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Blago and backlash

How the Chicago corruption story and other lavish raids on the public treasury (and trust) could induce an angry populist backlash.
Gov. Rod Blagojevich at the Illinois State Fair in 2003.

Gov. Rod Blagojevich at the Illinois State Fair in 2003. State of Illinois

The federal charges against Illinois Gov. Rod Blagojevich are only the most recent and prominent episode in a series of events which are building toward a bigtime populist backlash.

Corruption in Illinois, as in Louisiana, New Jersey, Nevada, Rhode Island, oldtime Boston, and other notorious political venues, should come as no big shock. Yet Blagojevich's pattern of conduct, as revealed in the charges, was so blatant and reckless that you wonder why it took so many years to be found out.

A couple Illinois-related jokes come to mind: The first, in a cartoon, portrays convicts in a prison chow line. One turns to the other: "The food was much better here when you were governor." The second related to the discovery, after his death, of shoe boxes containing millions in cash in the bedroom closet of Illinois State Treasurer Paul Powell. Sen. Adlai Stevenson, when asked to comment on Powell's death and the bedroom discovery, remarked that "Paul Powell left big shoe boxes to fill."

We can laugh about such matters, but these recent abuses of public trust are nonetheless disgusting. They are contributing to a public backlash which could be both angry and vengeful. President-elect Barack Obama has not been implicated in the Illinois scandals and is unlikely to be. His unifying temperament should help us get us through a difficult period of at least a couple years. But it will not be easy. Below are some of my concerns about the coming backlash.

One of the reasons for backlash is the way Master of Universe types took reckless risks that weakened our financial system and economy. Yet many of them have walked away with personal fortunes and remain in line for seven-figure holiday bonuses this month. The price has been paid by investors, taxpayers, retirees, ordinary working families, and a growing army of unemployed.

Meanwhile, the Federal Reserve and Treasury have put huge sums into major financial houses, few questions asked. The federal government has taken over Fannie Mae and Freddie Mac, has a major equity position in AIG, and appears about to become a partner of the Detroit Big Three while extending an initial $15 billion bailout which will be burned for operating expenses. The industry will be back for much more. Bottom-up help has been slower in coming.

A final reason: the Masters, federal regulators, Fannie Mae/Freddie Mac and auto executives, relevant Members of Congress, and others have characteristically responded with "Who could have known?" statements about the crisis, presenting themselves as victims rather than perpetrators.

Add these factors up and the times are ripe for a populist George Wallace or Ross Perot. (Perot, remember, got a surprising 19 percent of the national popular vote for president in 1992, despite running an ineffectual, mistake-filled campaign). As a result of all this, mountains of public and private debt have been accumulated. Social Security and Medicare reform and national health and energy schemes will have to be pushed to the back burner.

There are several unintended consequences of all these rapid changes. For instance, American financial and economic systems have been moved in an unprecedented direction toward European models, where government is an active and often intrusive partner of private business and finance. U.S. presidents, over 40 years, have tried to maintain an American competitive edge by moving in the other direction.

As he should, Obama early in 2009 will institute major infrastructure spending (on roads, highways, bridges, water and electric facilities, ports, public buildings, etc.) to bring jobs and economic activity to the local level. But there is a big peril in having this spending turn into an irresponsible porkfest tailored to suit the political priorities of state and local officials. Do you have any doubt, for instance, that Mayor Greg Nickels will try to channel these monies to his Mercer Project and Seattle streetcar public-works boondoggles and to Sound Transit, which he chairs, at the expense of work having far higher public priority?


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Comments:

Posted Thu, Dec 11, 8:14 a.m. Inappropriate

Dead on, Mr. Van Dyk.

Personally, I'm so angry that people in positions of power, financially and politically, have let us come to the brink of where we find ourselves today, as a nation, trying to stay afloat in the now turbulent and tenuous seas of a sinking global economy--and in great part this difficult condition is the fault of the United States, a result of our softly regulated, *look the other way* financial practices and the reinforcement of rating systems that were completely off the mark. There is no one that can tell me that many of these people *high up* were unaware of the faulty practices put in place--though so many are in denial (can you say Mr. Phil Gramm, for starters?). I think the game that was played was: *Well, everyone's cashing in on this, so I'm in on it too.* Despite the risky loans; despite the betrayal of the trust of investors; despite all outcomes.

And as Mr. Van Dyk said, so many walked away extremely wealthy on the broken financial backs of investors--and ironically those same investors along with everyone else in the United States, through the government's intervention, are helping to bail out these same companies once again.

In my eyes it's all become an orgy of BIG greed. The result is that all the boys and girls at the top of the food chain seem to be disconnected from the real world, still wanting large bonuses despite the bailouts and poor performances of their companies. It's time for our political leaders to get BIG about it and have it come to a close. It's costing us dearly.

My concern is that our political leaders, many of whom are corrupt, are part of problem that needs fixing so desperately. And yet our political system seems prone to such illness in practice, and truly can't get fixed until we stop the legal bribery of campaign contributions from major corporations and curb the over-influence of the lobbyists. And the greed of the elected politicians themselves. Perhaps small party internet donations are the way. Time will tell. In the meantime, we have the best political and financial systems that money can buy. And it's costing the taxpayer. BIG time.

-Political

political

Posted Thu, Dec 11, 11:01 p.m. Inappropriate

As "political" says, dead on, indeed. Will Bloomberg be next decade's Perot?

Meanwhile, I never noticed before how much Blagojevich looks like Wayne Newton.

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