California Free Press

You'll Never Hear a Republican Mention the $2.5 Trillion in the Social Security Trust Fund

by John Lawrence

Republicans want to "reform" social security. They say social security is broke. Not so. There's $2.5 trillion in the Social Security Trust Fund (SSTF). The way the funding for social security works is this. Workers pay a payroll tax otherwise known as a FICA tax. The rate is 7.65% of gross earnings up to $106,000 for employees. Employers pay a similar amount. Any money earned above $106,000. is not subject to the FICA tax. 6.2% goes to social security and 1.45% goes to Medicare. In 2011 the rate was temporarily lowered to 5.65% for employees to spur the economy. If you're self-employed, you pay both the employee's and the employer's shares which amounts to 15.3% of your gross earnings which is more than what a hedge fund manager pays. They pay the capital gains rate of 15%. There are no deductions or exemptions for the FICA tax. So no matter how poor you are, there's no escaping paying 7.65% if you're other-employed or 15.3% if you're self-employed. Even if your income is so meager that you pay no income tax at all, you still pay FICA tax.

In 1983 and 1984 President Ronald Reagan conspired with Alan Greenspan to raise the FICA tax and reduce benefits ostensibly to protect the long term security of social security. They made social security benefits taxable income for one thing. This resulted in more money coming in in FICA taxes than was being paid out to social security recipients. Reagan and Greenspan took the balance of the money, after social security recipients were paid, and put it in the General Fund along with income tax receipts. They then put a similar amount in the form of a non-marketable, "special" Treasury bond in the SSTF. The ostensible rationale was that, when payouts exceeded FICA receipts at some later date, the SSTF would simply cash in those Treasury bonds as any investor would and use the money to make up the difference between FICA receipts and payouts to recipients. These "special" Treasuries supposedly had the "full faith and credit" of the United States Government. Only in reality they didn't. The reality is that Reagan raised taxes on the poor so that he didn't have to raise progressive income taxes on the rich. There is no $106,000. limit on income taxes. You pay income taxes on the full amount of your income not just the first $106,000. of it.

Well, the time is here when social security payouts exceed what is collected in FICA taxes. So the SSTF should simply be cashing in those "special" Treasuries to make up the difference, right? So why are Republicans in a tizzy about reducing social security benefits? Because the Reagan/Greenspan plan was a scam from the beginning. It was a Ponzi scheme on top of a fraud. They knew that at some later date Republicans could raise Holy Hell about social security and the American people would be too dumb to demand their benefits based on the $2.5 trillion that still exists in the SSTF. Instead they paid their regressive FICA taxes for years only to reach the point where those "special" Treasuries were supposed to be cashed in to continue paying out to social security recipients at the same rate. But what happens when the "special" Treasuries are cashed in? Why that amount has to be paid out of the General Fund back into the SSTF so that it can make payments to recipients. That means that the government either has to raise income taxes or other forms of revenue or has to borrow the money which is to say that it has to issue marketable Treasury bonds to investors which it has to pay interest on. These marketable Treasuries then get added to the deficit and the national debt whereas they weren't counted as part of the debt as long as they existed in the SSTF in the form of "non-marketable" Treasury bonds.

So the government either has to issue marketable Treasuries to investors or raise taxes to pay back the SSTF when it cashes in its Treasury bonds in order to make up the difference. But you will never hear Republicans mention the fact that there is $2.5 trillion in the SSTF which has the "full faith and credit" of the US government. Instead, they have their panties in a wad over the fact that taxes would have to be raised or the national debt would have to be increased every time the SSTF cashes in some of the Treasuries it holds. So Republicans want you to believe that social security needs to be "reformed", that benefits must be reduced in order to keep taxes low and reduce the deficit. They want you to watch the movie over here while ignoring the reality over there. I have explained all this in a previous blog.

So all that would be necessary is for Americans to demand their rights based on the fact that they have paid into social security with the understanding that the money in the SSTF would be paid out to social security recipients and, until that money is depleted, there should be no reason to lower social security payouts or benefits, just as Reagan and Greenspan promised and under the "full faith and credit" of the American government. But here is the shocker. As it turns out a Supreme Court decision (Flemming vs Nestor) determined that no individual American has a claim on the funds in the SSTF even if he or she paid into it over their whole working career. Furthermore, Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." So all that would be necessary to do away with social security altogether is for Republicans to gain control of all three branches of government. They then could just abolish social security completely and legally. Think it couldn't happen. Consult the Tea Party crowd and the rabid right wing libertarians and the Ayn Rand acolytes.

I maintain that Reagan and Greenspan knew exactly what they were doing. They created a regressive tax on the American poor and lower middle class that they knew could be scammed at a later date when payouts exceeded what was paid in or in other words when the regressive tax had lost its usefullness as a supplement to the General Fund. With all the concern about the debt crisis today and all the anxiety over whether or not the US will default on its debts, no one is the least bit worried over whether the US will default on its "special" Treasuries held in the SSTF. The default on Treasuries in the SSTF is not even on anyone's radar - least of all the bond market's. The rating agencies are not the least bit concerned about downgrading the US AAA credit rating because of default on the "special" Treasuries. Why? Because it knows that Congress can simply change the rules at any time either by reducing benefits or by raising FICA taxes to guarantee that these non-marketable "special" Treasuries will never be converted into marketable Treasuries! So the Reagan/ Greenspan plan consisted of a fraud on top of a Ponzi scheme. All that would have been necessary to guarantee the legitimacy of the bonds in the SSTF in the first place would have been to make them marketable Treasury bonds. In a previous comment Art a Layman said that the SSTF actually did have the right to purchase Treasuries and other securitites on the open market. If so, why didn't they do it? They simply could have purchased Treasuries and other securities on the open market when FICA taxes exceeded payouts. But then that money couldn't have been transferred into the General Fund and used for Federal expenditures! However, the bonds held by the SSTF would have been redeemable or salable just like any other investor owned Treasury. The SSTF would then have had enlarged fiduciary reponsibilities to invest and manage their investments wisely. This is what most countries which have sovereign wealth funds actually do. Norway's sovereign wealth fund which provides pensions for Norwegians actually invests in the open market in a basket of securities. But Reagan and Greenspan knew what they were doing when they didn't reform social security in this way. They knew that they were essentially raising taxes on the poor and lower middle class in lieu of raising taxes on the rich.

The Federal receipts from FICA taxes are almost the same as the Federal receipts from income taxes - both FICA taxes and income taxes constitute approximately 40% of Federal revenue receipts. This was the plan all along. Now when the Democrats want to raise taxes on the rich, Republicans call this heresy. They won't stand for raising taxes on the rich, but they didn't have a problem when regressive taxes on the poor were raised by Reagan and Greenspan, and these have been in effect for over 30 years. And the American public is not even aware. Again it's watch this movie over here and ignore that reality over there. Congressman and Tea Partier Joe Walsh doesn't want to have his children have to pay off the national debt, but the fact that he's over $100,000. behind in child support payments doesn't seem to bother him at all.

I am not against social security reform, only the kind of social security reform Republicans would bring us which amounts to cutting benefits on the poor and middle class and raising regressive FICA taxes. Instead, what I propose is a drawdown of the "special" Treasuries in the SSTF. This would provide benefits at current rates for the next 25 years or so. At that point social security FICA taxes could be enhanced very simply by raising the cap which presently is $106,000. By taxing the rich on their whole income instead of just the first $106,000., social security could be made solvent into the indefinite future. Any positive balance in the SSTF at that time should be invested in marketable securities including but not limited to US Treasury bonds. Furthermore, benefits could be reduced for the rich while enhancing benefits for the poor. People with retirement incomes over $100,000. don't need an additional $1000. a month in social security benefits. This money would be better spent enhancing the incomes of those with little or no retirement income other than social security. However, social security should still be there if for some reason the retiree with $100,000. in retirement income suddenly lost that income. So increasing benefits for the elderly poor while reducing benefits for the elderly rich would be a social security reform that I would endorse. Not all social security reform is bad, just social security reform brought to you by Republicans. Democrats should embrace social security reform based on democratic principles not simply reject any and all reform out of hand.

But again Republicans are demagoguing and being their usual duplicitous selves when they say social security is in trouble. It's not. They want you to watch their movie over here while ignoring the reality over there. Granted their movie is more entertaining than the reality, and American consumers would have to exert some effort to find out what the reality actually is. They might have to pull themselves away from their reality shows and football games to do some research. What! Should the average American be expected to do "research" instead of relying on the "research" conducted by Fox so-called News and Rush Limbaugh? And as this movie is being played out, the reality is that the Republicans in Congress just want to reneg on the "full faith and credit" of the American government when it comes to the Treasuries in the SSTF while the bond market could care less because after all those Treasuries represent money owed to the American people, not to wealthy investors.

Don’t Fall for the GOP Lie: There is No Budget Crisis. There’s a Job and Growth Crisis.

by Robert Reich

Thursday, July 28, 2011

A friend who’s been watching the absurd machinations in Congress asked me “what happens if we don’t solve the budget crisis and we run out of money to pay the nation’s bills?”

It was only then I realized how effective Republicans lies have been. That we’re calling it a “budget crisis” and worrying that if we don’t “solve” it we can’t pay our nation’s bills is testament to how successful Republicans have been distorting the truth.

The federal budget deficit has no economic relationship to the debt limit. Republicans have linked the two, and the Administration has played along, but they are entirely separate. Republicans are using what would otherwise be a routine, legally technical vote to raise the debt limit as a means of holding the nation hostage to their own political goal of shrinking the size of the federal government.

In economic terms, we will not “run out of money” next week. We’re still the richest nation in the world, and the Federal Reserve has unlimited capacity to print money.

Nor is there any economic imperative to reach an agreement on how to fix the budget deficit by Tuesday. It’s not even clear the federal budget needs that much fixing anyway.

Yes, the ratio of the national debt to the total economy is high relative to what it’s been. But it’s not nearly as high as it was after World War II – when it reached 120 percent of the economy’s total output.

If and when the economy begins to grow faster – if more Americans get jobs, and we move toward a full recovery – the debt/GDP ratio will fall, as it did in the 1950s, and as it does in every solid recovery. Revenues will pour into the Treasury, and much of the current “budget crisis” will be evaporate.

Get it? We’re really in a “jobs and growth” crisis – not a budget crisis.

And the best way to get jobs and growth back is for the federal government to spend more right now, not less – for example, by exempting the first $20,000 of income from payroll taxes this year and next, recreating a WPA and Civilian Conservation Corps, creating an infrastructure bank, providing tax incentives for small businesses to hire, expanding the Earned Income Tax Credit, and so on.

But what happens next week if Congress can’t or won’t deliver the President a bill to raise the debt ceiling? Remember: This is all politics, mixed in with legal technicalities. Economics has nothing to do with it.

One possibility, therefore, is for the Treasury to keep paying the nation’s bills regardless. It would continue to issue Treasury bills, which are our nation’s IOUs. When those IOUs are cashed at the Federal Reserve Board, the Fed would do what it has always done: Honor them.

How long could this go on without the debt ceiling being lifted? That’s a legal question. Republicans in Congress could mount a legal challenge, but no court in its right mind would stop the Fed from honoring the full faith and credit of the United States.

The wild card is what the three big credit-rating agencies will do. As long as the Fed keeps honoring the nation’s IOUs, America’s credit should be deemed sound. We’re not Greece or Portugal, after all. We’ll still be the richest nation in the world, whose currency is the basis for most business transactions in the world.

Standard & Poor’s has warned it will downgrade the nation’s debt from a triple-A to a double-A rating if we don’t tend to the long-term deficit. But, as I’ve noted, S&P has no business meddling in American politics – especially since its own non-feasance was partly responsible for the current size of the federal debt (had it done its job the debt and housing bubbles wouldn’t have precipitated the terrible recession, and the federal outlays it required).

As long as we pay our debts on time, our global creditors should be satisfied. And if they’re satisfied, S&P, Moody’s, and Fitch should be, too.

Repeat after me: The federal deficit is not the nation’s biggest problem. The anemic recovery, huge unemployment, falling wages, and declining home prices are bigger problems. We don’t have a budget crisis. We have a jobs and growth crisis.

The GOP has manufactured a budget crisis out of the Republicans’ extortionate demands over raising the debt limit. They have succeeded in hoodwinking the public, including my friend.

The Empty Bully Pulpit

by Robert Reich

Wednesday, July 27, 2011

How did we get into this mess?

I thought I’d seen Washington at its worst. I was there just after Watergate. I was there when Jimmy Carter imploded. I was there during the government shut-down of 1995.

But I hadn’t seen the worst. This is the worst.

How can it be that with over 9 percent unemployment, essentially no job growth, widening inequality, falling real wages, and an economy that’s almost dead in the water — we’re locked in a battle over how to cut the budget deficit?

Part of the answer is a Republican Party that’s the most irresponsible and rigidly ideological I’ve ever witnessed.

Part of the answer is the continuing gravitational pull of the Great Recession.

But another part of the answer lies with the President — and his inability or unwillingness to use the bully pulpit to tell Americans the truth, and mobilize them for what must be done.

Barack Obama is one of the most eloquent and intelligent people ever to grace the White House, which makes his failure to tell the story of our era all the more disappointing and puzzling. Many who were drawn to him in 2008 (including me) were dazzled by the power of his words and insights — his speech at the 2004 Democratic convention, his autobiography and subsequent policy book, his talks about race and other divisive issues during the campaign.

We were excited by the prospect of a leader who could educate — an “educator in chief” who would use the bully pulpit to explain what has happened to the United States in recent decades, where we must go, and why.

But the man who has occupied the Oval Office since January, 2009 is someone entirely different — a man seemingly without a compass, a tactician who veers rightward one day and leftward the next, an inside-the Beltway dealmaker who doesn’t explain his compromises in light of larger goals.

In his inaugural address, Obama warned that “the nation cannot prosper long when it favors only the prosperous.” In private, he professes to understand that the growing concentration of income and wealth at the top has robbed the middle class of the purchasing power it needs to keep the economy going. And it has distorted our politics.

He is well aware that the Great Recession wiped out $7.8 trillion of home values, crushing the nest eggs and eliminating the collateral that had allowed the middle class to keep spending despite declining real wages — a decrease in consumption that’s directly responsible for the anemic recovery.

But instead of explaining this to the American people, he joins the GOP in making a fetish of reducing the budget deficit, and enters into a hair-raising game of chicken with House Republicans over whether the debt ceiling will be raised.

Never once does he tell the public why reducing the deficit has become his number one economic priority. Americans can only conclude that the Republicans must be correct — that diminishing the deficit will somehow revive economic growth and restore jobs.

Instead of powerful explanations we get the type of bromides that issue from every White House. America must “win the future,” Obama says, by which he means making public investments in infrastructure, education, and basic R&D. But then he submits a budget proposal that would cut nondefense discretionary spending (of which these investments constitute more than half) to its lowest level as a share of gross domestic product in over half a century.

A president can be forgiven for compromising, if his supporters understand why he is doing so. That the health-care law doesn’t include a public option, that financial reform doesn’t limit the size of the biggest Wall Street banks, even that cuts may have to be made to Medicare or Social Security — all could be accepted in light of the practical necessities of politics, if only we understood where the President is leading us.

Why is Obama not using the bully pulpit? Perhaps he’s too embroiled in the tactical maneuvers that pass for policy making in Washington, or too intent on preserving political capital for the next skirmish, or cynical about how the media will relay or distort his message. He may also disdain the repetition necessary to break through the noise and drive home the larger purpose of his presidency. I have known (and worked for) presidents who succumbed to all these, at least for a time.

A more disturbing explanation is that he simply lacks the courage to tell the truth. He wants most of all to be seen as a responsible adult rather than a fighter. As such, he allows himself to be trapped by situations — the debt-ceiling imbroglio most recently — within which he tries to offer reasonable responses, rather than be the leader who shapes the circumstances from the start.

Obama cannot mobilize America around the truth, in other words, because he is continuously adapting to the prevailing view. This is not leadership.

The Biggest Driver in the Deficit Battle: Standard & Poor’s

by Robert Reich

Tuesday, July 26, 2011

If you think deficit-reduction is being driven by John Boehner or Harry Reid, think again. The biggest driver right now is Standard & Poor’s.  

All of America’s big credit-rating agencies — Moody’s, Fitch, and Standard & Poor’s — have warned they might cut America’s credit rating if a deal isn’t reached soon to raise the debt ceiling. This isn’t surprising. A borrower that won’t pay its bills is bound to face a lower credit rating.

But Standard & Poor’s has gone a step further: It’s warned it might lower the nation’s credit rating even if Democrats and Republicans make a deal to raise the debt ceiling. Standard & Poor’s insists any deal must also contain a credible, bipartisan plan to reduce the nation’s long-term budget deficit by $4 trillion — something neither Harry Reid’s nor John Boehner’s plans do.

If Standard & Poor’s downgrades America’s debt, the other two big credit-raters are likely to follow. The result: You’ll be paying higher interest on your variable-rate mortgage, your auto loan, your credit card loans, and every other penny you borrow. And many of the securities you own that you consider especially safe – Treasury bills and other highly-rated bonds – will be worth less.

In other words, Standard & Poor’s is threatening that if the ten-year budget deficit isn’t cut by $4 trillion in a credible and bipartisan way, you’ll pay more – even if the debt ceiling is lifted next week.

With Republicans in the majority in the House, there’s no way to lop $4 trillion off of the budget without harming Social Security, Medicare, and Medicaid, as well as education, Pell grants, healthcare, highways and bridges, and everything else the middle class and poor rely on.

And you thought Republicans were the only extortionists around.

Who is Standard & Poor’s to tell America how much debt it has to shed in order to keep its credit rating?

Standard & Poor’s didn’t exactly distinguish itself prior to Wall Street’s financial meltdown in 2007. Until the eve of the collapse it gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations.

Standard & Poor’s (along with Moody’s and Fitch) bear much of the responsibility for what happened next. Had they done their job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn’t have become so large – and their bursts wouldn’t have brought down much of the economy.

Had Standard & Poor’s done its job, you and I and other taxpayers wouldn’t have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn’t have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.

In other words, had Standard & Poor’s done its job, today’s budget deficit would be far smaller.

And where was Standard & Poor’s (and the two others) during the George W. Bush administration – when W. turned a $5 trillion budget surplus bequeathed to him by Bill Clinton into a gaping deficit? Standard & Poor didn’t object to Bush’s giant tax cuts for the wealthy. Nor did it raise a warning about his huge Medicare drug benefit (i.e., corporate welfare for Big Pharma), or his decision to fight two expensive wars without paying for them.

Add Bush’s spending splurge and his tax cuts to the expenses brought on by Wall Street’s near collapse – and today’s budget deficit would be tiny.

Put another way: If Standard & Poor’s had been doing the job it was supposed to be doing between 2000 and 2008, the federal budget wouldn’t be in a crisis — and Standard & Poor’s wouldn’t be threatening the United States with a downgrade if we didn’t come up with a credible plan for lopping $4 trillion off it.  

So why has Standard & Poor’s decided now’s the time to crack down on the federal budget — when it gave free passes to Wall Street’s risky securities and George W. Bush’s giant tax cuts for the wealthy, thereby contributing to the very crisis its now demanding be addressed? 

Could it have anything to do with the fact that the Street pays Standard & Poor’s bills?

Wealth in America: Whites Leave Minorities Behind

by Mike Brunker from msnbc.com, July 26, 2011

WASHINGTON — As Congress and the White House wrestle whether to raise taxes for the wealthiest Americans, a new analysis of Census data shows that the wealth gaps between whites and blacks and Hispanics widened dramatically during the recession.

The analysis by the Pew Research Center, released on Tuesday, found that from 2005 to 2009, inflation-adjusted median wealth fell 66 percent among Hispanic households and 53 percent among black households, compared with a 16 percent decline among white households.

Those declines increased the wealth gap between white and minority households to the largest since the census began collecting such data in 1984. The ratio of wealth for whites to blacks, for instance, is now roughly 20 to 1, compared to 12 to 1 in the first survey 25 years ago and 7 to 1 in 1995, when a booming economy lifted many low-income Americans into the middle class.

The wealth ratio for whites to Hispanics was 18 to 1 in 2009, also up from 7 to 1 in 1995, the Pew analysis found.

The declines from the recession left the median black household with $5,677 in wealth (assets minus debts, where assets include items like a car, a home, savings, retirement funds, etc.) and the typical Hispanic household with $6,325. White households, by comparison, had $113,149, the study found.

Sliced another way, the data from the Census Bureau’s Survey of Income and Program Participation (SIPP), showed that 35 percent of black households and 31 percent of Hispanic households had zero or negative net worth in 2009. The comparable rate for white households was 15 percent.

The SIPP income questionnaire is considered to provide the most comprehensive snapshot of household wealth by race and ethnicity.

The Pew analysis said the housing crisis was largely to blame for the widening gulf. The median level of home equity held by Hispanic homeowners declined by half from 2005 to 2009, from $99,983 to $49,145 it found. By comparison, white homeowners saw their median equity decline from $115,364 in 2005 to $95,000 in 2009. Black homeowners’ median equity fell from $76,910 to $59,000 over the same period.

The study said the sharper decline among Hispanics happened because a large share of Hispanics live in California, Florida, Nevada and Arizona, which were among the states hardest hit by the housing crisis.

Other studies have noted that blacks and Hispanics lost so much more home equity because they were far more likely to be sold a high-cost, sub-prime loan, regardless of their credit histories. Those mortgages now have the highest foreclosure rates.

The Grio: How minority families can help bridge the wealth gap

It also noted that because whites are more heavily invested in the recovering stock market than blacks or Hispanics, the former had recovered a higher percentage of the wealth lost to the recession.

National Urban League President and CEO Marc Morial called the report a “wake-up call” that minority communities need more investment in long-term job creation.

"A paramount issue for this nation for the 21st century is to ensure the narrowing and closing of the racial wealth gap," Morial told the Associated Press on Tuesday, a day before the National Urban League opens its annual convention in Boston. "It has deep social implications. It has deep political implications."

In Washington, the wealth gap has been a major point of friction in talks about raising the debt ceiling and putting the nation on sounder fiscal footing. President Barack Obama and Democrats have sought a variety of ways to increase revenue, all aimed at those in the upper income bracket.

The president has proposed closing loopholes in the tax code, such as breaks for owners of private jets and for oil companies as well as higher income tax rates on wealthier individuals and families. Republicans have made resistance to any tax increases a focal point in the debate, arguing that raising taxes in a recession is an impediment to creating jobs. Neither plan currently under consideration contains any tax increases.

More information

• Pew Social & Demographic Trends
• Census Bureau

The Associated Press contributed to this report.

Vicious Cycles: Why Washington is About to Make the Jobs Crisis Worse

by Robert Reich

Monday, July 25, 2011

We now live in parallel universes.

One universe is the one in which most Americans live. In it, almost 15 million people are unemployed, wages are declining (adjusted for inflation), and home values are still falling. The unsurprising result is consumers aren’t buying — which is causing employers to slow down their hiring and in many cases lay off more of their workers. In this universe, we’re locked in a vicious economic cycle that’s getting worse. 

The other universe is the one in which Washington politicians live. They are now engaged in a bitter partisan battle over how, and by how much, to reduce the federal budget deficit in order to buy enough votes to lift the debt ceiling. 

The two universes have nothing whatever to do with one another — except for one thing. If consumers can’t and won’t buy, and employers won’t hire without customers, the spender of last resort must be government. We’ve understood this since government spending on World War II catapulted America out of the Great Depression — reversing the most vicious of vicious cycles. We’ve understood it in every economic downturn since then. 

Until now. 

The only way out of the vicious economic cycle is for government to adopt an expansionary fiscal policy — spending more in the short term in order to make up for the shortfall in consumer demand. This would create jobs, which will put money in peoples’ pockets, which they’d then spend, thereby persuading employers to do more hiring. The consequential job growth will also help reduce the long-term ratio of debt to GDP. It’s a win-win.

This is not rocket science. And it’s not difficult for government to do this — through a new WPA or Civilian Conservation Corps, an infrastructure bank, tax incentives for employers to hire, a two-year payroll tax holiday on the first $20K of income, and partial unemployment benefits for those who have lost part-time jobs. 

Yet the parallel universe called Washington is moving in exactly the opposite direction. Republicans are proposing to cut the budget deficit this year and next, which will result in more job losses. And Democrats, from the President on down, seem unable or unwilling to present a bold jobs plan to reverse the vicious cycle of unemployment. Instead, they’re busily playing “I can cut the deficit more than you” — trying to hold their Democratic base by calling for $1 of tax increases (mostly on the wealthy) for every $3 of spending cuts. 

All of this is making the vicious economic cycle worse — and creating a vicious political cycle to accompany it.

As more and more Americans lose faith that their government can do anything to bring back jobs and wages, they are becoming more susceptible to the Republican’s oft-repeated lie that the problem is government — that if we shrink government, jobs will return, wages will rise, and it will be morning in America again. And as Democrats, from the President on down, refuse to talk about jobs and wages, but instead play the deficit-reduction game, they give even more legitimacy to this lie and more momentum to this vicious political cycle.

The parallel universes are about to crash, and average Americans will be all the worse for it.

Why Medicare Is the Solution — Not the Problem

by Robert Reich

Friday, July 22, 2011

Not only is Social Security on the chopping block in order to respond to Republican extortion. So is Medicare.

But Medicare isn’t the nation’s budgetary problems. It’s the solution. The real problem is the soaring costs of health care that lie beneath Medicare. They’re costs all of us are bearing in the form of soaring premiums, co-payments, and deductibles.

Medicare offers a means of reducing these costs — if Washington would let it.

Let me explain.

Americans spend more on health care per person than any other advanced nation and get less for our money. Yearly public and private healthcare spending is $7,538 per person. That’s almost two and a half times the average of other advanced nations.

Yet the typical American lives 77.9 years – less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations.

Medical costs are soaring because our health-care system is totally screwed up. Doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures.

You have lower back pain? Almost 95% of such cases are best relieved through physical therapy. But doctors and hospitals routinely do expensive MRI’s, and then refer patients to orthopedic surgeons who often do even more costly surgery. Why? There’s not much money in physical therapy.

Your diabetes, asthma, or heart condition is acting up? If you go to the hospital, 20 percent of the time you’re back there within a month. You wouldn’t be nearly as likely to return if a nurse visited you at home to make sure you were taking your medications. This is common practice in other advanced countries. So why don’t nurses do home visits to Americans with acute conditions? Hospitals aren’t paid for it.

America spends $30 billion a year fixing medical errors – the worst rate among advanced countries. Why? Among other reasons because we keep patient records on computers that can’t share the data. Patient records are continuously re-written on pieces of paper, and then re-entered into different computers. That spells error.

Meanwhile, administrative costs eat up 15 to 30 percent of all healthcare spending in the United States. That’s twice the rate of most other advanced nations. Where does this money go? Mainly into collecting money: Doctors collect from hospitals and insurers, hospitals collect from insurers, insurers collect from companies or from policy holders.

A major occupational category at most hospitals is “billing clerk.” A third of nursing hours are devoted to documenting what’s happened so insurers have proof.

Trying to slow the rise in Medicare costs doesn’t deal with any of this. It will just limit the amounts seniors can spend, which means less care. As a practical matter it means more political battles, as seniors – whose clout will grow as boomers are added to the ranks – demand the limits be increased. (If you thought the demagoguery over “death panels” was bad, you ain’t seen nothin’ yet.)

Paul Ryan’s plan – to give seniors vouchers they can cash in with private for-profit insurers — would be even worse. It would funnel money into the hands of for-profit insurers, whose administrative costs are far higher than Medicare.

So what’s the answer? For starters, allow anyone at any age to join Medicare. Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the administrative costs of companies in the small-group market (amounting to 25 to 27 percent of premiums). And it’s way, way lower than the administrative costs of individual insurance (40 percent). It’s even far below the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

In addition, allow Medicare – and its poor cousin Medicaid – to use their huge bargaining leverage to negotiate lower rates with hospitals, doctors, and pharmaceutical companies. This would help move health care from a fee-for-the-most-costly-service system into one designed to get the highest-quality outcomes most cheaply.

Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year. More Americans would get quality health care, and the long-term budget crisis would be sharply reduced.

Let me say it again: Medicare isn’t the problem. It’s the solution.

[This is drawn from a post I did in April, also before current imboglio]

The Only Social Security Reform Worth Considering: Raising the Ceiling on Income Subject to It

by Robert Reich

Friday, July 22, 2011

The very idea that Social Security might be on the chopping block in order to pay the ransom Republicans are demanding reveals both the cravenness of their demands and the callowness of the opposition to those demands.

In a former life I was a trustee of the Social Security trust fund. So let me set the record straight.

Social Security isn’t responsible for the federal deficit. Just the opposite. Until last year Social Security took in more payroll taxes than it paid out in benefits. It lent the surpluses to the rest of the government.

Now that Social Security has started to pay out more than it takes in, Social Security can simply collect what the rest of the government owes it. This will keep it fully solvent for the next 26 years.  

But why should there even be a problem 26 years from now? Back in 1983, Alan Greenspan’s Social Security commission was supposed to have fixed the system for good – by gradually increasing payroll taxes and raising the retirement age. (Early boomers like me can start collecting full benefits at age 66; late boomers born after 1960 will have to wait until they’re 67.)

Greenspan’s commission must have failed to predict something. What?

Inequality.

Remember, the Social Security payroll tax applies only to earnings up to a certain ceiling. (That ceiling is now $106,800.) The ceiling rises every year according to a formula roughly matching inflation.

Back in 1983, the ceiling was set so the Social Security payroll tax would hit 90 percent of all wages covered by Social Security. That 90 percent figure was built into the Greenspan Commission’s fixes. The Commission assumed that, as the ceiling rose with inflation, the Social Security payroll tax would continue to hit 90 percent of total income.

Today, though, the Social Security payroll tax hits only about 84 percent of total income.

It went from 90 percent to 84 percent because a larger and larger portion of total income has gone to the top. In 1983, the richest 1 percent of Americans got 11.6 percent of total income. Today the top 1 percent takes in more than 20 percent.

If we want to go back to 90 percent, the ceiling on income subject to the Social Security tax would need to be raised to $180,000.

Presto. Social Security’s long-term (beyond 26 years from now) problem would be solved.

So there’s no reason even to consider reducing Social Security benefits or raising the age of eligibility. The logical response to the increasing concentration of income at the top is simply to raise the ceiling.

[This post is drawn from one I posted in February — before Social Security was as on the chopping block]

The Shameful Murder of Dodd Frank

by Robert Reich

Wednesday, July 20, 2011

Happy Birthday Dodd Frank,
Happy Birthday to you,
You’ve lost all your muscle,
And your teeth are gone, too.
 
One full year after the financial reform bill spearheaded through Congress by Christopher Dodd and Barney Frank was signed into law, Wall Street looks and acts much the way it did before. That’s because the Street has effectively neutered the law, which is the best argument I know for applying the nation’s antitrust laws to the biggest banks and limiting their size.

Treasury Secretary Tim Geithner says the financial system is “on more solid ground” than prior to the 2008 crisis, but I don’t know what ground he’s looking at.
 
Much of Dodd-Frank is still on the drawing boards, courtesy of the Street. The law as written included loopholes big enough to drive bankers’ Lamborghini’s through — which they’re now doing.

What kind of derivatives must be traded on open exchanges? What are the capital requirements for financial companies that insure borrowers against default, such as AIG? How should credit rating agencies be funded? What about the much-vaunted Volcker Rule requiring that banks trade their own money if they’re going to gamble in the stock market – how should their own money be defined? What “stress tests” must the big banks pass to maintain their privileged status with the Fed?
 
The short answer: whatever it takes to maintain the Street’s profits and perquisites.
 
The law included a one-year delay, ostensibly to give regulators time to iron out these sorts of details. But the real purpose of the delay, it’s now obvious, was to give the Street time to expand the loopholes and fill the details with pablum — when the public stopped looking.
 
Since Dodd Frank was enacted a year ago, Wall Street has spent as much – if not more – on lobbyists and political payoffs designed to stop the law’s implementation than it did trying to kill off the law in the first place. The six largest banks spent $29.4 million on lobbying last year, according to firm disclosures — record spending for the group. This year they’re on track to break last year’s record. 

According to the Center for Public Integrity, the Street and other financial institutions engaged about 3,000 lobbyists to fight Dodd-Frank – more than five lobbyists for every member of Congress. They’ve hired almost the same number to delay, weaken, or otherwise prevent its implementation.
 
Meanwhile, the portion of the law that’s now supposed to be in effect is barely being enforced. That’s because the agencies charged with enforcing it, such as the Securities and Exchange Commission, don’t have enough money or staff to do the job. Congress hasn’t seen fit to appropriate these necessities.

Several of these agencies are still lacking directors or commissioners. Senate Republicans have refused to confirm anyone. They wouldn’t even consider Elizabeth Warren to run the new consumer bureau.
 
Many of same business leaders who blame the sluggish economy on regulatory uncertainty are complicit in all this. A senior vice president of the Chamber of Commerce told the New York Times that “uncertainty among companies about the rules of the road is keeping a lot of capital on the sidelines.” The Chamber has been among the groups responsible for keeping Dodd Frank at bay.
 
But it’s the biggest Wall Street banks – the ones that got us into this mess in the first place, and got bailed out by the public – that have taken the lead in killing off Dodd-Frank. They can afford the hit job.

At the same time, their executives  – enjoying pay and bonuses as large as in the boom days of the housing bubble – are busily bankrolling both political parties, although Republicans are favored in this election cycle. A significant portion of Mitt Romney’s sizable war chest has come from the Street. President Obama is no slouch when it comes to pulling at the Street’s purse strings.
 
Bankers try to justify their shameful murder of Dodd-Frank by saying tightened regulatory standards will put them at a disadvantage relative to their overseas competitors. JP Morgan’s Jamie Dimon had the nerve to publicly accost Ben Bernanke recently, complaining that the law’s implementation would harm the Street’s competitiveness.
 
The argument is pure claptrap. In the wake of global finance’s near meltdown, Europe has been more aggressive than the United States in clamping down on banks headquartered there. Britain is requiring its banks to have higher capital reserves than are so far contemplated in the United States. In fact, senior Wall Street executives have warned European leaders their tighter bank regulations will cause Wall Street to move more of its business out of Europe.
 
Wall Street is global because capital is global. JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, and Morgan Stanley are doing business in every corner of the world. Goldman even advised Greece on how to hide its growing indebtedness, before the rest of the world got wind, through a derivatives deal that circumvented Europe’s deficit rules.
 
The real reason Wall Street has spent the last year bludgeoning Dodd-Frank into meaninglessness is the vast sums of money it can make if Dodd-Frank is out of the way. If you took the greed out of Wall Street all you’d have left is pavement.
 
Wall Street is the richest and most powerful industry in America with the closest ties to the federal government – routinely supplying Treasury secretaries and economic advisors who share its world view and its financial interests, and routinely bankrolling congressional kingpins.

How else can you explain why the Street was bailed out with no strings attached? Or why no criminal charges have been brought against any major Wall Street figure – despite the effluvium of frauds, deceptions, malfeasance and nonfeasance in the years leading up to the crash and subsequent bailout? Or why Dodd-Frank has been eviscerated?
 
As a result of consolidations brought on by the bailout, the biggest banks are bigger and have more clout than ever. They and their clients know with certainty they will be bailed out if they get into trouble, which gives them a financial advantage over smaller competitors whose capital doesn’t come with such a guarantee. So they’re becoming even more powerful.
 
Face it: The only answer is to break up the giant banks. The Sherman Antitrust Act of 1890 was designed not only to improve economic efficiency by reducing the market power of economic giants like the railroads and oil companies but also to prevent companies from becoming so large that their political power would undermine democracy.
 
The sad lesson of Dodd-Frank is Wall Street is too powerful to allow effective regulation of it. We should have learned that lesson in 2008 as the Street brought the rest of the economy – and much of the world – to its knees. Now we’re still on our knees but the Street is back on top. Its leviathans do not generate benefits to society proportional to their size and influence. To the contrary, they represent a clear and present danger to our economy and our democracy.
 
They should be broken up, and their size must be capped. Congress won’t do it, obviously. So we’ll need to rely on the nation’s two antitrust agencies — the Federal Trade Commission and the Antitrust Division of the Justice Department. The trust-busters are now investigating Google. They should be turning their sights onto JPMorgan Chase, Citigroup, and Goldman Sachs instead.

Corporate Tax Holiday in Debt Ceiling Deal: Where's the Uproar?

Published on Friday, July 22, 2011 by Rolling Stone

by Matt Taibbi

Have been meaning to write about this, but I’m increasingly amazed at the overall lack of an uproar about the possibility of the government approving another corporate tax repatriation holiday.

I’ve been in and out of DC a few times in recent weeks and one thing I keep hearing is that there is a growing, and real, possibility that a second “one-time tax holiday” will be approved for corporations as part of whatever sordid deal emerges from the debt-ceiling negotiations.

I passed it off as a bad joke when I first saw news of this a few weeks ago, when it was reported that Wall Street whipping boy Chuck Schumer was seriously considering the idea. Then I read later on that other Senators were jumping on the bandwagon, including North Carolina’s Kay Hagan.

This is what Hagan’s spokesperson said:

Senator Hagan is looking closely at any creative, short-term measures that can get bipartisan support and put people back to work. One such potential initiative is a well-crafted and temporary change to the tax code that encourages American companies to bring money home and put it towards capital, investment, and–most importantly–American jobs.

For those who don’t know about it, tax repatriation is one of the all-time long cons and also one of the most supremely evil achievements of the Washington lobbying community, which has perhaps told more shameless lies about this one topic than about any other in modern history – which is saying a lot, considering the many absurd things that are said and done by lobbyists in our nation’s capital.

Here’s how it works: the tax laws say that companies can avoid paying taxes as long as they keep their profits overseas. Whenever that money comes back to the U.S., the companies have to pay taxes on it.

Think of it as a gigantic global IRA. Companies that put their profits in the offshore IRA can leave them there indefinitely with no tax consequence. Then, when they cash out, they pay the tax.

Only there’s a catch. In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a “one-time” tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.

Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash. Some of those companies promising waves of new hires have already committed to massive layoffs..

It was bad enough when lobbyists managed to pull this trick off once, in 2004. But in one of the worst-kept secrets in Washington, companies immediately started to systematically “offshore” their profits right after the 2004 holiday with the expectation that somewhere down the road, and probably sooner rather than later, they would get another holiday.

Companies used dozens of fiendish methods to keep profits overseas, including such scams as “transfer pricing,” a technique in which profits are shifted to overseas subsidiaries. A typical example might involve a pharmaceutical company that licenses the rights or the patent to one of its more successful drugs to a foreign affiliate, which in turn manufactures the product and sells it back to the U.S. branch, thereby shifting the profits overseas.

Companies have been doing this for years, to incredible effect. Bloomberg’s Jesse Drucker estimated that Google all by itself has saved $3.1 billion in taxes in the past three years by shifting its profits overseas. Add that to the already rampant system of loopholes and what you have is a completely broken corporate tax system.

And the whole thing is predicated on that dirty little secret – the notion, long known to all would-be major corporate taxpayers, that there would come a day when there would be another tax holiday.

That time, they hope, is now. According to Drucker, lobbyists met with President Obama last December to ask for another holiday. And now the drumbeats are rolling on the Hill for a new holiday to be included in the debt-ceiling deal.

Senator Carl Levin of Michigan, the same Senator who produced the damning report of corruption on Wall Street, has been trying to fight the problem, introducing a measure that would prevent companies from accessing offshored money through correspondent accounts and branches of offshore banks.

Levin’s Permanent Subcommittee on Investigations has also been investigating how companies might use the cash they save from a tax holiday, surveying companies like DuPont, presumably to find out just how many of these firms really intend to create new jobs with their tax savings.

I’m shocked there isn’t more of an uproar about this. Could you imagine what the Tea Party would be saying right now if there was a law on the books that allowed immigrants to indefinitely avoid taxes on income sent back to family members in the old country, in Mexico and Venezuela and India?

Imagine the uproar if Barack Obama, in the middle of this historic revenue crunch and "We're so broke the world is going to end tomorrow!" debt-ceiling hysteria, decided to declare a second “one-time tax holiday” for, say, unwed single mothers, or recipients of public assistance? Middle America would be running through the streets, firing shotguns out its truck window, waving chainsaws in mall lobbies, etc.

As it is, leading members of the Senate are seriously considering giving the most profitable companies in the world a total tax holiday as a reward for their last seven years of systematic tax avoidance.  Hundreds of billions of potential tax dollars would disappear from the Treasury. And there isn’t a peep from anyone, anywhere, on this issue.

We’re seriously talking about defaulting on our debt, and cutting Medicare and Social Security, so that Google can keep paying its current 2.4 percent effective tax rate and GE, a company that received a $140 billion bailout en route to worldwide 2010 profits of $14 billion, can not only keep paying no taxes at all, but receive a $3.2 billion tax credit from the federal government. And nobody appears to give a shit. What the hell is wrong with people? Have we all lost our minds?

© 2011 Rolling Stone

As Rolling Stone’s chief political reporter, Matt Taibbi's predecessors include the likes of journalistic giants Hunter S. Thompson and P.J. O'Rourke. Taibbi's 2004 campaign journal Spanking the Donkey cemented his status as an incisive, irreverent, zero-bullshit reporter. His latest collection is Smells Like Dead Elephants: Dispatches from a Rotting Empire

The Tax Burden of the Very Rich

Published on Saturday, July 23, 2011 by CommonDreams.org

by Christopher Brauchli

When there is an income tax, the just man will pay more and the unjust less on the same amount of income.
— Plato, The Republic

The purpose of this piece is to identify for readers how an unjust tax system treats the very wealthy. Once that is understood it is easy to understand Senator Orin Hatch’s recent comments.

In a little noted speech the Senator said that the poor need to “share some of the responsibility” for lowering the deficit and observed that the rich are paying too much in taxes.” In his remarks he observed that “The top 1 per-cent of the so-called wealthy pay 38% of all income tax, the top 10 percent pay 70 percent of all income tax and the top 50 percent pay almost 98 percent of all income tax.” Those were facts of which many, including this writer, were unaware and it immediately created feelings of compassion for those paying that much. Of course, compassion is slightly tempered when one learns that in 2007 the top 1 percent received between 21 and 23 percent of all U.S. income depending on what studies you read. It is also slightly tempered when one realizes that the bottom 50 percent earned only 12.3 percent of all U.S. income. Nonetheless, the rich are obviously paying too much and that explains why Republicans don’t want them to pay more.

IRS statistics released in May of this year reflect that in 2008, the most recent year for which statistics are available, the average income among the top 400 Americans was $270.5 million. In 2008 someone with that income would have paid about $50 million in taxes. (The effective rate on that income is about 18.1%.) Of course, if you are someone who has net taxable income of $60,000, after deductions and exemptions, and are, therefore, in the 25% tax bracket on all your income in excess of $34,500, you may wonder why you are in a much higher bracket than someone who earns $270.5 million. There is a perfectly logical explanation for this seeming (but not actual) inequity.

The main reason that the tax rate in the United States for the rich is low is that being rich, many of the rich do not need to work. It has long been accepted by Republicans in Congress, among others, that unearned income should receive more favorable treatment than earned income. According to the IRS, in 2008 only 8 percent of the income of the top 400 earners in the country came from salary and wages. Close to 10% came from dividends and about 56% came from capital gains. Happy to help those who have prospered, either through their own efforts or through a wise choice of ancestors, Congress decided that people who receive dividends should only pay 15% tax on those dividends. Similarly, Congress thinks that capital gains, subject to a few non-onerous rules, should only be taxed at 15%. There is another group with very large incomes that also pays tax at the 15% rate. Those are hedge fund managers.

Like the VERY RICH, among whom many hedge fund managers find themselves, money that hedge fund managers get from investors for managing their money is treated like capital gains and is taxed at only 15% even though to the unsophisticated observer money paid to them looks for all the world like the sort of money that the typical wage earner gets, except for its considerably larger amount than what most wage earners receive. (One commentator pointed out that if hedge fund managers paid taxes like the people earning $50,000 or even $100,000, the national deficit would be reduced by $44 billion in the next 10 years. In 2008 the top 25 hedge fund managers “averaged”: $1.01 billion in annual income. )

In 2011, the only worker who will pay as low a rate as the folks described above is the worker whose taxable income is less than $34,500. Workers with taxable income between that and $69,675 will find themselves in the 25% tax bracket and from there the rates go up to 35% which is more than twice as much as the rate at which the person with $1.1 billion in dividends and capital gains is taxed. There are, of course, many adjustments made in calculating taxable income and the actual percentages vary taxpayer by taxpayer. But the long and the short of it is that the taxpayer who wants the satisfaction of paying taxes at the same rate as the really rich should keep his or her taxable income under $34,500. For many, that will not be difficult.

It is possible that readers of this column will not understand why Mr. Hatch thinks the poor should do more. It is even possible that they will not find the foregoing an adequate explanation for why Republicans do not think taxes on the wealthy should be raised. They are not the only ones who are puzzled.

Christopher Brauchli is a columnist and lawyer known nationally for his work. He is a graduate of Harvard University and the University of Colorado School of Law where he served on the Board of Editors of the Rocky Mountain Law Review. He can be emailed at [email protected]. For political commentary see his web page at http://humanraceandothersports.com

OUR FISCAL-ECONOMIC QUAGMIRE: SOME SOLUTIONS

by Frank Thomas

John,

“Good people are out there (edit: fighting the ordinary folks fight and exposing the  financially destructive, narrow-minded Republican cut spending and taxes policy). They just aren’t getting the media exposure the other side is.”

Your words are right on, John, and reflect “the same old story” of right-wing ideological domination of the public political dialogue, mastering the indoctrination art of repeated, simplistic one-liners through media channels bought by powerful special-interests’money.

A huge inequality in income and wealth in a deregulated environment caused people to go into debt to consume or borrow against the inflated value of a house. The social-economic morass we are now in shows no light at the end of the tunnel. How do we come together finally to come out of the MESS we are in? 

PART  1

 What Is The Republican Agenda For America?

“DOWN with deficits, debt, government spending and UP with jobs by LOWER taxes mainly for the rich.”

This is the Boehner, McConnell, Cantor, Bachman Incorporated fiscal paradise shift for America … in reality, it’s an agenda to make government small by “starving the beast.” Welcome to the resurrection of Newt Gingrich’s “Contract for America” fiasco. Successor deciple Boehner has assumed the pledge of  government’s  demise with his recent words: “We need to end the job-killing binges by the federal government,…, and then we need to turn attention to killing the job-killing health care law.” The irony that passes over his head conveniently is that the Republicans did a marvelous job killing ALL jobs the last decade!

Only problem is this lean and mean paradigm will increasingly starve  what’s left of middle-class Americans in an economy where job growth, aggregate demand and private investment remain stagnant with ±28 million people unemployed or underemployed … all reinforcing a vicious circle of ever lower demand, risk of spiraling deflation, and thus more unemployment. 

Let’s bear in mind the last decade was the Lost Decade for working people with near ZERO job growth and annual GDP growth rates of 1.9%, close to 1.3% in the 30s Great Depression. We now have both private and public jobs being wiped out at all levels – a recipe for an ongoing financial relapse and continuing deficits (similar to Japan’s 1992-2004 economic stagnation).                                 

As most informed Americans well know by now, tax cuts, mainly benefiting the rich, accelerate deficits and do little to create jobs (as Reagan found out much to his surprise). The right wing never stops lying about this much proven point.

However, as stated, the Republican priority is not lower deficits but smaller government and Obama’s defeat in 2012 – no matter the disproportionate economic sacrifices inflicted on ordinary Americans.

A creative, balanced, pragmatic BLEND of austerity measures and renewal policy solutions in the interests of everyone – middle-class as well as the upper class – clearly is not a driving Republican priority. Ignored is the persistent recession middle-class squeeze (building up over 30 years) with lost jobs and lost home equity and retirement savings.

How Will A Balanced Budget Amendment To The Constitution Help?

Republicans are now proposing a tough Balanced Budget Amendment (BBA) to come to grips with the soaring repetitive federal budget deficits – presumably formulated so as not to inflict greater pain on the working class, but of course this is the million dollar question.

In my opinion, the Republican initiative for a BBA could be a good idea providing it didn’t duplicate on a national level California’s catastrophic BBA experiment passed in Reagan’s time as Governor … and providing the language didn’t mirror an anti-government mission or incorporate strictures further harming the very vulnerable middle-class.

The Amendment as now formulated will:

• Require Congress to balance the Federal Budget each year
• Prevent Congress from spending more than 18% of GDP
• Require a 2/3 supermajority vote to raise taxes 

The argument is that most states already have some form of BBA. This is true. BUT, the inevitable state and local budget shortfalls that frequently occur are by necessity greatly offset by recycled federal taxpayer funds. Without such support funds, most states would be in even more dire financial straits today (and would have been historically).

California, for example – despite federal funds support and emergency, panic implementation of other local taxes/fees – still has a ±$25 billion deficit – and  climbing under its statute enforced BBA rules. Why is this? The answer is: insuffcient tax revenues caused by the state’s BBA over the years. (Ed. note: California has a 2/3 majority requirement in order to raise taxes put in under Prop. 13 which also is driving the deficit. Despite Democratic control of all three branches of government, California could not close it's budget gap because they were a few votes short in both Houses this year to raise taxes.) So what can be done in such a situation? Simple … fire teachers, firemen, policemen, government service providers; destroy Union collective bargaining rights; reduce social net benefits, etc. Result? State deficits and social instability are rising to inhuman proportions. This self-destructive practice on a national scale under a federal Balanced Budget Amendment would be disastrous.

The EU has a simple rule for controlling state budget deficits. The rule requires that a deficit not exceed 3% of GDP, with allowances for  emergencies. When pro-actively enforced under effective warning signals – which wasn’t done for Greece, Ireland, Spain, and Portugal – it has worked reasonably well for the mature EU countries.

In short, if a federal BBA is to be given serious consideration, it should Not be based on the three key provisions noted above. Such an Amendment should incorporate the following refinements, without riddling it with loopholes:

• Require that annual budget deficits not exceed 2% of GDP


• Prohibit by statute federal government borrowing from Social Security Trust Fund to cover other deficit spending. In past years, trust fund surpluses amounting to over $2 trillion have been siphoned off by the federal government  borrowings in exchange for Treasury notes. This conceals the true nature of normal federal budget shortfalls and diverts taxpayer funds from a trust fund most Americans assume is for their minimum old-age pensions. 


• Prevent Congress from spending more than 20% of GDP in any year which could be waived in times of recession, environmental disasters, war or military conflict. The 18% of GDP cap is far too low. It would have our country – with its no-holds barred, winner takes all political infighting culture – frequently meshed in enduring controversial budget storms. Result? The Supreme Court starts to run the country’s business.
  
  Federal spending as a % of GDP in past decades was as follows: 17.8% in 1960; 19.5% in 1970 (Vietnam War); 21.7% in 1980; 22.8% in 1985 (Reagan’s increased Defense budget and lower taxes for rich); 21.9% in 1990 (Iraq War); 18.2% in 2000 (under Clinton); 19.9% in 2005 (under Bush Jr. with 2 wars); 25.4% in 2010 (under Obama with 2 wars, a nation still suffering from the Great Recession depressing GDP growth, tax revenues).


• It is felt that a supermajority requirement for Congress and each state to raise federal taxes will hamstring flexibility of central and local government initiatives in running operations with a minimum of paralysis from extended infighting (as happens in California). Moreover, a 2/3 supermajority requirement would give an even greater advantage and incentive to the wealthy (e.g. Kochs) and corporate special interests to buy political and media influence to prevent the 2/3 majority from happening -- bringing our democracy that much closer to an oligarchy  "of the rich and powerful, by the rich and powerful, for the rich and powerful."

How Much Has Our National Debt Grown In Past Decades?

The ultra-right especially and media pundit sensationalists tend to play on the public’s fear or preconceptions by manipulating and often misrepresenting government financial performance data. The lying machine is alive and speeds up in times of crisis. This has been occuring lately in discussions around raising the debt ceiling. It has occured when discussing the origins of our $13.8 trillion national debt, yearly deficits, and “Who is responsible.”  

While the evidence shows both parties are responsible, it also shows that almost 70% of the $12.9 trillion increase in the national debt – after Pres. Carter’s last year office in office in 1980 – has happened on the watch of Republican Administrations (see TABLE 1). Below is a factual statement of origins of past debt growth … typical data so often used in a distorted blame game to misguide or dumb down the general public’s understanding.

________________________________________________________________
TABLE  1                                     National Debt       Increase       %+-

DOLLARS IN BILLIONS                   (Year Ending)

1980: Pres. Carter                        $909                          

_________________________________________________________________
1984: Pres. Reagan                        $1,565                 $656          72%

1988: Pres. Reagan                        $2,602                 $1,037       66%

1980-1988: Pres. Reagan            $2,602                $1,693     186% 

_________________________________________________________________

1989-1992: Pres. Bush. Sr.         $4,065                $1,463      56%

_________________________________________________________________

1996: Pres. Clinton                         $5,182                 $1,117       27%

2000: Pres. Clinton                         $5,674                 $492          9.5%

1993-2000: Pres. Clinton             $5,674               $1,609     29.5%

_________________________________________________________________

2004: Pres. Bush Jr.                        $7,355                $1,681       30%

2008: Pres. Bush Jr.                        $10,025               $2,670      36%

Plus: Tax revenues                                                    $1,250(a)
reduced by Bush
tax cuts: 2001-08(a)

2001-2008: Pres. Bush                 $11,275             $5,601      99%

_________________________________________________________________

2009-2011: Pres. Obama              $13,800             $2,525      22%

Less: Tax revenues                                                    -$450 (b)
Reduced by Bush
tax cuts: 2009-11

Net Debt Increase: Pres. Obama                               $2,075      18%

 

NOTE: The $2,075 net debt increase under
Obama was caused by recession, saving
financial institutions, stimulus package,etc.

_________________________________________________________________

1980-2011 TOTAL                            $13,800            $12,891 (c)

 

DEBT GROWTH UNDER REPUBLICANS:                   $  8,757  = 68%   

DEBT GROWTH UNDER DEMOCRATS  :                   $  4,134  = 32% (d)

 

SOURCE: U.S. Federal Budget Reports, CBO 2011 Study: Bush Tax Cuts                                                    

__________________________________________________________________________

FOOTNOTES:

(a) CBO 2011 study result Bush tax cuts reduced fed. tax revenues $2.8 trillion between 2002-11; $1,250 figure is 50% of CBO study

(b) Fed. tax revenues reduced by Bush tax cuts per CBO study reduced 50%

(c) June ending debt of $13,800 minus 1980 $909 ending debt under Carter

(d) $4,134 excludes 2009-2011 $450 billion debt increase caused by Bush tax cuts  

So much for the Republican double talk that those profligate liberals, with Obama in the vanguard now, are the BIG SPENDERs causing most of the expansion in national debt over the last 31 years. In fact, the really big Republican spenders and deficit producers were Reagan, Bush Sr., Bush Jr.

Reagan to his great credit saw that “tax decreases don’t pay for themselves” as debt and deficits rose steeply in his first term of office, not helped by sharply increased Defense spending. Reagan got caught up in the “Trickle Down” political-economic con game that lowering taxes for the rich reduces deficits and increase jobs. Reagan ended up Raising Taxes 11 times. Bush Sr. also saw the need to increase taxes.

Tragically, Bush Jr. (and Greenspan) didn’t respect the junk economics of “Trickle Down” calling for reducing taxes largely for the wealthy because this increases jobs – a line Boehner robotically repeats to the party faithful. The truth is that the modest 2001-07 economic expansion  period produced lackluster tax revenue growth and an anemic 6.2 million jobs.(see study: U.S. Pattern of Structural & Long-Term Joblessness ).                                                       

The meager 6.2 million job increase over 7 years evaporated when ±8 million jobs were lost in the 2008-09 Great Recession. After 2009, the Great Recession was thought to be finis, but the job and growth crisis is still unfolding. No need to worry though, the deficits and debt will magically disappear by firing government workers at all levels and lowering taxes to expand jobs. If you believe this financial math wizardry, you're drinking too much wine.

 

PART  II

How Is Our Economic Development Affected by the Global Economy?

There are critical structural challenges to our economic system in a technically fast-evolving, tightly integrated global economy. An economy where emerging nations with lots of cheap labor and sustainable +8% GDP growth rates are placing severe competitive pressures on existing scarce natural resources, on the income, wealth and job opportunities of advanced nations. Our national debt escalation is but a serious symptom of these underlying global changes affecting future growth dynamics.

Some of these structural factors are:

• U.S. Consumption at 70-72% of GDP (vs. 60% in Europe) is not sustainable with huge trade deficits. This dependence combined with stagnant wages inevitably exhausts savings, accelerates credit levels (i.e. living beyond one’s means) to buy cheap imports offsetting stagnant wages, drives up trade deficits to new astronomical levels, and reduces system liquidity for desperately needed societal improvements. With a national debt structure approaching 100% of GDP, this economic vicious circle will only lead to repeated social-economic crises. Lower consumption patterns will be an increasingly negative factor affecting future aggregate demand and our economic model. More on this later.


• New labor-saving technology, automation, robotization, outsourcing, job downgrading, also means relatively fewer decent jobs in coming years – particularly job opportunites for the less well-educated in a world favoring high-value-added jobs. The Wall Street Journal recently reported that the top U.S. firms cut 2.9 million jobs in the last decade – a Zero job growth decade – while hiring 2.4 million overseas.


• A structurally slower rate of job growth started in the 80s, slowed  down substantially to less than 1% in 2001-07 and peaked to below zero in the 2007-09 crisis bubble. Recently, there has been a slowdown in the low-value-added service job sector – retail, hotel, restaurant, construction, health-care, government jobs – providing  over 90% of all new jobs in the past two decades. This slowdown cannot be regained by the much smaller high-value-added job sector of the well-educated in computer science and design, finance, consulting services, engineering and production of products. Manufacturing activities have declined considerably the last 30 years. They now provide jobs to less than 8% of the workforce  vs. 22% in 1980 and vs. +20% in Germany today – expanding Germany’s job opportunities, technical knowhow and breadth as well as trade surpluses. Meanwhile, U.S. jobs are growing less in both low-tier and high-tier job sectors adding other pressures on the nation’s ability to continue Consuming  at 70-72% of GDP.


• Our economic model is structurally out-of-balance, relying far too much on consumption for GDP growth with stagnant wages driving cheap imports  and massive trade deficits made worse by polluting fossil fuel imports. Under our economic model, high trade deficits reduce GDP so much we are forced into an abnormal dependence on consumption triggering irresponsible debt expansion and the next financial crisis.

We are in a losing battle with the GDP formula for growth: GDP = Consumption + Private Investment + Public Investment + Net Exports.

                                                                                                     
Our GDP growth rate is greatly depressed by huge trade deficits, which in turn depress private and public investments, which in turn drive our economy into a high consumption dependence with all the negative consequences. The current jobless GDP growth may comfort the few winners, but it’s a bankrupted development.  The GDP components of growth are relatively much more in balance in mature EU countries with low net exports (trade deficits), higher private and public investments, much lower consumption (+-60% of GDP) and thus far higher savings (10-12% of GDP), adding more liquidity and stability to the entire social-economic system. 

Until we learn how to get our economic model in better balance  with the GDP components of growth, we are systemically destined to social-economic manic depression Ups and Downs, testing the barrier of an eventual complete breakdown!                                        

• The economic model puzzle is how can the mature EU countries, where annual GDP growth averages about 10% less than ours, still  have a decent living standard, no excessive trade deficits, lower unemployment levels (excepting the weaker countries under great stress now), stabilizing social-nets, active innovation and entrepreneurship … and do this with higher marginal tax rates?

Some answers are: higher household savings supporting private investment, VAT and ample tax funds for public investments, getting something  concrete and valuable back for higher  taxes, low college education costs, excellent health care coverage, constantly updated and state-of-art infrastructure, quality of life, e.g., vacations,  a much, much flatter disparity between high-low income /wealth classes contributing to a spirit of equity and cohesion.

• Propagandists like to say that redistributing existing wealth by progressive taxation does not create wealth. Only low taxes spur economic growth and net tax revenue growth. Reagan found such claims to be completely FALSE; as did Bush Jr. but would never admit it; false also to the Germanies, Hollands, Swedens, Denmarks, Norways, etc., of this world; false also according to CBO study showing that tax cuts replace 22% of lost tax revenue the first 5 years, rising to replace 32% of lost tax revenue the second five years. In layman’s language: a $1 million tax cut would generate a $780,000 deficit in each of the first 5 years and a 680,000 deficit in each of the second 5 years!   

TABLE 2 shows that the compositions of federal tax receipts from individuals, corporations, retirement receipts (Social Security), excise and other taxes have been getting Smaller or Stagnant in recent decades: 

______________________________________________________
TABLE  2        PERCENTAGE COMPOSITION OF FED. TAX RECEIPTS

                        1960s        1970s        1980s        1990s           2000s    

Individual             44.1%       45.4%          45.8%        45.7%        44.7%
Taxes 

Corporate            20.7%       14.6%            8.9%        10.6%        10.1%
Taxes 

Retirement          19.9%       28.8%           35.2%        35.3%        37.6%
Taxes

Excise                  10.8%       6.0%             4.8%          3.9%         3.2%
Taxes

Other                    4.5%        5.2%             5.3%          4.5%          4.4%
Taxes

Individual taxes are extremely significant and stable contributing about 45% of all federal taxes. About 70% of all individual taxes are paid by the top 10% income bracket. This group earns +-48% of all reported income and owns 70% of all household wealth. Of course, conservative propagandists focus only on the 70% of individual taxes paid figure, ignoring the top 10% group's remarkably high absolute growth in income and wealth at the modest effective tax rate of +-20% -- of course,after exploiting all the tax loopholes, including 15% capital gains tax.

Hey, Mr. Boehner, do you hear me? The upper 1%-5%-10%  income earners pay more taxes because of the huge increases in their income and wealth. Consider this FACT Mr.  Boehner: Over the past three decades, 34.6% of all income growth went to the top 0.1% of all earners! In contrast, 90% of all earners have collectively seen only 15.9% of all income growth over the same period  (Source: Economic Policy Institute, Feb. 2010). Republican propaganda that the rich are overtaxed is the party’s lie machine working overtime. Conclusion on individual taxes? Any dropping of the top income earners' taxes, besides increasing federal deficits and further exploding the income/wealth gap, will endanger the critically important, stable tax contribution of these taxes.                                                                      

Same applies to corporate taxes which have declined  50% from 21% of all taxes  in the 60s to 10% the last decade. Republicans and some Democrats, to please their election financiers, propose dropping the statutory corporate tax rate from 35% to 25%, knowing that the current corporate effective tax rate is at 25%.  So, with all the loopholes and special deductions, this means the proposed 25% statutory rate will drop to a new low effective rate of +-18% range! This would have a disastrous effect on the already tiny, tiny percentage contribution of all taxes corporations already make to the nation's tax revenues. It would also raise pressure to increase individual taxes, add to deficits and intensify existing make-shift panic practices of many states to find other taxes in all directions to compensate for insufficient local revenues and federal funds.

Retirement receipts  (Social Security) have been stagnating as a percentage of all taxes the past 30 years. In combination with the aging population and people living longer, this  points to the need to improve the contribution of retirement receipts and/or reduce outflows by resetting retirement age to 67, doing away with benefits for millionaires, discontinuing the government practice of borrowing from the trust fund, and starting to refund the over $2 trillion accumulated government borrowings from trust fund (though legally done).

Excise taxes have all but vanished as a % of all federal taxes, dropping from 11% of all taxes in the 60s to 3.2% the last decade. Besides contributing to the extraordinary wealth gap in America, this is just another factor squeezing our nation's overall tax revenue base to the primary benefit of the rich.

Conclusion: It's financial suicide  to be recommending reducing marginal tax rates on the rich unless compensated for by serious tax reform that removes tax loopholes and special deductions. New taxes having no notable negative effects on deficits and aggregate consumer demand are still a critical  (tax reform or not) dire need to reduce deficits/debt while also investing in our society’s renewal. It’s impossible to just cut our way out of deficits and debt!

What Blend of Balanced Solutions Deserve Consideration?

A balanced strategy mix around which to design a prudent tax and financing policy should embrace the following goals:

• Take needed austerity measures to remove wasteful spending
• Reform (not privatize) Social Security and Medicare
• Invest in human capital, technology, infrastructure
• Focus aggressively on renewables, eliminating fossil fuel imports
• Reduce debt and deficits under some form of balanced budget rules
• Fund programs by 50% self-financing (new taxes and cost cutting) and 50% debt financing

As opposed to a cut,cut,cut strategy  with no tax increases, making things worse  –  a blend of financing actions to fund above goals might include:

(1)  Implement a financial transaction tax on all stock, bond, large currency transactions – potential annual savings $100 billion

(2)  Remove tax subsidies for large firms, e.g., the oil firms – potential annual savings $50 billion

(3)  End tax havens and tax loopholes  – potential annual savings $75 billion                                                                                                         

(4)  Reduce tax loopholes and simplify a tax structure so complex that even Warren Buffet stated recently he had a lower tax rate than his secretary

(5)  Limit deductibility of interest on residential real estate (as the Netherlands is now planning to do) especially on second homes

(6)  Reduce unaffordable Defense spending back to 3.5% to 4% of GDP over next 5 years – potential annual savings $200 billion (Obama Administration's recent $50 billion savings target is a joke. This out-of-control cost center contributes at least three times that amount to our annual deficits.                                               

(7)  Re-examine unfair trade practices as our current account deficits are no longer sustainable. Financing $40-65 billion a month trade deficits robs liquidity for investments in our society. Furthermore, it’s going to be increasingly difficult, if not impossible, to finance trade deficits even at a higher interest rate for Treasury notes. The sheer scale of trade deficit growth is nothing but ominous, rising from $132 billion in the 70s, to $940 billion in the 80s, to $1,457 billion in the 90s, to $5,636 billion in the 2000s (i.e., $5.6 trillion).

(8) Provide incentives for aggressive expansion of  worker-manager owned Cooperatives that place profit and concern for people and communities on a more equal plain. Cooperatives bring money circulation closer to communities, reduce trade deficits, and expand jobs by more buying and producing of products at home.

SUMMARY

Let's not forget there's a minimum safety net in the U.S. The whole society has always been based on the assumption that new work is around the corner. We are in a dramatically changing world where such hopes are getting far more difficult to realize. Structural unemployment and underemployment sends too many people into a descending spiral: job degraded, health care coverage lost, auto lost, home lost, job lost, family lost … FOOD STAMPS!

The human challenge can't be better portrayed than in this painful job debacle picture (TABLE 3) that omits the ugly trend of a permanent drop in wages for those lucky enough to find work.

TABLE  3        UNEMPLOYED AND UNDEREMPLOYED IN MARCH 2011

 

A.     Officially defined as unemployed (a)                      13.5 million

B.    Persons not in the labor force but wanting a job      6.5 million

C.    Working part time but desiring full-time work            8.4 million

       TOTAL                                                                     28.4 million                                    

(a)  Revised to 14.1 million June 2011

SOURCE: U.S. Dept. Of Labor, Bureau of Economic Research

When all is said and done, the U.S. challenge is to find a sound fiscal and human balance in our nation’s renewal process that benefits ALL Americans.

Purist ideology and orthodoxy must be set aside … if we are to recapture those unique American creative, pragmatic, dynamic skills. This requires courage to try new initiatives such as reducing the number of jobs exported that should stay at home … such as getting our house on a solid financial footing while investing in renewal … such as getting off the fossil fuel cocaine. These goals need not be mutually exclusive.

I want to be optimistic that our broken, polarized political climate will step up, come together to make the necessary changes … while at the same time recognizing this may only be possible by the common folk finally fighting back to get justice, the true facts, the development options, and a fair share of the pie in a more level playing field.    

Frank Thomas
The Netherlands
July 2011

Deconstructing the “Federal Debt Crisis”

Published on Wednesday, July 20, 2011 by RootsAction.org

by Sam Pizzigati

Once upon a time in America, back a century ago, our nation's rich paid virtually nothing in taxes to the federal government. And that same federal government did virtually nothing to better the lives of average Americans.

But those average Americans would do battle, over the next half century, to rein in the rich and the corporations that made them ever richer. And that struggle would prove remarkably successful. By the 1950s, America's rich and the corporations they ran were paying significant chunks of their annual incomes in taxes — and the federal projects and programs these taxes helped finance were actually improving average American lives.

America's wealthy, predictably, counterattacked — and, by the 1980s, they were scoring successes of their own.

Today, the rich and their corporations no longer bear anything close to their rightful share of the nation's tax burden. The federal government, given this revenue shortfall, is having a harder and harder time funding initiatives that help average working families. The result: a “debt crisis.”

This “debt crisis” in no way had to happen. No natural disaster, no tsunami, has suddenly pounded the United States out of fiscal balance. We have simply suffered a colossal political failure. Our powers that be, by feeding the rich and their corporations one massive tax break after another, have thrown a monkey wrench into our national finances.

Some numbers — from an Institute for Policy Studies report released this past spring — can help us better visualize how monumental this political failure has been.

If corporations and households amassing $1 million or more in income each year were now paying taxes at the same annual rates as they did in 1961, the IPS researchers found, the federal treasury would be collecting an additional $716 billion a year.

In other words, if the federal government started taxing the wealthy and their corporations at the same rates in effect a half-century ago, the federal debt to investors would almost totally disappear over the next decade.

Similarly stunning numbers have just come, earlier this month, from MIT economist Peter Diamond and the University of California's Emmanuel Saez, the world's top authority on the incomes of the ultra-rich. These two scholars have calculated some fascinating “what ifs” that dramatize just how spectacularly the incomes of our wealthiest have soared over recent decades.

In 2007, Diamond and Saez point out, taxpayers in the nation's top 1 percent actually paid, on average, 22.4 percent of their incomes in federal taxes. If  that actual tax burden were to about double to 43.5 percent, the top 1 percenter share of our national after-tax income would still be twice as high as the top 1 percent’s after-tax income share in 1970.

So why aren't we taxing the rich? Why are we now suffering such fearsome “debt crisis” angst? Why are our politicos so intent on shoving the “fiscal discipline” of layoffs and cutbacks — austerity — down the throats of average Americans

No mystery here. Our political system is failing to tax the rich because the rich have fortunes large enough to buy off the political system. Again, some numbers can help us better visualize the plutocratic big picture.

In 2008, the IRS revealed this past May, 400 Americans reported at least $110 million in income on their federal tax returns. These 400 averaged $270.5 million each, the second-highest U.S. top 400 average income on record.

In 1955, by contrast, America’s top 400 averaged — in 2008 dollars — a mere $13.3 million. In other words, the top 400 in 2008 reported incomes that, after taking inflation into account, amounted to more than 20 times the incomes of America’s top 400 a half-century ago.

But 1955’s top 400 didn’t just make far less than 2008’s top 400. The rich in 1955 paid far more of their income in taxes than today’s rich. In 2008, the new IRS data show, the top 400 paid only 18.1 percent of their total incomes in federal income tax. The top 400 in 1955 paid 51.2 percent of their total incomes in tax.

The bottom line: After taxes, and after adjusting for inflation, 2008’s top 400 had a staggering $38.5 billion more left in their pockets than 1955’s most awesomely affluent. Multiply that near $40 billion by the annual tax savings the rest of America's richest 1 percent have enjoyed over recent years and you have an enormous war chest for waging class war, billions upon billions of dollars available for bankrolling think tanks and candidates and right-wing media.

 

Take Action! Cutting human needs must be off the table, and taxing billionaires on it. Tell every Progressive Caucus member that we expect them to stand by that commitment when it comes time to vote. We want billionaires to pay their fair share, so that programs we need, and have paid for, can be left undamaged. Take Action!

© 2011 RootsAction.org

Sam Pizzigati edits Too Much, the Institute for Policy Study's online weekly newsletter on excess and inequality.

Congrats to the Gang of Six, the Powerful, the Wealthy, and Multinational Corporations

Published on Thursday, July 21, 2011 by CommonDreams.org

by Bernie Sanders

If there was ever a time in the modern history of America that the American people should become engaged in what's going on here in Washington, now is that time. Decisions are being made that will impact not only our generation but the lives of our children and our grandchildren for decades to come, and I fear very much that the decisions being contemplated are not good decisions, are not fair decisions.

There is increased understanding that defaulting for the first time in our history on our debts would be a disaster for the American economy and for the world's economy. We should not do that.

There also is increased discussion about long-term deficit reduction and how we address the crisis which we face today of a record-breaking deficit of $1.4 trillion and a $14 trillion-plus national debt.

One of the long-term deficit reduction plans came from the so-called Gang of Six. We do not know all of the details of that proposal. In fact, we never will know because a lot of the decisions are booted to committees to work out the details.

It is fair to say, however, that Senators Coburn, Senator Crapo and Chambliss deserve congratulations. Clearly, they have won this debate in a very significant way. My guess is that they will probably get 80 percent or 90 percent of what they wanted. In this town, that is quite an achievement, but they have stood firm in their desire to represent the wealthy and the powerful and multinational corporations. They have threatened. They have been smart. They have been determined. And at the end of the day, they will get almost all of what they want. That is their victory, and I congratulate them.

Unfortunately, their victory will be a disaster for working families in this country, for the elderly, for the sick, for the children and for low-income people.

Based on the limited information that we have, I think it is important to highlight some of what is in this so-called Gang of Six proposal that the corporate media, among others, are enthralled about.

Some may remember that for a number of years, leading Democrats said that we will do everything that we can to protect Social Security, that Social Security has been an extraordinary success in our country, that for 75 years, with such volatility in the economy, Social Security has paid out every nickel owed to every eligible American. I heard Democrats say that Social Security has nothing to do with the deficit. That is right because Social Security is funded by the payroll tax, not by the U.S. Treasury. Social Security has a $2.6 trillion surplus today. It can pay out every benefit owed to every eligible American for the next 25 years. It is an enormously popular program. Poll after poll from the American people says don't cut Social Security. Two and a half years ago when Barack Obama, then a senator from Illinois, ran for president of the United States, he made it very clear if you voted for him there would be no cuts in Social Security.

What Senators Coburn, Crapo and Chambliss have managed to do in the Gang of Six is reach an agreement where there will be major cuts in Social Security. Don't let anybody kid you about this being some minor thing. It is not. What we are talking about is that Social Security cuts would go into effect virtually immediately. Ten years from now, the typical 75-year-old person will see their Social Security benefits cut by $560 a year. The average 85-year-old will see a cut of $1,000 a year. Now, for some people here in Washington, maybe the big lobbyists who make hundreds of thousands a year, $560 a year or $1,000 a year may not seem like a lot of money, but if you are a senior trying to get by on $14,000, $15,000, $18,000 a year and you're 85 years old, the end of your life, you're totally vulnerable, you're sick -- a $1,000 per year cut in what you otherwise would have received is a major, major blow.

So I congratulate Senator Coburn, Senator Crapo, Senator Chambliss for doing what president Obama said would not happen under his watch, what the Democrats have said would not happen under their watch.

But it's not just Social Security. We have 50 million Americans today who have no health insurance at all. Under the Gang of Six proposals, there will be cuts in Medicare over a 10-year period of almost $300 billion. There will be massive cuts in Medicaid and other health care programs. There will be caps on spending, which mean that there will be major cuts in education. If you are a working-class family, hoping that you're going to be able to send your kid to college and thinking that you will be eligible for a Pell grant, think twice about that. Pell grants may not be there. If you're a senior who relies on a nutrition program, that nutrition program may not be there. If you think it's a good idea that we enforce clean air and clean water provisions so that our kids can be healthy, those provisions may not be there because there will be major cuts in environmental protection.

Some people think that's not so good, but at least our Republican friends are saying we need revenue and we're going to get $1 trillion in revenue. But wait a minute,. If you read the proposal, there are very, very clear provisions making sure that we are going to make massive cuts in programs for working families, for the elderly, for the children. Those cuts are written in black and white. What about the revenue? Well, it's kind of vague. The projection is that we would raise over a 10-year period $100 billion in revenue. Where is that going to come? Is it necessarily going to come from the wealthiest people in this economy? Is it going to come from large corporations who are enjoying huge tax breaks? That is not clear at all. I want middle-class families to understand that when we talk about increased revenues, do you know where that comes from? It may come from cutbacks in the home mortgage interest deduction program, which is so very important to millions and millions of families. It may mean that if you have a health care program today, that health care program may be taxed. That's a way to raise revenue. It may be that there will be increased taxes on your retirement programs, your I.R.A.'s, your 401(k)'s. But we don't have the details for that. All we have is some kind of vague promise that we're going to raise $1 trillion over the next 10 years, no enforcement mechanism and no clarity as to where that revenue will come from.

That is why it is so terribly important that the American people become engaged in this debate which will have a huge impact on them, on their parents and on their children. The American people must fight for a fair deal. At a time when the wealthiest people in this country are doing phenomenally well and their effective tax rate is the lowest on record, at a time when the top 400 individuals in this country own more wealth than 150 million Americans, at a time when corporate profits are soaring and in many instances corporations, these same corporations, pay nothing in taxes, at a time when we have tripled military spending since 1997, there are fair ways to move toward deficit reduction which do not slash programs that working families and children and the elderly desperately depend upon.

This senator is going to fight back. I was not elected to the United States Senate to make devastating cuts in Social Security, in Medicare, in Medicaid, in children's programs while lowering tax rates for the wealthiest people in this country.

Bernie Sanders (I-Vt.) was elected to the U.S. Senate in 2006 after serving 16 years in the House of Representatives. He is the longest serving independent member of Congress in American history. Elected Mayor of Burlington, Vt., by 10 votes in 1981, he served four terms. Before his 1990 election as Vermont's at-large member in Congress, Sanders lectured at the John F. Kennedy School of Government at Harvard and at Hamilton College in upstate New York. Read more at his website.

San Diego Balboa Park Plans Move Forward on July 19 Vote of City Council

by John Lawrence

Tueday, July 19 (my 70th birthday) the San Diego City Council voted 7-1 to move forward with a Memorandum of Understanding to create pedestrian only, car and traffic free zones in Balboa Park. The council chambers were crowded as over 100 people spoke in favor of or in opposition to a plan developed by Dr. Irwin Jacobs, former CEO of Qualcomm, that would eliminate traffic from core areas of the park. Save Our Heritage Organization (SOHO) Executive Director Bruce Coons spoke out against the Jacobs plan basing most of his opposition on the fact that a by-pass bridge would change the historic view of the entrance to Balboa Park from the west. However, at the present time the view of the area where the bridge would be located in entirely obscured by trees and other landscaping. If the bridge were in place now, it would not even be visible from the west. Surely, the same view could be preserved with intelligent landscape architecture after the bridge is actually built. Mr. Coons presented a slide showing the by-pass bridge stickling out like a sore thumb. This need not be the case with intelligent landscape architecture. It could be blended in with existing structures and vegetation, and even be totally obscured if necessary preserving the present "historical" view completely if that were deemed desirable.

Therefore, if on the one hand we weigh the fact that cars and traffic would be completely eliminated from core areas of the park, the fact that several acres of asphalt would be converted to parkland and the fact that every museum in the park would be accessible by pedestrians without having to cross traffic once against the fact that the view from the west of the facade of the park might  be slightly altered, I think the scales tilt in favor of the Jacobs plan.

Many citizens spoke out in oppossition to the Jacobs plab based on wanting to keep the park exactly as they remembered it from growing up. But this is a rather selfish attitude because the park is not only a destination for San Diego residents, but it is also a destination for travelers and tourists from all over the world. Already one of the top rated parks in the world, creating pedestrian only zones would place Balboa Park in the highest echelon of park destinations and be the focal point of tourism for travelers. These improvements to the park would catapult it to the top spot in park ratings and would be in keeping with the pedestrianization of parks, plazas and other urban areas that is happening world wide. These changes are necessary to bring the park up to 21st century standards while maintaining historical values, the main one of which is the founders' view that major areas in the park would be for pedestrians and not automobiles. This historical value overshadows the historical value of the park's facade viewed from the west which in fact can be mostly preserved anyway.

Another factor that should be considered is that Dr. Jacobs, who has been San Diego's chief benefactor in recent years contributing money to museums, the Symphony, educational institutions and more, would be putting up most of the money for this project himself along with money raised from other philanthropists. With the city practically broke the only thing that can even keep the park a world class destination and not allow it to fall into disrepair is private money. San Diego is fortunate to have such a civic minded citizen in its midst. There is currently over $200 million in deferred maintenance to Balboa Park. The Jacobs proposal while making major improvements inevitably would also pick up some of this backlog in maintenance. Philanthropists' money has been responsible in getting construction under way on the new Central Library which is being built without any San Dego City money. So San Diego has been able to maintain itself as a world class city not by means of taxpayer money which is pretty scarce right now but by means of private philanthropy. As citizens we owe a debt of gratitude to Dr. Jacobs and others that they have stepped forward to make up for the fact that San Diego as a city is flat broke. However, it's our good fortune to have people like Dr. Jacobs among us.

 

The Dangerous Hi-Jinks of the GOP’s Juveniles

by Robert Reich

Sunday, July 17, 2011

 

I’ve spent enough of my life in Washington to take its theatrics with as much seriousness as a Seinfeld episode. A large portion of what passes for policy debate isn’t at all — it’s play-acting for various constituencies. The actors know they’re acting, as do their protagonists on the other side who are busily putting on their own plays for their own audiences.

Typically, though, back stage is different. When the costumes and grease paint come off, compromises are made, deals put together, legislation hammered out. Then at show time the players announce the results – spinning them to make it seem they’ve kept to their parts.

At least that’s the standard playbook.

But this time there’s no back stage. The kids in the GOP have trashed it. The GOP’s experienced actors – House Speaker John Boehner and Senate Minority Leader Mitch McDonnell – have been upstaged by juveniles like Eric Cantor and Michele Bachmann, who don’t know the difference between playacting and governing. They’re in league with tea party fanatics who hate government so much they’re willing to destroy the full faith and credit of the United States. Washington has gone from theater to reality TV – a game of hi-jinks chicken that could end in a crash. 

So now the GOP’s experienced actors are trying to retake the stage. They’ve set a vote Tuesday for a so-called “cut, cap, and balance” plan – featuring an immediate $100 billion-plus cut from next year’s budget and a constitutional amendment requiring a balanced budget.

The plan would be a disaster for the nation, of course – a cut of that magnitude when the economy is still struggling to get out of recession would plunge it back in, and a balanced-budget amendment would make it impossible to counteract future recessions with extra spending and tax cuts.

But, hey, it’s all for show. The GOP’s adults know the President would veto their cuts and they couldn’t possibly muster the two-thirds of the Senate and House needed to override the veto. Nor, obviously, do they have the two-thirds necessary to pass a constitutional amendment.

The point is to give the kids more votes they can wave in the direction of their tea party constituents. It’s hoped that the “cut, cap, and balance” plan — along with Mitch McConnell’s proposed Republican vote disapproving the President’s move to raise the debt ceiling (which the President will then veto) — will be enough to get the juveniles to raise the debt ceiling before the August 2 deadline.

“The cut, cap and balance plan that the House will vote on next week is a solid plan for moving forward,” John Boehner told reporters Friday. Translated: I hope this will be enough playacting to get their votes on the debt ceiling.

But even if it’s enough, the bigger problem remains: There’s still no back stage where the real work of governing this country can occur. At best, the vote to raise the debt ceiling kicks the can down the road only until the end of 2012. By then, if we don’t elect adults, the kids will be in charge.

Can Obama Pull a Clinton on the GOP?

by Robert Reich

Friday, July 15, 2011

After a bruising midterm election, the president moves to the political center. He distances himself from his Democratic base. He calls for cuts in Social Security and signs historic legislation ending a major entitlement program. He agrees to balance the budget with major cuts in domestic discretionary spending. He has a showdown with Republicans who threaten to bring government to its knees if their budget demands aren’t met. He wins the showdown, successfully painting them as radicals. He goes on to win re-election.

Barack Obama in 2012? Maybe. But the president who actually did it was Bill Clinton. (The program he ended was Title IV of the Social Security Act, Aid to Families with Dependent Children.)

It’s no accident that President Obama appears to be following the Clinton script. After all, it worked. Despite a 1994 midterm election that delivered Congress to the GOP and was widely seen as a repudiation of his presidency, President Clinton went on to win re-election. And many of Mr. Obama’s top aides—including Chief of Staff Bill Daley, National Economic Council head Gene Sperling and Pentagon chief Leon Panetta—are Clinton veterans who know the 1995-96 story line by heart.

Republicans have obligingly been playing their parts this time. In the fall of 1995, Speaker Newt Gingrich was the firebrand, making budget demands that the public interpreted as causing two government shutdowns—while President Clinton appeared to be the great compromiser. This time it’s House Majority Leader Eric Cantor and his Republican allies who appear unwilling to bend and risk defaulting on the nation’s bills—while President Obama offers to cut Social Security and reduce $3 of spending for every dollar of tax increase.

And with Moody’s threatening to downgrade the nation’s debt if the debt limit isn’t raised soon, Republicans appear all the more radical.

So will Barack Obama pull a Bill Clinton? His real problem is one Mr. Clinton didn’t have to contend with: a continuing terrible economy. The recession in 1991-92 was relatively mild, and by the spring of 1995, the economy was averaging 200,000 new jobs per month. By early 1996, it was roaring—with 434,000 new jobs added in February alone.

I remember suggesting to Mr. Clinton’s then-political adviser, Dick Morris, that the president come up with some new policy ideas for the election. Mr. Morris wasn’t interested. The election will be about the economy—nothing more, nothing less, he said. He knew voters didn’t care much about policy. They cared about jobs.

President Obama isn’t as fortunate. The economy remains hampered by the Great Recession, brought on not by overshooting by the Federal Reserve but by the bursting of a giant housing bubble. As such, the downturn has proven resistant to reversal by low interest rates. The Fed has kept interest rates near zero for more than two years, opened the spigots of its discount window, and undertaken two rounds of quantitative easing—all with little to show for it.

Some in the White House and on Wall Street assume the anemic recovery will turn stronger in the second half of the year, emerging full strength in 2012. They blame the anemia on disruptions in Japanese supply chains, bad weather, high oil prices, European debt crises, and whatever else they can come up with. These factors have contributed, but they’re not the big story.

When the Great Recession wiped out $7.8 trillion of home values, it crushed the nest eggs and eliminated the collateral of America’s middle class. As a result, consumer spending has been decimated. Households have been forced to reduce their debt to 115% of disposable personal income from 130% in 2007, and there’s more to come. Household debt averaged 75% of personal income between 1975 and 2000.

We’re in a vicious cycle in which job and wage losses further reduce Americans’ willingness to spend, which further slows the economy. Job growth has effectively stopped. The fraction of the population now working (58.2%) is near a 25-year low—lower than it was when recession officially ended in June 2009.

Wage growth has stopped as well. Average real hourly earnings for all employees declined by 1.1% between June 2009, when the recovery began, and May 2011. For the first time since World War II, there has been a decline in aggregate wages and salaries over seven quarters of post-recession recovery.

This is not Bill Clinton’s economy. So many jobs have been lost since Mr. Obama was elected that, even if job growth were to match the extraordinary pace of the late 1990s—averaging 300,000 to 350,000 per month—the unemployment rate wouldn’t fall below 6% until 2016. That pace of job growth is unlikely, to say the least. If Republicans manage to cut federal spending significantly between now and Election Day, while state outlays continue to shrink, the certain result is continued high unemployment and anemic growth.

So Mr. Obama’s challenge in 2012 has nothing to do with Mr. Clinton’s in 1996. Most Americans care far more about jobs and wages than they do about budget deficits and debt ceilings. Even if Mr. Obama is seen to win the contest over raising the debt limit and succeeds in painting Republicans as radicals, he risks losing the upcoming election unless he directly addresses the horrendous employment problem.

How can he do this while continuing to appear more reasonable than Republicans on the deficit? By coming up with a bold jobs plan that would increase outlays over the next year or two but would credibly begin a long-term plan to shrink the budget. To the extent the jobs plan spurs growth, the long-term ratio of debt to GDP will improve.

Elements of the plan might include putting more money into peoples’ pockets by exempting the first $20,000 of income from payroll taxes for the next year, recreating a Works Progress Administration and Civilian Conservation Corps to employ the long-term jobless, creating an infrastructure bank to finance improvements to roads and bridges, enacting partial unemployment benefits for those who have been laid off from part-time jobs, and giving employers tax credits for net new hires.

The fight over the debt ceiling will be over very soon. Most Washington hands know it will be raised. Political tacticians know President Obama will likely appear to win the battle, and his apparent move to the center will make Republicans look like radicals. But the Clinton script will take the president only so far. If he wants a second term, he’ll have to come out swinging on jobs.

"Pornography Is a Vast Graveyard Where the Left Has Gone to Die"

by John Lawrence

In his book, "Empire of Illusion: The End of Literacy and the Triumph of Spectacle," Chris Hedges has a whole chapter on pornography, "The Illusion of Love". The title of this blog is taken from a quote from Andrea Dworkin which Hedges uses as a lead-in to the chapter. Recently, Michelle Bachmann has garnered some media notice for signing a pledge put out by the FAMiLY LEADER, an Iowa conservative group, to rid the country of pornography among other things. The pledge has gained notoriety for a phrase suggesting that African-American families were better off during slavery than they are today. But there is little discussion of the substance of the pledge including its stance on pornography (as usual the media is only interested in the most sensationalized aspects of reality). Bachmann, whom many have characterized as a right wing nut case, has championed Christian conservative family values including the definition of marriage as being "between a man and a woman." Irregardless, the Left has been mute regarding pornography which suggests that it adopts the "live and let live" attitude it has about homosexuality and marriage and the family in general which is really a libertarian attitude. After reading Chris Hedges' chapter on pornography, the Left might reconsider this stance at least with regard to pornography. What Hedges has to say is truly shocking and the faint of heart might consider discontinuing reading this blog right here.

Suffice it to say that pornography has gone mainstream. According to Hedges:

There are some 13,000 porn films made every year in the United States, most in the San Fernando Valley in California. According to the Internet Filter Review, worldwide porn revenues, including in-room movies at hotels, sex clubs, and the ever-expanding e-sex world, topped $97 billion in 2006. That is more than the revenues of Microsoft, Google, Amazon, eBay, Yahoo!, Apple, Netflix, and EarthLink combined. Annual sales in the United States are estimated at $10 billion or higher. There is no precise monitoring of the porn industry. And porn is very lucrative to some of the nation's largest corporations. General Motors owns DIRECTV, which distributes more than 40 million streams of porn into American homes every month. AT&T Broadband and Comcast Cable are currently the biggest American companies accommodating porn users with the Hot Network, Adult Pay Per View, and similarly themed services. AT&T and GM rake in approximately 80 percent of all porn dollars spent by consumers.

And Obama thought he was saving the American auto industry! Instead he saved one of America's largest porn purveyors! The mainstreaming of porn has openly flouted obscenity laws which like other regulatory laws have been largely missing in action. According to the website HULIQ, "According to Miller v. California (1973), the "Miller Test" became a Supreme Court-sanctioned ruling that set up a three-part array in which "community standards" could be used to determine whether or not an item was pornographic, obscene, and of no redeeming value. This allowed communities and regions to set their own obscenity standards, which is in keeping with Tea Party standards (as a federal law banning pornography would not)." So where are the community standards especially in the red Tea Party states that would ban pornography? Or is it OK because there's a lot of money in it? So what's the problem with the mainstreaming of pornography? It's innocuous adult entertainment, isn't it? Hardly. According to Hedges, "The largest users of Internet porn are between the ages of twelve and seventeen. And porn producers increasingly target adolescents." I've even heard this demographic referred to as "children"! "The age demographic has moved downwards, especially in the UK and Europe," explained Steve Honest, the European director of production for Bluebird Films. "Porn is the new rock and roll. Young people and women are embracing porn and making purchases. Porn targets the mid-teens to the mid-twenties and up."

Hedges interviewed porn star Patrice Roldan who has starred in nearly two hundred films including Lord of Asses, Anal Girls Next Door, Monster Cock Fuckfest 9, Deep Throat Anal, Trophy Whores, and  Young Dumb & Covered in Cum.  Roldan made good money in the porn industry so to say that these girls who entered the industry voluntarily were exploited is not wholly accurate. In addition to the money they made filming, they could go on "dates" with their fans who they met at the annual Las Vegas porn convention at $3000 -$5000 a pop and up. Some made great money as hotel-bound prostitutes. Just imagine if you could have met Marilyn Monroe or Lana Turner or Sophia Loren at an annual convention and "dated" them! But in those days movie stars couldn't even sleep together onscreen in the same bed much less "date" their adoring fans. But that's de rigeur in the porn film world. Tres ordinaire et normale. After Roldan's first film, she was handed $600. and contracted gonnorhea. Hedges again: "She began, once she had treated her gonnorhea, to do films three or four times a month. She would have several more bouts with gonnorhea and other sexually transmitted diseases during her career. She got pregnant and had an abortion. The demands on her began to escalate. She was filmed with multiple partners. Her scenes became 'extremely rough.' They would pull my hair, slap me around like a rag doll."

"The next day my whole body would ache," she recalls. "It happened a lot, the aching. It used to be that only a few stars, people like Linda Lovelace, would once do things like anal. Now it is expected." And this is how our teen-agers are learning about love, sex and relationships?! This is how they are developing their concept of how to treat a woman!

The physical pain and numerous surgeries to repair torn vaginas and anal tissues lead most porn stars to use excessive amounts of drugs and alcohol to deal with the pain and the emptiness of their emotional lives. Most end up being junkies and alcoholics. Hedges again: "Roldan would endure numerous anal penetrations by various men in a shoot, most of them 'super-rough.' She would have one man in her anus and one in her vagina while she gave a blow job to a third man. The men would ejaculate on her face. She was repeatedly "face-fucked,' with men forcing their cocks violently in and out of her mouth. She did what in industry shorthand is called 'ATM,' ass-to-mouth, where a man pulls his penis from her anus and puts it directly in her mouth." She explained that she washed herself good so this didn't bother her too much except when the man pulled his penis from another girl's ass and put it in her mouth because she didn't know about the other girl's standards of cleanliness!

"What does it say about our culture that cruelty is so easy to market?," Robert Jensen, author of Getting Off: Pornography and the End of Masculinity asks. "What is the difference between glorifying violence in war and glorifying the violence of sexual domination? I think that the reason that porn is so difficult to discuss is not that it is about sex - our culture is saturated in sex. The reason it is difficult is that porn exposes something very uncomfortable about us. We accept a culture flooded with women who are sexual commodities. Increasingly, women in pornography are not people having sex but bodies upon which sexual activities of increasing cruelty are played out. And men - maybe a majority of men - like it."

Finally Hedges sums up why pornography represents the "illusion of love":

As porn has gone mainstream, ushered two decades ago into middle-class living rooms and dens with VCRs and now available on the Internet, it has devolved into an open fusion of physical abuse and sex, of extreme violence, horrible acts of degradation against women with an increasingly twisted eroticism. Porn has always primarily involved the eroticization of male power through the physical abuse, even torture, of women. Porn reflects the endemic cruelty of our society. This is a society that does not blink when the industrial slaughter unleashed by the United States and its allies kills hundreds of civilians in Gaza or hundreds of thousands of innocents in Iraq and Afghanistan. Porn reflects back the cruelty of a culture that tosses its mentally ill out on the street, warehouses more than 2 million people in prisons, denies health care to tens of millions of the poor, champions gun ownership over gun control, and trumpets an obnoxious and superpatriotic nationalism and rapacious corporate capitalism. The violence, cruelty, and degradation of porn are expressions of a society that has lost the capacity for empathy.

Why would the Left cede this family values issue to the likes of Michelle Bachmann? Surely a libertarian attitude towards pornography acquiesces in the mainstreaming of pornography and the profits accumulated by large "respectable" US corporations like GM and AT&T. It also acquiesces in the purveying of pornography to young adolescent males who make up a large share of the audience and the attitudes that are being formed by exposure to such trash. American culture has gone in a few short years from one that was overly puritanical to one that is awash in degradation, obscenity and debauchery by anyone's definition. The sexual liberation of the 1960s, initially a salubrious renunciation of repression, has been thoroughly exploited and degraded by the commercialized pornography industry of the 2000s. It is the culture of the Roman Empire before its fall, of Caligua and Nero, a culture of debasement and depravity. Surely, it should not be left to the likes of Michelle Bachmann to point this out. While I don't agree with her on her stance against homosexuality or the definition of marriage, I do heartily endorse the fact that she purportedly is taking a stand against pornography. The American culture is so hypocritical that it outlaws legalized prostitution but mainlines pornography. I think legalized prostitution might serve an actual purpose for those who cannot find satisfaction in a normal relationship with a woman, but pornography is not helpful in formulating salubrious attitudes between the sexes nor is it protective of women who enter the industry despite the fact that they are paid well and do so voluntarily. When a "live and let live" libertarian attitude results in the degradation of a class of women and results in unhealthy attitudes towards sex, it should be prohibited while encouraging healthful relationships, not necessarily, but including, marriage.

ALEC Exposed: How Corporations Are Taking Over Our Democracy

Published on Thursday, July 14, 2011 by The Progressive

by Ruth Conniff

Today the Center for Media and Democracy rolled out a new web site, ALEC Exposed, based on a massive leak of information from the American Legislative Exchange Council, the powerful coalition of corporations, rightwing foundations, and state legislators who have been literally writing the laws at the state level to push their pro-business, anti- democracy agenda.

For many years, big corporations, including Kraft, Pfizer, WalMart, and AT&T, to name a few, have been paying hefty dues to belong to a group that gives them access to state legislators. The legislators, for a much smaller fee, get to attend annual conferences, receive briefings from ALEC, and get the honor of putting their names on boilerplate legislation the groups drafts.

One of the many new pieces of information to emerge from the impressive ALEC Exposed project is that the corporate members of this group vote these bills out of their own, corporate committees before passing them on to their pet legislators.

"We've discovered through a whistleblower that these corporations actually vote on these bills behind closed doors, before legislators or the people they represent even hear about them," Lisa Graves, the director of the Center for
Media and Democracy said today.

If you live in a state like Wisconsin, the results of this coordinated assault on democracy are all too evident.

Much of the group's legislation--privatizing the public schools, taking away collective bargaining rights, loosening environmental regulation, even suppressing the vote--got a huge boost when ALEC foot soldiers, including Governor Scott Walker and the heads of both of Wisconsin's legislative chambers, took power. The group's hard work and careful planning for just such an opportunity over the last two decades accounts for the head-spinning all-fronts attack ordinary citizens are currently enduring in Wisconsin.

State representative (and Progressive magazine blogger) Mark Pocan went "behind enemy lines" to write a piece about attending an ALEC conference for The Progressive Magazine back in March 2008, in a darkly comic piece titled "Through the Corporate Looking Glass".

That piece is more relevant--and less funny--now that ALEC has become even more powerful.

A big controversy erupted when Professor William Cronon at the University of Wisconsin-Madison, blogged about ALEC's corporate takeover of the state and became the target of Republican attacks and had his emails seized by Governor Scott Walker's administration.

Walker and Co. will be even less pleased when they see ALEC Exposed.

The site, which posts and analyzes more than 800 bills produced by ALEC, is a treasure trove of information, including never-released text of the actual ALEC bills broken down and organized by topic, information about the corporate membership of ALEC's task forces on particular issues, the names of ALEC's state chairmen, and the effects of the bills: on working people, schools, the environment, consumer rights, and our democracy.

"We know that we are standing on the shoulders of some tremendous investigative work," Lisa Graves said in a press conference on the roll-out, "But we believe this is a special contribution."

Reporters and citizens can now look at bills that were introduced in their states under the names of their elected officials, and trace the actual, corporate origins of these profoundly anti-democratic efforts.

"We know, for example, that Kraft has been the head of the task force for ALEC responsible for anti-union bills," Graves said.

On the schools issue, which I wrote about in a Progressive cover story a couple of months ago, it turns out that Connections Academy, the company that runs Wisconsin's virtual charter schools, which are poised to displace bricks-and-mortar public schools throughout the rural parts of the state under a Republican proposal, is the head of ALEC's task force on education.

The Center for Media and Democracy deserves a lot of credit for this tremendous addition to our understanding of what is happening to our states. Now, as ALEC Exposed puts it, it's up to us to dig in and spread the word.

© 2011 The Progressive

Ruth Conniff covers national politics for The Progressive and is a voice of The Progressive on many TV and radio programs. Conniff was a regular on CNN’s Sunday Capital Gang and is now a regular on PBS’s To the Contrary. She also has appeared frequently on C-SPAN’s Washington Journal and on NPR and Pacifica.

The Rise of the Wrecking-Ball Right

by Robert Reich

Friday, July 15, 2011

Recently I debated a conservative Republican who insisted the best way to revive the American economy was to shrink the size of government. When I asked him to explain his logic he said, simply, “government is the source of all our problems.” When I noted government spending had brought the economy out of the previous eight economic downturns, including the Great Depression, he disagreed. “The Depression ended because of World War Two,” he pronounced, as if government had played no part in it.

A few days later I was confronted by another conservative Republican who blamed the nation’s high unemployment rate on the availability of unemployment benefits. “If you pay someone not to work, they won’t,” he said. When I pointed out unemployment benefits couldn’t possibly be the cause of joblessness because there are now about five job seekers for every job opening, he scoffed. “Government always makes things worse.”

Government-haters seem to be everywhere.
 
Congressional Republicans, now led by House Majority Leader Eric Cantor, hate government so much they’re ready to sacrifice the full faith and credit of the United States in order to shrink it.

Taming the deficit isn’t their aim. They rejected Obama’s offer to cut $3 trillion of spending over the decade – including major reductions in entitlement programs – because his plan would also entail $1 trillion of tax increases. Their ultimate goal, in the words of their guru Grover Norquist, is to take government down to “the size where we can drown it in the bathtub.”
 
Where did this wrecking crew come from? And why do so many Americans seem to support them? To answer “the tea party” begs the question because the tea party itself is a product of this rage.
 
Credit the economic fears and insecurities now felt by a broad swathe of the public who want to find a villain for what they’re going through. Wall Street is too abstract and the financial games that brought on the Great Recession almost impossible for most Americans to grasp. But the government bailout of the Street was a specific act almost everyone could instinctively understand – and to most Americans it seemed perversely wrong.

It’s no coincidence that the emergence of the tea party coincided with the Wall Street bailout. An acquaintance who has embraced the tea party explained to me she hates government “because it’s always captured by the powerful, who take our taxes and eat our lunch.”
 
At the same time most of what government does that helps average people is now so deeply woven into the thread of daily life that it’s no longer recognizable as government. Think of the indignant voters who showed up at congressional town meetings to protest Obama’s health care bill shouting “don’t take away my Medicare!”

A recent paper by Cornell political scientist Suzanne Mettler surveyed how many recipients of government benefits don’t really believe they have received any benefits. She found that over 44 percent of Social Security recipients say they “have not used a government social program.” More than half of families receiving government-backed student loans said the same thing, as did 60 percent of those who get the home mortgage interest deduction, 43 percent of unemployment insurance beneficiaries, and almost 30 percent of recipients of Social Security Disability.
 
Add in the relentlessly snide government-hating and baiting of Fox News and Rush Limbaugh and his imitators on rage radio; include more than thirty years of Ronald Reagan’s repeated refrain that government is the problem; pile on hundreds of millions of dollars from the likes of oil tycoons Charles and David Koch intent on convincing the public that government is evil, and you have all the ingredients for the emergence of a wrecking-ball right that’s intent on destroying government as we know it.
 
The final critical ingredient has been the abject failure of the Democratic Party – from the President on down – to make the case for why government is necessary.

One would have thought the last few years of mine disasters, exploding oil rigs, nuclear meltdowns, malfeasance on Wall Street, wildly-escalating costs of health insurance, rip-roaring CEO pay, and mass layoffs would have offered a singular opportunity to explain why the nation’s collective well-being requires a strong and effective government representing the interests of average people.

Yet the case has not been made. Perhaps that’s because, even under the Democrats, the interests of average people have not been sufficiently attended to.

Why Mitch McConnell Will Win the Day

by Robert Reich

Wednesday, July 13, 2011

 

Senate Minority Leader Mitch McConnell’s compromise on the debt ceiling is a win for the President disguised as a win for Republicans. But it really just kicks the can down the road past the 2012 election – which is what almost every sane politician in Washington wants to happen in any event.

McConnell’s plan would allow the President to raise the debt limit. Congressional Republicans could then vote against the action with resolutions of disapproval. But these resolutions would surely be vetoed by the President. And such a veto, like all vetoes, could only be overridden by two-thirds majorities in both the House and Senate – which couldn’t possibly happen with the Democrats in the majority in the Senate and having enough votes in the House to block an override.

Get it? The compromise allows Republicans to vote against raising the debt limit without bearing the horrendous consequences of a government default.

No budget cuts. No tax increases. No clear plan for deficit reduction. Nada. The entire, huge, mind-boggling, wildly partisan, intensely ideological, grandly theatrical, game of chicken miraculously vanishes.

Until the 2012 election, that is.

McConnell, like most other Republican leaders, has all along seen the battle over raising the debt ceiling as part of a master plan to unseat Obama. Remember, it was McConnell who openly admitted the GOP’s “top goal is to defeat President Obama in 2012” – a brazen and bizarre statement in the face of the worst economic crisis in seventy years.

The GOP will weave Obama’s decision to raise the debt ceiling into the 2012 presidential campaign –- as well as Senate and House races — so 2012 becomes what they hope will be a referendum on Obama’s “big government.”  

McConnell’s compromise will win the day. Expect much grousing from the GOP, especially those who feel they need to posture for the tea party. But McConnell – or something very similar – is the only way out. Obama can’t agree to a budget plan lacking tax increases, especially on the wealthy. Republicans can’t agree to one including them. In Washington, when an immovable object meets an irresistible force, something’s got to give. A compromise that allows both sides to save face is the easiest give of all.

Moreover, as the August 2 deadline approaches, big business and Wall Street (who hold the purse strings for the GOP) are sending Republicans a clear signal: Raise the debt ceiling or capital markets will start getting nervous. And if they get nervous and interest rates start to rise, you guys will be blamed.

Washington insiders will consider the McConnell compromise a win for Obama. But the rest of the country hasn’t been paying much attention and won’t consider it much of a win for either side. Their attention is riveted to the economy, particularly jobs and wages. If those don’t improve, Obama will be a one-term president regardless of how the GOP wants to paint him.

Getting to Crazy

Published on Friday, July 15, 2011 by The New York Times

by Paul Krugman

There aren’t many positive aspects to the looming possibility of a U.S. debt default. But there has been, I have to admit, an element of comic relief — of the black-humor variety — in the spectacle of so many people who have been in denial suddenly waking up and smelling the crazy.Of course, the other shirt reads: 'I'm not just an incompetent invertebrate, I'm a Democrat'. Both shirts come in many sizes.

A number of commentators seem shocked at how unreasonable Republicans are being. “Has the G.O.P. gone insane?” they ask.

Why, yes, it has. But this isn’t something that just happened, it’s the culmination of a process that has been going on for decades. Anyone surprised by the extremism and irresponsibility now on display either hasn’t been paying attention, or has been deliberately turning a blind eye.

And may I say to those suddenly agonizing over the mental health of one of our two major parties: People like you bear some responsibility for that party’s current state.

Let’s talk for a minute about what Republican leaders are rejecting.

President Obama has made it clear that he’s willing to sign on to a deficit-reduction deal that consists overwhelmingly of spending cuts, and includes draconian cuts in key social programs, up to and including a rise in the age of Medicare eligibility. These are extraordinary concessions. As The Times’s Nate Silver points out, the president has offered deals that are far to the right of what the average American voter prefers — in fact, if anything, they’re a bit to the right of what the average Republican voter prefers!

Yet Republicans are saying no. Indeed, they’re threatening to force a U.S. default, and create an economic crisis, unless they get a completely one-sided deal. And this was entirely predictable.

First of all, the modern G.O.P. fundamentally does not accept the legitimacy of a Democratic presidency — any Democratic presidency. We saw that under Bill Clinton, and we saw it again as soon as Mr. Obama took office.

As a result, Republicans are automatically against anything the president wants, even if they have supported similar proposals in the past. Mitt Romney’s health care plan became a tyrannical assault on American freedom when put in place by that man in the White House. And the same logic applies to the proposed debt deals.

Put it this way: If a Republican president had managed to extract the kind of concessions on Medicare and Social Security that Mr. Obama is offering, it would have been considered a conservative triumph. But when those concessions come attached to minor increases in revenue, and more important, when they come from a Democratic president, the proposals become unacceptable plans to tax the life out of the U.S. economy.

Beyond that, voodoo economics has taken over the G.O.P.

Supply-side voodoo — which claims that tax cuts pay for themselves and/or that any rise in taxes would lead to economic collapse — has been a powerful force within the G.O.P. ever since Ronald Reagan embraced the concept of the Laffer curve. But the voodoo used to be contained. Reagan himself enacted significant tax increases, offsetting to a considerable extent his initial cuts.

And even the administration of former President George W. Bush refrained from making extravagant claims about tax-cut magic, at least in part for fear that making such claims would raise questions about the administration’s seriousness.

Recently, however, all restraint has vanished — indeed, it has been driven out of the party. Last year Mitch McConnell, the Senate minority leader, asserted that the Bush tax cuts actually increased revenue — a claim completely at odds with the evidence — and also declared that this was “the view of virtually every Republican on that subject.” And it’s true: even Mr. Romney, widely regarded as the most sensible of the contenders for the 2012 presidential nomination, has endorsed the view that tax cuts can actually reduce the deficit.

Which brings me to the culpability of those who are only now facing up to the G.O.P.’s craziness.

Here’s the point: those within the G.O.P. who had misgivings about the embrace of tax-cut fanaticism might have made a stronger stand if there had been any indication that such fanaticism came with a price, if outsiders had been willing to condemn those who took irresponsible positions.

But there has been no such price. Mr. Bush squandered the surplus of the late Clinton years, yet prominent pundits pretend that the two parties share equal blame for our debt problems. Paul Ryan, the chairman of the House Budget Committee, proposed a supposed deficit-reduction plan that included huge tax cuts for corporations and the wealthy, then received an award for fiscal responsibility.

So there has been no pressure on the G.O.P. to show any kind of responsibility, or even rationality — and sure enough, it has gone off the deep end. If you’re surprised, that means that you were part of the problem.

© 2011 The New York Times

Paul Krugman is professor of Economics and International Affairs at Princeton University and a regular columnist for The New York Times. Krugman was the 2008 recipient of the Nobel Prize in Economics. He is the author of numerous books, including The Conscience of A Liberal, and his most recent, The Return of Depression Economics.

The California Conundrum: Propositions, the Fourth Branch of Government, and Minority Rule

from the OB Rag 

by Andy Cohen on July 15, 2011 · 0 comments

in California, Economy, Education, Election

Texas vs. California Part II:  Legislation by initiative is paralyzing the state and handcuffing the legislature’s ability to do the job they were sent to Sacramento to do.  With the California economy struggling and mired in deficits, the Governor and the legislature have limited options.

This is part two of a series examining the economic fortunes of both states.  See part one here.

California, like Texas, has more than its fair share of economic problems.  The difference is that everyone knows about California’s problems; the state has been pretty up front and honest about it, whereas Texas is in complete denial about their issues, to the point of poo-pooing a $27 billion budget deficit.  Because deficits don’t matter, right Dick Cheney?

With current unemployment in California at 11.7% and a state government that’s possibly even more dysfunctional than our national government in Washington it’s hard to see brighter days coming.  But at least the state is realistic about where it is.

Governor Jerry Brown recently signed into law the 2011-12 California state budget.  In it are some pretty painful cuts—cuts necessitated by the Republicans’ refusal to even consider any kind of revenue increases.

Painful all cuts budget

The state budget cuts 22% of funding from the University of California system, and 25% from the California State University system (which means that tuition is going to be hiked again in both systems, after hefty fee hikes in the previous few years).  It calls for a $10 per unit increase in the California Community College registration fees; it cuts $744 million from the state courts; it cuts mental health programs; and a devastating $2 billion cut to MediCal, the state’s Medicaid program, among many other cuts to social and public services.  And of course there’s the closure of 70 state parks, pushing recreation further toward becoming the exclusive domain of the rich and powerful.

K-12 education was spared the axe…….for now.  But if projected revenue increases do not materialize, the budget contains a mechanism to automatically slash $1.5 billion from the state’s education system.

Still, according to the official state budget, education funding is $6 billion below what it was in 2006-07, and that has to change.  Long term the state is going to have to deal with its revenue problem (yes, a revenue problem) in order to restore funding to critical services, such as education, public safety, and public health.

Despite the draconian cuts to both state budgets, the major difference between California and Texas is that a huge majority in the California government realizes that the state’s budgetary shortfalls cannot be solved through cuts alone; that although no one likes paying taxes, they’re a necessary “evil” that must be a part of any reasonable and workable budget solution.  Revenue must be raised in order for the state to function, and for the state’s $35 billion in debt to be paid off.  It doesn’t happen without revenue, and revenue means taxes.

Prop 13:  The inspiration for “legislation by initiative”

Unlike in Texas, where a hard right wing ideology controls the state’s policies on taxation and spending, California is held hostage by its fourth branch of the government:  The voters.  The ballot initiative process was instituted in California in the early 1900’s as a means to curb the influence of the Southern Pacific Railroad, and in the last three decades it has nearly completely hijacked the state’s legislature.  What was once a necessary tool to combat the influence and power of special interests in the state has now become the most effective weapon of special interests.  And it all started with Prop 13.

California, like most states, was heavily dependent on the collection of property taxes as a primary source of revenue.  The property taxes are collected by the state and distributed back to the local governments to pay for essential services, in particular schools.  Texas is no different:  That state is heavily dependent on a higher than average property tax rate for state revenues.

But in the 1970’s, property values in California started to skyrocket.  And since property taxes were levied based on the value of the property, property taxes too went skyrocketing.  This sudden shock to the system did not sit well with California residents, and in 1978, Prop 13 was put on the ballot.

Prop 13 changed the system in a number of ways:  First, instead of basing the tax value on the assessed value of a property, Prop 13 set a baseline value at which the property could be taxed.  That baseline would be determined by the purchase price paid by the current property owner.  This means that if a property was purchased in 1975, and the purchaser still owns that property today, the baseline property tax value is the 1975 purchase price regardless of any increase in the property’s value over time.  Any property purchased prior to 1975 was assessed at the 1975 value.

Prop 13 also sets the property tax rate at a fixed 1% of a property’s assessed value, and limits the allowable increase to the rate of inflation or 2%, whichever is less.

Finally, Prop 13 modified the state’s constitution to require a 2/3 majority vote in both houses of the legislature in order to pass a budget or to raise taxes (2010’s Prop 25 changed that, reducing the requirement to pass a budget to a simple majority).  Taxes can also be raised via ballot initiative, but that would also require a 2/3 majority of the state’s voters.  Highly unlikely to happen.

Prop 13 also does not differentiate between residential and commercial property.

The unintended consequences of Prop 13 have been to effectively handcuff the legislature from actually being able to legislate.  Despite the Democrats’ 52-28 advantage in the State Assembly and a 25-15 advantage in the State Senate, they are still two votes shy in both chambers to be able to pass any real fiscal legislation.  It has handed the minority 1/3 more power in the legislature than the majority 2/3.

With a growing state and a revenue stream that was cut off at the knees, and since nearly all of the property taxes collected were filtered back down to local governments, the state had to find another way to reimburse local governments for their expenses.  California had to find new sources of revenue.  Thus the state became increasingly dependent on a state income tax and state sales tax—the very taxes that Conservatives insist are stifling businesses, forcing them to leave the state.

Victimization of California’s schools

California’s schools have suffered the most from Prop 13.  California was once the national model for education and education standards.  The state’s k-12 school system was among the best in the country, and the universities were the envy of a nation.  Today, according to Education Week, California’s schools rank 30^th in the nation for academic achievement (Texas ranked 13^th).

Prop 13 was the beginning of a trend.  Special interests realized that they could bypass the state legislature and enact their own laws by putting them on the ballot.  The result is a lot of new, shiny programs that the voters have placed into law, but no new mechanisms to pay for them.  And since Prop 13 limits the legislature’s ability to raise revenues, the funding has to come from somewhere, and the state’s schools are the easiest target.

Despite efforts to better define them, funding mandates for the state’s schools are a bit murky and open to interpretation, making it easy to pull funding from schools to pay for other priorities.  According to the National Center for Education Statistics, California spends $9,830.13 per student per year on education, compared to a national average of $12,097.91 per student.  (Texas currently spends even less, tallying $8,047.74 per student.)  Legislators say that they have control of only about 10% of the state’s budget due to the initiative process, so in effect, the initiative process has made defunding schools the only option.

Conservative ideology invades California

One of the ways California was able to survive the implementation of Prop 13 was through the vehicle license fee—more commonly known as the car tax.

As the LA Times’ George Skelton tells us, the car tax went from 1.75% in 1935 to 2% in 1948 “where it remained for the next 50 years with hardly anyone squawking.”  The money was collected by the state, but went to the cities to pay for vital services.  After 50 years of tranquility, Republicans determined that the car tax was no longer tolerable and was stifling the California taxpayer, so Republican governor Pete Wilson whacked it down to 1.5%.

Wilson’s successor, Gray Davis–a Democrat–apparently caught the Republican bug and cut the rate to 1.3%, and then all the way down to 0.65% during the days of a booming California economy.  Then came the hammer:  Rolling blackouts and an economic downturn.  Davis came to his senses and upped the car tax back to 2%.

After successfully supplanting Davis in a recall election after making the car tax a major election issue, Arnold Schwarzenegger immediately busted the tax back down to 0.65%, and as Skelton argues, the state has never recovered.  Local governments depended on those fees, and without them the state had to find another way to reimburse them.

Since then—and because of the cut–the state has been mired in debt, struggling each year (until now) to balance the state’s annual budget through accounting trickeration and sleight of hand.  Had the car tax remained at 2%, or even Davis’ 1.3%, chances are that the legislature would not have had to find other ways to reimburse local governments for lost revenue, and California would not be mired in $35 billion of debt.

Public demands services, but someone has to pay for them

Look, it’s understood.  No one likes paying taxes of any kind.  Taxes are evil and despicable.  Taxes represent the government taking away our hard earned money.  But the thing is people also happen to like the things that taxes pay for an awful lot.  Things like roads; sewer and water systems; clean beaches and city streets; public safety, including the ability to prevent and solve crimes; state parks for everyone to enjoy; and yes, even a high quality college or university education that doesn’t cost a student $40,000 per year in tuition.  We like having clean water to drink and air to breathe.  We like having hospitals.  We like having a place to treat and house severely mentally ill citizens so that they don’t have to walk the streets aimlessly and potentially pose a threat to themselves and to society at large.  The public demands prisons and a criminal justice system to punish criminals.  All of these things cost money, and if the state didn’t provide them, then no one would—at least not at a cost that the average person could afford.

Democrats get this.  Republicans don’t.  But with the legislative rules the way they are, even with overwhelming majorities, Democrats are powerless to do anything about it.  Well, not powerless exactly, but rather not vicious or ruthless in any way that would send a message to Republican districts.  Democrats by and large are for fairness, usually to their detriment.

But there is light at the end of the tunnel.  2010’s Prop 20 changed the state’s redistricting process to remove it from politicians’ hands and theoretically eliminate the gerrymandering that plagued the state and created a huge partisan gulf.  And as mentioned, Prop 25 amended the state constitution to allow the legislature to pass a budget bill with a simple majority, reducing the annual gridlock that prevented an on-time passage of the state budget every year–or sometimes passing one at all.  The state’s primary election system has also been amended, allowing only the top two finishers in a primary election—regardless of party—to advance to the general election.

Slowly but surely Californians are starting to get it.  But there’s still a long way to go.  The state must wean itself off of the insatiable dependence on the direct democracy approach that is paralyzing the state.  The state cannot hold its legislators accountable if they are not directly responsible for the problems and if they are not allowed the tools to fix them.

Let the legislators do the job they were sent to Sacramento to do instead of asking the voters to do it for them.  And if the legislature enacts egregiously unpopular laws, then there’s a mechanism built into the state constitution for the voters to deal with it:  A referendum.  Via referendum the voters can directly voice their disapproval of the actions of the legislature, and California could be governed much more efficiently.

Without the myriad of ballot propositions writing new programs into law, legislators from both parties would then have more freedom to determine how best to use the state’s financial resources.  They would be able to more effectively streamline the government and put money where it’s really needed instead of into programs that are no longer useful but are mandated by the initiative process.  And if the voters don’t care for a legislator’s actions, they are free to make that displeasure known through a process called an election.

To learn more about California’s unusual system of governance, see the April 23^rd, 2011 edition of the British publication The Economist.  You can read the special report main story here, with more in dept insights into what has made the state tick here, here, here, and the story of Prop 13 here.  There are other subscription only portions to the special report.  If you don’t have a subscription, I highly recommend finding the issue in your local library.

The Two Party System is Not Working

 by John Lawrence

The following is an article from the Ohio Commission on Hispanic/Latino Affairs on the Two Party System. My rebuttal follows after the article.

"As Republicans and Democrats grapple over spending caps and tax structures, and as our national legislature stays virtually locked-up with a Democratic Senate and a Republican House, it’s worth wondering how we got here.  The United States is one of a bare handful of countries across the world that uses a two-party system of government.  Third parties are typically repressed in such an environment and, indeed, members of either or the two parties in the United States serve as the overwhelming majority of elected officials at all levels of government.

"The voting system that the United States uses for legislative districts - as well as the Electoral College system for Presidential elections -encourages a two-party system.  This voting system, called often called “winner-take-all”, means that in each election in each district, the winner of the election will win the seat.  It seems simple and intuitive, but many other countries do things slightly differently.  Proportional representation is often used as a voting system in countries with multi-party systems.  Simply put, these seats are filled according to the percentage of the vote that each party received.  To illustrate the difference, say that a party wins 15% of the national vote but won no seats in individual elections.  Under the American “winner-take-all” system, that party would receive no seats in the legislature.  In a proportional representation jurisdiction, however, that party would receive 15% of the seats.  Countries that employ some proportional representation sometimes have a certain quantity of legislative seats set aside to be filled in this way in addition to those seats assigned to geographical districts, whose winners will fill the seat.  Our Electoral College system, likewise, is a winner-take-all system.  Winners of the plurality of the votes in each state win all of a state’s electoral votes.  Only Maine and Nebraska split electoral votes according to proportional voting.  This environment teaches voters that votes for third parties are often “wasted”, and it teaches third parties that they must fuse to have any hope of promoting an alternative to either of the dominant parties.

"Disadvantages to two-party systems are obvious.  The system bars fringe, extremist and issue parties from winning seats and therefore wielding influence.  It also discourages cooperation between the two dominant parties.  In a multi-party system, parties often have to form “coalition governments” - alliances with other parties which, in exchange, allow the agendas of the smaller parties into the majority.  The system does have its advantages, however.  It promotes centrism and discourages extremism.  In order to appeal to a wide-enough swath of the electorate, the parties must be moderate.  It also promotes political stability which is often an indicator of economic growth.  By contrast, multi-party systems can go months or even longer with no government in power due to disagreements and fractures among the parties.  This instability has notably plagued Italy for much of its modern history.

"The United States has been a two-party system for most of its history.  Today’s Democrats trace their founding to Andrew Jackson and the ashes of the early Democratic-Republican Party in the 1830’s.  Their primary foes were first the now-defunct Whig Party and later the emergent Republican Party.  Somewhat strangely, they were very weak in populous New England but very strong on the frontier and in the mid-Atlantic states.  The Republican Party was founded in 1854 to combat the expansion of slavery into the territories and was, perhaps consequently, strong in the North and very weak in the South.  One founding father - George Washington - who was venerated for his wisdom and leadership as well as the examples he set, warned of the insidious influence of political parties in his farewell address, and charged the United States to avoid them, saying

“ 'There is an opinion that parties in free countries are useful checks upon the administration of the government and serve to keep alive the spirit of liberty. This within certain  limits is probably true; and in governments of a monarchical cast, patriotism may look with indulgence, if not with favor, upon the spirit of party. But in those of the popular character, in governments purely elective, it is a spirit not to be encouraged. From their natural tendency, it is certain there will always be enough of that spirit for every salutary purpose. And there being constant danger of excess, the effort ought to be by force of public opinion, to mitigate and assuage it. A fire not to be quenched, it demands a uniform vigilance to prevent its bursting into a flame, lest, instead of warming, it should consume.' ”

"Despite his best efforts, however, the United States has largely institutionalized its two-party system.  Despite recent third party relative successes, such as Ross Perot in the 1990’s, the chances of sweeping change remain remote."

The following is my rebuttal:

The article states:

"The system bars fringe, extremist and issue parties from winning seats and therefore wielding influence. ... In order to appeal to a wide-enough swath of the electorate, the parties must be moderate. "

This is not true if one of the parties becomes an extremist party in and of itself.

Right now the two party system is not working. Far from coming to some kind of compromise between the two parties leading to a "centrist" government policy, the Republicans are going to the rightward extreme and then holding the Democrats hostage to their position.  There is nothing inherent in the two party system that leads to compromise. Republicans have shown that they can prevent any excercise of legitimate government functions even if they are in the minority by using the filibuster. They can filibuster every federal judiciary appointment and even every appointment to head an agency as they've prevented Elizabeth Warren from heading the Consumer Financial Protection Commission. They can literally bring government to a standstill and even destroy the US if they so choose by not raising the debt ceiling. They have threatened to do all of this if they don't get totally their own way. Thus the two party system is fatally flawed.

Their sole goal is to get rid of Obama in the 2012 election, and they are not willing to do anything even if it is beneficial to the American people, even if polling shows 80% of the American people would prefer it, that gets in the way of defeating Obama. Their sole aim is to prove that Obama is ineffective and can't get anything done. Such a system of government cannot last. If the Republicans take the White House in 2012, they will have achieved their goal, and, if they then start passing some legislation that would benefit the American people, the public will think that Republicans know how to get things done while Democrats don't. The only reason they might be able to get some things done is that Democrats won't filibuster every piece of legislation that might benefit the American people just for political advantage because some of them still care about the American people.

However, since the Republican party is a wholly owned subsidiary of large corporations and the wealthy, the chances of their passing much in the way of legislation that would benefit the middle class is nil. Instead once they get their hands on all the levers of power, the US will go the way of Wisconsin, Michigan, Ohio, NJ and other states where Republicans control all three branches of state government: privatizing public institutions including Social Security and Medicare, deunionizing, demonizing government workers, lowering taxes especially on the rich and corporations, cutting spending including unemployment insurance, welfare and the safety net in general. Then Democrats will have no choice except to filibuster all proposed Republican legislation. However, Republicans might throw a few crumbs to the poor and middle class all of which Democrats will heartily endorse because they are not as totally heartless as Republicans.

The President’s Jobs Plan (Not)

by Robert Reich

Tuesday, July 12, 2011

What did the President do in response to last week’s horrendous job report — unemployment rising to 9.2 percent in June, with only 18,000 new jobs (125,000 are needed each month just to keep up with the growth in the potential labor force)?

He said the economy continues to be in a deep hole, and he urged Congress to extend the temporary reduction in the employee part of the payroll tax, approve pending free-trade agreements, and pass a measure to streamline patent procedures.

To call this inadequate would be a gross understatement.

Here’s what the President should have said:

This job recession shows no sign of ending. It can no longer be blamed on supply-side disruptions from Japan, Europe’s debt crisis, high oil prices, or bad weather.

We’re in a vicious cycle where consumers won’t buy more because they’re scared of losing their jobs and their pay is dropping. And businesses won’t hire because they don’t have enough customers.

Here in Washington, we’ve been wasting time in a game of chicken over raising the debt ceiling. Republicans want you to believe the deficit is responsible for the bad economy. The truth is that when the private sector cannot and will not spend enough to get the economy going, the public sector must step into the breach. Cutting the deficit now would only create more joblessness.

My first priority is to get Americans back to work. I’m proposing a jobs plan that will do that.

First, we’ll exempt the first $20,000 of income from payroll taxes for the next two years. This will put cash directly into American’s pockets and boost consumer spending. We’ll make up the revenue shortfall by applying Social Security taxes to incomes over $500,000.

Second, we’ll recreate the WPA and Civilian Conservation Corps — two of the most successful job innovations of the New Deal – and put people back to work directly. The long-term unemployed will help rebuild our roads and bridges, ports and levees, and provide needed services in our schools and hospitals. Young people who can’t find jobs will reclaim and improve our national parklands, restore urban parks and public spaces, recycle products and materials, and insulate public buildings and homes.

Third, we’ll enlarge the Earned Income Tax Credit so lower-income Americans have more purchasing power.

Fourth, we’ll lend money to cash-strapped state and local governments so they can rehire teachers, fire fighters, police officers, and others who provide needed public services. This isn’t a bailout. When the economy improves, scheduled federal outlays to these states and locales will drop by an amount necessary to recover the loans.

Fifth, we’ll amend the bankruptcy laws so struggling homeowners can declare bankruptcy on their primary residence. This will give them more bargaining leverage with their lenders to reorganize their mortgage loans. Why should the owners of commercial property and second homes be allowed to include these assets in bankruptcy but not regular home owners?

Sixth, we’ll extend unemployment benefits to millions of Americans who have lost part-time jobs. They’ll get partial benefits proportional to the time they put in on the job.

Yes, most of these measures will require more public spending in the short term. But unless we get this economy moving now, the long-term deficit problem will only grow worse.

Some in Congress will fight against this jobs plan on ideological grounds. They don’t like the idea that government exists to help Americans who need it. And they don’t believe we all benefit when jobs are more plentiful and the economy is growing again.

I am eager to take them on. Average Americans are hurting, and their pain is not going away.

We bailed out Wall Street so that the financial system would not crash. We stimulated the economy so that businesses would not tank. Now we must help ordinary people on the Main Streets of America — for their own sakes, and also so that the real economy can fully mend.

My most important goal is restoring jobs and wages. Those who oppose me must explain why doing nothing is preferable.

Majority of Dutch Parliament MPs Support AOW (Social Security) Refo

by Frank Thomas

 

The Dutch three-tier pension system -- state AOW (Social Security) Pension, Supplementary Pensions based on terms of employment between employers and employees, and Supplementary Personal Pensions anyone can buy from insurance firms, companies or banks --  are reputed to be the best in the world. At the end of 2009, total assets of Dutch pensions funds were $745 billion or 130% of GDP -- the highest of all OECD countries by far. This enormous sum is invested in bonds and stocks and is thus sensitive to volatility in the financial markets. During the years 2001-2003 preceeding the bubble, the Dutch very wisely reduced significantly the level of  pension fund investments in stocks while sharply increasing investments in bonds. Result? Modest exposure to plummeting stock markets in 2007-09.  

                                                                                                                                                                                         

Still, the Netherlands is no exception to the rising pressures being placed on pensions (and health care) as a result of the financial and economic crises, low interest rates, and particularly the aging population, increasing life expectancy, and recourse to expensive high-tech medical services.  So, true to Dutch pragmatism of timely confronting changing macro-economic realities head-on -- unlike the enduring systemic political squabbling and paralysis on such serious matters in the U.S. -- last Friday, a majority of Dutch Parliament MPs announced their support of a reformed state AOW pension deal agreed to among unions, employers, and ministers. The reforms still have to be approved by individual union members and some influential union members have said they will vote no. 

 

The main reform points of the state AOW (Social Security) pension agreement include:

• The pension age will go to 66 in 2020 and probably rise again to 67 in 2025.


• The pension will increase by 0.6% plus inflation per year from 2013 to 2028.


• The pension of people who stop working earlier will be cut by 6.5% per year. Those who work longer than 67 will receive 6.5% more for each extra year.

 

The main reform points on corporate pensions include:

• Corporate pensions will not work with nominal guaranteed payouts but will vary with stock exchange developments. The effect of changes will be spread over a maximum of 10 years, removing the need for quick fixes. Details have to be worked out. One alternative for the current nominal contract may be a "hybrid contract" composed of two layers -- one layer of lower accrual but with a large degree of nominal security and a second layer that is fully performance-dependent (profit sharing). A second alternative may be a completely flexible contract.   

 

• Companies and employers can determine the balance between risk and security in terms of the corporate pension fund investment mix.

 

• Premiums will be split between workers (one-third) and employers (two-thirds) and employers will no longer have to top up the fund if it runs into trouble.

No final conclusion has been reached on how to handle accrued pension rights: freeze them and set them apart or bring them under the enforcement of the new rules. The second option is unlikely and probably not even possible. Trade unions are vocal in pressuring officials to respect accrued pension rights.

 

And here we are in America constantly spreading lies and fear-mongering stories about how our Social Security system is near bankruptcy. Actually it has been and is in a SOLID financial state  -- punctuated by fact that over the years our Federal Government has borrowed substantially from the surplus funds built up in the Social Security Trust Fund. All that needs to be done to preserve the fund's financial integrity and solvency over the next 30 years is to do (in some appropriate way) exactly just what the Dutch have timely done, namely, set the policy for raising the qualifying retirement age from 65 and 67 (or higher) as dictated by the fiduciary math calculations.

                                                   

SIMPLE? Actually YES! ...  but NOT SIMPLE in our broken down political system where everything's about getting re-elected, being ideologically pure to self-interests rather than serving the national interest.

 

Instead, populist fundamentalists with tunnel vision are popularized as they patronize the libertarian drumbeat of privatization of everything governmental to truly enjoy the greater "benefits-freedom-equality" (better said, "excesses") of unregulated capitalism!  This axiomatic thinking leads to stupid flights of fancy, for example, to claim government intervention never does any good overall for society as opposed to the effects of the market. If accepted, this fools' dogma would be the deathknell of affordable Social Security and Medicare for older generations to come.

                                                                                         

Meanwhile, in a spirit of solidarity, the Netherlands like other mature European countries are promptly, painfully, fairly, cleverly restructuring the financial imbalances in their social-economic models ... while not throwing out that overriding, long-standing European value, "WE ARE ALL IN THIS LIFE TOGETHER."  

Conversation with Frank and Paul About How to Make Corporations Consider More Than the Bottom Line and Getting the Money Out of Politics

We have been talking about a constitutional amendment along the lines of movetoamend.org which is advocating a constitutional amendment which would seek the following:

"We, the People of the United States of America, reject the U.S. Supreme Court's ruling in Citizens United, and move to amend our Constitution to:

* Firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.

* Guarantee the right to vote and to participate, and to have our vote and participation count.

* Protect local communities, their economies, and democracies against illegitimate "preemption" actions by global, national, and state governments."

In addition there is a need to get money out of politics namely the money that goes into lobbying and political campaigning.

Frank Thomas wrote the following:

Sorry I've been out of commission as we took some vacation time and had a 10 day visit by a dear friend from Connecticut whose husband suddenly passed away not long ago. Thanks much for keeping me informed of your give and take on the A Code for Corporate Citizenship constututional amendment idea.

 

Regarding this effort, American corporate law is caught up in the normative consensus that the shareholder-centered corporate goverance model offers greater efficiencies in a growing world network of corporate intermediaries . A standard questionable argument is that the interests of other participants in the firm or nonshareholder constituencies such employees, customers, creditors, merchants in a firm's local community, extended interests of those concerned about a well-preserved environment can be best protected by existing efficacious legal mechanisms outside corporate law. For workers, this embraces antidiscrimination law, health and safety law, pension law, labor contracting law. For consumers, it includes product safety regulation, antitrust law, warranty law, tort law governing product liability, mandatory disclosure of product contents, performance specifications, etc. For the general public, it includes environmental law, mass torts, and nuisance law. The argument is that investor rights cannot be well-protected by contract but only by having exclusive, strong control and representation rights. 

 

In contrast, Germany and the Netherlands have adopted stakeholder models that include investors and worker representatives in the board of directors, while also protecting societal and corporate interests through similar contract and regulatory law devices noted above. For example, German law allows workers to elect representatives for almost half of the supervisory board of directors. This applies to public and private firms with 2000 or more employees. In addition, employees in Germany and the Netherlands are entitled to elect a works council (Betriebsrat) according to the Industrial Constitution Act.  The employer is not active in this election process but is responsible for all costs that arise through the works council. Each plant with more than 5 employees must have a works council.The council represents employees' interests as distinct from that of the employer and trade unions. It also has rights in dismissal and recruitment as well as codetermination on issues not regulated by law or collective agreements.

 

This practice has been in place for many years and insures rather stable and productive worker participation in corporate affairs without unduly paralyzing or damaging management and board decision making. It has enabled Germany to have +-20% of its workforce in high-value added manufacturing vs. less than 8% in the U.S. 

 

One U.S. version of this broader stakeholder corporate governance model is the so-called fiduciary model. Here, if stakeholders are not given a direct representation at the corporate board level, they are protected by the board's greater discretion to represent not just shareholder interests but other stakeholder interests as well. However, experience often shows courts to be ineffective in formulating well and enforcing adequately fiduciary duties that make sure managers act fairly in the interests of all constituencies, including society as a whole. 

 

But this shareholder model does not come close to the collective representation models existing in mature EU countries. Sweden, for example, has a one-tier system with codetermination where employees are given seats on the board of directors. In fact, in all EU countries there is employee representation by trade unions and/or by a works council.Trade unions are voluntary affiliations covering collective bargaining agreements. They are of great importance in France but of less importance in Germany, although over 60% of employment contracts refer to them. A works council represents all employees in a company and is constituted by statute.

                                  

For the last 30 years, the U.S. has been going diametrically in the opposite direction of systematically destroying unions to maximize corporate freedom to set wages, hire and fire, and maximize profits. U.S. management by itself and in secret can make strategic decisions as to whether to close a plant or reduce manpower levels. This has been backed up by U.S. Supreme Court decisions holding that an employer need not bargain with its employees over whether to shut down part of its business. Things just simply don't work that way in Europe.

 

Europeans tend to feel that employees acquire a property right  interest in their jobs over time. The more senior the employee the greater is property interest built up in his or her job   performance .  Thus, appropriate severance pay is legally required (a minimum of one month for each year of employment in the Netherlands) as compensation for the taking of that property interest by dismissal. Such norms reflect substantial cultural and business morality differences between U.S. labor practices and how Europeans view and value the role of workers.                

 

In the U.S., people do not commonly accept or believe anyone is entitled to a job. Employees can be dismissed with little notice. Legally required severance pay is low and is viewed as a human cushion to help the dismissed until a new job is found. As mentioned, U.S. law gives the employer and entrepreneur flexibility to do almost as they wish with their employees. U.S. corporations, particularly global firms,  have one principle objective -- maximum profit for shareholders using all job elimination means (outsourcing, automation, robotization, downgrading, etc.). Under German law, the works council must approve any dismissal or any plant changes, relocation, and merger or any co-determination issue that might result in serious disadvantages to employees. If it does not approve, then parties must appear before a labor court or an arbitration committee for a binding decision. 

 

Again,  the "old world"and the "new world" societies are leap years apart on how they treat workers and how they view corporate social welfare  and shareholder responsibilities. 

 

I will return to this whole subject whether the pursuit of profit will solve the larger problems of society -- pollution, war, a higher standard of living for all citizens, making things better for workers and communities.

 

I have in mind another writing on the continuing U.S. JOB DEBACLE -- where politicians are playing irresponsibly dangerous brinkmanship and blackmailing tactics concerning raising the debt ceiling -- while the world watches in disbelief and +-28 million American remain unemployed or underemployed. Obama appears to be wallowing in leaderless compromised nothingness.

Paul Keleher wrote in response to my suggestion that we look at other countries which have already successfully solved these problems:

I agree with everything and have begun to read Max Chafkin's piece. Interesting.... whole towns in Norway smell like rotten fish?!?!

What I take from this reply is that more research into existing models and examples of what works is needed before a draft text should be attempted. Perhaps we don't need to invent a new "American" model for socially responsible business when working models already exist that we can learn from and adapt for our own use. I wonder what moral authority in the Norwegian government has guided the country to adopt the regulations you describe. For what I'm talking about is the drafting of just such a moral authority for the US.

Obviously, there is much work to be done here. But I think that the vast majority of the American people also believe that the country will be better off if money is barred from the political process. However, given the recent history here, a change of course is needed, because Citizen's United just pushed it the other way, big time. To effect such a change, the restrictions of money found in Europe could never be put through this Congress without first passing a moral guideline in the form of a constitutional amendment passed by referendum ballot initiatives in the states in which the people express a direct voice, and only then might we be able to force Congress to consider such a resolution.

Conversations With Great Minds - Lester Brown - Part 1

 

Banking Has Become Our State Religion

Published on Sunday, July 10, 2011 by Eric Margolis

by Eric Margolis

In 1922 Greek armies trying to conquer western Anatolia were routed by Turkey’s military leader, Mustafa Kemal Ataturk. Hundreds of thousands of ethnic Greeks were uprooted from Ionian coastal areas.After this debacle, Greek officers took three former prime ministers, a general and two other politicians who had led the Turkish-Greek War and shot them. Greeks cheered.

Many Greeks today must be wishing to see similar punishment inflicted on their politicians who were responsible for the nation’s bankruptcy and staggering $500 billion debt.

For decades, Greece’s conservatives and Socialist parties alike bought votes by dishing out the very cushy, do-nothing government jobs, high pensions, and benefits that brought Greece to its knees. Call it state sponsored laziness.

In 2010, the second shoe of the 2008 US financial crisis hit Europe. Greece, Ireland, Portugal and Spain came under financial attack, showing the alarming degree to which uncontrolled, run amok banks and money men had poisoned Europe’s economic waters by speculation and outright gambling.

After intense debate, Greece’s EU partners and the International Monetary Fund just staved off Greece’s impending default on its maturing debt by a $165 billion loan. But Athens must soon make more huge payments. The EU aid package piles more debt onto Greece’s already mountainous debts – just as President Barack Obama is doing in the US.

The Papandreou government is praying the EU will come up with another $150 billion euros to keep Greece going for two more years. Germany and the EU’s wealthy northern members are furious at Greece and reluctant to pay for its profligacy.

But there is no way Greece can generate enough money by cost-cutting and asset sales to pay off its debts. Some form of default seems inevitable, as this column has been saying for over a year. The recent EU rescue package merely postpones default-day.

Calls for Greece to ditch the EU, restore the old drachma, then devalue it are mistaken. Greece manufactures and exports little of high value. Feta, olives and tour packages won’t pay off Greece’s debts. Leaving the EU would collapse Greece’s banks and end mammoth EU agricultural aid.

Greece is using the same scare-tactics that the supposedly too-big-to-fail insolvent US banks employed in 2008: “if I go down, I’ll take everyone with me.”

In this case, it’s Europe’s big banks. Three big French banks, BNP, CréditAgricole, SociétéGénéral, hold large chunks of

Greece’s debt. If Greece defaults, goes the hue and cry, French, German, Swiss, and Belgian banks may crash.

Here we go again. Politicians have allowed the banking industry not only to grow larger than manufacturing, notably in the United States where the top five banks control 40% of all deposits, but to become so over-extended and risky they are a danger to itself and the public.

Bankers who invested in Greek debt or US subprime mortgages were greedy fools and should be fired, not rescued.

We hear them cry: “Lehman Brothers II!” And “we don’t know what murky financial deals link banks.”

Greece’s only viable solution is to renege on its debts, go bankrupt like Argentina did, and start afresh.

Europe’s banks will no doubt be shaken, but they will survive the jolt, just as the US banking system survived 2008. Time for Europe’s banks to get these bad debts off their balance sheets. Rescue funds should be focused on Spain and Italy, if necessary.

It’s time for the bankers to pay for the mess their greed and recklessness created. Just this week we learned that the US government loaned $15 billion to Goldman Sachs during the 2008 crisis. Goldman should have been allowed to fail. The world would have better off without it.

No wonder Greeks are so angry. They must pay for the sins of their politicians and the bankers, whose bonus payments have reached an all-time high. The current EU rescue package for Greece is really about rescuing the banks, not Greek citizens. Just as the US government rescue saved and enriched Wall Street while punishing Main Street.

Finance is our new state religion. The power of the banks must be curbed and brought under control. How many more crises do we need before this lesson sinks in?

© 2011 Eric Margolis

Columnist and author Eric Margolis is a veteran of many conflicts in the Middle East, Margolis recently was featured in a special appearance on Britain’s Sky News TV as “the man who got it right” in his predictions about the dangerous risks and entanglements the US would face in Iraq. His latest book is American Raj: Liberation or Domination?: Resolving the Conflict Between the West and the Muslim World

The Evils of Unregulated Capitalism

Published on Sunday, July 10, 2011 by Al Jazeera

by Joseph E. Stiglitz

Just a few years ago, a powerful ideology - the belief in free and unfettered markets - brought the world to the brink of ruin. Even in its hey-day, from the early 1980s until 2007, US-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world.

Indeed, over the course of this ideology's 30-year ascendance, most Americans saw their incomes decline or stagnate year after year.

Moreover, output growth in the United States was not economically sustainable. With so much of US national income going to so few, growth could continue only through consumption financed by a mounting pile of debt.

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government.

Alas, that has not been the case.

On the contrary, a resurgence of right-wing economics, driven, as always, by ideology and special interests, once again threatens the global economy - or at least the economies of Europe and America, where these ideas continue to flourish.

In the US, this right-wing resurgence, whose adherents evidently seek to repeal the basic laws of mathematics and economics, is threatening to force a default on the national debt. If Congress mandates expenditures that exceed revenues, there will be a deficit, and that deficit has to be financed.

Rather than carefully balancing the benefits of each government expenditure program with the costs of raising taxes to finance those benefits, the right seeks to use a sledgehammer - not allowing the national debt to increase forces expenditures to be limited to taxes.

This leaves open the question of which expenditures get priority - and if expenditures to pay interest on the national debt do not, a default is inevitable. Moreover, to cut back expenditures now, in the midst of an ongoing crisis brought on by free-market ideology, would inevitably simply prolong the downturn.

A decade ago, in the midst of an economic boom, the US faced a surplus so large that it threatened to eliminate the national debt.

So what happened?

Unaffordable tax cuts and wars, a major recession, and soaring health-care costs - fueled in part by the commitment of George W Bush's administration to giving drug companies free rein in setting prices, even with government money at stake - quickly transformed a huge surplus into record peacetime deficits.

The remedies to the US deficit follow immediately from this diagnosis: put America back to work by stimulating the economy; end the mindless wars; rein in military and drug costs; and raise taxes, at least on the very rich.

But the right will have none of this, and instead is pushing for even more tax cuts for corporations and the wealthy, together with expenditure cuts in investments and social protection that put the future of the US economy in peril and that shred what remains of the social contract.

Meanwhile, the US financial sector has been lobbying hard to free itself of regulations, so that it can return to its previous, disastrously carefree, ways.

But matters are little better in Europe. As Greece and others face crises, the medicine du jour is simply timeworn austerity packages and privatization, which will merely leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America, and elsewhere, and it will fail in Europe this time around, too. Indeed, it has already failed in Ireland, Latvia, and Greece.

There is an alternative: an economic-growth strategy supported by the European Union and the International Monetary Fund. Growth would restore confidence that Greece could repay its debts, causing interest rates to fall and leaving more fiscal room for further growth-enhancing investments.

Growth itself increases tax revenues and reduces the need for social expenditures, such as unemployment benefits. And the confidence that this engenders leads to still further growth.

Regrettably, the financial markets and right-wing economists have gotten the problem exactly backwards: they believe that austerity produces confidence, and that confidence will produce growth. But austerity undermines growth, worsening the government's fiscal position, or at least yielding less improvement than austerity's advocates promise. On both counts, confidence is undermined, and a downward spiral is set in motion.

Do we really need another costly experiment with ideas that have failed repeatedly? We shouldn't, but increasingly it appears that we will have to endure another one nonetheless.

A failure of either Europe or the US to return to robust growth would be bad for the global economy. A failure in both would be disastrous - even if the major emerging-market countries have attained self-sustaining growth.

© 2011 Joseph E. Stiglitz

Joseph E. Stiglitz is University Professor at Columbia University. Among many books, he is the author of Globalization and Its Discontents. He received the Nobel Prize in Economics in 2001 for research on the economics of information. He is the co-author, with Linda Bilmes, of The Three Trillion Dollar War: The True Costs of the Iraq Conflict.  His most recent book is Free Fall: America, Free Markets, and the Sinking of the World Economy.

Reagan Mythology is Leading US Off a Cliff

Published on Sunday, July 10, 2011 by Al Jazeera

During Reagan's presidency, the US went from a creditor to debtor nation and marked a take-off for financial inequality.

by Paul Rosenberg

As things stand today, the US is hurtling toward a budget showdown in less than a month. Either President Obama will once again capitulate to extreme Republican budget-slashing demands, making Democrats seem as much of a threat to Medicare as Republicans, and virtually ensuring a GOP electoral sweep in 2012, or the US will default on its debt for the first time in its history, most likely plunging the world economy back into another five-continent recession, also costing Democrats the 2012 elections. These are the options left for a president and a political class completely divorced both from reality, and its own history of how one of the three greatest US presidents of all time steered the country from the brink of collapse eight decades ago

Corporate CowboyEntirely forgetting the real history of how Franklin D Roosevelt used activist government to save American capitalism from itself, the entire US political establishment is instead hypnotized by the false history woven around its most over-hyped president of all time: Ronald Reagan. Idolatry of Reagan's supposed tax-cutting wonders propels the now widespread economic belief that up is down, that cutting government spending is the way out of - rather than into - a severe recession. At the same time, idolatry of Reagan's supposed political wonders propels GOP extremists to ignore all other considerations.

Because of this hypnotism, America's political establishment has barely even begun to notice two unconventional possible ways out that remain, neither of which require anything from Congress, but both of which need bold presidential leadership ala FDR.

The first is to ignore the debt ceiling, relying directly on the 14th Amendment's statement that: "the validity of the public debt of the United States … shall not be questioned". The second is a proposal from maverick Republican Ron Paul to have the Federal Reserve Board destroy the $1.6 trillion in government bonds that it currently holds, which progressive economist Dean Baker recently wrote, "actually makes a great deal of sense". It might take some arm-twisting on Obama's part, but Congress has no say over the Fed, and central bankers have no great love of spreading financial panic.

In anything close to a sane world, either one of these two bold strokes would be widely hailed for avoiding a reckless threat to the still-fragile world economy. But we do not live in a sane world, and the idolatry of Ronald Reagan is one of the principle reasons why. This is why it behooves us to review some of the principle lies involved with Ronald Reagan's record, focusing specifically on the economy. What follows is but a brief rundown.

The idea that Reagan produced a uniquely booming economy is false

First, Reagan's record on the economy was not just exaggerated by his boosters, it's almost exactly the opposite of what they claim. It was a fairly ordinary time by the most common measurements of economic growth, looking good only in comparison with a selective time-slice of the 1970s. But once you start looking beneath the surface even the tiniest bit, the picture turns very dark indeed.

In terms of the most basic measure of economic growth - increase in gross domestic product (GDP) - the vaunted "Reagan boom" was an unremarkable period of time. If we look at Reagan's eight years, and compare them with Clinton's and JFK/LBJ's, Reagan comes in dead last, with 31.7 per cent compared with Clinton's 33.1 per cent and JFK/LBJ's 47.1 per cent. Only Nixon/Ford's eight years make Reagan look good, with a mere 26.2 per cent growth.

The idea that Reagan brought prosperity is true only for those at the top, not for average American workers

If we examine incomes, we discover that Reagan's eight years marked a real take-off for inequality, while average incomes stagnated. The income growth of the top one per cent was ten times that of everyone else during his term: 61.5 per cent versus 6.15 per cent. Under JFK/LBJ, the bottom 99 per cent actually did better: gaining 30.9 per cent compared with 26.9 per cent for the top one per cent. And while inequality continued to rise under Clinton, the bottom 99 per cent did more than twice as well as they did under Reagan, gaining 16.7 per cent compared with 56.6 per cent for the wealthiest one per cent.

The idea that Reagan was good for the American economy in general is false

Reagan was a disaster for the American economy in at least four fundamental ways:

Debtor Nation Status: Under Ronald Reagan, the US went from being the world's largest creditor nation to the largest debtor nation in just a few years - and we have remained the largest debtor nation ever since. In 1981, Reagan's first year in office, the US was a net creditor to the tune of $140.9bn. By 1984, that had shrunk to just $3.3bn - and the next year, the US shifted from being a creditor nation to a debtor nation for the first time in almost 70 years. By 1987, the US was a net debtor by $378.3bn - the largest debtor nation in the world. The figure rose to $532.5bn by the end of 1988, when Reagan left office.

De-Industrialization: While the percentage of industrial jobs in the economy had been declining since the 1950s, with the growth of the service sector, the raw number of industrial jobs continued to increase right up through 1979, just before the 1980/1982 double-dip recession. From that year onward, the number of industrial jobs began declining, with a smattering of years when the number would increase. In addition to the raw number of jobs declining, the number of unionized jobs and the number of jobs with American companies declined even further.

Personal indebtedness: The income stagnation that began under Reagan has had a devastating impact on personal savings. While it fluctuated considerably, the personal savings rate had more than doubled between 1949 and 1982, from 5.0 per cent up to 11.2 per cent. Ironically, one of the main stated purposes of the Kemp-Roth tax cuts, the basis for Reagan's 1981 tax cut bill, was to boost personal savings. Instead, they plunged precipitously, falling all the way down into negative territory by 2006.

Government Indebtedness: The idea that Reagan was "fiscally conservative" is false. The story of government indebtedness was even more bleak. Before Reagan, debt really wasn't a problem for America. From World War II to 1981, every president had reduced the debt as a percentage of GDP, except for the divided term of Nixon-Ford, which saw a tiny 0.2 per cent increase.

The debt-to-GDP ratio is much more significant than the debt alone, since the GDP represents the nation's total capacity to pay off the debt. And from WWII to 1981, the debt-to-GDP ratio fell from almost 120 per cent down to just down to just 32.5 per cent. The sharpest drop came early on, but even during the supposed "big government" heyday of the Kennedy/Johnson years, the ratio fell by over 16 per cent in eight years. Conservatives then might have complained about the debt - and they certainly did - but no one knowledgeable about economics took them seriously, because the debt grew significantly slower than our ability to repay it.

During Reagan's term, this changed dramatically. The ratio rose by over 20 per cent, and it rose another 13 per cent under his successor, George Bush Sr. It took a Democrat, Bill Clinton, to get the ratio headed down again - by almost 10 per cent during his two terms, before Bush Jr sent it skyrocketing again - by almost 28 per cent. It's rising fast under Obama as well - but that's to be expected as a result of the worst recession since the 1930s.

The idea that Ronald Reagan consistently opposed tax increases is false

The idea that Ronald Reagan always opposed tax increases is completely untrue. He raised taxes dramatically as Governor of California in 1967 - by a whopping 30 per cent. But he also raised them as president - 11 times. Sure, his 1981 tax increase, along with three smaller increases, was much larger than his total tax cuts. But his willingness to raise as well as lower taxes would have made him at least somewhat compatible with President Obama, and totally unacceptable to movement conservatives today, especially Tea Partiers.

Bruce Bartlett was a leading supply-side economist in the 1970s, who helped draft the Kemp-Roth tax bill as a staff economist for Congressman Jack Kemp. He went on to serve in both the Reagan and Bush I administrations. In an April 2010 blog post, listing Reagan's 11 presidential tax hikes and four tax cuts, Bartlett wrote: "It may come as a surprise to some people that, once upon a time in the not-too-distant past, Republicans actually cared enough about budget deficits that they thought raising taxes was necessary to bring them down. Today, Republicans believe that deficits are nothing more than something to ignore when they are in power and to bludgeon Democrats with when they are out of power."

Bartlett was obviously overstating his case, given how the debt skyrocketed under Reagan. But things would have clearly been much, much worse if Reagan had never raised taxes. And if Reagan were around today, he would no doubt be denounced as a "socialist" for all the tax increases he signed onto.

The idea that Reagan's tax cuts spurred job creation is false

As noted in Bartlett's table of tax cuts and increases, Reagan followed up his 1981 tax cuts with increases in 1982 and 1983. And for good reason: The unemployment rate - already high when Reagan took office - continued to skyrocket after his tax cuts were passed - peaking at 11.2 percent in 1983, when the jobless rate finally started to come down. The exact mixture of cause and effect over such an extended period may be subject to debate. But one thing is certain: Reagan's 1981 tax cuts did not magically result in job creation in anything like the way that conservatives nowadays mindlessly claim.

The idea that Reagan changed America's mind about taxes and the role of government is false

Political scientist James Stimson, author of Public Opinion in America: Moods, Cycles, and Swings, has constructed an index of economic liberalism based on hundreds of public opinion questions asked repeatedly over the years. This index reached a low-point in 1980 and rose dramatically for the next seven years, reaching a plateau at levels not seen since Nixon's first term, as if Reagan's rhetoric were convincing more and more people of the exactly the opposite of what he was saying.

This rise was reflected, for example, in four questions asked in the General Social Survey, the most-cited data source for social scientists after the US Census. Between 1980 and 1990, the number of people saying the government was spending "too little" nationally increased 27.4 per cent on health care, 32.9 per cent on education, 67.8 per cent on welfare and 46.7 per cent on the environment. The questions all reminded people that increased taxes might be required if more was spent.

What's more, 20 years after Reagan's election, in 2000, federal tax receipts as a percent of GDP were up 8.4 per cent over what they had been the year Reagan was elected, indisputable proof that government's role had ultimately not decreased across that time-span.

TIME Magazine Cover: Why Obama ♥ Reagan. Feb. 7, 2011The idea that Reagan was a singularly popular president is false

Reagan was quite fortunate in getting re-elected in 1984 when his popularity was particularly high, but that was not true of his record in general. According to Gallup, Reagan's overall average approval rating was only 52.8 per cent, lower than John F Kennedy (70.1 per cent), Dwight Eisenhower (65 per cent), GHW Bush (60.1 per cent), Bill Clinton (55.1 per cent), and Lyndon Johnson (55.1 percent). It's only modestly higher than George W Bush (49.4 per cent) and Richard Nixon (49.1 per cent).

Summing Up

Surveying all these lies in a single panorama, it should be clear that neither Reagan's economic record nor his political one should provide any case at all for embracing conservative economics. Quite the opposite: They clearly point to failure on both counts. What's more, the only reason his mythology is possible at all is because he significantly backtracked by raising taxes, when doing otherwise would have completely exposed the failure of his principal economic intentions.

President Obama is as drunk on Reagan's kool-aid as anyone else in Washington today. It will be difficult indeed for him to break the spell in time to save the country - and himself - from repeating the economic disaster that conservative policies led to just before he was elected.

One thing about Reagan is true, however: His wife did play a significant role in saving him from following ideologues into dangerous folly on a number of occasions. Perhaps Michelle Obama is America's last best hope. Perhaps she can see what her husband thus far cannot.

© 2011 Al Jazeera

Paul Rosenberg was a frontpage blogger for OpenLeft.org and is now Senior Editor for Random Lengths News, an alternative bi-weekly in the Los Angeles Harbor Area, where he specializes in labor, community and environmental justice issues.

FAMiLY LEADER Statement Suggests Pledge, Signed By Bachmann, Requires Her To Prosecute Essentially All Porn

By Judd Legum on Jul 9, 2011 at 6:15 pm, from ThinkProgress

New audio of statements by the prominent Iowa social-conservative group THE FAMiLY LEADER suggests the group believes essentially all pornography is illegal. Moreover, they are seeking commitments from presidential candidates to appoint an Attorney General who would prosecute almost all pornography found online or in stores.

This week, THE FAMiLY LEADER introduced a pledge intended to protect traditional marriage which quickly attracted the signatures of Michele Bachmann and Rick Santorum. ThinkProgress, ABC, the Washington Post, the New York Daily News, Slate and many other outlets interpreted the broad language in the pledge as advocating a ban on pornography.

This week, THE FAMiLY LEADER introduced a pledge intended to protect traditional marriage which quickly attracted the signatures of Michele Bachmann and Rick Santorum. ThinkProgress, ABC, the Washington Post, the New York Daily News, Slate and many other outlets interpreted the broad language in the pledge as advocating a ban on pornography.

After this coverage of the pledge generated substantial controversy, THE FAMiLY LEADER’s head, Bob Vander Plaats, said the pledge, despite its expansive language, was only intended to cover “opposition to women being forced into pornography or prosititution.”

But that’s not, however, what he said at the press conference on Thursday when he unveiled the pledge.

Certainly the U.S. Supreme Court has delineated what is prosecutable and even with the Ashcroft Department of Justice, and certainly then more so with Holder Department of Justice we have not had illegal pornography prosecuted. So we expect the executive to appoint an Attorney General who will vigorously prosecute all illegal pornography.

You can listen to the audio, starting at 17:29, here. There are two main points: 1. We need to “vigorously prosecute all illegal pornography,” and 2. The scope of the prosecutions under Ashcroft were not aggressive or expansive enough.

This seems fairly reasonable, until one considers the approach to prosecuting pornography under Ashcroft. The Baltimore Sun detailed these efforts in an April 6, 2004 article entitled: “Administration wages war on pornography: For the first time in 10 years, the U.S. government is spending millions to file charges across the country.” From the intro:

Lam Nguyen’s job is to sit for hours in a chilly, quiet room devoid of any color but gray and look at pornography. This job, which Nguyen does earnestly from 9 to 5, surrounded by a half-dozen other “computer forensic specialists” like him, has become the focal point of the Justice Department’s operation to rid the world of porn.

In this field office in Washington, 32 prosecutors, investigators and a handful of FBI agents are spending millions of dollars to bring anti-obscenity cases to courthouses across the country for the first time in 10 years. Nothing is off limits, they warn, even soft-core cable programs…or the adult movies widely offered in guestrooms of major hotel chains.

The Justice Department hired Bruce Taylor to take the lead in developing and prosecuting many of the cases:

The Justice Department recently hired Bruce Taylor, who was instrumental in a handful of convictions obtained over the past year and unsuccessfully represented the state in a 1981 case, Larry Flynt vs. Ohio…

“Just about everything on the Internet and almost everything in the video stores and everything in the adult bookstores is still prosecutable illegal obscenity,” [Taylor] said.

“…Once it becomes obvious that this really is a federal felony instead of just a form of entertainment or investment, then legitimate companies, to stay legitimate, are going to have to distance themselves from it.”

THE FAMiLY LEADER believes that this interpretation of obscenity law — which deems essentially all pornography found online or in adult book and video stores illegal — is insufficiently expansive and aggressive. Vander Plaats also emphasizes that every instance of obscenity under their interpretation needs to be vigorously prosecuted. According to Vander Plaats those who sign the pledge, like Michele Bachmann, agree to appoint an Attorney General who will make sure these prosecutions happen.

The Triumph of Illusion and Spectacle

by John lawrence

While the nation is close to a catastrophe of global proportions, the mass media treats us to one spectacle after another. Instead of discussing the jobs crisis or the debt crisis or the worst recession since the Great Depression, we are treated first to the saga of Anthony Weiner's weiner followed closely by a 24/7 immersion in the Casey Anthony case. All cameras were on when Nancy Pelosi stepped before them to announce that she was not going to discuss Anthony Weiner but she was there that day to discuss jobs. Immediately, the mass media cut her off and went back to the studio to discuss Anthony Weiner. Jobs was not an important enough topic that we should want to hear what one of America's leading politicians had to say about it. No, far more important was to keep the spotlight on Weiner's weiner. And in a stroke of genius the media created another spectacle out of the Casey Anthony case. Back to back spectacles; it doesn't get any better than that! Without discussing the merits or the tragedy of the case, suffice it to say that it didn't need to have been made into a media spectacle. The wheels of justice could have ground slowly on without the general American public knowing much of anything about it just as it knows little or nothing of the hundreds of other similar cases that go to court every year. This was totally a media created spectacle.

In his book, Empire of Illusion: The End of Literacy and the Triumph of Spectacle, Chris Hedges explains what's happening. The media are only interested in the bucks they can command from advertisers based on the number of eyeballs that are glued to the tube. Therefore, they are not interested in reporting or discussing the issues of the day that are affecting whether or not the US will default on its debt or have enough money to pay social security or what is the best way to create jobs. They are only interested in patching together one media spectacle after another because that is where the money is and their only interest is money not the issues of the day. I'm sure they're working very hard right now to find a replacement for the Casey Anthony spectacle now that it is drawing to a close. What'll be next?

The Anthony Weiner saga would have amounted to nothing if the media hadn't gotten involved. There was no sex, consensual or otherwise, but there were pictures and the media loves pictures. And it loves appealing to the prurient interests of the general public. Weiner's resignation was a heads up to the media to find another spectacle and they found Casey Anthony. Instead of people discussing issues of national importance, they are led to the trough of discussion of the many facets of the case, a case which had no significance whatsoever for the lives of American citizens and a case which is replicated over and over again, unfortunately, almost every day of the year so there was nothing even unique about it. So the media had to create the illusion that this was the most important thing an American citizen should be concerned with, at least until it's replaced by another spectacle. Instead of Nero fiddling while Rome burned, we are treated to the spectacle of corporate induced fiddling by the American public while America burns. The public is systematically dumbed down so that media corporations can maximize their profits.

Hedges points out that all this mind numbing television has reduced Americans to a nation of functional illiterates:

Functional illiteracy in North America is epidemic. There are 7 million illiterate Americans. Another 27 million are unable to read well enough to complete a job application, and 30 million can't read a simple sentence. There are some 50 million who read at a fourth-or-fifth-grade level. Nearly a third of the nation's population is illiterate or barely literate - a figure that is growing by more than 2 million a year. A third of high school graduates never read another book for the rest of their lives, and neither do 42 percent of college graduates. In 2007, 80 percent of families in the United States did not buy or read a book. ... Television, a medium built around the skillful manipulation of images, one that can overpower reality, is our primary form of mass communication. A television is turned on for six hours and forty-seven minutes a day in the average household. The average American daily watches more than four hours of television. That amounts to twenty-eight hours a week, or two months of uninterrupted television-watching a year. The same person will have spent nine years in front of a television by the time he or she is sixty-five. Television speaks in a language of familiar, comforting cliches and exciting images. Its format from reality shows to sit-coms, is predictable. It provides a mass, virtual experience that colors the way many people speak and interact with one another. It creates a false sense of intimacy with our elite - celebrity actors, newspeople, politicians, business tycoons and sports stars. And everything and everyone that television transmits is validated and enhanced by the medium. If a person is not seen on television, on some level he or she is not important. It is the final arbitrator of what is important in life. Hour after hour, day after day, week after week, we are bombarded with the cant and spectacle put out over the airwaves or over computer screens by highly-paid pundits, corporate advertisers, talk-show hosts, and gossip-fueled entertainment networks. And a culture dominated by images and slogans seduces those who are functionally literate but who make the choice not to read. There have been other historical periods with high rates of illiteracy and vast propaganda campaigns. But not since the Soviet and fascist dictatorships, and perhaps the brutal authoritarian control of the Catholic Church in the Middle Ages, has the  content of information been as skillfully and ruthlessly controlled and manipulated. Propaganda has become a substitute for ideas and ideology. Knowledge is confused with how we are made to feel. Commercial brands are mistaken for expressions of individuality. And in this precipitous decline of values and literacy, among those who cannot read and those who have given up reading, fertile ground for a new totalitarianism is being seeded.

And all this is happening because of the capitalist imperative to maximize profits. News and discussion doesn't sell as well as spectacle and illusion. What does it matter if American citizens have a distorted sense of values and are politically and intellectually ignorant if media corporations can continue to maximize profits? Entertainment is more important than political or scientific reality. Facts don't matter. Being mediagenic matters. That's why Michelle Bachmann is way ahead of Tim Pawlenty and Jon Huntsman. People are more interested in her because she comes across as attractive even though she's a whackadoodle in terms of her ideas. If only spectacle and illusion are important, then whether or not we are destroying the environment is a subject not for scientific inquiry but is up for debate with the most attractive and mediagenic, not the most informed,  winning. Have you ever seen a reputable scientist discussing global warming on TV? No, but we are treated to the opinions of uninformed ignoramuses on a daily basis whose main claim to fame is that they can persuade us of falsehoods without batting an eye. And they can go on non-stop by the hour.

Spectacle has triumphed over reason when we can be convinced that evolution is only a theory on the same par as creationism, when President Obama's birth place is a subject for debate, when climate change caused by carbon dioxide emissions is only a theory. When people are too lazy to search out the best opinions and facts on any subject, they are pawns in the hands of media manipulators who will amuse them to death in order to maximize profits.

 

 

Cut the Crap and Create Jobs

Published on Friday, July 8, 2011 by The Hill

by Brent Budowsky

I have recently written a series of columns about jobs with titles such as "An angry dissent," and today's disastrous numbers are a political game changer. All incumbents of both parties are threatened if jobs are not created in large numbers by Election Day 2012.

This is one of the great outrages in political history. Neither party is now proposing a major jobs program. While the Republican Party at the national and state level is doing everything it can to destroy jobs, the Democratic Party is failing to fight for jobs with the intensity that Democrats have historically done. Meanwhile, the Democratic president does photo-ops, Twitter events and mini-jobs programs of the magnitude of school uniform trivia.

It is an outrage, a crime, a sin against decency and a defamation against everything I personally believe that nobody, I repeat nobody, in the high councils of politics gives a damn about those who have been jobless for 99 weeks. This violates my faith as a Christian, where we are supposed to help those in need. It violates my values as a Democrat, where we are supposed to fight for jobs. It violates the most common-sense economics, which proves that help for 99ers provides more stimulus than tax cuts for the wealthy, but since the 99ers would have to spend the money from assistance, to live.

The president's political brain David Plouffe now suggests that voters will not vote based on the jobless rate. This is ridiculous, absurd, delusional and symptomatic of a president far out of touch with the realities of working-class Americans who is clueless in confronting Republicans who believe in firing police, firefighters, teachers and librarians.

The jobless rate is a scandal.

The plight of the 99ers is a moral outrage.

The disastrous jobless numbers today will add to the political earthquake of a nation that demands jobs and is outraged by Washington power brokers who show no signs of caring, understanding or acting.

Shame on the president. Shame on the Republicans. Shame on the Democrats. Shame on the media. Shame on them all.

It is time to cut the crap, create the jobs and fight like hell for what Americans want: jobs.

I continue my angry dissent today.

The horrendous and disastrous jobs numbers announced this morning are a thunderbolt reminder of the jobless plague that grips our nation.

If the jobs are not created soon there will be more incumbents, from both parties, who will join the jobless after the next change election in 2012.

© 2011 The Hill

Brent Budowsky is a columnist for The Hill.

Tax the Rich. Problem Solved

Published on Friday, July 8, 2011 by CommonDreams.org

by Carl Gibson

What if there was a group of terrorists holding your family hostage with a gun pointed at themselves, demanding the account number to your pension fund? Would you negotiate with the terrorists by allowing them access to your savings, or would you let them shoot themselves and keep your retirement money intact?

Congressional Republicans are threatening to default on the debt unless President Obama caves to their demands to cut Medicare, Medicaid and Social Security spending. Regardless of the market-crashing consequences of a debt default, actually doing so would be unconstitutional. Section 4 of the 14th Amendment clearly states that "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions...shall not be questioned." Republicans are violating the constitution by threatening a debt default. End of discussion.

Credible economists and lawmakers on both sides generally agree that raising the debt ceiling is an essential part of governing, and that a large deficit can pose a danger to economic security. But if Speaker Boehner genuinely cares about deficit reduction, he need only look to ending his own party's policies and shifting the tax burden. Swearing allegiance to Grover Norquist's no-new-taxes pledge, the GOP will only allow room for $4 trillion in cuts, arguing this is a spending problem, not a revenue problem. However, their budget would collect exactly $4 trillion less over the next decade through even more tax cuts for corporations and the wealthy.

Contrary to Republican claims, the United States is one of the lowest-tax countries in the world-- U.S. corporations and wealthy citizens pay far less in taxes than other developed nations. Since 1950, capital gains taxes have dropped 10 percent, tax rates for million-dollar households have decreased 10 percent since the mid-nineties, and the estate tax has virtually disappeared for those with the largest fortunes since the onset of the Bush presidency. Four simple solutions would close that $4 trillion budget gap in the next decade, without even touching Social Security or Medicare.

By passing laws like Sen. Carl Levin's Stop Tax Haven Abuse Act, we could generate over $100 billion in new revenue from closing loopholes that allow corporations to shift profits to overseas bank accounts. Through modest taxation of speculative Wall Street trading, we could bring in another $150 billion per year. With higher income tax brackets for households earning over $1 million annually, as Rep. Jan Schakowsky has proposed, we would gain another $100 billion. And progressively taxing estates worth $5 million or more would mean an extra $45 billion in tax revenue.

A truly principled leader would refuse to negotiate with terrorists, and allow them to turn the gun on themselves. Our President needs to stand firmly behind these common-sense proposals, and remove from the table any cuts to the programs we've spent our lives funding from our own paychecks. No exceptions.

Carl Gibson is the co-founder of US Uncut, a grassroots movement to stop budget cuts by getting corporations to pay their fair share. He lives in Jackson, Mississippi where, among other things he works as a bouncer at the Club Bottoms Up. www.usuncut.org

As Unemployment Spikes, Obama's Got a Bigger Problem Than the Debt Ceiling

Published on Friday, July 8, 2011 by The Nation

by John Nichols

The big story out of Washington—and rightly so—is the debt-ceiling fight that President Obama seems to be coming very close to losing. If the president abandons his 2008 campaign promise to be an absolute defender of Social Security, Medicare and Medicaid, he will have very little indeed to run on in 2012.  

But that won't be what beats him.

Because the biggest story in America is a different one from the biggest story in Washington. Americans are not that into the debt-ceiling debate. Polling has suggested that less than a quarter of Americans are "closely following" the fight. Those numbers will rise a bit as the deadline gets closer and as the media hypes the issue.

The issue that Americans have been following closely, and will continue to follow straight through the 2012 election cycle, the issue that tops the polls on the list of concerns, is the jobs crisis. Americans are worried about unemployment and underemployment.

And on Friday they got a lot more worried.

The Los Angeles Times headline was stark: "Dismal Jobs Report Shows Unemployment Rising to 9.2%."

The New York Times headline was, if anything, bleaker: "Job Growth Falters Badly, Clouding Hopes for Recovery."

The 9.2 percent official unemployment rate—up from 9.0 percent two months ago and 9.1 percent a month ago—is only a pale shadow of the real rate. Categorized in official terms as the "U6" unemployment, the real rate includes the offically unemployed as well as Americans who are underemployed and those who have given up on the search for work. It stands at more than 16 percent nationally. And in depressed states, such as Michigan (which Obama carried handily in 2008 but where his approval ratings are now troublingly low), it is well over 20 percent.

The official and the real unemployment rates are devastating. These numbers are some of the worst since the Great Depression. But they are not getting the response that high unemployment rates got from Democrats in the Depression era of other periods of economic downtown in the years since.

President Obama and his team have never focused on job issues with the intensity that is needed. And now they  are simply being ridiculous.

David Plouffe, the president's political czar, said on the eve of the release of Friday's dismal jobs numbers that he does not believe that the high unemployment rate poses a threat to President Obama's 2012 reelection campaign.

Speaking to reporters this week, Plouffe said, “The average American does not view the economy through the prism of GDP or unemployment rates or even monthly jobs numbers. People won’t vote based on the unemployment rate, they’re going to vote based on: ‘How do I feel about my own situation? Do I believe the president makes decisions based on me and my family?’ ”

The almost 10 percent of Americans who are officially unemployed probably don’t feel all that great about their situation. The same goes for the the tens of millions of additional Americans who are underemployed or who have fallen off official radar because they have given up on the search for work in communities where there are simply no jobs to be had.

The unemployed, the underemployed and the abandoned add up to almost one in five Americans. And an awfully lot of them live in battleground states such as Indiana, Michigan, Ohio and Pennsylvania —all of which President Obama won in 2008, all of which President Obama needs to win in 2012.

Now, let’s be clear, no one in their right mind thinks that Republicans who would be president are any more concerned about jobless Americans than is the Obama administration.

But neglecting unemployment as an issue—or presuming, as Plouffe does, that Americans will give Obama the benefit of the doubt—is political madness.

When unemployment reaches the level that it has nationally, and the even higher levels that it has in battleground states,  potential Obama voters start losing faith that "the president makes decisions based on me and my family."

Some of the disappointed may still vote for Obama out of fear of the Republicans, some will find social issues that draw them to the Republicans, but millions will simply stay home —as they did in 2010.

That's the danger heading into the 2012 race, and it is more profound today that at any time in Barack Obama's presidency.

Obama is toying with the notion of running for reelection as the president who did what George Bush could not: cut Medicare, Medicaid and Social Security.

That calculus suggests that Obama and his team really are out of touch with the electoral dynamic.

But that is not the most politically tone deaf scheme to come out of the president's camp this week.

While the president's apparent willingness to take the best argument available to Democrats going into the 2012 election cycle—the promise that they will defend Medicare, Medicaid and Social Security—suggests that Obama learned nothing from the Democratic party's devastating electoral experience in 2010, his top political aide's statements with regard to unemployment suggest that his team has learned even less.

No president since Franklin Roosevelt has won reelection when the unemployment rate was over 7 percent. And Roosevelt won because he ran as a candidate who was fully willing to use the power of the federal government to create jobs —and programs like Social Security.

The notion that a Democratic president can win reelection with an unemployment rate that is edging upward—perhaps toward double digits—and talk of cutting Social Security is not merely unrealistic. It is evidence of a disconnect that could devastate not just Obama's reelection campaign in 2012 but Democratic prospects for years to come.

Copyright © 2011 The Nation

The Tea Party and Goldman Sachs: A Love Story

By Robert Scheer from Truthdig, July 5, 2011

Face it. We live in two nations, sharply divided by an enormous economic chasm between the super-rich and everyone else. This should be an obvious fact of life for most Americans. Just read the story in Tuesday’s Wall Street Journal headlined “Profits Thrive in Weak Recovery.” Or the recent New York Times story pointing out “that the median pay for top executives at 200 big companies last year was $10.8 million,” a 23 percent gain over the year before. 

In the midst of a jobless recovery, those same corporations are sitting on more than $2 trillion in reserves, refusing to invest in this country, as increasing percentages of their profits are garnered in tax-sheltered operations abroad. And the bankers who caused the economic meltdown have turned against President Barack Obama, who saved them; instead they favor a tea-party-dominated Republican Party that seeks to limit any restraint on corporate greed while destroying the ability of state and federal governments to bring some measure of relief to ordinary folk.

The whole point of the tea party is to focus concern over our stagnant economy on something called “big government” while ignoring the big corporations that have bought the government as an accessory to their marketing strategies. Big government is big precisely because it now exists primarily to make the world safe for multinational capitalism, whether through a bloated defense budget, trade pacts like the North American Free Trade Agreement, or monetary policies that serve the interests of the largest companies. 

It was their lobbyists who got Congress to end sensible regulations of financial shenanigans, and now, with the new tea party members of Congress as their most stalwart allies, they are yanking the teeth from the very mild regulations that Obama got through the last Congress. As The Associated Press reported: “Congressional Republicans are greeting the one-year anniversary of President Barack Obama’s financial overhaul law by trying to weaken it, nibble by nibble.”

It is nothing short of demagogic for the Republicans to be complaining about the debt when it was the radical deregulatory policies that they pursued which caused all that governmental red ink in the first place. What a hoax to pretend that teachers’ pensions or environmental protections are responsible for a debt that increased by 50 percent as a direct consequence of the banking collapse. Yet they want to gut even the tepid regulations that became law under the Obama administration, foaming at the mouth about sensible regulation as job killing when it is the uncontrolled greed of Wall Street that is at the root of our high unemployment.

Congressional Republicans are cutting funding for the Securities and Exchange Commission and the Commodity Futures Trading Commission as if those already underfunded agencies are centers of anti-business radicalism. The CFTC is run by former Goldman Sachs partner Gary Gensler, who, back when he was in the Clinton Treasury Department serving under another onetime Goldman leader, Robert Rubin, teamed up with Republicans in Congress to gut financial regulation. He is one of the Obama regulators who has managed to delay even the minor controls that the Dodd-Frank law requires for the still wildly out-of-control $600 trillion derivatives market.

What a joke that the tea party assertion that radicals have taken over the Obama government is embraced even by lobbyists for Goldman Sachs, whose former executives have populated the Obama administration as widely as they did the two previous administrations. All they are missing this time around is that they didn’t get to have one of their own named as treasury secretary, as was the case in both the Clinton and Bush cabinets.

This week, the Los Angeles Times reported on Goldman’s renewed lobbying efforts in Washington aimed at watering down what remains of the promise of Dodd-Frank. True to Washington tradition, Goldman has hired Michael Paese, a former top staffer for the “liberal” Rep. Barney Frank to head its Washington operation, which last year spent $4.6 million lobbying Congress to soften the bill, a task now made far easier with Goldman’s tea party allies in the new Republican-dominated House. As the Times noted, “Goldman has spent much of its money on hired guns from major Washington lobbying firms, including former Senate Majority Leader Trent Lott (R-Miss.) and former House Minority Leader Richard A. Gephardt (D-Mo.).”

Between the faux populism of the tea party and the army of sellout ex-congressional staffers and politicians from both parties, the Washington fix is in. Short of hitting it big on a lottery ticket, the vast majority of Americans are sentenced to a future of lowered expectations, insurmountable personal debt and dismal job prospects. 

They may not know it, however, thanks to the constant propaganda from a corporate culture dominated by images of a classless nation in which all consume the delights of the American dream, from the perfect smartphone to the perfect pill for bladder control, while merrily hacking away on the perfectly manicured golf course of one’s fantasies.

Click here to check out Robert Scheer’s new book, “The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.” Keep up with Robert Scheer’s latest columns, interviews, tour dates and more at www.truthdig.com/robert_scheer.

A Cosmic Visitor's Take on Taxes

Published on Wednesday, July 6, 2011 by Tax.com

by David Cay Johnston

It is a human tendency to assume the world we are born into is as it should be -- a Panglossian assumption that colors our understanding of the abstract, like tax policy.

To get grounded in what is, without assuming it is natural, let's try a thought experiment. Imagine you are a researcher from a distant planet, part of a team sent to stealthily observe and report your findings. Telemetry has revealed the watery and volcanic nature of our planet, so you focus on the organized activities of Earth's top sentients. Your protocol requires you to identify the biggest common enterprises first and then work your way down.

So what would lead your report? What is the biggest human enterprise? Industry? Digital activity? Military? Healthcare? Food production? No, the biggest enterprise, by far, is tax.

Tax accounts for close to 30 percent of economic activity in the United States, 40 percent or more in much of the modern world, and in some countries more than half the economy.

Not being from another planet, it may come as a surprise to you that tax is number one. After all, tax has become a vile word in America, an epithet and a feared label. And because it's a vile word, rational discussions about tax and how to get the most benefit for the least levy are about as likely as a team of extraterrestrials conducting stealth research.

But there it is, number one. Because we devote so much to tax, we must love taxes, right? Or at least what taxes buy. Either that or we are crazy because it doesn't make sense to put first that which you hate. Yet our focus as a society is on far smaller components of our economy.

Take profits. Profits are Lilliputian compared with the gargantuan size of tax. Interest is only about three-fourths the size of profits and virtually unknown as a source of income to those below the top 2 percent of earners.

Or consider new vehicle sales, a giant business whose total domestic revenue when you count both cars and light trucks equals less than four months of federal income taxes, which in turn are less than a fourth of all taxes in America.

Yet anyone taking the measure of America or the world from popular media, be it television or magazines, would think tax was nothing and automobiles were huge. Indeed, from the ads in print and on the air, one could easily be misled into thinking that beautiful people with costly ornaments rank very high in importance, while taxes are unheard of.

This results in a series of paradoxes:

2. The countries with the highest overall taxes tend to be better off and report the highest degree of happiness, but there is a global trend to reduce taxes.

3. Washington is full of claims that high taxes are killing business, yet manufacturers rush to leave America for a high-tax country called China.

1. Humans devote the largest single part of their economies to taxes, yet generally hate taxes and avoid thinking about them in serious ways.

These contradictions are, with apologies to Winston Churchill, a riddle wrapped in a mystery inside an enigma.

When words and deeds are so far disconnected, it suggests a kind of craziness. And craziness does not beget rationality or good decisions. And an amalgam of irrationality and bad decisions is a prescription for a very bad economic headache.

Now let's ponder where taxes come from, geographically speaking, and where wealth is held, although not necessarily made. Imagine your report back to the home planet includes hologram-type three-dimensional images of Earth, virtual globes with spikes and valleys to show the contours of economics.

The world of wealth would include vast flat expanses -- Africa, Siberia, large parts of Australia and Brazil -- and lots of spikes at Bermuda, the Caymans, and cities like London, Beverly Hills, Calif., Zurich, and Monaco.

Even in a nation as wealthy as America, the spikes would stand out against a mostly flat landscape, wealth being highly concentrated not just in a relatively few hands, but in a relatively few places. Lower Manhattan would be a sharp spike rising far above the planet, while vast areas of Appalachia, the South, Midwest, Rockies, and the western parts of New York state would be mostly flat. Wyoming would be as flat as Kansas, except for the sharp spike rising from Jackson Hole.

A parallel hologram of where taxes are paid, however, would not look the same. Even if the globe scales were proportional to global shares, the tax globe would not rise nearly so high in its spiked places.

The Caymans and Monaco would be spikes on the wealth globe, flat on the tax globe, although both would be flat on a third virtual globe showing population.

How much does our crazy, disconnected debate about taxes have to do with the mismatch between these twin three-dimensional images of where wealth resides and taxes arise? How much does it have to do with the fact that Kiplinger's, Money, Smart Money, and dozens of other magazines operate from an antitax bias, as shown by their focus on how to cut your individual taxes rather than on taxes as a whole? How much does it have to do with policies that have made a growing minority of Americans exempt from federal income taxes, although that portion of the populace will shrink some starting next year?

There is an old truism that what you think about is what matters to you. The same is true about your money. Taxes must matter, or else why would we spend so much time on them?

Yet we treat taxes and public finance like a reliable and familiar spouse ignored in favor of the excitement of an illicit affair, our hearts and minds focused on the baubles and not the substance of life.

In three years of writing this column, I have enjoyed the time and reason to think deeply about the role of tax in life, in sustaining our democracy, and about the growing mismatch between our debased national debate on taxes and how we make society work.

The top conclusion I have come to, the one that like our imaginary intergalactic researchers report must come first because it matters most, is that America with all of its greatness, its freedoms, and its potential, is, like democracy itself, the child of tax.

Two centuries of debate and thoughtful consideration by the ancient Greeks gave us the moral basis for progressive taxation and, in turn, the radical ideas that people could govern themselves and that just because a man had money he was not entitled to a larger voice in the body politic.

Seven years under a central government without the power to tax or regulate commerce destroyed the first American republic and created the need for the second, with its strong powers of tax and regulation.

We are abusing our child -- which is to say we are abusing America -- with all of the hate-filled, nonsensical, demagogic talk about tax that dominates one of our political parties and intimidates the other.

We have forgotten the wise words of Edmund Burke, the founder of modern conservatism, who in his 1793 letter made the telling observation that "the revenue of the state is the state."

We seem to think we can raise generations to hate tax, when hate is never a good emotion. We spread tax illiteracy, with no regard for how it undermines America, the liberties of the people, and the very idea of self-governance. If you doubt that, just remember the total disconnect between what the Boston Tea Party was about and what modern Tea Partiers say is their cause.

Tax is not a pleasant subject and never will be. Neither are the responsibilities of child care, like calming bedtime fears about imagined monsters lurking in the shadows. Parents who perform these duties, showing their love by their actions, make for productive adults, while those who shirk the unpleasant realities of parenting often discover what a nightmare a child can grow up to become.

We need to nurture America. We need to do the hard work of changing our tax system to fit the times, of comforting those afflicted by change, and conquering the imaginary monsters perpetuated by politicians consumed by anti-tax ideology and the pursuit of power. We need to remember all six noble purposes in our Constitution's preamble, and we need to take care of our common property, forgetting neither our purposes nor our investments in the commonwealth.

Without taxes there is no America. Taxes are the foundation of the commonwealth, of the goods and services that make society work, and on which private wealth is built. Unless we build a sturdy foundation, we cannot prosper, we cannot remain free. Skyscrapers built on sand will fall.

Too few Americans know these simple truths. When too many fail to even care about them, our society will begin to die, until one day students will open a history text to a chapter that begins with these awful words:

The United States of America was. . . .

© 2011 Tax.com

How Racism, Global Economics, and the New Jim Crow Fuel Black America's Crippling Jobs Crisis

Published on Tuesday, July 5, 2011 by TomDispatch.com

by Andy Kroll

Like the country it governs, Washington is a city of extremes. In a car, you can zip in bare moments from northwest District of Columbia, its streets lined with million-dollar homes and palatial embassies, its inhabitants sporting one of the nation's lowest jobless rates, to Anacostia, a mostly forgotten neighborhood in southeastern D.C. with one of the highest unemployment rates anywhere in America. Or, if you happen to be jobless, upset about it, and living in that neighborhood, on a crisp morning in March you could have joined an angry band of protesters marching on the nearby 11th Street Bridge.

They weren't looking for trouble. They were looking for work.

Those protesters, most of them black, chanted and hoisted signs that read "D.C. JOBS FOR D.C. RESIDENTS" and "JOBS OR ELSE." The target of their outrage: contractors hired to replace the very bridge under their feet, a $300 million project that will be one of the largest in District history. The problem: few D.C. citizens, which means few African Americans, had so far been hired. "It's deplorable," insisted civil rights attorney Donald Temple, "that... you can find men from West Virginia to work in D.C. You can find men from Maryland to work in D.C. And you can find men from Virginia to work in D.C. But you can't find men and women in D.C. to work in D.C."

The 11th Street Bridge arches over the slow-flowing Anacostia River, connecting the poverty-stricken, largely black Anacostia neighborhood with the rest of the District. By foot the distance is small; in opportunity and wealth, it couldn’t be larger. At one end of the bridge the economy is booming even amid a halting recovery and jobs crisis. At the other end, hard times, always present, are worse than ever.

Live in Washington long enough and you'll hear someone mention "east of the river." That's D.C.'s version of "the other side of the tracks," the place friends warn against visiting late at night or on your own. It's home to District Wards 7 and 8, neighborhoods with a long, rich history. Once known as Uniontown, Anacostia was one of the District's first suburbs; Frederick Douglass, nicknamed the "Sage of Anacostia," once lived there, as did the poet Ezra Pound and singer Marvin Gaye. Today the area's unemployment rate is officially nearly 20%. District-wide, it’s 9.8%, a figure that drops as low as 3.6% in the whiter, more affluent northwestern suburbs.

D.C.'s divide is America's writ large. Nationwide, the unemployment rate for black workers at 16.2% is almost double the 9.1% rate for the rest of the population. And it's twice the 8% white jobless rate.

The size of those numbers can, in part, be chalked up to the current jobs crisis in which black workers are being decimated. According to Duke University public policy expert William Darity, that means blacks are "the last to be hired in a good economy, and when there's a downturn, they're the first to be released."

That may account for the soaring numbers of unemployed African Americans, but not the yawning chasm between the black and white employment rates, which is no artifact of the present moment. It's a problem that spans generations, goes remarkably unnoticed, and condemns millions of black Americans to a life of scraping by. That unerring, unchanging gap between white and black employment figures goes back at least 60 years. It should be a scandal, but whether on Capitol Hill or in the media it gets remarkably little attention. Ever.

The 60-Year Scandal

The unemployment lines run through history like a pair of train tracks. Since the 1940s, the jobless rate for blacks in America has held remarkably, if grimly, steady at twice the rate for whites. The question of why has vexed and divided economists, historians, and sociologists for nearly as long.

For years the sharpest minds in academia pointed to upheaval in the American economy as the culprit. In his 1996 book When Work Disappears, the sociologist William Julius Wilson depicted the forces of globalization, a slumping manufacturing sector, and suburban flight at work in Chicago as the drivers of growing joblessness and poverty in America's inner cities and among its black residents.

He pictured the process this way: as corporations outsourced jobs to China and India, American manufacturing began its slow fade, shedding jobs often held by black workers. What jobs remained were moved to sprawling offices and factories in outlying suburbs reachable only by freeway. Those jobs proved inaccessible to the mass of black workers who remained in the inner cities and relied on public transportation to get to work.

Time and research have, however, eaten away at the significance of Wilson's work. The hollowing-out of America's cities and the decline of domestic manufacturing no doubt played a part in black unemployment, but then chronic black joblessness existed long before the upheaval Wilson described. Even when employment in the manufacturing sector was at its height, black workers were still twice as likely to be out of work as their white counterparts.

Another commonly cited culprit for the tenaciousness of African-American unemployment has been education. Whites, so the argument goes, are generally better educated than blacks, and so more likely to land a job at a time when a college degree is ever more significant when it comes to jobs and higher earnings. In 2009, President Obama told reporters that education was the key to narrowing racial gaps in the US. "If we close the achievement gap, then a big chunk of economic inequality in this society is diminished," he said.

Educational levels have, in fact, steadily climbed over the past 60 years for African Americans. In 1940, less than 1% of black men and less 2% of black women earned college degrees; jump to 2000, and the figures are 10% for black men and 15% for black women. Moreover, increased education has helped to narrow wage inequality between employed whites and blacks. What it hasn't done is close the unemployment gap.

Algernon Austin, an economist for the Economic Policy Institute in Washington, D.C., crunched data from the Bureau of Labor Statistics and found that blacks with the same level of education as whites have consistently lower employment levels. It doesn’t matter whether you compare high-school dropouts or workers with graduate degrees, whites are still more likely to have a job than blacks. Degrees be damned.

Academics have thrown plenty of other explanations at the problem: declining wages, the embrace of crime as a way of life, increased competition with immigrants.  None of them have stuck. How could they? In recent decades, the wage gap has narrowed, crime rates have plummeted, and there's scant evidence to suggest immigrants are stealing jobs that would otherwise be filled by African Americans.

Indeed, many top researchers in this field, including several I interviewed, are left scratching their heads when trying to explain why that staggering jobless gap between blacks and white won't budge. "I don't know if there's anybody out there who can tell you why that ratio stays at two to one," Darity says. "It's a statistical regularity that we don't have an explanation for."

Behind Bars, the Invisible Unemployed

So what keeps blacks from cutting into those employment figures? Among the theories, one that deserves special attention points to the high incarceration rate among blacks -- and especially black men.

In 2009, 7.2 million Americans -- or 3.1% of all adults -- were under the jurisdiction of the U.S. corrections system, including 1.6 million Americans incarcerated in a state or federal prison. Of that population, nearly 40% percent were black, even though blacks make up only 13% percent of the American population. Blacks were six times as likely to be in prison as whites, and three times as likely as Hispanics. For some perspective, consider what author of The New Jim Crow Michelle Alexander wrote last year: "There are more African Americans under correctional control today -- in prison or jail, on probation or parole -- than were enslaved in 1850, a decade before the Civil War began."

Incarceration amounts to a double whammy when it comes to African-American unemployment. Rarely mentioned in the usual drumbeat of media reports on jobs is the fact that the Labor Department doesn't include prison populations in its official unemployment statistics. This automatically shrinks the pool of blacks capable of working and in the process lowers the black jobless rate.

In the mid-1990s, academics Bruce Western and Becky Pettit discovered that the American prison population lowered the jobless rate for black men by five percentage points, and for young black men by eight percentage points. (Of course, this applies to whites, Asians, and Hispanics as well, but the figures are particularly striking given the over-representation of blacks in the prison population.)

Even that vast incarcerated population pales, however, in comparison to the number of ex-cons who have rejoined the world beyond the prison walls. In 2008, there were 12 million to 14 million ex-offenders in the U.S. old enough to work, according to the Center for Economic and Policy Research (CEPR). So many ex-cons represent a serious drag on our economy, according to CEPR, sucking from it $57 billion to $65 billion in output.

Of course, such research tells us how much, not why -- as in, why are ex-cons so much more likely to be out of work? For an answer, it’s necessary to turn to an eye-opening and, in some circles, controversial field of study that may offer the best explanation for the 60-year scandal of black unemployment.

Twice as Hard, Half as Far

In 2001, a pair of black men and a pair of white men went hunting for work in Milwaukee, Wisconsin. Each was 23 years old, a local college student, bright and articulate. They looked alike and dressed alike, had identical educational backgrounds and remarkably similar past work experience. From June to December, they combed the Sunday classified pages in the Milwaukee Journal Sentinel and searched a state-run job site called "Jobnet," applying for the same entry-level jobs as waiters, delivery-truck drivers, cooks, and cashiers. There was one obvious difference in each pair: one man was a former criminal and the other was not.

If this sounds like an experiment, that's because it was. Watching the explosive growth of the criminal justice system, fueled largely by ill-conceived "tough on crime" policies, sociologist Devah Pager took a novel approach to how prison affected ever growing numbers of Americans after they'd done their time -- a process all but ignored by politicians and the judicial system.

So Pager sent those two young black men and two young white men out into the world to apply for perfectly real jobs. Then she recorded who got callbacks and who didn't. She soon discovered that a criminal history caused a massive drop-off in employer responses -- not entirely surprising. But when Pager started separating out black applicants from white ones, she stumbled across the real news in her study, a discovery that shook our understanding of racial inequality and jobs to the core.

Pager's white applicant without a criminal record had a 34% callback rate. That promptly sunk to 17% for her white applicant with a criminal record. The figures for black applicants were 14% and 5%. And yes, you read that right: in Pager's experiment, white job applicants with a criminal history got more callbacks than black applicants without one. "I expected to find an effect with a criminal record and some with race," Pager says. "I certainly was not expecting that result, and it was quite a surprise."

Pager ran a larger version of this experiment in New York City in 2004, sending teams of young, educated, and identically credentialed men out into the Big Apple's sprawling market for entry-level jobs -- once again, with one applicant posing as an ex-con, the other with a clean record. (As she did in Milwaukee, Pager had the teams alternate who posed as the ex-con.) The results? Again Pager's African-American applicants received fewer callbacks and job offers than the whites. The disparity was particularly striking for ex-criminals: a drop off of 9 percentage points for whites, but 15 percentage points for blacks. "Employers already reluctant to hire blacks,” Pager wrote, “appear particularly wary of blacks with known criminal histories."

Other research has supported her findings. A 2001-2002 field experiment by academics from the University of Chicago and the Massachusetts Institute of Technology, for example, uncovered a sizable gap in employer callbacks for job applicants with white-sounding names (Emily and Greg) versus black-sounding names (Lakisha and Jamal). They also found that the benefits of a better resume were 30% greater for whites than blacks.

These findings proved a powerful antidote to the growing notion, mostly in conservative circles, that discrimination was an illusion and racism long eradicated. In The Content of Our Character (1991), Shelby Steele argued that racial discrimination no longer held black men or women back from the jobs they wanted; the problem was in their heads. Dinesh D'Souza, a first-generation immigrant of Indian descent, published The End of Racism in 1995, similarly claiming racial discrimination had little to do with the plight of black America.

Not so, insist Pager, Darity, Harvard's Bruce Western, and other academics using real data with an unavoidable message: racism is alive and well. It leads to endemic, deeply embedded patterns of discrimination whose harmful impact has barely changed in 60 years. And it cannot be ignored. As the old African-American adage puts it, "You've got to work twice as hard to get half as far as a black person in white America."

Is There a Solution for Black America?

Tracing black unemployment in America since World War II, there are two moments when, briefly, the gap between black and white joblessness narrowed ever so slightly -- in the 1940s and again in the late 1960s and early 1970s. For example in 1970, unemployment was at 5.8% for blacks and 3.3% for whites, a sizeable gap but significantly better than what followed in the Reagan era. Those are moments worth revisiting, if only to understand what began to go right.

According to University of Chicago professors William Sites and Virginia Parks, those periods were marked by a flurry of civil rights and anti-discrimination activity on the federal level. A series of actions ranging from the creation of the Fair Employment Practice Committee in 1941 to the passage of the Civil Rights Act of 1964 (which mandated the Equal Employment Opportunity Commission), the Voting Rights Act of 1965, and the Equal Employment Opportunity Act of 1972, write Sites and Parks, had "dramatic impacts on employment discrimination."

But those gains of the 1970s were soon wiped out. The thinning of union membership and the dwindling power of organized labor didn't help either, after decades of pressure on employers to end discrimination against workers of color.

Today, in terrible times, with the possibility of social legislation off the table in Washington, the question remains: What, if anything, can be done to close the jobless gap between blacks and whites? When I asked Devah Pager, she called this the "million-dollar question." This form of discrimination, she pointed out, is especially difficult to deal with. As she noted in 2005, many employers who discriminate don't even realize they're doing so; they're just going with "gut feelings." "It's not that these employers have decided that they are not going to hire workers from a particular group," Pager told me.

What won't work is relying on discrimination watchdogs to crack down more often. The way federal anti-discrimination law works, it's up to the person who was discriminated against to raise an alarm. As Duke's William Darity points out, that’s a near impossibility for a job applicant who must convincingly read the mind of a person he or she doesn’t know. Worse than that, the applicant who wants to lodge charges of discrimination also has to prove that the discrimination was intentional, which, as Pager’s experiments make clear, is no small feat. Under the circumstances, as Darity told me, perhaps no one should be surprised to discover that blacks "grossly underreport their exposure to discrimination and whites grossly overreport it."

Of course, fixing a problem first requires acknowledging it -- something the nation has yet to do, says the Economic Policy Institute's Algernon Austin. To put blacks back to work, lawmakers should invest federal money directly in job creation, especially for black workers. Other avenues for putting people back to work, like a payroll tax credit won't do the trick. "We've spent billions in trying to build jobs overseas" in war zones, Austin told me. "But if we invested that money here in our cities, we wouldn't have this racial gap."

But how likely is that at a moment when, in a Washington gripped by paralysis, any discussion of spending in Washington begins and ends at how much to cut? The painful reality of permanent crisis for black workers is here to stay. That’s how it seems to blacks in D.C., especially those who live east of the river. In April, another group of protesters took to the 11th Street Bridge to demand more D.C. hires, and the following month, the group D.C. Jobs or Else took their complaints to City Hall. But progress is slow. "We're being pushed out economically," said William Alston El, a 63-year-old unemployed resident who grew up in D.C. "They say it’s not racism, but the name of the game is they have the money. You can’t live [in] a place if you can’t pay the rent.”

© 2011 Andy Kroll

Andy Kroll is a reporter in the D.C. bureau of Mother Jones magazine and an associate editor at TomDispatch.com. He will never again sleep on the frigid stone floor of a state capitol.

Health Care Debate: It's Time to Get Outraged

Published on Tuesday, July 5, 2011 by CommonDreams.org

by Wendell Potter

One of my favorite bumper stickers reads, "If you're not outraged, you're not paying attention."

That's sort of how I feel about the health care debate. If more Americans paid attention to the fate of neighbors and loved ones who have fallen victim to the cruel dysfunction of our health care system, they would see through the onslaught of lies and propaganda perpetrated by special interests profiting from the status quo.

Since I started speaking out against the abuses of the insurance industry, I have heard from hundreds of people with maddening and heartbreaking stories about being mistreated and victimized by the greed that characterizes so much of the profit-driven American health care system.

Many other people send me links to articles or broadcasts they have seen. When I worked in the insurance industry, we called them "horror stories," and for good reason. The circumstances people often found themselves in were nightmarishly horrible. As an industry PR guy, my mission was to keep as many of those horror stories out of the media as possible. We didn't want the public to know.

It occurred to me recently that Americans are not sufficiently outraged because they either don't hear these stories or, if they do, don't believe how commonplace they are or that anyone they know could experience the same misfortune. Or they might hear that more than 50 million Americans don't have insurance because they can't afford it or, in many cases, can't buy it even if they can afford it, but they don't stop to think that real human beings make up that abstract 50 million figure.

The reality is that these stories are indeed commonplace. Almost all of us -- regardless of our age, income, job or political affiliation -- are just a layoff or plant closure away from being uninsured, or a business decision beyond our control from being underinsured, or an illness away from being forced into bankruptcy and homelessness.

My life changed when I really started paying attention a few years ago. I now have a new mission -- to help people become aware of and understand what is going on around them. So, starting today, I will be sharing on an occasional basis some of the horror stories like the ones I used to work so hard to keep out of the press. My hope is that people will begin to remember why reform is so necessary and why repealing "ObamaCare," despite its shortcomings, is not a real option.

You might have heard about this first one. Even if you have it bears retelling. A few weeks ago, a man in North Carolina was arrested for robbing a bank for $1 so he could get government-provided health care in prison.

Fifty-nine-year-old Richard James Verone has a tumor in his chest and two ruptured disks, but no job or health insurance. He is one of those 50 million Americans I mentioned earlier. Verone told reporters he asked for only a dollar to show that his motives were medical, not monetary. Because of his "preexisting" medical conditions, no private insurer will have anything to do with him. He wasn't destitute enough to qualify for Medicaid, the government program for low-income Americans, or old enough to qualify for Medicare, the government program for people 65 and older.

Verone and millions of other Americans who have a history of illness are considered by private insurers to be "uninsurable." Insurance company underwriters consider them an excessive risk to profits. Even insurers that operate as nonprofits, like many Blue Cross plans, refuse to sell coverage to a third or more of Americans who apply because they've been sick in the past. Many of the people they turn down are children who were born with birth defects.

Shortly after Verone staged his robbery, one of the contestants in the Miss USA pageant revealed during a nationally broadcast interview that she is homeless. Why? Her sick mother could not pay both the rent and her mounting medical bills. Twenty-three-year-old Blair Griffith was evicted along with her mother and brother just weeks after she won the title of Miss Colorado.

"I didn't know what to think" when sheriff's deputies starting putting the family's belongings in garbage bags, she said. "It was shocking. And then I saw my mom on her knees crying and begging them, 'Please don't do this to me' and then looking up at me and saying, 'I'm so sorry.'"

Blair's mother, a widow, lost her health insurance soon after suffering a severe heart attack. She was unable to get another policy. She and her children eventually had no choice but to join an untold number of other Americans who are homeless because they can't pay their medical bills. Many are bankrupt as well as homeless. Medical debt is the leading cause of bankruptcy in the United States.

The third story I want to share with you hasn't made headlines. Most such stories never do. A few days ago a young woman who said she'd been raped sent me an e-mail to ask if I might be able to help her find insurance.

"I am in the process of hiring a broker to help me find insurance, but it is just very overwhelming and sad," she wrote. "I have been denied by three major companies or had riders attached that will not cover anything related to HPV, cervical cancer, medications, or treatments. Basically, they will do nothing for me."

She wrote, essentially, to beg for help.

"I have never talked about what happened (to me), but I am learning that this is too big to handle on my own. There are so many barriers, and while I consider myself an intelligent person, I am by no means an expert when it comes to dealing with insurance agencies. I will take and am grateful for all the help that I can get."

I hope I can help her, but there is no assurance that either I or a broker or anyone else for that matter can help her get the coverage and access to care she needs. She is an apparent victim not just of rape but also of an unjust system that has devolved into seemingly intractable dysfunction while we were not paying close enough attention.

These are just three people whose lives have taken a tragic turn because of America's profit-driven private health care system. There are literally millions of other stories, many of which are even more maddening and heartbreaking.

When the Affordable Care Act (ObamaCare) is fully implemented in 2014, the number of uninsured Americans will be reduced by 30 million, and many of the insurance industry's most egregious practices -- including refusing to sell coverage to people with preexisting conditions -- will be outlawed.

Let's hope that there will be far fewer horror stories after 2014. But the new law is just the beginning. We still will have a long way to go before we have universal coverage, like every other developed country in the world.

Universal coverage, in my view, is the ultimate goal we all should share. Remember this if nothing else: Until we achieve it, you and your loved ones could easily be facing your own horror stories. 

Wendell Potter is former Vice President of corporate communications at CIGNA, one of the United States' largest health insurance companies. In June 2009, he testified against the HMO industry in the U.S. Senate as a whistleblower. He is now the Senior Fellow on Health Care for the Center for Media and Democracy in Madison, Wisconsin.

Radicals, Reactionaries and an Unhappy Fourth

by Robert J Samuelson

Washington Post, July 4, 2011

In this summer of our discontent, Americans arrive at the Fourth of July full of doubt and disappointment. The sickly economy is the main cause; if unemployment were 8 million (about 5.2 percent) instead of 14 million (9.1 percent), Americans would feel better. But we are also unhappy with our democracy — though hardly anyone says so — and this goes to the heart of how we see ourselves.

We are fiercely patriotic. The overlooked reality in the debate about American “exceptionalism” is that most Americans don’t believe it’s debatable. In a 2010 poll, 77 percent of us said that “whatever its faults,” the United States “has the best system of government in the world.” In the 2003-04 World Values Survey, 74 percent of Americans felt strongly that they’d “rather be a citizen of my country than any other.” This surpassed any other nationality. Comparable responses were 58 percent for Canadians, 37 percent for South Koreans and 18 percent for Germans.

Our huge national pride — which often strikes others as arrogance — rests on economic accomplishments and even more on what scholars call the American Creed: faith in freedom; the rule of law; equal opportunity; and democratic ideas and political institutions. What defines us (and this differs from most societies) is not ethnicity, race or religion but our bedrock beliefs. Unfortunately, widely shared values do not settle most specific conflicts.

We are now engaged in a messy debate over big budget deficits and the size of government. The struggle nominally pits liberals against conservatives, but this is misleading. The real debate involves reactionaries vs. radicals. Many liberals are reactionaries and many conservatives are radicals.

A reactionary is someone who, says Webster’s Collegiate Dictionary, desires “a return to an earlier system or order.” This defines many liberals. They “pine,” Michael Barone writes in the Wall Street Journal, for “the golden years of the 1940s, ’50s and early ’60s [when] . . . Americans had far more confidence in big government.” Modern liberals want yet-bigger government to enhance social justice. They defend virtually all Social Security and Medicare benefits. Everything can be financed, they suggest, by cutting defense or increasing taxes on the rich.

Conservatives have become radical by seeking “drastic political, economic or social reform.” Their obsession with tax cuts when even today’s taxes don’t cover today’s spending implies radically shrinking government programs that are woven into America’s social fabric. All this ignores a basic conservative tenet: to respect existing institutions and traditions that anchor the social order. Change — especially radical change — is a last resort, not because today’s world is perfect but because efforts to improve it might make it worse.

Both visions are unrealistic. Given an aging population — which boosts Social Security and Medicare spending — government is automatically expanding. Since 1971, federal spending has averaged 21 percent of the economy (gross domestic product); just continuing present programs could easily raise that to 28 percent of GDP by 2021. The liberal-reactionaries can’t smoothly finance that. In 2011, the deficit is already twice the entire defense budget. The richest 10 percent already pay 55 percent of federal taxes. The blanket embrace of all benefits for the elderly — no matter how rich — will require much higher taxes or steep cuts in other programs, including those for the poor.

The conservative-radicals are no better. Since 1971, federal taxes have averaged about 18 percent of GDP. There is no believable plan to reduce federal spending below that level, even with sizable cuts in Social Security and Medicare benefits. So promises of more tax cuts either border on dishonesty or imply huge unspecified spending cuts that would devastate national defense, states and localities, and the poor.

A dilemma of democracy is the difficulty of making changes that, though essential for society’s long-term well-being, are unpopular in the short run. That describes today’s budget deadlock. To be sure, not all conservatives and liberals have become radicals and reactionaries. But many have. If we applied true labels to them — reactionaries and radicals — we would clarify the debate and compel them to deal with the world as it exists, not as they imagine it. Dream on.

Our politicians prefer self-serving fantasies. Americans are misinformed, and consensus becomes harder. Democrats won’t admit the need for major benefit cuts in Social Security and Medicare; Republicans won’t concede the necessity for higher taxes. The result is that our leaders are now playing a game of brinkmanship over raising the federal debt ceiling or defaulting. Liberals say spending cuts now would subvert the recovery; conservatives find that an excuse not to cut. Surely a compromise would be phasing in credible future cuts.

All this from “the world’s greatest nation.” It lowers our competence and elevates our national embarrassment. Altogether, an unhappy birthday.

Minnesota Government Shuts Down As Republicans Refuse To Raise Taxes On Millionaires

By Marie Diamond posted from ThinkProgress Economy on Jul 1, 2011 at 10:42 am

Minnesota’s government will be shutdown over the Fourth of July weekend as the state’s Republican-controlled state legislature and Democratic governor failed to reach an agreement to close a $5 billion budget deficit before midnight. To close the deficit, Gov. Mark Dayton (D) proposed raising taxes on people making over $1 million a year. Republicans, who took control of both houses last November and campaigned on a platform of no tax increases, are digging in their heels and insist on reducing the deficit through major budget cuts.

This state battle closely mirrors the one on the national stage over the debt ceiling:

Without a two-year budget agreement in place, state parks and the Minnesota Zoo will be shut for the July 4 holiday weekend, nonemergency road construction will halt and thousands of state workers will be furloughed.

Government functions deemed critical by a county judge on Wednesday will keep operating, including the state patrol, prisons and the Medicaid health-insurance program for the poor. Courts will stay open, and welfare and food-stamp payments will continue.[...]

Senate Majority Leader Amy Koch, a Republican, said late Thursday that the state’s health and human-services budget was a sticking point in the negotiations.

Ms. Koch was interrupted several times by protestors in the Capitol chanting, “Tax the rich!”

The effects were reportedly already being felt hours ahead of the deadline, as people rushed to get driver’s and fishing licenses, and “park officials began warning campers to pack their gear and leave.”

Dayton is standing by his plan to raise taxes on millionaires in order to spare cuts in services to the most vulnerable residents. He told reporters late Thursday, “This is a night of deep sorrow for me because I don’t want to see this shutdown occur. But I think there are basic principles and the well-being of millions of people in Minnesota that would be damaged not just for the next week or whatever long it takes, but the next two years and beyond with these kind of permanent cuts in personal care attendants and home health services and college tuition increases.”

This is Minnesota’s second government shutdown in the last six years. The first occurred in 2005 under then-Governor Tim Pawlenty (R), and lasted only a few days. However, this year’s shutdown is “expected to become the broadest shutdown of state services in its history.”

PA Gov. Corbett Slashes Education and Health Care, Refuses To Tax Natural Gas Drilling

From ThinkProgress on Jul 2, 2011 at 12:00 pm

Pennsylvania Gov. Tom Corbett (R) signed a disastrous state budget last night that favors the natural gas industry at the expense of the state’s children and least fortunate citizens. The $27.15 billion budget does not raise taxes, but cuts health care for more than 100,000 of the state’s poorest residents. It did this by slashing Medicaid contributions by $280 million, which will result in a $425 million loss in matching federal funds. State universities and community colleges have announced the largest tuition hikes in state history as education funding took a heavy, $863-million hit.

Yet, state Republicans and Corbett did not have to punish children and the neediest to plug a $4 billion budget deficit. Several variations of natural gas drilling taxes were proposed this year, and an extraction fee tacked onto the budget by the state Senate last week would have raised $310 million. However, Corbett threatened to veto any tax, and he strong-armed the state House into withdrawing a vote on the tax this week just hours before it was scheduled to be debated. Corbett’s obstinacy continues even though Pennsylvania is the only major gas producer that does not tax its use.

So why is Corbett very friendly to natural gas, despite its documented dangers? It may be because the governor owes part of his political career to the industry, having accepted almost $1.3 million in campaign contributions from drillers. The Philadelphia Inquirer reported this week on the cozy relationship between Corbett and Chesapeake Energy, the state’s largest natural gas driller, which began during Corbett’s first statewide campaign for attorney general.

“For much of the fall of 2004, polls showed a slight lead for the Democrat. … Then, in the final weeks of the race, came a game-changer…$450,000 in campaign checks from Aubrey McClendon, CEO and chairman of Chesapeake Energy…The influx of cash helped Corbett narrowly win the closest attorney general’s race in Pennsylvania history and propelled him toward the governor’s mansion, where he has now pledged to turn the Keystone State into ‘the Texas of the natural-gas boom.’”

Chesapeake is one of the worst environmental offenders, having racked up fines of $900,000 and $188,000 in the last few months. They are also currently being sued by the attorney general of Maryland. Despite this, representatives from Chesapeake initially served on Corbett’s Marcellus Shale Advisory Commission. Since his election, Corbett has also favored the industry by lifting a moratorium on new drilling on public lands, and by requiring his office’s approval before any regulations against natural gas companies can be enforced.

– Sean Savett

On International Day of Cooperatives: Tagore and the Idea of Cooperation

Published on Saturday, July 2, 2011 by The Hindu (India)

An idea worth revisiting on the International Day of Cooperatives, which this year falls on July 2

by Ananya Mukherjee-Reed

“Today, economic power has been captured by a small minority. But it has acquired this power only by accumulating the productive power of others. Their capital is simply the accumulated labor of a millions of working people, in a monetized form. It is this productive power that is the real capital, and it is this power that latently resides in every worker ...” — Samabayaniti/The Co-operative Principles, 1928.

In a compelling set of essays written between 1915 and 1940, Rabindranath Tagore articulated a social vision where exploitation would give way to a just, humane, collectively owned economy. At the core of his thought was the cooperative principle. This is an idea worth revisiting on the International Day of Cooperatives, which this year falls on July 2, and even more so during the lead-up to 2012, which is the United Nations International Year of Cooperatives.

Rabindranath TagoreWhy cooperatives again? Have they not been tried — and have failed? Well, so have big banks and large corporations. Yet they continue undiminished. The reason they do so with such impunity is that alternatives are hard to come by. With the financial crisis on the one hand, and the (predictable) collapse of the system of microcredit on the other, the need to identify alternative forms of ownership is greater than ever before.

In India, the experience with the century-old cooperative movement has been mixed. There are some stunning successes: Amul, for one. There are others, too, where cooperatives have proved transformational for the marginalized. The problems are also well-known: abuse, politicization, excessive dependence on the state, and so on. But these are mere symptoms. The real disease lies elsewhere. There is little understanding, much less acceptance, of the cooperative principle and its potential. It is yet to enter the core of our social vision, leave alone public policy. Those spaces are dominated, ever more aggressively, by the competitive principle, the scepter of ‘efficiency' and private gain. This is why India can emerge as one of the top wealth-generators even as 93 per cent of its working citizens toil in the informal sector. That 93 per cent contributes almost half of India's fast-growing GDP. But it has no say over the way that growth is generated — or any voice to claim a fairer distribution of the wealth it produces. The same goes for the majority that survives on the agrarian economy.

Written some eight decades ago, Tagore's thoughts stemmed from these concerns: the growing concentration of economic power and the destruction of rural India. He wrote: “Today our villages are half-dead. If we imagine we can just/ continue to live, that would be a mistake. The dying can pull/ the living only towards death.” (from The Neglected Villages, 1934).

He was deeply skeptical about the solutions proposed by the elite — such as charity or moral enlightenment of the wealthy. These were like putting out “a raging fire by blowing at it,” he wrote. Instead, he sought an ethical model of production.

What would that entail? Tagore's vision went far beyond notions like ‘social responsibility' that are in vogue today. To him, ethical production required that resources (such as land and capital) are collectively owned by producers themselves. This would ensure that the produce is also collectively owned, and that all producers have a say in determining their share of value in the product of their work.

The typical small farmer, indebted and impoverished, was much in need of such a structure. “Imagine if all of our small farmers farmed their land collectively, stored their produce in a common facility and sold them through a common mechanism...” Only then can we prevent profiteering; only then can the farmer recoup the legitimate value of her labor, wrote Tagore.

Without such mechanisms, the farmer would never be able to effectively exercise the right to his land, even if he held the title. Structural conditions would make him powerless. Under these circumstances, giving the small farmer the legal right to land was no more than giving him ‘the right to commit suicide.'

Indeed, in the cooperative principle, Tagore saw the possibility of challenging power, of altering power relations. Ordinary people, whose work constituted what was ‘the real capital,' could only do so if they collectively owned that ‘capital.' Many economists may well reject this as the misplaced idealism of an ill-informed poet. But it will resonate readily with the struggles for producer-ownership in the world today, such as Via Campesina. As the clout of agri-business grows, food inflation rises, and informal work becomes the norm, challenging dominant structures of ownership. And power is the central challenge of these movements.

In India, no amount of tinkering can make growth ‘inclusive,' unless people have a say in how that growth is driven. Take the case of cotton textiles, a boom sector that has seen much growth. But has it really benefited those who have produced that growth? The cotton growers, for instance — the largest single group within the 200,000 farmers who have taken their own lives in the past decade? Or the millions of women who work the long shifts in export factories? Even worse, the drive for profits constantly pits the growers and workers against one another. When, at the peak of the cotton crisis, cotton farmers received price support from the government, export sector workers were threatened with job losses because cotton had become ‘too expensive.' (Ironically, the worst off among the cotton growers did not even benefit from price support.) As long as prices are globally determined, we are told, not much can be done to save those at the bottom. Yet, the past few months have seen global prices hit a big high — and the government sharply restricted cotton exports to favor the textile lobby. This crippled the growers.

This brings us right back to the question of ownership. When global prices fluctuate, who decides how the gains and losses are to be shared? Certainly not the majority of workers and small farmers. But more important, global prices do not operate by magic. They reflect the same concentration of ownership and economic power. Indeed, several movements today urge consumers to use their purchasing power to counter such power. But consumer movements cannot succeed unless the productive economy is differently organized, differently owned.

Can that happen? Yes, if several conditions are in place. First, the competitive principle must be properly applied. Every institution, from schools to universities to hospitals, is increasingly being judged according to that principle, and forced to forgo its social priorities. At the same time, banks and corporations remain blatantly non-competitive, operating like cabals with little discipline or accountability. Second, among the main points of criticism of cooperatives in India has been their need for state resources. But our corporations have also been heavily subsidized by state resources. While they flourish, cooperatives flounder. Why? Corporations enjoy state support with no interference; cooperatives do not. State support has come with levels of bureaucratic control that are incompatible with a truly autonomous, member-driven movement. Third, cooperatives cannot survive in isolated sectors. Systematic linkages between sectors and across countries are necessary if we are to harness the full political, social, economic power of the cooperative principle.

Here is a story from Peru. From its mountains comes a special brand of coffee called Cafe Femenino, produced by cooperatives of very poor indigenous women. It grew out of the women's struggle to claim their share of the value they produce. As growers of organic Fair Trade coffee they earn a premium over and above the market price. Before Cafe Femenino, the women had no access to this premium, no say in its use. Now they use it to educate their daughters who would otherwise not go to school; more than that they raise awareness against the tremendous gender violence in their communities.

There is more. In Canada, Cafe Femenino is distributed also by a workers' cooperative, creating as a result an entire coffee chain of cooperatives. Finally, as a mark of recognition of the global character of gender violence, Cafe Femenino is distributed free to shelters for abused women in Canada. The Femenino experiment has spread to six countries in Latin America and grows by the day. In India too, various experiments with women's collective enterprises have long been under way, but do not receive the attention they deserve.

As Tagore had foreseen it, the cooperative principle enables the most marginalized people to mobilize their most abundant resource: their productive power and their solidarity. ‘Development projects' or paternalistic policy models for ‘empowering the poor' cannot achieve this.

The choice is not between textbook theories. The lessons of everyday life have been stark, more so since 2008. The choice is between two different worlds: one driven by hyper-profit and mass distress, the other holding out the promise of shared prosperity and well-being.

© 2011 Ananya Mukherjee-Reed

Ananya Mukherjee-Reed is Professor and Chair, Department of Political Science at York University in Toronto. [email protected]

more Ananya Mukherjee-Reed

Extreme Weather Link 'Can No Longer Be Ignored'

Published on Friday, July 1, 2011 by The Independent/UK

Scientists to end 20-year reluctance with study into global warming and exceptional weather events

by Steve Connor

Scientists are to end their 20-year reluctance to link climate change with extreme weather – the heavy storms, floods and droughts which often fill news bulletins – as part of a radical departure from a previous equivocal position that many now see as increasingly untenable.

In this April 19, 2011 file photo, smoke rises from an uncontrolled wildfire burning near Possum Kingdom, Texas. It was a spring to remember, with America pummeled by tornadoes, floods, wildfire, snowmelt, thunderstorms and drought. (AP Photo/LM Otero, File) Climate researchers from Britain, the United States and other parts of the world have formed a new international alliance that aims to investigate exceptional weather events to see whether they can be attributable to global warming caused by greenhouse gas emissions.

They believe that it is no longer plausible merely to claim that extreme weather is “consistent” with climate change. Instead, they intend to assess each unusual event in terms of the probability that it has been exacerbated or even caused by the global temperature increase seen over the past century.

The move is likely to be highly controversial because the science of “climate attribution” is still in the early stages of development and so is likely to be pounced on by climate “skeptics” who question any link between industrial emissions of carbon dioxide and rises in global average temperatures.

In the past scientists have been extremely reluctant to link a single extreme weather event with climate change, arguing that the natural variability of the weather makes it virtually impossible to establish any definitive association other than a possible general consistency with what is expected from studies based on computer models.

However, a growing number of climate scientists are now prepared to adopt a far more aggressive posture, arguing that the climate has already changed enough for it to be affecting the probability of an extreme weather event, whether it is an intense hurricane, a major flood or a devastating drought.

“We’ve certainly moved beyond the point of saying that we can’t say anything about attributing extreme weather events to climate change,” said Peter Stott, a leading climate scientist at the Met Office Hadley Centre in Exeter.

“It’s very clear we’re in a changed climate now which means there’s more moisture in the atmosphere and the potential for stronger storms and heavier rainfall is clearly there.”

Kevin Trenberth, a distinguished senior scientist at the US National Center for Atmospheric Research (NCAR) in Boulder, Colorado, also believes the time has come to emphasize the link between extreme weather and the global climate in which it develops.

“The environment in which all storms form has changed owing to human activities, in particular it is warmer and more moist than it was 30 or 40 years ago,” Dr Trenberth said.

“We have this extra water vapor lurking around waiting for storms to develop and then there is more moisture as well as heat that is available for these storms [to form]. The models suggest it is going to get drier in the subtropics, wetter in the monsoon trough and wetter at higher latitudes. This is the pattern we're already seeing.”

The Met Office and NCAR have joined forces with other climate organizations, including the influential US National Oceanic and Atmospheric Organization (NOAA), to carry out detailed investigations of extreme weather events, such as the vast flooding in Pakistan last year, to see whether they can detect a climate change “signal” as a likely cause.

A group of their researchers has formed a coalition called the Attribution of Climate-Related Events which is preparing a report on the subject to be published later this year at a meeting of the World Climate Research Program in Denver. They hope in future to assess each extreme weather phenomenon in terms of its probability of being linked with global warming and then to post the result on the internet.

“There is strong evidence if you look across the world that we are seeing an increase in heatwaves and floods and droughts and extreme rainfall and extreme temperatures,” Dr Stott said.

“The evidence is clear from looking at the observational records globally that extreme temperatures and extreme rainfall are changing. But you can’t jump from that and say that a specific event is straightforwardly attributable because we know that natural variability could have played a part.

“We’ve been developing the science to be increasingly more quantitative about the links and make more definitive statements about how the risk has changed. You look sensibly about these things by talking about changing risk, or changing probability of these events.”

Dr Stott had his colleagues have already carried out studies of the 2003 heatwave in Europe, in which up to 35,000 people died of heat-related illnesses, as well as the devastating UK floods in 2000 which cost £1.3bn in insurance claims and destroyed 10,000 homes following the wettest autumn in England and Wales since records began in 1766.

In both cases, the scientists found that the contribution of man-made greenhouse gases to global warming substantially increased the risk of such extreme events occurring. The group is also investigating the exceptional warm April in Britain this year, which was the warmest since central England records were kept in 1659 and 0.5C warmer on average than the previous warmest April.

Also this year, an unprecedented number of tornadoes across the southeastern US and the flooding of major rivers such as the Mississippi and Missouri led many people to question whether they were exacerbated by global warming. In the past scientists would have been reluctant to link single weather events such as these with climate change, but Dr Trenberth believes this is wrong.

“I will not say that you cannot link one event to these things. I will say instead that the environment in which all of these storms are developing has changed,” Dr Trenberth told The Independent.

“It’s not so much the instantaneous result of the greenhouse effect, it’s the memory of the system and the main memory is in the oceans and the oceans have warmed up substantially, at depth, and we can measure that. I will assert that every event has been changed by climate change and the main time we perceive it is when we find ourselves outside the realms of the previous natural variability, and because natural variability is so large this is why we don't notice it most of the time.

“When we have things that occur usually 4 per cent of the time start to occur 10 per cent of the time, that’s when we begin to notice. The main way we perceive climate change is in changes in the extremes? this is when we break records.”

A report by the insurance company Munich Re found that 2010 was one of the worst years on record for natural disasters, nine-tenths of which were related to extreme weather, such as the floods in Pakistan and eastern Australia and heatwave in Russia, which is estimated to have killed at least 56,000 people, making it the most deadly natural disaster in the country’s history.

“This long-term trend can no longer be explained by natural climate oscillations alone. No, the probability is that climate change is contributing to some of the warming of the world’s oceans,” said Peter Höppe, author of the Munich Re report.

Making the connection

Tornadoes, US, 2011 More than 220 people were killed by tornadoes and violent storms that ripped through south-eastern United States in April; 131 were killed in Alabama alone. Fifteen people died in Tuscaloosa and sections of the city were destroyed.

Heatwave, UK, 2011April was the warmest since 1659, when records in England began. Sun-lovers flocked to St Ives, above, but fears of drought were raised. Rainfall in the UK that month was only 52 per cent of the long-term average.

Drought, Brazil, 2005 The Amazon region suffered the worst drought in more than a century. The floodplains dried up and people were walking or using bicycles on areas where canoes and river boats had been the only means of transport.

Floods, USA, 2005 Katrina was one of the five deadliest hurricanes in the history of the US, and it caused the destruction of New Orleans when levees were overwhelmed. Some 90 per cent of residents of south-east Louisiana were evacuated.

©independent.co.uk

Europe Taking Lead on Speculations Tax

Published on Friday, July 1, 2011 by Foreign Policy In Focus

by Sarah Anderson

Out of the ashes of the 2008 financial crisis, an idea that progressives have been kicking around for decades – a financial transactions tax (FTT) – took on new life. 

There were high hopes that the G-20, which had declared itself the “premier forum for international economic coordination,” would take up the proposal as a way to raise massive revenues to pay for the costs of the crisis and also discourage reckless short-term financial speculation. 

And there were some early encouraging signs. In the summer of 2009, the chief financial regulator of the United Kingdom, Europe’s biggest financial market, came out strongly in support of expanding that country’s existing tax on securities trades to include derivatives and foreign exchange. By the fall, the leaders of Germany and France pledged to put the issue on the agenda of the G-20’s summit in Pittsburgh. Meanwhile, there seemed to be at least a small kernel of potential in the Obama administration, as the president lashed out at “fat cat bankers” and proposed a levy on top banks to pay for bailouts. 

Today, however, European leaders appear to have given up on a G-20 agreement and are going ahead on their own. The European Commission has included an EU-wide financial transactions tax in its budget proposal for 2014-2020. According to reports, the EC estimates that it would raise about 30 million euros ($43 million). The EU tax commissioner, who previously insisted that such taxes would only be feasible if coordinated globally, has now said there “there are ways to implement a financial transaction tax in the EU while mitigating the main risks identified.” 

This comes on the heels of resolutions in support of such taxes that passed by strong majorities in the European Parliament and the French national parliament. A new Eurobarometer poll shows 61 percent of Europeans favor the plan.   

Why has the debate moved so much further ahead in Europe than the United States? 

Less Dependence on Financial Sector

In a story headlined “Obama Seeks to Win Back Wall St. Cash,” The New York Times described a recent White House meeting between the president and two dozen Wall Street honchos aimed at warming up relations with an industry that has been an important source of campaign donations.

In the midst of this charm offensive, it’s easy to understand why a tax on these potential campaign benefactors would not be on the top of the administration’s agenda. 

Although European leaders are certainly not immune to pressure from financial lobbyists, they are not as dependent on them for campaign cash. In France, corporate contributions are prohibited altogether. In Germany, political parties can accept corporate money, but they can’t purchase ads on TV or radio, and overall expenditures are a small fraction of the more than $1 billion spent during a U.S presidential election cycle.  

The Greek Crisis

The Greek debt crisis has created a crushing need for new revenue sources, while increasing the clout of the German and French governments, since they will have to foot much of the bailout costs. It has also opened many eyes to the dangers of financial speculation.

Risky financial deals were part of what got the country into this mess in the first place.  In 2001, Goldman Sachs helped the government of Greece cook their books to hide debts from European regulators. The scheme involved a complex swap of currencies, using fictional exchange rates that made it look, at least temporarily, that Greece hadn't sunk as deeply into debt as it really had. This shady deal was one reason Greece's economic problems spiraled out of control. If a financial speculation tax had been in place when Greece cut the Goldman deal, it would've added significantly to the cost of their "creative accounting." 

Today in Greece, the speculators are once again making a bad situation worse. “Hedge funds are speculating hugely on the outcome of the current negotiations, arguably hastening the likelihood of default," says Max Lawson, head of development finance and public services for Oxfam Great Britain. “Anger toward speculators who are driving up the cost of government debt is a vote winner for European leaders and a key reason governments support the financial transaction tax."

Sarkozy’s Historic Ambitions

French President Nicolas Sarkozy stands out among world leaders not only as the most vocal advocate of financial transactions taxes but also as the only one who has said he would like to see all the money go to health and climate programs in the poorest countries.

Strange as this may sound to American ears, this approach actually attracts votes in France, where Sarkozy will be up for re-election next year.  (Recall the vice-presidential debate where Joe Biden was asked what would need to be cut first from the Obama budget plan and he replied “foreign assistance.”) 

As Marie Yared, project manager for international advocacy with the French HIV/AIDs group Aides, explains it, “Sarkozy is keen to have the ‘glory of France’ everywhere. He wants us to be seen as a generous country. It’s a post-colonial thing.” She also noted that Carla Bruni, Sarkozy’s wife, lost a brother to AIDS and has been very helpful in supporting domestic and international programs to fight the disease.

Pro-Tax Conservatives

German Finance Minister Wolfgang Schäuble is a long-time conservative leader who first served in the cabinet in the Helmut Kohl regime in the 1980s. When I asked Peter Wahl, of the German research group WEED, why Schäuble would support the FTT, his first reaction was, “he has no choice.” Chancellor Angela Merkel made a promise to support such taxes when her Christian Democratic Union was in a coalition with the Social Democrats. When she formed a new ruling coalition with the pro-business Free Democrats after her 2009 re-election, leaders of that party made clear their opposition to the FTT. But Merkel stuck to her promise, and her new finance minister, Schäuble, had to go along. Wahl was quick to point out, however, that Schäuble represents a type of European conservative who does not take a knee-jerk position against taxes – a breed that is nearly extinct in this country. 

Despite all the recent progress, actual implementation in Europe is by no means a sure thing. There remain differences of opinion over the design of the tax and how it will be spent. For example, the German government has objected to using the revenue for the budget of the European Commission, the bureaucracy of the EU. Instead, they prefer to have revenues flow into national coffers, with some agreement likely on a portion being spent to meet international needs. Moreover, since the 2010 election, the UK government has not supported the proposal (although they have implemented other financial sector taxes). In case they cannot be brought on board, implementation within the 17-country eurozone is being discussed as a fallback to a coordinated tax on all 27 EU countries. 

Ultimate success will depend on continued pressure from the labor, global health, environmental, and other civil society groups that have worked together across borders for the past 18 months. Although the campaign is international – activists in more than 40 countries took part in a global day of action on June 22 – the primary focus now is on European policymakers. Victory there would give a huge boost to campaigns to tax speculation in many other parts of the world, including the home of Wall Street.

© 2011 Foreign Policy in Focus

Sarah Anderson directs the Global Economy Project of the Institute for Policy Studies, a progressive multi-issue think tank, in Washington DC. She’s also the co-author of the IPS report, America’s Bailout Barons: Taxpayers, High Finance, and the CEO Pay Bubble.

Movement to Abolish Corporate Personhood Gaining Traction

Published on Friday, July 1, 2011 by CommonDreams.org

by Kaitlin Sopoci-Belknap

In the year and a half since the Citizens United decision, Americans from all walks of life have become concerned about corporate dominance of our government and our society as a whole. In Citizens United v. FEC, the U.S. Supreme Court (in an act of outrageous “judicial activism) gutted existing campaign finance laws by ruling that corporations, wealthy individuals, and other entities can spend unlimited amounts of money on political campaigns.

Throughout the country people have responded by organizing against “corporate personhood,” a court-created precedent that illegitimately gives corporations rights that were intended for human beings. 

The movement is flowering not in the halls of Congress, but at the local level, where all real social movements start. Every day Americans experience the devastation caused by unaccountable corporations. Thanks to the hard work of local organizers, Boulder, CO could become the next community to officially join this growing effort. Councilmember Macon Cowles is proposing to place a measure on the November ballot, giving Boulder voters the opportunity to support an amendment to the U. S. Constitution abolishing corporate personhood and declaring that money is not speech. 

At the forefront of this movement is Move to Amend, a national coalition of hundreds of organizations and over 113,000 individuals (and counting). Move to Amend is committed to building a grassroots movement to abolish corporate personhood, to hold corporations accountable to the public, and ultimately to fulfill the promise of an American democratic republic. 

Boulder is not alone in this fight, nor is it the first community to consider such a resolution. In April, voters in Madison and Dane County, WI overwhelmingly approved measures calling for an end to corporate personhood and the legal status of money as speech by 84% and 78% respectively. Similar resolutions have been passed in nearly thirty other cities and counties. Resolutions have also been introduced in the state legislatures of both Vermont and Washington. 

Despite the momentum, Move to Amend organizers know this won’t be an easy fight. Corporate America controls traditional media, and has invested heavily in politicians, lobbyists, and extremist groups to oppose our efforts. We can’t expect Congress to act, nor can we depend on the courts to solve a problem of their own making. We draw our strategy and inspiration from the great social movements of history.  

The abolition of slavery, the struggle for women’s suffrage, trade unions, and the civil rights movement all started with grassroots organizing. The ruling elites denounced these movements as un-American, and they will make the same accusation against this effort. Others claimed that those movements went “too far,” and were unrealistic. Thankfully, folks before us did not quit or give up. They gained traction with solid strategy, unwavering commitment, and moral authority. 

Move To Amend proudly identifies with this tradition of engaged citizen participation. Building momentum with local organizing and resolutions is our best chance of driving a constitutional amendment into Congress. Recent events in Boulder provide an example of this strategy in practice. Months of education, organizing, and advocacy by Boulder Move to Amend empowered Councilman Cowles to provide political leadership and prepared the community to respond. 

Awareness of corporate personhood in Boulder is now higher than ever before. It is widely viewed as a mainstream issue, having earned the support of local Democratic Party leaders. Answering critics of the measure, Boulder County Democratic Party Chairperson Dan Gould recently told the Daily Camera that corporate personhood is an issue that must be addressed locally. "This is as important as municipalization, this is as important as school bonds," he said. "This is immediate." 

Move to Amend is gaining momentum rapidly in communities throughout the country precisely because the problems of corporate power are most evident locally. Developers seeking special favors pour money into elections. Big polluters avoid investigations and litigation by hiding behind their illegitimate “rights.” Bad employers lie to the public about unfair labor practices with no legal consequences. People see it every day. They get it and they’re ready to fight back. Move to Amend is here to help them do that with a strategy for long-term success.

Kaitlin Sopoci-Belknap serves on the Executive Committee Move to Amend. She is Field Organizing Coordinator for the campaign. She can be reached at [email protected].

Since 2009, 88 Percent Of Income Growth Went To Corporate Profits, Just One Percent Went To Wages

By Guest Blogger on Jun 30, 2011 at 3:15 pm

from ThinkProgress

After the longest recession since WWII, many Americans are still struggling while S&P 500 corporations are sitting on $800 billion in cash and making massive profits. Now, economists from Northeastern University have released a study that finds our sluggish economic recovery has almost solely benefited corporations. According to the study:

“Between the second quarter of 2009 and the fourth quarter of 2010, real national income in the U.S. increased by $528 billion. Pre-tax corporate profits by themselves had increased by $464 billion while aggregate real wages and salaries rose by only $7 billion or only .1%. Over this six quarter period, corporate profits captured 88% of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1% of the growth in real national income. …The absence of any positive share of national income growth due to wages and salaries received by American workers during the current economic recovery is historically unprecedented.”

The New York Times adds, “According to the Bureau of Labor Statistics, average real hourly earnings for all employees actually declined by 1.1 percent from June 2009, when the recovery began, to May 2011, the month for which the most recent earnings numbers are available.”

So as average wages fall, and nearly 14 million people remain unemployed, America’s economic recovery has almost entirely benefited corporations. This development adds another chapter to the decline of the middle class, whose incomes are shrinking and wages are stagnating. Last year, top executives’ salaries increased 27 percent, while workers’ salaries increased only 2 percent. At the moment, income inequality in America is the worst it’s been since the 1920s, as the richest 1 percent make nearly 25 percent of the country’s income.

–Sean Savett

Former GOP Senator Alan Simpson calls Republican Refusal to Raise Revenue "Absolute Bullshit"

By David Weigel

from Slate, June 30, 2011

ASPEN, Colo.—We're taking a break inside the Doerr-Hosier Center, a stately box of glass and concrete that sits on a green hill as elegantly as a tiara sits on Miss USA. Former Sen. Alan Simpson, the co-chairman of the president's bipartisan fiscal reform commission, is standing a few steps away from me. I start to ask him about the debt-ceiling debate, which was just discussed by President Obama in a morning press conference, but Walter Isaacson, the president and CEO of the Aspen Institute, has spotted the senator and walked right over.

"Here's a smooth-talking son of a bitch!" says Simpson, with admiration.

Isaacson rolls with it. "You've got to start being a smooth son of a bitch about your deficit commission!" he says. "We've got to keep selling it!"

This was what Simpson wanted to talk about. "Bill Clinton works Obama over on this baby about once a week," he says. "He went into there and said, 'God, if I'd appointed a commission, and five Democrats and five Republicans and an independent come out with a recommendation, I'd have taken that in a minute!'"

We spend the next 10 minutes hashing out the politics and listening to Simpson hit his expletives-per-minute quota. Between the expletives he describes a world of bipartisan compromise—of AARP backing down on Social Security, of Grover Norquist backing down on tax hikes. "Republicans can't be in thrall to him!" says Simpson. He comes back to the debt debate, the last best hope for compromise, and explains how Treasury Secretary Tim Geithner—"tough little guy"—can broker a deal. He offers a script: If you think I'm shitting ya, I've raided every pirate cove, torn up all the gold crates, and this is it—Aug 2.

"If it wasn't for that," says Simpson, "this would be the same old shit."

This is the mood—call it optimistic desperation, or maybe desperate optimism—that pervades Aspen, where I arrived Monday. Politico has dubbed the event "D.C.'s summer camp." Happily, very little of the content, and few of the luminaries, are intimately connected with politics. That said, I see no reason why a political celebrity would want to pass this up. This is the sort of place where people smile and show off blurry cell phone photos that they've captured of Alan Greenspan or Michael Chertoff as they strolled over to the Greenwald Tent or the Koch Building. (The Koch Building—yes, donated by David, who owns a home nearby—has a seemingly endless supply of Pepsi Max.)

The people on the Aspen campus this week pay attention to politics, but they have slightly different attitudes. The first is boundless optimism. Think-tankers and sustainability pioneers and representatives talk up the investors they've got and the interest they're generating. Panels on "green jobs" and education reform and food policy are packed.

There's a good reason for this. If you're interested in making money, the sticky political status of these issues isn't necessarily good. But it's something you can deal with. After one session, I picked up a helpful, glossy brochure from Ernst & Young, titled "Action Amid Uncertainty: The Business Response to Climate Change" (PDF). It finds that "despite regulatory uncertainty, climate change investment is on the rise," and that "the majority of companies surveyed [internationally] say they are committed to investing in climate change initiatives in 2010, and they are interested in adopting innovative approaches to product and service development." So Congress can't pass a comprehensive cap-and-trade bill? So Republicans are putting their hands on their hearts and pledging that climate change is a hoax? The safe bets are still on regulation and green energy, still.

And then there's the second view of politics in Aspen: Despair. The crowd here is not monolithically liberal, but it is monolithically disappointed in Obama. The disappointments change from subject to subject. Phil Beck, a Republican lawyer from Chicago, says Obama "squandered an opportunity to pass some really effective legislation" and "handed it off to Reid and Pelosi." Martha Jackson, whose husband's company develops oil deals in South America, says Obama has prolonged the war in Afghanistan more than she would have liked.

How can he turn things around?

"He can win a second term," she says.

This was the tenor of a lot of Obama critiques. On Tuesday afternoon, David Axelrod took a friendly shellacking from Time's Joe Klein about all the opportunities Obama had missed. The attendees agreed with Klein—to a point. Their questions, about Obama's economic appointments and about his messaging problems, all began with some variation of "I'm going to vote for Obama again, and work for him, but …"

No one expressed that worried ambivalence quite like Feisal Abdul Rauf. I walked with the president of the Cordoba Initiative, the martyr of the "Ground Zero Mega-Mosque" tempest, when he was on his way to see Axelrod. Rauf had gotten only the least helpful of assists from Obama, back when the heat was on—a comment that opposed the furor over the project, followed by a walkback about he, Barack Obama, was agnostic on whether it should be built. Was that really so good for the cause, I asked?

"He has to worry about winning an election," Rauf said with a shrug.

Rauf caught Axelrod, and handed me his empty cup of tea so he could rustle up his business card. He walked up to Obama's strategist and gave him some advice.

"Just win the election in 2012!"

There's desperation where there used to be hope. No one here still believes Obama can engineer great change. He's what we've got; he's offering more than the Republicans. The most realistic ideas about what can be done politically are predicated on what Washington will be forced to do by crisis.

Which takes us back to Simpson. The Aspen consensus is that bipartisan fiscal reform needs to happen—it must be willed into existence, and a critical mass of smart people could help. After Isaacson departs, Simpson is buttonholed by someone else, someone who wants to bring him and Erskine Bowles together to speak at the Council of Foreign Relations. Sooner or later, the Washington consensus will be replaced by the Aspen consensus. If Washington is going to keep dealing with political crises, forced upon them by stasis, the city will eventually listen to the bipartisans. It has to, doesn't it?

"We're at 15 percent revenue, and historically it's been closer to 20 percent," says Simpson. "We've never had a war without a tax, and now we've got two," he says. "Absolute bullshit."