William Greider

Donald Trump Could Be the Military-Industrial Complex's Worst Nightmare

Let’s admit it. As political provocateur, Donald Trump has a dizzy kind of genius. He feints to the right, then he spins to the left. Either way, the hot subject for political chatter becomes Donald Trump.

This week, while people everywhere were fretting over his violent talk, the candidate came to Washington and dropped a peace bomb on the neocon editorial writers at The Washington Post and the war lobby. Trump wants to get the United States out of fighting other people’s wars. He thinks maybe NATO has outlived its usefulness. He asks why Americans are still paying for South Korea’s national defense. Or Germany’s or Saudi Arabia’s.

“I do think it’s a different world today and I don’t think we should be nation-building anymore,” Trump said. “I think it’s proven not to work. And we have a different country than we did then. You know we have $19 trillion in debt. We’re sitting probably on a bubble, and, you know, it’s a bubble that if it breaks is going to be very nasty. And I just think we have to rebuild our country.”

Will anybody give him an amen? Yes, lots of folks. People who read The Nation (myself included) have been saying something similar for a long time. So have libertarian Republicans on the right. But this sort of thinking is mega-heresy among the political establishment of both parties. The foreign-policy operators consider themselves in charge of the “indispensable nation.”

This new Trump talk is definitely career-threatening for the military-industrial complex. It was particularly playful of Trump to choose The Washington Post as the place to drop his bomb; after all, it’s the Post that has made itself such a righteous preacher for endless war-making.

The Donald, usually bellicose in style and substance, is singing, “give peace a chance.” What does his detour portend for national policy? We can’t know for sure, since Trump also has a tendency to casually contradict himself before different audiences. Later on the same day, he addressed AIPAC’s convention and sounded a like a warrior for Zion. He got thunderous applause after making the ritual promises that candidates from both parties always make at AIPAC meetings.

But Trump has, in his usual unvarnished manner, kicked open the door to an important and fundamental foreign-policy debate. It is far more profound than the disputes we usually hear between hawks and doves. He’s proposing a radical standard for testing US policy abroad, both in war and peace: Is it actually in America’s interest? Or has US global strategy become a dangerous hangover from the glory years, when Washington armed and organized nations for the Cold War?

Whatever happened in past decades, Trump insists that this US ambition always to be in charge is now actively damaging our country, wasting scarce treasure and drawing us into other people’s conflicts. ThePost opinionators must have choked on his words.

“I watched as we built schools in Iraq and they’d be blown up,” Trump told the editors. “And we’d build another one and it would get blown up. And we would rebuild it three times. And yet we can’t build a school in Brooklyn.… at what point do you say hey, we have to take care of ourselves. So, you know, I know the outer world exists and I’ll be very cognizant of that but at the same time, our country is disintegrating, large sections of it, especially in the inner cities.”

Trump has thus shrewdly articulated what ought to be a vital subject for debate in 2016. Instead, I suspect, he will be inundated with lordly rebukes by the policy elites. And the editorial writers will explain how half-baked and dangerous his ideas are to the future of mankind.

We can imagine the labels they’ll haul out from history: Protectionist. Nationalist. Isolationist. America Firster. His challenging proposition reminds me of my childhood, because I grew up in idyllic small-town Ohio, where those skeptical views of “foreign entanglements” defined the Republican Party (there weren’t many Democrats in my home town, and they mostly kept quiet).

As teenagers, we grew up as Robert A. Taft Republicans and deeply suspicious of the “Eastern Establishment,” who looked down on us as Midwestern bumpkins. The decisive election was 1952, when Taft lost the GOP nomination to a genuine national hero, Gen. Dwight Eisenhower. We were heartbroken. In the Midwest we lived in the middle of a great big country and could reasonably feel that we should stay out of other people’s troubles. The Cold War pretty much destroyed that common sense.

Ike’s victory ratified America’s commitment to developing a new world order of global alliances and foreign military deployments. That order seemed like the right thing to do 60 years ago, but now it falls to an outsider named Trump to demand fundamental reconsideration.

I suspect most Americans would agree with Trump’s tough questions but are not sure of the answers (neither perhaps is he). Plus, in these insecure times, people do not wish to sound unpatriotic. In my hometown, we quickly fell in love with Eisenhower the moderate Republican, who resisted the party’s hard right (who thought Ike was a commie).

At the end of his second presidential term, Eisenhower, the general who won World War II in Europe, was warning us about the dangers of something he called the “military-industrial complex.” I wonder what he would tell us today.

How Trump Dog-Whistles the Business Establishment

Even as Donald Trump woos working-class voters by trashing Washington politicians, he is sending a reassuring message to the business-financial establishment: Don’t worry, I’m on your side, he’s telling corporate execs in coded language. Trump the dealmaker has signaled that he’ll deliver mammoth tax “forgiveness”—worth hundreds of billions—to the largest multinational corporations.

Trump delivered this message during his victory speech in Florida on Tuesday, but it was couched in evasive and deceitful terms that only insiders were likely to understand. Business and financial leaders will certainly get it, because they’re lobbying intensely for the same deal: massive tax reductions for gold-plated names like Apple, Microsoft, Oracle, Citigroup, JPMorgan Chase, Goldman Sachs, and scores of other globalized American corporations.

The companies have $2.1 trillion in overseas profits parked offshore and untaxed, and they won’t bring the money home until Congress agrees to give them another “tax holiday” and permanently reduces the corporate tax rate.

Except Trump makes it sound like the multinationals are the victims—held hostage by dirty politicians. In fact, it’s the opposite. The tech companies, mega-banks, and drug makers are carrying out the corporate version of highway robbery: If Congress doesn’t give in to their demands, they threaten to pull the trigger by moving to Ireland or other low-tax hangouts.

“I’m disgusted with it; I’m tired of seeing it,” Trump told his adoring fans. “People can’t get their money back into the country because the politicians can’t get along, they can’t make a deal…. Companies are leaving our country in order to go and get money—that’s their money—because there’s no way of bringing it in.”

Trump says he would change all that instantly as president. The dealmaker would introduce a cooperative spirit of compromise. “If I sat down with a few of the senators, or a few of the congressmen, you could make a deal on that in 10 minutes,” he said.

Like so much of his campaign rhetoric, Trump turns reality into baloney. The multinationals can bring their profits home anytime they wish. Like right now. They merely have to pay the taxes they already owe. The threat to American citizens is that both Democrats and Republicans will cave in and collaborate in giving the corporate tax dodgers what they want. The rest of us will pick up the tab.

Campaign reporters and cable-TV talkers missed the story entirely, though it’s not exactly their fault, because Trump distorted the true meaning of what he was promising. I imagine campaign reporters ignored this talk because it sounded like more of Trump’s goofy stream-of-consciousness soliloquies.

The only reason I caught his drift was that Trump was talking about the very subject of my recent Nation blog, “Democrats and Republicans Are Quietly Planning a Corporate Giveaway—to the Tune of $400 Billion.” Senator Elizabeth Warren has already denounced this bipartisan political scheme as “a giant wet kiss for the tax dodgers.” Indeed, it is another stunning example of why Washington deal-making enrages citizens.

Most voters don’t have a clue. They certainly do not realize that this working-class hero named Trump is actually a willing agent of the 1 percenters. Who will tell the people, if reporters covering the presidential election think it’s only a horse race?

Trump, I suspect, is turning a corner in his campaign. Having bonded with millions of hurt and angry working people, he’s attempting now to assure elites that he can also play “presidential” in a convincing manner. After ridiculing Marco Rubio mercilessly for months, Trump congratulated the young man on his campaign and predicted a promising future for him. Ho-ho-ho.

Trump also had a nice talk with the Grand Wizard of GOP obstruction, Senate majority leader Mitch McConnell, who urged him to go light on the violent lingo. Trump also made nice with House Speaker Paul Ryan.

I expect this next phase of the Trump campaign will test the Republican temperament generally. Will party regulars depart on principle if he wins the nomination? (Not many have, so far.) Or will they hop on board in the vague hope that Trump is a winner who might “mature” in the cauldron of presidential responsibilities?

I imagine Trump is imperially pleased with himself. He chuckles when he does his hair. Not sure himself which way to go, he knows it will be great.

Hillary Clinton Is Whitewashing the Financial Catastrophe

Hillary Clinton’s recent op-ed in The New York Times, “How I’d Rein In Wall Street,” was intended to reassure nervous Democrats who fear she is still in thrall to those mega-bankers of New York who crashed the American economy. Clinton’s brisk recital of plausible reform ideas might convince wishful thinkers who are not familiar with the complexities of banking. But informed skeptics, myself included, see a disturbing message in her argument that ought to alarm innocent supporters.

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Could There Be Huge Racial Conflict If Something Were to Happen to the Obamas?

Reading details of the Secret Service’s failure to protect the president, I was jolted by a sudden premonition. Our country is once again risking “the fire next time.” James Baldwin’s dreadful prophecy—a phrase he borrowed from an old Negro spiritual—was published in 1963 when the civil rights movement was approaching its climactic triumph. Yet the novelist’s resonant warning came true a few years later. Cities across America were in flames. This is not a prediction of what is coming, but my fear. We should talk candidly about this risk before it is too late.

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Already Second Thoughts About Goliath, U.S.'s New Bombing War

The war whoops of the pundit class helped propel the nation into yet another doomed military adventure in the Middle East. Ghastly beheadings by a newly discovered enemy were the frightening flashpoint. The president ordered bombers aloft and US munitions were once again pounding battlefields in Iraq—as of last night, in Syria. The president promised to “degrade and destroy” this vicious opponent.

Here we go again, I thought. This is how modern America goes to war. When superpower Goliath is challenged by sudden savagery, it has no choice but to respond with brute force. Or so we are told. Otherwise, America would no longer be a convincing Goliath. When war bells clang, politicians of every stripe find it very difficult to resist, lest they look weak or unpatriotic. And the American people, as usual, rally around the flag, as they always do when the country seems threatened. Citizens and members of the uniformed military are tired of war, but both in a sense are prisoners of the media-hyped hysteria that is the usual political reflex. Shoot first, ask questions later.

Only this time something different seems to be unfolding. Some of the most belligerent political commentators like Thomas Friedman of The New York Times are beginning to sound, well, wimpish. The new war is only a few weeks old, but Friedman and other prominent cheerleaders are already expressing sober second thoughts.

“How did we start getting so afraid again so fast?” Friedman asked. He ought to remember because Tom Friedman was a leading fear-monger a dozen years ago when the United States invaded Iraq with “shock and awe” destruction. Now the columnist wants us to be cautious. “Before we get in any deeper,” he wrote, “let’s ask some radical questions, starting with: What if we did nothing?”

Radical indeed. In 2003, he celebrated US intervention as a generous gift to the Iraqi people. “The only reason Iraq has any chance for a decent outcome today,” Friedman boasted, “is because America was on the ground with tens of thousands of troops to act as that well-armed midwife, reasonably trusted and certainly feared by both sides, to manage Iraq’s transition to more consensual politics.”

What did Americans learn at the Iraq War? We learned not to believe cocky pundits with their grandiose ideas about how America would use its awesome military weapons to civilize other countries. That war-of-choice doctrine has been America’s foreign policy for the quarter century since the Cold War ended. We have deployed troops and weaponry around the world, looking for trouble in scores of countries. Sure enough, trouble found us.

The big media have been an important component of the US war machine because they transmit and amplify any potential dangers we are supposed to fear. Then the big-foot columnists act like theater critics, righteously questioning if the government performance has been sufficiently vigilant and aggressive. President Obama resisted these go-to-war pressures, hoping foreign policy could be gradually demilitarized. In the end, he surrendered to the battle cries.

Belated second thoughts by elite media may simply be an attempt to paper over their past failures and perhaps dodge blame for this new borderless war they helped promote. The evidence of how the press failed the country in that last war is so overwhelming, bringing it up again is like shooting fish in a barrel. If some pundits feel guilty, they have much to feel guilty about.

When George W. Bush’s war turned sour, Washington Post columnist David Ignatius offered an incredibly lame explanation for the media’s failure. “In a sense,” Ignatius wrote in 2004, “the media were victims of their own professionalism. Because there was little criticism of the war from Democrats and foreign policy analysts, journalistic rules meant we shouldn’t create a debate of their own.” The press is not supposed to stir up things on its own? That narrow notion of what reporters and editors are not supposed to do bluntly explains why media heavies in Washington serve their sources among the governing elites, without thinking much about the broader public.

Then Ignatius provided an even more damning excuse for not asking tough questions. “Because major news organizations knew the war was coming,” he explained. “We spent a lot of energy in the last three months before war preparing to cover it—arranging for reporters to be embedded with military units, purchasing chemical and biological weapons gear and setting up forward command posts in Kuwait that mirrored those of the US military.” War is exciting, war is a chance to dress up in camouflage suits and play like real soldiers.

Like Tom Friedman and others, Ignatius is elaborating on reasons why this new war in Iraq and Syria might not work out so well. His columns cite many critical questions, but without actually opposing the intervention. This is progress of a sort, but not so different from what he said during the last Iraq war. Ignatius apologized many times then for overlooking key factors but always retained his support.

”I don’t regret my support for toppling Hussein but I wish…” “I still think the war was a just cause but I worry…” “My own gut tells me this is a war worth fighting but I’m bothered…” “My own mistake was thinking more about the justice of overthrowing Saddam Hussein’s tyrannical regime than about the difficulty of building a new postwar Iraq.”

In the sophisticated milieu of Washington policy makers, it is acceptable to question specific policies or strategies, so long as you do not go overboard and denounce the administration’s overall objective. If you do that, you may discover that valued sources will no longer take your calls.

So it is possible that the various commentators criticizing elements of Obama’s war policy are actually reflecting what their government sources tell them and want to see published. The press is often used in this roundabout way by agencies that want to lobby the White House on sensitive policy debates but without getting blamed. Sophisticated readers know, for instance, that David Ignatius is regarded as the CIA’s go-to-guy at The Washington Post. His deep sources at the agency trust him not to violate their anonymity or intrude on dark secrets like torture or assassination. Washington insiders know how to read between the lines of unsourced stories and figure out who is pushing on whom.

In that regard, David Ignatius has raised some smart questions about how this war will be fought and the tension with Obama’s vow not to deploy uniformed American ground troops. The CIA, Ignatius pointed out, could help solve the problem if it is given the management role for special forces and for running paramilitary units covertly, the kind of war the agency often directed in the past.

“Let’s be honest,” Ignatius wrote. “US boots are already on the ground and more are coming. The question is whether Obama will decide to say so publicly, or remain in his preferred role as covert commander in chief.” Ignatius conceded that covert war by the CIA would quickly be known by the enemy. Only Americans would be kept in the dark.

These tactical issues will generate a lot of controversy in Washington, but they do not address the larger question facing American war-making. The US notion that it can pursue lots of little wars wherever it sees bad guys is a doomed concept. Not only do these wars fail their objectives—establishing peace and order—but they literally build recruiting strength for our so-called enemies (most people resent having their village bombed by Uncle Sam). If not this war, then maybe the next war will finally persuade the American public (if not Washington policy hounds) that this open-ended search for enemies is plain nuts. The United States must somehow find ways to back out of its exposure as the singular Goliath willing to fight on limitless fronts. Getting out of this trap won’t be easy, for sure, but neither is the foreign policy of endless war.

The best news I see in Washington right now is that scattered voices in the media and government are beginning to ask the right questions—the same questions Tom Friedman posed but did not quite answer. What exactly are we afraid of? What would happen if we did nothing? Among leading columnists, I have seen only two who are framing the American dilemma in a more straightforward way.

Columnist Eugene Robinson is a lonely voice at The Washington Post arguing for a fundamental shift. He has no touchy-feely illusions about holding hands with jihadists. But he knows repression by military force insures the cultural collision will get worse.

“Political Islam cannot be bombed away,” Robinson wrote. “If it is not somehow allowed constructive expression, it will make itself heard, and felt, in more tragic ways.”

Robinson is a liberal. The other columnist exploring similar terrain is Ross Douthat of The New York Times, a conservative. Douthat suggested a hybrid strategy of containment and attrition that avoids a larger war in Syria and backs away from the illusions that ground warfare leads to nation-building. “It does not traffic, in other words, in the fond illusions that we took with us into Iraq in 2003 and that hard experience should have disabused of by now,” Douthat wrote. “But some illusions are apparently just too powerful for America to shake.”

How Obama Can Address One of His Biggest Political Crises

Never mind the stalemated Congress, demonstrators for immigration reform showed up again at the White House on Monday—Barack Obama’s birthday—to make more speeches and deliver fresh petitions urging the president to take unilateral action on their issue. To the astonishment of veteran activists, Obama has already assured them he intends to do so. According to movement leaders who met with the President at the White House on June 30, a bombshell announcement is planned for right after Labor Day—an executive order that could liberate millions of undocumented workers from the threat of deportation. Republicans are sure to go bat guano.

Of course, Obama could always change his mind and back off his promise, as he has certainly done before with Latinos and allied groups campaigning for immigration reform. But this time the reform leaders sound quite confident of his word. “I’m shocked,” one leader admitted to me. “It seems totally out of character for Obama. But it appears the White House’s resolve has not been totally demolished by the kids on the border crisis. In fact, they seem determined to do what they can on undocumented workers and deportations as a giant ‘screw you’ to the Republicans.”

Political reporters have already written off the Obama presidency and moved on to hyper-speculate about the horse race for 2016. The plot twist on immigration reform could jerk their chain if it succeeds. It might even refresh Obama’s presidential persona if the public reacts favorably to aggressive action. When Obama took a gutsy initiative in 2012 on behalf of immigrant children, it turned out to be quite popular. Like this new move, it also revealed the shrewd politics of the Latino-led immigration reform movement. It turns out that making life difficult for a leader who disappoints and doesn’t keep his word can produce dividends.

“The good news of this story,” the anonymous leader explained, “is that after two or three or four years of confrontations with the White House about deportations, the movement will get a victory. And I think that’s a very big deal.”

With Obama in office, other Democratic constituencies tended to be more deferential and accepting. But Latinos repeatedly confronted Obama at the White House with in-your-face complaints about his failures to follow through. His desire to find common ground with Republicans, they warned, was futile. Republicans had no intention of finding a legislative compromise. The White House pleaded for patience, but the reformers only turned up the heat. Obama expressed his resentment after all he had done for them. They dismissed his efforts as unsatisfactory.

But in the last four or five months, the White House tone softened. At the meeting in late June, the president told immigration reform leaders he had a change of heart. I agree, he said, the Republicans are not going to move on legislation. So Obama said he is now preparing to use his executive authority to immunize more immigrants from deportation. He couldn’t cover 11 million of them, he said, but he would go as far as the law allows.

Someone asked at that June meeting about the children flooding the border but Obama ruled out any unilateral policy changes as unrealistic. It would open US borders to the world, he said. That touched off a tense exchange but the president stood his ground. Reformers fear that in coming weeks a lot of children are going to be flown home to the dangerous circumstances they had fled.

The exact actions that could help millions more of other undocumented migrants are still being developed at the White House and the Department of Homeland Security. The options include granting immunity to parents of the children already exempted from deportation under the DACA—Deferred Action for Childhood Arrivals. Obama could, for example, broaden the categories of immigrations afforded this immunity to include people with long-established records of US employment or long-term residency in the country.

Democrats are hoping that Republicans will react to Obama’s daring intervention by doing something stupid, like impeaching or threatening to impeach the president. Otherwise, Dems are fearful of a disaster in this fall’s midterms. If impeachment becomes the issue that can fire up the Democratic base—not just Latino voters, but also other core constituencies.

This is high-risk politics but, given his declining popularity, Obama has decided to double down. What does he have to lose? It will inflame Obama haters of course, but it may also persuade voters to take another look at the president. In recent months, his administration has taken a series of actions that are not hot political topics, but still speak directly to segments of working people. And Obama’s style has become more flavorful in the process. He is taunting the Republicans in an amused manner, teasing them for their obvious contradictions. One day they accuse him of acting like a monarch, the next day they complain he hasn’t acted strongly enough.

Whether or not Obama wins his political gamble, it seems the Latino dreamers are already winning theirs.

What Does the Democratic Party Actually Believe?

To put it crudely, the dilemma facing the Democratic party comes down to this: Will Dems decide next time to stand with the working people, or will they stick with their big-money friends in finance and business? Some twenty years ago, Bill Clinton taught Democrats how they can have it both ways. Take Wall Street’s money—gobs of it—while promising to govern on a heart-felt agenda of “Putting People First.”

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The Interventionist Starved Neo-Con Hawks Are Trying to Drag Us Back Into More War

The War Party in American politics is beating its drum and once again, mobilizing hawkish politicians and policy experts of both parties to wage a high-minded war of words. Hawks are salivating because they see the world’s current turmoil as a chance to rehabilitate themselves and the virtues of US military intervention. Three hot wars are underway and the United States has a client state in each of them. Civil wars in the Ukraine and Iraq plus Israel’s invasion of Gaza give Washington’s armchair generals fresh opportunity to scold President Obama for his reluctance to fight harder. They are not exactly demanding US invasions—not yet anyway—but they want the dovish president and Congress to recognize war as a worthy road to peace.

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Justice Sotomayor Speaks Truth to (White) Power

This article originally appeared at The Nation, and is reprinted here with their permission.

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Does Obama Have the Guts to Play Hardball?

Given the election results, the question Barack Obama has to decide for himself is whether he really wants to be president in the fullest sense. Not a moderator for earnest policy discussions. Not the national cheerleader for hope. Not the worthy visionary describing a distant future. Those qualities are elements in any successful presidency, and Obama applies them with admirable skill and seriousness.

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That Big Sucking Sound in the Economy Is the Threat of Serious Deflation

The economic specter stalking Barack Obama is not the nonsense debate that captivates deficit hawks and witless political reporters. It is the threat of a full-blown monetary deflation that would truly put the US economy in ruin. In a general deflation, everything falls--prices, output, wages, profits. Unchecked, this can lead to another Big D--the Depression Obama claims he has avoided.

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Hold The Fed Accountable

The weirdness of this political system is reflected in the fact that it takes a Socialist senator from Vermont, Bernie Sanders, and a libertarian Republican from Texas, Rep. Ron Paul, to beat the banking lobby. The Democrats are making a show of "Wall Street reform" but choking on the tough issues. Republicans are in the tank, as expected, though nervous about the public fury.

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Larry Summers Is Lying About Big Banks

How can I say this nicely? Larry Summers is a clumsy public liar. His noxious, condescending manner helps explain why he failed as president of Harvard. But it is the crude mendacity that ought to bother people now. The man is President Obama's top economic adviser.

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Conservative Mogul Buying Up Reporters to Promote His Regressive Agenda

He's baaack -- the Wall Street billionaire who wants to loot Social Security. This time, Pete Peterson has invented his own "news network" to promote his right-wing rants about shrinking the only retirement security system available to millions of working people. Peterson styles himself as a patriot saving the nation from fiscal insolvency and has committed $1 billion to that cause (a chunk of the wealth he accumulated at Blackstone Group, the notorious corporate-takeover firm). His efforts might be dismissed as ludicrous -- except money does talk in Washington, and Peterson is now buying Washington reporters to spread his dire warnings.

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7 Big Questions for the Commission Tasked with Getting to the Bottom of the Financial Crisis

When the Financial Crisis Inquiry Commission opened for business on September 17, it was a nonevent for the media. Leading newspapers brushed aside chairman Phil Angelides, the former California state treasurer, and his declaration of purpose -- "uncovering the facts and providing an unbiased historical accounting of what brought our financial system and our economy to its knees." As Angelides put it, "The fuses for that cataclysm were undoubtedly lit years before. It is our job to diligently and doggedly follow those fuses to their origins."

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Is Obama Squandering Our Best Chance for Better Health Care?

After his brilliant beginning, the president suddenly looks weak and unreliable. That will be the common interpretation around Washington of the president's abrupt retreat on substantive heathcare reform. Give Barack Obama a hard shove, they will say, rough him up a bit and he folds. A few weeks back, the president was touting a "public option" health plan as an essential element in reform. Now he says, take it or leave it. Whatever Congress does, he's okay with that.

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Solid Reformer Picked to Investigate How We Got into the Financial Mess

Angelides, the former state treasurer of California, is a tough-minded liberal with hands-on knowledge of high finance and the social contradictions in modern capitalism. So it is remarkable that Angelides has been chosen to chair the Financial Crisis Inquiry Commission newly created by Congress. The commission has enormous potential to generate deeper reforms than anything President Obama has yet proposed, simply by digging out the hard facts of what caused the financial collapse.

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Taxing Health Care Will Destroy Democrats

Vincent Panvini Sr. is one of those Washington insiders whose names seldom appear in the newspapers but can be found in hundreds of Rolodexes on Capitol Hill. He is the guy in charge of political contributions for the Sheet Metal Workers union. In the 2008 election, Panvini handed out almost $2.4 million, 97 percent of which went to Democrats. Panvini's choices will change, he predicts, if the Democratic Party decides to reform healthcare on the backs of union members--taxing the health benefits that working people won in collective bargaining by forgoing wage increases.

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The President Needs to Hear Millions of Second Opinions on His Economic Plans

This is part of a special AlterNet series on Obama's latest plans for a rescue of the bankers and Wall Street's toxic assets.
Read our editorial on the big picture.

The president is getting what he asked for, but perhaps not what he had in mind. During the campaign, Barack Obama beckoned Americans to put aside their cynicism about politics and re-engage as active citizens. They are now doing so with red-hot anger. They are outraged by events and forcing their way into congressional affairs and behind closed doors where policy wonks discuss issues with cerebral civility. The president is now trapped between these two realms -- the governing elites who decide things and the people who are governed. Which side is he on? If he does not choose wisely, the anger could devour his presidency.

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Stop the Campaign to Loot Social Security

The resounding defeat of George W. Bush's effort to privatize Social Security in 2005 seemed to be the end of attacks against the program. However, William Greider argues that Wall Street interests are leading a new round of threats to Social Security in a plan to use money from the program to recover the costs of bailing out banks. Although President Obama has indicated support for Social Security in the past, Greider argues in the video below that progressives need to exert pressure and educate the public about its solvency in order to counteract the efforts of private interests pushing for a compromise. 

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The Financial Crisis Could Shake the Foundations of American Politics



Phil Gramm, the senator-banker who until recently advised John McCain's campaign, did get it right about a "nation of whiners," but he misidentified the faint-hearted. It's not the people or even the politicians. It is Wall Street -- the financial titans and big-money bankers, the most important investors and worldwide creditors who are scared witless by events. These folks are in full-flight panic and screaming for mercy from Washington, Their cries were answered by the massive federal bailout of Fannie Mae and Freddy Mac, the endangered mortgage companies.



When the monied interests whined, they made themselves heard by dumping the stocks of these two quasi-public private corporations, threatening to collapse the two financial firms like the investor "run" that wiped out Bear Stearns in March. The real distress of the banks and brokerages and major investors is that they cannot unload the rotten mortgage securities packaged by Fannie Mae and banks sold worldwide. Wall Street's preferred solution: dump the bad paper on the rest of us, the unwitting American taxpayers.



The Bush crowd, always so reluctant to support federal aid for mere people, stepped up to the challenge and did as it was told. Treasury Secretary Paulson (ex-Goldman Sachs) and his sidekick, Federal Reserve Chairman Ben Bernanke, announced their bailout plan on Sunday to prevent another disastrous sell-off on Monday when markets opened. Like the first-stage rescue of Wall Street's largest investment firms in March, this bold stroke was said to benefit all of us. The whole kingdom of American high finance would tumble down if government failed to act or made the financial guys pay for their own reckless delusions. Instead, dump the losses on the people.




Democrats who imagine they may find some partisan advantage in these events are deeply mistaken. The Democratic party was co-author of the disaster we are experiencing and its leaders fell in line swiftly. House banking chair, Rep. Barney Frank, announced he could have the bailout bill on President Bush's desk next week. No need to confuse citizens by dwelling on the details. Save Wall Street first. Maybe lowbrow citizens won't notice it's their money.




We are witnessing a momentous event -- the great deflation of Wall Street -- and it is far from over. The crash of IndyMac is just the beginning. More banks will fail, so will many more debtors. The crisis has the potential to transform American politics because, first it destroys a generation of ideological bromides about free markets, and, second, because it makes visible the ugly power realities of our deformed democracy. Democrats and Republicans are bipartisan in this crisis because they have colluded all along over thirty years in creating the unregulated financial system and mammoth mega-banks that produced the phony valuations and deceitful assurances. The federal government protects the most powerful interests from the consequences of their plundering. It prescribes "market justice" for everyone else.




Of course, the federal government has to step up to the crisis, but the crucial question is how government can respond in the broad public interest. Bernanke knows the history of the last great deflation in the 1930s -- better known as the Great Depression -- and so he is determined to intervene swiftly, as the Federal Reserve failed to do in that earlier crisis. By pumping generous loans and liquidity into the system, the Fed chairman hopes to calm the market fears and reverse the panic. So far, he has failed. I think he will continue to fail because he has not gone far enough.




If Washington wants real results, it has to abandon the wishful posture that is simply helping the private firms get over their fright. The government must instead act decisively to take charge in more convincing ways. That means acknowledging to the general public the depth of the national crisis and the need for more dramatic interventions.



Instead of propping up Fannie Mae or others, the threatened firm should be formally nationalized as a nonprofit federal agency performing valuable services for the housing market. That is the real consequence anyway if the taxpayers have to buy up $300 billion in stock.



The private shareholders "are walking dead men, muerto," Institutional Risk Analytics, a private banking monitor, observed. Make them eat their losses, the sooner the better. The real national concern should be focused on the major creditors who lend to Fannie Mae and other US agencies as well as private financial firms. They include China, Japan and other foreign central banks. Foreign investors hold about 21 percent of the long-term debt paper issued by US government agencies -- $376 billion in China, $229 billion in Japan.




It is not in our national interest to burn these nations with heavy losses. On the contrary, we need to sustain their good regard because they can help us recover by bailing out the US economy with more lending. If these foreign creditors turn away and stop their lending now, the US economy is toast and won't soon recover.



Americans should forget about whining; it's too late for that. People need to get angry -- really, really angry -- and take it out on both parties. What the country needs right now is a few more politicians in Washington with the guts to stand up and tell us the hard truth about out situation. It will be painful to hear. They will be denounced as "whiners." But truth might be our only way out.

A Challenger to the Church of Free Trade

The church of global free trade, which rules American politics with infallible pretensions, may have finally met its Martin Luther. An unlikely dissenter has come forward with a revised understanding of globalization that argues for thorough reformation. This man knows the global trading system from the inside because he is a respected veteran of multinational business. His ideas contain an explosive message: that what established authorities teach Americans about global trade is simply wrong -- disastrously wrong for the United States.

Martin Luther was a rebellious priest challenging the dictates of a corrupt church hierarchy. Ralph Gomory, on the other hand, is a gentle-spoken technologist, trained as a mathematician and largely apolitical. He does not set out to overthrow the establishment but to correct its deeper fallacies. For many years Gomory was a senior vice president at IBM. He helped manage IBM's expanding global presence as jobs and high-tech production were being dispersed around the world.

The experience still haunts him. He decided, in retirement, that he would dig deeper into the contradictions. Now president of the Alfred P. Sloan Foundation, he knew something was missing in the "pure trade theory" taught by economists. If free trade is a win-win proposition, Gomory asked himself, then why did America keep losing?

The explanations he has developed sound like pure heresy to devout free traders. But oddly enough, Gomory's analysis is a good fit with what many ordinary workers and uncredentialed critics (myself included) have been arguing for some years. An important difference is that Gomory's critique is thoroughly grounded in the orthodox terms and logic of conventional economics. That makes it much harder to dismiss. Given his career at IBM, nobody is going to call Ralph Gomory a "protectionist."

He did not nail his "theses" to the door of the Harvard economics department. Instead, he wrote a slender book -- Global Trade and Conflicting National Interests -- in collaboration with respected economist William Baumol, former president of the American Economic Association. Published seven years ago, the book languished in academic obscurity and until recently was ignored by Washington policy circles.

I asked Gomory if his former colleagues from the corporate world quarrel with his provocative message. "Most of them have never heard it," he said. "It's a pretty new message." He has discussed his reform ideas with some CEOs, "who said, Well, maybe we could do that. Others couldn't have disagreed more strongly."

Now Gomory is attempting to re-educate the politicians in Congress. He has gained greater visibility lately because he has been joined by a group of similarly concerned corporate executives called the Horizon Project. Its leader, Leo Hindery, former CEO of the largest US cable company and a player in Democratic politics, shares Gomory's foreboding about the destructive impact of globalization on American prosperity. Huge losses are ahead -- 10 million jobs or more -- and Hindery fears time is running out on reform.

"We want to be a counter to the Hamilton Project," Hindery explains. "They have a sense of stasis that is more benign than I have. I don't think this is all going to work out." The Hamilton policy group was launched last year by former Treasury Secretary Robert Rubin to make sure the laissez-faire trade doctrine known as Rubinomics continues to dominate the Democratic Party. "We're never going to have the status of Bob Rubin," Hindery concedes. "But we're not chopped liver either. We have respectable business careers. You can't tell Ralph Gomory that he is 'smoke and mirrors,' because he wrote the book."

Gomory's critique has great political potential because it provides what the opponents of corporate-led globalization have generally lacked: a comprehensive intellectual platform for arguing that the US approach to globalization must be transformed to defend the national interest. Still, it will take politicians of courage to embrace his ideas and act on them. Gomory's political solutions are as heretical as his economic analysis.

At IBM back in the 1980s, Gomory watched in awe as Japan and other Asian nations captured high-tech industrial sectors in which US companies held commanding advantage. IBM invented the disk drive, then dropped out of the disk-drive business, unable to compete profitably. Gomory marveled at Singapore, a tiny city-state, as it lured American manufacturers with low-wage labor, capital subsidies and tax breaks. The US companies turned Singapore into a global center for semiconductor production.

"It was an unforgettable transformation," Gomory remembers. "And it was pretty frightening.

"The offer that many Asian countries will give to American companies is essentially this: 'Come over here and enhance our GDP. If you are here our people will be building disk drives, for example, instead of something less productive. In return, we'll help you with the investment, with taxes, maybe even with wages. We'll make sure you make a profit.' This works for both sides: the American company gets profits, the host country gets GDP. However, there is another effect beyond the benefits for those two parties -- high-value-added jobs leave the U.S."

China and India, he observes, are now doing this on a large scale. Microsoft and Google opened rival research centers in Beijing. Intel announced a new, $2.5 billion semiconductor plant that will make it one of China's largest foreign investors. China's industrial transformation is no longer about making shirts and shoes, as some free-trade cheerleaders still seem to believe. It is about capturing the most advanced processes and products.

The multinationals' overseas deployment of capital and technology, Gomory explains, is the core of how some very poor developing nations are able to ratchet up their technological prowess, take over advanced industrial sectors and rapidly expand their share in global trade -- all with the help of US companies and finance, as they roam the world in search of better returns.

The Gomory-Baumol book describes this as "a divergence of interests" between multinational firms and their home country. "This overseas investment decision may then prove to be very good for that multinational firm," they write. "But there remains the question: Is the decision good for its own country?" In many cases, yes. If the firm is locating low-skilled industrial production in a very poor country, Americans get cheaper goods, trade expands for both sides and the result is "mutual gain." But the trading partners enter a "zone of conflict" if the poor nation develops greater capabilities and assumes the production of more advanced goods. Then, the authors explain, "the newly developing partner becomes harmful to the more industrialized country." The firm's self-interested success "can constitute an actual loss of national income for the company's home country."

American multinationals, as principal actors in this transfer of wealth-generating productive capacity, are distinctively free to make the decisions for themselves without interference from government. They want profit and future consumer markets. Their home country wants to maintain a highly productive high-wage economy. Without recognizing it, the two are pulling in opposite directions -- the "divergence of interests" most US politicians ignore, evidently believing church doctrine over visible reality.

The Gomory-Baumol book explains the dynamics with charts and equations for economists to study. For the rest of us, it is easier to follow Gomory's personal explanation of changing fortunes among trading nations. "What made America much wealthier than the Asian nations in the first place?" Gomory asks. "We invested alongside our workers. Our workers dug ditches with backhoes. The workers in underdeveloped countries dug ditches with shovels. We had great big plants with a few people in them, which is the same thing. We knew how, through technology and investment, to make our workers highly productive. It wasn't that they went to better schools, then or now, and I don't know how much schooling it takes to run a backhoe.

"The situation today is that the companies have discovered that using modern technology they can do all that overseas and pay less for labor and then import product and services back into the United States. So what we're doing now is competing shovel to shovel. The people in many countries are being equipped with as good a shovel or backhoe as our people have. Very often we are helping them make the transition. We're making it person-to-person competition, which it never was before and which we cannot win. Because their people will be paid a third, a quarter of what our people are paid. And it's unreasonable to think you can educate our people so well that they can produce four times as much in the United States."

As this shift of productive assets progresses, the downward pressure on US wages will thus continue and intensify. Free-trade believers insist US workers can defend themselves by getting better educated, but Gomory suggests these believers simply don't understand the economics. "Better education can only help," he explains. "The question is where do you put your technology and knowledge and investment? These other countries understand that. They have understood the following divergence: What countries want and what companies want are different."

The implication is this: If nothing changes in how globalization currently works, Americans will be increasingly exposed to downward pressure on incomes and living standards. "Yes," says Gomory. "There are many ways to look at it, all of which reach the same conclusion."

I ask Gomory what he would say to those who believe this is a just outcome: Americans become less rich, others in the world become less poor. That might be "a reasonable personal choice," he agrees. "But that isn't what the people in this country are being told. No one has said to us: 'You're probably a little too rich and these other folks are a little too poor. Why don't we even it out?' Instead, what we usually hear is: 'It's going to be good for everyone. In the long run we're going to get richer with globalization.'"

Gomory and Baumol are elaborating a fundamental point sure to make many economists (and political leaders) sputter and choke. Contrary to dogma, the losses from trade are not confined to the "localized pain" felt by displaced workers who lose jobs and wages. In time, the accumulating loss of a country's productive base can injure the broader national interest -- that is, everyone's economic well-being.

"Our objective," Baumol told a policy conference last summer, "is to show how outsourcing can indeed reduce the share of benefits of trade, not only for those who lose their jobs and suffer a direct reduction in wages but can wind up making the average American worse off than he or she would have been."

The conventional win-win assurances, they explain, are facile generalizations that ignore the complexity of the trading system -- the myriad differences in country-to-country relationships and the vast realm of government actions and policy interventions designed to shape the outcomes. "Many of our 'dismal science' colleagues speak unguardedly as though they believe free trade cannot fail, no matter what," Baumol said.

Some nations, in other words, do indeed become "losers." Gomory fears the United States is now one of them -- starting to go downhill. When he and Baumol wrote their book, they figured US trade relations with China and India produced "mutual gain" for both ends. The United States got cheaper goods, China and India got jobs and a start at industrialization. But the rapid improvements in those two nations during the past decade, Gomory thinks, are putting the United States in the bind where their gain becomes our loss.

Essentially, the terms of trade have changed as more and more value-added production has shifted from the United States to its poorer trading partners. America, he explains, becomes increasingly dependent, buying from abroad more and more of what its citizens consume and producing relatively less at home. US incomes stagnate as the high-wage jobs disappear and US exports become a smaller share of the world total.

The persistent offshoring of domestic production is leading to a perverse consequence: The United States finds itself paying more for imports. The production that originally moved offshore to get low-wage labor and cheaper goods is now claiming a larger and larger share of national income, as the growing trade deficits literally subtract from US domestic growth. "All the stuff you were already importing from them becomes more expensive," Gomory explains. "That's why you can start going downhill -- because you pay more for what you were previously getting." Put another way, one hour of US work no longer buys as many hours of Chinese work as it once did. China can suppress its domestic wages to keep selling more of its stuff, but that does not alter the fundamental imbalance in productive strength.

The US predicament is vividly reflected in the nation's swollen trade deficits, now running at nearly 7 percent of GDP every year. The country consumes more than it produces. It borrows heavily from trading partners, led by China, to pay for its "excess" consumption. This allows America to dodge -- temporarily -- a reckoning with its weakened condition, that is, falling living standards. But that will eventually occur, when Americans are compelled to reduce their consumption and pay off the overdue bills. Postponement will deepen the ultimate injury because, meanwhile, the trading partners will gain greater industrial capabilities, while US productive strength weakens further.

Americans can choose to blame China or disloyal multinationals, but the problem is grounded in US politics. The solution can be found only in Washington. China and other developing nations are pursuing national self-interest and doing what the system allows. In a way, so are the US multinationals. "I want to stress it's a system problem," Gomory says. "The directors are doing the job they're sworn to do. It's a system that says the companies have to have a sole focus on maximizing profit."

Gomory's proposed solution would change two big things (and many lesser ones). First, the US government must intervene unilaterally to cap the nation's swollen trade deficit and force it to shrink until balanced trade is achieved with our trading partners. The mechanics for doing this are allowed under WTO rules, though the emergency action has never been invoked by a wealthy nation, much less the global system's putative leader. Capping US trade deficits would have wrenching consequences at home and abroad but could force other nations to consider reforms in how the trading system now functions. That could include international rights for workers, which Gomory favors.

Second, government must impose national policy direction on the behavior of US multinationals, directly influencing their investment decisions. Gomory thinks this can be done most effectively through the tax code. A reformed corporate income tax would penalize those firms that keep moving high-wage jobs and value-added production offshore while rewarding those that are investing in redeveloping the home country's economy.

US companies are not only free of national supervision but actively encouraged to offshore production by government policy and tax breaks. Other advanced economies have sophisticated national industrial policies, plus political and cultural pressures, that guide and discipline their multinationals, forcing them to adhere more closely to the national interest.

Neither of Gomory's fundamental policy reforms -- balancing trade or imposing discipline on US multinationals -- can work without the other. Both have to be done more or less at once. If the government taxed US multinational behavior without also capping imports, the firms would just head out the door. "That won't work," Gomory explains, "because you will say to the companies, 'This is how we're going to measure you.' And the corporations will say, 'Oh, no, you're not. I'm going overseas. I'm going to make my product over there and I'll send it back into the United States.' But if you insist on balanced trade, then the amount that's shipped in has to equal the amount that's shipped out by companies. If no companies do that, then nothing can be shipped in either. If you balance trade, you are going to develop internal companies that work the way you want." Public investment in new technologies and industries, I would add, may not achieve much either, if there is no guarantee that the companies will locate their new production in the United States.

Essentially, Gomory proposes to alter the profit incentives of US multinationals. If the government adds rules of behavior and enforces them through the tax code, companies will be compelled to seek profit in a different way -- by adhering to the national interest and terms set by the US government. Other nations do this in various ways. Only the United States imagines the national interest doesn't require it.

In recent months Gomory and Leo Hindery of the Horizon Project have been calling on Congress with these big ideas and getting respectful audiences. The two met with some thirty Democratic senators and Congressional staffers from both parties. Senator Byron Dorgan, with co-sponsors like Sherrod Brown, Russell Feingold and even Hillary Clinton, has introduced several bills to confront the trade deficits.

Gomory's concept for multinational taxation is a tougher sell amid Washington lobbyists because it goes right to the bottom line of major US corporations. On the other hand, this proposal has stronger intuitive appeal for citizens, who reasonably ask why multinationals are allowed to undercut the national interest when they enjoy all the benefits of being "American" companies.

Hindery's group is advocating Congressional action to arrange a "national summit" on trade, where all these questions can be thrashed out. The political system has never really had an honest, open debate on globalization in the past thirty years. The dogmatic church of free trade -- "free trade good, no trade bad" -- wouldn't allow it. As more politicians grasp the meaning of Gomory's analysis, they should start demanding equal time for the heretics.

Gomory's vision of reformation actually goes beyond the trading system and America's economic deterioration. He wants to re-create an understanding of the corporation's obligations to society, the social perspective that flourished for a time in the last century but is now nearly extinct. The old idea was that the corporation is a trust, not only for shareholders but for the benefit of the country, the employees and the people who use the product. "That attitude was the attitude I grew up on in IBM," Gomory explains. "That's the way we thought -- good for the country, good for the people, good for the shareholders -- and I hope we will get back to it. ... We should measure corporations by their impact on all their constituencies.

"So in my utopian dream, we decide what we want from the corporations and that's how they make a profit -- by doing those things. Failing that, I would settle for the general realization of this divergence and let people argue it out."

Some older CEOs and board members at least listen to him sympathetically. "They have grandchildren," he says. "They wonder too what's going to happen to our grandchildren. You can't get a vote around the corporate board table about, Is this good for the grandchildren? But you can talk to them and they'll worry about it and say, Well, maybe we need to do something."

Message to the Man in the White House Bunker

Take a deep breath. The nation has arrived at an extraordinary political moment. The Congress is about to instruct the President he should withdraw from the ongoing war. Yes, I know the fine print in the House and Senate versions has lots of wiggle room. But the congressional action is still breathtaking when you think about it, possibly without historic precedent.

I assumed it would take many months and numerous failed efforts for the new Democratic majority to reach this juncture. When House leaders kept softening their terms, I even thought it might be a good thing for House Speaker Nancy Pelosi to lose the first time around. She would then be assailed by outraged Americans and get the message: stiffen up, this is not business as usual. I was mistaken. Many of the final details are disappointing, but the message has been delivered and received–get out of Iraq. It will rule politics until the American exit actually occurs.

Democrats did not create this new dynamic–it arose volcano-like from the American people–but Democrats have had the wisdom to embrace it. I remember the torturous struggle in the Sixties waged by congressional opponents–Republicans and Democrats–trying to end the war in Vietnam. Their first resolutions were mild and deferential, politely urging Lyndon Johnson to start negotiating for peace. They were rejected. Subsequent measures raised the ante, but it took years of frustrating failure to get Congress to speak clearly. By comparison, the shift in politics this time moved like lightning.

Democrats now have the Republicans in a political vise and will keep squeezing them. Let Bush veto whatever anti-war measure House and Senate finally produce. Let the president’s GOP troops uphold his veto. Democrats will then rally for another legislative assault on the willfully blind chief executive. Each new roll call will stick it again to the Republicans. Do they want to stand with the public’s common-sense grasp of reality? Or are they going to keep voting with the crackpot commander-in-chief and his delusional search for victory?

The guy in the bunker, unfortunately, may never get the message. That deepens the tragedy, both for America and Iraq. Each new needless death will deepen the hurt and anger. But it looks like George W. Bush will stick with denial, even as Congress keeps toughening its attempts to force withdrawal. I hope I am wrong about that, but a wise friend explained the logic of Bush’s desperation politics.

Bush and Cheney, he said, are trying to run out the clock–keep this war going until they leave office and can dump the mess on the next president, very likely a Democrat. In retirement, the Bush crowd will then begin to sow the “if only� revisionism that blames Democrats or the media or the American people for a “loss of will.� Sounds absurd now, but that is roughly what happened after the lost war in Vietnam. We could have won, “if only.� Sad to say, many Americans came to believe it, especially resentful veterans seeking explanation for why they fought and lost.

Given all he has done to this country, Bush could do something truly valuable for history by accepting the blame in a stand-up way. Admit his great errors. Acknowledge the failure. This might ensure him a tragic but noble legacy. I am afraid there is nothing noble in the man.

The Beginining of the End for Corporate-Led Globalization?

Thanks to the aggressive spirit of many newly elected Democrats, this Congress offers an encouraging opening for opponents of corporate-led globalization to go on offense. For decades, the critics of the global system have been pinned down by multinational business and finance and reduced to playing defense. Labor, environment and other reform advocates have mostly tried to block new trade agreements negotiated by Republican and Democratic Presidents. Their efforts usually have fallen short.

This year could be different. In both the House and Senate, the growing nucleus of legislators who are skeptical of or downright hostile to globalization is strong enough to force debates on some reform ideas. That doesn't mean the reformers will necessarily prevail. But they can employ the kind of political jujitsu that gradually leverages change by forcing reluctant officials to cast roll-call votes they would rather avoid. Do incumbents in the middle stand with the public's rising concerns or with the multinationals? The Republican right used this tactic brilliantly for many years as its way to take over the party from traditional conservatives. Progressive Democrats can do the same if they're willing to put some of their fellow Democrats on the spot and discomfit party leaders who may want to avoid divisive controversies. Forcing a roll call and taking down names of those who vote wrong is useful, even if the issue is likely to lose. Voters are educated and mobilized. Bruised incumbents eventually change their views. Or voters change their representatives.

Here are a few global issues that ought to be addressed. They don't deal with every disorder of globalization, but they might jump-start a debate Congress has long avoided.

Sweatshop imports. The principle at stake is whether Congress has the power to regulate any products imported from foreign factories. Global advocates assume not, but Congress has already embraced the opposite precedent.

A few years back, American consumers discovered to their horror that fur collars on made-in-China coats purchased in US stores were made from the fur of cats and dogs. The Humane Society of the United States conducted an eighteen-month undercover investigation and exposed the slaughter of more than 2 million domestic dogs and cats by garment makers in China and other Asian countries. Congress acted swiftly. It enacted the Dog and Cat Protection Act of 2000, banning all imported garments made with dog or cat fur. The bill included fines of up to $10,000 for each illegal item and barred repeat violators from importing or exporting any fur products.

Question: If Congress can protect the rights of dogs and cats in foreign trade, will it do the same for the young girls -- some as young as 11 -- who work in sweatshops? They stitch garments for as little as 6 cents an hour and typically work twelve- to sixteen-hour days, sometimes longer and often in brutal conditions.

The vile human abuses lurking behind famous brand names have been repeatedly exposed by Charles Kernaghan of the National Labor Committee, which has been investigating factories in Central America, China, Bangladesh, Mexico and others. Wal-Mart is among the repeat offenders. Like other US retailers, it claims to be enforcing decent labor conditions. The investigators find otherwise. Kernaghan points out that the same companies have won enforceable rules in trade agreements to protect their trademarks, labels and copyrights, yet regard protections for workers as "an impediment to free trade." "Under this distorted sense of values," says Kernaghan, "the label is protected but not the human being, the worker who makes the product."

Antisweatshop legislation -- the first of its kind -- is ready to go, in the form of a bill introduced last year by Senator Byron Dorgan and Representative (now Senator) Sherrod Brown. It bars imports produced under internationally defined "sweatshop" conditions and holds companies accountable for using forced labor or denying basic human rights to workers, including the right to organize. The sweatshop measure could be amended to include well-defined terms requiring safe workplace construction, thus outlawing the conditions that lead to the factory fires that have killed thousands of young workers making garments and toys in Asia.

Free riders. As American companies move more and more of their manufacturing offshore, many take on the status of "free riders." They enjoy all the benefits of being "American" -- government services and subsidies, the protection of the US military -- while discarding reciprocal obligations to the country: jobs, economic investment and paying a fair share of the tax burden. The new Democratic majority proposes to repeal some of the tax incentives for moving jobs overseas, but that doesn't begin to address the scope of the deteriorating loyalty.

Congress can create a reverse incentive -- higher taxation -- for firms that have already moved a substantial portion of their production offshore and intend to move more. These are not marginal offenders. Microsoft has offloaded most of its manufacturing. General Electric, General Motors, Boeing and other big names are pursuing similar strategies.

A "free rider" surcharge could be enacted on top of the corporate income tax, which would raise the tax liability for firms in proportion to how much their domestic production is declining because of offshoring. By itself, the special tax wouldn't reverse the dynamics driving the process, but it would change the incentives. The measure would inform corporate executives that the "free ride" is over and that "global companies" will begin paying a rising price for abandoning loyalty to the US economy.

Cap trade deficits. Stop the hemorrhaging. "Our economy is engaged in a very dangerous game of chicken," Senator Dorgan warned last summer when he and Senator Russ Feingold introduced the Balanced Trade Restoration Act. The US trade deficits -- $800 billion a year and rising -- are either setting up an epic financial crisis for the United States or a pit of deepening indebtedness that will produce falling living standards for most Americans. "I'm afraid that our mountain of trade debt could come crashing down on our heads and make the stock-market collapse seem like a blip on the radar," Dorgan said.

Dorgan's legislation is the economic equivalent of "going nuclear." It would rattle the global system profoundly, because the United States has long been the willing "buyer of last resort" for world production. By issuing a limited supply of import certificates to trading companies, the government would unilaterally restrict the amount of goods brought into the country. Gradually over five years, it could correct its huge trade imbalance. This sounds "protectionist" -- and forbidden by trade rules -- but is actually consistent with Article 12 of the WTO charter, which authorizes nations facing a balance-of-payments crisis to invoke emergency tariffs to correct extreme problems. The use of import certificates (first proposed by investor Warren Buffett) has the same effect as tariffs but relies more on private market forces.

Other trading nations might threaten retaliation, but that's not a game they can easily win since the US market remains the largest buyer for their goods. The United States would have to accept the necessary pain of reducing its vast capital borrowing from overseas -- hundreds of billions every year from China and other major exporting nations -- and start living within its means. The virtue of Dorgan's measure is that it would confront the deterioration now rather than waiting for a grave crisis.

America's problems are not the whole story. The trading system itself is deeply out of whack and unstable, in need of major structural reforms that can put the entire world on a more promising path. But Dorgan figures other nations will not accept the need for such moderating changes -- new international financial rules, new protections for labor and environmental rights -- until they see that the United States is prepared to act on its own. If Washington does act, US multinationals would be compelled to bring some production back home, the United States would resign as buyer of last resort and major exporting economies like China would have to stimulate their own domestic consumption. These are all healthy steps toward balance and equity.

The President, of course, won't touch Dorgan's idea (he won't even mention the trade problem) and neither will most Democrats, at least at first. The political community is in the hand-wringing stage: unable to act and afraid to share the blunt truth of our condition with the public at large. The politicians need a painful jolt themselves. That is what makes Dorgan's shock therapy potentially valuable. By pushing this measure forward and threatening to demand a roll-call vote, Dorgan and his allies could force their colleagues out of denial and into inquiry and debate. Senators in both parties would find it awkward to vote against a measure that puts limits on the burgeoning trade deficits, and the roll call would be brutally clarifying for voters. Dorgan is not particularly optimistic, but he would at least like to give ordinary Americans fair warning of the reckoning that is approaching. "At the moment, there's a great yawn about all this," he told me. "But one day when everything collapses, people will ask: Why didn't we do anything about this?"

Democrats with the nerve have a chance to challenge the self-satisfied status quo and expose many of globalization's fallacies and contradictions. They will no doubt be scolded as troublemakers in the here and now, but the country will honor their courage in the long run.

The Coming Political Revolution

Momentous change is approaching in American politics. Conceivably, the turning point has already arrived, too indistinct to recognize. We are witnessing the demise of the reigning economic ideology. A deep shift of this kind is a very rare event, one that comes along only every thirty or forty years. Economic disorders accumulate that the orthodoxy cannot answer and may even have caused. Eventually, the ideological presumptions are discredited by real-world contradictions.

The last time this happened was in the 1970s, when economic liberalism foundered and collapsed. Ossified intellectually, unable to adjust to changed circumstances, the liberal order did not know how to deal with economic consequences like inflationary stagnation. As the long postwar prosperity lost its energy, so did liberal politics.

Something similar is happening now to the Republicans. Their problem is the underperforming economy, which must borrow to stay afloat and, roughly speaking, lifts only half the boats. The conservative order -- inspired two generations ago by Milton Friedman and Friedrich von Hayek and brought to power by Republican ascendancy -- pushed government aside so business and capital would be free to generate more lasting prosperity. But their utopian promise was not fulfilled. Instead, the right's principal product, one can say, was economic inequality.

The breakdown won't necessarily produce an immediate shift in power. When the bottom fell out of liberal doctrine thirty years ago, what first unfolded was confusion and political paralysis, then an awkward retreat by the Democrats until they were finally displaced by the aggressive new conservatives under Ronald Reagan. But it does mean that Republicans have lost the political cohesion to advance their more extreme measures (privatizing Social Security, freeing capital entirely of taxation).

More to the point, the way is now open for alternative thinking: the new ideas that can lead to a new governing order. These ideas must be grounded in a determination to give people back their future. The strange paradox of our times is that despite America's fabulous wealth, most people's lives are shadowed by economic anxieties and real confinements, the wounds that market ideology has imposed. They fear that much worse is ahead for their children. Reform must re-establish this fundamental principle: The economy exists to support society and people, not the other way around. Only government can liberate them from the harsh rule of the marketplace, the demands imposed by capital and corporations that stunt or stymie the full pursuit of life and liberty in this complex industrial society. This very wealthy country has the capacity to insure that all citizens, regardless of status or skills, have the essential needs to pursue secure, self-directed lives. This starts with the right to health, work, livable incomes and open-ended education, and to participate meaningfully in the decisions that govern their lives. The marketplace has no interest in providing these. It is actively destroying them.

A coherent alternative agenda that will fulfill these principles does not yet exist. Nor will a liberal-progressive program emerge miraculously if the Democratic Party should somehow regain power in the next few years, since many Democrats in Congress have internalized the market ideology and collaborate with the right. But elements of that alternative agenda are already ripe for discussion. Before we explore some of them, however, we should examine the economics of why the right failed.

The economic engine is running on empty. It looks robust only if you ignore the underlying conditions. Household savings were negative last year for the first time since 1933; that is, families kept up by spending more than they earned and by borrowing to do so. The national economy, encompassing private-sector business and government as well as households, also had negative savings in the fall quarter of 2005, despite bountiful corporate profits.

The household accounting reflects a common reality: Wage incomes, adjusted for inflation, are stagnant or falling. The weekly wage for 92 million people in nonsupervisory jobs (82 percent of the private-sector workforce) has declined for three consecutive years, largely because total working hours shrank across the economy. Even per capita income -- a broader measure that includes the billionaires -- declined for four years in a row under Bush. One in six manufacturing jobs has been lost since 2000 (39 percent in communications equipment, 37 percent in semiconductors). These losses are explained as free-market "efficiencies" but mainly represent the global relocation of American production.

The cumulative effect is an economy that doesn't produce enough to pay for what it wants and needs. The conservative order, notwithstanding its proclaimed values, makes up the difference by borrowing. In five years, Bush has added $2.5 trillion to the federal debt with more to come (thanks to his regressive tax cutting, deficit spending, the war in Iraq and the subpar economy). In the same five years, the national economy as a whole took on even more debt -- $2.9 trillion -- to pay for the ever-swelling trade deficits. The creditors are our trading partners, led by China and Japan. The collective indebtedness is growing much faster than the nation's collective income -- always an ominous sign for a debtor. George W. Bush may wind up as history's goat because he had the bad luck to inherit the effects of 25 years of rightward governance (including Bill Clinton's tenure). Government shifted tax burdens downward, favored military spending over productive domestic investment, encouraged multinationals to disperse jobs and production overseas and embraced the Federal Reserve's hard-money monetary policy, which suppressed working-class wages. Fortunes were shifted upward, fabulously.

The era produced a great ideological irony: Starting with Reagan, the right repeatedly finessed its contradictions with debt -- the borrow-and-spend "sin" they once assigned to liberalism. In 1981, Reagan's first year as President, the federal debt surpassed $1 trillion for the first time ever. Twenty-five years later, despite fiscal restraint under Clinton, the federal debt has surpassed $8 trillion.

The Republicans now find themselves in a corner with no good choices. If Bush withdrew the stimulus of federal deficits, economic growth would collapse. The sensible course would require a massive shift in priorities -- moving money and benefits from the wealthy few to the struggling many -- but that is ideological heresy and would double-cross the GOP's monied patrons. Bush could confront the huge trade deficits by imposing unilateral limits on imports, but that is also a humiliating heresy he won't touch. So conservatives are likely to muddle on, hoping the economy will somehow work itself out of its weaknesses. Progressives should get busy now developing alternative ideas for the major shift that must inevitably follow.

For life and liberty

You wouldn't know it from reading the newspapers, but substantial and often overwhelming majorities of Americans have repeatedly endorsed governing concepts that conventional politicians dismiss as radical or unrealistic: Universal healthcare. A job for everyone who wants to work, guaranteed by the government. Secure retirements. Stronger enforcement of environmental laws. Stronger defenses against encroaching corporate power. Union protection for workers against exploitative employers. The list goes on. These widely endorsed goals assume an activist government that nurtures people and society first, ahead of corporations and capital. Imagine a political agenda that sets out to give the people what they say they want. The heart of the problem is the deterioration of work and wages. There are many other elements damaging the pursuit of life and liberty; but as old-school liberals always understood, if wages and working conditions are not moving in the right direction, you won't accomplish much toward healing other social injuries and disorders. What follows is a short list of provocative ideas meant to stimulate imaginations.

Repair wages:

This should start with government acting as the "employer of last resort" and involves a large and permanent program of federally financed jobs, open to anyone ready and willing to work and closely integrated with skill training and education. For most workers, the public jobs would be temporary, a safe harbor until opportunities improve in private employment. What might the people do? Any work that helps address the vast inventory of unmet public needs -- a broad program of public investment that rebuilds neighborhoods, reclaims ruined ecosystems or restores production. Local citizens and governments would choose the priorities, not Washington.

The most dramatic benefits would obviously accrue to the poor -- injecting jobs with reliable (and legal) cash incomes into desolate urban and rural communities, a financial platform to stimulate private enterprise and redevelopment. Young people could hold part-time public jobs, conditioned on staying in school, and bring cash home to the family, while getting hands-on experience and productive skills--a powerful alternative to dead-end lives. The federal job guarantee would also bolster the broad working class: a new safety net for the people displaced by recessions, offshoring or corporate downsizing. Wages could be scaled upward for the public jobs, based on the skill levels involved, and the displaced industrial workers would have access to retraining.

Above all, a permanent program of public employment, properly conceived, would boost wages. It would mop up surplus labor (about two times larger than official unemployment) and create a new wage floor, generating upward pressure in the labor market. In a more bountiful era, this might seem unnecessary, even inflationary. But today's economy has things upside down: It proliferates the low-wage service jobs that cannot sustain families, while it gradually eliminates the high-wage manufacturing jobs that provide middle-class incomes. Public jobs, together with a sustained campaign to raise the minimum wage and other measures, would gradually shift the flow of rewards in the other direction.

Employers will not like this, obviously, and will argue that rising wages are bad for the economy -- higher prices, lower profits. But is that really so? The steady deterioration of working-class wages over the past thirty years did not produce a healthier economy. Someone should ask working people whether they would choose cheaper prices at Wal-Mart or better incomes for themselves. The current labor market does indeed benefit the more affluent Americans who have been enriched by what happened to the price of labor. Now it is time to reverse the flow and heal the wounded -- that is, restore a balanced prosperity.

Deregulate labor:

The destruction of worker rights (the right to organize a union, established by the 1935 National Labor Relations Act) is a great failure of regulatory government and a critical factor in the deterioration of wages and working conditions. Union density has declined to 8 percent of the private-sector workforce, yet a poll last year found that 53 percent of workers would like to be represented by a union -- if they could. The gap between aspirations and reality is maintained by systematic and often illegal corporate tactics that block workers from exercising their rights.

One answer might be to eliminate the National Labor Relations Board -- free the workers of regulation. Federal law and regulators are quite lame in policing the corporate illegalities, but workers and unions are prohibited by law from using effective tactics like secondary boycotts, sit-down strikes occupying workplaces and mass mobilizations. A newly enacted labor law would be grounded in constitutional rights -- free speech, freedom of assembly, the Thirteenth Amendment prohibiting involuntary servitude -- rather than politically vulnerable regulatory law.

Rethinking labor rights is another opportunity to build bridges across class differences by creating a broader set of rights that apply to all employees, regardless of union status. That would involve basic protections against managerial abuses, and also new rights of self-expression and the right to participate in decision-making within the firm. The best companies already do this, because they know the free flow of information among employees stimulates innovation and efficiency reforms. Labor law effectively inhibits unionized workers from even meeting with nonunion colleagues without the boss's consent.

Ultimately, labor-law reform should encourage an economy of worker ownership in which employees share responsibility for the firm with management and share more equitably in the returns. The top-down corporate structure is a major source of inequality. Does anyone imagine that employees, if they had a voice, would ratify the scandalous executive pay for CEOs?

Tax corporate behavior:

Major corporations used to be part of the liberal social contract. They were the institutional partners that distributed health insurance, pensions, labor guarantees and other progressive benefits to workers and communities (reimbursed by federal tax deductions). But during the last generation, companies have resigned from this role, turning on their employees and extracting "profit" by expropriating the value that belonged to their workers: wages, pensions, healthcare benefits and good working conditions.

Government has to step in and fill the void to avert social calamity. The old arrangement helped build the middle class, but it was never as good as it sounded. Roughly half the country was left out. Moreover, the voluntary nature gave managements the power to set the terms -- and the freedom to break promises -- which were challenged only by unions.

Universal health insurance is the most pressing imperative because health costs continue to soar as the burden is shifted to employees. Pensions may become a larger crisis in the long run. The right's t25-year experiment with individual pension accounts has failed, leaving even middle-class workers unprepared for retirement. Instead of tinkering with the failed concept, reformers should create an entirely new national pension: universal, mandatory savings under government supervision that, alongside Social Security, will insure comfortable retirement for all. One model is the pension plan already enjoyed by federal employees and members of Congress.

Companies need to pay, meanwhile, for their antisocial behavior. They collect hundreds of billions in tax breaks and subsidies, yet abuse society in return -- degrading the environment and communities, ignoring the national interest, offloading their obligations. Corporate taxation has declined since the 1960s from more than 20 percent of federal revenue to less than 10 percent. Despite their profitability, scores of major corporations pay zero taxes (some even collect refunds). One plausible remedy is to refashion the corporate income tax as an important new mechanism for enforcing corporate obligations to society. Imagine a reformed tax code that clears away all the corrupted loopholes and sets the basic corporate tax rate higher, at around 45 percent.

Corporations would then be able to reduce their tax liability -- perhaps by 15 points or more -- by demonstrating that their performance adheres to higher social standards. Does the company, for instance, increase wages for workers in step with its rising productivity, as economists assume, or does it pocket the money for the insiders and shareholders? A positive record could knock several points off the tax rate. Does the company have an egregious history of trashing environmental laws or fraudulent dealings in financial markets? It would be ineligible for reductions. If the company is increasing its American workforce, augmenting pensions and healthcare, encouraging democratic relations with employees, it could be rewarded at tax time. This leverage would penalize bad behavior at the bottom line and reinforce the tattered regulatory laws. The performance ratings would be public -- a "market signal" that tells investors and consumers which companies are the white hats and which are the rogues.

Develop an industrial policy for essential needs:

Economic deregulation produced real economic gains, like stimulating technological innovation, but it also fed inequality in sly ways. The deregulated system raised costs for the least affluent, while larger business customers were able to bargain for lower prices. Financial deregulation (enacted by Democrats in 1980) legalized usurious lending and created a large pool of families (now around 12 million) who can't afford a bank account and who get ripped off by predatory lenders. Deregulation of electric utilities led to Enron and the price-rigging scandals. That sector, meanwhile, notoriously ignores its culpability for producing global warming.

The point is, some consumer goods are too essential to be left to the profit-seeking enthusiasms -- and reckless disruptions -- of private enterprise. People need them to live and are thus always prey to exploitation. Family finances will benefit and so will the environment if government selectively re-regulates industrial sectors producing for essential needs: banking and finance, energy, elements of transportation and telecommunications, for starters.

The basic approach is restoring a franchise relationship in which firms accept government-imposed obligations in exchange for limited competition and an assurance of moderate profits. Market space can be preserved for smaller, innovative firms. New rules can avoid the inflexibilities of the old system. But the notion that corporations have a right to annex common public assets and turn them into profitable commodities has to be stopped. Companies are buying the water. What's next -- selling us clean air?

A prime candidate for essential-needs regulation is the drug industry. Among its many outrages, the drug companies ride free on the expensive basic research financed by government, then convert it into private, overpriced products -- paying nothing at all back to the original financiers, the taxpayers. If citizens ever understood this scam, they would be angry enough to demand a nationalized drug industry. At the very least, citizens are entitled to reasonable pricing and a share of the profits from the medicine they paid to create.

Re-regulation of commerce also requires some rules accepted as everyday practice in business. When government hands out public money to a company, it should demand an enforceable contract: written agreement from the corporate recipient about what the public gets in return and the right to recover the money if the agreement isn't fulfilled. When government puts up public capital for a private development as tax breaks or infrastructure, it should get equity in return. If businesses don't like these terms, they don't have to take the public's money.

These ideas and others can gain political traction if reformers reclaim the language of freedom. It starts with a liberating message for people: The failure lies in the system, not yourselves. When the conservative order stripped away government protections for society, control was handed over to another master -- the marketplace -- that is even more remote from accountability and far less sympathetic to the human condition. That old order is collapsing. Now life and liberty can be restored. Government helps by creating the proper foundations. People will do the rest for themselves.

The Boy Who Cried Wolf

David Brooks, the high-minded conservative pundit, dismissed the Dubai Ports controversy as an instance of political hysteria that will soon pass. He was commenting on PBS, and I thought I heard a little quaver in his voice when he said this was no big deal. Brooks consulted "the experts," and they assured him there's no national security risk in a foreign company owned by Middle East Muslims -- actually, by an Arab government -- managing six major American ports. Cool down, people. This is how the world works in the age of globalization.

Of course, he is correct. But what a killjoy. This is a fun flap, the kind that brings us together. Republicans and Democrats are frothing in unison, instead of polarizing incivilities. Together, they are all thumping righteously on the poor President. I expect he will fold or at least retreat tactically by ordering further investigation. The issue is indeed trivial. But Bush cannot escape the basic contradiction, because this dilemma is fundamental to his presidency.

A conservative blaming hysteria is hysterical, when you think about it, and a bit late. Hysteria launched Bush's invasion of Iraq. It created that monstrosity called Homeland Security and pumped up defense spending by more than 40 percent. Hysteria has been used to realign U.S. foreign policy for permanent imperial war-making, whenever and wherever we find something frightening afoot in the world. Hysteria will justify the "long war" now fondly embraced by Field Marshal Rumsfeld. It has also slaughtered a number of Democrats who were not sufficiently hysterical. It saved George Bush's butt in 2004.

Bush was the principal author, along with his straight-shooting Vice President, and now he is hoisted by his own fear-mongering propaganda. The basic hysteria was invented from risks of terrorism, enlarged ridiculously by the President's open-ended claim that we are endangered everywhere and anywhere (he decides where). Anyone who resists that proposition is a coward or, worse, a subversive. We are enticed to believe we are fighting a new cold war. But are we? People are entitled to ask. Bush picked at their emotional wounds after 9/11 and encouraged them to imagine endless versions of even-larger danger. What if someone shipped a nuke into New York Harbor? Or poured anthrax in the drinking water? OK, a lot of Americans got scared, even people who ought to know better.

So why is the fearmonger-in-chief being so casual about this Dubai business?

Because at some level of consciousness even George Bush knows the inflated fears are bogus. So do a lot of the politicians merrily throwing spears at him. He taught them how to play this game, invented the tactics and reorganized political competition as a demagogic dance of hysterical absurdities, endless opportunities to waste public money. Very few dare to challenge the mindset. Thousands have died for it.

Bush's terrorism war has from the start been in collision with the precepts of corporate-led globalization. One practices hyper-nationalism -- Washington gets to decide where it goes to war, never mind the Geneva Convention and other "obsolete" international restraints. Yet Bush's diplomats travel the world banging on governments for trade rules that defenestrate a nation's sovereign power to run its own affairs. The U.S. government regards itself as comfortable with this arrangement since it assumes the superpower can always get its way. Most citizens are never consulted. They are perhaps unaware that their rights have been given away, too.

It would be nice to imagine this ridiculous episode will prompt reconsideration, cool down exploitative jingoism and provoke a more rational discussion of the multiplying absurdities. I doubt it. At least it will be satisfying to see Bush toasted irrationally, since he lit the match.

Bring On the Rebels

The political news from Connecticut did not seem earth-shaking on its face, but the New York Times and the Washington Post were both sufficiently alarmed to put the story on page one. Some upstart citizens are talking about challenging their warrior senator, Joe Lieberman, by running an antiwar candidate against him next fall. The Wall Street Journal went ballistic. Its hysterical editorial denounced the "liberal animosity" toward Wall Street's favorite Democrat.

Possibly, this rump-group assault on the established order will come to nothing, just another angry rant from frustrated Democrats. But it could be the start of something big -- a David-and-Goliath challenge that encourages other nascent insurgencies around the country. Rebellion can be fun -- who doesn't enjoy upsetting the mainstream media? -- but in these dispiriting times it is also good for one's mental health. Even better, rebellion could revive the Democratic Party.

Intraparty challenges are one of the most effective ways to get the attention of risk-averse politicians and force them to change their thinking. Even if the targeted politicians are not defeated, they hate intrusions from meddlesome citizens messing with their job-for-life security. And nothing upsets members of Congress like seeing a few of their colleagues abruptly taken down by outsiders with supposedly marginal issues the Washington Club didn't take seriously. Incumbents will do quite a lot to avoid the same fate.

With persistence and strong convictions, insurgents can change a political party. Witness the right's slow-motion crusade to conquer and transform the Republican Party. Thirty years ago right-wing activists regularly mounted hopeless challenges to the GOP establishment -- including Richard Nixon -- and usually lost. They were called "ankle biters" in those days. Today, they are running the party. The right continues to use this tactic to threaten and punish wayward incumbents. The Wall Street-financed Club for Growth ran a right-wing primary opponent against Senator Arlen Specter of Pennsylvania in 2004, and it is doing the same thing to Senator Lincoln Chafee of Rhode Island in 2006. New York Times columnist David Brooks astutely observed: "When conservatism was a movement of ideas, it attracted oddballs; now that it's a movement with power, it attracts sleazeballs."

The Democratic Party is never going to change substantively and again become a reform party with a serious agenda until some of its blood is spilled in the same fashion. For years, incumbent Dems have distanced themselves from fundamental convictions, confident the party's "base" wouldn't do anything about it beyond whimpering. Until now, the cynicism was well founded. Galvanized by the war, disgusted with weak-spined party leaders, the rank-and-file may at last be ready to bite back.

The fuse was lit for Lieberman a few weeks ago, when MoveOn.org let it be known that the web-savvy organization will support a challenger if that's what its Connecticut members decide to do. "Our first allegiance is to our members," explains Tom Matzzie, MoveOn's Washington director, "and they are just as frustrated with the Democrats as anybody else. So they've given us the charge to change the Dems, and we're taking that very seriously." Politicians and media learned to respect MoveOn in 2004, when it proved its ability to organize people and money.

The center-right senator, meanwhile, is practically taunting the party's loyal voters with his extreme embrace of Bush and Bush's misbegotten war. "What a colossal mistake it would be," Lieberman lamented recently, "for America's bipartisan political leadership to choose this moment in history to lose its will." Party leaders in D.C. -- Harry Reid, Nancy Pelosi and Howard Dean -- all took shots at him. Rumors started that Lieberman must be fishing for a job in Bush's Cabinet.

A showdown in Connecticut -- rank-and-file voters versus the big money bankrolling the party -- would provide a fabulous test case, sure to attract maximum funding from Lieberman's patrons in business and finance. The prospects for denying him the party nomination in the primary look encouraging, Matzzie says, citing private polling he won't discuss. Voters are bitter about Iraq but also about Lieberman's toadying to corporate interests. If the senator gets past the 2006 primary, he would still be deeply wounded and vulnerable for the general election. It's too early to know whether a viable Democratic challenger will emerge, but the search is on. Lowell Weicker, the much admired former governor and senator, has proclaimed that if nobody else of stature will take on Lieberman, he will do it in the general election as an independent. Weicker, a maverick and liberal Republican, has the stature to pull it off, though a three-way race might backfire by splitting the anti-Lieberman vote.

Democratic leaders in Washington naturally discourage the talk of insurgency, warning it could endanger the party's chance of regaining a majority in the House or Senate. Some progressives doubtless agree. But this is the same logic -- follow the leaders and keep your mouth shut -- that has produced a long string of lame candidates with empty agendas, most recently John Kerry in 2004. The strategy of unity and weak substance led Democrats further to the right, further from their most loyal constituents. And they lost power across the board.

MoveOn doesn't believe in kamikaze politics, Matzzie says, and won't get into the race unless local members are committed and have a plausible challenger. "We have to make sure we can back up our swagger," he says, "so it's not just talk." Other antiwar forces are less cautious than MoveOn, more willing to support long-shot candidates and at least deliver a message to the hawks. Progressive Democrats of America, with activists across the nation, is pushing antiwar resolutions in state party organizations and searching for viable peace candidates. In California activists are shopping for a primary challenger to Senator Dianne Feinstein (antiwar heroine Cindy Sheehan has been approached). A candidate was lined up to run against House minority leader Nancy Pelosi until Pelosi got religion and endorsed Representative John Murtha's call for speedy withdrawal. In New York a little-known labor activist, Jonathan Tasini, plans to run against Senator Hillary Clinton.

MoveOn is proceeding more cautiously to pick its spots, and it is testing various techniques for turning up the heat on Democrats who consistently offend the grassroots on principled concerns. Representative Allen Boyd of Florida got a warning shot earlier this year for endorsing a Social Security privatization scheme similar to Bush's. MoveOn peppered his district with TV ads, and Boyd fell silent on the issue. Representative Steny Hoyer of Maryland got a similar admonition because, as a party leader, he supported the credit card industry's bankruptcy bill. MoveOn has developed an informal evaluation system that judges the quality of incumbents' performance according to four categories, ranging from "American hero" and "Stand up and fight" to "As expected" and "Wrong." For Lieberman and some others, "Wrong" is not a close call. But that doesn't necessarily insure that they will be challenged. "People who fall into the fourth category -- Wrong -- are in play," Matzzie said, "but these are ultimately going to be decided on the numbers." That is, do we have the money and people to win, or at least to make a serious impact?

MoveOn and many other groups are, in essence, experimenting in the early stages of democratic invention -- developing ways to restore influence to citizens at large and exert discipline on party incumbents. These are the self-correcting mechanisms of representative democracy that have been largely lost in the Democratic Party. "We are challenging the incoherence and appeasement of the Democratic Party," Matzzie says, "but we also have to do the work and develop the movement."

Obviously, this is political work for the long run. It requires patience and self-discipline and, since no one can claim proven results, it requires a generous respect for others trying to achieve the same thing in very different ways. It will need many more rump groups and freelance guerrillas, asserting convictions and educating citizens, disturbing the peace in moribund politics.

The antiwar fervor is likely to exert real impact in the electoral arena, but that would only be a beginning for an insurgency. To sustain the transformation, people will have to broaden the agenda to include the bedrock economic and social issues -- issues like deindustrialization, corporate power, decayed democracy and poverty -- that reluctant Democrats are unwilling to confront with a serious determination for change. Re-educating comfortable incumbents is difficult; sometimes it's easier to replace them. Long-term organizing is good. So is kamikaze assault. Let a thousand flowers bloom.

The Sun Sets On the Golden Years

In 1900 Americans on average lived for only 49 years and most working people died still on the job. For those who lived long enough, the average "retirement" age was 85. By 1935, when Social Security was enacted, life expectancy had risen to 61 years. Now it is 77 years--nearly a generation more--and still rising. Children born today have a fifty-fifty chance of living to 100. This inheritance from the last century--the great gift of longer life--surely represents one of the country's most meaningful accomplishments.

Yet the achievement has been transformed into a monumental problem by contemporary politics and narrow-minded accounting. "The nation faces a severe economic threat from the aging of its population combined with escalating health costs," a Washington Post editorial warned. Others put it more harshly. "Greedy geezers" are robbing from the young, bankrupting the government. Painful solutions must be taken to avoid financial ruin. Or so we are told.

A much happier conviction is expressed by Robert Fogel, a Nobel Prize-winning economist at the University of Chicago and a septuagenarian himself. America, he reminds us, is a very wealthy nation. The expanding longevity is not a financial burden but an enormous and underdeveloped asset. If US per capita income continues to grow at a rate of 1.5 percent a year, the country will have plenty of money to finance comfortable retirements and high-quality healthcare for all citizens, including those at the bottom of the wage ladder. When politicians talk about raising the Social Security retirement age to 70 in order to "save" the system, they are headed backward and against the tide of human aspirations.

The average retirement age, Fogel observes, has been falling in recent decades by personal choice and is now around 63. Given proper financing arrangements, he expects the retirement age will eventually fall to as low as 55--allowing everyone to enjoy more leisure years and to explore the many dimensions of "spiritual development" or "self-realization," as John Dewey called it.

"What then is the virtue of increasing spending on retirement and health rather than goods?" Fogel asked in his latest book, The Fourth Great Awakening and the Future of Egalitarianism (2000). "It is the virtue of providing consumers in rich countries with what they want most." What people want is time--more time to enjoy life and learning, to focus on the virtuous aspects of one's nature, to pursue social projects free of economic necessity, to engage their curiosity and self-knowledge or their political values. The great inequity in modern life, as Fogel provocatively puts it, is the "maldistribution of spiritual resources," that is, the economic insecurity that prevents people from exploring life's larger questions. Everyone could attain a fair share of liberating security, he asserts, if government undertook strategic interventions in their behalf.

Fogel's perspective is generally ignored by other economists, but sociologists and psychologists recognize his point in the changing behavior of retirees. The elderly are redefining leisure, finding "fun" in myriad activities that lend deeper meaning to their lives. An informal shadow university has grown up around the nation in which older people are both the students and the teachers. They do "volunteer vacationing" and "foster grandparenting." They rehab old houses for the needy, serve as self-appointed environmental watchdogs or act as ombudsmen for neglected groups like indigent children or nursing-home patients. They dig into political issues with an informed tenacity that often withers politicians. In civic engagement, they are becoming counselors, critics, caregivers and mentors equipped with special advantages--the time and freedom to act, the knowledge and understanding gained only from the experience of living.

When the "largest generation" reaches retirement a few years from now, the baby boomers will doubtless alter the contours of society again, perhaps more profoundly than in their youth. Theodore Roszak, the historian who chronicled "The Making of a Counter Culture" thirty-six years ago, thinks boomers taking up caregiving and mentoring roles will inspire another wave of humanistic social values (perhaps expressed more maturely this time around).

"More than merely surviving we will find ourselves gifted with the wits, the political savvy and the sheer weight of numbers to become a major force for change," Roszak wrote in America the Wise (1998). "With us, history shifts its rhythm. It draws back from the frenzied pursuit of marketing novelties and technological turnover and assumes the measured pace of humane and sustainable values. We may live to see wisdom become a distinct possibility and compassion the reigning social ethic."

The "retired," he predicts, will seek to become reintegrated with the working society and claim a larger role in its affairs. Some elderly may reclaim the ancient role of respected "elders" who keep alive society's deeper truths and remind succeeding generations of their obligations to the nation's longer term. None of these possibilities are likely to unfold, however, if the promise of economic security for retirement is eviscerated in the meantime.

Fogel's optimism sounds eccentric amid the gloom and doom of the Social Security debate and the more threatening deterioration under way in private pensions and personal savings. Fogel skips over the snarled facts of current politics. He thinks big-picture and long-term. He won the Nobel Prize by producing unorthodox economic history that traced the deeper shifts in demographics and living conditions across generations, even centuries. His thinking is especially provocative because the conclusions collide with both left and right assumptions. Fogel is a secular Democrat, yet he extols the conservative evangelical awakening as a valuable social force. He sounds alternately conservative and liberal on economic issues, yet he thinks government should engineer a vast redistribution of financial wealth, from top to bottom, to insure equitable pensions for all.

Fogel's solution is a new national pension system alongside Social Security--a universal "provident fund" that requires all workers to save a significant portion of their wage incomes every year to provide for their future. He proposes a savings rate of 14.7 percent (though taking Social Security benefits and taxes into account, a lower rate would suffice for a start). The contributions would be mandatory but set aside as true personal savings, not as a government tax. The accumulating nest eggs would belong to the individual workers and become a portable pension that goes with them if they change jobs, but the wealth would be invested for them through a broadly diversified pension fund.

Employers would no longer be in charge (though they could still contribute to worker savings to attract employees). The government or independent private institutions would manage the money, investing conservatively in stocks, bonds and other income-generating assets while allowing workers only limited, generalized choices on their investment preferences.

The concept resembles the forced savings plans adopted in some Asian and Latin American countries, but Fogel's favorite prototype is American: TIAA-CREF, the pension system that exists for nearly all college professors (a nonprofit institution founded in 1917 by Andrew Carnegie). Another model could be the government's own Thrift Savings Plan, which manages savings wealth for federal employees. Lifelong healthcare, Fogel adds, could be guaranteed for all by setting aside another 9.8 percent from current incomes.

"If you take the typical academic, we all have TIAA-CREF," he explains. "The universities require of us that we invest anywhere from 12.5 to 17.5 percent of our salaries in a pension fund--mandatory--but it's all in my name. I can leave it to whomever I want. It has entered my sense of well-being for many years. The fund has earned about 10 percent a year since the 1960s, so retirement is not a burden to the university."

Obviously, people with low or even moderate incomes could not afford such savings rates, and even diligent savings from their low wages would not be enough to pay for either retirement or healthcare. Fogel has a straightforward solution: Tax the affluent to pay for the needy. A tax rate of 2 or 3 percent, applied progressively to families in the top half of income distribution, could finance the "provident fund" for those who can't pay for themselves. "This is a problem, not of inadequate national resources, but of inequity," he observes.

Fogel's big thinking--a system of compulsory savings, with the federal government taking charge--sounds way too radical for this right-wing era, and probably even most Democrats would shy away from the concept. But keep Fogel's solution in mind as we examine the sorry condition of retirement security. The current political debate is not even focused on the right "crisis," much less on genuine solutions. It is not Social Security that's financially threatened but healthcare and the other two pillars of retirement security--employer-run pension plans and the private savings of families.

Many millions of baby boomers realize as they approach the "golden years" that they can't afford to retire at all, much less retire early. They will keep working because they lack the wherewithal to stop. Retiring for them would mean a drastic fall in their standard of living. Fogel's vision of expanding leisure and greater human fulfillment is actually receding at the moment. The time for big ideas is now.

Grasshoppers and Ants

When George W. Bush launched Social Security reform with his promise of new personalized savings accounts for everyone, he did not seem to grasp that most Americans already have such accounts. During the past generation tax-exempt 401(k) and IRA accounts--the individualized "defined contribution" approach--became the principal pension plan for working people, displacing the traditional company pension provided by employers who assume the risks and promise a "defined benefit" to workers at retirement. The do-it-yourself version of pensions is a flop, as many Americans have painfully learned. When older employees look at their monthly balance statements, they are more likely to experience fear than Bush's romanticized thrill of individual risk-taking.

Picking stocks for themselves has left many employees, perhaps as many as 40-45 percent, without an adequate nest egg for retirement. When Bush explains further that he intends to divert trillions from Social Security to finance his "ownership society," it makes people even more nervous. Social Security pays very modest average benefits--roughly equivalent to the federal minimum wage--but it is the last safety net. For nearly half of the private-sector workforce, it is the only safety net. The far more threatening problem is elsewhere--shrinking pensions, collapsed personal savings and soaring costs for health insurance.

The bleak reality is reflected in those 401(k) account balances. Of the 48 million families who hold one or more of the accounts, the median value of their savings is $27,000 (which means half of all families have less than $27,000). Among older workers on the brink of retiring (55 to 64 years old) who have personal accounts, the median value is $55,000. That's only enough to buy an annuity that would pay $398 a month, far short of middle-class living standards. What's strange and disturbing about their low accumulations is that these older workers have been investing during the best of times--the "super bull market" of soaring stock prices that lasted nearly twenty years. The Congressional Research Service summarized the sobering results: Median pension savings "would not by themselves provide an income in retirement that most people in the United States would find to be adequate."

This grand experiment was launched nearly twenty-five years ago by Ronald Reagan, but with very little public debate because the pension changes were obscured by more immediate controversies--Reagan's regressive tax cuts and massive budget deficits. His Treasury under secretary explained the reasoning: "The evidence of the past suggests that people do not behave like grasshoppers. They are much more like ants." For lots of reasons, most Americans turned out not to be like the proverbial ants, storing food for winter. People either misjudged their future need for savings or couldn't afford to put much aside or bet wrong in the stock market and got wiped out. But corporate managements turned out to be the true grasshoppers, living for the moment and ignoring the future. Companies took advantage of the 401(k) innovation to escape their traditional responsibility to employees. They dumped old defined-benefit pension plans and adopted the new version, which requires much smaller employer contributions and thereby reduces labor costs dramatically. Good for the bottom line, bad for the country's future.

"The whole thinking was: Let's relieve the employers of this burden and empower individuals," explains Karen Ferguson, longtime director of the Pension Rights Center in Washington. "The problem is, it has failed--and failed miserably--and no one wants to say that."

Pension protection is actually shrinking, despite the proliferation of 401(k) accounts and the alleged prosperity of the 1980s and '90s. In the private sector, fewer employees participate in pension plans of any kind now than twenty years ago, down from 51 percent to 46 percent (the defined-benefit company pensions that once covered 53 percent now protect only 34 percent). The value of pension wealth, meanwhile, fell by 17 percent for workers in the middle and below, mainly because their voluntary savings were weak or nonexistent, yet soared for those at the top--"an upsurge in pension wealth inequality," economist Edward Wolff of New York University observed.

In sum, pensions became less valuable. And fewer families have one. That helps explain why Bush's plan encountered popular resistance. In these circumstances, whacking Social Security benefits or raising the retirement age does not sound like "reform." But neither political party has yet summoned the nerve to acknowledge the implications of the failed experiment or to propose serious solutions.

The circumstances look even more ominous--the very opposite of Professor Fogel's sunny vision--because personal savings also collapsed during the long, slow-motion weakening of pensions. Given the stagnating wages for hourly workers and easier access to credit, families typically managed to stay afloat by working more jobs and by borrowing more. Saving for the future was not an available option for many. In 1982 personal savings peaked at $480 billion, then began an epic decline. Last year the national total in personal savings was only $103 billion--down nearly 80 percent from twenty-five years ago. As Eugene Steuerle of the Urban Institute points out, the federal government now spends more money on tax subsidies to encourage the individual forms of pension savings--$115 billion last year--than Americans actually save.

The one potential bright spot in this story might be real estate--the family wealth that accumulates gradually through home ownership and the rising market value of houses. Given the current housing boom and runaway prices in the hotter urban markets, many families might salvage retirement plans by selling their homes and moving to less expensive dwellings. The trouble is, families have been living off that wealth--borrowing, almost dollar for dollar, against the rising price of their homes through equity-credit lines or refinanced mortgages. From 1999 through 2003, the value of family homes rose by a spectacular $3.3 trillion, but families' actual equity in those properties changed little because mortgage borrowing rose nearly as fast.

Thus, people financed routine consumption by borrowing against their long-term assets--that's real grasshopper behavior. And the situation could turn very ugly if the housing bubble pops and home prices fall. People will find themselves stuck paying off a mountain of debt on homes that are suddenly worth less than the mortgages. They will not only need to keep working; they might also be filing for bankruptcy.

How could this have happened in such a wealthy nation--especially during an era when stock prices were rising explosively? The basic explanations are familiar: rising inequality and reactionary economic policies, launched first by Reagan, then elaborated by Bush II and resisted only faintheartedly by Democrats. The corporate "social contract" was discarded; regressive tax-cutting rewarded capital and the well-to-do; numerous other measures fractured the broad middle class. The wages of hourly workers--80 percent of the private-sector workforce--have been essentially unchanged in terms of real purchasing power for three decades (no one in politics wants to talk about that, either).

The political system continues to defer to the needs of corporations despite the torrent of financial scandals and extreme greed displayed by egomaniacal CEOs. All these factors contributed to the erosion of retirement security. Economist Teresa Ghilarducci, a pension authority at Notre Dame, remarks, "Just as wealth and income are being redistributed to the wealthy, so is leisure."

In fact, Ghilarducci argues, allowing the pension system to deteriorate serves a long-term interest of business: avoiding future labor shortages when the baby-boom generation moves into retirement. "All this retirement policy is really a labor policy," she asserts. "It's motivated by these experts who say, Hey, wait, we're going to need to do what we can to encourage people to work longer. A whole range of economists and elite opinion makers is talking about a labor shortage where, God forbid, wages would increase. That's what they're worried about--making sure there isn't a corporate profit squeeze, that skill shortages and upward wage pressures are checked."

This development is already lengthening working lives, she finds. The average retirement age, rather than gradually declining toward 55, as Fogel foresees, has turned around in the past few years and is slowly increasing. "I'm not against older people working if they want to," Ghilarducci says. "I'm against policies that force them back into the workforce because they've lost their pensions or their healthcare costs have gone up."

One need not question the sincerity of the right's ideological convictions to see that their policy initiatives are also designed to benefit important political patrons. With the transition to 401(k) accounts, corporate employers were major winners. Ghilarducci's examination of 700 companies over nearly two decades found that their annual pension contributions dropped by one third--from $2,140 to $1,404 per employee--as they shifted from defined-benefit pensions to the less expensive defined-contribution model. Not surprisingly, the traditional company pension began to disappear or shrink as large industrial companies hacked away at the uncompetitive costs. The number of younger workers with the traditional form of pension is much smaller and falling fast.

Wall Street banks and brokerages were big winners too, since they began competing for the millions of new "investors" with their individual stock accounts. This enormous influx of customers helped fuel the long stock-market boom and encouraged the exaggerated promises made by both corporations and financial firms. The overall economy was probably damaged too, because mutual funds competed for customers by going after rapid, short-term gains rather than focusing on the long-term investments financed by patient capital. When the stock-market illusions burst in 2000, the meltdown evaporated lots of retirement accounts too, especially for those innocent risk-takers who had bet their savings on NASDAQ's high-flying tech stocks.

The most damning fact about the 401(k) experiment is that it has failed to fulfill the original purpose: boosting savings for ordinary Americans. Academic studies have confirmed that the personal accounts produced "very little net savings" or "statistically insignificant" gains. While every worker could participate in theory, the practical reality is that only the more affluent families could afford to take full advantage of the 401(k) tax break--sheltering their annual 401(k) contributions from income taxes. But typically they did so simply by moving money from other conventional savings accounts into the tax-exempt kind.

More affluent Americans thus reduced their income taxes, but their net savings did not actually increase. For two decades, the federal government has been heavily subsidizing "savings" by the people who needed no inducement because they were already saving. Think of it as welfare for the virtuously well-to-do. A rational government would phase out such a misconceived program. Bush is instead proposing to make the contradictions worse by adding still other tax-exempt savings vehicles designed to benefit the affluent.

The old system of defined-benefit pensions had many strengths by comparison, but it was never a solution to the national problem either. Even at their peak, the traditional corporate pensions left out half of the workforce. Larger companies, especially in unionized industrial sectors, provided strong benefits for their employees, responding to labor's bargaining demands and to attract well-qualified people. But the millions of very small firms, where more Americans work, almost never offered pensions. The burden either seemed too costly or too complicated to administer. Generally, their workers are the folks who depend solely on Social Security.

The corporate pensions are also not portable (a problem the individual accounts were supposed to solve). And pension law gives corporate managers ample latitude to game their pension funds to enhance the company's bottom line. Stories of elderly retirees stranded by their old employers are now commonplace: broken promises on healthcare and other benefits that go unpunished. Instead of accumulating larger surpluses during the good times, the corporations often did the opposite, leaving their pension funds severely underfunded for the bad times, when shortfalls couldn't be overcome. Employees have no representatives to speak for them in the decision-making. If a corporate pension fund goes belly up, its liabilities are dumped on the government's insurance agency, which is getting strapped itself.

Alogical and achievable solution exists to correct this mess. Government should create a new hybrid pension that combines the best aspects of defined-benefit and defined-contribution versions--one that requires all workers to save for the future and no longer relies on the "good will" of employers. Given modern employment patterns, workers do need a portable pension that stays with them, job to job. But their voluntary savings are simply too small and erratic--too vulnerable to manipulation by financial brokers--to produce secure results in the stock-market casino. Either they get lured into wild gambles or they park their savings in mutual funds that gouge them with inflated fees and commissions while catering to the corporations that are the funds' largest customers (this conflict of interest between large and small customers is endemic to the US financial system; guess who loses). The employees' money will produce far more reliable accumulations if it is invested for them by professionals at a major independent pension fund that works only for them.

The fundamental truth (well understood among experts) is that individualized accounts can never match the investment returns of a large common fund, broadly diversified and soundly managed, because the pension fund is able to average its results over a very long time span, thirty years or more. A few wise guys might beat the casino odds, but the broad herd of small investors will always be captive to the random luck of bad timing and their own ignorance. The right wing's celebration of individual risk-taking in financial markets is like inviting sheep to the slaughter.

The super bull market is over. Its gorgeous returns will not return for many years, maybe many decades. But a very large, diversified pension fund--managed solely in the interests of its contributors--provides the vehicle for "shared luck." It can smooth out the ups and downs among all participants, young and old, lucky and unlucky. It can invest for long-term economic development rather than chase stock-market fads. Good returns for retirees, good results for the economy.

These are the very qualities Professor Fogel envisions. They describe trustworthy pension systems, like TIAA-CREF, which reliably serves many thousands of individual employees (teachers and professors) who are scattered across many different employers (schools and universities). The present reform debate is not thinking this way. Collective action is out of fashion, especially if the government is involved. Significant reform would require institution-building. The transition would pose many technical difficulties. "There are obstacles, but I don't think that's the problem," Ghilarducci says. "The obstacle is imagination."

Pro-Life Pension Reform

The Pension Rights Center just conducted a year-long "conversation on coverage" that pulled together experts from business and labor, the insurance industry, Wall Street finance, academia, AARP and other interested sectors. The workshop sessions produced a long list of worthy ideas for patching up the broken system, but that was the problem: The proposals basically involved incremental tinkering with the status quo, not universal, mandatory solutions. To get all these diverse interests to join the conversation, Karen Ferguson confides, the center had to stipulate that "mandatory" would not be discussed.

"The bottom line is that the companies always have the upper hand, even though they've gotten huge subsidies and tax benefits," she explains. "The system is voluntary, so companies can always opt out." Indeed, the politics of pension reform is usually a discussion about what new favors and concessions should be granted to employers to get them to do the "right thing" for their employees. This political logic led to the current failure. "Voluntary" is a loser, as the past twenty years amply demonstrated, because it gives companies controlling leverage over what is possible. And even well-intentioned executives will always have to choose between the company's self-interest and its employees (guess who usually loses). Only the government has the reach and power to design and oversee a pension system that truly serves all. During the past generation, most corporations discarded their obligations under the old social contract. It seems only fair they should forfeit political control too.

Plausible plans in addition to Fogel's do exist that offer genuine solutions. A universal savings system that covers everyone because it is mandatory could prove to be as durable (and popular) as Social Security. It balances equity by subsidizing the savings of lower-income workers. It creates authentic individual ownership and incentives to save more for the future, consume less in the present. It operates free of Wall Street profiteers and under government supervision, adhering to well-established principles of sound investing. Employers could be discouraged from further abandoning their obligations by penalties in the tax code. Many other nations, large and small and far less wealthy, have created such systems. Americans would need to craft their own distinctive version.

One promising example, designed by economist Christian Weller for the Economic Policy Institute, proposes a modest savings rate of 3 percent of wages, but combined with the existing Social Security benefits, it would approach the level of retirement security envisioned by Fogel. The government would contribute substantial savings for low earners and also match additional contributions made by the workers or their employers. Weller estimates this would cost around $48 billion a year--less than half the federal tax subsidy now devoted to all pension plans. Weller's design is robustly equitable, scaled to help the bottom rungs most and top income earners least. Combined with Social Security, low earners (wages of $24,000 or less) would enjoy a pension that replaces 83 percent of their peak working wages. Average earners would get 60 percent replacement, high earners only 48 percent. This makes sense, because higher-income families have much greater opportunity to augment pensions with other sources of income and savings. The working poor do not.

Essentially, Weller has updated and expanded a mandatory savings plan that was proposed nearly twenty-five years ago--a last gasp from the Carter Administration. Reagan's election and laissez-faire politics snuffed the idea. While still modest in scale, Weller's design represents a meaningful start toward Fogel's larger vision of a 15 percent savings rate. Since the Social Security tax now collects 12.6 percent of wages jointly from workers and employers, it is not plausible at this point to add another 15 percent to labor costs for pension savings. However, as the new pension system matures and public confidence is established, a gradual transition can be pursued that adds little by little to the personal savings rate, offset by equivalent reductions in the payroll tax for Social Security--thus yielding greater savings and lower taxes. Both government systems would continue in place, one as the fundamental safety net of social insurance, the other as the universal, expanding pillar for comfortable retirement.

Ghilarducci thinks much of the accumulating wealth could be stored and invested by large private pension funds, organized by unions or other groups for workers at multiple employers (much like TIAA-CREF's role for universities). A successful existing model is the unified pension systems for the building and construction trades. Co-managed by unions and companies, they encourage industry and labor to collaborate on joint training and other productivity-enhancing endeavors that can raise the quality of work and wages.

While most politicians don't dare embrace a "mandatory" solution--not yet, anyway--it is not self-evident that ordinary Americans would reject one, if properly educated about the alternatives. Most people are conflicted. They know they need to save more--retirement is a very meaningful investment for them--but it's very hard to accomplish, given the competing pressures. They like the concept of personal accounts but are also aware of their vulnerability as amateur investors.

In her conversations with union presidents, Ghilarducci finds they are more in favor of an "add on" national pension than raising the payroll tax for Social Security. "You can sell workers if their name is on it," she concludes. "If you had a system that says you must contribute 3 percent of wages to your mandatory savings account, you would actually have two-thirds of the workers grateful that they are being forced to save. You wouldn't get that if they were forced to pay another 3 percent in taxes into Social Security."

The retirement question--choices of mandatory or voluntary, universal or incremental--embodies a classic dilemma often facing liberal politics. Do reformers pursue the larger, more provocative approach that invites greater resistance but would fundamentally solve the problem? Or do they opt for smaller, safer measures that have a better chance of adoption and will demonstrate good intentions, if not a genuine remedy for society?

For several decades, it seems obvious, most Democrats have chosen the side of caution: thinking small, offering symbolic gestures, avoiding fights over fundamental solutions. One can see where this strategy has gotten the party. The gestures are no longer taken seriously, since they don't lead anywhere. The public no longer associates Democrats with big ideas or principled commitments to authentic reform. We await incautious politicians with the courage to pursue their unfashionable convictions.

Pro-Death Politics

I was astounded to read an E.J. Dionne column in The Washington Post about a baby boy in Texas who was denied life support by hospital officials over the objections of his mother--astounded because this act of euthanasia was authorized by a state law passed by then-Gov. George W. Bush. Or should we call it "murder," as some Republicans fervently insist in the death of Terri Schiavo? I wanted to know more about Bush's role, but the Post never returned to the matter. I wanted to know more about the circumstances surrounding the death of Rep. Tom DeLay's injured father (the doctors pulled the plug on him with the family's consent).

I also want to know who makes these godlike choices for the Hospital Corporation of America, the 191-hospital chain built by Senator-Doctor Bill Frist's family. Does HCA follow the end-of-life logic suggested by Bush's law, or do the hospitals subscribe to Pope John Paul II's dictum that providing food and water to sustain brain-dead mortals is "morally obligatory"?

These questions sound tasteless and insensitive, I know, but our sensibilities have been jarred by the recent melodrama mounted by the right. The Pope's death was, by contrast, a model for dying with dignity and proper mourning. The life-or-death issue goes deeper than the obvious hypocrisy of certain politicians. It leads us into intriguing, disturbing questions about what "moral people" believe in this very moralistic country. Shouldn't we have a fuller discussion about who is pro-life, who is pro-death?

The Catholic Church, for instance, is opposed to the death penalty, though the U.S. bishops have downplayed this conviction until very recently, compared with their political efforts against abortion rights, contraception and other "life-threatening" practices. Their conservative political allies, the evangelical Protestants, find biblical authority for the state's right to kill certain citizens, yet the Catholic Church finds the opposite. How do these political partners reconcile their moral differences? I don't wish to provoke religious antagonism, but these questions ought to be asked because the American Catholic bishops and the Protestant Christian right have become a muscular political force for their shared version of "moral values," asserting their influence at the highest levels.

The Bible says simply, Thou Shalt Not Kill, but various codicils have been added over the millennia by religious thinkers. It's OK to kill people in war--lots of people--if the circumstances meet the theological test for a "just war." Pope John Paul II opposed the U.S. invasion of Iraq, called it a "crime against peace" and a conflict that "threatens the fate of humanity." American bishops warned that Bush's war did not meet "the strict conditions in Catholic teaching." We should return to examine their position more closely, because the killing continues in Iraq, including death by torture. If you think about it, Washington's overwhelming power in the world is founded on death, the awesome arsenal for killing people.

Most people would not regard ecology as a life-or-death issue, but some conservative Christians are beginning to espouse that moral position. The relentless march of industrial despoliation--destroying ecosystems and thousands of species--is the ultimate offense against life since all life forms, including humans, are sustained by nature. Scientists have described these times as an epoch of massive extinction attributable to human activity. Can a moral people do this? Would church leaders explain the mass destruction of God's creatures as Providence, part of God's plan? Pro-lifers are, meanwhile, trying to stamp out contraception and stem-cell research.

Here is what I believe: The country has just witnessed an interlude of religious hysteria, encouraged and exploited by political quackery. The political cynicism of Republicans shocked the nation. But even more alarming is the enthusiasm of self-described "pro-life" forces for using the power of the state to impose their obtuse moral distinctions on the rest of us. The Catholic Church and many Protestant evangelicals are acting as partisan political players in a very dangerous manner. Once they have mobilized zealots to their moral causes, they can expect others to fight back in the same blind, intolerant manner.

The Republican right's religious agenda is no secret. Both the Catholic Church and numerous evangelical churches want to win taxpayer financing for their private schools. The Republican Party supports them. The school-voucher issue has been sold as help for poor children trapped in failing public schools, but the long-term objective is to secure government money to pay the tuition of all students in parochial and private religious schools. Given the strong emotions of recent events, the pro-lifers are advancing an explosive agenda--forcing other Americans (whom they regard as infidels) to pay for the propagation of their "one, true faith."

The New Colossus

The New Politics of Capital

While dispirited Democrats stew over their party's uncertain future, they might check out an unusual cluster of progressive "activists" forming within their ranks. Some politicians with real muscle are pursuing far-ranging possibilities for reforming the economic system. Their potential for driving important change is not widely recognized, perhaps because the reformers are drawn from unglamorous backbenches of state government – treasurers, comptrollers, pension-fund trustees. Yet these state officials, unlike the minority Democrats in Congress, have decision-making power and control over enormous pools of investment capital. They are fiduciaries who manage the vast wealth stored by state governments in public-employee pension funds, invested in behalf of working people – civil servants, teachers and other types of public workers – who as future retirees are "beneficial owners" of the capital.

In the wake of Enron-style corporate scandals, in which public pension funds lost more than $300 billion, some of the leading funds have restyled themselves as more aggressive reformers. They are picking fights with Wall Street orthodoxy they long accepted, like the obsessive maximizing of short-term gains. More important, they are broadening their definition of fiduciary obligations to retirees by trying to enforce corporate responsibilities to serve society's long-term prospects. Instead of adhering passively to market dogma, the activist funds now regularly accuse corporate managements and major financial houses of negligently or willfully injuring the long-term interests of pension-fund investors, therefore injuring the economy and society, too. Pension-fund wealth is thus being mobilized as financial leverage to break up the narrow-minded thinking of finance capital and to confront the antisocial behavior of corporations.

The core players in this struggle are the largest and most progressive pension funds in the nation – anchored by blue-state constituencies in California and New York. The heavyweights are occasionally joined by a handful of smaller states like Connecticut, North Carolina, Iowa and a few others where pension officials are kindred spirits. Together and individually, their efforts are possibly the only reform impulse ascendant among Democrats. Party leaders trying to rethink strategies could learn a lot from these state-level officials (and come to their political defense, if they had the nerve). "We're thirty-year investors and we have to take the long view," California Treasurer Phil Angelides explains. "I believe one of the things that led to the corruption of recent years was this notion that infected America that wealth is somehow created in six to nine months and all that matters is whether this quarter's returns are better than last quarter's – not whether you are building companies and products and an economy that will have enduring value."

His resonant phrase – "enduring value" – effectively summarizes the reform objective. The reformers understand that the current laissez-faire, let-'er-rip system damages important social values – equitable treatment of workers, the environment and other commonly shared public assets – and that both workers and retirees (and the state taxpayers who put up the money for public pension funds) have a strong self-interest, personal as well as financial, in husbanding the distant future: a healthy society and strong economy for themselves and their families.

The best evidence that the reform-minded pension funds are onto something – maybe something big – is the fierce and nasty counterattack launched by business and financial interests. Last spring, the Business Roundtable, the U.S. Chamber of Commerce and the American Enterprise Institute began a simultaneous barrage of complaints and name-calling accusations (faithfully echoed by The Wall Street Journal and Forbes). State pension officials, they warned, are departing dangerously from their fiduciary duties, putting "social issues" first and becoming pawns of organized labor. AEI's economic-policy director claimed CalPERS (the mammoth California Public Employees' Retirement System) "is abusing the public trust in a manner as serious and grave as any I have seen. They have a pool of money controlled by politicians and they are using that pool to strong-arm changes in targeted companies."

Why California Matters

CalPERS is the largest pension fund in the nation, holding $180 billion, and it is indeed trying to "strong-arm" companies – scores of them – into making reforms. Angelides has become a favorite target of the corporate critics – and a visible point man for pension-fund activism – because he sits on the boards of both CalPERS and CalSTRS (California State Teachers Retirement System), the country's second-largest, with holdings of another $125 billion. Angelides has pushed both funds to adopt a whirlwind of reforms – dumping tobacco stocks, blacklisting ten "emerging markets" that ignore international labor standards, redeploying capital to neglected sectors like inner-city redevelopment and innovative environmental technologies, and, above all, peppering scores of corporations, banks, brokerages, financial markets and federal regulators with critiques and demands for change.

Angelides has only one vote among the numerous board members at each pension fund, but he regularly prevails because his partner in reform is organized labor. Sean Harrigan, the regional director of the United Food and Commercial Workers, was, until very recently, the CalPERS board president. Alert elements in labor – unions led principally by the Service Employees (SEIU) and State, County and Municipal Employees (AFSCME) – are closely involved, mobilizing grassroots support and lobbying the policy-makers. Harrigan and Angelides have collected a lot of enemies, one might say, in all the right places. "The old holders of capital – the old status quo – are very nervous about this discussion of capital and the larger context of what's good for the economy," Angelides warns. "They don't want these questions asked. They don't want the old order to be changed. They want to control capital and they want to control it to their benefit, not to the larger economy's."

Harrigan tried to downplay the conflict, suggesting the trustees were simply advocating "corporate governance" improvements, as they have done for years, to better align corporate management with the interests of the corporate shareholders. "We think we are having an impact on the marketplace and influencing the way companies behave, at least on the margins," Harrigan told me. "There's been some marginal progress – that's all it is."

His opponents, it became clear, did not buy bland reassurances. In early December Harrigan was abruptly ousted from his position – whacked through an obscure maneuver at the State Personnel Board that reformers attributed to business-financial lobbyists allied with right-wing Republicans and assisted by Governor Arnold Schwarzenegger. The governor denied any role, but he followed up a few weeks later by proposing legislation to begin breaking up CalPERS into private personalized accounts similar to 401(k)s, thus dispersing its financial power and diluting its ability to exercise reform leverage.

What had been remote skirmishes over esoteric financial rules suddenly became a very visible political fight. To Angelides, the collision was fundamental and inevitable. "Look," he says, "in the course of a reform movement, you are going to rattle some cages and upset some people who have power. But if you're not willing to do that, what good are you as a reformer?"

Neither the treasurer nor his colleagues on the two pension-fund boards appear to be backing away from the fight. Two weeks after Harrigan was dumped, CalPERS trustees adopted another new labor-backed investment policy, this time against investing in corporations that profit by privatization of public services and jobs. "We are just beginning to have an impact on the ethos, the thinking, the culture in corporate America and the financial markets," Angelides says. "Why would we stop now? Not on my watch, we're not."

Building on the Past

The current wave of pension-fund reformers is building upon shareholder activism pioneered 30 years ago by churches and other social activists, most famously in the campaign to end apartheid in South Africa. The shareholder-petition movement continues to grow and exert influence, but has always suffered from an essential weakness: Under existing rules, CEOs and boards of directors are free to ignore the dissidents, even when their policy proposals draw overwhelming support from other shareholders. Many managements do decide to be responsive, if only for good public relations. But the vision of pension-fund power has never been fully realized. These new activists might conceivably be different.

For one thing, the state funds have grown enormously in financial girth. Fiduciary institutions in general (including mutual funds, corporate pension funds and some others) are now the majority owners of the 1,000 largest U.S. companies and collectively Wall Street's largest customer. The new strategies also seem more systematically focused because the public pension funds are not distant critics promoting broad principles of "socially responsible" behavior but major owners asking boards of directors tough and precise balance-sheet questions. Organized labor's active engagement also promises a much stronger base of popular support for reform ideas. So far, the collaborations among the progressive funds have brought together as much as $700 billion to support a corporate-governance issue, with a prospect of far greater firepower if other state pension funds join the cause (nationwide, public funds hold about $2.7 trillion and union-managed funds have another $400 billion).

The coalescence of labor and environmental activism is visible on an issue stalemated in regular politics – global warming. The overseers of around $800 billion in investor wealth have endorsed the Investor Network on Climate Risk, a coalition of pension funds with church-based, environmentalist and other like-minded shareholder activists led by Connecticut Treasurer Denise Nappier. The coalition is methodically engaging major corporations in the oil, auto and electric-utility sectors, which are the leading U.S. sources of carbon emissions – that is, global warming. The strategy is beginning to win some meaningful admissions of corporate exposure to financial risks (more about this later).

Other initiatives have led to swift and bloody conflicts. New York State Comptroller Alan Hevesi, a gray, subdued figure alongside Angelides, brings another $121 billion to the table as the single manager of the New York State Common Retirement Fund, third-largest in the nation. Other regulars include William Thompson Jr., who runs the New York City pension funds (more than $80 billion), and North Carolina Treasurer Richard Moore ($63 billion). Last fall Hevesi scored against Sinclair Broadcast Group, which intended to televise a nasty propaganda film attacking John Kerry in the guise of "news." As a substantial shareholder, Hevesi objected; Sinclair backed down. Hevesi recently won an important corporate-accountability precedent in his fund's investor lawsuit against fraud-riddled WorldCom. Ten former directors of the collapsed telecom company agreed to pay $18 million out of their own pockets rather than risk further exposure to fraud accusations. A year ago Angelides scored a bull's-eye when he demanded the resignation of Richard Grasso, the grossly overpaid president of the New York Stock Exchange. Other pension leaders jumped aboard. Grasso was gone the next day.

The Spitzer Factor

These officials draw inspiration from the stunning reform victories won by New York State Attorney General Eliot Spitzer, who has blistered financiers and corporate moguls with his continuing exposures of scandal. When Spitzer demanded and won reformed operating rules from Merrill Lynch, the pension-fund leaders embraced the principles and applied them as their own new rules for the banks and financial houses handling their money. More recently, Spitzer exposed a bid-rigging scandal in the insurance industry. Four pension funds, led by AFSCME, nominated an independent director for the board of Marsh & McLennan and the firm accepted him – a former federal prosecutor now collaborating with the AG on reforms.

Spitzer intends to run for New York governor in 2006. Angelides intends to do the same in California (though his prospects were dimmed by the abrupt rise of Gov. Arnold). The two men can be seen as representative figures, since each is trying to revive an important dimension of the reform tradition their party has virtually abandoned. Like the earlier Progressives, Spitzer seeks to tame the abuses and excesses of American capitalism, using inventive approaches and toughness (who else is taking on his home state's most powerful industry?). Angelides is more like a New Dealer – an economic liberal who seeks to transform the system more deeply. He boldly espouses basic principles of economic liberalism (and forgotten principles of sound investing) without apology.

With both Spitzer and Angelides running in 2006, Democrats will hear from aggressive campaigns that could provide building blocks for regenerating a reform-minded party. Angelides, for instance, articulates – actually resurrects – old wisdom about the nature of economic development. Public investment and private enterprise are not at war with each other, as the right has taught people to believe. They are mutually reinforcing and the key to insuring equitable opportunities for all (if you doubt this, check out the history of the world's sixth-largest economy – California).

If Democrats looked more closely at the issues that Spitzer-Angelides bring to corporate governance, they would find a powerful rebuke to George W. Bush's loose talk about "democracy" and the "ownership society." While Bush calls for democracy worldwide, he is smothering the ownership rights of corporate shareowners at home. In behalf of business-financial elites, the White House has bullied Securities and Exchange Commission (SEC) chairman William Donaldson (a GOP financier himself) for favoring the proposal to allow major institutional investors like public pension funds to nominate independent directors to corporate boards. If that proposal is killed, as appears likely, reformers led by the Carpenters Union will be pushing a more direct initiative at the corporations: requiring that directors and CEOs who run unopposed at least win with majority support from the shareholders. How radical is that? Too radical for the status quo's moguls and titans. They know that majority rule would allow a broad coalition of institutional investors to withhold their votes and veto entrenched managements.

A Way to Talk About Power

Converting obscure financial issues into broadly understood political issues requires deft translation, but will speak to a very broad audience of abused Americans. It's a way to talk about excessive corporate power – a major public concern, according to polls, yet seldom mentioned – with concrete examples rather than abstractions.

Labor seems to understand the potential politics better than most. Numerous unions are getting engaged, and a few have committed real resources to organizing and educating. Now some 50 AFSCME members are pension trustees around the country. SEIU has a staff of ten field organizers nationwide who stay close to pension boards and the relevant elections. Together, the two unions backed a librarian elected by co-workers to Ohio's retirement board, gaining a 5-to-4 majority at the $65 billion fund. Three new labor-friendly members were elected in New Mexico, two more in Maryland.

Oddly enough, this small-d democratic brand of politics is well suited to the daunting realm of finance capital. At its best, organizing is about building "relationships with power," and Wall Street itself functions daily on the power relationships among major financial players – the people who make the deals and decide who gets what, who's in charge, whose values will be reflected in how a company operates. The problem is, the millions of workers who, collectively, are major corporate shareowners do not get a seat at the table appropriate to their wealth. (The same orphaned status applies to most small investors, who turn over their savings to mutual funds that proceed to ignore their interests.) Creating trustworthy financial intermediaries that speak reliably for their clients is a fundamental reform in itself.

In this convergence of rising politicians and activist elements, are we glimpsing the vanguard of a new kind of reform politics? My answer is: yes, maybe. This reform impulse is different because it seeks to change the system from within, using workers' capital as the driving wedge. Yet it is also traditionally liberal in that the latter-day reformers seek to leverage government's regulatory system and build popular support for new and stronger regulatory legislation (though not yet in Washington).

Thinking Like a Capitalist

The largest public pension funds, including CalPERS, have always been conflicted in their obligations to workers and retirees. They are supposed to invest only in the "best interests" of their beneficial owners, which traditionally has meant seeking the best financial returns. But they have often seemed to be playing for the other side – trashing the environment, workers and communities, and cutting costs in ways that undermine long-term economic prospects. Dennak Murphy, a West Coast organizer for SEIU, crisply explains: "We have nearly 800,000 members, most of whom are in public employee retirement funds [including 210,000 in CalPERS]. The pension funds take their money and buy stocks in two or three thousand companies. Then a lot of those companies turn around and screw the workers."

No other major investors in finance capital would tolerate such abuse for long – they would dump the stocks and perhaps plot retaliation. Pension-fund managers are expected to look the other way and accept collateral damage to their members as unavoidable on the grounds that diversification – spreading their investments across the entire stock market and effectively owning the broad economy – reduces their risk. Passivity does not protect them from horrendous losses, however. CalPERS lost $586 million on WorldCom alone.

Grossly oversimplified, the reform strategy is guided by two interacting principles: First, pension funds should invest to restore the once-common understanding that, in the long run, you can't have a successful economy and a failing society (roughly speaking, that's what the "market ideology" ignores). Second, while pension funds adopt this perspective to advance the self-interest of their members (including long-term financial soundness), they should also use their leverage to make the financial system incorporate these principles as the system's operating routines.

If the happy day ever arrives when the financial system itself recognizes and reinforces the values of long-term investing, miscreant corporations will be punished in terms they can readily understand: falling stock prices and higher costs on their borrowing. Stock-market analysts will then have to calculate what they now routinely ignore – the long-term economic consequences of social destruction – and investors will learn to prefer shares in healthy companies. The marketplace, in effect, will have the information to "mark down" bad guys and reward managements that are truly forward-looking. That, at least, is the vision.

Angelides is familiar with the accounting fallacies of capitalism because he's a capitalist himself, a developer and investor who made his fortune in California real estate. "I would make the case – this comes from my experience in real estate – that the best, most highly regarded companies are the ones that are profitable and also produce products that are of utility to society, that increase our productivity and enrich our lives," he says. "When people step back and ask what they most want to see in the private sector, it is both profitability and good results for society. There is no reason capital shouldn't be held to the same standard."

Angelides led a tough, two-year fight to persuade CalPERS and CalSTRS to dump tobacco company stocks from their portfolios, but he prevailed on hard facts of investor risk, not social sentiment. "We worked day and night to lay out the risks to the companies – the increasing regulatory climate, the increasing lawsuits the companies would face," he recalls. "It wasn't simply that we don't like tobacco."

Acknowledging Risks to Society

Yet when even the largest pension fund withdraws its capital from antisocial companies, they are unlikely to feel the sting. For genuine muscle, the reformers will have to generate a market-wide reaction to their critiques – with many investors, large and small, shunning the companies. That's why activists are working to accomplish their second strategic principle: convincing the governing institutions of the financial system to acknowledge that society's risks are also financial risks and that these factors should be made standard elements in evaluating corporate worth.

Confronting industrial producers of carbon emissions, the Investor Network on Climate Risk follows this logic systematically. Connecticut Treasurer Nappier, who leads the network, explains: "My basic premise is that by being an activist I can add value to the companies, not just by the integrity of their financial accounting but on issues we refer to as 'sustainable governance,' like the environment, treatment of workers, diversity in the workforce and on corporate boards. Climate change will affect the long-term value of the companies and therefore our pension-fund portfolio."

The investor network filed shareholder petitions with 25 corporations – the big names in oil, autos, electric utilities – asking them to disclose their risk exposure on global warming, then to explain how the companies intend to avoid the potential losses. Last fall, American Electric Power, the largest coal-burning utility and therefore the largest U.S. generator of carbon emissions, startled the industry by responding forthrightly. It not only acknowledged the reality of global warming's threat to the world and its own risk exposure but also predicted that U.S. controls on carbon emissions are likely in the next decade and spelled out its capital investment plans to begin reducing emissions. AEP had rejected previous petitions. Why did it respond this time? "They asked a reasonable question that had an answer," said AEP director Robert Fri. "What would be the economic impact to the nation's largest coal-burning utility? The answer is a lot." Other utilities, like Cinergy, followed with similar reports. In oil, ChevronTexaco and several smaller companies got religion too. In autos, Ford prepared a lame promise to make big changes by 2030.

The noose of global warming is tightening on U.S. industry, as the Kyoto Protocol enters active enforcement. The global reinsurance firm Swiss Re has warned its corporate clients to come up with strategies for global warming or risk losing their liability coverage. The Association of British Insurers warns that "businesses responsible for high emissions of greenhouse gases could be held liable for the damage that is caused by climate change."

CERES, the environmental coalition that does strategy and research for Nappier's network, explains that the business risks go further than lawsuits and regulation. Electric utilities that build new power plants without incorporating carbon reductions may find they have misused billions in capital and are stuck with obsolete plants. Auto companies that continue to resist the transformation to nonpetroleum cars will lose market share to forward-thinking competitors like Toyota. Energy firms that ignore renewable sources are missing future business opportunities. These sectors might someday find they are the next tobacco industry, facing billions in damage lawsuits, insurance costs and capital losses. Yet most corporations still do not mention global warming in their quarterly disclosures of "material risk." Are they misleading shareholders? Thirteen pension funds have petitioned the SEC to require all companies to disclose these hidden risks.

Meanwhile, the drive to inject these issues into the financial system's formal rules is already under way. In essence, the "social screens" pioneered by "socially responsible investor" funds – excluding rogue products and companies from the portfolio – would be reformulated to market standards. Nappier has promoted the development of an alternative Standard & Poor's 500 index, alongside the existing one, that would include only companies actively committed to sustainable economics. A rival S&P index could deliver serious injury to the stock prices of companies that get kicked out of the "white hat" 500.

Since the risk-rating agencies also failed utterly to alert investors to scores of fraudulent corporations in the recent wave of business scandals, they too are becoming more sensitive to the reform critique. Social issues do affect returns. Contrary to market lore, the accumulated evidence shows that the best-managed and least socially destructive companies also perform better in the stock market than "low road" rivals in the same sector.

Major pension funds, in the end, will still need to diversify their holdings, but diversification can be done more astutely than passive indexed investing that simply buys stocks across the market without making any distinctions. The CalPERS professional staff is designing an experimental index that reflects the overall economy but leaves out companies with a record of high risks and price volatility – factors typically accompanied by negative behavior on "social issues." If this proves successful, CalPERS will have invented a new investment model that other funds can adopt. Angelides also envisions "actions of consequence" for truly notorious corporate behavior. "If there are recalcitrants," he suggests, "you kick them out of the index."

The reformers will get no help from Washington. The Bush administration clearly stands with the CEOs, who whine about the burdens of complying with the new, rather modest reform regulations. On the other hand, the stock market is still sick, limping sideways for the last three years because investor distrust remains strong. Angelides likes to point out that after the crash of 1929, it took the stock market 25 years to regain its old peak.

Democrats have a political opportunity in this situation. They can rally around reformers and build popular support for their social-economic agenda. Or they can remain quiet so as not to offend very powerful corporate-financial interests. Their choice may tell us something about the party's future.

Eclipsed in Iraq

The presidential pageant has now risen full in the sky and is blocking out the sun. Until November, we dwell in a weird half-light, stumbling into spooky shadows but shielded from the harsh glare of the nation's actual circumstances. Down is up, fiction is truth, momentous realities are made to disappear from the public mind. The 2004 spectacle is not the first to mislead grossly and exploit emotional weaknesses in the national character. But this time the consequences will be especially grim.

The United States is "losing" in Iraq, literally losing territory and population to the other side. Careful readers of the leading newspapers may know this, but I doubt most voters do. How could they, given the martial self-congratulations of the President and relative restraint from his opponent? High-minded pundits tell us not to dwell on the long-ago past. But the cruel irony of 2004 is that Vietnam is the story. The arrogance and deceit – the utter waste of human life, ours and theirs – play before us once again. A frank discussion will have to wait until after the election.

Several Sundays ago, an ominous article appeared in the opinion section of the New York Times : "One by One, Iraqi Cities Become No-Go Zones." Falluja, Samarra, Ramadi, Karbala, the Sadr City slums of Baghdad – these and other population centers are now controlled by various insurgencies and essentially ceded by US forces. This situation would make a joke of the national elections planned for January. Yet, if U.S. troops try to recapture the lost cities, the bombing and urban fighting would produce massive killing and destruction, further poisoning politics for the U.S. occupation and its puppet government in Saigon – sorry, Baghdad.

Three days later, the story hit page one when anonymous Pentagon officials confirmed the reality. Not to worry, they said: The United States is training and expanding the infant Iraqi army so it can do the fighting for us. That's the ticket – Vietnamization. I remember how well General Westmoreland articulated the strategy back in the 1960s, when war's progress was measured by official "body counts" and reports on "new" fighting forces on the way.

But this time Washington decided the United States couldn't wait for "Iraqization," a strategy that might sound limp-wristed to American voters. The U.S. bombing and assaults quickly resumed. The Bush White House is thus picking targets and second-guessing field commanders, just as Lyndon Johnson did forty years ago in Indochina. Bush is haunted by the mordant remark a US combat officer once made in Vietnam: "We had to destroy the village in order to save it."

Meanwhile, Bush's war is destroying the U.S. Army, just as LBJ's war did. After Vietnam, military leaders and Richard Nixon wisely abolished the draft and opted for an all-volunteer force. When this war ends, the volunteer army will be in ruins and a limited draft lottery may be required to fill out the ranks. After Iraq, men and women will get out of uniform in large numbers, especially as they grasp the futility of their sacrifices. Yet Bush's on-the-cheap warmaking against a weak opponent demonstrates that a larger force structure is needed to sustain his policy of pre-emptive war. Kerry says he wants 40,000 more troops, just in case. Old generals doubt Congress would pay for it, given the deficits.

Iraq is Vietnam standing in the mirror. John Kerry, if he had it in him, could lead a national teach-in – re-educate those who have forgotten or prettified their memories but especially inform younger voters who weren't around for the national shame a generation ago. Kerry could describe in plain English what's unfolding now in Iraq and what must be done to find a way out with honor. In other words, be a truth-teller while holding Bush accountable.

Kerry won't go there, probably couldn't without enduring still greater anger. His war-hero campaign biography inadvertently engendered slanderous attacks and still-smoldering resentments. Kerry, like other establishment Dems, originally calculated that the party should be as pro-war as Bush, thus freeing him to run on other issues. That gross miscalculation leaves him proffering a lame "solution" – persuading France, Germany and others to send their troops into this quagmire. Not bloody likely, as the Brits say.

Bush can't go near the truth for obvious reasons. If elected, he faces only bad choices – bomb the bejeezus out of Iraq, as Nixon bombed Vietnam and Cambodia, or bug out under the cover of artful lies. The one thing Bush's famous "resolve" cannot achieve is success at war. Never mind, he aims to win the election instead.

So this presidential contest resembles a grotesque, media-focused war in which two sides skirmish for the attention of ill-informed voters. Bush won big back when he got Iraq off the front pages and evening news with his phony hand-off of sovereignty and his chest-thumping convention. But then his opponents – the hostile insurgents in Iraq – struck back brilliantly and managed to put the war story back in the lead on the news (might we expect from them an "October surprise" of deadlier proportions?). In this fight, Kerry is like a bystander who might benefit from bad news but can't wish for it. Most combat correspondents, with brave exceptions, hesitate to step back from daily facts and tell the larger truth. Maybe they are afraid to sound partial.

The timing of events in Iraq does not fit propitiously with the election calendar. A majority has already concluded that it was a mistake to fight this war, but public credulity is not yet destroyed. A majority still wants to believe the strategy may yet succeed, that Iraq won't become another dark stain in our history books. During Vietnam, the process of giving up on such wishful thinking took many years. The breaking point came in 1968, when a majority turned against the war. LBJ withdrew from running for re-election. Nixon won that year with his "secret plan" to win the peace. The war continued for another five years. US casualties doubled.

This time, public opinion has moved much faster against the war, but perhaps not fast enough. People naturally are reluctant to conclude that their country did the wrong thing, that young people died for a pointless cause. If the war story does stay hot and high on front pages, a collapse of faith might occur in time for this election, but more likely it will come later. Nixon won a landslide re-election in 1972 with his election-eve announcement that peace was at hand, the troops were coming home. In the hands of skilled manipulators, horrendous defeat can be turned into honorable victory. Temporarily at least. When the enemy eventually triumphed in Indochina, Nixon was already gone, driven out for other crimes.

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