result was a global economic crisis that we still cannot see the end of. How could that repeal have been good for the country? The economy was doing well, so it’s not like we needed a boost. So it wasn’t driven by need, it was driven by greed. The financial industry wanted it and they had Phil Graham bought and paid for.

I’m not anti-corporation. Corporations provide needed jobs and tax revenues. We need corporations. And I don’t want to clip their wings like some bad passage from “Atlas Shrugged” (as if there is a good passage to that book). But our society exerts more control over stray dogs than we do over corporate malfeasance. What’s more, unchecked corporate evil comes with a future cost. Pollution costs. Global warming costs. And ask the millions and millions of unemployed around the world if there is a cost to the current economic crisis.

Proper regulation does not prevent corporations from making a profit, it prevents them for making a profit at the expense of the citizens. Make all the money you want, just don’t make a mess. Simple.

We need to rule over corporations, we cannot have them rule over us. And rule over us they have.

Can we put down the pitchforks now?

The New York Times today published an open resignation letter by Jake DeSantis, Executive VP at AIG. Since it's publication, many computer fonts have been spilled about it's portent. Too many of these comments are simply ill-informed. A typical example from the left is digby's from Hullabaloo. I am a fan of digby, and enjoy his blog. But too often I see liberals rant about business practices that they don't seem to understand, and this is a classic example.

First digby rolls his eyes at at an op-ed piece by Martin Feldstein, who claims that President Obama's proposal to limit the tax deductibility of charitable contributions will hurt charities. Without discussing the merits of Feldstein's argument, digby dismisses him because he is a member of AIG's board, and a member of their Finance Committee. Exactly how those facts makes Feldstein's argument moot, digby does not say. But consider this...would a bazillionaire donates $50 Million to a charity if there were no tax deduction? I think not. And I think Feldstein is correct that Obama's plan will disastrous for charities. But don't take my word for it, call the head of fundraising for your favorite national charity and ask for yourself.

Next digby moves on to DeSantis, describing his letter as a "petulant whine." He then goes on to say, "It's very hard to believe that this person knew nothing of the CDO business since it was the focus of the division in which he worked." He quotes MSNBC commentator Carlos who basically said the same thing: "I know and you know that when you're an executive in a large company you sit in those senior management meetings you hear what's going on in other parts of the business." Carlos and digby are simply wrong about this, and their comments lead me to believe they never worked for a large corporation. Busy managers focus on their own departments, and they don't have time to get detailed breakdowns of what others are doing.

MSNBC and digby show a lack of understanding of financial products and large financial organizations. DeSantis worked in commodities, and had nothing to do with CDOs. But digby assumes that every executive working for AIG is guilty by association. It doesn't take every employee to bring down a company. Remember Barings Bank? Barings was the oldest merchant bank in London until its collapse in 1995 after a single employee lost $1.4 billion speculating on futures contracts. One guy killed a 200 year old company.

Just because you worked for AIG does not make you evil or stupid. And we can debate whether anybody deserves to make a $750,000 bonus, but if other executives at other companies were getting similar bonuses (which they were) then AIG executives were not overpaid relatively speaking.

The AIG rhetoric is becoming shrill and is leaving logic behind. digby effectively says that we should not listen to anything that an AIG board member says. The board members deserve their share of blame for this mess. They were wrong about that, but that doesn't make them wrong about everything. DeSantis opened himself up to a lot of scorn by publishing his letter, but I saw it as frustration, not whining. He was angry that the CEO promised to fight for them, then did not. And he was angry that he and the vast majority of AIG employees did nothing wrong, but are being treated like lepers.

I'm not a pro-corporation apologist - far from it. But I think it is important to focus on real issues and not get tied up in witch hunts. Too much has been written about the AIG bonuses. Americans are frustrate at the mess we are in, and want to punish the guilty. I do as well. But a lynch mob is not the answer. Let's put down the pitchforks.

Robert Gates makes a bold move

The Boston Globe reports that Defense Secretary Robert Gates is going to do the unthinkable. He is going to end costly, high-tech military programs in an effort to cut Defense Department waste, and to shift focus from gadgets to boots on the ground. This is an extraordinary move, and may be the most potent assault on Eisenhower's "military industrial complex" since Ike left office.

The country is broke. We can't keeps spending like we did. But the Military loves their toys, and nobody wants to appear soft on defense. However, now it's pretty obvious that our current enemy is decidedly low tech. So there is no real use in spending money for new jets and destroyers. But I never expected to see a Secretary of Defense reach that conclusion, and I am very pleased that ours did.

Our Navy has not fought a sea battle since World War II. Our cruisers and destroyers have not fired a shot in anger for decades. Aircraft carriers can at least deliver fighters to a theater, but only if that war zone is near enough to an ocean. But if Iraq is any indication, "air cover" is less of an issue because there is nothing to bomb. Insurgents don't present a united front. They don't charge your fort like Indians in a John Wayne movie. The only aircraft that makes sense are helicopters that can swoop in and get your guys the hell out of there. Everybody in the military knows this. But for the Defense Secretary to actually shut down military projects is extraordinary.

Robert Gates took the world's worst job, at a time when it was guaranteed to get worse. He never grandstanded or engaged in subterfuge. When a new administration from the other party asked him to stay on, he did. He has done the best he could with the awful hand that was dealt him, and he has done it with class. But this latest decision is, I think, his bravest. Defense contractors have armies of lobbyists. The Spam has not yet hit the fan. But I think the time is right for this. And I think that the savings will help soften the blow of this, the worst financial year in many generation.

Thank you, Robert Gates, for doing the hard thing.

9000 earmarks

9000 earmarks. The spending bill that Congress is sending to President Obama has 9000 earmarks. At a time when our economy is staggering Legislators still can't stop loading up spending bills with pet projects. When our deficit and our national debt are the highest in history, our elected officials still show no restraint. During his campaign, Obama promised to curtail earmarks. But the White House says that they are going to sign the omnibus bill, which is a holdover from the Bush administration. But they hinted that Obama would veto future spending bills that were loaded with earmarks. Why wait? Why not veto this one? Why not send a message that Congress simply cannot wallow up to the hog trough...especially not now, while Rome is burning.

9000 earmarks...I am totally disgusted.

Geithner needs to step up or step aside

I have grown restless lately, waiting for Treasury to step up to the plate and act like a leader. This morning I read a NY Times article that points out a main reason why - Treasury Secretary Tim Geithner still has not staffed up the Department. The Times points out that Geithner has only filled about half of the top spots.

I think we can all agree that the economy is the most pressing issue we face right now, and the Obama administration is dropping the ball big time. As the Times article pointed out, "Of the four major federal departments — State, Justice, Defense and the Treasury — the Treasury has had the fewest nominees even though it is dealing with probably the most significant problems facing the government." That shortfall is on Geithner.

So far Geithner has been a dud. When we need bold action and reassurances, we get a Treasury Secretary that hardly ever appears in public, and when he does his pronouncements are so vague, so uninspiring, that he actually makes the problems worse. Those open Treasury posts are an example of how unqualified Geithner is. To be effective at that job, you need to be not just savvy about economics and the market, but you need to also be a leader, a recruiter, a manager, a coach and a delegater. It appears that the reason Treasury is moving so slow is because Geithner is doing everything himself.

These are extraordinary times, and we need extraordinary effort. We are not getting it. Obama needs to take Geithner to the wood shed. Step up or step aside. We need to know that the best and brightest are working on the economy and our foundering banking system. If Geithner can't do the job, President Obama should cut his losses and replace him.

Foreclosure prevention, or foreclosure delay?

The New York Times reports details of the Obama administration foreclosure prevention initiative today, and it looks like it is only delaying the inevitable. The plan pays lenders a flat fee to reduce loan interest rates to no more than 38 percent of a family’s gross monthly income. Then the government pays the actual cost of reducing the interest rate further to 31 percent of the gross monthly income. This rate would remain for five years, then will rise one percent a year until it is back to its original amount. Let's crunch some numbers, shall we?

According to the National Associate of Realtors (NAR), the average home price in the US as of February 4th is $213,100. According to the census bureau, the average family income in 2007 was $50,233. While figures are not yet available for the current average, we would have to assume it is lower, given layoffs and wage reductions that are so common right now. Let's be conservative and call the average $45,000. Let us further assume that the family has one of those "bad" mortgages that started with low payments but quickly increased them to, 8%. That would be a monthly mortgage payment of $1,562.92 or $18,755.04 per year. This mortgage payment represents 41% of the family's gross income.

Under the Obama plan, the family's mortgage payment would be reduced to $1,162.5, roughly 5.15% interest. That rate will remain in effect for five years, then rise 1% until it is back to 8%, just under eight years total. By then the family will be back in the same boat.

Obviously, the plan hopes that inflation will cause salaries to rise so that the restored mortgage payment will by then be only 31% of gross family income. In order for that to happen, the family income has to be $60,500 by 2017. That is a 34.4% increase in family income over eight years. But according to inflationdata.com, the inflation rate in January was 0.03%. For the family to reach the magic 31% mark, inflation would have to increase substantially. If it does, inflation will not only raise wages, but also the cost of gas, food, clothing, etc. So the family's extra income will be at least partially eaten up by those increases, leaving less for the mortgage.

My question is...are we really solving the problem or just delaying it? Many of the families this plan is designed to help bought at the top of the real estate market. Now that home prices have fallen so drastically (17% in the last year alone, according to NAR), most homeowners who bought in the last several years owe much more than the home is worth. Home prices have fallen so drastically, and the economy is so sluggish, it appears likely that in eight years these rescued homeowners will still owe more than the home is worth. And unless they increase their income past inflation levels, they will again be paying too high a percentage of gross income for their mortgage.

One advantage of this plan is that it stops the bleeding now. Given our current situation, that is not a bad thing. But the plan will not "fix" the problem, as we will see after five years when those mortgage interest rates start to rise again. And those properties will continue to be a sword of Damocles hanging over the real estate market.