The Case for Nationalization

This has been a very difficult week for the Obama administration. The Geithner/Summers’ economic plan, mid-way from being implemented, has come under a half-sensical attack. On one side, Republicans have unitedly opposed it as a crazy spending spree with a socialist agenda, while a vast majority of economists, many now working for Team Obama, still think it is not enough to stimulate and grow the economy. Aside from a lack of bipartisan support in Washington, many economists and analysts now believe that the real cancer of this recession lies in the banking system, and if left to its own devices, it will burn through the recovery money like gambling junkies in a casino.

Take for instance the largest banks in the US: Wells Fargo, J. P. Morgan Chase, Citibank, Bank of America and HSBC. Economists and anyone out there in their right mind know that at this point, even if questions of fairness are raised at the notion that we are feeding the capitalist canker we are trying to eradicate, the government cannot allow these giants to fail. Why? Because the cost would be unthinkable and more damaging to consumers, investors, taxpayers and ultimately the American economy. So what is Obama to do? He should carefully consider plans to temporarily nationalize the banks, by breaking them into manageable sizes. By buying their toxic assets and controlling the freefall of their stocks and the increase in net-loss derivatives he can more easily restore lending. Capping CEO pay and re-establishing some regulations is a good start, but it is not enough to restore consumer confidence.

Last year, when the Bush administration bailed out the banks the first time, the purpose of the bailout was to free up credit and allow for banks to beef up their vaults. However, instead of taking the money to address their liquidity problems, they went out on a shopping spree. Wells Fargo acquired Wachovia, J.P. Morgan bought Washington Mutual and Bank of America seized Merrill Lynch. Is there something wrong with this picture? Absolutely. These bailouts left out the government’s conditions and specifications to interpretation. This time, the Obama administration has to be stricter. How about creating a banking czar? Republicans will never agree to this, even if they cannot put together one sound economic policy and present it to the American people. But the alternative is bleaker: throwing money at the banking industry without some strings attached can make Obama seem like an appeaser, not a reformer.

Even if the American people are willing to turn a cold shoulder to Republican criticism because of their lack of better and interesting ideas, time is of the essence if the Administration is to push for a bigger, bolder and desperately needed banking rescue. Unemployment is at a 25-year high, consumer spending has been at a record low, foreign investment has dried up, and confidence is running out in the financial markets. The American people should understand that the only way to erase these assets from the balance sheets is by buying up shares. At the end, the public should realize that they are the only ones that stand to gain.

The Opposition’s Tug of Rhetoric

Yesterday’s speech by President Obama, addressed to a joint session of Congress and clearly directed at the American people, was a sour reminder of the uphill battle our nation faces toward recovery and reform. Guilty of caution to an extreme, the President managed to sound hopeful to an increasingly politically incredulous crowd. But this is insular Washington, so in my book, he gets points just by standing up there and making his case for a better future.

However clear and optimistic Obama’s message might be, there is plenty of crumbling speed ahead of us. The economy is a disaster. Unemployment will keep rising to unprecedented levels as long as credit remains frozen in the rusty pipes of the financial sector. As much as half of this downward spiral is based on fear, and as long as the American people keep stumbling upon the opposition’s misplaced criticism of the Administration’s economic reforms, the long road to recovery will seem insurmountable.

The latent defeatism of the GOP has plunged to a new low and Governor Jindal (R-LA) has emerged as their spokesperson. It is without much contemplation that the members of his party are rallying against the recovery bill’s chance to jumpstart the economy. Their fodder? That government has no place in nation-building and recovery. Of course, there is substantial evidence against this rhetoric, but in the face of political annihilation much of this verbosity has translated into little persuasiveness precisely because the GOP, the party of fiscal responsibility, has contributed to the rampant deficit and the economic tsunami we have inherited.

What should be obvious in their impertinent argument is that when government is faced with a crisis such as this one, not doing enough can be costly. We see the consequences around the world. Economic crises can weaken the middle class, obstruct development and bring chaos. The world’s biggest middle class is now in trouble and much is at stake if government does not step in. This of course, is what Jindal’s party fundamentally opposes, and their solution is more of the same: taxcuts and a hands-off approach to basic universal problems like healthcare, energy independence and education reform. Fortunately, this crisis presents an opportunity for Obama’s government to try to fix some of the fundamental problems that got us here in the first place.

When 9/11 happened and Pres. Bush rallied us against his cause for war, much of the nation gave him the benefit of the doubt. It was not until six months later that we, the American public, realized we had evidently lost control and had stepped into the biggest foreign policy fiasco this nation has ever been confronted with still no end in sight. The least this Administration deserves is a fair attempt at improving the economy with a full front-attack. And let it be clear to Jindal and his party that after two wars, Katrina, the biggest deficit in US history and six straight unbalanced budgets, they have no moral grounds to lecture the Administration on how to go about fixing the problem.

Recovery Should Be Obama’s Bait

No doubt President Obama’s first days in office have been stressful. From faulty nominations to uncooperative deals, some say it's politics as usual. The media is busy dissecting all of this, highlighting, with some merit, his inexperience in back-channel negotiation tactics. But the truth is more profound. The economy and our livelihoods are in crisis and I think it’s time for Obama to put aside his gaily efforts to be bipartisan and focus on selling his recovery bill to the American people, which finally he will do this week, with or without the Republicans on board. Ultimately we, the taxpayers, will decide in favor of it.

Republicans have been doing a great job of making this American Recovery and Reinvestment Act (stimulus bill) sound like a wasteful spending spree. For Republicans, tax cuts should be the number one ingredient in the pot. Really? And what would John Doe do with a $1,200 tax cut? Go to Disneyland? Buy a flat screen TV set? If the average John Doe is like most of us, scared and reticent, he will cautiously put that money away or use it to pay up debt. This reasoning is what Republicans don’t understand. They want to jolt the economy back to life, to the unprecedented levels of profits and growth of the past 25 years so that corporate America can go back to their old ways of doing business.

Fortunately, Obama and his team can see through the smokescreen even if some of the details don’t yet add up. He has been saying it during the campaign. America needs to fundamentally change gears when it comes to spending, profiteering, and saving if we are to learn from the deepening mess we find ourselves in. He understands exactly how we got here: on credit and by lascivious risk-taking. Wall Street got greedier and rejected conservative and sound investment policies. Their complex schemes got the better of them and they developed glaucoma in their investment decisions. When the pressure set in and the losses started to compound, whose door did they knock on? You know the answer.

I understand the argument of some, that if we grow the size of government, things will get out of hand. It is true, overseeing the debt and spending of government takes a lot of work. It requires agencies working together in efficient, transparent and harmonious ways. However, if we are to avoid the past failed attempts at recession rescue plans, like Japan’s, we need a more comprehensive approach to spending. And this bill is offering exactly that. There is plenty of smart spending, which builds upon the realization that job recreation and long-term growth can come from government taking the initiative. How? By spending on infrastructure, education, research, science and technology, energy production, reforming our tax code, our trade agreements, specially investment regulations so that corporate and government financial transactions appear, at least, transparent.

If we fail to act now in defense of our expensive healthcare system, our crippled infrastructure, our burdened education system, our costly energy system and our unregulated financial system, it will be too late and expensive in the future, and we will have no incentives. For example, our green revolution is waiting to take off, if government is willing to be the co-pilot. This recession will be not be a short one, its lingering effects will continue to sip in even as recovery efforts make their presence in urban, rural, and suburban areas across America. There is no doubt in my mind that this is the greatest human challenge Americans face, one which will claim more victims than 9/11, the Iraq and Afghanistan wars, and Hurricane Katrina combined.

Obama's economic policy team: two thumbs up

Now that the United States is experiencing the biggest economic crisis in modern history, it is safe to say, that America’s best choice is Senator Barrack Obama. After eight years of irresponsible management and low-grade politics, the obvious choice is the Democratic ticket. But instead of capitalizing on the downfalls of the Bush administration and the offspring they have produced, here is why Obama's economic plan is the best option for America.

When it comes to improving the economic prospects of this nation at this critical time, the Obama economic team has highlighted the necessary steps for recovery, reform and renewability desperately needed in the unconscientious American financial system.

Heading Obama’s economic policy team is Jason Furman, a 39 year-old centrist economist and fiscal policy expert from Harvard University. Obama has also enlisted other top-notch economists and academics including Alan Binder, a Princeton University economist and former Federal Reserve Chairman; Austan Goolsbee, senior economist at the Progressive Policy Institute and columnist for the New York Times; Jeffrey Liebman, a pension and poverty expert at Harvard University; and David Cultler, a Harvard University health economist. Other prominent advisors come from The Brookings Institution, The Center for American Progress and Citigroup.

But the most exciting, un-official advisor and supporter comes in the form of an unpretentious billionaire named Warren Buffet, solidifying Obama’s bid for the Presidency. Buffet has held fundraisers for Obama and has rallied entrepreneurs, economists, and union leaders to back him, stressing the fact that it’s about time for tax reform and healthcare reform, specifically shifting the tax burden away from the middle class to the upper rich. In Buffet’s words, it is called social justice.

Finally, someone with enough guts has finally called McCain’s bluff. It’s not socialism you swiftboating morons, it’s social justice.

The Addiction to Oil: Hidden Consequences

After watching the movie Syriana for the second time (it takes two times to actually understand the plot) I was compelled to analyze how oil consumption and addiction has made nations weaker and vulnerable in many ways when it comes to stability and collective security.

The US consumes 25% of the world's oil production and many of the world's security conflicts stem from our self-confessed addiction to petroleum products. Let me break it down for you:

Just recently Cheney's critical speech of Russia's autocratic government was met with silent dismay (calls have been raised to suspend Russia's membership into the G8 because of its democratic crackdowns). Behind the lack of response? Oil and natural gas, and of course Russia has plenty to feed US demand and the world's.

The US, Europe and Asia need oil and natural gas and are willing to abandon western principles and independence to get them. This is called addiction. One possibility to the lack of consensus the US has tried to gather from the European Union and the UN Security Council to stop Iran from enriching uranium (accused of developing nuclear weapons) may have a deeper explanation: as the world's oil reserves diminish and ways to explore and extract it become more expensive, securing Middle Eastern oil and Russia's own production is at the heart of the debate. I still fathom the possibility that the Iraq war has been the linkage to securing a buffer zone to deal with extremist regimes in the Middle East that are sitting on the oil wells we westerners have an addiction to.

Another good example of how our addiction is in direct conflict with our democratic principles is our ambiguous relationship with Saudi Arabia, which supplied 15 of 19 Sept. 11 terrorists. Most of our oil comes from this country, yet as we continue to crackdown on terrorist and extremist Muslim nations worldwide that can produce attacks on US soil or allies, we seem to ignore the fact that this nation still teaches militant Islam in school textbooks, and has not produced democratic elections in decades.

We all know that the cost of oil will keep rising thanks to climate change, widespread authoritarianism (Venezuela and Iran) and nuclear proliferation. Developing countries will be hit the hardest as their bargaining power is almost non-effective and citizens end with most of the hidden costs.

We need not only to recognize that we have an addiction, but to seek practical alternatives to oil. There is much to learn from Brazil, which developed a cost-effective, alternative to oil. Three decades ago, Brazil made a shift in consumption and invested in sugar cane ethanol production. Today, Brazil has succeeded where other industrialized nations have failed: it has become energy independent. During his most memorable moment in this year’s State of the Union address, Pres. Bush finally recognized this country’s addiction to oil; now let’s act together to find the cure.

During his most memorable moment in this year’s State of the Union address, Pres. Bush finally recognized this country’s addiction to oil; now let’s act together to find the cure. Developing alternative energy sources is not economic suicide like many have advocated, instead it is a national security issue just as it’s a vital economic one. It would be advantageous for the US to assume a leading role in a cleaner and more sustainable world.