One year after Mohammed al-Bouazizi lit himself on fire in protest against mistreatment by police, sparking a movement that has toppled regimes in Tunisia, Egypt and Libya, a global wave of popular protest continues, from the Arabic-speaking world to Europe, India, Chile, the United States and Russia. Today, democracy advocates protest unlawful detention, arbitrary power and socio-economic injustice across the world.

December 17, 2011, marks the one year anniversary of Mohammed al-Bouazizis desperate self-immolation, the 24th birthday of Bradley Manning, a US Army private held in solitary confinement in conditions some have described as torture, for allegedly releasing secret documents, and the three-month mark of the Occupy Wall Street movement seeking to take back public spaces, Constitutional liberties, and the fundamental right to active participation.

Tragically, in Egypt, this day of worldwide celebration and peaceful protest is being marked by a deliberate campaign of killing against unarmed civilian demonstrators, by the last holdouts of the old criminal regime, who now say democratic gatherings are counter-revolutionary activities that warrant deadly force.

The news from Cairo today: military police squads stormed into Tahrir Square, lit the protest camp on fire, have shot and killed an unknown number of unarmed civilians, and have allegedly begin throwing people off of a bridge into the Nile River. The depraved indifference to human life is so extreme, the civilian advisory council, that was supposed to lend some legitimacy to the military junta running the country, has resigned in protest.

It now appears that under the negotiations agreed after the fall of Hosni Mubarak, the military council now longer wields any legitimate authority, and it is time forth international community to apply maximum pressure to force all military personnel out of power and implement an immediate, and orderly, transition to 100% civilian rule.

All acts of violence against civilian demonstrators must now be treated by the international community as deliberate, coordinated crimes against humanity, and arrest warrants and/or material witness warrants issued for every member of the ruling military council. International warrants should be put on hold only if the crimes committed are prosecuted through a credible, legitimate, transparent system of due process, in Egypt.

In Syria, after 9 months of resistance to the escalating aggression and violence of the Assad regime against its own people, at least 35 people have been killed in direct military assaults against civilians. Russia and China are blocking direct action through the United Nations Security Council, but Assad has now lost all legitimacy, and will likely be the next dictator swept from the scene. One can only hope it is achieved before he kills another 5,000 of his own people.

In the United States, the use of paramilitary tactics and alternative combat weaponry (including chemical agents, LRAD sound cannon, flash-bang grenades and rubber bullets) to evict or shut down Occupy protest camps, has become commonplace. There is, now, a mounting popular concern about the commitment of elected officials to the fundamental principles of the Constitution.

Instead of honoring the historic force of principle being expressed by the American people, city governments across the US have given in to the darkest temptations of arbitrary power, and have declared the commons off limits for peaceful protest, using potentially deadly force at times to bar citizens from exercising their constitutional rights to free assembly, free speech and open protest (to petition the government for a redress of grievances, many and far-reaching).

But TIME Magazine, recognizing the worldwide wave of citizen awakening that has marked the year 2011, has named The Protester its Person of the Year. Across the middle east, across Europe, in India, Chile, the United States, and now in Russia, a movement of citizen-centered activism is not only occupying public spaces to demand immediate positive change in political and economic structures, but is now publishing, webcasting and building a global collaboration to bear witness to any and all obstacles to genuine democracy.

On December 17, 2011, hundreds of thousands of people across the world are honoring the cause of humanity: freedom, dignity, equal treatment and equal opportunity, and the primacy of the citizen over the power of the public servant. #D17 is intended to be a global day of celebration and resistance.

The Occupy movement in the United States marks its third full month in practice today, and a transition to focused actions to right injustices is underway. Occupy assemblies are discussing and deciding plans for new encampments and an OccupyHomes movement is spreading, as legal advisers, protesters, concerned citizens and others, join together to literally take back foreclosed homes from banks the occupiers accuse of criminal activity and predatory mortgage and foreclosure practices.

The world will enter the year 2012 infused with a now explicit and spreading demand for an end to all forms of tyranny, including that great weapon of all tyrants: official secrecy. Technology, democratic process, creative media and nonviolent civil disobedience are converging to allow citizen volunteers to retake the reins of the decision-making process, potentially turning advisory protest movement into a new civic order, designed to uphold and propagate genuine democratic rights and safeguards.

Engaged citizens everywhere should demand that every public official at every level honor the primacy of citizens over the exercise of power.

The spreading Occupy movement has seen one after another sit-in, protest camp or march brutally and inexcusably assaulted by paramilitary police actions, using chemical agents and other weapons of war, against unarmed, nonviolent citizens exercising their basic constitutional rights. The result has been a rash of unfettered violence across the world against pro-democracy advocates.

In Egypt, officials have openly said they should be allowed to use military violence against civilian demonstrators, because it is being done across the United States. After the atrocities of Oakland, when police fired rubber bullets, flash-bang grenades and tear gas canisters at point-blank range at penned-in, unarmed demonstrators, sending ex-Marine Scott Olsen to the hospital with a fractured skull and brain injuries, the use of paramilitary tactics seems only to have spread.

In New York City, Mayor Michael Bloomberg last week staged an unannounced, midnight raid on the original Occupy Wall Street protest site, using chemical weapons, LRAD combat sound cannon, and police officers in riot gear swinging wildly with billy clubs against anyone in sight, regardless of threat or posture. There has been no penalty, and no punishment, for officers engaged in aggravated assault against civilians.

Mayor Bloomberg deployed counter-terrorist police helicopters to the scene of the violent assault, to prevent news helicopters from filming what occurred. Press were banned from the site, by what authority it remains unclear. At least 26 journalists were assaulted, beaten, injured, and/or detained, on the night of the Zuccotti Park raid. There was a planned, deliberate use of violence and combat tactics against unarmed, nonviolent, even sleeping and prone demonstrators.

The brutality of the raid was so severe that when City Councilman Ydanis Rodriguez (D-Washington Heights) rushed to the site to observe and to make the case against the use of violence to disperse the protesters, he was assaulted by police and arrested for disorderly conduct. According to the New York Daily News: Several people detained with him told me Rodriguez was bleeding badly from a gash in his forehead. Still, by 6 p.m., he had not been arraigned and his lawyer, Leo Glickman, had not been allowed to see him.

Glickman says his client is not even being afforded the basic due process protections afforded to any arrestee and that the citys treatment of the protest and of the councilman is an effort to silence the movement. At least one retired state Supreme Court justice also found her attempts to provide legal observation to the raid obstructed. The Daily News reports the scene as follows:

Retired Supreme Court Judge Karen Smith can’t believe what she saw this week. At the urging of her son, who joined the Zuccotti Park protests weeks ago, Smith had volunteered to be a legal observer in case of mass arrests.

She received a text message early Tuesday that a bust was imminent, so she got to Zuccotti around 1:30 a.m. As she exited the subway at Broadway and Dey St., she met a wall of cops in riot gear who were preventing people from getting anywhere near the park.

“There was a black woman standing next to me,” Smith said. “She kept frantically telling the cops her daughter was in the park and she wanted to make sure the girl was okay.”

“All of a sudden, a cop takes his baton and cracks her in the head,” Smith said. “She hadn’t done a thing. Then they started chasing people down the street.”

Smith’s efforts to get police to recognize her as a legal observer proved futile. Likewise, several reporters who were arrested while covering the protest found their press credentials worthless.

Crimes were committed by authorities that directly violate the Constitution of the United States and its fundamental protections for free speech, freedom of the press and the freedom of the people to peaceably assemble. The denial of access to counsel for some and the barring of press and legal observers from the scene is a clear attempt to circumvent the right of the people to petition their government for the redress of grievances. Some First Amendment advocates have accused the city of barring press and legal observers in order to 1) undermine the evidentiary process and 2) allow for impunity in the use of extreme force by police.

Across the United States, we are witnessing, sadly, one after another mayor decide that the free exercise of constitutional liberties is a threat to public order, only to deploy paramilitary tactics to crush peaceful protests.

There are accusations of a coordinated planning strategy among mayors to determine what level of force they will deploy, and by what means, to crush the demonstrations. Some mayors offices have claimed the right to secrecy for security reasons, and there are Freedom of Information filings being made to learn who knew what when, and who gave which order that led to police firing on demonstrators, or using chemical weapons in unprovoked attacks against citizens.

In Egypt, where the nonviolent Tahrir Square uprising brought down the dictator Hosni Mubarak, in just 18 days between January 25 and February 11 of this year, authorities are now openly citing the actions of American mayors and police forces as justification for their use of extreme violence against nonviolent civilian demonstrators calling for genuine democratic reform. Mayors Bloomberg, Emanuel, Quan and others, are aiding and abetting the use of extreme violence to crush pro-democracy movements across the world.

This is not hyperbole. This is not interpretation. This is what is happening:

• In the streets of New York City, paramilitary forces were deployed, using tactics designed for armed combat in a warzone, using weapons designed specifically for combat in a war zone, deploying chemical weapons against unarmed civilians and banning all press coverage of the event.
• In the streets of Oakland, police shot a former Marine in the face at point-blank range, while he was penned in, and despite his having no weapon of any kind, posing no threat to anyone, and doing nothing of any kind in violation of any law. When he fell to the ground, gushing blood and good samaritans rushed to his aid, which not one of the police present did, an Oakland police officer fired a flash-bang grenade apparently loaded with tear gas directly into the huddle of people trying to help him, as if to finish off the protest with one last shot.
• At UC Davis, police walked along a row of nonviolent student protesters linking arms, and deployed a chemical weapon directly into their faces, with reckless and abject disregard for their health, their wellbeing, their rights, the rule of law or their own obligation to protect and serve.

In each case, the authorities behaved in direct contravention of the Constitution of the United States, and carried out brutal, wanton, physical assault against unarmed civilians. The violence against journalists in New York City is among the most worrying developments, because it suggests a depraved disregard for American law at the highest levels and directly mirrors the kind of planned atrocities being carried out in countries where corrupt regimes are actively trying to stamp out all pro-democracy protest.

In Egypt, the escalation of official violence against protesters has left 33 people dead since Saturday. The lesson of military impunity taught by Mayor Bloombergs assault on demonstrators has been learned, and is being treated almost as legal precedent by corrupt regimes unwilling to consent to any genuine open democratic process. The consequences are increased impunity, increased suffering, the deaths of innocents and an attempt across the region to roll back the democratic gains of the Arab spring.

People across the United States should stand together, regardless of party or ideology, and demand that there never again be even one instance of law enforcement being deployed to use force against any civilians exercising their basic rights.

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Related:

• The Oakland Crackdown (discussion)
• What is the Meaning of This?
• Occupy Wall Street, with a People-centered Investment Bank

Robert Reich explains how big money is taking over the privileges of democratic rights, to the exclusion of ordinary people, and to the detriment of citizens who seek to exercise their basic civil liberties. The violence of police against unarmed civilians is absolutely inexcusable, and it is motivated in part by a systemic disregard for the value of the human individual, of basic rights, of citizenship and of the obligation public servants have to work for, not against, the people they are elected to serve. Says Reich: “WE NEED TO OCCUPY OUR DEMOCRACY.”

The city of Oakland is experiencing a deep crisis of conscience, amid what appears to be the moral confusion of its administration. The mayor, who had marched with the Occupy Oakland demonstrators, has now ordered not one but two paramilitary strikes against nonviolent protesters, in which tear gas, “flash-bang” grenades, rubber bullets and powerful sonic pulses were fired directly at unarmed civilians.

An ex-Marine is now in the hospital, reported in critical condition, and authorities say the paramilitary tactics were justified. New video has emerged clearly showing a policeman firing directly at a group of unthreatening unarmed civilians simply attempting to assist a man injured by the attacks. To many, the crisis seems incomprehensible, even moreso because the mayor herself previously marched among them.

There are calls for attempted murder prosecutions against some of the officers. Thousands are now demonstrating against clear violations of constitutional civil liberties, caught on video. The reaction has spread across the country, and some have questioned whether the mayor should resign.

The most vital question, however, is how can the people of Oakland rally to the Occupy cause, without further inflaming tensions in a city where the elected government openly violates basic civil liberties? What strategy should the demonstrators adopt in order to maintain and defend their rights to peaceable assembly, free expression and to seek redress for grievances, that will allow them to show how steadfast nonviolence wins the struggle against brutal aggression?

Join the discussion here

We need a system of cooperative public-private infrastructure financing, a national infrastructure bank. But we also need to use that fabric of cooperative investment and output to foster specific areas of major improvement to our national economy. The model could be replicated across the world, but the US is uniquely positioned to deploy this solution and to vastly improve its chances of restoring vibrancy to the wider middle class by doing so.

Two parallel projects are necessary to make the infrastructure redevelopment and economic recovery strategy a success:

• a renewable energy infrastructure bank – to help target some of the wider funding options to the project of building a sustainable, smart energy economy, free of the massive externalized costs of carbon-based fuels
• an economic opportunity bank – to aggressively, specifically and persistently direct funds to businesses that are hiring, building capacity at the community level, and restoring real wage gains to the middle class

The first is our topic here: a national renewable energy infrastructure bank. To build such a bank, we would need to first establish how a cooperative public-private infrastructure financing scheme would work. Ideally, it needs to work much like an investment bank, where individual investors see visible gains, but money is kept in the pot for a long enough period of time to produce gain across the full spectrum of investor contributions.

In other words, there has to be commitment to the project, and that shared commitment of resources will yield shared substantial gains to all parties. In the area of clean energy investment, this is possibly much easier than with other types of infrastructure investment, because the industry is entering into a period of massive, and necessary, prolonged expansion. Big investors understand that big investment will help to secure that prolonged expansion.

If Congress acts to incentivize this investment, massive amounts of private-sector capital will flow to clean energy resources. There are three reasons why this will happen:

1. Fossil fuels carry with them massive production costs that have long been externalized; the economy can no longer afford to continue such a strategy.
2. Clean energy technologies offer a major opportunity for prolonged expansion of business value, as information technologies have shown over the last 30 years.
3. There are literally hundreds of billions of dollars of private capital sitting on the sidelines, waiting for directional certainty that fossil fuels cannot provide.

So, how to structure such an operation? The renewable energy infrastructure bank would need the following to reach its full potential:

1. A national price signal or clear set of incentives to direct investment to clean energy
2. An investment strategy that looks at best practices, value to community, prospects for building aggregate demand, and structural resiliency
3. A focus on job-creation, skilled retraining, and positive value feedback loops that favor consumers
4. A legislative charter that sets forth priorities favorable to public-sector, private-sector and start-up investors alike
5. A model for redirecting funding when key elements of a project require support or restructuring
6. A focus on rewarding institutions, individuals and investors who do cutting-edge R&D that is practicable, 100% carbon-emissions-free and scalable
7. Short-, medium- and long-term investment strategies for building, optimizing and utilizing the smart grid

Suggestions for deployment:

1. Implement a national carbon fee and dividend policy, to correct market failures in the pricing of carbon, return control of the energy economy to households and incentivize major private capital investment in the rapidly expanding clean tech sector
2. Identify, build or support and expand, focus facilities in cities and regions across the country, to operate as cooperative laboratories of R&D, start-up incubators, and investment engines (examples might be Brooklyn Navy Yard or Philadelphia Navy Yard, or the Fab Labs project)
3. Motivate scalability planning for distributed clean energy production projects, to ensure sustained investment opportunities, and optimized overlap between community-building, job-creation and investment strategies, for higher overall cost efficiency
4. Ensure legal support for avoiding corrosive business models, favoring generative ones, to ensure Investment flows to the new technologies and collaborative strategies that build future prosperity, not to extraction-oriented investments
5. Reward rapid ramping up of high-efficiency clean energy tech, because this will build structural resiliency, favor the highest-value market-healing technologies, and help to revive the middle class

We can begin doing this nationally tomorrow, if:

• We focus first on wind and solar, due to their naturally occurring US domestic supply far outstripping total demand and all possible demand growth
• We commit to decentralizing innovation, influence and income-growth in the energy sector, so community and regional economies are empowered by the transition
• We recognize the need to fully develop leading-edge infrastructure at all levels
• We identify and elevate the pioneers who already know how to motivate and execute this transition
• We charter public-private partnerships to manage investment flows to stakeholder-defined initiatives

The clean energy economy is coming, and to fully enable its expansion, the US needs to flex the muscle necessry to turn the ship of state, to wrest from entrenched industries and financial investment patterns rooted more in extraction than in generative payoff the ability to decide what comes next. There is nothing beyond clean and renewable in terms of energy production and distribution, except the work of achieving the most advanced efficiency gains and making robust power generation an ever more ephemeral affair, at an ever faster rate.

To lead in that new economy, we need to be the first to build its value.

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Originally published October 12, 2011, at ProjectQuipu.net

The Occupy Wall Street movement—now being called “the American Autumn”, after the Arab Spring, or the September 17th movement, after the day it got started in lower Manhattan—is now completing four weeks on the scene. Yet we can still be astounded to hear so many incredulous “experts” unable to understand how a grassroots movement, infused with the zeitgeist of very problematic times, is working toward anything constructive. What is the meaning of this? Why don’t they have a ready-to-go list of demands? What are they asking us to think?

It’s actually very simple. It’s self-evident, but if you’re at a loss, you can also go to Zuccotti Park, or to any of the Occupy Together protest sites, and just talk to people, and what did not seem evident will rapidly become so. The meaning of the Occupy Wall Street movement that is spreading across the United States like wildfire is: democracy. The unifying sentiment, which is actively put into practice every day at Occupy encampments, is that citizens have a right to participate. They are building a participatory process to restore the principle of informed citizen participation to our political system and our economy.

Listen to the protesters: “Show me what democracy looks like! This is what democracy looks like!” This is not pretend protest; this is the message. The message is that people have a right to free assembly, have a right to free expression, have a right to govern their own destiny, have a right to earn a living, to expect that as citizens of a free society, as implicit signatories to the social contract that gives legitimacy to our democracy, they have a right to be treated with dignity.

Above all, they believe it is necessary to restore to prominence the idea that we all have a right to expect that the powers that decide the shape of our everyday existence 1) represent us, and 2) be accountable directly to us, to the people. Participation and transparency are antidotes to the temptations of unfettered power, elite negotiating environments, and deals that ignore the interest of most people and structure outcomes to favor insider interests. Participation and transparency are democracy; their absence is not.

The non-violent citizen-action uprisings that ousted dictators in Tunisia and Egypt early this year inspired a wave of protest across Spain, in which people calling themselves Los Indignados—the indignant—occupied central squares in Madrid, Barcelona and cities across the country, with semipermanent encampments: acampadas. They formed asambleas by topic or task and held asambleas generales to decide the direction of the national movement through direct democracy.

OccupyWallStreet.org describes the American movement as follows:

#OCCUPYWALLSTREET is a people powered movement for democracy that began in America on September 17 with an encampment in the financial district of New York City. Inspired by the Egyptian Tahrir Square uprising and the Spanish acampadas, we vow to end the monied corruption of our democracy … join us!

There is now a nationwide OccupyTogether movement that seeks to coordinate the actions, debates and proposals of protesters across the United States, and across the world. As of today, they have rallies planned for 1,539 cities, large and small.

The global movement inspired by the Tunisian and Egyptian uprisings has spawned not only the Spanish acampadas and the American Occupy protests, but also the Chilean student uprising, which has shut down much of Chile throughout the southern winter, as students demand wider access to high quality public education.

Some participants have been very vocal that the message should consistently be anti-corruption. And it clearly is. In every sense, the non-violent, sleep-on-the-street, do-for-others, collaborative enterprise that is the Occupy Wall Street movement, has persistently demanded transparency, integrity, corporate social responsibility and accountability. It is very much about transcending what is corrupt in the current system. But it is also about something deeper than that.

Last week, with a large crowd echoing her words in chorus—a practice called “the people’s mic”, done to amplify spontaneously, at the human scale, without electrified amplification—Naomi Klein said the movement was attempting one of the most arduous, improbable and time-consuming tasks: that of “changing the underlying values of our culture”.

There have been crazily tone-deaf responses from some in the political establishment, calling citizens engaging in constitutionally protected non-violent assembly “mobs” and referring to calls for justice, fairness and the restoration of middle class opportunity “class warfare”. What motivates such comment is hard to fathom, though pundits, activists and foreign observers alike seem to think it is simply an unwillingness to see the obvious truth: that the powers that be have forged a dysfunctional and distorted economy that does not benefit most people and does not foster real democratic freedom at the human scale.

The movement has consistently made reference to “the 99 percent“, the vast majority of people not earning 7-figure annual income. The movement seeks to represent the right of that 99 percent of all people to be heard, to have a direct role in helping to fashion the policies that determine what kind of society they and their children and families will inhabit. Messages describing the complaints and motivations of those who want better treatment of the 99 percent are posted at We are the 99 percent.

And they have won support from many of the 1 percent that do benefit from the policies that disadvantage so many. A Tumblr page called We stand with the 99 percent is recording their messages of support for the Occupy Wall Street movement.

The Occupy Wall Street movement seems only to be spreading, gaining support and becoming more organized, because it is focused on restoring a sense of reason and justice to a nation too long forced to accept widening inequality, rigged markets and pervasive corporate tax dodging. The cause is as close to universal as one can get. It is about calling on those with responsibilities to hundreds of millions of people, whose decisions affect the lives of hundreds of millions of people, to behave as if that responsibility carried some weight in the calculus of their decisions.

The Occupy Wall Street movement is about people willing to give voice to those without a voice. In the assembly process, people don’t just debate ideas, or choose leaders. They aren’t caucusing for positions, or jockeying for influence. The assemblies allow anyone to speak, and aim for consensus. The consensus building process entails hearing all voices, considering competing ideas, then building coalitions of support in order to achieve real consensus among those in attendance. The plan is direct democracy, plain and simple, but specifically a kind of direct democracy in which no one is marginalized.

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Originally published October 14, 2011, at ProjectQuipu.net

With gasoline prices at record highs in 2008, 2009 and 2010, 2011 has looked like a microcosm of the longer oil-market trend: consistent increases in pricing, fuel costs hurting small business and the middle class, slowing the pace of economic growth in the US, and—maybe most strangely of all—no national policy to motivate a rapid, comprehensive transition away from fossil fuels and the volatility and cost inefficiency of their products to the wider marketplace. Instead, we have seen a recommitment to ramping up production, expanding drilling and exploration, and prioritizing local importation (from Canada and Mexico), instead of real coordinated policy planning to end dependency on foreign-sourced fuels.

With the oil strain on an already precarious American economy at an historic extreme, Pres. Bush in 2008 pushed Congress to hold an “up-or-down vote” on renewed exploration of the Outer Continental Shelf (OCS) before its August recess. Opponents protested vocally that none of any oil found there would be available for production for 10 to 15 years, the total amount would do little to ease the overall dependency on foreign-sourced fuels, and that the OCS plan was little more than an aggressive attempt to deliver to hugely profitable oil firms an unjustifiable gift, taking advantage of the pressurized situation of exorbitant prices.

The Energy Information Agency (EIA), evaluating the OCS strategy, found that opening offshore sites in the Pacific, the Atlantic and the Gulf of Mexico would still not produce enough oil and natural gas to have a significant effect on domestic reserves, even as far out as the year 2030. In July 2008, as the debate raged over drilling, CNN reported that Democratic members of Congress were saying a preliminary investigation was attributing more than 50% of the soaring oil prices to speculation, while traders were saying OPEC had deliberately held production low in order to drive prices up. Dependency on speculation-susceptible foreign-sourced fuels was building unaffordability into the US economy.

So, after three years of prolonged economic malaise, with the energy and fuel sectors continuing to extract massive amounts of wealth from our local and regional economies, transferring economic leverage away from the middle class and spontaneous job creation, we must face the underlying truth: that fossil fuels work on the marketplace in ways that are corrosive to the long-term health and stability of democratic societies conducive to a vibrant middle class. And given the massive negative externalities, which all of us are funding all of the time, and the unaffordability of so much of the stagnant, status-quo industrial economy, we must also face the increasingly clear economic reality that carbon emissions are not just destructive to the health of our natural environment, but that they have real economic costs not directly related to ecosystem resilience, such as human health, and the cost of industrial activity related to clean-up and to the obsolescence of devices running on combustible fuels.

Devoting increasing amounts of our energy economy to combustible fuels at a time when prices are soaring—a periodic reverse trend of a few months of gradually easing prices is not a reversal of the long-term trend—has a multiple-negative economic effect. The key to understanding what is happening, and which looks likely to make recourse to nuclear and carbon-based fuels counterproductive, is to understand that we are no longer living in a traditional industrial energy economy. We are now dealing with the consequences of that economy’s exploration and combustion burden. The “carbon footprint” is not merely an environmental ethics concern, but a serious economic factor potentially mitigating future productivity, or added long-term costs on a scale never before seen.

Sen. John McCain (R-AZ), the 2008 Republican nominee for president, proposed building 45 new nuclear plants across the country in order to bring down energy prices overall. The idea was borrowed, to a large extent, from then Vice President Dick Cheney, who had long been close to the nuclear lobby and who included nuclear energy as part of his initial proposals for a new national energy policy. Yet the economic reasoning behind such proposals is dubious: no plants have been built in the US in three decades, and environmental and cost concerns, including pending court rulings, make the strategy unlikely to be implemented.

The state of California—the world’s 5th largest economy—has only two nuclear plants, so the amount of energy sought in producing 45 plants is more than ambitious, especially when compared to the promise of new alternative fuel and energy-production options. That each plant could ulimately cost taxpayers tens of billions of dollars in construction, maintenance, security, decomissioning, insurance, health and environmental costs, makes the proposition seem like an ill-informed proposed detour into fiscal collapse.

The entire nation has only 104 nuclear reactors, so the commitment to 45 new nuclear power plants—under McCain’s 2008 plan—would be serious, even as new options become available. What’s more, the history of accidents and near accidents is widely unknown among the public. We know the word “Chernobyl”, but most people don’t know that the V.I. Lenin Memorial Chernobyl Nuclear Power Station had four reactors, only one of which exploded in the cataclismic disaster of 1986. The other three reactors were finally shut down only years afterward, in 1991, 1996 and 2000, respectively. And, the Ukraine’s largest nuclear plant, also Europe’s largest, at Zaporizhzhia, has six pressurized light-water reactors.

We saw this spring what kind of unrelenting social, economic and biological catastrophe can result from the failure of multiple reactor cores, containment strategies and engineering and regulatory mechanisms, when Japan’s Fukushima Daiichi complex went into meltdown, after being struck by a tsunami. That crisis has yet to be fully contained, and no government agency in Japan or elsewhere, seems willing to publish definitive statistics detailing the full scale of the radiation released into the air and water. We know that contaminated rain has fallen on the other side of the Pacific Ocean—which covers half the globe—and so the US is living with fallout from the ongoing Fukushima Daiichi disaster.

We have heard of the serious nuclear accident at Three Mile Island, Pennsylvania, in March 1979, in which partial core meltdown in one reactor led to the release of 43,000 curies of radioactive krypton (1.59 PBq), and 20 curies (740 GBq), considered a relatively small amount of the especially dangerous iodine-131 isotope, into the surrounding environment. But few people are aware of the major explosion, following core meltdown, in January 1961, at the National Reactor Testing Station in the Idaho desert. All three people working the plant during the explosion were killed and the radioactivity levels were so intense, they were required to be buried in lead coffins.

A massive 890 square-mile complex, now known as the Idaho National Laboratory, was the site of the first success in producing electricity from nuclear reactions, and is in part a national historic landmark. But among its 52 reactors, only three are currently operational, and there are reported to be plans to use at least one to produce plutonium-238 for classified national security purposes.

Now, given the intense security concerns related to nuclear power, rapid construction is literally impossible. Federal public health and environmental laws also require fastidious attention to detail, which has intensified since the last plant was constructed 3 decades ago. Failure to meet with absolute precision all the security requirements can result in catastrophic accidents and/or major cost-overruns in relation to federal regulatory fines and/or takeovers. This means that entirely new systems for construction need to be designed and tested before even the first construction of any new plant can begin.

There is, simply put, no way that new nuclear plants can affect current gas prices.The timeline here has also been pushed back as far as 2030 for any significant shift on percentage of national energy production derived from nuclear power, if the massive new construction project were undertaken.

With both offshore drilling and new nuclear construction likely to delay the infusion of new supply into the domestic energy economy, the real economic result of committing to these strategies for expanding domestic energy production may actually be the increase in prices for oil and automotive gasoline, as it becomes clear that overall supply depends heavily on these resources for the foreseeable future. Over the last few years, as carbon pricing legislation has stalled, discussion about future economic development has shifted to the need for funding the broad expansion of national infrastructure for renewable resources, like wind and solar power.

It is fair to say that given the revolutionary advances in cost-effective construction and comparable end-user cost for renewable resources—we now know existing wind and solar technologies can power the entire US economy—, there has not been enough attention given to the potential for rapid infrastructure development that could bring new sources of energy production online within 2 to 3 years.

We face a stark choice, at this moment of economic division, confusion and peril: we can continue to heavily invest in the old, dirty, costly energy paradigm, or we can deploy smart policies to price carbon accurately, in a way that is designed to return economic influence to the middle class, to innovators and communities, and build a local, user-centered smart energy economy.

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A version of this report was originally published July 31, 2008, at CafeSentido.com

Saturation means more of a given ingredient cannot be added to a given volume or fabric of activity, without spilling over, and being wasted. The fossil fuels market is saturated, in the sense that it cannot effectively capitalize on major new production investment without major new construction of productive facilities. The industry has effectively pushed prices higher and cannot reduce them without seeing a dropoff in profits. Most people can no longer afford the fuel they used to consume.

This raises the question of scalability. Scalability refers to the notion that as activity of a given kind expands, as the benefits and efficiencies of size, reinforced by growing market share, which means a greater ability to determine outcomes, an economy of scale arises: a thing begins to cost less per unit or per usage, because a scalable activity has made the unit or the usage cost less without reducing overall revenues.

Scalability depends on many other features of the marketplace, however. One of these is the value of investment. Another is the availability of that investment. When a market has already gone global, and is controlled by a handful of megaconglomerates and governments, and is saturated, and is pricing reliant consumers out, investment slows down. In a credit-scarce economy where no one is as rich as the oil interests, even moreso.

The ability to rapidly scale up production, and to create a potent and escalating visible return on investment for consumers, is hampered by justifiable skepticism about where this globalized, saturated and entrenched market sector can hope to go. Add to that this problem of a business model whereby one consumes a finite fossil resource that cannot be reproduced, burning one’s assets as one goes, and you have a model that does not shape up favorably for the 21st century.

The S&P 500 are now sitting on over $1 trillion in accumulated cash reserves. This money could, and normally would, be invested in future economic development. But sclerosis in the top-heavy oil sector, a serious lack of capital in the hands of consumers, and the real vulnerability of banks and even governments, are all conspiring to hold that money back. Wise investors understand that when the marketplace for risk and investment fails, a rainy-day fund is the best option.

In stark contrast to the fossil fuels sector, the clean renewables sector:

• is far from saturated,
• produces an ever-increasing rate of return for investors,
• is primed to produce economies of scale,
• can offer more jobs at better wages over a longer term,
• and lends itself to accelerating efficiency gains.

So, why are so many smart people still saying they favor the economics of oil? Two reasons:

1. They are invested in the fossil-burning-for-profits model and so don’t accurately perceive the saturation problem;
2. They don’t understand the paradigm shift and so view clean energy not as a rapidly expanding market but as a feeble one.

It’s not presumptuous to make these assertions about the anti-clean-energy crowd; it’s giving the benefit of the doubt to people who are not seeing the lay of the land as it is, but rather as they are accustomed to hoping it is. It is wishful thinking to hold that oil will always be king and no better option will replace it, wishful, that is, if you profit from oil’s dominance. The same with coal.

We are running out of ways to extract coal cheaply without literally blowing mountains apart, wiping them off them map, which carries very significant costs. Coal is an 18th-century technology not optimized for our 21st century needs. While employment from coal steadily declines, the risks and costs of its production mount, and coal-rich communities continue to experience chronic endemic poverty which the industry has been unable to solve.

We are running out of easy access to oil; the remaining reserves are trapped in undeveloped remote wilderness, behind high-risk, low-yield extraction processes that require major new dirty energy infrastructure to be built. Their development will impede investment in and development of better, cleaner, more efficient alternatives. We can do much better.

The fossil fuel saturation problem, known to states like Texas as an ongoing “energy emergency”, means we need to be actively searching not only for alternative fuels, but also for investment opportunities where we can build in drivers of more generalized prosperity, i.e. a restored and strengthened middle class, and accelerating returns in productive capacity.

The only way to achieve that is by building a smart-grid-based distributed clean renewable-energy market.

- – -

Cross-posted from TheHotSpring.net

El ser humano se ha vuelto tan influyente en los proceso naturales que los científicos ahora temen que la naturaleza ha perdido capacidades vitales de resistencia

Futurismo Verde :: En una reunión de científicos europeos, en Estocolmo, el hombre que inventó el término ‘antropoceno’ para describir una nueva época geológica—en la que la influencia humana domina los proceso naturales—ha anunciado que el término ahora se está aplicando desde múltiples campos de estudio. La importancia real del término es que la información ecológica es cada vez más imprescindible para poder llevar a cabo las ambiciones humanas de una forma responsable y sostenible.

The Financial Times, de Londres, ahora informa que “The EuroScience forum in Stockholm heard on Thursday that climate change was the most obvious of a complex range of man-made effects that is rapidly changing the physics, chemistry and biology of the planet.” [En el foro EuroScience, en Estocolmo, el jueves pasado, escucharon que el cambio climático era el más obvio de un complejo tejido de efectos de la actividad humana, que están cambiando rápidamente la física, la química y la biología del planeta."] Otros efectos tendrán que ver con la resistencia de la cosecha, fertilidad de la tierra, elasticidad de habitat vital para especies de sustento.

El alba de la época Antropocena, en la historia geológica, conlleva una cantidad importante de desafíos y oportunidades. En sentido de llevar a cabo una transición rápida de ubicuos modelos económicos a una metodología sostenible, hay una gran oportunidad de aumentar la producción económica potencial de la economía global. Hacerlo, sin embargo, exigirá cantidades masivas de inversión y de innovación acelerada.

Un grupo de 21 de los científicos e investigadores más respetados ha publicado su estudio de la cronología geológica en GSA Journal, y han confirmado que ocurrió un cambio fundamental a una época geológica definida por el efecto humano en el medio ambiente, a principios del siglo XIX. Lo que ocurre ahora, más allá de eso, es que se está desarrollando una conciencia del impacto severo de 200 años de expansión industrial agresiva, incluyendo explotación de recursos, construcción urbana y remodelación terrenal sin precedentes.

Estamos llegando a un punto de inflexión, después del que la ciencia no podrá evitar la necesidad de reconocer y manejar los impactos de la actividad humana en los sistemas naturales. Se ve ahora alteraciones fundamentales en la sedimentación, calidad de tierra, patrones geológicos y habitat biológico, hasta en la misma flora y fauna que habita los sistemas naturales afectados, y en la atmósfera respirable.

Específicamente:

From the beginning of the Industrial Revolution to the present day, global human population has climbed rapidly from under a billion to its current 6.5 billion (Fig. 1), and it continues to rise. The exploitation of coal, oil, and gas in particular has enabled planet-wide industrialization, construction, and mass transport, the ensuing changes encompassing a wide variety of phenomena, summarized as follows. [...]

Humans have caused a dramatic increase in erosion and the denudation of the continents, both directly, through agriculture and construction, and indirectly, by damming most major rivers, that now exceeds natural sediment production by an order of magnitude [...]

Carbon dioxide levels (379 ppm in 2005) are over a third higher than in pre-industrial times and at any time in the past 0.9 million years [...]

The projected temperature rise will certainly cause changes in habitat beyond environmental tolerance for many taxa (Thomas et al., 2004). The effects will be more severe than in past glacial-interglacial transitions because, with the anthropogenic fragmentation of natural ecosystems, ‘escape’ routes are fewer.

Los mecanismos principales de resistencia ecológica se ven erosionados, y el medio ambiente natural se encuentra menos capaz de adaptarse a los cambios en los sistemas naturales y su manera de competir dentro de y entre sí. El estudio también cita evidencia de un nivel acelerado de extinción de especies y de la creciente probabilidad de una ola masiva de extinciones, resultado directo de la actividad humana.

La comunidad científica ha comenzado a elaborar modelos informáticos del sistema natural integral, un complejo de ecosistemas e interacciones a nivel planetario. Esos modelos servirán para averiguar hasta qué punto la actividad humana influye en el medio ambiente y cómo se puede actuar para mitigar esos impactos y lograr un futuro más sostenible, y más capaz de seguir proporcionando los beneficios naturales necesarios como base de la civilización humana.

La idea del periodo Antropoceno es más que una clasificación cronológica del momento en el que nos encontramos. Se trata de una conciencia cada vez más desarrollada de la necesidad de modificar nuestras tendencias para colaborar con los sistemas naturales de los que dependemos tanto para la supervivencia. Es un despertar al efecto que tiene nuestro nivel de vida, nuestra producción y consumo industriales, y a lo que significa la integración de las sociedades alrededor del planeta, en una red global de comunicación y un mercado global de intercambio material y cultural.

Es posible ahora hablar de una creciente conciencia global de la necesidad de cambiar las motivaciones básicas de la política estatal, el negocio privado, el consumo y los mercados en general. Es posible ahora hablar de un momento en el que la evidencia existe para darnos cuenta del poder que tiene la industria de una civilización globalizada sobre el medio ambiente.

La época Antropocena existe porque el impacto medioambiental ya no se trata de un impacto local, en un ambiente limitado, sino de un impacto a nivel global, con secuelas en ecosistemas que no parecen tener contacto directo con la causa de su malestar. El cambio de pensamiento que ahora viene tiene que coincidir con una creciente capacidad de imaginación y colaboración, para dejar atrás la dependencia peligrosa que nos ata a los combustibles fósil.

• Geological Society of America: “Are we now living in the Anthropocene”
• Financial Times / MSNBC: “Scientists warn of a new Anthropocene age”
• About.com Geology: “Introducing the Anthropocene”
• Max-Planck-Institut für Chemie: “Anthropocene” [article that coined the term]
• Resilience 2008: “Resilience, Adaptation & Transformation in Turbulent Times” [Conf., Stockholm 14-17 April]
• Albaeco, Sustainability School: “Masking Environmental Feedbacks”

A return to people-centered investment can motivate the flow of private capital

As I go back and look over what was being written about the economy, and the federal budget, the lost Clinton surpluses, falling wages, and the property bubble, throughout George W. Bush’s second term in office, it is clear the signs were there throughout that a major financial collapse was coming. Many observers, some more astute than others, predicted a correction was in the offing, without having to depend on very complex analysis.

In fact, simple arithmetic sufficed: there was not enough private wealth being generated in the Bush economy to sustain generalized economic growth. Millions of people were not earning enough to pay back what they owed. The mortgage industry was too reliant on refinancing to make existing loans payable—too often, the logic was: take out a second loan to pay your first. Cost of living was soaring while wages were falling, and Bush’s budgets were essentially pretending the two most expensive wars in US history were not real spending.

Now, in 2011, with the benefit of hindsight, we have learned that economic growth was substantially slower, at least in 2008, than we had previously thought. Some defend the Bush administration, saying the numbers could not be known adequately then, that the measures were flawed, or that we have expanded economic transparency generally since then, and so now know more than we could have then.

From The Economist:

ON DECEMBER 16th, 2008, President-Elect Barack Obama met in Chicago with key members of his economic team to discuss their response to the deteriorating economic situation. Just two weeks earlier, the Bureau of Labour Statistics reported that 533,000 jobs had been lost in November, after a decline of 302,000 in October. According to the latest output figures, the economy had contracted by 0.5% in the third quarter, and much worse was expected of the fourth. …

President Obama was inaugurated on January 20th, and a stimulus bill was introduced in the House of Representatives on January 26th. A stimulus package worth $819 billion passed in the House just two days later.

Two days after that, Americans received grim news about the economy: in the fourth quarter of 2008, GDP contracted at a 3.8% annual pace—the worst quarterly performance since the deep recession of 1982.

What we now know, however, is that those reports—which were the mathematical foundation for the American Recovery and Reinvestment Act, and the Obama administration’s belief that unemployment could be kept to 8%—were radical understatements of the economic chaos that was unfolding.

In fact, as The Economist report continues:

Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.

When Obama was implementing the stimulus, the official numbers from George W. Bush’s administration showed negative growth in the third and fourth quarters of 2008 to be 0.5% and 3.8%, respectively. In fact, the reality, never shown to Obama or any top policy-makers in Washington until two years after the Recovery Act was law, was negative growth of 3.7% and 8.9% in the last two quarters of 2008.

Both of those figures were worse than anything seen in nearly 20 years. The fourth quarter decline of 8.9% was the worst since the double-digit single-quarter decline of 1957. And there were very good reasons to worry that GDP was being artificially inflated by anomalous activity: the Pentagon’s record budget, for instance, counts as GDP, but was far beyond any historically normal level, and with two concurrent wars, would eventually have to decline. (The recession of 1945, many believe, is attributable in part to the war-spending bubble deflating as the war came to an end.)

But the question then would have to be: what was really going on in the private-sector economy, if government policies were propping up GDP? Where was household wealth going to come from to fund the record, and rapidly expanding, debt Americans had taken on? How could people get this wealth, if it was not available through wages and other costs of living, aside from credit repayment, were rapidly escalating?

For trained observers watching financial markets, and who had some understanding of the “extreme investing” that was going on, and becoming mainstream, through complex mortgage-backed securities and credit-default swaps, it was clear huge swaths of the financial sector were essentially underfunded and could collapse. The property bubble, however, was visible, and was well understood—and discussed—by prominent voices as early as 2005.

The Economist magazine ran a cover story in June 2005, exploring what would happen “after the fall”, projecting a global collapse in real estate markets, severe economic fallout in Europe and the US especially, the contraction of private wealth generation for most people in those markets, and resulting budgetary shortfalls that could cripple governments and their ability to respond.

Part of the problem is the idea of GDP itself: it is a flawed measure of economic health and wellbeing, because sometimes expansion is illusory or somehow counterproductive, and contraction can be a healthy correction, resetting apparent values to where they actually lie. That something was wrong with GDP measures across the developed world was evident throughout Bush’s second term; what was not evident was how to get out of the mess without inviting economic collapse.

Is that, however, a defense of the policies enacted from 2005 to 2009? In early 2008, when George W. Bush introduced his federal budget proposal for Fiscal Year 2009, his last official budget, there was widespread concern the policies he proposed were reflective of and would invite more sustained economic malaise. He had built into the federal budget record deficits, but had not yet begun counting the wars in Iraq and Afghanistan as budget items—the fear was this would give a distorted impression of the nation’s fiscal health, and might conceal from key decision makers worrying revenue shortfalls that could hamper overall growth.

Interestingly, the longest recession since the Great Depression—it lasted 18 months, from Q1 2008 through Q2 2009—with such deep declines in GDP was over by the third quarter of 2009, Pres. Obama’s second full quarter in office. The GDP growth rates for that period were:

• Q1 2008: -1.8%
• Q2 2008: 1.3%
• Q3 2008: -3.7%
• Q4 2008: -8.9%

• Q1 2009: -6.7%
• Q2 2009: -0.7%
• Q3 2009: 1.6%
• Q4 2009: 3.8%

It is evident that the Recovery Act worked. Economic growth continued steadily throughout 2010, and is weaker now that the stimulus spending is beginning to wind down. There are mounting concerns that massive federal budget cuts will have a depressive effect on the economy, literally withdrawing hundreds of billions of dollars a year in economic output from the domestic economy.

For some, this is healthy and corrective. But to the average American household, it feels very much like a period of prolonged economic malaise. We can blame financial analysts, rating agencies and policy-makers, for creating the economic framework that ignored long-running pathologies and exacerbated the crisis, by using unfunded derivatives, rampant credit expansion, tricky accounting and record Defense spending, to conceal the clues, but it is more important to learn the lessons, to avoid doing the kind of things that impose crisis on ordinary working families and small businesses.

At present, the government has issued so many historic tax cuts, from 2001 right through 2011, that revenues are at historic lows, just 14% of GDP. Budgetary requirements, by contrast, are upwards of 22% of GDP. That is the cause of the record deficits, and much of it is about correcting course from a time of underfunded hyper-exploitation, in which the underpinnings of sustainable economic growth were eroded by flawed theories, flawed reporting of data, unsustainable borrowing and unwarranted gambles.

Total federal government revenue for 2010 was just $2.092 trillion, while GDP for 2010 was $14.66 trillion, so revenues amount to only 14.27% of GDP. With spending at $3.397 trillion, or 23.17% of GDP, there is a resulting stimulus shortfall to the wider economy. The deficits from the Bush years, which helped to conceal the gravity of the mounting economic crisis, have been passed to the Obama years. And now, with BEA revising its reporting for all GDP figures since 2006, in July 2011, it is clear the 2009 stimulus was less than was needed, not more.

The question is: if we were able to see the oncoming economic collapse years before it happened, but we are still living with the legacy of the policies that created it, how can we get back to the healthy growth of late 2009, early 2010, and avoid slipping into another recession? American businesses are sitting on record amounts of cash, and banks enjoy record low interest rates, to stimulate lending, yet neither are putting money into the economy.

A specific kind of policy course correction, then, is needed to motivate significant private investment in new industry, new technologies, and new jobs. It has to be the kind of policy that will not cost taxpayers a lot of money, that gets money from industry profits moving through the consumer economy, and which either before or after achieving that, results in the net creation of millions of new jobs.

There are few ways to achieve this, but there is real promise in the energy sector. Because energy is tied into all other economic activity, which means that virtuous adjustments to how we find energy, how we harvest it, and how we get it to consumers, will ultimately push a cascade of positive impacts through the economy.

According to the Carbon War Room:

Investing $1.3 trillion each year in green sectors would deliver long-term stability in the global economy, a new UN report has suggested. Spending about 2 percent of global GDP in 10 key areas would kick-start a global low carbon, resource efficient green economy.

Since the oil crises of the 1970s, billions of dollars have been pumped into technology development in the areas of energy efficiency, low carbon energy, efficient transportation, bio-fuels, and other areas. This investment has led to hundreds of breakthroughs that are today cost effective. Yet, full commercial utilization of these innovations and their financial rewards still elude us.

What is needed to deploy those breakthrough innovations is for private capital to come off the sidelines and motivate collateral investment in an overhaul of our outmoded energy sector. Clean, renewable energy sources will replace dirty, finite combustible fuels; the question is whether it happens sooner, bringing the economic benefits to more people at a lower overall investment cost, or later, putting off the moment of maximum opportunity.

In many ways, the legacy of the Bush years will be one of putting off the moment of maximum generalized economic opportunity. Much was done to slow the development of rivals to the fossil fuels sector, and unprecedented amounts of money were spent to protect, obtain and propagate the use of fossil fuels. Even the catastrophic deepwater BP oil well failure of 2010, with net cost impact estimates running as high as $100 billion, was the result of a culture of lax regulation and virtually non-existent safety and emergency planning, instituted by the Bush-era Interior Department.

That the signs of impending economic calamity were visible for at least four to five years before the financial collapse of 2008 is an indication of how urgently policy makers need to learn the lesson that all citizens are stakeholders in the outcome of our broader economic policy and that the work of government is to protect stakeholder interest, not shareholder interest.

A confusion of the two may be the leading philosophical driver of the 2008 collapse, as shareholder interest was thought to be inherently virtuous for wider economic prosperity. But in the hyperactive financial markets of 2001-2008, shareholder interest was too often served by practices that ran contrary to the wider interests of sustainable economic growth and generalized prosperity.

If we are to emerge from the Great Recession and its aftermath stronger and more resilient than we were when it set in, then we need to favor government policies that actively consider the stakeholder interests of citizens and incentivize private investment to work for the wider economy. The capture-and-hold profit-making of the Bush years was in many ways illusory and corrosive to long-term economic health; we need real investment, with resilient, optimizing impacts on the consumer economy, so that more people are earning, more people are spending, and more people are building assets and buying power to keep us secure against another collapse.

Recommendations: 

• To Solve the Debt Crisis, Rebuild the Middle Class
• Why We Should Have a National Infrastructure Bank
• Fee and Dividend: To Spur Job Creation, Industrial Boom

Perry touts Texas jobs record, promises to make government “inconsequential”

Today, three-term Texas governor Rick Perry announced his bid for the Republican presidential nomination, promising to foster innovation and enterprise. The speech offered no specifics, but Perry called for simplifying the tax code and promoting private business interests. In what may be the most striking and unusual phrasing of the speech, Perry promised, with passion: “I’ll work every day to make Washington, DC, as inconsequential in your lives as I can.”

Perry offered no plan for balancing the widening federal budget deficits, calling instead for what appeared to be a new round of tax cuts for business and decrying the American government as an institution that “takes too much” from its people. While short on specifics, Perry’s speech was a startling departure from what many believe to be the economic reality of the times: taxes are at historically low rates, revenues are so low, economists fear budget shortfalls are stunting economic growth, and Perry, who has left Texas with a $27 billion budget deficit is calling for cuts and for a radical rolling back of government.

The speech was in many ways like the speeches given by George W. Bush during the 2000 campaign, referring wistfully to the ideology of Margaret Thatcher, decrying the American government as intrusive and corrosive of free enterprise, and promising tax cuts that could lead to serious long-term stagnation for average household wages and the wider consumer economy. Perry attacked Pres. Obama, suggesting that his economic agenda—which has favored entrepreneurship, small business and innovation—is somehow the opposite of what it has been.

And in what appears to be a foreshadowing of Perry’s coming campaign of free-market rhetoric, Perry vowed to repeal Pres. Obama’s “one-size-fits-all government healthcare plan”—which, incidentally, does not exist and was never part of the Affordable Care Act. Perry’s rhetoric is tough, aggressive and ideologically deep-seated, but he will have to be far more disciplined about facts and solutions. Beyond that, he will have to grapple with the realities of both the healthcare law—already paying dividends in lower cost growth and popular among many who have benefited—and the budget—where he will not have the liberty to run up massive deficit spending to pay for new tax cuts.

Perry’s record in Texas is decidedly mixed: while he and his supporters have talked up the so-called “Texas miracle”, the miracle is in many ways an illusion. While there have been more new jobs created in Texas than in other states, unemployment remains high, wages have declined, most of the new jobs are very low paying, and immigration, including illegal immigration, which Perry has opposed, is considered to be the main source of growth in the Texas economy.

On energy, Perry’s record also must be of interest to voters: while Texas has more developed energy infrastructure than any other state, it is presently in its fifth “energy emergency” of 2011, and has had to resort to importing electricity from Mexico. This is in part because, while talking up his interest in renewables, and benefitting from a ground-up boom in wind energy production in his state, Perry has helped to impede the building of new clean energy infrastructure, favoring huge subsidies for fossil fuels production, making his state more vulnerable to foreign oil powers, price fluctuations, cartels and high fuel costs.

According to TIME Magazine’s Swampland blog:

In a report written for Perry last spring, Porter found that Texas’ overall prosperity growth, as measured by the rate of change in per capita GDP, was the eighth slowest in the country from 1998 to 2008. Texas has the highest proportion of minimum-wage jobs and the lowest median wage in the country. Porter found that Texas’ labor-force productivity was growing more slowly than 37 other states, further suggesting that the job-creation machine may not be keeping pace with productivity improvements in the rest of the country.

Perry offered no plan for taxes, war, healthcare, education, debt and deficit reduction, or economic recovery. In fact, his speech sounded much like it was intended to convey the message that he would call for aggressive austerity measures of the type that pushed the UK into a recession, after the were pushed through by David Cameron’s government.

In Texas, Perry has developed a reputation for being tough politically, but never truly popular with the legislature or with the people. He has won three consecutive terms, which many attribute to a kind of aggressive and hyperbolic rhetoric that is designed to obscure the realities of the public policy landscape, where his performance has not been as winning as he would like voters to believe.

His chief political adviser says Perry’s jobs record will make him the strongest possible Republican candidate to take on Obama, especially in a slow recovery with sparse job creation. But there are concerns about whether Perry’s record really stands up to scrutiny and whether once some of his more extreme positions become known, he might not appeal to moderates and to swing-state independent voters needed to win the presidency.

According to Politico:

One veteran GOP strategist said that multiple members of Congress had “expressed concerns about Perry’s ability to compete in not only the traditional 10 to 12 swing states, but also some of the lean-Republican states.”

The same state party chair, who spoke on condition of anonymity, voiced a worry that Perry hasn’t been “thoroughly vetted” and predicted: “If he’s the nominee, the first thing the White House is going to do is make an issue of secession.”

Perry’s 2009 comment — he said he didn’t want to “dissolve” the Union, “but if Washington continues to thumb their nose at the American people, you know, who knows what might come out of that?” — is already the most famous black mark on his political resume.

Republican operatives have reportedly expressed worry that he is a “bombastic regional politician” who is not equipped to appeal to the governing priorities the majority of the country want to see. They worry that his extremist rhetoric, threatening secession if he were to disagree with Washington policy, calling for war against Mexico, will persuade most voters that Perry might be dangerous distracted by ideology and by personal obsessions, and not focused on serving all of the people.

Perry’s campaign announcement speech did little to calm those worries, and in fact may have exacerbated them. There is analysis that suggests Perry’s early moves will determine primarily whether the “smart money” starts to flow in decisive amounts to frontrunner and reputed moderate Mitt Romney, or whether a competitive Perry will dilute funding and support among a wider number of candidates, undermining the party’s chances to defeat Obama—the most prolific fundraiser in US history.

Perry’s “rogue” status may also work against him. While some believe a tough, “truth-talking” cowboy image will appeal to voters who are tired of the nuance and maneuvering of so many Congressional factions, others say Sarah Palin’s struggle to draw interest for her film or for a potential candidacy is a general fatigue with the very idea of a “rogue” candidate.

After a great deal of media hype, during several weeks, Gov. Perry announced his candidacy from South Carolina, on the day of the Republican Straw Poll, in Ames, Iowa, and Perry supporters can write in his name in Ames, if they support him. If he fails to show in the top half of the list of candidates, at the very least, there will be questions about his appeal to voters outside of Texas and the south.

Unlike Huntsman and Romney, who have set themselves up as problem-solvers, Perry seems to be betting his campaign on Bush-era Republican ideology and his record in Texas. The Obama campaign is almost certain to set itself up not as the “big government” campaign, but as the “good government” campaign. Perry’s attacks on the very idea of government playing a constructive role in the economic landscape may unnerve voters in the vital center of the ideological spectrum.

TheHotSpring.net :: The debt crisis is attributable to “structural” causes, meaning the way the nation’s financing is structured over the next several decades, but also to political and economic causes, meaning both the way we make policy and the way we live and experience the marketplace for trade, credit and consumer purchases. So, we need to implement policies that make serious, sustainable corrections on all three fronts.

On Monday, the first day of trading after a credit downgrade of US Treasury bonds from Standard and Poors, the Dow Jones Industrial Average dropped 624 points. On Tuesday, it gained 429 points. On Wednesday, it dropped by 509. And on Thursday, it gained 414. It is the first time in its history that the DJIA saw swings of 400 points or more for four consecutive days, swings that far out-strip some of the worst one-day declines in its history.

But perhaps most importantly, Thursday, August 11, 2011, marked the eighth consecutive trading session in which the DJIA changed the direction of its net increase or decrease. The volatility is literally unprecedented, and analysts have been at a loss to explain why. Some say US employment numbers drove the market down, others that they are what pulled the market back up. Some say European banks are “scaring” investors, others that American banks may be less solvent than previously known.

According to Dow Jones, as of Aug 11, 2011:

• The DJIA has changed directions each day for the past eight sessions.
• This is the first time in its history, the DJIA has closed with a net change of 400 points or greater for four consecutive days.
• This is the fourth straight day of 3.5% + moves; the last time this occurred was the four-day period ended November 24, 2008.
• Second largest point and percent gain this year.
• An intraday high of 11278.90 occurred at 15:46:44 today, representing an increase of 558.96 points, or 5.21%.
• An intraday low of 10729.85 occurred at the open today.
• The DJIA has now had six consecutive days of 400+ point high/low swings (549.05 points today) — The last time this occurred was during the six-day period ended 10/29/2008.
• Down 3021.22 points, or 21.33% from its record close of 14164.53 on October 9, 2007.
• Up 7.98% from 52 weeks ago.
• Up 70.20% from its 12-year closing low of 6547.05 on March 9, 2009.

What may astonish many of the uninitiated is that in just one day, on August 11, “The market capitalization of the DJIA rose $140.8B today.” That means the 30 corporations that comprise the Dow Jones Industrial Average appreciated in value by a total of $140.8 billion, in just a few hours.

What’s more, “All 30 component stocks closed up today; the last session where all 30 stocks traded higher was 08/09/2011.” So, in the midst of this “summer of uncertainty”, every “blue-chip” stock on the DJIA gained in value for two out of the four most volatile trading days in history.

Some have said the reason for the declines was that American businesses are not as competitive; others say Apple’s new position as the nation’s most valuable corporation has buoyed stocks in general, showing that innovation and consumer products can restore economic growth. Some say markets are worried about government policy; others say it is the Fed’s unprecedented decision to set interest rates as near zero for at least two years that has allowed a rebound to occur.

Nevertheless, over the eight sessions in which the DJIA has swung back and forth each day, the overall decline has been 986 points or 8.1%. Since July 22, when concerns that the US would default on its debt actually became credible, as Republicans walked out of talks, the decline has been 1,581 points, or 12.4%.

Why is that important? It is important, because it actually gives us a real and relevant marker of enough significance to explain why the market has seen some of the most intense volatility it has ever seen. It began to become clear, on the 22nd of July, that Republicans in the US House of Representatives were not willing to make a “grand bargain” to reduce the American budget deficit by $4 trillion over 10 years, because they had vowed not to raise taxes.

Markets responded by declining steadily. In fact, between July 22 and August 3, the DJIA declined steadily every single day, as the US debt crisis came to a head. Then, on August 4, began the daily reversals that have puzzled so many investors, analysts and policy makers. And there is good reason for this period of intense confusion: US Treasury bonds, the value of which was called into question by the debt-ceiling crisis, underpin the entire global financial system.

August 2011 has posed grave and unanswerable questions to the worldwide financial sector: What would happen if the US defaulted on its debt? What would happen if the most stable financial investment in the world suddenly saw its credit rating downgraded? More confusing still: what if only one agency downgraded it, while the rest disagreed with what are patently unsound calculations by that one agency?

What will happen to the American economy if Texas experiences its fifth energy emergency of the year, while Dallas endures 40 consecutive days of 100ºF heat and the state begins importing electricity from Mexico? What if austerity measures—deep cuts in government spending—in Europe and the US begin to impede economic growth and destabilize major consumer economies?

This period of intense volatility is attributable to a lot of economic challenges, but mainly to the unprecedented confusion over whether the US government will work across party lines to support its long-term debt obligations. That policy logjam has very savvy investors, some of the world’s best, confused as to how best to judge the long-term value of not just US Treasury bonds, but thousands of different kinds of investments.

The relentless inflexibility of anti-tax radicals in the House of Representatives has destabilized the world financial system, in that it has injected irrationality into the management of the most rational, stable, form of financial investment and called into question. The world’s major industrial economies are facing unprecedented coordinated pressures, with food prices and cost of living rising in China, and Europe and the US experiencing massive employment crises and declining overall wages.

While Pres. Obama’s economic stewardship has coincided with the DJIA having gained “70.20% from its 12-year closing low of 6547.05 on March 9, 2009″, he has not had a cooperative opposition, and the steady—if gradual—recovery is seen as being in doubt by many investors. Yet Warren Buffett, thought by many to be the world’s most successful, steady and reliable investor, has said the entire debate is off the mark, that he would give US Treasury bonds a AAAA rating, if one existed.

So, four days of radical stock market swings—eight days of unprecedented back-and-forthing—show… very little with clarity. More than half of all trades are now computerized, following pattern-based programs for investment, which means the markets are not necessarily “commenting” on economic reality, so much as they are being driven by machines trying to maximize returns, given the moment to moment activity of other traders.

Whatever the underlying dynamic, it will surely play out as ripple effects of uncertainty that have very certain impacts, jogging or slowing credit markets and undermining the ability of home-buyers to fund new purchases or new construction. Indeed, in what may be a story of massive overriding significance, 60 Minutes this week began to report on what may yet be the most important economic trend of the year: how banks’ insistence on foreclosure as a tool for optimizing their home-loan ROI might be dragging the housing sector down.

The stock market is a driver of economic activity, not a mood ring

It has become a standard of political and economic commentary that the stock market is a “reflection” of the general economic mood or of wider economic health and wellbeing. It is not. The stock market is not a mood ring and it was not designed to be. The Dow Jones Industrial Average (Dow/DJIA) was not designed to stand alone as an economic indicator, but rather as part of a fabric of tools and analyses that would, taken together, give a more insightful, more complete picture of generalized economic balance.

Specifically, the Dow was designed to measure the stability and progress of major industrial corporations—a narrow but highly relevant interest within a much wider pool of economic interests. And there are numerous examples of the stock market’s divorce from economic and political reality, which makes sense, because it is not focused on the whole economy, but rather on what investors can do with a certain subset of economic interests.

During the 1930s, to take an extreme example, numerous Wall Street firms fought to avoid national divestment from Nazi Germany, so they could continue to profit from the regime’s aggressive military build-up and industrial expansion; they were on the wrong side of history, and they opposed the war, because  they believed it ran counter to their narrow profit interests. Their vision of what was economically sound was, to be polite, deeply flawed.

In fairness, not everyone on Wall Street shared that narrowly interested view, but that the flawed metrics of what was economically or politically wise, what was in the nation’s best interests, and what served the national interest of maintaining a vibrant, free democracy, intervened in the calculus of some firms, for some years, is not in dispute.

For much of the last decade, Wall Street’s top banks actively modeled, incentivized and promoted a business model whereby insurers were rewarded for failure to provide insurance or to hold down costs—their two reasons for being. They also modeled, incentivized and promoted “toxic” derivatives that could never have yielded what was promised and which brought about the near collapse of the global financial system.

We do not hear much in the way of self-criticism or public apology for the intense commitment to gravely mistaken investment priorities. We do not hear the major firms on Wall Street urging their current managers, clients and/or lobbyists, to reverse the gravely mistaken interpretation of reality, whereby anything that could “generate profit” could be justified and consequences—some very serious and very foreseeable—were largely ignored or obscured.

The myth of the stock market protest vote—”the market is reacting negatively to express its displeasure”—is very specifically part of a refusal to take responsibility for the active role the stock market’s leading agents play in motivating economic activity. The market’s failure to perform is partly—to be fair—related to economic factors, partly related to the financial maneuvering of investors and the traders who represent them, but it is also partly attributable to what is, at the end of the day, the market’s own failure to perform.

The “mood ring” myth is a way of deflecting blame: We have not failed; we have not lost money; we did not make bad judgments—the world did it to us.

That is not the picture of an institution at the height of its relevance or the peak of its abilities. It is the kind of attitude that arises in an atmosphere of irresponsibility, confusion, misrepresentation and flawed logic. The complexity of high-risk derivatives has been widely talked up as a key source of confusion leading to poor judgment across the financial services sector. But others have argued there was deliberate obfuscation involved, rooted in a belief that as long as it was never understood that there might not be any substance to some of those products, they would not collapse.

That’s not to say that everyone in finance was engaged in a sordid criminal conspiracy. It is more a problem of access, responsibility and attitudes: for one, there is too much automatic trading built into the financial sector, so human agents do less of the thinking for each trade than used to be the case. This limits access—to information, to the reasoning behind trading trends, and to corrective measures—and it expands the territory for the spread of the attitude that the market is not responsible for what happens in connections with its activities.

Today’s stock market makes almost incomprehensible volumes of automatic trading, managed by computers using advanced algorithms to judge what is sold or bought and when—not always with any deep human intellectual examination of the real promise or risk inherent in the enterprises, or even the sector, in question.

Glenn Hall, editor in chief of The Street, wrote last week that:

Machines don’t understand the responsibilities of ownership. They obviously don’t care about the fundamentals behind the numbers or understand the power of responsible and responsive corporate leadership.

Beyond that, what’s wrong with high-tech trading? In my opinion, it’s too fast and too stupid. I like to think humans are smart enough to avoid a massive selloff like we had yesterday, when there was no particular news or event that merited such a drop.

Hall cites Doug Kass as observing that “high-frequency-trading funds are very active and have taken the role as the dominant investor in the U.S. stock market. The market’s spastic action reflects, in part, the disproportionate role of high-frequency-trading funds on the market over the past few weeks.”

An July 2010 article by Matt Krantz, published in USA Today, warned that computerized trading was now dominating overall stock trading activity:

Most of those trades aren’t coming from trigger-happy day traders and mutual fund managers with billions of dollars at their disposal. It’s a flood of machine-gun speed fury coming from an army of computers programmed to obey complicated algorithms that are hyperactively buying and selling.

What does that mean to you, the individual investor? The next time you buy or sell a stock, forget the quaint idea that there is a living, breathing human being on the other side of the transaction. You’re trading with a computer.

Not only are the markets completely computerized, more than half of the market’s volume is churned by computers programmed to spot certain patterns in trading. These machines see stocks not as securities used by companies to raise money, but rather, symbols, numbers and bits that are traded, swapped and exchanged.

And now, traders say, humans are responding to machines rather than the other way around. Increasingly, too, the machines are reacting to each other, trying to second-guess what their next moves might be on how to take advantage of an edge that might be gone in milliseconds.

That automaticity takes much of the intelligence out of the stock market, but it also demonstrates the extent to which the market is not a mood ring and does not serve as some sort of game theory real-time poll of the nation’s economic attitudes, health status or even prevailing trend lines.

The stock market is not, and cannot be, a reflection of the human-scale economic landscape, because it is specifically designed to be an abstract realm in which abstract values are traded, and where profit is to be gained from gambling on the trends in those numbers, not in the long-term economic relevance or resiliency of a particular enterprise.

There are now thousands of different automated “trading systems”, each looking to predict, trace and capitalize on trends that may have little to do with the long-term economic promise or viability of a given financial product. It is the zealous pursuit of automatic wealth creation that cuts off stock trading and the financial services sector from the rest of the economy, and gives us such deeply flawed metrics and such inexplicable trading variations.

There are important differences between stocks and bonds, of course, and the two often comprise opposing and complementary trends for major investment, but it is worth noting that while stocks plunged in value after the S&P downgrade, the bonds themselves hit record demand, suggesting the S&P finding was very much off the mark.

There is informational confusion in the financial services sector, at the moment, and this is due to, more than anything else, the persistent and pervasive disconnect between the present day realm of high finance and the overall economy. We need to forget about the idea that the market rises and falls as a commentary on the events of the day, and get back to a model whereby human beings plan and commit to investments that make sense, because they have real economic promise on their side.

TheHotSpring.net :: With the objectivity and commitment to fact of S&P now seriously in question, and allegations now revived that it and other rating agencies were paid to give AAA ratings to junk securities derivatives, it is clear that we need a 100% not-for-profit (NFP) cooperative bond rating agency. The independent NFP agency could be one of several, staffed by top economists, stakeholders and public servants, and standing somewhere between the public and the private sectors.

The role of such a new cooperative agency would be to take the profit motive and the complication of day to day financial dealings out of the rating agency portfolio. While Standard and Poors is owned by the publishing conglomerate McGraw Hill, its analysts have been accused of incestuous relationships with the entities they are tasked with rating, sometimes taking huge profits in financial services fees while evaluating risky products put out by their patrons.

A not-for-profit rating agency would allow for greater transparency, a more aggressive process of analysis, and more unbiased foundation for that analysis. It would allow for a wider-ranging and more flexible input of data to ensure that evaluations correspond in some clear way to genuine long-term value. It would, in short, ensure that private interests don’t interfere with the straightforward process of factual analysis.

It would also, maybe more than any other single factor, help to contribute to a virtuous cycle of transitioning back toward separation of interests, diversification of markets, and decentralization of financial sector influence and wealth creation. How would this benefit society at large? It would allow for a more democratic, more evidentiary, more pragmatic reading of bonds and other financial services products.

The first step is to remove the profit motive from the evaluation process. The reason for this is that the assumption that narrow profit motives somehow spark virtuous behavior, “efficiency” and “performance” loses relevance when the incentive to produce a given rating—like AAA on high-risk subprime mortgage-backed derivatives—conflicts with the evidence-based analysis, which indicates that there is no way that product can be a safe bet for most investors.

- – - A brief aside: The same can be true in reverse: a bond rating agency that made such catastrophically bad misjudgments when there was a conflicting interest in play could seek to be more aggressive, in a highly visible way, to restore its reputation for seriousness of purpose, when—by coincidence—there is no direct accounts receivable windfall in play.

There is enough room for doubt that on the first day of trading since S&P’s downgrade of US Treasury bonds, those same bonds have hit an all-time record for demand, as investors seek shelter in the very product that was just downgraded. That suggests the S&P evaluation was flawed, or was issued for mathematically inconsistent reasons, or simply that—as one analyst suggested today—their poor performance during the mortgage bubble has left them less relevant and less well regarded generally. 

Paul Krugman, the Nobel Prize-winning economist and New York Times columnist, wrote today that “they may be a prestigious organization for some reason, but their track record is ludicrously bad.” In fact, he is not the only prominent economist expressing concern that the Wall Street firms and the financial services sector more broadly are becoming perilously divorced from the wider economy. – - -

The American economic system has artfully grappled for generations with the problematic tension between narrow, well-funded interests, and the wider landscape of stakeholder interests. A strong regulatory system and vibrant democratic marketplace have been able, periodically, to rein in abusive behavior and make it visibly profitable for powerful interests driving economic behavior to line up their interests with those of the wider economy.

Some now believe that time may have passed. A generation’s worth of deregulation and financial experimentation have led to the widest wealth gap since before the Great Depression, and credible economic analysis suggests the stagnant economic trendlines are the result of having a post-Depression system, with meaningful checks and balances, and a Depression-era economic dynamism. In other words, we should be experiencing a depression, but we have deployed failsafe measures to make it less likely.

The stakeholder problem is a very real bone of economic contention, and very much worthy of close scrutiny. Where financial instruments are based on bad investments, then pitched as good investments, and tens of trillions of dollars in private wealth evaporate, even the most minute activities within the financial services sector have high-stakes consequences for people and institutions throughout the economy.

A genuinely useful, wholly relevant and economically optimally constructive rating system requires real independence. It requires a commitment to fact, and a commitment to economic balance and generalized prosperity. It requires a substantive, transparent measure of the major economic drivers that induce periods of “irrational exuberance” for bad investments, which by extension bring widespread economic hardship in their wake, when banks shut down many of their financial support services to the middle class and small businesses.

The proposed NFP cooperative bond rating agency would be:

• fully independent of ties to Wall Street firms;
• required to publish source material and white-paper reports detailing internal discussions;
• required to publish information regarding all meetings with any interested parties;
• focused on stakeholder interests across the economy;
• responsible for public comment fora, at least one per month, to gather anecdotal guidance;
• staffed with independent economists, former financial services professionals, public service veterans—each without active ties to interested parties;
• required to pay only base stipends, with no bonuses except for consistent accuracy over the long term;
• a model for similar NFP financial analysis projects.

The four central ideas motivating this new model, and which should then be emulated by competing institutions are:

1. eliminating professional conflict of interest;
2. comprehensive transparency of process, sourcing and aims;
3. focus on overall stakeholder interest;
4. reliable precision, based on health modeling, not profit forecasting.

The simplest way to institute a project on this scale, with this level of responsibility and in a visible enough way to give it active influence and long-term viability is, of course, a public-private partnership. It should be funded in part by the federal government, and in part by the financial services sector, and top schools of economics should hold competitions to bring on board some of the world’s most visionary, flexible and precise economic minds.

The process should begin this fall and winter, with the goal of holding public hearings for the creation of the first independent NFP cooperative rating agency in the spring and fall of 2012. The fully functional institution could be active by the end of 2012, in time to play a constructive role in the landscape of analysis surrounding the 2013 negotiations on the 2014 federal budget, and the financial planning of major banks, insurers, governments and industry.

creative prosperity is sustainable prosperity

To build a future of vibrant open democracy and robust and sustainable economic prosperity, it is necessary to privilege creative activities and constructive solutions to the challenges we face. Addressing major challenges in constructive, innovative ways, is the single most significant driver, historically, of sustained economic booms. In short, we need to move deliberately and swiftly toward a creative prosperity agenda.

The first consideration, then, is to examine how the creative prosperity agenda would differ from what we are doing now. At present, we are wrestling with the complex fabric of consequence related to long-running economic distortions, most of which we have not yet corrected. Healthcare reform and financial regulatory reform were comprehensive in scope, but moderate in impact, cautious and rooted in the prevailing model; energy reform needs to move forward rapidly and do more to prioritize innovation.

We are facing a major, civilization-wide transition from one way of conceptualizing political and economic power to another. We stand at the dawn of what should be the global solidification of open democracy as the standard for elevating and defending human dignity and freedom of thought. But we need to build creative prosperity into that future, and this will require a fundamental shift in the dominant view which holds that power is more effective when concentrated in fewer hands.

That view comes from ancient times—from prehistoric times, in fact—when the governing principle of human life was the need to survive in competition with forces far more powerful than any one individual, family or band. Power, then, was a combination of accumulated resources and raw force. In that light, power is a destructive force, requiring intense concentration of resources and the ability to draw a line between the inside and the outside of the power circle.

the feudal (concentration) model

Economically, the fact of human society was that there was not enough technology, enough resources, enough liberty, to deliver real comfort to most or all people. In fact, there was only the material wealth to deliver substantial comfort to about 1 in every 100 people. The model of concentration allowed those in that 1 percent to cling to comfort and fight off would-be attackers.

The only way into the circle in which power, means and comfort were concentrated was to pay the toll for access. That might be done by force of arms, or by handing over significant sums of wealth. Paying the toll perpetuated the model, and won significant privileges for those who helped to make sure that system remained viable.

This developed eventually into authoritarian empires and the medieval elevation of aristocracy. The logic of the model of concentration held: those inside the circle must remain there, and the society must be organized to keep them there. They were, it was presumed, worth more than other people, and so they were able to treat their privilege as if it were part of a life of service—maintaining law and order—to those with less.

the democracy (decentralization) model

Modern democracy posits an entirely different model: the model of decentralization. Modern democracy, according to the ideals of the American revolution and the French revolution, requires a comprehensive departure from the status quo of feudal dominance. It requires the engineering of a model for economic and political activity whereby power cannot be concentrated, and where excessive concentration of power brings disadvantage.

A creative prosperity agenda for public policy and economic renewal would put aside the bias of the old model, once and for all, asking enterprises large and small to join together in a fabric of imaginative competition, prioritizing localization, innovation and service value to the marketplace. It would help to recapture the energy of modern democracy, wherein monopolies and juggernauts sputter and trudge, slowed by their weight, and individuals and small businesses are better able to take the field, to effect positive change, to feed a generalized economic expansion.

The key to that model is the vibrancy of an expanding and upwardly mobile middle class. Achieving that means doing what the United States did so effectively in the 1950s and 1960s, decentralizing the levers for creating wealth, allowing more free people to participate not only as citizens but as leaders and entrepreneurs.

losing our former focus on creative (decentralized) prosperity

A period of intensive deregulation in key industries has led the United States’ economy into a period of prolonged slow growth, because it has led to the hyper-concentration of wealth and of access to the levers of wealth-creation generally. Average household income has dropped by about $2,500 since 2000, even as the gap between average pay and the earnings of the wealthiest has expanded to historic highs.

There is a problematic knock-on effect of this, which is that innovation is no longer a priority, as major conglomerates seek first of all to secure their position. Upstarts like Apple are not emerging at the rate they were during previous periods of economic expansion, and the most powerful, most concentrated interests—Apple now among them—are controlling the field of play.

recapturing momentum: how to build a creative prosperity agenda

There are a couple of key changes that need to take place to move toward a creative prosperity agenda:

1. Move from a bias favoring large conglomerates to one against them;
2. Move away from subsidies for high-polluting, low-yield fossil fuels;
3. Move toward clean energy technologies that favor rapid innovation, brainy startups, more robust job creation, and local economies;
4. Revive national commitment, public and private, to infrastructure redevelopment;
5. Provide direct tax credits for real job creation (payable on a per-job basis);
6. Establish sustainability incentives for municipalities (ref: Sustainable Jersey), states and businesses;
7. Establish an aggressive Renewable Portfolio Standard;
8. Prioritize higher education spending, including post-graduate studies incentives for businesses looking to sponsor their employees;
9. Introduce critical thinking, macroeconomic studies, engineering basics and public policy debate, to public high schools—judge these as more valuable than test scores;
10. Make sure tax reforms are not regressive; make sure they prioritize family and community-level “thriving”, i.e. asset-building, quality of life and spending power;
11. Tax derivative financial instruments at a higher rate than direct capital investments in enterprise, innovation and hiring;
12. Apply national policy to correct market distortions relating to fossil fuel costs.

The outcome of this process of reform would be:

• accelerated, more widespread innovation;
• entree for creative small business models;
• unprecedented opportunities for sustained hiring;
• more vibrant, resilient local economies;
• a consumer-centered smart electricity grid;
• cleaner air and water;
• a sustainable economy where growth is not tied to the promotion of vast negative externalities;
• more robust civic engagement from citizens, communities and creative thinkers…

The United States is perfectly capable of achieving this kind of virtuous cycle between democratization, decentralization, creative thinking, entrepreneurship and the expansion of the middle class. But substantive policy changes need to be made—to remove the incentive for corrosive activities that favor the unhealthy concentration of wealth and productive capacity and motivate the revival of generative activities that favor the healthy decentralization of assets and productive capacity.

A vibrant middle class—where the best ideas can come to the fore and be implemented and the dignity and worth of citizens and communities takes priority over the naked pursuit of profit—is better suited to fostering creative, sustainable prosperity. The first step is to recognize where we favor profit over people, and then work to change the prevailing model and free human creative talent to achieve that goal.

IndependentsOfPrinciple.com :: What’s wrong with the stock market, particularly the New York Stock Exchange and the Dow Jones Industrial Average? The most significant problem facing the stock market is really a confluence of two problems: 1) we have too little middle class wealth, and so too little consumer demand, and 2) we face an urgent need to accelerate the transition to a new economy, but we are focused on trying to revive an old economy.

On Thursday, August 4, the Dow Jones Industrial Average dropped almost 513 points, losing 4.3% of its total value, the worst one-day decline since December 2008, and an effective reversal of 8 months’ worth of gains. It happened two days after the United States avoided a default by raising the debt ceiling and cutting government spending by about $250 billion per year over the next 10 years.

Analysts differ over whether the massive stock sell-off is attributable to concerns about an impending default by Italy, or whether it indicates some sort of deep weakness suddenly revealed in the dealings of American banks. What is evident, however, is that with massive cuts in government spending planned, the nation’s leading industrial corporations may lose needed funding and/or incentives for new investment.

The Dow Jones Industrial Average measures the collective value of 30 leading publicly traded industrial corporations. It is rooted in a 19th-century industrial economic model, in which the value of these firms grows as the wider economy is developed. In a fully developed post-industrial economy, connected at countless points of contact to a global marketplace, and driven by consumer behavior, there are obstacles to modeling economic health in this way.

But beyond the power and relevance of the Dow Jones Industrial Average, stock indices in general are prone to certain inherent flaws that can incentivize the slowing or even reversal of trends that would be healthy for the overall economy. This is because they favor already powerful entities, and are often ill equipped to measure or reward activities that substantially disperse wealth creation.

Stock indices are at best an indirect measure of capital decentralization, because they measure its centralization, albeit in a way that could, if all other conditions are right, result in more people gaining access to the levers of capitalization and wealth creation. In other words, the best-case scenario is: if everyone gets in, and makes the same bets, and most people keep up, then maybe most people get richer. But that is not the point, and the indices don’t even attempt to tell that story.

When banks come to depend on the commonly held belief that they control wealth that does not in fact exist, the possibility of wealth being decentralized in a way that drives consumer spending is greatly reduced. It has to be, because to meet the demands of their own fictional wealth claims, banks must persuade others, i.e. many or most people, to take on unsustainable debt.

Ultimately, this practice drives the deployment of still more unsustainable debt, and deprives consumers of too great a portion of their wealth, cutting into economic output, slowing economic growth and impeding hiring. This is where we find ourselves, and the banks, investment firms and major industrial corporations, are sitting on massive real wealth, waiting for government to somehow force consumer spending higher.

But the summer of 2011 has seen two worrying trends that make it less likely government can motivate new growth: the United States has committed to removing $2.5 trillion in government spending from the economy, over ten years, and multiple eurozone countries appear closer to default than before the US debt ceiling debacle.

Austerity plans in the US and the EU now threaten to destabilize major western commercial markets, even as investors grapple with the shift toward more volatile consumer markets in Brazil, Russia, India and China, sometimes grouped together as the “BRIC” bloc. Much conventional industry is still heavily invested in mineral fuels, a dependency which could lead to cost swings so severe as to limit investment of even huge pools of cash in reserve.

So, what is wrong with the stock market? It is viscerally linked to trends that no longer support sustained unlimited expansion. The fabric of our global economy, and the technologies and innovations that make it work, have evolved so far as to work, in many ways, against the continued expansion of the specific values counted by the various stock indices, given the way they are counted.

We need a more astute, more precise, more direct and versatile way to read the economic landscape that offers up the best opportunities for investment. We need to consider and then to integrate into our planning and our value judgments real measures of generalized quality of life, corresponding to household autonomy, individual career choice, and opportunities for asset building and middle-class entrepreneurship. And then we need to find ways of measuring these indicators that actually drive the underlying economic reality to improve.

We need to remember that not everyone trades stocks and bonds for a living, not everyone is hoping banks and insurers can continue to reap major profits without providing consumer-centered service, real wealth expansion and a more resilient foundation for sustained prosperity, and not everyone is served by a system that focuses on concentrations of wealth near the top of the income ladder.

We need to stay global in our thinking, and make sure we are inspired by the aim of building a robust, democratic society; the middle class will thrive if we do.

The United States government, until Friday, had more than twice the AAA debt outstanding as any other category of AAA debt. According to Nomura, while the US had $11.2 trillion in AAA debt oustanding, agency mortgage backed securities account for over $5 trillion, and Germany and France follow with less than $2 trillion. Standard and Poors has now downgraded the credit worthiness of the United States government, though there was no default and no indication the government was in any way likely to default.

S&P has come under fire for reportedly having made a $2 trillion error in its calculations. Though its estimations are based on publicly available data, the ratings agency reportedly estimated $2 trillion more in government spending than actually exists. According to Reuters: “S&P was forced to remove the number from its analysis after Treasury officials discovered that the rating agency’s estimates of the government’s discretionary spending was $2 trillion too high, sources familiar with the discussions said.”

Though the underlying economic reasoning for the credit downgrade was the figure which was $2 trillion too high, and the difference between the debt ceiling deal and the $4 trillion demand made by S&P is less than $2 trillion, the ratings agency refused to forego the credit downgrade. S&P suffered a severe blow to its reputation, when it was revealed that the agency has maintained, with little to no evidence of merit, AAA ratings on subprime mortgage-backed securities, which eventually collapsed, and led to the 2007-2009 financial crisis.

Reuters also includes this detail in its report:

Ian Lyngen, a senior government bond strategist at CRT Capital Group in Connecticut, agreed S&P now had more than just a credibility problem.

“The fact that they have now downgraded the United States suggests to me that they are now going to be dealing with a relevance issue,” he said. “Because the fact of the matter is that 10-year (Treasury note) yields are near 2.5 percent, and that in no way suggests a lack of sponsorship for U.S. debt.”

Yields on U.S. 10-year notes US10YT=RR, a benchmark for borrowing rates throughout the economy, fell as far as 2.34 percent on Friday — their lowest since October 2010 and very low by historical standards.

The credit downgrade was expected to impose massive escalating costs on the entire US economy, the borrowing of the US government, and also competing sovereign debt products and commercial investment. The fear, then, would be that a credit downgrade on the entity whose bond products and currency support the entire global financial system could lead to a second great recession, possibly a global economic depression.

But Standard and Poors has possibly waded into quicksand, for six crucial reasons:

1. The United States did not, in fact, default;
2. The ratings agency in question made a $2 trillion error in its calculations;
3. Despite conceding that its chief calculations were erroneous, the agency insisted on the downgrade;
4. Treasury officials were told that S&P was using the downgrade to express its displeasure that a bigger debt package was not agreed;
5. Other ratings agencies have not seen fit to downgrade US Treasury bonds;
6. There does not appear to be a lag in investment in Treasury bonds…

Taken together, it would appear that while there is virtually no evidence to substantiate the downgrade, and with S&P’s only internal justification for the downgrade discredited, S&P representatives expressed a desire to downgrade Treasury bonds—with all the global economic fallout that might entail—in order to express displeasure that their will was not done on Capitol Hill. S&P may now lose relevance, even as its actions may motivate serious economic slowdown around the world.

There are reports that China will immediately seek to begin diversifying its bond holdings and reserves. The S&P downgrade could ultimately threaten the value of the US government’s lending and the Chinese government’s holdings, and undermine the legitimacy and security of the dollar as the world’s reserve currency. It now appears Treasury officials will be meeting with key players in the world’s financial markets, including major foreign bondholders, like China, to hold off interest rate increases, and possibly to marginalize the S&P finding.

Shoring up the US and the world financial markets is now crucial, as another financial collapse could leave the world economy with negative growth, and could destabilize governments in fractious regions and even do serious harm to the fiscal integrity of the European Union. The S&P downgrade will be less influential if it is limited to one rating agency, and could have massive unintended consequences, if it is not contained.

John Chambers, chair of S&P’s sovereign ratings committee, said today that “There are two things that we should emphasize. One is that the political discourse has diminished the credit standing of the United States. The other is a fiscal analysis.” This makes four distinct justifications given so far for the downgrade: the $2 trillion in (non-existent) extra spending; the structural problems that might materialize despite the $2 trillion error; the agency’s expression of “displeasure”; and the fact that “political discourse has diminished the credit standing of the United States.”

In April, a bipartisan Senate committee found that S&P, Moody’s and other rating agencies may actually have directly “triggered” the financial crisis:

In one of the most stark condemnations of the credit rating agencies, a Senate investigations panel said the agencies continued to give top ratings to mortgage-backed securities months after the housing market started to collapse.

The agencies then unleashed on the financial system a flood of downgrades in July 2007, the panel said.

“Perhaps more than any other single event, the sudden mass downgrades of (residential mortgage-backed securities) and (collateralized debt obligation) ratings were the immediate trigger for the financial crisis,” the staff for Senators Carl Levin and Tom Coburn wrote in their report.

Today, there are mounting questions about how S&P came to make direct policy demands on the United States Congress, under threat of a credit downgrade, and if the agency is now expressing displeasure, what is the actual ask? Numerous economists have taken issue with the S&P demand for $4 trillion in deficit reduction now, in the midst of a slow recovery, warning that draining that amount of capital from the economy could end the recovery and push the economy back into recession.

Texas, the most energy-rich populous state in the country, with more oil, more wind, more sun, and a more developed energy sector, than any other state, is now undergoing rolling blackouts, in part because Gov. Rick Perry’s budget policy is bankrupting the state, ending incentives and cutting off supply. Under Perry, the state has run up a $28 billion deficit, and Chinese firms have been buying up major wind energy projects.

Perry’s ideological manipulation of state budget priorities has not only hampered the state’s development of cutting-edge clean energy sources, it has eroded the educational opportunity, targeted lower income families for reduced opportunity, and slowed job creation. The one thing propping up the state’s economic output is immigration, which has allowed new opportunity, new hiring and new capital flows, despite the governor’s attempts to shut them down.

When he named a top utility regulator to head the state’s railroad agency, he did so specifically proclaiming his appointee ”will continue to push back against the Obama Administration’s misguided energy policies which threaten Texas jobs and our nation’s energy security”.

Specifically, Perry meant he wanted to stop construction of high-speed railways—which would create tens of thousands of jobs—and slow, halt or even reverse the transition from costly fossil fuels to more efficient clean energy technologies. The reason? Fossil fuels produce a higher profit margin for the interests that back them, though clean energy technologies, high-speed rail and the smart grid would produce more generalized prosperity and a healthier economy for the state and the region.

Perry has consistently sought to stock the state’s regulatory authorities with industry-interested figures. He has complained that Texas, which emits a huge amount of carbon-dioxide and other pollutants, from fossil fuel-powered plants, should not be subject to the clean air rule that seeks to prevent contamination of one state’s air by activities in another state. He maintains that Texas is above federal law, and has been criticized for a ‘head-in-the-sand’ approach to energy.

Now, in the long, hot summer of 2011, Rick Perry’s Texas has run out of energy, and is experiencing rolling blackouts. The energy capital of the United States is out of energy, because the governor’s fiscal policies and manipulation of incentives has been reckless, ill-informed and biased, crimping the flow of investment and undermining the rate of innovation.

Though oil and gas are not producing the level of job creation of wind, solar, geothermal and renewables, Perry has sought to curtail investment in new technologies, privileging outdated fuel sources whose entrenched power is hampering the job creation potential of what has been Texas’ best opportunity for growth: wind and solar power.

While the nation has been moving toward, albeit at a painfully slow pace, a cleaner energy paradigm, for three decades, with technologies to achieve this accelerating in efficiency and productivity several fold in the last ten years alone, and while Texas is the nation’s wind-energy leader, he has sought to put fossil fuel interests first, to the detriment of the state’s immediate and long-term economic health and vibrancy.

Under Perry’s stewardship, the leading energy-rich state in the nation has been forced into its fifth “energy emergency” this year alone, and is now importing electricity from Mexico. According to a Texas Tribute report from earlier this week:

As scorching temperatures continued and Texas electricity use reached another all-time high, the state grid operator initiated the first step of emergency procedures today, seeking power from other grids, including Mexico.

About 20 power generation units, accounting for around 3,000 megawatts of capacity, were unavailable today during unplanned outages, adding to the strain on the grid. Today’s temperatures soared well past 100 degrees, and it’s not likely that the situation will get better Wednesday or Thursday unless some thunderstorms pass over a major metropolitan area, like Houston or Dallas, to lessen demand.

ERCOT—the Energy Reliability Council of Texas—has sought to implement these emergency procedures due to a combination of record electricity demand and inadequate supply. The unplanned outages were the most significant development, in that they suggest the grid itself has been underfunded and unprepared for the volume needed.

When Perry’s bad fiscal planning and ideological manipulation of taxes is combined with his loyalty to entrenched oil, gas and coal interests, it is clear the clean energy and smart grid industry is fending for itself, and doing very well, but not as well as Texas’ world leading electricity demand requires. His policies have, in fact, left his state with a massive and worsening budget deficit, with no serious plan for course correction, and with severe obstacles to improving the electricity generation crisis.

According to the New Republic:

The Lone Star State has a standing $10 billion shortfall every two-year budget cycle, thanks to a faulty tax system pushed by Perry that fails to balance the budget. Although the governor normally stays away from the state Legislature—sightings in either chamber are rare and exciting—Perry engineered a new business tax in 2006 to replace a prior one riddled with loopholes. Ostensibly a good idea, his new tax nonetheless suffered from the simple fact that it didn’t bring in enough revenue. Furthermore, it turned out to be incredibly complex, leaving many business owners scratching their heads. Those who figured it out, meanwhile, realized that, because the new tax was levied on gross margins as opposed to profits, companies could be losing money and still find themselves on the hook.

State legislators on both sides of the aisle have decried Perry’s ill-conceived fiscal planning. The chief Senate budget writer, Republican Steve Ogden, hasn’t been afraid to mince words about just how bad the business tax is. “None of us were elected to raise taxes on anybody,” he said the first day of the session. “But the margins tax is different. If we don’t fix the margins tax, local property taxes will definitely go up.” The regular legislative session came and went, however, without any real effort to fix the broken tax. The result is that the state is still operating with a structural deficit, and will very likely face more cuts the next time around.

Perry’s loyalty to old energy interests means the state’s cuts are hurting the more job-creation-intensive new energy sector. There has not been the funding available to develop the smart grid, or the major transmission lines, needed to maximize output from wind farms. So even as the Texas wind industry has seen a nation-leading boom in the last decade, its ability to adequately serve the marketplace has been slowed by outdated priorities and what some call overt political bias.

Due to its Renewable Portfolio Standard, which Perry supported, Texas has outpaced other states in wind energy sector development, but critics say too much of the profit is going to foreign companies, not enough Recovery Act funding was deployed to spur investment and too few incentives are in place for in-state start-ups to compete with big oil, coal and gas, and with the Chinese firms Perry is now relying on to fund wind development.

When the Texas wind industry was gearing up for what was likely to be one of the biggest investment booms the state, or the nation, for that matter, had seen in a long time, as a result of Congressional action to reduce carbon emissions and incentivize a transition to clean energy, Perry vehemently opposed the action. When the carbon pricing legislation failed, in the summer of 2010, the result was a swift reversal on the part of major investors, like oil tycoon Boone Pickens, who had been ready to devote record sums to the wind energy sector.

One year later, Texas is undergoing rolling blackouts, its fifth energy emergency in just 8 months, and is having to import electricity from Mexico, because the fiscal and regulatory management of Gov. Rick Perry is not designed to, and is not capable of providing for a more robust smart energy economy. The state has more demand than conventional energy sources can provide, and Gov. Perry has sought to prop up those power sources, to the detriment of innovation and job creation.

The most wind-rich state in the Union could be supplying more than half its electricity from advanced wind power systems, were the infrastructure in place to do so, and Perry’s budgetary mismanagement has diverted both public and private investment to wasteful spending on outmoded power sources, which are costing the state still more in terms of regulatory and public health adaptation, and in opportunity costs from jobs foregone, competition not stimulated, and infrastructure not built.

A wind-and-solar supplied smart grid would allow Texas’ hobbled fossil fuel economy to meet demand, and could, within just two years, reach the 20% clean energy threshold, using existing public-private investment incentives, were they directed where they need to be. The long-term plan should be for 50% wind and solar by 2020, something an adequately funded Texas clean energy sector could easily accomplish, with its abundance of wind, solar and land area.

There are also concerns that, as the focus has moved away from aggressive development of wind energy, Texas may now be experiencing a kind of energy market manipulation like what took place in California, right before the collapse of Enron, when power utilities and power-supply traders colluded to deprive the market of supply in order to force blackouts, during hot—deadly—summer months, and extract huge long-term price hikes from the state. Public policy in Texas has been steered toward subsidizing low consumer electricity prices, but now, the same suppliers that benefit from the resulting massive demand are crying poverty, producing too little and demanding higher prices.

They have hit the state electricity price cap of $3,000 per megawatt-hour, but despite that cap, and what should be the potential to rapidly ramp up clean energy output, the deregulated Texas energy sector leaves the state vulnerable to this kind of underfunded energy production, supply shortages and potential market pricing disruptions. It will be up to Rick Perry to figure out if the status quo is the best thing for Texas; we can only hope he sees that what Texas needs is a majority-renewable smart energy sector, sooner rather than later.

In order to win support from radical Tea Party freshmen, most of whom voted against the legislation anyway, Congressional leaders imposed stiff new tax penalties on radiate students across the country. Specifically, subsidized loans for grad students were cut—the government provides all student loans, so this effectively eliminates funding for post-graduate education—and a tax credit for borrowers who repay student loans on time for 12 consecutive months was eliminated.

The tax credit eliminated costs far less than the massive subsidies going to oil, natural gas, coal and nuclear power companies, yet the Tea Party freshmen, who have touted their opposition to any and every tax increase, did nothing to oppose the tax hikes on students. And while the tax credits may be much smaller than fossil fuel subsidies, or nuclear, eliminating them will cost far more.

Eliminating the on-time repayment credit will reduce the likelihood of on-time repayment significantly, potentially costing the government billions, over time, as well as subjecting more borrowers to fines and fees, depleting their personal economic footprint, and serving as a drag on growth.

The logic is simply astonishing: while the radical anti-tax Tea Partiers, backed by billionaire partisans, claim as an article of faith the absolute truth that any and all tax cuts incentivize the wealthy to create jobs—though we have ten years of evidence this is often not the case—, they reject the idea that a direct cash incentive for repayment will pay off—despite the evidence that it does.

In fact, the particular kind of tax increase the Tea Partiers have demanded and are supporting is more costly and will exacerbate not only budget shortfalls but also the negative economic trends whereby the American people are unnecessarily disadvantaged in the face of far more powerful economic forces.

Allegations that the so-called Tea Party caucus has degenerated into little more than a lobby for the wealthy interests that back them gain credibility when they support tax hikes on the vulnerable, and which will have a direct negative impact on the middle class. It should be well understood by all: the House Tea Party Republicans have pushed for and supported—the anti-student provisions in the failed Republican-only House bills were far worse—tax hikes that will make college more expensive and eat way at middle class wealth.

Two public opinion surveys released today are raising eyebrows among political analysts, as they show the sharp disapproval the American people feel toward the hardline elements in Congress that nearly drove the nation into default. A CNN/ORC poll found that 77% of those polled believe members of Congress involved in the debt negotiations behaved like “spoiled children”.

CNN also found:

The overall approval rating for Congress, now at 14 percent, is at an all-time low. Sixty-eight percent of respondents disapprove of how the Republican leaders in Congress handled the debt ceiling, 63 percent disapprove of Democratic leadership and 53 percent disapprove of President Obama’s role in the agreement.

A poll from the Washington Post and the Pew Research Center found a uniformly negative response from the public to how Congress managed the negotiation process. Among the most prominent words chosen were: “ridiculous”, “disgusting”, “stupid”, “childish”, “terrible”, “frustrating”, “scary”, “outrageous”, “chaos”, “disgrace” and “pathetic”.

Specifically, out of 1,001 respondents, the following numbers of people put the following descriptions at the top of the list:

1. Ridiculous — 66
2. Disgust/disgusting/disgusted — 42
3. Stupid/stupidity — 36
4. Frustrating/frustrated — 26
5. Poor/poorly — 25
6. Terrible — 25
7. Disappointing/disappointment/disappointed — 24
8. Childish — 23
9. Joke — 22
10. Mess/messy — 22

Rep. Charlie Rangel suggested today to MSNBC’s Martin Bashir that the Tea Party freshmen, many of them anti-tax radicals who vowed to drive the nation to default, come what may, have behaved like a “suicide cult”—Rangel provided the word “cult”, while Bashir inferred “suicide cult” from his analysis.

It is unclear how the ongoing debt and deficit reduction negotiations will play out, but it is certain that much of this public disgust and ire will be felt by members of Congress visiting their home districts throughout the August recess. This week may involve negotiations between the executive branch and ratings agencies and major banks, to ensure the US does not see its credit rating downgraded, while the new program of cuts is negotiated.

Pres. Barack Obama today addressed the nation from the White House Rose Garden, explaining how the grand compromise on debt and deficits will play out, as negotiations on new debt reduction continue. He spoke after the United States Senate passed the controversial debt deal, with the second significantly bipartisan vote in two days.

Obama said “the American people may have voted for divided government; they did not vote for dysfunctional government”. He called for cooperative bipartisan solutions, going forward, and noted that while “deficit reduction is part of the agenda, it is not the whole agenda.” He promised serious and sustained effort to incentivize job creation, balance revenues against spending cuts, and protect needed public services, like enforcement of the Clean Air and Clean Water Acts.

He called for investment from the private sector in construction and infrastructure development, and suggested a national infrastructure bank would allow private capital to begin to flow to those projects. Obama suggested that “Both parties share power in Washington, and both parties need to take responsibility for improving this economy,” and called for sustained and cooperative focus, whether or not there is the threat of national default.

The Senate voted 74 to 26 to pass the debt package. Both Democrats and Republicans opposed the measure and a broad coalition from both parties supported passage. This marks the second consecutive day that a broad bipartisan coalition voted to pass legislation that few liked, but all agreed was necessary to stave off potentially calamitous economic fallout.

The composition of the national debt is a complex history of policy decisions, governmental priorities and Congressional authorizations. Republican opponents of Pres. Obama have suggested that debt and deficits have “exploded” since he took office. They have sought to paint the president as a “tax and spend liberal”, because that accusation fits their standard campaign model.

But economists and budget analysts, including a top budget aide to Republican presidents Reagan and Bush, the elder, say Obama’s actual performance as president puts his budget policy in the “moderate conservative” segment of the fiscal policy spectrum. He has routinely demanded from Congress that major legislation be “paid for” or “deficit neutral”, and he has struggled mightily—putting aside his own policy priorities—to slow the expansion of deficits that stems from policies enacted by the previous administration.

Among these major policy drivers are the wars in Iraq and Afghanistan. The Bush administration simply never included either war in official budget projections, requiring Congress to fund both through “supplemental” spending agreements. The result was that two massive unfunded wars, each adding trillions to government spending, over a decade, were kept “off the books”.

Barack Obama—who voted to oppose raising the debt ceiling when he was a senator, in part because he believed the “off the books” accounting was going to bankrupt the government and pose a threat to the nation’s long term health and prosperity—viewed this as unethical and pledged to put the wars on the books, so the public, and the Congress, could more directly judge the costs and benefits of the wars and plan for the long term.

What is vitally important for all independent voters to understand is that while the debt debate has been laced-through with intense partisan rhetoric and vitriolic attacks, is that there are real drivers of the national debt, and they have little to do with socialism. The national debt is a product of patterns of borrowing that have soared over the last three decades, largely from one particular problem: the coincidence of relentless tax cutting with the need to fund existing programs and address real-world challenges.

In 1981, when Pres. Jimmy Carter left office, the national debt was under $1 trillion. By the time Pres. Ronald Reagan left office, in 1989, the national debt was close to $3 trillion. During Pres. George H.W. Bush’s first year in office, when the budget was Reagan’s last budget, the national debt broke $3 trillion.

The first Pres. Bush was a better debt manager than his immediate predecessor or his son; debt grew by roughly $1.4 trillion, during his 4 years in office. Pres. Clinton did a little better, adding about the same amount over 8 years. But Clinton achieved an important result: he left the government with projected budget surpluses exceeding the total national debt, over the coming decade.

Pres. George W. Bush took office in 2001 with those surpluses in place. His 2001 tax cut, however, reversed the entire surplus, and by the time of his reelection in 2004, he added to the (once again) growing debt another $1.7 trillion. By the time he left office in 2009, the national debt had escalated to over $10 trillion, and the debt ceiling was already primed for another $2 trillion in borrowing.

That extra $2 trillion in borrowing was necessary, to pay for spending already “in the pipeline”, already passed into law and on the federal books, either as part of the official budget or supplemental spending. By the end of 2009, with George W. Bush’s last annual budget playing out, the national debt was at $12 trillion. It would be mid 2010, before the active federal budget was “owned” by Obama.

As of this writing, the policies of George W. Bush have added fully $7 trillion to the national debt. Since then, Pres. Obama’s policies have added another $1.4 trillion, and already planned spending policy, historically low government tax revenues and the economic reality of tight credit, slow growth and lagging job creation, makes it very difficult for him for him to cut spending to a level where he would be able to match Pres. Bush, the elder and Pres. Clinton, in managing the national debt.

His record on budgets has been one of reformer: he has consistently favored institutional reforms that impose real cuts, and bend cost growth down to match or fall below inflation. But reducing spending can reduce national economic growth as well, further straining the national debt trend lines.

What Pres. George H.W. Bush and Pres. Clinton were able to manage was a cooperative Congressional environment, in which tough bargains were made with rivals in Congress. Pres. Obama has not had that luxury, and it may be he will not have it. There are growing tensions in the Republican party, resulting from real disagreement about whether budget and debt should be used for partisan strategy or whether they should be non-partisan policy items, with all voting in favor of the national interest.

Independent voters are looking for sanity. We are looking for reason and clarity. We are looking for long-term policy decisions that help steer the nation toward prosperity and sustainable, generalized economic wellbeing. We need a balanced standard for budget policy, where revenues increase to meet costs, so the United States remains the world’s leading fiscal policy driver and the dollar remains the world’s reserve currency.

There is opportunity in the budget policy negotiations, but the opportunity will be missed, if one or both sides refuse to use the negotiations to reach a constructive, well-designed, well-funded, rational policy on national community reinvestment, infrastructure upgrades, education and new revenues capable of meeting our needs and our aims.

Tonight, Pres. Barack Obama announced to the nation and the world that he and the leaders of both parties, in both houses of Congress, have reached agreement on a plan to raise the nation’s debt ceiling through the 2012 election and into 2013. The deal immediately cuts $1 trillion, then relies on “triggers” to guarantee future spending cuts.

A bipartisan bicameral debt reduction committee will have to present a program of new, agreed cuts, by the end of this year, or the new law will make tough cuts that neither party favors automatic. The triggers allow all parties to sign on to a deal that will raise the debt ceiling until after the 2012 elections—importantly preventing an even more partisan, more contentious negotiation in 2012—without increasing overall borrowing.

The House and Senate are now laboring to rush the bill through, to win bipartisan support for passage, and to do so before tomorrow’s deadline for national default. There is tough opposition by members of both parties, and by radicals and moderates in both parties. And there is word, at this writing, that the Senate will not hold a vote until tomorrow, perilously close to the final hour.

Pres. Obama is facing intense criticism from his progressive base, many of whom are outraged that there was no agreement to roll back corporate subsidies and the Bush tax cuts for the wealthy. But Obama and Democratic leaders are saying the new bicameral committee, with equal representation from Republicans and Democrats, will have a very hard time dealing seriously with  future debt reduction, without raising new revenues, most likely through those kind of tax cuts—which have a very low rate of return on investment.

Tea Party activists are viewing the compromise bill as a capitulation by the Republican leadership, as they view the debt ceiling increase as a central policy aim of the Obama administration—however untrue that may be. Many of them appear to be—according to their public statements throughout the day—jockeying for position, in hopes of winning approval from leadership to vote no on a must-pass bill, the failure of which could sink the economy into a depression.

The House of Republicans is scheduled to vote this evening, and the coalition that is shaping up now looks increasingly to be the kind of broad, bipartisan coalition of unhappy souls that were always required to pass a debt ceiling increase in this political environment. There is, nevertheless, mounting suspense and spreading concern that hard-talking opponents among Tea Party Republicans and progressive Democrats may dissuade some moderates from supporting the deal.

The Republican House leadership today again reiterated the false claim that Democratic leaders and the president have been pushing for “job-killing tax increases”. It is obviously a deliberate rhetorical exaggeration, designed to make a case for tax cuts, in a mode of campaigning and fundraising. But it is also a lie: not one politician in either party has ever called for “job-killing tax increases”.

But there is substantial evidence that radical revenue shortfalls, owing to the unfunded Bush tax cuts of 2001 and 2003 are responsible for the lag in job-creation. The recipients of those cuts are not “job creators” if they are not creating jobs. They were creating jobs before those tax cuts, and wages were higher. Overall economic growth was bigger and the economy itself was growing at a sustainable pace.

The Bush tax cuts interrupted a trend of spreading middle-class affluence. More people were entering the middle class, and more people in the middle class were building broad bases of financial and property assets. While some Republicans continue to push campaign distortions with no foundation in reality as the sole argument about the American economy, the facts paint a very different picture:

In fact, it appears that the unfunded, unaffordable Bush tax cuts have had a corrosive impact on government revenues, a corrosive impact on job creation, and a corrosive impact on the job-creation potential of private wealth holdings. The Bush tax cuts have been intensely regressive—funneling far more money to the wealthy, and depriving most other Americans of comparable wealth gains.

Now that Republicans and Democrats both are griping about the unsavory taste of the bipartisan debt compromise, there is a return to false claims about Pres. Obama—the only president in US history to repeatedly demand that Congress “find the funds” and send him “deficit neutral” bills—wanting “a blank check” and about the Democratic party being devoted to a perverse conspiracy to “kill jobs”, and erode the middle class.

The arithmetic is simple: it is the policies of Pres. Barack Obama that have been designed precisely to benefit the middle class and hardworking wage earners; it is the policies of the House Republican caucus that have been designed to cut spending, cut taxes and steer still more of the American people’s household wealth to the already wealthy.

It is Pres. Obama who has been pushing policies designed to ensure that the United States fulfills its obligations; it is the Republican House caucus that has been pushing the idea that “we overpromised” to those under 55, and that Medicare is fundamentally unaffordable and should be reformed into nonexistence—Medicare is an insurance plan; the Ryan plan proposes replacing it with a coupon book but requiring seniors to buy costly private health insurance.

One of the worst and most insidious tricks of the Bush administration’s fiscal and economic policies is hard at work in the current radicalism of the Republican House caucus, and that is the giving of special favors—in the form of unfunded tax credits, lower rates and wide-open loopholes, to make businesses that have ceased to serve the market look as if they still do.

Specifically, instead of requiring—as did the Affordable Care Act—that insurers meet new standards, turn no one away and provide quality care at affordable rates, in exchange for tens of millions of new private sector clients, the Ryan Medicare plan would simply force tens of millions of seniors to give huge sums to the insurance industry, without demanding performance. In other words, it would take seniors’ money without requiring even similar quality of care to what Medicare now makes possible.

It is the job-killing unfunded tax cuts and wealth displacement of the Bush era that Democratic leaders and Pres. Obama are working to overturn, so that the nation can be restored to fiscal sanity and the interests that control most of the nation’s wealth can return to job creation. It is simple common sense: free money already received does not provide an incentives; the need to be enterprising in order to earn new wealth, does.

The following is a complete transcript of Pres. Obama’s remarks to the nation, announcing a bipartisan deal to raise the debt ceiling, agreed to today by the leadership of both parties…

Good evening. There are still some very important votes to be taken by members of Congress, but I want to announce that the leaders of both parties, in both chambers, have reached an agreement that will reduce the deficit and avoid default — a default that would have had a devastating effect on our economy.

The first part of this agreement will cut about $1 trillion in spending over the next 10 years — cuts that both parties had agreed to early on in this process. The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President — but at a level that still allows us to make job-creating investments in things like education and research. We also made sure that these cuts wouldn’t happen so abruptly that they’d be a drag on a fragile economy.

Now, I’ve said from the beginning that the ultimate solution to our deficit problem must be balanced. Despite what some Republicans have argued, I believe that we have to ask the wealthiest Americans and biggest corporations to pay their fair share by giving up tax breaks and special deductions. Despite what some in my own party have argued, I believe that we need to make some modest adjustments to programs like Medicare to ensure that they’re still around for future generations.

That’s why the second part of this agreement is so important. It establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit, which will then be put before the entire Congress for an up or down vote. In this stage, everything will be on the table. To hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don’t act. And over the next few months, I’ll continue to make a detailed case to these lawmakers about why I believe a balanced approach is necessary to finish the job.

Now, is this the deal I would have preferred? No. I believe that we could have made the tough choices required — on entitlement reform and tax reform — right now, rather than through a special congressional committee process. But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year.

Most importantly, it will allow us to avoid default and end the crisis that Washington imposed on the rest of America. It ensures also that we will not face this same kind of crisis again in six months, or eight months, or 12 months. And it will begin to lift the cloud of debt and the cloud of uncertainty that hangs over our economy.

Now, this process has been messy; it’s taken far too long. I’ve been concerned about the impact that it has had on business confidence and consumer confidence and the economy as a whole over the last month. Nevertheless, ultimately, the leaders of both parties have found their way toward compromise. And I want to thank them for that.

Most of all, I want to thank the American people. It’s been your voices — your letters, your emails, your tweets, your phone calls — that have compelled Washington to act in the final days. And the American people’s voice is a very, very powerful thing.

We’re not done yet. I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days. It will allow us to avoid default. It will allow us to pay our bills. It will allow us to start reducing our deficit in a responsible way. And it will allow us to turn to the very important business of doing everything we can to create jobs, boost wages, and grow this economy faster than it’s currently growing.

That’s what the American people sent us here to do, and that’s what we should be devoting all of our time to accomplishing in the months ahead.

Thank you very much, everybody.

List of Legislative Riders on H.R.2584, The Interior & Environment Approps bill for FY12
39 provisions in the bill specifically eliminate environmental protections in service of big polluters and GOP campaign donors

*In order as they appear in the bill, with section numbers cited.

Blocks Endangered Species Act Designations [Language on page 8]: Prohibits funding for Endangered Species Act listings or critical habitat designations.

Blocks NPS Boat Checks on Yukon River [Section 116]: Prohibits the National Park Service from carrying out boat inspection or safety checks on the Yukon River within the Yukon-Charley National Preserve in Alaska.

Blocks Agency Appeal of Grazing on Public Lands [Section 118]: Amends administrative appeal procedures for grazing on public lands to require parties to exhaust all administrative appeals before they may file suit in Federal Court.

Blocks Judicial Review of De-listing Wolves in Wyoming/Great Lakes [Section 119]: Protects from judicial review any decision of the Secretary of the Interior to de-list wolves in Wyoming or the Great Lakes region.

Blocks NEPA Review of Livestock Movement across Public Lands [Section 120]: Provides that for FY 2012 through FY 2014 the movement of livestock across public lands shall not be subject to NEPA review.

Requires BOEMRE Oil & Gas Permit Reporting [Section 121]: Requires Bureau of Ocean Energy Management, Regulation, and Enforcement to keep detailed records and provide quarterly reports on any oil and gas permit or plan that was not approved by the agency.

Blocks Wild Lands Secretarial Order [Section 124]: Prohibits funding for the Wild Lands Secretarial Order announced by Interior Secretary Salazar last December. Proponents of the Secretarial Order argue that the Order is a reiteration of the Federal Land Policy and Management Act of 1976 requirements for BLM management of federal lands with wilderness characteristics.

Allows for Export of Alaskan Western Cedar [Section 414]: Allows Alaskan western red cedar and yellow cedar to be sold for export. Current law requires such cedar to be used domestically.

Blocks NEPA Review of Extended Grazing Permits [Section 415]: Allows grazing permits to be extended without the required NEPA review in FY 2012 through FY 2016. In prior year’s appropriations, the extension of grazing permits was only for one year.

Extension of Forest Service Stewardship Program [Section 427]: Allows the Forest Service stewardship contracting program which under current law does not expire until September 30, 2013 to be extended through September 30, 2023.

Blocks Livestock Emissions Regulation [Section 428]: Prohibits funds for the promulgation or implementation of any regulation requiring a permit for emissions resulting from the biological processes of livestock production.

Blocks Greenhouse Gas Rule on Manure Management [Section 429]: Prohibits EPA from implementing a rule requiring reporting of greenhouse gases from manure management systems.

Blocks Greenhouse Gas Rule on Stationary Sources [Section 431]: Severely limits EPA’s ability to regulate greenhouse gases. For a one-year period EPA is prohibited from proposing or promulgating regulations to reduce greenhouse gas (GHG) emissions from stationary sources. The language also prevents civil tort or common law lawsuits during this one-year period. Furthermore the language states that any permit applied for during the one-year period shall not be federally enforceable.

Blocks Update to Mountaintop Removal Mining Rule [Section 432]: Prohibits the Office of Surface Mining (OSM) from updating the Stream Buffer Rule. This is for the benefit of companies engaged in Mountaintop Removal Mining.

Blocks Mountaintop Removal Mining Policy at Multiple Agencies [Sec. 433]: Prohibits EPA, the Corps of Engineers, and OSM from implementing or enforcing any policy or procedure contained in two specified documents on Mountaintop Removal Mining.

Blocks Coal Ash Regulation [Section 434]: Prohibits EPA from regulating Fossil Fuel Combustion Waste (coal ash) under the Solid Waste Disposal Act.

Blocks Modification of Clean Water Act [Sec. 435]: Prohibits EPA from changing or supplementing guidance or rules related to the scope of the Clean Water Act.

Blocks Clean Water Act Regulations on Cooling Water Intake Structures [Section 436]: Prohibits EPA from developing, finalizing, implementing, or enforcing rules for facilities with cooling water intake structures.

Limiting Public Appeals [Section 437]: Changes the general administrative appeal process for the Forest Service to the less rigorous one contained in the Healthy Forests Restoration Act of 2003.

Blocks Storm Water Discharge Regulations [Section 439]: Prohibits regulations or guidance that would expand the storm water discharge program under the Clean Water Act to post-construction commercial or residential properties until after the EPA administrator submits a study to the Appropriations and authorizing Committees. The study must include overall cost as well as a cost-benefit analysis for various options.

Financial Break for Big Mining Companies [Section 440]: Amends the 1993 law establishing the Hardrock Mining Claim Maintenance Fee to provide a financial break for placer claims held by an association of two or more persons.

Allows for Texas’ Cap-and-Trade System [Section 441]: Provides that the EPA shall take no action to disapprove or prevent implementation of any flexible air permitting program. This provision was for the benefit of the State of Texas.

Blocks Grazing Management of Bighorn Sheep [Section 442]: Provides that through FY 2016 no action can be taken to manage Bighorn Sheep if such action would result in a reduction in the number of livestock allowed to graze upon a parcel.

Waives Clean Air Act Requirements for Big Oil Companies [Section 443]: Amends the Clean Air Act to (1) preclude EPA from requiring offshore sources to demonstrate compliance with health-based air quality standards anywhere but in a single onshore area; (2) reduce the length of time during which exploration platforms and drill ships are considered emission sources under the CAA, thereby limiting the time when emissions would be controlled; (3) make it impossible to use the permitting program to set emission control requirements for service vessels associated with offshore sources; and (4) replace a relatively fast, inexpensive process for citizens to challenge government action with a longer, more expensive review process in the Court of Appeals for the D.C. Circuit. This legislation passed the House on June 22, 2011 by a vote of 253-166.

Blocks Arsenic Cancer Study & Formaldehyde Risk Assessments [Section 444]: New authorization language requiring EPA to improve its Integrated Risk Information System (IRIS) seeking to draw doubt to the program that highlights health implications from environmental contaminants. The language stops the release of draft or final risk assessments that are not based on improvements in IRIS based on a National Research Council assessment of formaldehyde. Further requires the National Academy of Science to review EPA’s changes to IRIS and review risk assessments undertaken by EPA. The language goes on to limit funds for any action that would lower exposure levels below or within background concentration levels in ambient air, drinking water, soil, or sediment. Report language directs EPA to take no further action to post its draft cancer assessment of inorganic arsenic until the completion of the NAS study.

Removes Protection of Grand Canyon from Uranium Mining Claims [Section 445]: Prohibits the Secretary of the Interior from implementing a land withdrawal to protect the Grand Canyon from new uranium mining claims.

Blocks Forest Service Travel Management: [Section 446]: Prohibits the Forest Service from implementing Travel Management Plans in California until completion of an assessment of unauthorized routes. It further limits the classification of certain forest roads.

Blocks EPA Opinions on Pesticides [Section 447]: Prevents the EPA from using biological opinions related to pesticides and the Endangered Species Act, with a focus on ESA-listed salmon.

Blocks Clean Air Act Regulations of Cement Industry [Section 448]: Prohibits funding for the EPA to implement Clean Air Act regulations on the manufacture of Portland cement.

Blocks EPA Enforcement of Florida Water Quality Standards [Section 452]: Prohibits funding for the EPA to implement or enforce numeric Florida Water Quality Standards even though the state receives millions in federal funds for water projects.

Blocks EPA Greenhouse Gas Standard for Automobiles [Section 453]: Prohibits funding for the EPA to develop or finalize a new greenhouse gas standard for automobiles after model year 2016.

Blocks Clean Air Act Regulations of Fine Particles/Soot [Section 454]: Prohibits funding for the EPA to regulate certain levels of particulate matter in the air under the Clean Air Act.

Blocks EPA Regulation of Hard Rock Mining Operations [Section 455]: Prohibits funding for the EPA to develop additional financial assurance requirements for hard rock mining operations.

Requires BLM Notification of Land Exchanges [Section 458]: Amends the Federal Land Policy and Management Act of 1976 to require BLM and the Forest Service to provide written notification of land exchanges to adjacent landowners.

Blocks EPA Funds to Great Lake States due to Ballast Water Requirements [Section 459]: Prohibits certain Great Lakes states from receiving any EPA funding if they have adopted ballast water requirements that are more stringent than Coast Guard requirements. The Coast Guard believes this will block at least four Great Lake States from receiving any EPA funds.

Blocks EPA Guidelines on Misleading Pesticide Labels [Section 460]: Prohibits funding for the EPA to finalize guidelines on misleading information provided on pesticide labels.

Blocks Fictitious EPA Action on Ammonia Emissions[Section 461]: Prohibits funding for the EPA to develop or implement regulations related to ammonia emissions under the secondary standard for NOx and SOx.   EPA has already stated that it has no intention of doing so.

Blocks Clean Air Rules for Power Plants and Requires a Study That Ignores Public Health Benefit of the Clean Air Act [Section 462]: Directs the EPA to do a cumulative assessment of the impacts of EPA regulations, and prohibits funding for the “Utility MACT” and “Transport” rules.

Blocks Permit Requirements for Pesticide Discharge in Waterways [Title V]: Amends the Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Water Act to eliminate requirements for chemical companies and agriculture to obtain permits for pesticides entering waterways.

• From the Democratic minority of the House of Representatives’ Committee on Appropriations

Less than two hours after the passage of House Republicans passed a hobbled version of “cut, cap and balance”, the Senate rejected the so-called Boehner plan. This now opens the field of negotiation for a weekend of heated, anxious, uncomfortable compromise debt plan negotiations, in both houses, as leaders attempt to cobble together broad bipartisan coalitions in both houses.

The fact that 59 senators voted against the Boehner plan is significant, because it reflects the analysis that has been building up throughout the debt negotiations, which is that in both houses, broad coalitions including members from both parties, in both cases a majority Democrats, will have to support legislation that Speaker Boehner and Leader Reid can both agree to and persuade Pres. Obama to sign.

Of the 59 votes against the Boehner plan, 6 were Republicans. If the Reid plan wins support from just 7 Republicans, it will be immune to filibuster and will become the must-pass plan for the House of Representatives. Boehner will have to persuade a majority of House members to vote for a bill that includes no new revenues—the demand of Democrats—and no balanced budget amendment—the demand of Tea Party Republican.

If Speaker Boehner were to join all of the Democrats and 22 of his fellow Republicans in voting for a compromise plan, they would have a majority, and the president could sign a bipartisan debt plan from both houses. Senate minority leader Mitch McConnell is allegedly refusing to speak to the majority leader, Harry Reid, and Speaker Boehner may have a hard time reversing course on a strategy that seems to be geared toward depriving Obama of his leadership role.

It has been suggested that former Speaker Nancy Pelosi might help Boehner muster the votes needed to pass a bipartisan plan. But there is no easy way to see how Mr. Boehner can maneuver out of the situation he is in. Just a week ago, amid news the Speaker was walking out of debt negotiations, the Senate rejected a proposal similar to, but more ambitious than the one rejected today. Boehner has, during that time, alienated much of his own party, and nearly every Democrat, and will likely have to make additional concessions to both sides to win a coalition vote.

There are now rumors of a challenge to his speakership from within the Republican party, and it remains unclear whether Mr. Boehner’s driving calculation has been to achieve a viable deal to raise the debt ceiling or to appear to do so while protecting his leadership position against more radical elements in his party.

One analysis suggests that Boehner might be well served to court Democratic support, and that he might even have gone as far to the right as he has in order to demonstrate the relevance of his leadership. Were Democrats to have to choose between Mr. Boehner and one of the Tea Party radicals, the might work to elevate and defend the speaker, to prevent further attacks on key Democratic priorities.

Another analysis suggests Democrats have outwitted the Republicans at the political maneuvering, driving a wedge through the heart of Republican party politics and sowing disarray and confusion among the House caucus. The relative calm of Senate Republicans, some say, is a sign they may see this dynamic playing out, and prefer to keep out of the fray.

By this analysis, Speaker Boehner is now caught between a Republican majority that no longer trusts his leadership and which fears the party may come apart and a Democratic minority that shares very few of his policy priorities, and which—led by the tough, experienced and effective Pelosi—might be ready to demand some serious concessions.

Even as Sen. McConnell and Speaker Boehner were accusing Democrats of watching from the sidelines, NPR reports the pressure was already back on Boehner for some sort of substantive compromise:

At the same time Reid appealed for bipartisanship, he and other party leaders accused Boehner of caving in to extremists in the GOP ranks — “the last holdouts of the Tea Party,” Sen. Richard Durbin of Illinois called them.

Republicans conceded that the overnight delay had weakened Boehner’s hand in the endgame with Obama and Senate Democrats.

But Politico reports the House Republicans are planning to propose Sen. Reid’s measure in the House on Saturday, one to two days before it is expected to pass the Senate, in hopes of voting it down, effectively killing the two alternative legislative plans that remain available. Politico also reports there is expected to be little Republican support in the House for the Reid plan, though nearly every element of the plan is more in line with Republican than Democratic priorities. Democrats are expected to support it.

Should the Reid plan fail on Saturday, in the House, it would effectively call the president to action. He has said he will not allow the nation to default and he will not accept a plan that does not extend the debt ceiling far enough to prevent a credit downgrade, but he has not yet said he will invoke the 14th Amendment to prevent default or downgrade.

White House spokesman Jay Carney has said, over the last two days, that the grand bargain framework Speaker Boehner walked out on a week ago is still “on the table”. That measure included at least $800 billion in new revenues and as much as $4 trillion in deficit reduction and was expected to have support from both parties. Whether it would win a majority in either house is not yet clear.

After nearly two months of intense, relentless, high-pressure negotiations over whether and how to raise the ceiling for government borrowing, Speaker John Boehner’s debt-reduction plan passed the House of Representatives, with 218 Republican votes in favor, and 22 Republicans voting with all of the Democrats to oppose it. The measure is expected to fail, this evening, in the Senate.

Since Speaker Boehner walked out of talks last week, Sen. Reid, the leader of the Democratic majority in the Senate, has consistently said the limited “cut, cap and balance” model Boehner was trying to pass in the House would not get through the Senate. Yet after a week of corralling and cajoling his membership, Speaker Boehner passed precisely the plan neither Reid nor Pres. Obama intend to support.

The Senate plan is not yet ready for a floor vote, but Sen. Reid says he hopes to have it through the Senate by Sunday. This, however, leaves the entire world waiting as the foundation of the international financial system—the American Treasury bond—looks about to see its value sharply decreased by a national sovereign debt default and credit downgrade.

Rep. Boehner shouted angrily, as he spoke after the bill’s passage, that the fate of the nation was now in the hands of Pres. Obama and Leader Reid. Some expressed concern and surprise at his hostile tone, but given the opposition to his plan and the likelihood that he will be forced to endure even more withering attacks from all sides, before a final deal is reached, some say it is to be expected.

There is no report at this hour as to whether Rep. Pelosi, the House minority leader, and Speaker Boehner, have been discussing the necessary preparations for a complicated coalition vote, which will likely require both of them to make painful concessions that will anger some in their base. There is, however, mounting speculation that Pres. Obama may need to invoke the 14th Amendment ban on questioning outstanding debt, and institute a unilateral debt ceiling increase.

We will know more about what the weekend might look like, after the Senate has voted tonight.

The Republican party’s demand that any deal to raise the debt ceiling—normally achieved by passage of a single line of legislative text—include a balanced budget amendment is a complex tangle of distractions, rooted in campaign rhetoric and a desire to frustrate the process of economic recovery. The last constitutional amendment to pass, the 27th, was ratified by the states fully 203 years after it was introduced.

The process of amending the Constitution is a complex tangle of maneuvering and retrenchment that invites into the fray nearly every ideological bias and grudge. That tangle is notoriously difficult to unravel, to win consensus, because an amendment to the Constitution takes on supreme overriding value as against any number of statutory laws, the ramifications of which can be hard to quantify, and which can lead to many vicious partisan fights in the future, or, where the budget is concerned, to policy changes and unforeseen consequences that not even the amendment’s supporters would like.

State-level balanced budget amendments, like European Union deficit constraints, are guidelines that often result in dysfunctional—underfunded—government or even more problematic deficit crises, stemming from unusual accounting methods and bills passed in overly pressurized political environments. Many political observers in California blame much of the state’s ongoing budget crisis on the relative ease with which referenda are used to amend the state’s constitution, building in policy requirements that are not always—at first glance—an obvious result of the amendment.

Observers on Capitol Hill believe the balanced budget amendment demand is a non-starter in the Senate, and that it will only bring the United States closer to a catastrophic credit downgrade. Passage would require impossible two-thirds votes in both the House and the Senate, and then ratification by three-fifths of the states. It is impossible to pass such a plan by Tuesday, at which point the United States will go into default and see its credit downgraded.

Republicans are now being accused of electioneering, trying to use the debt crisis as a lever to inspire voter turn-out in the 2012 election. And some observers are complaining that Boehner did not propose this in any serious piece of legislation before this last-minute debt crisis was afoot. That analysis has led some to call the entire idea a stunt that is putting the nation in real fiscal jeopardy.