We all know that John McCain famously remarked that he didn't know much about economics. Given that, who are the people advising McCain? Today I've chosen three members of McCain's "Brain Trust" to highlight. Let's take a look:
- Phil Gramm: Widely regarded as McCain's lead advisor, and a likely Secretary of the Treasury in a McCain administration.
Gramm first entered politics as a Democrat--winninng a congressional seat from Texas in 1978. He was reelected in 1980. While in his second term he betrayed his Democratic colleagues when he advised the Reagan Administration of his congressional caucus' budget strategy meetings. Stripped of committee responsibilites by the Democratic leadership, Gramm resigned, then ran successfully as a Republican in the special election his resignation forced. In 1986 Gramm ran successfully for the Senate, where he served three terms.
While in the Congress, Gramm was an aggressive proponent of spending restraint and deregulation. Working closely with the Reagan White House and Reagan's OMB director David Stockman, Gramm was a committed soldier in the war against government. (Gramm's pal Stockman was famous for observing--when discussing Social Security and Medicare--that he didn't believe "the American people are entitled to anything." Stockman was indicted in 2007 by the US attorney in Manhattan for defrauding investors in his auto parts company).
Gramm's tenure in the Congress was highlighted by two pieces of legislation, the Gramm-Rudman-Hollings Act which sought to apply an across the board budget cutting discipline to federal spending (as Grover Norquist once famously said, we'll shrink government down to the size where we can drag it into the bathroom and drown it in the tub). Key elements of the act were later deemed unconstitutional. Of more lasting importance was the 1999 Gramm-Leach-Bliley Act which repealed key provisions of the Depression era Glass-Steagall Act and broke down the firewalls between financial businesses--banking, brokerage services, and insurance--making rapid consoidation in the investment services sector possible. The breaching of these barriers led directly to the excesses and abuses of the 1990's (ex: an analyst in the brokerage arm of a firm plumps a given company's stock because the investment banking arm of the same firm wants to please the company and gain additional investment banking business. Investors--believing they are recieving objective and independent information--are then led to make decisions contrary to their interests). Many economists believe that the sub-prime slime we are currently suffering through today is another effect of Gramm-Leach-Bliley.
After leaving the Senate, Gramm became a vice-president at the international banking firm UBS. By the way, Gramm's wife Wendy is also an accomplished member of our ruling class: she sat on the board of Enron prior to its collapse and along with her fellow board members agreed to a settlement of a suit brought by the Regents of the University of California.
- Pete Peterson: Along with Warren Rudman (another McCain advisor and co-sponsor of the Gramm-Rudman-Hollings Act), Petersen is a premiere deficit hawk. One can only imagine the pain he has endured during the last seven years of the Bush administration's radical and profligate spending.
Long a proponent for fiscal restraint, Peterson is a founding member of the Concord Coalition. He was also Chairman of the Federal Reserve Bank of New York between 2000-2004 and served as the Chairman of the Council on Foreign Relations. Peterson matches his desire for small government and fiscal restraint with his advocacy of limited regulation. And why not? Petersen is a co-founder, with Steven Schwarzman, of The Blackstone Group--a huge private equity firm. (Nodes commonly intersect within the rarefied world of the Power Elite: Stockman was with the Blackstone Group until 1999). These two kings of leverage--who operate with little to no oversight--are collectively worth in excess of 10 billion dollars. Peterson's partner, Schwarzman, is perhaps best known to the larger public for his grotesquely expensive 60th birthday party.
- Carly Fiorina: At first glance this seems like a bit of a head scratcher. But, part of her value to McCain is likey that she's well-spoken and very telegenic.
Now deputed as the "RNC Victory Chairwoman," Fiorina was a diva of the "new economy" of the late 1990's and early 2000's. As the CEO of Hewlett-Packard between 1999-2005, Fiorina regularly appeared on the financial channels spouting unalloyed "new economy" gibberish. I once asked my sister-in-law--at the time a HP executive--what Fiorina meant when she waxed rhapsodic about "synergistic strategies across mulitple platforms." After all, the centerpiece of Fiorina's business plan--swallowing a moribund PC maker (Compaq) at the cost of core competencies--didn't seem particularly "synergistic" or new. My sister-in-law just shrugged her shoulders.
What was new during Fiorina's tenure? As the company's fortunes soured, Fiorina broke with a fundamental article of faith at HP and authorized--for the first time in the company's history--large layoffs. At her direction, over 7,000 HP employees were let go. Eventually, Fiorina herself was dismissed by the board of HP after failing to perform to expectations. On news of her dismissal, HP's stock price spiked 7%. Happily, Fiorina did better than most other fired HP employees and pocketed a severance package that included $21,000,000 in cash. This certainly doesn't make her unique as she is just one of many corporate executives who are routinely rewarded for their failures.
Today, Fiorina sits on the board of Revolution Health Care Group (started by another huckster of the "new economy", Steve Case), a web portal designed to help individuals shop for heath insurance. (Finally, she has achieved synergy: McCain's health care plan would surely benefit Revolution Health Care Group).
So, what can we expect from this crew? Simply put, more "market-based" solutions--read deregulation and privatization. We certainly see this in McCain's health care plan. Privatization means a renewed push for school vouchers, more private contractors--from KBR to Blackwater to privatizing the prison system, to outsourcing myriad other public functions (like issuing passports). Privatization means dissolving shared public responsibility; it means an agenda that surrenders the polity to the discipline of the market.
Certainly, at the center of this will be the insistent drumbeat of tax cuts. How can we pay for these cuts? McCain assures us that any loss of revenue will be offset by a vigorous rooting out of "fraud, waste, and abuse" in the federal budget. Lower taxes, in other words, will be offset by eliminating the inefficiences of government. Of course, this kind of thinking is through the looking glass. McCain likes to offer the famous "bridge to nowhere" as an example of waste that--once eliminated--will help move toward a balanced budget by 2012(!). Putting aside the paltry sum that all earmarks and pork spending represents--there is a fundamental dishonesty here. Vetoing proposed, or possible, spending does not save money. Cancelling spending already in the budget does. (For example: the horrifically costly and technically flawed ABM "Star Wars" system). This kind of economic hocus-pocus is standard operating procedure to a certain breed of beltway types. On second thought, perhaps through the looking glass is too mild. Consider the Orwellian world that McCain occupies when it comes to the Bush tax cuts: in McCain's world, allowing the tax cuts to expire--as legislatively mandated--is recast as a tax increase. (Republicans are very good at this Orwellian dodge; ex: the Estate Tax becomes the "Death Tax). Ironically, rhetoric can often be most powerful when it is--intellectually--the most specious.
What kind of simple frames, then, can we expect from McCain and his advisors?
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Tax cuts (and McCain's health care proposal): "It's the people's money and they know how to spend it better than bureaucrats do."
- Privatization: "The market works efficiently, 'bloated' big government is wasteful." (A tip of the conical hat to Ronald Reagan here).
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Deregulation: "American businesses cannot compete in the global market when they are hamstrung by needless domestic regulation (ex: Sarbanes-Oxley) drafted by (again) bureaucrats who've never had to meet a payroll, pay a supplier, blah, blah.".
The economic message from John McCain is clear. You're on your own "my friends"...good luck.
PS. I would really like to know where and how Cindy McCain's tens of millions are invested.