DERIVATIVE PRODUCTS EXPLAINED

THE PRESIDENT: Well, look, here's what happened. You've got a company, AIG, which used to be just a regular, old insurance company. Then they insured a whole bunch of stuff and they were very profitable and it was a good, solid company.

Then they decided -- some smart person decided, let's put a hedge fund on top of the insurance company and let's sell these derivative products to banks all around the world -- which are basically guarantees or insurance policies on all these sub-prime mortgages.

And this smart person said, you know, none of these things are going to go bust; this sub-prime thing, it's a great deal, you can make a lot of profit. So they sold a whole bunch of them -- billions and billions of dollars. And what happened is, is that when people started going bust on sub-prime mortgages you had $30 worth of debt on every dollar worth of mortgage -- and the whole house of cards just started falling down.

LENO TRANSCRIPT OF PRESIDENT

Now, you know, it's funny, because the last time you were here, you walked in, you had your jacket on your finger and you had the two guys with you.

THE PRESIDENT: Right.

Q And that was it. Big change?

FIRST RATE STORY ABOUT LIFE IN THE BUBBLE.

THE PRESIDENT: You know, I was mentioning earlier, we landed yesterday and then -- this is an example of life in the bubble. We landed at the fairground down in Costa Mesa. And I see the fairground where I think we're having this town hall and I said, well, why don't we walk over there? Secret Service says, no, sir, it's 750 yards. (Laughter.)

So I was trying to calculate -- well, that's like a five-minute walk? "Yes, sir. Sorry." (Laughter.)

Now, they let me walk on the way back. But, you know, the doctor is behind me with the defibrillator. (Laughter.)

Q Wow.

THE PRESIDENT: Michelle jokes about how our motorcade -- you know, we've got the ambulance and then the caboose and then the dog sled. (Laughter.) The submarine. (Laughter.) There's a whole bunch of stuff going on.

Q Now it's only, what, 59 days now, right?

THE PRESIDENT: Yes, 59 days.

Q And so much scrutiny. Is it fair to judge so quickly? I mean --

REALLY GOOD JOKE, PROBABLY WRITTEN FOR HIM.

THE PRESIDENT: Well, look, we are going through a difficult time. I welcome the challenge. You know, I ran for President because I thought we needed big changes. I do think in Washington it's a little bit like "American Idol," except everybody is Simon Cowell. (Laughter.)

Q Wow. Wow. That's rough. (Applause.)

THE PRESIDENT: Everybody's got an opinion. But that's part of what makes for a democracy. You know, it's contentious and people are hitting back.

I do think, though, that the American people are all in a place where they understand it took us a while to get into this mess, it's going to take a while for us to get out of it. And if they have confidence that I'm making steps to deal with issues like health care and energy and education, that matter deeply to their daily lives, then I think they're going to give us some time. (Applause.)

Q Let me ask you about this. I know you are angry -- because, you know, doing what I do, you kind of study body language a little bit. And you looked very angry about these bonuses. Actually, stunned.

THE PRESIDENT: Stunned. "Stunned" is the word.

EXCEPT FOR THE SMIRK. CAN WE GET A CLIP OF ME MAKING A TOTAL IDIOT OF MYSELF, OR WORSE, SHOWING MY TRUE COLORS. RUSH SAID I WAS A REALLY COLD, HARD BASTARD. THIS CLIP SHOWS IT. ROLL THE CLIP. (I'M REALLY, CHOKED UP WITH ANGER HERE)


REALLY GOOD EXPLANATION OF AIG INSURANCE FRAUD. LEGAL BUT WE SHOULD CHANGE THE LAWS.

Q Tell people what happened. I know people have been over it, just --

THE PRESIDENT: Well, look, here's what happened. You've got a company, AIG, which used to be just a regular, old insurance company. Then they insured a whole bunch of stuff and they were very profitable and it was a good, solid company.

Then they decided -- some smart person decided, let's put a hedge fund on top of the insurance company and let's sell these derivative products to banks all around the world -- which are basically guarantees or insurance policies on all these sub-prime mortgages.

And this smart person said, you know, none of these things are going to go bust; this sub-prime thing, it's a great deal, you can make a lot of profit. So they sold a whole bunch of them -- billions and billions of dollars. And what happened is, is that when people started going bust on sub-prime mortgages you had $30 worth of debt on every dollar worth of mortgage -- and the whole house of cards just started falling down.

So the problem with AIG was that it owed so much and was tangled up with so many banks and institutions that if you had allowed it to just liquidate, to go into bankruptcy, it could have brought the whole financial system down. So it was the right thing to do to intervene in AIG.

Now, the question is, who in their right mind, when your company is going bust, decides we're going to be paying a whole bunch of bonuses to people? And that, I think, speaks to a broader culture that existed on Wall Street, where I think people just had this general attitude of entitlement, where, we must be the best and the brightest, we deserve $10 million or $50 million or $100 million dollar payouts --

Q Right. AND THEY DON'T. THAT'S MORE THAN THEY NEED. HELL. I GET MORE THAN I NEED. IS THERE ANY WAY OUT OF THIS. I MEAN, IT'S ALWAYS BEEN LIKE THAT. AND ALWAYS HAS BEEN, AND IT'S NOT FAIR, AND IT CAN'T CHANGE. O MEAN, I SIT HERE AND JOKE ABOUT IT, BUT REDISTRIBUTING THE WEALTH, THAT COULD CHANGE EVERYTHING. WE COULD HAVE IMMENSE PUBLIC PARKS, DID YOU KNOW LOS ANGELES DOESN'T HAVE A PUBLIC PARK. IT DOESN'T. IT'S HORRIBLE, BUT TRUE. JUST GOLFCOURSES. FOR THE WEALTHY.

BUT THERE'S NO WAY OUT OF THAT IS THERE. I MEAN, YOU CAN'T TAKE MY ELEVEN HUNDRED CARS?? MY EIGHTY BATHROOM MANSION?? CAN YOU?


THE PRESIDENT; UM, ER... NO. WE CAN'T. IT'S IMPOSSIBLE TO CHANGE THINGS TO THE WAY THEY SHOULD BE, AND EVEN IF WE DID, HOW LONG WOULD IT TAKE FOR THE BEST AND THE BRIGHTEST TO TAKE THE LIONS' SHARE. NOT LONG. IT'S A PARADOX. JOHN EDWARDS HAS A HOME WORTH 20 MILLION, FIFTY BATHROOMS, I MEAN HOW MANY TOILETS DO YOU NEED. IT'S WRONG. THERE WAS A MOVIE ABOUT A POPE WHO SOLD THE VATICAN, TO FEED AND CLOTH THE POOR, SHOES OF THE FISHEREMAN. THE FISHERMAN. JESUS CHRIST. REMEMBER HIM. HE OF THE EYE OF THE NEEDLE. YOU AND I CAN'T GET INTO HEAVEN. HARDLY ANYONE IN THIS AUDIENCE, RICH ENOUGH TO COME HERE, TAKE WEEKS OFF, VISIT NEW YORK THE MOST EXPENSIVE PLACE ON THE FACE OF THE EARTH, NOBODY IN THIS ROOM COULD GET, WILL GET INTO HEAVEN, BECAUSE THEY DON'T TITHE TEN PERCENT... HELL, NINETY PERCENT IN MANY CASES. SO ... WELL A WELL KNOWN ASSHOLE SHOW OFF MICK JAGGER, ANOTHER OVERPAID TALENT, SAID IT BEST, TOO BAD, GET FUCKED WHO GIVES A SHIT. I SHORTENED THAT TO TBGF. TOO BAD, GET FUCKED.

JAY, YOU WERE SAYING.

Q. NO GO ON.

THE PRESIDENT: And, you know, the immediate bonuses that went to AIG are a problem. But the larger problem is we've got to get back to an attitude where people know enough is enough, and people have a sense of responsibility and they understand that their actions are going to have an impact on everybody. And if we can get back to those values that built America, then I think we're going to be okay. (Applause.)

Q Well, you know, it's interesting, when you said -- it's, like, I had to laugh the other day when the CEO of AIG said, okay, I've asked them to give half the bonuses back. Now, if you rob a bank and you go into court -- (laughter) -- and you go, Your Honor, I'm going to give you half the money back. (Laughter.) And they seem stunned that we're not jumping at this wonderful offer.

THE PRESIDENT: Well, you know, the only place I think that might work is in Hollywood. (Laughter.)

Q Let me ask you this. Now, I heard them say, well, one of the problems is it's contractual and if we don't pay these bonuses, well, they can sue us. All the time people say, so sue me.

THE PRESIDENT: So sue me, right.

Q I mean, the federal government is in debt a trillion dollars. We're broke -- sue us. Sue me. (Laughter and applause.)

THE PRESIDENT: In fairness, I think that part of the calculation they were making was the way the contracts were written said, if you don't pay us immediately, then we can claim three times as much as we were owed under the bonuses. And so they were making a legal calculation, and their legal judgment was not necessarily wrong.

But there's a moral and an ethical aspect to this, as well. And I think that's what has gotten everybody so fired up. The main thing -- we're going to do everything we can to see if we can get these bonuses back. But I think the most important thing that we can do is make sure that we put in a bunch of financial regulatory mechanisms to prevent companies like an AIG holding the rest of us hostage. Because that's -- that's the real problem.

The problem is not just what's happened over the last six months. The problem is what was happening for years, where people were able to take huge, excessive risks with other people's money, putting the entire financial system at risk -- and there were no checks, there were no balances, there was nobody overseeing the process.

And so what we're going to be moving very aggressively on -- even as we try to fix the current mess -- is make sure that before somebody makes a bad bet you say, hold on, you can't do that.

Q Well, here's something that kind of scared me. Today they passed this thing that says we're going to tax 90 percent of these bonuses. And the part that scares me is, I mean, you're a good guy -- if the government decides they don't like a guy, all of a sudden, hey, we're going to tax you and then, boom, and it passes. I mean, that seems a little scary as a taxpayer, they can just decide -- you want to take a break and answer that when we come back? Okay, hold that answer.

THE PRESIDENT: I will. I've got a good answer, too. (Applause.)

* * * * *

Q Welcome back. We are talking with President Barack Obama.

Before the break I mentioned that they had just passed this new bill which will tax them 90 percent -- and I said it was frightening to me as an American that Congress, whoever, could decide, I don't like that group, let's pass a law and tax them at 90 percent.

THE PRESIDENT: Well, look, I understand Congress' frustrations, and they're responding to, I think, everybody's anger. But I think that the best way to handle this is to make sure that you've closed the door before the horse gets out of the barn. And what happened here was the money has already gone out and people are scrambling to try to find ways to get back at them.

The change I'd like to see in terms of tax policy is that we have a system, going back to where we were back in the 1990s, where you and I who are doing pretty well pay a little bit more to pay for health care, to pay for energy, to make sure that kids can go to college who aren't as fortunate as our -- as my kids might be. Those are the kinds of measured steps that we can take. But the important thing over the next several months is making sure that we don't lurch from thing to thing, but we try to make steady progress, build a foundation for long-term economic growth. That's what I think the American people expect. (Applause.)

Q I just read today about Merrill Lynch. They handed out $3.6 billion -- it's not even million anymore, it's billions in bonuses. I know it would make me feel good -- shouldn't somebody go to jail? (Laughter and applause.) I say that because I watch those people in New York, even people who had lost everything -- when Bernard Madoff went to jail, at least they felt they got something.

THE PRESIDENT: Right. They got some satisfaction. Here's the dirty little secret, though. Most of the stuff that got us into trouble was perfectly legal. And that is a sign of how much we've got to change our laws -- right? We were talking earlier about credit cards, and it's legal to charge somebody 30 percent on their credit card, and charge fees and so forth that people don't always know what they're getting into. So the answer is to deal with those laws in a way that gives the average consumer a break.

When you buy a toaster, if it explodes in your face there's a law that says your toasters need to be safe. But when you get a credit card, or you get a mortgage, there's no law on the books that says if that explodes in your face financially, somehow you're going to be protected.

So this is -- the need for getting back to some common sense regulations -- there's nothing wrong with innovation in the financial markets. We want people to be successful; we want people to be able to make a profit. Banks are critical to our economy and we want credit to flow again. But we just want to make sure that there's enough regulatory common sense in place that ordinary Americans aren't taken advantage of, and taxpayers, after the fact, aren't taken advantage of. (Applause.)

Q Yes -- because when I was a kid, we would -- banks or credit cards would lend you money so you would pay it back. Now they lend you money so you can't pay it back. (Laughter.) It's like we were talking before, I mentioned we all saw A Wonderful Life -- Mr. Potter, the meanest man -- remember he owned the whole town? You know what he charged on a mortgage? Two percent. (Laughter.)

THE PRESIDENT: He's like Mother Teresa now. (Laughter.)

Q Like Mother Teresa now. (Laughter.) He makes VISA look like ohhhh --

THE PRESIDENT: Well, and part of what happened over the last 15, 20 years is that so much money was made in finance that about 40 percent, I think, of our overall growth, our overall economic growth was in the financial sector. Well, now what we're finding out is a lot of that growth wasn't real. It was paper money, paper profits on the books, but it could be easily wiped out.

And what we need is steady growth; we need young people, instead of -- a smart kid coming out of school, instead of wanting to be an investment banker, we need them to decide they want to be an engineer, they want to be a scientist, they want to be a doctor or a teacher. And if we're rewarding those kinds of things that actually contribute to making things and making people's lives better, that's going to put our economy on solid footing. We won't have this kind of bubble-and-bust economy that we've gotten so caught up in for the last several years.

Q Now, Treasury Secretary Geithner, he seems to be taking a little bit of heat here. How is he holding up with this? He seems like a smart guy --

THE PRESIDENT: He is a smart guy and he's a calm and steady guy. I don't think people fully appreciate the plate that was handed him. This guy has not just a banking crisis; he's got the worst recession since the Great Depression, he's got an auto industry on -- that has been on the verge of collapse. We've got to figure out how to coordinate with other countries internationally. He's got to deal with me; he's got to deal with Congress. And he's doing it with grace and good humor. And he understands that he's on the hot seat, but I actually think that he is taking the right steps, and we're going to have our economy back on the move.

Q Now, see, I love that it's all his problem. (Laughter.)

THE PRESIDENT: No, no, no --

Q -- I mean, when he came in you probably said, hey, this is not a problem. Now, it's, hey, you got this, you got that, hey, good luck. (Laughter.)

THE PRESIDENT: No, no, but this is the point that I made, I think two days ago, when somebody asked, well, do you have confidence in Tim Geithner. I said, look, I'm the President, so ultimately all this stuff is my responsibility. If I'm not giving him the tools that he needs to make sure that we're moving things forward, then people need to look at me.

On the AIG thing, all these contracts were written well before I took office, but ultimately I'm now the guy who's responsible to fix it. And one of the things that I'm trying to break is a pattern in Washington where everybody is always looking for somebody else to blame. And I think Geithner is doing an outstanding job. I think that we have a big mess on our hands. It's not going to be solved immediately, but it is going to get solved. And the key thing is for everybody just to stay focused on doing the job instead of trying to figure out who you can pass blame on to.

Q Well, when will the money -- this money was given out to the banks. I would have thought by this time it would have sort of trickled down to Main Street, to people wanting to get loans -- I mean, it all went out there months and months ago. Where is it?

THE PRESIDENT: Well, what's happening is a lot of these banks are keeping it in the bank because their balance sheets had gotten so bad that they decided, you know what, for us to stay solvent we need to maintain certain capital ratios; we've got to have a certain amount of capital in the bank -- and they haven't started lending it yet. And that's why what we've got to do -- right now what we're doing is essentially doing a diagnostic test -- trying to use some auto language here so you -- (laughter) -- we're doing a diagnostic on each of the banks, figuring out what are their capital levels? Can they sustain lending? And then I think we're going to separate out -- those banks that are in good shape, we're going to say to them, all right, you're on your own; go start lending again. Those banks that still have problems, we'll do a little more intervention to try to clean some of those toxic assets off their books.

But I actually have confidence that we'll get that done. In the meantime, we're taking a lot of steps to, for example, opening up -- open up separate credit lines outside of banks for small businesses so that they can get credit -- because there are a lot of small businesses out here who are just barely hanging on. Their credit lines are starting to be cut. We're trying to set up a securitized market for student loans and auto loans outside of the banking system. So there are other ways of getting credit flowing again.

But that's why we've got to solve the banking problem and we've got to solve issues like health care, energy, and education that will put us on a pathway for long-term economic growth.

Q We're going to take a break. When we come back I want to ask you what we can do -- (applause) -- all right, we'll take a break. We'll be right back.

* * * * *

Q Welcome back. Talking with President Barack Obama. So I was going to ask you before we went to the break. So you have -- obviously we have a lot of people with a few dollars -- couple of hundred, couple of thousand -- but there's millions of them. Okay, obviously that's a tremendous financial forest. What should they do? Put their money in the bank? Should they be spending money? Should they hide it under their mattress?

THE PRESIDENT: Look, first of all, everybody should have complete confidence in the banks. They're deposits are protected. They shouldn't be putting it in their mattresses. I will leave it up to others to provide individual, personal financial advice.

But I will say this, that if you're working right now, obviously you've got to be prudent and you've got to recognize that the economy has been in a tough way. But, you know, we've still got kids who are going to need a coat for winter or a computer for school. You know, that young family is still going to at some point need to buy a house. And right now cars, for example, we know that typically you need about 14 million cars for this population -- and right now only 9 million are being sold every year. So at some point those inventories are going to run down and people are going to start buying cars again.

So, you know, what people should not do is forget that what has built America has always been a faith and a confidence in the future. And our future is bright if we take some smart steps right now. And that's what we're working on in Washington. And I think if everybody stays focused on getting through these tough times, the future is going to be very bright for all of us.

Q Now, you mentioned cars a minute ago. You went to the electric car, you went to look at some batteries today.

THE PRESIDENT: I did. It's spectacular what is being down now with plug-in hybrids, where not only are you getting the hybrid technology, but now you can plug it in at home in your garage. And potentially we could see cars getting 150 miles to a gallon of gas.

And when you get home you could potentially sell the energy in your car back into the grid, back to your utility and get money.

So we're going to be investing billions of dollars in research and development around these technologies. I know that you were mentioning you've got a hydrogen car --

Q I've got the GM hydrogen car. That's a whole new --

THE PRESIDENT: That's a whole new level of technology. That's what's going to create the auto industry of the future. That's where we're going to win back manufacturing. But right now we're behind. These batteries are being made in Japan -- just like wind power is being made in Europe. We need to bring that here, and that's part of what my budget and part of what our Recovery Act is all about.

Q Let me ask you some personal things. Now, how cool is it to fly in Air Force One? (Laughter.)

THE PRESIDENT: Now, let me tell you, I personally think it's pretty cool. Especially because they give you, you know, the jacket with the seal on it. (Laughter.)

Q Oh, yeah. See, I still get the little wings when I fly.

THE PRESIDENT: So you have the jacket. I will tell you, though, Malia and Sasha, my daughters, they're just not as impressed. The first time we went on Marine One -- right, you've got the Marines in front and they're saluting you. And we go up and we're passing the Washington Monument, circling around on the way to Camp David -- and Sasha looks over and she says, "Are those Starbursts?" (Laughter.) There's, like, the candy in the little canister. (Laughter.) That's -- "Can we have some?" (Laughter.)

So they're splitting up the Starbursts and we're flying over the Lincoln Memorial. So they got a whole 'nother level of cool. (Laughter.)

Q Now, are they going to put a basketball -- I imagine the bowling alley has been just burned and closed down.

THE PRESIDENT: No, no. I have been practicing all -- (laughter.)

Q Really? Really?

THE PRESIDENT: I bowled a 129. (Laughter and applause.)

Q No, that's very good. Yes. That's very good, Mr. President.

THE PRESIDENT: It's like -- it was like Special Olympics, or something. (Laughter.)

Q No, that's very good.

THE PRESIDENT: No, listen, I'm making progress on the bowling, yes.

Q And how about, are you going to put in a basketball court?

THE PRESIDENT: Oh, yes. Yes. Well, we have a basketball court already at Camp David. We just had a little rim that was inadequate -- (laughter) -- at the White House. But there are tennis courts, so we're going to just get those -- you know, those rims that you can roll in and out. And then we'll just put them on either --

Q Let me ask you, when people -- Mr. President, would you like to play? Yes, I would. Do they throw the game? Come on. (Laughter and applause.)

THE PRESIDENT: I don't see why they would throw the game -- except for all those Secret Service guys with guns around. (Laughter.)

Q Yes, exactly.

THE PRESIDENT: I will say that I don't think I get the hard fouls that I used to. Usually I don't --

Q Yes, Reggie goes, ohhh, I missed, ohhh. (Laughter.)

THE PRESIDENT: Reggie doesn't do that. This is Reggie Love, my assistant. He played for Duke, very competitive guy. He doesn't let me win because, as he pointed out, if you lose to Obama you never hear the end of it. (Laughter.)

Q See, there you go. Now, have you picked a final four?

THE PRESIDENT: I did.

Q Okay. How about your final one, who do you got?

THE PRESIDENT: I got North Carolina Tar Heels. (Applause.)

Q North Carolina.

THE PRESIDENT: I think I got -- I got a hard time from Reggie, because he played at Duke, and you know, Coach K, being competitive, I think was a little -- you know, pushed back a little bit today. And I understand that. That's what you want. You want everybody to be competitive. I think these are all great teams.

Q Like, do you look at the whole picture when you do that? For example, isn't that a swing state? (Laughter and applause.) I'm just saying, are you looking at the whole picture when you pick?

THE PRESIDENT: I mean, the fact that teams from North Carolina, Indiana, Iowa, all seem to do well in my bracket -- (laughter) -- I think is a complete coincidence. Absolutely.

Q All right, one last question. Now, when is the dog coming? I keep hearing about the dog. It seems to me -- when was the dog supposed to be there by? I thought it was, like, as soon as --

THE PRESIDENT: Listen, this is Washington -- (laughter) -- that was a campaign promise. (Laughter.)

Q Oh, wow. Wow. Man. (Laughter and applause.)

THE PRESIDENT: I'm teasing. The dog will be there shortly. (Laughter.)

Q How soon?

THE PRESIDENT: We have actually sort of been laying the groundwork here. We've got a trip, I've got to go to the NATO summit. When we get back, dog will be in place.

Q Wow. And it's, what, a Portuguese water head? (Laughter.) What is it, what kind of dog is it?

THE PRESIDENT: It's not that. (Laughter.)

Q It's not that.

THE PRESIDENT: It's not a "water head." (Laughter.)

Q Whatever they are, I don't know what they are.

THE PRESIDENT: That sounds like a scary dog. (Laughter.) Sort of dripping around the house. (Laughter.)

Q I don't know what it is.

THE PRESIDENT: No, no. We're going to get a dog that is -- that I think the girls will have a great time -- I think I'm going to have a lot of fun with it. You know, they say if you want a friend in Washington, get a dog. (Laughter.)

Q Exactly. Mr. President, I must say, this has been one of the best nights of my life. Thank you very much, sir.

The President of the United States. (Applause.)

MORE OF MY WEBLOGS

FOR MORE WEB LOGS, CLICK ON "VIEW MY COMPLETE FILE" BELOW ARCHIVE LIST AT RIGHT.

IT DOESN'T TAKE A VILLAGE TO RAISE A CHILD

In the United States of America, what our revolution was fought over -- the whole concept of individual freedom and liberty was the reason we sought independence from the tyranny of King George. Not Bush. George III of Britain. I said back in the nineties when the Clintons were running this show, "You know, rugged individualism is what built this country," and Mrs. Clinton went out there and took me on and ripped me, and we forget what she said, but she had a very critical comment about rugged individualism. Rugged individuals don't care about anybody else, they leave everybody else behind, and it takes people like Mrs. Clinton to care about the people who get left behind when rugged individuals take over.

Mrs. Clinton had a book that says It Takes a Village to raise a child. I said, no, it doesn't, it takes individuals to raise a child. It doesn't take a village. The town doesn't raise a child, village or what have you. That was just code word for the parents don't really matter. It's the school. It's government enterprises that are responsible for raising the child right. And nothing could be further from the truth.

PUT ASIDE CHILDISH THINGS

LIKE A NEW CAR EVERY THREE OR FOUR YEARS.


TAX BREAK FOR FOOLISH BEHAVIOR.


HOW MUCH DO YOU SAVE IF YOU MAINTAIN A CAR FOR FIFTEEN YEARS. THREE THOUSAND A YEAR, AND YOU DRIVE IN STYLE, BUT NOT IN GLORY.


LOVE WHAT YOU DRIVE. TROPHY CAR


THE REST OF US ARE SPENDING TOO MUCH KEEPING UP WITH THE MILLIONAIRES, AND OUR STUPID COUNTRY ENCOURAGES US.

AND THE RESULT HAS BEEN A FIFTY YEAR CAR BUBBLE, PEOPLE SPENDING, WHAT, THREE THOUSAND A YEAR TO KEEP THEM LOVING WHAT THEY DRIVE. KEEP THEM HAVING A TROPHY CAR?

A FIFTY YEAR CAR BUBBLE THAT IS NOW ONE OF THE DRIVING FACTORS OF THE CURRENT DEPRESSION. AND IF YOU PRETEND THAT YOU DON'T SEE THE CAR BUBBLE YOU ARE HIDING IT.


NEW CAR EVERY THREE YEARS.

SO HOW MUCH DOES IT COST? THREE K A YEAR, LESS, MORE, DEPENDS, THERE IS A FACTUAL ANSWER HERE. AND STILL WE TALK OF A TAX BREAK FOR NEW CAR PURCHASE. WE SHOULD GIVE A TAX BREAK FOR OLDER CAR MAINTAINENCE. PAINT AND DENTS. NEW UPHOLSTERY. REFIRBISH MOTOR. ABOUT FIVE THOUSASND AND YOUR CAR IS GOOD AS NEW. THAT DECISION, RATHER THAN TO BUY A NEW CAR FOR TWELVE THOUSAND, THAT THRIFIT OUTHT TO BE REWARDED, BUT THIS IS AMERICA, THE GREATEST COUNTRY ON GOD'S GREEN EARTH UNLESS YOU DON'T HAPPEN TO BE A MILLIONAIRE.

BUT IT'S ALL A DEAL MADE IN HELL, AND IT WILL JUST KEEP ON. AND IF YOU GET GOOD ENOUGHT AT EXPOSING THAT , THEY WILL KILL YOU AND YOUR FAMILY.


CARS.

INFLATION

Somewhat louder whispers can be heard, though, about the gradual default known as inflation. Just three or four years of currency erosion at, say, 10 percent a year would slice the real value of our debt -- public and private, U.S. bonds and jumbo mortgages -- in half.

Anyone who regards the prospect of double-digit inflation with insouciance is either too young to have lived through it the last time (the late 1970s) or too old to remember. Among other problems, inflation works only as a surprise or betrayal. It can never be part of any public, official plan. ---MICHAEL KINGSLEY

GEORGE F. WILL

By George Will



Charles Dickens, who visited in 1842, described Washington as a "city of magnificent intentions" because of the incongruity between the city's grand aspirations and muddy, swampy actuality. Today Washington's discrepancy is not architectural but political. It is between the extraordinary powers and competences the administration claims it has and the administration's inability to be clear or plausible about what it is doing.


Improvisation is understandable when confronting the unprecedented, but protracted improvisation precludes a prerequisite for recovery — investors' certainty about the relationship between the government and the economy. One year ago this weekend, that relationship began changing when the Bush administration decided that Bear Stearns, the nation's fifth-largest investment bank, was too big, or too connected — too something — to be allowed to fail. Seven months later, with the financial system frozen, Congress passed the Troubled Assets Relief Program, fresh proof that the titles of legislation, like the titles of Marx Brothers movies ("Duck Soup," "Horse Feathers"), are uninformative about the contents.


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Quicker than you can say "toxic assets," which TARP was supposedly designed to quarantine, TARP was subsidizing the manufacture of automobiles partially designed by Washington. Which recent government adventure in enterprise justifies such government confidence? Fannie Mae? Freddie Mac? Amtrak? Ethanol? The government has subsidized ethanol, protected it with tariffs, mandated levels of production and authorized 10 percent ethanol in gasoline blends, and now the shrinking ethanol industry wants government to authorize 15 percent.


Five months after enactment of TARP, a plan for unfreezing the credit system remains, like Atlantis, rumored but unseen. Twelve months after the government brokered the marriage of Bear Stearns and J.P. Morgan Chase, the government is recapitalizing financial institutions that the market has said should be shuttered. Lawrence H. White, economics professor at the University of Missouri at St. Louis, denies that financial institutions ever were "unregulated." Hitherto, such institutions were "regulated by profit and loss":


"The failure of Lehman Brothers and the near-failure of Merrill Lynch raised the interest rate at which profit-seeking lenders were willing to lend to highly leveraged investment banks. The market thereby forced Goldman Sachs and Morgan Stanley to change their business models drastically and to convert to commercial banks. If that isn't effective regulation, what is? Protecting firms from failure (Bear Stearns, AIG, Fannie Mae, Freddie Mac, Goldman Sachs, Citigroup) and mitigating their losses with bailouts renders this most appropriate form of regulation much less effective."


The president's confidence in his capacities is undermining confidence in his judgment. His way of correcting what he called the Bush administration's "misplaced priorities" has been to have no priorities. Mature political leaders know that to govern is to choose — to choose what to do and thereby to choose what cannot be done. The administration insists that it really does have a single priority: Everything depends on fixing the economy. But it also says that everything depends on everything: Economic revival requires enactment of the entire liberal wish list of recent decades.


The implausibility of this opportunistic hypothesis is deepened by Obama's rhetoric, which says "catastrophe" impends unless everything is done simultaneously. But his budget, in effect, says the danger will soon be gone and the new risk will be whiplash from the economy's sudden acceleration. Although only a small fraction of the supposedly countercyclical stimulus will be spent by the end of the year, the budget assumes that by then the economy will have perked up, and that it will grow robustly — 3.2 percent, 4 percent and 4.6 percent — in the next three years. Growth supposedly will cut the deficit in half — growth and the $1.6 trillion "saved" by first assuming, and then "canceling," a 10-year continuation of the surge in Iraq. Why, one wonders, not "save" $5 trillion by proposing to spend that amount to cover the moon with yogurt and then canceling the proposal?


The first president whose campaign was his qualification for office continues to campaign. And he is overexposed. His schedulers should remember what a contemporary said of Thomas Babington Macaulay, a prodigiously articulate but oppressively constant talker: "He has occasional flashes of silence that make his conversation perfectly delightful."


One afternoon last week, cable news viewers saw, at the top of their screens, the president launching yet another magnificent intention — the disassembly and rearrangement of the 17 percent of the economy that is health care. The bottom of their screens showed the Dow plunging 281 points. Surely the top of the screen partially explained the bottom.

TELEPROMPTER MADNESS

The British newspapers skewer Obama on this incident. Here is what happened. "Irish Prime Minister Brian Cowen was just a few paragraphs into a [speech] when he realized something sounded way too familiar," and it was. He was repeating the speech that the teleprompter had told Obama to say mere moments ago. The teleprompter forgot to change speeches from Obama's to Cowen's. So Cowen stopped, he turned to the president and said, "That's your speech." I'm surprised it took him 20 seconds to figure out it wasn't his. So Obama started laughing, and Obama went back to the podium to take over, but when Obama got there... This is hilarious! When Obama got there, the teleprompter had then switched back to the Cowen speech. The teleprompter switched back to the Cowen speech while Obama of his laughing and heading to the podium.

So when Obama then reached the podium to try to "coolly, calmly" save the day, he ended up thanking himself for throwing a huge party because he ended up reading the speech the teleprompter wrote for the Irish prime minister. The script had been switched, and Obama ended up thanking himself for inviting everybody to the party.

THE TONIGHT SHOW

He's just getting ready to leave for California to appear on Jay Leno. This is historic. You know, a sitting president has never before lowered himself to sit on a late-night comedy show, and that's the way to look at this. A president of the United States has never lowered himself like this to sit on a late-night comedy show , not even with Johnny Carson, certainly not Letterman. Obama's going to go out there, and my question is: Who's teleprompter is he going to use? Is he taking his teleprompter, or is he going to use Leno's teleprompter? What's the teleprompter going to tell him to say? You know, the Brits, ladies and gentlemen, British journalists are doing such a far better job of covering events in this country than our media because they're not personally invested in Obama's success.

As I mentioned at the top of the program, the teleprompter embarrassed President Obama last night during his White House party. There were a bunch of White House parties last night for St. Patrick's Day. Oh, there's a new name for St. Patrick's Day. Some people are upset that it's called St. Patrick's Day. They want to change it because it has religious overtones. They want to change it to Shamrock Day. No, I kid you not. I kid you not. So anyway, the big, big bashes, big parties. In the middle of bonuses and a recession and an economic downturn, big parties at the White House last night, and the teleprompter totally embarrassed the president of the United States. I've read accounts of this in the US Drive-By Media, and they pretty much present Obama as a guy who saved the day with his cool, his aplomb, his calm demeanor.

The British newspapers skewer Obama on this incident. Here is what happened. "Irish Prime Minister Brian Cowen was just a few paragraphs into a [speech] when he realized something sounded way too familiar," and it was. He was repeating the speech that the teleprompter had told Obama to say mere moments ago. The teleprompter forgot to change speeches from Obama's to Cowen's. So Cowen stopped, he turned to the president and said, "That's your speech." I'm surprised it took him 20 seconds to figure out it wasn't his. So Obama started laughing, and Obama went back to the podium to take over, but when Obama got there... This is hilarious! When Obama got there, the teleprompter had then switched back to the Cowen speech. The teleprompter switched back to the Cowen speech while Obama of his laughing and heading to the podium.

So when Obama then reached the podium to try to "coolly, calmly" save the day, he ended up thanking himself for throwing a huge party because he ended up reading the speech the teleprompter wrote for the Irish prime minister. The script had been switched, and Obama ended up thanking himself for inviting everybody to the party. Now, stop and think of this. It's a party. It's a party! You have to assume that the adult beverages are flowing. I don't know about the president, and don't misunderstand, I'm not suggesting anything here, but it's a party. It's a St. Patrick's Day -- Shamrock Day -- party. You gotta assume this. So here comes the Irish guy, goes up to make a speech after Obama, and the teleprompter plays a little game on everybody, doesn't switch the speeches. So the Irish guy gives the same speech for 20 seconds that Obama gave, and suddenly realizes, "Wait a minute. I just heard this."
So he turns to Obama and says, "That's your speech." Obama says, "Huh, duh, ha, ha," comes back to the podium. While Obama is on the way to the podium, the teleprompter (very craftily, very shiftily) put in the right text for the Irish guy, and Obama starts reading that, and he continues to read it until he thanks himself. Because the Irish guy's message in the prompter was, "I want to thank President Obama..." So Obama thanked himself! At some point, do you not realize that? Don't you just stop, before you get to the point where you thank yourself? And of course the British papers talk about, "What is this guy's dependency on the teleprompter here?" The US media is talking about his quick wittedness and his aplomb. (interruption) I do not use a teleprompter at my parties. That's another thing.

A party. It's a party, folks -- a freaking party -- and there's a teleprompter at a party! I don't use a teleprompter, period. Folks, I'll tell you, I have some questions for the teleprompter. You know, this is getting outta hand. Wait a minute. Our microphones just arrived at the Rose Garden. Can we JIP it? Who's there? Oh, Geithner is standing there still looking... Now they're taking questions. Kathleen is rolling on this. If there's anything interesting from this we'll have the audio sound bites coming up. I have some questions for the teleprompter, since it engaged in behavior last night that embarrassed both the Irish prime minister and the president of the United States. I mean, when a teleprompter can get somebody who is as great an orator as the president to thank himself for having this party, you gotta love this prompter. So, "Teleprompter, do you have a name?"

"Teleprompter, in your opinion, how is President Obama doing so far? Did he convey the level of anger you hoped for regarding what you told him to say about AIG? Teleprompter, is the president ever argumentative with you, or is he compliant with your instructions? Teleprompter, have you ever thought about helping Secretary Geithner, or do you work for just one person? Teleprompter, how are you and the First Lady getting along? Are you dating anybody, teleprompter? Mac or PC? There's a rumor, teleprompter, that you send out a small shock to the president when he mispronounces words or mangles phrases you tell him to say, or that you can even make him cough. Is that true?

"Teleprompter, in private, is Joe Biden as buffoonish in private as he is in public? Tell us. We want to know. How does it feel, teleprompter, to be the First Teleprompter for an American president? You're the First TeleprompteR, capital "F"! First Teleprompter. Teleprompter, as a consumer of electricity, how do you feel about cap and trade? Do you feel threatened and endangered? Teleprompter, do you listen to talk radio? Would you consider yourself a Dittohead? When did you first meet Barack Obama, teleprompter? Are you paid with taxpayer money, and if so, did you have to fill out Obama's questionnaire before you were hired as First Teleprompter? And teleprompter, what are your plans post-presidency? Will you retire to Silicon Valley, or will you tell Obama what to say when he's giving speeches at a million dollars per year after his presidency? And finally, teleprompter, are you nervous about President Obama appearing with The Chin on The Tonight Show without you?

END WORLD POVERTY. TAX THE ULTRA RICH

As unbelievable as it may sound, the combined wealth of the world's seven richest people could end world poverty. According to United Nations Human Development Report, $80 billion could pay for access to basic social services and eradicate poverty. The net wealth of ten billionaires is worth 1.5 times the combined national income of the 48 least developed countries.

Rugged Indivudualism

How would you feel if the mouse did that to you?


You better explain why the individual is so important. You know, a lot of people, you got a whole bunch of brand-new tuner-inners out there, Rush, and a lot of these people think the individual is just a greedy SOB, and the individual, a bunch of individuals are what got the country in trouble." "If I have to explain this, it's over." I mean, it depresses me to have to try to explain this, why is the individual important? If you have to explain why the individual is important in the United States of America, then you have to explain freedom, and if you have to explain that, I'm at a loss. I guess I'll just ask you a question.

To those of you in the audience who kind of have a fit when you hear me say that this administration's targeting and making an all-out assault on the individual, which is an assault on freedom, individual freedom and liberty, where and how do you think your freedom comes from? Why is it you are free? To me, that answers it. I mean are you free because you are a member of a group? Or are you free because you are your own soul, endowed by your creator, God, certain inalienable rights: life, liberty, pursuit of happiness. From where does your freedom come? Do you not have freedom until you join a club? Do you not have freedom until you join a union? Do you not have freedom until you are part of the disabled? Do you not have freedom until you are a minority? Where does your freedom come from?

In the United States of America, what our revolution was fought over -- the whole concept of individual freedom and liberty was the reason we sought independence from the tyranny of King George. Not Bush. George III of Britain. I said back in the nineties when the Clintons were running this show, "You know, rugged individualism is what built this country," and Mrs. Clinton went out there and took me on and ripped me, and we forget what she said, but she had a very critical comment about rugged individualism. Rugged individuals don't care about anybody else, they leave everybody else behind, and it takes people like Mrs. Clinton to care about the people who get left behind when rugged individuals take over.

Mrs. Clinton had a book that says It Takes a Village to raise a child. I said, no, it doesn't, it takes individuals to raise a child. It doesn't take a village. The town doesn't raise a child, village or what have you. That was just code word for the parents don't really matter. It's the school. It's government enterprises that are responsible for raising the child right. And nothing could be further from the truth. This country was not built on group politics. The country was not built on group identities. The country was built on rugged individualism. Rugged individualism is portrayed, unfortunately, as selfishness. But it is not selfishness. Rugged individualism is self-interest, and self-interest is good. If we were all acting in our own self interest... What are your self interests? Let's say you're a father, a husband. What is your self-interest?
Well, if you take it responsibly, the responsibility of being a husband and father, your self-interest is improving the life that your family lives. You want economic opportunity for them. You want social stability for them. You want a relatively crime-free existence. You want some security. You want to see to it that your kids don't go off the wrong path. All of these things are the things that you work for. And you rely on yourself to provide them. Of course you have support groups, the church and friends and so forth. It doesn't mean that you are solitary, doesn't mean that you're isolated. But it means that you accept responsibility for your life and what happens to you is your responsibility, and that you have, in this country, all of the ability and opportunity in the world to make the most of it. Or, you can slough it off, and you can not make the most of yourself.

But then you're not acting in your own self-interest. Then you're letting everybody down. When you don't seek your best, when you don't try to be the best you can be, you're letting everybody down, you're letting the country down. Obama even said this. When talking about the dropout rate, he said, "You people dropping out, you're not helping your country. You're harming your country." That's the same thing: self-interest. He won't ever say that again. It sounds too Reaganesque, and it sounds too conservative. But individuals, rugged individuals have great and high expectations of themselves. It was rugged individualists that built the railroads. It was rugged individualists that discovered the New World. It was rugged individualists that dreamed about getting to the moon.

It was rugged individualists that invented the automobile and the airplane, the bullet, the gun. It was rugged individualists who invented medicines, improvements in health care. It wasn't a bunch of groups. "But, Rush! But, Rush! The pharmaceuticals have a bunch of people in laboratories working." Yeah, they do. There's somebody that runs them, but they're all working to try to be the best they can be and come out on top. Thomas Edison, the lightbulb. Benjamin Franklin, electricity. Alexander Graham Bell, the telephone. Marconi, the radio. Henry Ford, automobile mass production, the assembly line. Karl Benz, the automobile. I'll never forget a story. Reagan was governor of California in the seventies -- and this is in one of the books about Reagan.

I heard William Rusher who was the former publisher of National Review tell the story. I'm paraphrasing this. There may be others that know it better. But the students at Berkeley were all bent out of shape one day as they always were during the free speech movement. They didn't like what Reagan was doing with the National Guard. They didn't like Reagan's policies. They thought Reagan, back in the seventies, was just an old man, out of touch, he had no clue about their lives, and who was he to sit there and make policies about their future? So they demanded, they had a sit-in, State Capitol in California, somewhere outside his office, they got in the building, they were let in, they demanded to see him. And at some point Reagan let a couple of these student leaders in, and they went in there, cocky young little kids, and they essentially said, "Who are you, old man? You don't know anything about our lives. You don't know how we function. You don't know how we get along. You don't know anything about the telephone, you don't know anything about computers, televisions, you don't know anything about that. These things are all foreign to you. Look at all these old-fashioned things around here."

And Reagan looked at them and said, "You know, you're right about that. We had to invent these for you to use them. We had to invent them for you." Take your favorite actor or actress, take your favorite television personality and ask yourselves what government, what protective agency got them their job, or was it rugged individualism? Or sleeping on the couch or whatever they had to do, but they did it. They also get $20 million a movie because they put people in the theater seats. Whether the movie's any good or not, people go, except Tom Cruise is in trouble right now. Well, Valkyrie just wasn't quite it. But the point here, ladies and gentlemen, is that anything that beats you down, anything that says to you that you're no more than anybody else, that you're no better, no different, no worse, that you're the same as anybody else, is lying to you, and they're seeking to control you. They're seeking to limit your own ability and your own desire, because we're not the same. The whole premise of equality, it's a great thing to strive for, like equality before the law, equality in job opportunity and so forth. But there are no two things that are equal, certainly not outcomes. Other than identical twins, no two human beings look exactly alike.
Do you realize that as many human beings as will be created in the history of the earth, no two of them will look alike. It's not possible, other than the rare cases of identical twins. But even those people are not the same. They have the same shell, the same look, but they're not the same inside. No two people are the same. Everybody's got different level of ambition, desire. Everybody has a different IQ. Everybody has different intelligence. Everybody has a different metabolism. Everybody has a different hairline. Everybody's got something. No two people are the same. And it's not fair. Some people are smarter than others; some people are more creative than others. Some people could walk down the street and just have people throw money at them.

Other people can toil their whole lives and never make more than minimum wage. Why? Who knows. But it is our contention that the people who never make more than minimum wage can do far better if they're just invested in themselves, not in a government, not in a president, not a Congress, not a program. How many people in those people's lives tell 'em that they're special, versus how many of them tell them, "You don't have a chance. You don't have a prayer. This country's racist. It's homophobic; it's bigoted. You don't have a chance. You need to vote for us." Even I, ladies and gentlemen, you listen to me, and you see whatever you see, but you see me as successful, it may make you mad, may make you furious, but nevertheless you see me successful. But you don't know the 35, 37 years that I've spent in this business since I was 16 (minus five that I worked for the Kansas City Royals baseball team) you don't know the seven times I got fired, and you don't know how many people in this business told me to quit and told me to give it up, that it's not a fair business, even if you're good, there are too many idiots above you, too many jealous people above you that don't want you to get anywhere because you're better than them. Hey? Hello? That's the world. There are a lot of professors who don't want you to be smarter than they are. There are a lot of people working at banks who are tellers that probably could be at the investment side but somebody is threatened by them. Everybody's trying to hold everybody back.

It's just human nature, and it's only the belief in yourself that propels you through all those things, and yourself is the individual. I got fired seven times. One time was it probably justified. The other times due to vagaries of the broadcast business, but each time I got fired the person that fired me said, "You know, you really don't have what it takes to succeed here. If you want to stay in this business you need to go into sales or something else. You really don't have that much talent," and I'm saying to myself, "How would you know? You've never let me exhibit it. You and your brilliant management have come up with ways that I could only say this here or that there, and I can only take that much time. How do you know what my talent is? And when was the last time you cared to really find out what my talent is?"

Without believing in yourself, you're going nowhere, and you won't believe in yourself if somebody beats the individual out of you. If somebody convinces you that you don't deserve to do better than anybody else because that's not fair, and they are teaching you that in school about your grades and they're teaching you that about economics. It's not fair that you might have a nicer car than the schlub down the street. It's not fair. It's humiliating to the people who have less. So they're trying to beat the individual out of you, and the individual in you, the belief in yourself is the only thing you've got to compete against everybody that's trying to hold you back, and they all are. It's the way of the world. You look at things from afar, you look at pop culture, you look at movie stars, and you think that's a community, and they all decided one day, they all decided that Cameron Diaz is great and they all got together and they all loved Cameron Diaz and they've all made her a big star.

That's the image they project because they want you to think it's all a giant community. Cameron Diaz is like everybody else, she had to fight for everything she has, and they're nipping at her heels now as she gets older, same thing with Julia Roberts, it doesn't change, no matter where you are, no matter what kind of glamour. You take a look around you, the genuinely successful people that you see who you want to be did not check their individualism at the door when they started their work. They didn't check their self-interests at the door, and they didn't check their self-respect, and they didn't turn over the belief in themselves to somebody else. That's all I'm talking about and that's under assault by this administration, which wants to control and limit freedom, 'cause the only way Obama can get the power he wants and the Democrats can get the power they want is if you willingly turn it over to them, by getting rid of your self-interest, your self-respect and holding your best interests at heart. Your best interests do not coincide with your government's, especially now.

GOLD

Gold futures on the COMEX Division of the New York Mercantile Exchange retreated from 4-week high and dropped slightly on Friday as investors took profits ahead of weekend after a surprising surge in the previous session. Silver continued to gain and platinum ended lower.

MORE GOOD PROGRAMMING ON AM WILL GENERATE FAIRNESS

AM RADIO AND THE FAIRNESS DOCTRINE

A REASONABLE SOLUTION, WITHOUT ENFORCED FAIRNESS.
A court that considers the doctrine today will note that whereas in 1980 there were fewer than 100 talk radio programs, today there are more than 1,500 news or talk radio stations. BUT IN ANY PARTICULAR CITY, THE NUMBER IS LESS THAN FIVE OR SIX. FAIRNESS WOULD BE ACHIEVED BY SPREADING THESE 1,500 SHOWS AROUND.

IN LOS ANGELES THERE ARE THREE TALK RADIO STATIONS. AND UP TO THIRTY PERCENT OF THEIR RADIO TIME IS ADVERTISEMENTS. THAT SHOULD BE EVALUATED AS RUNAWAY FREE MARKET PRODUCT DETERIORATION AND PARED DOWN.

TWO RGHT WING, ONE LEFT WING, AND THE LEFT STATION HAS SPORTS COVERAGE MANY EVENINGS, STARTING DURING DRIVE TIME.

CONSUMERS ARE GETTNG A VERY THIN OUTPUT, AND THAT IS A CHALLENGE THAT SHOULD BE MET, BUT IS NERVER DISDCUSSED. IF THERE WERE TWENTY OR THIRTY TALK RADIO STATIIONS IN THE LOS ANGELES AREA, THAT WOULD GUARANTEE FAIRNESS. THERE WOULD BE, ONE WOULD HOPE, A GOOD VARIETY. OBVIOUSLY THE STATE AS IT IS TODAY, AND HAS BEEN FOR SOME YEARS, DOES LITTLE TO BROADEN THE SPECTRUM, WITH ONLY THREE OR FOUR STATIONS DOING A TALK VENUE.

BUT WHAT WE HEAR IS THERE ARE FIFTEEN HUNDRED NEWS OR TALK RADIO STATIONS. THATS NATIONWIDE. THAT FIFTEEN HUNDRED DEVOLVES TO FOUR OR FIVE IN ANY GIVEN AREA. THAT IS OBVIOUSLY MARKET DRIVEN AND ANTI CONSUMER. IT HAPPENS A LOT. . without a watchful eye, the market can spin out of control . AND IT HAS IN RADIO. COMMERCIALS EVERY SEVEN OR EIGHT MINUTES. FOUR MINUTE OR LONGER BANKS OF ADVERTISEMENTS. AND ONLY A MODEST NUMBER OF TALK SHOWS COMPETITING, MAKING IT EASIER FOR THE CONSERVATIVES TO RULE THE ROOST. THEY DO HAVE MORE APPEAL. THEY ARE BRASH AND ENTERTAINING,


WHILE PROGRESSIVE RADIO TODAY HAS LESS ENTERTAINMENT TO OFFER. BUT PLENTY OF TRUTH AND CONTROVERSY. THE ANSWER IS TO BRING MORE PRPFESSIONAL RADIO PUNDITS TO LOCAL VENUES.
HOPEFULLY THAT WILL INCREASE FAIRNESS. CURTIS SLEEWA, BILL ORIELY (HAS A SHOW BUT NOT PLAYED IN LOS ANGELES, FOR NO GOOD REASON, AND A HUGE NUMBER OF PROFESSIONAL RADIO HOSTS NEED TO FIND PLACES IN ALL THE MAJOR CITIES.

FOR DECADES TALK RADIO HAS BEEN SCANTY. TIME TO CHANGE THAT. AND SKIRT THE FAIRNESS ISSUE. JUST GIVE US A LOT MORE PROGRAMS. DON IMUS SHOULD BE AT DRIVE TIME, NOT AT THREE A.M. THAT DOESNT MAKE ANY SENSE, AND THERE ARE PLENTY OF STATIONS TO SUPPORT PRIME TIME APPEARANCES OF SEASONED PROFESSIONALS, CONTROVERSIAL AND TALENTED MAN. RALPH NADIR NEEDS A SHOW. BILL CLINTON, GERRY BROWN, WHO HAD A SHOW ON FM FOR SEVERAL YEARS AT THE AFTERNOON DRIVE TIME. AND THERE IS ENOUGH ROOM IN THE AM BAND, THOUGH MANY OF THE STATIONS ARE RELIGIOUS, FOREIGN LANGUAGE, FOREIGN MUSIC SHOWS AND WOULD BE RELEGATED TO LATE NIGHT. OR JUST GO. DODD AND OLBERMAN, GERALDO AND JOHN STEWART, PAT BUCHANIN...FAIRNESS DOESN'T HAVE TO BE AN ISSUE. JUST MUCH GREATER DEPTH, MORE PLAYERS AND HOPEFULLY FEWER COMMERCIALS.




THIS IS ONE OF THE BEST CONSUMER SIDE SOLUTIONS BEING OFFERED.

THERE IS NOTHING WRONG WITH THIS SUGGESTION, AND IT CERTAINLY WORKS BETTER THAN A FAIRNESS DOCTRINE, TELLING PROGRAM PRODUCERS WHO THEY CAN AND CANNOT HAVE ON THEIR PROGRAMS. THAT DOESN'T APPEAL. NO. MORE STATIONS, AND MORE TOP OF THE LINE PROFESSIIONAL PUNDITS WITH DAILY OR WEEKLY SHOWS. ESPECIALLY AT DRIVE TIME INTO EARLY EVENING. AND IT COULD BE FUNDED BY THE SAME INTERNET HELP THAT GAVE OBAMA SUCH A BOOST.


A court that considers the doctrine today will note that whereas in 1980 there were fewer than 100 talk radio programs, today there are more than 1,500 news or talk radio stations.

IN LOS ANGELES THERE ARE THREE TALK RADIO STATIONS. AND THIRTY PERCENT OF THEIR RADIO TIME IS ADVERTISEMENTS. THAT SHOULD BE EVALUATED AS RUNAWAY FREE MARKET PRODUCT DETERIORATION.

TWO RGHT WING, ONE LEFT WING, AND THE LEFT STATION HAS SPORTS COVERAGE MANY EVENINGS, STARTING DURING DRIVE TIME. THERE ARE HUNDREDS OF SYNDICATED RADIO SHOWS, YET ONLY TEN OR FIFTEEN OF THEM ARE IN THE L.A. AREA. FOR FAIRNESS, THAT SHOULD BE EXTENDED. CONSUMERS ARE GETTNG A VERY THIN OUTPUT, AND THAT IS A CHALLENGE THAT SHOULD BE MET, BUT IS NERVER DISDCUSSED.


IF THERE WERE TWENTY OR THIRTY TALK RADIO STATIIONS IN THE LOS ANGELES AREA, THAT WOULD GUARANTEE FAIRNESS. BUCHANIN, SLEEWA, BUCHANIN, NADIR, JOE BIDEN AND BOBBY JINDAL, WOULD ADD FAIRNESS BY THEIR SHEER NUMBER. A DOZEN MORE NAMES, CATERINE COULTER KARL ROVE, MICHAEL KINSLEY, GEORGE WILL, PEGGY NOONAN. TWENTY OR THIRTY MORE HOSTS ADDED TO CITY RADIO VENUES. EVEN NOAM CHOMPSKY.


THERE WOULD BE, ONE WOULD HOPE, A GOOD VARIETY. OBVIOUSLY THE STATE AS IT IS TODAY, AND HAS BEEN FOR SOME YEARS, DOES LITTLE TO BROADEN THE SPECTRUM, WITH ONLY THREE OR FOUR STATIONS DOING A TALK VENUE.

BUT WHAT WE HEAR IS THERE ARE FIFTEEN HUNDRED NEWS OR TALK RADIO STATIONS. THATS NATIONWIDE. THAT FIFTEEN HUNDRED DEVOLVES TO FOUR OR FIVE IN ANY GIVEN AREA. THAT IS OBVIOUSLY MARKET DRIVEN AND ANTI CONSUMER. IT HAPPENS A LOT. . t without a watchful eye, the market can spin out of control . AND IT HAS IN RADIO. COMMERCIALS EVERY SEVEN OR EIGHT MINUTES. FOUR MINUTE OR LONGER BANKS OF ADVERTISEMENTS. AND ONLY A MODEST NUMBER OF TALK SHOWS COMPETITING, MAKING IT EASIER FOR THE CONSERVATIVES TO RULE THE ROOST. THEY DO HAVE MORE APPEAL. THEY ARE BRASH AND ENTERTAINING, WHILE PROGRESSIVE RADIO HAS LESS ENTERTAINMENT TO OFFER. BUT PLENTY OF TRUTY AND CONTROVERSY. I THINK THAT POINT IS FAIRLY CLEAR. IF YOU WOULD AGREE AND SUPPORT MY POSITION, WE MIGHT BE ABLE TO CLOSE THE SUBJECT FAIRLY SOON WITH AN AGENDA, TO WORK TOWARD NOT FAIRNESS, BUT TOWARD MORE TALK RADIO STATIONS COMPETING. HOPEFULLY, AND I AM REPEATING MYSELF, HOPEFULLY THAT WILL INCREASE FAIRNESS. CURTIS SLEEWA, BILL ORIELY (HAS A SHOW BUT NOT PLAYED IN LOS ANGELES, FOR NO GOOD REASON, AND A HUGE NUMBER OF PROFESSIONAL RADIO HOSTS NEED TO FIND PLACES IN ALL THE MAJOR CITIES. FOR DECADES TALK RADIO HAS BEEN SCANTY. TIME TO CHANGE THAT. AND SKIRT THE FAIRNESS ISSUE. JUST GIVE US A LOT MORE PROGRAMS. DON IMUS IS ON THE RADIO, AT THREE A.M. THAT DOESNT MAKE ANY SENSE, BUT THERE JUST ARENT ENOUGH STATIONS TO SUPPORT A PRIME TIME APPEARANCE OF THIS VERY CONTROVERSIAL AND TALENTED MAN. Curtis_Sliwa, DON IMUS RALPH NADIR NEEDS A SHOW. BILL CLINTON, THEY COULD CONDUCT A HOUR A WEEK WITH CALL INS. BUT THERE IS PLENTY OF ROOM IN THE AM BAND, WITH FEWER, HIGHER PRICED COMMERCIALS. SO MANY OF THE STATIONS ARE RELIGIOUS, FOREIGN LANGUAGE, FOREIGN MUSIC SHOWS. THOSE COULD BE REPLACED.

THERE IS NOTHING WRONG WITH THIS SUGGESTION, AND IT CERTAINLY WORKS BETTER THAN A FAIRNESS DOCTRINE, TELLING PROGRAM PRODUCERS WHO THEY CAN AND CANNOT HAVE ON THEIR PROGRAMS. THAT DOESN'T APPEAL TO ME, AND IN GENERAL, LACKS APPEAL. NO. MORE STATIONS, AND MORE TOP OF THER LINE PROFESSIIONAL PUNDITS WITH DAILY OR WEEKLY SHOWS.WILL COME CLOSE TO FIXING THE PROBLEM WITHOUT THE DRACONIAN MEASURES OF A SUBJECTIVE FAIRNESS DOCTRINE.

CLASS WAR

Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions.

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.

AND OBAMA CAN'T ANSWER RIGHT. THIS IS A ONE TIME PUNISHMENT. FOR A REAL SMACK IN THE FACE TO ORDINARY PEOPLE. IE, ACTUAL PEOPLE, NOT INFERIOR SUB HUMANS AS THESE TALENTED FUCKING BASTARDS, SEE US. (GUESS WHICH SIDE OF THE CLASS WAR I'M ON.)

I'M AGAINST THE LIONS. AND LIONS' SHARE. I KNOW IT WON'T CHANGE, BUT AT LEAST ONCE IN A WHILE, PUT A BERNIE MADOFF IN JAIL.PUNISH A MILLION DOLLAR BONUS EARNER AT A FAILED COMPANY. AND PLEASE, DON'T TALK ABOUT HOW THESE PEOPLE CAN SAVE THE COMPANY. SOME OF THEM DON'T EVEN WORK AT THE COMPANY ANY MORE. DO WE REALLY NEED THEM TO FIX UP WHAT THEY MESSED UP?? IT CAN'T BE FIXED. IT WAS A CRIME. IT NEEDS TO BE PUNISHED. EVEN THE UNGREAT OBAMA ADMITTED THAT LAWS HAD TO BE CHANGED. THAT MANY OF OUR LAWS ARE WRONG. THAT WHAT WAS DONE AT A.I.G. WAS LEGAL, AND SHOULDN'T HAVE BEEN, AND IF HE GETS HIS WAY, THOSE LAWS WILL BE CHANGED. ( AND DON'T EXPECT ANY FOLLOWUP ON CHANGING LAWS. OBAMA IS JUST ANOTHER POL. GET USED TO IT, WORSHIPPERS.)




I THINK LENO AND OBAMA ARE OVERPAID. HUNDREDS OF TIMES. LENO HAS A BILLION DOLLARS. HE'S NOT THAT FUNNY. THE TOP ONE PERCENT HAVE ENOUGH TO GET US OUT OF THIS DEPRESSION. SORRY. IF YOU THINK THAT'S ENVY. GO RIGHT AHEAD. I CAN TAKE THE SHAME.

BACK TO THE STONE AGE. RIGHT. SO NOW, WE HAVE FLYING PIGS. FUCK YOU. THIS IS A PUNISHMENT FOR A HORRIBLE SLAP IN THE FACE. THESE ARE RETENTION BONUSES.

“anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”. NOTHING CHANGES. IT'S THE FLYING PIGS AND FAT CATS VS. THE SUB HUMANS WITH NO TALENT. FUCK YOU. AND FUCK THE HORSES YOU RODE IN ON.

PRESIDENTIAL COMEDY

In the middle of decrying the misdeeds of the financial firm AIG, President Obama cracked a joke. "Excuse me," he said Monday, after coughing into the microphone. "I am choked up with anger here." There were laughs all around the East Room of the White House.

FIND MORE OF MY WEB LOGS

FOR MORE WEB LOGS, CLICK ON "VIEW MY COMPLETE FILE" BELOW ARCHIVE LIST AT RIGHT.

'I'll Be Short'

By

August 4, 2002

'I'll Be Short'

By ROBERT B. REICH

t is far too early to know what historians will see when they look back on the years 2000 to 2002 from their perches in the future, but it's likely they will chronicle a profound change in America. The years leading up featured almost breathless excitement about getting rich quick in dot-coms, irrational exuberance in the stock market, and boundless confidence about the nation's power and place in the world. Then, in rapid succession, the dot-com bubble burst, the economy drifted into recession, and terrorists attacked with a deadliness and ferocity never known or even imagined before. Then one of our most successful corporations suddenly imploded, revealing a sham of accounting gimmicks and regulatory lapses; investors and employees lost big while top executives walked off with fortunes.

What have we learned, other than humility? We remain a blessedly optimistic people. But these two years have shaken our certainty about some things we had begun to take for granted—especially, I think, the idea that each of us can make it solely on our own. The get-rich-quick exuberance of the late nineties may have temporarily blinded us to how dependent we are on one another. Subsequent events serve as reminders that the strength of our economy and the security of our society rest on the bonds that connect us. But what, specifically, are these bonds? What do we owe one another as members of the same society?

This is a small book about these large questions. Some of the observations recorded here are culled from my writing during these fitful years. In collecting and fitting them together, my hope is to reveal a larger perspective on what is at stake and what we can do about it.

One of my themes concerns politics, and the heightened importance now of a politically active and engaged citizenry. As this volume goes to press, I am heeding my own advice in the extreme by running for governor of Massachusetts. By the time you get around to reading it, I may have succeeded—or else have returned to the far safer ground of commenting from the sidelines. If it's the former, I hope I can put some of those principles into action; if the latter, I hope others will.



Chapter One



Not since World War II have Americans felt so unified. We're fighting a war against terrorism and we're fighting to get the economy moving again. And we're all in this together. Except when it comes to paying the bill.

Add the cost of fighting the war to the biggest military buildup in two decades and extra security at home, and you're talking real money—hundreds of billions of dollars over the next few years. The Bush administration has also enacted a mammoth tax cut—$1.35 trillion over the next ten years. At this writing, the president is proposing almost $600 billion in additional cuts in income taxes and capital-gains taxes. The bulk of these cuts—those already enacted and those proposed—benefit large corporations and people who are already wealthy.

So who's going to pay? Take a guess. Middle- and lower-income Americans.

Most Americans now pay more in payroll taxes than they do in income taxes. Payroll taxes include Social Security and Medicare payments. You pay these taxes on the first $80,000 or so of your income (the ceiling rises slightly every year). After that you're home free. Bill Gates stops paying payroll taxes at a few minutes past midnight on January 1 every year.

None of the enacted or proposed tax cuts affect payroll taxes, even temporarily. To the contrary, they increase the odds that payroll taxes will have to be hiked. That's because the tax cuts, combined with the military buildup, will drain so much money out of the Treasury that there won't be enough money to pay for Social Security and Medicare by the time the early baby boomers begin retiring, about a decade from now. So payroll taxes probably will have to rise in order to fill the gap.

Get it? Income and capital-gains tax cuts for the rich now, payroll tax hikes on middle- and lower-income Americans to come.

Americans like to think we're all in this together, but the fact is that the economic fallout from terrorism is hitting some Americans much harder than others. When the slowdown began, layoffs and pay cuts hit hardest at manufacturing workers, white-collar managers, and professionals. Since the terrorist attacks, a different group is experiencing the heaviest job losses: the low-paid. Many are service workers in retail stores, restaurants, hotels, or other tourist-industry businesses that have been hard hit. Others are caregivers—social workers, hospital workers, elder-care workers—whose jobs and wages are on the line as public budgets are trimmed. The economy may be rebounding, but these people aren't.

Government is less helpful this time around. Safety nets are in tatters. Welfare-to-work programs made sense when work was plentiful, but without work, those no longer eligible for welfare have nowhere else to turn. Even job losers who still qualify find that welfare payments in most states are worth less than before.

Unemployment insurance is also harder for them to get. Since part-time workers, temps, the self-employed, and people who have moved in and out of employment often don't qualify, a large portion of the lower-wage workforce is excluded. Many who don't qualify are women with young children.

Meanwhile, federal programs for job training and low-income housing have been shrunk by budget cuts. State and local governments are in no position to step in. They're already strapped by rapidly declining tax revenues. Rather than beefing up social services, they're cutting them. Rather than improving our schools by reducing class size and offering all-day kindergartens and after-school programs, they're paring back. Instead of making higher education more affordable, it's getting out of reach for many families. Meanwhile, more Americans are in danger of losing health care or are paying more for the care they get.

In short, the fat years of the nineties left us woefully unprepared for a slower economy that's taking a particularly large toll on hardworking families and the poor.

In the past, when Americans faced a common problem—the Depression, a hot war, a cold war—we understood intuitively that we were all in it together. Someone's misfortune could be anyone's: "There but for the grace of God go I." Social insurance was a natural impulse, a first cousin to patriotism. It was not difficult to sense mutual dependence and to agree on a set of responsibilities shared by all members, exacting certain sacrifices for the common good.

But that sense of commonality is endangered as we drift into separate worlds of privilege and insecurity. I can't help asking, if you'll pardon me for questioning our newfound unity, whatever happened to the social contract?

The sobering news is that even our ten years of economic expansion didn't do much for the bottom half. Sure, they had jobs, but they had jobs before the last recession, too. The fact is, the median wage—the real take-home pay of the worker smack in the middle of the earnings ladder—is not much higher than it was in 1989. In my home state of Massachusetts, the typical household ended the roaring nineties $4,700 poorer (adjusted for inflation) than it began. And health and pension benefits for the bottom half continue to shrivel.

Many families have made up for the steady decline by working longer hours. The average middle-income married couple with children works almost 4,000 hours a year for pay—about seven weeks more than in 1990. But for most mortals who do not relish what they do for pay, more hours at work does not translate into a higher standard of living. On top of that, jobs are less secure. Health care is more expensive. Working families are shelling out huge bucks for good child care. And if you've got elderly parents who also need help, it's even rougher. At the same time, the upper reaches of America have never had it so good. Their pay and benefits have continued to rise.

Look, I don't begrudge anyone a fat paycheck or a big dividend check. But the worrier in me won't let go. I don't want my boys to grow up in a two-tiered society where they'll have to live in gated communities. Yet that's the direction we're heading in.

The problem is not that some of us are getting rich. That's the good news. The problem is that most of us are getting nowhere, even though we're working harder than ever before. We are hurtling toward a society composed of a minority who are profiting from changes in the economy and a majority who are not.

The consequence of this erosion extends beyond economics. It helps explain why hard-pressed parents can't find the time to raise their kids the way they themselves were raised and to pass on the values they grew up with; why voters whose family budgets pinch so tightly are outraged about government inefficiency and waste; why even instinctively generous Americans find their compassion toward the less fortunate flagging; why our politics have become so angry, even sometimes ugly.

Perhaps most important are the moral consequences. Put simply, it just isn't right. The glaring, grotesque wrongness of what's happening to hardworking American families spawns despair and cynicism. It affronts our values, mocking the American bargain linking effort and reward. It makes people feel like suckers and gnaws away at the precious ethic of responsibility. It closes the gate to the very poor. Ultimately, the hollowing-out of the middle class and the creation of a two-tiered society pose a mortal threat to what's always been special about our country.

Why isn't this being talked about? My guess is that Republicans don't feel comfortable with the topic because they don't have any solutions they'd find palatable. The right wing of the Democratic party has drifted toward a flaccid Republicanism, where the basic philosophy is that everyone is on his or her own. Corporate America isn't particularly eager to talk about it, or to sponsor television programs or advertise in magazines that do. But the fact is, as we proceed with the war on terrorism, our domestic agenda is in shambles. We need to make the case that we can only be a strong nation if the working middle class and the less fortunate are brought along. True national security begins with economic security.

Millions of Americans—myself included—were raised to believe in a simple bargain: Anybody who worked hard could earn a better life for themselves and their family. That's anybody—not just the wellborn, not just the well connected. Anybody with the drive and discipline to make the most of their opportunities had a decent chance to make it. Corporate America backed the bargain, too. Employees who worked hard and gave it their all could share in the company's success. If the company did well, their jobs were reasonably secure, and their wages and benefits rose.

In the 1950s, my mother and father worked six days a week in their small clothing shop, selling skirts and dresses to the wives of factory workers. I remember making signs when they had special sales: COTTON DRESSES, $2.99; BLOUSES, $1.00. As factory wages went up, local families had a bit more to spend every year, and my parents' little business grew less precarious. They went upscale. We all did better together. Growing together was the way it worked in America.

America has got off that track. We're growing apart—and at a quickening pace. My parents retired before the new economy elbowed out the old. Most of those factory jobs are now gone. Jobs like them accounted for over a third of all American jobs in the 1950s; now, fewer than 16 percent. Many of the old service jobs have disappeared as well. Telephone operators have been replaced by automated switching equipment, bank tellers by automated teller machines, gas station attendants by self-service pumps that accept credit cards, and secretaries by computers and voice mail. Any job that can be done more cheaply by a computer is now gone, or pays far less than before.

We can't bring back the old economy, and shouldn't try. But that doesn't leave us helpless. What we can do is create a new economy in which many more succeed.

Earnings began splitting between the have-mores and the have-lesses largely because of two revolutions—one in computer technology, the other in global economic integration. The combined effect has been to shift demand in favor of workers with the right education and skills to take advantage of these changes, and against workers without them. Meanwhile, the unionized segment of the workforce has shrunk. Today, fewer than 10 percent of private-sector employees are unionized. In 1955, 35 percent were unionized. At the same time, the real value of the minimum wage has declined. The drop in unionization has taken a toll on the wages of men without college degrees. The drop in the minimum wage has taken the biggest toll on the wages of working women without college degrees.

The real puzzle is why in recent years we've let this happen. If the right education and skills are so important, why haven't we done more for our schools? Why is the federal government cutting back on job training? Why is college becoming less affordable? If family incomes are under greater and greater stress, why have we let unions wither and the minimum wage decline? Why haven't we widened the circle of prosperity so that more Americans have a decent shot at it? In short, why has the social contract come undone? In the world's preeminent democratic-capitalist society, one might have expected just the reverse: As the economy grew through technological progress and global integration, the "winners" from this process would compensate those who bore the biggest burdens, and still come out far ahead. Rather than being weakened, the social contract would be strengthened.

Nations are not passive victims of economic forces. Citizens can, if they so choose, assert that their mutual obligations extend beyond their economic usefulness to one another, and act accordingly. Throughout our history the United States has periodically asserted the public's interest when market outcomes threatened social peace—curbing the power of the great trusts, establishing pure food and drug laws, implementing a progressive federal tax, imposing a forty-hour workweek, barring child labor, creating a system of social security, expanding public schooling and access to higher education, extending health care to the elderly, and so forth. We did part of this through laws, regulations, and court rulings, and part through social norms and expectations about how we wanted our people to live and work productively together. In short, this nation developed and refined a strong social contract, which gave force to the simple proposition that prosperity could include almost everyone.

Every society and culture possesses a social contract—sometimes implicit, sometimes spelled out in detail, but usually a mix of both. The contract sets out the obligations of members of that society toward one another. Indeed, a society or culture is defined by its social contract. It is found within the pronouns "we," "our," and "us." We hold these truths to be self-evident; our peace and freedom is at stake; the problem affects all of us. A quarter of a century ago, when the essential provisions of the American social contract were taken for granted by American society, there was hardly any reason to state them. Today, as these provisions wither, they deserve closer scrutiny.



To the extent that there's been a moral core to American capitalism, it's consisted of three promises.

First, as companies did better, their employees would too. As long as a company was profitable, employees knew their jobs were secure. When profits rose, wages and benefits (health care and pensions) rose, too. In harder times, companies accepted lower profits to retain their workers. At worst, if a recession hit hard, companies laid workers off temporarily and then hired them back as soon as the economy turned up. The communities where most employees lived were also part of the contract: As long as the company was profitable, it remained in the community—often underwriting charities and responding to community needs.

"The job of management," proclaimed Frank Abrams, chairman of Standard Oil of New Jersey, in a 1951 address typical of the era, "is to maintain an equitable and working balance among the claims of the various directly interested groups ... stockholders, employees, customers, and the public at large. Business managers are gaining in professional status partly because they see in their work the basic responsibilities [to the public] that other professional men have long recognized in theirs."

(Continues...)

Excerpted from I'LL BE SHORT by Robert B. Reich. Copyright © 2002 by Robert B. Reich. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

Copyright 2002 The New York Times Company | Permissions | Privacy Policy

t is far too early to know what historians will see when they look back on the years 2000 to 2002 from their perches in the future, but it's likely they will chronicle a profound change in America. The years leading up featured almost breathless excitement about getting rich quick in dot-coms, irrational exuberance in the stock market, and boundless confidence about the nation's power and place in the world. Then, in rapid succession, the dot-com bubble burst, the economy drifted into recession, and terrorists attacked with a deadliness and ferocity never known or even imagined before. Then one of our most successful corporations suddenly imploded, revealing a sham of accounting gimmicks and regulatory lapses; investors and employees lost big while top executives walked off with fortunes.

What have we learned, other than humility? We remain a blessedly optimistic people. But these two years have shaken our certainty about some things we had begun to take for granted—especially, I think, the idea that each of us can make it solely on our own. The get-rich-quick exuberance of the late nineties may have temporarily blinded us to how dependent we are on one another. Subsequent events serve as reminders that the strength of our economy and the security of our society rest on the bonds that connect us. But what, specifically, are these bonds? What do we owe one another as members of the same society?

This is a small book about these large questions. Some of the observations recorded here are culled from my writing during these fitful years. In collecting and fitting them together, my hope is to reveal a larger perspective on what is at stake and what we can do about it.

One of my themes concerns politics, and the heightened importance now of a politically active and engaged citizenry. As this volume goes to press, I am heeding my own advice in the extreme by running for governor of Massachusetts. By the time you get around to reading it, I may have succeeded—or else have returned to the far safer ground of commenting from the sidelines. If it's the former, I hope I can put some of those principles into action; if the latter, I hope others will.



Chapter One



Not since World War II have Americans felt so unified. We're fighting a war against terrorism and we're fighting to get the economy moving again. And we're all in this together. Except when it comes to paying the bill.

Add the cost of fighting the war to the biggest military buildup in two decades and extra security at home, and you're talking real money—hundreds of billions of dollars over the next few years. The Bush administration has also enacted a mammoth tax cut—$1.35 trillion over the next ten years. At this writing, the president is proposing almost $600 billion in additional cuts in income taxes and capital-gains taxes. The bulk of these cuts—those already enacted and those proposed—benefit large corporations and people who are already wealthy.

So who's going to pay? Take a guess. Middle- and lower-income Americans.

Most Americans now pay more in payroll taxes than they do in income taxes. Payroll taxes include Social Security and Medicare payments. You pay these taxes on the first $80,000 or so of your income (the ceiling rises slightly every year). After that you're home free. Bill Gates stops paying payroll taxes at a few minutes past midnight on January 1 every year.

None of the enacted or proposed tax cuts affect payroll taxes, even temporarily. To the contrary, they increase the odds that payroll taxes will have to be hiked. That's because the tax cuts, combined with the military buildup, will drain so much money out of the Treasury that there won't be enough money to pay for Social Security and Medicare by the time the early baby boomers begin retiring, about a decade from now. So payroll taxes probably will have to rise in order to fill the gap.

Get it? Income and capital-gains tax cuts for the rich now, payroll tax hikes on middle- and lower-income Americans to come.

Americans like to think we're all in this together, but the fact is that the economic fallout from terrorism is hitting some Americans much harder than others. When the slowdown began, layoffs and pay cuts hit hardest at manufacturing workers, white-collar managers, and professionals. Since the terrorist attacks, a different group is experiencing the heaviest job losses: the low-paid. Many are service workers in retail stores, restaurants, hotels, or other tourist-industry businesses that have been hard hit. Others are caregivers—social workers, hospital workers, elder-care workers—whose jobs and wages are on the line as public budgets are trimmed. The economy may be rebounding, but these people aren't.

Government is less helpful this time around. Safety nets are in tatters. Welfare-to-work programs made sense when work was plentiful, but without work, those no longer eligible for welfare have nowhere else to turn. Even job losers who still qualify find that welfare payments in most states are worth less than before.

Unemployment insurance is also harder for them to get. Since part-time workers, temps, the self-employed, and people who have moved in and out of employment often don't qualify, a large portion of the lower-wage workforce is excluded. Many who don't qualify are women with young children.

Meanwhile, federal programs for job training and low-income housing have been shrunk by budget cuts. State and local governments are in no position to step in. They're already strapped by rapidly declining tax revenues. Rather than beefing up social services, they're cutting them. Rather than improving our schools by reducing class size and offering all-day kindergartens and after-school programs, they're paring back. Instead of making higher education more affordable, it's getting out of reach for many families. Meanwhile, more Americans are in danger of losing health care or are paying more for the care they get.

In short, the fat years of the nineties left us woefully unprepared for a slower economy that's taking a particularly large toll on hardworking families and the poor.

In the past, when Americans faced a common problem—the Depression, a hot war, a cold war—we understood intuitively that we were all in it together. Someone's misfortune could be anyone's: "There but for the grace of God go I." Social insurance was a natural impulse, a first cousin to patriotism. It was not difficult to sense mutual dependence and to agree on a set of responsibilities shared by all members, exacting certain sacrifices for the common good.

But that sense of commonality is endangered as we drift into separate worlds of privilege and insecurity. I can't help asking, if you'll pardon me for questioning our newfound unity, whatever happened to the social contract?

The sobering news is that even our ten years of economic expansion didn't do much for the bottom half. Sure, they had jobs, but they had jobs before the last recession, too. The fact is, the median wage—the real take-home pay of the worker smack in the middle of the earnings ladder—is not much higher than it was in 1989. In my home state of Massachusetts, the typical household ended the roaring nineties $4,700 poorer (adjusted for inflation) than it began. And health and pension benefits for the bottom half continue to shrivel.

Many families have made up for the steady decline by working longer hours. The average middle-income married couple with children works almost 4,000 hours a year for pay—about seven weeks more than in 1990. But for most mortals who do not relish what they do for pay, more hours at work does not translate into a higher standard of living. On top of that, jobs are less secure. Health care is more expensive. Working families are shelling out huge bucks for good child care. And if you've got elderly parents who also need help, it's even rougher. At the same time, the upper reaches of America have never had it so good. Their pay and benefits have continued to rise.

Look, I don't begrudge anyone a fat paycheck or a big dividend check. But the worrier in me won't let go. I don't want my boys to grow up in a two-tiered society where they'll have to live in gated communities. Yet that's the direction we're heading in.

The problem is not that some of us are getting rich. That's the good news. The problem is that most of us are getting nowhere, even though we're working harder than ever before. We are hurtling toward a society composed of a minority who are profiting from changes in the economy and a majority who are not.

The consequence of this erosion extends beyond economics. It helps explain why hard-pressed parents can't find the time to raise their kids the way they themselves were raised and to pass on the values they grew up with; why voters whose family budgets pinch so tightly are outraged about government inefficiency and waste; why even instinctively generous Americans find their compassion toward the less fortunate flagging; why our politics have become so angry, even sometimes ugly.

Perhaps most important are the moral consequences. Put simply, it just isn't right. The glaring, grotesque wrongness of what's happening to hardworking American families spawns despair and cynicism. It affronts our values, mocking the American bargain linking effort and reward. It makes people feel like suckers and gnaws away at the precious ethic of responsibility. It closes the gate to the very poor. Ultimately, the hollowing-out of the middle class and the creation of a two-tiered society pose a mortal threat to what's always been special about our country.

Why isn't this being talked about? My guess is that Republicans don't feel comfortable with the topic because they don't have any solutions they'd find palatable. The right wing of the Democratic party has drifted toward a flaccid Republicanism, where the basic philosophy is that everyone is on his or her own. Corporate America isn't particularly eager to talk about it, or to sponsor television programs or advertise in magazines that do. But the fact is, as we proceed with the war on terrorism, our domestic agenda is in shambles. We need to make the case that we can only be a strong nation if the working middle class and the less fortunate are brought along. True national security begins with economic security.

Millions of Americans—myself included—were raised to believe in a simple bargain: Anybody who worked hard could earn a better life for themselves and their family. That's anybody—not just the wellborn, not just the well connected. Anybody with the drive and discipline to make the most of their opportunities had a decent chance to make it. Corporate America backed the bargain, too. Employees who worked hard and gave it their all could share in the company's success. If the company did well, their jobs were reasonably secure, and their wages and benefits rose.

In the 1950s, my mother and father worked six days a week in their small clothing shop, selling skirts and dresses to the wives of factory workers. I remember making signs when they had special sales: COTTON DRESSES, $2.99; BLOUSES, $1.00. As factory wages went up, local families had a bit more to spend every year, and my parents' little business grew less precarious. They went upscale. We all did better together. Growing together was the way it worked in America.

America has got off that track. We're growing apart—and at a quickening pace. My parents retired before the new economy elbowed out the old. Most of those factory jobs are now gone. Jobs like them accounted for over a third of all American jobs in the 1950s; now, fewer than 16 percent. Many of the old service jobs have disappeared as well. Telephone operators have been replaced by automated switching equipment, bank tellers by automated teller machines, gas station attendants by self-service pumps that accept credit cards, and secretaries by computers and voice mail. Any job that can be done more cheaply by a computer is now gone, or pays far less than before.

We can't bring back the old economy, and shouldn't try. But that doesn't leave us helpless. What we can do is create a new economy in which many more succeed.

Earnings began splitting between the have-mores and the have-lesses largely because of two revolutions—one in computer technology, the other in global economic integration. The combined effect has been to shift demand in favor of workers with the right education and skills to take advantage of these changes, and against workers without them. Meanwhile, the unionized segment of the workforce has shrunk. Today, fewer than 10 percent of private-sector employees are unionized. In 1955, 35 percent were unionized. At the same time, the real value of the minimum wage has declined. The drop in unionization has taken a toll on the wages of men without college degrees. The drop in the minimum wage has taken the biggest toll on the wages of working women without college degrees.

The real puzzle is why in recent years we've let this happen. If the right education and skills are so important, why haven't we done more for our schools? Why is the federal government cutting back on job training? Why is college becoming less affordable? If family incomes are under greater and greater stress, why have we let unions wither and the minimum wage decline? Why haven't we widened the circle of prosperity so that more Americans have a decent shot at it? In short, why has the social contract come undone? In the world's preeminent democratic-capitalist society, one might have expected just the reverse: As the economy grew through technological progress and global integration, the "winners" from this process would compensate those who bore the biggest burdens, and still come out far ahead. Rather than being weakened, the social contract would be strengthened.

Nations are not passive victims of economic forces. Citizens can, if they so choose, assert that their mutual obligations extend beyond their economic usefulness to one another, and act accordingly. Throughout our history the United States has periodically asserted the public's interest when market outcomes threatened social peace—curbing the power of the great trusts, establishing pure food and drug laws, implementing a progressive federal tax, imposing a forty-hour workweek, barring child labor, creating a system of social security, expanding public schooling and access to higher education, extending health care to the elderly, and so forth. We did part of this through laws, regulations, and court rulings, and part through social norms and expectations about how we wanted our people to live and work productively together. In short, this nation developed and refined a strong social contract, which gave force to the simple proposition that prosperity could include almost everyone.

Every society and culture possesses a social contract—sometimes implicit, sometimes spelled out in detail, but usually a mix of both. The contract sets out the obligations of members of that society toward one another. Indeed, a society or culture is defined by its social contract. It is found within the pronouns "we," "our," and "us." We hold these truths to be self-evident; our peace and freedom is at stake; the problem affects all of us. A quarter of a century ago, when the essential provisions of the American social contract were taken for granted by American society, there was hardly any reason to state them. Today, as these provisions wither, they deserve closer scrutiny.



To the extent that there's been a moral core to American capitalism, it's consisted of three promises.

First, as companies did better, their employees would too. As long as a company was profitable, employees knew their jobs were secure. When profits rose, wages and benefits (health care and pensions) rose, too. In harder times, companies accepted lower profits to retain their workers. At worst, if a recession hit hard, companies laid workers off temporarily and then hired them back as soon as the economy turned up. The communities where most employees lived were also part of the contract: As long as the company was profitable, it remained in the community—often underwriting charities and responding to community needs.

"The job of management," proclaimed Frank Abrams, chairman of Standard Oil of New Jersey, in a 1951 address typical of the era, "is to maintain an equitable and working balance among the claims of the various directly interested groups ... stockholders, employees, customers, and the public at large. Business managers are gaining in professional status partly because they see in their work the basic responsibilities [to the public] that other professional men have long recognized in theirs."

(Continues...)

Excerpted from I'LL BE SHORT by Robert B. Reich. Copyright © 2002 by Robert B. Reich. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
ROBERT REICH FIRST CHAPTER