Friday, September 20, 2013

“The Club” Runs Washington for Fun and Profit, Says New Book

“This Town,” a new book about Washington by Mark Leibovich, the chief national correspondent for the New York Times Magazine, is a surprise best seller.

But it’s no surprise that the book recounts anew the story of money’s dominant role in our political system.  The book reveals the seamy story about the ways that money affects what gets done in Washington.

As is widely known, political contributions by lobbyists and their clients give them access and influence far beyond that of the average citizen.  Their gifts fuel the high-cost campaigns often needed to ensure the re-election of members of Congress.

Are positions taken by people in Congress influenced by campaign contributions?  Of course, they are.

But the book reveals that the situation is even worse than that.  Lobbyists promise senators and House members lucrative jobs after they leave Congress, knowing that the mere suggestion of a job gets office holders to line up enthusiastically in support of their clients’ interests.

And the lobbyists come through with jobs. About half of those leaving Congress stay in 
Washington and work on legislative matters for big-spending clients.

Supposedly, they are not allowed to lobby for a year after their term ends, but they easily get around the law by claiming to be consultants while directing the work of front-line lobbyists for that year.

It would be difficult to believe that the retired officials don’t occasionally chat with their former colleagues about something more than how the Washington Redskins are doing.

And the bitter partisanship that plagues Congress these days melts away in those golden days that come after what is still called “public service.”  Some of the top lobbying forms are led by people from both parties, making it possible for them to talk with members on both sides of the aisle.

In other words, political philosophy is not allowed to stand in the way of profits.  Some lobbyists are multi-millionaires.

But Washington doesn’t seem to be getting anything done, so why, you might reasonably ask, do corporations need lobbyists?

The answer is amazingly simple, according to the book.  Many corporations want nothing to happen. So the bipartisan lobby firms work well in trying to ensure that bipartisan cooperation doesn’t break out in Congress and thwart their clients’ desire for inaction.

The Washington political community – Congress, lobbyists and the media – are all part of what Leibovich calls “the Club.”  However partisan the nation’s capital appears to the rest of us, the leading players are friends all engaged in the same game.

Success for most of them is making a lot of money and getting invited to the right parties.

A Washington insider told me about yet another way money matters.  It has to do with who gets to lead the two parties in Congress, including being chairpersons of committees.

It is often unrelated to merit or expertise. It depends on loyalty to the current party leaders and the ability to contribute or raise campaign funds.

That’s why so many members of the House and Senate raise money to contribute to other candidates to those chambers.  When they raise large sums to go into party or campaign coffers, they take a step up on the leadership ladder.

Maine Democrat George Mitchell was chair of his party’s Senate campaign committee. His great success in raising money and electing Democrats helped him to be chosen as Senate Majority Leader.

Nothing described by the book or in this column is illegal.  People with money can use it to ensure that laws limiting political funds don’t pass, so the system continually renews itself.   
In fact, the power of well-financed lobbyists has sharply increased in recent years.

The underlying cause is the Supreme Court ruling that spending money for political purposes is the same as speech.  And free speech is guaranteed by the Constitution.

The power of money and the need for those in Congress to cater to their leaders so they gain political clout threatens to make senators and House members less concerned about their constituents.

Of course, they serve the core interests of their states and districts, but on other issues, possibly less important and certainly less visible, many can serve their own career interests.

The clear message of “This Town” is that Washington belongs to the members of the “Club” and their backers and not to the people who elected Congress.
Does the book’s success mean that people are now concerned about this situation or only that many Washingtonians want to see if their names are in it as members of the Club?

Some GOP members seek to impeach Obama

Amid the partisan controversy in Congress, some Republican members of the U.S. House of Representatives say they will try to impeach President Obama.

Do they believe that Obama is guilty of what the Constitution calls “high crimes and misdemeanors?”  Do they believe they can be successful?

The answers to both questions is “no.”

They want to use the impeachment process for purely political purposes, mostly as a way of tying up the House so it cannot do any other business, like paying for Obamacare. 

And they seem to believe they could avoid any blame for bringing the unfunded federal government to a halt, because the Congress would be engaged in the serious business of trying to toss the president out of office.

Surely, the Founding Fathers did not mean that impeachment – the bringing of charges by the House – or conviction by the U.S. Senate should be used as a political tactic. 

It was intended to allow a president who was a criminal or who violated the express terms of the Constitution to be removed.  But it has never been used for the intended purposes.

Obama could find himself in line after the two presidents who were impeached, because a majority in the House thought they were usurpers and barely had the right to hold the office.

Andrew Johnson, who moved up from the vice presidency after Lincoln’s assassination, was the first president to be impeached.  He was a Democrat, chosen by the Republican Lincoln to create a national unity ticket.

His problem was that Congress was dominated by Republicans who disliked his willingness to go easy on the South after the Civil War and to deny help for the newly freed slaves.  They saw him as having distorted Lincoln’s legacy.

So the Republicans cooked up a law that probably was unconstitutional and then impeached him for disobeying it.  At the end of the Senate trial, he was not convicted because seven Republicans, including Maine’s William Pitt Fessenden, refused to go along with the ploy.

Bill Clinton was impeached by a Republican-controlled House for his problems in telling the truth about his sexual encounters.  Once again, the Senate did not convict, this time with a few Republicans, including Maine’s Olympia Snowe and Susan Collins, refusing to going along with the misuse of the impeachment power.

Though elected twice, Clinton, like Johnson, was seen by the GOP as a president who should not have held the office.   The presidencies of Ronald Reagan and George H.W. Bush had set the government on a clear conservative course, which Clinton had diverted by his elections. 

Congress tried to take control of the government, just as it has with Johnson, by dumping a president in whom it had no confidence.  Fortunately, there were enough people in Congress who thought the Constitution was more important than partisan games.

But Clinton showed the ploy was not entirely a wasted effort.  He sought common ground with the Republicans on some issues, partly because he was less liberal than many had thought and partly to appease them.  That’s pretty clearly the reason he went along with changing the name of the capital’s airport to honor Reagan instead of Washington.

Obama, too, is seen by conservative Republicans as almost an accidental president.  After the Democratic Party’s losses to the tea party in 2010, Obama should not have been re-elected two years later.  But he was.

Perhaps those GOP House members now seeking impeachment believe they can get Obama to yield on continuing with Obamacare and appease them to avoid nasty impeachment proceedings. 

The two historic impeachment proceedings and the current talk of one against Obama have something in common.  A disciplined majority in at least one house of Congress seeks to express its lack of confidence in the president.

In other words, the opposition would use impeachment in the same way the opposition in a parliamentary democracy uses a so-called “no confidence vote.”  It can embarrass the prime minister and, if successful, can cause a new election.

Of course, the United States does not have a parliamentary system.  But that may not stop some members of Congress from using impeachment to paralyze the president for the remainder of his term, as it did for Johnson, or to adopt some of their proposals, as it did with Clinton.

Still, it is unlikely that the latest impeachment talk will get very far.  The Republican House leadership seems to want to get on with a direct legislative struggle with Obama, probably fearing the political fall-out from misuse of the impeachment process.

Wednesday, September 4, 2013

Employment and stock markets send conflicting signals

New housing starts are down, and the stock market goes up.

Bad news produces new profits.  That’s kind of a “man bites dog” story.

Why does negative economic news stimulate the stock market? And why does the stock market rise to record highs when employment is recovering slowly and new jobs pay less?

Before you ask why you should care about the stock market, it is worth remembering that more than half of the American people have stock market investments, either through their direct purchases or through their retirement plans.

The stock market is supposed to reflect the outlook for the economy.  When prices rise, investors buy shares of companies that they believe will become more profitable in a growing economy.

Obviously, something different is happening now.  On Labor Day weekend, perhaps it is a good idea to consider the growing disconnect between the uncertain prospects for working people and what happens in the financial markets.

First, here’s the answer to the question why bad economic news causes higher stock prices.

In the absence of any economic stimulus coming from a deadlocked Congress and a frustrated president, the Federal Reserve, the government banker, has stepped in to provide the only boost to the economy coming from Washington.

The Fed has only a limited array of measures it can deploy to boost the economy.  Its main tool has been to create more money to make available at almost no cost to lenders allowing them to offer it at low rates to borrowers to buy new homes or invest in developing their businesses.

The nation’s banker is responsible for much of the recovery in the economy as the unemployment rate has continued to decline, however slowly.

From the perspective of investors, lending their money is not a great idea when interest rates are kept so low by the Fed.  Instead, they turn to stocks, pushing their prices up as funds flow from bonds, the usual form of lending to corporations, into share ownership.

The Fed wants to avoid inflation, with its rapidly rising prices, that could result from too much money flowing into the economy.  So it will slow down its creation of more money as soon as it is sure that the economy is on the path to recovery.

Its officials have been saying recently that they see signs the economy is coming back.  They have begun talking openly about cutting back on the Fed’s support for lower rates in the belief that private lenders will take over as higher rates make loans more attractive.

That sounds like good news.  As interest rates rise, investors are putting more money into lending and send less money into stock purchases.

So the stock market, sensing the coming change, goes down simply because the Fed sees the economy improving.

This simplistic view takes hold, even against data that shows stock and bond markets have in the past been able to grow at the same time.

There is yet another contradiction between the outlook for workers and increases in stock prices. 

How can companies be booming with so many people still out of work or forced to take lower paying jobs?

The answer lies in the nature of recession itself.  It was not simply a slowdown that is often the normal part of the cycle of growth.  It marked a major change in our economy.

Goods and services are increasingly produced by technological tools, like computers and robots, and require less hands-on labor.  And the labor-intensive production that remains is mostly carried out in lower-wage countries.

The most successful companies include many that rely less on labor and more on technology.  If they seek new employees, they want people who a better educated than in the past and who are capable of devising and using the tools of technology.

In other words, many of those companies that are doing well in the stock market depend less on labor or buy it abroad where it is cheaper than in the United States.

What can turn the situation around and improve the outlook for working people?

For one thing, workers need to be better educated and trained.  For many, a high school education will no longer be enough.  And training will need to become a life-time responsibility, not one that ends when a person gets a job.

For another, a sound immigration policy that admits more people who can be customers will at the same time create more jobs to serve those customers.

Labor Day could again be a day to celebrate jobs not a day to worry about them.