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The House That Gramm Built

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Posted on Jul 14, 2008

By Marie Cocco

The big trouble roiling the financial markets and the impending federal bailout of mortgage giants Fannie Mae and Freddie Mac offer voters the sort of incomprehensible mess they hope the next president will make more orderly and less costly to taxpayers. Not a chance.

    The seeds of the meltdown were sown over decades, and there is no way to avoid reaping the harvest now. The public may not trust John McCain to fix things—he famously admitted once that he doesn’t know much about the economy. But Barack Obama offers an economic résumé at least as thin, having spent only short time in the Senate before running for president.

    Of all people, the person we should be paying attention to is Phil Gramm. The former Texas senator, a close friend and campaign adviser to McCain, made a fair mess of things politically last week when he declared that the state of the economy really isn’t so bad. It’s just that Americans are in a “mental recession,” and we’ve become a “nation of whiners” with unceasing complaints.

    Why should we listen to this guy’s poppycock? Because Gramm is the embodiment of the economic philosophies and misguided policies—embraced by Republicans and far too often by Democrats—that have gotten us precisely where we are today.

    He has espoused, promoted and written into law economic policies based on the simplistic arguments that cutting taxes and deregulating huge industries (especially the financial industry) are the keys to making magical markets work. And if this turns out to be voodoo, the blame is to be shifted either to big-spending Democrats or to the great mass of American “whiners.”

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    Gramm’s name is familiar to most Americans because he got first billing on the Gramm-Rudman-Hollings law, the Reagan-era budgetary device that was supposed to reduce the federal deficit by forcing automatic, across-the-board cuts in programs. The beauty of Gramm-Rudman, if you were a conservative, was that it thoroughly ignored the role that tax cuts had played in creating the deficit, while simultaneously forcing cuts in spending that otherwise could not win approval from Congress or political support back home.

    But Gramm has been much more than that. He was the congressional godfather of Reaganism, the man who—initially as a Democrat—wrote the first Reagan budget and persuaded conservative Democrats to provide the crucial bloc of votes necessary for its passage. In case you’ve forgotten, that first effort cut just about everything, including Social Security.

    Later in his career, as a Republican, Gramm authored the legislation that is widely fingered as one of the culprits in creating both the Enron debacle and the broader financial crisis that plagues us now. His handiwork included the legislation that dismantled the Depression-era walls that separated the financial activities of commercial banks, investment banks and the insurance industry. He also slipped the infamous “Enron loophole” into law, allowing energy futures to be traded without federal oversight. Various investigations of the Enron collapse have pointed to this loophole as crucial to the manipulation of the California energy market by Enron, which provoked an energy crisis in the state in 2000 and 2001.

    What could Gramm do for an encore?

    For one thing, he continues to promote tax cuts as the economic idea that stands above all others. In an April interview with U.S. News & World Report, for example, he credited tax cuts exclusively with Ireland’s recent economic success and said that “nobody has ever” achieved prosperity through government spending. Of course, Gramm conveniently ignored Ireland’s cradle-to-grave social safety net, which includes a national health care system as well as a state-supported college education for those who qualify.

    For another, he is a vice chairman of international banking giant UBS. He has raised millions in political donations from the very financial companies he helped deregulate, and whose rapacious conduct helped bring on the crisis we confront, and will apparently pay for, today.

    So don’t dwell too much on Gramm’s silly gaffe about mentally distraught whiners. Campaign “surrogates” often talk out of turn or, rather, they say what’s really on their minds and not in their talking points. Obama confronted a similar situation during the Democratic primaries, when he ousted a foreign policy adviser for calling Hillary Clinton “a monster.”

    The trouble with Gramm isn’t what he says. It’s that he has had McCain’s ear—and has laid claim to ours—for far too long. 
   
    Marie Cocco’s e-mail address is mariecocco(at)washpost.com.
   
    © 2008, Washington Post Writers Group


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ApprxAm's avatar

By ApprxAm, July 16, 2008 at 8:07 pm Link to this comment

Gramm is a thousand-year old weakling who’s used his mind and political connections and know-how to steal candy from the distracted many. While Americans were worried about gays and terrorist, fighting the culture war and sending her children to fight for oil overseas, while oil companies weren’t drilling over here with the leases they already have, now comes the boom and it’s scary.

Whinning will be the least of it when the country goes into full-fledge revolt and this arrogant j*ckass will be allowed to live out the rest of his life in comfort, far from the pressures of high everything.

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By Jim Yell, July 16, 2008 at 8:10 am Link to this comment
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Phil Gramm enjoyed the benifits given by the public to education and then has spent his life trying to denie them to the rest of his fellow Americans. He really is a bad person and a hypocrit, probably a criminal, not prosecuted though he may be.

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By RBStanfield, July 16, 2008 at 7:08 am Link to this comment

I am a bigot - the male Caucasian Texas oligarchy are guilty until proven innocent beyond a reasonable doubt. Only Texans can have so many mega-catastrophes and still not be in jail.

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By Gloria Picchetti, July 16, 2008 at 5:33 am Link to this comment
(Unregistered commenter)

I love the mental recession and being a nation of whiners and cryers comment. There are no jobs. People are losing their homes a go go. Pets are being surrendered to animal shelters by the dozens. It’s all in our minds mind you. Those who do not have to applaud because they can shake their jewelry could care less. They have money. Gotcha! Trickle down is now filtering up because it’s hitting The Market. The Sacred Market for G-d’s sake. The new equality is the new depression. Ashes ashes all fall down. Everyone suffers. All of us who could not stand another you-don’t-know-what-The-Depression-was-like story from our elders are now going to tell them to our children and grandchildren. Well, maybe not. Some of us will not survive it. I don’t feel so sorry for myself but the thought of the animals in shelters & the heartbreak of the owners that love them has me on the verge of tears 24/7. I almost went homeless because of Reagon. I might not survive Bush at all. There is nothing like a trillion dollar war where the country did nothing to us. Maybe Obama will redo WPA. Who is going to vote for a candidate who has an economic advisor with the attitude of Marie Antoinette when they can’t order a pizza?

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By P. T., July 15, 2008 at 10:48 pm Link to this comment

That’s why he’s become known as “Foreclosure Phil.”

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