Why Progressives Should Fear Rick Santorum (It's Not Why You Think)

Two things are becoming increasingly clear this election season: 1) Mitt Romney is looking less and less likely to be the GOP nominee; and 2) whoever is the nominee is going to be pushed so far to the right that he or she will in no way be able to effectively challenge Barack Obama in November. The reason on both counts is the same: the incredible emergence of Rick Santorum.

At first glance Santorum's improbable rise to the lead in the GOP primary race would seem to be a good thing for progressives. His completely insane brand of theological right wing conservatism turns off everyone to the left of Glenn Beck.

So why should progressives fear Santorum? The obvious answer would be the remote possibility that Santorum would actually get elected and our political realm would become a nightmare of monumental proportion. But that is so unlikely that if it did actually happen I really would start preparing for the Mayan Apocalypse.

No, the real problem with Santorum's emergence is the fact that because the GOP has done cartwheels to position themselves to the right of Barack Obama, that the chances of any movement away from the pro-Wall Street, anti-liberty policies of his first term are unlikely at best.

This election gave progressives the opportunity to move the Democrats away from their recent centrist governance by withholding our votes, refusing to vote for the lesser of two evils. There was a real opportunity to either move Obama to the left (which would put him somewhere in the middle) giving some hope to a second Obama term, or make the Democratic party re-evaluate its position (which is no longer the party of the middle class or the workers) if they lost the 2012 election.

With the specter of a possible Santorum candidacy or some other wing nut in his place, the next four years is unfortunately most likely going to resemble the last four. The Republicans are placing themselves so far to the completely insane right wing, that there is really no choice but to vote for a second Obama term. So there will be no consequence for Obama's policies of appeasement of Wall Street, of the overwhelming secrecy of his Administration, of his policies of assassination and indefinite detention of American citizens without charge or trial, of the largest number of deportations in history, of neo-liberal economic policies which increase the gap between rich and poor and steer us toward austerity and the further suffering of our lower classes, of the unparalleled attacking and punishing of whistle blowers, of the doubling down of the prosecution of marijuana growers and distributors which are legal under their state's laws, all of which have been the policies which this Administration has put into action over the last three plus years.

With no primary challenge, and no socially moderate opposition, Obama will go into the next four years thinking that his landslide re-election, which is all but inevitable at this point, is somehow an approval of these policies and we will see four years of the same policies further cementing the fact that no major party represents the vast majority of Americans who make up the increasingly shrinking middle class and the ever growing lower class.

What Santorum means is that the progressives have lost. Let's face it, Obama was just not that into us to begin with. Now with no reason for the Democrats to court our vote, we are essentially left ignored by both parties once again. Obama's campaign coffers will be filled by the same Wall Street titans who have on the surface met his occasional criticisms with derision while at the same time benefiting handsomely from his actions (or lack thereof), the protests at the DNC will be covered as crazy anarchists who won't be mollified by anything, and those who, like me, continue to criticize Obama's policies will be even further marginalized and met with more credible arguments of "But, do you really want Santorum as President?"

The answer, of course, is no. Or hell no! But I really don't want four more years of the same nonsense that I've received from Obama either. The only thing I can hope for is an Elizabeth Warren victory in Massachusetts catapulting her to the Democratic Presidential nomination in 2016. Now, that would be something to hope for. Of course, we'll probably be left with some inoffensive, stuffed-shirt, Wall Street beholden hack. Martin O'Malley, you used to rock with O'Malley's March, but you'd be one hell of a shitty president.

Has The Republican Party Gone Bat-shit Crazy?

There was recently a study that looked at the early childhood intelligent quotients and political views later in life that found a correlation between low i.q.'s and racism, bigotry and socially conservative views later in life. The Republican party is doing everything they can to show that this study was dead on.

For months now, I have been planning a post entitled "Why I Am Not Voting For Barack Obama, And Why You Shouldn't Either." I was prepared for all of the attacks from my liberal friends who have already been critical of me for my criticisms of the President's continual idiotic decision making, especially when it comes to his handling of the economy and the banking sector. There are plenty of reasons not to vote for a second term for Obama -- his continuing bailout of the banks, his coddling of Wall Street, his failure to pass any kind of immigration reform resulting in the highest number of deportations of any President, his awful deal on the debt ceiling, the overwhelming secrecy of his administration, his prosecution of whistle-blowers, NDAA, on and on and on and on...

So, faced with a President who is and has always been weak in the polls, an economy that is floundering, a continuing unacceptably high number of unemployed and underemployed, what do the Republicans do? They declare war on 52% of the population! The Republicans for some reason have decided that it is a winning strategy to attack women's rights.

We're all used to the Republican platform including the so-called "right to life" plank (it seems Republicans are all in favor of making sure that life is preserved and nurtured as long as it is in utero). Every four years they talk about passing constitutional amendments to ban abortion, and in the interim we have states passing increasingly inane laws that treat pregnant women as if they are too stupid to make decisions for themselves and are therefore forced to have the government intervene on their behalf to saddle them with even more guilt than they would normally have when making such a monumental decision.

But this year, they have gone above and beyond their usual primary season insanity and have crossed straight over into a reality that only seems to exist in the minds of Rick Santorum and those who have spent their adult lives confined to some sort of cult compound (or the Vatican). The four remaining candidates for the Republican nomination are falling all over themselves to find out who can most restrict the lives of American women. Rick Santorum leads the pack with the following arguments: women who have been impregnated as the result of a rape should make the best out of a bad situation and not be allowed to have an abortion (rape is a bad situation?); women should not serve in combat because their emotions may get in the way; abortion causes breast cancer; women should stay at home and are forced by society to enter the workplace (and then blamed his wife for that one). But the others have just been clawing all over themselves to keep up.

This was sent into overdrive when the Obama administration ruled that Catholic hospitals and universities (but not churches or other strictly religious employers) would not be allowed to restrict their employees access to free birth control as part of their employee health insurance. This piggy-backed on the earlier decision of the Obama administration that health insurance policies would have to cover birth control at no cost, something health insurers are more than happy to do since the cost of birth control is less than the cost of abortion and a whole lot less than the cost of pregnancy and birth.

Suddenly the entire party was howling at the top of their lungs. None of the candidates could get to the microphone fast enough to declare this move as an outright attack on the Catholic Church and freedom of religion. Huh? The conservatives were foaming at the mouth over the inherent evil of -- birth control? Now of course, nobody was saying that the Catholic Church had to hand out birth control or that Catholic women had to use birth control (something that 98% of them already do), nobody was telling Catholic doctors that they had to prescribe birth control against their own conscience (although would you go to a doctor who wouldn't prescribe it?), nobody was telling Catholic professors that they had to teach that birth control was morally acceptable or a good thing. They were simply stating that if an employee is covered under their employee health insurance that the Catholic hospital or university could not prevent them from obtaining birth control under their plan.

The outcry over this (or at least the outcry reported by the MSM) forced the administration to take a second look at this and they bent a little. What they did, in a move that was pure political genius, is that they said to the Catholic employers, ok, we are not going to mandate that you pay for the coverage for birth control, what we are going to do is say that the insurer must make it available directly to the employee at no cost. So, religious freedom conundrum avoided, everyone goes home happy, right? Of course not!!!!!

As I said at the time, this move of the Obama administration was going to show once and for all that this issue had absolutely nothing to do with religious freedom, this had to do with women's access to contraception specifically, and women's health and women's rights in general. It amazes me that we are having this argument in 2012. Birth control is simply not controversial for a vast, vast majority of Americans. But there have always been the crazies -- the religious zealots who have never really been comfortable with women having an equal place in society with men, who saw a woman's ability to control if and when she has a child as a threat to their world view. These are the folks that push the failed policies of abstinence only sex education, as if teenagers only thought about having sex because they were told they could in school.

What's even more troubling about these arguments is that, at least in the myopic world of the Republican primaries, they seem to be working. The latest polls show that Rick Santorum is in a dead heat nationally with Mitt Romney. Conservatives are pressuring Newt Gingrich to get out of the race as they seem to be coalescing behind Santorum as the right wing candidate, the new Not-Mitt who will challenge the preppy New England Mormon for the nomination. So, don't expect these arguments to go away anytime soon. In fact as the race grinds on, expect to hear even more crazy statements such as the one from some nitwit woman on Fox News today who said that women in the Army should expect to get raped (I can't make this shit up). We have already seen that the Republicans are already conflating birth control with abortion and they will continue to get further and further off the range as we go along.

What amazes me about this is how it is how much these arguments are sure fire losers. The only thing that the Republicans are doing is scaring the living hell out of everyone who doesn't wear prairie dresses and refuse to cut their hair. Continuing along this road does nothing but assure Barack Obama of re-election and they apparently can't see that this is the case.

So where does this leave us? In a nation whose economy is a house of cards with its central bank sitting on an almost unfathomable amount of toxic debts previously owned by criminal enterprise banking establishments, whose middle class is eroding away to the point of almost non-existence, whose unemployment is still unacceptably high and those who are finding work are finding it at a much less desirable wage and working conditions, whose labor force is having their rights annihilated and their pensions stolen, whose safety net is being eaten away and the futures of our youth being gambled in international casinos of finance, we will again be told that the most important issues facing us are gays, guns and remarkably uppity women.

So, I haven't written that column about why I'm not voting for Barack Obama. And I have gone from looking for anyone to vote for instead of Barack Obama, to seriously considering the possibility that I may have no choice other than to vote for him. This is the first Presidential election in which I will vote as a father. Do I really want to do anything to endanger my daughter's right to live equally in a society with men, to make her own decisions and chase her own opportunities free from the shackles of the past that have kept women subservient to men? Right now, that's what the Republicans are making this election about. And I can tell them the answer to that question is a resounding NO.

So, Why Should I Care About Interest Rates?

I could have subtitled this post "Or...Where the hell is my damn pitchfork?!?!?!?!"

You might wonder why I am complaining that interest rates are at zero percent at least through 2014 if we are to believe the FOMC (and there is no reason not to). Let's face it, there are lots of benefits to low interest rates for consumers -- cheap credit, lower car payments, lower mortgage payments, etc. So why in the world would I be arguing for interest rates to increase?

The simple answer is that it encourages economic responsibility in that higher interest rates encourage saving and right now savers are getting royally screwed in favor of speculators.

But if we look at what led to the economic collapse of 2008 and beyond, we see what real destructive effects debt and low interest rates have had on our economy as a whole and if you really start to understand what is going on, you too will be looking for your own pitchfork (or an arsenal of high powered assault rifles).

I will focus on one scenario here. One of the biggest investors in bond markets are pensions. I'm sure that you've heard all sorts of stories about the trouble that large pensions, especially public employees pensions and unionized manufacturers like automobile companies have had since the collapse in 2008. Often, especially over the last two years this has been used as an excuse for right wing politicians to attack unions and in some cases such as Wisconsin, Indiana, Ohio and elsewhere to actually attempt to eliminate the right of public employees to bargain collectively. It is the wasteful, overpaid union employees that lead to the unaffordable pensions.

This is nonsense of course, and hopefully you'll see why once you've finished.

Pensions focus on bonds because they are historically the safest investments around. Bonds generally have a guaranteed rate of return at a specific date. Bonds do not have a high rate of return, but they also do not pose much of a risk. However, the rate of return on a bond is effected by the interest rate which is set by the Federal Reserve. When interest rates are high, bonds are a better investment as they have a higher rate of return. However, when interest rates are low, the rate of return on those investments is lower making them a worse investment.

During the 2000s, the FOMC set interest rates at historically low levels. Many times this was in response to huge economic emergencies such as the 9/11 attacks. But as a general rule the decade saw the lowest interest rates overall in recent history, holding for long periods below 2% and spending most of the decade well below 5%.

Because of this, pensions found themselves getting less and less of a return on their usual investments in bonds. This is the major reason that large bond investors such as government and large corporate pension funds started looking elsewhere for places to invest their money. The Trustees of these funds had a duty to maintain a certain level of return for their beneficiaries and the bond market was simply not providing them an avenue in which to find these returns.

Wall Street banks offered a solution to this in the form of derivatives. Derivatives of course are the complex financial instruments such as collateralized debt obligations and credit default swaps which played the largest role in the economic collapse and were responsible for the annihilation of trillions of dollars of wealth in 2008 after the collapse of Bear Stearns, Lehman Brothers, and the rest of the large Wall Street financial institutions.

What derivatives such as CDOs were in their simplest form were securities that were made up of other debts or financial instruments. Say bank A makes 1,000 loans to consumers and then sells those loans to Investment Bank B who then carves up the 1,000 loans into a security. The best loans are Pool 1, the middle loans somewhat riskier are Pool 2 and the worst of the loans which are the most likely to default are Pool 3. These are then sold to investors with a price and return that is equal to the risk that each pool's individual risks.

As long as everyone played by the rules, these were pretty basic, pretty vanilla investments. Sure, they were sexier than your run of the mill bonds like T-Bills, since they would provide a slightly better rate of return since they involved slightly more risk, but they weren't any kind of economic succubus which would devour the entire economy either. The problem was, that as long as interest rates remained relatively normal (5%-7% or higher), there really wasn't a huge market for these types of investments among large pension funds, since the risk simply wasn't worth the slightly higher return.

When interest rates tanked and large investors like pension funds started looking for new ways to satisfy their duties to their beneficiaries is when everyone stopped playing by the rules.

Faced with this huge market of new potential investors, the banks started aggressively marketing these investments which up until that point had been seen as exotic creatures that were far beyond the pale of anything that a wise principled conservative investor like a pension fund would invest in. However, seeing the opportunity to make boatloads of money, these investments were marketed as virtually risk-free investments much like Treasury bonds but with a much higher rate of return.

Once the pension funds (along with other traditionally conservative investors such as life insurance companies, nonprofits, hospitals and the like) were hooked, this is when things went horribly awry. With a sudden increase in demand for CDOs which were mostly based on residential mortgages, there was a need for more product. As a result, there was greater and greater pressure placed on lenders to make more and more mortgages. Inevitably, standards for mortgages dropped. Traditional requirements for a mortgage like having 20% equity as a down payment, a certain level of income, or stability in employment were quickly abandoned, as the goal for many lenders simply became to lend so that the mortgages could be sold to investment banks who would securitize the mortgages into CDOs.

This erosion of traditional standards of lending led to riskier and riskier mortgages making up the CDOs that were being sold as risk-free investments. However, the ratings agencies, who were being paid by the very investment banks whose instruments they were supposed to be scrutinizing, went along for the ride, abandoning their own underwriting standards and continuing to give these increasingly risky investments the highly sought after AAA rating.

As time went on, many of the firms began slicing up these pools of investments even further to create as if out of thin air new AAA investments. In many cases what they would do is take the worst investments of one CDO (Pool 3 for instance) and then slice that up further to create a new CDO with three new levels with the new Pool 1 receiving a AAA rating, even though it was previously considered the lowest level of the prior CDO in which it was included.

The worst offenders (Goldman Sachs and JP Morgan Chase are among this group and have paid civil fines in the billions of dollars to settle charges of this without acknowledging wrongdoing) would intentionally create CDOs that were made out of complete junk (the notorious "shitty deals" referred to in Senate hearings on the subject), sell them as AAA risk-free investments to institutional investors and then bet against them, making billions upon billions of dollars as the investments acting exactly as they were designed to, with all of the loans that made up the CDOs defaulting and the value of the investment going to zero.

We know what eventually happened. Plain simple logic would dictate that this type of scheme could not last forever, and the cracks in the foundations started being seen in 2007 and then imploding completely in 2008. The large banks which were responsible for most of what led to the implosion were bailed out and essentially absolved of their wrongdoing with a waive of the hand of Tim Geithner and Ben Bernanke.

Although there has been some reform in lending institutions (for instance, the ridiculous interest-only loans and adjustable rate mortgages have been for the most part abandoned and many equity requirements have been reintroduced) the underlying problem that led in great part to the collapse has not only not been remedied, but has become worse. Interest rates have been at 0% for more than three years and the FOMC has said that they will remain there at least through 2014. This policy encourages increases in both institutional and consumer debt as well as discouraging savings. Large investors are still faced with taking on greater and greater risk in order to satisfy their requirements on return. Conservative investors are being squeezed out of the market altogether as there is simply no incentive to save or invest in low risk, low return instruments.

This is how bubbles are created. This is how economies are ruined. This is how nations are destroyed.

What I have presented here is a very bare-bones example of the effect of the FOMC's policies over the last couple of decades. The realities are obviously more complex and more difficult to understand. However, what I have set forth is no less true. The more we pay attention to these machinations, the more we learn how the cards are being stacked against ordinary Americans by our own government and financial institutions. The more we pay attention, the less likely we are to stand by and say nothing or believe the talking heads on CNBC who say "it's all a part of the market and there's nothing we can do about it." The more we pay attention, the more likely we are to demand change.

Are you looking for your pitchfork yet?