Interpreting the actions of this administration requires an understand of two conditions: 1) Bush was elected by big corporation interests and the country is being run for their benefit. 2) Bush has no interest other than politics and his decisions, when not a response to his corporate sponsors, are always political. Bush showed a bit of independent activism in his first eight months, then came the war. The only outside interest shown since 9/11 was when the Enron revelations threatened his sponsoring corporate chieftains. Enron demonstrated how the management of many publicly held companies had become corrupted by an orgy of bonuses and options. Corporate heads needed to cut short the resulting reform movement. They awakened Bush from his war fixation and distaste for new proposals. He announced support for, first a limited restriction on the ability to cash in shares received in 401K plans, and, second, against a plan to penalize management that makes off with huge option awards only to see their stock crash. Bush's efforts are an attempt to limit reform to something his mentors can swallow, although they have already reneged on the company stock holding time limitation. The Enron situation has the potential to correct the accounting problem and the excessive option awards that led to the cheating. Bush is trying to short circuit reform by putting soft proposals on the table. Next came tariffs on steel. This issue has been around for a long time. No president, not even Reagan, did anything because the dumping charges are empty. The war allowed the steel industry to place itself in the position of a needed national interest. The modern portion of our steel industry, so-called mini-mills using largely scrap, have been expanding year after year, and the efficient ones are profitable. Tariffs are terrible economic policy and worse for international relations. The whole structure of world trade, the foundation of a world of understanding interaction, has been undermined. Why did he do it? The only possible answer, other than responding to corporate sponsors, is politics - a hope of buying union votes. The champion of free trade suddenly turned to tariffs, at another loss of credibility and deepening distrust abroad. The decision was typically pragmatic relative to his corporate sponsors. It was blatantly protectionist, and a setback for both free trade and foreign relations, but it met the urging of his backers. The movement to foreign factories, or just buying from foreign sources, has been further encouraged. Steel users are far more important to our economy than the industry itself, but they failed to mount a strong counterattack. The key issue, though, appears to be politics, the hope of picking up votes in steel making states. We could see more tariffs, as Bush has revealed his willingness to sell out free market principles for votesf. Foreign competitive pressures are growing in many American industries, and Bush responds to the requests of his corporate buddies. Normally a president trying to lead an international war would avoid moves that harm allies and cast us in the worst possible light (remember the ABM treaty, unnecessarily given up for an anti-missile research program that was going to be worked on regardless). Other than intervening to help his sponsors, since 9/11 Bush has been interested only in sounding off with tough guy bully talk, building the worst foreign relations in American history, if a strangely based popularity in his own country. His talent for cheerleadering, first seen at Andover, is being applied on a national scale. In the meantime, he has nothing to offer, no recession fighting plan, no domestic anti-terrorist program, no oil dependency program, no nothing, just as would be expected of a far righter who thinks government, other than defense, is bad. A normal president would have seen recession fighting as his job, but Bush used it only for political advantage. He is so detached from anything other than his little war that he seems to be wound up daily by his handler, Karen Hughes, and sent out like a toy soldier to make ha daily speech, saying nothing except how brave we are, what cowards everyone else is, and what a great leader he is. At first it was the same speech, now he has about three variations. This man started running for reelection the day after inauguration and the pace picked up once he had an issue as a guide. Anyone getting in the way is termed unpatriotic. Bush became a popular hero because of the war, but the image is built on a strange foundation. His transformation from a smirking, shallow man interested only in helping his rich friends and big corporations into a great wartime leader is based on his single minded purpose in defeating terrorism. Now his lack of knowledge and interest in affairs of state, his child-like attitudes toward difficulties, his very simplicity, comes in handy. Bush seems resolute and engaged because of his extraordinarily narrow attention span. The focus on getting the evil doers is cast as great leadership, the empty braggadocio as inspiring. The almost daily round of flag waving speeches goes smoothly because he has the three variations down pat. The goofy-friendly manner is most unpresidential, but seems to make him liked. Reagan was a bit that way and got away with his cowboy act, but on him it seemed sincere, and he expressed himself in an intelligent witty manner. Bush overdoes the cornpone and nothing intelligent ever leaves his lips. The war made Bush seem more knowledgeable, but whenever caught in an unprepared situation, he comes across as dumb as ever. His lack of curiosity and thoughtfulness is covered up by flag waving. His handlers won't let him near an open press conference because extemporaneously his still comes across as uninformed and bumbling. It isn't the messed up grammar, it is what he says. What appears to be purposeful is a narrow minded inability to think about consequences. Though he is currently viewed as unbeatablke for re-election, the American people can't continue to fall for this act, they are not that dumb. It is important to remember that his popularity is based on the war, but this was never was a real war. How can the most powerful nation on earth fight a war against maybe 10,000 semi-beggars spread out over thousands of miles. Afghanistan did give us the sole concentration and the leader, but we bungled the job (while the generals and the administration have been strutting about their great victory). We popped off a lot of toys, but the only accomplishment was to driver the hidden enemy more underground and probably increase his numbers. in the worldThe phony war is not going nearly as well as we are told. Everyone but the generals knew bin Laden and most of his followers would get out through Pakistan and might have been cut off (apparently we overestimated them and failed to consider they would move on to fight another day). The U.S. has never shown much flanking ability (good in Iraq and Inchon, otherwise almost always straight frontal assault). From a post Afghanistan point of view, the impossibility of invading other countries is becoming clearer. Now Bush is stuck with a phony over-propagandized war and no place to go. The weird combination of bombast, bombs, and stupidity leaves us not trusted by the rest of the world. Foreigners see Bush as a combination bully-idiot-kid with a lot of scary toys to play with. Bush has to keep going because of the initial failure and the promise of a long war, but mainly because of politics. Despite the propaganda from the White House and the Pentagon, fighting a phantom enemy will inevitably degenerate into ineffective flailing. Since he needs to keep the war going at all costs for political purposes, it has been expanded to a war against "weapons of mass destruction". Iraq is the target, for lack of a terrorist one, but the rest of the world recognizes that Iraq has little relationship to terrorism and they are offended at aggressively invading any sovereign nation. They have seen this before, from the Romans, to Napoleon, to Hitler. As a result, Bush has failed to land Turkey as his mercenary ally and staging base. Apparently the right wing saw Turkey as buyable in exchange for Iraq's oil fields, but Iraq means Kurds and the Turks already have a serious internal problem with their own Kurds. They disappointed Bush in saying no. Europe has turned him down. It looks as if we have to put in our own troops, but there is no chance of the kind of strong coalition of 1990-91. Then we were repelling the aggressor, now we are the aggressor. Europe has long memories of aggressors. Neighboring countries have refused to serve as staging areas. Renewed fighting in Afghanistan is a great break, as would be another terrorist attack (for him politically). Politically he has to go for Iraq as the only alternative in maintaining his popularity, and enough foreign nations will be dragged along to cover up, at least in this country, the resulting bitterness against us. But the move against Iraq would probably harm the war against terrorism by being distracting and building hatred against us. Among the many dumb decisions resulting from these policies is the proposed increased in the defense budget. Bush used the "war" to try and foist off a major increase in defense expenditures. The circumstances of this war make it clear that heavy weapons are a thing of the past. The only conclusion I can draw is that the warmongers want to take in China, probably because they are a growing economic threat. But the lack of need for the new heavy equipment is going to make for a hard fight in congress. You don't need big weapons to fight a small guerrilla war. Bush has missed his period of great popularity to get through needed programs, of which internal defense against terrorism and a long term oil program are merely the most obvious. The reason is that he totally lacks genuine leadership, he ever avoids it because he has no understanding of the problems and holds the right wing position that governmental action is always negative. Bush showed once again that he has no interest in the general good, but will respond to special corporate interests. Certainly Bush has political talent, probably because that is his only interest, but his utter lack of engagement in national policy has led to a failure to use his popularity. The he internal defense program against terrorism is wallowing in ridiculous militia carrying unloaded rifles in airports and color coding. There is no program of any sort, like cleaning up the mess in the immigration agency, or tightening borders, or planning for another Oklahoma City like bombing (a more likely next step rather rather a jetliner bomb). 9/11 made clear that we must eliminate dependence on Moslem oil. Bush could get Alaska approved for his oil buddies, but it has to be part of a long term program to eliminate middle east oil through alternative means. Instead, Bush pushes the oil company line and pretends that Alaska would make us self-sufficient. Since the oil buddies do not want a plan for seriously cutting oil usage, we are unlikely to hear anything from Bush, though the need is so obvious perhaps even he will get the message. Thoughtless policy and an ineffective war have to be covered up. The means are flag waving, propaganda, and a blanket of non-information. This is the most secretive administration in history. What have they got to hide? Why is so little being discussed about the cause of Moslem hatred and how to meet it? Instead, Bush strikes out like a spoiled kid and makes the problem worse. We are sending terrorists under cover, but the resentments that brought on terrorism are growing deeper and more widespread. You can't bomb this kind of fervor away, it must be dealt with intelligently. We are fighting a guerrilla war and guerrilla wars are always embarrassing for the ruler-invader. Guerrilla wars are about harassing the bully boy. The Bushies can't see that it is this is the kind of war. Smash 'em with overwhelming power has always failed in guerrilla wars. We must deal with the underlying problems, for our present policy will only create more guerrillas. The battles go to the invader, the war goes to the home team. We played the invader with overwhelming force once before, and lost that one. We won't lose this one on the battlefield, but we are likely to lose by increasing hatred the point where terrorism becomes a greater threat. Bush can get all the support he needs against terrorism, but when it comes to invading countries just because we don't like then ,it is another matter. There is little evidence he understands the distinction. The war on terrorism isn't a big weapon war. It takes intelligence and working with the home country. The threats and stupid diplomatic moves harm the effort. The manifestation of the corporate culture in the administration is a don't give a damn attitude about anyone else. Arrogance was always Bush's worst problem. You can see this same quality in Ashcroft and Rumsfeld. The right is pillaging Powell because he talks reason and is not sufficiently macho. The results are bad tax policy and hopeless foreign policy. Bush is ruled by hard line right wingers who are dogmatic in doing things their way and to hell with the cost. His skill is in appearing to be a non-dogmatic good guy, but the actions say otherwise.
Free flowing propaganda about the pressing need to get Saddam, in which kernels of truth are built into wild imaginings as to his intent, worries Americans, and frightens the rest of the world. It took me a while and some study, but I am leaning to the idea that kicking out Saddam is the right move, that he really is dangerous, and that Iraq is a reasonable next step in the war on terror. The case is plenty good enough not to have been spoiled with exaggerated rhetoric. The American public could easily have been convinced, and, more significantly, foreign support was there for the asking, by making a straightforward case, as father Bush did in 1990, instead of sounding off like spoiled brats and bashing anyone offering resistance. Although the administration sounds like a bunch of warmongering klutzes, there is something behind the bluster. While they are so secretive that their own cause has been injured, there is something sensible going on here. I have been trying to figure out what it is. Our indecisiveness stands out because of the loud rhetoric, but it probably results from a struggle between two camps: the non-war Powell side and the Cheney/Rumsfeld warmongers. On the Powell side, the plan all along has been to use threats to get Saddam to comply. Assuming he wasn't the frenzied madman we portrayed, it was logical to assume that if we were firm enough (that is, took decisive steps to invade, the only way to deal with him) he would give up his weapons in order to remain in power. Unfortunately for Powell, we had threatened too often in the past, and Saddam had worked wonders with the U.N. and felt he could again, so we have had to follow through by positioning troops. The Cheney side is anxious to get on with it because, if Saddam saves himself at the eleventh hour, he will remain a threat and their plans will be thrown awry. In the end, Saddam will make the decision, which is unfortunate for us if he remains (so I am rooting against Powell at this point). What about the troubling political vacuum should Saddam be eliminated. The warmongers have a plan. Here it is. The following theory on what the hard liners are thinking comes from the February 17 The New Yorker, in an article titled After Iraq by Nicholas Lemann. Lemann uncovered a plan in the defense department, a mighty aggressive and optimistic one, but at least a rational approach. Remarkably, no one seems to have noticed because of intense concentration elsewhere. It goes this way. The belief is that terrorism can survive only with state support (right wing pundits have begun to recite this as gospel). One of the reasons we did not go after Pakistan, the new home of al Qaeda, is that the government there makes a passing attempt at not letting terrorists run free. Better to support the military government because if it falls, fundamentalists, who support terrorists, will take over. Pakistan's possession of the A-bomb adds to our reluctance, but the official reason is that the present government is "safe" as related to terrorism. Saddam, while not active in terrorism, provides a heaven sent opportunity for an aggressive strategy in the war on terrorism. The concept is to make Iraq an example, to put fear into other Moslem states that we mean what we say and will knock them off if they support terrorists. Iraq sits right in the middle of the Moslem world on the border of both Iran and Syria, the two main terrorist supporting countries. We will be right there, with all our arms, saying, clean up the terrorists or it is your turn to be crushed. Military force, or hopefully threat, will be used to bring enough pressure on the governments to get them to reform, modernize, renounce terrorism, and go after terrorists in their own countries. At the same time, gradual creation of a humane representative government in Iraq, operating in the Japan occupation style, will have a spillover effect on the entire region. Combine the idea that terrorists require state support with the immense pressure we will be able to apply by sitting squarely in the midst of the Moslem world, and you have a strategy for winning the war on terror. The apparently foolish urgency relates to Powell's fear that time is running for out his peaceful solution (which is not a solution as regards to Iraq and Saddam), and Cheney/Rumfeld's even worse fear that Saddam will wiggle off the hook at the eleventh hour. Supporting the idea of a forcible military government is that nothing is heard any more about regime change because we have no interest in a new regime, we will be in charge (at least for several years). This is the vital change brought about by 9/11, the inadequacy of regime change and the need for an occupation government. I understand we are pretty much ignoring the people who might have taken over (they are very fragmented anyway), and they are beginning to get worried. Liberal fears that removing Saddam will leave chaos behind are wrong. The fact that Iraq is a Versailles Treaty 1919 put together is all the better for the plan since it is relatively ungovernable anyway. The hard line theory is to make terrorism like piracy and the slave trade, unacceptable in the world (Bush is good at articulating this when he isn't carrying on about evil ones). Moslem countries used to be proud of their piracy, but we wiped it out (after Mediterranean countries themselves failed). We think it can be done again by putting pressure on every country to consider terrorism as similar to poison gas (used only once by Iraq/Iran since World War I) and the A-bomb (used only once/twice by us), that is to say, not acceptable for a civilized nation. The hardliners believe that, because of jealousy and our support for hated Israel, terrorism can't be ended through moral pressure. We've got to force it by making an example of what can happen to them and be on the spot to back up the threat. Afghanistan was a diversion, a get al Qaeda and Osama campaign that failed. We are accused of neglecting Afghanistan, but that was a side show. We won't neglect Iraq, because it is the key to the plan for defeating terrorism. Iraq offers another plus: it has the economic potential in its oil to be self-sustaining, and become a successful economic nation. We are going to supervise a major oil development program by seeing that reliable contracts are issued to oil companies in exchange for rapid development (another reason why we have to remain in control) because oil fits neatly into the overall plan. Oil can be used in addition to military pressure to bring non-oil countries, notably Syria, in line, perhaps even to produce enough oil to pressure Iran and Saudi Arabia. The hints coming out of Washington support this as the plan. It is reasonably sensible from the militarist point of view, but whether or not it is doable remains to be seen. The biggest danger is a perfect terrorist set up, an occupying army in an uncooperative country, where nationalism is added to the motivation of religion. Even if some see us as providing freedom from an oppressive regime, that good will is apt to quickly wear thin. It is Lebanon and Somolia all over again on a grand scale. The plan is also probably too optimistic about threat versus shooting, and any more invasions will make us look like a conquering hoard. I suspect we are overlooking the religious factor that makes terrorism more difficult to stamp out, the horrible example being set by Israel, and the difficulty of conventional forces against an at home guerrilla movement (Viet Nam already forgotten). Another probably unanticipated difficulty was the severity of the shock around the world, especially in Europe, at our provoking a war, a problem that will be intensified by an occupation government. I sense we have at least temporarily lost our world leadership, other than militarily, because of the hopeless diplomacy of the Bush administration, but it might be recovered some time in the future. No matter which alternative unfolds, the strategy could not be revealed. The very man Lemann talked to refused to say anything the other day before a Senate committee, leaving the impression we have no plan for a post-Saddam Iraq. There was a hint at a two year program for Iraq, but the real plan involves a lot longer. Revealing a plan to use Iraq as a long term foil to terrorism might have created even greater resistance. Even if countries like France understood what we were up to, the plan is extended, fraught with future problems, and undoubtedly very expensive, so they did not want any part of it. Both France and Germany are emotionally opposed to occupation, whereas we have the arrogance to think that everything we do is well intentioned. The perhaps unintended consequence is that we are going to be left with the full cost of the war and the occupation. While everyone is trying to figure out the cost of the war, the more pertinent question is probably the cost of maintaining a large army in Iraq for years, and the lack of maneuverability a large force there leaves us elsewhere. In the administration's mind, some of that cost can be covered by Iraq oil royalties on greatly increased production, but taking their royalties to pay for our occupation will create even greater bitterness abroad. Another reason for secrecy is Bush's determination for more tax cuts. Apparently we are looking at a deficit building toward $400 billion, before a war that might cost $100 billion (we have had to do a lot of bribing, not just to Turkey, so the cost will probably be much higher), and occupation another $50 billion a year. Put that on top of $50-100 billion more in tax cuts (remember, the largest portion of the 2001 cuts, those in the top brackets, have barely begun) and who knows where we are headed. It may seem inconceivable that Bush would take such a reckless course, but the far right is in charge of domestic policy and they view any tax cut as good. They are emotionally committed to chopping social programs, and how better to accomplish that goal than to make it a matter of national security. The lesson on the Iraq controversy is the bankruptcy of the Bush foreign policy. As soon as he came to office, the bashing of foreigners began, we pointedly refused to cooperation in any global effort, and most of our treaties were renounced. When the decision was made to make Iraq the second step in the war on terror, the Bushies immediately began bashing anyone who did not step up and offer support. The situation was made worse, both for foreigners and at home, by exaggerating the immediacy of the affair. It is likely that the tense international situation could have been avoided by reforming the old coalition through friendly face to face diplomacy. Proceeding recklessly ahead, while bashing anyone expressing caution, was the kind of thoughtless hot headed arrogance this administration has become noted for. When Powell talked them into going through the U.N., the case was already in trouble because of the president's excessive rhetoric, then Bush made a tragic mistake: he went to the U.N., made a grand, highly exaggerated, talk down his nose speech, and then threatened all who would not provide support. He even concluded with the extraordinarily unwise statement that the U.N. would render itself irrelevant by not following his lead, referring to them as a budding League of Nations. While seen as a great fiery speech in the U.S., at least in conservative circles, it was a truly amazing blunder, a blueprint for turning friends into enemies. These kinds of words are almost never used in diplomacy because they are so counter-productive. All of this is incomprehensible until you remember that the radical right wing wants to destroy the U.N. and exercise our superior military power to get what we want (in other words, the people calling the shots are seriously dangerous). However, after throwing away any hope for help and backing ourselves into a corner, we ought to go ahead and clean up Saddam. Reviewing the history of our ins and outs with Saddam, the following events are likely. The U.N. difficulties encourage Saddam to remain firm, but he will fold with action. We always open with lengthy bombing and when that begins, the game will be on. He will be back-tracking, we won't. He will try to remain by giving up the weapons (not all at once, chemicals first), thereby enlisting support from the rest of the world, we will want to go on, get him, and execute the plan. It will be a process, not a sudden happening. In this final showdown, our ridiculous diplomacy will make life much harder for us, but at this point we might as well win the war, and hope that Bush, if not his militaristic aides, has learned from the mistakes.
Bush’s presidency has so far followed the course indicated by study of his past. The only real surprise is the absence of any effort to protect the compassionate image. I always thought it was talk, and now he has forged ahead on his pro-business path without the slightest pass at compassion. In a mild surprise, he has done a lot of speaking and has been much better prepared than in the past, so as to avoid the embarrassing gaffs of the past. For Republicans, the fact he has not made a complete fool of himself is taken as proof that he is not as stupid as we all thought. The most interesting surprise is not really a surprise at all, given the fact that his only non-political success was as front man for the Texas Rangers baseball team. Many of us expected that, given his lack of experience, trouble in expressing himself, and elitist views, he would not be the front man for the administration, but would operate as sort of a team cheerleader. In fact he is up front on everything, in many cases pushing cabinet members into the background when they would have been the more appropriate spokesperson. Thinking supporters were always concerned about his smarts and experience, but the great team was supposed to carry the ball. From what we have seen so far, he has his finger in every pie. If anything, Cheney has been a disappointment, appearing up front only with the highly pro-business, anti-environment energy program. In this case, Bush had already made enough harsh statements that drew loud howls of protest so that he undoubtedly wanted to handed it off to Cheney. The team leader thing is also interesting, for already a number of mistakes have been made that were passed off on cabinet members. It is well to remember that Bush describes the most important quality for a member of the administration as loyalty, that is loyalty to him. This is not the sign of a knowledgeable confident man. As expected, all of the motion has been in the direction of support for business. He is pushing defense spending, oil exploration, easing environmental restrictions, pulling back on anti-trust, putting hard right people in all the government agencies, etc. He even seems to be pulling back on education in so far as it involves spending money. While the polls are reasonably favorable, there is evidence of a widening feeling against Bush. It is not just environmentalists, but the dreadfully cocky overbearing public speaking style is a turning people off. I know many who say they can’t listen to him, the speeches are simply deplorable. Reagan used the good guy approach, but in Bush’s case what comes through is the elitism, the selfishness, the absence of a link to the common man. I predicted that his arrogance and lack of feel for the public interest would get him into trouble, and now trouble has arrived. Here we have a 50-50 senate, which anyone else would have approached tenderly. Perhaps encouraged by the ability of the party to strong arm Republicans who were not happy with his program, especially the tax cut that went mostly to the rich, Bush attempted to ramrod his program through the Senate. Already there are defectors. Now we have the Jeffords situation. Bush tried strong arm tactics, and, appalled, Jeffords has bolted the party. Not normally a sensational deal, but hugely important in a 50-50 situation. All of a sudden, Cheney no longer controls the Senate, thanks to the arrogance of his boss. Nothing is more likely to get you into trouble than arrogance, and Bush has it in spades. I think it is so ingrained that even this setback will not temper the problem. Clinton was criticized for governing by polls. That is not such a bad thing when the alternative is decision making by people who have little interest in popular causes, who show not a grain of human kindness.
This chapter was written long before the Enron debacle came to light, in fact it is about the inevitability of Enrons because of wholesale cheating to boost reported earnings. Enron was not the exception, it was the rule. Enron undoubtedly passed the line and broke accounting rules, but the majority of publicly held companies push as close to the line as possible in order to enhance reported earnings. Arthur Anderson, its auditor, is not a rotten apple, all the major accounting firms aid and abet the process of overstating earnings. Solutions do not lie with cleaning up the accounting profession, it is the source that must be attacked - the tremendous payoffs corporate management derives from stretched accounting. Will the sensational disclosures lead to a clean up, or will the affair blow over with a few revisions to the rules for 401K plans? I am not optimistic. Enron points out once again the overwhelming power of aggressive corporate management to use company funds to benefit themselves. Sound rules carried out in a vigorous manner can solve the problem. Accountants will give us honest figures if freed from the pressure of management wielding big money for compliant manipulation. Enron paid Arthur Anderson $52 million for accounting services in 2000, $25 million just for auditing, a figure topped by only a few other and much larger public companies. That kind of money buys a lot of cooperation. The answer to the mess is truly independent auditors, both in setting rules and enforcing them. I am utterly fascinated by Enron. A day never passes without at least two new revelations. Its tentacles are so widespread that new chapters will be unfolding for a long time. This is a much bigger story than realized. The war is a tiny affair in comparison because Enron and America are about business. Enron brings into focus many deeply troubling problems that have been swept under the rug by the long bull market. Enron says a lot about what is wrong with the stock market, for its revealed evils are not at all uncommon. Too many public companies are managed to elevate the stock price, rather for the long term good of the enterprise and the economy. The result is unwise activities that boost earnings over the short term, bad acquisitions, restructuring to erase past mistakes, manipulative accounting that makes investing a guessing game, and an immense waste of capital resources in frivolous ventures. There is a lot more to running a company than hyping the stock. Some of the revelations about Enrons accounting are mind boggling. Even more amazing is that many are legal, and therefore in common use. Arthur Anderson, Enron's accountant, is no different from the other big accounting firms. They are all thoroughly enmeshed with management in exaggerating reported earnings in an effort to elevate stock prices. Every knowledgeable person is aware of this scandal, but no one wants to think or do anything about it for fear of hurting the price of their stocks. Now the mess is out in the open. Why not start at the top. George W. Bush had no qualifications for the presidency, he was selected by big business because as governor of Texas he demonstrated political skill and unqualified support for business. He was elected on big corporate money, though not bought, for he is wholeheartedly their man. The question for his presidency was going to be, can big business run the country? Enron says the answer is no. Destruction of the surplus with tax cuts crowded into the high brackets says no. Give Bush the benefit of the doubt, though, the jury is still out on big business's governmental management talents, but the signs coming out of Enron are not encouraging. Next, there is Congress. Enron was built on stock hype and bad accounting. The accounting profession was well aware of spreading misrepresentation, and its governing bodies tried to slow the trend. In the crucial decisions, notably accounting for stock options and separation of auditing and consulting, reform lost because of the intervention of campaign contribution stuffed senators and congressmen. How could these people intervene where they had no expertise when the rule making bodies were doing the right thing? Because corporate management paid them to. The connection is being made between business excesses and campaign contributions. At yet another level, Enron demonstrates the dreadful practices that overwhelmed leading investment banks. These people are willing to finance anything they can get away with simply because the fees are large. In Enron's case they raised the money to support many of the fraudulent partnerships and offshore entities that covered up the company's true condition. They sold a large institutional placement offering information on the company withheld from stockholders, probably illegally, though judging by the subsequent results, the treasured information should have alerted buyers to stay away. A major commercial bank/investment banker provided a vehicle for hiding losses from recent annual reports. Why did bankers engage in these probably illegal activities? The answer is huge fees, just as with underwriting hundreds of dreadful high technology and internet IPOs. They sold manure through unqualified boosting. Lacking full disclosure, deals that violated the intent of the securities laws became everyday. To an extent investors deceived themselves, but they bought the reputation of the underwriters and the hype they provided more than the companies themselves. American capitalism works because of a blending of the free market and government regulation. Left unfettered, the free market gets caught up in intense greed and self- destructs. Karl Marx was about the inevitable self-destruction, except Marx was wrong because government stepped in and controlled the instinctive unfairness in the free market. We operate under a delicate balance between the free market and government regulation that swings back and forth. The free market self-destructs, the government steps in and over-regulates, then the free market regains its energy and outwits government controls, only to once again self destruct in its excesses. The end of the great bull market and the Bush election probably mark the high water mark for the up phase of the free market. Now that its bad aspects are revealed in all their ugliness, the pendulum will swing back toward government control. The problems are profound and the swing to more control will take time, especially with the Bush administration manning the free market ramparts. Many of the best minds on the market think stocks will go no where for a good many years until pricing returns to reasonable levels. Those of us who felt the market was reaching a long term peak a couple of years ago did not know what forces would end the long rise. Now we know - bad corporate practices arising out of the market's own excesses. A flat market will be supported by modest earnings growth, making extreme overpricing stand out. Improved accounting standards will be a force holding down earnings. A slow period for the market will be helpful, as all would be forgotten if we once again entered euphorialand. One of the most intriguing questions arising from Enron is why otherwise respectable people use manipulative accounting. The answer is the tremendous incentive in stock options. Options allow management to become extremely rich in a short period of time. We are going to find that twenty or so people at Enron became very rich on options. The present secretary of the army, a former Enroner, was a second line executive who became an eight figure multi-millionaire as the second in command of a division that was guilty of gross figure manipulation. Apparently his job was sales and he did not know the ridiculous accounting tricks being played with the long term energy contracts he brought in. Is it comforting to know that one of Bush's cabinet members was too dumb to understand what was going on in his own division? He stretched out his sales of Enron stock, required by his government position, so clearly he was ignorant of the gimmickry. Bush shares that kind of innocence. If Clinton's number one backer had come out as has Enron with Bush, everyone would be screaming because of knowing he had probably given something in return. In Bush's case, his standard bewilderment about anything complicated makes it easy to believe he failed to understand the implications, particularly when catering to big business is what brought him the presidency. There is little appreciation of the extent to which management of public companies has been stealing ownership out from under stockholders. In the more popular companies, options often represent 30% of outstanding shares. Counting already exercised options, management and employee shares can end up representing over 50% of ownership on a free ride. Management gets away with this theft because options, while obviously a form of compensation, never appear as an expense on the income statement because of a special exemption earned through congressional intervention. In addition, Enron, Cisco, Microsoft to a large extent, and practically all high technology companies because of their particular abuse of options, have never paid income taxes because they are permitted to take options as an expense at the highest valuation. The option system is crazy. It encourages earnings enhancement because even a temporarily high level for the stock can fix management up for the rest of their lives. The set up involves no risk and no investment, because the stock is usually pay for simultaneously with cashing in the exercised options. Being fully aware of the hype that elevated the stock, management is in position to make timely purchases and sales. While options are supposed to be an incentive for good management, in fact they are just the opposite. The popular slogans, pay for performance and aligning management and shareholder interests, are baloney. One of the subtler entanglements coming to light through Enron is the role of boards of directors. Why have boards allowed management to get away with huge stock option awards, a highly anti-stockholder form of compensation? The answer is that management buys their cooperation through large fees, stock options, and inclusion in company pension plans. The total package is so fat that directors would be acetic spartans not to follow management's lead and forget their purported job of representing stockholders. Enron brings the highly conflicted position of boards of directors, and their decisions in favor of management and against stockholders, out into the open. On management's part, the temptation to become very rich overrides fear of dishonesty, aided by many of the figure enhancing practices being perfectly legal. If you want to hear insistent pleas of innocence, don't go to death row, listen to top managers pleading their devotion to Generally Accepted Accounting Principles. Management is no longer concerned about the day of reckoning that goes with bad accounting because restructuring allows the cheating to be erased. An interesting undertone to the corrective process is that Bush, ever catering to business interests, brought in as head of the SEC a man totally conflicted by being a leading SEC lawyer for big companies and accounting firms. He began to dismantle many of the progressive moves initiated by his predecessor. He reminds me of Joseph Kennedy, who FDR named as first SEC head under the theory it takes a crook to know a crook. Now Pitt, the new head, looks like a fool, so maybe he can turn himself around and stop protecting the thieves. The cards are face up on the table, and what used to be easy to get away with no longer is. Dick Cheney's claim that he was only consulting the experts in dealing with oil executives while drawing up energy policy might have been accepted a year ago, now it is greeted with the guffaw it deserves. Suddenly we appreciate the extraordinary greed that has overtaken corporate culture.
The new president is greeted with glee by comedians, but his presidency may be a watershed event. Bush Jr, to a greater extent than any predecessor, is the man of business. Reagan was all for the free market, but he was an idealist able to believe wacky ideas like voodoo economics and star wars. He never followed through on reducing the size of government. Father Bush, we forget so soon, was seen as an empty man lacking idealism. He was a competent administrator who saw the need for reducing the deficit and lost Republican support by raising taxes. Unfortunately, he had harped on no tax increases to get elected and going back on his word created the impression that Bush senior did not stand for anything. Not so Dubya, he stands for something - unqualified support for business. Bush has sought to identify himself with education, a nice comfortable political issue, but education is a sideline. The central theme of Bush’s rule in Texas was support for business and that support is what got him elected. Business leaders picked him out as their man and provided the largest pot of money in the history of elections. He was not bought, he is a true believer that businessmen should run the country. Bush will pay absolutely no attention to McCain’s election reform effort. He is the big business candidate McCain’s program is specifically aimed at. The cabinet appointments prove the point. Start with treasury, a businessman. Look at defense. Rumsfeld is a known supporter of increased defense spending, a powerful business issue. Bush talks about raising soldier pay, but the real support will be for new weapons. Our defense contractors sold so many advanced weapons overseas that we apparently need new ones to counter all those now in the possession of foreign powers. The appointment of a general as secretary of state (if he weren’t black we would all be shaking our heads at a general in this position) would seem to further the point. The lesser appointments are more revealing. The original labor nominee, Chavez, is a union basher and critic of the minimum wage. Could corporations wish for anyone better. Energy: the qualification here is that the new secretary has championed closing the department. Interior: the lady’s only known position is opening up government lands to business. The most subtle is Christy Whitman as head of the Environmental Protective Agency. This may seem like a reward to a fellow member of the eastern establishment, but not so. Whitman’s predecessor introduced one of the most comprehensive environmental programs of any state and she simply disbanded it. Who better to run the EPA in the interests of business. As for Justice, look for a dismantling of the anti-trust effort of recent years. Ashcroft’s own views are less interesting than the fact Bush would pick someone so far to the right (he did owe them a big one for repulsing the McCain bandwagon in South Carolina). The SEC - look for it to be turned over to Wall Street (an established Bush trick is turning a regulatory agency over to those being regulated) and some of the activist Levitt initiatives reversed. The takeover of government by corporations goes beyond cabinet appointments. Business representatives, CEOs, lobbyists have swarmed the transition office seeing that sub-cabinet and other positions fall into friendly hands. As to Prime Minister Cheney, we are so relieved to have a solid experienced man to shield us from an in-over-his-head Bush that we forget his far right views and the fact that he picked these people. Bush endlessly talked of being a healer, but the cabinet appointments reveal the emptiness of his views on bipartisanship. Disguised by ethnic and gender diversity, the Bush appointments are blunt in-your-face moves from a man supposedly placed in a conciliatory position by the questionable nature of his win. His actions demonstrate the extend to which he is unalterably allied with big business, not the most popular interest of the common man. The important question, will the alliance of business and the administration be good for the country? A few years ago the judgment would unquestionably have been no. Twenty years ago Bush would have been laughed at as a presidential candidate, now as the business president he is a product of changed times. Business has greatly increased its influence in government and prosperity has never been greater. Starting off with a recession, or a severe slump, means that his timing is good. Over the short run, business probably needs a helping hand and Bush is going to provide it. For the stock market over the next year, we could not ask for a better choice. Longer term, the issue breaks down to the relative view of capitalism. The free market is seen by some as solving all economic problems and producing the greatest benefit to the greatest number. The rich may get an apparently unfair slice of the pie, but the poor end up much better off than under any other system. Certainly capitalism has proven itself in modern times. While the returns are mixed overseas because of centuries old cultural barriers, capitalism works in this country. So the issue isn’t capitalism, it is the degree to which capitalism compromises democratic principles. Communism did not come out of the old feudal serfdom, it came out of the industrial revolution and the exploitation of labor. Free market capitalism does give rise to unfairness. The rich become greedy, they never have enough. They use money power to accumulate more and lose their sense of justice. Monopoly is an inevitable corporate goal and monopoly slows progress and leads to higher prices, defeating the free market. Enthusiasts point out that the free market ultimately destroys monopolies, but it takes time and in a democracy we are unwilling to wait. The monopoly problem may be moot, for in the fast moving high technology international economy, establishing a monopoly is almost impossible, so the anti-trust laws may have become superfluous. The government beat Microsoft, but with the peaking of the PC, Microsoft is back in a fight for its life. But the problem remains - business means big corporations and big corporations exercise great power in an undemocratic manner. The point is that the completely free market is not utopia, it almost instinctively goes astray. I think we face a serious problem at the moment because of the crazy, greedy, indiscriminate new issuance market brought to us by Wall Street. We are seeing the downside of overselling the market and driving stocks to ridiculous levels. More significant than the immense waste of capital is the false sense of wealth that may have put the consumer behind the eight ball. Greenspan’s efforts to control stock market speculation were directed at preventing just this situation, but he failed. On the subject of Greenspan, apparently he is close to Cheney, so he may be protected, but look for the Bush people to go after him, specifically with blame for the slowdown. Business does not like Greenspan’s powerful and moderating influence on the economy, it wants a free hand. In America we developed a government restrained capitalism to control the nastier, undemocratic practices that inevitably develop in a free market. The government is also an important partner in providing services that assist the free market to grow. The idea that government is always a hindrance is ridiculous. On the other hand, coming out of the New Deal, the need to counter the Russian threat, fears about a shortage of energy, the need for a central bank of last resort, and many other examples, government undoubtedly became too active in our lives. The environment needs protection, but the original cleanup laws of twenty-five years ago went too far. The influence of government in our lives has gradually diminished and that probably helped sustain the long prosperity of the 1990s. Although business recognizes the contribution of government, it can’t resist fighting to reduce that role. Business wants the roads, but it does not want to pay for them. Business has captured the keys to the regulatory safe and this administration will do whatever it can to eliminate regulation. Will they overdo it? Corporations are not noted for restraint when it comes to their self-interest. The cabinet nominations are evidence of a must-have-it-our-way attitude that gets corporations in trouble. A corporation can be run as an autocracy, the country can’t. The question is, will the business takeover be good or bad? I am a firm believer that government restraint is an important cog in the success of our form of capitalism and that given the chance business will go astray. But what do I know, maybe the unfettered market will provide new stimulus. That decision will not be made in the next four years, this is a long term contest. The pendulum of relative strength between government control and the free market has moved in favor of the free market. The result is big business flexing its muscles as never before, but that swing may be reaching a peak. You can’t help but admire Bush’s don’t give a damn attitude, but in a democracy a business president probably holds a bad hand. I am disturbed by the constant talk show spinmeisting that this is the greatest cabinet ever, when it clearly lacks in distinction. This may reflect a defensive foreboding among Republicans about the cabinet, or an effort to obscure what this group actually stands for. The majority of voters believe in government and anyone letting the big corporations run wild may be placing himself in an unelectable position. But maybe not. Business is on top and the majority of Americans are stockholders with a more benign view of big corporations. Business will never have a better chance to prove it can lead. The next four years will be fascinating for students of capitalism.
By the time some of you read this, the game will be over. One of the ideas of my notes was that Bush’s emptiness should have made him an easy opponent, but in the home stretch he seems a sure winner. What happened? I think Gore ran one of the most pathetic campaigns in history. He got himself tied up in policy, in pandering to every voter, and missed his best theme: Bush’s weakness. I could watch the debates only briefly, they were too pathetic. Bush’s shortcomings stood out clearly: his lack of grasp of programs, his inane rambling about lifting the nation’s spirits, compassionate conservatism, and so forth. But his weak performance was overwhelmed by Gore’s pomposity, his obnoxious condescension, his gratingly constrictive style, his overemphasis on his own policies that seemed to rob him of the insight to throw Bush’s lies and prevarication back in his face. He was constantly talking about the differences in their policies rather than taking advantage of openings to blow up what Bush said. Bush does have a personal touch Gore completely lacks and it came through. Gore always seems scripted, which makes his policies seem opportunistic rather than real. Thus, while Bush lied much more than Gore, he still seemed the more honest. In this case, his lack of a clue worked in his favor. Bush’s favorite line has been about leadership, "you’ve got a leader on your hands!" Of course leadership is the one thing he has never displayed, except as an Andover cheer leader. Bush engaged in a good bit of demagoguery and got away with it. Much of his trash was effective because Gore had no response except back to his boring policies. Gore was afraid to talk about being one of the best VP’s ever, afraid of any relationship with Clinton, afraid even to offset Bush’s claim about nothing happening in Washington in the last eight years by pointing to the obvious target, the Republican congress. Gore left out the record, where he is strong, because it was associated with Clinton. Then all the new stuff made him seem like a bleeding heart liberal. I don’t understand why Gore was unable to respond to the Bush trash talk. Did he want to be honorable and not get into personalities? Bush is weak on policy, so that seems a logical target, but the personal stuff is Bush’s greater weakness. Gore seemed determined not to engage Clinton, but Clinton might have been brilliant skewering Bush. He is such an inviting target and Clinton is such a clever fellow. I have to admit to a churning stomach when seeing Bush on TV late in the campaign. He is so aggressively confident now, so fixed on himself. He thrusts his chest out and delivers the empty lines as if they were terribly important. The only positive thing is that the next four years are going to be entertaining, where they might have been dull with Gore. Will the arrogance of birth and position, now fed by this amazing triumph, ruin his presidency. Nothing is more deadly than arrogance. The most surprising aspect of the campaign other than Gore’s incompetence is the Bush demagoguery. I noted above my inability to listen to Bush without a sinking feeling. In thinking about it, what gets me is this. It is not so much the emphasis on nothing issues like education (a pitty patty issue everyone is for), tax cuts, social security (so impractical and economically ruinous there isn’t a chance of it happening), dignity in the White House (come on), misrepresenting his position on medical assistance, it’s the way he says it. It’s loud, its chanting, its emotional. Even the voice inflections change depending on whether he is talking in the east or the west. What is he doing? I am reading a new book on World War II and in the chapter on Hitler, there it is. Mein Kampf explains that the basis of political power is emotional support from the masses. The strength of a national leader depends on the ability to seize and manipulate emotions. Policies don’t matter, stirring the crowd does. Bush is not talking to his base constituency, Wall Street and the relatively well off, he has been after the masses and the style is Hitler. It shows in the increasingly obvious self-confidence, the strutting, the incredible "you’ve got a leader on your hands." If he is getting visions of greatness, he may not do what the average thinking supporter, who lacks faith in his ability for good reason, wants him to do: sit back and leave the governing to well-selected appointees. This presidency could get much more interesting than I thought.