Thanks for the Drawing, Kiddo!

While cleaning house today, I ran across this faded and yellowed drawing that our then three year-old daughter made for me many decades ago.

I had it scotch-taped to my various office walls for most of my working life, first in the Computer Center at the Stanford Linear Accelerator Center (SLAC) for twenty years, then in Networking on the Stanford campus for another ten years.

I kept this little drawing taped to the wall because it always cheered me up to look at it.

Nothing bad can happen in a world where smiling children walk in the air a few feet above a field of flowers.

It still cheers me up.

Maybe she still subconsciously draws on this image today while using art therapy with her clients?

It could be a touchstone for the healed psyche.

Washington’s Whiskey Woes

Cross-posted from the New Deal 2.0 Blog.

by William Hogeland

Despite claims to the contrary, the Whiskey Rebellion was no anti-government crusade — it was a battle for progressive taxation and regulation.

The seething social, political, and economic struggles over public and private finance that marked our founding period came to a head in the late fall of 1794, when President George Washington, back in the saddle for the first time since the Revolution, personally led nearly 13,000 troops into western Pennsylvania to subject its populace to a military occupation. Treasury Secretary Alexander Hamilton served as Washington’s major domo for the operation — and he took over full command when Washington turned back to Philadelphia. Under Hamilton’s command, troops rousted citizens from beds in the snow and ran them to holding pens. They detained on no charge hundreds of people against whom the executive branch knew it had no evidence, administering searches and seizures of property and subjecting detainees to harsh conditions and terrorizing interrogations. After spending indefinite periods in privation and fear, most of the detainees were released — inevitably, as there hadn’t been evidence for their detention. The whole operation was conducted in the absence of warrants, any resolution of Congress, or legal suspension of habeas corpus.

Prosecutions were never the purpose of the arrests. Troops soon arrived at every home in the region and required every male over the age of eighteen to sign an oath of loyalty to the federal government. Not surprisingly, most complied. Such was the context in which the U.S. government established its sovereignty in what was then the restless, defiant, trans-Appalachian West.

The real issues sparking the 1794 suppression of western Pennsylvania have been trivialized, at first by Hamilton himself, as “the Whiskey Rebellion.” Just as Hamilton hoped, historians and biographers have contentedly gone on marginalizing the democratic-finance movement that Hamilton dedicated his career to obstructing and tried to give the coup de grace in the suppression of western Pennsylvania.

But the resistance wasn’t about whiskey, and Hamilton knew it. It was about public finance and national economics.

The resistance did begin in objections to the first federal tax on a domestic product, an excise on distilled spirits. That tax had been authored by Hamilton himself as linchpin to his comprehensive funding-and-assumption plan for supporting investment in the federal domestic debt and making that debt a national engine. But whereas Hamilton’s famous political enemies in government — the opposition party coming to be associated with Jefferson and Madison — objected on general principles to Hamilton’s activist approach to federal government, the ordinary people on whom his tax operated most painfully were objecting on other, more pragmatic grounds.

They’d hoped for a government that would protect them against what they saw as the avaricious merchant-class lending industry, and they saw the whiskey tax as a betrayal of those hopes, a continuation, even an amplification, of finance policies deliberately favoring elites and obstructing ordinary people’s efforts to get their hands on political and economic power. The rebels began by making disguised attacks on tax collectors — in the classic “regulation” style that the unenfranchised had long employed to promote more democratic public finance. Then they began raising what had been known in 1776 as “liberty poles” (the Washington administration now deemed raising the poles seditious). By 1794, when the western counties of Pennsylvania, along with some in western Virginia, in correspondence with sympathizers in Kentucky, were marching under a new flag and threatening secession from the United States, their goals went well beyond regulation.

They sought to form a new, western country, with direct access to trade on the Mississippi, cultivating a new kind of democratic republic in which ordinary people would thrive. The rebels were well armed and well organized, some of the toughest people America has ever known. Hunters, trackers, dirt-farmers, laborers, craftsmen and marksmen, they were rank-and-file veterans of the worst theaters of the Revolutionary war; their fathers and grandfathers had been harassing eastern government, both British and American, for many years. The prospect of their seceding and forming a government of their own, hostile to the U.S., was a terrifying one.

And of course it wasn’t realistic. In the end the rebels’ ruthless illegality was overcome by Hamilton, using his own ruthless illegality, on behalf of President Washington, in the occupation of western Pennsylvania.

I’ve written in detail elsewhere, as have others, about how Hamilton’s tax, which he sold to a financially naive Congress as an innocuous duty on consumption of a luxury item, was in fact carefully calibrated to cartelize the distilling business, favoring big merchants, eastern financiers, and federally-connected western cronies and putting small farmers out of business, all while using the tax revenues to pay interest (untaxed) to well-heeled investors in U.S. debt. Also widely discussed in Whiskey Rebellion literature (though not by Hamilton’s biographers!) are Hamilton’s eager anticipation of leading a military effort against U.S. citizens somewhere in America to enforce finance policy, and his manipulating, along with Attorney General William Bradford, the prosecution of tax resisters to create a pretext for bringing that plan to fruition in western Pennsylvania.

But in the context of today’s debates over taxation and public debt, it might be more important to look at some specific things the so-called whiskey rebels objected to in Hamilton’s polices. Hamilton biographers haven’t done so, and taking at face value Hamilton’s own tactical dismissals of his populist critics’ objections, they have confused many of the most important issues in founding finance.

Although the rebels protested and ultimately mobilized militarily against a tax, they were neither inheritors of the Boston Tea Party nor forerunners of today’s Tea Party movement. Unlike the Boston Sons of Liberty — upper-middle-class men who objected to Parliament’s taxing American’s without representation, as well as to a bailout of a company deemed to big to fail — the whiskey rebels wanted government not merely to observe the classic liberties of propertied Englishmen but to promote the equality of the less- and un-propertied. And unlike many in today’s Tea Party, the rebels of the 1790’s did not object to federal taxes per se. Their slogan wasn’t “no taxation” or even “less taxation” but “equal taxation.” They rightly identified the whiskey tax as what today we would call regressive. In their first of many unsuccessful petitions for repeal, they complained that the tax was unjust because it didn’t operate in proportion to property. They saw clearly, in a way Hamilton’s enemy Madison never would have, that the tax was designed to hit the poorest hardest, favor the east over the west, and end local efforts at popular finance.

Nor did they object to an activist federal government. They just wanted it to be activist on behalf of labor, not wealth. Anti-federalists did try pandering to the economic populists epitomized by the whiskey rebels, but one of the most important rebel leaders was the preacher and activist Herman Husband, the first to be arrested by Washington’s troops and sent to prison in Philadelphia. Husband’s sermons were anything but antifederalist. Like Paine, another radical democrat with high regard for the progressive power of government, Husband called for a national government that would use its might to ensure equality. Unlike some of their fellow populists (then and now) both Paine and Husband saw power invested largely in “states’ rights” as likely to be socially and economically regressive.

The “madman of the Alleghenies,” as Husband was called, envisioned a strong national government with social security; taxes on investment income; and slow, centrally managed inflation. Referring to the process by which democratic populists overturned the Pennsylvania government in 1776, he suggested that the rank-and-file militias might succeed in taking over western Pennsylvania. He was in his seventies when federal troops marched him over the Alleghenies and all the way to Philadelphia, where he lay in jail in awful conditions. Unlike many of those arrested, Husband was actually charged — with sedition. But the jury found him not guilty.

No matter. Detention was punishment enough — and for Americans, the occupation of western Pennsylvania was example enough. Husband had been terribly weakened by his ordeal, and he died on his way back to western Pennsylvania. His grave is unknown. The obscurity in history of one our most original and prescient thinkers on finance, government, and democracy is emblematic of the obscurity of the real causes of the Whiskey Rebellion, the cogent thinking of the men who became rebels, and the open conflict between Hamiltonian finance and American democracy.

William Hogeland is the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History. He has spoken on unexpected connections between history and politics at the National Archives, the Kansas City Public Library, and various corporate and organization events. He blogs at

Get Ready for a Global Growth Slowdown

Cross-posted from the New Deal 2.0 blog

by Marshall Auerback

Governments across the globe are headed for a disaster entirely of their own making.

Though capital markets remain strong, the global economic backdrop continues to deteriorate as fiscal retrenchment takes hold. Commodity markets have rallied in tandem with the fall in the dollar even though there are signs that growth in the emerging world is slowing. Japan’s economy is in the soup, the U.S. economy has failed to pick up as many thought (with a mere 2% growth rate expected to be released for Q1 shortly), and the European economy is overdue for its own slowdown. The U.S. stock market has also rallied despite the threat of a very high gasoline price, disappointing economic growth data, and a fairly mixed earnings picture.

The new theme in the market seems to be that the Fed, unlike other central banks, will stick with super easy money policies, hence the tendency to push the weak dollar, rising equity prices, and soaring commodity prices. But the news that real GDP growth has fallen sharply in the first three months of 2011 is evidence that the current policy mix, with its emphasis on public spending cuts, is not working. If gasoline prices spike as high as they did in June 2008, they will further weaken an already feeble economy. Consumers did not show up at Walmart at the end of the month because they ran out of money. House prices are still falling.

At the same time, the political debate is focused on the public debt limit, which expires in a few weeks. Conservatives are once again threatening not to extend this limit, even though no less a figure than Warren Buffett has said the failure to do so would be the “most asinine act” the U.S. Congress has ever committed.

The evidence of an increasingly imploding euro zone (which continues to embrace fiscal austerity with the zeal of a religious fanatic) does not seem to have shifted the debate much in this country. Many European governments are facing a fiscal crisis due to their failure to advance public purpose and raise the funds needed to maintain existing programs. Only the interventions of the ECB are saving the whole system from total meltdown, but the underlying solvency problem for the individual member states is getting worse as the days go by. The Euro bosses are failing, and with any luck, so is political resistance to rational economic policy.

Last week, we got a whopping negative surprise with real retail sales down 2.1% in Germany, Europe’s largest economy. Since analysts had been hoping for no change, this is troubling and suggests that the problems of the euro zone are now extending beyond the periphery problem children, like Ireland, Portugal and Greece, into the core countries. The stronger euro, slowdowns in some emerging economies, and fiscal tightening could all add up to weaker-than-expected German exports, and weak German household spending could lead to a significant disappointment in the rest of Europe.

While Germany looms on the horizon, the euro disaster de jour is an eight percent year on year decline in Spanish retail sales. This in a country with a 21.3% unemployment rate. Their construction industry is probably still in decline, and there will be further government cutbacks. The Spanish trade account is now deteriorating and should continue to do so at this exchange rate, short of a disastrous decline in domestic demand. Spain was the domino that wasn’t supposed to fall in Euroland. So much for that idea.

Meanwhile, what is happening in Ireland makes a Samuel Beckett play look like a Restoration Comedy by comparison. The issue being faced there is akin to the problem faced by Iceland last year: should voters reject a taxpayer bailout of foreign creditors? Like Iceland, it faces a crushing debt because its government took on the liabilities of its oversized banks, who had lent indiscriminately throughout Euroland. However, unlike Iceland, Irish bank liabilities are denominated in the currency used in Ireland, the euro. Like every other country in the euro zone, the “Celtic Tiger” abandoned its sovereign currency when it joined the Euro. Effectively, it became like a U.S. state within Euroland, which means that it has little domestic policy space to use monetary or fiscal policy to deal with this crisis. The Irish economy continues to deflate into the ground, and default seems like an increasingly likely option unless debt relief is provided by the ECB or the EMU through some other entity. That is actually in the EMU’s interests, since much of the bank debt guaranteed by Ireland’s government is held externally by EU banks, but huge political opposition in some of the wealthier EU states (e.g. Finland and Germany) makes this an increasingly unlikely scenario. Default and possible expulsion from the euro zone (and all of the attendant systemic problems this would pose for Europe) are increasingly likely possibilities.

In Asia, things are not much better. Japan’s industrial production is down far, far more than anyone imagined, as is household consumption. Destructive IMF-style thinking still predominates in Tokyo, where the government is in thrall to a gaggle of deficit terrorists who think they can’t afford to fund a proper reconstruction in the country.

The economic data coming out of China is so bad it is hard to assess what is happening, but there is enough evidence to suggest that the Chinese economy too slowed in the fourth quarter of last year and has slowed further in the first quarter of this year. It seems that there are two reasons to expect further slowing:

1. The Chinese keep tightening monetary policy in response to rising inflationary pressures. Unfortunately, hiking rates via direct rate rises is the wrong way to go about it, because the resultant rise in interest income for savers ADDS to aggregate demand through the interest income channels, making their inflation that much worse. In response, Beijing is also beginning to deploy credit controls, which do slow demand, as do automatic stabilizers that work through higher nominal growth, including reduced transfer payments and higher tax receipts. In general, this type of policy response constitutes a significant tightening of fiscal policy and leads to a very hard landing.

2. The ratio of Chinese fixed investment to GDP is so high it is very difficult to sustain. A rising real effective exchange rate is surely squeezing many companies and that should curb their fixed investment. There has been a big shift in the composition of Chinese fixed investment from profitable industries that can self-finance to local government projects which are highly debt-dependent and have minimal ability to self-finance. This shift to more debt-dependent sectors should have an adverse impact on fixed investment, though with some lag.

All in all, not a pretty global picture. It’s only made worse by the fact that virtually all economic debates remain heavily skewed to further cutting government spending at a time when growth rates are falling and unemployment claims are rising. In short, the human tragedy we are now experiencing is totally self-inflicted policy stupidity. But then again, when have the neo-liberals ever let facts get in the way of a good theory?

Marshall Auerback is a Senior Fellow at the Roosevelt Institute, and a market analyst and commentator.

**For more on why cutting spending during an economic downturn is a bad idea, check out Arjun Jayadev and Mike Konczal’s working paper, “The Boom Not the Slump: The Right Time for Austerity.”

Was Bin Laden a Casualty of the Arab Revolt?

Interesting perspective on Osama Bin Laden’s death from the Asia Times:

“More surprising than the death of Osama bin Laden on Monday was the fact that he lived unmolested in a mansion in Abbottabad, about 65 kilometers north of the Pakistani capital Islamabad. How many Pakistani officials and others must have known about this? “America can do whatever we set out mind to,” President Barack Obama intoned in his May 1 announcement of Bin Laden’s death at the hands during a strike by Pakistani and American special forces.

“Not, apparently, without a little help from its friends, and remarkably belated help at that.

” … while al-Qaeda had drawn funding from both Saudi and Iranian sources, in present circumstances its activity tended to serve Iranian rather than Saudi interests. Support for terrorism, moreover, is a two-way street: precisely because Saudi Arabia was “a critical financial support base for al-Qaeda”, Saudi intelligence knows something about the recipients of their money.

“The Saudis, moreover, have an interest in cleaning up the terrorist associations of the Pakistani military. As the Saudi cold war with Iran grows increasingly hot, Riyadh may look towards Islamabad for military support. Asia Times Online has reported that the Bahrain National Guard already is recruiting Pakistani mercenaries.”

” … American special forces may have been the proximate cause of Bin Laden’s violent death, but the efficient cause is a great strategic upheaval that America does not yet understand, and is not prepared to respond to.”

Read full fascinating article here.

Sierra Snow Survey: Lots of Water but No Records

“Surveyors from the Department of Water Resources strapped on their skis today and headed out to measure the status of the Sierra snowpack for the fifth and final time this season.  As expected, they reported good news for the state’s water supply.

“It’s been a big year for the snowpack – the biggest since 1995 – and the snow’s water content is about 180% of what’s “normal” for early May. The spring melt has already begun, so there’s less snow than there was month ago.  Historically, early April is when the snowpack is at its peak, as it was this year.  And yet, the current water content of the snowpack is still 50% higher than the historic average for April first.”

Read full article in Climate Watch Blog.


Did Osama Bin Laden Die Yesterday, or in 2001?

Conspiracy theories are usually the tiresome productions of the paranoid psyche.

And this is probably just as true of the old theory of the cover-up of Bin Laden’s 2001 death, which is now given new vigor by the Obama Administration’s announcement yesterday that it has finally succeeded in killing him.

What gives that old theory even a grain of plausibility?

The grain comes from the recognition that any war-based economy and society gets a benefit from the perpetuation of its enemies, and would therefore be tempted to hide the death of its greatest enemy of all time.

And of course, it goes without saying that Bin Laden’s followers would benefit from perpetuating the myth the he could not be killed.

But what gives anyone in this country the motive to claim that Bin Laden really died in 2001, and that the President is lying about it now?

Certainly our president’s political enemies will clamor to deny him the glory of this current accomplishment.

Personally I love the idea that Obama accomplished what George Bush failed to accomplish. It wouldn’t be the first such accomplishment, and probably not the last (think: health care reform).

And this particular achievement — the elimination of Bin Laden — will likely help Obama get re-elected (a fact which in itself serves as more fodder for the conspiracy theorists).

What sort of  evidence do purveyors of Bin Laden’s 2001 death offer in support of their theory?

You can examine most such evidence on the following website, which — by the way — the operators claim was the victim of a massive denial-of-service attack  “just moments before President Obama announced that the U.S. had killed Osama Bin Laden.”  Just because you’re paranoid doesn’t mean people aren’t really out to get you.

Of course, to take seriously the theory of Bin Laden’s 2001 death, you’d have to believe the improbable idea that your government and your president would lie to you.

And I suppose the hurried burial of Bin Laden “at sea” after being shot in the head deep inside Pakistan will only serve to stoke the fires of skepticism even more.

Remember, you read it here last.

Check out :


Cheney Was Right About One Thing: Deficits Don’t Matter

Ellen Brown, author of a recent Huffington Post article about the deficit (“Cheney Was Right About One Thing: Deficits Don’t Matter“), also wrote the book called “Web of Debt.” In her article, she says that it doesn’t matter how big the deficit is. What matters is what that deficit costs (the interest we incur on the bonds we issue to cover the deficit).

If, on the other hand, rather than issuing bonds to cover the deficit, we  borrow money interest-free from our own government-owned banks (as North Dakota has done for years and as eight other states are now considering doing) we can maintain debt til the end of time, and it has no negative impact on the economy.

The key is to look at the large-scale banks as public utilities for managing debt, not as for-profit private enterprises. We should, she says, convert the US banks that are “too big to fail” into such public utilities. She agrees with Thomas Hoenig, President of the Kansas City Federal Reserve, who said that such banks “should be restricted to commercial banking and barred from investment banking.”

By the way, North Dakota has a $1 billion budget surplus, the lowest unemployment rate in the nation (3.7%), and probably more small-scale private banks than any other state (proving that large-scale public utility banking poses no threat to private banks).

Here’s Ellen Brown’s article: “Cheney Was Right About One Thing: Deficits Don’t Matter.”

Click on the image to see the Amazon review of her book, “Web of Debt.”

The High Cost of Low Teacher Salaries

Here’s a great article in the New York Times about teachers, by Dave Eggers and Ninive Clements Calegari:

The High Cost of Low Teacher Salaries

It turns all the conventional wisdom of the last several decades completely upside down, and challenges all the rhetoric about “teacher accountability.” And it asks us to decide what sort of a nation we want to be, and with what sort of priorities. These are the right questions to ask.

In the end, the answers are unsurprising. There are successful models elsewhere in the world for what works well in education.

These are models we must follow if we are ever to achieve greatness in education.

Excerpts from the article:

“WHEN we don’t get the results we want in our military endeavors, we don’t blame the soldiers. We don’t say, “It’s these lazy soldiers and their bloated benefits plans! That’s why we haven’t done better in Afghanistan!” No, if the results aren’t there, we blame the planners. We blame the generals, the secretary of defense, the Joint Chiefs of Staff. No one contemplates blaming the men and women fighting every day in the trenches for little pay and scant recognition.

“And yet in education we do just that. When we don’t like the way our students score on international standardized tests, we blame the teachers. When we don’t like the way particular schools perform, we blame the teachers and restrict their resources.

“Compare this with our approach to our military: when results on the ground are not what we hoped, we think of ways to better support soldiers. We try to give them better tools, better weapons, better protection, better training. And when recruiting is down, we offer incentives.

” … So how do teachers cope? Sixty-two percent work outside the classroom to make ends meet. For Erik Benner, an award-winning history teacher in Keller, Tex., money has been a constant struggle. He has two children, and for 15 years has been unable to support them on his salary. Every weekday, he goes directly from Trinity Springs Middle School to drive a forklift at Floor and Décor. He works until 11 every night, then gets up and starts all over again.

” … every year 20 percent of teachers in urban districts quit. Nationwide, 46 percent of teachers quit before their fifth year.

” … The study compared the treatment of teachers here and in the three countries that perform best on standardized tests: Finland, Singapore and South Korea.

“Turns out these countries have an entirely different approach to the profession. First, the governments in these countries recruit top graduates to the profession. (We don’t.) In Finland and Singapore they pay for training. (We don’t.) In terms of purchasing power, South Korea pays teachers on average 250 percent of what we do.

“And most of all, they trust their teachers. They are rightly seen as the solution, not the problem, and when improvement is needed, the school receives support and development, not punishment. Accordingly, turnover in these countries is startlingly low: In South Korea, it’s 1 percent per year. In Finland, it’s 2 percent. In Singapore, 3 percent.”

Read the full article here.

Here’s the trailer from the documentary, American Teacher:

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