• Latest News
  • Pitch a Story
  • Work with a Journalist
  • Join the Blog Squad
  • Afghanistan
  • Africa
  • Asia
  • Baltimore
  • Canada
  • Egypt
  • Europe
  • Latin America
  • Middle East
  • Russia
  • Economy
  • Environment
  • Health Care
  • Military
  • Occupy
  • Organize This
  • Reality Asserts Itself
  • US Politics
  • Fiscal Cliff "Crisis" Manufactured to Prey on the Weak

    Rob Johnson: Real crisis is the cost of health care which has nothing to do with Medicare or Medicaid -   December 13, 2012
    Members don't see ads. If you are a member, and you're seeing this appeal, click here


      Share to Twitter
    Share to Facebook

    Finally, News that brings out Facts usually concealed or edited out for Nielsen Ratings-Bravo! - Rev. David
    Log in and tell us why you support TRNN


    Rob Johnson is the Director of the Economic Policy Initiative at the Franklin and Eleanor Roosevelt Institute and is a regular contributor to the Institute's blog NewDeal2.0. He serves on the UN Commission of Experts on Finance and International Monetary Reform. Previously, Dr. Johnson was a Managing Director at Soros Fund Management where he managed a global currency, bond and equity portfolio specializing in emerging markets. He was also a Managing Director at the Bankers Trust Company. Dr. Johnson has served as Chief Economist of the US Senate Banking Committee under the leadership of Chairman William Proxmire and was Senior Economist of the US Senate Budget Committee under the leadership of Chairman Pete Domenici. Dr. Johnson was an Executive Producer of Taxi to the Dark Side, an Oscar Winning documentary produced and directed by Alex Gibney.


    Fiscal Cliff PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And now joining us is a new regular contributor—of course, he's been a contributor many times in the past, but he's going to be a regular weekly or biweekly contributor now. And that's Rob Johnson. Rob is executive director of the Institute for New Economic Thinking and a senior fellow and director of the global finance project, financial reform, for the Roosevelt Institute. Thanks for joining us.


    JAY: And Rob's in New York. So what's on your mind this week, Rob?

    JOHNSON: I think this week we're zooming in on the fiscal cliff, which to me illustrates and underscores the despondency we should all feel about the process of governance in the United States. The Congress, the president, and all of the [incompr.] have manufactured an artificial crisis in order to do somewhat like Naomi Klein would suggest in her book Shock Doctrine, be able to force changes down the throat of our society that would not ordinarily be done. And they're doing it in the name of goodness.

    But what they're essentially doing is trying to tee up how to prey upon the weak again in some respects, particularly seniors and their health care services, and to a lesser extent Social Security. And, of course, they'll pay for this a little bit with the ritual of taxing the wealthy because Obama won the election, which underscores that John Boehner made a mistake. He should have taken the grand bargain last summer. They made a bet they could win the presidential election, and they came up empty.

    But I think right now we've got a serious problem in America, and that is health care costs. All you have to do is look at the United States' problems in health care and the cost of health care relative to every other OECD country and keep in mind that we're rated 37th in the quality of service by the World Health Organization. Almost all of the long-term budget problem you could do nothing else except take on the health-care industry. I'm there talking about pharmaceutical monopolies, insurance monopolies, and hospitalization monopolies. If you knock those costs down—and I'm not talking about some pie-in-the-sky thing; I'm talking about exactly the performance that you get—and you can take your pick, Canada, France, U.K., Germany, or Switzerland—you can knock your costs in half and have better-quality performance and have no budget problem and a lot happier people.

    JAY: The point here is if they were really—if the issue here really was debt reduction, that's what they would be focusing on.

    JOHNSON: That's what they would be focusing on. And there's a sidekicker to this, which is: the competitiveness of American industry as a place to hire (meaning new jobs) and produce relative to foreign direct investment would be fortified and enhanced if you could bring down the costs of private employer supplied health care. And we don't do that. Puts us at a competitive disadvantage. Honda has a big edge over Ford Motor Company in terms of their cost structure related to health care.

    And one of the most surprising things (but it's not, how you say, that surprising when you dig deep into political economy) is that American employers have not banded together to bring their lobby of pressure and power onto the process in government, and they've allowed the health-care lawyers and the health-care lobbyists and the pharmaceutical lobbyists and the insurance lobbyists to do as they please. And I think this is a disaster for America.

    JAY: So President Obama, I mean, first of all, he knows this, 'cause the math is pretty straightforward. But when he makes his health care legislation, he, number one, makes a deal with the pharmaceutical companies not to reduce their prices, and number two, he gives up on the public option, which would have in most people's estimation given a lot more clout to reducing the costs of health care. He has a bill now which some people say reduced the cost of health care, although there's debate on that. On the other hand, he's quite focused, it seems, on negotiating some kind of grand bargain on entitlements and has said so. Is there—what's driving him?

    JOHNSON: Oh, I think what's driving him is a sense of realpolitik. I'm talking about comparative analysis with other countries shows it could be done and done easily as policy. In other words, it doesn't require a great stretch of the imagination or going out into the fog. You could replicate those systems and do a lot better than we're doing.

    What is impossible or very hard to believe is how we're going to get the structure of American politics, with lobbying, campaign contribution super PACs, into a place where those concentrated interests in the health industries and pharmaceutical industries and insurance industry could be defeated in the political process. And I think Obama probably doesn't believe that those people can be defeated, and he's not getting what I asked for—is all of the rest of industry to come in behind him to restore the public option, negotiate pharmaceutical prices, and put pressure on the hospitalization costs.

    JAY: So when you talk about the sort of elites around the world, not just American elites, obviously one of the most important elites now outside the United States is the Chinese elite. The Chinese government leadership just changed, and you essentially have two factions there, one related to the Communist Youth League and another related to what they call the princelings, the children of former communist leaders who've gotten very, very wealthy.

    I saw a report the other day in Asia which said that the 680 people who constitute the leading cabinet members, the administration, the Supreme Court, and the American Congress are worth collectively about $6.6 billion. And the 680 most influential people in the governments of China are now worth $90 billion. And so you have a very, very serious problem with what we call rent-seeking in China. And the change of their governance seemed to reflect a consolidation of power of the princelings at the expense of the reformers associated with the former Communist Youth League. And this bodes ill, I think, for a changing from American leadership to Chinese leadership, in the sense that the trust in legitimacy of governance is being questioned all over the planet, and China, as the rising, aspiring power, it's not clear that people will want to emulate that model or feel safe or trust in that model like they do, what you might say, [in] British law or American law historically.

    JAY: And there's another twist to talking about elites and the levels of corruption current-day in terms of the Libor scandal. We've done a few reports on this, how the London interest rates are set between banks, and that scandal broke publicly. But now also it turns out the same thing's going on in Europe. What's that about?

    JOHNSON: Well, I think the concentration of large power inside of a small number of financial institutions leads to all kinds of dealing that doesn't look anything like what you might say the farmer's market that's in the traditional economics model of economists. And when people get involved in price-setting and price-rigging [incompr.] Adam Smith in The Wealth of Nations spent a great deal of time talking about when businessmen can get together to conspire and they have monopoly power. And I think in this instance we're looking at another example of, behind the scenes, in those dark corners, how the financial markets aren't that [crosstalk]

    JAY: And what we're talking about here is what they're calling—is—the Euribor, is it? And this is how European banks get together and set interest rates for interbanking loans in Europe. Is that it?

    JOHNSON: Libor, so-called London Interbank Offered Rate, is different than Euribor, which is the European Interbank Offered Rate, which is denominated in euro. But these daily auctions are set, and many, many contracts are tied to these rates. Regarding the Libor scandal, which has involved the chief executive of Barclays leaving and others, apparently there are now widespread lawsuits amongst people who held these contracts who felt that the cartel who organized—fixed these rates too high and cost them a lot of money, and they want some clawback.

    But to me, whether you're talking about Chinese corruption, whether you're talking about an artificial cram-down of the American people through the fiscal cliff, or whether you're talking about Euribor, you're talking about things that are denigrating and diminishing trust in our society, its institutions and governance. And I don't think heightening the anxiety and the fears of people about the fairness of their institutions is doing anyone anywhere on the planet any good.

    JAY: So what can be done about it? I mean, isn't this part of the character? I mean, you know, in terms of where capitalism is these days, where parasitical finance seems to really be—dominate virtually everywhere, isn't this the natural outgrowth of that?

    JOHNSON: Well, it's a natural agenda for reform. It's a natural agenda for scrutiny all over the world that financial engineering, whether it relates to corporate governance, financial speculation, frontrunning, derivatives construction, where prices are akin to what my friend Tom Ferguson calls the Gosplan, Soviet-type pricing, meaning fictional pricing, fictional cash-capital ratios, all of these things are unfinished business, and my view is that people all over the planet know this, and it's increasing despondency. And when you don't fix things, you end up with social unrest. And that may be the next chapter that we have to visit in various places on the planet.

    JAY: Alright. Thanks for joining us, Rob.

    JOHNSON: My pleasure.

    JAY: And thank you for joining us on The Real News Network. Don't forget, we're in our year-end fundraising campaign. Every $1 you donate gets matched by a matching grant we have until we hit $150,000. So please click on the Donate button over here, 'cause if you don't click there, we can't do this.


    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


    Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at


    Latest Stories

    Affirmative Action Ruling Will Further Racial Inequality
    Evidence for Russian Involvement in East Ukraine Based on Shoddy Journalism
    Ivy League Study: The General Public Has Virtually No Influence on Policy
    The Modern History of Venezuela and Popular Democracy - Edgardo Lander on RAI (9/9)
    An Asia "Pivot" Should Mean Cooperating with China to Solve the Global Environmental Crisis
    Assessing the U.S. Environmental Movement
    Intimidation and Political Interference Goes Unpunished in UAW Case
    Exclusive Investigation Uncovers How BP Uses Bribes To Do Business
    The Modern History of Venezuela, The Protests and Democracy - Edgardo Lander on RAI (8/9)
    Greek Politics 4 Years After The Financial Crisis
    CBO Report Confirms U.S. Deficit Back to Normal Level
    Israel Uses Refugees as "Currency" in Arms Trade with Africa
    Who Will Pay for Climate Change Disaster?
    Canada Shifts to Right Under Harper, Mimicking the United States
    The Savings and Loan Crisis Demonstrates the Importance of Glass-Steagall
    South African Platinum Miner's Struggle Challenges ANC Leadership
    TRNN Original Report: Manning Determined to Fight Back After Army Upholds 35- Year Sentence
    Hundredth Anniversary of the Ludlow Massacre
    The Bundy Ranch Standoff Demonstrates Values Shared by Corporations and the Far Right
    The Resegregation of American Schools
    The Modern History of Venezuela, Why Still So Much Crime? - Edgardo Lander on Reality Asserts Itself (7/9)
    What Role Has Russia Played in Eastern Ukraine?
    Can Johns Hopkins Afford to Pay A Living Wage? (2/2)
    University Sit-In Targets World's Largest Private Coal Company
    The Modern History of Venezuela and the Need for a Post-Oil Economy - Edgardo Lander on RAI (6/9)
    Can Johns Hopkins Afford to Pay A Living Wage? (1/2)
    One Percent of Environmentalists Killings Lead to Convictions
    Investigation Finds Former Ukraine President Not Responsible For Sniper Attack on Protestors
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Ukraine Transitional Gov't Moves Militarily To Reclaim Seized Buildings
    IPCC Report Flawed By Narrow Focus on Carbon Emissions
    The Modern History of Venezuela: The Bolivarian Revolution - Edgardo Lander on Reality Asserts Itself (5/9)
    Obama Signs Directives to Reduce the Gender Wage Gap
    Eastern Ukraine Lacks Political Representation in Kiev
    Demystifying the Role of Mitigation in the Most Recent IPCC Report
    Hypersurveillance State Won't Prevent Another Boston Marathon Bombing
    The Modern History of Venezuela from 1973 to the Caracazo Massacre - Edgardo Lander on Reality Asserts Itself (3/9)
    Univ. of Maine Faculty Reinstated After Students Protest Against Cuts
    The Modern History of Venezuela from 1908 to 1973 - Edgardo Lander on Reality Asserts Itself (2/9)
    IMF Will Address Global Inequality, Says Managing Director Christine Lagarde
    Raising Big Banks' Leverage Ratio Good, But Not Nearly Enough
    TRNN Replay: Austerity Road to 19th Century
    Has Palestinian Maneuvering Revived Peace Talks?
    Late Jackson Mayor Lumumba's Son Wins Primary to Replace His Father, Runoff Election Ahead
    Quebecers Reject PQ and Elect a Liberal Government Representing Big Business
    TRNN Debate: Decriminalization vs. Legalization
    The Beginning of the Chavez Era - Edgardo Lander on Reality Asserts Itself (4/9)
    "Off With His Head": Court Upholds Obama's Power to Kill
    Workers at Nation's Top Hospital Strike For Fair Wages
    From Exile to Radicalization in Venezuela - Edgardo Lander on Reality Asserts Itself (1/9)
    Rwanda 20 Years Later: Genocide, Western Plunder of Congo, and President Kagame
    Ukrainian Protesters in the East Demand More Autonomy From Kiev Government
    Hunger Strikers Demand President Obama Halt His Record 2 Million Deportations
    Indian Parliamentary Elections - A Primer With Vijay Prashad
    West Looks to Carve Up Ukraine & Privatize Industries Held by Kleptocrats
    Where Are Israeli-Palestinian Peace Negotiations Headed?
    The Multiple Kingdoms of Saudi Arabia (5/5)
    Do the Afghan Presidential Elections Signify Progress?
    Republican Presidential Hopefuls Pay Homage to Billionaire Casino Tycoon Sheldon Adelson
    Will Extremist Lieberman Become Israel's Next Prime Minister?
    Why do the Saudis Want the US to Attack Iran? (4/5)
    Immigrant Advocates and Families Tell President Obama 'Not One More'
    Elections, Pipelines, and Protests - The Canada Panel
    Chris Hedges on "Israel's War on American Universities"
    Baltimore Residents Decry Lack of Affordable Housing
    Yellen Talks the Talk But Will She Walk the Walk?
    Hopkins Hospital Workers Speak Out against "Poverty Wages"
    Will Venezuela's New Floating Exchange Rate Curb Inflation?
    The European Central Bank's War on Wages is Pushing Europe's Economy to the Brink
    Supreme Court Decision Opens Floodgates for More Campaign Cash
    Charles Keating, the Financier Behind the Savings and Loan Scandal, Dies at 90
    Saudi Arabia and the al-Qaeda Monster (3/5)
    Maryland Residents Voice Opposition to Natural Gas Fracking Export Facility
    Supreme Court Ruling Gives Wealthy Individuals More Influence Over Elections
    What are the Saudis Afraid Of? - Madawi Al-Rasheed (2/5)
    Baltimore's MICA Adjunct Professors Set to Vote on Unionization
    Boycott of Israel Moving to Next Level?
    Hypocrisy Dressed Up as "Realism" Justifies American Alliance with Saudi Dictatorship
    Immigration Reform in the Shadows of Cesar Chavez's Legacy
    Leaked Senate Report Shows Use of Torture As "Ineffective"
    UN Report Says Climate Change Will Threaten Food Production Worldwide
    The Hypocrisy of US Calling for Enforcement of International Law
    How the Ecuadorian Economy Grew in a Global Recession
    'Shadows of Liberty' Trailer
    Kristina Borjesson on Why CBS Shut Down Her investigation into Flight 800 (2/8)
    Glen Ford on Racism in the American Media (3/8)
    Paul Jay on What Drives Corporate Media and What Drive The Real News (4/8)
    Creating a New Media Paradigm After Citizens United (5/8)
    Should The Left Engage with the Mainstream Media? (6/8)
    What Is the Financial Backing For The Real News? (7/8)
    Standing up to Character Assassination (8/8)
    Oligarchs, Fascists and the People's Protest in Ukraine
    TRNN Debate: Is Obamacare In the Interest of Workers?
    Too-Big-To-Fail Advantage Remains Intact For Big Banks
    Obama and the Saudi Agenda
    TRNN Replay: Investigating the Saudi Government's 9/11 Connection and the Path to Disilliusionment - Sen. Graham on Reality Asserts Itself pt 1
    The Iraq War's Real Legacy
    Petitions with 100,000+ Signatures Call for Snowden's Passport to be Reinstated
    We Need to Harness People Power - Andy Shallal on Reality Asserts Itself (4/4)
    BC Pipeline Fight and Quebec Elections - The Canada Panel
    Jonathan Schell - 1943-2014: Board Member of TRNN on Why We Need The Real News
    Teachers on Strike from the UK to Argentina
    Connecticut Poised to Become First State with $10.10 Minimum Wage
    Oil Spill Threatens Wildlife and Local Economy
    DC School Test Scores Up, But Poor Black Kids Are Doing Worse - Andy Shallal on RAI (3/4)
    Obama's Proposal To End NSA Bulk Data Collection Won't Protect Privacy
    How Google, Apple & The Biggest Tech Companies Colluded to Fix Workers' Wages
    An American Should be One that Questions Their Government - Andy Shallal on RAI (2/4)
    What's Driving Putin & Obama's Posturing on Ukraine?
    Hundreds of Students & Faculty Occupy College Campus to Fight Cuts to Public Higher Ed
    Due Process 'Impossible' In Harsh Death Sentencing Of Over 500 Muslim Brotherhood Members
    Has Anglo-American Capitalism Run Out of Steam?
    Being the "Other" in America - Andy Shallal on Reality Asserts Itself (1/4)
    TRNN Debate: Should Baltimore 'Ban The Box'?
    How Fallujah Became the Iraqi Government's New Battleground
    Why I Decided to Blow the Whistle on the NSA
    NASA Climate Predictions Show Serious Threat To Humanity
    Professor Who Teaches Israel-Palestine Conflict Accuses College of Violating His Academic Freedom
    CIA and NSA Wrongdoing Requires Independent Investigation, Says Former Church Committee Staff
    Are Tuition Breaks Enough To Combat High Student Debt And Low Graduation Rates?
    Industries Across the U.S. Are Stealing Wages From Their Lowest Paid Workers
    Who In Ukraine Will Benefit From An IMF Bailout?
    NSA Recording All International Calls From U.S.
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (2/2)
    BP Gets Green Light to Drill in Gulf, But Has Safety Improved?
    Residents Still Not Drinking Tap Water Two Months After West Virginia Spill (1/2)
    Libya's Descent Into Turmoil Three Years After NATO Intervention
    From Pipelines to Peladeau - Canadian Report
    Israel "Making Lives Miserable" for Africans, Hoping They 'Self-Deport' (1/2)
    Congressional Progressive Caucus Budget Strikes Back Against Austerity
    Libya Three Years Later - Chaos and Partition
    Why Was Gaddafi Overthrown?
    Should Ukraine and West Accept De Facto Crimea Joining Russia? (2/2)
    Tony Benn Saw Socialism as the Culmination of Democratization
    Why Didn't Bush/Cheney Attack Iran and Can Obama Make and Sell a Deal? - Gareth Porter on Reality Asserts Itself (3/3)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi? (2/2)
    Crimea Referendum: Self Determination or Big Power Manipulation? (1/2)
    Sen. Graham: President Must Side with Openness About CIA and 9/11
    Manufacturing a Narrative for War - Gareth Porter on Reality Asserts Itself (2/3)
    Protesters Hit the Streets of Brooklyn to Demand $15 Minimum Wage
    Hammer: 'Moral Bankruptcy' Behind Massive GM Recall
    White House Withholds Thousands of Documents from Senate CIA Probe
    I Grew Up Believing in Time Magazine's Version of America - Gareth Porter on RAI (1/3)
    Western European Banks Vulnerable to Ukrainian Sovereign Debt Crisis
    TRNN Debate: What's Driving Inflation in Venezuela? (2/2)
    CIA vs. Senate: Who Is Obama Protecting?
    Will Tipped Workers Get Excluded Again From Minimum Wage Hike?
    TRNN Debate: What's Driving Inflation in Venezuela? (1/2)
    After Late Mayor Lumumba is Laid to Rest, What's Next for Jackson, Mississippi?(1/2)
    TRNN Replay: A Look at Who's Poised to Become No.2 at the Fed
    How Right-Wing Nationalism Rose to Influence in Ukraine (2/2)
    Netanyahu Attacks Boycott As Campaign Enters New Phase
    Moving Towards a Police State - Michael Ratner on Reality Asserts Itself (7/7)
    Fighting Reagan's Secret, Illegal Wars - Michael Ratner on Reality Asserts Itself (6/7)
    Puerto Rican Independence Movement and Cuba Further Radicalized Me - Michael Ratner on RAI (5/7)
    The Butcher of Attica - Michael Ratner on Reality Asserts Itself (4/7)
    MLK and a Radicalizing Moment in American History - Michael Ratner on Reality Asserts Itself (3/7), Real News Network, Real News, Real News For Real People, IWT are trademarks and service marks of IWT.TV inc. "The Real News" is the flagship show of IWT and Real News Network.

    All original content on this site is copyright of The Real News Network.  Click here for more

    Problems with this site? Please let us know

    Linux VPS Hosting by Star Dot Hosting