Oct
15
2010

Peter Stone on campaign financing, Dean Baker on TARP

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This week on CounterSpin: Reporters can always find many themes in election season, but some are saying this time around there's really only one and that’s money. A new study from the Center for Public Integrity examines the fundraising going into the midterm elections; what impact is the Supreme Court's Citizen United ruling having on the already prepossessing flow of dollars to candidates and their PR? We'll hear from the study's author, Peter Stone, the head of Center for Public Integrity's Money and Politics team.

Also on the show: The economic meltdown and the government response to it are one of the most important stories in recent memory. What if it's being seriously misrepresented in the media, such that public understanding of key elements is virtually upside down? Our guest says when it comes to the financial institution bailout program TARP, proponents of the now-expired program are seriously distorting its terms and impact. Dean Baker is co-director of the Center for Economic and Policy Research; he'll join us to talk turkey about TARP.

That's coming up but first, as usual, we'll take a look back at the week's press.

—In light of the recent and tragic spate of gay youth suicides, the Washington Post's On Faith blog chose to honor National Coming Out day, October 11, with a guest post by raging homophobe Tony Perkins of the Family Research Council.

The post, titled "Christian Compassion Requires the Truth About Harms of Homosexuality," accused "homosexual activist groups" (and their allies in media and education) of being the real bullies, pushing gay kids to accept themselves and believe they can't change. It's that, Perkins wrote, that creates "a sense of despair that could lead to suicide."

As evidence, Perkins cited two studies that he says show that depression amongst gay people is not connected to discrimination. The trouble is, the two studies actually say the opposite, as Jim Burroway of Box Turtle Bulletin was able to demonstrate by actually clicking on the links Perkins provided—presumably, Burroway says, "for decoration." One study author actually predicted precisely the sort of anti-gay misuse of the work that Perkins illustrates. But twisting facts isn't unusual for Perkins; his group often relies on pseudo-scientific anti-gay "studies" like those of the Family Research Institute, whose head, Paul Cameron, once argued that "extermination of homosexuals" might be needed in the next three to four years.

Yet Perkins is a go-to guy for corporate media. When he put out a statement saying repealing Don't Ask Don't Tell would "jeopardize our nation's security to advance the agenda of the radical homosexual lobby," CNN felt that merited two interviews, while MSNBC went with Perkins' colleague Peter Sprigg, who warned that a repeal was "guaranteed" to lead to sexual assault—by gays, not against them.

The heartening thing about the Post column is that the comments on the blog are overwhelmingly, and fiercely, critical of "On Faith" editors Jon Meacham and Sally Quinn's decision to give space to Perkins on the subject and not to fact-check him. But we still have to wonder when corporate media outlets will stop lending legitimacy to lying bigots in the first place.

—In the debate over what to do with the Bush tax cuts, many Republicans have tried to argue that raising taxes on the wealthy is really something else entirely.

Washington Post columnist George Will tried the tack on October 10, slamming Barack Obama as a "chronic campaigner" who's trying to "arouse the masses" with a deceptive line about how the cuts will mainly affect "millionaires and billionaires." Will offers a counter-example: "In Obama's Chicago, a high school principal can earn $148,000. A police officer with 25 years on the force can earn $114,000—not counting overtime. If the principal and the officer are married, supposedly they are rich."

So the tax hike on the wealthy is actually a hike on cops and principals? It's too bad the Post feels like it has to print this stuff—especially since just a few weeks ago they published a chart that actually explained how the tax plan would work. Will's married couple would face little, if any, tax increase— as much as $400, but probably less.

As the Post explained, actual millionaires would be treated differently. Under the Democrats' plan, those with incomes of $1 million or more would still pay $6,000 less compared to pre-Bush tax rates, but they wouldn't receive, as the Republicans' tax plan would provide, the full $100,000 tax break that Bush gave them.

So the Democrat's tax "increase" for "millionaires and billionaires" would be negligible for the Chicago public servants that Will is attempting to use to get a better deal for the truly wealthy, which includes himself.

—On the October 10 edition of NBC's Meet the Press, Time magazine columnist Joe Klein came on to talk about the mood of the country heading into the midterm election. But as is painfully often the case with big-time pundits, he wound up revealing more about himself.

Trying to explain how voters feel about Washington, Klein provided this anecdote about the public:

They have no idea what the Democrats stand for, except for these big, slovenly pieces of legislation that we've seen which inevitably contain ridiculous provisions. One candidate in Nevada, a Republican running for Congress, said that there's a provision in the healthcare reform bill that small businesses have to set aside areas for breastfeeding women to use their breast pumps. My dad was a small businessman. He didn't need to be told by the government to do that... He would have just said, "Use my office."

The idea that businesses easily accommodate working mothers will come as a surprise to working mothers—most of whom would probably disagree with the idea that a dedicated place to express breast milk is a "ridiculous provision" in a healthcare law, especially since we can't all work for Joe Klein's dad. For the record, there doesn't actually appear to be a small business breast pump mandate in the new healthcare law; if anything, such employers would seem to be eligible for an exemption. But Klein's goal on the show was to point out the ridiculous, and he did that just fine.

—"New kids' TV channel raises product-placement concerns" was the headline of an October 5 Los Angeles Times story. But concerns go rather beyond that on the launch of the Hub, a new kids TV network that's co-owned by a toy company. Yes, with shows based on toy lines G.I. Joe, Transformers, My Little Pony and Pound Puppies, along with Family Game Night, in which contestants play giant-size versions of network co-owner Hasbro's games, it's pretty much every parent's dream. Executive Margaret Loesch says she gets that Hasbro's ownership is a "hot button" but she'd prefer you focus on the other owner, cable giant Discovery. Still, the paper notes, "neither partner is backing off the idea that one of the objectives of the Hub is to move Hasbro's products." As for the FCC, those valiant defenders of the public good, the piece notes that "during shows based on a toy or game, the FCC bars advertisements for that toy or game." I, for one, feel better already.

—And finally, who says U.S. media are too negative? When it comes to Afghan civilian casualties of the U.S./NATO War, the U.S. corporate press' glass is always half full. Take the headlines from a single day, October 13. The London Guardian has a story, "Afghan civilian war injuries double in Kandahar conflict," on the news that the number of Afghan civilians hospitalized for serious war wounds has doubled in 12 months in Kandahar, the focus of Operation Dragon Strike, an ongoing U.S.-led campaign against Taliban strongholds. That day's USA Today has a piece on civilian casualties too, headlined "Civilian casualties in Afghanistan fall sharply" which celebrates, apropos of nothing in particular, that the number of civilians killed or injured by coalition airstrikes has dropped "over the past several years," according to coalition statistics. Which approach you prefer might depend on whether or not you want to feel good, or know what's going on.

PETER STONE

CounterSpin: Follow the money is meant to be a, if not the, cardinal imperative for political reporters, perhaps never more so than at election time. That doesn't mean it's easy, and it's been made even harder by rulings that allow political donors to be even more hidden than before. Why is it important to know who donates or their relationship to candidate campaigns? And have we lost the ability to do that?

Peter Stone has been covering campaign finance and lobbying for decades, breaking stories on Jack Abramoff's influence peddling at the National Journal, and reporting on BCCI at Legal Times. He now leads the Money and Politics Team at the Center for Public Integrity and is the author of their new report on campaign cash. He joins us now by phone from Washington, D.C.

Welcome to CounterSpin, Peter Stone!

Peter Stone: Thanks much.

CS: We know money plays a role in elections, and the bigger the money, the bigger the role. We think it's important to know the sources of that money, not as a parlor game, but because we believe there to be a relationship between who a politician gets money from and how they shape legislation. So, what is new and significant about money in these midterm elections, in terms of its quantity and its sources?

PS: What's new this year is the rise of more outside groups, particularly on the GOP side, outside groups that are allied with the party, trying to help dozens of House and Senate candidates by running ads in their districts or their states. The spending this year has soared in part because of the Supreme Court ruling—Citizens United v. the SEC—that overturned a couple of decades of campaign finance law and permitted corporations and unions to spend unlimited sums on ads and other campaign activities that specifically endorse candidates. The ruling was very controversial from the get-go and early polls showed that some 80 percent of the public opposed the decision by the high court. The decision basically helped to open the flood gates to corporations who wanted to put money into outside groups. Many corporations, according to analysts and campaign finance lawyers, have been wary of doing it on their own because they feared public backlash; they feared consumer protests; they feared liberal groups. But they like the idea, or they apparently like the idea, of putting money into groups where their names are not disclosed. And there's been a proliferation of these groups this year. Top GOP strategists, principally former White House aids Karl Rove and Ed Gillespie starting mulling the idea of more outside spending late last year, thinking about the need to create more groups that could take in money. This is even before the Supreme Court decision came down. So they were conceiving the idea of groups back then. They played a big role in the spring in launching American Crossroads and a couple months later, its affiliate Crossroads GPS, which allows for anonymous donors under IRS provisions. American Crossroads is set up in a way that it has to report its large donors every month. But they set up two arms of this group, and one has been doing very well taking in anonymous donations. So the Supreme Court decision came down in January and kind of was a Godsend to these groups and others as well. Karl Rove had the first meeting back in April, at his house, with many of these groups to talk about the need for expanded coordination this year, which is perfectly legal as long as the outside groups do not coordinate with party committees or candidates.

CS: Now, that's what I was going to ask: it's not illegal as long as?...

PS: They have to do it among themselves. They can't do it with the party committees, and there's no evidence that they have done it with the party committees. But these outside groups are full of veterans who've worked the party committees before. They're savvy insiders. They know how to play the game; let's put it that way. And they've built a kind of shadow GOP here, which is expected to spend roughly 300 million—that's based on their budget projections—on ads and get out the vote for GOP candidates in dozens of Senate and House contests.

CS: Well, let me ask you, I learned from National Public Radio that American Crossroads, this group that you've just been talking about, is now at times aggressively "correcting" journalists who report that Karl Rove is behind the group. Ken Vogel of Politico told NPR that the group has urged them and other media even to take down pictures of Rove and Ed Gillespie from stories that were posted online about American Crossroads or Crossroads GPS, because it's "misleading". How do you think a reporter should respond to that?

PS: Well, they've called Karl Rove and Ed Gillespie informal advisers from the beginning—that's their term for them. They're not paid; they're not on staff—that's what they've said. And I believe that's true—they're not paid, and they're not on staff. But the two helped get both groups off the ground by raising millions of dollars back in the spring in the first report about American Crossroads, that they'd taken a trip down to Texas together early in the year and seen some major donors there. They've been key players, strategists. I think they're trying to downplay their role, and I think the spokesmen for the group take umbrage at the term "started by Karl Rove" but it's kind of splitting the difference, if you will.

CS: Your report describes "a virtual Wild West, with fewer rules and more cash than ever," and a source says: "The financial flows into this election cycle are beyond regulation and beyond the existing mechanisms of the Federal Election Commission and the IRS." That seems finally like something for journalists to not just document, which is very important, but possibly to raise some alarm bells about. What are your concerns about the situation?

PS: Well, I think journalists are looking closely trying to find out who some of the anonymous donors are. It's very hard. I've been working on that. I mentioned one who I discovered based on several sources I trusted. We know that Rupert Murdoch's News Corp has given a million dollars to the U.S. Chamber based on sources that others reported. I've asked a few people at different groups who are their big donors. Scott Reed, a GOP operative who started a new group just this summer called the Commission on Hope, Growth and Opportunity, told me on the record when I asked about that that the big three stepping into the batters box are financial service, healthcare, and energy interests—not naming any companies, but those are the sectors he identified.

CS: So you can take a lead from that...

PS: So I think we have an idea that certain sectors are ripe for fundraising, and certain sectors have been appealed to a great deal. The exact totals we have from those sectors, the exact companies we don't know. And obviously there are lots of other donors outside those sectors, as well.

CS: So it's a matter, really, of just asking questions and keeping on asking them.

PS: Well, it's partly a matter of asking questions. Ultimately there's legislation around that would require more transparency—a bill called the Disclose Act passed the House this year that would require trade groups and others, some of these other groups, to identify who their major donors are in ads. And the bill got out through the House, but it's been blocked twice in the Senate on party-line votes and doesn't have much chance this year. It's possible that it might get through next year. That would be kind of a sunshine measure that would allow for more scrutiny of where some of the money is coming from.

CS: We've been speaking with Peter Stone, of the Money and Politics Team at the Center for Public Integrity. Find them and their new report on campaign cash on their website; it's PublicIntegrity.org.

Peter Stone, thank you very much for joining us this week on CounterSpin.

PS: It's been a pleasure.

DEAN BAKER

CounterSpin: A Wall Street Journal report says financial institutions on Wall Street are set to pay a record-breaking $144 billion in compensation and benefits this year, which represents a four percent raise over the previous record of $139 billion, which they got: last year. Before government "solutions" like TARP (the Troubled Assets Relief Program), the "problems" were popularly understood to be: banks that were "too big to fail," a Wall Street culture encouraging irresponsible risk-taking, and the unfair trickle-down of the costs of that gambling. After the bailout, and TARP officially expired October 3 ...well, what's different, exactly? Should a public looking to take away lessons from the financial meltdown and the political response to it get those lessons from, say, the October 3, Washington Post editorial headlined, "The tale of TARP; A good-news story that's actually true"?

Here to help us sort through the arguments you're likely reading and hearing about TARP is economist Dean Baker, co-director of the Center for Economic and Policy Research and author most recently of Taking Economics Seriously.

Welcome back to CounterSpin, Dean Baker!

Dean Baker: Thanks for having me on.

CS: Well, the Washington Post editorial says "sometimes the spin is true: TARP, reviled by populists of the left and right, produced more benefit for the U.S. economy at lower cost to taxpayers than even its strongest initial supporters expected." In any event, they conclude, we have to weigh its costs "against the costs of not intervening." The New York Times on October 1 went past "lower cost to taxpayers" to saying that TARP, besides as one source has it "saving the world from financial meltdown," also "could conceivably earn taxpayers a profit." So not only is the world saved, but I should look out for a check?

DB: Yeah, well don't look too far. There's a lot of game playing here, and these people presumably know better. I assume it's done in many other contexts. For example, back in '94-'95, when we had the Mexican Tequila loan crisis, we extended loan guarantees and at the end of the day because, in large part, we extended the loan guarantees, the Mexican government didn't need them, and we got paid some amount on that and they said well we made a profit. This is game playing. These people know better. The credit, the guarantees from the U.S. government are enormously valuable. And basically we gave something of enormous value to the biggest banks in the country, many of the richest people in the country, the top executives, stockholders, or creditors, and they allowed them to stay in business and to, as we see now, thrive. And that was enormously valuable to them. They paid way below market interest for that. Now we got some money back on it. We got much, much less if they just had supposedly auctioned off, in effect TARP rights, we're going to guarantee your institution. Suppose we had auctioned that off. That would have been enormously valuable, we would have gotten much, much more money. So this is kind of game playing. If you envision a counterfactual where we say, okay, suppose we didn't make sure that Citigroup and Goldman Sachs and Morgan Stanley and Bank of America went under, well, you would have had those people would have lost trillions of dollars in wealth, which in effect, would be up for grabs. That would be available for the rest of us because you wouldn't have these huge banks out there operating. The idea that somehow the economy was in danger, that it was going to collapse, that really was an absurd scenario that was invented by the banks to basically get money from taxpayers.

CS: David Ignatius had a column in the Washington Post October 14, that echoed the themes that TARP, even though the hoi polloi hated it, really was good stuff, and he said, "ignoring government's achievements in times of crisis is willfully stupid." Ignatius says we should keep our eyes on the real villains, namely the private companies that made these bad decisions. In your mind, is there a conflict, as he's suggesting, between criticizing the financial players and criticizing responses like TARP?

DB: Well, everyone I know put the two in the same boat in the sense that people criticized the government because they were doing the will of Goldman Sachs and Citigroup and the other bad actors in this story. So I'm not quite sure who he is thinking of. I don't think there's anyone that quite fits that boat that blames the government who doesn't also blame Wall Street. I think that the basic story is that people are upset that government responded to the whims of Wall Street and was prepared to cough up trillions in loans and loan guarantees when Wall Street was in trouble but now you have—well we have 15 million people unemployed and, you know, I don't think anyone feels good about that, but that's not a crisis. But they were literally saying the world's going to end. People were saying stuff like that, people like Ben Bernanke, people like Henry Paulson, so I don't mean your man in the street, I mean people in positions of enormous responsibility were saying absolute doomsday if we didn't get the money that would keep the Wall Street banks in business.

CS: Well Gretchen Morgenson at the New York Times has pretty consistently been a more critical voice on these things. Her October 2, story says not only to take the claims of success, of TARP's success, with an "extra hefty grain of salt," but also to "Count on Sequels to TARP," because the legislation promoted as reducing the threat that these huge banks pose for taxpayers and the for the economy—that legislation doesn't actually do that.

DB: Well, the idea that somehow we pass Dodd-Frank, that's the bill of course she's referring to, that that's going to prevent future bailouts—that really is just wishful thinking. If you just run through the scenario, and go let's imagine Dodd-Frank had been in place five years ago, what would have been different? There's no reason whatsoever to think the regulators would have done anything differently. I mean, we have systemic risk regulation. This is the thing I got the biggest kick out of of all because the idea was if somehow we just had someone who though they should look at the risk of banks then they wouldn't have gotten in this situation. We had plenty of people who had that job. They weren't doing the job; they all said everything was fine. So the idea that if we gave them hats that said systemic risk regulator they would have said oh wait a second, this is really risky, that's close to crazy. The basic point was the banks were making tons of money doing very risky activities. The regulators looked at it and said oh, that's okay, because they didn't want to cross Citigroup and Goldman and Morgan Stanley and the other big actors. None of them got fired for it. And you just go, you know as an economist, I just go, I think people respond to incentives. If you're a regulator, whether it's Chair of the Fed, FDIC, whatever position you hold, and on the one hand you go well I could get in a really big fight with Citigroup or Goldman or I could keep my mouth shut and no matter what happens I don't get in trouble, I'd assume most of them are going to keep their mouth shut and ignore whatever dangerous practices these banks are getting into. So, the notion that Dodd-Frank, the financial reform bill is going to prevent another bailout, that really, there's no basis for that.

CS: Well, Morgenson's piece ends with a source saying taxpayers will "revolt" if the losses from these bailouts keep getting passed on to them, but most coverage, including at the New York Times treats the public quite differently in this story. Another Times piece has a source say that though TARP was "probably the only effective method available to us... it really cuts against the grain for a public that is so angry at banks to think that something that so plainly helped the banks could also be good for the public." I get a real undercurrent of people in general are too emotional or too stupid, you know, to know to take their medicine in this coverage. I wonder, what would reporting that really had people's back and was from regular folks' perspective look like on this issue?

DB: Well, what were the alternatives? So they allowed Bernanke and the banks to paint this doomsday scenario that if they went under, the economy shut down. And there were even some formal modeling things: suppose the banks went under and the economy shut down, how bad would that be? The answer: really bad. But our alternatives were not just bailing out the banks or letting the economy shut down. We could of either a) bailed them out with very stringent conditions and people were saying oh we have no choice, we just have to give them the money. No, we could've—you know I make this joke that we could've told them to run around Wall Street naked with their underpants on their heads, they would've had to do it. They had no choice. They were going bankrupt. You're the CEO of Citigroup, go tell your shareholders that we made you run around with your underpants on your head, and you weren't going to do it, so they're out the money. You have do it. They had no choice. We held all the cards there. So a) we could've bailed them out, and just said no you're going to totally restructure—you know, you thought you were going to get 20 million this year, how does 200,000 sound? Take it or leave it. We could have laid down those conditions, you know, take it or leave it, and they all would've had to take it. Second thing is, okay, let's say they do go under, the supposition is we just sit here and we have 20 percent unemployment like totaly morons. No, we actually know how to counter that. We get the Fed out there and basically do what they ended up doing but they do it after the banks go under. They throw money out there so people have money to borrow and that boosts the economy. So they created this totally phony scenario where the only way we could bail things out was to give money to the banks, no questions asked, and if we didn't do that, somehow we were condemned to be stupid morons for the next decade. It's absurd.

CS: We've been speaking with Dean Baker of the Center for Economic and Policy Research. Find their work, including Dean's recent piece, "The Cost of the TARP: One More Time," on the web at CEPR.net.

Thanks so much, Dean Baker, for joining us this week on CounterSpin.

DB: Thanks for having me on.