Reflections on A Promised Land by Barack Obama

Part XII: U.S. Foreign Policy on Iran

America is facing a pandemic crisis that is predicted to get worse before it starts to improve. America is facing a communication crisis in a post-truth world in which a considerable majority of Republican Party supporters still believe that Joe Biden was not elected in a fair election, thus undermining his legitimacy. America faces a fiscal crisis in which government revenues are dropping, GDP is dropping, deficits are increasing, yet a much bigger stimulus package is required at this time to give the economy a boost while helping the unemployed and small businesses get over the financial slump as a direct result of the pandemic and which will also allow states to deliver the vaccines to get past the pandemic. We also have a worldwide climate crisis in which the years left to reverse the drift are shrinking rapidly.

Facing all these challenges, the American polity is split between activists who want to attack these problems directly at a time when the other almost half still favours less regulation and less government just at a time when more and better governance and government regulation are needed. And I have not even mentioned an immigration and refugee crisis, unfinished health care policy, protections needed for homeowners and renters, policies that are necessary to improve education, and on and on.

Where is there any room for attention to foreign policy? It is quite clear that the Biden administration is concentrating and must concentrate on domestic policy. Yet foreign policy, defense policy, intelligence, trade policy and the international banking and health systems all need urgent attention. And then there is the ever-present looming nuclear issue. This is particularly acute with respect to Iran, not only because Donald Trump withdrew the United States from the Joint Comprehensive Plan of Action (JCPOA) dealing with Iran’s nuclear program, but because Iran’s nuclear program is complicated by domestic human rights abuses, Iranian foreign policy meddling in its neighbours as it tries to become a leading power in the Middle East, and its technical developments in acquiring mid-range and even intercontinental missiles capable of carrying a nuclear warhead.

In his memoir, Barack Obama describes his initial immersion into foreign policy with Russia, dealing with the G-20, attending a major NATO meeting and then with a Somalia pirate crisis eventually made into a film starring Tom Hanks in Captain Phillips. His Saudi Arabia visit was not primarily intended to be about the Saudi main rival, Iran, but about an effort to reset America’s relations with the whole Muslim world in the aftermath of Iraq and the rise of radical Islam. On 3 June 2009, Air Force One landed in Riyadh, Saudi Arabia. Obama planned to deliver what became known as the “Muslim speech” in an effort to redress media portrayals of Muslims as either terrorists or rich self-indulgent sheikhs and to correct the image of America as exclusively interested in combating terrorism, defending the oil supplies to the West (even though, because of fracking, America was now independent of the need for Middle East oil) and America’s guardian role over the security of Israel.

Iranian policy not only suffered from historical hangovers – the American CIA sponsored coup against the Iranian elected leader, Mohammad Mosaddegh in 1951, the hostage crisis that ended Jimmy Carter’s presidency in 1980 – but was further complicated by Iran’s relations with Russia and China. Vladimir Putin in Obama’s meeting with him in July 2009 dismissed Obama’s “concerns about Iran’s nuclear program and bristled at my suggestion that he suspend a pending sale of the powerful Russian-designed S-300 surface-to-air missile system to the regime.” (465) Putin insisted that it was just a defensive system. In any case, Russia could not afford either in money terms ($800 million) or in reputation canceling the arms deal.

“Since rejecting my offer of bilateral talks, Iran had shown no signs of scaling back its nuclear program. Its negotiators continued to stall and bluster in [UN] sessions with P5 +1 members [the permanent members of the UN Security Council + Germany], insisting that Iran’s centrifuges and enriched uranium stockpiles had entirely civilian purposes. These claims of innocence were spurious, but they provided Russia and China with enough of an excuse to keep blocking the Security Council from considering tougher sanctions against the regime.” (470)

In the case of China, America had a whole set of problems beside his seeking support for new sanctions on Iran. In addition to American complaints about artificial Chinese interventions to keep their currency at a low international value, U.S. priorities included, “managing the economic crisis and North Korea’s nuclear program; the need to peacefully resolve maritime disputes in the South China Sea; the treatment of Chinese dissidents.” The alleged genocide against the Uyghurs and the status of Hong Kong and Taiwan had not yet reached the top of the pile.  

On Iran, Obama on his visit to Beijing in November of 2009, “appealed to Chinese self-interest, warning that without meaningful diplomatic action, either we or the Israelis might be forced to strike Iran’s nuclear facilities, with far worse consequences for Chinese oil supplies.” As expected, “Hu [President Hu Jintao] was noncommittal on sanctions, but judging by his shift in body language and the furious notetaking by his ministers, the seriousness of our message on Iran got his attention.” (481)

By June 2010, Obama’s efforts, begun a year earlier with Putin, bore their first fruits with respect to Iran. The UN Security Council, “passed Resolution 1920 imposing new sanctions on Iran, including a ban on weapons sales, a suspension of new international financial activities by Iranian banks, and a broad mandate to bar any commerce that could help Iran expand its nuclear weapons program.” As Obama wrote, the U.S. “now had the tools we needed to bring Iran’s economy to a halt unless and until it agreed to negotiate. It also gave me a powerful rationale for counselling patience in conversations with Israelis and others [presumably American hawks] who saw the nuclear issue as a handy excuse for a U.S.-Iran military confrontation.” (484)

Nuclear weapons in the hands of Iran alongside intercontinental missiles capable of carrying a nuclear warhead were strategic threats against America. But nuclear weapons owned and developed by Iran and capable of being delivered by intermediate range missiles were an existential threat to Israel. Iran had vowed to wipe Israel off the map. Preventing Israel from launching an attack on Iran that could lead to a wider Middle East war, and one that might inevitably draw the U.S. in on one side, was a major objective of getting the sanctions as the precondition of a new agreement.

The result was not only a product of multilateralism but was a multi-personnel affair requiring the depth of knowledge and breadth of diplomatic skills of Hilary Clinton and Susan Rice, and the technical and strategic support of Michael McFaul, Obama’s campaign adviser of Russia and the Director at the Freeman Spogli Institute for International Studies. He is the Ken Olivier and Angela Nomellini Professor of International Studies in the Department of Political Science at Stanford University, and the Peter and Helen Bing Senior Fellow at the Hoover Institution. In addition, there were Bill Burns, a career diplomat, former ambassador to Russia under George W. Bush and the National Security Council senior director for Russian and Eurasian affairs, and the U.S. nonproliferation expert, Gary Samore.  Of course, as Obama acknowledged, it had to be topped off by Barack Obama’s personal diplomacy, especially with Dimitri Medvedev, president of Russia from 2008 to 2012.

What a contrast with the unilateralism, UN-bashing, singular and amateurish grandstanding of Obama’s successor. Donald Trump dashing off hither and yon without expert support or any in-depth study of an issue. With Joe Biden, there will be a return to professionalism in foreign affairs. However, Trump’s off-the-cuff unilateral diplomacy did prove how effective American sanctions could be and were, but at what cost in contrast to the internationally legal and multilaterally-based efforts of the Obama administration?

Other than the methods utilized, there was the central issue of substance. Obama in negotiations agreed to focus singularly on the nuclear issue and leave the issues of domestic human rights abuses, developments of missiles and missile technology and meddling in the affairs of other states in the region – Iraq and even Afghanistan, Syria, Lebanon which had by then for a longtime been a satrap of Iran, Yemen on behalf of the Houthis, and whatever support the regime could offer to Gaza in its conflict with Israel.

Obama summarized the American position as follows: “By the time I took office, conservative hard-liners were firmly back in charge in Tehran, led by a new president, Mahmoud Ahmadinejad, whose many anti-Western outbursts, Holocaust denial and persecution of gays and others he considered a threat made him a perfect distillation of the regime’s most hateful aspects. Iranian weapons were still being sent to militants intent on killing American soldiers in Iraq and Afghanistan. The U.S. invasion of Iraq had greatly strengthened Iran’s strategic position in the region by replacing its sworn enemy, Saddam Hussein, with a Shiite-led government subject to Iranian influence. [AN UNDERSTATEMENT!] Hezbollah, Iran’s proxy, had emerged as the most powerful faction in Lebanon, with Iranian-supplied missiles that could now reach Tel Aviv. The Saudis and Israelis spoke in alarming tones of an expanding “’Shiite Crescent’ of Iranian influence and made no secret of their interest in the possibility of a U.S.-initiated regime change.”

“Under any circumstances, then, Iran would have been a Grade A headache for my administration. But it was the country’s accelerating nuclear program that threatened to turn a bad situation into a full-blown crisis.” Obama determined to roll the crisis away from a full-blown catastrophe into a very serious international political and security annoyance. Why did he not go much further, and push the Iranians away from being a direct existential threat to both Israel and Saudi Arabia even without nuclear weapons? Certainly, this is what both Israel and Saudi Arabia wanted. And it need not have involved regime change.

Part of the answer is the seriousness of the nuclear threat. As Obama described it, “The regime had inherited nuclear facilities built during the time of the shah, and under the U.N.’s Nuclear Non-Proliferation Treaty – to which Ian had been a signatory since its ratification in 1970 – it had the right to use nuclear energy for peaceful means. Unfortunately, the same centrifuge technology used to spin and enrich low enriched uranium (I.E.U.) that fueled nuclear power plants could be modified to produce weapons grade highly enriched uranium (HEU). As one of our experts put it, ‘With enough HEU, a smart high school physics student with access to the internet can produce a bomb.’”

In 1953, I did not have access to the internet. There was no internet. Nor did I have access to enriched uranium. But on parents night at Harbord Collegiate, I could offer a brief 15-minute talk – repeated four times during the evening – instructing parents on how to build a nuclear bomb. That is why the Nuclear Non-proliferation Treaty was so important. That is why Iranian compliance was so important.

Ironically, the Israelis who were most under threat from such a possibility were no less afraid of Iran’s conventional technology and its meddling in the domestic situation of neighbours that provided a more direct and real threat to Israel. Israel wanted to use the lever of restricting Iran’s nuclear program to also restrict Iran’s developments in missile technology and its deployment of surrogates and equipment to fortify Israel’s many enemies in the region.

Obama who had promised to consult and involve Israel on American initiatives involving Israel security, made two bets. It saw an opportunity to pursue a nuclear treaty with Iran under international law and the Nuclear Non-proliferation Treaty and with the very difficult to get political support of both Russia and China (in the end, Russia even cancelled its S-800 sales to Iran (300)), get what would end up at the Joint Comprehensive Plan of Action (JCPOA) between Iran and the P5 +1 and the EU based on an April 2015 framework deal on 14 July 2015. Obama won that bet, in spite of enormous political interference run by Netanyahu that broke with the Israeli practice of a continued Republican and Democratic united policy. Netanyahu totally aligned himself with the Republican Party and denounced the deal.

Obama made another bet. Netanyahu in accepting a two-state solution and Abbas in insisting he would not negotiate with Israel while Israel continued its settlement program in the West Bank and Jerusalem, took advantage of the situation and got Netanyahu to agree to a ten-month freeze, at least on new settlements in the West Bank, but not Jerusalem, in order to explore the possibility of restarting peace talks. By the time Abbas came around, the ten-month period was almost over and Netanyahu refused to extend the freeze. As a result, Obama spent enormous political capital pursuing an Israeli-Palestinian peace agreement when the prospects were very slim to begin with.

As a result, Netanyahu and the President of the United States had, to say the least, a political falling out. One of the results is that Netanyahu would become one of the most vocal critics of the Iran Nuclear deal claiming that both in what it included – weak inspection provisions, very short timelines for compliance before they expired, etc. – and even more importantly at what the agreement excluded with respect to missile development and sponsorship of proxy enemies against Israel. This critique formed one of the foundation stones for the rise of Donald Trump and his explicitly one-sided support for the Israeli position on both Iran and the absence of a real prospect of peace with the Palestinians.

I had become a strong supporter of the nuclear deal with Iran. Like Obama and his advisers, I recognized both its internal weaknesses and its narrow focus. However, I believed strongly that that imperfect deal was better than none as long as it worked to keep nuclear weapons out of the hands of the Iranians. The deal proved to be even weaker than I thought even without Trump undermining it. Further, the Trump regime proved that unilateral American sanctions without the endorsement of China, Russia, the UN or even the P-4 +1, could be very effective in pushing Iran against the economic wall. However, though that resulted is some curtailment of Iranian interference in Iraq, Syria, Yemen, Lebanon and Hamas, the programs still remained robust and were pursued with even more determination on behalf of Iran.

Given this inheritance on the Iranian portfolio, what can Joe Biden be expected to do based on lessons learned from both Obama and Trump policies?

Tomorrow: Part XIII: Biden’s Iran Foreign Policy

Ten Plagues on the House of Pharaoh

In Shakespeare’s play, Romeo and Juliet, written a century after Columbus set sail for what he called “the new world,” the old world of Verona was still being torn apart by family feuds, in this case between the Montagues and the Capulets. A Capulet fashionista fop sought to find Romeo, a Montague, and challenge him for showering his affections on Juliet, a Capulet. In the scuffle that ensued, the witty punster and Romeo’s best friend, Mercurio, was killed. As he lay dying, he cries out, “A plague on both your houses.”

In the Torah story, a plague is visited only on one house, that of the Pharaoh. And there is not only one, but ten plagues. The Hebrew God orders those plagues against the Egyptians; the Hebrews are spared. “Ten poxes on the house of Pharaoh” seems to be the slogan. Unlike Mercurio’s assessment, only one party is said to be in the wrong. The tale has elicited an enormous amount of commentary. Why was God intent in visiting the plagues on Pharaoh, his people, their livestock and the land? What did each plague mean? What did each accomplish? Why that specific plague in that order? What kind of threat did each plague pose?

Last week I referred to Chapter 7 of Exodus and God’s promise to the Israelites that He would “harden Pharaoh’s heart and multiply my signs and My wonders in the land of Egypt.” (7:3) “But Pharaoh will not hearken unto you, and I will lay My hand upon Egypt, and bring forth My hosts, My people the children of Israel, out of the land of Egypt, by great judgment.” (7:4) The Hebrew word for judgment here is גְּדֹלִים, gedolim, which is translated more mildly as chastisement (God will slap Pharaoh on the wrist) or as punishment, an outcome more severe even than judgement as it is often translated. But as we read the tales of the plagues that God inflicts on Pharaoh and the Egyptians, it seems clear that not only do chastising and even judgement seem too weak as descriptors, but so does punishment. For there is no trial. And Pharaoh himself does not suffer from his obstinance. In fact, as the plagues are each let loose in turn, Pharaoh’s heart hardens.

Why ten? One frequent answer is that God had to up the ante each time given Pharaoh’s resistance. God is like a torturer who makes each kind of torture worse than the one before in order to elicit compliance. As Jonathan Sacks wrote in his commentary “Parshat Bo: The True Meaning of the Plague of Darkness, “Thus far there have been eight plagues, and they have become steadily and inexorably more serious.” But a review of the plagues quickly falsifies such a notion. Allowing the Nile River to turn into blood and spread into the wooden and stone idols of Egypt (the first plague) seems far worse than the 7th or 8th plagues which are natural phenomena frequently experienced by Egyptians – hail and locusts. So too with the second – frogs everywhere and dying slimy amphibians piled high and rotting on beds and hearths of Egyptians. Surely this is much worse than hail. Though certainly the tenth plague – slaying of the first-born – seems the worst

The ten plagues are:

No.Plague in EnglishTransliterationHebrew                      Location
עֶשֶׂר Makot Mitzrayim מכות מצרים
1BloodDamדָּדָם                                  7:14-7:23
2FrogsTsfardeahצְפַרְדְּעִים              7:24-8:11
3Sand flies & fleesKinimכִנִּם                                  8:12-8:15
4Swarms of beetlesArovעָרֹב                      8:16-8:28
5Animal blightMeyodכָּבֵד מְאֹד              9:1-9:7
6BoilsShkhinשְׁחִין                     9:8-9:12
7HailBaradבָּרָד                      9:13-9:35
8LocustsArbehאַרְבֶּה                  10:1-10:20
9DarknessChoshechחֹשֶׁךְ                               10:21-10:29
10Slaying first-bornB’chorבְּכוֹר                    11:1-12:36

Let us take a step back. Why does God say he is inflicting the plagues on Pharaoh, on his servants, on his people, on their livestock and on his land?  In the segue from one plague to the next, in the transition from locusts to darkness, the text declares that, “the LORD hardened Pharaoh’s heart, and he did not let the children of Israel go.” (10:20) In the transition from hail to locusts, God instructs Moses to, “Go in unto Pharaoh; for I have hardened his heart, and the heart of his servants, that I might show these My signs in the midst of them.” (10:1) In the transition from boils to hail, the text concludes, “the LORD hardened the heart of Pharaoh, and he hearkened not unto them.” (9:12) The same is true from blight to boils (9:7), flies to blight (8:28), lice to flies (8:15), frogs to lice (8:11), blood to frogs (7:22-23), and even before the plague of blood after the first request before inflicting a plague. In each case, God hardens the heart of Pharaoh before inflicting a plague.

Rabbi Daniel Zucker has argued that as Pharaoh’s heart grew heavier, it was a sign of increased guilt since in ancient Egyptian belief, a person’s heart was weighed after death to determine whether the individual was righteous or wicked. As interesting as the exposition is of prayers and post-death proceedings in Egyptian religious practices, Zucker does not explain the weight threshold or the heart to body mass over which degrees of guilt were ascribed. Instead, it is a matter of absolute mass rather than relative weight. “If the heart was found to be lighter than maʾat, the judged was shown to be righteous and would be allowed into the afterlife, and would be referred to as ‘vindicated.’” But exploring why such a system would discriminate against large men and favour small women is beside the point. For one reason: the issue of weight for Rabbis Zucker and Sacks was not physical, but a matter of guilt over the degree to which a lie was told when the person was interrogated at death.

However, calculating brain weight ratios to body weight is not necessary for a more fundamental reason. There is no indication at all that Pharaoh felt guiltier as each plague passed. Further, in English, having a heavy heart suggests sadness rather than guilt, ranging to overwhelming melancholy. That sadness is related to increasing skepticism that there is a way out of a quandary the person believes himself to be in. Each event stiffens his heart. The person grows another layer of armour around his heart and is more resistant to any external influence. The person’s resistance grows and his woe deepens.

There is no indication that God would buy into an Egyptian cosmology and ontology by saying that God made Pharaoh’s heart heavy “akin to saying that he (Pharaoh) was not ‘worthy’ of an afterlife, a terrible curse for an Egyptian.” (Rabbi Jonathan Sacks) Rather, the evidence suggests the phrase is used to invert its meaning from any suggestion that a weightier heart is a guiltier heart to a weightier heart as one with increasing defences against outside influences, the same pattern as Donald Trump revealed as his term in office progressed. Stubborn. Resistant, Defensive. And in increasing amounts. Not guilt.

To understand what is happening, the character of each plague has to be revealed. As I indicated in my last blog, the plague of blood was a direct assault on the wood and stone statues of Egyptology, on the idols of the kingdom, and a demonstration that only the God of the Hebrews could bring things to life by controlling blood, the core to the life force. After that ontological assault, the plague of frogs was an existential one on Egyptian everyday life, contaminating the hearth, the beds and the stoves of the Egyptians who practically worshipped hygiene. The God of the Hebrews was demonstrating the enormous extent of His power. This is said explicitly when Pharaoh, his courtiers and the Egyptians were to be struck with the plague of hail. “I could have stretched forth My Hand and stricken you and your people with pestilence, and you would have been effaced from the earth. Nevertheless, I have spared you for this purpose: in order to show you My power, and in order that my fame may resound throughout the world.” (9:15-16)

But why? If the only effect was to make Pharaoh even more resistant to letting the Hebrews go? After all, in the first stages, when Pharaoh’s heart grew heavy in response to the plagues of the blood and the frogs, Pharaoh is still capable of bending even if resistant. He bargains with Moses. You and your people can go into the wilderness to worship your God, but you must return to slavery, so you cannot go very far. But Pharaoh still resists caving in and goes back on his word. He reveals himself as lacking any integrity. No sooner does Moses get God to cancel the plagues of the lice and the flies than Pharaoh reneges on his promise to just let the people go a little way for the sake of freedom of religion while still denying freedom altogether.  

I suggest something else is happening rather than Pharaoh being weighed down with greater guilt after each pair of plagues. It does have to do with the journey towards death. Elisabeth Kubler-Ross enunciated five stages of resistance as death approaches:

  • Denial and trying to ignore death.
  • Anger when faced with what is obvious
  • Bargaining in an attempt to forestall what you begin to see is inevitable
  • Depression when faced with the reality of imminent death
  • Acceptance of death, which may be half-hearted and, therefore, a reversion to personal resistance.

Before confronting the plagues, Pharaoh resists any consideration of letting the Hebrews go. After God demonstrates His enormous power with an all-out assault on the ontological and existential foundations of Egyptian existence, Pharaoh is enraged. After the assault of the plagues of lice and flies, Pharaoh resorts to bargaining. After the plagues of blight on the livestock and boils on his Egyptian subjects, Pharaoh goes into a total funk. He is stirred out of his depression by the plagues of hail and locusts, but instead of moving on to acceptance of the final result, his mood becomes totally bleak and black. He goes into total rejection. It is all a fraud. He insists that he will emerge victorious. He flails about and God must resort to a final extreme measure – killing of the first-born to get Pharaoh to let the Hebrews go, even though once again Pharaoh will change his mind immediately after the Hebrews leave.

I suggest that what is taking place is a metaphysical war between God and the Egyptian belief system. The goal is not Pharaoh’s conversion, but his destruction – the collapse of the whole basis of his faith beginning with the revelation of the impotence of the Egyptian gods, the idols, and the extreme vulnerability of the everyday dedication to hygiene. But that is not enough to destroy the system. Such acts only undermine the foundation. The structure and, finally, the superstructure must be brought down. God does not want Pharaoh to give in. God increasingly hardens his heart, gets him to resist to the very last, a resistance which will lead to total, not only absolute humiliation, but actual destruction.

Why lice and flies to propel the movement from anger to bargaining? God is conducting cosmic warfare. He had shown up Osiris, the top dog in Egyptology, the god of the Nile and the life force of that river. But blood was the life force within humans and God turned the waters of Egypt into blood to swamp the wood and stone idols of the kingdom.  Hekyt, the wife of the creator of the world and the sacred saint of midwives in the Egyptian pantheon, was portrayed as having the head and body of a frog. When all those frogs multiplied endlessly and then all died and became rotting corpses, and then had to be cleaned up, both Osiris and Hekyt had been reduced to impotent figures in fairy tales. It is not hard to imagine how enraged Pharaoh must have become.

Then the Egyptians were plagued with lice – really likely sand flies that burrowed under the skin like lice and planted eggs. In effect, the god of the earth (geb – to dig), instead of being worshipped for producing the annual bounty of grain was resented for producing insects that get under one’s skin. This was followed by swarms (which is normally translated as swarms of flies), masses of dung beetles in motion that suddenly emerged from under the earth to turn dead matter into balls; Amon-Ra, the king of the gods, had the head of a beetle. Then God destroyed the beetles. In other words, the disaster for the Egyptians was not the plague itself, but the aftermath, the piles of dead dung beetles, the red skin with rashes, the contamination of the homes and the deconsecration of the wooden and stone idols.

Then murrain, the contagious disease that infected the Egyptian cattle and their subsequent slaughter. (Obviously, the lesson for the Hebrews was insufficient because they easily reverted and sought to imitate the Egyptian worship in creating a golden calf in the wilderness – Apis, the bull god, and Hathor, the cow-headed goddess of the desert.) Then the boils on humans, or was it something much more serious like leprosy? Again, the gods protecting Egyptians against the infection of cattle and humans with fatal diseases proved flawed; Pharaoh and his gods were once again proven not to be up to the task. Starting with the major divine figures, God was working His way down through the rest of the world of the gods, knocking them over like pins in a bowling alley.

Then the air filled with hail, frozen ice balls falling from the sky, and and locusts so that one could no longer breathe. The whole process had become suffocating. Pharaoh’s mood totally blackened; he went into a deep depression and increased his resistance. Then the killing of the first-born. But who did the killing? Abraham was sent to sacrifice his first-born but was saved from doing so at the last minute. The Egyptians were not. They were desperate. They retreated to their last resort, sacrificing their first-born child to the gods. It was still not enough to save the Egyptians and they were forced to let the Israelites go. No sooner did they do so, than they were full of regret. The Egyptian military forces went after the Hebrews only to be drowned in the Sea of Reeds when a tsunami wave washed over them.

This is a tale of a cosmic battle. This is a tale of absolute resistance and the heavy heart that grows in such a battle as one sinks into depression and then, at the last minute, rises from one’s lair to launch a final, and futile, attack on The Capitol and the Constitution of a nation trying to fulfill the promise of a united free people.

“The new dawn balloons as we free it.

For there is always light, if only we’re brave enough to see it.

If only we’re brave enough to be it”  – Amanda Gorman, “The Hill We Climb”

Reflections on A Promised Land by Barack Obama

Part XI: An Economic Alternative

There are various fields of economic policy that I have not examined (healthcare, energy, labour law, immigration, trade, etc.) and some I barely touched (tax policy and education), but I want to offer an overall alternative view. Obama said when he took office, unemployment had reached 8.5% and would go higher; employment was probably the most important segment of economic policy. However, I will not be analyzing how to reduce the rate as much as use it as an indicator of failed policies.

When Obama left office, unemployment had dipped to the lowest level in decades, 4.7% in the last quarter. Obama had inherited a disaster and, not only turned the economy around, but sent if forward on an upward projection. In Donald Trump’s last quarter, the unemployment rate was 8.4%. But in 2019, it had dropped to 3.5%, 1.2% lower than when Obama left office. However, Donald Trump’s totally calamitous handling of the COVID-19 pandemic sent unemployment back up to 8.3% and required a tremendous federal financial economic injection to save the economy.

But what about Trump’s few signature economic accomplishments? He is credited with lowering corporate tax rates – which he did – and which resulted in less not more funds available for the treasury and greater discrepancies between the wealthy and the poor. He is credited with eliminating regulations which had been burdensome to business so that their removal contributed to a more robust economy. But the laxity in regulations during the Bush administration and the ignoring of regulations during the Trump administration, especially the use of regulations to control and minimize a pandemic, meant a terrible tsunami of deaths – over 400,000 thus far. Systems of testing, providing safety equipment, monitoring etc. were ignored and even discarded.

Trump is credited with forging a new trade pact with Mexico and Canada. He also got Congressional support to approve it. But the improvements over the North American Free Trade Agreement (NAFTA) were very modest. The route to getting there was very destructive to U.S.-Canada and U,S.- Mexico relations. And, in any case, the best parts were simply plagiarized from the Trans-Pacific Partnership from which Trump had withdrawn America. The latter was very destructive to a growing international economic order. What was even worse was the absence of any initiatives in this sphere. International organizations need legal and economic frameworks to facilitate more trade that benefits more and more countries so that more people can participate in the global economy.  Trump sent this trend line into a downward spiral.

Obama left the country in far better economic shape than the situation that he inherited. Trump left a disaster contrary to a reputation of at least being an economic president. No decent minimum wages, increased poverty and a resumption of high levels of mortgage foreclosures without adequate protections and remedies, were just part of his destructive legacy.

Obama from his very first reforms also kept his eye on improving the international economic system. As he wrote, increasing the “GDP would have important implications for global-governance arrangements.” Obama saved the market system on which the international economy was based. “First and foremost, we needed to restore some semblance of market confidence so that investors who’d fled to safety pulling millions of dollars in private capital out of the financial sector, would return from the sidelines and reinvest.” (276) While Trump promoted nationalism, unilateralism, and isolationism, Obama defended and tried to reinforce and strengthen internationalism, multilateralism and engagement with overseas partners.

However, both GDP and the rate of productivity improvement, both domestically and internationally, had been falling over the last two decades. To reverse low productivity and slow growth required much more fundamental changes to the structure of the American economy. Neither Obama’s promotion of globalization nor Trump’s stress on protectionism and nationalism dinted this overall pattern.

In this blog, I want to concentrate like a laser beam on the financial sector. In doing so, I want to try to answer several questions that should bother any close reader of Obama’s memoir. Why did he not use his leverage over the banks to better effect when they were really on the ropes? Though he was put off by the sense of entitlement and the disdain of the bankers (296-297), and he suspected that they did not know what they were talking about, why did he not strong arm them when he had the chance? Why was he really not able to do anything about banker and insurance executive huge bonuses (on top of enormous salaries) at the very same time that they were being bailed out by the government? If I can answer these questions, I believe I might get closer to understanding why Obama allowed 1 of 6 homeowners under financial stress to lose their homes.

On a personal level, in financial matters, one should follow the 5M’s of prudence:

  • Money, money, money makes the world go ‘round
  • Math – keep track of the numbers
  • Manage the money – budget
  • Mind your habits – differentiate between needs and wants
  • Measure the benefits.

For the system as a whole, all those elements apply, but one must understand each conceptually and how they work together. Take money. Aristotle, as did the early Christians and the Muslims, viewed money as simply an instrument to facilitate exchange. What you had difficulty doing directly, you did indirectly using money. Therefore, the amount of money circulating should be restricted to the inherent value of things in the economy. However, that meant that things or property had value but social capital (e.g. past reputation) or human capital (future potential of individuals) or even inherent value in a new technology, were not given a monetary value. Further, lending money bearing interest was immoral because that attributed value to money itself. (What else can you expect from philosophers who imagined themselves as aristocrats and disdained the value of labour.) Instead of seeing the fault in this conceptualization, moralism was projected onto money and the economy was seen as a circulatory system with a fixed amount of blood to make and distribute goods and services. Excess was dangerous, and perhaps more so, than an insufficient supply.

Adam Smith, the father of laissez-faire economic theory in opposition to mercantilism, a theory of self-regulation versus external manipulation, offered a “reflux” theory of money. The demand for money was fixed at a nominal value. In contrast to Aristotle, although agreeing that the total amount was fixed, he proposed that, instead of being based on substantial essential value, the quantity of money in circulation was based on a nominal quantity. Excess was impossible and, therefore, the value of money could not influence employment rates, salaries or prices of goods and services.

I remember when, as a student, I first read Adam Smith’s 1776 white covered thick volume, An Inquiry into the Nature and Causes of the Wealth of Nations. Just when I was finishing the book, there was a bulletin given out by the Royal Bank branch at the north-east corner of Harbord Street and Spadina Avenue in Toronto. In that printed bulletin, the head of the bank had a long article on Adam Smith’s espousal of competition determined by supply and demand and unfettered by regulation. I wrote the president of the bank a six-page letter citing Smith and his earlier work, The Theory of Moral Sentiments, and suggested that he hire a better hack to write his essays, someone who actually read Smith. Two weeks later, I received a call from my bank manager asking if I could come to see him. “I’d be delighted,” I replied.

I went to his office and learned that he had not called me to discuss my loan. The president of the bank had called to inquire about the “radical” customer who had written him a letter. The manager wanted to warn me not to do anything to jeopardize my credit. I said that I was not worried. Since he looked very worried, I suggested he look at the bright side. If not for my letter, the president would probably never know he existed. “Take advantage of the opportunity and endear yourself to him.” I left his office with the glee of self-satisfaction of a very minor enfant terrible.

I tell this story that I believe is amusing because it illustrates how much Smith is used as a caricature to misrepresent capitalist theory. This is not the place to even tip a toe into the thesis, but Adam Smith’s conception of capitalism is supposedly not interested in the well-being of individuals, but only the satisfaction of their needs and wants. Demand determines supply and price; money is simply the nominal means of representing the exchange value of labour, goods, services and even capital – hence the justification for interest. What is omitted in this caricature of capitalism is regulation, something that should have been suspected simply by reading his earlier work on the importance of moral sentiment. The invisible hand is not a given as a natural law, but a balanced system of demand and supply, a system that must be protected (rather than individuals in high places) by institutional laws, regulations and guides, ones that not only ensure the smooth working of the system, but facilitates the expression of moral sentiments for the benefit of those who are deprived.

However, in Adam Smith’s theory of money, we can see how both he and Aristotle were fixated on fixidity, though Smith broke away from Aristotle’s essentialism. It would take later writers and thinkers, especially John Maynard Keynes, to break through the idea of fixidity itself altogether.

Keynes’ 1936 masterpiece, The General Theory of Employment, Interest and Money focussed on the growth of an economy as central. Stability was not the goal; economics studied a dynamic system. Demand determines supply; there is no system of simply matching a given demand to a limited supply. That means that money theory must necessarily be expansionary. In times of weak demand, government investment in infrastructure, unemployment and other social benefits was meritorious, but even in the demand for consumer necessities, such as a roof over one’s head. Government intervention did not need to be restricted to collective goods and services.

How does it work? The government borrows money and infuses it into the economy. A depression was the result of inadequate demand and loss of confidence in the value of things. Debt itself was a vote of confidence in the future. Money, rather than representing the values placed on an exchange, was more fundamentally a positive vote on the future, namely that the future would be better than the past. Hence, more debt and greater collective wealth in the future. Hence, theoretical support for government spending in general, and for budgetary deficits and monetary intervention.

Though the 16th-century price revolution and profit inflation against the previous mercantilist system played a crucial role in the primitive accumulation of capital and in the birth of capitalism, following the second industrial revolution of the first three decades of the twentieth century, the Keynesian revolution with its stress on the sophisticated growth of capital and the preservation of capitalism was perhaps of even greater importance than the factors influencing capitalism’s origins. The third industrial revolution, the digital age, absolutely requires and is developing a very different conception of the economy, and once again more specifically of money.

The following guidelines need to be followed based on the following 5 C’s:

  • Complexity must be translated for clarity in communications (in contrast to what happened in the sub-prime mortgage crisis of 2008-2009)
  • Costs, all costs, including the resupply of fresh air and water and the depletion of the earth, increasing risks of forest fires, must be included in pricing and price should not be based simply on demand, at the same time as reductions in pricing must be continuous using modern technology
  • Charges for fees and services, including differential interest rates, must be readily apparent and transparent – that is, nothing can be hidden
  • Conversability is a requirement – transferability to different currencies and debt instruments must be accessible and easy
  • Candor entails complete honesty based on both a fair and forthright system that is guileless and impartial, disinterested and dispassionate, without any insertion of moralism or sentimentalism.

Fortunately, new online banks are directly addressing this challenge. With transparency, accessibility, simplicity and cost reductions, the new online banks are mounting a real challenge to the old-line banks which are desperately trying to change and adapt to remain competitive. Obama ran for the presidency to restore the people’s trust – trust in its civic and political institutions and in its financial ones. (276) With respect to the latter, the above strictures are a necessity, but ones never imposed by the Obama (and certainly not by the Trump) administration. Instead, most environmental and social costs remain unaccounted for. Instead of transparency, one finds only opaqueness. Instead of ensuring that technology is translated into cost cuts derived from that technology, often created because of government investment, enhanced value is accumulated to foster monopolies and control pricing. Conversability on all levels becomes more difficult rather than easier. And candor is totally discarded along with the moderating role of moral sentiment.

In the third digital age industrial revolution based on the internet, networking, shared use of many more assets than just sidewalks and roads, in an age where renewable energy is replacing the depletion and destructiveness of fossil fuels, mobility both vertically and horizontally must be enhanced. The communications, transportation and energy sectors must be coordinated by government to foster the growth of the new economy.

The potential was presented to Obama to facilitate the beginning of such an evolution creating a distributed and networked system in which, literally, no one is left out or left behind. Obama failed to do so. Not only did millions of homeowners pay the cost, but so did the advance of the economy as a whole. Instead of a neoliberalism which promotes privatization, but where that benefit goes to a smaller and smaller percentage of the population which can afford to own a home, instead of promoting austerity, beneficence for all should be viewed as the goal. Instead of deregulation, what is required is the correct and constant regulation and certainly not the crisis interventions of the Obama years. Instead of government withdrawal from the economy, a much more activist presence of the government in the governance of the economy is required. Instead of reduced government spending, we need increased government investment, including partnerships with homeowners in their personal and most important asset, their homes if and when they get into trouble.

An opportunity missed must be used at the very least as an opportunity to understand.

Next week: Obama’s Foreign Policy

Reflections on A Promised Land by Barack Obama

Part X: Salvation by Larry and Tim

“Through Palin, it seemed as if the dark spirits that had long been lurking on the edges of the modern Republican Party – xenophobia, anti-intellectualism, paranoid conspiracy theories, and antipathy to Black and brown folks – were finding their way to centre stage.” (195) By the end of Obama’s second term, they took over centre stage with the election of Donald Trump, culminating in the highly theatrical, but foolish and dangerous tilting at windmills during the final days of the deplorable Donald Trump presidency. The insurrection ignored the enormous power of the investigative and security services of the state and left the legislative powers in place after a very destructive interruption. The insurrectionists, posing for the TV cameras and taking selfies to allow their own criminality to be documented, ended up turning protest into a demonstration of impotent mob violence, but also political farce on a most dangerous scale on the largest theatrical stage.

Twelve years earlier, instead of the COVID-19 crisis, in the economic recession and the political fiasco on the federal level – all interconnected – the economic drama was far worse, but at least a peaceful political transition had been underway and one in a thousand Americans were not dying. “With over half of America’s twenty-five financial institutions having either failed, merged, or restructured to avoid bankruptcy during the previous year, what had begun as a crisis on Wall Street had now thoroughly infected the broader economy.” (235) The infection was not a virus but a collapse of faith in the future.

“The stock market had lost 40 percent of its value. There were foreclosure filings on 2.3 million homes. Household wealth had dropped 16 percent…more than five times the percentage loss that occurred in the aftermath of the 1920 market crash. All this on top of an economy that was already suffering from persistently high levels of poverty, a decline in the share of the working-age men who were actually working, a fall in productivity growth and lagging median wages.” (238)

Obama asked, “what would happen when change didn’t come fast enough?” He should have asked what would happen if there was no real change at all, especially in the fundamentals? When he did ask that question, this was his answer. “The thought nags at me. And yet even if it were possible for me to go back in time and get a do over, I can’t say that I would have made different choices.” (305) Why not? Because, as he himself says, he “was a reformer, conservative in temperament if not in vision.”

Why did not a person of such enormous intelligence, charm, sociability, deep concern for the wellbeing of Americans, and highly skilled in both prose and rhetoric, not wrestle with the fractured foundations of the American polity in a far more effective way? Why, whatever the enormous successes on the surface, did the forty-fourth president of the United States fail in dealing with the enormous foreign affairs crises, the international economic crisis, and the climate change crisis in a way that would re-establish America on new stronger foundations rather than lead to a backlash and victory of the Restorationists who wanted America to travel backwards and make America Great Again instead of traveling forwards to make America even greater?

Hence, the even larger irony than the one implied when he quoted his predecessor. “The good news, Barack, is that by the time you take office, we’ll have taken care of the really tough stuff for you. You’ll be able to start with a clean slate.” (207) He not only inherited a filthy slate, he also inherited a dirty rag to rub it clean. This propelled Obama into a course of action that would indeed save the economy, but at far too great a cost to the society and politics of the country.

“When it came to assembling my economic team, I decided to favor experience over fresh talent. The circumstances, I felt demanded it.” (211) My smart-alecky mental thought was to add – “you should have thought more and felt less and recognized that the circumstances did not demand reinforcing the existing system but using the opportunity of the crisis to reset its foundations.”

“I loved the various up-and-comers who’d advised me throughout the campaign and felt a kinship with left-leaning economists and activists who saw the current crisis as the result of a bloated and out-of-control financial system in dire need of reform. But with the world economy in free fall, my number one task wasn’t remaking the economic order. It was preventing further disaster.” (211) In fact, it only postponed further disaster. Caught up in the false dichotomy between corrective surgery and a total transplant, he did not see that much simpler solutions were on offer which would have enhanced the positions of both the poor and the middle class while strengthening the financial system by saving the lives and livelihoods of their customers.

Obama appointed Larry Summers Secretary of the National Economic Council, a surprise since the job required coordination, and diplomacy, not exactly Larry’s forté. An American economist and the Charles W. Eliot University Professor and President Emeritus of Harvard University, he was the former Vice President of Development Economics and Chief Economist of the World Bank (1991–93), became senior U.S. Treasury Department official and eventually Treasury Secretary (1999-2001) under President Clinton and became director of the National Economic Council for President Obama (2009–2010). America was facing a financial crisis.

Larry back in the nineties led an international response to the currency crises in Mexico and Russia, Brazil and Japan. A brilliant, talented and accomplished guy, no? Yes. He was an economic star on both the domestic and international scene. President Obama had once declared, “I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team.” But immediately after the announcement, Obama learned that, “Larry had  been a strong advocate of deregulation of financial markets.”

Larry was basically a neo-liberal on the ground level in economics, fusing a microeconomic “laissez faire” approach to macroeconomic activism. “Markets should allocate capital, labour and ideas without interference, but sometimes markets go haywire, and must be counteracted forcefully by government.” In other words, do not interfere unless you have to intervene. While I agree on the ground game, I believe in the government intervening very actively on the grand level as a continuous and tough regulator, the activities of which are not restricted to crises, and as an active investor in human and technical capital rather than as a subsidizing agency. In fact, when Summers was president at Harvard, he used Harvard’s wealth precisely in this way to foster equity. Why did he not do this in 2009 for the American economy? The problem was not just his lack of tact and restraint or his obliviousness to other persons, but his contradictory economic philosophies.

He enunciated this economic philosophy in a speech in 2009. (Cf. The Baseline Scenario https://baselinescenario.com/2009/04/27/larry-summers-new-model/)

  1. All crises must end.  The “self-equilibrating” nature of the economy will ultimately prevail, although that may take massive one-off government actions.  Such a crisis happens only “three or four times” per century, so taking on huge amounts of government debt is fine; implicitly, we will grow out of that debt burden.
  2. We will get out of the crisis by encouraging exactly the kind of behaviors that “previously we wanted to discourage” two years ago.  It is “this insight, this view” particularly with regard to leverage (overborrowing, to you and me) that “undergirds the policy program in the United States.”
  3. There is a critical need to support financial intermediation and to ensure it is adequately capitalized, with a view to the risks inherent in the current situation. 
  4. Growth in the 1990s and more recently was based too much on finance. (Hence, Obama’s comment about the over-bloated economy.)  The high and rising share of finance in corporate profits “should have been a warning”.  The next expansion should be based less on asset bubbles and more on investment in key public services.
  5. The financial regulatory system “in fundamental respects has been a failure”.  There have been too many serious crises in the past 20 years (this statement was somewhat at odds with the low frequency of major crises statement in point 1).

I call this Crisis Capitalism Economic Theory. Instead of seeing the need to expand credit availability in an expanding universe, the premise is a self-equilibrating universe. Instead of the problem focused on “overpowering,” the expansion of credit should be applauded, but it has to be partnered with regulation so that the expansion does not run amuck. The first and primary focus should not have been on providing support for the financial intermediaries but for the end users which would in turn have reinforced the stability of the financial intermediaries. “Asset bubble” in this case is a reference to too much credit being available to those who should not have it believing it detracts from the amount available in public services. But public services should be regarded as an absolutely necessary capital investment along with intellectual and technological capital which all require a steadily increasing expansion of credit. Sommers basis his work on a steady state instead of an expanding universe. The real issue is to ensure that the expansion is steady and neither explosive on the one hand nor stalled on the other hand.  

Tim Geithner was Obama’s other key economic appointee, his Treasury Secretary and known as “the indispensable one” and opposite to Larry Summers with his poise, and soft-spoken equanimity, but a critical complement who added “quiet confidence and intellectual rigour,” “a basic integrity, a steadiness of temperament and an ability to problem solve” to Larry’s economic leadership. It is clear from Obama’s account that he chose both men based on an economic ideology that he failed to probe, but even more for the personalities of both men.

When Geithner was still President of the Federal Reserve Bank of New York, he helped manage restructure Bear Stearns and the AIG as well as wind up Lehman Brothers, As Treasury Secretary, he oversaw the distribution of $350 billion under TARP, the Troubled Asset Relief Program created by the Bush administration. He helped restructure the regulation of the country’s financial system and reinvigorate the mortgage market as well as rescue the auto industry. However, he totally neglected the small homeowners who lost their homes. The following sums it up: “In his book Bailout: How Washington Abandoned Main Street While Rescuing Wall Street, Neil Barofsky[1] argues that Geithner never had the intention to utilize the Home Affordable Modification Program as intended by Congress. Instead of providing relief for homeowners to avoid foreclosures, it was Geithner’s plan that the bank should proceed with these foreclosures. Geithner said that he ‘estimates’ that the banks ‘can handle ten million foreclosures, over time’, and that HAMP ‘will help foam the runway for them’ by ‘keeping the full flush of foreclosures from hitting the financial system all at the same time.’ As such, ‘banks participating in the program have rejected four million borrowers’ requests for help, or 72 percent of their applications[2], since the process began.’ Citimortgage  and JPMorgan Chase were among the banks that refused the most HAMP claims. As such, the program only helped 887,001 people out of the over 4 Million people that were originally estimated to be able to benefit from the program.” In fact, the estimated number of households affected in the end was about six million and less that 1 in 5 were helped.

Why? Because you get the economic philosophies of those you hire or appoint, especially when you lack even an acquaintance with economic theory.

Next: XI: An Economic Alternative


[1] Barofsky, Neil M. (2012). Bailout: an inside account of how Washington abandoned Main Street while rescuing Wall Street. New York: Free Press. 

2 “Banks reject 72% of applicants under HAMP program,”.The Real Deal Miami. 2015-08-09.

Reflections on A Promised Land by Barack Obama

Part IX: The Obama Analysis of the Financial Crisis

As Obama wrote, “nobody – not the public, not Congress, not the press, and (I’d soon discover) not even the experts – really understood just how much worse things were about to get.” (240) Who were his own experts?

Obama was sold on men like Hank Paulson and the economic managers Obama continued or put in his place (e.g. Ben Bernanke, Larry Summers and Tim Geithner) who were cut from the same cloth. They were almost singularly focused on rescuing the banks, insurance companies, and the mortgage holders rather than the homeowners, even when they sympathized with the plight of those homeowners. If they had focused on the latter, it would have been much cheaper to rescue financial institutions and even make significant profits for the government in the process. As it is, when the government bailed out Freddie Mac and Fannie Mae, which between them held or guaranteed 90% of the residential mortgage debt in America, with $200 billion – only $187 was actually used in the end – the government made money on its investment. It could have made a lot more, but most of the increased value of the properties when the market recovered went to speculators. instead of the government and homeowners, if the latter had been induced to hold on.

The longer-term result was both more rapid increases in residential house prices and an expanding distrust in the financial system. As the Nobel-prize winning economist, Michael Spence, noted, “There are many reasons for declining confidence and trust in key institutions, both inside and outside government. Complexity is one of them. (my italics) Over the last several decades, as economies and financial systems have become increasingly interconnected, they have also become increasingly complex. Today, not even the most educated and experienced experts can pretend to comprehend fully these systems’ workings. Amid such complexity – and, indeed, opacity – questions about whose interests are really being represented abound, fueling mistrust and creating fertile ground for misinformation and conspiracy theories.”

In rescuing the economy, the rescuers punished the financial institutions but low-income homeowners much more. If they had recognized that the problem was complexity and ignorance, a key element would have been in place to recognize how both the private owners and the financial institutions could have benefitted by a rescue plan.

Instead, the focus was on the stock market rather than homeowners. For the mortgage financial crisis had sent a tsunami towards Wall Street. On 15 September, Lehman Brothers, a $649 billion company, filed for bankruptcy protection. The government determined it was both too weak to prop up or induce others to buy the company at fire sale prices. Further, the government was busy protecting AIG, the largest mortgage insurance company, with an $85 billion rescue package.

It did not help that everything began falling apart during an election in the Fall of 2008 and political shenanigans helped gum up the works temporarily for a rescue package. Obama in his analysis paid more attention to McCain’s playing games at the time than in understanding why the package might save Wall Street but sacrifice the homeowners who were underwater – that is, who owed more on property than its current worth on the market precisely at a time when it was only possible to sell at fire-sale prices and when the homeowner had been laid off and no longer had the funds to pay his. her or their mortgage. Instead, the focus was on ideological Republicans opposed to government intervention in capital markets. Can you imagine the opposition to a scheme that could be easily labeled socialist?

The alternative scheme that was proposed, and that Hank Paulson deemed unworkable, was a government insurance program against losses to banks. A government capital investment rather than insurance program was neither proposed nor investigated. That would have involved expanding the liquid capital available to the federal government by as much as two trillion dollars, but money that could easily be foreseen as bringing in a very large return on the investment. By 2020, most legislators had overcome their mindblindness to the government finding two trillion dollars in this way. However, in the memoir covering 2008, Obama concentrated on how the financial crisis had benefited him politically – and it certainly did, given the way McCain had responded.

But the solution could have been presented as an investment opportunity rather than a package of subsidies for business and homeowners. Projections could easily have been produced showing how the government as well as the people would have profited. The anti-socialists would have screamed louder than even the neo-liberal crowd, even though the package would have saved many more businesses and kept the little guy in the capital market as a homeowner and the best system for providing for his old age security. The socialist believers in more state-owned rental subsidized housing might have screamed even louder.

In the meanwhile, problems were piling up. “Despite the eventual passage of the Temporary Asset Relief Program (TARP) eventually passed by the Bush administration, with most of the support coming from the Democrats, “the financial system remained paralyzed. The housing market was in a nosedive. The economy was shedding jobs at an accelerating rate, and there was speculation that the Big Three automakers would soon be in jeopardy.” (196) (I will not be writing about the Obama rescue of the auto industry because I believe it was accomplished with aplomb and justifiably motivated by the need to retain tens of thousands of jobs of voters in Michigan, Illinois and Ohio.)

“In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists consider it the worst crisis since the Great Depression…The causes are manifold, but can be found substantially rooted in illogical investments and greedy schemes [my bold and italics]…The banks then created a new idea—linking investors to homeowners through mortgages. Ordinarily, a mortgage broker would connect a house-buying family to a mortgage lender, who would then supply them with a mortgage. In this system, everyone is happy—the mortgage broker earns a handsome commission, the mortgage lender earns a new mortgage, and the family is now a homeowner in a market of increasing housing prices.”

“In the new system, an investment banker buys the mortgage from the lender, borrowing millions of dollars to buy thousands of mortgages, and every month he gets payments from homeowners for each of the mortgages. The banker then consolidates all the mortgages and splits the final product into three sections: safe, okay, and risky mortgages, which make up a collateralized debt obligation (CDO). As homeowners pay their mortgages, money flows into each of the sections, with the safe filling first and the risky filling last, contributing to their respective names. Credit agencies stamp the top two safer mortgages with a triple A or triple B rating, which are then sold to investors who want a safe mortgage, while the risky slice is sold to hedge funds who want a risky investment.”

The basic problem was not moral turpitude but complexity. Briefly put, a PhD student in Waterloo University in Ontario at the end of the twentieth century invented an algorithm for both combining mortgages and slicing them into tranches for investors where a package could have a mixture of risks that balanced out. The effect was to create a new source of capital for the residential housing market. In the early part of this century, Wall Street and the big firms adopted this innovative way of increasing the amount of capital available for the real estate market. The problem is that, because it was an algorithm, that is a set of instructions and computer rules to facilitate this activity, brokers, who were generally computer illiterate, never understood the system. The response was not to increase understanding but to bail out the system in a way that dried up rather than expanded the source of monies to finance residential home building.

By 2006, acute observers had begun to notice that the algorithm was being used just to combine and sell mortgage debt with insufficient and often no appraisal of the underlying value. It did not help that rating agencies, such as Moody’s, employed staff that were equally computer illiterate. Complexity bedazzled the implementors. Complexity also induced them to turn their backs on the system that created more capital and less upward pressure while providing monies for lower income individuals to get into home ownership. This was not a bad thing. This was good. What was bad was the misuse of the system largely as a result of ignorance rather than malfeasance. What was really bad was closing down the system altogether because of that ignorance.

Though moral turpitude was indeed involved, though the normal quest for earnings and profits were clearly at work providing incentives, the major problem was systemic. And once things began to fall apart, no one knew where to go to fix it. Hence Obama’s summary that in complex systems you cannot tell the bad guys from the good guys. But moral assessments were largely irrelevant. The issue was understanding the system and how it could be used to benefit homeowners and the government, and then indirectly save some skin for banks and investors.

Obama proposed what became the American Recovery and Reinvestment Act (ARRA). (244) $800 billion would be “divided into three buckets of roughly equal size. In bucket one, emergency payments like supplementary unemployment insurance and direct aid to states to slow further mass layoffs of teachers, police officers and other public workers. In bucket two, tax cuts targeted at the middle class, as well as various business tax breaks that gave companies a big incentive to invest in new plants or equipment now instead of late.” The third bucket took longer to both design and implement and was designed for long-term impact – not only the usual infrastructure projects, but high-speed rail, solar and wind power, broadband internet services for rural areas and educational reform incentives.

It is quite clear that bucket three could have absolutely no immediate impact on the financial crisis. Rather, the crisis provided an opportunity to include laudable plans for infrastructure investment. In bucket two, Obama argues that, “The Tax cuts had the added benefit of potentially attracting Republican support,” (244) but to get any support, the Democrats even had to extend the cuts to the top 2%. 

There is no question that bucket one was invaluable and required in an emergency like this. But tax cuts? At the time (15 April 2009), Obama had claimed that the tax cuts were targeted at Americans who needed them while also “jump starting growth and job creation in the process.” “Across America, families like the folks who have joined me here today have had tough choices forced upon them,” Obama said. “Many have lost a job or are fighting to keep their business open. Many more are struggling to make payments, to stay in their home, or to pursue a college education. These Americans are the backbone of our economy, the backbone of our middle class… They need a government that is working to create jobs and opportunity for them, rather than simply giving more and more to those at the very top in the false hope that wealth automatically trickles down.”

The cuts eliminated $288 billion not only in taxes but in the annual income to the federal government. Did they also restore confidence and help end the Great Recession? At the time, Obama claimed that his tax cut was the most progressive in modern history” and “will affect some 120 million families and put $120 billion directly into their pockets.” And in their bank accounts. And used to reduce their debt. The other half of the one-third in bucket two went to business incentives.

Though the benefits outweighed the costs, though the tax deductions and incentives appeared to help reduce unemployment, the question remained whether there were alternative uses of the money that would have had an impact that was both greater, more targeted to those who needed it most and with a more immediate affect. Further, the political costs were enormous. As Obama said, in spite of his concessions, not one Republican voted for ARRA. “The next day the Recovery Act passed the House 244 to 188 with precisely zero Republican votes.” (258) Further, it spurred the rise of The Tea Party, the predecessor to Trumpism. Finally, the Democrats lost control of Congress in the 2010 elections.

The Nobel prize winning economist, Paul Krugman, in his usual fashion put it bluntly – too little with the effects too late, and he could have added that those most in need of help did not get a significant enough share. $45 billion went to extend unemployment benefits and increase them by $25 a week. As well, assistance went to various forms of charity – $19.9 billion to the Food Stamp Program, $14.2 billion for supplementary $250 Social Security payments, $3.45 billion for job training, $3.2 billion in supplementary welfare payments plus a smattering of other smaller amounts to worthwhile causes.

However, virtually none had a direct impact on the housing crash at the centre of the economic crisis. Obama would justly argue that it was not intended to do any such thing. After ARRA was passed in February, he turned his attention to the collapsing housing market. By the end of 2008, home prices on average had fallen 20% and, in some areas, by as much as 50%. As Obama put it, “Other than job loss, no aspect of the economic crisis had a more direct impact on ordinary people. With more than three million homes having gone into some stage of foreclosure in 2008, another eight million were now at risk. Over the final three months of the year, home prices fell almost 20 percent, meaning that even families who could manage their payments suddenly found themselves ‘underwater’ – their house worth less than they owed, their primary investment and nest egg now a millstone around their necks.” (269-270) Progressives were pushing mortgage relief by forgiving a portion of the debt and subsidizing mortgage payments. The costs were considered prohibitive.

Instead, two much more modest programs were introduced, “the Home Affordable Modification Program (HAMP) designed to reduce the monthly mortgage payments of eligible homeowners to no more that 31 percent of their income, and the Home Affordable Refinance Program (HARP) which would help borrower refinance their mortgages at lower rates even if their homes were underwater.” (271)  These programs would not help “those who through subprime loans had bought way more home than their income could support.” Nor flippers. Did the programs help those whose homes were “underwater”?

Next: Part X: The Impact of HAMP and HARP

Reflections on A Promised Land by Barack Obama

Part VIII: The Mortgage Crisis

The overall picture of the economy over the dozen years from 2007 to 2019 before the latest crash last year is very clear. It has been clear for decades. As Michael Spence, the Nobel-winning economist has written about the current situation, “the results of congressional and state elections were driven by different factors. Among them were most likely fast-rising income and wealth inequality – undoubtedly a major contributor to today’s economic, social, and political polarization – and distrust of elites on both sides.”  

Obama recognized that inequality and that it kept growing. “To this day, I survey reports of America’s escalating inequality, its reduced upward mobility and still-stagnant wages, with all the consequent anger and distortions such trends stir in our democracy, and I wonder whether I should have been bolder in those early months, willing to exact more economic pain in the short term in pursuit of a permanently altered and more just economic order.” (305)

Obama also recognized that the causes were structural (176):

  • Shifting jobs overseas to take advantage of lower cost labour
  • Automation
  • The new digital economy requiring extensive training to use and improve
  • Those controlling financial and human capital (those with highly specialized skills) “could leverage their assets, market globally and amass more wealth than any group in human history”
  • The compounding effect because of commanding services to improve the human capital of one’s children through accessing the best schools, obtaining tutoring, attending special classes, test preparations, unpaid internships
  • The steady diet of tax cuts for the wealthy since the Reagan era (which Obama perpetuated in the need to get Congressional votes as documented in a previous blog in spite of promising the opposite) (177)

But Obama read the economic crisis as fundamentally a moral failure much more than a product of structural distortions. One of the results of the misreading of the crisis – viewing it as a problem of moral turpitude on the part of both residential purchasers, real estate agents, mortgage brokers and financial gurus – was to limit the options available in tackling the crisis. The risky mortgage imbroglio should have been viewed as a very beneficial system of increasing capital available, lowering residential costs and making access to home ownership easier, but one misunderstood and undermined by a combination of complexity, ignorance and an inability to recognize and evaluate assets.

The consequences were politically catastrophic. The Republicans won big in the midterm 2010 elections even as economic inequality continued to grow. To reverse this trend over time, government could employ many instruments, including more progressive income taxes, low-cost delivery of high-quality public services (such as education and health care), a higher minimum wage, and greater wage-setting power for labor.” One omission – greater access for more people at lower cost to home ownership.

If, “A more equitable distribution of income between capital and labor is needed,” if “value creation is heavily skewed toward intangible capital” (algorithms not only for faster and much better information storage and exchanges, but ones that enhance the capital available for the residential real estate market), if this enhancement of intangible capital “is supported by public investment in science and technology, government could retain an equity interest in the value that is created.”

Again, quoting Spence, “Over the last several decades, as economies and financial systems have become increasingly interconnected, they have also become increasingly complex. Today, not even the most educated and experienced experts can pretend to comprehend fully these systems’ workings. Amid such complexity – and, indeed, opacity – questions about whose interests are really being represented abound, fueling mistrust and creating fertile ground for misinformation and conspiracy theories.” In other words, the result is a political crisis that led to the catastrophe of Donald Trump piled on top of a chronic and increasing economic crisis.

Let me examine the economic crisis at a deeper level that looks at increasing income disparities, mortgage debt and defaults, and student debt. (I will not examine credit card debt.)  The first indicator to look at is the percentage of people in America that live in poverty. Poverty status is determined by comparing annual income to a set of poverty thresholds that vary by family size, number of children, and the age of the householder. If a family’s before-tax money income is less than the dollar value of its threshold, then that family and every individual in it is considered to be in poverty. The Annual Poverty Rate (APR) averaged 21.3% between 2005-2009, 27.7 from 2010-2014 following the Great Recession, and 21.1% between 2015 and 2019 just before COVID-19 hit. In 2020, it is estimated that the poverty rate jumped back up to 28% or so. In sum, as far as poverty is concerned, the U.S. no sooner showed signs of progress than it was plummeted back again to a state where over one in four households would live in poverty without government assistance. After each economic cycle, the differentiation seemed to worsen.

When the Supplementary Poverty Measure (SPM) of government programs designed to lift low-income families out of poverty status (social security, refundable tax credits, etc.) are taken into account, we get the net effective poverty rate. In the 5-year period between 2005–2009, it was 13.5%. In the years following the Great Recession from 2010–2014, it rose to 15.6%. For the years from 2015–2019, it fell back to 13.4%. In other words, the differences between the period 20005-2009 and 2015-2019 were statistically insignificant.

What about another economic indicator, this one more applicable to the middle class, namely missed mortgage payments. On 1 August 2020, 32% of Americans carried outstanding mortgage payments, up from 30% in June. Further, the percentage of mortgages considered to be delinquent jumped from 3.8% in July 2019 to 6.6% in July 2020. Mortgages in default (over 90 days) rose to 4.1% on 2020 from 1.3% a year earlier. This relatively low figure given the circumstances was a consequence of the government legal measures to pause payments and legalize delays for up to 180 days. By September, 7.1% had missed mortgage payments. Note that in 2008, the percentage of mortgages that were delinquent over 30 days was over 4%. That had declined steadily until 2019 when it was less than 1%.

Compare this current situation to the 2008-2010 economic crisis. There are three classifications of foreclosure filings: default notices, scheduled foreclosure auctions and bank repossessions (called repos). The figures here cluster all three and do not differentiate between homeowner foreclosures and those against contractors or builders. On 15 January 2009, data showed that a total of 861,664 families lost their homes to foreclosure the previous year according to RealtyTrac, In 2009, the total number of foreclosure filings was 3,957,643, involving 2,824,674 properties. 2010 was an even worse and record year; 2.9 million properties received foreclosure filings — an increase of 2 percent from 2009 and 23 percent from 2008.

This suggests that the COVID-19 crisis compared to the Great Recession has hit the Middle Class with even greater force than the Great Recession, but its effects has been over a much shorter period and, therefore, affected a smaller percentage of the population and of homeowners. It is estimated that at least six million homeowners lost their homes from 2008-2010 affecting about twenty million Americans, or about 1 in 7 Americans who owned their own homes. The catastrophe was massive. The victims of the subprime mortgage crisis of 2008-2010 came largely from the lower middle working class attempting to climb into the middle class via home ownership.

Look at one of two other economic indicators – student loan totals. (I will not deal with credit card debt, a very important, but also very large issue in its own right.) By 2020, American student loan debt by 45 million borrowers, almost 1 in 7 Americans, had reached $1.6 trillion dollars. 3 million borrowers owed more than $100,000 each, 800,000 of them with debt exceeding $200,000. When Barack Obama was first elected to the Senate of the United States, he and Michele, two highly educated professionals, were still burdened with large student debts.

In 1964, the Canadian Universities Foundation in Canada set up a commission headed by Dean Vincent Bladen of the University of Toronto to estimate the financial requirements of Canadian universities and to recommend means of supplying them. One source was increased student fees. Another source was enhanced government grants if the quantity and quality of university graduates were to be increased, an increase that would be absolutely critical to the digital revolution that was then just in its infancy. In 1966, the Education Support Branch of the Department of the Secretary of State was established to coordinate assistance given to universities. Even before the Bladen Commission tabled its report, the Canada Student Loan Program (CSLP) was established.

In 1963-64, I was the Finance Commissioner for the Student Administrative Council (SAC) at the University of Toronto. I had been recruited to represent the graduate students and was elected Finance Commissioner because the SAC wanted to raise student fees from $8 to $12 per student to provide funds for students to engage in social activism. My recruitment was motivated by my social activism in the sixties as well as a seeming acquaintance with large scale financing because of my involvement in expanding student housing. I reviewed the budget and found ways to shift the cost of The Varsity, the student newspaper, to which students contributed $2 of their fees, to enhanced advertising income to make The Varsity a self-sufficient publication.

This was simply an early version of what became the American legislated PAYGO system whereby new expenditures had to be matched by cuts elsewhere. (Of course, this Republican conservative, both policy and principle, was simply set aside when it suited them.) In another application of this conservative economic approach, I also shifted the costs of the Blue and White Society of $2 per student for social activities, that largely seemed to benefit sororities and fraternities, to those who attended such events. As a result, we were able to avoid a student fee increase and shift half of the use of student fees to a budget for social activism.

As a result, I had gained enormous credit from very different ideological political camps so that when I proposed that we go before the Bladen Commission and propose raising student fees 400%, the student council went along and supported the proposal. Who had ever heard of students proposing to raise their own fees? What I had proposed was funding university educational (not research) costs entirely through student fees instead of by direct subsidies to universities. University education was an investment in human capital; higher education was not a consumer commodity. I, thus, also recommended that fees be recognized not as an expense but as a capital investment. Students would be enabled to borrow monies to invest in their own human capital and would repay the monies borrowed. That part of the proposal was eventually adopted far and wide and the proposal was greeted with front page headlines in the Toronto newspapers at the time, if only because of the shock value of students proposing to raise their own fees by 400%. The Bladen Commission also received our proposal with accolades and the statement that it was the most original proposal they had received.

However, they had ignored the second part of the proposal in which the debt incurred was to be repaid based on the return on investment. The higher the subsequent earnings of the student, the more they would repay. After all, if it was a capital investment and not an expense, the investor had to expect a return on the investment beyond the cost of the monies and sufficient to cover those cases where the student’s income fell below a certain level. Thus, if a student chose to become a Christian medical missionary in Africa, effectively his debt would be written off over time while students who went on to become CEOs or hedge fund managers would return much more than 100% over the initial investment.

I point this out to show how conventional Barack Obama’s economic thinking was, and not just about the financial system. He never recognized the huge importance of either human capital investment or the importance of supporting rather than undermining new complex financial instruments rooted in algorithms, the use of which needed to be recognized and regulated rather than perceived as a witch’s brew endangering the whole economy. Further, this failure also led to developments that eventually endangered the political system as well.

Desire and Life: Parashat Ve’eira וארא Exodus 6:2-9:35

A friend called me two days ago on Wednesday and asked what I would be writing about this Friday. I said that I did not know. I usually decide Thursday afternoon, do some research, and write my blog Friday morning. He then asked why I did not write about God. After all, God was the major and continuing character in the Torah. How could I write about everything under the sun and ignore God? There is nothing in Torah that is more important. My flippant answer was that God was about the future. God is He who shall be. God is revelation. I rarely write about the future. I am a terrible prophet. I write about what is happening and what has happened.

So, let me begin by writing about God. In last week’s portion, Moses expressed grave doubts about his being chosen to lead the Hebrew people to freedom from oppression. God reassured Moses, promised he would not only remain at his side, but would also provide a sign by which Moses could prove that God had sent him and that he was not simply appointing himself.  

יא  וַיֹּאמֶר מֹשֶׁה, אֶל-הָאֱלֹהִים, מִי אָנֹכִי, כִּי אֵלֵךְ אֶל-פַּרְעֹה; וְכִי אוֹצִיא אֶת-בְּנֵי יִשְׂרָאֵל, מִמִּצְרָיִם.11 And Moses said unto God: ‘Who am I, that I should go unto Pharaoh, and that I should bring forth the children of Israel out of Egypt?’
יב  וַיֹּאמֶר, כִּי-אֶהְיֶה עִמָּךְ, וְזֶה-לְּךָ הָאוֹת, כִּי אָנֹכִי שְׁלַחְתִּיךָ:  בְּהוֹצִיאֲךָ אֶת-הָעָם, מִמִּצְרַיִם, תַּעַבְדוּן אֶת-הָאֱלֹהִים, עַל הָהָר הַזֶּה.12 And He said: ‘Certainly I will be with thee; and this shall be the token unto thee, that I have sent thee: when thou hast brought forth the people out of Egypt, ye shall serve God upon this mountain.’

Moses then asked who he should say sent him. “What is His name?” God replied, in the Masoretic text that I use, “’I AM THAT I AM’; and He said: ‘Thou shalt say unto the children of Israel: I AM hath sent me unto you.’ and He said: ‘Thus shalt thou say unto the children of Israel: I AM hath sent me unto you.’” (3:14) Gunther Plaut in his edition does not offer a translation. “And God said to Moses, ‘Ehyeh-Asher-Ehyeh.’ He continued, ‘Thus shall you say to the Israelites, ‘Ehyeh sent me to you.’” (3:14)

Robert Alter in his translation of the text bites the bullet and translates as follows: “Ehyeh-Asher-Ehyeh, I Will Be Who I Will Be.’ And he said, ‘Thou shalt say to the Israelites, Ehyeh has sent me to you.’” “And God said further to Moses, ‘Thus shall you say to the Israelites: ‘The Lord God of your father, the God of Abraham, the God of Isaac, and the God of Jacob sent me to you.

That is my name forever

And thus am I invoked in all ages.’” (3:15)

Is God “I Am”? If so, God is Being. God is everything there is in the present tense. God is permanence. God is eternally the same. God is unchanging. Or is God, “I Will Be Who I Will Be.” God is then Becoming. God is the one who reveals Himself. God is He Who Shall Be Who He Shall Be.” God is a promise. Or is God the continuity of He who was the God of your ancestors: He who revealed Himself to Abraham, Isaac and Jacob? Figure out who I am and who I shall be by reading who I have been to your forefathers.

God not only appears enigmatic, but the Hebrew is enigmatic. If God had said, ‘My name is Sam,’ or ‘My name is Arthur,’ there is a clear implication that there are other gods with different names. That has to be ruled out. Instead, God offers an ontological question (not a definitive answer) of the most profound sort. In Greek philosophy, the alternatives were represented by the division between Parmenides and Heraclitus. Parmenides insisted that the fundamental character of reality was being, was constancy, was eternally the same. Heraclitus insisted that everything always changes. You cannot step into the same river twice. Everything is becoming. Everything is change.

Are you on the side of Being or on the side of Becoming? God in the Hebrew text seems to be saying that I am akin to a quantum in physics, both a particle (Being) and energy (Becoming) at one and the same time. I appear and am physical, but I have the least amount of physicality possible, only sufficient to engage in an interaction with the world. On the other hand, I have no restricted discrete value. I am unlimited. Instead of being a particle that occupies the least amount of space possible, I spread through all space. I am energy. I am creativity and not just what has been created. From one perspective, I am matter and not just immaterial. From another perspective, I am not matter but only energy, only creativity.

When you look to the future, “I will be Who I Will Be.” When you look to the present, “I Am Who I Am.” And when you look backwards in time, I am neither and I am both. I am the Being who reveals himself as ever-changing. I was the Being who was always Becoming. I am the God of creativity. As the Arabic and Hebrew scholar, Shlomo Dov Gottein, demonstrated, Yahweh derives from the Arabic root h.w.y (هوى), and the word hawaya (هوايا), which means “desire.” (Cf. Professor Israel Knohl’s commentary on this week’s portion.)

After all, the original Arabic meaning of אֶהְיֶה, of Ehyeh, YHWH, originates in Midian and derives from the Arabic term for “desire.” God is He who wants what he does not have. God is not perfection as the Greeks led the Jews to believe later in their history. God was and is incompleteness. God was the process of both making Himself and revealing Himself, becoming He who He was not and who He became. Robert Alter in his footnote insists that “I Am That Who I Am” cannot be excluded as the meaning of God’s name, that is, the name can be translated as, “I Am He Who Endures,” However, “I Will Be Who I Will Be” is the most plausible construction of the Hebrew. (p. 222)

Alter chooses “will” rather than “shall” because “shall” suggests a declaration whereas “will” implies an affirmation, one uttered with emphasis. The assertion is not just a promise, but “I Will Be Who I Will Be” is more, a promise, a guarantee and not just a mystery.

Alter adds that in oral Hebrew, “the Greek transcriptions reflect a pronunciation close to ‘Yahweh.’ In that form, the name would be the causative, or hiph’il, form of the verb ‘to be’ and thus would have the theologically attractive sense of, ‘He Who Brings Things into Being.’” As Alter writes after deciphering the meaning and arrangement of the letters, the name, Yahweh, fits “a common pattern for male names in the third-person masculine singular, qal conjugation, imperfective form, Yitdhaq (Isaac), ‘he will laugh,’ Ya’aqov (Jacob), ‘he will protect.’ Or ‘he will grab the heel,’ Yiftah (Jephthah)’. “Yihyeh then suggests God who is unlimited in his creativity.

All this is but background to this week’s portion, more particularly, chapter 6, 2-8 where the God who has revealed his enigmatic name now describes what He has done in the past and what He will do in the future and does so by His own authority without reference to any other legitimation. God is a historic version of the American constitution that provides the foundation of a promise. He will not only liberate Israel, but will deliver Canaan into their hands.


ב  וַיְדַבֵּר אֱלֹהִים, אֶל-מֹשֶׁה; וַיֹּאמֶר אֵלָיו, אֲנִי יְהוָה.
2 And God spoke unto Moses, and said unto him: ‘I am the LORD;
ג  וָאֵרָא, אֶל-אַבְרָהָם אֶל-יִצְחָק וְאֶל-יַעֲקֹב–בְּאֵל שַׁדָּי; וּשְׁמִי יְהוָה, לֹא נוֹדַעְתִּי לָהֶם.3 and I appeared unto Abraham, unto Isaac, and unto Jacob, as God Almighty, but by My name YHWH I made Me not known to them.
ד  וְגַם הֲקִמֹתִי אֶת-בְּרִיתִי אִתָּם, לָתֵת לָהֶם אֶת-אֶרֶץ כְּנָעַן–אֵת אֶרֶץ מְגֻרֵיהֶם, אֲשֶׁר-גָּרוּ בָהּ.4 And I have also established My covenant with them, to give them the land of Canaan, the land of their sojournings, wherein they sojourned.
ה  וְגַם אֲנִי שָׁמַעְתִּי, אֶת-נַאֲקַת בְּנֵי יִשְׂרָאֵל, אֲשֶׁר מִצְרַיִם, מַעֲבִדִים אֹתָם; וָאֶזְכֹּר, אֶת-בְּרִיתִי.5 And moreover I have heard the groaning of the children of Israel, whom the Egyptians keep in bondage; and I have remembered My covenant.
ו  לָכֵן אֱמֹר לִבְנֵי-יִשְׂרָאֵל, אֲנִי יְהוָה, וְהוֹצֵאתִי אֶתְכֶם מִתַּחַת סִבְלֹת מִצְרַיִם, וְהִצַּלְתִּי אֶתְכֶם מֵעֲבֹדָתָם; וְגָאַלְתִּי אֶתְכֶם בִּזְרוֹעַ נְטוּיָה, וּבִשְׁפָטִים גְּדֹלִים.6 Wherefore say unto the children of Israel: I am the LORD, and I will bring you out from under the burdens of the Egyptians, and I will deliver you from their bondage, and I will redeem you with an outstretched arm, and with great judgments;
ז  וְלָקַחְתִּי אֶתְכֶם לִי לְעָם, וְהָיִיתִי לָכֶם לֵאלֹהִים; וִידַעְתֶּם, כִּי אֲנִי יְהוָה אֱלֹהֵיכֶם, הַמּוֹצִיא אֶתְכֶם, מִתַּחַת סִבְלוֹת מִצְרָיִם.7 and I will take you to Me for a people, and I will be to you a God; and ye shall know that I am the LORD your God, who brought you out from under the burdens of the Egyptians.
ח  וְהֵבֵאתִי אֶתְכֶם, אֶל-הָאָרֶץ, אֲשֶׁר נָשָׂאתִי אֶת-יָדִי, לָתֵת אֹתָהּ לְאַבְרָהָם לְיִצְחָק וּלְיַעֲקֹב; וְנָתַתִּי אֹתָהּ לָכֶם מוֹרָשָׁה, אֲנִי יְהוָה.8 And I will bring you in unto the land, concerning which I lifted up My hand to give it to Abraham, to Isaac, and to Jacob; and I will give it you for a heritage: I am the LORD.’

In the present, God is, both by appearing, coming into view, and by speaking. The key factor in the past was God establishing a covenant – not a contract – with the Israelites. It is a covenant that is recalled. It was unconditional. For, in the immediate past, God listened and heard the suffering of the Israelites and remembered that covenant. (Did He forget for four hundred years?) In the future, where most of the action resides, God will deliver the Israelites out of bondage, will redeem the people, will make the people His people, and will deliver Canaan into their hands as a heritage.

Yehwa was the place name, the toponym, for where one found God’s presence on earth originally in the nomadic lands rather than the settlements of the Nile basin where prosperity was guaranteed by the repeated overflow of the waters of the Nile each year onto the farmlands lining each shore, Yahweh is the theonym for that divine presence just as Athena was the goddess for Athens.

Desire is the will to close the gap between what is and what is not. God is not only the guarantor that the gap will be closed, that the desire of the people will be fulfilled, but that promise has its only legitimation in God as the promiser as well as the guarantor that the promise will not be broken. It is not a conditional agreement, but a unilateral unwavering commitment. That is who God is and will be.

In such an account, God is not everything that is. God is not the divinity of the Pharaohs, the cult of which was dedicated to guarantee eternal life, not like the promise to the Israelites as a collectivity of a future as a nation-state on their own land in Canaan. God does not deliver on his covenant in a single stroke. God first destroys the constitutional foundation of the alternative of a promise of eternal life. The ideology of the ancient Egyptians was an antithesis to God. Yahweh was a jealous God in a world of monolatry with different gods and ideologies competing for loyalty rather than a monotheistic world where only one god was posited as existing.

To understand this further, let us, like the frogs, leap ahead to the plagues. The first two plagues are blood and frogs. (Cf. Professor Christoph Berner’s commentary on this week’s portion.)

יז  כֹּה, אָמַר יְהוָה, בְּזֹאת תֵּדַע, כִּי אֲנִי יְהוָה:  הִנֵּה אָנֹכִי מַכֶּה בַּמַּטֶּה אֲשֶׁר-בְּיָדִי, עַל-הַמַּיִם אֲשֶׁר בַּיְאֹר–וְנֶהֶפְכוּ לְדָם.17 thus saith the LORD: In this thou shalt know that I am the LORD–behold, I will smite with the rod that is in my hand upon the waters which are in the river, and they shall be turned to blood.
יח  וְהַדָּגָה אֲשֶׁר-בַּיְאֹר תָּמוּת, וּבָאַשׁ הַיְאֹר; וְנִלְאוּ מִצְרַיִם, לִשְׁתּוֹת מַיִם מִן-הַיְאֹר.  {ס}18 And the fish that are in the river shall die, and the river shall become foul; and the Egyptians shall loathe to drink water from the river.’ {S}
יט  וַיֹּאמֶר יְהוָה אֶל-מֹשֶׁה, אֱמֹר אֶל-אַהֲרֹן קַח מַטְּךָ וּנְטֵה-יָדְךָ עַל-מֵימֵי מִצְרַיִם עַל-נַהֲרֹתָם עַל-יְאֹרֵיהֶם וְעַל-אַגְמֵיהֶם וְעַל כָּל-מִקְוֵה מֵימֵיהֶם–וְיִהְיוּ-דָם; וְהָיָה דָם בְּכָל-אֶרֶץ מִצְרַיִם, וּבָעֵצִים וּבָאֲבָנִים.19 And the LORD said unto Moses: ‘Say unto Aaron: Take thy rod, and stretch out thy hand over the waters of Egypt, over their rivers, over their streams, and over their pools, and over all their ponds of water, that they may become blood; and there shall be blood throughout all the land of Egypt, both in vessels of wood and in vessels of stone.’

Blood appears in the idols [rather than vessels, a word that does not appear in the Hebrew text) of wood and stone, in the central symbols of the Egyptian world that worshipped gods of wood and stone. Instead of water, however, the core substance of living forms, blood, spreads from the life-giving waters of the Nile River. It is Yahweh who gives life to these objects of wood and stone and reveals that they are inanimate, that they lack any life force on their own. With the first plague, God attacked the core belief of the Egyptians, a belief in reification, that the purpose of this world was to mummify life and preserve it for an eternal state. That foundation and structure was the first bastion of the Egyptian belief system to be attacked.

Then out of that same river came swarms of frogs which invaded the bed chambers, ovens and kneading bowls of all Egyptians. And then the frogs were all killed; the stinking contamination piled up in heaps and particularly desecrated the instruments that had to be spotlessly clean. The Egyptians who disdained the eating habits of the Hebrews were now themselves made unclean.

With the first two plagues, the God of Israel has attacked the core ontological and existential elements of the Egyptian way of life. It was a belief system dedicated to eternal life, to reification in contrast to the Hebraic vision of change, of dynamism, of creativity. Becoming trumped Being. Instead of the Egyptian values of freezing time forever, within the flow of time was the promise of change, of revelation. Revelationists lived on promise and hope for a better future. Reificationists and restorationists lived to make the present and the past permanent.

The war of worlds had begun.

Part II: To Impeach or Not to Teach?

Lord of Lies

Impeached

PartiesAyesNaysAbstentions
Democrats22200
Republicans  101974
Totals2321974 = 433

One of the interesting items to note about the whole affair of Donald Trump and the Storming of the Capitol is that impeachment was not really a question for almost all the legislators. Virtually all Democrats knew what they wanted to do. A small group of Republicans, not that much larger than those who voted for impeachment, did not want to impeach POTUS, not because they were uncertain about whether he committed a high crime, in particular, one of inciting sedition, but because a rapid process might be flawed, due process was not observed, the time left was too short to deliberate the matter, or some combination of these reasons that prevented a proper investigation of the matter and the right to a defence. They urged their Democratic colleagues to practice restraint and not politicize the impeachment process.

Of course, the vast majority voted “Nay” because, if they voted otherwise, it might affect their position in the party or their prospects for re-election two years hence. Liz Cheney, who voted “Aye,” after insisting she wasn’t going anywhere, before the evening was out, reportedly resigned her position as the third ranking Republican in the House of Representatives.  Some Republicans voted “Nay” because they feared not simply for their own lives, but for the lives of their wives and children.

Of course, this is not how most defended their negative vote. Their free speech rights were being quashed. Republicans just lost two Senate seats in Georgia to the Democrats in a runoff vote, in good measure because of Trump’s attacks on the Republican state governor and the secretary of state for not ensuring that enough ballots went his way to assign the electoral college votes of Georgia to him. This was the same election responsible for electing QAnon Representative Marjorie Taylor Greene of Georgia. Greene complained of suppression of her rights, justifying her Nay vote. Lauren Boebert of Colorado went further and tweeted the speaker’s location during the invasion of The Capitol.

Jim Jordan of Ohio and Glen Grothman of Wisconsin joined Greene in denouncing the cancel culture that wanted to silence Trump so that he could not have the opportunity to investigate and expose the election as fraudulent, the same ballot that reelected all of them. Tom McClintock of California dubbed Donald’s speech to the mob at his rally on Wednesday as freedom of speech and just normal politics when the Donald instructed his supporters to march to The Capitol. The Donald insisted that the bottom line in the political arena was determined by strength. The use of fiery language before a mob was just free speech; Steve King of Iowa complained that the Lord of Lies had been “deplatformed” in “cyber god’s Kristallnacht.” How obscene could they get!

The invaders of The Capitol who killed a Capitol police officer were not charged with denying First Amendment rights to certify the vote as honest. Only their will had been repressed. Only the attackers, not the legislators who hid under their seats or in safe rooms, had been denied their rights of free speech. Only Donald Trump suffered from cancel culture when the Silicon Valley cabal of large media companies canceled his ability to use social media to spread lies and incite insurrection. Trump was not the arsonist. The Democrats in their efforts to douse “the burning embers of the movement” with gasoline were destroying “the whole experiment in self-government” according to one Republican legislator. It was a topsy-turvy Alice and Wonderland world which they had joined.   

Of course, Nancy Pelosi, the Democratic Speaker of the House was not exactly angelic when she insisted Donald Trump was “a clear and present danger” and that is why he must be impeached. She knew full well that the chance of Mitch McConnell, who still controlled that august body, the Senate, until inauguration day, would be most unlikely to call the Senate together to hold a trial before inauguration day. The vote to impeach would not remove The Donald from the presidency, only deservedly besmirch his name.

The star of the day was Liz Cheney (Wyoming), a Republican who voted to impeach Donald Trump insisting that, “there has ‘never been a greater betrayal’ by a president to his office and his oath to the Constitution days after a pro-Trump mob attacked the Capitol.” John Katko from upstate New York and Adam Kinzinger from Illinois were also vociferous critics of Trump. Even a dyed in the wool Trump loyalist like House Minority Leader Kevin McCarthy from California insisted that Trump had been “irresponsible” in the way he addressed the mob; he still voted Nay.

The actual vote in the Senate will not depend on innocence or guilt of the charge, but on the politics of dealing with the charge. Further, some who would wrack vengeance on the shattered future life of Donald Trump would like to add to his woes by denying him the post-service benefits of security, pension and other office benefits. Unfortunately, that will require new legislation once Biden takes office.

Since there is so little time left – 7 days – would it not have been better to travel the political route? After all, quite aside from all the court cases expected to follow him into private life – assaulted women suing him, commercial imbroglios, tax issues – it is expected that Trump will face charges for conflicts of interest and possibly obstruction of justice in addition to the cases that state attorney generals are preparing against him, a criminal charge of sedition is unlikely since the bar of proof beyond a reasonable doubt is so high. Case law suggests that his directive to the mob at the rally on 6 January to march up to The Capitol is not the same as ordering the mob to march up there, capture,  occupy and rack havoc on the legislative building itself. That you must fight, that you must have strength, are considered metaphorical versions of political conversation and speech making. A criminal charge to stick would probably require that his directions be more explicit and not implicit.

The American Second Amendment, unlike other political jurisdiction, is fairly broad in terms of permissible speech. Even Guliani’s urging the mob to engage in trial by combat might not be enough to satisfy a criminal charge of incitement, unless, of course, he offered explicit directions that we know nothing of at this time. Further, the renewed Merrick Garland Justice Department will have its hands full recovering from the destructive effects of the Trump regime. Attorney General Garland might not want to invest human resources in a case that would meet the standard of a good prospect of a conviction.

What about Vice-President Michael Pence invoking the 25th amendment instead of using impeachment? This was the Democrat’s preference. But that would require the willingness of Pence to initiate such an action and his ability to round up at least half the remaining cabinet to support making a finding of incapacity. Quite aside from his personal reluctance, given his desire to become a future candidate and needing the support of Donald Trump’s base, there is the problem that the 25th amendment was designed to deal with incapacity, possibly including mental incapacity, but not willful criminal behaviour. That is the rationale for the impeachment process. Pence declined because he said that he wanted to give “the nation time to heal.” He wanted members of Congress to “avoid actions that would further divide and inflame the passions of the moment.” An arsonist incites a mob’s destruction of The Capitol and threatens the lives of its members, but responsibility was not assigned to Trump for spreading lies about a fraudulent election of for stirring up the passions of the mob, but loaded on the Democrats for insisting that the president be held accountable for his actions

The real reason for Pence not taking this route was explained in another long letter by Pence to members of Congress, not about invoking the 25th amendment, but explaining why on 6 January he could not comply with Donald Trump’s pressure on him as chair of the Senate to set aside the electoral votes declaring Biden as president elect. His role was only ceremonial.  For that, Pence had already become a target of the insurrectionists who planned to lynch him. As Donald Trump put it, ““Mike Pence, I hope you get to stand up for the good of our Constitution and for the good of our country, and if you’re not, I’m going to be very disappointed in you,” Trump subsequently locked him out of the White House. Pence had no interest in rousing Trump’s supporters further.

I suspect the real urgency for pushing the impeachment process was preventing Trump from using his very wide-ranging pardon powers to get a wide swath of family members, cronies and even insurrectionists off the hook. The fear that he can pardon himself seems far-fetched. He may issue such a pardon, but the Supreme Court, with a majority rooted in Originalism as a basic legal theory, is unlikely to set aside the court ruling in 1974, before Richard Nixon resigned, that no person can be the judge and pardoner of his own case. Extending a pardon is an act of extending mercy to another, even if this is not what motivated Trump thus far. Further, there is a very good chance that Trump will pardon even unnamed individuals and offer an amnesty for certain categories of actions. Such pardons would likely be considered lawful, even if an abuse of the intent of the power. Clearly, the law governing the use of pardons needs to be updated in light of Trump’s abuse of the provision. But none of Pelosi’s moves are likely to prevent Trump from abusing his powers. In any case, since there is no pardon for obstructing justice, Donald Trump can be expected to face legal action on this score.

The real impact of all of this will mostly fall on the Republican Party itself. The party is already continuing to lose support, donors and legitimacy. This may have been what most motivated Mitch McConnell to try to stem the tide by insisting that Trump was directly responsible for the insurrection and AWOL in tampering it down. McConnell even signalled that he was open to voting for impeachment, probably in an effort to purge the party of Trumpism.

I personally think that the most important after-effect of the whole affair focuses on the far right in the Republican Party and the white supremacist enablers who support or at least sympathize with the alt-right efforts. Routing out the insurrectionists offers an opportunity to destroy the extreme right-wing of the party. The investigation of the insurgency is already well underway. The FBI is evidently doing everything it can to identify all the conspirators, with proper attention to due process and very sensitive attention to the law.  Foreign governments like Canada have already announced that they are considering designating extremist groups, such as Proud Boys, as terrorists and adding them to the country’s list of organized terrorist organizations. The extreme right is a broad movement with millions of sympathizers, and the investigations and trials and hearings that will follow can provide an opportunity to exhume this menace to American democracy.

My eldest son believes it might also turn Trump into a martyr. Another reader suggested that QAnon is becoming the core of a new American religion. There is no doubt that this is a real danger, but I believe it is one that must be countered by the rule of law, by transparency and by truth. The last has been the most important victim of Trump’s campaign of lies about the alleged fraudulent 2020 election. Even after the insurrection, 71% of Republicans still believe Trump. As I implied in my previous blog, it is critical that the dangerous far right be excised as a force in the American polity.

That entails naming and at the very least shaming the legislators who were enablers of the insurrectionists. Based on their lies, their fiery speeches and even Jeff Hawley’s raising a fist in solidarity, on the evidence available, it would seem that there is no basis for criminal charges, expulsion from Congress or even censure. This is in spite of their parroting of Trump’s falsehoods and claims that the election was a fraud and he was the real winner. Those who supported the position that the election was stolen carry a tremendous responsibility for riling those right-wingers who disrupted the counting of the Electoral College vote confirming Joe Biden’s win. But there will be an investigation and who knows what will turn up. There is a rumour that members of Congress actually threatened fellow members. But though these actions were clearly irresponsible in leading the lying chorus, that in itself is not incitement to insurrection or criminal. Censure, however, and informal sanctions may be considered.

The rise of Trump and his performance in office points to a whole other area – the need for reform of the duties and responsibilities of the president, turning what pre-Trump were established norms about conflicts of interest and obstruction of justice, about the independence of the Attorney General and reporting on payment of taxes, into written legislation. Even more important are laws focused on foreign interference in the democratic process in American domestic politics. Harder to achieve will be laws against voter suppression, gerrymandering, disenfranchising voters, campaign financing and even minimum common standards in the conduct of elections.   That is a long and urgent agenda for an administration that already faces enormous challenges ranging from Iran to COVID-19.  My hope is that the investigation of the insurrection will provide a much broader opportunity for electoral reform, especially since so many on the Republican side held this up as their banner in opposing impeachment.   There is another realm. As one pundit wrote, “The results of Wednesday’s melee don’t only threaten U.S. domestic institutions, but our national security interests and foreign policy priorities.” America has become an exporter of right-wing extremism. They spread their distrust of democracy in the name of democracy to foster a transnational fascist movement. America is an exporter of extremist right-wing and white supremacist ideology. At the same time, the U.S. has lost most of its moral standing in demanding that other regimes adhere to a high democratic standard. Further, many of the human rights advocates in Hong Kong and other jurisdictions fled to the United States as a safe haven and, surprisingly, a number became supporters of Donald Trump:   “barefoot” lawyer Chen Guangcheng from ChinaBob Fu of ChinaAidWang Dan, a former Chinese student leaderAlexander Otaola, a Miami-based Cuban activistAhmad Batebi, an Iranian dissident, called Ashli Babbit, the 33-year-old ex-airforce rioter who was killed on 6 January, a martyrMasih Alinejad, another Iranian dissident.   With a background in confrontational politics and backing from Trump, they have often allied with Trump and identified with his protests against rigged elections.   Of all the negative aspects of this whole crisis, this is, in my mind, the worst.

Punishing the Radical Right in America

Part I: Cauterizing the Radical Right

Just over fifty years ago in October 1970 (in what became known as the Crise d’Octobre or the October Crisis), Prime Minister Pierre Trudeau invoked the War Measures Act. It was the first peaceful use of that draconian measure. It set aside the civil liberties of all Canadians. With far-reaching powers, the police rounded up 497 Canadians and put them in jail without any immediate prospect of bail and initially without any charges being laid. Many were acquaintances from Quebec. A few were even friends. 3,000 premises were raided and searched. Though it must be admitted that, true to Canadian form, both the arrests and the searches were reputedly very courteous. That is Canada. Civility even in the face of insurrection!

The application of the War Measures Act was not a response to an invasion of 40,000 Canadians and their seizure of our Parliamentary Buildings with five casualties. It was a response to radical Quebec separatists from the Font de liberation du Québec (FLQ). They had kidnapped and murdered Pierre Laporte, the provincial deputy Premier of the province. They still held British diplomat James Cross in captivity. The latter was released in return for the murderers agreeing to go into exile in Cuba. The War Measures Act explicitly took away the rights of due process. Habeas corpus (an individual’s right to have a judge confirm that they have been lawfully detained) was suspended. They could be held for up to 28 days without charges being laid and were not even entitled to have legal representation or even call a lawyer. They could be held without bail for 90 days.

The Premier of Quebec, Robert Bourassa, and the Mayor of Montreal, Jean Drapeau, supported Trudeau’s invocation of the War Measures Act which drastically limited civil liberties as almost 500 Quebec separatists or separatist sympathizers or believed separatist sympathizers (not FLQ supporters or sympathizers) were rounded up and imprisoned, though the vast majority had nothing to do with the kidnappings and murder or even with the FLQ. In fact, only 62 of those arrested were even charged and most of those were exonerated. It is as if the American FBI not only arrested identifiable insurrectionists videotaped at the invasion of The Capitol, but rounded up 5,000 right-wing extremists across the U.S.A., when the vast majority were not even in Washington at the time of the insurrection.

What if Pierre Trudeau himself had been a separatist fellow traveler? What if a huge throng of separatists had arrived in Ottawa and marched on the Parliamentary Buildings after being egged on by the Prime Minister himself? What if they had ransacked the centre of our democracy and five people had died as a result of the mob effort?  What if the instigation had been Pierre Trudeau’s false claim that he had just lost an election to the opposition leader, Robert Stanfield, an election that he falsely claimed was fraudulent?

Further, remember that Pierre Trudeau had called out the military. Canadian troops patrolled the streets of Montreal, Quebec and Ottawa. What if Americans had done the same upon the singular orders of say Vice-President Pence whom the insurrectionists had threatened to hang? Obviously, the comparison is more than a stretch. Its only purpose is to indicate the relatively mild response of the American politicians to what was an attempted insurrection, even if one implemented by “protesters” in colourful clown costumes and military fatigues rather than secret conspirators working in the underground of Quebec politics.

Polls at the time showed that Canadians, especially Quebeckers, supported the invocation of the War Measures Act by a wide margin. 89% of English-speaking Canadians and 86% of French-speaking Canadians supported Pierre Trudeau’s dramatic and drastic response. I did not. I was among a small minority who argued that the action was excessive and very disproportionate to the events that had instigated such an extreme response. However, I had to admit that the excessive step did succeed in cauterizing the organized efforts to use violence to advance the separatist cause. From then on, electoral processes were relied upon to advance a separatist agenda. In fact, just five years later, a sovereigntist government was put in power in Quebec with the election of the separatist Parti Québécois which formed the government in 1975.

In both Canada and the U.S., the events had been preceded by years of violence. In the seven years between 1963 and 1970, 950 bombs, largely of post boxes, had been set off. It was equivalent to 10,000 bombs being ignited in the US. But post boxes were not the only targets. Admittedly nothing in Canada occurred as serious as Timothy James McVeigh’s 1995 bombing of the Alfred P. Murrah Federal Building in Oklahoma City killing 168 and wounding 680, but the radical separatists did bomb the Montreal Stock Exchange on 13 February 1969 when 27 were injured, a few seriously. Montreal City Hall, the T. Eaton department store and RCMP (The Federal police force, the Royal Canadian Mounted Police) facilities, had all been targeted.

One major difference is that the insurrection in the US was an entirely domestic affair. The separatists in Quebec had external support. President Charles de Gaulle of France even instigated dramatic separatist action when he shouted “Vive le Québec libre” from a balcony in Montreal. Canadians were not in a position to impeach Charles de Gaulle, but the Prime Minister at the time (24 July 1967), Mike Pearson, rebuked him and sent the president home tout de suite. Pearson fumed, “The people of Canada are free. Every province in Canada is free. Canadians do not need to be liberated. Indeed, many thousands of Canadians gave their lives in two world wars in the liberation of France and other European countries.”

I am convinced that as the FBI investigates extremist right-wing activities in the United States, they will discover the equivalent of other militant insurrectionist plans, such as the kidnapping of the Israeli consul in Montreal, stores of guns and explosives, and documented evidence of plans to overthrow the government. Further, in Canada, a number of prominent individuals defended the aims if not the actions of the FLQ separatists. Robert Lemieux became the FLQ lawyer and not only negotiated the exchange of the kidnapped Cross in return for exile, but he urged students at the Université de Montréal to boycott classes in support of FLQ. He also organized a rally at the Paul Sauvé. Paul Chartrand, a prominent labour leader, insisted that support for the separatists, and the FLQ in particular, was rising as a result of their dramatic action – admittedly a statement he made before learning that Pierre Laporte had been killed. Bernard Mergler and Robert Demers were two prominent lawyers who negotiated the release of FLQ prisoners and those involved in the Laporte killing and their exile in Cuba in return for the release of James Cross after 62 days in captivity.

A number of observations are apropos. First, though the U.S. tardily did bring out the National Guard, which do have a legislated responsibility to help preserve domestic order, no American authority proposed the use of the military dedicated to keeping America safe from foreign adversaries. Canadians made no such distinction and Canadian troops occupied Ottawa, Montreal and Quebec, though the troops only functioned in support of the civilian authorities. Second, the American insurrection threatened every member of the federal legislative chambers in Washington. The federally elected members of Parliament in Ottawa were never in danger. There are other comparisons that can be made, all of which suggest that the Canadian response was far more extreme than the current American one with its focus on criminal actions against the insurrectionists and impeachment of the president.

In Canada, the FLQ was declared illegal, giving the police virtually unlimited powers to arrest and hold suspected members. In the US, we have yet to see whether QAnon, members of the Boogaloo movement, the Patriot Front (unlike others on the right, they reject Trump), the Base, the Nationalist Justice Party, the Order of Five Angels, the Proud Boys (remember Donald Trump in the presidential debate advising them to “stand back and stand by”), the Groypers and the various other iterations of right-wing extremism will be dubbed as domestic terrorists, an action taken by the Canadian government by federal fiat.

Before I get into the impeachment, I want to point to one result of the Canadian response. The radical non-democratic, in fact, anti-democratic left-wing insurrectionist effort in Canada was cauterized. In medical surgery, cauterization, burning the ends of a blood vessel, is used to stem the loss of blood. A hot iron or equivalent is used both to destroy the infected tissue and to deaden the infectious process behind the bleeding. Extremist left-wing separatism was destroyed in Canada. We have yet to see whether the same will occur in the United States with right-wing extremism and whether the governmental authorities will go after the myriad of extremist groups in the US and not just remove the president and bar him from office in the future.

In the US, 2020 was a record year for far right or alt-right (really fascist) violence with more murders and car attacks aimed at peaceful protesters than any year in recent memory. Their most important enabler, ever since he labeled Barack Obama a foreigner and accused him of not being born in the United States, has been Donald Trump. Since then, the Republican Party, the GOP, has been effectively taken over by the Trumplicans. What unites all of these movements is a family of beliefs and activities which culminated in the proposition that the election of the president in November 2020 had been a fraud. These include:

  • The belief in the existence of a “deep state” that controls the American government against the will of the people
  • The belief that the president-elect, Joe Biden, is a member of satanic pedophile cabal
  • That Black Lives Matter (BLM) is merely an extension of the Antifa anti-fascist movement on the left
  • That the Covid-19 pandemic is a hoax
  • That wearing surgical masks is merely a step towards denying individual freedom

The history of right-wing violence in the US has been permeated with a record of sporadic acts of violence as well as scurrilous racist and antisemitic rants on social media platforms with exchanges of conspiracy theories and disruption plans. A selective list of violent events restricted to this past year only is offered below that do not include many arrested for plotting violent actions.

  • March Timothy Wilson, a National Socialist – fascist – member on route to bombing a hospital, was killed by police in Portland
  • April 30 armed protesters invaded the Michigan legislature threatening to kidnap the governor
  • In May, Steven Carrillo was arrested for murdering a federal security guard during the Oakland protests
  • In late May, a police precinct was burned in Minneapolis and militant demonstrations broke out across the country in response to the Black Lives Matter invigorated protests in response to a Minneapolis police officer killing of George Floyd
  • On 31 May, Donald Trump tweeted, “The United States of America will be designating ANTIFA as a Terrorist Organization,” but he has never seriously rebuked right-wing terrorism
  • On 26 August, a militia member, 17-year-old Kyle Rittenhouse of Kenosha Illinois, killed two people at a BLM demonstration, and this was but one of many attacks on BLM peaceful protesters
  • Just before the end of August, Aaron Danielson attacked random individuals as part of a far-right protest in Portland, Oregon and was killed by a self-declared antifa proponent, Michael Forest Reinoehl, who in turn was killed by law officers on 3 September (Donald Trump gloated that he was shot down.)
  • During the Western wildfires, vigilante right-wing armed checkpoints were set up to catch and arrest antifa alleged arsonists based on rumour and absolutely no evidence
  • In October, Lee Kellner, a right-wing activist, threatened a TV crew in Denver and was killed by police
  • In the same month, 13 right-winger members of a Michigan militia group were arrested for planning to kidnap the Governor Michigan
  • The 6/1 rally of Trumpists in Washington was preceded by the 14 November Washington Million Maga March, the 12 December right wing clashes with four stabbings that ended up destroying two Black churches, the Proud Boys attempts to break into the Oregon state legislature in Salem on 21 December.

All of this is offered to put the American political initiative to impeach their president in a comparative context.

Next: Part II: To Impeach or Not to Impeach)

Reflections on A Promised Land by Barack Obama

Part VI: The Financial Crisis of 2008 – Moralism versus Structural Analysis

 (A 2010 scholarly article of mine analyzing the source of the disaster provides a more in depth analysis: “Trust and Transparency: The Need for Early Warning,” in Iain MacNeil and Justin O’Brien (eds.) The Future of Financial Regulation, Oxford: Hart Publishing, Ch. 18, 322-336.)

I presented Obama’s very brief summary of his analysis of the housing and financial crisis in my last blog. A Later blog will provide a much more detailed review. For now, a few basic questions. What was Obama’s substantive depiction and analysis of the financial crisis, more specifically, the mortgage crisis?

Obama first clued in that something was really wrong when “the nation’s second largest subprime lender, New Century, declared bankruptcy.” (177) The Federal Reserve had forced the largest subprime lender into a shotgun marriage with Bank of America. In September 2007, Obama decried “the failure to regulate the subprime lending market.” He proposed stronger oversight. Though ahead of the curve compared to most of his colleagues and competitors, he was well behind the bonfire already underway. However, he was correct in pointing at a failure in regulation but never offered a diagnosis of the reasons for that failure except to imply greed was at fault.

Subsequently, “financial markers saw a flight to safety as lenders and investors moved their money into government-backed Treasury bonds, sharply restricted credit, and yanked capital out of any firm that might have significant risk when it came to mortgage-backed securities.” (178) In October 2007:

  • Merrill Lynch announced $7.9 billion in losses related to mortgages
  • Citigroup projected possible losses of $11 billion

The situation was unravelling fast. By March 2008, Bear Stearns stock value plummeted from $57 to $30 in a single day, forcing a fire sale to JP Morgan Chase. Goldman Sachs, Morgan Stanley and, especially, Lehman Brothers were all hemorrhaging capital at alarming rates. While some looked on with self-righteous glee at the comeuppance to these capitalists and their firms, Obama determined that “in a modern capitalist economy it was impossible to isolate good businesses from bad or administer pain only to the reckless or unscrupulous.” (178) “Everybody and everything was (sic!) connected.” By that Spring, the consequences had been dire – contracting demand, widespread layoffs, canceled orders, deferred investments and literally millions of foreclosures.

But surely the COVID-19 economic crisis of 2020 should have been a clue for Obama that the problem was systemic and not simply a matter of sorting out good businesses from bad ones. In the Great Recession that followed, the financial crisis of 2007-2008 witnessed property values dropping by 20% to 50%, depending on the location. Stock portfolios lost 30% of their value. Pension plans were big losers putting at risk the plans of millions of pensioners. However, a period of collapsing asset prices combined with high unemployment and shrivelling demand also provided an opportunity for the government, as the largest potential buyer of last resort, to purchase stock and other assets at fire sale prices. Falling prices are short term and provide enormous opportunities for perceptive investors. And many less-panicked entrepreneurs cashed in – especially in the Florida and Arizona real estate markets where properties were selling for at least 50% less than their pre-recession values.

Is this not a cold-hearted way to look at the situation? On the one hand, brokers and firms according to Obama had been unscrupulous. “They (irate Republicans and mortgage brokers) didn’t appear chastened by the fact that the game they played had been rigged up and down the line, if not by them then by their employers, the real high rollers in wood-paneled boardrooms. They didn’t seem concerned by the fact that for every ‘loser’ who had bought more house than he could afford, there were twenty folks who had lived within their means but were now suffering the fallout from Wall Street’s bad debts.” (273)

If you look at the economic calamity from a moralist perspective, then working to save the financial institutions seems hypocritical. If you bracket morality and do your utmost to save as many financial institutions as possible because the system is so complex and interconnected and too many failures of TGTF (too big to fail) institutions would bring the whole system crashing down, then you save the economy but come across as an amoral capitalist enabler. In either case, millions of small homeowners lose their homes.

Obama recognized the unfairness of applying a moral calculus to those losing their homes. “Was it fair to devote the hard-earned tax dollars of those Americans to reducing the mortgage payments of a neighbour who’d fallen behind? What if the neighbour had bought a bigger house than they could really afford? What if they’d opted for a cheaper but riskier type of mortgage? Did it matter if the neighbour had been duped by a mortgage broker into thinking they were doing the right thing? What if heir neighbour had taken their kids to Disneyland the year before rather than putting that money into a rainy-day fund? – did that make them less worthy of help? Or what if they had fallen behind on their payments just because they’d put in a new swimming pool or taken a vacation but because they’d lost their job or because a family member had gotten sick and their employer didn’t offer health insurance or because they just happened to live in the wrong state – how did that change the moral calculus.?” (272) Obama rejected this approach, both because it offered no practical route to a solution, because it took the moral weight off those he thought were primarily responsible, and because the government’s function then was to be a fire department and stop the fire from spreading rather than assessing the credit worthiness of the homeowner.

However, Obama is as guilty of playing the blame game as his Republican colleagues, blaming the brokers and bankers though rather than imprudent home buyers and owners. However, if you see the problem as systemic, a structural error that encourages immoral behaviour rather than inherently immoral, then you can concentrate on correcting the faults in the system rather than simply applying bandages. But what if it is too late to close the proverbial barn door? What if the system is totally aflame? Isn’t the first priority bringing in the fire department rather than either looking for the arsonists who started the fire? Is the priority not rescuing what you can? Perhaps you simply have to accept that whole communities will be destroyed in the conflagration.

If the problem is that the core of the fire was a faulty electrical transformer rather than a domestic greasy oil fire on which you had to pour tons of foam, then fixing the transformer after temporarily disconnecting it could limit the damage. Further, recognizing the right source and correcting the problem may mean that you can use the electrical grid itself as a critical tool in limiting the spread of the fire. At the heart of the matter, you can use prospective profits to offset the short-term costs of helping homeowners get past the crisis. But how can one consider the government making a profit from the calamities of others?

A simplistic answer – by turning a negative sum game in which there are greater and lesser losers into a positive sum game in which the benefits are skewed in favour of the homeowners rather than the banks and financial institutions. The objective would be to ensure that everyone benefits to some degree. Further, the prudent lenders would benefit more than any imprudent ones, but the effort should be made to save as many homeowners’ homes as possible from foreclosure.

Let me digress for a moment and examine a situation where the government itself was directly responsible for depressed real estate prices. In Ontario in the eighties, rent controls meant that apartment buildings were for sale at very depressed prices related to their replacement costs. While the government costs for building new apartment units for subsidized housing was costing on average $150,000 per unit, older rental apartment buildings could be purchased at $30,000 per unit. Many of these buildings were in need or repair and updating, since it did not pay the owners to make improvements. That could be done then at a cost of $30,000 per unit bringing the cost of a renovated unit to $60,000 compared to $150,000 for a new unit.

There were two ways to accomplish this. On one hand, rent controls could be eased to allow, and even encourage landlords, to renovate their properties so that renters paid for the costs over time and the assets of the 0wners eventually more than doubled in value. Alternatively, you could create a system that facilitated the tenants purchasing those units – they would get the benefit of the capital cost improvements rather than the owners of the buildings. But that would mean users rather than owners would get the advantage of the capital gains.

The latter approach was taken to a very limited extent in the conversion of about 1,000 units to co-operative ownership in Toronto. Renters were provided with a unique opportunity for many to buy and own apartments when they otherwise could not afford to do so. They could get on the capital ownership ladder on rungs much closer to the ground. However, by far the major effort focussed on saving the assets and capital appreciation for the landlords and reserving the yearly increasing system in which over half the population lived in rental housing with decreasing opportunities to gain home ownership. Indeed, pressure was put on the government to allow apartment owners to renovate their buildings and pass the costs onto tenants while, at the same time, effectively doubling the value of their assets.

The opportunity to convert the bulk of tenants to owners was not only lost when a social democratic government was in power, but laws were subsequently passed preventing the conversion of rental housing to co-operative ownership by the inhabitants on the specious argument that it would deplete the rental housing stock even further. Though the facts indicated otherwise, that is that renters who were able to get on the ownership ladder at a much lower rung, went on to “buy up” and thereby decrease the pressure on the rental market. Within a few years, they went on to buy their own homes and leave the inventory of what had been or continued to be rental housing units to a smaller pool. These facts were ignored for very different reasons by conservative and socialist provincial governments alike.

Imagine the government not building subsidized housing units at $150,000 each, saving on both capital costs and continuing rental subsidies even though supporters of increased government owned or rent subsidized housing might strenuously object. Imagine if the government had set up a lending facility to help tenants both buy the buildings they occupied and renovate them with the government purchasing the minority of units where tenants would not take up the offer. There would be no cash outflow, just loan guarantees or assets purchased securitized by the property. Reducing the costs of building new units and subsidizing rents would, in fact, decrease the outflow of expenses to the government. Further, by purchasing units not bought by tenants, the government continued to have rental units on the market while benefitting considerably from the capital gain to those units. Effectively, the government would be buying property at very depressed prices for the benefit of renters and allowing those renters who could otherwise not purchase property to become home-owners.

This is not just an abstract model. We demonstrated it in practice in the 1980s as I indicated above. Further, if the government wanted to be fairer to property owners because of guilt over buying their property at depressed prices when it was the government itself that was responsible for those low prices, the government could have provided added incentives to encourage property owners who wanted to – and many were eager to do so – to get out of the rental market and retrieve their investments by offering concessions on capital gains taxes when buildings were sold to tenants.

How does this example apply to the depressed value of real estate in the 2008 crash? Very simple! And I mean simple. While quick-on-their-feet entrepreneurs bought up enormous swaths of property at very depressed prices only to sell them four or five years later at recovered prices, realising very large profits, the government would facilitate homeowners retaining their homes at the depressed prices when mortgage companies foreclosed. It could do so by taking three actions – 1) delaying forced evictions as the government is doing currently in the COVID-19 crisis, 2) requiring foreclosed homes to be first offered to occupants, and 3) offering mortgages on those repurchased homes at 100% of the depressed value, but with the government retaining an interest – say 25% of any profit realized when the home was sold.

This was not done. Instead, the financial institutions were directly bailed out and most saved from insolvency. And tens of millions lost their homes. Many if not most, were never again able to re-enter the home ownership market. What about the home occupier who had also lost his or her job and could not even afford payments on a mortgage even when it was reduced by 50%? For those cases, the government could introduce a mortgage repayment forgiveness program and gain incrementally up to another 25% of the increased profit of the home when it was sold.

As I will show in a future blog, the government did introduce a limited version of this but without any gain for the government. Why? I believe it was because the dominant analysis of what went wrong was erroneous. It was not primarily a combination of unscrupulous mortgage lenders and gullible and greedy buyers who could not afford their purchases. Obama would himself later agree about the misrepresentation of the buyers, but when it was too late. And he never really understood the core of what happened.

Next VII: The Obama Analysis and the 2009 Rescue