More Shades of TARP: Latest Deficit Ceiling Plan to Establish Extra-Constitutional Legislative Process

We commented last night on the parallels between the pressure tactics used to railroad the passage of the TARP and our current contrived debt ceiling crisis. The similarities have increased in a predictably bad way. Even worse than the economic toll radical budget cutting will impose on ordinary Americans is the continued undermining of basic democratic processes.

The foundation was set with the TARP’s radical power grab. As we wrote when the Treasury presented its initial draft:

But here is the truly offensive section of an overreaching piece of legislation:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

This puts the Treasury’s actions beyond the rule of law. This is a financial coup d’etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

But far worse is the precedent it sets. This Administration has worked hard to escape any constraints on its actions, not to pursue noble causes, but to curtail civil liberties: Guantanamo, rendition, torture, warrantless wiretaps. It has used the threat of unseen terrorists and a seemingly perpetual war on radical Muslim to justify gutting the Constitution. The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review?

The answer to that question, as we know now, was “no.”

The TARP, along with a new extralegal legislative process that is likely to be part of the bailout bill, are enabling acts. In a 2010 post, John Ryskamp discussed enabling acts, using the German Greek bailout legislation, Paulson’s 2008 draft legislation, and Hitler’s 1933 enabling act as case studies. His overview:

The enabling act changes the nature of the political system which puts it into effect, which is why such political systems are said to have “committed suicide” by passing enabling acts. It is important to keep this in mind, because, on their face, enabling acts seem often only amend the previous political system; the political system remains, and indeed enabling acts make much of the supposed preservation of the existing political system. They also make much of dealing only with specific problems over a specified period. But various traps, sprung along the way to enforcement, lead to unitary power and the discarding of government. People wonder how a simple remedy led to such profound dislocation.

As with the TARP, we have the drumroll of a purported threat to public safety, namely the possible Destruction of the Financial System as We Now Know It. John Boehner is stoking the panic by saying there needs to be a deal by the opening of trading in Asia or the Market Gods will take their vengeance. Turbo Timmie will no doubt warn of dire consequence of the failure to ink a deal by the supposed drop dead date of August 2 when he makes the rounds on Sunday TV.

However, the New York Times apparently did not get the memo. Its story on the status of the budget talks is below the fold on the front page. Above it are two stories on the Norway bombings, two on the Murdochs, one on the death of Amy Winehouse, and one on the first gay marriage in New York. And the Treasury markets did react to the news of the breakdown of talks on Friday. Yields rose initially, as one might expect, then fell back.

Nevertheless, both the Washington Post, which is taking up the deadline hysteria, and the more jaundiced Times are neglecting the most heinous aspect of the latest proposed remedy, which is to circumvent Constitutionally-prescribed legislative procedures. There’s no mention in the Times, and from what I can tell, only this oblique reference in the Post:

Then Congress would go to work to produce as much as $3 trillion in additional savings through an overhaul of the tax code and major changes to Social Security and Medicare, the biggest drivers of federal spending. To identify those savings, Congress would create a new bipartisan debt-reduction committee comprising 12 lawmakers from both the House and Senate, an idea offered by Senate Majority Leader Harry M. Reid (D-Nev.).

This innocuous description is incomplete and misleading. Ryan Grim explains what it really means in the Huffington Post (hat tip Guy S):

Debt ceiling negotiators think they’ve hit on a solution to address the debt ceiling impasse and the public’s unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress.

This “Super Congress,” composed of members of both chambers and both parties, isn’t mentioned anywhere in the Constitution, but would be granted extraordinary new powers. Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers — six from each chamber and six from each party.

Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

House Speaker John Boehner (R-Ohio) has made a Super Congress a central part of his last-minute proposal.

The Tea Partiers make a fetish of invoking the Constitution when it suits them but will happily run roughshod over it when it conflicts with their pet wishes. Not that they are singularly guilty in this conspiracy against the public-at-large, but their faux holier-than-thou/populist pretense while aligning themselves with an elite power grab is particularly nausea-inducing.

I hate using the word “fascism” because overuse has weakened its bite, but trumped-up threat by trumped up threat, our government is moving relentlessly in that direction.

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  1. attempter

    The bright side of things like this is that it throws off more of the masks. If it’s at all possible for those who still believe in this system to have reality penetrate their thick skulls, maybe stark actions like this (as opposed to the more obscure ways the same thing is already accomplished in congress) can achieve that.

    And isn’t it a good thing to force all this swine to vote Yes or No on something they had no chance to fiddle with? Won’t that mean less earmarks, petty pork, and so on? Sure, those things can be shifted to other bills, but it still forces them to vote Yes on flatly wicked and tremendously unpopular measures without any direct quid pro quo. Maybe that even increases the chances of a No vote. Or maybe I’m just being too optimistic.

    1. Yves Smith Post author

      No, look at all the pork that was larded into the third and final version of the TARP, see

      It was done in sufficient haste as to achieve the same results as the Super Congress device would assure, and IIRC after all the lard was worked in it was an up/down vote.

      You really seem to have a closet appetite for fascism out of a hope that it will lead to apocalypse of some sort. The record in the modern world that fascist regimes fall only to conquest. As the dominant military power with the only navy capable of landing large scale ground forces, we aren’t going to be rescued by a “liberating” army.

      Congress is already problematic, yet you prefer something even less democratic?

      1. ambrit

        As the piece pointed out, give us an ‘Enabling Act,’ and our Democracy is well and truly done for. I hate to contemplate the Hitlerian Model but, if someone suggests ‘seriously’ the incorporation of Blackwater type para militaries into the Homeland Security fold, we will have had our “Night of the Long Knives.”
        Take hope though. Most, if not all, tyrannies tend to fall from internal weakness and power struggles. Having an alternate governing system ready to step in when the opportunity appears is key. As the old joke says; “If they knew what they were doing, they’d be dangerous.”

        1. rafael bolero

          The paid thugs are the police and army, and the Guard, at least most of them will probably obey orders. And, as the economy and jobs continue to erode, vanish, the military–a work place with full benefits–will increasingly appeal, as under the Hitlerian model; so, this fascism here, CAN evolve into the publicly-militarized model–and many would say it already has : the wars and weapon production are the leading US industry. How often do you see soldiers in uniform in airports? The “terrorist” Islamofascist meme, with the mass-media propaganda that blare it, and the crisis-terror culture here add another classic component, the enemy race, even if not as specific as just saying “Jews.” Yes, they are not wearing uniforms yet, unless it’s ball caps and beer-belly t-shirts with American flags and eagles. Every time I see jets fly over the Super Bowl, I think this is a fascist-tinged country, at least.

          1. Dave of Maryland

            Unique to America, so far as I am aware, we have an option. We have a way out of this.

            Which is for 34 cash-strapped, starving states with rioting cities (next year fer sure!) to call a Constitutional Convention. Will it be scary? Heck yes. But a lot less scary than the direction we’re headed.

            We need a strong, charismatic governor to lead it.

          2. attempter

            I think it will be difficult to domestically deploy police and army in an overtly fascist way across the country. In some locales, like some cities, sure. But I think once it came to that the main phenomenon would be disintegration, as regions split off from the center. (Then in some places we might see regional versions which are closer to the classic fascism.)

            There’s also the fact that, like Ellen says below, these mercenaries will obey only so long as the paychecks are sufficient and don’t bounce. Sure, it’s hard to picture a rational tyranny lowballing its enforcers, but if we know anything we know this finance tyranny isn’t rational where it comes to short-run greed. Look at the way they want to gut the VA, or the way they allow the banks to gouge and fleece service personnel? In either case it would cost them pennies to maintain good pro-serviceman propaganda and avoid bad PR, but they just can’t help themselves.

            So is it really that hard to imagine that they’ll soon come around to austerity for rank-and-file police and soldiers as well?

            And although it seems hard to picture, we have to consider the possibility that at least some of these cadres would balk at direct domestic repression. (But I don’t count on that in my calculations.)

            As for the potential of drunken yahoos with “ball caps and beer-belly t-shirts with American flags and eagles” to become a disciplined brownshirt militia, I think I’ll keep that pretty low on my list.

          3. Yves Smith Post author


            The authorities don’t need to.

            Look at background checks as a condition for employment for most jobs. One arrest renders you unemployable. Even the wrong stuff on Facebook renders you unemployable. And the powers that be are also gutting the safety net. And there has been enough stoking of class jealousies for a lot of people to incorrectly focus their ire on the have nots or the people fighting for better labor rights than those at the top of the food chain.

            The threat of not eating will keep people in line. No need for jackboots and machine guns.

          4. Ellen Anderson

            If there is a currency collapse or a run on the global banking system the first thing that will happen is that the food supply chain will become unreliable. People will have to find unorthodox ways of getting food. Broke governments are notorious for not paying their soldiers and police.

            Who will have the real stuff that people will need under such circumstances? I don’t know. Maybe drug dealers? Maintaining jackboots will be beyond the capabilities of many existing governments.

          5. James

            “The paid thugs are the police and army, and the Guard, at least most of them will probably obey orders.” I agree with that and anyone that has looked into why those that come back from military service in Iraq/Afghanistan have mental problems, then you can understand why they have PTSD. Who are they that do the killing, stealing and destroying of those people without anyway of fighting back. Of course the answer is, ‘Our US troops and helping nations”. Not one thing that they did during these wars gave you or me the right to vote or anything else they claim is for our freedom. This would all come to an end the day we keep our young people from joining in the service of corporations and their lackey’s in Washington.

          6. Nathanael


            (1) a power elite can only threaten people with unemployment or lack of food up to about 25% — more if the group of people targeted is a specific ethnic subgroup, but this time it isn’t. After about 25% unemployment/hunger nationwide, solidarity kicks in and the hungry people TAKE the food. And sometimes KILL the overlords.
            (2) The deliberate misdirection of anger towards people other than the looting neofeudalist elite is effective, again, only up to a point; there is only so long that the cognitive dissonance necessary for ‘false consciousness’ can persist among most people, when the evidence of their own eyes gets more and more and more and more clear. There is every sign that the project of misdirecting anger at scapegoats is failing now, with right-wingers and left-wingers alike ready to crucify the banksters.

            A smart fascist knows when to stop looting; populism is a key element of retaining power as a fascist. The current crop of kleptocrats do *not* know when to stop looting. They are therefore absolutely guaranteed to self-destruct, and will probably be executed in public. The worry is about who will replace them, as a competent fascist could replace them far more easily than a democracy could.

      2. attempter

        Wasn’t that pork part of the way they got some of the No votes to change to Yes? But the way this is being represented here, there would be less opportunity to do that.

        Well, I’m not insisting on that argument. I don’t doubt they can figure out how to do anything they want to do.

        As for your other point, it’s clear that the kleptocracy doesn’t need anyone’s “closet appetites” to bring about an apocalypse. The only question is how to prepare for it to be in the best position to build something better out of it.

        But while you’re wrong about my appetites, it’s true that I don’t regard classical fascism as one of the main threats we face. We have the full economic aspect of fascism, we have the permanent war*, and the police/prison state is being built up. So we have the top-down aspects.

        But we do not have, and I’d argue are not likely to ever have, the real fascist social cohesion. This is partially because of America’s extreme heterogeneity and fragmentation, and partially because the elites’ own ideology of atomization and radical mercenarism and selfishness will tend to prevent any attempts to build the social bonding and self-sacrificial endurance and fanaticism which characterized classical fascism.

        But it was those things which made fascism structurally so strong, that only external conquest through total war could destroy those regimes. Without it, this “fascism” is a top-heavy Tower of Babel with no real social base, just force enforced by mercenary thugs. Real fascism didn’t (couldn’t) rely on paid thugs, but on perverted idealism. How is technocratic neoliberalism ever supposed to conjure that idealism on a mass basis?

        So that’s why I place the threat of real fascism (as opposed to ad hoc police state escalation) rather low on my list of things to worry about.

        1. tomk

          Thanks Attempter, that was an insightful comment in response to Yves, hope you’re right and I hope she engages you more often. What keeps me coming back is the conversation. Smart, informed people (and Craazyman’s entities) moving forward with an honest back and forth. Flexibility and integrity. Thanks to all.

        2. Patricia

          Perhaps we are already living in a rapidly developing oligarchy rather than fascism?

          Athenians tried to minimize the inevitable rise of oligarchy by using a lottery (called sortition) for election of officials. I think it’s a great idea.

        3. Dave of Maryland

          Hello Attempter,

          Whatever is coming will be uniquely American. Not German, not Italian, not neo-French.

          American atomization means we will be rendered poor. Scattered. Unable to organize. Unable to protest.

          The real difference between American in 2011 and Italy and Germany in, say, 1935?

          Citizens in those densely populated countries were comparatively rich.

          We are scattered and poor. For Germany, the Nazi party was a seductive virus imported from who knows where. In America, the Tea Party neo-whatevers are a long pent-up endemic disease. Paradoxically, everything well-wishing liberals do for them only makes things worse. What’s wrong with Kansas? Not a damn thing, except they don’t like being lectured to. Would you?

        4. craazyman

          you are correct sir.

          People lose sight of the fact that fascism was essentially a form of tribalism, where the group consciousness constellated areound the life force of the tribal blood dna as a refuge from the burden of individual awareness and moral conscience.

          America was, at its best, founded on the notion of a conscious tribe and not a tribal consciousness. It was a Copernican revolution, much more so than France, which at the time of its revolution remained essential tribal. More like Rome, which despite all its horrors, made some steps toward the erasure of ethnicity as a definition of self. Consider that Paul himself used his Roman citizenship to avoid persection after the riots he instigated by his preaching of the gospel.

          What this implies is that our form of fascism seeks some other metaphor than dna for the life force to constellate around. And so it constellates around the most potent abstraction of the life force, which is money. The problem, as you observe, is that money is not as stable a foundation as dna/ethnic identity. It flows and moves and spills, just like awareness itself. And the way money abstracts the procreative life force means that the offspring of the tribe that are heralded as fertility totems aren’t actual children, but new forms of wealth and success, which innovation and chance drives as much as planned strategy or corruption.

          The blessing of all this is that it represents one form of ascension over what Joyce called “The nightmare of history”. The curse is that it creates its own demons and nightmares, if and when money pools into the hands of a corrupt oligarchy, a direction we seem to be heading in.

          It’s sort of fascism light, without the cement of ethnicity to bind it into a blind rage, but one that produces its own unique, skittish and unstable energies of corruption.

        5. nowhereman

          Golly, just look at the start of any sporting event, NASCAR in particular. “My country, right or wrong” types everywhere you look. Now tell me there isn’t a large base for the “brown shirt’ brigade.
          YOU SHOULD BE AFRAID, VERY AFRAID. We’ll all be looking at our nieghbors wondering if they’ll give us up, pointing the finger to protect their own asses.

        6. Citalopram

          Don’t forget that fascism traditionally requires a strong leader, and there’s been measures over the last 50 years giving more and more power to the Executive Branch. We’ve seen huge leaps in Bush area, which Obama continues with undeclared wars in Libya et al.

          Of course, we also have Obama now ordering the assassinations of American citizens with a trial:

      3. attempter

        I forgot to conclude my comment with the asterisk on “permanent war”: While we have permanent war, it’s not the kind of war Hitler used to generate a mass fanaticism of self-sacrifice. The very fact that the system uses mercenaries and the Pentagon won’t touch the very idea of a draft with a ten foot pole is strong evidence that the elites don’t think America can really be whipped into a war fever (or at least induced to endure whatever sacrifices are necessary). But that’s part of the classical fascist formula.

        1. Ellen Anderson

          I think we already have as much classical fascism as we are likely to get. People who say that Americans are too diverse, selfish and contentious (or maybe just smart) to really give up their lives for the “fatherland” are likely correct. It is just as unlikely that the european countries that have been at each other’s throats for centuries are going to form a political federation with the Germans in charge.

          What the elites and their purchased governments are really afraid of is the “mother of all runs on the bank” the “bank” in this case being the globalized economy. That would be such a revolutionary situation that no one can predict what things will look like on the other side.

          Because of the lack of political solidarity in the economically globalized world, the run on the system is coming sooner or later. It will be revolutionary and its consequences can only be guessed at. One of my guesses is that the soldiers and police will go home to their families and will not come back until someone is able to pay them. They are all mercenaries at heart. There are no patriots anywhere as far as I can see.

          1. attempter

            There’s no real patriots, nor is there much perverted but deeply-felt pseudo-patriotism. There’s just the shallowness of bluster, little flags on cars, and lapel pins. If there’s no pay in it, no one’s going to lift a finger, and those who do accept pay will be cowardly bullies who will run away the moment anyone steadfastly fights back.

            What could be the idealist basis for a more determined and tenacious fascism than this?

        2. nowhereman

          attempter; the major flaw in your arguement is that you think you are part of the majority. That most Americans think like you. Sadly, as has been demonstrated so often in the past, you’ll be taken totally by surprise when they come for you.

      4. CoinKoin

        > The record in the modern world that fascist regimes fall only to conquest.

        What about Spain, Portugal, Greece, Argentina, and the other south-american juntas?

        1. attempter

          Yes, they gradually fizzled out. The only thing lacking was a strong affirmative vision and movement to succeed them. Therefore they simply lapsed into neoliberalism.

          1. Ellen Anderson

            I don’t understand what you mean by “idealist basis.” What I was trying to say was that, if the global economy collapses and governments go broke, they will not be paying the mercenaries. Those people will be up for grabs and who knows who will have the wherewithal to grab them? Will they work for the Chinese for gold? Who knows?

            I think that fascism requires a unified ideology as a necessary but not a sufficient condition. It must be backed up by a strong central government with the ability to support it. National governments are weakening themselves right now. What will it take for them to recover from a sovereign debt crisis? We can make some guesses, particularly since we know that energy resources will be critical, but no one ever can predict what will come out of chaos especially since the only common ideologies we share in the develop world surround the myth of progress and infinite growth.

          2. CoinKoin

            > they simply lapsed into neoliberalism.

            They simply went to whatever the model was around them, which, for Spain and Portugal, was European-style social-democracy. Btw, it wasn’t that “gradual” : in Portugal, for example, the regime change happened in one day, on April 25, 1974.

          3. Senior Pico

            Argentina’s an interesting case. From the fifth highest standard of living in the world around WWI to grandmothers prostituting themselves for a scrap of bread 85 years later to telling the IMF to go screw themselves a few years agol. In fact, all of South America, with the exception of our puppet shadow government in Colombia, is following
            the same model…It helps to have resources and a unifying language except for those pesky Brazilians…

          4. Yves Smith Post author

            Re the South American versions, these were in largely agriculture based economies, not ones with significant industrial bases. They are arguably not comparable. Pinochet was a creation of the US. There has been a fascist movement in Greece for a long time, but it has never much held power.

            I don’t know what you are talking about re Portugal, it was Socialist through the 1990s. Ditto Spain (not it being Socialist, it being fascist).

            And none of the regimes you mention rate a Wikipedia list of neofascism save Argentina.

            In addition, I quibble with some of your definitions. Even though Peron was a follower of Mussolini, there was a fair bit of redistribution of wealth, at least initially when he was married to Eva. She was a big fan of costly gestures to the poor.

          5. CoinKoin

            As for Spain, I’m refering to the regime of Franco, between the Spanish civil war (1936-1939) and 1975; as for Portugal, to the regime of Salazar, between 1933 and 1974. Regarding Greece, I refered to the 1967-1974 military junta, although I have to admit this regime was not strictly speaking fascist.

            > And none of the regimes you mention rate a Wikipedia list of neofascism save Argentina.

            True. Looks like they are finished for good, but this won’t remove their status as former fascist regimes. “Nazism” was an extreme form of fascism, whose main model was Italy, later copied by Spain – no need to kill millions or take part into great criminal wars to be fascist.

            > In addition, I quibble with some of your definitions. Even though Peron was a follower of Mussolini, there was a fair bit of redistribution of wealth, at least initially when he was married to Eva. She was a big fan of costly gestures to the poor.

            No authoritarian regime can survive without some demagogy. Yes, Peron did create a fascist regime that was not all evil, or all for the powerful ones, and it was light-level fascism, but it still was a (rather particular) expression of fascism.

            However, time for me to quibble with your definitions. Most if not all Fascist regimes appeared between WWI and WWII, all of those that took part to WWII were defeated (and destroyed), and all of those that did not survived, and ultimately failed with no foreign intervention. Don’t this speak in favor of an observation bias linked to WWII, and not any particular internal stability of fascist states?

          6. Yves Smith Post author


            Egypt had a command and control economy for (depending on how you count it) 2000 to 3000 years. Japan under the Shogunate (I’d need to dust off my history books, but over 200 years) had the most extensive sumptuary laws in the history of man, enforced by spying on neighbors that makes the Stasi look pale. The nobles were made to go from Edo back home on a regular basis to keep them under control and partly broke. Internal mobility of the rest of the population was so restricted as to be effectively non-existent. Those were not strictly fascism but they show that high control regimes (which is one of the major elements of fascism) can be surprisingly durable.

          7. CoinKoin

            > high control regimes (which is one of the major elements of fascism) can be surprisingly durable.

            The key to long-term stability of *any* regime is its legitimacy in the eyes of its population. This is absolutely unavoidable : on the long run, you *will* face crises, you *will* be weakened, and at this point, either you can ask your population for help, or you will fall.

            As for Egypt, it was seen as legitimate by its population for the same reason the European monarchies were : because the folk couldn’t imagine anything else. And it doesn’t qualify for stable : otherwise, it would not have had 30 dynasties. The dynasties simply kept the power strong because, even for the leaders, nothing else was imaginable.

            The Japanese example is more interesting : the regime actually used its power to prevent the population from learning about its illegitimacy, or about anything foreign; this can be seen as the precursor of modern-era dictatorships. However, around 1850, the shogunate was already severely weakened (the two main south daimios were openly breaching its rules, one by trafficking with China, the other with the Europeans; additionnaly, the intellectuals had started realizing the power ought to belong to the emperor and the shogun’s mandate was at best weak). And the regime fell, not to invasion, but to a simple destabilization from the outside.

            So, to be clear and see wether we agree or not, my points are :

            A) Yes, high control regimes CAN, sometimes, last for long;
            B) This, however, is more the exception than the rule;
            C) Such regimes tend to fall more due to internal weaknesses than to invasion, with the additionnal bonus that :
            D) they don’t survive invasions, and
            E) Notwithstanding point D), some are stupid enough to go to war.

            And due to WWII, we recently saw a bunch of such regimes fall by foreign invasion, but this was mostly an historical accident.

            As an illustration of point B), let me mention the rather high number of dictatorships and authoritarian regimes that both started and ended during the XXth century, compared to the small number that either had started before it, or survived it. Doesn’t this means the stability of these regimes is more apparent than genuine?

            And so, are you in disagreement with any of these points?

          8. Nathanael

            Crucial point: high control regimes achieve legitimacy by being *very* reliable at supplying the lower parts of Maslow’s hierarchy of needs.

            The Egyptian pharoahs kept the entire population fed, and clothed (well, such clothes as were needed for that climate, which is mostly shoes), and housed. Reliably. A pharoah who didn’t would be overthrown VERY promptly, within a year.

            This is crucial to the long-term stability of a high-control regime. If it can provide the lower rungs of Maslow’s hierarchy *very reliably*, people are willing to forgo the upper rungs. The moment it is seen as unable to provide them by the majority of the population, it collapses, very very quickly. A more democratic regime can retain legitimacy even when it isn’t really satisfying people’s needs.

      5. Middle Seaman

        The Soviet Union, which we resemble most, was brought down through internal collapse of the house of cards.

        That is our only hope.

        1. Senior Pico

          “Brought down” should be taken to mean when an important number of citizens simply ignore whatever the government says or does and lead their own lives within their own economy and culture? When the local sheriff stops enforcing Washington’s edicts, i.e. the local building department waives the ADA, housing codes and most importantly,
          does nothing when dispossessed citizens squat in their own or others foreclosed homes, then it’s over.
          Fear of authority is stronger than the ability of authority to do anything.

        2. okie farmer

          Middle, the Soviet Union wasn’t ‘brought down’ in any real sense, it was merely converted from a somewhat broad based oligarchy into a concentrated oligarchy; and, they did that by adopting a Jeff Sachs’ definition of a market system that they had correctly criticised for decades as corrupt and unjust. Yes, Russia does resemble us a lot – more now than before, I suppose, but nothing over there was ‘brought down’. Just re-arranged.

          1. former_su

            I believe that you severely understate the effect of Shock Doctrine on the country, when the entire social-economic structure was dissolved, so it can be “free” (by Jeff Sachs’ definition). Having government spending dry up when everything relies on it was disastrous. Some people’s salaries were not paid for years.

            At the top, there was intense fighting over who will bite off a bigger chunk of the country. Bribes, assassinations, other criminality (they tried to present a civil face to the western sponsors, of course). Not just a “mere conversion” as you stated. Ultimately, the Soviet Union fell, because a group of political leaders decided, with the public sentiment behind them, to “bring down” the dysfunctional Soviet Union and impose a new system on the country. Although they would like to think otherwise, the public didn’t really have a say in the process.

            It is important to realize that Russia has lived under an authoritarian rule for most of its existence and obeying authority is ingrained deeply in the national consciousness. Even as people would regularly cheat the system in secret, most would not openly stand up to it. Most things in Russia today and in the past happen by a decree from “the top” (currently the President/Prime Minister).

            This is in contrast to the western model, where power has been historically decentralized. Division of power, limitation of government, personal freedom are ingrained in the consciousness. Unfortunately, as documented by many bloggers, there has been a consistent effort to change that, curtailing liberties while centralizing power in the military-financial complex. As it progresses and people accept the new normal, it will be increasingly difficult to choose the course, as opposed to it being imposed from up high.

            As the internal inconsistencies accumulate, someone from the top might decide that the current order no longer suits them and, riding public sentiment, rearrange things as they (and not the public) see fit. That may or may not makes things better. After Russia went through that transformation, it only recovered, after much suffering, by essentially reverting to authoritarian rule and by getting lucky with the oil prices.

      6. Up the Ante

        “Congress is already problematic, yet you prefer something even less democratic?”

        I think he means the “democratic” thing is a game of charades, and the act of “preferring” something is not relevant, past the point of no return is too unknown to offer preferences.

        A closet predilection for fantasizing fascism is not already here, formed by this,

        “The Supreme Court, which has been supine on many fronts, has finally started to push back, but would it challenge a bill that sweeps aside judicial review?
        The answer to that question, as we know now, was “no.””

        To offer the concept of coup d’etat and not to consider fascism is here already? Are you sure?

        Reference a recent photograph online of Geithner smiling his primate smile, teeth bared like the baboon, for the viewer.

        1. Yves Smith Post author

          I said “financial coup d’etat”. You can loot the public purse and still keep the other forms of democracy intact (voting, protection of other property rights ex the specific looting mechanisms, civil rights, etc).

          If you’ve got the important part, the dough, all the rest is a lot of work for not much return. Of course, the flip side is the example of the banksters no doubt has emboldened others to want their goodies too.

          1. KnotRP

            Well, we’ve proven that Checks and Balances can be overcome with the proper application of the tax payer’s cash flow.

            Now what?

          2. Up the Ante

            “I said “financial coup d’etat”.”

            I was aware you said that. I omitted “financial” because the end result of a financial coup d’etat is a fascist ultimatum to either undo the coup or submit to it.

            “You can loot the public purse and still keep the other forms of democracy intact (voting, protection of other property rights ex the specific looting mechanisms, civil rights, etc).”

            No. The founders of the nation took great care in protecting the public purse. Those forms are not intact in a ‘banana republic’.

            I have enjoyed “the attempter’s” comments more times than I can count.
            “and I” or “Alex Jones” or w/e saying he “belittles” people is BS.

          3. Yves Smith Post author

            Up the Ante,

            Were you asleep during the crisis? Go read Simon Johnson’s The Quiet Coup or ECONNED. The transfer of wealth to the banks that occurred during and in the aftermath of the crisis is the greatest looting of the public purse in history. “The bailout paid for themselves” propaganda is meant to obscure that ugly fact.

          4. Up the Ante

            Yves, these are YOUR words quoted,

            “The transfer of wealth to the banks that occurred during and in the aftermath of the crisis is the greatest looting of the public purse in history.”

            For you a “financial coup d’etat” is not a usual coup d’etat, and “democratic forms” are intact after stealing from the citizenry, the “greatest looting” by consent of the governed?!! A non-fascist performed that looting?!

          5. Up the Ante

            A non-fascist performed that looting?!

            I believe it Steve Coll of Ghost Wars that introduced the world to the intelligence unit of the CIA that was monitoring the terrorist called “the hysterics”.

            For someone to be telling me it was only a “financial” coup is like having an FBI analyst after the crisis meltdown tell me it’s ok to perform the “greatest looting in history” because fascism has been avoided, democratic forms are intact.

          6. Up the Ante


            Not only do we not hear from “the hysterics” any more, nor do we hear from those who warned of an epidemic of mortgage fraud in, 2004, was it?

            “.. a bill that sweeps aside judicial review ..”
            We’re to think “the greatest looting in history” has escaped the notice of the Supreme Court because the Supreme Court .. was excused of its noticing?

  2. razzz

    Congress and this administration are one, no difference behind the smoke and mirrors so never let a serious crisis go to waste, if there isn’t one then make one.

    1. hermanas

      The founders put responsibility for war and taxes in “the people’s house”. They shirk it with the apparent approval of the court. Go figure, “nothing adds up to nothing”.

  3. appointmetotheboard

    Out of interest, has anyone come across any kind of impact assessment on default armageddon vs proposed spending cuts on the typical American citizen?

    I know that there probably isn’t enough detail known about the cuts for anything too serious. And its looking increasingly like a case of cuts and default, or just cuts. Nonetheless, could be an interesting read…

  4. notabanker

    Came across a new app playing with the iPad yesterday that is essentially a polling app. Questions are posted and all response are tabulated. This is not a plug for the app, hence no name given.


    Do you think of the average American as generally ignorant or generally intelligent?

    79% answered Ignorant, overall, male and female responses alike
    84% answered Ignorant, Democrat responses
    72% answered Ignorant, Republican responses
    80% answered Ignorant, Independent responses

    9276 total responses.

    Granted this is non-scientific and the demographic is iPad users, but very interesting nonetheless.

    1. lambert strether

      That’s just “creative class” arrogance. I mean, what are the demographics of iPad ownership? They don’t think they’re ignorant, just vos autres. These are, of course, the same idiots who thought Obama was liberal because of his skin color.

      1. KnotRP

        Most people are working their asses off (dual income, kids to raise), so they don’t yet know what’s up.

        The increasing unemployment is going to cure ignorance,
        undoubtably in surprising ways…

  5. Rex

    Often, lately, it is painful to come here and read about the latest versions of abuses being distributed by the powerful. Most of my life I have ignored this type of thing because I was busy living and comfortable enough not to worry.

    The financial crash several years ago shook my sense of security and I was shocked how hard it was to get any believable explanations of what had happened. Even harder to get, through normal channels, any rational assessment of what was then happening or where we should be heading.

    Eventually, I found Yves’ book Econned and this blog. Painful as it often is to see the current situation, I guess it must be better to know something close to the truth than not to know. I appreciate this island of veracity in a sea of lies and manipulation that is the norm.

  6. Deb Schultz

    Thank you for posting this information, Yves. I read the Post article earlier this morning and couldn’t quite figure out what the committee of 12 was all about, from the description given by Lori Montgomery. The whole report was rather poor, I felt. The Post pretty consistently fails to explain what the cuts proposed to Medicare and Social Security actually are and what they would mean to beneficiaries and annuitants. And of course, the Post just doesn’t seem able to give clear, objective reports on the funding and function of these two programs. Nor do they consistently explain what a default could entail.

    I think the collapse of democratic participation in governance has to be laid, in great part, at the feet of the Potemkin press. People are being deeply misled by the over-coverage of the personalities and ‘politics’; there is almost no detailed discussion of the budget, the debt, the deficit and perhaps even less of the actual proposals to ‘solve’ these perceived problems. Very few reporters have the necessary knowledge to do this job. The ignorance is compounded by the mainstream media’s apparent aversion to providing a public platform for those who are not part of the player in-crowd. One of the consequences of this narrow spectrum of either-or views on any given topic is that many people look elsewhere for their information and find it where they feel their biases are most confirmed.

  7. jpe

    The proposal only impacts the internal workings of Congress, so while it may be bad policy there’s nothing unconstitutional about it. The constitution is very clear that Congress can determine its own rules.

    1. hermanas

      S.C.O.T.U.S. determines constitionality and their apolitical stature has been debunked.

    2. curlydan

      thanks for posting this, jpe. My thoughts exactly. This seems more like a weasly parliamentary procedure than anything “extra-Constitutional”. Nevertheless, it’s just another way to further the kleptocracy and strip the bottom 80% of their money and benefits.

    3. Yves Smith Post author

      Please read Article 1 of the Constitution.

      The Constitution specifies the form of both the Senate and the House and clearly contemplates a vote on all legislation by each chamber separately. A small body from both houses whose intent is to effectively “pre approve” legislation that each Chamber rubber stamps is inconsistent with the Constitution.

      You can argue that this committee manages to observe the required forms, but the intent is clearly contrary to the Constitution.

      1. jpe


        Read Article I, Section 5: the houses can set their own rules. And then each house will vote on it.

        Clearly constitutional, and similar procedures are used all the time. That’s what a “conference report” is, for example. We use the same procedures for budget reconciliation and trade agreements.

        This is plainly constitutional and obviously so.

        1. TC

          Does not Article I Section 7 blow your argument out of the water? Does not the Constitution’s language per passage of bills in Congress supersede each House’s power to establish the “Rules of its Proceedings?”

    4. R. Pointer

      This whole piece shows a surprising lack of knowledge about Congressional operations. See Wilson’s Congressional Government. All this is a joint temporary committee. This is how Congress gets its work done in proper fashion and by compromise. Compromise isn’t hashed out in the media, it is done in serious talks with Congresspersons saying with what they can go back to their districts and still get re-elected. Unfortunately, American politics hasn’t really operated like that since before the Reagan administration.

      It is too bad that this website has deteriorated so much that its analysis is rubbish.

  8. Externality

    This approach is similar to how the Bolsheviks destroyed the council democracy system that existed in the first days of the Union of Soviet Socialist Republics.

    The original idea for Soviet democracy was that average workers would elect the leadership of their respective local soviets, or councils. (The Russian word for “council” is “сове́т,” pronounced “soviet.” Local communities, factories, and military commands each had their own council.) The council leaders, would then, in turn, help elect the members of higher level bodies, who would in turn, help elect more senior leaders. This is analogous to the way that popularly elected state legislatures, before the 17th Amendment, chose US Senators.

    The Bolsheviks turned quickly decided that the system was too cumbersome and allowed unwelcome dissent and debate. They initially kept the lower level councils, but concentrated all power the councils’ hand-picked (by Moscow) executive committees (ExComs). On the rare occasion that the local councils met, their only role was to quickly rubber-stamp legislation written by the Moscow and the local ExComs. Failing to do so, the council members were told, would be disastrous for the USSR, global socialism, and for them and their families personally. ‘The decision was made by the ExCom, comrade, there is no time to debate it here. Do you not trust the leadership?’ (not an actual quote)

    (Between 1919 and 1920, power was centralized even further, as the chairmen of the local soviets’ ExComs were given sole authority. Finally, local leaders were simply appointed by Moscow to do the Party’s bidding or chosen by the Party and “elected” in an unopposed “election.” The next time a local soviet had any power or relevance was 1989.)

    If the Super Congress system is implemented, the result would be very similar to that of the Bolsheviks’ initial steps to consolidate power. The budget bills (and attached policy riders) would be sent to the Congress by the Super Congress days or hours before the deadline for debt default or government shutdown. Congressmen would be told that there was no time to read, debate, or amend the bill; it must be passed to protect the US and prevent a global economic catastrophe. As Nancy Pelosi would say, “But we have to pass the bill so that you can find out what is in it.” Immense pressure, including threats of various sorts, would be brought to bear against anyone who dared oppose it. Policy decisions, in the form of riders, would also be incorporated into the bill by the Super Congress; favored companies would receive favorable regulatory treatment in proportion to their bribes campaign donations.

    In short, Congress would meet primarily to vote on must-pass legislation created by a secretive (but intensely lobbied) Super Congress. The twelve anointed Senators would hold immense power over both fiscal and policy matters. ‘The decision was made by the Super Congress, Senator, there is no time to debate it here. Do you not trust the leadership?’

    1. Sufferin' Succotash

      At first glance, this “super Congress” proposal resembles simply a glorified Joint Committee and there’s nothing unconstitutional about that. What’s disturbing is the abdication of legislative responsibility that this proposal represents.
      If the initial reports are accurate, the new committee would initiate and draw up legislation. What will the rest of Congress be doing in the meantime besides rhetorical posturing and raising campaign funds? The Super Congress would in due course present the House and Senate with bills which can be voted on, but not debated or amended. The term “rubber stamp” immediately comes to mind. The resemblance here is not so much to the early Russian soviets as to France’s legislative body under Napoleon, which could vote on proposals but not debate them.
      Of course, there’s also the problem of the Super Congress itself. Since its membership will be split evenly between both houses and both parties there’s a very good chance that it too might wind up deadlocked.
      There’s more than a whiff of desperation in this idea. It seems to be an attempt in Congress to maintain a shred
      of relevance and to ward off a Presidential dictatorship next month. This is due to the fact that there WILL BE a Presidential dictatorship next month if Congress fails to raise the debt ceiling. Forget about anything Obama or Geithner say now about not taking the Fourteenth Amendment into account. When the time comes, the US Government will not default on or suspend any of its obligations, period.
      The legislative branch of the Federal Government, as established in Philadelphia in 1787, may be nearing the end of its effective lifespan. If representative government is to survive in this country, we need to cut it off once and for all and get a new one.

    2. Dave of Maryland

      Soviets are not quite the right idea.

      It’s a United Nations system: There is the General Assembly aka the House and Senate, and there is the hand-picked, well-controlled Security Council, aka Gang of 12, where all the real work gets done.

      It’s a significant advance on the Security Council. In the SC, you’re stuck manipulating the same players over & over again. The US runs the place, but we have to work at it.

      The Gang of 12, or 6 or 9 (whatever) are a rotating group picked from among 535 candidates. There’s always going to be many eager applicants to do the King’s bidding.

      I thought that Bush/Cheney would find some way to annul the 2008 elections and stay on. But now I’ve realized that after eight years, the top leadership people are tired and just want to move on. On the other hand, the Gangs might just make their lives so much easier they will stay awhile longer.

    3. issacread

      I remember reading David Brock’s Blinded by the Right years ago and being stunned by the revelation that the posters in Grover Norquist’s apartment were, if I remember correctly, Mao and Lenin!? To me, this was a supreme irony but made perfect sense. These far right Repubs were emulating the organizational talents of the Communist Party to subvert democratic procedure.

  9. Jessica

    “I hate using the word “fascism” because overuse has weakened its bite, but trumped-up threat by trumped up threat, our government is moving relentlessly in that direction.”

    The other danger in using the word “fascism” is its Maginot Line quality. In other words, we become distracted looking for signs of a return to what top-down class warfare looked like in the 1930s and 40s in central Europe and because of that fail to notice the different form it is taking right now.
    I appreciate Yves pointing out the details that tyranny by the elite is taking right now. The shift of power from (at least theoretically accountable) legislatures to deliberately insulated executive bodies is similar to the form that the European project has taken. Probably not a coincidence.
    One difference between now and the 30s and 40s is clearly that the current elites are much, much sneakier and have way better PR. The use of pseudo-opposition in particular is new and diabolical.
    Another difference, which Attempter may have been getting at, is that I believe our elites have neither vision nor coherence. They will have a difficult time holding together and will tear each other apart unless the non-elites take away their power.
    That process will not necessarily be any less painful and destructive than the way in which the German elite of the 30s and 40s managed to unite everybody else against them, even forces, such as the US and the USSR, which were enemies almost all of the rest of the time. But the process will be different.
    Finally, I wonder if much of the difference might stem from the effect of the first wave of unifying mass media (radio) in the 1930 compared to the current diversifying mass media (Internet), which generates more confusion and befuddlement than fanaticism.

    1. psychohistorian

      I am tilting at windmills thinking that using the term fascism and insinuating into the public dialog will help incite the public to react. Even if it does, where is the leadership that hasn’t been killed to show us a positive direction?

      I disagree with the premise that it will all fall apart because they don’t know what they are doing. I have been watching the dismantling of American ideals for 40+ years. There is nothing left but disintegrating infrastructure and a totally propagandized public.

      If America is not brought down from within, who can stand up to our nukes?

      It hasn’t started getting ugly yet but maybe this winter……

  10. Viator

    What’s wrong with this article?

    If you read the material you quickly find out that Rep. Andy Harris, renowned teaching physician at John Hopkins University Hospital, wasn’t complaining about not having insurance. He was pointing out that for the first time in his life after having numerous jobs which always provided insurance from the very first day of employment his new government job only provided insurance after thirty days. A curious example of government ineptitude, particularly if you had an ill dependent, especially considering how urgently the case had just been made for everyone to have insurance. He full well knew he could remedy the situation with COBRA or likely a range of options since he was employed in a prestigious position at one of the nation’s premier teaching hospitals.

    So the link was pure left wing spin. As was the rest the the Alternet left wing propaganda and lame talking points.

    Yves, you need to learn more about the Tea Party. You, they and some of your readers have more in common than you may imagine.

    1. Yves Smith Post author


      You clearly didn’t read the piece linked to, it had many examples of Tea Party hypocrisy and you stopped at one. Tea Party hypocrisy is hardly unique, but as I pointed out, the loud cries of its members re purity and moral superiority makes their hypocrisy more galling.

      I have no sympathy with the Tea Partiers. Their naive individualism makes them the perfect tools for the corporcrats. Napoleon himself (remember, a dictator) promoted individualism because it made people easier to control. We don’t live in a world of small farms. Virtually all ways to earn a living now involve concentrations of economic power (there are economics of scale, particularly network effects, that produce this outcome). The Tea Partiers choose to ignore this, making them the prototype of Lenin’s useful idiots.

      1. Eagle

        So how many misleading anecdotes must an article have to earn your rebuke? Why would anyone read past the first item once it’s clear the author is a hack?

        Better a “protypical” useful idiot, than the actual one Alterman was.

        1. Yves Smith Post author

          Your attack and his do not stand scrutiny. Viator’s defense does not rebut the article. The criticism stands. Andy Harris ran against Obamacare. The link in that piece goes to Politico. Politico is very highly regarded, is all over the political beat, and if anything skews a bit conservative. This is from Politco:

          A conservative Maryland physician elected to Congress on an anti-Obamacare platform surprised fellow freshmen at a Monday orientation session by demanding to know why his government-subsidized health care plan takes a month to kick in….

          Harris, a Maryland state senator who works at Johns Hopkins in Baltimore and several hospitals on the Eastern Shore, also told the audience, “This is the only employer I’ve ever worked for where you don’t get coverage the first day you are employed,” his spokeswoman Anna Nix told POLITICO.

          Under COBRA law, Harris can pay a premium to extend his current health insurance an additional month.

          Harris of course tried to claim this isn’t hypocritical, as you do, which is a howler.

          Altenet provided an accurate summary, albeit with a bit of hyperventilating

          1. Eagle

            I sincerely don’t even understand the basis of the charge of hypocrisy. How does his dissatisfaction with the benefits of his job have anything to do with the policies he wishes to pursue, unless I overlooked a line in the Contract from America regarding Congressmen getting benefit cuts?

            Had this Congressman insisted on staying on a Medicare plan or something, I could at least understand where Alternet was coming from, although I still wouldn’t necessarily agree. Should a Democrat who wishes to cut the Defense budget forgo his security detail in some misguided display of commitment?

          2. Yves Smith Post author


            Wow, this is astonishing. Either you don’t have a dictionary or you have no sense of morality. Neitehr interpretation is flattering.

            What don’t you understand about “I want something for me that I’ve said I’m opposed to for everyone else?” That is pretty close to a textbook example of hypocrisy.

            The Tea Party position is firmly anti-government. That includes government provided health care. IN case you missed it, there are a lot of people who have jobs who don’t get healthcare from their employer (for instance, WalMart employees have to wait longer to be eligible for company coverage, WalMart claims its practices are standard for the retail industry). Which means by that logic he should be fine with joining the 47 million uninsured and learning what that feels like. And it also means his claim about government being less “efficient” is also BS, given the comparison with uber efficient WalMart.

          3. Eagle

            By this bizarre logic, is there any privilege a Congressmen should can advocate for that isn’t enjoyed by a Wal-mart cashier, from minimum-wage pay, to security detail, to franking?

  11. eclair

    “We commented last night on the parallels between the pressure tactics used to railroad the passage of the TARP and our current contrived debt ceiling crisis. ”

    With emphasis on “contrived.”

    I’ve begun to see the current “crisis” as a kind of Reality Show. Not content with the humdrum and rather boring domestic sit-coms that deal only with day-to-day issues of the nation – birth, death, food, water, love and charity – the Congress has taken on the unscripted and insanely contrived premise of a Reality Show.

    Imagine that we invent the concept of a “debt ceiling.” We’ve reached the limit and to get it changed we have to get the two, philosophically opposite, teams to agree on a solution, with a cut-off date and the threat of a world financial melt-down to ensue if the teams fail to come up with a solution under the time limit.

    Oh god, governing as Reality Show.

    TV ratings will sky-rocket!

  12. EJ Milbankster

    The New York Times and the Washington Defense Post, incredible investigative reporting, I tells ya. Where o’ where would we be without them. Wars, both domestic and foreign, rolled into authentic snooze, the likes of which are marginally more subtle then Murdoch product.

  13. Terry

    The “joint” committee combining members from both Congressional houses is not new nor particularly effective, much less frightening. “Joint” committees, including the Joint Economic Committee (JEC), have existed for decades, if not more than a century. They have proven to be no more effective than their unicameral counterparts so don’t expect any kind of secret deals rammed through Congress overnight–even if Boehner succeeds in making this happen.

  14. Viator

    Speak of the devil…

    “The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression.”

    “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

    Do you think the Tea Party is fine with this? Happy about this? If you do you need to do some reading.

    How about Ron Paul and the libertarians. Think they like this?

    1. Sufferin' Succotash

      The Tea Partiers seem perfectly happy voting for the politicians who will allow these sorts of bailouts to continue.
      If Ron Paul is such a staunch defender of the little guy, then why is that it take the socialist Bernie Sanders to publicize the $16 trillion giveaway?

      1. Senior Pico

        Because Bernie Saunders was the author of the alternate Audit the Fed Bill in the Senate?

        1. Sufferin' Succotash

          Interesting that it took a leftie like Sanders to do that.
          All you get from the other side is a lot of hot air denouncing the bank bailout, coupled with diehard resistance to anything that even looks like serious regulation of the financial industry.

    2. Yves Smith Post author

      Please read Chapters 4 and 5 of ECONNED, in which I discuss the incoherence of the libertarian viewpoint. Then we might have an intelligent discussion.

  15. Spigzone

    It’s useful to consider there is a fundamental institutional future survival reality driving a concentration of power at the executive and legislative level and the continuing, seemingly unstopable, build out of a police state infrastructure.

    The world has now entered the age of Declining Oil.

    A year and a half ago two internal studies, one by the U.S. Joint Forces Command and one by it’s German Counterpart, were leaked to the press. (one might assume governments around the world have done their own studies) Both studies determined that by the end of 2015, worldwide oil production would be producing 10 to 15 mbpd than at present and DECLINING. Both studies anticipated a world of increasing wars, political upheavals, famines and so on.

    Germany’s response is a national drive to wean itself from oil dependence (and after Fukushima to do so with non-nuclear sustainable energy) and onto sustainable energy sources and implement strict energy conservation programs.

    The U.S. response is to NOT prepare for this in any even slightly meaningful way as to let Wall Street and Big Energy suck maximum profits from the situation while preparing a fully equipped and frightenly efficient police state infrastructure to handle the citizen uprisings that are inevitable as their standard of living lurches downward.

    What has happened to this point is only a foretaste of what is coming. And it IS coming and it IS unavoidable. Energy = survival. Reduced energy = reduced survival.

    The U.S. needed to have been on a crash program for the last decade to adequately prepare for Declining Oil. The day Obama took office was the last chance, as unlikely as it already looked considering his post election choices, to inform the citizenry of this reality and it’s ramifications and at least ALLOW them the chance to rise to the occasion. Obama, as we now know, decided the easier route was to just continue implementation of Cheney’s Master Energy Plan.

    Realistically, the situation has passed a point of a corrective political based solution. Individually, it’s time to take action locally to prepare for the shit-hurricane that, in one form or other, IS coming to a locality near you.

    1. Dave of Maryland

      I love this peak oil / declining oil crap. When was the last time you went to the pump and it said, “empty” – ?

      What we have is a peak money / declining money situation. When was the last time you saw any money? When? Years and years ago!

      There are vast reservoirs of MON$Y$$$ right beneath our feet! We just need to DRILL FOR IT, BABY !!!

      1. former_su

        How are the pumps not being “empty” relevant?

        Spigzone brings up a valid point that as supplies of easily-accessible oil diminish, the cost of production will go up and produce a large drag on the economy. The economy is already experiencing some drag from the oil prices, but it is expected to get worse as we have to increasingly rely on tar sands and deep water to feed our addiction.

        This site is about economics/finance and politics, which, in my opinion, are at the root of the current crisis. However, that doesn’t mean that you can ignore a fundamental effect from increasingly costly supplies of oil, a resource that is at the core of the modern physical economy.

        How big of an effect it will be is up for debate. I believe it will be large, but I also disagree with people who attempt to see everything through a peak oil lens. They are just as wrong as those who see everything through a financial lens.

        So, I disagree with both of the above posts. Energy is at the root of physical economy and peak oil is a factor today, but it is not the dominant factor, yet. Perhaps it would be if we had a saner political and economic system. I am amazed at the ability of humans to generate unnecessary crises for themselves.

  16. John Merryman

    The problem is a global private banking system that is sucking value out of every other sector of the economy and lacks the vision to moderate its behavior, so that it is rapidly reaching the edge.
    When it freezes up, local communities will find they need to develop mediums of exchange. There will be lots of out of work banksters offering to set up such a system, for a small fee. What needs to be promoted is that these need to be public utilities. They can actually be somewhat distinct from current governing structure, much as complex organisms have distinct central nervous systems and circulatory systems. Government is society’s central nervous system and finance is its circulatory system. We are simply reaching a paradigm shift in how societies function.

    1. Betty Rubble

      I know, I know. It is very difficult for the ‘Murican redneck to equate Bankster with his beloved Pentagon, but here goes:

      “There is no budget focus on the illegal wars and military occupations that the US government has underway in at least six countries or the 66-year old US occupations of Japan and Germany and the ring of military bases being constructed around Russia.

      The total military/security budget is in the vicinity of $1.1-$1.2 trillion, or 70 per cent -75 per cent of the federal budget deficit. “

      1. John Merryman

        What the average Murcain doesn’t recognize is those pieces of paper in his wallet are a multiparty contract, not a commodity.
        He is taught they are his property and should not be taxed, therefore no one else should be taxed. Which is just fine for those producing this “commodity” and will continue to produce as much as can be sustained by the unregulated casino that is feeding on all notional value and using it to control all actual value. Just wait until most roads, parks, public resources, etc. get sold to “private” investors.
        If people recognized money is a form of public utility, they would be far more careful how much they use it and would develop other mediums of exchange, which would reduce control by banks and government.

  17. BS

    “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

    This is about as meaningful as the signs in the all parking lots that say “we are not responsible for anything”.

    The courts have held otherwise. It will likely be the same thing here once a strong case gets to the courts on this.

    1. Yves Smith Post author

      Um, where have you been? The TARP was “paid back”, victory declared, and no one tried contesting what Paulson and Timmie did.

  18. i

    The power grab does not surprise, however, I think it’s a sideshow – a small part of a bigger global picture. I think there are factions in government/finance in Europe and the USA who want to collapse the USA and European economy. I think they’re trying to preserve Euro-American hegemony by killing the dollar and the Euro. The scenario, I think, will go like this:

    1) No debt ceiling agreement is reached.

    2) Congress dithers for weeks and months as the government meets fewer and fewer of its financial obligations.

    3) Eventually, bond holders stop getting paid. The bond market panics. The USA’s debt is now unfinanced by China, et. al. exacerbating the government’s crisis. The panic spreads to Europe where the Euro dies a noisy death.

    4) The shrinkage of government money tanks the economy of the USA. Deflation follows rapidly.

    5) Through QE3, QE4, QE-forever or some other method, the government starts printing money and injecting it into the economy in any way it can until inflation reaches Zimbabwe levels.


    1) The USA has hyper-inflated its way out of dollar denominated debt.

    2) New currency is issued, but wages and prices in the USA are now realigned with BRIC and Chinese standards, making the American economy competitive on price.

    3) The Chinese must either keep their currency pegged to the dollar, making it worthless and causing major political upheaval at home, or let it rise, making their export market much less competitive, which suppresses their economy.

    In short, China is de-fanged while America and Europe are given breathing room while they still have military power, and oil is plentiful. The alternative, waiting 10 years for the inevitable default, would simply give China and the BRIC countries overwhelming military and economic advantage.

    Better to take your pain now, if it takes your enemies with it.

    1. Ellen Anderson

      @isays: You could be on to something. I would imagine that this would look like a potential solution to an elite who realizes that the BRICs can’t possibly achieve for their citizens what America’s citizens expect. But it will come to the same conclusion that Attempter is talking about – a break down of the globalized financial system. The possible outcomes are just impossible to predict but a lot of the commenters rightly point out that Americans don’t live on farms and don’t have cohesive organizations to help them through hard times.

      Still, humans are very inventive and it won’t take long for new orders to arise. Will they be fascist? They could be plenty bad and brutal but for fascism to take hold you need a strong state, plenty of food and energy and a consensus about the nature of reality. We have none of those at present.

  19. Fraud Guy

    I agree that the specific concerns here seem overwraught. The “super congress” structure sounds parallel to various other committees that Congress has formed in the past to make recommendations that are not subject to amendment but must be put to a strict up-or-down vote. I think that the original prototype for this was the military base closure commission in the early 1990s.

    On the other hand, I do agree that is worth complaining about the essentially undemocratic nature of congressional rules of procedure, of which I think this is an example. This blog has previously highlighted the pay-to-play system of committee assignments. Another example, which never receives any attention, is the departure from Roberts Rules of Order, where under Roberts Rules it is ALWAYS permissible to demand that the presiding officer “divide the question”, but in Congress, it is never permissible to do this. In other words, under Roberts Rules, any member can object to the structure of an item about to be voted on as follows, “Madam Chair, this matter–which is presented to us as a single item–actually consists of three separate questions. I ask that the chair therefore divide the question.” The chair in this case is REQUIRED to allow a separate vote on each of the three items embedded in the original item. Adopting this simple rule change in Congress, which would be consistent with the rules governing thousands of deliberative bodies world-wide, would severely reduce the incidence of earmarks, as they could be “divided out” for separate votes. This change would also significantly reduce the power of the parties and their leadership, as a key element of their existing power flows from the ability to bundle together related items and force consent on unpopular matters by linking them to necessary votes.

    Congressional rules are an important threat to our democracy, and I agree that its way too complicated for our Potemkin press to understand.

    1. Sufferin' Succotash

      The presidential line-item veto was an attempt to “divide the question” by “dividing the answer”, rejecting some provisions in spending bills while accepting others.
      But the Supremes gave that a thumbs-down.

    1. craazyman

      yeah, Copious Ingestion of Alcohol (CIA)

      I mean really.

      Amy RIP. I never heard her songs until I just checked them out on Youtube. Not entirely my cup of tea, but I could see she had enormous talent and was striving for something real.

    2. craazyman

      and Quiet?

      Front page on the 3 papers where I get my coffee. NY Post , NY Daily News, NY Times.

      What is it about the big 27. That’s when they ascend, I guess. I was never talented or famous, but I walked away from a lucrative Wall Street career at 27. It was kind of a death and a rebirth of sorts. In hindsight, mostly a death. ha hahahahaha.

    3. Yves Smith Post author

      Huh? It got more prominent play that the budget at the Times, even more so in the British media, it was the lead story at BBC.

  20. Bravo

    When does the country reach the inevitable conclusion, that starting with the World War II generation, promises of what amounted to a free lunch, via faulty assumptions on life expectancy and health care costs, were made to too many older Americans. The tab for this free lunch was continually passed off to future generations by politicians eager to please their older voting constituents most likely to benefit. And then making matters worse, we jumped into too many wars that we clearly couldn’t afford. So the answer our Congress is giving us today is to create a Super Congress that will surely elect to pass the tab down to yet another generation, likely relying on an entirely new set of faulty economic assumptions with which to falsely assure us that our fiscal house is in order. For we Americans, those free lunches are really hard to give up. At some point, the youth of this country are going to say enough is enough and we are going to see intensifying inter-generational conflict as they see the tab coming their way.

    1. Hugh

      You simply don’t know what you are talking about. We live in a condition of artificial scarcity and elevated debt created by mammoth wealth inequality. The whole purpose of government is to distribute our society’s resources among we the many in a fair and equitable manner. Throughout our nation’s history a disproportionate share us gone to our elites. Periodic social, political, and economic explosions tended to redress but not eliminate these inequalities. However in the last 35 years, there has been an unopposed looting of our society’s resources by an unproductive rentier class. If you want to talk about free lunch, talk about them. Our society has the resources to feed and clothe its citizens and provide solid, stable, good paying jobs, good education, good healthcare, good housing, and good retirements. But it can not do so if 1/3 of society’s private wealth is in the hands of a parasitic 1% of its citizens, or if 2/3 of that wealth is tied up by the top 10%, or if government and the public commons is controlled by them and for them.

  21. Hugh

    The Super Congress is just a reworking of the Cat Food Commission. The original idea there was that the Commission would come up with a series of budget cutting recommendations with a guaranteed up or down vote in Congress.

    The resurrection of this idea in a slightly different form shows something fundamental about the working of the kleptocracy in which we live. And that is that for us there are no victories. There are only momentary respites.

    At the beginning of his Administration, Obama signaled that he wanted to cut Social Security and Medicare. His first real effort to cut Social Security was in February 2009 via a one day conference put together by Pete Peterson. There was a lot of pushback, and Obama let it go. He moved on to healthcare where he was able to make major cuts to Medicare and Medicaid. Something like 2/3 of the projected $950 billion in “savings” from Obamacare were to come from cuts in these two programs. On January 19, 2010, the day a corporatist candidate Coakley lost Ted Kennedy’s old Senate seat in the most liberal state in the country, with the blessing of the Democratic Congressional leadership, Pelosi, Hoyer, and Reid, Obama announced his proposal for a Congressionally-mandated Cat Food Commission. The idea was killed in the Senate. Did our intrepid kleptocrat in chief take the rejection of his proposal as final? Of course not. And that’s what this is all about. Our kleptocratic elites never take no for an answer. They simply reload and try again until they achieve the looting they planned for. On February 18, 2010, Obama created the Cat Food Commission by Executive Order. On November 10, 2010, the Cat Food Commission came out with the Bowles-Simpson recommendations. They went nowhere. Just a few weeks later on December 15-16, to show how serious everyone was about budget deficits the Congress passed the Obama brokered tax cut deal, increasing those deficits by $858 billion. Importantly an increase in the debt ceiling was not part of the deal. This set up the current Shock Doctrine event and renewed attempts to slash Social Security, Medicare, and Medicaid. If they do not succeed this time, they will try again. Even if they do succeed, they will be back to cut and cut again.

    Kleptocracy is relentless. It does not recognize any limits. Looters will keep trying to loot until they succeed. They will not stop even if they drive the economy to crash and collapse. This is not appreciated enough by us. Crash and collapse may be devastating for us, but for kleptocrats they represent the ultimate in Shock Doctrine moments. They are perfect opportunities from the kleptocratic perspective to increase looting. The kleptocratic paradigm can be best summed up as: Loot to collapse and then loot the collapse.

    1. MontanaMaven

      Another succinct explanation, Hugh. The word “relentless” stuck out for me. These crooks are relentless. They are like fire ants or locusts. They certainly don’t seem human.

      1. James

        “They certainly don’t appear to be human.” Watching all of this unfold over the past few years, I am beginning to really believe that these are Shape Shifters and that one of these days, very soon, they will immerge from underground for the supposed space invasion, but they are already here. ‘War of the worlds’. Maybe so. One thing about that and an answer as to why they just don’t do this takeover, is that they will bleed like the rest of us, and they know that we are still Armed to the hilt. Let’s stay that way and keep them afraid for their lives, the same way they want to keep the rest of the world.

  22. LJR

    Ever so much cheaper to only have to lobby the gang of 12, eh? Sounds like a great “economy” move by the oligarchs.

    “But it’s all right, it’s all right
    You can’t be forever blessed
    Still, tomorrow’s going to be another working day
    And I’m trying to get some rest
    That’s all I’m trying to get some rest” Paul Simon

  23. Allen C

    America is likely to emerge from a near coma like unawareness once fiscal and trade deficits become impossible. We can hope that the collective immigrants’ fundamental resistance to tyranny triumphs.

  24. Patrick

    The assumptions behind the article is that this “Gang of Twelve” would in fact work together and be impervious to outside political pressure. Given the divisive nature of current politics those assumptions are probably incorrect.

    The proposal is, in political terms, a fig leaf to get the incompetent leadership in Congress and the WH out of the corner they have painted themselves into., It is a cynical exercise in the abdication of responsibility for fixing this faux problem until a future date. The whole effort is a transparent effort to get the issue beyond the 2012 election.

    The current state of the body politic means there is no need for an
    ‘enabling act”, not when you have an “enabling” Congress and WH.

    1. Yves Smith Post author

      This is one of the cases where the cure is likely to be worse than the disease. Remember, it has become conventional wisdom for a lot of people to say they like a divided Congress or a Congress of an opposite party from the President because it limits how much new legislation can be introduced and passed.

      But now that the Republicans have become intransigent, and the Democrats have refused to punish them (this is the approach game theorists advocate, but the corporate Dems chose to use the Republicans as a human shield to provide cover for their move to the right) what might have been a virtue in small doses has become toxic in big ones. There is a big difference between some sand in the gears that slows down the machinery versus having it seize up totally.

      Think back to the crisis. Measures to reduce risk in tightly coupled systems (and this is exactly what this is, it’s a measure to reduce the risk of hopeless gridlock) instead increase risk in ways not easily foreseen.

      1. Gang of Pirates

        You’ve got to get off of that addiction to partisan stage craft. It’s a tough one, admittedly, but the kids don’t buy it anymore. The machine creates malaise!

        “The National debt ceiling has been raised many times since the mid-1970s in order to facilitate the drastic increases in military spending, the major tax breaks for the wealthy and, most importantly, the multi-trillion dollar bailouts of the Wall Street gamblers. Having thus accumulated nearly as much debt as gross domestic product ($14.3 trillion), the bipartisan servants of the plutocracy now claim that the debt ceiling would reach its “crisis” limits by August 2nd, and that it cannot be raised beyond this “critical” limit without counterbalancing cuts in non-military social spending. “

      2. Patrick

        I agree with you that a tightly coupled system, or more accurately in this case a rats nest of a system, can lead to higher risk in part due to the potential of highly unpredictable outcomes. The danger in the current situation is that some of the participants really do want a government default, and they will not be persuaded of the folly of their opinions. Plus dogmatists are usually reluctant to blink. They want the pragmatists to do it for them and thus earn the blame for the compromises.

        On the grid lock scenario as always theres is nothing profound about conventional thinking.

        I have never understood the idea that having a gridlocked government is good for anything other than a formula for childish behavior. When one half of the legislature is fearful of the current mood of the voters then calm reasoning is basically out the window.

  25. TC

    All well and good reporting, but the simple fact remains: continued bailout of the trans-Atlantic banking system’s insolvent, fictitious “assets” in fact only will serve to accelerate the hyperinflationary breakdown of not only our badly diminished physical economy, but also the grossly bloated casino economy as well. Pretend as dying dinosaurs will that debt built up during the expansion phase of Adam Smith’s Leveraged Ponzi Scheme somehow can be sustained now that the Ponzi scheme’s inescapable collapse phase has been entered, the fact of the matter is otherwise and simply cannot be denied. No Ponzi scheme in history ever has survived without exceptionally disruptive consequence.

    Per a “super-Congress” I could not imagine a more effective way for a congressional representative, as well as his or her family and staff to risk life and limb amidst a citizenry that, in increasing desperation would risk their own for the sake of at least attempting to match such seditious cowardice as approval of a “super-Congress” would represent.

  26. TC

    If I might add one more relevant matter to the discussion: the take-down of DSK and News Corp is not occurring in some vacuum confined to a parallel universe. Rather, it probably is more intimately related to issues surrounding a Congress packed with a bunch of seditious weasels and a White House occupied by a slick talking fascist than most people generally will have the courage to fathom.

    Therefore, should one of the key backers of a “super-Congress” suddenly turn up dead of a heart attack, I for one will not be the least bit surprised.

  27. helplesscase

    If there was a legit fascist movement in this country, I’d probably join out of sheer boredom.

  28. 60sradical

    I remember how many of us thought the War in Viet Nam, Loas, and Cambodia had karmically created a deep fatal wound to the future of America–we would never really recover from it in so many ways: A drift to The Police State, millions of humans dead for what? A massive escalation of “defense spending, an enormous financial blow, etc., etc.
    So here I wonder on a purple plain with depleted uranium dust, Fukushima particles, and Chinese coal plant dust forever circling the globe and this staggering organic film called life.
    Then I am told about such things as “”fiat” money, fractional reserves, and a permanent bankster kleptocray. So I study how central banking, the IMF, and the World Bank really work. Unbelievable!
    It seems childish to ask how we can solve this bewilderment. Yet, some of us choose to try.
    Thanks again, Yves.

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