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.

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.

The print edition of today’s Buffalo News features two extra editorial pages. Resembling two full-page ads, the “Buffalo News Editorial Opinion: Say No to State Government Incompetence” lists over 75 new taxes, fees, and other “revenue raising items.” But rather than let the figures speak for themselves, a large upper-case font, superimposed over the list shouts “THE STATE BUDGET IMPOSED $8 BILLION IN NEW TAXES AND FEES ON YOU.”

Makes your blood boil, doesn’t it? Here I am, Joe twelve-pack, working my fingers to the bone, and now those fat cats in Albany are trying to steal my hard earned money with the following measures sure to keep the little man down. They want to raise:

$4.78 billion by increasing the personal income tax rate by 1-2% on people making over $200,000 (We all know how hard it is getting by on 200 grand a year.)

$200 million by limiting itemized deductions, except charitable, on incomes over $1,000,000 (I work hard for my million dollars a year. Now some politician wants to limit my tax deductions? WTF?)

$10 million by imposing a tax on the sale of partnerships by nonresidents (I was in Miami over the weekend, bitching on my buddies yacht about how the founding fathers would never stand for such BS)

$5 million by closing timetable loopholes for claiming state residency (Now they want to tell me where I can and can’t live receive my mail? TYRANNY!)

$6.3 million on sales tax avoidance affecting vehicle, aircraft, and marine sales (Thank God I bought that Learjet last year)

$29 million by closing the captive insurance corporation tax (One more income-sheltering provision stolen from us little guys.)

$171.6 million by placing a 1.75% tax on accident/health premiums on for-profit Health Maintenance Organizations (Nobody gets into the health insurance business for the money. For example, Alphonso O’Neill-White, local CEO of Blue Cross Blue Shield is forced to make due on $8,300/day. Now they want to cut into that narrow profit margin?)

$124 million by restoring a .35% assessment charge for hospitals (A hospital bed costs as much as a new car. How will they make ends meet if we resume this outrageous tax, especially when you consider that most of the money hospitals make comes from the State and Federal governments in the first place?)

$240 million by hiking health care premiums $45 for a WNY family policy (The money has to come from somewhere. Don’t look to Alphonso to eat some of that charge—this ain’t the USSR, yet.)

$1.2 million by increasing penalties for food safety violations (Is it not enough that my frozen hamburger company works around the clock slaughtering cows? Now I have to make sure there are no cow patties mixed in? Don’t come crying to me when you run out of food at your 4th of July cookout—I tried my best to provide.)

$5 million by increasing fees for pollutant discharge permits (Great. My company creates an insane amount of pollutants. Now I’m expected to pay more for the privilege of pouring them into the Niagara river? No thanks. Same goes for the $5 million they want to raise by doubling fees on all the pesticides I need.)

$500,000 by increasing fees for facilities that emit contaminants (See above. Let’s not forget the $300,000 they expect to raise by heaping fees and penalties on explosives handlers. Good luck with that one. Are you gonna be the one to ask for a dime from a man holding a stick of dynamite? Don’t tread on me!)

$2.7 million by nearly doubling the fees to run my nuclear power plant (Mr. Burns would never stand for such an outrage in Springfield.)

$400,000 by slapping a fine on uncertified crane operators (What’s next? Raising the cost of trying to win a stuffed animal from the Claw machine at Chuck E Cheese? I mean, how hard is it to operate a crane on a high-rise above pedestrians?)

$50 million in fees on non-LLC partnerships (Communism, plain and simple.)

$1 million by charging $10 to enter horses in races (Looks like it’s time to sell the mansion in Saratoga and move the thoroughbreds down to Florida.)

$115 million by charging a five-cent deposit on bottled water  (How many people will die of dehydration at the gym thanks to this cruel and short-sited policy? Don’t they know that water is better when it comes encased in a petroleum-based product?)

$476 million by “sweeping” cash from the NY Power Authority into the general fund (The Authority has worked hard for decades earning that $476 million. Now the state wants to take it away? Write your elected officials and demand that money be quickly returned to the Authority. THEY didn’t get us into this mess. ALBANY did.)

The list of outrages perpetrated by our elected officials against the common man goes on and on.

And look how these seemingly little changes can effect the entire economy. You ride a motorcycle? It’s gonna cost you $3.50 more to register it, Easy Rider. That will translate into fewer motorcycles on the road. Fewer motorcycles on the road translates to fewer trips by Mercy Flight next summer. Fewer trips by Mercy Flight translates to fewer hospital procedures combined with loss of revenue in the funeral home sector—not to mention fewer clients for physical therapists. Who pays in the end? YOU!

Last but not least these sickos in our state capital want to raise $14 million by bumping up the tax on a gallon of beer by 3 cents. Which one of them is gonna have the guts to explain to my daughter that her college fund will be effectively eaten up by their irresponsibility and unbridled greed?

If you couldn’t get into your usual parking space at the Buffalo Club this morning, blame it on UB President John Simpson, who held his annual community address across the street at Babeville. I think I was the only sucker who put a quarter in a meter on the street. And I’m lucky I had a quarter, because the automated kiosk on Delaware Avenue was broken and wouldn’t accept credit or debit cards.

This year’s speech, “Buffalo-Niagara at a Crossroads,” riffs on themes borrowed from bluesman Robert Johnson and poet Robert Frost.

Teddy Roosevelt also received major props in the address, as Simpson reminded us, “If we are really to be a great nation, we must not merely talk big; we must act big.” As in UB2020, get it?

Simpson also borrowed Roosevelt’s warning to skeptics: “It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”

Dust and sweat and blood, people. You can’t make this stuff up. He even threw in a reference to the Russians and Sputnik. But don’t take my word for it, read it for yourself by clicking here.

And for the heck of it, I’ll offer another Teddy Roosevelt quote, for your edification: “A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad.”

Roll It. Snort with it. Spend it.

The American Chemical Society’s national meeting kicked off last Sunday. One interesting presentation was a U. Mass-Dartmouth research study which found that cocaine is present in up to 90 percent of paper money in the United States, particularly in larger cities such as NY, Boston, Baltimore, Washington, LA and Detroit. Biochemistry professor Yuegang Zuo, Ph.D., said it’s long been known U.S. currency had had drug traces, due to money used in drug deals and rolled to use the drugs themselves. The study collected paper money from over 30 cities in five countries. The figure of 90 percent is a significant rise from a similar study done two years ago in which the percent of drug contaminated bills was 67 percent.

This is sad.

Dave Torke has been beating the drum for this historic property for years, and now they’re gone.

The national debate about drilling in natural areas is heating up locally as the U.S. Energy Development Corporation, located at 2350 North Forest Road in Getzville, NY, proceeds with plans to develop five new wells in Allegany State Park.

Recently, NYS Assemblyman Sam Hoyt, Larry Beahan, and other concerned citizens have been turning their attention to the state park, as they did over a decade ago when the Pataki administration was moving toward selling timber rights in the park. Back then, former 10,000 Maniac Natalie Merchant hopped on the bandwagon and public opinion swung against the lumber industry.

Now, Hoyt is spearheading efforts with the NYS Office of Parks, Recreation and Historic Preservation “to forever protect Allegany from commercial logging and oil and mineral mining.”

Just as pro-drilling forces are losing their perkiest national cheerleader in the form of ex-Alaska Governor Sarah (Drill, baby, drill!) Palin—their case is further compromised by U.S. Energy Development Corporation’s recent rebuke from the Pennsylvania Department of Environmental Protection, for their activities just south of Allegany State Park, across the state border in McKean and Warren counties.

On July 10, the department issued a cease and desist order to U.S. Energy “for persistent and repeated violations of environmental laws and regulations. The order prohibits the company from conducting all earth disturbance, drilling and hydro-fracturing operations throughout Pennsylvania.”

Over a period of just two years, beginning in August, 2007, U.S. Energy chalked up 302 violations of the Clean Streams Law, the Dam Safety and Encroachments Act, the Oil and Gas Act, and the Solid Waste Management Act. U.S. Energy is the owner and operator of the wells in the Alleghany National Forest in Pennsylvania, which borders Allegany State Park in New York.

According to the order, one third of the violations have been corrected, but the civil penalties for those violations have not been resolved. Among the many violations cited by the DEP are the unpermitted discharge of residual and industrial waste into the ground and the waters of the Commonwealth.

In Pennsylvania, U.S. Energy has had to “cease all gas and oil well activities including, but not limited to well stimulation, well drilling, road construction, pipeline construction and any other related well activities” in the state until the DEP notifies them in writing that they have complied with all the obligations of the order. They must also stop all “earth disturbance activities” except those necessary to fix the damage they’ve already done. View the cease and desist order here.

Prior to the park’s official designation in 1921, the area was widely drilled for oil, including the first oil well in New York State, which was completed in 1864. While the state controls the surface rights to the park land, private interests have been unwilling to relinquish ownership of what lies beneath to this day.

One bill supported by Hoyt would create a sunset provision for privately held oil and gas interests beneath the park.

U.S. Energy spokesperson Matt Iak confirmed that they have access to mineral rights in Allegany State Park, and that they are “going through the various channels” to make those wells a reality.

However, a spokesperson for the NYS Department of Environmental Conservation had this to report: “U.S. Energy has never applied for drilling permits in Allegany State Park. That being said, they have been drilling wells on a regular basis in other parts of Region 9 area (Western New York), and DEC does receive drilling applications from them on a regular basis.”

When asked about the Pennsylvania DEP order, Iak said, “It’s premature for us to make a comment. I can tell you that we’re both working with the same interest at heart, and it’s in very good spirit right now.”

He would not respond to any particular charges included in the order. “I’m not saying I don’t want to respond. I’m not in a position to respond until they give you the final word on what’s going on, and I think you’ll have a different opinion at that point in time.”

A spokesperson for the Pennsylvania DEP said that “the scope and magnitude” of U.S. Energy’s violations “is not commonplace, and that’s why we took the action that we did.”

Four items of interest:

—Byron Brown wins the endorsement of Goin’ South, the South Buffalo political organization stacked with city employees. No surprise there; there was no chance that Ray McGurn and Goin’ South would buck the mayor and his allies Brian Higgins, Mark Schroeder, and Tim Kennedy. Still, it’s a show of force for Brown.

—Mickey Kearns wins the endorsement of the Police Benevolent Association. No surprise there, either: What was Bob Meegan to do, spin around and embrace a mayor who keeps dragging the PBA to court and losing? (It’d be informative to get a breakdown of the City of Buffalo’s legal expenses fighting the PBA over the past three years, including time spent by the Corporation Counsel.) The PBA is Kearns’s first union endorsement, but how much good will it do him? There are 700-odd cops in the BPD, plus support staff, but lot of cops live and vote in the suburbs. Nonetheless, Kearns needed an endoresement like this and now he has it.

—Jim Heaney reported in Sunday’s Buffalo News that the FBI, US Attorney, Erie County DA, and New York State Police are all in some manner or another investigating Buffalo’s City Hall. Some are looking at Brian Davis’s finances, some at BERC and One Sunset, some at the city’s use of HUD money. Heaney did well to confirm these investigations are occurring; it’s hard to get beyond a no comment on these matters. His article also offers a review of the cavalcade of scandals rolling out of City Hall over the past few months.

—Most interesting to me, however, is this story by Susan Schulman, about a Cleveland developer whose East Side housing project was nixed after the Jeremiah Project, a group run by the influential Reverend Richard Stenhouse, failed to win a contract to oversee minority hiring on the project. (For the sake of argument, I’m leaving alone the merits of NRP’s project. In any case, Stenhouse’s objections seem thin, since the Jeremiah Project has been lead agency in similar low/mod rental housing development themselves.) Schulman is admirably careful about what she implies in her story, but it reads to me like a classic Buffalo shakedown: Stenhouse, in a position to stall a project, seeks a part of it. When he doesn’t get the contract, he helps to kill the project.

Why is this much more to me interesting than Heaney’s article? Because, whereas a local developer might take this setback stoically in hopes of working another day, a developer from Cleveland may not fear the consequences of speaking out. This is the sort of thing that raises eyebrows at the FBI.

Rosa Gibson passed away on Friday at age 78. It is a tremendous loss to her family, to the people she worked with and for, to her neighbors, and to this city. To Artvoice, in addition to  being a dedicated community activist, she was reliable source of information, and occasionally a sharp-tongued and much appreciated critic. We’ll miss her.

We shot this video of Rosa at the Community Action Information Center last year:

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As I write this post, the Great Lakes Health system is conducting a private retreat at the Hyatt Regency downtown. The event is closed to the public and press. The retreat follows a half-hour “open meeting” conducted by GLH board chair Robert Gioia, and board members Edward Walsh, Jr., Sharon L. Hanson, and Kevin E. Cichocki, D.C.. At the end of the brief presentation (click here for the outline), the two reporters present were told to leave. Below are screen shots of the various “breakout” meetings taking place in private.

	And let’s not forget lunch…

Wonder what’s on the menu?

When you visit the Great Lakes Health Web site and read that they are “unveiling a bold new healthcare delivery system for Western New York,” what they really mean, obviously, is that they are “unveiling” it to one another, behind closed doors.

The Western New York public will then have the opportunity to live, and die, with their decisions.