AV columnist Bruce Fisher sends in this reflection on How Treasury Secretary Tim Geithner’s bad economics could turn Blue states Red in 2010:

Jim Hightower, the former Texas politician and veteran political wit, was fond of excoriating political moderates as he was of skewering Republicans. “Ain’t nothin’ in the middle of the road but yellow lines and dead armadillos,” he’d say. In the Blue states, the curious phenomenon of middle-of-the-road economic policy in 2009 may turn politics Red in 2010. That’s because trillions of American tax dollars spent on “stimulus” spending have gone into bailing out banks rather than into buying America any new jobs. And the political effect is terrible for Congressional Democrats, who are getting angrier and angrier, just like their constituents. By the time of the next Congressional elections in 2010, the political impact of the economic policy decisions of George W. Bush’s and Barack Obama’s Treasury Secretaries, Henry Paulson and Timothy Geithner, could destroy Obama’s majority support in Congress.

Treasury Secretary Tim Geithner

A group of non-mainstream economists has been warning about the wrong-headedness of the Bush-Obama approach to financial stabilization. At the recent international conference of Post Keynesians held at Buffalo State College, the consensus was pretty clear that both the Bush and Obama administrations gave America a policy that will do nothing to prevent the financial instability that gave us the financial collapse and the resulting recession.

Current policy, according to L. Randall Wray and Eric Tymoigne of the Levy Institute, “serves to preserve the interests of big financial companies rather than to implement government programs that would directly sustain employment and restore state finances.”

In one of those rare papers that non-specialists can read, these economists don’t go anywhere near the political question of why it is that first the Bush Treasury and then the Obama Treasury flushed trillions of US taxpayer dollars into propping up banks that are “too big to fail” while doing nothing about the crushing burden of household debt—and still leaving at least 26 million people without a steady full-time job. Unfortunately, Obama’s economic advisory crew is led by people whose views are undistinguishable from Bush’s—the very people who have personally profited from what historian Kevin Phillips calls “the financialization of the American economy.” The Post Keynesians who gathered in Buffalo warned that the incentives for money-manager capitalism have become far, far lucrative than for industrial capitalism, evidenced by the far higher level of profits scored by financial firms than by industrial firms.

The astounding surge of influence of the financial world has been a bipartisan phenomenon. Former President Bill Clinton’s own Treasury Secretary, Larry Summers, was one of the architects (if deconstruction can be called architecture) of the changes in financial regulation that had been in place since the New Deal. Republicans and Democrats alike gleefully went along with all of that and more, raising money from Wall Street hand over fist. They all sang from the same “free market” hymnbook. Markets were supposed to be self-correcting. Indeed, the Republicans who are called “free-market fundamentalists,” like Congressman Ron Paul and Senator Richard Shelby, criticized the Paulson and Geithner bank-bailout policies by making at has least one point in common with the Post Keynesians: They all say that there should be no such thing as a bank or an insurance company that is “too big to fail.”

This past week, Senator Shelby rose in opposition to Senate Banking Committee Chairman Chris Dodd’s legislation that, Shelby says, “significantly expands the federal government’s ability to bail out not only banks, but any large, politically connected company.” The Post Keynesians make the same point.

Thus President Obama is facing a brewing rebellion on the Left as well as the one that has been hammering him from the Right. His bailout of the banks massively swelled the federal deficit without providing a public-works program that resulted in a surge of hiring. As the Christmastime consumer spending-frenzy approaches, there is still double-digit unemployment almost everywhere and no relief in sight. The Congressional Black Caucus is in open rebellion at the Tim Geithner-Larry Summers “brain trust” that still apparently believes that macro-measures of economic output are a perfectly adequate gauge of economic recovery, even while middle-class and working-class household stress is boiling over.

Even worse, the economic pain in 2010 will hit home even harder. The Pew Center on the States reports that most state governments are so strapped for cash that tax increases, layoffs and service cutbacks loom. Brookings Institution economists have issued a dire warning that local governments everywhere will be following suit.

Thus it’s no surprise that Congressional sentiment in favor of a new round of “stimulus” spending seems to be growing—because folks at home, from governors and mayors to households and shopkeepers, are all asking “Where’s my bailout?” Here’s the political problem: the apologists for the “free market” will be happy to bash the proposed financial reforms the same way they’ve bashed the stimulus spending and the healthcare reform—as big-government programs that don’t, haven’t and won’t deliver benefits to the average family. The Levy Institute economists of the Post Keynesian school warn that the free-marketeers, whether they worked for Bush, for Obama, for Ron Paul or Richard Shelby, are dangerously wrong. The average family would benefit tremendously from the policies prescribed by Tymoigne and Wray, policies that include a permanent public-works jobs program at a living wage, plus household debt-forgiveness, plus “a return toward term lending by regulated financial institutions that hold loans and a restoration of incentives to engage in proper underwriting.” Tymoigne and Wray argue that the only way to fix the lending institutions is to give working people a chance to start paying their mortgage payments and their credit-card bills.

That’s sober advice that also happens to have a certain genius about it as political advice, though as non-politicians, they never say as much. Sadly, the political rhetoric of 2010 will likely be dominated by Republicans who will bash the Bush-Obama bank bailouts and also bash the massive deficits that those bailouts caused.

As non-Keynesian and Post-Keynesian economists alike know, though, the most dangerous thing in the world would be to try to enact aggressive anti-deficit measures because of this thing called demand. If deficit hawks get elected in 2010, and succeed in restricting the actually stimulative “stimulus” spending, then unemployment could get much, much worse, and the downward spiral toward the Depression could get going faster than it could be stopped.

So here’s the punchline: If Obama sticks with Bush economic policies, and if his Senate allies like Connecticut’s Chris Dodd push financial non-reforms that institutionalize “too big to fail” for Wall Street’s irresponsible giant firms, then hunger and hurt in the heartland will tip the Blue states toward Red.

There’s already a tax revolt on Long Island and in the Hudson Valley in New York State, and a shrill anti-government movement in the permanently dependent, permanently job-losing Buffalo area. Ohio voters just this month reversed themselves with a vote to legalize casino gambling, which is always a sign that a depressed area has become a desperate area, as study after study has shown that casinos cause deadweight economic loss in addition to criminality and family woe. In Michigan, northern Ohio and elsewhere in the Great Lakes, other automobile-industry centers are already seeing red. Unemployment, housing foreclosures and overall economic stress make those areas prime targets of former Alaska Governor Sarah Palin’s book-promotion tour, where she delivers her anti-government message to some seriously hurting folks.

The Bush and Obama teams delivered for the financial elites on Wall Street, whose bonuses this Christmas will still have them consuming lots of jewelry, high-end watches, designer clothing and imported luxury cars. Meanwhile, a recent Wall Street Journal report shows that sales of low- and moderately-priced items at shopping malls are still depressed. The Target-brand department stores, whose customers briefly became Democrats in 2008, expect lower-than-usual sales because their customers don’t have the money this year.

The Classics on Elmwood concert series returns tonight from a two-year hiatus with a performance featuring internationally renowned guitarist Mir Ali. Accompanying him will be members of the Buffalo Philharmonic Orchestra Amelie Fradette (cello), Betsy Reeds (flute), and associate concertmaster Amy Glidden (violin). This concert will also function as the quartet’s release of their collaborative CD, Amistad. Mir Ali, the Pakistani-born virtuoso, has graced these pages many times, and more notable accomplishments include composing music for movies, theater, radio, and TV—most recently for the documentary “Roots and Branches” which won the Award of Excellence from the Film Advisory Board of Hollywood. Amistad is Ali’s first recording in seven years, making this event a long-awaited revival for both the muscians and the Classics on Elmwood series.

—alan victor

Unitarian Universalist Church, 695 Elmwood Ave. / 8pm / $15

Remember New London, Connecticut? In 2005, the struggling city won a Supreme Court case to bulldoze the homes of many residents, citing eminent domain, to make way for a huge expansion for Pfizer Pharmaceuticals. The city threw in crazy tax breaks to lure the company there, in an effort to revitalize the city. The company promised a “business and technology park.”

Now, Pfizer is shutting down its huge research facility, after merging with Wyeth Pharmaceuticals. Turns out they’re not making enough money. This leaves an overgrown field where the homes that were demolished to make way for the expansion used to stand.

Say…didn’t there used to be a big Westwood-Squibb pharmaceutical complex over by the Scajaquada on the West Side?

I mean, nothing like this could ever happen in a place like Buffalo…could it? Let’s hope a store like Bass Pro has a more stable future than the pharmaceutical industry.

For a born-again, turn-the-other-cheek, ride-that-Gospel-ship, my-check-kiting-days-are-over Christian, Joe Illuzzi certainly is given to fits of stunning vituperation. The bile he unloaded last night is particularly freighted with hate and slander.

On Cheektowaga Democratic chairman Frank Max:

One of the bloggers arrested for indecent exposure  known for fabricating stories, libel, etc. & getting paid to do it wrote Cheektowaga Chairman Frank Max beat up his wife & did jail time, true account.

However, later on Max paid him to write a retraction. Now Max says this publication  solicited an ad for Glascott for Sheriff. Absolutely not true. Max brought the ad up & we ignored him. Max would always preface his conversations with us by offering some sort of payment in kind. The fool never realized how insulted we were by that tactic. We should mention Max excoriated the blogger in question for over a year until he realized he could purchase the retraction.

We never swayed from our support of Tim Howard. We wouldn’t take money from a man who represented one of the most racist, brutal police departments in the country. However, the blogger in question took Glascott’s money & excoriated Howard for months.

But what was is true is Max beat up his wife!

On Erie County Legislator Tom Mazur:

Then this degenerate who represents a guy who beat up his wife (Max) is singing the praises of Legislator Tom Mazur was forced to resign his teaching position at ECC for sexually abusing a very young female student, more than one says a very prominent jurist.

On New York State Assemblyman Sam Hoyt:

To add insult to injury: Hoyt Sam I’ll be your lollipop Hoyt is taking full credit for the Legislature reversing itself on the license plate mandate. Hoyt sanctioned by the Assembly Speaker & kicked out of the “student intern” for having sex with one of the girls in his charge. Actually, there was more than one & one had an abortion.

On Common Council President Dave Franczyk:

We received a number of emails from readers wanting to make the point that Common Council President David Franczyk is simply a talking head. His district looks like a war zone because Franczyk has done little or nothing for his constituents. His job is to get the Black guys.

On the five members of the majority coalition on the Common Council:

The Majority on the Buffalo Common Council is trying to lynch Brian Davis.

And on an unnamed member of the Common Council:

Oh! I almost forgot! Sources say unequivocally that a Majority member of the Buffalo Common Council got caught in a extra marital tryst. Did we mention it was a gay man. The gay guys partner made him come clean if he wanted a reconciliation. No names (We have  names) just the facts – just the facts.

Come on, Joe. Don’t blow a week’s worth of character assassination in one evening. It’s only Tuesday, and your weekly dose of forgiveness is a long time coming.

The last assertion is especially egregious. Who is the old blackmailer threatening with this gossip, and why?

Consider Illuzzi’s sponsors: He is the paid man of Byron Brown and Steve Casey, who, like their opponents, are scrambling to positions for the fight to choose the successor to Brian Davis, who, according to state law, vacated the Ellicott District seat on Friday by pleading guilty to two misdemeanor violations of campaign finance law. (By the way, note that DA Frank Sedita claims there was no plea deal with Davis. Sedita says that Davis plead to exactly the crimes he committed, and if he had not, Sedita would have convened a grand jury this week to look at the case. But if Sedita was ready to convene a grand jury, then he must have had felonies to pin on Davis, not misdemeanors. Sounds like a plea deal to me.) The Council’s majority coalition wants to fill the vacancy quickly, not only because the Ellicott District needs representation but because the Council is beginning to work on the mayor’s proposed capital budget. Last year, the majority held the capital budget hostage well into the new year, insisting on changes that the mayor refused to make, and unable to force the mayor’s hand because they lacked a sixth vote to overturn Brown’s veto.

The Ellicott District seat could provide that sixth vote this year, but they need to fill the vacancy before December 15, by which date the Council must make its changes to the mayor’s $22.7 million capital budget proposal.

It may seem like the majority should be able to pick whomever they like for that seat, after advertising the position, accepting resumes, interviewing candidates, and listening to the district’s Democratic committee members, whose recommendation is influential but non-binding. But a five-to-four majority is thin, and it might be possible for Brown and Casey to peel away one ambitious majority member. One of the five, for example, might be convinced to vote for the candidate backed by Brown and Casey (Janique Curry, perhaps?) in exchange for the Council presidency, which would be determined by a new majority comprising the mayor’s bloc—North, University, Masten, and Ellicott—plus the rogue member of the current majority.

That carrot, or one similar to it, is surely being dangled right now. Perhaps Illuzzi, then, is the stick. If you don’t take the carrot, Brown and Casey may be saying, we can turn Illuzzi and his poison on you.

Tonight is the second annual celebration of  all things Lebowski at Voelker Lanes (corner of Elmwood and Amherst, across from Joe’s Garage). Thirty dollars  (a portion of which benefits the local chapter of the American Cancer Society) buys you unlimited bowling and shoe rental, some local comedians, live music, and an open bar from 11pm to 1am. Contests include His Royal Dudeness Trivia and the Buffalo Lebowski Achiever Costume Extravaganza. Doors open at 10:30pm.

Here’s the letter Erie County Attorney Larry Rubin wrote to Legislature Chair Lynn Marinelli in January 2007 after Legislator Butch Holt plead guilty to tax evasion charges:

January 24, 2007

VIA HAND DELIVERY

Hon. Lynn M. Marinelli, Chairperson

Erie County Legislature

92 Franklin Street, 4th Floor

Buffalo, New York 14202

Dear Madame Chairperson:

It is my duty to formally advise you that, in my opinion, the office of Legislator for the Third Legislative District of the Erie County Legislature is vacant as of January 9, 2007 by operation of law. On the previous day Legislator George Holt pleaded guilty to two misdemeanor charges of making fraudulent sales tax reports in violation of § 1817(b)(1) of the New York State Tax Law.

Public Officers Law §30 (1)(e) provides that a public office, which includes that of a County Legislator, is automatically vacant upon the office holder’s “conviction of a felony or a crime involving his oath of office…” A misdemeanor which demonstrates a “lack of moral integrity”, because the elements of the crime involve “intentional dishonest or corruption of pupose”, constitutes a violation of a public officer’s oath of office. The quoted language are the standards established by the New York Court of Appeals in its 1993 ruling in the cast of Matter of Duffy v. Ward (81 NY2d 127).

Several Opinions of the New York State Attorney General have applied Duffy and concluded that such misdemeanors as petit larceny and attempted grand larceny meet the standard enunciated in Duffy. See Op. Atty, Gen. No. 97-F7 and Op. Atty. Gen. 99-03. The determination of whether a crime shows a lack of moral integrity by the convicted public officer is maded based on the penal statute in question and without regard to the individual facts of the particular crime. In 2000 the Appellate Division of the New York State Supreme Court had occasion to review whether a guilty plea to a misdemeanor charge of filing a fraudulent New York State income tax return caused a public office to be vacated automatically pursuant to Public Officer’s Law §30. It was the unanimous decision of the Court that those midemeanors involve “a willful deceit of a calculated disregard for honest dealings”. Bowman v. Kerik 271 A.D. 2d 225 (First Dept., 2000).

We have compared the elements of the crime for which Mr. Holt has been convicted with the elements at issue in Bowman and we have concluded that they are equivalent.

We have also discussed this matter with both the District Attorney and the Attorney General. We have found nothing to dissuade us from our conclusion that Mr. Holt’s plea of guilty caused his office to be vacated pursuant to Public Officer’s Law §930.

Obviously, Mr. Holt should not be counted for a quorum nor his vote recorded subsequent to January 8, 2007. You may file this letter for the next meeting of the Legislature for the purpose of having the records reflect the same and to take the appropriate next steps to fill the vacancy. I understand that the timing of this letter is rather abrupt and it was only yesterday that I briefed you generally on the research my office has been conducting. As County Attorney it is my duty to help ensure that legislative proceedings are conducted with as much regularity as possible.

I am available to answer any questions you may have on this matter.

Very truly yours,

Laurence K. Rubin

Rubin’s opinion was affirmed by the courts. Subsitute “Council President David A. Franczyk,” “Ellicott District Councilman Brian C. Davis,” and “Acting Corporation Counsel David Rodriguez” where appropriate, and let the betting begin on how long before Davis is formally removed from office.

I’m told the Common Council President Dave Franczyk has asked city attorneys for a ruling on whether the guilty plea offered in court today by Ellicott District Councilmember Brian Davis vacates his office.

As you may recall, former Erie County Legislator Butch Holt lost his seat upon pleading guilty to misdemeanor tax evasion charges in 2006, because his offense violated his oath of office. That interpretation of New York State Public Officers Law  was made by Erie County Attorney Lawrence Rubin and upheld by the State Appellate Court.

So how will the Mayor Byron Brown’s Corporation Council respond? Do they tell the Common Council that Davis should be removed according to state law? Or do they disagree with the state courts on interpretation of state law and say Davis can hold on to his office, or somehow duck the question entirely, risking the appearance that they are substituting political obedience to Brown, who is Davis’s sponsor, for legal integrity?

The decision is made trickier by the fact that inquiries continue into the One Sunset affair and the city’s use of anti-poverty funds; there is overlap between those two matters, and Davis plays a part in both. Giving Davis a pass now could look even worse a few months down the road.

No wonder Alisa Lukasiewicz resigned as Brown’s Corporation Counsel. Who’d want that job? Too many shoes waiting to drop.

Word is that Brian Davis will resign claims he is not resigning the Ellicott District Common Council seat this afternoon at one o’clock, after pleading guilty this morning to two criminal charges brought by New York State Police in Judge Thomas Amodeo’s court.

Not a lot of callbacks on this story: Brian Davis isn’t answering his cell phone (his voicemail is full); Davis’s staff isn’t answering their phones, though a friend just strolled by his office and says they’re in there; the troopers have not returned calls.

So who will fill the Ellicott District seat? Word is that Mayor Byron Brown’s camp favors moving Erie County Legislator Barbara Miller-Williams into Davis’s seat, and with Janique Curry filling Miller-Williams’s seat. Attorney Bill Trezevant has had his eye on the seat for some times, as has firefighter Bryon McIntyre, who primaried Davis two years ago.

Under the rule adopted after Mickey Kearns won the South District seat vacated by Jimmy Griffin in 2005, the Common Council must advertise the vacancy, accept resumes, interview qualified candidates in public hearings, then vote in a replacement. In the past, the recommendation of Democratic district committee members was sacrosanct when it came to filling vacant seats, but the Common Council itself has the final say — if the committee members recommend someone the majority doesn’t care for, the Council could vote in someone else.

Champ Eve, son of the the legendary Arthur Eve, controls a substantial number of Democratic committee seats in the Ellicott District, as does Niagara District Councilman David Rivera and a number of others generally opposed to Grassroots, the mayor’s political organization. (Grassroots has some committee seats, too, but was greatly weakened in Ellicott in last year’s election.) So any candidate recommended by the party in Ellicott District is likely to be independent of the mayor. The question is whether that candidate will give the current five-member mjaority voting bloc and six-member super-majority that could ovverride Brown’s veto.

Just in time for the annual haggle over the capital budget.

UPDATE: Oh, right the charges: Jim Heaney of the Buffalo News, who’s been bird-dogging Davis all year, says it was personal use of campaign funds.He also pled guilty to filing incomplete campaign finance disclosure forms.

Davis’s lawyer said in court that the councilman did not intend to resign. I guess we’ll see: Erie County Legislator Butch Holt was removed from office when he ran afoul of the law, under the auspices of New York State’s Public Officers Law. Davis is reportedly  on his way to be fingerprinted and photographed right now. How can he stay in office if Holt had to go?

Erie County DA Frank Sedita will hold a press conference at 2pm.