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Euro Fund Head: No Quick China Deal; Italy Costs Up

From Reuters

By Aileen Wang and Koh Gui Qing

BEIJING | Fri Oct 28, 2011 10:40am EDT

(Reuters) - The head of Europe's bailout fund sought financial support from China on Friday to help resolve the bloc's debt crisis, saying that while no quick deal was in sight he was still confident Beijing would keep buying bonds issued by his fund.

Klaus Regling, chief executive of the European Financial Stability Facility (EFSF), was in Beijing for talks with Chinese officials a day after euro zone leaders struck a hard-fought accord on the two-year crisis that nonetheless left major economies Italy and Spain under financial market pressure.

After the European summit in Brussels reached agreement in the early hours of Thursday, French President Nicolas Sarkozy immediately got on the phone to China to seek financial help, saying Beijing had "a major role to play".

But despite a characteristically bullish sales pitch, the French leader did not appear to have received any specific commitments.

European governments had announced an agreement under which private banks and insurers would accept 50 percent losses on their Greek debt holdings in the latest bid to cut Athens' debt load to sustainable levels.

European leaders are now under pressure to finalize the details of the plan if they expect China and others to support it and Regling said he expected Beijing to continue buying bonds issued by the EFSF.

"We all know China has a particular need to invest surpluses," Regling told a Beijing news conference, referring to the country's $3.2 trillion of foreign exchange reserves, the world's biggest.

Regling said the bailout deal with Greece was an exceptional case that he did not believe would have to be repeated for other nations.

Many in financial markets are concerned that the fund is not big enough to cope if Italy and Spain are drawn deeper into the crisis.

Italy's borrowing costs hit new euro-era highs at a bond auction on Friday. Prime Minister Silvio Berlusconi was forced to promise new reforms and counter speculation that his coalition government was about to collapse.

Despite Berlusconi's assertion that his center right alliance remains solid, critics contend that his reform promises do not go far enough and the country will face early elections next year with no significant progress to show.

France said investment by China would inspire confidence in the euro zone.

"The reality is that China is the third largest shareholder in the International Monetary Fund, and if China via the IMF wants to participate - not by saving Greece or the euro - but by participating in investment, that is a gesture of confidence," French Finance Minister Francois Baroin said.

"What is happening in Europe and creating instability is that public and private investors are pulling out," he told RMC radio.

Global stocks were heading for their best week in over two years on Friday, bolstered by the Brussels deal, while the euro hit a seven-week high at one stage before falling back, shrugging off the lack of detail in Thursday's anti-crisis plan.

Switzerland said it was looking at participating in the EU bailout fund via a special investment vehicle, although the idea could run into domestic opposition given the country's euro skeptical tradition.

Norway, however, whose $572 billion oil fund is Europe's biggest investor in equities, said it had less than 100 million euros in EFSF investments and would not invest in any euro zone rescue schemes that had elements of aid in them.

Key aspects of the euro zone deal, including the mechanics of boosting the EFSF and providing Greek debt relief, have yet to be finalized. It is proving difficult to explain in the meantime and European officials were jeered by journalists at one briefing as they struggled to outline it clearly.

There are fears that the latest deal will fall apart like the last one, three months ago, that was also meant to draw a line under the troubles of the 12-year-old currency bloc.

Within weeks it was clear that deal was inadequate given the scale of Greece's problems and the vulnerability of European banks. The new deal aims to plug these holes.

"ABSOLUTELY SUSTAINABLE"

Under it, the private sector agreed to voluntarily accept a nominal 50 percent cut in its bond investments to reduce Greece's debt burden by 100 billion euros, cutting its debts to 120 percent of gross domestic product by 2020, from 160 percent now.

The euro zone will offer 30 billion euros in "credit enhancements" or sweeteners to the private sector to get them on board. The aim is to complete these negotiations by year end, so Greece has a full, second financial aid program in place before 2012.

The value of that package, EU sources said, would be 130 billion euros -- up from 109 billion euros in the July deal.

"The debt is absolutely sustainable now," Greek Prime Minister George Papandreou said.

In a bid to convince markets that they can defend larger countries like Italy and Spain, euro zone leaders also agreed to scale up the EFSF, the 440 billion euro bailout fund they created in May 2010 and have already used to provide aid to Ireland, Portugal and Greece.

Around 250 billion euros remaining in the fund will be leveraged 4-5 times, producing a headline figure of around 1.0 trillion euros.

The EFSF will be leveraged in two ways, either by offering insurance, or first-loss guarantees, to purchasers of euro zone debt in the primary market, or via a special purpose investment vehicle that will be set up in the coming weeks and which is aimed at attracting investment from countries such as China and Brazil.

The methods could be combined, giving the EFSF greater flexibility, the euro zone leaders said.

But EU finance ministers are not expected to define the plan until some time in November, with the exact date not fixed.

Another question mark is Berlusconi's commitment to shoring up his country's debt-laden economy. Dogged by scandals, Berlusconi has promised to raise the retirement age to 67 by 2026 and attempt other reforms, but the EU is reserving judgment after repeated backsliding from Rome in recent months.

SARKOZY TALKS TO HU

Sarkozy said he had spoken to Chinese President Hu Jintao by telephone after the summit on Thursday and that Hu was relieved Europe had announced a deal to tackle a crisis that could otherwise have taken down the entire world economy.

Sarkozy also donned the hat of euro salesman.

"China has a major role to play. China must deploy more resources to stimulate the world economy: If they decide to invest in the euro rather than the dollar, why reject that? "

"Why not accept that the Chinese place their trust in the euro zone?" the French president said.

"China hopes all these measures will help stabilize the European financial market and conquer the current difficulties and promote the economic recovery and development," Hu said, according to China's state television. ($1 = 0.724 Euros)

(Writing by Giles Elgood; Editing by Ruth Pitchford)

The Path Not Taken

from the New York Times, October 27, 2011

by Paul Krugman

Financial markets are cheering the deal that emerged from Brussels early Thursday morning. Indeed, relative to what could have happened — an acrimonious failure to agree on anything — the fact that European leaders agreed on something, however vague the details and however inadequate it may prove, is a positive development.

But it’s worth stepping back to look at the larger picture, namely the abject failure of an economic doctrine — a doctrine that has inflicted huge damage both in Europe and in the United States.

The doctrine in question amounts to the assertion that, in the aftermath of a financial crisis, banks must be bailed out but the general public must pay the price. So a crisis brought on by deregulation becomes a reason to move even further to the right; a time of mass unemployment, instead of spurring public efforts to create jobs, becomes an era of austerity, in which government spending and social programs are slashed.

This doctrine was sold both with claims that there was no alternative — that both bailouts and spending cuts were necessary to satisfy financial markets — and with claims that fiscal austerity would actually create jobs. The idea was that spending cuts would make consumers and businesses more confident. And this confidence would supposedly stimulate private spending, more than offsetting the depressing effects of government cutbacks.

Some economists weren’t convinced. One caustic critic referred to claims about the expansionary effects of austerity as amounting to belief in the “confidence fairy.” O.K., that was me.

But the doctrine has, nonetheless, been extremely influential. Expansionary austerity, in particular, has been championed both by Republicans in Congress and by the European Central Bank, which last year urged all European governments — not just those in fiscal distress — to engage in “fiscal consolidation.”

And when David Cameron became Britain’s prime minster last year, he immediately embarked on a program of spending cuts in the belief that this would actually boost the economy — a decision that was greeted with fawning praise by many American pundits.

Now, however, the results are in, and the picture isn’t pretty. Greece has been pushed by its austerity measures into an ever-deepening slump — and that slump, not lack of effort on the part of the Greek government, was the reason a classified report to European leaders concluded last week that the existing program there was unworkable. Britain’s economy has stalled under the impact of austerity, and confidence from both businesses and consumers has slumped, not soared.

Maybe the most telling thing is what now passes for a success story. A few months ago various pundits began hailing the achievements of Latvia, which in the aftermath of a terrible recession, nonetheless, managed to reduce its budget deficit and convince markets that it was fiscally sound. That was, indeed, impressive, but it came at the cost of 16 percent unemployment and an economy that, while finally growing, is still 18 percent smaller than it was before the crisis.

So bailing out the banks while punishing workers is not, in fact, a recipe for prosperity. But was there any alternative? Well, that’s why I’m in Iceland, attending a conference about the country that did something different.

If you’ve been reading accounts of the financial crisis, or watching film treatments like the excellent “Inside Job,” you know that Iceland was supposed to be the ultimate economic disaster story: its runaway bankers saddled the country with huge debts and seemed to leave the nation in a hopeless position.

But a funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.

So how’s it going? Iceland hasn’t avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. “Things could have been a lot worse” may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph.

And there’s a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary. If this is a time of incredible pain and a much harsher society, that was a choice. It didn’t and doesn’t have to be this way.

‘Economic Democracy’ Key to Solving Global Financial Crisis, Says City Tech Professor in New Book

Released: 10/27/2011 2:00 PM EDT
Source: New York City College of Technology

Newswise — Brooklyn, NY -- October 27, 2011 -- Discussing citizen movements that arose in response to the global financial crisis, Costas Panayotakis, author of the new book Remaking Scarcity: From Capitalist Inefficiency to Economic Democracy (Pluto Press, UK, September 2011), notes that although it seemed the whole world except the U.S. was in revolt, “uprisings and the eruption of social movement activity are unpredictable because they usually represent the convergence of many different factors interacting with each other in complicated ways.”

Even earlier, preceding the Occupy Wall Street protest movement by almost a year-and-a-half, Panayotakis, associate professor of sociology at New York City College of Technology (City Tech), wrote in a published article: “As a Greek teaching at The City University of New York, I can’t help but notice the parallels between brutal budget cuts in Greece and the impact of the economic crisis in the United States.”

The timeliness of Panayotakis’ work was captured in the forward to his book by Joel Kovel, author of ten books in the field and editor-in-chief of the international journal Capitalism Nature Socialism. “In Remaking Scarcity, Costas Panayotakis expertly dissects a capitalist system in the agonies of intractable crisis and gives a radical yet practicable guide to its transformation.” The book has been favorably received by experts on economics, politics and “green” economics from universities in the U.S. and England.

Panayotakis will read from his book on Thursday, November 10, at 5 p.m., in the City Tech campus bookstore, 259 Adams Street, in Downtown Brooklyn. Also reading that same evening will be City Tech Professor Ben Shepard, from his book The Beach Beneath the Streets: Contesting New York City’s Public Spaces.

In Remaking Scarcity, Panayotakis proposes “economic democracy,” a restructuring of economic control ensuring that a wealthy minority does not determine economic and political priorities and make decisions affecting the majority of citizens. As an example, he cites the 2003 Argentinian workers’ transformation of nearly 200 bankrupt factories, where they became the stockholders and managers, sharing administrative responsibilities and profits.

While teaching courses on sociology and globalization, Panayotakis has long been an observer of the global economy, political systems and their effect on democracy, social problems and the environment. “We now are seeing a popular loss of faith in the economic and political decision-makers who affect all our lives and the future of the planet,” he says, “especially the banks, whose profit-seeking severely damaged the global economy.”

Panayotakis has given presentations at international conferences including at Oxford University and York University, at meetings of the American Sociological Association and Eastern Sociological Society, at the Kennedy Space Center and at the Brecht Forum in New York. He was also recently invited to present his ideas on economic democracy at Tufts University. He has appeared on radio and television talk shows in Canada, Jamaica, New Zealand, Iran, and the U.S., and contributes regularly to scholarly journals and other publications. He is book editor for Capitalism Nature Socialism.

Formerly a Robert Gillece Fellow at The CUNY Graduate Center, he has taught at several colleges within the CUNY system before becoming fulltime at City Tech in 2002.
During the past few months, Panayotakis also has taken his message to the streets of New York City in a theatrical way. In the subways, he and other participants perform his satirical script, “Confessions of an Austerity Nut,” preaching the virtues of belt-tightening to assist “our neediest billionaires,” and blaming the current economic crisis on working people who are “too rich and too greedy.” Afterward, he and his cohorts distribute the script to observers, encouraging them to perform it publicly.

The idea for this project came to Panayotakis after a union meeting and discussion with a colleague on creative ways to resist what he calls “the austerity policies imposed on ordinary New Yorkers.” “I got up at 6 a.m. one day and furiously scribbled the script,” he explains. “It’s more appealing and inspiring to people if this kind of critique takes the form of comedy.”

More “Austerity Nuts” have joined in, and recently the professor himself became a homework assignment for a college journalism student, who posted online a radio journalism report on that experiment. Support for the “Austerity Nut” experiment has continued to grow ever since the recent launch of an Austerity Nut video and website (see austeritynut.com). Says Panayotakis, “My dream is that one day I will walk into a train, and I won’t be able to perform the script because somebody is already doing it!”

New York City College of Technology (City Tech) of The City University of New York (CUNY) is the largest public college of technology in New York State. Located at 300 Jay Street in Downtown Brooklyn, the College enrolls more than 16,000 students in 62 baccalaureate, associate and specialized certificate programs.

California Gets OK for Large Cuts to Medi-Cal

California plans to reduce payments to many Medi-Cal providers by 10%. The federal government's approval of the budget-cutting measure raises concerns from doctors and others.

By Anna Gorman, Los Angeles Times

October 28, 2011

The Obama administration will allow California to cut hundreds of millions of dollars from Medi-Cal, a move doctors and experts say will make it harder for the poor to get medical treatment.

California plans to reduce rates by 10% to many providers, including physicians, dentists, clinics, pharmacies and most nursing homes, the Centers for Medicare and Medicaid Services announced Thursday.

The cuts "will have a real impact on Medi-Cal patients" because fewer doctors will be willing to see those covered by the program, which serves 7.6 million poor and disabled Californians, said Anthony Wright, executive director of Health Access, a consumer group. The head of the California Medical Assn., which represents doctors, echoed the concern.

Cindy Mann, deputy administrator of the Centers for Medicare and Medicaid Services, told reporters the action gives California the flexibility it had requested to address its budget shortfall. "We know that the reductions that are being approved today will have significant impact on affected providers, and we regret the very difficult budget circumstances that have led to their implementation," she said.

The cuts are expected to save the state $623 million. California spends $14 billion on Medi-Cal, the state's Medicaid program.

"The budget actions that the state had to make were very difficult decisions," said Toby Douglas, director of the state Department of Healthcare Services. "But we knew we had to move forward with these reductions."

Federal law requires that Medicaid beneficiaries be able to access healthcare services to the same extent as the general population in their area. California health officials will monitor whether the changes will affect that access.

The state withdrew a separate request to cut rates to hospitals and to children's medical providers after determining those reductions could make it harder for patients to get care.

Yet to be decided is the state's request to add co-pays for Medi-Cal recipients and limit the number of times people can see a doctor. Under that proposal, patients would have to come up with co-pays of $5 for doctor's appointments, $50 for emergency room visits and $100 a day for hospital stays. Most beneficiaries would be allowed to visit the doctor seven times a year.

Medicaid pays for medical care for nearly 60 million people nationwide and is jointly funded by states and the federal government. But shrinking state revenue and increasing numbers of enrollees have forced states to cut costs to make up budget deficits. Stimulus money postponed the effects of the recession, but that extra federal funding dried up in June.

A 50-state survey released by the Kaiser Family Foundation on Thursday showed that nearly every state has required co-payments, eliminated benefits, moved more patients into managed care or taken other actions to reduce costs. Like California, many states are also trying to control spending by reducing payments to doctors.

"All of these things reflect the ongoing, persistent budget pressure that has just accumulated from year to year," said Vernon Smith, one of the authors of the Kaiser report.

California, which already spends less per beneficiary than any other state, has led the way in aggressively slashing its programs. Now the government's decision to allow California to move forward with its plans sets a precedent for other states seeking to reduce their Medicaid bills.

The California Medical Assn. expressed frustration over the new cuts, saying that physicians could receive as little as $11 a visit. Doctors will have no choice but to stop seeing Medi-Cal patients, said CEO Dustin Corcoran. "You can't pay the bills at these rates," he said. "They are unconscionably low."

Federal healthcare reform, which includes a massive expansion of Medicaid, also could be seriously hampered by this new round of cuts, Corcoran said.

"They built federal healthcare reform on the foundation of Medi-Cal, and they just destroyed that foundation," he said. "We have a hard time seeing how healthcare reform has a chance of being successful in the state of California after these cuts are implemented."

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The Study That Shows Why Occupy Wall Street Struck a Nerve

from the Washington Post, October 27, 2011

by Eugene Robinson

The hard-right conservatives who dominate the Republican Party claim to despise the redistribution of wealth, but secretly they love it — as long as the process involves depriving the poor and middle class to benefit the rich, not the other way around.

That is precisely what has been happening, as a jaw-dropping new report by the nonpartisan Congressional Budget Office demonstrates. Three decades of trickle-down economic theory, see-no-evil deregulation and tax-cutting fervor have led to massive redistribution. Another word for what’s been happening might be theft.

The gist of the CBO study, titled “Trends in the Distribution of Household Income Between 1979 and 2007,” is that while we’ve become wealthier overall, these new riches have largely bypassed many Americans and instead flowed mostly to the affluent. Perhaps my memory is faulty, but I don’t remember voting to turn the United States into a nation starkly divided between haves and have-nots. Yet that’s where we’ve been led.

Overall, in inflation-adjusted dollars, average after-tax household income grew by 62 percent during the period under study, according to the CBO. This sounds great — but only until you look a little closer.

For those at the bottom — the one-fifth of households with the lowest incomes — the increase was just 18 percent. For the middle three-fifths, the average increase was 40 percent. Spread over nearly 30 years, these gains are modest, not meteoric.

By contrast, look at the top 1 percent of earners. Their after-tax household income increased by an astonishing 275 percent. For those keeping track, this means it nearly quadrupled. Nice work, if you can get it.

This is not what Republicans want you to think of when you hear the word redistribution. You’re supposed to imagine the evil masterminds as Bolsheviks, not bankers. You’re supposed to envision the lazy free-riders who benefit from redistribution as the “poor,” and the industrious job-creators who get robbed as the “wealthy” — not the other way around.

If Americans were to realize they’ve been the victims of Republican-style redistribution — stealing from the poor to give to the rich — the whole political atmosphere might change. I believe that’s one reason why the Occupy Wall Street protests have struck such a nerve. The far-right and its media mouthpieces have worked themselves into a frenzy trying to disregard, dismiss or discredit the demonstrations. Thus far, fortunately, all this effort has been to no avail.

The right maintains that inequality is the wrong measure. To argue about how the income pie should be sliced is “class warfare,” and what we should do instead is give the private sector the right incentives to make the pie bigger. This way, according to conservative doctrine, everyone’s slice gets bigger — even if some slices grow faster than others.

Indeed, the CBO report says that even the poorest households saw at least a little income growth. Why is it any of their business that the high-earners in the top 1 percent saw astronomical income growth? Isn’t this just sour grapes?

No, for two reasons. First, the system is rigged. Wealthy individuals and corporations have disproportionate influence over public policy because of the often decisive role that money plays in elections. If the rich and powerful act in their self-interest, as conservative ideologues believe we all should do, then the rich and powerful’s share of income will continue to soar.

Second, and more broadly, the real issue is what kind of nation we want to be. Thomas Jefferson’s “All men are created equal” is properly understood as calling for equality of opportunity, not equality of outcomes. But the more we become a nation of rich and poor, the less we can pretend to be offering the same opportunities to every American. As polarization increases, mobility declines. The whole point of the American Dream is that it is available to everyone, not just those who awaken from their slumbers on down-filled pillows and 800-thread-count sheets.

So it does matter that as the pie grows, the various slices do not grow in proportion. We’re not characters in one of those lumbering, interminable, nonsensical Ayn Rand novels. We believe in individual initiative and the free market, but we also believe that nationhood necessarily involves a commitment to our fellow citizens, an acknowledgment that we’re engaged in a common enterprise. We believe that opportunity should be more than just an empty word.

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Bankster Mumbo Jumbo Ruling the World

By LOUISE STORY and JULIE CRESWELL

Published: October 27, 2011, by the New York Times

The naysayers who have been betting against Greece may not get their big payoff.

That is because even though Greece is not going to pay all its bills, it intends to avoid a debt default.

And many investors have bet against Greece, using billions of dollars in complex financial instruments, called derivatives, that turn a profit when there is a debt default.

Worried about the ripple effects of any such default, European leaders announced on Thursday a plan for a voluntary swap of Greek debt. Holders of Greek bonds are being asked to accept a loss of at least half the face value of their bonds and will in exchange receive certificates guaranteed by the countries in the euro zone. If enough investors accept this deal — and that is uncertain — Greece will avoid a default and the derivatives contracts will not pay out.

The determination of a default in the derivatives market is not up to regulators. A committee of an industry association decides after a market participant asks for a ruling. Market participants are waiting to see if the voluntary swap is successful. The association, however, provided guidance on Thursday that a voluntary swap would not constitute a default.

Ever since Greece ran into problems, European officials and banks have been at odds over derivatives on sovereign debt. The business is profitable for the institutions that create the products, but some officials fear that the trading of the contracts has helped feed the crisis.

Derivatives have been among the most lucrative banking businesses for more than a decade. Companies like JPMorgan Chase, Goldman Sachs and Deutsche Bank have sold trillions of dollars worth of derivatives that, like homeowners insurance, promise to pay out in certain situations in exchange for a small premium. These financial instruments allow investors to make an outright negative bet against a country or to protect themselves against losses on investments in, for example, Greece.

Analysts warn that the derivatives market may lose some of its credibility, at least in the sovereign debt area, if the contracts tied to Greece do not pay out.

“If a 50 percent notional haircut doesn’t trigger an insurance contract on that debt, I mean what’s going to trigger it?” asked Antonio Garcia Pascual, chief economist for Southern Europe at Barclays Capital. “ If you bought protection and now all of a sudden, a 50 percent haircut is imposed on you and you don’t get a payout on your insurance, that really casts a large doubt.”

Still others say that European leaders are wise to try to stifle profits in the derivatives market to discourage additional speculation.

Investors who bought derivatives on Greece “are just gaming the situation,” said Michael Greenberger, a professor at the Francis King Carey School of Law at the University of Maryland and a former official at the Commodity Futures Trading Commission, which oversees derivatives in the United States.

Mr. Greenberger said if Greece’s derivatives did not pay out, traders might flee other derivative contracts on European countries and banks there.

“That’s like saying that people who have bets in Las Vegas will pull their bets,” he said. “It has a good social consequence. I’m all for people betting, but when betting leads to worldwide contagion, I think it needs to be stopped.”

Whether investors will really lose interest in derivatives on sovereign debt in Europe is unclear.

A lively market has continued for Greek derivatives even after European officials indicated in July that they would like to avoid a default by using a voluntary swap. Some investors say they believe that the voluntary deal will not succeed and that a default will ultimately follow.

“If you’re a bank and you have a lot of exposure and risk to Spain, you’re not going to exit,” just because Greece did not default, said Gennaro Pucci, who oversees the $500 million Matrix PVE Global Credit hedge fund in London.

Ultimately, representatives of a group of financial companies will declare whether a default has occurred. Those companies — 10 banks and five asset managers — are on a committee of the International Swaps and Derivatives Association, a trade group. The association does not name the individuals, but it makes their votes public afterward, listing them by company. The banks and investment firms do not have to disclose their financial interests.

A spokeswoman for JPMorgan Chase, one of the banks on the committee, said in an e-mail, “As a policy on these matters, we do not vote our book.”

None of the other companies provided a comment or replied to e-mail messages about the process. They include Morgan Stanley, Goldman Sachs and Bank of America, as well as European banks like UBS, Société Générale, Deutsche Bank, Barclays Bank, BNP Paribas and Credit Suisse. The asset managers are BlueMountain Capital, BlackRock, the Citadel Investment Group, D. E. Shaw and Pimco.

The I.S.D.A. rules have been used to declare a sovereign default only once— for Ecuador in 2008. The rules say debt swaps should be declared defaults if they are “binding to all holders.” The Greek swap is voluntary.

“At the end of the day, if people have the right to walk away, then that counts for a lot,” said Richard Metcalfe, the global head of policy at I.S.D.A. “People can step away if they like.”

The Middle Class: Demonized by the New Left in the Sixties, Defended by Occupy Wall Street Radicals Today

by John Lawrence

What a difference 40 years makes! The New Left radicals of the sixties treated the middle class with about as much respect as Rush Limbaugh treats liberals. The middle class was put down, demeaned and vilified. Today the protest movement is all about defending the beleaguered middle class. The middle class and the treatment thereof is the axis on which turns the raison d'etre of the two movements. It's why the movement of the sixties failed and why the Occupy Wall Street Movement may very well succeed in radically restructuring the US government and economy.

First of all in the sixties the protest movement was basically a cultural rather than a political movement despite the attempts of the New Left to make it political. The protest was mainly an anti-war movement combined with cultural overtones. It was the Age of Aquariius. There was a big change coming because Bob Dylan and the Beatles told us there was. It was Blowin' in the Wind. If you didn't wear bell bottoms and grow your hair long you were not part of the movement. Magic was in the air. But when it came right down to it, the Beatles didn't want a revolution because after all they were making too much money. So was relatively speaking the middle class, Nixon's silent majority. They were pretty well off in the sixties and early seventies. They just wanted the US out of Vietnam so their sons wouldn't have to be drafted. Hardly anyone had a student loan. College was relatively free compared to today.

Where I went to school at the University of California San Diego in the late sixties, tuition was free. There was a $73. a quarter incidental fee, and I rented a room for $40. a month. Middle class wages came with benefits - a pension and health care. Wives didn't have to work outside the home to make mortgage payments. I bought my first home for less than what you pay for a mid range car today. There were no adjustable rate mortgages. Everybody had it pretty good. Is it any wonder that the vast middle class did not join the radicals in their attempt to foment a revolution? People were too well off. And the cultural aspects were easily co-opted by commercial interests. You want tie dye. Hey, we'll sell it to you. You want bell bottoms. You can find them at Macy's.

The put down of the middle class was mainly a put down of middle class mores. Things like staying a virgin until you were married, buying ticky tacky houses in tract developments, having to go to church on Sunday, participation in the Rotary club. People didn't want to buy their Grandfather's Oldsmobile. So capitalist society geared up to sell them something else. You want long hair. Hey there's the Broadway musical, Hair. Down to here. Down to there. The same old imperatives to sell, sell, sell - only updated for a new generation. The Students for a Democratic Society were isolated because what people really wanted was new mores to replace their parents' mores. They didn't want to do away with capitalism. Capitalism had been very, very good to them.

Today the situation is different. The middle class is under siege. Far from putting down the middle class, today's Left is trying to defend it. The right wing is reduced to trying to defend the very wealthy, the upper 1%, using their vast wealth for TV advertising and smoke and mirrors. The 99% have lost the prosperity of the sixties. The Occupy Wall Street Movement is aimed right at the heart of capitalism - Wall Street. College tuition at UCSD is over $13,000 today. Along with room and board, books and other expenses, the cost for a year of college education at UCSD is almost $30,000. A far cry from when I was paid to go there as a graduate student with a research assistantship and expenses were minimal. One of my classmates even took flying lessons with the money that was left over from his assistantship. No one went into debt to go to college. Student loans were unheard of. People could work their way through college as I did as an undergraduate on the co-op plan where I worked for a quarter and went to school for a quarter. People could work their way through college with a waitressing job at Howard Johnson's.

Foreclosures are running rampant. People are being forced out of their homes even though the banks don't have the proper documentation to prove ownership. People whose homes are underwater, meaning they owe more than their homes are worth, are stuck there not being able either to refinance or to sell. Their choice is to go on paying exhorbitant mortgage payments every month or to walk away to an uncertain fate and ruined credit. 50 million people have no health care. Jobs are hard to come by. Recent college graduates are lucky to get a job as a barrista at Starbucks. Teachers, firemen, librarians and policemen are being laid off in droves. Manufacturing has moved to China. The middle class is under attack. That is the difference between the demonization of the middle class in the sixties and the attempt to save the middle class that is happening today.

Ed Schultz who has a talk show on msnbc was the first person I know that made a point of defending the middle class, long before it became fashionable, on his previous radio talk show. Now everyone is jumping on the bandwagon. Why? The upper 1% owns most of the wealth and makes most of the income, and they are accelerating their financial predominance. The bankers on Wall Street, having been bailed out by middle class taxpayers and the Fed to the tune of trillions of dollars, are giving themselves even larger bonuses today than they were before the financial crisis which they precipitated. Unions are under attack in Wisconsin, Michigan, Florida and elsewhere where Republican governors and legislatures are in control of state governments. The American Dream has turned into the American Nightmare for masses of people. People are waking up to the fact that government has been taken over by the large corporations who pay politicians, all the Republicans and a number of Democrats, to do their bidding. 30,000 lobbyists swarm Capitol Hill. They are not there to protect the interests of the middle class. They are there to curry financial favors for the upper 1%. Their money floods TV with ads favoring their politicians and their interests. Money runs politics and the American government.

The American government is gridlocked and dysfunctional. Republican filibusters kill any legislation President Obama would like to get enacted to create jobs, forestall the student debt crisis, or help underwater home owners. So now he is trying to get something done by executive orders, but so far it's just frittering around the edges. He needs to make much bolder moves by executive order such as starting an infrastructure bank and reincarnating FDR's CCC and WPA. If the American divided government continues on its present path it will inevitably be replaced by a more functional political system such as a parliamentary system or some system that can't be gridlocked and obstructed to death. Republican intransigence is just making the need for a different system of government more obvious. And it's not about replacing the American government with socialism or communism. It's about replacing a democratic system that doesn't work or only works in the interests of the rich with another democratic system that works in the interests of the middle class. As far as an economic system, there is not a country in the world that has a purely socialistic or communistic system. Even China's economic system is a synthesis of communism and capitalism. So no one in his right mind is advocating replacing capitalism with pure socialism or pure communism. There are societies which have adopted the best features of a number of disparate systems to create societies that are democratic both politically and economically. Economic democracy, in which the middle class is predominant and not beholden to the big banks which sit at the beating heart of American capitalism, is indeed a real possibility. The Occupy Wall Street Movement will eventually have to demand radical changes in the American system in order even to accomplish its minimal goals. Bankruptcy protection for student loans, which was taken away by the Bankruptcy Act of 2005 will have to be reestablished, and that will be an arrow aimed at the heart of capitalism and in particular Wall Street. But what was changed six years ago can be changed back. It's not so set in stone. It's a fight worth fighting.

So the New Left radicals of the sixties were way ahead of their time in wanting a political and economic revolution. The vast middle class was too comfortable and well off to support such a major change. Cultural revolution was co-opted and amounted to nothing. Today, however, with more and more income and wealth flowing upward to the 1% leaving the 99% further and further in the dust, with a political system which is wholly owned by the wealthy, with poverty at record levels and more and more people falling out of the middle class, there is the possibility of a true political and economic revolution in the US which would take back democratic control in favor of the vast majority and create a fairer and ultimately more prosperous society.

The Tea Party vs. Occupy Wall Street

Published on Tuesday, October 25, 2011 by On the Commons

Finally, a truly populist uprising

by David Morris

Host David Gregory complained about Occupy Wall Street protestors “demonizing banks” and wondered, “Is this not a reverse tea party tactic?”

Gregory is right. In many respects Occupy Wall Street (OWS) is indeed a mirror image of the Tea Party. To the Tea Party government is the enemy. To OWS the huge corporation is the enemy. OWS wants to raise taxes on billionaires. The Tea Party wants to considerably reduce them. OWS wants to rebuild and strengthen the safety net. The Tea Party wants to weaken it. 

Both OWS and the Tea Party are mass movements but their attitude toward the masses couldn’t be more different. OWS and the other #Occupy protests lack leaders and a formal platform, but their demands clearly emerge from the thousands of individual grievances expressed in homemade signs and letters. Mike Konczal at Rortybomb.org did a statistical analysis of 1000 personal statements posted at We are the 99% TUMBLR and found them far less ideological than practical. Their demands effectively boil down to these. “(F)ree us from the bondage of our debts and give us a basic ability to survive.”

From his analysis, Konczal sees the outlines of a program, “Upon reflection, it is very obvious where the problems are. There’s no universal health care to handle the randomness of poor health. There’s no free higher education to allow people to develop their skills outside the logic and relations of indentured servitude. Our bankruptcy code has been rewritten by the top 1% when instead, it needs to be a defense against their need to shove inequality-driven debt at populations. And finally, there’s no basic income guaranteed to each citizen to keep poverty and poor circumstances at bay.”

As one would expect, given its longevity and political impact, the Tea Party does have leaders and a relatively clear program. Probably the best expression of that program occurred when Houston-based attorney Ryan Hecker created a website and invited people to propose ideas for a platform patterned on the Contract for America the Republicans effectively used in 1994 to gain control of the House of Representatives. Some 1,000 ideas were submitted. Ultimately 450,000 people voted online for the final 10 that became the Contract from America.

All parts of this new Contract are intended to shrink government. “Identify the constitutionality of every new law.” “Audit federal agencies for constitutionality.” Demand a federal balanced budget amendment. Reduce taxes.

Starkly absent is any mention of the dangers associated with concentrated private wealth and power.

Faux Populism vs. True Populism

Both OWS and the Tea Party might be described as populist but their definitions of populism wildly diverge. That divergence has been clear from their founding. Occupy Wall Street began on September 7, 2011 with hundreds converging on Wall Street. The Tea Party began on February 19, 2009 with a rant from the floor of the Chicago Mercantile Exchange. CNBC Business News editor Rick Santelli loudly condemned the government’s plan to help people stay in their homes. “(D)o we really want to subsidize the losers’ mortgages”? he asked. Santelli suggested holding a tea party for traders to dump derivatives into the Chicago River. Floor traders around him cheered his proposal. The video went viral after the Drudge Report publicized it. Within days, Fox News was discussing the appearance of a new “Tea Party”. A week later coordinated protests under the Tea Party banner took place in over 40 cities.

Santelli’s insistence that those who lose their homes are “losers” who have only themselves to blame is a sentiment widely shared among Tea Party Republicans and most recently expressed by Republican Presidential candidate front runner Herman Cain. When asked about Wall Street protestors Cain, former CEO of Godfather’s Pizza declared, “Don’t blame Wall Street. Don’t blame the big banks. If you don’t have a job and you’re not rich, blame yourself.”

During a recent CNN televised Republican presidential debate held in front of a Tea Party audience, the moderator asked Representative Ron Paul what he would do if a healthy 30 year old man decided not to buy health insurance and then had an injury or disease that required hospitalization and surgery. Who would pay for that? Ron Paul said the man was responsible for his actions. He had taken a risk and would have to suffer the consequences. The moderator asked, “Should society just let him die?”. While the Congressman pondered the question, audience members vocally expressed their approval.

This lack of empathy for what OWS would call the 99% is palpable wherever Tea Party Republicans come to power,

In Michigan conservative Republicans gained control last November. The state is home to nearly 2 million people, about 20 percent of the state’s population, who depend on food stamps. Until last month, eligibility was based on income. But this year, even while the state remains mired in the worst recession since the 1930s the Republicans made it much more difficult to qualify for food assistance. Eligibility is now based on assets. Those with assets of more than $5,000 in the bank or who own a vehicle worth more than $15,000 will no longer be eligible.

For Michigan Republicans it is not enough to be poor and needy to qualify for food assistance. You must be destitute.

In the Tea Party era, policy makers in three dozen states have proposed drug testing for people receiving benefits like welfare, unemployment assistance, job training and food stamps.

In 2011, Florida succeeded in passing legislation requiring the drug testing of welfare applicants at the urging of its Governor Rick Scott, who rode to office on a wave of Tea Party support. The roughly 113,000 Florida welfare recipients must pay for their own drug test. People who fail the test become ineligible for a year. A second failed test makes them ineligible for three years. The Economist magazine’s headlines conveyed the elation Tea Party members must have felt with their legislative victory. Drug testing in Florida: their tea-cup runneth over.

Despite Governor Scott’s rhetoric, the poor are not drug addicts. Only about 2 percent of Florida’s welfare applicants are failing the test, according to Florida’s Department of Children and Families. After adding up the savings derived from not paying welfare to this 2 percent and subtracting the cost of testing 100 percent of the applicants the Tampa Tribune concluded that Florida may save “up to $40,800 to $60,000 for a program that state analysts have predicted will cost $178 million this fiscal year.

But in Florida or Michigan or a dozen other states, it’s not about saving money. It’s about punishing those who teeter on the economic edge. It’s about making clear that we are not our brothers’ keeper.

OWS does demonize powerful banks. The Tea Party demonizes the poorest and weakest of us all.

For OWS unfairness means taxing billionaires at half the rate their secretaries pay and allowing the top 1% of the population to “earn” as much, collectively, as the bottom 60 percent. For Tea Party Republicans taxes themselves are unfair and inequality is desirable. Indeed, they want to give the 1% even a greater share of the nation’s wealth.

All Republican presidential candidates promise to lower taxes on the rich. Herman Cain has captured the popular conservative imagination with his 9-9-9 plan, a flat tax of 9 percent on the rich and corporations and the imposition of a 9 percent national sales tax on everyone. This would result in a 50-75 percent cut in taxes paid by the richest 1% while imposing a hefty new tax on the 99%. The Citizens for Tax Justice estimates that under Cain’s plan, the bottom 60 percent of taxpayers will pay about $2,000 more in taxes while the richest 1% will pay about $210,000 less.

The Tea Party vision of a future America may have been best expressed by the budget introduced last spring by Tea Party darling Representative Paul Ryan (R-WI) last spring and passed enthusiastically by the Republican House. “This is not a budget,” Ryan declared at the time. “This is a cause.”

Indeed it was, and is. Ryan’s plan would cut about $4.3 trillion from programs that primarily benefit the 99% while cutting taxes by about and equal amount, $4.2 trillion, cuts that would overwhelmingly benefit the 1%. According to Robert Greenstein of the Center on Budget and Policy Priorities Ryan’s plan “would produce the largest redistribution of income from the bottom to the top in modern U.S. history, while increasing poverty and inequality more than any measure in recent times and possibly in the nation’s history.”

Even when they agree that federal spending is profligate, OWS and the Tea Party violently disagree on what should be cut. Signs and speeches at #Occupy events often target the exorbitant military spending and foreign wars. But despite the fact that the Pentagon is the poster child for government waste and incompetence, not to mention corruption, it is also the only part of the government the Tea Party considers all but off limits.

As soon as Republicans took over the House of Representatives in November 2010, they changed the rules so that military spending does not have to be offset by reduced spending somewhere else, unlike any other kind of government spending. It is the only activity of government Republicans believe does not have to be paid for. The Tea Party’s ascendance has only strengthened the Republicans’ resolve that the Pentagon’s budget is untouchable. An analysis by the Heritage Foundation of Republican votes on defense spending found that Tea Party freshmen were even more likely than their Republican elders to vote against cutting any part of the military budget.

The Use and Abuse of Government

The Tea Party hates the very idea of government, embracing Ronald Reagan’s famous dictum, “Government is the problem.” OWS also sees government as an enemy when democracy has been corrupted by money and government has been captured by corporations. The Declaration of Principles adopted by the general assembly of Occupy Wall Street in its first days makes this clear, “…no true democracy is attainable when the process is determined by economic power. We come to you at a time when corporations, which place profit over people, self-interest over justice, and oppression over equality, run our governments.”

As Nobel laureate economist Joseph Stiglitz observes government increasingly is the 1%.

Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office….When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

But OWS also knows that government is the only vehicle through which the majority can fashion rules that increase personal security and restrain unbridled greed and private power. If we give up on government we give up on our ability to collectively influence our future.

Which is why high on the list of demands by OWS protestors is to minimize the impact of money on politics and increase the number of people voting.

Tea Partiers again take the opposite position. They defend the right of global corporations to spend unlimited amounts of money to influence elections and they advocate policies that suppress voter turnout.

“Since Republicans won control of many statehouses last November, more than a dozen states have passed laws requiring voters to show photo identification at polls, cutting back early voting periods or imposing new restrictions on voter registration drives,” the New York Times reported a few weeks back.

A recent study by the Brennan Center for Justice at New York University School of Law analyzed 19 laws that passed and 2 executive orders that were issued in 14 states this year. The report concludes that these policy changes “could make it significantly harder for more than five million eligible voters to cast ballots in 2012.”

Today the Tea Party has the upper hand. With the backing of some of the world’s richest men and most powerful corporations, it has successfully converted the justifiable anger at Wall Street and government inaction into an unprecedented and ahistorical form of populism: a mass uprising against the masses. The Occupy Wall Street movement proposes a populism more compatible with other mass protests, one that doesn’t turn its back on neighbors, one that fights against massive inequality and concentrated private power, and that urges reforms that can once again allow us to have a government of the people, by the people and for the people.

David Morris is Vice President and director of the New Rules Project at the Institute for Local Self-Reliance, which is based in Minneapolis and Washington, D.C. focusing on local economic and social development.

Measuring Progress: A Better Alternative to the GNP

Published on Tuesday, October 25, 2011 by OtherWords

Maryland's government is embracing an alternative way to monitor the state's wellbeing called the Genuine Progress Indicator, which brings depth to the analysis of the state's economic growth.

by Daphne Wysham

Tent cities and shacks sprung up on empty lots across the country. Food lines at soup kitchens wrapped around city blocks. Unemployment soared to 25 percent. Farmers watched helplessly as crop prices plummeted, then lost their land. The evidence was clear, yet at the height of the Great Depression, Congress lacked the tools to accurately measure just how the economy as a whole was faring. With no commonly accepted national income data, they had no guideposts upon which to base sound economic policy.

And so Congress turned to a young and promising Russian-American economist. U.S. lawmakers asked Professor Simon Kuznets of the National Bureau of Economic Research, who would go on to win the Nobel Prize in economics, to develop a data set to assess the state of the national economy. In 1937, Kuznets presented a vast volume of data on income to Congress. It became the Gross National Product (GNP).

With remarkable foresight and humility, Kuznets warned that his newly minted GNP shouldn't be used as an instrument of social policy. It could never adequately measure the things we value, he said, such as housework or caring for elderly parents. Nor, he warned, could the GNP distinguish between the growth of good and bad jobs. The data would be the same if workers earned their pay from employers who endangered their lives or guarded their health and safety. "Goals for more growth should be more growth of what and for what," Kuznets said.

Alas, Kuznets' warnings on the GNP — later renamed the Gross Domestic Product (GDP) — went unheeded. Instead, the GDP became the barometer of health not only for the U.S. economy, but for the entire global economy.

More than 70 years later, the desirability of GDP growth is so entrenched in our national and international discourse that it's hard to imagine it any other way. The revered indicator's expansion or contraction can swing national elections. Conversely, talk of GDP declines can drive a country to war.

During tough economic times such as these, it's particularly surprising to have a leader bucking the tide. Yet Martin O'Malley is doing just that. Maryland's governor is the first in the United States to embrace a set of alternative indicators that bring depth to the analysis of his state's economic growth. Under O'Malley's leadership, the state's officials are now gathering and annually updating economic, social, and environmental data that help measure the overall wellbeing of Maryland's citizens.

The 26 underlying indicators, which collectively comprise the "Genuine Progress Indicator," are a more meaningful gauge of the overall economic health and wellbeing of Maryland residents than standard economic measuring sticks. For example, the state tracks things like volunteerism, time spent with family and loved ones, and air quality in its quest to gauge its real progress. These indicators may lack concrete economic value, but studies show they help make a society more healthy and vibrant.

GPI assesses what's left behind when the "gross product" expands. Is the landscape more or less toxic than before? Is the air and water cleaner or dirtier? How well-educated is the populace? Is public transportation decent? Is crime more common? Are too many people spending more time commuting to jobs than at home with their kids?

Maryland leads the nation in measuring overall societal wellbeing through the GPI, but there are similar efforts underway elsewhere in the United States, as well as in Canada, France, and even Bhutan. Yes, Bhutan, a tiny country nestled in the Himalayan mountains. There, "gross domestic happiness" carries more weight than the gross domestic product.

It's time to recall Kuznets' warnings about the limitations of the GDP and to pick up where he left off by embracing a new set of tools that will help shape good social, environmental, and economic policy — not just for Maryland, but for our entire country and the world.

Daphne Wysham is a fellow at the Institute for Policy Studies and the host of Earthbeat Radio. IPS is a community of public scholars and organizers linking peace, justice, and the environment in the U.S. and globally.

Lessons From Spain: "Los Indignados," Occupy Wall Street, and the Failure of the Status Quo

by Arianna Huffington, from Huffington Post, October 24, 2011

Saying I've just returned from a country in which I witnessed huge protests calling for economic justice doesn't tell you much about where I was -- it only narrows it to about 15 or 20 countries. In fact, I was in Spain during the loosely coordinated worldwide demonstration that took place on October 15th. The date was chosen because it was the five-month anniversary of the Spanish protests, which began in the middle of May. Many of the Occupy Wall Street protesters have said that the Spanish protests served as one of their inspirations, and many of the Spanish protesters I spoke to said they had been re-energized by OWS. (What's the Spanish word for "synergy?")

There were protests in over 80 countries on the 15th, with half a million taking to the streets in Madrid to voice their frustration with a political system that has failed the people of Spain -- in the same way our own "Los Indignados" (Spanish for "The Outraged") are voicing their anger and frustration at a system that has failed the "99 percent" here in America.

The Spanish protests have become the granddaddy of the protest movements sweeping most Western democracies, and might just offer a look at the future of what's to come on this side of the Atlantic. There are three things in particular that strike me as I look back on my week in Spain and try to apply it to the Occupy Wall Street phenomenon unfolding here.

The first is the political paradox inherent in the European protests. In Spain, the dissatisfaction is widely expected to lead to an overwhelming victory for the conservative candidate for prime minister, Mariano Rajoy of the Popular Party, over Alfredo Pérez Rubalcaba of the Socialist Party, in elections to be held on November 20th. (The current prime minister, Socialist José Luis Rodríguez Zapatero, announced in April that he wouldn't be running for a third term.) By some estimates, the Popular Party may win over 190 of the 350 seats in the Spanish Parliament, while the Socialists might drop below 120.

Meanwhile in France, in elections to be held in April, it is widely expected that President Nicolas Sarkozy of the conservative Union for a Popular Movement (UMP) will lose to the Socialist Party candidate, François Hollande. This shows that the outpouring of anger isn't directed against any one particular party or political philosophy, but against the status quo. It doesn't matter what party you represent; if you're in power, you're part of the broken political system and the people of Spain, of France, and, quite possibly of the United States, want you out.

In Spain, the evidence of the failure of the status quo is particularly stark, with an unemployment rate of nearly 21 percent (over twice what it is here). Among young people, the number has soared to 45 percent, the highest in Europe.

While I was in Spain, I spent an hour with each of the two leading candidates for prime minister. There were, of course, many differences in their positions, but they were both hearing the Indignados loud and clear.

"Three years into the recession," Rubalcaba told me, "the Spanish only have one word on their minds: 'change.'" He spoke especially about the plight of the young, the so-called "Lost Generation" of those who have recently graduated from college and have little chance of finding work any time soon. "They did everything they needed to do to have a future, and now they can't find a job," he said.

Even though they're more than likely to vote his party out of power, Rubalcaba is not, as many of his American counterparts are, willfully blind to what's fueling the protesters. "The people out there demonstrating aren't anti-system," he said. "They expect solutions from politics, from the system, and they haven't gotten them."

For his part, Mariano Rajoy has eagerly presented himself as the conduit for the widespread desire for change. Like his opponent, he too stressed that his "basic priority" is employment and jobs. "Many young people don't see a future," he told me, noting that in Spain, as in the U.S., for the first time the younger generation doesn't expect to do as well as their parents.

The second thing that struck me was how family-oriented the protests were. However they started, they are now truly a middle-class movement. But when I looked at how the media covered the October 15th protests, instead of the thousands of families and children and retirees who marched in the streets, what dominated the airwaves were burning cars from the protest in Rome -- which was hijacked by a coterie of masked anarchists.

Just as solutions to the problems facing Europe and America are not going to be found in traditional political ways, the truth of what's happening is not going to be found in traditional media coverage either. The conventional wisdom of the establishment media has been constantly upended -- not just about the economic crisis and how it unfolded, but about the reaction to it, as well.

Greg Sargent, for example, convincingly challenged the conventional wisdom that there is some unbridgeable "cultural fault line" between blue-collar white Americans and the people who take to the streets to protest for economic justice. He pointed to a recent National Journal poll in which the percentage of non-college-educated whites who agree with the Occupy Wall Street protesters was 56. Just over 30 percent disagreed. Sargent also cited a Time poll in which the percentage of those in agreement with OWS was over 50 percent.

So the real message of the protesters is getting out, even if many in the media want to portray it as a hippie-dippy relic of the 1960s. In a piece for HuffPost, CNBC contributor and former White House aide Keith Boykin concludes that, after visiting Zuccotti Park, "almost everything the media told me about the protest is wrong."

Boykin takes apart myths like "The Movement Is Violent," "It's Just A Bunch Of Pampered Kids," and "There Are No Black People Involved." Boykin says he was "taken aback by how many black and Latino participants" he saw. "I hadn't seen them on the television coverage," he writes. He also counters the idea that it's just a bunch of hippies. "To watch some of the media coverage of the movement, you would think the protest was filled with long-haired hippies left over from the 1960s," he writes, noting he saw "high school-aged kids with their parents, college students in their school sweatshirts, men in business suits, mothers with baby carriages, people with jobs, people who were unemployed," and "white-haired retirees."

The third thing that struck me about the protests -- both in Spain and here -- is that they are about more than political and economic goals. They are bigger than that. They are about changing civil society -- about creating a new relationship not just between the people and their government, but among the people themselves. There's the growing sense that the problems we're facing can't be solved just by fixing our political institutions. We need to transform our relationships to our communities.

There is, of course, a rich tradition for strengthening civil society here in America -- but not so in Spain. As Rubalcaba told me, an activist civil society isn't something that's been historically nurtured. "Spanish civil society is passive," he said.

Working hard to help Spain develop its civil society muscle is U.S. Ambassador Alan Solomont, the former chairman of the board for the Corporation for National and Community Service, the federal agency responsible for Senior Corps, AmeriCorps, and Learn and Serve America. A one-time community organizer, Solomont has spent his life championing the need to develop a culture of citizenship, service, and social responsibility in America -- and is trying to assist Spain in doing the same. As he told me: "Civic participation is not a luxury but a necessity for a healthy democracy."

The need to nurture civil society was acknowledged by both candidates. And so was the need for entrepreneurship and innovation. Indeed, it was Rubalcaba, the Socialist candidate, who lamented the fact that "the coming century should be our century -- Spain has a lot of creativity, innovation and intelligence, but risk is not part of our DNA." He sees nurturing an entrepreneurial spirit -- especially among the young -- as key to Spain's turnaround: "It's about enabling people to have a chance to get as far as they can."

If we're going get out of this mess -- the U.S., Spain, Greece and all the rest -- there are two essential ingredients we'll need: empathy nurtured by a strong civil society, and innovation nurtured by an entrepreneurial spirit. Producing a political system that rewards these essential traits, instead of being at the mercy of lobbyists and big money donors, may require a movement of citizens taking to the streets.

As George Bernard Shaw put it: "All progress depends on the unreasonable man."

Wall Street is Still Out of Control, and Why Obama Should Call for Glass-Steagall and a Breakup of Big Banks

by Robert Reich

Tuesday, October 25, 2011

Next week President Obama travels to Wall Street where he’ll demand – in light of the Street’s continuing antics since the bailout, as well as its role in watering-down the Volcker rule – that the Glass-Steagall Act be resurrected and big banks be broken up.

I’m kidding. But it would be a smart move — politically and economically.

Politically smart because Mitt Romney is almost sure to be the Republican nominee, and Romney is the poster child for the pump-and-dump mentality that’s infected the financial industry and continues to jeopardize the American economy.

Romney was CEO of Bain & Company – a private-equity fund that bought up companies, fired employees to save money and boost performance, and then resold the firms at a nice markups.

Romney also epitomizes the pump-and-dump culture of America’s super rich. To take one example, he recently purchased a $3 million mansion in La Jolla, California (in addition to his other homes) that he’s razing in order build a brand new one.

What better way for Obama to distinguish himself from Romney than to condemn Wall Street’s antics since the bailout, and call for real reform?

Economically it would be smart for Obama to go after the Street right now because the Street’s lobbying muscle has reduced the Dodd-Frank financial reform law to a pale reflection of its former self. Dodd-Frank is rife with so many loopholes and exemptions that the largest Wall Street banks – larger by far then they were before the bailout – are back to many of their old tricks.

It’s impossible to know, for example, the exposure of the Street to European banks in danger of going under. To stay afloat, Europe’s banks will be forced to sell mountains of assets – among them, derivatives originating on the Street – and may have to reneg on or delay some repayments on loans from Wall Street banks.

The Street says it’s not worried because these assets are insured. But remember AIG? The fact Morgan Stanley and other big U.S. banks are taking a beating in the market suggests investors don’t believe the Street. This itself proves financial reform hasn’t gone far enough.

If you want more evidence, consider the fancy footwork by Bank of America in recent days. Hit by a credit downgrade last month, BofA just moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits. That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.

Wasn’t this supposed to be illegal? Keeping risky assets away from insured deposits had been a key principle of U.S. regulation for decades before the repeal of Glass-Steagall.

The so-called “Volcker rule” was supposed to remedy that. But under pressure of Wall Street’s lobbyists, the rule – as officially proposed last week – has morphed into almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.

It would have been far simpler simply to ban proprietary trading from the jump. Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf? Bring back Glass-Steagall.

True, Glass-Steagall wouldn’t have prevented the fall of Lehman Brothers or the squeeze on other investment banks in 2007 and 2008. That’s why it’s also necessary to break up the big banks.

In the wake of the bailout, the biggest banks are bigger than ever. Twenty years ago the ten largest banks on the Street held 10 percent of America’s total bank assets. Now they hold over 70 percent. And the biggest four have a larger market share than ever – so large, in fact, they’ve almost surely been colluding. How else to explain their apparent coordination on charging debit card fees?

The banks aren’t even fulfilling their fiduciary duties to investors. Last summer, after Groupon selected Goldman Sachs, Morgan Stanley, and Credit Suisse to underwrite its initial public offering, the trio valued it at a generous $30 billion. Subsequent accounting and disclosure problems showed this estimate to be absurdly high. Did the banks care? Not a wit. The higher the valuation, the fatter their fees.

Just last week Citigroup settled charges (without admitting or denying guilt) that it defrauded investors by selling them a package of mortgage-backed securities rife with mortgages it knew were likely to default, but didn’t disclose the hazard. It then bet against the package for its own benefit – earning fees of $34 million and net profits of at least $126 million. So what’s Citi paying to settle this outrage? A mere $285 million. Its CEO at time (Charles Prince) doesn’t pay a dime.

I doubt the President will be condemning the Street’s antics, or calling for a resurrection of Glass-Steagall and a breakup of the biggest banks. Democrats are still too dependent on the Street’s campaign money.

That’s too bad. You don’t have to be an occupier of Wall Street to conclude the Street is still out of control. And that’s dangerous for all of us.

Why We Shouldn’t be Selling the Right to Live in America

by Robert Reich

 Monday, October 24, 2011

America is having a fire sale. Why not sell wealthy foreigners the right to live here, too?

That’s the notion behind a bill introduced last week by Republican Senator Mike Lee of Utah and Democrat Senator Charles Schumer of New York: Stoke demand for American homes by allowing foreign nationals to buy them. In return, give foreigners the right to live here (although not work here).

The price? At least $500,000 cash. It could be one piece of real estate costing $500,000 or more, or several, of which one would have to be worth at least $250,000.

Presumably, this would help homeowners by boosting demand. “This is a way to create more demand without costing the federal government a nickel,” Schumer told the Wall Street Journal.

And it would help the Street. Rather than have the big banks carry all those non-performing mortgage loans on their books or be forced to write them down, we’ll just goose the housing market by selling off the right to live in America.

And the measure wouldn’t allow in the world’s riff-raff, because buyers would have to be rich enough to pay cash, and live here six months a year without working.

Realtors love it. Says Glenn Kelman, CEO of Redfin, an online brokerage firm, “when property values sag and this is a desirable place to live, one of the simplest solutions is just to let more people in so they can buy the homes.”

In Seattle, where Kelman lives, housing prices have slumped – as they have all over America. But Vancouver, Canada – just 140 miles to the north – is enjoying a housing boom because Canada allows foreigners to buy their way into Canada, just as the Lee-Schumer bill would do here.

But wait a minute.

Rich foreigner buyers may be a boon to American homeowners looking to sell, because those homeowners can’t find Americans willing and able to fork over as much money as the sellers would like.

But what about American home buyers – many of them young, just entering the market – who would prefer low home prices that aren’t bid upward by rich foreigners? It’s not altogether obvious why we should favor American homeowners over American home buyers.

The visa-for-home swap proposal also comes at exactly the same time the nation is actively closing its doors to foreigners who aren’t wealthy. Is this what America is all about?

Policy makers have tightened eligibility for entering the country legally. Student visas are harder to obtain. Family members are waiting years to become resident aliens. Green cards are in short supply.

Meanwhile, many states are doing whatever they can to make immigrants – mostly poor, but legal as well as illegal – feel unwelcome. For example, Alabama and Arizona allow police to demand “papers, please” from anyone they suspect may be undocumented (read: anyone who looks Hispanic). Alabama requires public schools to demand documentation from parents of all children in K-12 programs.

The nation is expelling record numbers of undocumented workers. Over the last year (from October 1, 2010 to October 31, 2011), almost 400,000 people were deported – the largest number in the history of the Federal Immigration and Customs Enforcement Agency. Annual deportations have increased 400 percent since 1996.

Some of these people committed criminal acts in the United States but a significant number simply overstayed their visas. Others had been in America for decades, working and raising their families here. Some had even been here legally but had no opportunity to defend themselves. A recent report by my colleagues at the Berkeley Law School notes that many immigrants “are pushed rapidly through the system without appropriate checks or opportunities to challenge their detention and/or deportation.”

If the Schumer-Lee bill becomes law, the easiest way for a foreigner to live in America will be to plunk down $500,000 for a piece of property.

Maybe we should rewrite Emma Lazarus’s words on the Statue of Liberty:

Give us your richest, fattest cats,

Your highest net-worth, seeking pleasure domes,

Your wealthy heirs and pampered brats.

Send these, with a half-million to buy our homes,

And gild our fading door mats.

The Public Option in Banking: Another Look at the German Model

Friday 14 October 2011

by: Ellen Brown, Truthout | News Analysis

Norddeutsche Landesbank, a public corporation by the federal states of Lower Saxony and Saxony-Anhalt. (Photo: dierk schaefer)

Publicly owned banks were instrumental in funding Germany's "economic miracle" after the devastation of World War II. Although the German public banks have been targeted in the last decade for takedown by their private competitors, the model remains a viable alternative to the private profiteering being protested on Wall Street today.

One of the demands voiced by protesters in the Occupy Wall Street movement is for a "public option" in banking. What that means was explained by Dr. Michael Hudson, professor of economics at the University of Missouri in Kansas City, in an interview by Paul Jay of the Real News Network on October 6:

[T]he demand isn't simply to make a public bank, but is to treat the banks generally as a public utility, just as you treat electric companies as a public utility.... Just as there was pressure for a public option in health care, there should be a public option in banking. There should be a government bank that offers credit card rates without punitive 30% interest rates, without penalties, without raising the rate if you don't pay your electric bill. This is how America got strong in the 19th and early 20th century, by essentially having public infrastructure, just like you'd have roads and bridges.... The idea of public infrastructure was to lower the cost of living and to lower the cost of doing business.

We don't hear much about a public banking option in the United States, but a number of countries already have a resilient public banking sector. A May 2010 article in The Economist noted that the strong and stable publicly owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the world in the last few years.In the US, North Dakota is the only state to own its own bank. It is also the only state that has sported a budget surplus every year since the 2008 credit crisis. It has the lowest unemployment rate in the country and the lowest default rate on loans. It also has oil, but so do other states that are not doing so well. Still, the media tend to attribute North Dakota's success to its oil fields.However, there are other Western public banking models that are successful without oil booms. Europe has a strong public banking sector; and leading it is Germany, with 11 regional public banks and thousands of municipally owned savings banks. Germany emerged from World War II with a collapsed economy that had degenerated into barter. Today, it is the largest and most robust economy in the eurozone. Manufacturing in Germany contributes 25 percent of gross domestic product, more than twice that in the UK. Despite the recession, Germany's unemployment rate, at 6.8 percent, is the lowest in 20 years. Underlying the economy's strength is its Mittelstand - small to medium sized enterprises - supported by a strong regional banking system that is willing to lend to fund research and development.In 1999, public banks dominated German domestic lending, with private banks accounting for less than 20 percent of the market, compared to more than 40 percent in France, Spain, the Nordic countries and Benelux. Since then, Germany's public banks have come under fire; but local observers say that is due to rivalry from private competitors rather than a sign of real weakness in the sector.As precedent for a public option in banking, then, the German model deserves a closer look.From the Ashes of Defeat to World Leader in ManufacturingGermany emerged phoenix-like from its disastrous defeat in two world wars to become Europe's economic powerhouse in the second half of the 20th century. In 1947, German industrial output was only one-third its 1938 level, and a large percentage of its working-age men were dead. Less than ten years after the war, people were already talking about the German economic miracle; and 20 years later, its economy was the envy of most of the world. By 2003, a country half the size of Texas had become the world's leading exporter, producing high quality automobiles, machinery, electrical equipment and chemicals. Only in 2009 was Germany surpassed in exports by China, which has a population of over 1.3 billion to Germany's 82 million. In 2010, while much of the world was still reeling from the 2008 financial collapse, Germany reported 3.6 percent economic growth.The country's economic miracle has been attributed to a variety of factors, including debt forgiveness by the Allies, currency reform, the elimination of price controls and the reduction of tax rates. But while those factors freed the economy from its shackles, they don't explain its phenomenal rise from a war-torn battlefield to world leader in manufacturing and trade.One overlooked key to the country's economic dynamism is its strong public banking system, which focuses on serving the public interest rather than on maximizing private profits. After the Second World War, it was the publicly owned Landesbanks that helped family-run provincial companies get a foothold in world markets. As Peter Dorman describes the Landesbanks in a July 2011 blog:

They are publicly owned entities that rest on top of a pyramid of thousands of municipally owned savings banks. If you add in the specialized publicly owned real estate lenders, about half the total assets of the German banking system are in the public sector. (Another substantial chunk is in cooperative savings banks.) They are key tools of German industrial policy, specializing in loans to the Mittelstand, the small-to-medium size businesses that are at the core of that country's export engine. Because of the landesbanken, small firms in Germany have as much access to capital as large firms; there are no economies of scale in finance. This also means that workers in the small business sector earn the same wages as those in big corporations, have the same skills and training, and are just as productive. [Emphasis added.]

The Landesbanks function as "universal banks" operating in all sectors of the financial services market. All are controlled by state governments and operate as central administrators for the municipally owned savings banks, or Sparkassen, in their area.The Sparkassen were instituted in Germany in the late 18th century as nonprofit organizations to aid the poor. The intent was to help people with low incomes save small sums of money, and to support business start-ups. The first savings bank was set up by academics and philanthropically minded merchants in Hamburg in 1778, and the first savings bank with a local government guarantor was founded in Goettingen in 1801. The municipal savings banks were so effective and popular that they spread rapidly, increasing from 630 in 1850 to 2,834 in 1903. Today the savings banks operate a network of over 15,600 branches and offices and employ over 250,000 people, and they have a strong record of investing wisely in local businesses.Targeted for PrivatizationThe reputation and standing of the German public banks were challenged, however, when they emerged as competitors in international markets. Peter Dorman writes:

[T]he EU doesn't like the landesbanken. They denounce the explicit and implicit public subsidies that state ownership entails, saying they violate the rules of competition policy. For over a decade they have fought to have the system privatized. In the end, the dispute is simply ideological: if you think that public ownership should only be an exception, narrowly crafted to address specific market failures, you want to see the landesbanken put on the auction block. If you think an economy should be organized to meet socially defined needs, you would want a large part of capital allocation to be responsive to public input, and you'd fight to keep the landesbanken the way they are. (There is a movement afoot in the US to promote public banking.)

The vicissitudes of German banking in the last decade were traced in a July 2011 article by Ralph Niemeyer, editor in chief of EUchronicle, titled "Commission's Dirty Task: WESTLB Devoured by Private Banks." He notes that after 1999, the major private banks left the path of sustainable traditional banking to gamble in collateralized debt obligations, credit default swaps and derivatives. Private German banks accumulated an estimated €600 billion in toxic assets through their investment banking branches, for which German taxpayers wound up providing guarantees. Deutsche Bank AG was feeding its record profits almost exclusively through its investment banking division, which made a fortune trading credit default swaps on Greek state obligations. When this investment turned sour, the German government had to bail out the financial institution into which Deutsche Bank AG dumped these toxic assets.While the large private banks were betting on the casinos of the financial markets, lending to businesses and the "real" economy was left to the public Sparkassen, which were more efficient in serving average citizens and local business because they were not stock companies that had to satisfy shareholders' hunger for ever-larger dividends. Today, the market share of private banks in Germany is only 28.4 percent, and Deutsche Bank AG dominates the segment. But with its 7 percent market share, it is still well behind the public banks owned by municipalities and communities.Neimeyer says the private banks wanted to break up the market dominance of the public banks to get a bigger piece of the pie themselves, and they used the European Commission to do it. The Commission had been lobbied since the early 1990s by German private banks and by Deutsche Bank AG in particular to attack the German government over the country's "inflexible" public banking sector.The International Monetary Fund, too, had long demanded that any competing public monopolies in the German banking market be broken up, citing their "inefficiencies." When the German public Sparkassen and Landesbanken were reluctant to turn to investment banking with its skyrocketing profits, they were branded as bureaucratic and "unsexy." When they were pressured to increase their returns for their government owners, the German Landesbanken did get sucked to some extent into derivatives and collateralized debt obligations  (fraudulently rated triple A). But while they "lost billions in the Goldman Sachs, Deutsche Bank and Lehman Brothers Ponzi scheme," Niemeyer says the extent to which they became involved in highly speculative transactions was "laughable in comparison with the damage done by private banks, for whom taxpayers are now providing guarantees."It was the public banks and Sparkassen that supplied the real economy with liquidity, and that stepped in for the private banks when they withdrew to bet in the financial casino; but it was on the failings of the Landesbanken and Sparkassen that the media focused their attention. The real motive, says Niemeyer, was that the large private banks wanted the public banks' market share themselves:

In order to win back this important market share, it has become a prerogative to destroy public banking in Germany completely. This unpopular move could never come from the German government itself, so that's why the [European] Commission is being employed for this dirty job.

The Price of SuccessThe German public banks were brought down by knocking their public legs out from under them. Previously, they had enjoyed state guarantees that allowed them to acquire and lend funds at substantially better rates than private banks were able to do. But in 2001, the European Commission ruled to strip the Landesbanks of their explicit state credit guarantees, forcing them to compete on the same terms as private banks. And today, the European Banking Authority is refusing to count the banks' implicit state guarantees in their "stress tests" for banking solvency.The upshot is that the German public banks are being stripped of what has made them stable, secure and able to lend at low interest rates: they have had the full faith and credit of the government and the public behind them. By eliminating the profit motive, focusing on the public interest and relying on government guarantees, the German public banks were able to turn bank credit into the sort of public utility described by Professor Hudson.The example of Germany shows that even success is no guarantee in the face of a relentless onslaught of propaganda by large privately owned banks interested only in making money for their CEOs, wealthiest clients and shareholders. But peering behind the propaganda, the public banking model that helped underwrite Germany's economic success might be the fast track to a US banking system that serves Main Street rather than Wall Street.

Ellen Brown

Ellen is an attorney and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com. 

Iraq By The Numbers: The World’s Costliest Cakewalk

By Eli Clifton posted from ThinkProgress Security on Oct 21, 2011 at 8:00 pm

The Obama administration’s announcement of a withdrawal of all U.S. forces from Iraq by the end of the year offers the possibility of a definitive conclusion for the U.S. military’s involvement in Iraq. But while the return of all U.S. service men and women by Christmas is a cause for celebration, the costs of the war are only beginning to be fully understood. The “cakewalk” to Baghdad, as George W. Bush adviser Kenneth Adelman infamously wrote in February, 2002, has been anything but. The Iraq War, and the faulty premise that Saddam Hussein was developing weapons of mass destruction, has had a staggering humanitarian and economic cost.

 

Here are some relevant numbers:

8 years, 260 days since Secretary of State Colin Powell presented evidence of Saddam Hussein’s biological weapons program

8 years, 215 days since the March 20, 2003 invasion of Iraq

8 years, 175 days since President George W. Bush’s “Mission Accomplished” speech on the USS Abraham Lincoln

4,479 U.S. military fatalities

30,182 U.S. military injuries

468 contractor fatalities

103,142 – 112,708 documented civilian deaths

2.8 million internally displaced Iraqis

$806 billion in federal funding for the Iraq War through FY2011

$3 – $5 trillion in total economic cost to the United States of the Iraq war according to economist Joseph E. Stiglitz and Linda J. Blimes

$60 billion in U.S. expenditures lost to waste and fraud in Iraq and Afghanistan since 2001

0 weapons of mass destruction found in Iraq

The Flat-Tax Fraud, and the Necessity of a Truly Progressive Tax

by Robert Reich

Friday, October 21, 2011

Herman Cain’s bizarre 9-9-9 plan would replace much of the current tax code with a 9 percent individual income tax and a 9 percent sales tax. He calls it a “flat tax.”

Next week Rick Perry is set to announce his own version of a flat tax. Former House majority leader Dick Armey – now chairman of Freedom Works, a major backer of the Tea Party funded by the Koch Brothers and other portly felines (I didn’t say “fat cats”) — predicts this will give Perry “a big boost.” Steve Forbes, one of America’s richest billionaires, who’s on the board of the Freedom Works foundation, is delighted. He’s been pushing the flat tax for years.

The flat tax is a fraud. It raises taxes on the poor and lowers them on the rich.

We don’t know exactly what Perry will propose, but the non-partisan Tax Policy Center estimates that Cain’s plan (the only one out there so far) would lower the after-tax incomes of poor households (incomes below $30,000) by 16 to 20 percent, while increasing the incomes of wealthier households (incomes above $200,000) by 5 to 22 percent, on average.

Under Cain’s plan, fully 95 percent of households with more than $1 million in income would get an average tax cut of $487,300. And capital gains (a major source of income for the very rich) would be tax free.

The details of flat-tax proposals vary, of course. But all of them end up benefitting the rich more than the poor for one simple reason: Today’s tax code is still at least moderately progressive. The rich usually pay a higher percent of their incomes in income taxes than do the poor. A flat tax would eliminate that slight progressivity.

Nowadays most low-income households pay no federal income tax at all – a fact that sends many regressives into spasms of indignation. They conveniently ignore the fact that poor households pay a much larger share of their incomes in payroll taxes, sales taxes, and property taxes (directly, if they own their homes; indirectly, if they rent) than do people with high incomes.

Flat-taxers pretend a flat tax is good public policy, for two reasons.

First, they say, it would simplify paying taxes. Baloney. Flat-tax proposals don’t eliminate popular deductions. (I’ll be surprised if Perry’s plan eliminates the popular mortgage-interest deduction, for example.) So most tax payers would still have to fill out lots of forms.

Second, they say a flat tax is fairer than the current system because, in Cain’s words, a flat tax “treats everyone the same.”

The truth is the current tax code treats everyone the same. It’s organized around tax brackets. Everyone whose income reaches the same bracket is treated the same as everyone else whose income reaches that bracket (apart from various deductions, exemptions, and credits, of course).

For example, no one pays any income taxes on the first $20,000 or so of their income (the exact amount depends on whether the person is married and eligible for tax credits like the Earned Income Tax Credit of the Family Tax Credit.)

People in higher brackets pay a higher rate only on the portion of their income that hits that bracket — not on their entire incomes.

So when Barack Obama calls for ending the Bush tax cut on incomes over $250,000, he’s only talking about the portion peoples’ incomes that exceed $250,000. He’s not proposing to tax their entire incomes at the higher rate that prevailed under Bill Clinton.

Republicans have tried to sow confusion about this. They want Americans to believe, for example, that if the Bush tax cut ended, small business owners with incomes of $251,000 a year would suddenly have to pay 39 percent of their entire incomes in taxes rather than 35 percent. Wrong. They’d only have to pay the 39 percent rate on $1,000 – the portion of their incomes over $250,000.

Get it? We already have a flat tax – flat within each bracket.

The real problem is the top brackets are set too low relative to where the money is. The top-most bracket starts at $375,000 a year. People with incomes higher than that pay 35 percent – again, only on that portion of their incomes exceeding $375,000.

This is absurd. It means a professional who’s making, say, $380,000 a year pays the same income-tax rate as a plutocrat pulling in $2 billion or $20 billion.

Our current flat tax at the top is treating the nation’s professional class exactly the same as it treats super-rich plutocrats. My doctor pays the same rate as Steve Forbes.

Actually, it’s worse than that because the plutocrats get most of their income in the form of capital gains, which are taxed at only 15 percent. That’s why America’s 400 richest people – who earned an average of $300 million last year, and who have more wealth than the bottom 150 million Americans put together – now pay at a 17 percent rate (according to the IRS).

The Republicans’ push for a flat tax masks what’s really going on.

Remember: The top 1 percent is now raking in over 20 percent of the nation’s total income and owns over 35 percent of the nation’s wealth. Under almost anyone’s view of fairness, these are grotesque portions. They’re especially large relative to what they were as recently as thirty years ago, when the top 1 percent raked in under 10 percent. And these huge portions at the top continue to increase.

Meanwhile, the top tax bracket is now 35 percent — the lowest it’s been in three decades. Between the end of World War II and 1980 it never fell below 70 percent. 

Simple fairness requires three things: More tax brackets at the top, higher rates in each bracket, and the treatment of all sources of income (capital gains included) exactly the same.

Not only fairness demands it, but also fiscal prudence. A truly progressive tax would bring in tens of billions of dollars a year from the people at the top who are in the best position to afford it.

Regressives are pushing the flat tax as a smokescreen. They’d rather not have anyone talk about the unfairness and fiscal absurdity of the current system.

Rather than merely oppose the flat tax, sensible people should push for a truly progressive tax – starting with a top rate of 70 percent on that portion of anyone’s income exceeding $5 million, from whatever source.

The Austerity Death-Trap

by Robert Reich

Wednesday, October 19, 2011

Ron Paul’s newly-unveiled economic plan – promising to cut $1 trillion from the federal budget in year one (presumably that means 2013) – is only slightly more ambitious than what we’re hearing from other Republican candidates. They’re all calling for major spending cuts starting as soon as possible. 

What are they smoking?

Can we just put ideology aside for a moment and be clear about the facts? Consumer spending (70 percent of the economy) is flat or dropping because consumers are losing their jobs and wages, and don’t have the dough. And businesses aren’t hiring because they don’t have enough customers.

The only way out of this vicious cycle is for the government – the spender of last resort – to boost the economy. The regressives are all calling for the opposite.

But even without these hare-brained Republican plans, we’re heading in their direction anyway. Unless Republicans agree to a budget deal before the end of the year (don’t hold your breath), the temporary payroll tax cuts and extended unemployment benefits we have now will end.

The result will be the most stringent fiscal tightening of any large economy in the world.

Together with ongoing cuts at the state and local government level, the scale of this fiscal contraction would be almost unprecedented.

It will come at a time when 25 million are Americans looking for full-time work, median incomes are dropping, home foreclosures rising, and a record 37 percent of American families with young children are in poverty.

To call this economic lunacy is to understate the point.

And if you think 2011 is bad, you ain’t seen nothin’ yet.

Even if you’re a deficit hawk this is nuts. Instead of reducing the ratio of debt to the size of the overall economy, this strategy increases the ratio because it causes the economy to shrink.

Call it the austerity death trap.

Under these circumstances, the harder a country works to cut its debt, the worse the ratio becomes — because the economy shrinks even faster.

Greece is already in the trap. Spain and Italy are perilously close. Even Britain, France, and Germany are tip-toeing up to it. And now us.

Deficit hawks have to understand: The first step must be to revive growth and jobs. That way, revenues increase and the debt/GDP ratio drops. Only then – when the economy is back on track – do you start cutting.

At the start of the Clinton administration the annual budget deficit was almost $300 billion. But rather than take a meat-axe to spending, we pushed for growth, as did the Fed. The expansion of the 1990s made it easy to get the budget under control. By 2000 we had a $226 billion surplus.

The austerity trap will even hurt Mitch-McConnell Republicans whose top priority is to “make sure Obama is a one-term president.”

While it increases the likelihood of this Republican goal, it doesn’t stop there. Because the austerity trap will last for many years, any Republican successor will also be a one-termer.

The San Diego Union-Tribune is on the Rocks

from Counterpunch, October 21-23, 2011

by FRANK GREEN

Print media’s decline in the United States can be tracked in microcosm in San Diego, longtime home to one of the country’s most conservative, reactionary dailies.

Local progressives have been watching in bemusement for several years as The San Diego Union-Tribune – once Richard Nixon’s favorite news source – radically chops staff, loses circulation and, more importantly, sees its once-dominant and domineering position as a right-wing political and cultural force in the area fade.

The fall of the U-T, which some newsroom insiders believe is heading for its last press run, would mirror the predicament of other major U.S. dailies long confronted by the ubiquitous Internet and similar burgeoning alternative media, as well as by a dwindling passion for reading among the young.

“My guess is, (the U-T) is barely breaking even, if that,” said a veteran staffer. “Everybody here is looking over their shoulder.”

The turbulence at the U-T commenced in 2006 when the paper announced the first of what would be seven rounds of layoffs and buyouts of newsroom, circulation and other staff (even the cafeteria closed).

Three years later, publisher David Copley, whose rabidly conservative family had monopolized the local newspaper industry and dominated the city’s civic affairs for decades, sold the business to Platinum Equity, a Beverly Hills-based private equity group.

However, Platinum’s involvement has hardly cut the flow of red ink. Daily circulation has dipped in the past three years from 242,705 to 218,614, according to the Audit Bureau of Circulation.

Efforts by Platinum to attract subscribers with a hyper-local emphasis in its news columns have failed to draw readers’ interest, as have circulation promotions which essentially give the paper away. (A U-T booth at a recent home improvement show at the local convention center, for instance, offered new subscribers $10 worth of free Starbucks gift cards for a $10-a-month sub.)

Some observers nevertheless think that Platinum’s plans for the U-T have little to do with keeping it in the black, or even in print.

Indeed, Platinum announced in July that it had hired the investment banking advisory firm Evercare Partners to examine “strategic alternatives” for the U-T – code words to some for finding a buyer.

It would all seem to be business as usual for Platinum, which owns more than 100 companies in such sectors as infotech, telecommunications and real estate. Platinum’s annual aggregate revenue from these firms is $27 billion or so.

The company has a reputation for acquiring distressed properties like the U-T at bargain rates, then quickly turning them around for sale at a tidy profit.

Potential U-T suitors, according to the newsroom rumor mill, include Rupert Murdoch’s News Corp., Tribune Co. and local hotel magnate Doug Manchester.

Murdoch’s interest in the U-T seems unlikely, however, since he would face a recalcitrant News Corp. board still fuming over this summer’s newspaper hacking scandal in the United Kingdom. The board would also seemingly balk at extending the company’s already substantial involvement in the shrinking newspaper industry, however enthusiastic Murdoch might be for supplementing his print portfolio.

Still other speculation has the paper eventually merging with various large regional newspaper properties (the Orange County Register, even the Los Angeles Times) to form one pervasive Southern California daily.

Such a consolidation could be operated with a fraction of current newsroom staffs and costs.

But at least one U-T editor thinks Platinum will instead soon simply stop printing the paper altogether – “it’s essentially worthless now,” the editor said – and sell the real estate on which the paper’s editorial offices and printing press are situated in the lush commercial hub of San Diego’s Mission Valley.

The editor noted that Platinum paid between $40 million and $50 million for virtually all of the U-T’s assets in the 2009 deal, even though the U-T’s headquarters alone reportedly sits on land assessed at about $90 million.

Progressives seemingly would hail the demise of the once-pervasive U-T, which for years has maintained a stridently right-wing sensibility in its opinion pages and news columns alike.

Among the lowlights:

- Well into the 1970s, U-T publisher James Copley routinely lent his political writers gratis to the successful mayoral, gubernatorial and senate campaigns of Pete Wilson, as well as numerous other Republican politicos. The late Herbert Klein, for example, worked alternately for years as an editor at the newspaper and a mouthpiece for GOP candidates, all the while collecting a Copley paycheck. Klein ultimately served as communications director for Nixon, who often referred to the Union as his favorite newspaper.

- In the late-1960s, a memo issued from the publisher’s office advised editors to avoid running photos of black people on section fronts. The policy remained in force, if unofficially, into the mid-1970s.

- During the same period, The San Diego Union (which later merged with its sister publication the Evening Tribune to form the Union-Tribune) targeted the late Marxist philosophy professor Herbert Marcuse in conjunction with threats and harassment by the Secret Army Organization, a militant right-wing vigilante group made up of San Diego Police officers and military veterans. Marcuse, who was teaching at UC San Diego at the time, often was wrongly characterized in Union news columns and editorial cartoons as a dangerous Soviet agent promoting violent revolution in the U.S. Union executives routinely bragged that the Marcuse campaign was designed to run him out of town, if not kill him.

- The vending machines of alternative newspapers like the O.B. Rag, the San Diego Door and the San Diego Free Press were routinely plucked off the streets by Union circulation drivers in the late-1960s at the behest of Victor Krulak, an executive in the U-T publishing office. (Krulak had earlier served as President John Kennedy’s counterinsurgency expert in Vietnam.)

Through it all, the newspaper used its news columns to pimp for conservative candidates and issues near to the heart of the Copley family, while downplaying or completely ignoring alternative progressive voices.

This stifling pro-business, pro-military stance has hardly diminished in the new century.

For instance, the U-T unwaveringly backed the U.S. invasions of Afghanistan and Iraq, including giving ad nauseum support for George W. Bush’s premise that Iraq was a repository for so-called weapons of mass destruction.

The intimate nature of the long Copley-GOP relationship could until recently be seen in the U-T executive offices, where a large photograph of David Copley, former editor Karin Winner and Bush – all three of them in the throes of laughter – had been prominently displayed for years.

A cursory read of Thursday’s U-T indicates that little has changed under Platinum’s stewardship.

The op-ed page features a Q&A with Mayor Jerry Sanders and other business leaders griping about how difficult it has been to find money to build a new football stadium for the Chargers, while the lead piece in the local section trumpets the police union’s endorsement of Republican newcomer Nathan Fletcher against liberal Democrat Bob Filner in the local mayoral race.

Of course, all of this debate about the U-T’s pernicious influence through the years may soon be relegated to the stacks.

A Web site dedicated to U-T retirees carried still a fresh newsroom rumor Thursday that the paper is being sold and that the transaction with a private buyer is in escrow.

Herbert Marcuse is smiling somewhere.

FRANK GREEN is a veteran journalist and lives in the San Diego area. He can be reached at [email protected]

Wall Street: The Centralization and Concentration of Capital

by John Lawrence

Marx's chief criticism of capitalism was that it led to the centralization and concentration of capital. In a society comprised of small scale enterprises such as the yeomanry and small scale farmers of early America, an America romanticised and favored by Thomas Jefferson, capital was widely dispersed in the form of small land holdings and businesses which replicated themselves throughout the US with different owners in every community. For example, each small town had a blacksmith shop owned by a single person who owned one and only one blacksmith shop. He didn't franchise his blacksmith shop operation all over the country calling it perhaps "Blacksmiths Are Us." He didn't go public with his blacksmith shop attracting investors from all over the country who bought shares in his blacksmith shop. He didn't acquire other blacksmith shops and merge with yet more blacksmith shops. He didn't expand into other towns creating  blacksmith shop megastores and forcing Mom and Pop blacksmiths out of operation. He didn't open a furniture store as an accompaniment to his blacksmith shop. All the techniques of modern capitaliasm - mergers and acquisitions, franchise operations, big box megastores - produce a centralization and concentration of capital or ownership in fewer and fewer hands. Instead of capital being dispersed in many hands, capital is concentrated in the hands of a few and the rest are left to be employees with zero capital assets.

The statistics are startling. Today the richest 400 Americans own more wealth than the bottom 150 million American citizens. According to Senator Bernie Sanders, six of the biggest banks own wealth equivalent to 60% of US GDP. Two of these banks, Citibank and Goldman Sachs, have been convicted of fleecing investors by selling them securities they knew were bogus and then betting that those securities would go bad. The top 1% earn 25% of the nation's income and own 40% of the nations's wealth. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. Despite owning the lion's share of wealth and income, three years ago American taxpayers provided the wealthy banks with the largest bailout in history. Furthermore, the Federal Reserve provided more than $16 trillion in low-interest loans to every major financial institution in this country, huge foreign banks, multi-national corporations, and some of the wealthiest people in the world. Meanwhile 43 million Americans live in poverty and millions have lost their homes through foreclosure. Countries with less income inequality than the US include Cambodia, Vietnam and Morocco. 

Is it any wonder then that the Occupy Wall Street protesters are proclaiming "We are the 99%." The 99% who are being left in the dust with no jobs, huge student loans, homes that are underwater or have been foreclosed on. No bailouts here. Thanks to Republican legislation, the terms of student loans are draconian. Unlike credit card loans student loans cannot be discharged in bankruptcy. They will follow you to the grave. And defaults due to lack of jobs can triple the amount owed. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law by President Bush and made possible by Republicans in Congress. It was designed to make it impossible to discharge student loans in bankruptcy and opened the way for a lucrative private loan industry to flourish. David Cay Johnston in his book Free Lunch says, "The idea that young minds should be a source of immediate profit is among the most coldly calculated changes in government which, over the past three decades, have taken from the many to enrich the few." Legislation to restore bankruptcy protection to student loans has been reintroduced in Congress by Democrats. Fat chance it will pass though with Republicans controlling the House and having the filibuster rule in the Senate.

People are facing retirement with no pensions, their 401ks having lost value or having been spent before retirement just to keep financially afloat. The 99 per centers include students, recently graduated students with huge student loans and no jobs, middle aged unemployed folks who are not being rehired, African Americans whose unemployment rates are sky high, people who have lost their homes to foreclosure - all those people who were not bailed out while the banks who were bailed out profit at their expense. The Obama administration failed to put sanctions on the banks allowing them to continue to profit with no accountability. No banksters went to jail. They made mortgage write downs voluntary on the part of the banks and so far banks have refused to volunteer. The cards have been stacked on the side of the banks and against the middle class. Is it any wonder then that people are occupying Wall Street whose CEOs make on average 300 times the salaries of average workers?

Johnston details a part of the process of how advanced US capitalism with government support centralizes and concentrates capital, ownership wealth and income in the hands of a few. He details how Mom and Pop stores are put out of commission by large mega stores which, with government help, take over retail trade while forcing former Moms and Pops to become employees rather than owners and concentrating wealth. He tells about Jim Weaknecht who had a little sporting goods store in Hamburg, Pennsylvania. In 2003 a sporting goods super store, Cabela's, opened  a few miles away. But far from being an exercise in free market capitalism, Cabela's demanded $32 million in government subsidies or else they would take their six acre store elsewhere. Cabela's wanted exemption from paying local property taxes for years to come and tax-exempt status for the "museum" part of the store in perpetuity.  In addition they wanted to pocket the sales tax. The store was 100 times bigger than Weaknecht's and stocked more guns and reels and hunting jackets than Weaknecht could sell in a lifetime. Their pitch was that people would come from miles away just to shop there bringing tourist dollars to Hamburg's restaurants and hotels. Shortly after Cabela's opened, Weaknecht's sales fell more than 70%. In less than two years he was out of business. Now Weaknecht works as an assistant manager at a grocery store chain and holds down a second job too. His wife, who previously devoted full time to their children, now also works two jobs. This is how, with government help, wealth and income along with political power is concentrated in the hands of a few. Cabela's has also opened numerous other super stores across the nation putting Mom and Pop operations out of business nationwide.

Johnson details how Wal-Mart pioneered the super store approach. "In seeking these subsidies, Cabela's was not inventing a new scheme. It was simply improving on a technique pioneered by an icon of retailing success, Sam Walton. The Walton story was not about the brave capitalist taking on risk and proving his mettle by being smarter than the other guy, no matter how carefully the Wal-Mart company has polished and sold that fairy tale. Sam Walton practiced corporate socialism. As much as he could, he put the public's money to work for his benefit. Free land, long-term leases at below-market rates, pocketing sales tax, even getting workers trained at government expense were among the ways Wal-Mart took every dollar of welfare it could get."

Fifty years ago, people shopped at a number of Mom and Pop stores rather than at one super store. For instance, there were paint stores, lumber stores, hardware stores, electrical supply stores all under different ownership and all under different ownership in different towns and cities. Now in one trip to Home Depot, you can buy all these items in one centralized location with the result that the smaller Mom and Pop stores have been put out of business and wealth has been centralized and concentrated. There are Home Depots in practically every large and middle sized town and city in America. The same holds true for large super market chains. Previously, shoppers went to a meat market for meat, a dairy for dairy items, a bakery for baked goods etc. Now one trip to a super market does it all and wealth has been centralized and concentrated in the hands of a few while the remaining population have become employees with no accumulation of wealth except for their houses which have drastically decreased in value in recent years.

The US has concentrated private wealth in the hands of the 1% while at the same time creating a concentration of debt in the government. Government debt has fueled private wealth as the government has been used just as a tool for benefitting private capitalists. The privatization of government functions has increased government debt while increasing private wealth. China, on the other hand, has a wealthy class including billionaires, less inequality than the US and a concentration of wealth in the hands of government. So wealth is dispersed at least between public and private entities and to a larger extent even among the public than in the US. China's sovereign wealth fund holds approximately $2 trillion of US debt. So while the US is a wealthy nation in terms of its cumulative wealth, that wealth is mostly in private hands and in the hands of the upper 1%. The US government itself is next to bankrupt. The US represents private wealth amid public squalor. 46 million people live below the poverty line as of 2011. Minorities are hit hardest. Blacks experience the highest poverty rate, at 27 percent, up from 25 percent in 2009, and Hispanics rose to 26 percent from 25 percent. For whites, 9.9 percent live in poverty, up from 9.4 percent in 2009. Asians were unchanged at 12.1 percent. The number without health insurance is on the rise. 43 million use food stamps to survive.

Marx foresaw that capitalism would lead to the concentration and centralization of wealth ownership in fewer and fewer hands. It is easy to see why. To recapitulate, mergers and acquisitions lead to larger and larger enterprises forcing smaller firms out of business. Franchise operations lead to replicating the same stores in every community with profits flowing to one centralized location. Think of MacDonald's, Wal-Mart, Home Depot and Starbucks which force less well capitalized Mom and Pop stores out of business. Loans and money from investors in equity shares is available to large scale enterprises but not to small Mom and Pop stores. The corporate form dictates that companies pursue the bottom line over all other possible goals. Owners of small scale enterprises are reduced to employees living paycheck to paycheck rather than owning capital which would tide them over economic downturns. So even though the corporate form was relatively new in Marx' day, he was remarkably prescient in showing how the dynamics of capitalism would centralize and concentrate wealth in fewer and fewer hands. That dynamic, along with the addition of political power to use government as a tool for the further accumulation of wealth which Marx did not foresee, is playing out today as Republicans go on the warpath against unions and government employees which will result in an even larger return to the owners of wealth while wages and benefits to workers remain stagnant or even decrease. The addition of computers and automated machinery means that workers will become increasingly irrelevant as they are replaced by capital equipment.

The Arc of the Moral Universe, From Memphis to Wall Street

Published on Wednesday, October 19, 2011 by TruthDig.com

by Amy Goodman

The national memorial to Martin Luther King Jr. was dedicated last Sunday. President Barack Obama said of Dr. King, “If he were alive today, I believe he would remind us that the unemployed worker can rightly challenge the excesses of Wall Street without demonizing all who work there.” The dedication occurred amidst the increasingly popular and increasingly global Occupy Wall Street movement. What Obama left unsaid is that King, were he alive, would most likely be protesting Obama administration policies.

Not far from the dedication ceremony, Cornel West, preacher, professor, writer and activist, was being arrested on the steps of the U.S. Supreme Court. He said, before being hauled off to jail: “We want to bear witness today that we know the relation between corporate greed and what goes on too often in the Supreme Court decisions. … We will not allow this day of Martin Luther King Jr.‘s memorial to go without somebody going to jail, because Martin King would be here right with us, willing to throw down out of deep love.” President Obama, first lady Michelle Obama, daughters Sasha and Malia, and Marian Robinson tour the Martin Luther King Jr. National Memorial before the dedication ceremony in Washington, D.C. (White House / Chuck Kennedy )

West was arrested with 18 others, declaring “solidarity with the Occupy movement all around the world, because we love poor people, we love working people, and we want Martin Luther King Jr. to smile from the grave that we haven’t forgot his movement.”

Over the same weekend as the dedication, the U.S. military/CIA’s drone campaign, under Commander in Chief Obama, launched what the independent, nonprofit Bureau of Investigative Journalism, based in London, called the 300th drone strike, the 248th since Obama took office. According to the BIJ, of the at least 2,318 people killed by drone strikes, between 386 and 775 were civilians, including 175 children. Imagine how Obama’s fellow Nobel Peace Prize laureate, Dr. King, would respond to those grim statistics.

Back in 1963, King published a collection of sermons titled “Strength to Love.” His preface began, “In these turbulent days of uncertainty the evils of war and of economic and racial injustice threaten the very survival of the human race.” Three of the 15 sermons were written in Georgia jails, including “Shattered Dreams.” In that one, he wrote, “To cooperate passively with an unjust system makes the oppressed as evil as the oppressor.” King revisited the idea of shattered dreams four years later, eight months before his assassination, in his speech called “Where Do We Go From Here,” saying: “Our dreams will sometimes be shattered and our ethereal hopes blasted. … Let us realize the arc of the moral universe is long but it bends toward justice.”

Earlier in that year, 1967, a year to the day before he was killed, King gave his oft-overlooked “Beyond Vietnam” speech at Riverside Church in New York City. King preached, “I knew that I could never again raise my voice against the violence of the oppressed in the ghettos without having first spoken clearly to the greatest purveyor of violence in the world today, my own government.”

With those words, with that speech, King set the tone for his final, fateful year. Despite death threats, and his close advisers urging him not to go to Memphis, King went to march in solidarity with that city’s sanitation workers. On April 4, 1968, he was shot and killed on the balcony of the Lorraine Motel.

Deeply impacted at the time by the assassination, we can follow two young men along King’s arc of moral justice all the way to Occupy Wall Street. One was John Carlos, a U.S. Olympic track star. Carlos won the bronze medal in the 200 meter race at the 1968 Summer Olympics in Mexico City. Carlos and his teammate Tommie Smith, who won the gold, raised their black-gloved fists in the power salute on the medal stand, instantly gaining global fame. They both stood without shoes, protesting black children in poverty in the United States. Last week, John Carlos spoke at Occupy Wall Street, and he told me after, “I’m just so happy to see so many people who are standing up to say: ‘We’re not asking for change. We demand change.’ ”

The other person is the Rev. Jesse Jackson. He was with King when he was assassinated. Late Monday night, the New York Police Department seemed to be making a move on Occupy Wall Street’s first-aid tent. Jackson was there. Just days past his 70th birthday, Jackson joined arms with the young protesters, defying the police. The police backed off. And the arc of moral justice bent a bit more toward justice.

Denis Moynihan contributed research to this column.

© 2011 Amy Goodman

Amy Goodman is the host of "Democracy Now!," a daily international TV/radio news hour airing on 900 stations in North America. She was awarded the 2008 Right Livelihood Award, dubbed the “Alternative Nobel” prize, and received the award in the Swedish Parliament in December.

The Meagerness of the Republican Debates, the Smallness of the President’s Solutions, and the Need for a Progressive Alternative

by Robert Reich

Monday, October 17, 2011

Republicans are debating again tomorrow night. And once again, Americans will hear the standard regressive litany: government is bad, Medicare and Medicaid should be cut, “Obamacare” is killing the economy, undocumented immigrants are taking our jobs, the military should get more money, taxes should be lowered on corporations and the rich, and regulations should be gutted.

Four years ago the most widely-watched TV debate among Republican aspirants attracted 3.2 million viewers. This year it’s almost twice that number. And for every viewer assume a multiplier effect as he or she shares what’s heard with friends and family.

Americans are listening more intently this time around because they’re hurting and they want answers. But the answers they’re getting from Republican candidates – tripping over themselves trying to appeal to hard-core regressives – are the wrong ones.

The correct ones aren’t being aired.

That’s partly because there’s no primary contest in the Democratic party. So Republicans automatically get loads of free broadcast time to air their regressive nonsense while the Democrats get none.

But even if the President had equal time, the debate about what to do about the crisis would still be frighteningly narrow.

That’s because the President’s answers don’t nearly match up to the magnitude of the crisis.

Without bold alternatives, Americans desperate for big solutions are attracted to bold crackpot ideas like Herman Cain’s “9-9-9” proposal, which would raise taxes on the poor and cut them for the rich.

This is where the inchoate Occupy Wall Street movement could come in. What’s needed isn’t just big ideas. It’s people fulminating for them – making enough of a ruckus that the ideas can’t be ignored. They become part of the debate because the public demands it.

The biggest thing the President has proposed is a plan to create 2 million jobs. But that’s not nearly big enough. Today, 14 million Americans are out of work, and 11 million more are working part-time who’d rather be working full time.

The nation needs a real jobs plan, one of sufficient size and scope to do the job – including a WPA and a Civilian Conservation Corps, to put the millions of long-term unemployed and young unemployed to work rebuilding America.

I’m not criticizing the President. Without energized, mobilized, and organized progressives, even the best people in Washington can’t overcome the monied interests. 

For example, America’s long-term debt needs to be addressed, but not the way the President is doing it. He wants to lop $4 trillion off the budget over the next ten years. This almost certainly means sacrificing education, job training, food stamps, and everything else now listed in the so-called “non-defense discretionary” budget, as well as cuts in Medicare and Medicaid.

What about halving the military budget instead? It doubled after 9/11, and military contractors are intent on keeping it in the stratosphere. So is Secretary of Defense Leon Panetta. Result: Defense cuts this size won’t be on the table unless progressives vociferously demand it.

And what about really raising taxes on the rich to finance what the nation should be doing to create a world-class workforce with world-class wages?

Here again, the President’s proposal is paltry compared to what should be done. He wants to raise taxes on the rich by ending the Bush tax cut for incomes over $250,000 and limiting certain deductions.

Yet income and wealth are now more concentrated than they’ve been in 70 years. The top 1 percent gets over 20 percent of total income and holds over 35 percent of national wealth; the richest 400 Americans have more wealth than the bottom 150 million Americans put together.

Meanwhile, effective tax rates on the rich are lower than they’ve been in three decades.

We need to push for higher marginal taxes on the top, and more brackets. Incomes of more than $5 million should be subject to a 70 percent rate. (The top marginal rate was never below 70 percent between 1940 and 1980.) And these rates should apply to all income regardless of source, including capital gains.

This would allow for a bigger Earned Income Tax Credit (that is, a wage subsidy) for lower-income workers. And lower taxes on middle-income workers.

There should be a 2 percent annual surtax on all fortunes over $7 million. This would only hit the richest half a percent of Americans at the very top of the heap. And would yield $70 billion a year – enough to improve our schools and make college affordable to everyone.

And a tax on financial transactions. Even a tiny one of one-half of one percent would generate $200 billion a year. That’s enough to make a major contribution toward early childhood education for every American toddler.

The President’s healthcare law is a good start but it’s not the solution, either. We need Medicare for all. Medicare has lower administrative costs than private insurers. And it has the bargaining heft to reduce drug and hospital costs as well as shift the system from fee-for-services to payments for healthy outcomes.

The President’s financial reforms are also a beginning but they’re way too weak to stop Wall Street depredations. (At this moment, for example, no one even knows the exposure of Wall Street banks to European banks and, through them, Europe’s debt crisis.)

We need to resurrect the Glass-Steagall Act and break up the biggest banks.

The President has talked about fixing Social Security by raising the retirement age. But the best way to ensure the program’s long-term solvency is to lift the ceiling on income subject to Social Security payroll taxes (now $106,800.) Yet this, too, is off the table.

Workers also need more bargaining power. The ratio of corporate profits to wages is now higher than it’s been since before the Great Depression. Workers should be able to form unions through a simple up-or-down vote, without delay.

None of this is possible without strong and consistent pressure from the progressive side. Regressives are setting the agenda.

The President isn’t even talking about the environment any more. Yet climate change is a reality, and our survival depends on reducing carbon emissions.

We should tax carbon-based fuels, and divide the revenues equally among all Americans. It’s the best way to get us to switch to non-carbon fuels, and stimulate research and development of them. And by dividing the revenues, the typical American would come out ahead even though some prices would increase.

Finally, we need public financing of elections and strict limits on so-called “independent” expenditures. Corporations should have to get the approval of every shareholder before spending corporate funds – the shareholders’ money – on politics.

I have no idea whether the Occupiers will morph into the kind of progressive force necessary to put these ideas into play. But if Americans stand together and demand real reform, we can have a real national debate in 2012.

Tomorrow’s Republican debate may attract lots of viewers. It need not capture their minds.

The Rise of the Regressive Right and the Reawakening of America

 by Robert Reich

 Sunday, October 16, 2011

A fundamental war has been waged in this nation since its founding, between progressive forces pushing us forward and regressive forces pulling us backward. 

We are going to battle once again. 

Progressives believe in openness, equal opportunity, and tolerance. Progressives assume we’re all in it together: We all benefit from public investments in schools and health care and infrastructure. And we all do better with strong safety nets, reasonable constraints on Wall Street and big business, and a truly progressive tax system. Progressives worry when the rich and privileged become powerful enough to undermine democracy. 

Regressives take the opposite positions.

Eric Cantor, Paul Ryan, Rick Perry, Michele Bachmann and the other tribunes of today’s Republican right aren’t really conservatives. Their goal isn’t to conserve what we have. It’s to take us backwards. 

They’d like to return to the 1920s — before Social Security, unemployment insurance, labor laws, the minimum wage, Medicare and Medicaid, worker safety laws, the Environmental Protection Act, the Glass-Steagall Act, the Securities and Exchange Act, and the Voting Rights Act. 

In the 1920s Wall Street was unfettered, the rich grew far richer and everyone else went deep into debt, and the nation closed its doors to immigrants.

Rather than conserve the economy, these regressives want to resurrect the classical economics of the 1920s — the view that economic downturns are best addressed by doing nothing until the “rot” is purged out of the system (as Andrew Mellon, Herbert Hoover’s Treasury Secretary, so decorously put it). 

In truth, if they had their way we’d be back in the late nineteenth century — before the federal income tax, antitrust laws, the pure food and drug act, and the Federal Reserve. A time when robber barons — railroad, financial, and oil titans — ran the country. A time of wrenching squalor for the many and mind-numbing wealth for the few. 

Listen carefully to today’s Republican right and you hear the same Social Darwinism Americans were fed more than a century ago to justify the brazen inequality of the Gilded Age:  Survival of the fittest. Don’t help the poor or unemployed or anyone who’s fallen on bad times, they say, because this only encourages laziness. America will be strong only if we reward the rich and punish the needy. 

The regressive right has slowly consolidated power over the last three decades as income and wealth have concentrated at the top. In the late 1970s the richest 1 percent of Americans received 9 percent of total income and held 18 percent of the nation’s wealth; by 2007, they had more than 23 percent of total income and 35 percent of America’s wealth. CEOs of the 1970s were paid 40 times the average worker’s wage; now CEOs receive 300 times the typical workers’ wage.

This concentration of income and wealth has generated the political heft to deregulate Wall Street and halve top tax rates. It has bankrolled the so-called Tea Party movement, and captured the House of Representatives and many state governments. Through a sequence of presidential appointments it has also overtaken the Supreme Court. 

Scalia, Alito, Thomas, and Roberts (and, all too often, Kennedy) claim they’re conservative jurists. But they’re judicial activists bent on overturning seventy-five years of jurisprudence by resurrecting states’ rights, treating the 2nd Amendment as if America still relied on  local militias, narrowing the Commerce Clause, and calling money speech and corporations people. 

Yet the great arc of American history reveals an unmistakable pattern. Whenever privilege and power conspire to pull us backward, the nation eventually rallies and moves forward. Sometimes it takes an economic shock like the bursting of a giant speculative bubble; sometimes we just reach a tipping point where the frustrations of average Americans turn into action. 

Look at the Progressive reforms between 1900 and 1916; the New Deal of the 1930s; the Civil Rights struggle of the 1950s and 1960s; the widening opportunities for women, minorities, people with disabilities, and gays; and the environmental reforms of the 1970s.  

In each of these eras, regressive forces reignited the progressive ideals on which America is built. The result was fundamental reform. 

Perhaps this is what’s beginning to happen again across America.

This is What Plutocracy Looks Like!

from the OB Rag

by Jim Miller on October 17, 2011 · 25 comments

in American Empire, Popular, Under the Perfect Sun

Image via erickthedesigner

While it remains to be seen whether the Occupation of America, from Wall Street to San Diego, will be able to sustain its amazing initial momentum, it has unquestionably struck a nerve and sparked a national discussion about class, power, and politics.  The heavy weights at the New York Times have recently staked out an interesting range of opinion on the occupation movement.  You have Paul Krugman, the paper’s reliable progressive, observing the panic of the plutocrats and astutely noting that, “The way to understand all of this is to realize that it’s part of a broader syndrome, in which wealthy Americans who benefit hugely from a system rigged in their favor react with hysteria to anyone who points out just how rigged the system is.”

This has been followed by the less hysterical reactions of the paper’s liberal to moderately conservative hegemonists, Thomas Friedman and David Brooks, whose takes on Occupy Wall Street range from cautious skepticism to condescending dismissal.  Friedman’s column on the protests starts by citing Austrian author Paul Gilding who argues that the American and global uprisings:

“are a sign that the current growth-obsessed capitalist system is reaching its financial and ecological limits . . . Occupy Wall Street is like the kid in the fairy story saying what everyone knows but is afraid to say: the emperor has no clothes. The system is broken . . . This particular round of protests may build or may not, but what will not go away is the broad coalition of those to whom the system lied and who have now woken up. It’s not just the environmentalists, or the poor, or the unemployed. It’s most people, including the highly educated middle class, who are feeling the results of a system that saw all the growth of the last three decades go to the top 1 percent.”

Friedman then counterbalances Gilding’s take with the views of John Hagel III who argues that the new opportunities of the global economy have resulted in “a huge global flow of ideas, innovations, new collaborative possibilities and new market opportunities. This flow is constantly getting richer and faster. Today, they argue, tapping the global flow becomes the key to productivity, growth and prosperity. But to tap this flow effectively, every country, company and individual needs to be constantly growing their talents.”  He then predictably concludes that his “heart is with Hagel” and his “opportunity-based” narrative rather than the “threat-based” narrative of Gilding but he thinks we ignore Gilding’s points at our peril.

…let’s hope that Occupy America is a sign that people are beginning to wake up…

Finally we have the sage of the affluent suburbs, David Brooks, the conservative every NPR-listening-liberal wishes was the face of the loyal opposition rather than that of the snarling tea baggers.  His take on the occupation of America is patronizing at best:

If there is a core theme to the Occupy Wall Street movement, it is that the virtuous 99 percent of society is being cheated by the richest and greediest 1 percent. This is a theme that allows the people in the 99 percent to think very highly of themselves. All their problems are caused by the nefarious elite.  Unfortunately, almost no problem can be productively conceived in this way. A group that divides the world between the pure 99 percent and the evil 1 percent will have nothing to say about education reform, Medicare reform, tax reform, wage stagnation or polarization. They will have nothing to say about the way Americans have overconsumed and overborrowed. These are problems that implicate a much broader swath of society than the top 1 percent.

Brooks follows this up by knocking down the strawman argument that taxing or taking the wealth of the top 1% would eliminate the federal deficit as if that was the key point of the entire protest.  His answer is to look toward the “boring” folks proposing real policy solutions that make use of “market forces.”  It’s the insiders like Sam Nunn, Pete Domenici, and former Clinton staffer Matt Miller who are the real visionaries, not the “milquetoast radicals” occupying Wall Street.

What is interesting about this discussion in the Times is that: 1) these elite columnists think it’s necessary to opine on the subject of the occupation; and 2) that the usual apologists for neoliberal globalization and corporate hegemony are both struggling to find a way to avoid basic facts just as their colleague Krugman suggests.  This makes for some interesting ideological maneuvers.

The Friedman strategy is a kind of inoculation—acknowledge the obvious through another writer’s words but hold it at a distance and don’t address the key point about real economic power while shifting the discussion to a more comfortable ideological frame with regard to globalization (the world is “flat” remember?).  Hence, Friedman is not in favor of a global system that benefits the economic elite, he is for “opportunity.”

The Brooks strategy is to pooh-pooh the very notion of an elite altogether as a simplistic fantasy, a facile oversimplification by the simple-minded rabble on the streets.  Clearly only these conspiracy nuts who don’t read his columns regularly enough to know that Pete Domenici is out there fighting for us are a silly bunch indeed.

By obfuscating the very real existence of the American and global elite, Friedman and Brooks do what they always do and what much of what constitutes American mainstream political and economic discourse always does: fail to give Americans an accurate cognitive map of political and economic power.  This is crucially important because if people don’t have the tools to clearly understand the nature of power, they don’t know how to contest it and frequently place blame for our country’s problems in the wrong places.

But let’s hope that Occupy America is a sign that, despite the obstacle of a corporately owned media system, people are beginning to wake up.

While recent discussions of the “Buffet rule” have focused people’s attention on the fact that the rich have gotten richer while the rest of us have suffered, they have also exposed the truth that, as opposed to the decade’s old mantra of the anti-tax zealots, the affluent pay a smaller percentage of their income in taxes than the rest of us.   The rich have gained, the poor are poorer, and the middle class is shrinking.  You don’t have to have a Nobel Prize in economics to know that this is not fair.

What this phenomenon has done is push us further towards plutocracy or the rule of the dollar.  And for those out there who think this is a conspiracy, all one need do is check out the activities of American Legislative Exchange Council, or ALEC.

What is ALEC?  As the Center for Media and Democracy’s ALEC Exposed website explains:

ALEC is not a lobby; it is not a front group. It is much more powerful than that. Through ALEC, behind closed doors, corporations hand state legislators the changes to the law they desire that directly benefit their bottom line. Along with legislators, corporations have membership in ALEC. Corporations sit on all nine ALEC task forces and vote with legislators to approve “model” bills. They have their own corporate governing board which meets jointly with the legislative board. (ALEC says that corporations do not vote on the board.) Corporations fund almost all of ALEC’s operations. Participating legislators, overwhelmingly conservative Republicans, then bring those proposals home and introduce them in statehouses across the land as their own brilliant ideas and important public policy innovations—without disclosing that corporations crafted and voted on the bills. ALEC boasts that it has over 1,000 of these bills introduced by legislative members every year, with one in every five of them enacted into law. ALEC describes itself as a “unique,” “unparalleled” and “unmatched” organization. We agree. It is as if a state legislature had been reconstituted, yet corporations had pushed the people out the door.

More specifically ALEC (which is 98% corporate funded) pushes a corporate agenda at the international, national, state, and local levels with regard to union busting, workers’ rights, the privatization of education, healthcare, the environment, energy, agriculture, voting, taxes, prisons, immigration, and much more.  It is not a conspiracy of the imaginary “nefarious elite” as David Brooks puts it; it is how the very real economic elites have high-jacked our government at every level.  It’s how the Koch brothers’ money talks and democracy walks.  To put it another way, this is what plutocracy looks like.

To review ALEC’s activities on a state by state level, see where their money comes from and which politicians are part of the organization, see: www.alecexposed.org.

Gloom Grips Consumers, and It May Be Home Prices

from the New York Times

By BINYAMIN APPELBAUM

Published: October 18, 2011

ORLANDO, Fla. — Ernest Markey lost his stone-cutting business in 2009. He then sold his home for half a million dollars less than its value at the peak of the housing bubble and moved with his wife, Marie, to a smaller home in a less affluent suburb. They gave up two new cars and bought one. Used.

The Markeys have since patched together a semblance of their old life, opening a new stone-cutting shop. But they do not expect that they will ever recover financially from the loss of equity in their old home.

“For two years I kept thinking that things would get better,” Mr. Markey, 51, said as he stood in his empty store on a recent weekday. “Now I think the future doesn’t look so good.”

The United States has a confidence problem: a nation long defined by irrational exuberance has turned gloomy about tomorrow. Consumers are holding back, businesses are suffering and the economy is barely growing.

There are good reasons for gloom — incomes have declined, many people cannot find jobs, few trust the government to make things better — but as Federal Reserve chairman, Ben S. Bernanke, noted earlier this year, those problems are not sufficient to explain the depth of the funk.

That has led a growing number of economists to argue that the collapse of housing prices, a defining feature of this downturn, is also a critical and underappreciated impediment to recovery. Americans have lost a vast amount of wealth, and they have lost faith in housing as an investment. They lack money, and they lack the confidence that they will have more money tomorrow.

Many say they believe that the bust has permanently changed their financial trajectory.

“People don’t expect their home to regain value, and that’s really led to a change in consumer attitudes about the economy that we’ve just never seen before,” said Richard Curtin, a professor of economics at the University of Michigan who directs its Survey of Consumers. The latest data from the survey, released Friday by Thomson Reuters, shows that expectations for economic growth have fallen to the lowest level since May 1980.

In Orlando, a city that trades in upbeat fantasies, the housing crash has been particularly painful. The total value of area homes has fallen below the total mortgage debt on those homes, according to the real estate analytics firm CoreLogic. In the parlance of the real estate world, Orlando is underwater, a distinction matched by Las Vegas.

“I don’t know that it’s going to get better. We just have to get used to it,” said Sherry DeWeese, whose home in Ocoee, a northwestern suburb of Orlando, is worth less than she paid for it 13 years ago — and about a third of its value at the peak of the market. “It was nothing to buy whatever we wanted. Now we just think about what we really need.”

Economists have only recently devoted serious study to how a decline in housing prices affects consumer spending, not least because this is the first decline in the average price of an American home since the Great Depression. A 2007 review of existing research by the Congressional Budget Office reported that people reduce spending by $20 to $70 a year for every $1,000 decline in the value of their home.

This “wealth effect” is significantly larger for changes in home equity than in the value of other investments, such as stocks, apparently because people regard changes in housing prices as more likely to endure.

A recent paper by Karl E. Case, an economics professor at Wellesley College, and two co-authors estimated the decline in home prices from 2005 to 2009 caused consumer spending to be $240 billion lower in 2010 than it otherwise would have been. That figure is equal to about 1.7 percent of annual economic activity, enough to be the difference between the mediocre recent growth and healthy growth. And it does not include all the other effects of the housing crash, including the low level of new home construction, that are also weighing on the economy.

Roy Pugsley, who owns a pool supply store in Winter Garden, another suburb here, said that he made 2,500 fewer sales during the first eight months of 2011 compared with the same period in 2007. That translates to one less person walking through the doors to buy chemicals or toys or spare parts in each hour that the store is open.

Mr. Pugsley said business actually increased in the early days of the recession; customers had told him they were spending more time at home. But now people buy only what they need for maintenance. “People realized that it wasn’t going to get any better, and they stopped spending on their pools, too,” he said.

At Milcarsky’s Appliance Center in the adjacent town of Longwood, business now comes from people remodeling their own homes rather than builders, and customers are picking cheaper models, said Doug Morey, a sales manager.

“People who might have bought that” — he taps a stove with chunky burners, designed to look like it belongs in a restaurant kitchen — “are double-thinking it. Everyone has had to cut back.”

That means Milcarsky’s has cut back too. The company, which employed 26 people three years ago, now has about a dozen workers, and they are making less in salary and commissions.

“I might like to think that I’m middle class, but I’m not. I’m not anymore,” said Rae-Anne Crotty, a customer service manager at the store. She now shops for groceries at discount stores, she said, and buys gifts for her children at Christmas but not on their birthdays.

It remains the prevailing view of economic policy makers that economic activity will eventually return to the same trajectory as before the recession. Mr. Bernanke and others have said that they see no evidence of any permanent change in the economy. Previous bouts of economic pessimism, as in the early 1980s and early 1990s, went away once growth picked up.

But many people in the Orlando area do not share this confidence, at least not when it comes to their own prospects. Instead, like the Markeys, they are settling into lives of less prosperity.

The couple moved to Orlando 12 years ago from central Massachusetts in search of opportunities. The business Mr. Markey created, Stone Giant, grew to include two factories and 60 employees, and it installed granite countertops in up to 15 new kitchens every day.

His new company, Winter Park Granite, now installs two kitchens on the average day. He has eight employees but cannot afford health insurance for them or himself. The family income last year was less than a third of the $175,000 that he and his wife made in 2007, their last good year.

And he sees little room for growth. He has stopped spending money on advertising.

“We’re never going to get that big again,” he said. “I was someone employing people and taking people to the good life. Now I’m just trying to survive.”

A Movement Too Big To Fail

Posted on Oct 17, 2011 on Truthdig
 

By Chris Hedges

There is no danger that the protesters who have occupied squares, parks and plazas across the nation in defiance of the corporate state will be co-opted by the Democratic Party or groups like MoveOn. The faux liberal reformers, whose abject failure to stand up for the rights of the poor and the working class, have signed on to this movement because they fear becoming irrelevant. Union leaders, who pull down salaries five times that of the rank and file as they bargain away rights and benefits, know the foundations are shaking. So do Democratic politicians from Barack Obama to Nancy Pelosi. So do the array of “liberal” groups and institutions, including the press, that have worked to funnel discontented voters back into the swamp of electoral politics and mocked those who called for profound structural reform.

Resistance, real resistance, to the corporate state was displayed when a couple of thousand protesters, clutching mops and brooms, early Friday morning forced the owners of Zuccotti Park and the New York City police to back down from a proposed attempt to expel them in order to “clean” the premises. These protesters in that one glorious moment did what the traditional “liberal” establishment has steadily refused to do—fight back. And it was deeply moving to watch the corporate rats scamper back to their holes on Wall Street. It lent a whole new meaning to the phrase “too big to fail.”

Tinkering with the corporate state will not work. We will either be plunged into neo-feudalism and environmental catastrophe or we will wrest power from corporate hands. This radical message, one that demands a reversal of the corporate coup, is one the power elite, including the liberal class, is desperately trying to thwart. But the liberal class has no credibility left. It collaborated with corporate lobbyists to neglect the rights of tens of millions of Americans, as well as the innocents in our imperial wars. The best that liberals can do is sheepishly pretend this is what they wanted all along. Groups such as MoveOn and organized labor will find themselves without a constituency unless they at least pay lip service to the protests. The Teamsters’ arrival Friday morning to help defend the park signaled an infusion of this new radicalism into moribund unions rather than a co-opting of the protest movement by the traditional liberal establishment. The union bosses, in short, had no choice.

The Occupy Wall Street movement, like all radical movements, has obliterated the narrow political parameters. It proposes something new. It will not make concessions with corrupt systems of corporate power. It holds fast to moral imperatives regardless of the cost. It confronts authority out of a sense of responsibility. It is not interested in formal positions of power. It is not seeking office. It is not trying to get people to vote. It has no resources. It can’t carry suitcases of money to congressional offices or run millions of dollars of advertisements. All it can do is ask us to use our bodies and voices, often at personal risk, to fight back. It has no other way of defying the corporate state. This rebellion creates a real community instead of a managed or virtual one. It affirms our dignity. It permits us to become free and independent human beings.

Martin Luther King was repeatedly betrayed by liberal supporters, especially when he began to challenge economic forms of discrimination, which demanded that liberals, rather than simply white Southern racists, begin to make sacrifices. King too was a radical. He would not compromise on nonviolence, racism or justice. He understood that movements—such as the Liberty Party, which fought slavery, the suffragists, who fought for women’s rights, the labor movement and the civil rights movement—have always been the true correctives in American democracy. None of those movements achieved formal political power. But by holding fast to moral imperatives they made the powerful fear them. King knew that racial equality was impossible without economic justice and an end to militarism. And he had no intention of ceding to the demands of the liberal establishment that called on him to be calm and patience.

“For years, I labored with the idea of reforming the existing institutions in the South, a little change here, a little change there,” King said shortly before he was assassinated. “Now I feel quite differently. I think you’ve got to have a reconstruction of the entire system, a revolution of values.”

King was killed in 1968 when he was in Memphis to support a strike by sanitation workers. By then he had begun to say that his dream, the one that the corporate state has frozen into a few safe clichés from his 1963 speech in Washington, had turned into a nightmare. King called at the end of his life for massive federal funds to rebuild inner cities, what he called “a radical redistribution of economic and political power,” a complete restructuring of “the architecture of American society.” He grasped that the inequities of capitalism had become the instrument by which the poor would always remain poor.

“Call it democracy, or call it democratic socialism,” King said, “but there must be a better distribution of wealth within this country for all of God’s children.”

On the eve of King’s murder he was preparing to organize a poor people’s march on Washington, D.C., designed to cause “major, massive dislocations,” a nonviolent demand by the poor, including the white underclass, for a system of economic equality. It would be 43 years before his vision was realized by an eclectic group of protesters who gathered before the gates of Wall Street.

The truth of America is understood only when you listen to voices in our impoverished rural enclaves, prisons and the urban slums, when you hear the words of our unemployed, those who have lost their homes or cannot pay their medical bills, our elderly and our children, especially the quarter of the nation’s children who depend on food stamps to eat, and all who are marginalized. There is more reality expressed about the American experience by the debt-burdened young men and women protesting in the parks than by all the chatter of the well-paid pundits and experts that pollutes the airwaves.

What kind of nation is it that spends far more to kill enemy combatants and Afghan and Iraqi civilians than it does to help its own citizens who live below the poverty line? What kind of nation is it that permits corporations to hold sick children hostage while their parents frantically bankrupt themselves to save their sons and daughters? What kind of nation is it that tosses its mentally ill onto urban heating grates? What kind of nation is it that abandons its unemployed while it loots its treasury on behalf of speculators? What kind of nation is it that ignores due process to torture and assassinate its own citizens? What kind of nation is it that refuses to halt the destruction of the ecosystem by the fossil fuel industry, dooming our children and our children’s children?

“America,” Langston Hughes wrote, “never was America to me.”

“The black vote mean [nothing],” the rapper Nas intones. “Who you gunna elect/ Satan or Satan?/ In the hood nothing is changing/ We ain’t got no choices.”

Or listen to hip-hop artist Talib Kweli: “Back in the ’60s, there was a big push for black … politicians, and now we have more than we ever had before, but our communities are so much worse. A lot of people died for us to vote, I’m aware of that history, but these politicians are not in touch with people at all. Politics is not the truth to me, it’s an illusion.”

The liberal class functions in a traditional, capitalist democracy as a safety valve. It lets off enough steam to keep the system intact. It makes piecemeal and incremental reform possible. This is what happened during the Great Depression and the New Deal. Franklin Delano Roosevelt’s greatest achievement was that he saved capitalism. Liberals in a functioning capitalist democracy are at the same time tasked with discrediting radicals, whether it is King, especially after he denounced the war in Vietnam, or later Noam Chomsky or Ralph Nader.

The stupidity of the corporate state is that it thought it could dispense with the liberal class. It thought it could shut off that safety valve in order to loot and pillage with no impediments. Corporate power forgot that the liberal class, when it functions, gives legitimacy to the power elite. And the reduction of the liberal class to silly courtiers, who have nothing to offer but empty rhetoric, meant that the growing discontent found other mechanisms and outlets. Liberals were reduced to stick figures, part of an elaborate pantomime, as they acted in preordained roles to give legitimacy to meaningless and useless political theater. But that game is over.

Human history has amply demonstrated that once those in positions of power become redundant and impotent, yet retain the trappings and privileges of power, they are brutally discarded. The liberal class, which insists on clinging to its positions of privilege while at the same time refusing to play its traditional role within the democratic state, has become a useless and despised appendage of corporate power. And as the engines of corporate power pollute and poison the ecosystem and propel us into a world where there will be only masters and serfs, the liberal class, which serves no purpose in the new configuration, is being abandoned and discarded by both the corporate state and radical dissidents. The best it can do is attach itself meekly to the new political configuration rising up to replace it.

An ineffectual liberal class means there is no hope of a correction or a reversal through the formal mechanisms of power. It ensures that the frustration and anger among the working and the middle class will find expression now in these protests that lie outside the confines of democratic institutions and the civilities of a liberal democracy. By emasculating the liberal class, which once ensured that restive citizens could institute moderate reforms, the corporate state has created a closed system defined by polarization, gridlock and political charades. It has removed the veneer of virtue and goodness that the liberal class offered to the power elite.

Liberal institutions, including the church, the press, the university, the Democratic Party, the arts and labor unions, set the parameters for limited self-criticism in a functioning democracy as well as small, incremental reforms. The liberal class is permitted to decry the worst excesses of power and champion basic human rights while at the same time endowing systems of power with a morality and virtue it does not possess. Liberals posit themselves as the conscience of the nation. They permit us, through their appeal to public virtues and the public good, to see ourselves and our state as fundamentally good.

But the liberal class, by having refused to question the utopian promises of unfettered capitalism and globalization and by condemning those who did, severed itself from the roots of creative and bold thought, the only forces that could have prevented the liberal class from merging completely with the power elite. The liberal class, which at once was betrayed and betrayed itself, has no role left to play in the battle between us and corporate dominance. All hope lies now with those in the street.

Liberals lack the vision and fortitude to challenge dominant free market ideologies. They have no ideological alternatives even as the Democratic Party openly betrays every principle the liberal class claims to espouse, from universal health care to an end to our permanent war economy to a demand for quality and affordable public education to a return of civil liberties to a demand for jobs and welfare of the working class. The corporate state forced the liberal class to join in the nation’s death march that began with the presidency of Ronald Reagan. Liberals such as Bill Clinton, for corporate money, accelerated the dismantling of our manufacturing base, the gutting of our regulatory agencies, the destruction of our social service programs and the empowerment of speculators who have trashed our economy. The liberal class, stripped of power, could only retreat into its atrophied institutions, where it busied itself with the boutique activism of political correctness and embraced positions it had previously condemned.

Russell Jacoby writes: “The left once dismissed the market as exploitative; it now honors the market as rational and humane. The left once disdained mass culture as exploitative; now it celebrates it as rebellious. The left once honored independent intellectuals as courageous; now it sneers at them as elitist. The left once rejected pluralism as superficial; now it worships it as profound. We are witnessing not simply a defeat of the left, but its conversion and perhaps inversion.”

Hope in this age of bankrupt capitalism comes with the return of the language of class conflict and rebellion, language that has been purged from the lexicon of the liberal class, language that defines this new movement. This does not mean we have to agree with Karl Marx, who advocated violence and whose worship of the state as a utopian mechanism led to another form of enslavement of the working class, but we have to learn again to speak in the vocabulary Marx employed. We have to grasp, as Marx and Adam Smith did, that corporations are not concerned with the common good. They exploit, pollute, impoverish, repress, kill and lie to make money. They throw poor families out of homes, let the uninsured die, wage useless wars to make profits, poison and pollute the ecosystem, slash social assistance programs, gut public education, trash the global economy, plunder the U.S. Treasury and crush all popular movements that seek justice for working men and women. They worship money and power. And, as Marx knew, unfettered capitalism is a revolutionary force that consumes greater and greater numbers of human lives until it finally consumes itself. The dead zone in the Gulf of Mexico is the perfect metaphor for the corporate state. It is part of the same nightmare experienced in postindustrial mill towns of New England and the abandoned steel mills of Ohio. It is a nightmare that Iraqis, Pakistanis and Afghans, living in terror and mourning their dead, endure daily.

What took place early Friday morning in Zuccotti Park was the first salvo in a long struggle for justice. It signaled a step backward by the corporate state in the face of popular pressure. And it was carried out by ordinary men and women who sleep at night on concrete, get soaked in rainstorms, eat donated food and have nothing as weapons but their dignity, resilience and courage. It is they, and they alone, who hold out the possibility of salvation. And if we join them we might have a chance.

 

What People at Occupy Wall Street Want

Occupy Wall Street from David Sauvage on Vimeo.

 

Occupy Wall Street Protests Spread Worldwide

Published on Saturday, October 15, 2011 by Agence France Presse

'Indignant' Activists Launch Worldwide Protests

by Daniel Silva

Activists scuffled with police in London and decried the wealthy in Hong Kong on Saturday as an unprecedented outcry against corporate greed and government cutbacks spread worldwide.

 
Protesters of the 'Indignant' group demonstrate against banking and finance in Rome October 15, 2011. Protesters worldwide geared up for a cry of rage on Saturday against bankers, financiers and politicians they accuse of ruining global economies and condemning millions to poverty and hardship through greed. (REUTERS/Stefano Rellandini)

Inspired by America's "Occupy Wall Street" and Spain's "Indignants", people took to the streets in a rolling action targeting 951 cities in 82 countries from Asia to Europe, Africa and the Americas.

It was the biggest show of power yet by a movement born on May 15 when a rally in Madrid's central Puerta del Sol square sparked a protest that spread internationally.

Anger over unemployment and opposition to the financial elite hung over the protests, which coincided with a Paris meeting of G20 financial powers pre-occupied by the eurozone debt crisis.

But the demands and the sense of urgency among the activists varied depending on the city.

Scuffles broke out in London where about 300 people rallied in the financial district by Saint Paul's Cathedral, raising banners saying: "Strike back!"; "No cuts!" and "Goldman Sachs is the work of the devil!"

Three lines of police, and one line at the rear on horseback, blocked them from heading to the London Stock Exchange and pushed back against lead marchers, some wearing masks.

"I am here today mainly as a sense of solidarity with the movememts that are going on around the world," said Ben Walker, a 33-year-old teacher from the eastern English city of Norwich.

"We're hoping for a kind of justice in the global financial system," the teacher said. He carried a sleeping bag and said he would spend the next night or two in the area.

In Madrid, 100 people in one of a series of five marches set off for an evening rally in the emblematic Cibeles square from where they will proceed to Puerta del Sol for all-night rallies.

"The fight goes on!" they chanted at the start of a six-hour march from the southern suburb of Leganes to the centre of Madrid.

Thousands more marched in Rome where 1,500 police patrolled, famous monuments including the Colosseum and the Roman Forum were closed down and four metro stations were shut.

"Today is only the beginning. We hope to move forward with a global movement," said one protester, Andrea Muraro, a 24-year-old engineering student from northern Padua.

A small group of about 50 protesters gathered outside of Africa's biggest bourse, the Johannesburg Stock Exchange, to voice concern over the country's widening gap between rich and poor.

"We need to stop the greedy wealthy elite from stealing from the poor working class," said "Occupy South Africa" organiser Marius Bosch.

As the day began, around 500 people gathered in the heart of Hong Kong's financial district to vent their anger at the inequities and excesses of free-market capitalism, while 100 demonstrators in Tokyo also voiced fury at the Fukushima nuclear accident.

Around 600 demonstrators in Sydney set up camp outside Australia's central bank, where the plight of refugees and Aboriginal Australians was added to the financial concerns.

Organisers of the worldwide protest, relying heavily on Facebook and Twitter, say demonstrations will be held in 951 cities across 82 countries in Europe, North America, Latin America, Asia and Africa.

The "indignant" protests first took hold in Spain, which has a jobless rate of 20.89 percent rising to 46.1 percent for 16- to 24-year-olds, where for a month activists lived in a ramshackle camp in Puerta del Sol.

They then spread elsewhere in Europe, finding strong backing in crisis-hit countries like Greece, and then worldwide -- last month reaching the centre of global capitalism in Wall Street.

In New York, where since September 17 several hundred people have occupied a small park in the financial district, organisers have called a rally in Times Square for 5:00 pm (2100 GMT).

The protesters declared victory Friday morning when New York authorities at the last minute postponed the evacuation of their camp.

But an impromptu celebration march to nearby Wall Street ended in scuffles and 14 arrests when protesters ignored police instructions to remain on the sidewalks so as not to impede traffic.

US police arrested about three dozen other protesters in Denver, Seattle and San Diego.

Over 100 authors, including Salman Rushdie and Pulitzer Prize-winning novelist Michael Cunningham, have signed an online petition declaring their support for the protests.
 

© 2011 AFP

The Untimely Death of Long-Term Health Insurance

by Robert Reich

Saturday, October 15, 2011

The Administration’s decision to pull the plug on long-term health insurance in the new healthcare law (so-called Community Living Assistance Services and Support or, as it was known by healthcare insiders, CLASS) offers an important lesson. 

As written, the law had three incompatible parts. 

First, it required beneficiaries to receive at least $50 a day if they had a long-term illness or disability (to pay a caregiver or provide other forms of maintenance). That $50 was an absolute minimum. No flexibility on the downside. 

Second, insurance premiums had to fully cover these costs. In budget-speak, the program was to be self-financing. Given the minimum benefit, that meant fairly hefty premiums. 

Third, unlike the rest of the healthcare law, enrollment was to be voluntary. But given the fairly hefty premiums, the only people likely to sign up would know they’d need the benefit because they had or were prone to certain long-term illnesses or disabilities. Healthier people probably wouldn’t enroll. 

Yet if the healthier didn’t enroll, the program would have to be financed entirely by the relatively unhealthy — which meant premiums would have to be even higher. So high, in fact, that even the relatively unhealthy wouldn’t be able to afford it. 

End of story. End of program. 

The lesson: If a public insurance system has minimum benefits and must pay for itself, it can’t be voluntary. Everyone has to sign up.

Or something else has to give — benefits have to be more flexible, or the program can’t be expected to pay for itself. 

For example, Medicare and Social Security are mandatory. Everyone effectively signs up through their payrolls. Even so, questions arise about how flexible their benefits have to be if the programs must be self-financing. 

So what does this mean for the remainder of the new healthcare law? Its fate hinges on the so-called individual mandate — the requirement that everyone, including younger and healthier people, participate (or pay a fine if they don’t).

Today’s decision to jettison long-term care offers clear evidence why that individual mandate is so necessary. 

Unfortunately, the mandate isn’t popular — because it wasn’t modeled on Social Security or Medicare but based instead on private insurers who’ll want to maximize revenues. It’s also vulnerable to constitutional challenge, largely for the same reason. The Supreme Court will likely decide its fate this term. 

Why, oh why, didn’t the Obama administration make life easy for itself and for Americans by choosing the simplest and most efficient system for both primary and long-term health insurance  — Medicare for all? 

It didn’t because it wanted to get Republican votes. It got almost none. And now the Republicans are enjoying the prospect of the law being dismembered piece by piece, starting today.

Local Jobs Through Local Banking

 

JOIN EUROPE IN PASSING A FINANCIAL TRANSACTION TAX

by Frank Thomas

Why Is Treasury Secretary Geithner Beholden to Wall Street?

Wall Street’s U.S. Treasury Secretary Geithner recently told European Commission members he opposed a “Tobin” Financial Transaction Tax on stock trades and other financial instruments. Eurozone  finance ministers are working towards a European-wide FTT involving  harmonization with existing EU transaction levies. But, financial industry experts in the UK – which has long had a 0.25% “stamp duty” on both purchase and sale of stocks by UK incorporated firms, independently of where the transaction takes place and whether the trader is foreign or domestic – are against recent EC FTT proposal of a 0.1% tax on stocks/bonds and a 0.01% tax on derivatives. WHY?

The reasons proffered by libertarian UK and US think tanks are voluminous and generally lacking documentary proof concerning effects of financial transactions taxes on trading volatility and volume, liquidity, stock prices, returns to investors, etc.  See opposing UK studies by Adam Smith Institute, “The Tobin Tax: Reason or Treason” and by U.S. Investment Company Institute, “Frequently Asked Questions on Securities Transactions Taxes” and compare both to the recent 2011 study by Dean Baker of the Center for Economic and Policy Research, “The Deficit-Reducing Potential of a Financial Speculation Tax.”                                                                          

These and other analyses of a FTT raise a couple of credible reasons questioning the workability of such a tax:

1.      Unless a FTT is uniformly and multilaterally implemented for  exchange-traded financial products (stocks, bonds, options, derivatives) in all key world markets and strictly enforced by every nation, it would be tantamount to economic suicide for any one country to go its own way in implementing such a tax. Today’s financial world of executing high-frequency stock and derivative trades in ‘picoseconds’ (one trillionth of a second) and expanding relative homogeneity of financial  product sales (vs. greater heterogeneity of OTC securities) has resulted in a highly competitive global financial industry. This in turn magnifies the temptation and increasing ease of capital flying abroad, of cross-border arbitrage occurring.   

 

For why would a company continue to conduct trading securities in a country where stock transaction and regulatory administrative burden costs are appreciably higher … when such costs are considerably lower in, say, Hong Kong? Of course, this whole flight of capital fear may be slightly overdone knowing that today many countries already have some form of a FTT or stamp tax including: Austria, Denmark, Poland, Spain, Luxembourg, Switzerland, Portugal, Italy, China, Singapore and Hong Kong. The European task is to harmonize individual EU country financial transaction levies with the EC FTT proposal.    

 

People like to cite Sweden’s 1984-90 experience with a stock turnover tax implemented in 1984. The action failed due to poor design, heavy concentration of foreign investors resulting in migration of 50% of stock trade volume to London by 1990.  Hence, all Swedish securities’ taxes were abolished in 1991. In contrast, UK’s “stamp duty” on only stock trading by investors (intermediaries are tax-exempt) hasn’t hurt its ability to have a thriving financial stock exchange, the 4^th largest in the world. The UK stamp duty yielded tax revenues close to 0.3% of GDP in 2007 before stocks crashed. A similar performance in the U.S. would yield over $40 billion in tax revenues today (source: CEPR study). 

                                                                                 

Nevertheless, the point is well made that it’s very important that any FTT, comprising an acceptable range of tax rate differences, be universally applied to all markets – at least in Europe and the U.S. – if  material location and  product substitution problems are to be minimized. If it is not workable to include all countries, other possible avoidance reduction measures include higher exit taxes (on  shares transferred to clearance services, and/or converted to other financial products, on stock securities made to qualify as bonds, on initial public offerings in overseas stock markets); intelligent tax design; pressure on tax havens or bilateral agreements covering treatment of securities.         

 

2.      This brings up another substitution problem experienced by Sweden with its 1984-90 FTT, namely, the ease of tax avoidance or reduction with products designed by sophisticated financial experts. As we all have learned the hard way the past 30 years, global finance is one of the most innovative (and non-transparent) industries operating today, and often not in the general public’s interests. FTT tax avoidance tricks are manifold: switching to debentures, derivatives, options, swaps, forward rate agreements, paying no tax on citizen trades of unregistered foreign shares, increasing use of contracts for differences and trade in American depository receipts (a derivative transaction). The latter three are all UK investor moves to avoid the stock stamp duty. In Sweden, untaxed domestic substitutes were available, making it easy for investors to execute their transactions in substitutes without incurring any additional costs. Even if Sweden had not had cheaper market alternatives and/or so many foreign investors, migration of trading activity would still have occurred because there were no barriers to trading in SEK denominated instruments.    

 

A lesson of the above is that Sweden’s failure with their FTT is hardly a valid reason to dismiss out-of-hand a European-wide FTT. After all, transaction taxes on stocks exist in many countries and forms today. One simply needs to make sure tax avoidance innovations or other avoidance measures threatening the tax base are included into the tax base or charged with a higher exit charge upon leaving the tax regime. If at all possible, this problem area should also incorporate a unified product policy and strict enforcement approach by trading exchanges in Europe and the U.S.

In a time of extreme need for spending austerity and major reforms to counter short-long-term escalating costs and raging deficits, there is a simultaneous need to invest in sustainable projects building JOBS. 

As only part of the recovery strategy, this means all taxes should be on the table, including a FTT tax. Why not attempt to harmonize a European FTT  with a US FTT plan (e.g., such as the DeFazio proposal, H.R. 4191) to neutralize any problems with flight of capital? The chance and amount of tax avoidance that might occur depends on the tax’s universality of design and the costs of avoidance measures. It’s incomprehensible that Treasury Secretary Geithner has not made it one of his missions to engage his counterparts in Europe in reaching a reasonably uniform FTT policy that effectively counter-balances problem areas. The all-important requirement is that the FTT brings in the tax revenue expected of it. Past country projections for such a tax have here and there been well below expectations.                     

The final tax should probably cover trading in stocks, bonds, derivatives, and options. On this basis, Dean Baker of CEPR assumes a U.S. 0.5%  FTT tax on both purchase and sale of stocks versus 0.1% being proposed by European Commission on stocks and bonds and a much lower rate on derivatives. He then projects an annual tax revenue generation of $150 billion, even assuming a considerable reduction in trading volume. These revenues equal 1% of GDP based on a scaled set of taxes on a range of asset securities. This compares to tax revenues equaling 0.3% of GDP for UK’s 0.25% tax on the purchase and sale of stocks only. Assuming only $75 billion is raised by a US FTT, this would cover the following societal costs as estimated by Dean Baker :

·      140% of a 1-year extension of unemployment benefits = $54 Bil.

·      70% of a 1-year payroll tax cut = $107 Bil.

·      75% of projected shortfall of Social Security Trust Fund = $100 Bil.

·      75% of the cumulative shortfall in state budgets = $101 Bil. 

We must Think Bigger both short and long-term to get control of deficits and simultaneously to invest in our nation’s decayed infrastructure, schools, and worker training. A FTT can bring in significant added tax revenues. We are tax revenue and cost bleeding on all fronts including federal, state and local in the face of ±25 million unemployed and underemployed. But the revenue bleeding when taken in context of our investment needs is a HEMMORAGE!

Baker says the FTT will be paid largely by the financial industry and very active traders, including top income classes. Fabrications and Exaggerations abound by think tanks that a FTT will hurt the middle class. But this is not so for one key reason shown in the following data showing the incredible concentration of U.S. stock ownership:  (source: “Wealth, Income and Power” G.W. Domhoff, 2011 and “Recent Trends in Household Wealth in U.S.: “Rising Debt and Middle-Class Squeeze – a 2007 Update” by E.N. Wolff).

·    The top 20% wealth class of Americans owned 91% of all stock 

with only 9% owned by the bottom 9%.

                                                                                                        

·    The top 10% wealth class owned 81% of all stocks and mutual funds with 19% owned by the  bottom 90%.

Above illustrates how small stock ownership is by bottom 90% and 80% of households. Also, the bottom 80% of households owning $10,000 or more in stock value is also relatively small. And ordinary investors owning less than $10,000 in stocks could always be made exempt from a FTT.

One can argue forever over whether a FTT tax will put a damper on casino stock speculation where the insider Big Hitters are the usual Winners … like former Treasury Secretary Paulson was in grand style to the sum of $500 million by short-selling his own firm´s flaky securitized mortgage packages. As one nobel prize economist has said, “Quick buck ultra short-term finance artists are rotting the foundation of our economy.”                                           

We have a democracy where the obscenely rich – mainly through stock, bond, business equity, and real estate investments – have created their own economy for their own needs. An economy where the wealth of all U.S. millionaires exceeds the GDPs of China, Japan, Brazil, Russia, and the EU combined!

And here is Secretary Geithner quietly opposing a European Commission proposed tiny (actually too tiny) 0.1% FTT on stocks and bonds. The billion dollar question is, is his view President Obama´s view? Geithner´s publically unexplained non-support of a uniform financial transaction tax in concert with Europe makes one wonder where his loyalties lie. For in addition to raising substantial funds when designed well, the FTT is fair compensation for the extraordinary damage the financial sector has inflicted upon Mainstreet America. It will also balance taxation of all parts of the economy more fairly to meet critical budget and deficit commitments.   

The European Commission´s proposal is supported by Germany and France. Britain and Sweden oppose on grounds that it will drive away financial trading institutions unless the tax is universal, i.e., either the world is in or we shouldn´t do it, as the Dutch finance minister, Jager, has remarked recently.                                                                     

An earlier impact study concluded that a low 0.1% FTT may result in a drop in GDP of 0.53% in best conditions to a loss of EC income of -1.76% in worst conditions in the long-run. But the study assumptions were questionable and quite different from those of the EC´s current proposal. (The EC proposal excludes any tax on shares and bonds when they are first issued). Some economists feel the FTT plan may expand market volatility and speculation because traders will handle fewer small transactions. However, there´s no empirical proof one way or the other supporting these assumptions. In short, the EC (and most EU member countries) feels the financial sector should pay its share of the financial crisis and expects to achieve $75 billion (Euro 55 billion) annually from the FTT.  

Huge short and long term deficits are the reality facing the U.S. This is in combination with a deeply rooted structural decline in the rate of job generation since 1980 – accelerating the past decade and onward into the future by the new world dynamic of outsourcing, robotisizing, automating, and downgrading jobs to maximize global shareholder returns. The middle class and poor can´t pay for these deficits with depressed wages/benefits and part-time survival jobs. 

The Scale and Diversity of our financial challenges are awesome! Secretary Geithner and President Obama´s need to get it right … bold steps are needed. All options whether related to cost reduction or revenue generation should be on the table. BUT, a compromising compromise or a doing-little fundamental stranglehold is NOT AN OPTION!                                                                               

Frank Thomas, the Netherlands

    

 

 

      

 

 

       

          

The All-American Occupation: A Century of Our Streets Vs. Wall Street

Published on Thursday, October 13, 2011 by TomDispatch.com

by Steve Fraser

Occupy Wall Street, the ongoing demonstration-cum-sleep-in that began a month ago not far from the New York Stock Exchange and has since spread like wildfire to cities around the country, may be a game-changer.  If so, it couldn’t be more appropriate or more in the American grain that, when the game changed, Wall Street was directly in the sights of the protesters.

The fact is that the end of the world as we’ve known it has been taking place all around us for some time.  Until recently, however, thickets of political verbiage about cutting this and taxing that, about the glories of “job creators” and the need to preserve “the American dream,” have obscured what was hiding in plain sight -- that street of streets, known to generations of our ancestors as “the street of torments.”

After an absence of well over half a century, Wall Street is back, center stage, as the preferred American icon of revulsion, a status it held for a fair share of our history.  And we can thank a small bunch of campers in Manhattan’s Zuccotti Park for hooking us up to a venerable tradition of resistance and rebellion.

The Street of Torments

Peering back at a largely forgotten terrain of struggle against “the Street,” so full of sound and fury signifying quite a lot, it’s astonishing -- to a historian of Wall Street, at least -- that the present movement didn’t happen sooner.  It’s already hard to remember that only weeks ago, three years into the near shutdown of the world financial system and the Great Recession, an eerie unprotesting silence still blanketed the country. 

Stories accumulated of Wall Street greed and arrogance, astonishing tales of incompetence and larceny.  The economy slowed and stalled.  People lost their homes and jobs. Poverty reached record levels.  The political system proved as bankrupt as the big banks.  Bipartisan consensus emerged -- but only around the effort to save “too big to fail” financial goliaths, not the legions of victims their financial wilding had left in its wake. 

The political class then prescribed what people already had plenty of: yet another dose of austerity plus a faith-based belief in a “recovery” that, for 99% of Americans, was never much more than an optical illusion.  In those years, the hopes of ordinary people for a chance at a decent future withered and bitterness set in.   

Strangely, however, popular resistance was hard to find.  In the light of American history, this passivity was surpassingly odd.  From decades before the Gilded Age of the late nineteenth century through the Great Depression, again and again Wall Street found itself in the crosshairs of an outraged citizenry mobilized thanks to political parties, labor unions, or leagues of the unemployed.  Such movements were filled with a polyglot mix of middle-class anti-trust reformers, bankrupted small businessmen, dispossessed farmers, tenants and sharecroppers, out-of-work laborers, and so many others. 

If Occupy Wall Street signals the end of our own, atypical period of acquiescence, could a return to a version of “class warfare” that would, once upon a time, have been familiar to so many Americans be on the horizon?  Finally!

What began as a relatively sparsely attended and impromptu affair has displayed a staying power and magnetic attractiveness that has taken the country, and above all the political class, by surprise.  A recent rally of thousands in lower Manhattan, where demonstrators marched from the city’s government center to Zuccotti Park, the location of the “occupiers” encampment, was an extraordinarily diverse gathering by any measure of age, race, or class.  Community organizations, housing advocates, environmentalists, and even official delegations of trade unionists not normally at ease hanging out with anarchists and hippies gave the whole affair a social muscularity and reach that was exhilarating to experience.

Diversity, however, can cut both ways.  Popular protest, to the degree that there’s been much during the recent past -- and mainly over the war in Iraq -- has sometimes been criticized for the chaotic way it assembled a grab-bag of issues and enemies, diffuse and without focus.  Occupy Wall Street embraces diverse multitudes but this time in the interest of convergence.  In its targeting of “the street of torments,” this protean uprising has, in fact, found common ground. To a historian’s ear this echoes loudly.

Karl Marx described high finance as “the Vatican of capitalism,” its diktat to be obeyed without question. We’ve spent a long generation learning not to mention Marx in polite company, and not to use suspect and nasty phrases like “class warfare” or “the reserve army of labor,” among many others.   

In times past, however, such phrases and the ideas that went with them struck our forebears as useful, even sometimes as true depictions of reality.  They used them regularly, along with words like “plutocracy,” “robber baron,” and “ruling class,” to identify the sources of economic exploitation and inequality that oppressed them, as well as to describe the political disenfranchisement they suffered and the subversion of democracy they experienced.   

Never before, however, has “the Vatican of capitalism” captured quite so perfectly the specific nature of the oligarchy that’s run the country for a generation and has now run it into the ground.  Even political consultant and pundit James Carville, no Marxist he, confessed as much during the Clinton years when he said the bond market “intimidates everybody.” 

Perhaps that era of everyday intimidation is finally ending.  Here are some of the signs of it -- literally -- from that march I attended: “Loan Sharks Ate My World” (illustrated with a reasonable facsimile of the Great White from Jaws), “End the Federal Reserve,” “Wall Street Sold Out, Let’s Not Bail-Out,” “Kill the Over the Counter Derivative Market,” “Wall Street Banks Madoff Well,” “The Middle Class is Too Big To Fail,”  “Eat the Rich, Feed the Poor,” “Greed is Killing the Earth.”  During the march, a pervasive chant -- “We are the 99%” -- resoundingly reminded the bond market just how isolated and vulnerable it might become.   

And it is in confronting this elemental, determining feature of our society’s predicament, in gathering together all the multifarious manifestations of our general dilemma right there on “the street of torments,” that Occupy Wall Street -- even without a program or clear set of demands, as so many observers lament -- has achieved a giant leap backward, summoning up a history of opposition we would do well to recall today.

A Century of Our Streets and Wall Street

One young woman at the demonstration held up a corrugated cardboard sign roughly magic-markered with one word written three times: “system,” “system,” “system.”  That single word resonates historically, even if it sounds strange to our ears today.  The indictment of presumptive elites, especially those housed on Wall Street, the conviction that the system over which they presided must be replaced by something more humane, was a robust feature of our country’s political and cultural life for a long century or more.

When in the years following the American Revolution, Jeffersonian democrats raised alarms about the “moneycrats” and their counterrevolutionary intrigues -- they meant Alexander Hamilton and his confederates in particular -- they were worried about the installation in the New World of a British system of merchant capitalism that would undo the democratic and egalitarian promise of the Revolution. 

When followers of Andrew Jackson inveighed against the Second Bank of the United States -- otherwise known as “the Monster Bank” -- they were up in arms against what they feared was the systematic monopolizing of financial resources by a politically privileged elite.  Just after the Civil War, the Farmer-Labor and Greenback political parties freed themselves of the two-party runaround, determined to mobilize independently to break the stranglehold on credit exercised by the big banks back East.

Later in the nineteenth century, Populists decried the overweening power of the Wall Street “devil fish” (shades of Matt Taibbi’s “giant vampire squid” metaphor for Goldman Sachs). Its tentacles, they insisted, not only reached into every part of the economy, but also corrupted churches, the press, and institutions of higher learning, destroyed the family, and suborned public officials from the president on down.  When, during his campaign for the presidency in 1896, the Populist-inspired “boy orator of the Platte” and Democratic Party candidate William Jennings Bryan vowed that mankind would not be “crucified on a cross of gold,” he meant Wall Street and everyone knew it. 

Around the turn of the century, the anti-trust movement captured the imagination of small businessmen, consumers, and working people in towns and cities across America.  The trust they worried most about was “the Money Trust.”  Captained by J.P. Morgan, “the financial Gorgon,” the Money Trust was skewered in court and in print by future Supreme Court justice Louis Brandeis, subjected to withering Congressional investigations, excoriated in the exposés of “muckraking” journalists, and depicted by cartoonists as a cabal of prehensile Visigoths in death-heads.

As the twentieth century began, progressive reformers in state houses and city halls, socialists in industrial cities and out on the prairies, strikebound workers from coast to coast, working-class feminists, antiwar activists, and numerous others were still vigorously condemning that same Money Trust for turning the whole country into a closely-held system of financial pillage, labor exploitation, and imperial adventuring abroad.  As the movements made clear, everyone but Wall Street was suffering the consequences of a system of proliferating abuses perpetrated by “the Street.”

The tradition the Occupy Wall Street demonstrators have tapped into is a long and vibrant one that culminated during the Great Depression.  Then as now, there was no question in the minds of "the 99%” that Wall Street was principally to blame for the country’s crisis (however much that verdict has since been challenged by disputatious academics). 

Insurgencies by industrial workers, powerful third-party threats to replace capitalism with something else, rallies and marches of the unemployed, and, yes, occupations, even seizures of private property, foreclosures forestalled by infuriated neighbors, and a pervasive sense that the old order needed burying had their lasting effect. In response, the New Deal attempted to unhorse those President Franklin Roosevelt termed “economic royalists,” who were growing rich off “other people’s money” while the country suffered its worst trauma since the Civil War.  “The Street” trembled.

“System, System, System”: It would be foolish to make too much of a raggedy sign -- or to leap to conclusions about just how lasting this Occupy Wall Street moment will be and just where (if anywhere) it’s heading.   It would be crazily optimistic to proclaim our own pitiful age of acquiescence ended.

Still, it would be equally foolish to dismiss the powerful American tradition the demonstrators of this moment have tapped into.  In the past, Wall Street has functioned as an icon of revulsion, inciting anger, stoking up energies, and summoning visions of a new world that might save the New World. 

It is poised to play that role again.  Remember this: in 1932, three years into the Great Depression, most Americans were more demoralized than mobilized.  A few years later, all that had changed as “Our Street, Not Wall Street” came alive.  The political class had to scurry to keep up.  Occupy Wall Street may indeed prove the opening act in an unfolding drama of renewed resistance and rebellion against “the system.”

Copyright 2011 Steve Fraser

Steve Fraser is Editor-at-Large of New Labor Forum and co-founder of the American Empire Project (Metropolitan Books). He is, most recently, the author of Wall Street: America’s Dream Palace. He teaches history at Columbia University.

more Steve Fraser

Memo to Occupy! How to Keep the Movement Alive, Spread the Message and Change the World

by Derek Shearer, Professor of Diplomacy at Occidental College and former US Ambassador

from Huffington Post, October 12, 2011

Two cheers for Occupy!

Abrazos from California to all those willing to take action and make a statement against the economic status quo and politics as usual. Your spirit and activism are cheering to those of us from the 60s generation who have not given up on reform in America.

You already have your critics from the right-wing Republican leadership to middle-of-the road commentators like David Brooks. Ignore them. You are more important than you know. A few progressive critics have made an important point: activism without a vision or a program ultimately will die out or be disappointed. Economic inequality in the US is outrageous, and Wall Street interests do heavily influence both political parties -- but being right about the situation does not mean that it will change. Your movement needs content -- and it needs dialogue. Here are a few modest suggestions:

• Organize a national day of Popular Economics teach-ins, focused on economic inequality. Model it after Earth Day or the Vietnam Moratorium. Start on campuses, then take it to communities in civic centers, union halls, churches and schools. There are a number of progressive economists who would participate such as Joe Stiglitz and Paul Krugman (both Nobel Prize winning economists), James Galbraith, Barry Bluestone, Robert Reich, Martin Carnoy, Richard Parker, Richard Rothstein, Jeff Madrick -- and smart political scientists and journalists like Jacob Hacker, Michael Hirsh, John Judis, Caroline Heldman and Tom Edsall. They and many others would be happy to offer their analysis and expertise -- and they all speak economics in English.
• Show the documentary Inside Job by Charles Ferguson. Put up screens in public parks and in front of city halls and have free showings of the film as part of your demonstrations. Make use of the film for Teach-In events in the spring as part of a public outreach strategy.
• Circulate and discuss the New America Foundation's report, The Way Forward, reported on in the New York Times, Oct. 11. This is a serious, progressive plan to move the economy out of the doldrums. It is one example of an intellectual rallying cry for your movement, and an answer to the question: what are you for?
• Give activists copies of what I call The Little White Book -- the paperback Mis-Measuring Our Lives -- Why GDP Doesn't Add Up by Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi, all world class economists, who explain why traditional economic statistics don't do justice to reality and what is important in our lives. Wave copies of the book in front of Congress and the Treasury in Washington, DC, to make the point that economics should put people's lives at its foundation -- and that there are practical ways to for the government to do that.
• Actively support candidates like Elizabeth Warren in Massachusetts and Tammy Baldwin in Wisconsin who are running on economic reform platforms -- and support Barack Obama, but with qualifications (as I outlined in my Huffington Post piece, Thinking About Obama, 9/12/11). And run your own candidates in state and local elections just as the Tea Party did. Many of the more liberal members of Congress got their start by running as anti-war candidates or pro-environment candidates in the 60s and 70s.
• Make allies of artists, musicians, comedians, and the clergy
• Already many of your Occupy sites have included improvised music and art. Reach out to more musicians and artists for songs and posters about economic inequality and justice and the power of Wall Street. Engage performers to put on local concerts. Ask local clergy to reflect on religion's stance on economic inequality. Consider a nationally televised concert for Economic Equality on the Mall in Washington, DC. I'll bet that you could persuade Lady Gaga (she has endorsed Obama) to appear with Bob Dylan and Bruce Springsteen. No doubt Jon Stewart would be happy to be MC.

If you extend the life of your movement by adding content and reaching out to more people through Teach-ins and other forms of public dialogue, you will have a dramatic effect on the issues debated in the 2012 Presidential election. You already have had an impact, adding spine to Democrats in Congress and pushing the White House in a more progressive direction. You could also energize Obama to become a truly progressive President in his second term -- and you could build a movement which would live beyond and outside any one elected leader. At the very least, call on him now to appoint a Presidential commission on Inequality--its causes and solutions.

Feel free to check out copies of Economic Democracy, or A New Social Contract, books which I co-authored with Stanford economist Martin Carnoy, or even peruse the Clinton/Gore campaign platform, Putting People First, which I co-authored with Robert Reich and Ira Magaziner. You might find a few reform proposals which are still relevant.

It's a Fall Offensive to make my heart sing.

The Deficit-Reducing Potential of a Financial Speculation Tax

by Dean Baker

January 2011, Center for Economic and Policy Research

While a number of commissions and organizations around Washington have produced plans for reducing the projected deficit in the decades ahead, most have not included a financial speculation tax (FST) in the mix.¹ This seems peculiar since an FST has several features that could make it attractive as a revenue source.

First, it would help reduce the economic rents earned by the financial sector. A tax on the turnover of stocks, options, credit default swaps and other financial instruments would make it less profitable to trade these assets. To a large extent current trading patterns reflect rent-seeking behavior with little or no economic benefit.

For example, the complex computer algorithms that can allow sophisticated traders to purchase assets ahead of ordinary investors – and therefore gain at their expense – provide no obvious benefit to the economy. In fact, the use of algorithms to jump ahead of ordinary investors reduces the expected gains from long-term investment. If an FST can reduce this sort of trading, it will impose no loss on the economy. This is one of the reasons that even the IMF, an institution generally friendly to banks, has advocated increased taxation of the financial sector.²

In addition, this sort of short-term trading can be enormously profitable. The large banks and hedge funds that engage in this trading are the source of many of the country’s highest salaries. In an economy where inequality has soared over the last three decades, a tax that will reduce the high-end salaries in the financial sector can be an important factor in reducing inequality.

It is also important to recognize that the tax will be borne almost entirely by the financial sector, not by ordinary investors. The financial sector is likely to bear almost the entire burden of the tax since investors are likely to respond to an increase in trading costs by reducing the number of trades they make. Most research suggests that trading volume is relatively elastic, meaning that investors will sharply reduce the frequency of their trades if the cost of a trade goes up.

For example, if the cost of an average trade of a share of stock were to double as a result of a tax, the evidence suggests that it would lead to a 50 percent reduction in trading volume. In this case, investors would be paying no more for their trades in total after the tax than they did before the tax. They would pay twice as much on each trade as a result of the tax, but since they make half as many trades, they would end up paying the same amount in total for their trades. This would mean that, on average, the tax would not increase the amount that investors pay for their trades. (It is worth noting that bills introduced in the last session of Congress exempted from the tax the vast majority of trades carried through by ordinary investors.)

The United Kingdom has long had a tax of 0.25 percent on each side of a stock trade. This tax raised an amount that was just under 0.3 percent of the U.K. GDP in 2007, before world stock markets plunged.³ An equivalent amount of revenue in the United States would be more than $40 billion a year.

The U.K. experience is important for two reasons. First, it shows that a tax on financial transactions is collectable. The government has been able to collect a substantial amount of revenue through this tax with relatively little difficulty. In fact, the Board of Inland Revenue (now HM Revenue and Customs) reported that the administrative cost of collecting this tax is lower than for any other tax.⁴ While some amount of financial transactions has undoubtedly been shifted away from the U.K. to avoid the tax, there clearly is still a substantial amount of trading that is subject to the tax, as the London Stock Exchange remains the largest in Europe.

This raises the second reason why the U.K. experience is important. The existence of the tax has not prevented the U.K. from having a vibrant financial market. The London Stock Exchange is the fourth largest stock exchange in the world. Apparently investors view the benefits of trading on the London exchange as being valuable enough to outweigh the cost of the tax. Presumably this would be even more true in the case of the United States since the U.S. market is even larger. Furthermore, the U.S. government is better positioned than the U.K. government to use economic and political power to discourage countries from establishing havens for avoidance of this tax.

The revenue from the U.K. tax is based exclusively on the taxation of stock trades. Ideally a financial speculation tax would tax not only stock trades but also trades of options, futures, credit default swaps and other derivatives. A recent analysis that applied a scaled set of taxes to a range of assets showed that an FST could easily raise more than 1.0 percent of GDP (approximately $150 billion in 2011) even assuming very substantial reductions in trading volume.⁵ Given the size of the potential revenue from an FST, there is remarkably little interest in Washington policy circles in implementing such a policy.

By comparison, the amount of revenue that could be raised from an FST is more than two and a half times the amount of money needed to pay for the extension of Unemployment Insurance benefits in the recent tax agreement signed into law at the end of 2010, as shown in Figure 1.⁶ It is more than one-third larger than the size of the 1-year payroll tax reduction that will be in effect in 2011.

The potential revenue from an FST is also large relative to other budget items. At one percent of annual GDP, it would raise more than $1.8 trillion over the course of the next decade. This is more than twice the size of the estimated cost of the stimulus package that Congress approved in 2009, as shown in Figure 2.

The projected shortfall in the Social Security trust fund provides another useful comparison with the potential revenue from an FST. The Congressional Budget Office projects that the shortfall over the program’s 75-year planning horizon will be equal to 0.6 percent of GDP over this period.⁷ This means that at 1.0 percent of GDP, the potential revenue from an FST is more than 50 percent larger than the projected size of the Social Security shortfall as shown in Figure 3. In other words, the Social Security shortfall could be entirely filled with the revenue from a tax on financial speculation, with a substantial sum still available for other purposes.

Another item that provides a useful comparison to the revenue that could be raised from an FST is the projected gap in state budgets. The Center on Budget and Policy Priorities projects that the cumulative shortfall in state budgets in fiscal 2011 will be $160 billion, with a gap of $101 billion remaining after taking account of funds coming from federal stimulus programs.⁸ If an FST raised $150 billion in 2011 then it could provide the federal government with almost enough revenue to fill the full gap and $50 billion more than the amount of revenue needed to fill the remaining gap in state budgets, as shown in Figure 4.

Conclusion 

In a context where deficit reduction is now playing a central role in Washington policy debates, it is striking that financial speculation taxes have received almost no attention. Calculations that assume sharp reductions in trading volume from current levels show that an FST can raise an amount of revenue that exceeds 1.0 percent of GDP. This is not just a hypothetical; the revenue collected by the U.K. on its more narrow tax on stock trades shows that it is possible to collect large amounts of money through such taxes. Furthermore, the incidence would be almost entirely on the financial industry and those involved in very active trading.

The potential revenue from such a tax far exceeds the amount of money involved in most items that are heavily debated in Congress, such as the extension of unemployment benefits or the tax breaks going to the wealthiest two percent of the population. The revenue from an FST also vastly exceeds the size of the projected Social Security shortfall. Given the amount of money potentially at stake and the progressivity of the tax, it is surprising that it does not feature more prominently in policy debates. It is not clear what possible downsides would be posed by such a tax, except for its negative impact on the income of people connected with the financial industry.

1 There were at least three economic/budget plans put forward that did include a financial speculation tax as a revenue option: “Investing in America,” by the Century Foundation, Demos, and the Economic Policy Institute, available at http://www.ourfiscalsecurity.org/storage/Blueprint_OFS.pdf; “Report and Recommendations of the Citizens Commission on Jobs, Deficits, and America’s Economic Future, available at http://www.ourfuture.org/report/citizenscommission; and Bowles-Simpson Commission member, Andy Stern’s “The 21st Century Plan for American Leadership,” available at http://www.safeandsecureig.org/sites/default/files/Stern%20Finalversion12-3.pdf. These plans have received far less attention than proposals that do not mention financial speculation taxes.

2 International Monetary Fund. 2010. “A Fair and Substantial Contribution from the Financial Sector: Final Report for the G-20.” Washington, DC: International Monetary Fund, available at http://www.imf.org/external/np/g20/pdf/062710b.pdf.

3 This calculation is derived from the U.K. Board of Inland Revenue’s reported total revenue from its stamp tax of 14.1 billion pounds in its fiscal year running from 2006-2007 (available at http://www.hmrc.gov.uk/stats/tax_receipts/menu.htm). Of this revenue, 10.0 billion pounds was attributable to the stamp tax on property sales (available at http://www.hmrc.gov.uk/stats/stamp_duty/table15-3-0910.pdf), leaving 4.1 billion pounds from the tax on stock trades. This is equal to 0.28 percent of the GDP of the United Kingdom at the time.

4 See Bond, Steve, Mike Hawkins, and Alexander Klemm. 2004. “Stamp Duty on Shares and Its Effect on Share Prices.” London: The Institute for Fiscal Studies, WP04/11 (p 4), available at http://www.ifs.org.uk/wps/wp0411.pdf.

5 Baker, Dean, Robert Pollin, Travis McArthur, and Matt Sherman. “The Potential Revenue from Financial Transactions Taxes.” Washington, DC: Center for Economic and Policy Research, available at http://www.cepr.net/documents/publications/ftt-revenue-2009-12.pdf.

6 The estimate of the cost of the extension of unemployment insurance benefits and the payroll tax cuts were taken from the Congressional Budget Office’s Cost Estimate for HR4853, “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010,” available at http://www.cbo.gov/doc.cfm?index=12020&zzz=41468.

7 Congressional Budget Office, 2010. “CBO's 2010 Long-Term Projections for Social Security: Additional Information.” Washington, DC: Congressional Budget Office, Exhibit 5, available at http://www.cbo.gov/ftpdocs/119xx/doc11943/SocialSecurity_SummaryforWeb.pdf.

8 McNichol, E, P. Oliff, and N. Johnson, 2010. “States Continue to Feel Recession’s Impact.” Washington, DC: Center on Budget and Policy Priorities, available at http://www.cbpp.org/cms/?fa=view&id=711.

A Quest for Hybrid Companies That Profit, but Can Tap Charity

By STEPHANIE STROM

Published: October 12, 2011 by the New York Times

A new type of company intended to put social goals ahead of making profits is taking root around the country, as more states adopt laws to bridge the divide between nonprofits and businesses.

California is the latest state to adopt a statute permitting what is called flexible-purpose corporations, new companies that are part social benefit and part low-profit entities. The companies are now allowed under laws in more than a dozen states and two Indian tribes.

States like New York and Massachusetts are weighing comparable legislation — sometimes also known as low-profit limited liability or benefit corporations — and efforts are afoot to get federal legislation passed that would lower hurdles to the creation of such companies, including a quiet push to get preferential tax treatment for them.

Many of the companies adopting the new structures provide services to nonprofits or are food purveyors that, for example, might employ the disabled. Perhaps the best known is MOO Milk of Vermont, a group of small dairy farmers.

Unlike a straight nonprofit group, these businesses can tap into conventional capital markets as well as philanthropy.

And unlike a for-profit corporation, the structure allows investors to emphasize the social mission over making money, and to be supported by money from foundations.

“Directors of many companies want to do the right thing, but they’re so busy looking at how not to get sued for failing to maximize profits that they don’t think more aspirationally about creating a great company that helps the planet and people and also makes money,” said R. Todd Johnson, a lawyer who is among the leaders of the movement to get states to create new legal structures.

Not surprisingly, the trend concerns some executives in charge of charities, who fear increased competition for philanthropic dollars fueled by the enthusiasm for the new formats among foundations, many of which have been lobbying hard for new laws to foster this type of business.

Many corporate lawyers and regulators also are wary. The California Department of Corporation and the business law section of the corporations committee of the state bar association opposed the law, as have similar organizations in other states. They argue that the new structure holds an inherent conflict of interest and that it will lower standards of fiduciary duty.

“There’s a marketing job that’s being done that somehow these are special,” said William Callison, a lawyer in Colorado whose opposition helped defeat efforts to pass the hybrid incorporation law in his state. “I think they’re anything but special.”

But proponents, like Jed Emerson, a pioneer in developing what he calls “blended value investing,” contend that many of the new organizations do not fit neatly into what have been the accepted models. “Over the last 10 to 20 years, there’s been a host of organization managers and financial investors saying the traditional approach to investing in this bifurcated framework of for-profit and nonprofit doesn’t capture what they’re really trying to achieve,” Mr. Emerson said. “Alternative structures like this allow investors and entrepreneurs to pursue social and environmental impact together with various levels of financial performance.”

One such company, ardentCause, was about to become a traditional limited liability company, or L.L.C., when Michigan began allowing businesses to incorporate as low-profit, limited liability companies, or L3C’s.

The company, founded by three veterans of the automotive industry, develops database software to help nonprofits manage and share information. “It was perfect for us because we believe businesses and nonprofits alike should run sustainably and profitably, but the main motive for us was the mission,” Rosemary Bayer, ardentCause’s chief executive, said of the L3C structure.

Its first product was introduced last fall with support from the First Step Fund, a pool of venture capital drawn from Detroit foundations as part of a broader effort to reinvigorate the city’s economy. Ms. Baer said ardentCause was currently negotiating with another foundation for investment.

Critics like Mr. Callison wonder why a new category of businesses is necessary at all, given that foundations can make investments in standard forms of business. A foundation may, for example, offer a business a loan at a below-market interest rate to spur it to build a factory in an economically blighted neighborhood.

Also, more and more companies are incorporating socially beneficial activities into their core business strategies without abandoning their primary goal of making profits. Hewson Baltzell, who oversees product development for MSCI, a data and research firm known for its global indexes, said that while the number of financial investors deploying what were known as “environmental, social and governance” screens to assess investments, “most investors are still not into the double-bottom line.”

“Do you need it? No, not necessarily,” Mr. Baltzell said. “The argument for it is probably that when push comes to shove over certain issues, if a social mission was baked into the bylaws, it would be legitimate for a board to allow, in certain cases, that mission to trump shareholder value.”

But charities seeking ways to reduce their reliance on donated dollars are increasingly developing programs that could be mistaken for businesses, and for them, such a structure solves a number of headaches. It gives them access to the capital markets, allows them to pay higher compensation levels and provides potential exit strategies, all unavailable to nonprofits.

“It expands the tool kit social enterprises can use to scale and increase the good they do,” said Matt Bannick, managing partner of the Omidyar Network, the organization managing the eBay founder Pierre Omidyar’s commercial and nonprofit investments, which pushed for the new California law.

One of the nonprofits it has supported, Global Integrity, is likely to spin off a project called Foglamp, which it started, into a flexible-purpose company. Foglamp has a worldwide network of 1,200 people that provide research, for example, on a country’s political stability. Hedge funds, institutional investors and global companies pay market rates for the information.

Nathaniel Heller, Global Integrity’s managing director, said that on at least two occasions recently, it had to turn away venture capitalists wanting to invest in Foglamp. “As a nonprofit, we have no equity to offer them,” Mr. Heller said.

That means, he said, that Foglamp can only grow “arithmetically, not geometrically.” He added, “As a nonprofit, we don’t have extra cash sitting around that would allow us to hire five more employees for Foglamp.”

Frontline SMS took another route and organized as a community interest company, or C.I.C.’s, the British corporate designation that has inspired many of the new hybrid in corporation laws passed in the United States. C.I.C.’s are required to have a social purpose like health care and their assets are locked, limiting what can be distributed to shareholders, employees and others.

Frontline was spun out of Kiwanja.net, a California nonprofit whose mission is to develop technology to help nonprofit groups deliver services. “The value proposition is inherently defined in terms of social benefit,” said Sean Martin McDonald, executive director of Frontline. “That reduces a lot of concerns you might normally have from traditional financial investors by making it clear that your mission is primarily social, not primarily about making profits.”

Book Review: After Capitalism

by Linda Greene, from The Bloomington Alternative

October 1, 2011

It’s easy to talk about socialism in the abstract, but hardly anyone tries to imagine and codify exactly what socialism in the United States could be like.

David Schweikart has a vision of what our society could be like after socialism replaces capitalism:

"[T]he Marxian vision of a new world is one in which the work I do — the work we all do — is both challenging and satisfying. Through work I develop my skills and talents, and have the pleasure of contributing to the well-being of others. The work I do involves my body as well as my mind, physical dexterity as well as intelligence — capacities that have been nurtured through education."

Schweikart’s book After Capitalism is an imaginative handbook for creating a socialist American society that succeeds capitalism. It describes in down-to-earth detail a replacement for capitalism that he calls "economic democracy” and how we can bring it about. The book is an entertaining and informative tour de force, with a lot of careful thought behind it. Only reading it can do justice to its complexity.

Schweikart lists four "fundamental problems” with capitalism: "staggering inequality, widespread unemployment, the intensification of work for those who remain employed, and intractable poverty, both domestic and global.”

Besides "its savage inequality,” capitalism is an irrational system: "How can it be,” Schweikart asks, "that the amazing technologies we keep developing tend to intensify, not lessen, the pace of work and make our jobs and lives less, not more, secure?”

***

Schweikart doesn’t envision the total overthrow of capitalism; he thinks it’s wise to incorporate the best qualities of capitalism into economic democracy. "A mass movement dedicated to establishing real as opposed to pseudo democracy is not going to trample on the genuine advances the previous order has achieved,” he says.

---

David Schweikart, After Capitalism, 2nd ed. Lanham, Md: Rowman & Littlefield Publishers Inc., 2011

---

"Economic democracy abolishes private ownership of the means of production and wage labor, but retains the market,” Schweikark says. In other words, economic democracy is a socialist system with a competitive market economy.

Economic democracy, according to Schweikart, has "three basic features, the second of which it shares with capitalism:”

Worker self-management: Each productive enterprise is controlled democratically by its workers.

The market: These enterprises interact with one another and with consumers in an environment largely free of government price controls. Raw materials, instruments of production, and consumer goods all are bought and sold at prices largely determined by the forces of supply and demand.

Social control of investment: Funds for new investment are generated by a capital assets tax and are returned to the economy through a network of public investment banks.”

In economic democracy the means of production belong to the whole society collectively, and workers lease them from the society. "A flat rate tax is the source of revenue and is distributed to regions on a per capita basis,” Schweikart says. The workers receive a "nationally specified minimum per capita income” and the profits of the firms they work in. That income is economic democracy’s "equivalent to the minimum wage.” The government is the "employer of last resort.”

Whereas capitalist companies strive to maximize total profits, in economic democracy the idea is to maximize profits per worker, according to Schweikart. "Economic democracy abolishes private ownership of the means of production and wage labor, but retains the market." Schweikart defines a capitalist as someone "who owns enough productive assets that he can live comfortably on the income from those assets.” Economic democracy makes capitalists obsolete.

Economic democracy is a "genuinely democratic, fully employed, stable, ecologically sustainable society without overwork or poverty,” Schweikart says. As he points out, a healthy capitalism requires unemployment to keep wages down. Further, the threat of job loss is the "basic disciplinary mechanism of the system.”

In economic democracy, as in capitalism, Schweikart says, "stimulating consumer demand is in the immediate interest of every enterprise.” Unlike capitalism, however, economic democacy is not "under competitive pressure to produce, make a profit, reinvest and grow.”

"The transformation from capitalism to economic democracy is nonviolent and comes about as a result of a social movement inspired by deep humanistic ideals (which is the only way it will ever come about),” Schweikart asserts. "One of the ‘conditions,’ if there is to be a relatively peaceful transition from capitalism to socialism, is the coming to power of a Left political party with a radical agenda,” he says.

The labor movement, of course, plays a critical role in changing the economic system, but that’s not to say that other struggles aren’t important and interrelated. As to issues of race, sex, ecology, peace, gay and lesbian liberation, prisons and so forth, "[N]one of these issues in fact can be treated in isolation from the others, although various movements will doubtless have distinctive emphases.”

***

Schweikart doesn’t merely elaborate on the characteristics of economic democracy but offers a blueprint for getting there. "Economic democracy abolishes private ownership of the means of production and wage labor, but retains the market." "Unlike capitalism, however, economic democacy is not 'under competitive pressure to produce, make a profit, reinvest and grow.'"

He suggests ways to move toward economic democracy by creating a more "benign form” of capitalism. Schweikart offers three scenarios for moving peacefully from capitalism to economic democracy, depending in part on the status of the economic system at the time.

After Capitalism leaves questions about specifics: What would happen to the military-industrial system under economic democracy? What would happen to Big Pharma? The health insurance industry? It’s a mark of a good book, however, that it leaves the reader eager to delve further into issues the book focuses on.

Democracy, Schweikart says, "is a system in which a universal electorate is reasonably well informed, active, and unobstructed by a privileged minority class.”

After Capitalism is a stimulating guidebook for those who want to work toward a genuine democracy in the United States.

Linda Greene can be reached at [email protected]

 

Chicago to Wall Street: Pay US Back!

Published on Wednesday, October 12, 2011 by PR Watch

by Mary Bottari

While the Occupy Wall Street movement is sweeping the country and peaceful arrests are mounting, Chicagoans took to the streets this week to hold the big banks accountable for crashing the economy and to demand city, state and federal policies that work for working families.

For many, the goal was stopping the foreclosure mill and telling the big banks it was time to Pay US Back! for the $4.7 trillion bailout. For others, the demands focused on the bailout from the financial crisis including contentious contract negotiations with the administration of Chicago Mayor Rahm Emanuel.

For most, the range of issues were inextricably linked.

Emanuel Goes to Bat for the Big Banks

At the height of the financial crisis in March of 2009, a new president was grappling with an unprecedented meltdown. Huddled with his closest advisers, his instincts were sound.

As described Ron Suskind’s riveting new book, Confidence Men, Obama wanted to restructure the  largest insolvent banks to “strike a blow for prudence” and “change the reckless behavior of Wall Street to show accountability flows in both directions.” 

His economic advisers chewed it over, discussing the pros (Larry Summers and Christina Romer) and cons (Tim Geithner) of breaking up a big bank, but when the President left the room for moment, his chief of staff spoke up.

“Listen, it's not going to fucking happen. We have no fuckin' credibility. So give it up. The job of everyone in this room is to move the President, when he gets back, to a solution that works,” said Rahm Emanuel. Emanuel's last foray into the global economy was as President Clinton’s point man on NAFTA, a trade agreement that cost the United States some 700,000 manufacturing jobs.

After this display of tough love and a subsequent trillion dollar bailout, Wall Street bonuses are bouncing back. The U.S. economy, however, remains in a in a dead stall with zero job creation, massive foreclosures and rapidly rising poverty. 

Take Back Chicago!

Now that Rahm Emanuel is Mayor of Chicago his team is working hard to balance budget deficits on the back of public workers. Rahm and his CEO of Chicago Public Schools (really, that’s his title) want the teachers union to forgo a contractual raise and do 30 percent more time for the same salary.

Why create sweatshops abroad when you can do it at home?

On Monday, 10,000 Chicagoans marched in the streets to tell Emanuel and his friends on Wall Street that enough is enough. Under the rubrik of “Take back Chicago,” community, labor and faith groups rallied for jobs, homes and schools. Occupy Chicago voted to endorse the march and were smart to target the big money at a futures trading conference.

While a banner fluttered off the Michigan Bridge declaring “Wall Street: Steals from the 99% to Give to the Rich. Let's Take it Back!" a merry band of protesters from National People's Action dressed as Robin Hood kayaked up the Chicago River chanting “We are the 99%!” within earshot of the annual meeting Mortgage Bankers Association (MBA). The MBA represents the big banks that created the housing bubble, crashed the economy and are now working hard to speed every foreclosure.

"The Crimes Against the Working People Have Mounted Up"

While some media pundits have complained that the protests breaking out across the nation lack a unified theme, former U.S. Russ Feingold appears to hear the protesters loud and clear.

“The crimes against the working people of this country have mounted up… This is not a time for cautious politics. This is a time to fundamentally identify the crooked way this country is being run, the corruption of Wall Street, the ridiculous notion that very wealthy people are saying that they shouldn't have to help solve our problems. It's time to take it up a few notches,” Feingold told Keith Olbermann.

Feingold and the 99ers know all these issues are interrelated. Wall Street crashed the economy, killing jobs, tanking state and local tax revenues. Mayors like Emanuel should be taking it out of the hide of the 1% before asking the 99% to make more sacrifices.

Tax Wall Street & Start with the Chicago Merc

The folks in Chicago are kicking it up a notch. But they are not just complaining, they are also laying down some concrete plans on how to create jobs and rebuild our economy.

The Chicago Political Economy Group (CPEG) released a plan to create 40,000 jobs in the Chicago area. The jobs plan is funded by a tiny $.25 speculation fee, to be paid by every buyer and seller of derivatives contracts on the Chicago Mercantile Exchange and the Chicago Board Options Exchange. The group estimates that the tiny tax will generate nearly $1.4 billion per year in direct funding for jobs.

Similarly, a growing list of groups is campaigning for the United States reinstate a financial transaction tax on Wall Street trading. A diverse array of groups including, the Rebuild the American Dream Movement, Americans for Financial Reform, AFL-CIO, SEIU, the National Nurses Union, and the New Bottom Line Coalition (over 1,000 faith and housing groups) are throwing their weight behind the idea of a federal financial transaction tax to force Wall Street to help pay for the damage it has done to the economy. Such a tax would raise an estimated $176 billion in revenue.

Internationally the issue is rapidly gaining traction, with the EU proposing a 10 cent per $100 dollars in stock trades and the G-20 set to take up the issue in November.

Click here to send a simple message to Congress that enough is enough. NO CUTS. TAX Wall Street!

© 2011 Center for Media & Democracy

Mary Bottari is the Director of the Center for Media and Democracy's Real Economy Project and editor of their www.BanksterUSA.org site.

THE SEVEN BIGGEST ECONOMIC LIES

by Robert Reich, October 11, 2011

 The President’s Jobs Bill doesn’t have a chance in Congress — and the Occupiers on Wall Street and elsewhere can’t become a national movement for a more equitable society – unless more Americans know the truth about the economy.  

Here’s a short (2 minute 30 second) effort to rebut the seven biggest whoppers now being told by those who want to take America backwards. The major points:

1. Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans’ wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke. 

 2. Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since. (Don’t believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)  

 3. Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody’s economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.

 4. Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They’ll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.

 5. Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that’s because the nation’s health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid’s bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.

 6. Social Security is a Ponzi scheme. Don’t believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800.  

 7. It’s unfair that lower-income Americans don’t pay income tax. Wrong. There’s nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.

 

Demagogues through history have known that big lies, repeated often enough,  start being believed — unless they’re rebutted. These seven economic whoppers are just plain wrong. Make sure you know the truth – and spread it on.

The Class Warfare the Rich Don't Understand

Published on Monday, October 10, 2011 by Al-Jazeera-English

The Masters of the Universe evaded responsibility and defiantly demanded more sacrifice from their victims, says author.

by Heather Digby Parton

"Those who own the country ought to govern it."
                  - Founding father, John Jay

Taxes for the rich are at 35 per cent, the lowest ever in comparison to 1960, when it was 91 per cent . (EPA)

There have been rumblings in the corners of the Tea party movement for some time, but the minute president Obama announced that he was going to ask wealthy Americans to kick in a small bit more in taxes to help pay for some infrastructure improvements in his jobs proposal, the Republicans have been clutching their pearls and gasping for breath like Aunt Pittypat awaiting the arrival of the marauding Yankees.

GOP leader Rush Limbaugh called for the smelling salts, saying "If [Obama] would get all of this actually passed, it would represent perhaps a fatal blow to the US private sector ... I don't know how anyone could even argue about the fact that this is on purpose anymore. To boldly lie that it's not class warfare? It is class warfare. Specifically and purposefully class warfare."

Republican economic guru Paul Ryan dolefully declared, "Class warfare may make for good politics, but it makes for rotten economics. We don't need a system that seeks to divide people. We don't need a system that seeks to prey on people's fear, envy, and anxiety." Indeed. What could be more destructive to the average American than to ask the upper one per cent to kick in what amounts to tip money? The guilt they will feel at such unfairness is bound to create a profound spiritual crisis throughout the land.

A false hope

One would have thought that in 2011, the term "class warfare" would be as out of fashion as Nehru jackets, but after watching the Republicans spend the first two years of Obama's presidency apoplectic over what they defined as hard core socialism put in practice, it stands to reason the old standard would make a comeback. No matter what you call it, rich people complaining about taxes is evergreen. It is also completely ridiculous.

The fact is that the mega-rich have been gobbling up a greater and greater share of the national wealth for several decades now: in 1976 the top 1 per cent of households received 8.9 per cent of all pre-tax income - by 2008, its share had more than doubled to 21.0 per cent. Between 1979 and 2009, the top 5 per cent of American families saw their real incomes increase 72.7 per cent, according to Census data. Over the same period, the lowest-income fifth saw a decrease in real income of 7.4 per cent (by contrast, the 1947-79 period all income groups saw similar income gains, with the lowest income group actually seeing the largest gains). And perhaps most astonishingly, the tax rate for the highest earners was 91 per cent in 1960, 70 per cent in 1980 and only 35 per cent today, the lowest ever with the exception of a couple of years in the late 80s and early 90s.

And it's not as if these people have been suffering during this recession. Unlike the bottom 99 per cent, they've quite smartly recovered from the 2008 unpleasantness. For instance, according to a recent New York Times report, executive pay at 200 big US companies last year went up by an average 23 per cent over 2009 - the median executive salary was 10.8m USD. Meanwhile, the average American family's household net worth declined 23 per cent between 2007 and 2009.

Considering this somewhat ostentatious disparity, one would think that those who are doing well would decide to lay low and quietly count their money so as not to draw undue attention to their good fortune. One might even have expected them to take up good works and be especially generous in order to deflect the anger and resentment that any sentient being could see might result from such blatant unfairness. But no. They have instead waged a public campaign of extravagant whining, complaining incessantly that they are being scapegoated for the nation's economic ills and throwing tantrums at the mere suggestion that they might need to contribute a little bit more in taxes to make up for the carnage their bad bets left in their wake.

Read the full article at Al-Jazeera English.

© 2011 Al-Jazeera-English

'Occupy Wall Street' Should Also Take Aim at Health Insurance Companies

Published on Monday, October 10, 2011 by iWatch News

Health insurers trade group is calling the tune in Washington

by Wendell Potter

The lobbyists for U.S. health insurers surely have to be feeling a little uneasy knowing that thousands of Occupy Wall Street demonstrators who have been marching and protesting in Washington as well as New York and other cities might target them in the days ahead. After all, the headquarters of the insurers’ biggest lobbying and PR group, America’s Health Insurance Plans (AHIP), at 601 Pennsylvania Avenue, N.W., is just blocks away from Freedom Plaza, where the demonstrators have set up camp, and problems with health insurers appear to be near the top of the list of protesters’ concerns.

Health Care for America Now, an umbrella advocacy group that played a key role in the health care reform debate, last week analyzed the 546 comments that had been posted by then on “ We are the 99 percent ” Tumblr site. It found that 262 of the comments mention such problems as getting denials for doctor-ordered care from their insurance companies and having to forego treatment because of hefty out-of-pocket costs.

In my book, Deadly Spin , I wrote about how the “Wall Street takeover” of the American health care system has created many of the problems mentioned in the Tumblr site. I also described how AHIP offices have often been command central for developing and implementing coordinated efforts to derail health care reform efforts in the past and how the organization helped shape major provisions of the Affordable Care Act, which Congress passed last year.

Over the past few years, many of the largest health insurance firms have converted from nonprofit to for-profit status and have been acquired by huge corporations whose stock is traded on the New York Stock Exchange. Today, more than one-third of all Americans are enrolled in a health benefit plan owned and operated by just five large insurers — a group that last year hauled in nearly $12 billion in profits. These companies have grown so big and powerful that they now often determine who has access to affordable care and who doesn’t. Their business practices, condoned by investors and Wall Street analysts alike, have contributed to the growing number of Americans without health insurance— more than 50 million of us at last count.

I worked for two of those large companies, Humana and CIGNA, during my nearly 20 years in the insurance industry, and I participated in many strategy meetings at AHIP’s offices in Washington where plans were hatched to influence public policy.

I am now watching how AHIP is getting Obama administration officials to write the regulations required by the Affordable Care Act in ways that benefit insurance companies more than consumers. And I have talked to administration officials who have quit their jobs in disgust as the White House has repeatedly sided with insurers rather than consumer advocates, as important regulations were nearing completion.

Here’s an example. Earlier this summer, the administration announced rules pertaining to new rights we supposedly now have, thanks to the Affordable Care Act, to appeal decisions made by insurers that don’t go our way. When the Department of Health and Human Services quietly released the regulations in late June, consumer advocates realized that insurers had, for all practical purposes, written them.

As Sabrina Corlette of Georgetown University’s Health Policy Institute wrote, the administration narrowed the range of issues consumers can appeal, gave insurers up to 72 hours, rather than 24 hours, to made decisions on emergency care claims and weakened a provision requiring health plans to provide enrollees with information about their appeal rights in understandable language. Administration officials also cut in half the number of days patients have for appeals and allowed insurers to frequently choose their own “judge and jury” when their enrollees request an external review.

Just last week, AHIP’s muscle was on display when the Institutes of Medicine released guidelines for the Obama administration to follow in establishing the “essential benefits package” that all health plans will have to offer on the health care exchanges, or insurance marketplaces, beginning in 2014.

In January, an AHIP executive warned the IOM about making the benefits package too “rich.” Insurers want the package to be as skinny as possible, which will enable them to continue selling plans that, in many cases, are inadequate for many peoples’ needs.

The IOM’s recommendation is almost exactly what AHIP suggested. 

So if the Occupy Wall Street demonstrators want to show up in front of the offices of some of the most important and influential people in Washington, whose strings are pulled by a handful of people on Wall Street, they will not want to miss 601 Pennsylvania Avenue, N.W. Trust me on this.

© 2011 Center for Public Integrity

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

Job Destroyers Don't Deserve a Tax Holiday

Published on Monday, October 10, 2011 by OtherWords

When thinks tanks from the left and the right agree on something, Congress should pay attention.

by Sarah Anderson and Chuck Collins

A coalition of big businesses is waging a campaign for a massive tax holiday on corporate profits stashed overseas. Its lobbyists claim that this windfall would create millions of jobs. If our lawmakers buy that, they've got very short memories.

Just seven years ago, big American corporations made the exact same promises. And Congress gave them a tax holiday that allowed 843 companies to reduce their tax rate from 35 percent to 5.25 percent on $312 billion in offshore profits.

What did Americans get in return? This week, our organization, the progressive Institute for Policy Studies, released a report showing that 58 companies that received 70 percent of the tax windfalls didn't boost employment. In fact, they actually destroyed a total of nearly 600,000 jobs.

Almost simultaneously, the conservative Heritage Foundation released a paper with the same conclusion: Tax holidays don't create jobs. When thinks tanks from the left and the right agree on something, Congress should pay attention.

But we're up against powerful forces.

A coalition called Working to Invest Now in America, which goes by the slick name WIN America, has deployed more than 160 lobbyists and spent at least $50 million to win a tax holiday on more than $1 trillion in offshore funds that might get repatriated if Uncle Sam grants this tax break. Lawmakers in both the House and the Senate have introduced bills that would do just that.

The Senate version, unveiled in early October, would give the deepest tax discounts to firms that create jobs, but that requirement only applies for one year. We need jobs that last, not positions that could vanish after the nation's supposed job creators get their huge tax windfall.

Some executives argue that without the tax holiday, these global firms would keep their cash offshore permanently, and it's better for Uncle Sam to get something rather than nothing. Nevertheless, offering such drastic tax discounts sets a dangerous precedent.

Back in 2004, the corporate lobbyists argued that the holiday would be a "one-time" deal. But after they won that round, they turned around and began amassing their offshore stashes once again. They must have counted on getting more tax holidays.

A tax holiday for job destroyers isn't only a waste of taxpayer money at a time of urgent needs. It hurts small businesses and other firms that operate only domestically. What sense does it make to give global companies deep discounts on their IRS obligations while these small, yet strong, engines of job creation face standard tax rates?

There are many things that we can do to strengthen the U.S. economy and spur job growth. But providing subsidies to companies whose business model is based on minimizing labor costs, sending profits offshore, and dodging taxes isn't a good strategy. These companies may compensate their CEOs lavishly and deliver value to shareholders, but they aren't in the business of creating jobs.

The WIN America campaign leader that stands to gain the most is Pfizer. The pharmaceutical giant was the leading beneficiary of the 2004 tax holiday when it toted $40 billion in foreign funds back to the United States.

And what did Americans get for Pfizer's subsidy? Instead of creating jobs, the firm proceeded to scrap more than 58,000 jobs in the years since that holiday.

Today, Pfizer is holding more than $48 billion in profits offshore. Will Congress be fooled again?

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.

more Sarah Anderson

Chuck Collins is a senior scholar at the Institute for Policy Studies where he directs the Program on Inequality and the Common Good (www.inequality.org). Chuck is also a co-founder of Wealth for the Common Good, a network of business leaders, high-income households and partners working together to promote shared prosperity and fair taxation.He is co-author of The Moral Measure of the Economy and with Bill Gates Sr. of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes

NYT Editorial: Protesters Against Wall Street

Published on Sunday, October 9, 2011 by the New York Times

New York Times Editorial

As the Occupy Wall Street protests spread from Lower Manhattan to Washington and other cities, the chattering classes keep complaining that the marchers lack a clear message and specific policy prescriptions. The message — and the solutions — should be obvious to anyone who has been paying attention since the economy went into a recession that continues to sock the middle class while the rich have recovered and prospered. The problem is that no one in Washington has been listening.

At this point, protest is the message: income inequality is grinding down that middle class, increasing the ranks of the poor, and threatening to create a permanent underclass of able, willing but jobless people. On one level, the protesters, most of them young, are giving voice to a generation of lost opportunity.

The jobless rate for college graduates under age 25 has averaged 9.6 percent over the past year; for young high school graduates, the average is 21.6 percent. Those figures do not reflect graduates who are working but in low-paying jobs that do not even require diplomas. Such poor prospects in the early years of a career portend a lifetime of diminished prospects and lower earnings — the very definition of downward mobility.

The protests, though, are more than a youth uprising. The protesters’ own problems are only one illustration of the ways in which the economy is not working for most Americans. They are exactly right when they say that the financial sector, with regulators and elected officials in collusion, inflated and profited from a credit bubble that burst, costing millions of Americans their jobs, incomes, savings and home equity. As the bad times have endured, Americans have also lost their belief in redress and recovery.

The initial outrage has been compounded by bailouts and by elected officials’ hunger for campaign cash from Wall Street, a toxic combination that has reaffirmed the economic and political power of banks and bankers, while ordinary Americans suffer.

Extreme inequality is the hallmark of a dysfunctional economy, dominated by a financial sector that is driven as much by speculation, gouging and government backing as by productive investment.

When the protesters say they represent 99 percent of Americans, they are referring to the concentration of income in today’s deeply unequal society. Before the recession, the share of income held by those in the top 1 percent of households was 23.5 percent, the highest since 1928 and more than double the 10 percent level of the late 1970s.

That share declined slightly as financial markets tanked in 2008, and updated data is not yet available, but inequality has almost certainly resurged. In the last few years, for instance, corporate profits (which flow largely to the wealthy) have reached their highest level as a share of the economy since 1950, while worker pay as a share of the economy is at its lowest point since the mid-1950s.

Income gains at the top would not be as worrisome as they are if the middle class and the poor were also gaining. But working-age households saw their real income decline in the first decade of this century. The recession and its aftermath have only accelerated the decline.

Research shows that such extreme inequality correlates to a host of ills, including lower levels of educational attainment, poorer health and less public investment. It also skews political power, because policy almost invariably reflects the views of upper-income Americans versus those of lower-income Americans.

No wonder then that Occupy Wall Street has become a magnet for discontent. There are plenty of policy goals to address the grievances of the protesters — including lasting foreclosure relief, a financial transactions tax, greater legal protection for workers’ rights, and more progressive taxation. The country needs a shift in the emphasis of public policy from protecting the banks to fostering full employment, including public spending for job creation and development of a strong, long-term strategy to increase domestic manufacturing.

It is not the job of the protesters to draft legislation. That’s the job of the nation’s leaders, and if they had been doing it all along there might not be a need for these marches and rallies. Because they have not, the public airing of grievances is a legitimate and important end in itself. It is also the first line of defense against a return to the Wall Street ways that plunged the nation into an economic crisis from which it has yet to emerge.

Panic of the Plutocrats

Published on Monday, October 10, 2011 by The New York Times

by Paul Krugman

It remains to be seen whether the Occupy Wall Street protests will change America’s direction. Yet the protests have already elicited a remarkably hysterical reaction from Wall Street, the super-rich in general, and politicians and pundits who reliably serve the interests of the wealthiest hundredth of a percent.

And this reaction tells you something important — namely, that the extremists threatening American values are what F.D.R. called “economic royalists,” not the people camping in Zuccotti Park.

Consider first how Republican politicians have portrayed the modest-sized if growing demonstrations, which have involved some confrontations with the police — confrontations that seem to have involved a lot of police overreaction — but nothing one could call a riot. And there has in fact been nothing so far to match the behavior of Tea Party crowds in the summer of 2009.

Nonetheless, Eric Cantor, the House majority leader, has denounced “mobs” and “the pitting of Americans against Americans.” The G.O.P. presidential candidates have weighed in, with Mitt Romney accusing the protesters of waging “class warfare,” while Herman Cain calls them “anti-American.” My favorite, however, is Senator Rand Paul, who for some reason worries that the protesters will start seizing iPads, because they believe rich people don’t deserve to have them.

Michael Bloomberg, New York’s mayor and a financial-industry titan in his own right, was a bit more moderate, but still accused the protesters of trying to “take the jobs away from people working in this city,” a statement that bears no resemblance to the movement’s actual goals.

And if you were listening to talking heads on CNBC, you learned that the protesters “let their freak flags fly,” and are “aligned with Lenin.”

The way to understand all of this is to realize that it’s part of a broader syndrome, in which wealthy Americans who benefit hugely from a system rigged in their favor react with hysteria to anyone who points out just how rigged the system is.

Last year, you may recall, a number of financial-industry barons went wild over very mild criticism from President Obama. They denounced Mr. Obama as being almost a socialist for endorsing the so-called Volcker rule, which would simply prohibit banks backed by federal guarantees from engaging in risky speculation. And as for their reaction to proposals to close a loophole that lets some of them pay remarkably low taxes — well, Stephen Schwarzman, chairman of the Blackstone Group, compared it to Hitler’s invasion of Poland.

And then there’s the campaign of character assassination against Elizabeth Warren, the financial reformer now running for the Senate in Massachusetts. Not long ago a YouTube video of Ms. Warren making an eloquent, down-to-earth case for taxes on the rich went viral. Nothing about what she said was radical — it was no more than a modern riff on Oliver Wendell Holmes’s famous dictum that “Taxes are what we pay for civilized society.”

But listening to the reliable defenders of the wealthy, you’d think that Ms. Warren was the second coming of Leon Trotsky. George Will declared that she has a “collectivist agenda,” that she believes that “individualism is a chimera.” And Rush Limbaugh called her “a parasite who hates her host. Willing to destroy the host while she sucks the life out of it.”

What’s going on here? The answer, surely, is that Wall Street’s Masters of the Universe realize, deep down, how morally indefensible their position is. They’re not John Galt; they’re not even Steve Jobs. They’re people who got rich by peddling complex financial schemes that, far from delivering clear benefits to the American people, helped push us into a crisis whose aftereffects continue to blight the lives of tens of millions of their fellow citizens.

Yet they have paid no price. Their institutions were bailed out by taxpayers, with few strings attached. They continue to benefit from explicit and implicit federal guarantees — basically, they’re still in a game of heads they win, tails taxpayers lose. And they benefit from tax loopholes that in many cases have people with multimillion-dollar incomes paying lower rates than middle-class families.

This special treatment can’t bear close scrutiny — and therefore, as they see it, there must be no close scrutiny. Anyone who points out the obvious, no matter how calmly and moderately, must be demonized and driven from the stage. In fact, the more reasonable and moderate a critic sounds, the more urgently he or she must be demonized, hence the frantic sliming of Elizabeth Warren.

So who’s really being un-American here? Not the protesters, who are simply trying to get their voices heard. No, the real extremists here are America’s oligarchs, who want to suppress any criticism of the sources of their wealth.

© 2011 The New York Times Company

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 Declaration of Economic Democracy

by Keith Harrington, from Huffington Post, October 3, 2011

A video from day 14 of the Occupy Wall Street protests shows an impressively huge crowd flowing through the arches of the NYPD headquarters in New York City. The crowd is chanting: "The whole world is watching, the whole world is watching!" While that may not be the case yet, we're getting there. And that brings up a pretty big problem for the protesters and the future of the movement: If the whole world does end up watching, what exactly will they be watching?

Like lots of leftists, I'm inspired by this movement, and elated that it's happening. But I'm deeply worried it could end up falling upon the sword of its own self-imposed ambiguity. Nothing sums up that ambiguity better than a quote from a recent article on the protests:

When [a protester was] asked how long he was planning to be there [he replied]... "Until change is made to the financial structure."

What that change might look like, no one can say for sure.

Here's what the occupiers are getting absolutely right: protesting and gaining attention for it. The world needs to know that there are those among us who are ready to take action, and not stand by while a ruthless, soulless elite hijacks our civilization and flies it into the ground.

But besides declaring "we're not going to take it" -- which is certainly an important thing -- the only other declaration the protesters have made is "we're angry, we're fed up, and we believe in a better world." And that's what they're doing wrong. Public outrage with the status quo is not news to anyone.

What the world needs to hear is an answer to the questions: "Where do we go from here? Is there a truly workable alternative to capitalism? How do we solve the myriad crises of capitalism?"

I understand there is a natural allergy among the protesters to taking this awesome amorphous mass of people power they've assembled and solidifying it around a core set of leaders or defined principles. And indeed, there are plenty of good reasons to avoid entrusting the voice and vision of the movement to a spokesperson. This is a people's movement; it's not a search for a messiah of hope to pull us out of dark times. It's about learning to pull ourselves out.

But while you don't need a spokesperson, that doesn't mean you shouldn't have "spokes-principles" -- a core set of ideas or answers to the crises of the Wall-Street Empire that speak for you, that communicate who you are to a public that's tuning in more and more every day.

Without that set of spokes-principles, the public may have sympathy for the protesters' motives, but it will ultimately fear their objectives. And the organizers will have done the world a great disservice by earning a big public spotlight and failing to shine it on answers that the world urgently needs to know and start talking about if we're going to have a fighting chance of saving our civilization.

The right spokes-principles can encompass all of the fluid, diverse, populist beauty and verve of the protests and channel it into a vision that the broader public can see itself and its aspirations reflected in.

If it's about anything, Occupy Wall Street is about challenging the economic imperialism of Wall Street. Naturally then, the movement's spokes-principles should be the principles of economic democracy as roughly defined here:

1. People over profit: An economic democracy is an economy that subordinates profit to people, not the other way around.
2. Stakeholders over shareholders: An economic democracy is an economic system in which the voices, rights, and interests of all economic stakeholders -- including employees, stockholders, communities, ecosystems, other species and future generations -- are represented. Unlike our current economy where shareholders are given primacy, in an economic democracy no one stakeholder is granted a disproportionate degree of power and privilege.
3. Better not bigger: In order to reorient the economy towards people and all stakeholders, we have to release it from the captivity of profit. In an economy geared towards GDP growth, the bottom line is the bottom line, and protecting it means suppressing wages, slashing payrolls, passing on costs to other people, other places, and other times. Most importantly, our economy has outgrown the physical limits of the planet, and saving civilization means stopping growth. A democratic economy should be a steady-state economy where existing wealth is distributed fairly, and where economic health is measured by true indicators of social welfare rather than the blunt and archaic tool of GDP. The Center for the Advancement of the Steady State Economy is a useful resource for steady-state solutions.
4. Main Street not Wall Street : The design of our financial system undermines true markets and productive community-based enterprises in favor of reckless speculation. It is designed to suck wealth away from communities and towards the corporate elite. A good blueprint here is the New Economy Working Group's report How to Liberate America from Wall Street Rule.
5. One employee, one vote: An economic democracy is an economy where companies are built around the concept of one worker, one vote. In an economic democracy a company is a community of employees, where the employees, as full citizens of that community and the true source of company profit, decide how to invest that profit in the community. In this way, an economic democracy is distinct from both capitalism and socialism -- both variations of economic oligarchy -- where private boards on the one hand and public bureaucrats on the other decide how the profits workers generate are disposed of.
6. Economic Constitutionalism: In the United States Constitution the framers properly defined the powers and limits to the powers of the powerful institutions that govern our society. In an age where corporations have become as powerful as any institution of government, and have amassed undue influence over the policies of those institutions, their powers need to be defined and constitutionally limited just like any institution of government.

This Declaration of Economic Democracy is by no means an exhaustive list. But it is an endlessly expansive one. One that is broad enough in its framework to incorporate and synthesize the wide diversity of dreams, grievances, demands and aspirations of the many people involved in the protests. It's one that can help the broader public understand and identify with the movement, and help the movement build an identity that's powerful enough to bring down the Wall and build a better world.

The Wall Street Occupiers and the Democratic Party

by Robert Reich

Friday, October 7, 2011

Will the Wall Street Occupiers morph into a movement that has as much impact on the Democratic Party as the Tea Party has had on the GOP? Maybe. But there are reasons for doubting it.

Tea Partiers have been a mixed blessing for the GOP establishment – a source of new ground troops and energy but also a pain in the assets with regard to attracting independent voters. As Rick Perry and Mitt Romney square off, that pain will become more evident.

So far the Wall Street Occupiers have helped the Democratic Party. Their inchoate demand that the rich pay their fair share is tailor-made for the Democrats’ new plan for a 5.6 percent tax on millionaires, as well as the President’s push to end the Bush tax cut for people with incomes over $250,000 and to limit deductions at the top.

And the Occupiers give the President a potential campaign theme. “These days, a lot of folks who are doing the right thing aren’t rewarded and a lot of folks who aren’t doing the right thing are rewarded,” he said at his news conference this week, predicting that the frustration fueling the Occupiers will “express itself politically in 2012 and beyond until people feel like once again we’re getting back to some old-fashioned American values.”

But if Occupy Wall Street coalesces into something like a real movement, the Democratic Party may have more difficulty digesting it than the GOP has had with the Tea Party.

After all, a big share of both parties’ campaign funds comes from the Street and corporate board rooms. The Street and corporate America also have hordes of public-relations flacks and armies of lobbyists to do their bidding – not to mention the unfathomably deep pockets of the Koch Brothers and Dick Armey’s and Karl Rove’s SuperPACs. Even if the Occupiers have access to some union money, it’s hardly a match.

Yet the real difficulty lies deeper. A little history is helpful here.

In the early decades of the twentieth century, the Democratic Party had no trouble embracing economic populism. It charged the large industrial concentrations of the era – the trusts – with stifling the economy and poisoning democracy. In the 1912 campaign Woodrow Wilson promised to wage “a crusade against powers that have governed us … that have limited our development … that have determined our lives … that have set us in a straightjacket to so as they please.” The struggle to break up the trusts would be, in Wilson’s words, nothing less than a “second struggle for emancipation.”

Wilson lived up to his words – signing into law the Clayton Antitrust Act (which not only strengthened antitrust laws but also exempted unions from their reach), establishing the Federal Trade Commission (to root out “unfair acts and practices in commerce”), and creating the first national income tax.

Years later Franklin D. Roosevelt attacked corporate and financial power by giving workers the right to unionize, the 40-hour workweek, unemployment insurance, and Social Security. FDR also instituted a high marginal income tax on the wealthy.

Not surprisingly, Wall Street and big business went on the attack. In the 1936 campaign, Roosevelt warned against the “economic royalists” who had impressed the whole of society into service. “The hours men and women worked, the wages they received, the conditions of their labor … these had passed beyond the control of the people, and were imposed by this new industrial dictatorship,” he warned. What was at stake, Roosevelt thundered, was nothing less than the “survival of democracy.” He told the American people that big business and finance were determined to unseat him. “Never before, in all our history, have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me, and I welcome their hatred!”

By the 1960s, though, the Democratic Party had given up on populism. Gone from presidential campaigns were tales of greedy businessmen and unscrupulous financiers. This was partly because the economy had changed profoundly. Postwar prosperity grew the middle class and reduced the gap between rich and poor. By the mid-1950s, a third of all private-sector employees were unionized, and blue-collar workers got generous wage and benefit increases.

By then Keynesianism had become a widely-accepted antidote to economic downturns – substituting the management of aggregate demand for class antagonism. Even Richard Nixon purportedly claimed “we’re all Keynesians now.” Who needed economic populism when fiscal and monetary policy could even out the business cycle, and the rewards of growth were so widely distributed?

But there was another reason for the Democrats’ increasing unease with populism. The Vietnam War spawned an anti-establishment and anti-authoritarian New Left that distrusted government as much if not more than it distrusted Wall Street and big business. Richard Nixon’s electoral victory in 1968 was accompanied by a deep rift between liberal Democrats and the New Left, which continued for decades.

Enter Ronald Reagan, master storyteller, who jumped into the populist breach. If Reagan didn’t invent right-wing populism in America he at least gave it full-throated voice. “Government is the problem, not the solution,” he intoned, over and over again. In Reagan’s view, Washington insiders and arrogant bureaucrats stifled the economy and hobbled individual achievement.

The Democratic Party never regained its populist footing. To be sure, Bill Clinton won the presidency in 1992 promising to “fight for the forgotten middle class” against the forces of “greed,” but Clinton inherited such a huge budget deficit from Reagan and George H.W. Bush that he couldn’t put up much of a fight. And after losing his bid for universal health care, Clinton himself announced that the “era of big government” was over – and he proved it by ending welfare.

Democrats have not been the ones to engage in class warfare. That was the distinct product of right-wing Republican populism. Anybody recall the Republican ad in the 2004 presidential election describing Democrats as a “tax-hiking, government spending, latte-drinking, sushi-eating, Volvo-driving, New York Times-reading, body-piercing, Hollywood-loving, left-wing freak Show?”

Republicans repeatedly attacked John Kerry as a “Massachusetts liberal” who was part of the “Chardonnay-and-brie set.” George W. Bush mocked Kerry for finding a “new nuance” each day on Iraq – drawing out the word “nuance” to emphasize Kerry’s French cultural elitism. “In Texas, we don’t do nuance,” he said, to laughter and applause. House Republican leader Tom DeLay opened his campaign speeches by saying “Good morning or, as John Kerry would say, Bonjour.”

The Tea Party has been quick to pick up the same class theme. At the Conservative Political Action Conference of 2010, Minnesota Governor Tom Pawlenty attacked “the elites” who believe Tea Partiers are “not as sophisticated because a lot of them didn’t go to Ivy League Schools” and “don’t hang out at … Chablis-drinking, Brie-eating parties in San Francisco.” After his son Rand Paul was elected for Kentucky’s Senate seat that May, Congressman Ron Paul explained that voters want to “get rid of the power people who run the show, the people who think they’re above everyone else.”

Which brings us to the present day. Barack Obama is many things but he is as far from left-wing populism as any Democratic president in modern history. True, he once had the temerity to berate “fat cats” on Wall Street, but that remark was the exception – and subsequently caused him endless problems on the Street.

To the contrary, Obama has been extraordinarily solicitous of Wall Street and big business – making Timothy Geithner Treasury Secretary and de facto ambassador from the Street; seeing to it that Bush’s Fed appointee, Ben Bernanke, got another term; and appointing GE Chair Jeffrey Immelt to head his jobs council.

Most tellingly, it was President Obama’s unwillingness to place conditions on the bailout of Wall Street – not demanding, for example, that the banks reorganize the mortgages of distressed homeowners, and that they accept the resurrection of the Glass-Steagall Act, as conditions for getting hundreds of billions of taxpayer dollars – that contributed to the new populist insurrection.

The Wall Street bailout fueled the Tea Party (at the Utah Republican convention that ousted incumbent Republican Senator Robert Bennett in 2010, the mob repeatedly shouted “TARP! TARP! TARP!”), and it surely fuels some of the current fulminations of Occupy Wall Street.

This is not to say that the Occupiers can have no impact on the Democrats. Nothing good happens in Washington – regardless of how good our president or representatives may be – unless good people join together outside Washington to make it happen. Pressure from the left is critically important.

But the modern Democratic Party is not likely to embrace left-wing populism the way the GOP has embraced – or, more accurately, been forced to embrace – right-wing populism. Just follow the money, and remember history.

Recession Officially Over, U.S. Incomes Kept Falling

By ROBERT PEAR Published: October 9, 2011 by the New York Times

WASHINGTON — In a grim sign of the enduring nature of the economic slump, household income declined more in the two years after the recession ended than it did during the recession itself, new research has found.

Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials. During the recession — from December 2007 to June 2009 — household income fell 3.2 percent.

The finding helps explain why Americans’ attitudes toward the economy, the country’s direction and its political leaders have continued to sour even as the economy has been growing. Unhappiness and anger have come to dominate the political scene, including the early stages of the 2012 presidential campaign.

President Obama recently called the economic situation “an emergency,” and over the weekend he assailed Congressional Republicans for opposing his jobs bill, which includes tax cuts that would raise take-home pay. Republicans blame Mr. Obama for the slump, saying he has issued a blizzard of regulations and promised future tax increases that have hurt business and consumer confidence.

Those arguments may be heard repeatedly this week, as the Senate begins debating the jobs bill. The full bill — a mix of tax cuts, public works, unemployment benefits and other items, costing $447 billion — is unlikely to pass, but individual parts seem to have a significant chance.

The full 9.8 percent drop in income from the start of the recession to this June — the most recent month in the study — appears to be the largest in several decades, according to other Census Bureau data. Gordon W. Green Jr., who wrote the report with John F. Coder, called the decline “a significant reduction in the American standard of living.”

That reduction occurred even though the unemployment rate fell slightly, to 9.2 percent in June compared with 9.5 percent two years earlier. Two main forces appear to have held down pay: the number of people outside the labor force — neither working nor looking for work — has risen; and the hourly pay of employed people has failed to keep pace with inflation, as the prices of oil products and many foods have jumped.

During the recession itself, by contrast, wage gains outpaced inflation.

One reason pay has stagnated is that many people who lost their jobs in the recession — and remained out of work for months — have taken pay cuts in order to be hired again. In a separate study, Henry S. Farber, an economics professor at Princeton, found that people who lost jobs in the recession and later found work again made an average of 17.5 percent less than they had in their old jobs.

“As a labor economist, I do not think the recession has ended,” Mr. Farber said. “Job losers are having more trouble than ever before finding full-time jobs.”

Mr. Farber added that this downturn was “fundamentally different” from most previous ones. Historically, other economists say, financial crises and debt-caused bubbles have led to deeper, more protracted downturns.

Mr. Green and Mr. Coder said the persistently high rate of unemployment and the long duration of unemployment helped explain the decline in income during the recovery.

In the recession, the average length of time a person who lost a job was unemployed increased to 24.1 weeks in June 2009, from 16.6 weeks in December 2007, according to the federal Bureau of Labor Statistics. Since the end of the recession, that figure has continued to increase, reaching 40.5 weeks in September, the longest in more than 60 years.

The new study by Mr. Green and Mr. Coder is based on monthly census surveys, rather than the annual data that appeared in last month’s census report on income. The monthly figures allow researchers to measure income changes more precisely during a recession or a recovery and provide more current information. The annual report is based on surveys conducted early in the following year, and people sometimes confuse how much money they are making at the time of the survey with how much they made the previous year. Additionally, recessions usually do not line up with a calendar year.

A committee of academic economists at the National Bureau of Economic Research, a private group widely considered the arbiter of the business cycle, judged that the most recent recession began in December 2007. The bureau defines a recession as a significant, broad-based decline in economic activity.

The economists said the recession ended in June 2009. In every quarter since then, the economy has grown.

Some economists see signs that the United States may be in or about to enter another recession, though the evidence is mixed.

In their new study, Mr. Green and Mr. Coder found that income dropped more, in percentage terms, for some groups already making less, a factor that they say may have contributed to rising income inequality.

From June 2007 to June of this year, they said, median annual household income declined by 7.8 percent for non-Hispanic whites, to $56,320, and by 6.8 percent for Hispanics, to $39,901. For blacks, household income declined 9.2 percent, to $31,784.

Mr. Green and Mr. Coder, who both worked at the Census Bureau for more than 25 years, found other income changes over the four-year period examined.

For example, income, after adjustment for inflation, declined fairly substantially for households headed by people under age 62, but it rose 4.7 percent for those headed by people 65 to 74, many of whom are not in the labor force. The change was negligible for those 62 to 64.

The type of employment also made a difference. Real median annual income declined to a similar degree for households headed by private-sector wage workers (4.3 percent) and government-sector workers (3.9 percent), but fell much more for the self-employed (12.3 percent).

Family households generally had larger declines in real income than other households. Men living alone showed a bigger decline than women living alone.

Education levels were also a factor. Median annual income declined most for households headed by someone with an associate’s degree, dropping 14 percent, to $53,195, in the four-year period that ended in June 2011, the report said.

For households headed by people who had not completed high school, median income declined by 7.9 percent, to $25,157. For those with a bachelor’s degree or more, income declined by 6.8 percent, to $82,846.

Rein in Wall Street and Rescue the Middle Class

by Senator Bernie Sanders, the Guardian, October 7, 2011

It's time for us to end the financial oligarchy so destructive to our economy. If a bank is too big to fail, it is too big to exist

An Occupy Wall Street protester in New York City. Photograph: Amy Sussman/Corbis

The protest movement called Occupy Wall Street has struck a nerve. The demonstrators' goals may be vague but their grievances are very real. If our country is to break out of this horrendous recession and create the millions of jobs we desperately need, if we are going to create a financially-stable future, we must take a hard look at Wall Street and demand fundamental reforms. I hope the protesters provide the spark that ignites that process.

The truth is that millions of Americans lost their jobs, their homes and their life savings because of the greed, recklessness and illegal behavior of Wall Street. Even Federal Reserve Chairman Ben Bernanke agreed when I questioned him this week at a joint economic committee hearing that that there was "excessive risk-taking" by Wall Street. Bernanke also said the protesters "with some justification" hold the financial sector responsible for "getting us into this mess", and added, "I can't blame them."

The demonstrators and millions of sympathetic Americans understand that odds are stacked in Wall Street's favor because of the extraordinary economic and political clout of the big banks. Believe it or not, the country's six largest financial institutions (Bank of America, CitiGroup, JP Morgan Chase, Wells Fargo, Morgan Stanley and Goldman Sachs) now have amassed assets equal to more than 60% of our gross domestic product. The four largest banks issue two-thirds of all credit cards, half of all mortgages, and hold nearly 40% of all bank deposits. Incredibly, after we bailed out the behemoth banks that were "too big to fail", three out of the four are now even bigger than they were before the financial crisis.

Not only do these financial institutions have enormous economic clout, their wealth makes them an extremely potent political force. From 1998 through 2008, in order to achieve their goal of repealing Glass-Steagall and other financial regulations, they spent more than $5bn on lobbying and campaign contributions. They also spent hundreds of millions to water down last year's Dodd-Frank reform bill. After the law was passed, hundreds of millions more were spent to repeal provisions and weaken regulations. They never give up.

Where do we go from here? How do we convert the protesters' enthusiasm into concrete results?

For starters, we should break up the giant financial institutions. Left to their own selfish devices, Wall Street bankers will continue to gamble with other people's money. Sooner or later, when their bets go wrong, they will come back to Congress asking to be bailed out again. Why not nip that in the bud? There also is a sound economic argument against too few owning far too much. The idea that six giant financial institutions can exert such enormous control over the economy should frighten anyone who believes in a competitive free-market system. Good Republican presidents like William Howard Taft and Teddy Roosevelt broke up Standard Oil, the railroad trusts and other huge monopolies a century ago.

Now is the time for us to end the financial oligarchy that has been so destructive to our economy. If a bank is too big to fail, it is too big to exist.

Wall Street reform also must address the powerful and secretive Federal Reserve. A Government Accountability Office audit that I requested found that the central bank provided $16tn in revolving, low-interest loans to every major financial institution in this country, multinational corporations and some of the wealthiest people in the world. The Fed even helped bail out other central banks around the world. When Wall Street was on the verge of collapse, the Fed acted boldly. Today, with the middle class collapsing, the Fed must act with equal vigor.

Real unemployment is more than 16%. Median family income has declined by $3,600 over the last decade. A record 46 million Americans live in poverty. The gap between the very rich and everyone else, the widest of any major country, is growing wider.

Under emergency provisions already in law, the Fed has the authority to provide low-interest loans to small businesses that are starving for capital so that they can create the millions of jobs our economy needs. It should do so. The Fed also has authority to make credit card issuers stop bilking consumers with sky-high fees and interest rates of 30% or more. Especially in a recession, working people use credit cards to stretch their paychecks for basic needs. Usury is already regarded as a sin in the eyes of every major religion. It should be a crime. The Fed has the authority to limit interest rates and fees. It should do so.

The Occupy Wall Street demonstrators are shining a light on one of the most serious problems facing the United States: the greed, recklessness and power of Wall Street. Now is the time for the president and Congress to follow that light – and act. The future of our economy is at stake.

Occupy San Diego, Day 1 – WE ARE THE 99 PERCENT!

by Patty Jones on October 7, 2011 · from the OB Rag

in American Empire, Civil Rights, Organizing, San Diego

Occupy San Diego - This was the scene that welcomed me to the Civic Center Plaza. Photo by T. Collins Logan

It’s been a long, short week, if that makes any sense at all… I haven’t slept much in the last few days, the wheels in my head have been spinning constantly, a mantra in the near reaches of my conscious thoughts, we, are, the 99%…

After 4 hours of sleep last night, an early morning meeting with the Better San Diego Coalition about the upcoming Mayoral Debate (more on that in the next few days) and tending to family matters most of the afternoon I grabbed a couple of chicken burritos from our neighborhood mexican grill and hopped on the trolley to downtown hoping to meet up with Frank and a multitude of friends, old and new, in the Civic Center to begin the Occupation of San Diego.

There weren’t many people on the trolley car I was on, most folks at that time of day are headed east on the Orange Line, not west. The trolley rocked me almost to sleep and I was starting to wonder if I would be able to make my tired body march… As the trolley made the turn into downtown I looked out the window and saw helicopters circling. “Wow,” I thought, “it must be big!” The mantra in my head kicked in again (we, are, the 99%) and the fatigue started to retreat a bit.

As the trolley traveled down C Street I started to see people on the streets with signs (We, Are, The 99%!). When I hopped off the lonely trolley car and rounded the corner into the Civic Center I was completely awestruck… The plaza was completely full of people. I have heard conflicting reports, someone said the cops estimated 1500, others said as many as 3,000 people turned out to be seen and be heard. WE ARE THE 99%!

My emotions have been running high all night, at times I had to work at keeping the tears from rolling down my face. I have never been part of something as uplifting and powerful. I am proud of our city today. We are here. Finally.

The following gallery of photos is a sampling taken from several different people. Enjoy, San Diego. Now I need some Jack Daniels and some sleep. More in the morning…

The Benefits of a Financial Transaction Tax

by Dean Baker, Center for Economic and Policy Research, December 2008

Introduction

The recent economic turmoil has generated renewed interest in a financial transactions tax (FTT). While such a tax will be vigorously opposed by the financial industry, it offers a very attractive mechanism for raising revenue that is arguably efficiency-enhancing. Calculations based on 2000 trading volumes showed that a set of scaled transactions taxes, imposed on transfers of stock and other financial assets, could raise more than $100 billion a year, even assuming large reductions in trading volume.

This article briefly outlines the case for a financial transactions tax. The following section discusses basic design issues, and the section after that discusses the revenue potential for such a tax. The final section summarizes the potential benefits from financial transactions taxes.

The Design of a Financial Transactions Tax

There has been a long historical experience with FTTs in both the United States and around the world. Substantial transactions taxes were imposed in most financial markets until the last two decades, when political pressure from the financial sector, coupled with the threat from increased global competition, led most countries to substantially reduce or eliminate their taxes. Nonetheless,, many taxes still remain in place, most notably the 0.5 percent stamp tax imposed on each trade on the London stock exchange. This tax raises more 4 billion pounds annually, the equivalent of almost $40 billion in the U.S. economy.¹

There are two reasons that it is noteworthy that the UK continues to impose its stamp tax, and manages to raise a substantial amount of revenue. First, it indicates that the tax is indeed collectable.² The UK tax applies to stock trades for firms that are incorporated in the UK, regardless of where the trades take place. While enforcement of the tax on trades that take place outside of the UK is undoubtedly poor, this law limits the extent to which firms would have incentive to list elsewhere to escape the tax.

The other important point that is demonstrated by the stamp tax in the UK is that a modest FTT is not inconsistent with maintaining a vibrant stock exchange. The London market remains one of the largest stock exchanges in the world, in spite of the stamp tax. The other benefits of the London exchange obviously outweigh the burden of the tax so that it is still an attractive venue for raising capital and trading shares.

As a successful model, the stamp tax has two important features that are worth emulating. First, the dealer is responsible for collecting the tax. Obviously the dealer is the party best able to ensure that the tax is paid. In the United States, the dealer already has the obligation to collect the very small transactions taxes that are charged to finance the Securities and Exchange Commission and the Commodities and Futures Trading Commission.

A second important feature of the UK law is that a security cannot be legally transferred unless the tax is paid. The stamp is effectively proof of the transfer of the security (this can also be done electronically). In effect, tax evasion would imply ambiguity around the ownership of the asset. Most investors are willing to pay a 0.25 percent fee to ensure their proper claim to the asset.

An obvious complaint against the stamp tax is that it only applies to a narrow class of assets (stock shares) and therefore it can be readily avoided by traders wishing to speculate on other assets, or even those wishing to speculate on stock through the purchase of futures or options. The obvious remedy to this problem is to have a more broadly based tax that applies to transfers of all standardized financial assets. The fee structure would be scaled to the expected life of the asset so that the disincentive to trading will be roughly equal across markets.

Pollin, Baker, and Schaberg (2002) propose a fee structure that is intended to maintain a rough balance across markets. To match a 0.5 percent fee on stock trades, the paper proposes the following fee structure:

Bonds: 0.01 percent for each year remaining until maturity
Futures: 0.02 percent of the notional value of the underlying asset
Options: 0.5 percent of the premium paid for the option
Interest Rate Swaps: 0.02 percent of asset value for each year until the expiration of the agreement

At the time Pollin et al. was written, credit default swaps (CDS) were still relatively new instruments,but the fee structure applied to interest rate swaps would probably be appropriate to transfers of CDS also. The tax schedule was intended to roughly correspond to current transactions costs for these assets. Since much of the trading for some of these assets is not on exchanges (e.g. interest rate swaps), it is difficult to obtain reliable information on current costs. In order for a tax to be neutral across asset classes (if that is desired), it would be necessary to obtain better information on current costs and adjust these tax rates accordingly.

The Potential Revenue from a Financial Transactions Tax

The few estimates of the elasticity of trading in stocks and other assets with respect to trading costs are quite dated and not very reliable. In the absence of good data on which to project trading responses, the paper simply constructed a range of revenue projections based on what were considered extreme responses (no change and a 50 percent fall in trading volume) and the midpoint of a 25 percent decline in trading.

The revenue calculations (based on 1997 trading volumes) in these three scenarios were $132.1 billion, $66.1 billion, and $99.2 billion, respectively. Approximately 40 percent of the projected revenue was derived from taxing stock trades, with trades of government bonds accounting for approximately 35 percent of the projected revenue.

The projected revenue would be approximately 25 percent higher in 2008 dollars, although the increase in trading volume over the last decade would have an even larger impact. Trading in all of these assets was far larger in 2007 than in 1997. In the case of CDS, the nominal value of the stock of these assets exceeded $60 trillion by 2007, while the asset did not even exist in 1997.

Clearly a fee structure comparably to the one described above would produce considerably more revenue based on the trading volume just prior to the recent financial collapse than the calculations in Pollin et al. show. While trading will almost certainly not recover to pre-collapse levels any time soon, $60 to $100 billion a year in revenue would not be an unreasonable target for a broad-based tax, given the experience in the United Kingdom and other countries that have imposed financial transactions taxes.³

The Efficiency-Enhancing Effects of Financial Transactions Taxes

Taxation generally leads to economic distortions, with the possible exception of cases where the activity being taxed is itself harmful, such as smoking or drinking alcohol. While there are undoubtedly distortions associated with financial transactions taxes (it will have some impact on the cost of capital), much of the economic activity that will be lost as a result of the tax has the character of gambling. It will have very little effect on the effectiveness of capital markets.

In this sense, a financial transactions tax can actually increase the efficiency of financial markets. If the sector can just as effectively fill its function as an intermediary while employing fewer workers and requiring less capital, then the tax will have increased the efficiency of the financial sector. In this respect, it is worth noting the explosive growth of the financial sector over the last three decades. In the years from 1977 to 2007, the share of private sector wages in the narrowly defined securities and investment sector grew from less than 0.6 percent to more than 2.3 percent.⁴

There is a real economic benefit to this growth insofar as it improved the allocation of capital, allowing firms to better gain access to capital markets or for individuals to better adjust their saving and spending patterns over their lifetimes. However, if this growth in resource use was only associated with additional trading and did not actually lead to better allocations of capital, then the resources were wasted. If a financial transactions tax reduces the volume of trading, and therefore the resources used by this sector, without harming the sector’s ability to allocate capital, then it will be making the sector more efficient and freeing up resources for more productive uses.

This could potentially be a very large benefit from an FTT. If it reduced trading volume by 25 percent (the middle scenario in Pollin et al.), leading to a corresponding reduction in resource use, it would free up more than $60 billion a year in labor and capital for productive uses.⁵

Whether or not reduced trading leads to serious harm to financial markets would depend on its impact on liquidity and market volatility. Obviously the tax will reduce liquidity by reducing the volume of trading, but it is not clear that the impact will have much consequence. For example, if trading of the most liquid assets, like government bonds, were cut by 50 percent, or even 75 percent, these assets would still have enormous markets. Such reductions in trading may reduce the volume to levels of 20-25 years ago, but these markets were already highly liquid in the 80s.

The tax will also affect trading in less liquid assets, but one of the advantages of the structure of the tax is that the proportionate increase in trading costs will almost always be smaller on less liquid assets, since these assets almost invariably have higher bid/ask spreads. In the case of equities, the tax may double the transaction costs for the most frequently traded stocks, the proportionate increase in trading costs will be far smaller on less frequently traded stocks, and therefore the proportionate reduction in trading volume would be lower.

The impact on volatility is also ambiguous. Theoretically, the impact can be in either direction. If all market actors arrived at their assessments of assets independently, then an FTT would by definition increase volatility, since it would reduce trading volume and therefore the number of independent assessments among traders. However, if there are substantial numbers of noise traders (traders who act based on market movements rather than an assessment of fundamentals) in the market, the reduction in trading volume could actually reduce volatility since it can prevent price swings driven by momentum rather than fundamentals.⁶ The research on the relationship between trading volume and volatility is ambiguous. In short, it is reasonable to believe that the reduction in trading volume that would follow from the imposition of an FTT will not qualitatively change the degree of volatility in financial market.

Conclusion

Financial transactions taxes have been a widely used source of revenue in the United States and elsewhere in the world. A set of taxes applied to trading in a broad range of financial assets and scaled to the level of the UK stamp tax on stock trades could raise close to $100 billion a year in revenue in the United States. Such a tax is arguably efficiency-enhancing since it would substantially reduce the resources used by the financial sector without reducing its effectiveness in allocating capital.

Notes:

1 Data on revenue raised from the tax in the United Kingdom can be found at
http://www.hmrc.gov.uk/stats/stamp_duty/table15-1.pdf.
2 The administrative cost of collecting the stamp tax are extremely low. The UK’s Inland Revenue Service estimated that the cost is equal to less than 0.05 percent of the revenue collected. By comparison, it estimated that the administrative costs for the income tax is equal to 0.7 percent of the revenue collected (cited in Bond et al., p 4
3 Prior to the collapse of its stock bubble in 1989, the financial transactions taxes in place in Japan raised more than 4 percent of all government revenue. This would be the equivalent to $120 billion a year in the United States (Japanese Securities Research 1992, p 244).
4 This is taken from the Bureau of Economic Analysis, National Income and Product Accounts, Table 6.3B ([line 55 + line 59]/ line1) and Table 6.3C (line 59/line 1).
5 This calculation assumes that the securities and investment sector’s share of private sector output is equal to its share of private sector wages and that its size shrinks by 25 percent as a result of the imposition of a FTT.
6 For a theoretical discussion of noise trading see Delong et al. 1987.

Paying for the Plan | American Jobs Plan

by the Economic Policy Institute

Paying for the American Jobs Plan with a financial transactions tax

Enactment of the American Jobs Plan would have immediate benefits for employment, but as long as the impact of the recession continues to weigh on the job market next year and through 2011, government economic policy must remain expansionary. When unemployment moderates and the economy has rebounded, it will be appropriate to address the federal budget deficit. The spending required by the American Jobs Plan would occur within the first two years after its enactment; in years three through 10, all of this spending could be recouped through a financial transactions tax.

Proposals for a financial transactions tax (FTT), such as one by Congressman Peter DeFazio (D-Ore.), have been met with strong opposition, especially from Wall Street. This opposition is misplaced. An intelligently designed financial transactions tax should be a key item on the policy menu. Those concerned about the state of the job market today and the state of the deficit tomorrow should embrace a proposal that calls for increased action to boost employment in the next two years that is paid for with the implementation of an FTT. The economic bottom line is that a financial transactions tax is a progressive revenue-raiser that is likely to be either efficiency-neutral or even efficiency-enhancing. Few other revenue-raisers can make this claim.

What would a well-designed financial transactions tax look like?

A financial transactions tax would levy a small “sales tax” on the transfer of ownership of a financial asset. For stock transfers, a rate of 0.5% (possibly split between buyer and seller) would raise significant revenue while not causing harmful economic effects. The rate would apply to and vary for other asset classes to provide disincentives for investors to arbitrage away the tax by moving out of stocks and into other instruments.

To put a 0.5% transaction tax in perspective, a typical state sales tax on goods and services is about 5.0%, or 10 times our proposed tax.

Taxing the simple transaction, rather than calculated proceeds, reduces the scope for disguising proceeds to avoid the tax. Also, taxing each transaction at a fixed rate implicitly imposes a higher tax on short “roundtrips,” that is, rapid (hourly or daily) turnovers of asset ownership. These short roundtrips generally do not provide large profits for investors, so the fixed transactions costs will impose a comparatively heavy fee. Conversely, if an asset is bought and held for an extended period, the transactions fee will likely constitute a small percentage of the total proceeds. This structure usefully biases the incidence of the tax toward speculators and away from long-term investors.

Financial transactions taxes exist today

Several countries have implemented examples of well-functioning financial transactions taxes. In the United States, the Securities and Exchange Commission currently levies a 0.00257% fee on stock transactions to fund its operating expenses. Japan had a 0.3% sales tax on stock transactions that raised substantial revenues (up to 4% of GDP during the stock market bubble of the late 1980s) before it was repealed in 1999. The United Kingdom currently imposes a 0.5% stock “stamp tax” on each trade on the London stock exchange.

The existence of the U.K. stamp tax belies an important argument often made against the tax in the United States—that it will harm the international competitiveness of U.S. stock exchanges and send companies fleeing to foreign ones. The fact that the London stock exchange is one of the largest in the world (in the top five in value of domestic market capitalization and total value of share trading, according to the World Federation of Exchanges Database) suggests that it has not been hurt unduly by the stamp tax. Furthermore, the U.K. tax means that the United States has more room to impose its own tax without losing competitive ground.

Lessons on designing a tax

The United States can learn from the rest of the world’s experience with financial transaction taxes. In the U.K., payment of the stamp tax is necessary to prove that ownership of the asset has legitimately changed hands. This feature gives it a built-in enforcement device: those who try to evade the tax will have trouble enforcing their claim to asset ownership.

On the other hand, the U.K. stamp tax is often criticized for taxing only stock transfers and thereby leaving a wide range of other asset markets unaffected. Those looking to evade the tax can engineer financial substitutes for stock transactions in these other asset markets. A well-designed tax would tax other asset classes as well as emerging asset classes at rates in line with the stock rate.

How much money could a financial transactions tax raise?

The U.K. stamp tax raised an amount equal to 0.2% of U.K. gross domestic product in the latest year analyzed; a similar share in the United States would equate to $30 billion. A 2004 Congressional Research Service study found that a 0.5% tax based on stock transactions could raise $79 billion annually. A review for the Canadian government in 1996 found that six of the nine countries surveyed collected revenue greater than 0.6% of their total GDP, equivalent to $85 billion in the United States in 2009.

A financial transactions tax could raise considerably more than these estimates—0.8% to 1.6% of GDP according to a 2002 study—by taxing a wider range of assets than stocks. In 2009 that range would amount to $113-226 billion. In short, the tax can be a significant revenue-raiser.

Who would pay the financial transactions taxes?

Probably the best guess as to who will be subject to the tax is to look at who owns financial assets now. A 2009 analysis of data from the Survey of Consumer Finance shows that the mean holdings of financial assets by the wealthiest 10% of households is 45 times greater than the mean holdings of the bottom 75% of households. In terms of wealth classes, the effect of the tax would therefore be extremely progressive and would help to reverse somewhat the decline in the progressivity of the federal income tax code that occurred between 2000 and 2006.

To make the incidence of an FTT more comparable to other taxes, one can look at the distribution of financial assets across income, not wealth, classes. By this measure, an FTT scores very well on progressivity even when stacked against overall federal taxes and even what is commonly regarded as the most progressive element of the current tax code – the federal estate and gift tax (see Figure A).

What would be the economic impact of an FTT?

Any newly introduced tax will change behavior and affect economic efficiency. The impact of an FTT depends greatly on how one views the current structure of U.S. financial markets. If one assumes that financial markets are efficient and allocate capital optimally, then the tax will reduce this efficiency by curbing financial activity at the margin. But the current upheaval in global financial markets has undermined this “efficient markets” view of finance and given credence to the “noise trader” approach, which argues that financial markets are prone to speculation, herd behavior, and excess volatility. If this is true, then marginal transactions in financial markets may have zero or even negative social utility.

This noise trader view is bolstered by examining two trends of the past three decades (see Figure B). While the financial se
ctor takes up a larger and larger share of the U.S. economy over that time, increasing by almost 3 full percentage points of GDP (its share was 75% larger in 2009 than in the late 1970s), real investment in plants and equipment (plus financial services exports) is actually less. Given that one of the core functions of the financial sector is allocating capital efficiently, it seems odd that more and more resources are demanded by this sector to do the same amount of capital allocation.

The academic research to-date shows mixed results of raising transactions costs (including FTTs) on asset trading and overall volatility. While there is little in this evidence to argue strongly that a first-order benefit of an FTT would be to rationalize financial markets dominated by noise traders, there is also nothing in this evidence to suggest that an FTT would cause any economic harm.

Policy recommendation

We recommend a modest 0.5% tax on financial transactions to pay for the American Jobs Plan. The tax would take effect three years after the implementation of the plan, and at year 10 it would cover the plan’s entire cost, making it deficit-neutral.

Jobs created by the American Jobs Plan

Each of the five points of the American Jobs Plan would have a significant impact on job creation. Table 1 shows the estimated first-year impact of each element of the plan.

1. Safety net spending. The investments in safety net programs (unemployment insurance and COBRA) would create jobs indirectly because those receiving assistance will have greater disposable income to spend on goods and services. An additional $110 billion in these programs would increase nationwide employment by 931,000 jobs.

2. Relief to state and local governments. Fiscal relief to state and local governments would prevent many public sector layoffs and create jobs in the private sector. States are currently facing several budget crises. For fiscal year 2011 (which starts in July 2010), state and local governments are facing a $182 billion shortfall, even after including $38 billion in Recovery Act assistance for that year. Without assistance, they will be forced to fire public sector employees (such as teachers and first responders), cut programs, raise taxes, or some combination of the three. All of these adjustments would also harm private sector employment, since the reduction in disposable income for those laid off would lead to less consumption of goods and services. Private sector employment would be further harmed as private firms that directly deliver services based on state funding—organizations such as hospitals, nursing homes, and construction contractors—are forced to cut back as well. Additional assistance of $150 billion to state and local governments would increase employment by about one million jobs. About half of this employment impact would be in the private sector.

3. Investments in schools and transportation. The Recovery Act contained additional funding for the nation’s infrastructure, including roads, bridges, and waterways. However, one element that was initially included but then stripped out of the final version was money for improvements to school buildings. Adding $30 billion to restore school facility funding and adding to other infrastructure investments would boost employment by 239,000 jobs.

These three components of the American Jobs Plan—each of which is an extension or augmentation of the Recovery Act—would in total boost employment by 2.2 million jobs. However, given the severity of the downturn, we must also look to new policy to spur employment in the private sector and to employ people directly to provide public services.

4. Public service jobs. The United States has a long history of direct public service employment in times of economic crisis, and a new program today could be targeted at distressed, high-unemployment communities and provide services such as environmental clean up, community policing, before- and after-school care of children, demolition or boarding up of abandoned houses and buildings, and parks improvements. A $40 billion investment in public service employment would employ an estimated 1 million people.

5. Job creation tax credit. The job creation tax credit would provide a temporary credit to firms that expand employment. The approach would give businesses a credit of 15% of expanded payroll costs in 2010 and 10% in 2011. The credit could spur an estimated 1.4 to 2.8 million new jobs in 2010 and 1.1 to 2.3 million in 2011.

Taken together, the gross cost of the five components of the American Jobs Plan is roughly $400 billion in the first year. However, the net cost of the plan would be much lower; we estimate that roughly 40 cents of each dollar spent on the plan would be recouped through higher revenue induced by increased economic activity, as well as reduced spending on existing safety net programs.

In total, the extension and augmentation of the Recovery Act together with the public service employment proposal would add about 3.2 million jobs to the economy that would otherwise not exist. A final estimate of the American Jobs Plan is more difficult because of how the tax credit might interact with other aspects of the jobs proposals; however, a conservative estimate would suggest that the total package, using the lower bound estimate of the job creation tax credit, would lead to at least an additional 4.6 million jobs over the first year.

Conclusion

To help the tens of millions of Americans who are unemployed or underemployed, Congress and the Obama administration should take bold, decisive action to create jobs. The Recovery Act passed earlier this year helped pull the economy out of its sharp descent. But the American people, who see unemployment as one of the most important economic problems facing the country, overwhelmingly favor additional action to create jobs. The American Jobs Plan would create at least 4.6 million jobs in the first year alone. Over a 10-year period, the entire cost of the plan would be paid for with a financial transactions tax.

Further Reading: Paying for the Plan

Tracking the recovery: Voters’ views on the recession, jobs, and the deficit

Generating Jobs for a Robust Recovery by Lawrence Mishel (Oct. 20, 2009 / Policy Memo #151)

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Download entire plan (PDF)

It's Labor vs. Capital, Stupid

Published on Friday, October 7, 2011 by On the Commons

Now that we're in the streets, what are we asking for?

 

by David Morris

 

A few months ago Nassim Taleb, author of the Black Swan, an influential book about the crucial importance of unpredictable, unforeseen events on our financial system was asked whether the hundreds of thousands taking to the streets in Greece was a Black Swan event. He replied, “No. The real Black Swan event is that people are not rioting against the banks in London and New York.”

They are now. Not rioting perhaps but vigorously protesting. Occupy Wall Street is moving into its second month. Twenty thousand strong demonstrated in New York City this week. Similar demonstrations are spreading nationwide

 From 1980 to 2005, more than 80 percent of the increase in personal incomes went to one percent of the population. One percent of Americans now take in more than quarter of the nation’s income every year. (photo: Massachusetts Cop Block)

In the 1976 movie, Network, anchorman Howard Beale tells his viewers,

Things have got to change. But first, you’ve gotta get mad!… You’ve got to say, ‘I’m as mad as hell, and I’m not going to take this anymore!’ Then we’ll figure out what to do about the depression and the inflation and the oil crisis. But first get up out of your chairs, open the window, stick your head out, and yell, and say it: “I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!”

We’re mad as hell and we’re not going to take this anymore. That is the message of the sit-ins by U.S. Uncut, the protests against Bank of America, the occupation of Freedom Plaza in Washington, D.C. to protest the war, Occupy Wall Street and the growing numbers of #Occupy demonstrations around the country.

We’re mad at the devastation wrought in the last four years by the toxic combination of unrestrained greed and concentrated wealth. Twelve to fifteen million families have received foreclosure notices. Seven to ten million more are unemployed. Median household income has fallen to its lowest level in more than a decade while the poverty rate is at a 17-year high. The number of homeless in New York City rose to an all-time high last year—higher even than during the Great Depression—with a record 113,000 men, women, and children, many of them comprising whole families, retreating night after night to municipal shelters.

We’re mad at Wall Street for taking our money and giving nothing back. This Administration has given Wall Street nearly $10 trillion in various programs, from insuring money market accounts to the Fed’s buying of troubled assets to loaning money to banks at near-zero interest rates.

Wall Street has used the bailout to enrich themselves. In 2010, it handed out $149 billion in bonuses and compensation, near an all time high. But it did not pass that largesse down. While bank profits have risen 136 percent since the financial crisis bank lending has fallen by 9 percent.

We’re mad at the 1 percent of the country who make decisions that enrich themselves while impoverishing the rest of us. From 1980 to 2005, more than 80 percent of the increase in personal incomes went to one percent of the population. One percent of Americans now take in more than quarter of the nation’s income every year. In New York City, home to Wall Street, the top 1 percent took for themselves close to 44 percent of all income in New York during 2007 (the last year for which data is available). According to the Fiscal Policy Institute the wealth of this 1 percent derived almost entirely from the financial services sector. To qualify for inclusion on the 2011 Forbes list of the richest 400 Americans you need to be worth at least $1 billion. In 2009 those 400 had average incomes of $227 million.

“We are the 99%” is a fitting slogan for the new movements.

Labor vs. Capital

We know who the enemy is. The Michigan teachers recently released a video showing CEOs marching into classrooms and literally taking desks away from children, a visualization of the impact of a $1.8 billion reduction in corporate taxes coupled with a $1 billion cut in education funding the Republican legislature enacted. Six hundred pilots marched on Wall Street to protest the refusal of the CEOs of their airlines to bargain in good faith.

We are beginning to reframe the debate, shifting from a focus on deficits to the more fundamental issue: the relationship of labor and capital.

One indication of the new mood is the willingness of opinion leaders to use heretofore impermissible language to describe the crisis. One of the nation’s leading economists, Nouriel Roubini informs the Wall Street Journal, “Karl Marx had it right. At some point, Capitalism can destroy itself. You cannot keep on shifting income from labor to Capital without having an excess capacity and a lack of aggregate demand.”

Another reflection of the new mood is the emergence of a new kind of folk hero. People like New York Attorney General Eric Schneiderman who last August rejected a proposed nationwide settlement that would have absolved the country’s biggest banks from future lawsuits in return for a paltry $20 billion. As Matt Tabbibi of Rolling Stone points out, “in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.” (mortgage-backed securities)

Mr. Schneiderman’s audacity led to his being kicked off the executive committee of state attorneys general in charge of the case. “Ever since,” the New York Times explains, “the four-member Correspondence Unit in Mr. Schneiderman’s office, in a building wedged between the New York Stock Exchange and the New York Federal Reserve Bank, has been dealing with a flood of mail. It is, by all accounts, a spontaneous and grass-roots eruption of thank-you notes.”

“I’m just doing my job,” says Schneiderman. “At heart, Americans are not cynical people. I think they want to believe that there’s one set of rules for everybody, that there are still good cops on the beat to keep things honest.”

Yes we do. Which makes us furious when Kathryn Wylde, the Fed Board member who ostensibly represents the public, tells the Times that Schneiderman should cease and desist his attacks on Wall Street. “It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

Unless they are doing something indefensible?

The 2011 Academy Award for best documentary went to Inside Job, a searing indictment of Wall Street. Its director, Charles Ferguson told the audience, “Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.”

Seven hundred Wall Street protestors were arrested in a single day. They were disrupting traffic. The CEOs of Wall Street firms disrupted the lives of hundreds of millions.

Conservatives have been remarkably successful in persuading us that government is the enemy. The 99 percenters know that is true only inasmuch as the government is captured by the 1 percenters. We are angry at government, but what makes us more angry is that in this system you get the government you pay for and 99% of us are not doing any buying.

We’re mad at government, but we haven’t given up on governance, on the right to make the rules.

Last week the General Assembly of Occupy Wall Street adopted a declaration of principles that will inform the new rules.

As we gather together in solidarity to express a feeling of mass injustice, we must not lose sight of what brought us together. We write so that all people who feel wronged by the corporate forces of the world can know that we are your allies.

As one people, united, we acknowledge the reality: that the future of the human race requires the cooperation of its members; that our system must protect our rights, and upon corruption of that system, it is up to the individuals to protect their own rights, and those of their neighbors; that a democratic government derives its just power from the people, but corporations do not seek consent to extract wealth from the people and the Earth; and that no true democracy is attainable when the process is determined by economic power. We come to you at a time when corporations, which place profit over people, self-interest over justice, and oppression over equality, run our governments. We have peaceably assembled here, as is our right, to let these facts be known.

From that declaration of principles a program will emerge. Conversations about the elements of that program have already begun. Grassroots driven fundamental change is not without precedent. We can look to the Arab spring. #Occupy Wall Street was self-consciously inspired by the occupation by Egyptians of Tahrir Square.

But we can also look to our own history. At the end of the 19th century a political movement arose to confront many of the same concerns that torment us: concentrated wealth, corporate power, the influence of money on democracy. The populist uprising led not only to the passage of state and national laws (e.g. anti trust legislation, minimum wage and maximum hour statutes) but several Constitutional amendments. In 1913 the 16th Amendment allowed an income tax; the 17th Amendment, ratified the same year required the direct election of Senators; the 19th Amendment, ratified in 1920, gave women the right to vote.

Five New Rules

The conversation about program will go on for months. To contribute to that conversation I offer five new rules: two of them Constitutional Amendments and three of them laws.

1. Corporations are not persons.

The 14th Amendment, ratified in 1868 gave blacks the constitutional right of citizenship: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

In 1886, in a case that had nothing to do with corporate personhood, the court clerk wrote a headnote to the case that contained these fateful sentences, “The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”

Since the case itself never addressed the question these words did not comprise a legal precedent. Nevertheless, from then on the Supreme Court has considered the question settled. Some 65 years later Justice William O. Douglas observed, “the Santa Clara case becomes one of the most momentous of all our decisions. Corporations were now armed with constitutional prerogatives.” And they made the most of these new prerogatives.

The 14th Amendment, written to protect weak and largely defenseless ex-slaves, was mostly used to protect big and powerful corporations. Of the 150 cases based on the 14th amendment the Supreme Court heard between 1886 and 1896, 15 involved blacks and 135 involved business entities.

In the next 20 years, relying on the 1886 “precedent” the Supreme Court steadily expanded the number of Constitutional rights accorded to this new type of person. The Women’s International League for Peace and Freedom (WILPF) offers a partial list: in 1893 the Court accorded corporations the right of due process under the 5th Amendment. In 1906 it extended to them the protection against search and seizure in the 4th Amendment. In 1908 it extended to corporations the 6th Amendment right to a trial by jury.

By the 1940s Justice Felix Frankfurter could accurately declare, “Artificial or not, corporations have won more rights under law than people have– rights which government has protected with armed force.”

In early 2010 the Supreme Court gave corporations the right, as persons, to spend unlimited amounts of money to influence elections.

Does it need to be said that unlike a real person, a corporation lacks a conscience. It is guided neither by ethics nor morality but rather by laws that required its Boards to elevate the maximization of profits above all other concerns. Does it need to be said that if a person makes a decision that kills or maims people he will go to jail. If a CEO makes such a decision he, at worst, receives a golden parachute.

A wonderful sign at the Occupy Wall Street protest reads, “I won’t believe corporations are people until Texas executes one.”

We need a constitutional amendment consisting of four words. Corporations are not persons.

2. Money is not speech

In 1976 the Supreme Court ruled that money is speech and therefore protected by the First Amendment. Today members of Congress now spend 25-40 percent of their time begging for money. Political scientist Thomas Ferguson observes, “Public opinion has only a weak and inconstant influence on policy. The political system is largely investor-driven, and runs on enormous quantities of money”.

When states or the federal government have tried to make elections fairer the Supreme Court says no. Vermont passed a law to cap campaign expenditures for state offices. The Court struck it down.

Congress tried to close a loophole in the campaign finance law that allowed billionaire candidates to spend an unlimited amount of their own money on their own campaigns. The Court struck down the law. Speaking for a 5-4 majority, Justice Samuel Alito told Congress that trying to “level electoral opportunities for candidates of different personal wealth” is not “a legitimate government objective.”

The Supreme Court rulings declaring money is speech and corporations are persons make for a lethal cocktail. Jamie Raskin, a Maryland state senator and law professor at American university points out that Fortune l00 corporations had profits in 2008 totaling about $600 billion. If they spent only l percent of their profits on elections, a trivial sum to protect and foster their interests, the total comes to $6 billion. That is more money than was spent for and on behalf of all congressional and presidential candidates in 2008.

We need a Constitutional Amendment consisting of four words. Money is not speech.

3. Tax Financial Transactions

In 1936, John Maynard Keynes first proposed a financial transactions tax. “The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise in the United States.”

Economist Dean Baker suggests that a modest tax (0.25 percent) could easily raise more than $100 billion a year. “A small increase in trading costs would be a very manageable burden for those who are using financial markets to support productive economic activity. However, it would impose serious costs on those who see the financial markets as a casino in which they place their bets by the day, hour or minute.”

4. Tax all income as ordinary income

Billionaire Warren Buffett has commented on the unfairness of having a lower tax rate than his secretary. That is so because most of his income derives from dividends and capital gains taxed at half the rate as income from work. (I think it altogether fitting that economists use the term “unearned income” to describe this kind of income.)

In 2007 the 400 Americans with the highest income—nearly $345 million—were taxed at less than 17 percent, less than half the ordinary income tax rate of 35 percent because most of their income was derived from investments. If we were to require that all their income be taxed at the 1999 tax rate of 39.6% this alone would generate an additional $300 billion in revenue over the next 10 years.

5. Declare a moratorium on foreclosures

Foreclosures hurt individuals, neighborhoods and the economy. Dumping millions of homes on the market depresses the overall value of all real estate, increases unemployment and disrupts lives and neighborhoods.

The most effective way to stop the tidal wave of foreclosures is through permanent, sustainable loan modifications that reduce homeowners’ mortgage principal and interest rates to market value. In a 2010 report, National Peoples Action proposed one strategy. “Across the country, some 11 million homeowners are $766 billion under water with their mortgages. Paid off over 30 years this means $73 billion a year needed to reset all underwater homeowners’ principals and interest rates would be about half of the $143 billion the top six banks alone are getting ready to pay in 2010 in bonuses and compensation. Even if the top six banks were to absorb the full cost of modifying all underwater mortgages in the country, they would still have $70 billion left for bonuses and compensation.”

The Wall Street occupiers have taken a stand against monied democracy and corporate power. We would do well to join them. Make your voices heard. And demand new rules that will honor the 99% and restore democracy to the nation.

David Morris is Vice President and director of the New Rules Project at the Institute for Local Self-Reliance, which is based in Minneapolis and Washington, D.C. focusing on local economic and social development.

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Confronting the Malefactors

by Paul Krugman, the New York Times, October 6, 2011

There’s something happening here. What it is ain’t exactly clear, but we may, at long last, be seeing the rise of a popular movement that, unlike the Tea Party, is angry at the right people.

When the Occupy Wall Street protests began three weeks ago, most news organizations were derisive if they deigned to mention the events at all. For example, nine days into the protests, National Public Radio had provided no coverage whatsoever.

It is, therefore, a testament to the passion of those involved that the protests not only continued but grew, eventually becoming too big to ignore. With unions and a growing number of Democrats now expressing at least qualified support for the protesters, Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

What can we say about the protests? First things first: The protesters’ indictment of Wall Street as a destructive force, economically and politically, is completely right.

A weary cynicism, a belief that justice will never get served, has taken over much of our political debate — and, yes, I myself have sometimes succumbed. In the process, it has been easy to forget just how outrageous the story of our economic woes really is. So, in case you’ve forgotten, it was a play in three acts.

In the first act, bankers took advantage of deregulation to run wild (and pay themselves princely sums), inflating huge bubbles through reckless lending. In the second act, the bubbles burst — but bankers were bailed out by taxpayers, with remarkably few strings attached, even as ordinary workers continued to suffer the consequences of the bankers’ sins. And, in the third act, bankers showed their gratitude by turning on the people who had saved them, throwing their support — and the wealth they still possessed thanks to the bailouts — behind politicians who promised to keep their taxes low and dismantle the mild regulations erected in the aftermath of the crisis.

Given this history, how can you not applaud the protesters for finally taking a stand?

Now, it’s true that some of the protesters are oddly dressed or have silly-sounding slogans, which is inevitable given the open character of the events. But so what? I, at least, am a lot more offended by the sight of exquisitely tailored plutocrats, who owe their continued wealth to government guarantees, whining that President Obama has said mean things about them than I am by the sight of ragtag young people denouncing consumerism.

Bear in mind, too, that experience has made it painfully clear that men in suits not only don’t have any monopoly on wisdom, they have very little wisdom to offer. When talking heads on, say, CNBC mock the protesters as unserious, remember how many serious people assured us that there was no housing bubble, that Alan Greenspan was an oracle and that budget deficits would send interest rates soaring.

A better critique of the protests is the absence of specific policy demands. It would probably be helpful if protesters could agree on at least a few main policy changes they would like to see enacted. But we shouldn’t make too much of the lack of specifics. It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details.

Rich Yeselson, a veteran organizer and historian of social movements, has suggested that debt relief for working Americans become a central plank of the protests. I’ll second that, because such relief, in addition to serving economic justice, could do a lot to help the economy recover. I’d suggest that protesters also demand infrastructure investment — not more tax cuts — to help create jobs. Neither proposal is going to become law in the current political climate, but the whole point of the protests is to change that political climate.

And there are real political opportunities here. Not, of course, for today’s Republicans, who instinctively side with those Theodore Roosevelt-dubbed “malefactors of great wealth.” Mitt Romney, for example — who, by the way, probably pays less of his income in taxes than many middle-class Americans — was quick to condemn the protests as “class warfare.”

But Democrats are being given what amounts to a second chance. The Obama administration squandered a lot of potential good will early on by adopting banker-friendly policies that failed to deliver economic recovery even as bankers repaid the favor by turning on the president. Now, however, Mr. Obama’s party has a chance for a do-over. All it has to do is take these protests as seriously as they deserve to be taken.

And if the protests goad some politicians into doing what they should have been doing all along, Occupy Wall Street will have been a smashing success.