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Weaponized Keynesianism

A few years back Representative Barney Frank coined an apt phrase for many of his colleagues: weaponized Keynesians, defined as those who believe “that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.”

Right now the weaponized Keynesians are out in full force — which makes this a good time to see what’s really going on in debates over economic policy.

What’s bringing out the military big spenders is the approaching deadline for the so-called supercommittee to agree on a plan for deficit reduction. If no agreement is reached, this failure is supposed to trigger cuts in the defense budget.

Faced with this prospect, Republicans — who normally insist that the government can’t create jobs, and who have argued that lower, not higher, federal spending is the key to recovery — have rushed to oppose any cuts in military spending. Why? Because, they say, such cuts would destroy jobs.

Thus Representative Buck McKeon, Republican of California, once attacked the Obama stimulus plan because “more spending is not what California or this country needs.” But two weeks ago, writing in The Wall Street Journal, Mr. McKeon — now the chairman of the House Armed Services Committee — warned that the defense cuts that are scheduled to take place if the supercommittee fails to agree would eliminate jobs and raise the unemployment rate.

Oh, the hypocrisy! But what makes this particular form of hypocrisy so enduring?

First things first: Military spending does create jobs when the economy is depressed. Indeed, much of the evidence that Keynesian economics works comes from tracking the effects of past military buildups. Some liberals dislike this conclusion, but economics isn’t a morality play: spending on things you don’t like is still spending, and more spending would create more jobs.

But why would anyone prefer spending on destruction to spending on construction, prefer building weapons to building bridges?

John Maynard Keynes himself offered a partial answer 75 years ago, when he noted a curious “preference for wholly ‘wasteful’ forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” Indeed. Spend money on some useful goal, like the promotion of new energy sources, and people start screaming, “Solyndra! Waste!” Spend money on a weapons system we don’t need, and those voices are silent, because nobody expects F-22s to be a good business proposition.

To deal with this preference, Keynes whimsically suggested burying bottles full of cash in disused mines and letting the private sector dig them back up. In the same vein, I recently suggested that a fake threat of alien invasion, requiring vast anti-alien spending, might be just the thing to get the economy moving again.

But there are also darker motives behind weaponized Keynesianism.

For one thing, to admit that public spending on useful projects can create jobs is to admit that such spending can in fact do good, that sometimes government is the solution, not the problem. Fear that voters might reach the same conclusion is, I’d argue, the main reason the right has always seen Keynesian economics as a leftist doctrine, when it’s actually nothing of the sort. However, spending on useless or, even better, destructive projects doesn’t present conservatives with the same problem.

Beyond that, there’s a point made long ago by the Polish economist Michael Kalecki: to admit that the government can create jobs is to reduce the perceived importance of business confidence.

Appeals to confidence have always been a key debating point for opponents of taxes and regulation; Wall Street’s whining about President Obama is part of a long tradition in which wealthy businessmen and their flacks argue that any hint of populism on the part of politicians will upset people like them, and that this is bad for the economy. Once you concede that the government can act directly to create jobs, however, that whining loses much of its persuasive power — so Keynesian economics must be rejected, except in those cases where it’s being used to defend lucrative contracts.

So I welcome the sudden upsurge in weaponized Keynesianism, which is revealing the reality behind our political debates. At a fundamental level, the opponents of any serious job-creation program know perfectly well that such a program would probably work, for the same reason that defense cuts would raise unemployment. But they don’t want voters to know what they know, because that would hurt their larger agenda — keeping regulation and taxes on the wealthy at bay.

Occupy

DENVER (AP) - The simmering tension near the Colorado Capitol escalated dramatically Saturday with more than a dozen arrests, reports of skirmishes between police and protesters and authorities firing rounds of pellets filled with pepper spray at supporters of the Occupy Wall Street movement.

Officers in riot gear moved into a park late in the day where protesters were attempting to establish an encampment, hauling off demonstrators just hours after a standoff at the Capitol steps degenerated into a fight that ended in a cloud of Mace and pepper spray.

Denver police spokesman Matt Murray said 15 people were arrested in the evening confrontation, where authorities were moving to prevent protesters from setting up tents in the park, which are illegal. Officals say the demonstrators had been warned several times that the tents would not be allowed and those who attempted to stop police from dismantling the camp gear were arrested. Protesters have been staying in the park for weeks, but tents have repeatedly been removed.

Murray said that most of the protesters were peaceful but there was "just a die-hard group that didn't want to cooperate."

"We showed great restraint," he said. "We were calm. We went in and did what we had to do. There's a group of very committed people who believe in a cause, and then there are a few people who just want to cause trouble."

Earlier in the day about 2,000 protesters rallying against what they see as economic inequality and corporate greed marched downtown toward the Capitol, setting up the most intense moments of the Denver movement, which has lasted weeks.

A group of the marchers advanced toward the building and some tried to make their way up the steps. About eight officers scuffled with a group of protesters and police confirmed that they used Mace and fired pepper balls - hollow projectiles filled with the chemical irritant - to break up the crowd. Protesters told the paper at the time that they believed police used rubber bullets.

Murray said protesters kicked police and knocked one officer off his motorcycle. He said five protesters were arrested, including two for assault and one for disobedience.

Chantrell Smiley, 21, of Denver, said she has been protesting downtown for more than a week, sleeping on the ground in the park. She said she didn't see the officer get knocked from his motorcycle and didn't see any reason for the afternoon confrontation.

"It was just chaos. This wasn't necessary. My friend got hit with rubber bullets in the face. He was screaming and bleeding, then they Maced him. We're being peaceful. We don't want to be harmed. They came through and took everything down - our food, our blankets, everything's gone."

Mike Korzen, 25, told the Denver Post that he was among the group that police dispersed with rubber bullets and pepper spray and suggested that the police force was excessive.

"I was standing there with my hands behind my back," Korzen said, using a water bottle to rinse pepper spray from his eyes.

After nightfall about a dozen Denver police and Colorado state patrol cars remained in the area.

About 100 protesters milled about, most coughing and sneezing from the haze of pepper spray and Mace that still hovered in the air. Some laid out tarps on the ground, preparing to spend another night outside. Throughout the evening vehicles pulled up, dropping off blankets and food with cheering protesters.

Who Gets What, When and How

During Herman Cain’s tenure as the head of the National Restaurant Association in the 1990s, at least two female employees complained to colleagues and senior association officials about inappropriate behavior by Cain, ultimately leaving their jobs at the trade group, multiple sources confirm to POLITICO.

The women complained of sexually suggestive behavior by Cain that made them angry and uncomfortable, the sources said, and they signed agreements with the restaurant group that gave them financial payouts to leave the association. The agreements also included language that bars the women from talking about their departures.

In a series of comments over the past 10 days, Cain and his campaign repeatedly declined to respond directly about whether he ever faced allegations of sexual harassment at the restaurant association. They have also declined to address questions about specific reporting confirming that there were financial settlements in two cases in which women leveled complaints.

POLITICO has confirmed the identities of the two female restaurant association employees who complained about Cain but, for privacy concerns, is not publishing their names.

Cain spokesman J.D. Gordon told POLITICO the candidate indicated to campaign officials that he was “vaguely familiar” with the charges and that the restaurant association’s general counsel had resolved the matter.

The latest statement came from Cain himself. In a tense sidewalk encounter Sunday morning outside the Washington bureau of CBS News — where the Republican contender had just completed an interview on “Face the Nation” — Cain evaded a series of questions about sexual harassment allegations.

Cain said he has “had thousands of people working for me” at different businesses over the years and could not comment “until I see some facts or some concrete evidence.” His campaign staff was given the name of one woman who complained last week, and it was repeated to Cain on Sunday. He responded, “I am not going to comment on that.”

He was then asked, “Have you ever been accused, sir, in your life of harassment by a woman?”

He breathed audibly, glared at the reporter and stayed silent for several seconds. After the question was repeated three times, he responded by asking the reporter, “Have you ever been accused of sexual harassment?”

Cain was president and CEO of the National Restaurant Association from late 1996 to mid-1999.

POLITICO learned of the allegations against him, and over the course of several weeks, has put together accounts of what happened by talking to a lengthy roster of former board members, current and past staff and others familiar with the workings of the trade group at the time Cain was there.

In one case, POLITICO has seen documentation describing the allegations and showing that the restaurant association formally resolved the matter. Both women received separation packages that were in the five-figure range.

On the details of Cain’s allegedly inappropriate behavior with the two women, POLITICO has a half-dozen sources shedding light on different aspects of the complaints.

The sources — which include the recollections of close associates and other documentation — describe episodes that left the women upset and offended. These incidents include conversations allegedly filled with innuendo or personal questions of a sexually suggestive nature, taking place at hotels during conferences, at other officially sanctioned restaurant association events and at the association’s offices. There were also descriptions of physical gestures that were not overtly sexual but that made women who experienced or witnessed them uncomfortable and that they regarded as improper in a professional relationship.

Peter Kilgore, who was the association’s general counsel in the 1990s, and remains in that position today, has declined to comment to POLITICO on whether any settlements existed, saying he cannot discuss personnel matters.

But one source closely familiar with Cain’s tenure in Washington confirmed that the claims related to allegations of sexual harassment – behavior that disturbed members of the board who became aware of it, as well as the source, who otherwise liked Cain.

“I happen to know there were sealed settlements reached in the plural. I think that anybody who thinks this was a one-time, one-person transgression would be mistaken,” this source said.

The first woman was identified to POLITICO by a former association board member and her identity was confirmed by two additional sources.

The former board member recalled learning of the woman’s departure at a 1999 association board meeting and trade expo in Chicago.

“She was offered a financial package to leave the association and she did,” said the former board member. “What I took offense at was that it was clear that rather than deal with the issue, there was an effort to hush it up. She was offered a way out to keep quiet.”

A second source with close ties to the restaurant association from that period said the woman revealed at the time that she had suffered what the source described as “an unwanted sexual advance” from Cain at a hotel where an event involving the group was taking place.

A third source said that the woman has indicated to her current employer that she received a compensation package from the association and has warned there that she may be the subject of an embarrassing story involving a presidential candidate.

The second woman’s identity was confirmed by a source familiar with the association.

On Oct. 20, POLITICO first approached Gordon, who serves as the campaign’s vice president for communications, about whether Cain had been the subject of complaints of sexual harassment.

After several days of not responding to the question, Gordon emailed on Oct. 24 that any dispute about Cain’s conduct at the restaurant association “was settled amicably among all parties many years ago.”

“These are old and tired allegations that never stood up to the facts,” Gordon said in an email response. “This was settled amicably among all parties many years ago, and dredging this up now is merely part of a smear campaign meant to discredit a true patriot who is shaking up the political status quo.”

Gordon added: “Since critics haven’t had much luck in attacking Mr. Cain’s ideas, they are trying to attack him personally.”

On Wednesday, the response shifted. Gordon telephoned to assert he was not using “settled” in a legal context but rather simply meant the matter was “resolved.”

In that interview, Gordon told POLITICO he had spoken to Cain about the allegations and said Cain was “vaguely familiar” with the situation.

“He was vaguely familiar with it and wanted me to get with the [National Restaurant Association] lawyer who worked the case, Peter Kilgore. He said, ‘Just get with Peter Kilgore at the NRA.’ He remembered there was something vaguely, some allegation, but he wasn’t familiar with it. Our lawyer called Peter Kilgore. Their policy is they don’t discuss personnel. That’s what our lawyer then told me.”

Added Gordon: “When you’re in a leadership position, sometimes people just try to take a shot at you.”

As to whether the association under Cain ever paid a monetary settlement to women who had leveled such accusations against him, Gordon referred the question to the restaurant trade group.

Kilgore told POLITICO in a statement: “Please understand that our corporate policy is not to discuss personnel matters (other than to confirm employment and dates of employment) with outside sources, including media. Thus, I must respectfully decline to comment on your questions or any allegations you may be looking into that concern current or former employees of the Association.”

After POLITICO published its reporting Sunday evening, the Cain campaign said in a statement that the “political trade press are now casting aspersions on his character and spreading rumors that never stood up to the facts” but did not deny the details of the report.

“Fearing the message of Herman Cain who is shaking up the political landscape in Washington, Inside the Beltway media have begun to launch unsubstantiated personal attacks on Cain,” the campaign said in a statement. “Sadly, we’ve seen this movie played out before – a prominent Conservative targeted by liberals simply because they disagree with his politics.”

The revelations come at a time when Cain is riding high in the polls, with a candidacy that relies heavily on Cain’s claims that his experience as a businessman and the former head of Godfather’s Pizza has prepared him to be president.

But the Republican presidential hopeful also has begun to face increasing scrutiny in the press over his management style, presiding over an unorthodox campaign that has seen the departures of several aides and struggled to take advantage of Cain’s sudden vault to the head of the pack.

Cain, who has been married to his wife Gloria for 43 years, did tell at least one campaign staffer this year about the possibility that claims of sexual harassment could surface, according to the aide. Cain, this person said, described a case in which he fired an employee in 1990s and the woman alleged sexual misconduct or harassment. Cain told the campaign staffer he had beaten the case and that the woman had paid for his legal fees. The aide had no further details.

Cain was head of the restaurant trade group after he left the job as CEO of Godfather’s Pizza. He has often referred to his experience running the pizza company but speaks less often about his tenure atop the association. The year before he took the helm, the association represented about 150,000 food service establishments, had roughly 115 employees and a government affairs budget of nearly $20 million. But it was not known as a top lobbying powerhouse.

Cain tried to change that, hiring more lobbyists and taking a much more public role in advocating for the industry than did his predecessor. Boasting of the shift in his book, Cain noted that during his tenure, the restaurant association made its first appearance on Fortune magazine’s list of Washington’s 25 most influential interest groups (it rose as high as 15th).

Information about the incidents was apparently closely held, even among association board members.

But one woman’s complaint apparently did make its way to at least some figures on the governing board when, at an association event, one board member got word that a female employee had complained about Cain’s advances, according to a source who was at the event.

The source said the board member asked the woman directly about the episode and was told that Cain had invited her up to his suite at a prior association event.

Ron Magruder, Denise Marie Fugo and Joseph Fassler, the chair, vice chair and immediate past chairman of the National Restaurant Association board of directors at the time of Cain’s departure, said they hadn’t heard about any complaints regarding Cain making unwanted advances.

“I have never heard that. It would be news to me,” said Fugo, who runs a Cleveland, Ohio, catering company, adding such behavior would be totally out of character for the Cain she knew. “He’s very gracious.”

Fassler, who helped bring Cain on board as CEO of the restaurant association, said that any inappropriate behavior was not brought to his attention and that he would be upset to learn it had gone on and he was not made aware of it.

“That’s a shock to me,” Fassler said. “As an officer during all of Herman’s years there as a paid executive… none of that stuff ever surfaced to me. Nobody ever called me, complained about this, nor did I ever hear that from Peter Kilgore, nor did I ever hear that from Herman Cain.”

Fassler – who ran a Phoenix food-service company and finished his term as chairman the month before Cain’s June 1999 departure but remained on the board’s executive committee – described Cain as treating men and women identically and asserted it was “not within his character” to make unwanted advances. “It’s not what I know of him,” Fassler said.

Much like Fassler, almost all board members remember Cain fondly and say he left on good terms.

Cain was “extremely professional” and “fair” to female staffers at the restaurant association, recalled Lee Ellen Hayes, who said she “worked fairly closely with” Cain in the late 1990s, when she was an executive at the National Restaurant Association Education Fund, a Chicago-based offshoot of the group.

Cain’s treatment of women was “the same as his treatment of men. Herman treated everyone great,” said Mary Ann Cricchio, who was elected to the board of the restaurant group in 1998. She said Cain left such a good impression on the organization that when he spoke at a group event in January of this year, as he was considering a presidential bid, “he had unanimous support in the room.”

Revelations about the settlements come as members of the association’s board planned to meet this month to talk about ways to use the organization’s clout to boost Cain’s campaign.

Ideas to be discussed included making a donation to Cain from the organization’s political action committee, which typically doesn’t contribute to presidential campaigns, and, more significantly, organizing a fundraiser for his campaign.

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