Open Thread: Are we at a point of no return?

Paul Krugman outline's the healthcare proposal now on the table and questions why the Blue Dog Democrats are opposing it. An Incoherent Truth . He states the case:



Right now the fate of health care reform seems to rest in the hands of relatively conservative Democrats — mainly members of the Blue Dog Coalition, created in 1995. And you might be tempted to say that President Obama needs to give those Democrats what they want.


But he can’t — because the Blue Dogs aren’t making sense.


He then reviews the options now before Congress that they are balking at. and then questions why they are doing it. What are their motives.



One interpretation, then, is that the Blue Dogs are basically following in Mr. Tauzin’s footsteps: if their position is incoherent, it’s because they’re nothing but corporate tools, defending special interests. And as the Center for Responsive Politics pointed out in a recent report, drug and insurance companies have lately been pouring money into Blue Dog coffers.


But I guess I’m not quite that cynical. After all, today’s Blue Dogs are politicians who didn’t go the Tauzin route [a founder of the Blue Dog coalition who switched to become a Republican] — they didn’t switch parties even when the G.O.P. seemed to hold all the cards and pundits were declaring the Republican majority permanent. So these are Democrats who, despite their relative conservatism, have shown some commitment to their party and its values.



Now, however, they face their moment of truth. For they can’t extract major concessions on the shape of health care reform without dooming the whole project: knock away any of the four main pillars of reform, and the whole thing will collapse — and probably take the Obama presidency down with it.



Is that what the Blue Dogs really want to see happen? We’ll soon find out.


Robert Kuttner broadens the discussion in a piece, Wall Street on Speed. In his introduction he lays the blame for the worsening economy on the Obama Administration:  [Bold emphasis is mine.":



If the financial crisis has proven anything, it is that capital markets have become an insiders' game in which trading profits crowd out the legitimate business of investment. The whole business-models of the most lucrative firms on Wall Street are a menace to the rest of the economy. Until the Obama administration recognizes this most basic abuse and shuts it down, it will be more enabler than reformer.


He then reviews the possibility that Goldman Sach's superprofits have come from abuse of the market through computer manipulations by tapping into the New York Stock exchange computers either legally or illegaly but then goes beyond the scandal aspect of the story to discuss its deeper implications.



The need to restrain traders from exploiting their privileged knowledge is an old fight. During the New Deal, for example, many reformers proposed that floor specialists for investment bankers and brokerage houses simply be prohibited from trading for their own accounts. They should be there simply to execute buy and sell orders for customers. Otherwise, the conflict of interest would be overwhelming--and this was before computers. These reformers were overruled, but insider trading was explicitly prohibited (and good luck catching it.)


... snip ...


Now, as then, it is a mark of Wall Street's stranglehold on politics that the most sensible of remedies seem impossibly radical. One very good way to damp down the dictatorship of the traders, and raise some needed revenue along the way, would be through a punitively high transactions tax on very short term trades. Genuine investors should get favored fax treatment. Pure traders should be taxed, and very short term manipulation taxed into oblivion.


If the financial crisis has proven anything, it is that capital markets have become an insiders' game in which trading profits crowd out the legitimate business of investment. The whole business-models of the most lucrative firms on Wall Street are a menace to the rest of the economy. Until the Obama administration recognizes this most basic abuse and shuts it down, it will be more enabler than reformer.


 

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