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identical to the positions Enron advocated," – Rep. Henry Waxman
Budget DisasterCongressman Sanders – Press Release – February 7, 2002
President Bush has submitted his proposed budget for next year that, as Congressman Sanders (I-VT) points out, is loaded up with spending on high tech weaponry that has nothing to do with protecting the nation from terrorism, including over $7.8 billion for the Star Wars program. Meanwhile, it starves most domestic priorities that benefit middle income and working families.
The wealthy have cause to celebrate, however, because the President wants to pile on another $675 billion in new tax cuts that will be heavily targeted the highest income earners. These new tax cuts are on top of the $1.3 trillion Bush tax cut that passed the Congress last year.
Sanders said, “If I’m a big money donor to the President’s campaign, I couldn’t be happier with this budget. But if I’m a member of a middle income family, it’s a disaster. While we should be focusing on extending Social Security and Medicare, the President thinks it’s more important to give tax breaks to the wealthy than it is to protect the retirement security of seniors. In fact, the President’s tax cuts will cost twice as much as we need to guarantee the financial health of Social Security for the next 75 years. I don’t know who the White House is talking to set its priorities but it’s not the men and women on the street that I meet.”
Examples of the programs that will come under the ax if the President has his way are LIHEAP (a $300 million cut); environmental programs ($1.5 billion cut); highway spending ($9.2 billion); law enforcement grants to local communities (69% cut). Score of other programs are frozen including Head Start and numerous education programs.
Sanders continued, “The Congress has got to make a very simple decision. Do we protect Social Security, Medicare, veterans programs, education and the environment or do we pump billions into exotic weapon systems and tax breaks for the rich?”
Social Security PledgesNew York Times – by Alison Mitchell – February 7, 2002
WASHINGTON, Feb. 5 — Ever since Bill Clinton greeted the new era of surpluses in 1998 with the pledge to "save Social Security first," Republicans and Democrats alike have made ever more fervent pledges to use the taxes collected for Social Security solely for retirement benefits or paying down debt. The parties ran campaign advertisements on the issue. They fashioned baroque legislative "lockboxes" to protect the Social Security trust fund. George W. Bush said in his 2000 campaign that "for years, politicians in both parties have dipped into the trust fund to pay for more spending — and I will stop it."
Now all those pledges are a memory. With the surplus drained by recession, last year's $1.35 trillion, 10- year tax cut and the war on terrorism, the president's new budget uses Social Security surpluses to pay for other programs every year through 2013, ultimately diverting more than $1.4 trillion in Social Security funds to other purposes.
This year alone, $262 billion in Social Security funds are to be tapped. In 2003, the budget envisions using $259 billion.
"The lockbox is gone," said Senator John B. Breaux, Democrat of Louisiana. That, to differing degrees, poses a political problem for both parties.
For the moment, Democrats are on the offensive. In one hearing today, Senator Kent Conrad, the North Dakota Democrat who is chairman of the Senate Budget Committee, told Mitchell E. Daniels Jr., the president's budget director, that if he had put forward such a plan to use pension money for other purposes in the private sector "you'd be headed for a federal correctional authority."
Republicans today were somewhat ill at ease. Until they made their recent pledges of allegiance to the preservation of the Social Security trust fund, they ran well behind Democrats when Americans were asked which party they most trusted to handle Social Security. In recent years they nearly closed the gap.
"What's fundamentally different today in 2002 is that Republicans have fought their way to even," said Terry Holt, a spokesman for Representative Dick Armey, the House majority leader. But that also means the Republicans have the most to lose if earlier perceptions return.
So Republicans are hoping that President Bush's sky-high approval ratings, and his emphasis on his budget as a war-time necessity, will prevent them from paying a price with the voters for the use of the Social Security money.
As Senator Pete V. Domenici, the ranking Republican on the Budget Committee, put it, "So I say to the seniors of this land, you would join us in saying the most important thing is winning this war." Republicans are also arguing that tax cuts will stimulate the economy and that growth will return the era of surpluses.
Republican pollsters say that for now at least voters are in a forgiving mood and believe that Sept. 11 brought a shift in priorities. "In the short run people understand there will have to be resources devoted to putting together the required elements of dealing with terrorism," said David Winston, a pollster for the House Republican conference. "You have an understanding electorate."
But the debate over Social Security is also coming at a time when the Enron collapse has given people second thoughts about the security of their 401(k) plans and put the issue of retirement security front and center. Democratic pollsters say that even if Mr. Bush will not suffer for his budget priorities, he is not up for election this year. Congressional Republicans are.
"Bush is at 85 percent," said Mark Mellman, a Democratic pollster, referring to the president's approval rating. "If he loses 10 points over Social Security he'll still be a very popular president. But some of these marginal House and Senate members who are at 55 percent, if they lose 10 points, they lose."
To help shield their members and reassure older voters, House Republican leaders are planning a vote soon on a measure that would require the Social Security Administration to give out certificates to people guaranteeing all the retirement benefits for which they are qualified.
Behind the scenes some conservatives, including Representative Tom DeLay, the House majority whip from Texas, have argued vociferously in recent private meetings that they do not want their party associated with deficits, lawmakers say. But most Republicans say they would not be able to cut spending enough to produce a balanced budget.
For all their criticism of the Bush budget, Democrats themselves will quickly face political difficulties of their own, since they have a one-vote majority in the Senate and will have to produce their own budget plan. Their protests will sound hypocritical if they, too, dip into the Social Security reserves.
But if anything, their ideas would make the deficits worse. Most Democrats want to support Mr. Bush's calls for robust new spending on the military and domestic security. Most are reluctant to take any step to freeze or roll back the tax cut. Democrats also want to add back money Mr. Bush proposed cutting from popular domestic programs for the environment, highways or job-training.
Of course, despite the debate about dipping into the Social Security surplus, current benefits are not imperiled. Social Security payroll taxes, plus the interest Social Security accrues on its trust fund, exceeds what is needed to pay benefits for the next 14 years, projections show. And in the 1980's the use of the Social Security surplus to pay for other programs was routine.
When President Bill Clinton coined the phrase "save Social Security first" in his 1998 State of the Union Message, part of the rationale was that if federal debt could be significantly reduced or even eliminated before 2016, it would help the government pay the Social Security benefits it will owe the large baby boom generation, without having to impose crushing new payroll taxes on younger workers in those years.
But Mr. Clinton was also employing a stratagem to prevent Republicans from passing large tax cuts in a time of surpluses. And when the Republicans embraced the idea, they did so partly because they realized that it would also stop Democrats from having big surpluses to finance new spending. Now both sides have to deal with the political price of breaking their promises.
Greenspan BabblesEmployee Advocate – DukeEmployees.com – February 6, 2002
Leave it to Federal Reserve Chairman Alan Greenspan to get into the Enron debate and get everything settled.
It seems the whole fault of everything is the ignorant American public. He told Congress that Americans must be better educated on managing their finances, according to the New York Times.
Alan Greenspan’s main job is to talk in circles. He can play with interest rates, but he mainly tries to talk the market up, or down. Lately, he is doing a much better job of talking the market down.
Perhaps he is trying to talk the Enron collapse away. But he is just not that good.
It is interesting that everything is the fault of the public. Crooked corporate officials must have had nothing to do with the millions of Enron pension dollars lost. Paid-for politicians, who let big companies write their own rules, must have had noting to do with it.
What about the Enron employees who were less than 50 years old? No matter how much they were educated, their 401 (k) money was locked into Enron stock! All of the employees 401 (k) money was inaccessible when the company froze transfers.
It goes much deeper than that. Enron played games with the pension fund, the same as many other companies have. The more games that Enron played, the less the employees had in their pension fund. Today, everyone wants to talk about the 401 (k) funds. But the cash balance conversions came first, and that is where most employees, across America, have lost the bulk of their retirement money.
There is not enough education available to teach people how to beat the crooks, who have free run of Washington!
Rep. Sanders on Corporate GreedCongressman Sanders – Press Release – February 6, 2002
The fall of Enron, and its subsequent bankruptcy, may well be the largest scandal in the history of American business and politics. If we ask, “What went wrong with Enron?” the answer would be, “Everything.”
A major corporation went bankrupt, in the process laying off a large percentage of its workers. Workers' pensions were under assault -- while executives bailed out of company stock at a huge profit. Executives hid losses and inflated profit reports with the full blessing of the firm’s outside auditors. Lawyers ‘investigated’ reports of wrongdoing – and found nothing wrong.
The moral of this sad story is greed. Everything that happened took place because someone – executives, accountants, investment bankers, lawyers – wanted to make as much money as possible as fast as possible.
Here are the details. The Enron Corporation was the seventh largest company in America with revenue exceeding $100 billion and over 20,000 employees. Having contributed millions in campaign contributions to the Republican Party and the President, the company was strongly positioned to influence the direction of energy policies in the Bush Administration. One of the major results of their efforts was a huge increase in electric rates in California.
When earlier this year Enron was forced to admit that it had over-reported its profits by nearly $600 million, the corporation imploded, leading to the largest bankruptcy in history.
While Enron was exaggerating its profits, and before its artificially high stock price plummeted, three top executives in the company, Lou Pai, Kenneth Lay and Jeff Skilling cashed in stock options worth some $560 million. Like rats on a sinking ship, they got their money out just in time. But they didn't give that same opportunity to their employees. As Enron's stock crashed, the company forced more than 12,000 of its employees to retain Enron stock in their 401(k) pension plans, causing massive losses for the workers. Many of them lost their entire retirement savings.
But tale of greed is not limited to Enron.
The American people continue to pay by far the highest prices in the world for prescription drugs. Many of the drugs sold in this country by American drug companies are sold abroad at a fraction of the price – the exact same drugs, but at far lower prices.
Yet while millions of Americans suffer, and some die, because they are unable to afford the medicine they need, the pharmaceutical industry is the most profitable industry in our country. Last year, drug company profits were over $30 billion. As many elderly citizens cut their dosages in half because they cannot afford to take the prescribed dosage, nine executives at the top pharmaceutical corporations received $890 million in stock options. This was on top of the $169.9 million in wages, bonuses and other compensation they also received. Corporate greed leaves old people suffering so that these nine – nine! – drug company CEOs can get over a billion dollars in compensation.
How can such a gross disparity occur? Easy. The pharmaceutical industry is the wealthiest political lobby in Washington, spending more than $200 million in the last three years on campaign contributions, lobbying activities and media advertising. The political influence this money secures makes sure that drug prices stay high, that people cannot import lower-priced drugs from Canada, and that they get access to government-sponsored medical research worth billions of dollars in future profits.
Corporate greed doesn’t end with Enron or the pharmaceutical companies. It is endemic. Take, for another example, IBM. Big Blue recently announced a new round of layoffs. But that doesn’t mean the company is contracting. While the company has cut more than 5,000 jobs in the United States since July, IBM is building two new micro-processing plants in China. In China, of course, workers are paid a fraction of what American workers receive – sometimes as little as 20 cents a day,
But then, IBM’s executives are so driven by greed that they ignore the plight of American workers. Two years ago, despite record-breaking profits and a pension fund surplus of some $10 billion, IBM slashed pension and retirement health benefits for workers and curtailed their salaries. Since cutting pensions and worker salaries means more for IBM CEO Louis Gerstner, then it must be good corporate policy. In fact, Gerstner raked in $176 million in total compensation and stock options over the past two years, and that does not count his $260 million in unexercised stock options from IBM during his tenure as CEO. (Just in case he doesn’t have enough for his senior years, Gerstner negotiated a retirement plan over $1.1 million a year for himself as a ‘reward’ for slashing the pension plans of IBM employees.)
As if trying to prove that no bad deed should go unrewarded, the House Republican leadership has proposed a tax package in which IBM is the single largest beneficiary: it is slated to get $1.4 billion in tax rebates.
Maybe a good result may yet emerge from the Enron fiasco. Perhaps people everywhere will rise in opposition to the greed that dominates the nation’s corporate suites. Perhaps finally we as a nation, as well as we in Congress, will place a higher priority on raising the minimum wage than to lowering tax rates on the wealthiest one percent of the population. Perhaps.
The Budget BungleNew York Times – February 6, 2002
The Axis-of-Inefficiency Budget
President Bush's proposed $2.1 trillion budget embraces the word "security" at every turn. It provides more spending for military security and domestic security and more tax cuts for "economic security." But the budget undermines the security of the nation's social safety net and the government's ability to carry out some of its basic responsibilities over the next two decades. It jeopardizes the future of Social Security and Medicare, whose trust funds would be siphoned away to underwrite outmoded military projects and tax reductions favoring the rich. The budget embodies a divisive agenda for which Mr. Bush has no mandate, in spite of his popularity.
For weeks the administration has cleverly leaked news about a handful of domestic programs like family nutrition, health research and food stamps that were targeted for spending increases. But the budget the administration presented yesterday revealed that everything outside these few programs was up for assault. According to Mitchell Daniels, the budget director, the administration is targeting only inefficient programs. The cuts, he insists, are not aimed at hobbling job training, environmental programs or labor safety — although those are some of the areas that will suffer. The administration, he says, is simply trying to do away with bad management. Mr. Daniels has created a virtual axis of inefficiency, and declared war on it.
It is hard to accept Mr. Daniels's sincerity when the defense budget remains packed with cold- war-era projects that have no business in the kind of modern, high-tech military the Bush administration wants to create. The budget will lock in billions of dollars in future spending for outmoded technology like the 70-ton Crusader howitzer and the F-22 jet fighter. Apparently the only federal programs that can be inefficient are the ones the Republican Party's right wing doesn't like.
The most discouraging part of the new budget is the way it disguises the true cost of its tax cuts with accounting gimmicks and arbitrary expiration dates. Almost incredibly, Mr. Bush wants to accelerate and make permanent previously enacted tax cuts and add new tax cuts on top of them. He says that his actions would cost more than $600 billion over the next 10 years, but without the gimmicks they would cost more than $1 trillion.
The Bush budget is a road map toward a different kind of American society, in which the government no longer taxes the rich to aid the poor, and in fact does very little but protect the nation from foreign enemies. If the budget is adopted as proposed, over the next decade the increasing cost of the tax cuts will drain the treasury while the rapidly rising price tag of unnecessary military projects will make up a larger and larger piece of what is left.
Virtually everyone supports spending as much money as it takes to fight the war on terrorism at home and abroad. But national security does not require new corporate tax write-offs or contracting for a new fighter plane designed primarily for cold- war-era dogfights. Mr. Bush is using the anti-terrorism campaign to disguise an ideological agenda that has nothing to do with domestic defense or battling terrorism abroad. The budget discontinues the tradition of making 10-year projections into the future, possibly because the administration does not want the American people to see where the road is heading.
One of the many pieces of this budget that the public would never accept if consulted is the harm it does to the future of Medicare and Social Security. When asked yesterday to address charges that the administration was not leaving enough money to keep Medicare and Social Security solvent, Mr. Daniels said both were heading toward insolvency anyway. His policies seemed intent on starving the federal government of money to save them so that they can be "fixed" by privatizing them in ways that favor the well-to-do.
The budget now goes to Congress, where it needs to be rethought and stripped of its gimmicks disguising the true cost of what it wants to do.
Open Letter to George W. BushMichaelMoore.com – by Michael Moore – February 6, 2002
01/29/2002 - "George W. in the Garden of Gethsemane"
An Open Letter to George W. Bush from Michael Moore
When it's all over in a couple months, and you're packing up your pretzels and Spot and heading back to Texas, what will be your biggest regret? Not getting out more often and seeing the sights around Rock Creek Park? Never once visiting the newly-renovated IKEA in Woodbridge, Virginia? Or buying your way to the White House with money from a company that committed the biggest corporate swindle in American history? I got a feeling you didn't miss much by not spending an entire Saturday afternoon assembling a Swedish bookcase -- but you should have known that there was no way you would ever finish your term by hopping into bed with Kenneth Lay.
It's kind of sad when you think about it. Here you were -- the most popular president ever! -- the recipient of so much good will from your fellow Americans after September 11, and then you had to go and blow it. You just couldn't stay away from your old cowpoke friend from Texas, Kenneth Lay.
Kenny has always been there for you. You needed a way to fly around to all the primaries and campaign stops in the 2000 election -- so Kenny gave you his corporate jet. Did you tell the voters when you arrived in each city that the bird you flew in on was from a billionaire who was secretly conspiring to give the bird to all his employees and investors? He flew you around America on the Enron company jet, and for that favor you touched down on tarmac after tarmac to tell your fellow citizens that you were "going to restore dignity to the White House, the people's house." You said this standing in front of an Enron jet!
Man, you loved Lay so much, you not only affectionately referred to him as "Kenny Boy," you interrupted an important campaign trip in April, 2000, to fly back to Houston for the Astros opening day at the new Enron Field -- just so you could watch Kenny Boy Lay throw out the first pitch. How sentimental!
I mean, you loved this man so intensely that, when you were awarded a set of keys the Supreme Court had made for you so you could live in the White House, you invited Kenny Boy to set up shop -- at 1600 Pennsylvania Avenue! He interviewed those who would hold high-level Energy Department positions in your administration.
You not only let Kenny Boy decide who would head the regulatory agency that oversaw Enron, you let him hand-pick the new chairman of the Securities and Exchange Commission, Harvey Pitt -- a former lawyer for his accountant, Arthur Andersen! Kenny and the boys at Andersen also worked to make sure that accounting firms would be exempt from numerous regulations and would not be held liable for any "funny bookkeeping" (don't you wish you were this forward-thinking?).
The rest of Kenny Boy's time was spent next door with his old buddy, Dick Cheney (Enron and Halliburton, as you'll recall, got the big contracts from your dad to "rebuild" Kuwait after the Gulf War). Lay and Dick formed an "energy task force" (Operation Enduring Graft) which put together the country's new "energy policy." This policy then went on to shut down every light bulb and juicer in the state of California. And guess who made out like bandits while "trading" the energy California was in desperate need of? Kenny Boy and Enron! No wonder Big Dick doesn't want to turn over the files about those special meetings with Lay!
The only thing that surprises me more than all the Enron henchmen who ended up in your cabinet and administration is how our lazy media just rolled over and didn't report it. The list of Enron people on your payroll is impressive. Lawrence Lindsey, your chief economic advisor? A former advisor at Enron! Treasury Secretary Paul O'Neill? Former CEO of Alcoa, whose lobbying firm, Vinson and Elkins, was the #3 contributor to the your campaign! Who is Vinson and Elkins? The law firm representing Enron! Who is Alcoa? The top polluter in Texas. Thomas White, the Secretary of the Army? A former vice-chair of Enron Energy! Robert Zoellick, your Federal Trade Representative? A former advisor at Enron! Karl Rove, your main man at the White House? He owned a quarter-million dollars of Enron stock.
Then there's the Enron lawyer you have nominated to be a federal judge in Texas, the Enron lobbyist who is your chair of the Republican Party, the two Enron officials who now work for House Majority Leader Tom DeLay, and the wife of Texas Senator Phil Gramm who sits on Enron's board. And there's the aforementioned Mr. Pitt, the former Arthur Andersen attorney whose job it is now as SEC head to oversee the stock markets. George, it never stops! My fingers are getting tired typing all this up -- and there's lots more.
Don't get me wrong, George -- I do not think you're an evil man. You don't need any crap from people like me -- heck, you got mother-in-law problems! Now, I have a very good relationship with my mother-in-law, but then, I never told her to put $8,000 of her money into a company my administration knew was going belly-up.
You say you didn't know? Your bag man -- Don Evans, the man who squeezed all that money for you from Enron as your campaign finance chairman (and is now collecting his reward as your Commerce Secretary) -- has admitted that he got calls from Enron begging for help last year because they were going under. Didn't he tell you this?
Then Paul O'Neill, your Treasury Secretary, admitted that Enron and Kenny Boy called him, too, for some special favors to save Enron. Didn't he mention this to you? They claim to have called your chief of staff, Andrew Card, and he said he didn't bother to inform you. What does your mother-in-law think about these boys her daughter's husband consorts with?
I love watching the O'Neill and Evans show. What a couple of cut-ups! They're, like, all proud of themselves for "not doing Enron any favors." Actually, I think it's more like they didn't do your MOTHER-IN-LAW any favors. Enron got LOTS of favors. And why not? Kenny Boy has been your number one financial backer since you ran for governor. No other American or Saudi has given you more money than Kenny Boy and his gang at Enron. O'Neill, Evans, Cheney, Energy Secretary Spencer Abraham -- ALL of them gave Lay and Enron special favors from day one. The New York Times last May was so concerned about how Kenny had the run of the place (1600 Pennsylvania Ave.), they referred to Lay as the "shadow advisor to the president."
And what advice! Who was it that wanted you to deregulate the energy industry further? Kenny Boy! Who was it that convinced you to explore the sick idea of PRIVATIZING our water supply and then allow private corporations to "trade" it in the future? Kenny Boy! Who was it that wanted Social Security to be tied to the stock market? Yup, Kenny Boy! (Imagine, if you will, what would have happened to our precious Social Security funds had they been invested in Enron stocks as you, George, suggested be done during your campaign as yuppies everywhere clucked along in agreement over that genius idea.)
O'Neill's and Evans's admission that they "did nothing" when Enron told them of the company's shell game and impending collapse is reason enough for you and yours to hit the Beltway and never return to that sacred trust we call Our American Government. They are proud of "doing nothing?" By doing nothing, millions of Americans have been swindled. Tens of thousands have lost their jobs. Thousands more have lost their savings and their retirement. Yet your cabinet secretaries gloat over what a "good job" you and they did by "doing nothing."
Let me ask you this: If someone was setting a house on fire, and they called you to help them set it on fire, and you said no you wouldn't help them -- BUT then you also DIDN'T call 911 and inform the police that someone was going to burn down a house, do you think you would have committed a crime?
Of course you would have! You had prior knowledge and then you knowingly and purposefully HID this information from the authorities and the people living in the house! You only admitted that you knew a house was going to be torched when you were confronted by the police. Are you complicit? Yes! Are you an accessory? Yes! Who would even think of going around boasting, "Hey, look what a great guy I am -- a friend of mine told me he was going to commit an act of arson, and then I decided NOT to tell ANYONE about it!! WHOO-HOO!!"
Enron and Kenny Boy bought your silence and the silence of your cabinet members. You yourself didn't have to actually raid the 401(k) accounts of those poor people in Houston (many of whom probably voted for you every time your name was on a ballot). All you had to do was remain silent, change the government regulations that let them get away with it, and install their hand-picked cronies to sit on the "oversight" boards which were supposed to be keeping an eye on them.
While doing all this, you told the American people that these rich friends of yours were not getting any special breaks -- when, in fact, Enron had already scammed their way out of paying NO taxes in four out of the last five years. Your economic "stimulus" bill that you got the House to pass after 9-11 had a section that would give Enron a gift of $250 million of our tax money. You were pushing this bill in November and December, long after your administration knew that Enron was raiding the vault and screwing its workers and investors.
You and your Republican friends are quick to point out that Enron had their claws into the Democrats as well. Yes, they did, and thank you for making the case why we not only need an alternative to the current make-up of the Democratic Party, we need private money removed from our electoral process ASAP.
But, George, let's be real -- the Democrats only got a pittance from Enron compared to the millions you and the Republicans received. Democrats just don't have the killer instinct to do anything right, and they certainly don't know much about making money the old-fashioned way, one off-shore tax shelter at a time. I would expect nothing less from a Party that couldn't even put their candidate in the White House after he had already won the election.
The Democrats are like a Yugo -- you know it won't last long or work well, but it will occasionally get the job done. Fat cats know they can buy the Democrats at discount prices, and so they do. Anyone who tries to deflect this scandal away from you, George, or away from the Republicans, or away from the whole dirty way we elect our leaders, is someone who is desperately trying to cling to what's left of a very crooked system that has to go and go now.
The saddest part of this whole affair was the day the scandal was revealed -- and you denied that you even knew your good friend, Kenneth Lay. "Ken who?" you said. Oh, he's just some businessman from Texas. "Heck, he backed my opponent for governor, Ann Richards!" was your way of trying to deflect the truth that was hitting you like a Mack truck. You knew that he, in fact, endorsed YOU and gave you THREE times the money Ann Richards ever saw from him.
I hardly ever talk to the guy, you said. You were like Peter outside the walls of Herod after they grabbed J.C. from the Garden of Gethsemane. Three times he denied he knew Jesus, and three times the cock crowed. But Peter, unlike you, felt shame and wept, and then ran away.
What shame do you feel tonight, George, for the lies you have told? What shame do you feel using the dead of 9-11 as a cover for your actions, hoping that our sorrow for those lost souls and our fear of being killed by terrorists would distract us from what your boys and Kenny Boy were up to during those horrific weeks in September and October?
It was during those very days, while the rest of us were in shock and sadness, that the executives at Enron were selling off their stock and shifting assets to their 900 phony partnerships overseas. Did they notice the remains of the dead being pulled from the rubble while they were downloading their millions, or were their eyes glued only to the bottom third of the TV screen as the stock ticker with the rigged Enron price crawled across the images of firemen desperate, in tears, to find their fallen brothers?
The country was behind you when you said you were fighting the evildoers who did this. In fact, all the while, the real fight your friends at Enron were conducting was the fight against the clock, to see how fast they could transfer all the loot to their personal accounts and run away. Those were the evildoers, George, and you knew it. And because you, by design or negligence, allowed this to happen, it is time for you to resign. The cock has crowed for the last time.
At the very least, your mother-in-law deserves better.
Owner of 7th LARGEST COMPANY IN AMERICA! (revised ranking)
State Of The Union: CorruptTomPaine.com – by Publicus – February 5, 2002
Then As Now
The more things change, the more they stay the same. Back in 1912, when he was running for president, Woodrow Wilson had this to say about democracy in America:
"Suppose you go to Washington and try to get at your government. You will always find that while you are politely listened to, the men really consulted are the big men who have the biggest stakes -- the big bankers, the big manufacturers, the big masters of commerce.... Every time it has come to a critical question, these gentlemen have been yielded to, and their demands treated as the demands that should be followed as a matter of course. The government of the United States is a foster child of the special interests."
What else can be said about the Enron meltdown? Nothing happened here that didn't happen during the savings and loan scandal of the 1980s, except back then we didn't have 24-hour cable channels and the Internet giving us saturation coverage.
Then, as now, the looting was set off by deregulation. In the S&L case, Congress allowed the small-town lenders to troll for depositors anywhere, with controls lifted on the interest rates they could offer, while promising to insure deposits up to $100,000. In Enron's case, it was a Congressional attack on the regulated economy of electric utilities, coupled with its non-regulation of the new and exotic world of derivatives, and its deliberate efforts to give accountants a free hand in sanctioning all this new funny business.
Then, as now, the path to untold riches for a craven, favored few was paved with millions in well-placed campaign contributions to members of both parties who called the regulatory cops off the beat. In the most famous S&L case, Charles Keating distributed $1.3 million to Senators Cranston, DeConcini, Glenn, McCain and Riegle, to get them to harass federal regulators who were sniffing around Keating's Lincoln Savings & Loan -- the delay ultimately cost taxpayers $2.5 billion. Keating's foray was bold, but the purchase of access and influence by Enron and Arthur Andersen makes it look amateurish.
Then, as now, supposedly trustworthy guardians of the public in the accounting, banking and legal professions facilitated the bookkeeping lies. (Let us never forget how Alan Greenspan, in 1980 a private consultant, wrote letters to federal regulators and testified on behalf of Lincoln S&L's solvency, for which he was paid $40,000 by Keating.)
Then, as now, the victims were the pensioners and retirees whose savings were redistributed upwards, as well as the common workers whose jobs were destroyed not by market forces but by fraud and theft.
Will there be a meaningful response from government? Probably not, unless it turns out that a great many more people were affected directly, or if we discover more Enrons in the coming months, or if a couple of mega-banks who went to bat for Enron, like Citigroup and J.P. Morgan, start to topple. Otherwise, this scandal will be swept under the rug in much the same way that the S&L mess was. In 1988, neither of the major party candidates for president would say anything about the S&L scandal -- too many members of their own party were tainted, as were too many of their party's donors. In the same way, neither George W. Bush nor Al Gore breathed a word about the enormous deregulation of the banking, finance and insurance sectors that was effected by the 1999 repeal of the Glass-Steagal Act. That Depression-era law had forced commercial banks out of the hyper-risky business of stock speculation and set up the Federal Deposit Insurance Corporation (FDIC) to protect individual depositors from bank failures. Now the U.S. Treasury -- that would be taxpayers like you and me -- is in the position of bailing out speculators in the event that their risky market gambles threaten their solvency.
The only Democrat in the Senate with enough independence to speak the truth about the Enron meltdown is Russ Feingold, and so far he seems more interested in getting his watered-down campaign finance bill through the House and to the President's desk.
And regarding campaign reform, I'm with Martin Mayer, the veteran financial writer whose book, The Greatest-Ever Bank Robbery, has an honored place on my bookshelf as an invaluable guide to the savings and loan mess. In it, he writes, "Political analysts have already seen the S&L crisis as an illustration of the corruption that must ultimately infect any government where the costs of running for office are greater than those that can or will be borne by the relatively small community of the public-spirited."
Just remove the words "S&L crisis" and insert "Enron" or "Arthur Andersen," the president's energy bill or his "economic stimulus" corporate welfare package, his top-heavy tax cuts, or the Democrats' cautious, calculating responses to all. What you'll have is a pretty good description of where we're at.
God Bless Sherron Watkins
"Has Enron become a risky place to work? For those of us who didn't get rich over the last few years, can we afford to stay?" With those words, Enron Vice President Sherron Watkins began her memorable unsigned letter to company chairman Ken Lay, expressing her alarm days after the company's CEO unexpectedly resigned.
Too bad there was no Sherron Watkins working at Harken Energy Corp. in the late 1980s and early 1990s, when George W. Bush was just the president's son and a director of that struggling oil firm. Four times during that period, Bush sold hundreds of thousands of shares of Harken stock and failed to make timely disclosure of those transactions to the Security and Exchange Commission, in violation of federal law.
The full story has been unearthed by Knut Royce and the Center for Public Integrity, but the key point is this: Just like his longtime patron Ken Lay, Bush took advantage of inside knowledge of his company's shaky finances to sell his stock before public filings of that information drove its price down, harming innocent investors. On June 22, 1990, he sold $848,560 worth at $4 a share, "just weeks before the company filed a quarterly report revealing that it had hemorrhaged $23 million during that period," Royce writes. By the end of the year, Harken was barely above $1 a share. Harken had been ailing for at least a year, but masked its losses "by claiming in its annual report a capital gain on the sale of a subsidiary even though the transaction was through a seller-financed loan," he adds. Does this sound familiar?
If the Democrats were really going to go for the jugular, which they're not, they'd be looking for ways to attack the whole culture of greed exposed by Enron's implosion, and they'd be all over Bush for this transgression, as well as all his family ties to power and plunder.
Instead, the Dems are trapped by their own complicity in the decisions that made this scandal possible, by their own feeding at the trough of corporate campaign contributions, and by the conventions of Washington scandals. That is, we are now expected to treat the President and his men as if they are innocent of any misbehavior unless we can find an explicit quid pro quo. The little crimes that turned George W. into a multi-millionaire are history. Again, unless someone discovers a whole new vein of Enron-Bush corruption or a major bank fails or some other corporate marauder collapses, this scandal will be contained and defused.
Still, you have to give Sharron Watkins credit, not just for her gutsy letter to Lay, but for capturing in one sentence the metaphor for our times: For those of us Americans who didn't get rich over the last few years, can we afford to stay?
Tommy, Teddy and Tepid Opposition
Senator Edward Kennedy gave an important speech on January 16, calling on Congress to undo about $280 billion of the $1.35 trillion tax cut it enacted last year. (Wouldn't it help us fathom those numbers better if they were written out as $280,000,000,000 and $1,350,000,000,000?) Pointing to pressing needs in education, health care, and the like, Kennedy urged his colleagues to repeal future reductions in the top rates affecting just the top 20 percent of all taxpayers -- people making over $72,000 a year -- and primarily those in the top one percent, who make over $373,000. He also called for reinstating the estate tax, but raising the exemption to $4 million for couples, effectively protecting all but 0.3 percent of all estates from the so-called "death tax."
When you recall that back during the election, top Democrats like Senator Tom Daschle argued that a $750,000,000,000 ($750 billion) tax cut would be excessive, you would think that Teddy's modest proposal would be winning a lot of support from his colleagues. But so far, there's been a resounding silence. Not even the labor unions had anything to say, though they have the greatest reason to join Kennedy's call -- it's their members and millions of moderate and middle-class income Americans like them who are being forced to shoulder an ever-larger share of the tax burden and corresponding cuts in social spending. For example, two days after Kennedy's speech, AFL-CIO President John Sweeney spoke at Jesse Jackson's Rainbow/PUSH Annual Wall Street Project Conference in New York City, and he totally dodged the issue. And so the media debate has been dominated by demagogic charges, from the President and all his men, that Kennedy and his fellow Democrats want to raise taxes on all Americans in the midst of a recession. This is a double lie: Teddy's changes would only stop reductions in top rates due to take effect starting in 2004, and they are only aimed at the very wealthy.
Senator Daschle gave a big speech, a few days before Kennedy's, calling for a "New Growth Agenda for the American Economy." If anyone needed proof that eight years of Clintonism have rotted the party's soul to dust, here it is. Democrats are now the "fiscal conservatives," supposedly more devoted to paying down the national debt than the budget-busting Republicans. This ideological switcharoo is not a bad thing, but only if the Dems were willing to talk about reversing the single-biggest policy change contributing to the re-appearance of annual deficits: Bush's $1.35 trillion tax cut for the wealthy. Senator Daschle correctly fingered that tax cut as the root cause of our new budget problems, but he only positioned the Democrats as proposing "more responsible" tax cuts for the future. That's pretty tepid opposition.
"If we can root out a network of terrorists hiding in caves half a world away, we can solve the problems in our own economy," Daschle says. Leaving aside whether we're going to be as successful as he claims in the former, why doesn't he talk about the real problems in our economy? Like the emergence of two Americas -- one that benefits from owning real property and assets and one that owns nothing but its debts; one that has seen its income and wealth rise phenomenally over the last 25 years and one that has stayed stagnant or lost ground. I didn't hear anything in his speech about an increase in the minimum wage, which, adjust for inflation, is at least 20 percent lower than the level it stood at in 1979 (no, that's not a typo). Nor is there any discussion of the health-care crisis or the huge need for affordable day care.
So Senator Daschle's attempt to reframe the current debate fails to change the horizontal or vertical edges of that frame. We're not going to talk about how we find the money we need to spend on programs that benefit the common good (i.e. tax policy). We're not going to talk about big changes in where we spend that money. We will dress up our few remaining differences -- over things like Social Security and Medicare, issues worthy of a fight. But we won't do anything to really provoke a national soul-searching, or to attract the interests of the millions of non-voters and independents (who, by the way, are mostly ex-Democrats and people who would have been Democrats, based on their demographic characteristics). If this is the best that Daschle can do, it's still not enough.
Here Comes 2004
It's Big Speech time for lots of Democrats, it seems. Senator John Kerry of Massachusetts just delivered a major environmental address. Representative Richard Gephardt followed quickly on his heels (and dodged the Kennedy tax proposal, too). Why the rush of Major Addresses from all these presidential wannabes (Daschle included)? Isn't it a bit early to be jostling for position? After all, the Iowa caucuses are still two years away.
Well, all these ambitious politicians know that the "wealth primary" has already started -- that's the race for big hard-money donations that precedes the actual primary. History shows that every candidate since 1980 who has raised the most money in the year before a presidential election has gone on to win his party's nomination. In effect, the wealth primary is the race in which wealthy donors get to pick the candidates the rest of us will get to vote on later.
The Democratic National Committee also just decided to make money an even more certain arbiter of its candidates' chances by choosing to allow any state to hold its primary as early as February 3, 2004. Iowa will still go first, on January 19, followed by New Hampshire on January 27. But after that, big states like California and New York would be free to push their dates forward, and there are already signs that South Carolina, Michigan and Arizona will do so.
There are no countervailing pressures to cause states to delay their primaries, and later dates are presumed to have less influence on the process. So assuming this all comes to pass, the takeover of the Democratic presidential primary process by big money will be complete, since the only way anyone will be able to compete under these circumstances will be with huge television advertising purchases. It's fitting that the man presiding over this maneuver is DNC Chairman Terry McAuliffe, Numero Uno Friend of Bill, fundraiser extraordinaire, and the person who suggested that the Clinton campaign of 1996 systematically rent out the Lincoln Bedroom.
Enron Memo is Smoking GunAssociated Press – by Jennifer Coleman – February 4, 2002
(1/31/02) - A memo from Enron officials to the White House is a "smoking gun" that shows how the now-bankrupt company helped set federal energy policy that hurt California during last year's power crisis, according to one California senator.
Democratic Sen. Barbara Boxer said she will press Enron on the April memo, which outlines discussions between company officials and the administration's energy task force headed by Vice President Dick Cheney. In the memo, former Enron chief executive Kenneth Lay urged Cheney to reject price caps on wholesale electricity that Gov. Gray Davis and a host of other state officials desperately wanted.
"This is the smoking gun," Boxer, told the San Francisco Chronicle, which first reported the memo Wednesday.
Lay is scheduled to appear before the Senate Commerce Committee on Monday, and Boxer said she will confront him.
Sen. Dianne Feinstein, D-Calif., said the memo shows Enron was more concerned with "escalating gas and electricity prices, from which it benefited, than in helping to fix the broken energy market."
In the memo, Enron urged the administration to reject price caps on wholesale electricity and support the creation of regional transmission organizations. Enron also sought the creation of a new energy trading market that could have enriched the company's existing trading businesses.
Though it now lies in ruins, Enron held tremendous sway with the White House, which was resisting California's calls for greater regulation of an energy market that had spun out of control and left the state's three largest utilities unable to buy electricity without the state's help.
The White House conceded that parts of the memo resemble Cheney's energy plan, but said that doesn't reflect any improper influence.
"The national energy policy is based on sound science," said Cheney spokeswoman Jennifer Millerwise. "Nothing in there benefits a specific company or interest group."
In April, the state's power grid said energy wholesalers, which included Enron, had overcharged the state $124 million.
State legislators were investigating Enron for possible market manipulation and the state was negotiating long-term energy contracts with power suppliers.
"That was an extremely important time for the generators not to have price caps," said Sen. Debra Bowen, D-Marina del Rey, and chairwoman of the Senate Energy Committee. "It kept the contract prices higher." Spot market prices averaged $293 per megawatt hour in April -- more than 800 percent higher than the year before, said consumer advocate Doug Heller.
Just how much influence Enron had is hard to tell, because the Bush administration also favors deregulation, said Steve Maviglio, Davis' press secretary.
Boxer said she sent the memo to the General Accounting Office, which sued the Bush administration Wednesday to gain access to some task force records. Boxer said she asked the GAO to investigate whether Enron manipulated California's power market.