California Free Press

Is the US a Wealthy Nation? Really??

by John Lawrence

We hear all this blather about how the US is such a wealthy nation. Not true. Before Ronald Reagan became President, the US was the world's largest creditor nation. People and countries owed us more money than we owed them. Now some 30 years later the US is the world's largest debtor nation. This is the definition of a poor - not a rich - nation. China on the other hand holds $3 trillion in international reserves including $1 trillion of US debt. Other nations have sovereign wealth funds which contain vast amounts of money. The US has only a huge pile of debt - some $14 trillion worth. The US used to be the world's largest importer of raw materials and exporter of manufactured goods. Now we're the world's largest exporter of raw materials and importer of manufactured goods with a trade deficit of some $600 billion a year. At the present time the US has a deficit of some $2 trillion in needed infrastructure repairs while China is building high speed rail track at such a rate that it will soon have more miles than the rest of the world combined. Meanwhile, the US spends more on its military establishment than the rest of the world combined while cutting safety nets and education for its own citizens.

Americans have pulled the wool over their own eyes. Despite having a national debt of $14 trillion, despite having gone from a net creditor nation to a net debtor nation in little over 30 years, despite having enormous trade deficits month after month, year after year, despite having an infrastructure in need of $2 trillion worth of repairs, Americans think they live in a wealthy nation. The truth of the matter is that the US is a poor nation within which live a lot of wealthy individuals. China on the other hand holds a little over $1 trillion of US debt making it a fairly wealthy nation albeit with a large but diminishing number of poor people. China is building new infrastructure at an astonishing rate. It's a fallacy to think a wealthy nation is a nation comprised of a large number of wealthy individuals. In fact many Banana Republics are comprised of a small class of wealthy individuals surrounded by a sea of poverty. The US is on track to becoming one of those. A recent survey showed that there is a higher level of inequality in the US than exists in Pakistan, Ethiopia and Ivory Coast. 

It is not hard to diagnose why the US is a poor nation which thinks itself rich while China is a rich nation which passes itself off as being poor. All the free trade agreements like NAFTA and CAFTA have resulted in the decimation of the US manufacturing base. US factories are closing in droves:

2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast.  Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?”  Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950.  America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little.  The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families.  The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day.  14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive.   Unfortunately, this is not just a temporary situation for American workers.  As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.

Since 2001, The U.S. Has Lost 42,400 factories. The "giant sucking sound" that Ross Perot predicted has become a point of actual fact. But this doesn't seem to bother America's leaders. They are dedicated to the policy that US consumption drives US GDP and as long as US GDP is the largest in the world, who cares? Sales are up! However China, as the world's second largest economy as measured by GDP, is on track to overtake the US in the near future. American politicians only care about transnational corporations, nominally American, and how they can maintain the US consumer appetite (and their profit margins) for buying their goods even though most of those goods are produced overseas. They coddle these corporations by lowering their taxes, having their lobbyists drill loophioles in the tax code and giving them a "tax holiday" during which they can "repatriate" their overseas capital and bring it "home" without any tax consequences.

The model of trickle down economics, long since discredited, is still being championed by right wing politicians with the result that the fig leaf of prosperity is being shredded to reveal a naked transfer of wealth from the middle class to the upper one per cent. Naked power grabs are becoming the order of the day as the recent vote to extend taxpayer subsidies to the five Big OIl companies, despite their being the most profitable corporations in human history, reveals. At the same time those same right wing policticians are demanding that the budget be balanced on the backs of the poor and middle class. While countries such as Norway fund their safety net with royalties from oil drilling, the US gives away its natural resources to oil corporations including BP which is not even headquartered in the US. The neocon model of privatization and eliminating safety nets, although unsuccessful in Argentina and Brazil, is achieving considerably more success when practiced here at home. Trade unions are being decimated. States are being turned into fiefdoms and dictatorships. Public education is being defunded. There is an all out assault on teachers, police and other public workers. The notion that government doesn't work and can't be trusted is being fostered.

The US is becoming the very definition of a Banana Republic. It is becoming a nation largely bereft of a middle class, a nation in which there exists a small class of extremely wealthy individuals surrounded by a sea of impoverishment, a nation of antiquated infrastructure, a nation in which there is no there there. All that exists is a diminshing probablity of getting rich or even making it into the middle class. Students are being saddled with immense and obscene amounts of student loan debt. Middle classers are losing their homes to foreclosure. Poor people are being shunted aside as food stamp programs are being shut down and home heating oil allowances are drying up. The war on the poor is raging. And the American people continue to vote the guys that are screwing them into office because they pander to them with promises of unlimited rights of gun ownership and promises that they won't allow gays to marry

The US in point of fact is not a wealthy nation despite attempts to brainwash us that it is, and it's becoming poorer by the hour. But instead of implementing a rational health care system, we continue to give away billions to the pharmaceutical companies that we wouldn't have to if the government weren't prevented by law from negotiating with them. We continue to give away billions in subsidies to Big Oil and Big Agriculture. We continue to give away billions in tax breaks to the rich. We continue to pour billions down ratholes in Afghanistan, Pakistan, Iraq, Israel and many other places. .

 

These countries are taking us for a ride, and the Israeli President Netanyahu lectures our President on why he won't cooperate to bring about mideast peace. They are manipulating us out of our money while actually working and fighting against us as revealed by Pakistan's harboring of bin Laden. If Obama had tried to coordinate bin Laden's capture with Pakistan instead of going it alone, bin Laden would probably have been tipped off with the result that the Seals, to Obama's embarassment, would not have found bin Laden at home. What, no bin Laden? Just innocent women and children.

As China eats the US' lunch and the rest of the world rips off Uncle Sucker for billions of US taxpayer dollars, the American people should get used to the fact that we're not number 1 any more. Far from being the world's richest nation we're fast becoming one of the world's poorest nations where some of the world's richest people happen to reside. But don't worry about them. They also own villas in France, Italy and Spain. They only continue to hold US citizenship as a convenience. They could live anywhere. They could headquarter their corporations anywhere. It's still convenient for them to headquarter here so they can use their lobbyists to rip off American taxpayers and sell into the American consumer market. But as time goes on most of their sales will be to emerging consumer markets in China and elsewhere.

 

The Korea-US Free Trade Agreement--Another Cash Cow for Corporations

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

by Jim Goodman

"We have to seek new markets aggressively, just as our competitors are. If America sits on the sidelines while other nations sign trade deals, we lose the chance to create jobs on our shores”. President Barack Obama, State of the Union Address January 27, 2010

The Korea-US Free Trade Agreement (KORUS) is precisely what President Obama is promoting. The arguments and the promises are pitched again, over and over and over, ad nauseum -- Free Trade Agreements (FTAs) will produce more and better jobs for U.S. workers, better markets and more profit for U.S. farmers.

The underlying assumption of job creation through FTAs is false. Current trade policy has not created more U.S. jobs; it has, according to the AFL-CIO, cost the U.S. 6 million jobs since 1998. Understanding that fact is not rocket science. Current trade policy has accelerated offshoring of U.S. jobs and it has, in effect, allowed multinational corporations to opt out of environmental protection and fair labor standards.

Considering our long history of FTAs, [North American Free Trade Agreement (NAFTA) 1994, the World Trade Agreement (WTO) 1995 and the Central American Free Trade Agreement (CAFTA) 2005], shouldn't the prosperity for workers and farmers be kicking in pretty soon? Why those 6 million jobs lost, why a the continuing food crisis, why the world economic death spiral?

Prior to NAFTA, 1990-1994 our trade deficit with Canada averaged $8.1 billion; by 2006 it was $71 billion. In 1993 we had a $1.6 billion trade surplus with Mexico; by 2010 we were $61.6 billion in the red. Given economic factors unrelated to NAFTA, both positive and negative, the Congressional Budget Office estimates that under NAFTA the U.S. gross domestic product increased a few hundredths of one percent. Wow.

While the Boston Globe indicated NAFTA was bad for U.S. jobs and the environment, the San Francisco Chronicle noted that under NAFTA multinational corporations had been able to cut labor costs and increase their profits. KORUS will be no different: bad for workers, good for corporate profits. The U.S. International Trade Commission estimates that under KORUS, the U.S. trade deficit would, again, increase and U.S. jobs would, again, be lost.

So, while profits will be realized, the benefit to society is a question of one's perspective. While workers are laid off, farmers gain nothing and the poor sink deeper into destitution, corporate power and profit will keep growing. Who really benefits when, for example, General Electric made $14 billion in profit in 2010 yet paid no taxes?

GE is one example, but the parallels are pointedly exact, whether it is GE, Wal-Mart, Nestle, Kraft, Cargill or any of a host of agribusiness corporations. They profit, they do not pay their fair share of taxes and they happily exploit labor standards and environmental protection.

Agriculture could be the biggest winner when KORUS is approved. U.S. agricultural interests stand to gain billions in earnings and undoubtedly they will. Farmers, however, are not international traders, the real profit in agriculture is made in the corporate boardroom and we don't have a seat there. Perhaps the stronger point is that most farmers worldwide produce food to be consumed locally, not commodities for international trade, they stand to be victims of corporate “dumping” rather than to benefit by trade.

Farmers' marketing options are limited, workers' bargaining power is limited and the poor have no power. Trickle down economics did not work when Ronald Reagan made it popular. It does not work now and it never will.

Like Mexican and Central American farmers under NAFTA and CAFTA, Korean farmers will, perhaps, suffer the most. They stand to loose their land, their culture and their dignity-- again.

Farmers and workers should not be forced into dependence on trickle down economics, content with the crumbs that fall off the corporate banquet table.

If the argument in favor of KORUS is increased corporate profit, fine. Call it that. But it is a perverse misrepresentation to imply that U.S. farmers and workers will profit, because we have not and we never will. We do not have the power the lawyers or off-shore banks that the multi-national corporations use to push their agenda and profit from our labor.

Increased profit through free trade? Yes, that will happen. Clearly there is profit to be made through the implementation of FTAs, but the profit will be made by the multi-national corporations who actually move product around the world. As tariff barriers are removed, the world will indeed be their oyster and Shakespeare could be quoted as their guiding light,* “*/*Why then the world's mine oyster/Which I with sword will open.”*/
 

Jim Goodman, his wife Rebecca and brother Francis run a 45-cow organic dairy and direct market beef farm in southwest Wisconsin. His farming roots trace back to his great-grandfather's immigration from Ireland during the famine and the farm's original purchase in 1848. A farm activist, Jim credits more than 150 years of failed farm and social policy as his motivation to advocate for a farmer-controlled consumer-oriented food system. Jim currently serves on the policy advisory boards for the Center for Food Safety and the Organic Consumers Association, and is board president of the Midwest Organic Services Association.

more Jim Goodman

How Germany Manages to Have an Export Economy and Provide Plenty of Jobs While the US is Engaged in a Race to the Bottom

by John Lawrence

Germany's economy is doing just fine while the US economy languishes. There are many reasons for this, but one that predominates is the Value Added Tax (VAT). At each stage in the production process, when a product or service changes hands, it is taxed at 19%. So if you're manufacturing a car, for example, when you buy a component like a transmission from another manufacturer, that manufacturer has to pay the VAT before that product can be sold to you. Some products and services like food and doctors pay a lower VAT.

The VAT must be paid on all imports in one fell swoop as they enter the country whereas the VAT was paid in stages by different business entities at each stage along the supply chain within the country. This tends to discourage imports, and make it more profitable to manufacture and sell (and thus provide jobs) within the country of Germany itself. Contrast this with America in which there is no tax on imports (thanks to free trade) so it is cheaper to manufacture abroad and import products into the US thus creating jobs abroad. The VAT acts as a tariff on imports and also provides a loopholeproof source of revenues for the government. In the US many major corporations like GE and Exxon Mobil, for example, pay no income tax even though they make tens of billions of dollars in profits. In fact many of them actually get tax refunds or subsidies! This process defunds the government, frays the safety net for the middle class and the poor and results in the budget being balanced, to the extent that it is, on the backs of the poor and middle class.

For German exports, the VAT is refunded thus encouraging exports at the expense of imports. No wonder Germany has a healthy export economy. This acts like a tariff in reverse. So imports are subjected to a 19% VAT at the border and exports are given a 19% refund at the border. American exports are given no such incentive. In short the US is letting foreign countries eat their lunch and running up their trade deficit in the process because of an antiquated approach to taxation which favors American multinationals while shortchanging American taxpayers.

The following is from an article, "The Foreign Value Added Tax: Making Our Exports Uncompetitive:"

Unknown to most Americans, the United States is losing the ability to compete in global trade because of the little known foreign Value-Added Tax (VAT). Foreign governments use this tax against United States producers as a means to prevent the importation and consumption of U.S. goods, while providing incentives for their countries to export their goods to the U.S. The foreign VAT was a subsidy created after World War II to speed up beneficial other countries' recovery. However, it is still used today by 149 countries to exploit this advantageous position against American trade. We have not used it domestically to off set theirs as a benefit to ourselves. The foreign VAT gives the companies of other nations and their exports the upper-hand by providing incentives in the form of rebates equal to the indirect tax on the exported product. For example, the VAT rate is 19 percent in Germany; therefore the Germans receive a 19 percent rebate from their government on each product exported to the U.S. This acts as a subsidy for a product while encouraging the exportation of products to the U.S. However, the VAT imposes a punishment on U.S. exports by placing a VAT equivalent to the Value Added Tax rate of the importing country. This means all U.S. exports that enter into Germany are taxed 19 percent on top of another 19 percent for the transportation fees of the goods into the country. The VAT destroys American industries’ ability to promote exports, while encouraging foreigners to sell their products to Americans – it must be amended or eliminated. In 2001, European countries had a VAT rate of 19.2 percent. By 2005, 94 percent of U.S. exports received a VAT. In the same year, foreign governments received rebates of $239 billion from the tax while collecting $131 billion from U.S. producers of goods and services. It is not surprising that the U.S. has become a nation promoting imports over exports under these unfair and harsh tax conditions. It can be seen why some companies choose to move overseas to produce their product abroad to avoid this monstrous tax and gain the advantage of it in some cases. Because of this detrimental tax, American firms cannot compete worldwide. Numerous attempts have been made by Congress to offset the tax – in 1974 the Nixon administration was urged to negotiate the tax during the Tokyo Round of global trade talks – only to be ignored by the other countries. In 1972 and 1984, Congress changed the tax system to exempt between 15 and 30 percent of an exporter’s income from U.S. taxes to offset the disadvantage of the VAT. The European Union (EU) complained to the World Trade Organization (WTO) in 1998, saying the U.S. tax exemption, acting as a tax subsidy, was a direct violation of the WTO agreement. In 1999 the WTO ruled in favor of the EU, giving the U.S. one year to change its tax exemption law or face penalties from the WTO. Again in 2000, Americans enacted new tax legislation to offset the VAT, which resulted in yet more EU complaints and another WTO case. The WTO decided in favor of the EU, leading to a ruling in 2002 allowing the EU to impose retaliatory tariffs of $4 billion each year on U.S. imports. By this time 25 European nations enacted the VAT to usurp America’s ability to trade. In 2004 Pres. Bush created new legislation again to offset the VAT. This again led to complaints from the EU – again filing a case with the WTO – arguing export subsidies were provided by the new legislation. In 2006 President Bush and Congress stopped enacting the tax provisions to U.S. exporters, demonstrating how the EU and WTO had successfully usurped the U.S. of its power to promote fair and free trade. During the battle between the WTO and the U.S., all nations were provided full VAT privileges, usurping the U.S. of fair trade. The WTO and EU do not serve in the best interest of the U.S. They are acting to support and promote continuance of this debilitating tax. The only way the WTO will allow us to offset the VAT is to have one of our own. We could feasibly do this if we were to lower our income tax. Until we do get a VAT of our own, our companies and our nation will continue to suffer against this unfair disadvantage.

While the US is straitjacketed by partisan bickering and paralyzed by insane trade policies, Germany and other countries are surging ahead with enlightened, rational thinking which gets translated into effective policies that keep the German government in a position of solvency and keep German factories humming. Meanwhile, the US engages in a race to the bottom encouraging the export not of products but of jobs and defunding the government by giving tax breaks to corporations and the rich.  Another informative article is the following:

In a June 28, 2010, economist Ian Fletcher said “Germany, like the U.S., is nominally a free-trading country.  The difference is that, while the U. S. genuinely believes in free trade, Germany quietly follows a contrary tradition that goes back to the 19th-century German economist Friedrich List …  So despite Germany’s nominal policy of free trade, in reality a huge key to its trading success is a vast and half-hidden thicket of de facto non-tariff trade barriers.” Fletcher quoted from a report by the Heritage Foundation: “Non-tariff barriers reflected in EU and German policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some good and services, market access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members.” Another opinion of Germany’s export success as reported in The New York Times, is “the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder.  By paring unemployment benefits, easing rules for hiring and firing, and management and labor’s working together to keep a lid on wages, ensured that it could again export its way to growth with competitive, nimble companies producing the cars and machine tools the world’s economies – emerging and developed alike – demanded.” The same article reported that Germany’s Chancellor Angela Merkel resisted the use of government stimulus spending that the United States and some European partners used to handle the recession.  Instead of extending unemployment benefits like the United States has done several times since the recession began, Germany “extended the “Kurzarbeit” or “short work” program to encourage companies to furlough workers or give them fewer hours instead of firing them, making up lost wages out of a fund filled in good times through payroll deductions and company contributions.  At its peak in May 2009, roughly 1.5 million workers were enrolled in the program,” and the Organization for Economic Cooperation and Development estimated that   “more than 200,000 jobs may have been saved as a result.” As a result, Germany’s unemployment rate at the height of the global recession was 9.0 percent in contrast to the 10.2 percent of the United States.  The German jobless rate in October 2010 was down to 7.0 percent in contrast to the 9.6 percent of the United States.  Germany is one of the few economies experiencing a solid recovery and one of the even fewer economies without a substantial deficit crisis on its hands.  Germany’s exports surged month by month in 2010, but year-end data hasn’t been released yet.

The US model of free trade has largely worked to create a trade deficit in the US, encourage a consumer based economy based on cheap imported products and undermine American workers. While the US encourages the offshoring of US corporations and unlimited imports into the US economy, it gives no incentives for corporations based in the US to export to other countries. As a result it is at a competitive disadvantage, and is losing out in the struggle to supply its government with cash and its workers with jobs. But instead of a rational assessment of this situation and a resolve to do something about it, the US argues about the President's birth certificate and engages in pointless, meaningless culture wars tantamount to arguing about how many angels can dance on the head of a pin.

The Fly in Obama's Ointment on Jobs

by John Lawrence

President Obama is waxing ebullient on the jobs front. He's partnered up with GE CEO Jeffrey Immelt, and they are both proclaiming that the US will again be a robust manufacturing and exporting nation. They have rejected the model for the US as a mainly consuming and service oriented nation. That's all to the good. But Obama seems to have placed too much faith in the corporate CEOs. He seems to think they're going to stop outsourcing, and, out of the goodness of their hearts, they're going to start creating jobs here at home. But the official US government still has in place laws and policies - and in particular tax policies - that actually encourage outsourcing. Nancy Pelosi, when the Democrats controlled the House, said after passing a bill which would have reined in outsourcing: "In this legislation, which is job creating, it closes the loophole which has allowed businesses to ship jobs overseas.  Can you believe that we have a tax policy that enables outsourcing?  So if you have one thing to say about this bill to your constituents, you can say that today, you voted to close the loophole to ship U.S. jobs overseas and giving businesses a tax break to do so. It is not right. It will be corrected today.” This was in May, 2010. Of course, this bill never made it into law because it was filibustered by Republicans in the Senate. Sorry, Nancy.

Closing the loophole that has allowed businesses to ship jobs overseas? Well, sorry to say that loophole was never closed! President Obama though wants us to believe that, regardless of that loophole being closed, CEOs like Jeffrey Immelt are going to be nice guys and create local manufacturing jobs here in the US even though it is going to lower their profit margins, even though the loopholes for shipping jobs overseas are still open! Is he being naive? And then there is this from Robert Reich:

General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE’s joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.

Will the real GE please stand up? Corporations are required by law to maximize their profits. This means that they will lower their expenses by getting the cheapest labor wherever they can get it. And American labor is relatively expensive compared to Chinese labor. So Obama is skating on thin ice. His bravado overlooks the underpinnings of law that give American corporations huge incentives for creating jobs overseas and outsourcing American jobs. Sure, GE wants to sell to the Chinese. But this doesn't mean that those products will be exported from the US. In the last ten years 42,000 American factories have closed. Millions of jobs have been lost. And now Mr. Nice Guy, Jeffrey Immelt of GE, is going to forego maximizing profits and his salary and his duty to shareholders in order to do a favor for President Obama and create some jobs in the US? What game is he playing? Mr. President, where are the legal underpinnings that would make sure that this will happen? You have a Congress that won't even close loopholes that would encourage job creation in the US. Do you have the feeling you're teetering on the brink? You said you've moved us back from the abyss. But have you? The abyss still looms because now for sure with a Republican controlled House, no loopholes that encourage and enable outsourcing will ever be closed unless and until Democrats control both Houses and the filibuster rules have been changed. Mr. President, you are whistling Dixie, in the dark, and past the graveyard too!

As President Obama touts the jobs being created at GE's Schenectady plant we have this dated January 14, 2011: "Solar Panel Maker Moves Jobs to China":

BEIJING — Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States. But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China.

It looks like the right hand doesn't know what the left hand's doing. It seems like not only does China have cheaper labor, but they have more government support for American companies that want to build plants and create jobs there! The US on the other hand has no industrial policy, no set of incentives in order to have companies, domestic or foreign, build more plants in the US. And there are no unions to speak of that would fight for the rights of American workers. America, for all intents and purposes, has been deunionized starting with Reagan's firing of the air traffic controllers which effectively put their PATCO union out of business.

In "19 Facts About The Deindustrialization Of America That Will Make You Weep", Michael Snyder says:

The United States is rapidly becoming the very first "post-industrial" nation on the globe.  All great economic empires eventually become fat and lazy and squander the great wealth that their forefathers have left them, but the pace at which America is accomplishing this is absolutely amazing.  It was America that was at the forefront of the industrial revolution. It was America that showed the world how to mass produce everything from automobiles to televisions to airplanes. It was the great American manufacturing base that crushed Germany and Japan in World War II.  But now we are witnessing the deindustrialization of America.  Tens of thousands of factories have left the United States in the past decade alone. Millions upon millions of manufacturing jobs have been lost in the same time period.The United States has become a nation that consumes everything in sight and yet produces increasingly little. Do you know what our biggest export is today? Waste paper. Yes, trash is the number one thing that we ship out to the rest of the world as we voraciously blow our money on whatever the rest of the world wants to sell to us. The United States has become bloated and spoiled, and our economy is now just a shadow of what it once was. Once upon a time America could literally outproduce the rest of the world combined. Today that is no longer true, but Americans sure do consume more than anyone else in the world. If the deindustrialization of America continues at this current pace, what possible kind of a future are we going to be leaving to our children?

The US is embarked on its own destruction thanks to the "small government" mantra of the Republican controlled Congress. Small government means no industrial policy except by lobbyists seeking special favors for their particular corporate sponsors. It means that US government policy will favor US business but not necessarily US workers. Unless and until the US can adopt policies which favor job creation in the US, US workers will be left out in the cold. And President Obama's soaring rhetoric about cooperation with CEOs like Jeffrey Immelt will be just that: rhetoric.

Serfing USA: Corporate America is Robbing American Workers

Published on Thursday, December 30, 2010 by ThisCan'tBeHappening.net

by Dave Lindorff

Along with the staggering theft in broad daylight of Americans' assets that has occurred in the course of the ongoing financial crisis, as taxpayers funded multi-trillion bank bailouts and banks stole homes through foreclosures with the help of fraudulent paperwork, American companies have also been picking the pockets of workers more directly.

This second round of paycheck theft has come in the form of stolen productivity gains.

Historically, the relatively high and rising standard of living of American workers--both blue and white-collar--which once gave the US one of the highest standards of living in the world, has come courtesy of rising productivity, which has allowed US companies to produce more goods with less labor, and to then pass some of the enhanced profits on to workers in the form of higher wages, without having to raise prices. That has been important because, when higher wages are financed by higher prices, it tends to be a kind of zero-sum game: higher wages cancelled out by inflation.

But beginning in 2000, the old system already creaky, broke down. (It must be noted that this system was never the result of the capitalists' largesse, but rather was because of a tighter labor market and, critically, a powerful labor movement.)

The corporate onslaught against trade unions and against the minimum wage, which began with the Nixon administration in 1968, combined with so-called "free-trade" deals that allowed US companies to shift production overseas and then to freely import the products of their overseas production facilities back for sale to Americans at home, by weakening the power of workers to demand higher wages, has led to a situation where companies can just pocket all the profits from productivity gains, leaving wages stagnant, or even driving them down.

The recession that began in late 2007 has only made matters worse, giving owners and managers to opportunity to really hammer employees. With real unemployment and underemployment now running at close to 20%, employees are in no position to press for higher wages, even as those who are still working are putting in extra effort to keep their jobs, thus pushing productivity gains even higher.

The figures speak for themselves.

According to the Bureau of Labor Statistics, productivity gains during the 1990-1999 decade averaged just 2.1% per year. The prior decade, from 1980-1989, the average productivity gain was 1.5% per year. But between 2000 and 2009, when the economy suffered two recessions, the average annual productivity gain has been 2.9%, almost 50% higher than the prior decade, and almost double the rate in the 1980s.

During this same period, however, wages have actually declined. According to the BLS, wages in 2010 rose 0.1%, but inflation, running at an official (and grossly under-measured) 1%, more than ate that up. According to the Economic Policy Institute, a Washington think tank, for the whole decade from 2000 through 2009, wages actually sank for most people. In 2000, the median weekly wage for a high school graduate was $629. By the end of 2009, high school graduates were earning a median weekly wage, in inflation-adjusted dollars, of just $626--three dollars a week less than a decade earlier. A college degree didn't change things, either. In 2000, the median weekly wage for a college grad was $1030, but that had fallen to $1025 by the end of 2009.

Remember, all during that decade, companies were seeing productivity gains averaging almost 3% per year. If 50% of that gain in productivity annually had gone to workers, as might have been typical back 30 years ago when unions were stronger and before Congress gave away the store by signing onto the World Trade Organization and the North American Free Trade Act and similar trade agreements, that high school grad would have been earning $729 a week in inflation-adjusted dollars by 2009, while the college grad would have been earning $1,195.

Of course as a whole, Americans have been doing even worse, because these are just the mean wages of people who are working full weeks. In fact, many companies have been laying off workers, and making the remaining workers, desperate to hang on to their jobs, work harder to produce the same amount of product, meaning that besides not getting any pay increase, they are producing much more profit for the boss. Many workers who are still hanging onto their jobs are actually working fewer hours, and thus are taking home smaller paychecks, all of which goes into that higher productivity figure for output per worker the government is reporting.

Indeed, the Wall Street Journal recently reported glowingly that US production of goods and services had returned to its 2007 pre-recession level, but this is with unemployment running at an official rate of 9.8 percent, and an actual rate of about 19 percent.

What we're witnessing is a massive national "speed-up" which is enriching the owners of capital, while the workers are getting stiffed. It is the payoff to the ruling class for decades of hammering of trade unions, and also of trade unions cutting deals with the Democratic Party, which in turn has refused to defend workers' interests. Look at the sell-out of Labor during the first two years of the Obama administration. The union movement's one big issue--restoring some measure of fairness to the Labor Relations Act, so that it would be at least possible to organize unions and to win contracts and improved wages and working conditions--was dropped without even a fight by the Obama administration and the leadership of the House and Senate. The government, fully in the hands of Democrats, has also continued to sign trade agreements, most recently with Korea, that further shift jobs overseas, thus further weakening the position of workers here at home.

A cynic might speculate that this is also why the Democrats have refused for over three years now to come up with any real public jobs program despite the desperate straits of tens of millions of jobless people who have been without work for more than a year. The Democrats, in thrall to corporate interests, would on the evidence much rather spend $50 billion on a program of extended unemployment benefits that leaves those millions of people hungry for any real job, than spend that same sum on providing them with government jobs, as that would actually reduce unemployment and increase the bargaining power of all workers vis-a-vis employers.

Meanwhile, the national corporate media, itself viciously anti-union, continue to skew news coverage to portray unions as corrupt and greedy, so that the 90 percent of American workers who are not in a union don't even realize that any pay gains or benefits they get are because employers are trying to avoid unionization of their workforce.

Unless Americans wake up soon to how this process is impoverishing us all, we will see this shifting income and wealth to the top strata of the population continue until most of us are little more than modern-day serfs.

A start would be for people to at least recognize that this stagnation and decline in incomes we're witnessing is not some natural phenomenon. It is, no less than the fat salaries, perks and bonuses paid by corporate managers to themselves, simply another manifestation of corporate greed gone wild.

© 2010 ThisCan'tBeHappening.net

Dave Lindorff is a Philadelphia-based journalist and columnist. He is author of Marketplace Medicine: The Rise of the For-Profit Hospital Chains (BantamBooks, 1992), and his latest book "The Case for Impeachment" (St. Martin's Press, 2006). All his work is available at www.thiscantbehappening.net

How Corporations Are Ripping Off US Taxpayers and Workers

by John Lawrence

US corporations are being subsidized by the US government to build factories abroad and to ship jobs formerly held by American workers overseas. In addition they are getting all sorts of tax breaks on profits they make selling products into the US market. These policies were designed during Republican administrations generally although Bill Clinton played a big role in this "globalization" process. There are three main goals of globalization from the corporation's point of view: 1) produce where labor and other inputs to the production process are cheapest; 2) sell into whatever markets are most lucrative (right now the US market represents the largest consumer market in the world); 3) pay as little in taxes to any government anywhere in the world. The Obama administration has tried to change some of these tax policies, but to no avail. The latest example of this is that at first the bill giving aid to first responders of 9/11 was going to be funded by not letting corporations continue to deduct expenses for constructing foreign plants from their tax bill. However, Republican objections and obstructionism forced a "compromise" in which that corporate tax "loophole" was left intact. Obviously, if there are tax advantages to constructing plants abroad in addition to the lure of cheap labor, corporations are being encouraged by US government policy to outsource American jobs. Just the opposite should be true. They should be given tax breaks for constructing plants here and employing American workers. The Obama administration has pledged to fix this situation, but with Republican control of the House there is little chance they will be able to accomplish this goal.

Here's how it works. Although the US corporate income tax rate is 35%, most corporations end up paying only 6-7%. This year, Google, which made $5.5 billion in revenues, only paid an effective tax rate of 2.4%. Corporations set up foreign subsidiaries in low tax countries and then shift profits to those subsidiaries. Therefore, they claim that they didn't make those profits in the US where they sold their merchandise but in those foreign countries where they didn't. It's a corporate shell game. You make your profits where the consumer market is good but taxes are high and then shift those profits to a country where the consumer market is bad but tax rates are low. An additional neat trick is that corporations are able to shift their expenses on their foreign operations to the US. Even though the expenses were incurred in the foreign country where their plant is located, for example, for tax purposes they are shifted to the US where they are deducted from their US tax bill. So they have the best of both worlds. They can shift factories to foreign countries where labor is cheapest, and then turn around and deduct the expenses for outsourcing plants and jobs from their US tax bill.

It's called "transfer pricing:"

For many companies, however, national combined reporting requirements aren’t an issue—they just create subsidiaries in international tax shelters like Ireland and the Cayman Islands. A tool called transfer pricing lets companies make profits in tax havens while allocating expenses to higher-tax countries, writes the OECD Observer. ... Google’s “Double Irish” strategy is one popular transfer pricing scheme. Google created two companies in Ireland to execute this maneuver. One pays royalties to use intellectual property (expenses that reduce income tax in Ireland). A second, located in Bermuda, collects those royalties. The meat in Google’s sandwich is the Netherlands, where profits go on their way from Ireland to Bermuda. “Irish tax law exempts certain royalties to companies in other EU- member nations,” according to the excellent Bloomberg article that describes Google’s acrobatics. “A brief detour to the Netherlands avoids…Irish withholding tax.” If you think the federal government would want to sink its teeth into those profits by implementing an international combined reporting requirement, think again. The feds would rather get what they can without changing the law: Google and the IRS negotiated for three years before coming to “an arrangement” that let the company execute its transfer pricing strategy, according to Bloomberg.

Transfer pricing is another reason the states are going broke. By locating plants in states where there are few sales, corporations avoid paying taxes in other states where most of their profits are made. By using this strategy with respect to foreign countries, they put their tax avoidance schemes on steroids. Corporations that transfer income abroad even though a lot of it might have been generated in the US are still on the hook if they repatriate those profits. That is if they bring those profits back into the US. But there is no need to. Most corporations never repatriate that income. They leave it parked outside the country because their interest is in constructing plants and facilties outside the US where labor is cheapest.

Halliburton is a good example of a corporation which makes most of its profits inside the US but exports most of its profits abroad. Recently, it moved its corporate headquarters to Dubai.

For decades, the U.S. tax code has encouraged companies like Halliburton to transfer the location of its subsidiaries from the United States to foreign countries. This is one reason why only thirty-six of Halliburton's 143 subsidiaries are incorporated in the United States and 107 subsidiaries (or 75 percent) are incorporated in 30 different countries. There are two methods by which Halliburton lowers its tax liability on foreign income: (1) By establishing a "controlled foreign corporation" and (2) By establishing a subsidiary inside a low tax, or no tax, country known as a "tax haven."

Controlled foreign corporations are becoming increasingly valuable to corporations because they allow those corporations to not pay any US income tax on profits generated outside the US. By filing a few papers and incorporating a subsidiary in the country where the profits are made, the subsidiary is no longer considered a "US resident" under the tax code. Instead it is considered a "foreign resident." These profits are only taxed if the profits are repatriated which in most cases they never are.

Here is more on how corporate profits are shifted to countries with low or no tax rates:

Congress reported that Halliburton owns 17 subsidiaries in tax haven countries, including 13 in the Cayman Islands, which has no corporate income tax, two in Liechtenstein and two in Panama. An analysis by CitizenWorks.org found a far greater number Halliburton tax havens. The nonprofit public interest group found that, while Dick Cheney was CEO of Halliburton (between 1995 and 2000), the number of Halliburton subsidiaries incorporated in offshore tax havens rose from 9 to 44. CitizenWorks.org also found that the Fortune 500 companies with the most offshore tax havens are dominated by energy firms, including El Paso (#1), AES (#2), Aon (#5), Mirant (#7), Halliburton (#8), and Williams (#14). Controlled foreign corporations and tax havens are the result of decades of corporate lobbying in Washington, DC. It has benefited corporate America tremendously. The tax savings to Halliburton, and the corresponding tax loss to individual American taxpayers, are enormous. Halliburton paid only $15 million of their $80 million in total taxes (or 19 percent) to the U.S. government in 2002. The remaining 81 percent of the company's taxes went to foreign governments. Although Halliburton is an "American" corporation on paper, it is actually a foreign corporation that has no allegiance to the United States.

The Obama administration has taken steps to discourage job creation overseas by American corporations and to encourage job creation at home. The likilhood of any of these steps being passed into law is nebulous. If American corporations find that American incorporation becomes too onerous, they can simply incorporate elsewhere like Hallburton did. Nevertheless, here are some of the things Obama is trying to do:

Currently, businesses that invest overseas can take immediate deductions on their U.S. tax returns for expenses supporting their overseas investments but nevertheless "defer" paying U.S. taxes on the profits they make from those investments. As a result, U.S. taxpayer dollars are used to provide a significant tax advantage to companies who invest overseas relative to those who invest and create jobs at home. The Obama Administration would reform the rules surrounding deferral so that--with the exception of research and experimentation expenses--companies cannot receive deductions on their U.S. tax returns supporting their offshore investments until they pay taxes on their offshore profits. This provision would take effect in 2011, raising $60.1 billion from 2011 to 2019.

In the final analysis perhaps the only way to retrieve taxes from corporations using every trick for tax avoidance is a VAT tax. The advantage of a VAT tax is that it is collected at point of sale. So no matter where a corporation chooses to move its corporate headquarters, it will never be able to escape taxation as long as it wants to sell into the American market. This also means that corporate profits aren't subject to manipulation by tax lawyers advising corporations how to get around paying taxes, and corporate lobbyists can't drill loopholes into the tax code. A VAT tax would truly tax profits made from sales in the country where the product was sold instead of allowing profits to be transferred to low tax countries. Also a VAT tax would avoid the transfer of deductible expenses from foreign countries to the US. It would put a stop to the transfer of profits to tax havens and expenses to high corporate tax rate countries like the US.

A VAT tax could also get around the free trade tariff restrictions. Germany imposes a VAT tax on imports to make them equivalent to domestically produced products on which VAT taxes have already been paid. This is only fair, but it also tends to give an advantage to domestically produced products and job creation and maintenance in country. The  VAT tax could be charged directly to the corporation whose product is being sold and not to the customer by estimating profits from each sale. Of course, the corporation could raise prices on the product thus effectively transferring the VAT tax to the consumer, but this is not necessarily bad in that it would tend to equalize the advantages of products produced by higher priced American labor. Revenue sharing of the VAT tax between the Federal and state governments would do a lot to alleviate the states' fiscal problems.

In the long run corporations cannot expect to outsource jobs and insource consumer sales indefinitely. The American market cannot sustain 70% of GDP being produced by consumption without American jobs being created to support that consumption. Prudent tax policies will not only encourage domestic job creation but also will recoup much needed tax revenues from corporations who have been escaping from paying their fair share.

American Multinational Corporations Have No Interest in Creating American Jobs So Let's Take Another Approach

by John Lawrence

President Obama's trip to Asia was billed as one to increase American exports. But American multinational corporations aren't interested in increasing exports because they have built manufacturing facilities in China, South Korea, Thailand and other places where labor is cheaper than American labor. Their preferred modus operandi is to export to the American market and sell directly to the local market abroad, hence, exports from the US are a non-starter.  For consumers in foreign countries who want an American product, there is no need to import it from the US. They can buy it from a US corporate manufacturing facility located in their own country. That's why President Obama is barking up the wrong tree. He should be more interested in getting multinational corporations, American and otherwise, to locate manufacturing facilities in the US in order to create American jobs even if their only goal is to sell to the American market and not to export. The only way to do this is to change the import tax laws to encourage companies to locate production facilities here. President Clinton threatened a 100% import tax on luxury vehicles and Toyota promptly started locating manufacturing facilities in the US to protect the market for their Lexus.

It doesn't really matter whether foreign multinationals or American corporations build manufacturing facilities in the US. It's all about providing jobs. With current policies successful start-up companies will provide American jobs temporarily until they grow to a certain size, and then they will offshore those jobs in order to increase profits. So small business start-ups will not be the salvation for American job-seekers except in the very short run. Some worry that profits from Toyota's US manufacturing operations, for example, are repatriated to Japan. But so what? Profits from American corporations operating abroad are held offshore where they aren't taxed. So for all intents and purposes they are not repatriated to the US and, even if they were, they would only end up in rich investors' pockets. By encouraging foreign corporations to locate here, they can at least be taxed before their profits are repatriated. That makes them more desirable than American multinationals who neither provide jobs in the US nor pay taxes in the US. Their sole relation to the US is the fact that they originated here and are registered here, but that can be quickly changed as we saw with Halliburton which moved its registration to Dubai. And even "American" companies have subsidiaries in places like the Cayman Islands, the better to take advantage of lax tax laws. From the average middle class American's point of view, if a corporation doesn't provide American jobs or pay American taxes, what good is it? And if a foreign multinational corporation does provide American jobs and pays American taxes, it is preferable to an American multinational.

The only way to get muiltinational corporations to build production facilities in the US is to make it relatively unprofitable for them to import into the US market. This can only be done by an import tax or tariff of some sort. I'm sure there are sophisticated ways to accomplish the same thing without mentionaing the dreaded word "tariff." Tariffs, by the way, were the largest source of federal revenue from the 1790s to the eve of World War I, a period of some 124 years or more than half the country's history. Ideologically at the present time, tariffs are anathema to the US because of its rhetoric and espousal of free trade. But the US is being played by other countries who effectively take advantage of American open markets while effectively closing their own markets. South Korea is a good example. It exports its cars here while closing its markets to cars from the US. However, it is open to the idea of American car corporations building production facilities in their country. Why? Because that provides jobs for their own citizens and local taxes. Thus there is no need to import those cars and other products from the US.

Globalization is not going away. Each country needs to respond to it in such a way as to protect its own interests. So far the US has failed to do so. President Obama's attempts to invoke rules to even out the trade imbalances so far have gotten him nowhere. Trying to jawbone China to revalue its currency is an excercise falling on deaf ears. Even quantitative easing, the Fed's latest attempt to make American exports more competitive only breeds resentment among our foreign competitors and represents taking a club to kill a gnat. The only effective response is one which unilaterally changes American laws and policies to create a benefical trade policy, not going around trying to get a bunch of other nations to cooperate in doing something beneficial to American interests. The only solution is to take a page out of the other countries' books. It's not exports that matter. It's the location of production facilities in the US that matters. That's what will provide jobs and increase tax revenues. So importing into the US market from abroad has to be made more onerous for the importers. Only then will they decide that locating production facilities and hence providing American jobs within the US is the way to go. Over half the imports into the American market are from American corporations which have located production facilities abroad in order to take advantage of cheap foreign labor.

The US taxpayers bailed out General Motors. We actually own a good percentage of GM, but what is GM doing? It's building production facilities abroad. It is not providing American jobs in gratitude for being bailed out. This is from the Detroit News:

Washington -- General Motors Corp. will shift more production of vehicles bound for the U.S. market to China, Mexico, South Korea and Japan, but will keep total imports at roughly one-third of all sales here. In a confidential 12-page presentation to members of Congress, obtained by The Detroit News on Friday, GM said it will boost U.S. sales of vehicles built in those four countries by 98 percent -- or about 365,000 vehicles -- while shrinking production in Canada, Australia and European countries by about 130,000 vehicles. GM also disclosed it will start importing vehicles made in China in 2011, reaching 51,546 vehicles in 2014. Imports from South Korea to the United States will jump from 36,967 vehicles in 2010 to 157,126 in 2014. The automaker said it is canceling expansion projects in Russia, India and Mexico. GM's plan to import more vehicles from low-wage countries raises questions about whether it should beef up its foreign operations as it is relying on federal money to stay afloat. It also puts the automaker at odds with the United Auto Workers, which is trying to protect U.S. jobs amid a dramatic restructuring of the domestic auto industry.

So GM has no effective allegiance to the US despite being bailed out with taxpayer money. The same goes for Ford. Ford is planning to build a $450 million car plant in Thailand.

Ford Motor Co. is investing $450 million in a new passenger car plant in Thailand, cementing the country's status as an Asian manufacturing base for the automaker despite prolonged political unrest. The plant with an annual production capacity of 150,000 vehicles will begin assembling the next-generation Ford Focus from 2012, the company said Thursday. Some 85 percent of cars produced at the facility will be sold overseas and the rest in Thailand. Ford said up to 2,200 people will be employed at the factory slated for construction in the eastern seaboard province of Rayong that serves as a base for automakers and other industries.

It's all about the jobs. How does Germany, a high exporting nation, manage to keep high paying jobs in its own country? That's maybe something Obama and the Democrats should study and try to emulate. One way they do it is that most German companies build their products in Germany and then export them while US corporations build plants near their markets and produce for the local foreign market so their sales do not count as exports. Coca Cola has production and marketing facilities in over 200 countries. Germany has powerful trade unions and an extensive vocational education program. Every manufacturing facility is unionized unlike in the US where unions have a vastly smaller role than they did just 30 years ago. Work councils in Germany put workers and management together in a decision making capacity. All industrial imports into Germany are subject to an "Import Turnover Tax" of 19%, which is charged on the duty-paid value of the import article plus the customs duty, which varies by item. The Import Turnover Tax is designed to place the same tax burden on imported goods as goods produced domestically, on which is levied a 19% "Value-added Tax" (VAT). The German customs authorities collect both customs duty and Import Turnover Tax. Germany's regulations and bureaucratic procedures can be a difficult hurdle for companies wishing to enter the market and require close attention by U.S. exporters. Complex safety standards, not normally discriminatory but sometimes zealously applied, complicate access to the market for many U.S. products. U.S. suppliers are well advised to do their homework thoroughly and make sure they know precisely which standards apply to their product and that they obtain timely testing and certification. Selling into the American market should be considered a valuable privilege. Therefore, according to free market principles, it shouldn't be given away for free. The US government needs revenue. A VAT tax and a corresponding import turnover tax would not only replenish US government coffers but would tend to equalize the profitability of companies manufacturing abroad and those manufacturing in the US. Reunionization of US workers would also contribute a voice in favor of keeping production and, therefore, jobs local and in country.

It's true that Honda and Toyota only located plants in the US because they were worried about import duties that might come into being. But their US plants were just used for assembly operations. They still imported most of the parts from foreign cheap labor countries. What the US needs is an industrial policy that is concerned with providing jobs for American citizens. This means that the US has to be seen as an attractive place for multinational corporations to locate or it has to be seen as an unattractive place to import into a desirable consumer market. In the past tax breaks and other perks have been given to auto companies by states in competition among themselves to get plants located in their state. A national industrial policy needs to be put in place that would prevent the states from competing against each other in order to get plants located within their state.  That way the states can't be played off against each other by foreign or domestic corporations.

The US will not be successful in cajoling its trading partners to "equalize" trade balances or to revalue their currencies. Only unilateral policies that seek to get multinational corporations to locate production plants inside the US can hope to change the status quo. Trade policy and industrial policy can effectively provide incentives to create jobs here and to discourage imports. The US needs to renounce its policy of free trade in favor of fair trade, and fair trade can only be established if the US changes its policies from within.

The Emerging Anti-Trade Coalition, and Its Dangers

by Robert Reich

Wednesday, October 6, 2010

Willis Hawley and Reed Smoot, you may recall, sponsored the Tariff Act of 1930 that raised tariffs to record levels on more than 20,000 imported goods. The duo said this would protect American jobs and revive the economy. It did the reverse, plunging the nation into an even deeper depression. Other nations retaliated. Global trade plummeted. Americans got poorer, as did millions of others around the world.

Why do I think we’re on the way back to Smoot-Hawley? Because with Republicans and blue-dog deficit hawks gaining ground after November 2, the chance of boosting the economy with an “infrastructure bank,” another big spending package, or even a big round of middle-class tax cuts is roughly nil. This means a lousy economy — possibly for years. 

And that leaves trade as a sitting duck.

High unemployment turns the public against trade. In a recent Wall Street Journal/NBC News poll, more than half of those surveyed (53%) said free trade hurts America. That’s up from 46% in 2007, and just 32% in 1999.

Traditional big-business Republicans support trade. But the tea partiers who are taking over the GOP don’t. An astonishing 61 percent of people who describe themselves as “Tea Party sympathizers” say trade is bad for America. That’s close to the 65 percent of union families who are against trade.

Think about it. The ground troops for both parties – tea party Republicans and union Democrats – believe free trade is bad.

The tea party movement represents the isolationist wing of the GOP. It’s a direct descendant of Mr. Smoot and Mr. Hawley. Not only are tea partiers against trade; they’re also against immigrants. At the first national convention of Tea Party Nation last February, former Colorado congressman Tom Tancredo brought the crowd to its feet by denouncing America’s so-called “cult of multiculturalism” and accusing immigrants of threatening America’s Judeo-Christian values. “This is our country!” he declared, to wild cheers. “Take it back!”

Neither trade nor immigration has been responsible for the huge job losses of the Great Recession. These losses have been due to the bursting housing bubble and collapse of domestic demand.

But dig deeper and you’ll find a longer-term truth about trade. While all of us have benefited from access to lower-cost products made abroad, the burdens of free trade have fallen disproportionately on what we used to call the working class.

Globalization is part of reason the median wage of male workers hasn’t risen in three decades, adjusted for inflation. Starting in the late 1970s, technologies like cargo ships, containers, and satellite communications, followed by computers and the Internet, enabled companies to efficiently parcel out work around the world wherever it could be done most cheaply. The result has been to undermine unions and destroy many good-paying routine jobs in America.

Meanwhile, the biggest benefits have gone to the top – to executives of U.S. global corporations, Wall Street financiers, big-name entertainers, and the most successful digital entrepreneurs. All have been sufficiently educated and well-connected, or lucky enough, to find a huge and growing global market for what they sell.

The consequence has been a degree of inequality not seen in this country since the late 1920s.

The winners from globalization have gained so much that they could have fully compensated the losers and still come out ahead. They could have financed better schools and free higher education for most Americans, along with wage subsidies that brought almost everyone up to a higher standard of living.

But they didn’t. Instead, they fought to keep their tax shelters, loopholes, and lower marginal rates, and they fought against more outlays for public investments and social safety nets. Wall Street got bailed out but Main Street got zilch.

So we’re on the cusp of new isolationism that’s likely to hurt all of us – a backlash against free trade, immigration, and maybe even international bodies such as the World Trade Organization, the World Bank, and IMF.

Isolationism and nationalism are the handmaidens of an economically anxious and frustrated middle class. That was the lesson we learned 80 years ago, but forgot.

Republicans Vote to Keep Subsidizing Corporations to Move American Jobs Offshore

by John Lawrence

Republicans had a chance not to filibuster a bill that would have eliminated tax breaks for corporations that move jobs offshore. The bill also provided for tax breaks for corporations that created jobs inside the US. To be fair four Democrats and Joe Lieberman joined with the Republicans.

"Why in the world would millions of Americans who are losing their jobs be subsidizing operations that are closed up, and the cost of doing that, and sending jobs overseas?" Michigan Democratic Senator Debbie Stabenow said.

The bill also takes on a hot tax topic known as "deferral," the ability of companies to defer taxes on income earned abroad. Right now companies can defer paying their taxes indefinitely as long as they keep the money parked offshore. This effectively means that they never pay US taxes as they reinvest the profits offshore or engage in other tax saving devices.

President Barack Obama's has said that he wants to sharply curtail that practice but this time it was a no go. The bill would have repealed deferral for companies that close or cut a business in the U.S. and start or expand overseas with the intention of importing goods for sale in the United States. So the American people are paying companies with their tax money to close up shop in the US, eliminate American jobs, start up a factory overseas and then import the same products back into the American market where American consumers are supposed to buy them even though their jobs have been eliminated. I guess they're supposed to go further in debt. No wonder there is a lack of demand.

Republicans and some Democrats must think that no one is paying any attention to what they do. They're giving the Bronx cheer to the American public when they continue to reward businesses for moving American jobs overseas. How can they justify that except by the fact that all Republicans and some Democrats are totally in the pocket of US corporations. They're only in it for the money and that money flows to them from lobbyists and other sources directly and indirectly from corporations with the purpose of setting up government in such a way as to profit American business and not the American middle class. Who out there that's not in the pocket of American corporations thinks that these corporations should get tax breaks for moving American jobs offshore? This is absolutely nuts.

But Republicans (and some Democrats ) don't care. They're relying on the fact that the American public is not paying close attention or is not involved in this level of minutiae. They're relying on the fact that they can do this sort of thing and fly beneath the radar because no major US news media will report on it. If Republicans can stick their thumb in the eye of the American public this blatantly with impunity, what else are they capable of?  

And what makes all this possible are the arcane rules of the Senate and in particular the filibuster rule. This bill would have passed if we had majority rule in the Senate. There were 51 votes for it, but under the filibuster rule (and let us remind you that Republicans filibuster everything) 60 votes are required just to bring any measure to a vote. This makes a joke of American democracy. First they have to vote on whether or not they are going to vote. How can you call it a democracy any more when majority rule has been made a mockery of?

The following is from Huffington Post:

Senate Republicans beat back an effort by Democrats Tuesday to end tax breaks for companies who send jobs offshore only to import products back into the United States. The House has passed a series of similar legislation over the past several weeks, as Democrats work to portray Republicans as in the pocket of Big Business at the expense of workers, the economy, the trade deficit and the budget deficit. That message was muddied, however, by the defection of four Democrats and Independent Democrat Joe Lieberman, who voted against the motion to end a filibuster. "I wish this election would be a simple referendum on this issue," Dick Durbin, the Senate's number two Democrat, said on the Senate floor Monday night. "Who in the world believes that we should be rewarding corporations in our country for shipping jobs overseas?" The U.S. Chamber of Commerce is one powerful answer to Durbin's query. The Chamber, which represents businesses in the United States, has aggressively battled the effort to reduce outsourcing. During the debate over the stimulus, the U.S. Chamber fought efforts to include a provision that would encourage taxpayer money to be spent on products made by domestic companies.

How Exactly, Mr. Reich, Do You Create Jobs?

by John Lawrence

Robert Reich writes in his October 1 post that lowering the value of the dollar is not the way to create jobs in the US. Lowering the value of the dollar seems to be the US government's job creation policy at this time. The theory is that that will produce more exports because our products will be cheaper abroad and fewer imports because imported products will be more expensive. Mr. Reich contends that other countries will simply follow suit and lower the value of their currencies. Result: a currency war.

The other way the Obama administration seems to favor for creating jobs is just to wait for the natural dynamics of the US economy to create them. The theory is that the US economy is so resilient that, if we wait long enough, it will just naturally recover and things will go back to normal - normal being 5% unemployment. This might be called the cross-your-fingers-and-wait-and-see approach. This approach is doomed to failure for reasons that have been mentioned on this blog before - outsourcing of jobs and automation, to be succinct. OK, then, what are some other methods by which jobs might be created. Innovation, for one thing. The creation of whole new industries. Technological innovation has fueled capitalism for centuries. Recently, computers and the internet are good examples. Problem is there are no new innovations on the horizon. Especially ones of an exclusively American nature. While the computerization of the world was conceived, developed and capitalized on in the US, current innovative technologies like alternative energy are being pursued more vigorously elsewhere. Automoble technology was developed concurrently in other countries but at a time when outsourcing was impractical so the development of the automobile proceeded independently in a number of countries as if they were on separate planets. In today's world that would not be possible.

Labor arbitrage means that major production facilities will be located wherever the cost of plants, equipment and labor is cheapest. Automation means that most products can be manufactured with a minimum of human labor. So where does this leave Americans who need to work in order to have an income that will let them consume the products and services that they need in order to have at least a decent middle class life? In other words where are the good jobs at good pay going to come from? Of course, one alternative is for Americans to work for starvation wages. There will always be a certain number of low paying service jobs available. But in order to have widespread prosperity among the majority of the population, there are only a few remaining alternatives none of which is being given serious consideration at this time.

Alternative #1: The government sets an industrial policy and subsidizes the development of certain industries which can compete at a world class level. Such is the case with Finland where Nokia has competed successfully at a world level and as a result brought prosperity to Finland. This is also true in Germany which has successfully retained a manufacturing base and has profited from its exports.

Alternative #2: The government sets up public/private partnerships to internally develop the US infrastructure. This in turn will lead to the creation of more private sector jobs following in the wake of infrastructure development just as the development of the railroads or the interstate highway system opened up opportunities for private sector development.

Alternative #3: The US government can create jobs directly in areas that the private sector is not interested in. This was done during the Great Depression when FDR created the Works Project Administration (WPA) and the Civilian Conservation Corps (CCC). There is just as great a need for conservation type projects today and just as much of a lack of interest on the part of the private sector. In fact the private sector ususally is in the business of degrading the environment rather than protecting or enhancing it. This creates an opportunity for government to be in the business of enhancing the environment in such a way that it is not in competition with private enterprise. There may be other areas where government can directly create jobs in ways that do not compete with private enterprise or in ways that are symbiotic with private enterprise. It is possible for government and private enterprise to be involved in a positive sum game, one which is beneficial for both sectors.

Alternative #4: Spread the wealth. Redistribution of wealth. Since income and wealth are becoming more centralized and concentrated (23.5% of income in 2007 went to the upper 1% similar to 1928 just before the Great Depression), the upper income brackets can be taxed heavily and the money used to create jobs ala the WPA and CCC or it can be redistributed by providing unemployment benefits and food and housing subsidies. In other words the social safety net could be greatly expanded. My preference is for the direct and indirect creation of jobs since I think that work is more ennobling than permanently remaining on the dole. Marx was right about the natural tendency of capitalism, particularly unregulated laissez faire capitalism, to centralize and concentrate capital in fewer and fewer hands. Economic inequality in the US has never been greater except just before the Great Depression.

The US is the most laissez faire capitalist country on the planet. At least it has been so for the last 30 years ever since Reagan became President. The lowering of tax rates on the upper income brackets and the deregulation of corporate industry has produced a society in which most of the economic benefits go to a very small number of people at the top. Other countries have prevented this phenomenon by means of their governments being more directly involved in their economies. Whether its the Euro zone, China, Japan or other prosperous nations, they are all - as governments - more directly involved in their economies than the US which has essentially a hands off policy between the government and the economy. Unfortunately for the US, these other nations are becoming more prosperous as the US loses ground. These capitalist hybrid economies especially in China are gaining while the US is losing. Another reason the US is falling further behind is that, while the other capitalist economies have been devoting large amounts of resources with a hands on policy towards their commercial sectors, the US has devoted huge amounts of resources with a hands on policy to its defense sector while maintaining a hands off policy towards its commercial sector.  Unfettered, unregulated capitalism is proving to be not as successful an economic model as is hybrid capitalism.

Government involvement in the economy, what might be called a socialist-capitalist hybrid, seems to be evolving as the successful economic model of the 21st century. Governments that don't have industrial policies such as the US and leave everything to a hands off policy towards the economy seem destined to stagnation. They are heading in the direction of Third World status which is defined as a country with a very small, very wealthy elite surrounded by a very large poverty class. This seems to be what unregulated capitalism produces.

Why the Stimulus Didn't Work

by John Lawrence

The American Recovery and Reinvestment Act of 2009 provided $787 billion in funds to get the economy moving again. The government was focused on getting the economy out of recession which is defined as negative economic growth for two straight quarters as indicated by a decrease in GDP. The present definition of recession has nothing to do with unemployment. It's just defined as a decrease in GDP for two straight quarters. Therefore, GDP could increase but unemployment remain high. Such is the situation we're now in - the so-called jobless recovery.

The theory is that if government primes the pump by pouring money into the economy, which was the effect of the $787 billion, that economic activity would increase, consumers would buy more products and services and this would create more jobs. GDP is made up of private consumption plus investment plus government spending plus exports minus imports. In the US consumption is 70% of GDP and the trade balance (exports minus imports) is negative so it actually detreacts from GDP. When consumer spending drops off, that leaves government spending to make up the difference since private companies are not investing in the US and hence are not creating jobs. So the GDP is overly dependent on consumer spending, and hence Bush's reponse to the 9/11 attacks was "Go out and shop." Consumer spending stimulates economic activity which then means business will invest in order to produce more and this will mean more jobs for American citizens. This was the conventional wisdom a few years ago, but this chain of logic doesn't work any more.

The government dumping dollars into the hands of consumers as Bush did with his stimulus, Bush's so-called "booster shot for the economy," means that consumers will spend more temporarily, but it does not mean that jobs will be created in the US because most US consumer goods are made in China. So the jobs created, if anywhere, will be in China. Therefore, the US government is left with the denouement that it must pour money into the economy on a perpetual basis and this is impossible because it would lead to increasing deficits with no sustainable results in terms of job creation. The nation’s international trade deficit in goods and services increased to $42.3 billion in May from $40.3 billion (revised) in April, as imports increased more than exports. This was taken as a good sign in that this showed an increase in American consumption pointing the way out of recession. Yes, GDP increased, but the trade deficit increasing showed that the jobs created by this increase in consumption were mainly abroad.

The US relies too much on consumption. Temporary government programs such as the "Cash for Clunkers" program and the $8000 tax rebate for new home purchases improve the economy temporarily. They do not create sustainable jobs. So the government is left with the dilemma of pouring money into the economy and increasing the national debt or getting GDP up by encouaging those who do have money to consume more or investing in the economy in a way that will increase jobs directly WPA style rather than just giving money to consumers and hoping that their spending it will create jobs. However, the government response at present seems to be to worry about the deficit and hence to gut government spending. This is rational insofar as pouring money into consumers' hands in the hopes of creating jobs is irrational for the reasons given above. However, it doesn't solve the problem of widespread joblessness.

The stimulus bill was almost equally divided among tax cuts, contracts, grants and loans and entitlements. The tax cuts put money in consumers' hands that increased consumption but did not create jobs (except perhaps in China), the grants and loans merely staved off job losses by bailing out states and municipalities and entitlement spending similarly just put money in consumers' hands without creating jobs. This leaves contracts as the sole source of job creation. If the stimulus had put relatively more money into contracts, then perhaps more jobs would have been created. The result was that only a paltry number of jobs were created. There is plenty of work that needs to get done, but private enterprise does not want to do it. Private enterprise is oriented towards producing individual consumer products. The work that needs to be done is more general in nature such as infrastructure rebuilding.

Right now most government contracts are taken up by defense spending. This creates jobs for defense contractors and in the military. It does not create jobs in the civilian economy except in the FBI and CIA and other defense related jobs. Also defense contractors such as Boeing and General Dynamics create jobs in the civilian economy. Evidently, this spending which is huge is not sufficient to create enough jobs to bring unemployment down to an acceptable level. Therefore, the government has two choices it seems to me. 1) Expand the military even further even though the US spends more money on its military than the rest of the world combined. 2) Create WPA style jobs funded directly or indirectly by the government to rebuild infrastructure.

What most people don't realize is that functionally the military and military-related jobs are identical to WPA style jobs. Both are funded by the government either directly or indirectly through contracting. Both serve the same purpose in the economy of creating and sustaining jobs. Both are public sector jobs. If the government wants to create sustainable private sector jobs, then it has to do something about its trade policies. Right now US trade policy is such as to create non-American jobs. The net result is ongoing trade deficits as far as the eye can see which add to the national debt. Bringing jobs home from overseas would not only spur the American economy in terms of job creation but would help the national debt once the trade balance becomes positive again.

Politically, both Republicans and Democrats seem incapable of creating sustainable WPA style jobs in the civilian economy. The Republican solution would be more defense spending, tax cutting and elimination of social programs. The result of this would be that former teachers, firemen and policemen would be forced to join the military in order to get a paycheck. Republicans could conceivably set up programs to encourage millionaires and billionaires to consume more thus elevating GDP. Democrats have been caught flat-footed and have fallen for the conventional wisdom that stimulating the economy by putting money into consumers' hands will ultimately result in job creation here in America. That hasn't happened, and is not likely to happen. They are left with FDR style WPA solutions which they don't seem to have the heart to even bring up. Therefore, they are and will continue to be tarred with the brush of big spenders as their methods of stimulating the economy don't produce sustainable jobs and hence sustainable increases in government revenues. Taxing the rich and limiting the offshoring of corporate profits would provide immediate relief to government deficit problems, but the poltical will to do it is not there. Republican tax cutting will only exacerbate the deficit as 30 years of Reaganomics has shown. Reagan and Bush tax cutting skyrocketed the national debt. Tax cutting not adding to the deficit is what George H W Bush called "voodoo economics" and he was right.

The result is that both political parties are missing the boat. The Democrats' policies of putting government money into the economy are merely staving off disaster for many middle class families which is a good thing, but they are not creating long term sustainable jobs which would help not only the middle class but government revenues themselves. Republican policies would be a continuation of the Reagan-Bush policies of the last 30 years which produced the economic mess we now find ourselves in. Tax cuts have been directly responsible for adding to the national debt. A resumption of these policies would be a prescription not only for more hardship for the middle class and the poor but for outright disaster. The US would come to resemble a Third World country in which there are a few very rich families while the majority of the people are extremely poor. It would be a country in which 20% unemployment would be the new normal and Great Depression style homelessness would be widespread and acceptable. The US would be forced into an austerity lifestyle (except for the rich) and the government's whole fiunction would be to merely pay interest on the national debt.

The Vanishing American Consumer and the Coming Trade War

by Robert Reich
Friday, July 9, 2010

President Obama has vowed to double U.S. exports within the next five years. That’s because exports are critical for rebooting the American economy. It’s clear American consumers can’t get the economy going on their own. They can’t restart the jobs machine. They’ve run out of money and credit.

It’s not just that one out of four Americans is unemployed or underemployed (working part-time, overqualified, or at a lower wage than before). More significantly, the Great Recession burst the housing bubble that had let American consumers turn their homes into ATMs. Now the cash machines are closed.

So the Administration figures foreign consumers will have to fill the gap.

Problem is, most other economies also relied on American consumers. Remember the trade gap? Americans used to be the world’s biggest and most reliable customers – sucking in high-tech gadgets assembled in China, car parts from Japan, shirts and shoes from Southeast Asia, and precision instruments from Germany.

With American consumers pulling back, these other economies have also been slowing down. Their unemployment is rising.

Last week I attended a conference with global business executives. When I asked them where they expected to find new customers to replace Americans who are pulling back, they all said China and India and quoted me the same number: 800 million new middle-class consumers from these and other fast-developing countries over the next decade.

Yes, but. As of now China and India are still relying on net exports to fuel their growth. Even if you think their middle classes will eventually become so big and rich they can buy everything these nations will be able to produce, that doesn’t mean they’ll also buy what the rest of the world produces. 

Yes, global companies will do wonderfully well. General Motors is well on the way to selling more cars in China than it does in the U.S. But American workers won’t get the jobs, and nor will workers in Europe, Japan, or the rest of the world. GM makes the cars it sells to Chinese consumers in China. 

Meanwhile, the productive capacities of China and India will continue to grow: More workers, more factories, more high-tech equipment, more offices. The buying power of their middle classes will have to expand rapidly just to catch up with what these nations will be able to produce.

This means Obama and others won’t easily find the export markets they need to create enough jobs to make up for the vanishing American consumer.

When the world’s productive capacities exceed the buying power of the world’s consumers, every government wants to increase exports and discourage imports. That spells trade war.

Last week the representatives of the world’s 20 biggest economies vowed to slash their budget deficits by half by 2013. The result will be even less domestic demand and even more pressure to export in order to avoid higher joblessness.

We’re unlikely to see a repeat of the disastrous Smoot-Hawley tariffs that worsened and lengthened the Great Depression. But you can forget trade-opening agreements. In Toronto last week, the G-20 leaders dropped their 2009 pledge to finish the Doha round this year. In the U.S., agreements with South Korea, Panama, and Columbia are languishing.

And watch out for under-the-radar protectionist moves. Since the start of 2008, when the Great Recession began, countries around the world have already imposed at least 443 measures to block imports, according to the Center for Economic Policy Research. 

This is just the start.

The New Normal: 10% Unemployment

by John Lawrence

The economy is out of recession since it is actually growing and not contracting. Yet job growth compared to the baseline of 100,000 new jobs a month just to accomodate the growth in the labor force is actually negative. There were 83,000 private sector jobs created in June. That means that actually there were 17,000 fewer jobs created than were needed just to stay even and so a net job loss. However, the economy is still expanding so what's the problem? The rich it seems have been presuaded to do their patriotic duty and consume more thus making up for the poor suckers who can't keep up their pace of consumption because their jobs went down the tubes. As long as the rich consume more to make up the difference, the economy will continue to expand and GDP will continue to grow since it is based 70% on consumption. It's the least the rich can do since they don't want to have their taxes raised, something that might make the government more solvent and provide funds for job creation.

The fact of the matter is that private sector employment will continue its downward trend simply because it's government policy to export jobs. So waiting patiently for the economy to "turn around" is like waiting for Godot. It's not going to happen unless radical changes take place in the relationship between government and the market place. Ross Perot was right. Ever since NAFTA, CAFTA, the WTO and various and sundry other free trade agreements, there has been a "giant sucking sound" of jobs leaving the American economy for places in the world where labor and raw materials are cheaper. It only stands to reason that most Americans cannot continue to consume at the same pace they did when they were actually employed. That is why the rich must step up to the plate and consume more. The gap between rich and poor has never been larger, taxes have never been lower and its their patriotic duty to make up the difference in consumption if they don't want to pay more taxes and now that the lower middle class can no longer be counted upon to consume.

It used to be that the US imported cheap natural resources from Latin America and then made manufactured products here and then exported those products abroad. The poor peasants that extracted the raw materials in Latin America were paid a pittance and American workers were paid decent salaries. Now the manufacturing is done elsewhere, the workers are paid less and profits for the corporations are commensurably greater. Profits created abroad tend to stay abroad in offshore secret bank accounts where they can escape taxation which is leading to the collapse of municipal and state governments. Eventually, it will lead to the collapse of the Federal government as well as it will no longer have any money or willingness to prop up the economy as it has done for a year now with automobile and housing credits. But it will always have money for war as long as the rest of the world remains willing to loan us the money.

What needs to be done obviously is to restructure the whole economy getting rid of the vast expenditures on the military machine and reducing it to the basics of actually defending the US Homeland instead of pursuing military adventurism abroad. The "free trade" aspects of government policy need to be revisited with an eye to actually creating and protecting domestic jobs and making imports from abroad more expensive. Tariffs were the largest source of federal revenue from the 1790s to the eve of World War I, until it was surpassed by income taxes. So for most of US history the Federal government was actually funded by foreigners wishing to import into the US economy. This actually fostered job creation in the US by 1) keeping taxes low and 2) making domestically produced manufactured goods salable at attractive prices. Today the US is subsidizing foreign competitors and US corporations who wish to use cheap foreign labor and import the finished goods back into the US. They locate their factories wherever labor is cheapest. They also have better access to cheaper raw materials. Cheap transportation by container ship makes it more profitable to import into the US market than to build factories here and to employ American workers. Labor for the products that can't be manufactured abroad is supplied by illegal immigrants who will work for sub-minimum wages and not complain for fear of being deported.

The Chinese model, where government is deeply involved in the private sector, is gaining ground over the US model of hands off by government and laissez faire economic practices. There is the obvious contradiction that laissez faire has done nothing to create jobs although it has added to the corporations' bottom lines. Deregulation not only led to the financial collapse of 2008 but also to the oil gusher in the Gulf which is destroying the environment. The capital not collected by the government in the form of taxes has not been put to productive use by the capitalists who have retained it. Instead, higher returns have been sought in the financial sector. The financialization of the economy has replaced the productive deployment of capital which might be involved in job creation with higher returns expected from the deployment of capital in the casino economy. Hedge fund managers and private equity leveraged buyout specialists have made money not by investing in productive pursuits but by gambling and ripping apart already profitable companies that had been actually producing manufactured goods until they were taken into bankruptcy by the private equity firms.

The rapaciousness of the bond markets and other financial experts and quants has diverted intelligent young college graduates into the financial economy in pursuit of making money from money rather than from the manufacture of finished products. The best and the brightest are going into finance not creating or being employed in businesses that manufacture products. In many cases the financial sector is duping their clients instead of serving them. In collusion with the hapless rating agencies such as Moody's and Standard and Poor's, the big banks like Goldman Sachs had worthless garbage rated as triple A investment grade bonds and fooled pension funds all over the world into buying them. Then they turned around and shorted their own products thus reaping billions when the bonds and the underlying subprime mortgages defaulted. You can read all about it in an excellent book, The Big Short, by Michael Lewis.

So what to do about restructuring the economy? 1) Cut the Pentagon budget by 50%. Eliminate most foreign military bases. 2) Come up with creative new ways to tax the rich. As Al Capone said, "I rob banks because that's where the money is." Similarly, government has to go after funding sources where the money is, and right now it's in the financial sector and among wealthy investors. 3) Institute a financial transaction tax. 4) Establish an industrial policy which establishes, shelters, husbands and grows companies which employ American workers and don't export jobs. 5) Build a domestic industrial base based on replacing the oil economy with a green economy. 6) Establish a fair trade policy replacing free trade. 7) Make sure a social safety net is in place to ease the transition of workers in the military-industrial complex to jobs in the green economy. 8) Emasculate lobbyist control of Congress. 9) Establish publicly funded elections with free air time. 10) Invest in the American people rebuilding the nation at home instead of spending fortunes trying to build nations abroad.

The probability of any of the above happening is near zero. Instead, the US will probably come to tolerate a 10% nominal unemployment rate with a real unemployment rate hovering around 25%. Just as free trade created a poverty class in Latin America, a new neo-feudal poverty class is already being created in the US. The rich will have to shoulder the patriotic duty of taking on the burden of increased consumption previously shouldered by the middle class, who will just be able to eke out a living, in order for the economy to expand. The homeless will take to the streets and public parks until the public parks are fenced off due to a lack of budget to maintain them. The rich who don't frequent public parks will say good riddance to them. Increasingly, public institutions will be privatized and the former middle class will be marginalized, quaking in their boots, grateful for a few crumbs from the tables of the rich. There will be just three classes: the rich, the poor and the desperately poor, just like in the rest of the underdeveloped world.

Bill Clinton Redeems Himself

Published on Friday, April 23, 2010 by The Oregonian

Bill Clinton's Contrition Contribution

by David Sirota

In 1992, I was in 10th grade. Hence, I didn't care about much more than the girls I could never get, the Philadelphia 76ers' playoff chances and the shortcomings of my own unimpressive basketball career (in that order) – and I certainly didn't care about politics. So when my teacher assigned me to represent a Southerner I'd never heard of in a mock presidential debate, I was, um, not psyched.

My attitude changed, though, when I started researching – wait, what was his name again? Oh, right – Bill Clinton. To my surprise, what I found was inspiring. The lip-biting saxophonist seemed like a forthright guy with some heartfelt "feel your pain" outrage at the unfairness of the moment's Gordon Gekko zeitgeist. An early campaign speech I discovered particularly captivated me – the one in which Clinton said, "I expect the jetsetters and featherbedders of corporate America to know that if you sell your companies and your workers and your country down the river, you'll be called on the carpet."

Call me crazy or gullible – at 16, I was probably both – but I bought it. If not for Clinton's campaign (and that irrepressibly optimistic Fleetwood Mac jingle), I might have followed star-crossed hoop dreams already doomed by my god-awful jump shot. Instead, I chose a political path, genuinely believing in that place called hope.

This naive faith, of course, is why I would later come to detest Bill Clinton.

Upon assuming office, he championed the very corporatist policies he railed on – lobbyist-written free-trade pacts and financial deregulation, to name a few. To me, a fervent supporter turned spurned groupie, Clinton eventually looked like an opportunist who knew he was selling out – and yet sold out anyway.

Because of his reversals, I ended up in my adult years being critical of Clinton – so consistently critical, in fact, that I'm shocked to find myself about to spend the next few paragraphs praising him. No, not for his (admittedly impressive) humanitarian work, but for his recent contrition.

Whereas former presidents typically devote their retirements to history-revising legacy preservation, Clinton is laudably doing the opposite – and the nation will, hopefully, benefit.

It began with his congressional testimony last month. Discussing his administration's trade policy, Clinton admitted that it "has not worked" to alleviate poverty, as promised.

"It was a mistake," he said of his agribusiness-backed initiatives forcing impoverished countries to eliminate tariffs. "It was a mistake that I was a party to ... I had to live every day with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did."

Clinton didn't stop there. In a subsequent ABC News interview, he said that when it came to 1990s-era financial deregulation that so harmed today's economy, "I think (my advisers) were wrong, and I think I was wrong."

Some will undoubtedly say "too little, too late." But with Clinton having nothing to gain from these admissions – and, really, lots to lose – the 10th-grade idealist in me says "better late than never."

Better he acknowledge the failure of misguided trade and deregulatory initiatives, rather than pretend they succeeded. Better he apologize for the betrayals that deflated his supporters, rather than feign indifference. Why? Because the penitence may now spur change.

Clinton's compunction could, for instance, convince President Obama to shelve new free-trade proposals and avoid undermining Congress' current financial regulatory legislation. It may compel Obama to fire the same Clinton economic aides who now work in his administration. And it might even prompt a nation of exceptionalists to admit its errors and actually reform itself.

After all, if Clinton can learn from mistakes, then America should be able to do the same.

 

© 2010 Creators.com

David Sirota is a bestselling author whose newest book is "The Uprising." He is a fellow at the Campaign for America's Future and a board member of the Progressive States Network-both nonpartisan organizations. Sirota was once US Senator Bernie Sanders' spokesperson. His blog is at www.credoaction.com/sirota.