Flame War

It all started when a writer I like a lot, Matt Taibbi, wrote this piece for the Rolling Stone entitled "Obama's Big Sellout"

Which drew this response about percieved or real inaccuracies in the piece from Tim Fernholz entitled "The Errors Of Matt Taibbi"

Which then, of course, drew this response from Matt Taibbi entiteled "On Obama's Sellout"

Now I encourage you to read all 3 pieces in their entirety and come to your own conclusions and decide for yourself who you think is more right or more wrong. But I will say this, while I like both Taibbi and Fernholz generally, it does seem like Taibbi had an agenda with his article in the Rolling Stone, especially after reading his response to Fernholz. Basically in his response he makes it seem as if they both have the same facts but he interpreted them differently from Fernholz. That is all fine and good but did he express any of that balance in his piece? Balance that he himself in his response admits is basically valid even though he doesn't agree?

I didn't see any.

Basically while Fernholz points out that many of the things Taibbi takes issue with President Obama over happened during President Bush's tenure, Taibbi still feels without any explanation that Obama should be held responsible for it because of the advisors that were chosen for his economic team. Again, its ok for him to have that opinion, but that's just what it is, an opinion. His article for me was ok as an op-ed but definitely not ok as a piece or actual reporting.

And here is my last major point in all of this. Fernholz takes Taibbi to task for flogging yet again the $23 Trillion dollar worst case scenario number for the bailout. Here is the graph where it appears in Rolling Stone:

But whatever jobs the stimulus has created or preserved so far — 640,329, according to an absurdly precise and already debunked calculation by the White House — the aid that Obama has provided to real people has been dwarfed in size and scope by the taxpayer money that has been handed over to America's financial giants. "They spent $75 billion on mortgage relief, but come on — look at how much they gave Wall Street," says a leading Democratic strategist. Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion. And while the government continues to dole out big money to big banks, Obama and his team of Rubinites have done almost nothing to reform the warped financial system responsible for imploding the global economy in the first place.

Here is how Fernholz addressed it:

"Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion." It could, if every single loan guaranteed by the Federal government failed at once and all of the assets bought with those loans were destroyed -- and many of those loans are to homeowners, including low-income homeowners, through Fannie Mae and Freddie Mac, or to small businesses. Some of that money went to Chrysler and GM in what was primarily a job saving move. TARP's actual outlays are only $518 billion (still nothing to sneeze at), including foreclosure relief for homeowners. More money has been actually allocated so far on fiscal stimulus, including funds to reinforce the social safety net, than on the bank bailouts.

Here is Taibbi's response to Ferholz:

First of all, Barofsky did use that number, so let’s get that out of the way — there’s no factual issue with the passage I wrote. The Prospect writer wants to take issue with Barofsky’s number and imply that the use of it is misleading. Obviously Barofsky’s number is a worst-case scenario. But let’s cut the bullshit about the bailouts being intended to help ordinary homeowners and save auto workers. We could have paid off every subprime mortgage in America for about $1.4 trillion and instead shelled out at least ten times that to Wall Street, primarily to pay off derivative bets made by bankers on those assets.

The writer notes that the total TARP outlay was only $518 billion, and implies that this is the entire outlay for the bailouts when in fact the TARP is just one small slice of the bailout package — most of the bailout monies went out through little-known Fed programs like the TALF, the TLGP, the TIP, the PPI, and the Maiden Lanes. The number my friend Nomi Prins is using now for the bailouts is about $14 trillion in total outlays, and just as Barofsky pointed out, that number could rise. But to imply that the bailout outlay is not only comparable to the $700 billion stimulus but smaller than it is totally disingenuous.

The bailouts have been a massive boon to Wall Street, not so much to the rest of us (again, see Nomi’s report on that). Most of the bailouts came in the form of very cheap money lent out to the same banks that caused the crisis, who then took that money and lent it out at market rates, pocketing the difference.

That’s where all these billions in bonuses for the major banks are coming from this year; it’s almost impossible to not make mountains of money when you’re borrowing your money from the government basically for free. Moreover we issued government guarantees for all the least responsible banks in the country — so while you and I have to keep our same old shitty credit scores, all the people who leveraged themselves to the hilt and bet the farm on subprime mortgages that we ended up bailing out now get squeaky clean, brand-new AAA credit ratings to borrow from. The cost of credit for them plummeted thanks to these guarantees, while we’re paying the same old rates to borrow our money.

This, again, is perfectly in line with the basic premise of the article. Geithner and Ben Bernanke continued a bailout policy that rewarded the very people who were most responsible for the crisis. The rest of the population did not see those same benefits. We can argue about the motives behind Obama’s bailout decision, but the numbers are not really a factual issue.

Now I pasted the whole response to be as fair as possible to Taibbi but its really his response at the beginning that is the tell.

First of all, Barofsky did use that number, so let’s get that out of the way — there’s no factual issue with the passage I wrote. The Prospect writer wants to take issue with Barofsky’s number and imply that the use of it is misleading. Obviously Barofsky’s number is a worst-case scenario. But let’s cut the bullshit about the bailouts being intended to help ordinary homeowners and save auto workers.

Let's cut the bullshit indeed. First of all, I don't know how anybody reads Taibbi's article and gets that its "obviously...a worst case scenario". In point of fact anybody reading the article probably thinks its highly likely or at least reasonable to assume that the number WILL reach $23 Trillion. Time and time again Taibbi has flogged this number as a kind of gotcha moment in his articles and when he has had TV interviews. At no point have I personally seen or heard or heard of him caveating it as a worst case scenario. And when confronted on it by Fernholz his reaction is not to admit he should have caveated it this time, but to say it was "obvious".

Really?

Because I can guarantee you that there are folks on both side of the political spectrum who quote that $23 Trillion dollar figure as if it were gospel. It definitely doesn't seem so "obvious" to them. And again I have to point out that the article isn't "Bush and Obama's Big Sellout", its "Obama's Big Sellout" as if he were President when TARP was signed into law anyway.

And just look at the rest of Taibbi's response which is constructed of all manner of strawmen. Fernholz isn't holding the bailouts out as to being meant to help "ordinary homeowners" or "save autoworkers". In point of fact TARP WASN'T about helping anybody but Wall Street from its inception and when you REALLY sit down to think about it, the fact that President Obama and his team broadened the scope of TARP to help homeowners and help the auto industry doesn't that kinda, you know, kick Taibbi's point on the matter squarely in the junk?

Just sayin...

Now I know there are some folks that believe President Obama should never be criticized, and there are others who think he should always be criticized and anybody who criticizes the people who level that criticism of him from the left are "apologists". I think if you go through my posts in this blog its clear that I fall into neither category. When Obama is fucking up I say so. When people on the left are full of shit in their criticism of him, I say that too. It is what it is.

But I have to say that for me, in this particular situation, Fernholz carries more weight. Matt Taibbi set out to write an article bashing President Obama essentially as guilty by association because of the economic advisors he chose and where he chose to put them. Again that's fine and dandy by me. But the problem for me comes in when he tried to mask it as actual reporting on President Obama's record since being, you know, President. When those facts are lined up against his opinion then his article becomes what it should have been, an op-ed.

But do the people reading the article realize that?

Somehow I highly doubt it because just like that $23 Trillion number, I just don't think its that "obvious".

A Mountain Of Evidence

I am not sure there is anyone on the planet that is still not convinced that Charlie Crist isn't lying through his teeth about his earlier support for the stimulus bill but just in case check out this exchange from the Rolling Stone.

But when I interviewed Crist this spring for my piece The GOP Jihad, here’s what he told me he’d have done had he had a darn vote:

Rolling Stone: Just a final question: Had you been in the Senate, would you have voted with the other Republicans for the stimulus package?

Crist: Absolutely.

Like I said before, this isn't likely to affect Republican voters in his primary against Rubio because for them his conformity is a good thing regardless of the hypocrisy it shows. But should he make it out of that primary this will definitely doom his electoral prospects.

Voters kind of expect politicians to lie. What they don't expect is for that politician to try to play them for fools.

Krugman's Letter

Paul Krugman, nobel prize winner in economics, has penned a letter to President Elect Barack Obama in Rolling Stone. The whole thing is a very interesting read as he gives his opinion for what Obama should do regarding the economy and at the end in regards to prosecuting people in the Bush Administration. There is one part I want to excerpt though because of some of the things I have seen on liberal and progressive websites.

IMHO to a certain extent we (liberals and progressives) have caught some of the "ideologue" bug when it comes to tax cuts/stimulus checks. Its interesting when you stand back and watch it because now we are willing to take the word of wing nut economists when they say the first round of stimulus checks didn't work. Well I dont think you can even begin to quantify whether they worked or not in light of the jobs lost last year and the mortgage crisis. I expressed my reasoning about this yesterday at the Swampland blogs and Krugman kind of makes the same case. What we should take great care to do now that we have the Presidency and Congress is avoid taking totally ideological and partisan stances against policies that might have a great benefit. When President Elect Obama put forth his stimulus plan there was no shortage of belly aching because it contained tax cuts/stimulus checks for middle income families, tax cuts that Obama actually campaigned on. But most if not all of the criticism never even took into account of WHY they might be needed as a part of an economic stimulus plan. Well here is Krugman speaking on it in Rolling Stone:

You can also do well by doing good. The Americans hit hardest by the slump — the long-term unemployed, families without health insurance — are also the Americans most likely to spend any aid they receive, and thereby help sustain the economy as a whole. So aid to the distressed — enhanced unemployment insurance, food stamps, health-insurance subsidies — is both the fair thing to do and a desirable part of your short-term economic plan.

Even if you do all this, however, it won't be enough to offset the awesome slump in private spending. So yes, it also makes sense to cut taxes on a temporary basis. The tax cuts should go primarily to lower- and middle-income Americans — again, both because that's the fair thing to do, and because they're more likely to spend their windfall than the affluent. The tax break for working families you outlined in your campaign plan looks like a reasonable vehicle.

But let's be clear: Tax cuts are not the tool of choice for fighting an economic slump. For one thing, they deliver less bang for the buck than infrastructure spending, because there's no guarantee that consumers will spend their tax cuts or rebates. As a result, it probably takes more than $300 billion of tax cuts, compared with $200 billion of public works, to shave a point off the unemployment rate. Furthermore, in the long run you're going to need more tax revenue, not less, to pay for health care reform. So tax cuts shouldn't be the core of your economic recovery program. They should, instead, be a way to "bulk up" your job-creation program, which otherwise won't be big enough.

Now most of the liberal/progressive blogosphere swears by Krugman when it comes to economic policy. I think it would be wise to take note that he himself believes that tax cuts should be an integral part of any economic stimulus. If you are going to believe him when he advocates infrastructure spending then you can't be selective when he also advocates middle and lower class tax relief. In the end we need to be about results, not about how we accomplish them. To do any less would relegate us to the left wing version of Wing Nuts and make it even harder than it is now to get our voices heard.