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Friday, July 22, 2011

The GOP: For Federalism or Less Government?

The stance of Sen. Jim DeMint (SC-R) in 2010 is emblematic of the ambiguity in the hierarchy of goals in the Republican party. DeMint can be taken as being primarily oriented to restoring the balance of federalism by having the federal government do less and the State governments more, at least in terms of domestic policy. This could bring the General Government back to its enumerated powers. Accordingly, Time magazine maintains that DeMint’s real target in 2010 was “a radical downsizing of the federal government.” This downsizing includes “turning education policy over to the states and gradually dismantling safety-net programs like Social Security and Medicare.”

Even so, DeMint may not have been assuming that the state governments would then create various degrees of “safety-net.” That is, his agenda could have been to get government out of the business of providing basic needs to those who might otherwise not survive. In other words, his primary goal could have been to reduce government itself, especially outside of defense and foreign policy. For instance, citing “creeping socialism in the U.S.”, DeMint wanted to “shrink government.” He “was incensed by what he considered a growing public reliance on government largesse for things like housing, food and income, which to him was creating dependency and stifling free enterprise.” The senator’s ideal here is distinct from his goal of downsizing the federal government in order to shift power to the state governments. A shift does not necessarily imply a reduction. It is precisely on this point that the Republican Party has been far too ambiguous. What is more important to the party: less government or restoring federal government?

Too often, the two goals have been conflated by Republican office-holders, as if restoring federalism means a reduction in government. It is possible, after all, that restoring social programs at the State level could result in more government. As Massachusetts demonstrates, the states are able to enact expansive social programs such as universal health-care. However, in a federal system, one size does not fit all; republics such as Texas and Oklahoma would doubtless have approaches to health-care that rely on far less government. So moving to toward a balance between the U.S. Government and the governments of the member republics of the Union may or may not mean less government. Whether government is more or less would depend not just on what Congress and the U.S. President want, but also on what the elected representatives and heads of state in the member states want.

Therefore, a Republican might say, “I want a shift toward the states in domestic domains and I want my particular republic to have less government while the federal government focuses on defense, regulating interstate commerce, and foreign policy.” I contend that such an integrated position is rarely, if ever, enunciated on behalf of the Republican Party. I suspect that the reality undergirding the GOP is less government, with occasional lip-service thrown to federalism.

Click to add a question or comment on the goals of the GOP.

Source: Michael Crowley and Jay Newton-Small, “Leading the Rebel Brigade,” Time, November 29, 2010, pp. 34-37.


 

Thursday, July 21, 2011

Superficial Hospitality in Hospitality Management

Staying at a motel or in a hotel can involve being at close quarters with people coming with various backgrounds and cultures, and with different lifestyles. A group of teenagers may be in one room, while an elderly couple is trying to sleep next door. It seems to me that hospitality management should take a look at Crowne Plaza, which has instituted “snore monitors” to patrol corridors in the designated quiet zones in the hotels in the cities of London, Leeds and Manchester in the E.U. While the monitors are apparently particularly oriented to detecting particularly loud snorers and only in the quiet zones, I contend that Crowne Plaza would better manage its use of the monitors by having them cover every floor and be on guard for excessive noise in general—whether in the hallways or the rooms—as per the time of night. What is fine at 9pm might be highly disruptive at 2am. Hotels (and especially motels) should not simply assume that assigning or reassigning customers to particular “zones” is the optimal way of handling the situation of noise.

Sometimes the problem with overnight noise can stem from the building itself. The building types built by Extended Stay and Studio Plus, for example, have virtually no insulation between floors so customers might get to hear stomping late at night and even into the morning. I once tried to move rooms because of an "all nighter" in the room above mine, but the front desk employee decided to ignore my reserved room change, telling me it had been cancelled and the other room had been given to another customer, or “guest.” Another employee remarked in a matter-of-fact tone, "People can walk in their rooms." Trying to correct for that situation involved even more headaches in dealing with the corporate "customer service" people, who also made promises and went back on them with impunity. Meanwhile, I discovered the local “area” manager had a penchant for eves-dropping on customers, or “guests.”

The true colors of the management mentality at the company really came out after I stopped a huge water-leak from the room above mine from flooding my room and the room below mine (a toilet overflow, which the customer failed to report). Essentially, I began and headed the multiple-pan and towel operation, with the able (and friendly) assistance of the young woman working at the front desk. In spite of the fact that I saved the company thousands of dollars, however, the management was unwilling to compensate me in any way, such as by offering me a discount on my bill (or even promising the same rate should I have extended, which I did not, or potentially stay again at an Extended Stay or Studio Plus—which I would not recommend to anyone). Even the front desk person who had assisted me was astonished that her company’s management had been so niggardly in its response to my generous efforts, which, by the way, had been spontaneous and unconditional even given the noise issue). It feels good to spontaneously react on the basis of agape seu benevolentia universalis, though I must admit that the ingratitude of others can mitigate the joy.

The lesson is perhaps the following: When a sordid (i.e., unreliable) management imbedded in a company as its very culture is combined with a cheap building model, the question is perhaps how such a company could survive bankruptcy and continue operating. This is not to say that the company operating Studio Plus and Extended Stay is the only culprit from which we can assess how far down the hospitality industry goes.

I also had to contend with noise while staying once at a Red Roof Inn. I complained about late night noise (a drunken party) in the room next door only to have the front desk person give up because he "got a busy signal" when he tried to call the room. Couldn't he have knocked on the room's door or at least have called security? One would think that the report of a party going on at 1am on a weeknight would trigger something more than giving up because of a busy signal. Part of the problem, I later learned from a front desk employee, was that the management had instructed the employees to accept virtually anyone of age who wanted a room. “We can’t anticipate what someone might do from how they act when they arrive at the front desk,” the employees were apparently told. The manager of the particular motel was also retaining rather than refunding the accumulated room tax owed by law to customers, or “guests,” staying more than thirty days. Ironically, both the manager and her desk employees were self-described Christians, and had no qualms in expressing their views of sinful “orientations.” Out of the blue, one front desk employee told me that another employee only seems gay, but is actually a “wholesome Bible brotha.” I was still back on how tax fraud jives with being Christian. What stood out for me most during my stay at that motel was that none of the employees seemed capable of recognizing that they could be mistaken, even as they were incompetent (and unethical) in many ways. This fault applies to the management of Extended Stay as well.

Convenient excuses, abuse of discretion, and lack of follow-through may be ubiquitous at badly-managed motels and hotels. It astonishes me that one industry can have such a breadth of quality within it. I'm glad that a hotel chain is instituting hall monitors. Doubtless not every motel and hotel will do so.

It seems to me that hospitality management may ironically be at the bottom end of management practice. Perhaps the existence of bad practice in at least part of the industry has given the entire industry a sense of (or tacit invitation to) shallowness, for even at the best hotels the hospitality is only skin-deep, being conditioned on money and thus utterly contingent and shallow. Indeed, using the word “guest” and conditioning it on paying money not only misuses the term itself, but also renders “hospitality” rather superficial and may even belie its very meaning. This can manifest even as "higher end" hotels, whose employees can be very rude indeed to real guests.

I remember, for example, being invited to the weekday late-afternoon reception at a Staybridge hotel by a "guest" staying at the hotel on business. He told me it was not uncommon for "guests" there on business to invite a friend or coworker from time to time--a practice that the hotel management went along with to please its business "guests." However, because I was not a "real" guest, but, rather, a guest more in keeping with the meaning of the term, the employees involved in the reception (and at the front desk) made it rather obvious to me that they were ignoring me while being nice to my host--their "guest." It occurred to me that the employees had no idea how to treat a real guest--one not conditioned on having paid money for the "privilege." The fraud of the "hospitality" at Staybridge was thus made transparent to me as well as to their "guest." In short, hotels use "guests" too conditionally, as well as in a way contrary to the term's meaning, for no real host would charge a guest. The hospitality industry seems to have decided to use a term at odds with that term's meaning, so as to reap the benefits nonetheless. Such hypocracy, which people can readily sense, is ultimately as counter-productive as it is self-serving, and yet hotel managers are utterly unrepentant in their usurption--as if they have done nothing of the sort.

Considering the hospitality industry's "mindset," or default, it is perhaps not completely unexpected that even some of the companies reputed to be among the best are actually rather superficial with respect to hospitality, while some motels, such as Extended Stay and Red Roof Inn, continue to operate without any hint of salubriousness and yet somehow manage to remain in the industry. Perhaps the industry itself is problematic, at least relative to the standards of management in other industries. The hospitality industry itself may simply be rather inhospitable, or low, as in base, under the subterfuge of hospitality itself.

In such a context, unethical conduct can spread unchecked. For example, while staying at a Best Western hotel, I negotiated with the general manager on a rate on which I would extend my stay. He gave me a counter-offer and a day or two to decide. On the second day, I accepted his rate in deciding to extend, but his assistant told me, "The manager changed his mind. He wants quite a bit more."  I called Best Western's "customer service," but to no avail as there was no accountability. I did not extend my stay. I subsequently heard that the manager was part of a class action lawsuit alleging that he improperly conducted himself with waitresses in the hotel's bar. Hospitality management, it would seem, may be an inferior sort of management under the facade of hospitality.

Click to add a question or comment on the hospitality in hospitality management.


Source:

Msnbc.com, “Light Sleepers Rejoice: Hotel Chain Drafts ‘Snore Patrols’ as Shuteye Sentries,” July 21, 2011. http://www.msnbc.msn.com/id/43839450/ns/world_news-weird_news/


Wednesday, July 20, 2011

Customers as Members: Retail Fakeness Infecting Society

“Are you a member of the store?”  A salesperson at a Barnes & Nobles’ café department asked me the question as I was preparing to pay for the coffee drink I had just ordered. Apparently, customers who have registered for a discount card are “members of the store.” The same thing happened to me at a Borders store. There, the salesperson refused to take my “No” for an answer—as per company policy—continuing to ask me if I wanted to sign up for a card.

Let's get this straight: Stores have customers, not members.  Shopping in Target is not like belonging to a country club. Furthermore, store policies should not involve ignoring customer answers. A company policy directed to ignoring a customer’s “no” on the chance that the “no” turns into a “yes” by repeating the question in spite of the customer's repeated "no thanks" while holding the transaction hostage lets the customers without a “loyalty” card know that they are by no means members, let alone customers. In fact, such a policy belies even “customer service.”

Moreover, it is presumptuous for a retail company’s employees (including managers, who are also employees) to act as if stores naturally have members. It is also presumptuous not to take “no” for an answer because it is so utterly disrespectful and dismissive. Lastly, a rather slick elitism is implicit in explicitly distinguishing members from non-members, as in “are you a member?” Is it really in a store's financial interest to make some of its customers feel second class? Such a class would at least be above the low class demeanor of a sales clerk's "Are you a member?" Imagine a Walmart cashier asking you that question! You might break out in uncontrollable laughter. A member of what, Walmart?  Are you kidding? Well, I suppose there is Sam's Club for those of you who enjoy shopping in a warehouse.

It is as if employees (including managers) of the modern retail store are pretending that their store is somehow more than a store—a club whose members are somehow a notch up from mere customers. It is as though with the passing of the twentieth century retail stores got an “upgrade” to being entitled to view themselves as clubs—as more exclusive than they are entitled to be. Of course, such clubs also take money from non-members. Exclusivity cannot be allowed to get in the way of making money.

I would not be at all surprised that the employees, including managers, salespersons, and cashiers view themselves as professionals—as equivalent to physicians and lawyers without the hassle of medical or law school. Whereas a physician and lawyer sell their judgments, however, retail clerks sell products. The two are not equivalent. Even so, the mentality of deciding for oneself what applies would certainly not be bothered by such fine distinctions.

Generations to come may look back on the bizarre retail culture manifesting in the early decades of the twenty-first century as having evincec a fakeness and assumed entitlement not based on any foundation. The demise of Borders can perhaps be interpreted as an indication of just how vacuous such a culture inherently is. In other words, Borders may be viewed as having imbibed that culture to such an extent that the management's arrogance overcame any substance.

Moreover, the culture highlighted by “members” and “upgrades” may point to a more general problematic societal trend that is not transparent. Too often, moderns pretend that vacuous retail phrases have substance--treating emptiness as though it were substance.

As one small example, in phoning  a company’s customer service call-bank, we allow ourselves to be spoon-fed empty phrases such as, “I’m sorry for your inconvenience.” Even the authors of customer service books admit that such apologies are so ubiquitous in business that they mean next to nothing. Even so, they can give the impression of sympathizing with a customer in order to (i.e., manipulative) assuage his or her complaining. Meanwhile, the herd animals on the other end of the phone take the "apology" at face value, rather than as a talking point.

In other words, customer service has become as much (or more) about public relations and selling as service. Were the latter foremost, real expressions would replace the form-sayings, and the authentic replies would be backed up by some economic sacrifice (rather than enticement to buy again with a coupon) by the company to compensate the customer for the invoncenience. Rarely does a customer demand such compensation, and make it a prerequisite for any further business. A business is an economic entity; one must treat it as such and transact in economic terms. By a business's own reckoning, "sorry for any inconvenience" without any economic cost is meaningless, or extrinsic.

In short, customers take the vacuous retail phraseology as substance far too often. Too few of us are willing to say, let alone admit, that the manniquin is not wearing any clothes. In fact, we are buying the clothes. We accept the status difference between a retail member and customer; we accept "sorry for any inconvenience" as compensation. We allow "upgrade" to be applied even to a larger cup of coffee.

Societally, people might be too susceptible to enabling the vested interests who have been spinning their webs as substance rather than snares. Society itself may be incorporating the proclivity to take vaccuous expressions as somehow involving substance. In other words, increasingly we may be going around mutually agreeing that empty form is something more. If this bubble ever bursts, I suspect that modern retail be left with its pants down. The question is perhaps: to what cost to society in terms of the decadence incurred from the self-serving sales pitches? To assess the cost, the decadence itself must first be made transparent.

Click to add a question or comment on the impact of retail culture on modern society.

When the Cameras Are Off: Behind the Politician

In Game Change, a journalist account of the 2008 U.S. Presidential race, the two political reporters conducted hundreds of interviews and had unusually close access to the campaigns. As a result, the reporters present some pretty interesting political morsels. For example, Hillary Clinton considered Bill’s administration to have been “a tactical and operational disaster” (p. 43). ouch! She would never have said such a thing in front of a microphone. This raises the question: do we, the voters, know candidates as well as we think we do? I contend that we do not, and, moreover, that this partially explains why we are so surprised when our elected representatives behave less than with maturity while in office.

The book’s overall theme calls attention to the magnitude of the difference between the actual candidates of president and vice president and the images of them that they efficaciously portrayed through an unwittingly complying media. In reading about what the candidates are like in person, I was particularly struck by their foul mouths and what their associated judgments intimate about their characters (or lack thereof). That we, the voters, are not privy to the candidates’ real personalities, characters and values is of great importance because we base our decisions at least in part on the fabricated images, or brands. We are situated too far removed from the actual candidates to be able to discover the people behind the curtain.

A candidate’s public image can differ radically from the actual person. When Hillary Clinton was a U.S. senator from New York, she portrayed herself as bipartisan and self-effacing in the Senate when in fact she was anything but—at least according to Game Change. On the evening of her win in New Hampshire, Hillary remarked privately, “I get really tough when people fuck with me” (p. 190). Referring to Barak Obama to her aides after one of the debates, she remarked, “What an asshole” (p. 145). We the People would never guess at such a remark from how chummy she would be with him in serving as his Secretary of State. Images can be deceiving.

As still another example, consider John Edwards, who said to Brumberger, one of his aides: “Why didn’t you come to me like a fucking man and tell me to stop fucking her?” (p. 134). On the republican side, McCain was “still prone to outbursts of profanity,” which have never been caught on tape during an interview (p. 274). On his first visit to his campaign headquarters, for instance, McCain blurted out, “What the fuck are all these people doing here? . . .  I am not fucking authorizing these fucking hires. Who are these fucking Bush people? Where is the fucking money?” (p. 278). In public, the candidate said, “I’m very happy with the campaign” (p. 285). It is no wonder we have so little actual basis on which to know what our representatives will actually do when in office.

Evidently, the candidates hire like-minded staff, which may mean that the political culture in Washington is saturated with a baseness that we, the People, never see. Harold Ickes of Hillary’s campaign, for example, said of Barak Obama after the Rev. Wright fiasco, “This guy has been sitting in the church for twenty fucking years. If you really want to take him down, let’s take him fucking down” (p. 238). This is not quite the separation of Church and state that we are used to. Ickes’ association of church and “fucking” is itself revealing. It is no wonder the real personalities are intentionally masked. How many candidates could win if they were simply themselves?

There are implications for how our system of government is structured and for its electoral processes. Even though we can’t be blamed for the fake images being fed to us if nothing else is available to us, we are to blame for acquiescing in the elongation of the election season—the 2012 presidential campaign “season,” for instance, began shortly after the 2010 midterm election. Such an elongation simply extends the run of the fake images, rather than making it more likely that we might glimpse the real persons behind the curtain. Furthermore, our ancestors are to blame for expanding popular election into larger and larger electoral districts in which there is more distance between the average voter and the candidates. On the number of electors per candidate, the delegates in the Constitutional Convention warned that in very large electoral districts the people would not be able to get to know their candidates. Contrary to American history from the USA-CSA war to today, we could demand more of our intra-state representatives and less of the elected officials in the U.S. Government. Members of Congress and candidates for president are too good at playing the image game . . . too fucking good . . . and the huge districts enable them to get away with it.

Click to add a question or comment on candidates in electoral politics in the United States.

Source:

John Heilemann and Mark Halperin, Game Change: Obama and the Clintons, McCain and Palin, and the Race of a Lifetime (New York: Harper Collins, 2010).


Tuesday, July 19, 2011

Presiding over a Debt Precipice

In the context of a rapidly approaching deadline on increasing the ceiling on U.S. Government debt, Barak Obama found himself rebuffing pressure from anti-tax “Tea Party” Republicans in the U.S. House while needing enough non-partisan credibility for his warning of an impending economic catastrophe to be believed by the citizenry and Congress. That is to say, Obama’s failure to stand back as the Democrats and Republicans in Congress duked it out on spending cuts and tax increases mitigated his stature or credibility as Presider in Chief. An editorial in the New York Times refers to this role of the president as "the utimate guardian of the constitutional order." To preside is to be oriented to the viability of the whole. This means stepping in when the system itself is at risk. Partisan involvement compromises the ability to function in a failsafe capacity, as the "ultimate guardian."

      President Barak Obama between the leading House Republican and Senate Democrat  (AP/Charles Dharapak)

Concretely, as the deadline on raising the debt-ceiling approached, someone with credibility was needed to stand up and get the attention of the partisans to say: We are running out of time. You need to come to an agreement. Taking and advancing one of the sides of the dispute detracted from Barak Obama’s ability to act as the party oriented to the deadline itself. It left the deadline itself vulnerable because the role designed to protect it was also interested in advancing a certain agreement (and killing another). I contend, therefore, that Obama’s priorities were at odds with that of how his office is designed to function in the system. The system itself is left vulnerable.

By analogy, a fire inspector is hired to sit in a crowded theatre to keep an eye on the building in case one of the special effects of the play causes a fire. Keeping an eye on the theatre itself, including backstage and the balcony, is less interesting than watching the plot unfold on stage. Taking the side of the protagonist, the inspector is diverted from noticing the smoke at the back of the balcony. The theatre, and its occupants, are at risk because the inspector does not reach the stage in time. To be sure, watching a play is more interesting, but the inspector role is designed to look out for the people as a whole—indeed, the theatre itself.

Now, say the theatre is host to a debate, and that the inspector steps on stage to take part in it. Not only is he or she distracted from keeping an eye out for sabotage, people in the audience favoring the other side on the debate might not believe the inspector’s eventual announcement that they must leave the building.

In 2010, Barak Obama remarked to the press after a partisan meeting with Congressional leaders, “Being bipartisan cannot mean that Democrats give up everything they believe in, find the handful of things that Republicans have been advocating for, and we do those things, and then we have bipartisanship.” Even as his statement sounds fair, to make it from a partisan position from the presidential podium undercuts the presiding nature of the Presidency. How might Republicans have reacted to the President had he then announced an emergency and indicated what needed to be done to avert disaster? While his detractors would probably not doubt his veracity, in the face of an impending disaster every bit of credibility that the Presidency itself is capable of is necessary.

In the context of the debt-ceiling showdown in July 2011, the president’s pushback against the House Republicans compromised his warning that “we are now in the eleventh hour; we don’t have time for smoke and mirrors.” Whereas the warning is oriented to the deadline, the pushback was partisan in nature. What would prevent Republicans from assuming that the “smoke and mirrors” comment was just as partisan (and thus could be safely relegated or dismissed)? The president would have been better advised to let the Democrats in the U.S. Senate fight the partisan battle with the Republicans in the House while he, the presider in chief, saved his political and reputational capital to act as an alarm clock, for there is no other than the president. In effect, wanting it both ways (pushing one of two sides and sounding the alarm) is like putting a pillow over the clock. In the case of the debt ceiling, America could not afford sleeping in. In allowing our presidents to be so partisan, We the People rack up tremendous systemic risk without realizing it. It is as though we have forgotten the old question, Who is watching the store? We simply assume the status quo, wherein the store's very existence is not in question.

Click to add a question or comment on Barak Obama’s role as presider during the debt-ceiling debate.

Sources:

Helene Cooper and Carl Hulse, “Two Parties Join Together, Then Resume Divided Ways,” New York Times, February 9, 2010. http://www.nytimes.com/2010/02/10/us/politics/10obama.html?hpw

Eric A. Posner and Adrian Vermeule, "Obama Should Raise the Debt Ceiling on His Own," New York Times (July 22, 2011). http://www.nytimes.com/2011/07/22/opinion/22posner.html?_r=1&hp

The Catholic Ethical Stance on Greed

Catholic economic, social and political ethics from Vatican II’s Gaudium et spes (The Church in the Modern World) encyclical in 1965 through the relevant encyclicals of John Paul II are “especially critical of the risks of avarice, acquisitiveness, and waste in consumerist societies, the indifference of many affluent people toward the poor, and the swing of governments away from redistributive taxation, welfare ‘safety nets,’ and foreign aid to poor nations, toward a kind of ‘economic rationalism’ that encourages and enacts hard-heartedness and selfishness.”

Avarice is simply another word for greed, a basic desire for more. This motivation presumes that however much a person has accumulated, it is not sufficient; rather than resting on a good deal having been achieved, it is human nature to instantly view it as insufficient next to a better deal not yet accomplished. The change of perspective from gladness to near indifference is truly remarkable. The quickly-assumed mere default-status of a good deal (e.g., from self-congratulations to the banality of fait accompli) is occasioned by the recognition that even more can potentially be had (on even better terms). A fundamental desire for more is behind this recognition and the ensuing change of perspective on what one already has procured.

Acquisitiveness itself can thus be seen as the value—indeed being an end in itself—behind greed. Within acquisition, or as a further end, is the pleasure that can be obtain by consumption. There is thus a utilitarian, pleasure-maximizing, utility undergirding the value (of acquisitiveness) and motive (of greed). But unlike the ethical utilitarianism of Bentham and Mills, here the maximizing of pleasure is at the individual level, rather than of the greatest good for the greatest number.

Although individualism can be ethically laudable in terms of character or virtue ethics, a focus on the individual can also reduce to hard-heartedness and selfishness. Where pleasure-maximization is centered in, or limited to, oneself, redistribution is viewed negatively. For example, in the context of the stalemate during July 2011 on raising the U.S. Government’s debt ceiling, certain members of Congress refused to go along with an agreement that included ending the Bush tax cuts for individuals making over $200, 000 ($250,000 for couples). At least for some of the wealthy, having more rather than less even when the latter included ample surplus was worth continued stalemate and the related possibility of default of the U.S. Government and global economic turmoil and hardship. Individual pleasure-maximizing at the expense of the public good can thus be viewed in terms of niggardly selfishness at odds with justice as love and benevolence, and thus, furthermore, as being at odds with Catholic ethics.

Click to add a question on the Catholic ethic on greed.

Source:

Encyclopedia of Applied Ethics, Vol. 1, Ruth Chadwick, ed. (New York: Academic Press, 1998), p. 486.

On the historical Christian views on the relationship between wealth and greed, and the associated theory of justice as love and benevolence, see: Godliness and Greed: Shifting Christian Thought on Profit and Wealth

Monday, July 18, 2011

Pay No Attention to the Banker behind the Curtain

U.S. Treasury Secretary, Tim Geithner, said he is not concerned about dire warnings from Jamie Dimon, CEO of JP Morgan Chase, one of the $1 trillion plus banks whose very existence proffers systemic risk. Dimon exclaimed that U.S. Government regulation may be suffocating the economic recovery. While it is nice of Jamie Dimon to be so civic-minded as to want to protect the recovery, his real objective was to increase his bank’s profitability. His ulterior motive was not in line with the economy over all, much less with society and the common good.

Referring to the banks, Geithner said on July 18, 2011, “"Their interests are not aligned perfectly with the broad interests of the American economy." Astonishingly, Geithner went on to suggest that given this cleft and the bankers’ vested interest in their own profitability, they should not even be part of the conversation on regulating them. "Don't listen to the banks about this kind of question," Geithner told CNBC.

Considering that Citibank acted as sponsor for Geithner’s appointment as President of the New York Federal Reserve (an office that at the time was selected by a board composed of New York’s major bankers), it is quite telling that the Treasury Secretary was willing to be so blunt concerning the biggest banks in the U.S. In fact, he went “on to say that complaints by banks, most recently surrounding what they describe as excessive regulation in the form of increased capital requirements, are unfounded. American banks have much more capital relative to risk than they had before the crisis. And they are in a very good position to thrive, not just to manage."

Pointing to the mentality behind the “overregulated” subterfuge, Geithner went on to explain  that a bank’s “job is to evade, or avoid, or weaken, any constraint on [its] ability to operate." The existence of any regulation would trigger demands for deregulation. That such cries would be made even after the unregulated derivatives had almost brought the global financial system to collapse in the last quarter of 2008 testifies to the hegemony of the single-minded “loosen constraints” mentality in business. This narrowness, Geithner was claiming, is not only at odds with the public good, but with the good of the economy itself. In fact, the mentality applied to a public policy bearing on the banks represents a conflict of interest—a special interest for personal gain at odds with the broader interest or obligations to others—justifying taking banks out of the debate. Don’t pay any attention to them, the Treasury Secretary advised American citizens concerning the banks crying foul on regulation.

For example, even in the wake of the recklessness of the banks leading up to the credit crisis in 2008, the banks opposed President Obama’s proposal for a new consumer agency for the financial sector that went into the Dodd-Frank law of 2010. What Geithner was saying in the following year is that the public should not pay any attention to the bankers’ complaints about the agency as it was coming on-line. The bankers would oppose any new regulatory agency under virtually any circumstances because a bank (and a company more generally) is inherently oriented to removing any externally-imposed constraint. It is hardly surprising that many of the people’s representatives mirror this mentality, given the money needed to run a campaign; what continues to confound me is why people take the banks’ asseverations at face value, as credible and even without an underlying vested interest (as if a banker were altruistically concerned principally about job creation in a recovery).  


Source:

“Tim Geithner: Banks’ Interests ‘Not Aligned’ with Those of American Economy,” The Huffington Post, July 18, 2011. http://www.huffingtonpost.com/2011/07/18/tim-geithner-interest-of-banks-not-aligned_n_901628.html?ref=tw


Sunday, July 17, 2011

Risking Default of the U.S. Government: Other Priorities

In mid-July 2011, as several of the American states were in the midst of a heat-wave, the showdown on the debt-ceiling was becoming hot in Washington, D.C. The “heat index” on default was steadily rising with no end in sight. The refusal of republican representatives in the U.S. House to automatically increase the debt-ceiling had prompted unprecedented attention on what had been treated hitherto as a “housekeeping matter” of the U.S. Government. The attention can be referred to as a “fiscal moment.” Whereas a “constitutional moment” is one in which a citizenry’s attention is momentarily galvanized on a particular constitutional question, a “fiscal moment” is a window wherein heightened popular attention of the citizenry enables a societal recognition of what had been vaguely understood and recognized as a long-standing fiscal tendency or pattern.

The prospect of default by the U.S. Government was dire indeed. Talking to U.S. Senate leaders, Secretary of the Treasury Geithner said, as later recounted by Sen. Reid according to the Huffington Post, “default would result in a complete ‘loss of capacity to function as a government.’ If this country defaults on its obligations, it will be ‘much worse than the Great Depression, and it would make the massive financial crisis of 2008 look mild. It will make what we just went through look like a quaint little crisis.’” Sen. Reid concluded from the Secretary’s remarks, "Those who say this crisis would be a blip on the radar are wrong. Default would be a plague that would haunt our nation for years to come. Our credit rating would take years to rebuild. The country would never be the same." In the context of this awareness of an impending yet self-inflicted catastrophe, the failure of the “players” in the Congress and Obama administration to mitigate rather than exacerbate real differences of opinion within the citizenry was apparent.

Perhaps not coincidentally, the attention of a crisis announced and solved at the last minute would serve the interests of, and be practically irresistible to a politician. Add to the mix a perplexing tendency to acknowledge what the catastrophe would bring and yet assert other priorities—of value to be sure—over that of extending the debt ceiling. Allowing other priorities to get in the way of an agreement oriented principally to obviating default is so perplexing that it raises the question of societal dysfunction and compromised representative democracy. That is to say, are We the People mature enough to self-govern when so much is at stake?

An accumulated public debt of over $14 trillion (plus $68 billion among the states) points to a basic imbalance, ultimately of values and rooted in psychology and its related culture. External discipline, while a tacit admission of self-government, is necessary where such an imbalance is countenanced (and perhaps not even recognized at large until a jolting fiscal moment of self-serving attention). One means of external discipline is a balanced budget amendment. To better understand, the rationale for this crutch, I discuss the ailment that is compromising our self-governance. The sickness is most apparent where incredulous claims are represented as taken-for-granted facts of reason.

Even in the context of a U.S. debt of over $14 trillion, and especially when an upcoming solvency deadline was looming, the question of whether the rich should contribute more in taxes was being allowed—incredibly—to prevent an agreement that would obviate default. Rationally speaking, it does not make sense to believe that default would be catastrophic while objecting to a solution because those who can pay more would face higher taxes. If something is crucial, it does not make sense to hold up because someone who can do something refuses because it is not convenient. At the very least, this evinces a problem of priorities, if not garden-variety selfishness at the expense of the public weal.

Put differently, if averting catastrophe is not enough of an incentive for people who can afford higher taxes to let an agreement go through with revenue increases as well as spending cuts, then closing the budget gap can be expected to be nearly impossible politically. “We have a terrible track record, Republicans and Democrats alike, of promising to get our spending under control and never doing it,” Senator Coburn (R-Okla) said on July 17th.  He could have added that the politicians do no better at getting their revenue in line with what they have decided to spend.

During the Bush administration (2001-2009), for example, the federal debt went from $5 trillion to $10.5 trillion because neither the Iraq and Afghanistan wars nor the prescription-drug benefit program were “paid for,” while tax cuts reduced federal tax revenue. This disconnect between spending and revenue, as well as the convenient decisions to spend borrowed funds, suggests that some form of external fiscal discipline. President Obama’s disclaimer that no such discipline, such as in the form of a balanced budget amendment to the U.S. constitution, is needed rings hollow. Even beyond the fiscal policies of the Bush administration, the pattern of debt-ceiling increases belies Obama’s claim.

We as a people, and our elected representatives, do not have sufficient discipline (and priorities) on our own. A balanced budget amendment, with a two-thirds majority in both bodies of Congress and a presidential signature necessary to go into debt (e.g. for an emergency such as to fight an invasion), ought not be so dismissed out of hand by such a people just because it would require us to confront our long-standing habit of living beyond our means governmentally.

The denial concerning the need for imposed or external fiscal discipline is itself indicative of the psychology sustaining the budgetary problem. It is to be expected that those used to spending beyond revenue levels would object to external discipline, but for officials to claim that such discipline is not necessary borders on recklessness. To be sure, a few years of preparation and adjustment would be needed for the Congress and president to get the U.S. Government’s spending and tax levels closer into line, and it is unlikely that such a task would be accomplished. The likely refusal to close the gap even to forestall a jarring adjustment is itself a testament to the need for the amendment. Even then, I predict that we would allow other priorities, such as the interests of the wealthy as well as debates on the size of government, to get in the way.

In other words, we, the American people, are not even close to a mentality capable of suitably managing our Union’s fiscal matters. We are like a bike tire out of balance and yet we seem to refuse even to recognize it. If there is to be recovery from our comfortable brain-sickness, a jolt, such as that which a balanced budget amendment could proffer, may be necessary.

Plainly spoken, Barak Obama’s claim that external fiscal discipline is not necessary and the republican decision to put the Bush tax cuts for the rich, a desire for a smaller government, and the (putatively tax-cut-related) priority on economic growth above an August 2nd deadline on the debt-ceiling BOTH point to a serious underlying psychological (or, at the very least, political) problem inhibiting our collective ability to get the fiscal house of our Union in order. Given the magnitude of the problem, our distractedness and denial says a lot finally about us as a people and whether we are adequate to self-governing. If our representatives were inventing a crisis in order to be viewed in the end as the saviors after having stirred up attention on themselves, We the People could perhaps do much better; we might reconsider how we approach our exercise of popular sovereignty on election day. We blame one party or the other at our own peril, as we are the sovereign and are ultimately responsible as one people. Are we something more than distracted, blaming, angry, and selfish? 

Click to add a question or comment on a balanced budget amendment for the U.S. Constitution.

Sources:

Eric Lipton, “Both Sides Confident on Deficit Talks Despite Impasse,” New York Times (July 17, 2011).

Michael McAuliff, “Tim Geithner: U.S. Debt Default Means ‘Lights Out’ and a New Depression, Treasury Secretary Warns,” [sic] The Huffington Post, July 18, 2011.