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Op-Ed Thu Oct 13 2011

Op-Ed: A Skeptical View of the Occupy Movement

by Peter Huff

Part of the challenge in assessing the Occupy protests is that it requires one to separate the optics of the moment and the media narrative that follows, from the substance of the positions being put forward by the group.

The people involved that I have spoken to have varying degrees of economic comprehension, but there are some points that have merit. For each "End the Fed" sign that hints at a certain level of sophistication and understanding the role of central bankers in our economic malaise, there is a "Tax the Rich" slogan that cheapens the debate to the point of indifference.

I'm skeptical about the Occupy protests. They have a staged feel to it; long on theatrics, short on a primary focus. If this was ever a grass roots movement, it is no longer. As I write this, there are now fundraising efforts on the back of the protest. The unfortunate involvement of unions, socialists, communists and anarchists will likely end any meaningful contribution by the more rational part of the protest. If there was a time for this movement to advance ideas that would be met with agreement by the majority of Americans, it has passed, and has now devolved into an expression of left-wing politics that could have been transplanted from any recent year.

As a result of the incoherence, the best way to describe this nascent scene is by the cognitive dissonance found in its message.

Let's consider...

Tax the Rich

It sounds so simple -- tax the rich. Take the "1%" and make them pay more in taxes. That will create enough revenue to plug the deficit, and allow the economy to grow.

Or not.

The CBO score of President Obama's latest jobs bill [PDF] estimates that the highly touted tax increases on the "rich" would result in $453 billion over 10 years. That is an impressive figure. However, it is wholly insignificant when compared with the current level of deficit spending.

The US government added $1.23 trillion in debt in 2011, or about $103 billion per month. Taxing the rich, this panacea of policy and justice, would, over the next 10 years, increase revenue to offset only four months of current spending.

Ten years vs. four months. This is not a solution. It's not even a serious attempt at a solution.

Wall Street & Labor

As unions position their organizations in support of the "Occupiers," an unnatural balance is struck in order to achieve the image of supporting the protest while disregarding the substance of "Wall Street's" involvement with unions. Consider that a standard part of organized labor's appeal is their benefit plan, which among other things, includes a worker's retirement pension. A multitude of these pension plans are defined benefit, i.e., the retirement compensation owed to an individual upon their retirement is defined in advance. This requires the fund to be managed according to cash flow requirements and forecasts benchmarked to an expected rate of return. Of course, the unions do not manage the pension funds themselves, financial management companies, generally referred to as Wall Street, manage those funds.

It is commonplace for many pension funds to benchmark an annual return of 8 percent. In order for a pension plan to continually gain 8 percent ROI, year over year, they must rely on the best money managers Wall Street has to offer. In order to maintain that high standard of return, especially in down years, money managers must venture further into riskier investments.

An insightful look into this can be found here regarding the Illinois Teachers Retirement System.

Is this the "greed" that the Occupy protesters are protesting? Whose "greed" is the primary driver in this relationship? The investment manager, whose role is tactical, or is it the pension fund, which is strategic in its demands for 8 percent returns?

It strikes me as duplicitous that these organizations seek to demonize the group of professionals upon whose labor and performance their own promises and obligations to their members are dependent.

Crony Capitalism

One area where the Occupy protesters and the vast majority of Americans find themselves in agreement is opposition to a growing relationship between governments and business interests. Most people inherently see the risks of allowing these relationships to become symbiotic, at the expense of the broader population. However, the Occupy protesters seem to identify this nexus only on ideological grounds.

Let us look at some recent examples:

Solyndra: The now bankrupt solar panel company exemplifies a political economy, where the formation and capitalization of a company is a function of ideology and political connections rather than the merit of the business model. However, no matter what political leverage it had, the company could not compete in a global market for its products. New emails show that this was clear for several years, but the risks were ignored by Obama administration officials in charge of lending.

Comcast/FCC: Earlier this year the FCC abdicated its responsibility as a neutral arbiter in judging whether the Comcast-NBC merger violated anti-trust laws. In exchange for agreeing to special favors, including subsidizing the cost up to 80 percent of their services to low-income consumers (creating annual $100 million structural loss that will be borne by either shareholders or existing customers), mandating increased content specific to minorities (regardless of whether there is a market for this content), etc., the FCC approved the merger [PDF].

The Occupy protesters are clearly proponents of regulators given their stated goal of increasing regulatory authority for government agencies. Would an example of a regulatory body expanding their jurisdiction into legislative authority temper this enthusiasm? Likely not.

Obamacare: The creation of a maze of legislation so numerous and complex that thousands of companies, labor unions, and entire states have been granted waivers from the law. Waivers have been granted to politically connected organizations and now represent a competitive advantage over firms who are subject to the healthcare law. The law institutionalizes the value of political clout over market competition. This favors larger organizations over smaller firms, and promotes the infusion of corporate money rather than discourages it.

It is true that many of the protesters are supporters of a single payer health system. It should be noted that a single payer healthcare system consolidates more decision making power to a small group of officials, which increases the susceptibility of corruption.

Given these examples, it would seem likely for a protest opposing corporatism to acknowledge that the current administration has increased the opportunities for businesses to take advantage of government access. With the protesters I have spoken to (all in Chicago), they are supportive of the Obama administration and assign very little culpability to its policies.

Student Debt

This seems to be the most specific demand from the Occupy protests. It makes sense that it would be. The vast majority of protesters are under 30 years old and many are unemployed. Many feel that, given the investment in their education, they are underemployed. In any case, many are struggling with the ability to pay the accumulated student loan debt, so the debt should be forgiven.

This demand is incredibly shortsighted. They don't understand what this demand would mean for future students who need access to capital in order to go to college. Debt forgiveness would mean that every future student would be highly scrutinized and the loan amount would be determined by their ability to pay the debt back (much like the real world). This would obviously reduce access to loans for students who chose degrees that led to less lucrative careers. For a protest that deploys signs such as "people before profits" this would surely be an unintended consequence of its demands. How long until we hear of the menace of sub-prime student lending?

But of course we needn't worry when the government is there to back the paper that no one else wants. Over the last decade, congress has positioned the US government as a major provider of student loans and last year made itself the sole provider. It should be reassuring that the US treasury is adding more debt to its balance sheet when the holders of this debt are pushing for payment adjustments. This sounds eerily familiar to the beginning of the housing collapse we have yet to live through.

So again, it is incomprehensible why the protesters are targeting Wall Street when they should be directing their anger at the federal government and their educational institutions.

The 99%

"The 99% vs. 1%." It likely polled well in a focus group. It certainly sounds better than "the 20%." It is reminiscent of the way all armies believe that God is on their side, and I'm sure it was chosen for that effect on the left base of the democrat party. However, the message doesn't match the reality.

The Occupy protests are still a big-government movement. We have enacted big government policies with each political party in power over the last several decades. In fact, I'm not sure if I have lived through an era of a small government movement.

It is apparent over the last decade, where government authority has become omnipresent in more aspects of our lives, the less we find satisfaction in this arrangement. It is the saying, the bigger the state, the smaller the man. In that we believe we have the answers for ourselves, we make the mistake of thinking that our answers can and should apply to others. In practice, as citizens in a democracy, we can agree on general laws and conduct, but when our laws and regulations focus on applying preferences rather than upholding standards to which all are subject, then the probability of the law satisfying anyone is reduced to zero.

It is because of this understanding that I do not begrudge the Occupy protests in their entirety.

~*~

Peter Huff has worked in the capital markets industry for the last eight years in business development and consulting roles.

 

Isaac / October 14, 2011 12:24 AM

"Peter Huff has worked in the capital markets industry for the last eight years in business development and consulting roles."

What exactly does that mean, anyway?

Margaret Ellwood / October 14, 2011 9:58 AM

I, too, am skeptical of the potential for the "Occupy" protests to gain significant traction, but don't believe you've adequately proven your thesis that "...if ever there was a time for this movement to advance ideas that would be met with agreement by the majority of Americans, it has passed."

Instead, what you've proven (and buried in your provocative piece) is that these diverse groups with diverse grievances would do themselves a huge favor by moving the "Occupation" to Washington and coalescing around the cohesive solution of ending "Crony Capitalism." That would bring this non-ideological member of the "99%" along. It is my contention that the seeds of a major movement are being sown by these disaffected Americans who need only the power of organization around a solution directed at the root of all of today's problems: increasing dysfunction in all three branches of government because of the influence of lobbyists and special interests. Take that money out of politics, as well as the time spent by every politician in fundraising, and watch how quickly government begins to attract people who truly represent their constituents.

The "Tea Party" began in much the same way as this current movement. It did not have a coherent, cohesive message other than a long list of grievances. What it quickly found was that it needed one "bogeyman" (the Democratic Party, importantly including the irrationally feared and hated President) and a devoted media outlet (yes, Fox) with charismatic mouthpieces, both serving to help form nationwide organizations with subgroups and sects. Their ranting against the Left helped to get them representation in Congress and we all know how well that's working. This movement is slowly, but surely declining in importance, while succeeding in obstructing progress because they started and remain primarily as complainers rather than problem solvers.

Bottom line, I agree that the current movement will fizzle out as another "wingnut" fringe unless it figures out that 99 v.1 should be focused on gaining more influence for the 99% of us who are not represented by government. Only when we are properly and fairly represented will this country be able to address the current crisis with real solutions--Simpson-Bowles anyone?-- Here's to them finding their way to Washington!

Peter Huff / October 14, 2011 2:09 PM

Margaret,

Thanks for the comment. I agree with many your sentiments. However, the further I look into this movement, the less I believe it has a chance to make a positive difference for this country.

It has been carefully crafted to look like a grassroots movement, but its a planned protest movement by anti-capitalist and pro-union organizations. This will eventually all come out.

For example:
October2011.org website.
- Registered
on May 22nd 2011 (months in advance of the actual protests)

http://www.dnsstuff.com/tools/whois/?tool_id=66&token=&toolhandler_redirect=0&ip=october2011.org

- Note the server: MAYFIRST.org
Mayfirst.org's description: May First/People Link is a politically progressive member-run and controlled organization that redefines the concept of "Internet Service Provider" in a collective and collaborative way. May First/People Link's members are organizers and activists
MayFirst's Director is an ex ACORN community organzizer and the organzation is listed as Members Local 1180, CWA, AFL-CIO

- The address, 707 Gillespie Ave charlottesville VA, is apparently the home of Warisacrime.org and was host to a pro-Obamacare cookout featuring Cindy Sheehan in 2009.

These groups are obviously well organized and intent on hiding their involvement in the Occupy movement.

I'm not against their excercising their freedom of speech in any way, but why the need to hide? Could it be because these organizations currently prosper from their own cozy relationships with government.

Ramsin / October 16, 2011 11:15 AM

Wow. The analysis in this article was bad enough, but this comment tracing some nefarious union "conspiracy" attributable to a few organizers with no connection beyond a website registration of a website only questionably connected itself to the Occupy movement is really a whole new level of misplacement.

The fact that people planned to protest Wall Street at some point in the past must mean "the unions" (who seem to you to be about a shade away from terrorists, comparing them with Communists and Anarchists--which must be news to these guys, or these guys) are planning all of these events:

Occupy Streams

Some powerless, isolated "former organizers" are surely the same as multi-billionaire industrialists who funded the on-going infrastructure of the tea party, right? Is that the idea?

There was an economy before the explosion of the financial sector, and there will be one after it. It frustrates me to no end that the great minds of capital markets are still deferred to on fundamental questions of economics, particularly as it intersects with public policy and social relations. Or that the public should accept their ideas of how to fix an economy that they see, in its idealized form, as a system where financial markets are accruing wealth at ever-increasing ratios to what goes to laboring classes. The financial sector's explosion was a *function* of rent seeking, it did not rise despite of it. It was crony corporate relationships that led to the forcing of NAFTA down the unwilling throats of the American and Mexican electorates, a key moment in the escalating domination of capital in the labor/capital dynamic. The financialization of the economy has led to income inequality, economic breakdown, and political unrest across the world, to name only a few of its problems. The worldview of the operators of those institutions is one of creating paper fortunes and taming autonomous social, political, and economic institutions to insulate and grow their fortunes unfettered. It's a worldview that should become increasingly embarrassing to express publicly.

Edited to make immature, stupid, angry late night ramblings coherent.

Peter Huff / October 16, 2011 6:36 PM

Ramsin,

Frankly, it is completely unprofessional to make ad hominem attacks on contributors to your own web site. You should put the original comments back because it shows that you are not interested in a diversity of opinion nor fostering intelligent discourse.

The personal insults and smearing is exactly why I have been relucant to contribute, and you have only reinforced this. If you want to know why there are few conservative voices who contribute to Mechanics, please take note of your behavior.

Dan / October 16, 2011 8:34 PM

I am glad that any "ad hominem late night ramblings" were removed. This is the first time I've commented on Mechanics, but the only reason I read the comments on gapersblock is because those atacks are infrequent. If I wanted that, I'd read the Trib comments. Dear editors, please continue to keep the site free of bs.

That said, I found a number of Mr. Huff's initial post interestign and thought provoking. However his follow-up comments are less so.

So what if the peope behind OWS are also in unions? From what I remember, some of the unions got a bailout of sorts by the federal government, so I don't see them biting the hand that fed them.

And I agree with Ms. Elwood. The biggest part of these protests for me (as an occasional protestor), is that there is the group of folks who get their opinion heard in DC and on Wall Street and the vast majority of us don't. Unions speak for less than 10% of Americans, so that leaves 89% of us with no voice where it matters.

And the simple fact is these protests are all disorganized and unorganized and unfocused. If they had some central organization they'd have more power. But if they get that central organization, they'll lose a lot of people supporting them.

Peter Huff / October 17, 2011 9:54 AM

Ramsin,

For posterity sake. The October2011.org site is finacially backed by Global Alliance for Justice, which is the same organization that is handling donations for the Occupy Wall Street (Zuccoti Park group). Go to each website and make a donation. They go to the same place. That is not questionably connected. That is undeniably connected.

Lets talk about the organizer, Kevin Zeese. You say he is powerless and isolated, but when asked about the connection between the October 2011 event and Occupy Wall Street protest, he confirms that he has been involved in planning the Occupy Wall Street protests.

http://www.youtube.com/watch?v=7pmJdjSns4E&feature=player_embedded

As for powerless, how does his email address show up on an email thread from Dylan Ratigan (MSNBC) and Matt Taibbi (Rolling Stone) and Noam Chomsky (MIT) discussing media strategy?

http://owsmail.dc406.com/OWSMailList_2062.html

Read thru the thread. Its interesting to see ">> here it is w/ Dylan's suggested revisions, the ending needs smoothing out,
>> let's see if we can finalize something tonight in GA - flooded w/ calls rght
>> now, will be on NBC w/ Brian William tonight"

GA is general assembly, where the occupy wall streeters meet and vote on action items.

I'm sure that this is no cause for skepticism. A MSNBC host revising the mission statement of a protest movement.

As I said previously, this will all come out eventually.

Jeff Burdick / October 18, 2011 4:43 PM

I don't find it useful to critically grade or gives thumbs up/down to different elements of the Occupy Movement. it suggests that if they don't completely cut the mustard, it is okay to stay on the sidelines. The Occupy Movement, which I have supported in person and online, is all about active expression regardless of perspective. Especially in Chicago and Illinois, we are too accustomed to just assuming all the corruption will never end, but ironically it is partly our lack of active involvement (even staying up on civic issues) that contributes to their perpetuation. As a humor writer, I've seen the same among the local comedy ranks. When was the last time you saw really penetrating, knowing local political comedy? I have to go back to the days of Aaron Freeman and his "Council Wars" act in the 80s. My attempt to combat this comedic apathy is a series of lampoons of Rahm Emanuel entitled "Rahms' Hand." Hope you enjoy and comment on them: http://tinyurl.com/3vpauh3

Dennis Fritz / November 1, 2011 10:23 AM

"The unfortunate involvement of unions, socialists, communists and anarchists will likely end any meaningful contribution by the more rational part of the protest."

Well, that pretty much says it all, doesn't it? To hold left-of-center political views and/or to belong to a union precludes the possibility that one is "rational" and makes one's participation in the OWS movement "unfortunate."

Rubbish.

Folks, don't let the length of this peice or its tone of pseudo-reasonableness fool you. It is just another hit-job.

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