Douglass presents a formidable amount of evidence, some old and some new, against the CIA and covert action agencies within the national security state, and does so in such a logical and persuasive way that any fair-minded reader cannot help but be taken aback; stunned, really. And he links this evidence directly to JFK’s actions on behalf of peace.
He knows, however, that to truly convince he must break a “conspiracy of silence that would envelop our government, our media, our academic institutions, and virtually our entire society from November 22, 1963, to the present.” This “unspeakable,” this hypnotic “collective denial of the obvious,” is sustained by a mass-media whose repeated message is that the truth about such significant events is beyond our grasp, that we will have to drink the waters of uncertainty forever. As for those who don’t, they are relegated to the status of conspiracy nuts.
Fear and uncertainty block a true appraisal of the assassination - that plus the thought that it no longer matters.
It matters. For we know that no president since JFK has dared to buck the military-intelligence-industrial complex. We know a Pax Americana has spread its tentacles across the globe with U.S. military in over 130 countries on 750 plus bases. We know that the amount of blood and money spent on wars and war preparations has risen astronomically.
There is a great deal we know and even more that we don’t want to know, or at the very least, investigate.
If Lee Harvey Oswald was connected to the intelligence community, the FBI and the CIA, then we can logically conclude that he was not “a lone-nut” assassin. Douglass marshals a wealth of evidence to show how from the very start Oswald was moved around the globe like a pawn in a game, and when the game was done, the pawn was eliminated in the Dallas police headquarters. As he begins to trace Oswald’s path, Douglass asks this question: “Why was Lee Harvey Oswald so tolerated and supported by the government he betrayed?” After serving as a U.S. Marine at the CIA’s U-2 spy plane operating base in Japan with a Crypto clearance (higher than top secret but a fact suppressed by the Warren Commission), Oswald left the Marines and defected to the Soviet Union. After denouncing the U.S., working at a Soviet factory in Minsk , and taking a Russian wife - during which time Gary Powers’ U-2 spy plane is shot down over the Soviet Union - he returned to the U.S. with a loan from the American Embassy in Moscow, only to be met at the dock in Hoboken, New Jersey by a man, Spas T. Raikin, a prominent anti-communist with extensive intelligence connections, recommended by the State Department. He passed through immigration with no trouble, was not prosecuted, moved to Fort Worth, Texas where , at the suggestion of the Dallas CIA Domestic Contacts Service chief, he was met and befriended by George de Mohrenschildt, an anti-communist Russian, who was a CIA asset. De Mohrenschildt got him a job four days later at a graphic arts company that worked on maps for the U.S. Army Map Service related to U-2 spy missions over Cuba. Oswald was then shepherded around the Dallas area by de Mohrenschildt who, in 1977, on the day he revealed he had contacted Oswald for the CIA and was to meet with the House Select Committee on Assasinations’ Gaeton Fonzi, allegedly committed suicide. Oswald then moved to New Orleans in April 1963 where got a job at the Reilly Coffee Company owned by CIA-affiliated William Reilly. The Reilly Coffee Company was located in close vicinity to the FBI, CIA, Secret Service, and Office of Naval Intelligence offices and a stone’s throw from the office of Guy Bannister, a former Special Agent in Charge of the FBI’s Chicago Bureau, who worked as a covert action coordinator for the intelligence services, supplying and training anti-Castro paramilitaries meant to ensnare Kennedy. Oswald then went to work with Bannister and the CIA paramilitaries.
During this time up until the assassination Oswald engaged in all sorts of contradictory activities, one day portraying himself as pro-Castro, the next day as anti-Castro, many of these theatrical performances being directed from Bannister’s office. It was as though Oswald, on the orders of his puppet masters, was enacting multiple and antithetical roles in order to confound anyone intent on deciphering the purposes behind his actions and to set him up as a future “assassin.” Douglass persuasively argues that Oswald “seems to have been working with both the CIA and FBI,” as a provocateur for the former and an informant for the latter. Jim and Elsie Wilcott, who worked at the CIA Tokyo Station from 1960-64, in a 1978 interview with the San Francisco Chronicle, said, “It was common knowledge in the Tokyo CIA station that Oswald worked for the agency.”
When Oswald moved to New Orleans in April 1963, de Mohrenschildt exited the picture, having asked the CIA for and been indirectly given a $285,000 contract to do a geological survey for Haitian dictator “Papa Doc” Duvalier, which he never did , but for which he was paid. Ruth and Michael Paine then entered the picture on cue. Douglass illuminatingly traces in their intelligence connections. Ruth later was the Warren Commission’s chief witness. She had been introduced to Oswald by de Mohrenschildt. In September 1963 Ruth Paine drove from her sister’s house in Virginia to New Orleans to pick up Marina Oswald and bring her to her house in Dallas to live with her. Thirty years after the assassination a document was declassified showing Paine’s sister Sylvia worked for the CIA. Her father traveled throughout Latin America on an Agency for International Development (notorious for CIA front activities) contract and filed reports that went to the CIA. Her husband Michael’s step-father, Arthur Young, was the inventor of the Bell helicopter and Michael’s job there gave him a security clearance. Her mother was related to the Forbes family of Boston and her lifelong friend, Mary Bancroft, worked as a WW II spy with Allen Dulles and was his mistress. Afterwards, Dulles questioned the Paines in front of the Warren Commission, studiously avoiding any revealing questions. Back in Dallas, Ruth Paine conveniently got Oswald a job in the Texas Book Depository where he began work on October 16, 1963.
From late September until November 22, various Oswalds are later reported to have simultaneously been seen from Dallas to Mexico City. Two Oswalds were arrested in the Texas Theatre, the real one taken out the front door and an impostor out the back. As Douglas says, “There were more Oswalds providing evidence against Lee Harvey Oswald than the Warren Report could use or even explain.” Even J. Edgar Hoover knew that Oswald impostors were used, as he told LBJ concerning Oswald’s alleged visit to the Soviet Embassy in Mexico City. He later called this CIA ploy, “the false story re Oswald’s trip to Mexico…their ( CIA’s) double-dealing,” something that he couldn’t forget. It was apparent that a very intricate and deadly game was being played out at high levels in the shadows.
We know Oswald was blamed for the President’s murder. But if one fairly follows the trail of the crime it becomes blatantly obvious that government forces were at work. Douglass adds layer upon layer of evidence to show how this had to be so. Oswald, the mafia, anti-Castro Cubans could not have withdrawn most of the security that day. The Sheriff Bill Decker withdrew all police protection. The Secret Service withdrew the police motorcycle escorts from beside the president’s car where they had been the day before in Houston; took agents off the back of the car where they were normally stationed to obstruct gunfire. They approved the fateful, dogleg turn (on a dry run on November 18) where the car came, almost to a halt, a clear security violation. The House Select Committee on Assasinations concluded this, not some conspiracy nut.
Who could have squelched the testimony of all the doctors and medical personnel who claimed the president had been shot from the front in his neck and head, testimony contradicting the official story? Who could have prosecuted and imprisoned Abraham Bolden, the first African-American Secret Service agent personally brought on to the White House detail by JFK, who warned that he feared the president was going to be assassinated? (Douglass interviewed Bolden seven times and his evidence on the aborted plot to kill JFK in Chicago on November 2 – a story little known but extraordinary in its implications – is riveting.) The list of all the people who turned up dead, the evidence and events manipulated, the inquiry squelched, distorted, and twisted in an ex post facto cover-up - clearly point to forces within the government, not rogue actors without institutional support.
The evidence for a conspiracy organized at the deepest levels of the intelligence apparatus is overwhelming. James Douglass presents it in such depth and so logically that only one hardened to the truth would not be deeply moved and affected by his book.
He says it best: “The extent to which our national security state was systematically marshaled for the assassination of President John F. Kennedy remains incomprehensible to us. When we live in a system, we absorb and think in a system. We lack the independence needed to judge the system around us. Yet the evidence we have seen points toward our national security state, the systemic bubble in which we all live, as the source of Kennedy’s murder and immediate cover-up.”
Speaking to his friends Dave Powers and Ken O’Donnell about those who planned the Bay of Pigs invasion of Cuba, JFK said, “They couldn’t believe that a new president like me wouldn’t panic and try to save his own face. Well, they had me figured all wrong.”
Let’s hope for another president like that, but one that meets a different end.
________________________________________
[i] http://consortiumnews.com/print’2009/091309a.html
[ii] Vernon Loeb, “Soviets Knew Date of Cuba Attack,” Washington Post, April 29, 2000
[iii] See James K. Galbraith, “Exit Strategy,” Boston Review, October/November 2003
Tuesday, December 8, 2009
Does President Obama Have Anything To Fear?
JFK and The Unspeakable
Despite a treasure-trove of new information having emerged over the last forty-six years, there are many people who still think who killed President John Fitzgerald Kennedy and why are unanswerable questions. There are others who cling to the Lee Harvey Oswald “lone-nut” explanation proffered by the Warren Commission. Both groups agree, however, that whatever the truth, it has no contemporary relevance but is old-hat, history, stuff for conspiracy-obsessed people with nothing better to do. The general thinking is that the assassination occurred almost a half-century ago, so let’s move on.
Nothing could be further from the truth, as James Douglass shows in his extraordinary book, JFK and the Unspeakable: Why He Died and Why It Matters (Orbis Books, 2008). It is clearly one of the best books ever written on the Kennedy assassination and deserves a vast readership. It is bound to roil the waters of complacency that have submerged the truth of this key event in modern American history.
It’s not often that the intersection of history and contemporary events pose such a startling and chilling lesson as does the contemplation of the murder of JFK on November 22, 1963 juxtaposed with the situations faced by President Obama today. So far, at least, Obama’s behavior has mirrored Johnson’s, not Kennedy’s, as he has escalated the war in Afghanistan by 34,000. One can’t but help think that the thought of JFK’s fate might not be far from his mind as he contemplates his next move in Afghanistan.
Douglass presents a very compelling argument that Kennedy was killed by “unspeakable” (the Trappist monk Thomas Merton’s term) forces within the U.S. national security state because of his conversion from a cold warrior into a man of peace. He argues, using a wealth of newly uncovered information, that JFK had become a major threat to the burgeoning military-industrial complex and had to be eliminated through a conspiracy planned by the CIA – “the CIA’s fingerprints are all over the crime and the events leading up to it” - not by a crazed individual, the Mafia, or disgruntled anti-Castro Cubans, though some of these may have been used in the execution of the plot.
Why and by whom? These are the key questions. If it can be shown that Kennedy did, in fact, turn emphatically away from war as a solution to political conflict; did, in fact, as he was being urged by his military and intelligence advisers to up the ante and use violence, rejected such advice and turned toward peaceful solutions, then, a motive for his elimination is established. If, furthermore, it can be clearly shown that Oswald was a dupe in a deadly game and that forces within the military/intelligence apparatus were involved with him from start to finish, then the crime is solved, not by fingering an individual who may have given the order for the murder or pulled the trigger, but by showing that the coordination of the assassination had to involve U.S. intelligence agencies, most notably the CIA . Douglass does both, providing highly detailed and intricately linked evidence based on his own research and a vast array of the best scholarship.
We are then faced with the contemporary relevance, and since we know that every president since JFK has refused to confront the growth of the national security state and its call for violence, one can logically assume a message was sent and heeded. In this regard, it is not incidental that former twenty-seven year CIA analyst Raymond McGovern, in a recent interview, warned of the “two CIAs,” one the analytic arm providing straight scoop to presidents, the other the covert action arm which operates according to its own rules. “Let me leave you with this thought,” he told his interviewer, “and that is that I think Panetta (current CIA Director), and to a degree Obama, are afraid – I never thought I’d hear myself saying this – I think they are afraid of the CIA.” He then recommended Douglass’ book, “It’s very well-researched and his conclusion is very alarming.”
Let’s look at the history marshaled by Douglass to support his thesis.
First, Kennedy, who took office in January 1961 as somewhat of a Cold Warrior, was quickly set up by the CIA to take the blame for the Bay of Pigs invasion of Cuba in April 1961. The CIA and generals wanted to oust Castro, and in pursuit of that goal, trained a force of Cuban exiles to invade Cuba. Kennedy refused to go along and the invasion was roundly defeated. The CIA, military, and Cuban exiles bitterly blamed Kennedy. But it was all a sham.
Though Douglass doesn’t mention it, and few Americans know it, classified documents uncovered in 2000 revealed that the CIA had discovered that the Soviets had learned of the date of the invasion more than a week in advance, had informed Castro, but – and here is a startling fact that should make people’s hair stand on end - never told the President. [ii] The CIA knew the invasion was doomed before the fact but went ahead with it anyway. Why? So they could and did afterwards blame JFK for the failure.
This treachery set the stage for events to come. For his part, sensing but not knowing the full extent of the set-up, Kennedy fired CIA Director Allen Dulles (as in a bad joke, later to be named to the Warren Commission) and his assistant General Charles Cabell (whose brother Earle Cabell, to make a bad joke absurd, was the mayor of Dallas on the day Kennedy was killed) and said he wanted “to splinter the CIA in a thousand pieces and scatter it to the winds.” Not the sentiments to endear him to a secretive government within a government whose power was growing exponentially.
The stage was now set for events to follow as JFK, in opposition to nearly all his advisers, consistently opposed the use of force in U.S. foreign policy.
In 1961, despite the Joint Chief’s demand to put troops into Laos, Kennedy bluntly insisted otherwise as he ordered Averell Harriman, his representative at the Geneva Conference, “Did you understand? I want a negotiated settlement in Laos. I don’t want to put troops in.”
Also in 1961, he refused to concede to the insistence of his top generals to give them permission to use nuclear weapons in Berlin and Southeast Asia. Walking out of a meeting with top military advisors, Kennedy threw his hands in the air and said, “These people are crazy.”
He refused to bomb and invade Cuba as the military wished during the Cuban missile crisis in 1962. Afterwards he told his friend John Kenneth Galbraith that “I never had the slightest intention of doing so.”
Then in June 1963 he gave an incredible speech at American University in which he called for the total abolishment of nuclear weapons, the end of the Cold War and the “Pax Americana enforced on the world by American weapons of war,” and movement toward “general and complete disarmament.”
A few months later he signed a Limited Test Ban Treaty with Nikita Khrushchev.
In October 1963 he signed National Security Action Memorandum 263 calling for the withdrawal of 1,000 U. S. military troops from Vietnam by the end of the year and a total withdrawal by the end of 1965. [iii]
All this he did while secretly engaging in negotiations with Khrushchev via the KGB , Norman Cousins, and Pope John XXIII , and with Castro through various intermediaries, one of whom was French Journalist Jean Daniel. In an interview with Daniel on October 24, 1963 Kennedy said, “I approved the proclamation Fidel Castro made in the Sierra Maestra, when he justifiably called for justice and especially yearned to rid Cuba of corruption. I will go even further: to some extent it is as though Batista was the incarnation of a number of sins on the part of the United States. Now we will have to pay for those sins. In the matter of the Batista regime, I am in agreement with the first Cuban revolutionaries. That is perfectly clear.” Such sentiments were anathema, shall we say treasonous, to the CIA and top generals.
These clear refusals to go to war and his decision to engage in private, back-channel communications with Cold War enemies marked Kennedy as an enemy of the national security state. They were on a collision course. As Douglass and others have pointed out, every move Kennedy made was anti-war. This, Douglass argues, was because JFK, a war hero, had been deeply affected by the horror of war and was severely shaken by how close the world had come to destruction during the Cuban missile crisis. Throughout his life he had been touched by death and had come to appreciate the fragility of life. Once in the Presidency, Kennedy underwent a deep metanoia, a spiritual transformation, from Cold Warrior to peace maker. He came to see the generals who advised him as devoid of the tragic sense of life and as hell-bent on war. And he was well aware that his growing resistance to war had put him on a dangerous collision course with those generals and the CIA. On numerous occasions he spoke of the possibility of a military coup d’etat against him. On the night before his trip to Dallas, he told his wife, “But, Jackie, if somebody wants to shoot me from a window with a rifle, nobody can stop it, so why worry about it.” And we know that nobody did try to stop it because they had planned it.
Despite a treasure-trove of new information having emerged over the last forty-six years, there are many people who still think who killed President John Fitzgerald Kennedy and why are unanswerable questions. There are others who cling to the Lee Harvey Oswald “lone-nut” explanation proffered by the Warren Commission. Both groups agree, however, that whatever the truth, it has no contemporary relevance but is old-hat, history, stuff for conspiracy-obsessed people with nothing better to do. The general thinking is that the assassination occurred almost a half-century ago, so let’s move on.
Nothing could be further from the truth, as James Douglass shows in his extraordinary book, JFK and the Unspeakable: Why He Died and Why It Matters (Orbis Books, 2008). It is clearly one of the best books ever written on the Kennedy assassination and deserves a vast readership. It is bound to roil the waters of complacency that have submerged the truth of this key event in modern American history.
It’s not often that the intersection of history and contemporary events pose such a startling and chilling lesson as does the contemplation of the murder of JFK on November 22, 1963 juxtaposed with the situations faced by President Obama today. So far, at least, Obama’s behavior has mirrored Johnson’s, not Kennedy’s, as he has escalated the war in Afghanistan by 34,000. One can’t but help think that the thought of JFK’s fate might not be far from his mind as he contemplates his next move in Afghanistan.
Douglass presents a very compelling argument that Kennedy was killed by “unspeakable” (the Trappist monk Thomas Merton’s term) forces within the U.S. national security state because of his conversion from a cold warrior into a man of peace. He argues, using a wealth of newly uncovered information, that JFK had become a major threat to the burgeoning military-industrial complex and had to be eliminated through a conspiracy planned by the CIA – “the CIA’s fingerprints are all over the crime and the events leading up to it” - not by a crazed individual, the Mafia, or disgruntled anti-Castro Cubans, though some of these may have been used in the execution of the plot.
Why and by whom? These are the key questions. If it can be shown that Kennedy did, in fact, turn emphatically away from war as a solution to political conflict; did, in fact, as he was being urged by his military and intelligence advisers to up the ante and use violence, rejected such advice and turned toward peaceful solutions, then, a motive for his elimination is established. If, furthermore, it can be clearly shown that Oswald was a dupe in a deadly game and that forces within the military/intelligence apparatus were involved with him from start to finish, then the crime is solved, not by fingering an individual who may have given the order for the murder or pulled the trigger, but by showing that the coordination of the assassination had to involve U.S. intelligence agencies, most notably the CIA . Douglass does both, providing highly detailed and intricately linked evidence based on his own research and a vast array of the best scholarship.
We are then faced with the contemporary relevance, and since we know that every president since JFK has refused to confront the growth of the national security state and its call for violence, one can logically assume a message was sent and heeded. In this regard, it is not incidental that former twenty-seven year CIA analyst Raymond McGovern, in a recent interview, warned of the “two CIAs,” one the analytic arm providing straight scoop to presidents, the other the covert action arm which operates according to its own rules. “Let me leave you with this thought,” he told his interviewer, “and that is that I think Panetta (current CIA Director), and to a degree Obama, are afraid – I never thought I’d hear myself saying this – I think they are afraid of the CIA.” He then recommended Douglass’ book, “It’s very well-researched and his conclusion is very alarming.”
Let’s look at the history marshaled by Douglass to support his thesis.
First, Kennedy, who took office in January 1961 as somewhat of a Cold Warrior, was quickly set up by the CIA to take the blame for the Bay of Pigs invasion of Cuba in April 1961. The CIA and generals wanted to oust Castro, and in pursuit of that goal, trained a force of Cuban exiles to invade Cuba. Kennedy refused to go along and the invasion was roundly defeated. The CIA, military, and Cuban exiles bitterly blamed Kennedy. But it was all a sham.
Though Douglass doesn’t mention it, and few Americans know it, classified documents uncovered in 2000 revealed that the CIA had discovered that the Soviets had learned of the date of the invasion more than a week in advance, had informed Castro, but – and here is a startling fact that should make people’s hair stand on end - never told the President. [ii] The CIA knew the invasion was doomed before the fact but went ahead with it anyway. Why? So they could and did afterwards blame JFK for the failure.
This treachery set the stage for events to come. For his part, sensing but not knowing the full extent of the set-up, Kennedy fired CIA Director Allen Dulles (as in a bad joke, later to be named to the Warren Commission) and his assistant General Charles Cabell (whose brother Earle Cabell, to make a bad joke absurd, was the mayor of Dallas on the day Kennedy was killed) and said he wanted “to splinter the CIA in a thousand pieces and scatter it to the winds.” Not the sentiments to endear him to a secretive government within a government whose power was growing exponentially.
The stage was now set for events to follow as JFK, in opposition to nearly all his advisers, consistently opposed the use of force in U.S. foreign policy.
In 1961, despite the Joint Chief’s demand to put troops into Laos, Kennedy bluntly insisted otherwise as he ordered Averell Harriman, his representative at the Geneva Conference, “Did you understand? I want a negotiated settlement in Laos. I don’t want to put troops in.”
Also in 1961, he refused to concede to the insistence of his top generals to give them permission to use nuclear weapons in Berlin and Southeast Asia. Walking out of a meeting with top military advisors, Kennedy threw his hands in the air and said, “These people are crazy.”
He refused to bomb and invade Cuba as the military wished during the Cuban missile crisis in 1962. Afterwards he told his friend John Kenneth Galbraith that “I never had the slightest intention of doing so.”
Then in June 1963 he gave an incredible speech at American University in which he called for the total abolishment of nuclear weapons, the end of the Cold War and the “Pax Americana enforced on the world by American weapons of war,” and movement toward “general and complete disarmament.”
A few months later he signed a Limited Test Ban Treaty with Nikita Khrushchev.
In October 1963 he signed National Security Action Memorandum 263 calling for the withdrawal of 1,000 U. S. military troops from Vietnam by the end of the year and a total withdrawal by the end of 1965. [iii]
All this he did while secretly engaging in negotiations with Khrushchev via the KGB , Norman Cousins, and Pope John XXIII , and with Castro through various intermediaries, one of whom was French Journalist Jean Daniel. In an interview with Daniel on October 24, 1963 Kennedy said, “I approved the proclamation Fidel Castro made in the Sierra Maestra, when he justifiably called for justice and especially yearned to rid Cuba of corruption. I will go even further: to some extent it is as though Batista was the incarnation of a number of sins on the part of the United States. Now we will have to pay for those sins. In the matter of the Batista regime, I am in agreement with the first Cuban revolutionaries. That is perfectly clear.” Such sentiments were anathema, shall we say treasonous, to the CIA and top generals.
These clear refusals to go to war and his decision to engage in private, back-channel communications with Cold War enemies marked Kennedy as an enemy of the national security state. They were on a collision course. As Douglass and others have pointed out, every move Kennedy made was anti-war. This, Douglass argues, was because JFK, a war hero, had been deeply affected by the horror of war and was severely shaken by how close the world had come to destruction during the Cuban missile crisis. Throughout his life he had been touched by death and had come to appreciate the fragility of life. Once in the Presidency, Kennedy underwent a deep metanoia, a spiritual transformation, from Cold Warrior to peace maker. He came to see the generals who advised him as devoid of the tragic sense of life and as hell-bent on war. And he was well aware that his growing resistance to war had put him on a dangerous collision course with those generals and the CIA. On numerous occasions he spoke of the possibility of a military coup d’etat against him. On the night before his trip to Dallas, he told his wife, “But, Jackie, if somebody wants to shoot me from a window with a rifle, nobody can stop it, so why worry about it.” And we know that nobody did try to stop it because they had planned it.
Wednesday, November 18, 2009
" Casino in America" con't.
'Greatest Trade': How You Can Make $20 Billion
by Gregory Zuckerman
Tuesday, November 17, 2009
provided by the "Wall Street Journal"
Even as the financial system collapsed last year, and millions of investors lost billions of dollars, one unlikely investor was racking up historic profits: John Paulson, a hedge-fund manager in New York.
His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson's personal cut would amount to nearly $4 billion, or more than $10 million a day. That was more than the 2007 earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods combined.
How did he do it? Believing that a housing-market collapse was coming, Mr. Paulson spent over $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. When the housing market cracked and the mortgages tumbled, the value of Mr. Paulson's insurance soared. One of his funds rose more than 500% that year. Then in 2008, he shorted financial shares, or wagered that they would fall in price, profiting again when these companies collapsed.
And are there any investing skills that average investors can learn from his success? Yes. There are no guarantees, of course, but the success of Mr. Paulson and a few other underdog investors lends encouragement to individuals trying to compete with Wall Street's pros.
Adapted from "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History," by Gregory Zuckerman. Broadway Books. Copyright © 2009 by Gregory Zuckerman.
by Gregory Zuckerman
Tuesday, November 17, 2009
provided by the "Wall Street Journal"
Even as the financial system collapsed last year, and millions of investors lost billions of dollars, one unlikely investor was racking up historic profits: John Paulson, a hedge-fund manager in New York.
His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson's personal cut would amount to nearly $4 billion, or more than $10 million a day. That was more than the 2007 earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods combined.
How did he do it? Believing that a housing-market collapse was coming, Mr. Paulson spent over $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. When the housing market cracked and the mortgages tumbled, the value of Mr. Paulson's insurance soared. One of his funds rose more than 500% that year. Then in 2008, he shorted financial shares, or wagered that they would fall in price, profiting again when these companies collapsed.
And are there any investing skills that average investors can learn from his success? Yes. There are no guarantees, of course, but the success of Mr. Paulson and a few other underdog investors lends encouragement to individuals trying to compete with Wall Street's pros.
Adapted from "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History," by Gregory Zuckerman. Broadway Books. Copyright © 2009 by Gregory Zuckerman.
"The Square Deal"
If health care reform gives people a choice, and doesn’t just fatten the rolls of insurance companies, it will be something to run on. If the recovery helps millions of people who don’t have a well-staffed lobby in Washington, it too will be a plus.
History, as always, is a guide for these American moments.
There was once a political party that came out against concentration of wealth. They called for regulation of food, drugs, and big corporations. Called for “square deal” for the average American. And their robust spokesman, the leader of their party, said this of his countrymen:
“There is not in the world a more ignoble character than the mere money-getting American, insensitive to every duty, regardless of principle, bent only on amassing a fortune.”
That party was the Republicans, a bit more than century ago, led by Teddy Roosevelt.
History, as always, is a guide for these American moments.
There was once a political party that came out against concentration of wealth. They called for regulation of food, drugs, and big corporations. Called for “square deal” for the average American. And their robust spokesman, the leader of their party, said this of his countrymen:
“There is not in the world a more ignoble character than the mere money-getting American, insensitive to every duty, regardless of principle, bent only on amassing a fortune.”
That party was the Republicans, a bit more than century ago, led by Teddy Roosevelt.
Thursday, November 12, 2009
Why Prime Minister Omar Khaddafi Insist on Knowing Who Killed President John F. Kennedy
Oliver Stone: JFK and the Unspeakable
The murder of President Kennedy was a seminal event for me and for millions of Americans. It changed the course of history. It was a crushing blow to our country and to millions of people around the world. It put an abrupt end to a period of a misunderstood idealism, akin to the spirit of 1989 when the Soviet bloc to began to thaw and 2008, when our new American President was fairly elected. Today, more than 45 years later, profound doubts persist about how President Kennedy was killed and why. My film JFK was a metaphor for all those doubts, suspicions and unanswered questions. Now an extraordinary new book offers the best account I have read of this tragedy and its significance. That book is James Douglass’s JFK and the Unspeakable: Why He Died and Why It Matters. It is a book that deserves the attention of all Americans; it is one of those rare books that, by helping us understand our history, has the power to change it. The subtitle sums up Douglass’s purpose: Why He Died and Why it Matters. In his beautifully written and exhaustively researched treatment, Douglass lays out the “motive” for Kennedy’s assassination. Simply, he traces a process of steady conversion by Kennedy from his origins as a traditional Cold Warrior to his determination to pull the world back from the edge of destruction. Many of these steps are well known, such as Kennedy’s disillusionment with the CIA after the disastrous Bay of Pigs Invasion, and his refusal to follow the reckless recommendations of the Joint Chiefs of Staff in resolving the Cuban Missile Crisis. (This in itself was truly JFK’s shining moment in the sun. It is likely that any other president from LBJ on would have followed the path to a general nuclear war.) Then there was the Test Ban Treaty and JFK’s remarkable American University Speech where he spoke with empathy and compassion about the Soviet people, recognizing our common humanity, the fact that we all “inhabit this small planet. We all breathe the same air. We all cherish our children’s futures. And we are all mortal.” But many of his steps remain unfamiliar: Kennedy’s back-channel dialogue with Khrushchev and their shared pursuit of common ground; his secret opening to dialogue with Fidel Castro (ongoing the very week of his assassination); and his determination to pull out of Vietnam after his probable re-election in 1964. All of these steps caused him to be regarded as a virtual traitor by elements of the military-intelligence community. These were the forces that planned and carried out his assassination. Kennedy himself said, in 1962, after he read Seven Days in May, which is about a military coup in the United States, that if he had another Bay of Pigs, the same thing could happen to him. Well, he did have another “Bay of Pigs”; he had several. And I think Kennedy prophesied his own death with those words. Why does it matter? The death of JFK remains a critical turning point in our history. Those who caused his death were targeting not just a man but a vision — a vision of peace. There is no calculating the consequences of his death for this country and for the world. Those consequences endure. To a large extent, the fate of our country and the future of the planet continue to be controlled by the shadowy forces of what Douglass calls “the Unspeakable.” Only by unmasking these forces and confronting the truth about our history can we restore the promise of democracy and lay claim to Kennedy’s vision of peace. But don’t take my word for it. Read this extraordinary book and reach your own conclusions.
http://www.huffingtonpost.com/oliver-stone/jfk-and-the-unspeakable_b_243924.html
The murder of President Kennedy was a seminal event for me and for millions of Americans. It changed the course of history. It was a crushing blow to our country and to millions of people around the world. It put an abrupt end to a period of a misunderstood idealism, akin to the spirit of 1989 when the Soviet bloc to began to thaw and 2008, when our new American President was fairly elected. Today, more than 45 years later, profound doubts persist about how President Kennedy was killed and why. My film JFK was a metaphor for all those doubts, suspicions and unanswered questions. Now an extraordinary new book offers the best account I have read of this tragedy and its significance. That book is James Douglass’s JFK and the Unspeakable: Why He Died and Why It Matters. It is a book that deserves the attention of all Americans; it is one of those rare books that, by helping us understand our history, has the power to change it. The subtitle sums up Douglass’s purpose: Why He Died and Why it Matters. In his beautifully written and exhaustively researched treatment, Douglass lays out the “motive” for Kennedy’s assassination. Simply, he traces a process of steady conversion by Kennedy from his origins as a traditional Cold Warrior to his determination to pull the world back from the edge of destruction. Many of these steps are well known, such as Kennedy’s disillusionment with the CIA after the disastrous Bay of Pigs Invasion, and his refusal to follow the reckless recommendations of the Joint Chiefs of Staff in resolving the Cuban Missile Crisis. (This in itself was truly JFK’s shining moment in the sun. It is likely that any other president from LBJ on would have followed the path to a general nuclear war.) Then there was the Test Ban Treaty and JFK’s remarkable American University Speech where he spoke with empathy and compassion about the Soviet people, recognizing our common humanity, the fact that we all “inhabit this small planet. We all breathe the same air. We all cherish our children’s futures. And we are all mortal.” But many of his steps remain unfamiliar: Kennedy’s back-channel dialogue with Khrushchev and their shared pursuit of common ground; his secret opening to dialogue with Fidel Castro (ongoing the very week of his assassination); and his determination to pull out of Vietnam after his probable re-election in 1964. All of these steps caused him to be regarded as a virtual traitor by elements of the military-intelligence community. These were the forces that planned and carried out his assassination. Kennedy himself said, in 1962, after he read Seven Days in May, which is about a military coup in the United States, that if he had another Bay of Pigs, the same thing could happen to him. Well, he did have another “Bay of Pigs”; he had several. And I think Kennedy prophesied his own death with those words. Why does it matter? The death of JFK remains a critical turning point in our history. Those who caused his death were targeting not just a man but a vision — a vision of peace. There is no calculating the consequences of his death for this country and for the world. Those consequences endure. To a large extent, the fate of our country and the future of the planet continue to be controlled by the shadowy forces of what Douglass calls “the Unspeakable.” Only by unmasking these forces and confronting the truth about our history can we restore the promise of democracy and lay claim to Kennedy’s vision of peace. But don’t take my word for it. Read this extraordinary book and reach your own conclusions.
http://www.huffingtonpost.com/oliver-stone/jfk-and-the-unspeakable_b_243924.html
Casino in America "Wall Street" The Game Our Grandchildren Didn't Want to Play
We All Lost
“I don’t think most people really understood that they were in a casino” says award-winning financial reporter Mark Pittman. “When you’re in the Street’s casino, you’ve got to play by their rules.” This film finally explains how and why over $12 trillion of our money vanished into the American Casino.
For chips, the casino used real people, like the ones we meet in Baltimore. These are not the heedless spendthrifts of Wall Street legend, but a high school teacher, a therapist, a minister of the church. They were sold on the American Dream as a safe investment. Too late, they discovered the truth. Cruelly, as African – Americans, they and other minorities were the prime targets for the subprime loans that powered the casino. According to the Federal Reserve, African-Americans were four times more likely than whites to be sold subprime loans.
We meet the players. A banker explains that the complex securities he designed were “fourth dimensional” and sold to “idiots.” A senior Wall Street ratings agency executive describes being ordered to “guess” the worth of billion dollar securities. A mortgage loan salesman explains how borrowers’ incomes were inflated to justify a loan. A billionaire describes how he made a massive bet that people would lose their homes and has won $500 million, so far.
Finally, as the global financial system crumbles and outraged but impotent lawmakers fume at Wall Street titans, we see the casino’s endgame: Riverside, California a foreclosure wasteland given over to colonies of rats and methamphetamine labs, where disease-bearing mosquitoes breed in their millions on the stagnant swimming pools of yesterday’s dreams.
Filmed over twelve months in 2008, American Casino takes you inside a game that our grandchildren never wanted to play.
--------------------------------------------------------------------------------
“I don’t think most people really understood that they were in a casino” says award-winning financial reporter Mark Pittman. “When you’re in the Street’s casino, you’ve got to play by their rules.” This film finally explains how and why over $12 trillion of our money vanished into the American Casino.
For chips, the casino used real people, like the ones we meet in Baltimore. These are not the heedless spendthrifts of Wall Street legend, but a high school teacher, a therapist, a minister of the church. They were sold on the American Dream as a safe investment. Too late, they discovered the truth. Cruelly, as African – Americans, they and other minorities were the prime targets for the subprime loans that powered the casino. According to the Federal Reserve, African-Americans were four times more likely than whites to be sold subprime loans.
We meet the players. A banker explains that the complex securities he designed were “fourth dimensional” and sold to “idiots.” A senior Wall Street ratings agency executive describes being ordered to “guess” the worth of billion dollar securities. A mortgage loan salesman explains how borrowers’ incomes were inflated to justify a loan. A billionaire describes how he made a massive bet that people would lose their homes and has won $500 million, so far.
Finally, as the global financial system crumbles and outraged but impotent lawmakers fume at Wall Street titans, we see the casino’s endgame: Riverside, California a foreclosure wasteland given over to colonies of rats and methamphetamine labs, where disease-bearing mosquitoes breed in their millions on the stagnant swimming pools of yesterday’s dreams.
Filmed over twelve months in 2008, American Casino takes you inside a game that our grandchildren never wanted to play.
--------------------------------------------------------------------------------
Supply Side Economics / Reagonomics Don't Be Fooled
Printer Friendly Version E-Mail This Article
Published on Sunday, May 14, 2006 by CommonDreams.org
A Tale of Two Theories: Supply Side and Demand Side Economics
It was the best of times. It was the worst of times. It was the era of low taxes. It was the age of high deficits. Prices were up. Wages were down. Oil and gold soared. Housing and big cars cratered. Foreign powers threatened. Foreign currencies beckoned. Some saw a new Jerusalem in the nation's future. Others saw only the glaucoma of gluttonous greed. It was the summer of economic hope. It was the winter of economic despair.
In short, the early eighties were an economic time not unlike our own�a time that scared the Dickens out of most sober observers.
The common thread that unites the two times is Supply Side Economics. In the eighties it was new and promising. In the aughts it is recycled and damaging. In both eras, it stood against Demand Side Economics in its prescription for how to manage the economy. But it is in their outcomes that the two theories present such stark and measurable differences.
In the late seventies, the U.S. economy was falling to pieces. Johnson's Great Society programs and the Vietnam War had produced enormous inflationary pressures. But these were only the beginning. In 1973, Arab oil sheikdoms tripled the price of oil and in 1978, they tripled it again. Inflation soared, interest rates skyrocketed, and the economy tanked.
Higher prices cut into corporate profits, forcing employers to cut back production. The higher prices also reduced the purchasing power of workers, causing a slowdown in the economy. It was the worst of both worlds: a stagnant economy with rampant inflation. Economists called it "stagflation". They were at a loss for a cure.
Traditionally, to fight inflation, governments raise interest rates and cut spending, tampening down demand. To fight unemployment, they do the opposite: cut interest rates and raise spending, increasing demand. But now they had both problems at the same time. The cure for stagnant growth (lower interest rates and higher spending) would only aggravate the inflation. And the cure for inflation (higher interest rates and lower spending) would only aggravate the stagnation. The problem seemed insoluble. Enter Supply Side Economics.
Supply Side Economics claimed that if the government cut taxes on the wealthy, it would jump-start the economy as the wealthy plowed their tax savings back into investments. New factories fitted with new technologies would produce goods at lower cost, taming inflation. And the newly hired workers would tame unemployment. It would, in effect, square the economic circle, fixing both inflation and unemployment at the same time.
Even better, more output meant government tax receipts would grow. The government could continue to spend money without having to raise taxes it would simply materialize as a byproduct of higher levels of production! The economy would bootstrap itself in an ever-expanding, virtuous circle of tax cuts, investment, productivity, employment, and rising tax revenues. It was the proverbial "something for nothing" story. It seemed too good to be true.
It was.
In 1980, Ronald Reagan promised that, if elected, he would cut taxes, raise military spending AND balance the budget all at the same time. His opponent, George H.W. Bush called it "voodoo economics". But Reagan won the election and kept his promise. He cut the marginal tax rate on the highest income earners from 75% to 38%. What happened?
In 1982, the first full year for Reagan's policies, the economy shrank by 2%, the worst performance since the Great Depression. Investment the magic transmission belt through which all other Supply Side benefits were supposed to flow actually declined as a percent of GDP over the 1980s. Worse, Reagan�s Supply Side policies created the biggest budget deficits in history. The numbers tell the story.
Jimmy Carter�s last budget produced a deficit of $77 billion. At the time, it seemed huge. But Reagan�s first budget swelled the deficit to $128 billion. By the next year, 1983, it had exploded to $208 billion and was creating severe problems for the economy. By 1992, at the end of the "Reagan Revolution, (under Reagan's Vice President and successor, Bush, Sr.) the deficit was approaching $300 billion a year.
Annual deficits, of course, accumulate to the national debt. In 1980, the national debt amounted to less than $1 trillion. By the end of 1992, it had reached $4.35 trillion. In other words, the debt, which had taken over 200 years to reach $1 trillion, quadrupled in the 12 years of Supply Side Economics. A more complete, definitive repudiation of Supply Side�s claims could not be imagined. What went wrong?
According to Supply Side theory, tax cuts should go to the wealthy for only they can afford to use the extra income to invest in the economy to increase its capacity to "supply" goods. But there is nothing to make sure they actually invest, especially in the U.S. economy.
The new money might simply sit in the bank, or be spent on expensive foreign imports. It might be wasted in misdirected speculation, or invested in fast growing markets like southeast Asia. Without the ability to ensure that tax cuts are, in fact, invested in new productive assets, Supply Side Economics cannot ensure any real linkage between tax cuts and the hoped-for economic boom.
Revealingly, Supply-Siders strenuously resisted calls to tie tax cuts to actual productive investments, that is, give the tax cut only after the investment had been made. This led critics to suspect the real motives behind the "theory". The only thing that was certain was that the rich would become richer and revenues to the government would be lower. Beyond that, it is all just wishful thinking.
Contrast this wishful thinking with Demand Side economics. Demand Side Economics, says that if taxes are to be cut, they should go to those who earn the least amount of money. The reason is that low-income workers spend virtually all of their incomes. Money given to them goes right back into circulation, fueling a boom in consumer spending. This is essentially the policy that rescued the U.S. economy from the Great Depression. This, say the Demand Side economists, is the real foundation for an expanding economy. How has this theory held up in practice?
Bill Clinton reversed Reagan's supply Side policies, raising taxes on the wealthy and lowering them on the working and middle class. This Demand Side formula was fiercely resisted by Republican leaders in Congress who predicted a stock market crash and another Great Depression. Indeed, every single Republican member of Congress voted against it. It took a tie-breaking vote by Al Gore in the Senate to get the bill passed. What happened?
The economy produced the longest sustained expansion in U.S. history. It created more than 22 million new jobs, the highest level of job creation ever recorded. Unemployment fell to its lowest level in over 30 years. Inflation fell to 2.5% per year compared to the 4.7% average over the prior 12 years. And overall economic growth averaged 4.0% per year compared to 2.8% average growth over the 12 years of the Reagan/Bush administrations.
It wasn't even close. The economy performed dramatically better in almost every way once Supply Side policies were replaced with Demand Side policies.
The most dramatic outcome was the reversal of the Reagan-era Supply Side deficits. Clinton's Demand Side policies not only paid down the Reagan/Bush deficits, they produced the first budgetary surpluses since 1969. By the time Clinton left office, the government was running surpluses of almost $140 billion per year. This is what he turned over to George W. Bush in January of 2001.
Bush, of course, returned to the Supply Side policies of Reagan and his father. He lowered taxes on the very rich his base as he calls them. His $1.6 trillion in tax cuts give 45% of the benefits to the top 1% of the population. It is classic Supply Side economics. What happened?
According to the Economic Policy Institute, "By virtually every measure, the economy has performed worse in this business cycle than was typical of past ones." GDP growth since the bottom of the 2001 recession has averaged 2.8%. But it grew at an average rate of 3.5% over the prior six recoveries dating back to World War II. Or consider jobs: 1.3% more jobs under Bush versus 8.8% more during earlier upswings.
Private sector jobs an especially telling measure of economic health are up only 1% since 2001 versus an average of 8.6% for past recoveries. Investment? That Holy Grail of Supply Side orthodoxy? Up 3.6% compared to the 8.2% average for the six earlier rebounds. Pick your measure: growth, jobs, income, spending, investment. The recovery based on the Bush II Supply Side tax cuts is one of the weakest ever recorded.
The one thing the Supply Side revival did excel at � not surprisingly � is debt. Bush turned a $136 billion surplus from Bill Clinton into a $158 billion deficit in his first year. When he took office, the national debt stood at $5.8 trillion. It now stands at $8.1 trillion and is projected to hit $10 trillion by 2008 when Bush�s second term is over. The ten-year cumulative deficit forecast by the non-partisan Congressional Budget Office has changed from a $5.6 trillion surplus in January 2001 to a $3.4 trillion deficit in March of this year�an almost inconceivable swing of $9 trillion to the worse in only six years.
After more than 17 years of experience with Supply Side economics, we now know beyond doubt that this is not an accident.
These mammoth debts are a huge boon to that rich "base" that Bush loves to coddle. It is they, the very rich, who loan the money to the government to fund its debts. And since more borrowing drives up interest rates, they get to do so at higher and higher rates of return. This is simple supply and demand. By increasing the demand for borrowed money in the economy as a whole, Supply Side deficits drive up the cost, not just of government borrowing, but of ALL borrowing�everything from credit cards and mortgages to car loans and municipal bonds.
In other words, Supply Side economics rewards the rich both coming and going. Higher government debt leads to higher interest rates for all borrowing or in their case, lending. And then, they get to pay lower and lower taxes on their higher and higher earnings. It is a magical two-fer worth hundreds of billions of dollars a year.
This is the real reason Bill Clinton was so relentlessly hounded while in office. It wasn't that he was being serviced by an intern or that he was a particularly radical president. Indeed, Clinton himself described himself as �"an Eisenhower Republican". His big faux pas was that by paying down the Republican debts, he lowered interest rates, the basis of Republican earnings. In fact, real interest rates declined 40% while Clinton was in office. You can see why he simply had to go.
This is the real magic of Supply Side economics: greater-debts-leading-to-higher-returns-but-lower-taxes for the rich. It is one of the reasons the top 20% of income earners has raised its share of national income from 44% in 1980 when Supply Side policies began, to 50.1% last year. They now earn more than all of the rest of the people in the economy combined.
But it only works for the rich. If you�re not rich, it is you who are paying those higher and higher interest rates and it will be you or perhaps, more precisely, your children who will be stuck with the bill for the higher government debts. Paying off those debts can only come at the expense of future economic growth for income spent paying off inflated debts is money that is not available for college tuitions, job retraining, repairing infrastructure, etc.
Rarely in matters of public policy do we have the luxury of such starkly clear, repeatedly proven, empirically founded contrasts. Demand Side economics, as we saw in the 1990s, while far from perfect, produces robust growth, budgetary surpluses, and broad based prosperity. Supply Side economics produces middling growth, soaring deficits, and broad based debt. Mountains of debt. And the mountains are growing.
If we are to salvage any kind of economic sanity and prevent the bankruptcy of the nation, the next Congress must reverse the Supply Side agenda and return the country to a responsible fiscal course.
Robert Freeman writes on history, economics, and education. He can be reached at robertfreeman10@yahoo.com
Published on Sunday, May 14, 2006 by CommonDreams.org
A Tale of Two Theories: Supply Side and Demand Side Economics
It was the best of times. It was the worst of times. It was the era of low taxes. It was the age of high deficits. Prices were up. Wages were down. Oil and gold soared. Housing and big cars cratered. Foreign powers threatened. Foreign currencies beckoned. Some saw a new Jerusalem in the nation's future. Others saw only the glaucoma of gluttonous greed. It was the summer of economic hope. It was the winter of economic despair.
In short, the early eighties were an economic time not unlike our own�a time that scared the Dickens out of most sober observers.
The common thread that unites the two times is Supply Side Economics. In the eighties it was new and promising. In the aughts it is recycled and damaging. In both eras, it stood against Demand Side Economics in its prescription for how to manage the economy. But it is in their outcomes that the two theories present such stark and measurable differences.
In the late seventies, the U.S. economy was falling to pieces. Johnson's Great Society programs and the Vietnam War had produced enormous inflationary pressures. But these were only the beginning. In 1973, Arab oil sheikdoms tripled the price of oil and in 1978, they tripled it again. Inflation soared, interest rates skyrocketed, and the economy tanked.
Higher prices cut into corporate profits, forcing employers to cut back production. The higher prices also reduced the purchasing power of workers, causing a slowdown in the economy. It was the worst of both worlds: a stagnant economy with rampant inflation. Economists called it "stagflation". They were at a loss for a cure.
Traditionally, to fight inflation, governments raise interest rates and cut spending, tampening down demand. To fight unemployment, they do the opposite: cut interest rates and raise spending, increasing demand. But now they had both problems at the same time. The cure for stagnant growth (lower interest rates and higher spending) would only aggravate the inflation. And the cure for inflation (higher interest rates and lower spending) would only aggravate the stagnation. The problem seemed insoluble. Enter Supply Side Economics.
Supply Side Economics claimed that if the government cut taxes on the wealthy, it would jump-start the economy as the wealthy plowed their tax savings back into investments. New factories fitted with new technologies would produce goods at lower cost, taming inflation. And the newly hired workers would tame unemployment. It would, in effect, square the economic circle, fixing both inflation and unemployment at the same time.
Even better, more output meant government tax receipts would grow. The government could continue to spend money without having to raise taxes it would simply materialize as a byproduct of higher levels of production! The economy would bootstrap itself in an ever-expanding, virtuous circle of tax cuts, investment, productivity, employment, and rising tax revenues. It was the proverbial "something for nothing" story. It seemed too good to be true.
It was.
In 1980, Ronald Reagan promised that, if elected, he would cut taxes, raise military spending AND balance the budget all at the same time. His opponent, George H.W. Bush called it "voodoo economics". But Reagan won the election and kept his promise. He cut the marginal tax rate on the highest income earners from 75% to 38%. What happened?
In 1982, the first full year for Reagan's policies, the economy shrank by 2%, the worst performance since the Great Depression. Investment the magic transmission belt through which all other Supply Side benefits were supposed to flow actually declined as a percent of GDP over the 1980s. Worse, Reagan�s Supply Side policies created the biggest budget deficits in history. The numbers tell the story.
Jimmy Carter�s last budget produced a deficit of $77 billion. At the time, it seemed huge. But Reagan�s first budget swelled the deficit to $128 billion. By the next year, 1983, it had exploded to $208 billion and was creating severe problems for the economy. By 1992, at the end of the "Reagan Revolution, (under Reagan's Vice President and successor, Bush, Sr.) the deficit was approaching $300 billion a year.
Annual deficits, of course, accumulate to the national debt. In 1980, the national debt amounted to less than $1 trillion. By the end of 1992, it had reached $4.35 trillion. In other words, the debt, which had taken over 200 years to reach $1 trillion, quadrupled in the 12 years of Supply Side Economics. A more complete, definitive repudiation of Supply Side�s claims could not be imagined. What went wrong?
According to Supply Side theory, tax cuts should go to the wealthy for only they can afford to use the extra income to invest in the economy to increase its capacity to "supply" goods. But there is nothing to make sure they actually invest, especially in the U.S. economy.
The new money might simply sit in the bank, or be spent on expensive foreign imports. It might be wasted in misdirected speculation, or invested in fast growing markets like southeast Asia. Without the ability to ensure that tax cuts are, in fact, invested in new productive assets, Supply Side Economics cannot ensure any real linkage between tax cuts and the hoped-for economic boom.
Revealingly, Supply-Siders strenuously resisted calls to tie tax cuts to actual productive investments, that is, give the tax cut only after the investment had been made. This led critics to suspect the real motives behind the "theory". The only thing that was certain was that the rich would become richer and revenues to the government would be lower. Beyond that, it is all just wishful thinking.
Contrast this wishful thinking with Demand Side economics. Demand Side Economics, says that if taxes are to be cut, they should go to those who earn the least amount of money. The reason is that low-income workers spend virtually all of their incomes. Money given to them goes right back into circulation, fueling a boom in consumer spending. This is essentially the policy that rescued the U.S. economy from the Great Depression. This, say the Demand Side economists, is the real foundation for an expanding economy. How has this theory held up in practice?
Bill Clinton reversed Reagan's supply Side policies, raising taxes on the wealthy and lowering them on the working and middle class. This Demand Side formula was fiercely resisted by Republican leaders in Congress who predicted a stock market crash and another Great Depression. Indeed, every single Republican member of Congress voted against it. It took a tie-breaking vote by Al Gore in the Senate to get the bill passed. What happened?
The economy produced the longest sustained expansion in U.S. history. It created more than 22 million new jobs, the highest level of job creation ever recorded. Unemployment fell to its lowest level in over 30 years. Inflation fell to 2.5% per year compared to the 4.7% average over the prior 12 years. And overall economic growth averaged 4.0% per year compared to 2.8% average growth over the 12 years of the Reagan/Bush administrations.
It wasn't even close. The economy performed dramatically better in almost every way once Supply Side policies were replaced with Demand Side policies.
The most dramatic outcome was the reversal of the Reagan-era Supply Side deficits. Clinton's Demand Side policies not only paid down the Reagan/Bush deficits, they produced the first budgetary surpluses since 1969. By the time Clinton left office, the government was running surpluses of almost $140 billion per year. This is what he turned over to George W. Bush in January of 2001.
Bush, of course, returned to the Supply Side policies of Reagan and his father. He lowered taxes on the very rich his base as he calls them. His $1.6 trillion in tax cuts give 45% of the benefits to the top 1% of the population. It is classic Supply Side economics. What happened?
According to the Economic Policy Institute, "By virtually every measure, the economy has performed worse in this business cycle than was typical of past ones." GDP growth since the bottom of the 2001 recession has averaged 2.8%. But it grew at an average rate of 3.5% over the prior six recoveries dating back to World War II. Or consider jobs: 1.3% more jobs under Bush versus 8.8% more during earlier upswings.
Private sector jobs an especially telling measure of economic health are up only 1% since 2001 versus an average of 8.6% for past recoveries. Investment? That Holy Grail of Supply Side orthodoxy? Up 3.6% compared to the 8.2% average for the six earlier rebounds. Pick your measure: growth, jobs, income, spending, investment. The recovery based on the Bush II Supply Side tax cuts is one of the weakest ever recorded.
The one thing the Supply Side revival did excel at � not surprisingly � is debt. Bush turned a $136 billion surplus from Bill Clinton into a $158 billion deficit in his first year. When he took office, the national debt stood at $5.8 trillion. It now stands at $8.1 trillion and is projected to hit $10 trillion by 2008 when Bush�s second term is over. The ten-year cumulative deficit forecast by the non-partisan Congressional Budget Office has changed from a $5.6 trillion surplus in January 2001 to a $3.4 trillion deficit in March of this year�an almost inconceivable swing of $9 trillion to the worse in only six years.
After more than 17 years of experience with Supply Side economics, we now know beyond doubt that this is not an accident.
These mammoth debts are a huge boon to that rich "base" that Bush loves to coddle. It is they, the very rich, who loan the money to the government to fund its debts. And since more borrowing drives up interest rates, they get to do so at higher and higher rates of return. This is simple supply and demand. By increasing the demand for borrowed money in the economy as a whole, Supply Side deficits drive up the cost, not just of government borrowing, but of ALL borrowing�everything from credit cards and mortgages to car loans and municipal bonds.
In other words, Supply Side economics rewards the rich both coming and going. Higher government debt leads to higher interest rates for all borrowing or in their case, lending. And then, they get to pay lower and lower taxes on their higher and higher earnings. It is a magical two-fer worth hundreds of billions of dollars a year.
This is the real reason Bill Clinton was so relentlessly hounded while in office. It wasn't that he was being serviced by an intern or that he was a particularly radical president. Indeed, Clinton himself described himself as �"an Eisenhower Republican". His big faux pas was that by paying down the Republican debts, he lowered interest rates, the basis of Republican earnings. In fact, real interest rates declined 40% while Clinton was in office. You can see why he simply had to go.
This is the real magic of Supply Side economics: greater-debts-leading-to-higher-returns-but-lower-taxes for the rich. It is one of the reasons the top 20% of income earners has raised its share of national income from 44% in 1980 when Supply Side policies began, to 50.1% last year. They now earn more than all of the rest of the people in the economy combined.
But it only works for the rich. If you�re not rich, it is you who are paying those higher and higher interest rates and it will be you or perhaps, more precisely, your children who will be stuck with the bill for the higher government debts. Paying off those debts can only come at the expense of future economic growth for income spent paying off inflated debts is money that is not available for college tuitions, job retraining, repairing infrastructure, etc.
Rarely in matters of public policy do we have the luxury of such starkly clear, repeatedly proven, empirically founded contrasts. Demand Side economics, as we saw in the 1990s, while far from perfect, produces robust growth, budgetary surpluses, and broad based prosperity. Supply Side economics produces middling growth, soaring deficits, and broad based debt. Mountains of debt. And the mountains are growing.
If we are to salvage any kind of economic sanity and prevent the bankruptcy of the nation, the next Congress must reverse the Supply Side agenda and return the country to a responsible fiscal course.
Robert Freeman writes on history, economics, and education. He can be reached at robertfreeman10@yahoo.com
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