Nietzsche on Bank of America

The positive correlation between incompetence and unethical conduct at companies is striking, for, theoretically at least, a person can be talented or smart and of questionable character. Of course, it could be that cutting corners is a survival strategy of people who are not competent. However, shirking seems to reflect a sordid character, which, like personality, is relatively constant throughout one’s life—though character flaws could manifest more when times are tough (as in when incompetence has eventuated in a dire balance sheet). One might investigate, moreover, whether a firm’s culture can become more tolerant of unethical conduct when the finances are going south—or do unethical cultures tend to be like fixtures in organizations irrespective of financial condition?

The full essay has been incorporated into On the Arrogance of False Entitlement: A Nietzschean Critique of Business Ethics and Management, available at Amazon.

Angela Merkel: Leading Germany in the E.U.

In the E.U. state of Germany, Angela Merkel had her work cut out for her in getting her coalition to carry the German House, or Bundestag. In vesting the debt bailout fund with powers had been at the state level. Conservatives feared the deal would “open to the door to relinquishing more sovereignty to the European Union.”[1] Also, the legislators in her Free/Christian Democrat coalition were having trouble justifying the increased cost to their constituents of the expanded fund even though it is geared to keeping the E.U. debt-loads at the state level from spinning out of control—meaning at the expense of the German economy. Economically, it can be argued that expanding the E.U.’s bailout fun is in the economic interest of the state of Germany and its residents.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

1. Vanessa Fuhrmans, “Merkel Faces Test OverBailout Fund,” The Wall Street Journal, August 30, 2011.

Social Media in the UK: Protests and Criminal Activity

Officials from the E.U. state of the United Kingdom met with representatives of Twitter, Facebook and Blackberry on August 26, 2011 “to discuss voluntary ways to limit or restrict the use of social media to combat crime and periods of civil unrest.”[1] Theresa May, the state’s Home Minister, said the aim of the meeting was to “crack down on the networks being used for criminal behavior.”[2] However, reducing the protests, rioting, and looting to such behavior ignores the point that civil unrest can include political protest. So it may be disturbing to some that the discussion, according to some who were present, “was still aimed at reeling in social media and strengthening the hand of law enforcement in gathering information.”[3] What would stop the police from gathering information on people taking part in a political protest against police brutality, for example? It would be convenient for a police department to classify a march as “criminial behavior” in breaching the peace, or simply collect information without any subterfuge.

Jo Glanville, the editor of Index on Censorship, observed, “You do not want to be on a list with the countries that have cracked down on social media during the Arab Spring.”[4] Indeed, Iran sent a human rights delegation to Britain to study human rights violations.” It is worth pointing out that the E.U., of which Britain is a state, has a charter of human rights. Yet as Gordon Scobbie, a senior police employee pointed out, the police’s duty to protect people from being harmed by others should be balanced with human rights rather than simply disregarded. Innocent people in Britain were afraid for their housing and lives during the riots, and it would surely be moral for the police to have protected them. The decisive question is perhaps whether officials’ special access to social media could effectively be limited to this moral purpose, which is delimited by criminal rather than political behavior.

As Lord Acton said, absolute power corrupts absolutely. If the state gains too much control over individual citizens, that alone can act as a pressure-cooker that could explode in political violence and even revolution. What would stop a government from using its inroads in social media to defend itself from the political opposition? Furthermore, to the extent that social interaction and liberty are things that should be valued in a society (and republic), might decreased privacy, such as is already the case on Facebook, be counterproductive in the long run? Might even the potential invasiveness lead people to feel less secure, and thus more susceptible to joining efforts to topple the regime itself? In other words, too much institutional control of individuals can backfire and give rise to a self-fulfilling prophesy.

1. Ravi Somaiya, “In Britain, A Meeting on Limiting Social Media,” The New York Times, August 26, 2011. 

2. Ibid.

3. Ibid.

4. Ibid.

The Payroll Tax Cut: A Luxury?

As U.S. deficits and thus the federal government's debt had been increasing since the Clinton Administration in the late 1990s, proposals for a payroll tax-cut entailed risking the financial condition of the U.S. Government. To be sure, increasing government spending above inflation was risky too. Here, though, tax policy as it relates to deficits, and thus debt, is analyzed. 

During the summer of 2011, Rep. Eric Cantor (R-Va), the U.S. House's Majority Leader, opposed continuing a tax cut. It was not the tax cut that had been enacted under George W. Bush that disproportionately benefitted the top brackets. That tax cut was sold to the American public as good under the supposition that the growth of jobs would result. The tax cut opposed by the Majority Leader in 2011 pertained to the payroll tax. Workers’ contributions to social security were to be cut from 6.2% to 4.2% until the end of 2011. A spokesman for the Majority Leader argued that if “the goal is job creation, Leader Cantor has long believed that there are better ways to grow the economy and create jobs than temporary payroll tax relief.”[1] However, it could be argued that whereas the tax cuts at the upper-income brackets tend to be saved because the wealthy already have the means to purchase what they want, workers tend to spend any extra disposable income precisely because they don’t have the means to buy even all that they need, particularly in the case of families. Moreover, workers would feel the end of a tax cut more than a rich person would.

It does appear that the Republican party’s support of tax cuts hinged on the financial interest of the rich—tax cuts are not created equal. This asymmetry eclipses the party’s ideological goal of smaller government, for otherwise any tax cut would be sought because it would mean less government taking as well as the possibility of starving government spending. Furthermore, the asymmetry trumped a priority on reducing a deficit that had been over $1 trillion in 2010. A deficit is the annual addition to the U.S. Government’s debt, which was around $14 trillion at the start of 2011. On the heels of S&P downgrading that debt to AA, continuing any tax-cut, even to prop up the economy, can be reckoned as foolhardy unless the money that taxpayers would otherwise pay in taxes is spent or invested sufficiently to boost the economy enough that the government would take in more tax revenue than the amount lost due to the tax-cut.

It is possible that Freddie Mac and Fannie Mae could have done more for the economy by allowing homeowners in trouble to refinance to the lower interest rates in 2010 and 2011 than would have been lost from ending the tax cuts. If so, it could be that we could do better in lowering deficits while stimulating the economy. Even with some drag on the economy, the numbers on the baby boomers retiring suggests that the social security fund could not afford the payroll tax cut in 2012. In fact, it could be that the fiscal impacts of government policy are less significant on the overall economy than on the deficits and debt, which are more immediate to the government's financial position. Debating whether to continue tax cuts with respect to economic growth (and even jobs) may reveal a lack of attention on reducing public debt as a priority if the tax revenue given up by the Internal Revenue Service is more than additional tax revenue to be obtained from the added economic growth from the tax-cuts. Indeed, analysis of the Bush tax cuts had shown that the tax revenue given up was more than the induced take. In technical language, the Laffer Curve had already been discredited by 2011. Therefore, ignoring the cost of a tax cut in terms of tax revenue, and thus higher deficits, is negligent and irresponsible, whether by Congress, the media, or the citizenry itself.

1. Jennifer Steinhauer, “For Some in G.O.P., a Tax Cut Not Worth Embracing,” The New York Times, August 26, 2011.

Refinancing Mortgages: Only for the Rich?

According to the U.S. Government, prices of homes with government-backed mortgages fell 5.9% in the second quarter of 2011 from a year earlier. This was the biggest decline since 2009, which was on the heels of the credit crisis of late 2008. In 2011, more than one in five homeowners with mortgages owed more than their homes are worth. That translates to at least 10.9 million families, almost none of whom could refinance. While the Treasury Department and Federal Reserve were able to pump hundreds of billions of dollars into American banks, federal programs to assist homeowners had been regarded as ineffective.. [1] Out of the $45.6 billion in TARP funds (the total being $800 billion) set aside to help struggling homeowners, only $22.9 billion had been spent by August 2011. Fewer than 1.7 million loans had been modified under federal programs as of 2011. Just over 760,000 permanent mortgage modifications had been initiated under the government programs while at least 5.5 million mortgages were in delinquency or foreclosure. Andrea Risotto, a spokesperson at Treasury, said that the unused portion of the TARP funds for homeowners would be used to reduce the deficit.[2]

So it is perhaps not a surprise that even though mortgage interest rates were around 4%, the Obama administration was hedging in 2011 on whether to direct Fannie and Freddie to allow the existing mortgages guaranteed by those agencies to be refinanced. David Wessel observed that whereas taxpayers bore all the downsides of nationalizing the two housing guarantors, the two firms and their regulators consistently resisted helping taxpayers over their heads on their mortgages.[3]

Even though the mortgage servicers and banks had been at the very least complicit in the liar’s loans of many of the sub-prime mortgages, the Obama administration was not sure even as late as mid 2011 whether homeowners behind in their payments should be able to refinance. According to the New York Times, despite “record low interest rates, many homeowners have been unable to refinance their loans either because they owe more than their houses are now worth or because their credit is tarnished.” Yet it was “unclear . . . whether people who are delinquent on their mortgages would be eligible or whether lenders would administer it.”[4] So it would appear that only homeowners who don’t need the refinancing will be able to get it.

The priorities showing through both with TARP and the refinancing ideas being floated in 2011 may have reflected the anti-borrower bias Countrywide and other mortgage originators, whose meagerly educated sales force and managers believed that the struggling sub-prime borrowers were lazy and dishonest idiots who do not deserve a break from the “sacred contracts” (even if constructed as a liar’s loan—meaning a lender lying about the borrower’s income to secure a double commission).[5] 

In other words, the imbalance concerning the treatment of the banks and the borrowers by the U.S. Government is consistent with the bankers’ selective attention to culpability. Most likely, the sub-prime crisis had multiple contributing sources. Were the government’s responses to reflect this, both the financial institutions and the borrowers would be given some leeway so as to obviate a collapse of the entire economy. Both the major banks and the struggling homeowners would be attended to because the crisis was larger than any one of them. For the government’s priorities to reflect one of them suggests disproportionate influence, which ultimately is detrimental to the republic itself.

1. Shaila Dewan and Louise Story, “U.S. May Back Refinance Plan for Mortgages,” the New York Times, August 25, 2011. 
2. Ibid.
4. Ibid.

5. David Wessel, “Tracking Missteps Behind World’s Economic Slump,” Wall Street Journal, August 25, 2011. 
3. Ibid.

States Bypassing the E.U.: A Problem for Federalism?

In August 2011, opposition was mounting among state governments to the Finnish-Greek bilateral deal wherein Greece would pay Finland 500 million euros in cash (in an escrow account) as collateral against Finnish loans. Angela Merkel of the state of Germany objected to one state getting extra collateral. Indeed, other state governments are seeking similar deals as Finland, which could undermine Greece’s ability to repay (and the “preferred creditor” status of the IMF). Furthermore, much of what the state of Greece owned at the time had already been earmarked to be sold for privatization proceeds.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Eurobonds: The Solution to the E.U.’s Debt Crisis?

One possible solution to the E.U.’s debt crisis may be debt issued by an E.U. government agency and vouched for by all 17 state governments that use the euro currency. According to The Wall Street Journal, “Such euro bonds would dispel concerns Italy or Spain might not be able to get the financing they need, as it would be provided centrally.”[1] Of course there is the downside of moral hazard: states facing crushing debt-loads could rely on the wealthier states to guarantee additional debt. Because the “fiscally imprudent” state governments “could borrow freely at low cost, there would be little incentive to stop.”[2] The wealthier states in turn would be in the position of guaranteeing debt that they do not control.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

1. Charles Forelle, “A Shaken Europe Looks for Bolder Fixes,” The Wall Street Journal, August 19, 2011. 

2. Ibid.

Two Tiers Fiscally in the E.U.: Too Simplistic

The main question regarding E.U. reforms oriented to preventing state governments from being overburdened with debt has been stated by Stephen Castle of The New York Times as follows: “Is the euro more in need of Germanic fiscal stability or the growth and stimulus policies that France traditionally champions?”[1] I contend that there are bigger fish to fry that unfortunately have gone largely unnoticed.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

1.  Stephen Castle, “In Debt Crisis,Reminders of Disputes in Euro’s Founding,” New York Times, August 18, 2011. See also Nathalie Boschat and Gabriele Parussini, “France, Germany Push for Sanctions,” Wall Street Journal, August 18, 2011.

Fraud at S&P: A Conflict of Interest

By the summer of 2011, the U.S. Government had brought relatively few cases against large financial institutions for their roles in the financial crisis of 2008. For instance, the government investigated Washington Mutual and Countrywide without taking any further action in spite of reports of “liars’ loans.” In the case of the three major ratings agencies, the business model “is riddled with conflicts of interest, since rating agencies might make their grades more positive to please their customers. Before the financial crisis,“banks shopped around to make sure rating agencies would award favorable ratings before agreeing to work with [one of the agencies].”[1] In spite of accounts of the agencies’ mixing of business and ratings, the Dodd-Frank law of 2010 retained the issuer-pays business model while putting the agencies on the same legal liability level as accounting firms. 


The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1.  Louise Story, “Justice Inquiry Is Said to Focus on S&P Ratings,” The New York Times, August 18, 2011. 

Congressional Earmarks: A Personal Conflict of Interest

Congressman Darrell Issa (R-Calif.) runs his local district office down the hall from where he runs his businesses worth hundreds of millions of dollars. According to the New York Times, his “dual careers” evince a “meshing of public and private interests rarely seen in government.”[1] While advocating for business in Congress, he split his holding company into separate multibillion-dollar businesses, started an insurance company, and retained a financial interest in his automobile-alarm business. At least some of his actions in government have made him richer.[2] Most notably, he secured Congressional earmarks for road widening and other public works projects that runs his local district office down the hall from where he runs  that he owns in his district. For example, earmarks that he arranged made possible the widening of a busy road in front of a medical plaza that he bought for $10.3 million. To be sure, his constituents applaud the easing of traffic, but what if the money would otherwise have been spent to relieve more severe congestion elsewhere? Even if no worse instances existed, that the congressman’s constituents benefitted from the street-widening does not mean that his action was ethical.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. Eric Lichtblau, “Helping His District, andHimself,” New York Times, August 15, 2011.

2. Ibid.

The London Riots of 2011: Protesting Police Power

Over three nights of rioting in London after the police shooting of a 29-year-old father of four, over 450 people had been arrested and 44 police officers injured. The rioting began on August 6, 2011 when a peaceful march in protest of the police use of lethal force turned violent. According to The Huffington Post, “Hooded and masked youths threw bottles and petrol bombs at police and buildings and vehicles, setting a building, a bus and cars alight.”[1] The source of the violence seems clear, at least with respect to its beginning. Rather than being fueled by greed at that point, anger at a possible abuse of power by the local police seems to have been the motive.[2] To be sure, rioting spread to include the looting of stores by kids and opportunistic adult thieves, but to claim that greed itself was the driving force instigating the riots is to miss the purpose of the initial march and give the London police a pass.

According to The New York Times, “The Daily Telegraph struck a popular chord when it blamed a ‘culture of greed and impunity’ that [the Telegraph] said extended to corporate boardrooms and the government itself.”[3] Indeed, the greed that almost took down the global financial system in September 2008 seemed unglued from any feasible normative constraint, including that proffered by Christianity (which formerly could threaten an afterlife literally of fire and brimstone).  Indeed, the Christian virtue of magnificence (i.e., philanthropy on a grand scale) can even perpetuate greed, as being wealthy is a prerequisite— rather unlike like a camel too big to get through the eye of a needle. Left unanswered by The Telegraph, however, was how or whether the greed in a bank’s boardroom that results in liars’ loans followed by foreclosures differs from the greed of a looter.  The differential treatment by the state government was palpable: bankers get bailouts (and bonuses), while looters get the full force of the law.

In any case, irrespective of any accretions of greed having been adjoined to the violence, residual anger at the police’s use of their power was likely in play as late as the third night, when, according to the deputy Mayor, “disturbing levels of violence were directed at officers again,”[4] including one policeman suffering broken bones and another receiving an eye injury. Were greed the only motive, anger would not have been directed at the police. Rather, the strategy would have simply been to evade them.

Furthermore, lest it be presumed that the anger over the force used by the police was simply a manifestation of selfishness, it could be argued alternatively that the unselfish human motive to stand up to power in the midst of an injustice was involved. This is not to justify the behavior, for the protestors/rioters would have been wiser to wait for the Independent Police Complaints Commission do its work and arrive at a determination; an unsatisfactory answer could then be matched with peaceful protest and an unwillingness to volunteer to help the police, rather than with violence.

At a distance from all the “mayhem,” I suspect that there is more to this story than merely a reaction against one incident (and even the looting).  I would not be surprised if the local police had a pattern of behavior of abuse of power, and that the shooting of the father of four was the last straw. To be sure, the troubled youth culture that partook of the violence and stealing is perhaps just as corrosive as unaccountable police abuse of citizens. Both problems are in need of being addressed in many cities around the world, not just in London. This is not to say that the riots reduce to public policy choices such as spending cuts in services (or to a debate on them). A police culture that does not respect law or citizens is unacceptable in a free society. A police officer who ignores department policy and even law to push a citizen beyond what is right and lawful is just as much of a thug as is the teenager who throws rocks at store windows in order to steal a plasma TV. To be sure, a youth culture of utter disrespect for others is also unacceptable, and it would be good if citizens would stand up to such thugs. Standing above both the police and teenage self-vaunted bullies are the people who sought to march in peace to point to the possible injustice of the initial killing. My point is simply that those people and their message were too quickly forgotten in the public uproar about greed, selfishness and the slow police response.

Therefore, rather than point to greed and selfishness exclusively, I would recommend that the investigation by the IPCC be expanded to look at whether the London police department has a pattern of abuse of citizens. That the department was inadequate in responding to the first riots suggests a culture of incompetence, and such a culture can easily go with an unethical culture. Where there is smoke, there is usually fire too—meaning they may not have only been in the cars and buildings. Riots do not pop up out simply from greed, which is more or less a constant in human nature. Nor do selfish people wake up one day and start rioting because they are suddenly more selfish. Rather, specific injustices fomenting resentment and frustration are much more likely to spark violence (which in turn can enable kids and adults to steal and destroy property even as ends in themselves).

I am not denying that people are greedy. In fact, emphasizing justice, especially in terms of benevolence, can serve as a constraint on greed! Along with actively valuing justice, people can have a low tolerance for injustice when accountability seems compromised or utterly corrupted by power-aggrandizement. Of course, two wrongs don’t make a right even where an injustice is the spark; the initial march could and should have remained peaceful.  Non-violent non-cooperation—including giving a corrupt police force the cold shoulder, actively ignoring police on their beat as outside society—would do more to make the sordid presumption of assumed power transparent.

1. Dina Rickman, “London Riots,” The Huffington Post, August 9, 2011. 

2. “Questions Over Duggan’s Death as Tension in London Remains High,” The Huffington Post, August 8, 2011.

3. Ravi Somaiya, “After Riots, Conflicting Answers as to ‘Why’,”The New York Times, August 13, 2011. 

3. Dina Rickman, “London Riots,” The Huffington Post, August 9, 2011.

What Is a Member-State?

It is easy to get locked into a certain way of viewing something, even if the perspective, it turns out, has more to do with one’s epoch than the thing itself, including how it came about and was designed. I contend that one of the main category mistakes is that wherein one Union is treated as equivalent to a state in another Union. It is astounding when citizens of the former acquiesce in the likening of “apples and oranges” at their own expense—in this case, citizens of the United States unwittingly treating their Union as though it were simply France with a very big backyard rather than a Union commensurate with the European Union (in which France is a state). The affable “going along” is caused in part by a willful indifference that relegates any study of the origins and history of the United States. I submit that a proper comparison between the U.S. and E.U. takes both after their respective first fifty years—hence most Americans are ill-equipped to refute the asseverations of European friends that the U.S. itself is somehow equivalent to a state in their own Union.

The complete essay is at Essays on Two Federal Empires.

The Debt-Ceiling Disaster Flick, Hollywood-Style

During the last two weeks of July 2011, the American media was focused on the debt-ceiling negotiations. In the midst of a summer with plenty of natural distractions, an increasing number of Americans were cluing in to find their federal government at a stalemate as the clock ticked to a possible economic catastrophe said to begin on 12:01am on August 3, 2011. The U.S. Treasury department had estimated that it would run out of ways to make up for the lack of additional borrowing authority on August 2^nd.  To the media, that meant a clock ticking down to 12 midnight. In actuality, tax revenues were up so the actual date was said to be around August 10^th. In any case, the U.S. would not implode at precisely 12:01am on August 3^rd by any account, yet that made better drama, which in turn increased viewership.

I contend that the American people were, by in large, taken for a ride by the media and members of Congress who tacitly worked to build suspense toward a precise crisis-point in order to gain the attention of the people. Never mind that the possible crisis was self-inflicted; the media companies would have higher viewership numbers and the elected representatives would be at the center of attention. To deflect blame, the politicians used their press conferences to take partisan shots at the other party. The idea was basically this: I get the attention and you get the blame. Meanwhile, msnbc.com assures its viewers that it would be covering the crisis all weekend.

I suspect that the suspense was faked. The Congressional leaders quietly admitted that they would not allow the U.S. Government to default. Few viewers apparently picked up on that; nor did it stop the news networks from continuing with their ticking clocks and instilling still more fear of a financial collapse. Put another way, were the politicians really as worried as they said they were, they would not have been spending their press conferences to bash the other guy. Were an asteroid rapidly hurling toward Earth, members of Congress would really be too scared to be concerned that the other party had gotten a good shot in and therefore should be countered. The officials would not even think of partisanship if there were a real danger of collapse. Nor would they allow themselves to get distracted by bringing in other obfuscating priorities. Instead, they would be concentrating on coming up with a plan to blow up the rock.

It is interesting, by the way, that in spite of such sustained and constant news coverage of the "crisis" over weeks, an intensely concentrated or focused public analysis did not ensue. Rather, there was merely more time for "talking heads" to pontificate and argue over the partisan shots and distracting other priorities that kept attention from being focused on the debt-ceiling question itself. In other words, even saturated coverage by the news media did not proffer a better public discourse on the topic. Is there perhaps a limit to how well public discourse can function in a union of republics or countries (i.e., on the scale of empire)? Even if so, the conduct of the representatives in the representative democracy does not give one more confidence.

For example, neither the media nor the public had an accurate understanding of default. Rather than happening at 12:01am on August 3rd without a raise in the debt-ceiling, it would not have happened until or unless the Treasury department missed interest and principal payments on Treasury bonds. Going on a cash basis and even closing some government agencies do not signify default, which pertains only to servicing existing debt. To the extent that the final agreement was accepted under the assumption that default would ensue in a day or two, the various errors concerning the nature of the doomsday contributed to the problem.

What most concerns me, however, is that the actual behavior of the members of Congress may have belied their attention-grabbing scare tactics. Sadly, I think the American people were taken in by the disaster-film narrative; we gave the news media and the politicians the attention they craved and we let them convince us that it was do or die on August 2, 2011. We bought into the notion that the world as we know it would end abruptly at 12:01am on August 3^rd.  Consistent with the Congressional leaders’ quiet admission that not raising the debt-ceiling was “off the table,” a compromise arrived just in time, like a vintage ending of a Hollywood script--arriving just in the nick of time. The suspense was pushed just to the brink (defined as 12:01am on August 3^rd), then the quick climax, just as in a standard screenplay. No more than ten or fifteen pages are allowed after the critical event when everything comes to a head.

I contend that the powers in Congress and the White House were quietly managing this drama, and that it ended just as they sought (i.e., maximizing the dramatic element, and thus the attention). Compromise did not have to come at the eleventh hour; the agreement was reached because it had been agreed that it would be. In other words, the politicians were not primarily oriented to averting "crisis"; they allowed their other agendas to intercede and we enabled this by giving the attention they craved. In other words, we rewarded the very behavior that belied the representatives' own claims, and we did so by tacitly agreeing to sit through the self-inflicted (by us and them) drama.

If I am correct, the problem involves a conflict of interest wherein the news media and politicians had as much or more of an interest in the attention that goes with even a self-inflicted crisis than in solving the immediate problem itself (i.e., deciding whether to raise the debt-ceiling). To the Americans who thought the Russian roulette was for real—that the politicians would actually permit default—the attention-grubbing plot was undoubtedly not appreciated.  Nor was it in the interest of the United States. It is as though the politicians in front of the microphones were indifferent to the stress being put on people already stressed out over a languid jobless “recovery.” But the politicians came out as screwed up, you retort. Yes, and Congress itself has an even worse reputation than it had before the "crisis."

It should be remembered, however, that politicians (and journalists) yearn for attention for its own sake, and they will do their utmost to shovel the blame on the other politician's sidewalk so to get both the attention and the credit for averting the crisis the very possibility of which they themselves created. If this doesn't sound rational, it is because it isn't. The politician's desire for attention can be intoxicating and even self-destructive. In the case of the debt "crisis" orchestrated drama, simply for us all to go through it was destructive. We were so oriented to the clocks ticking down to doomsday that we missed the real destructiveness going on in our being taken in by the ruse itself. Put still another way, if the members of Congress really thought the U.S. could be facing economic catastrophe, engaging partisan shots would be beyond reckless, given the pivotal role of the members in "saving" the country. Their own partisanship and other intervening priorities belied their claims of the magnitude of the risk of default. At the very least, something was amiss in how the politicians were presenting the drama itself, given their conduct. Sadly, we, the American people, were taken in by the torrid narrative itself, and therein resides the true destructiveness of the drama.

A Self-Inflicted Compromise on the Debt-Ceiling in the U.S.

On August 1, 2011, the Republican and Democratic Congressional leaders and the Democratic President came to an agreement--a compromise of sorts--on raising the debt-ceiling and spending. According to the deal, cuts of roughly $920 billion over ten years would be followed either by adopting a twelve-member Congressional committee's recommendations (including possible cuts and revenue increases) or watching another round of automatic across-the-board spending cuts. Structurally, this arrangement is unbalanced with respect to the nature of compromise between the two parties. In short, it proffers a relatively easy out for the Republicans.

Specifically, the "enforcement mechanism" that would automatically activate should the "super" committee's recommendations not be voted and signed into law contains only cuts even though the Democratic position is for a mix of cuts and revenue. In other words, the mechanism itself is biased to the default of one of the parties. The only incentive the Republican party would have to accept the committee's recommendation would be to avoid the military cuts in the automatic cuts. To obviate any revenue increases, even if only for the wealthy, the Republicans in Congress need only scuttle the committee's work or vote it down. The mechanism being counted on as "teeth" for the committee's work to be adopted should have included both across the board cuts AND revenue increases (including on the very rich). The incentive would have been on BOTH parties to work something out in committee.

Therefore, if I am correct, the structure, or arrangement, of the compromise is itself unbalanced, at least from the standpoint of incentives. It would seem that even with the possible cuts to defense, the compromise itself is a win for the Republicans. Once again, Democrats can be left wondering why their representatives gave up the store, or at least kept the door unlocked. In terms of the public option in the health-insurance reform, the matter of breaking up the biggest banks (too big to fail), and finally in permitting a spending-cuts-only outcome to the debt problem, Democrats, it seems to me, have real cause in withholding their votes from "their" man in the White House in 2012. Yet they have no practical alternative absent a primary challenger. They may be in a very tight box in "staying the course," lest they want to risk seeing the keys of the White House store formally change hands to the other party.