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Sunday, March 31, 2013

Free Trade On Steroids - Trans-Pacific Partnership

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Remember how free trade agreements like NAFTA and CAFTA screwed American workers by making it easy for big business to ship jobs overseas, and import crap from everywhere without oversight?

There’s a lot worse coming:

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EU and US to talk biggest trade deal in world history

RT News
February 13, 2013

The European Union and the United States announced they’re launching talks on a free-trade agreement, which if hammered out, would become the biggest bilateral trade deal ever negotiated.

“A future deal between the world’s two most important economic powers will be a game-changer,” boasted Jose Manuel Barroso, president of the European Commission, during a press conference in Brussels on Wednesday. 

Trade between the EU and the US is worth some $613 billion a year. A free-trade deal will be aimed at bringing down the barriers between the two and reducing import taxes in particular. The current average tariff stands at 4% and a further reduction could mean additional trade volume. Getting rid of approval processes that businesses have to go through in order to sell products on both sides of the Atlantic, can help create new jobs on both sides.

“It will be a comprehensive agreement going beyond tariffs by integrating markets and removing barriers. It is estimated that when this agreement is up and running the European economy will get a stimulus of half a per cent of our GDP which translates into tens of billions of Euros every year and tens of thousands of new jobs,” Mr. Barroso added.

US President Barack Obama hailed the talks in his annual address to Congress on Tuesday, saying a free-trade deal would “boost American exports, support American jobs and level the playing field in the growing markets of Asia”.

EU Trade Commissioner Karel De De Gucht said De Gucht said initial talks should start by summer.

“Ideally, we’d like to complete this work in about two years if possible before the end of the mandate of this commission, but more paramount than speed is achieving an ambitious deal,” De Gucht said. 

The negotiations will cover a huge array of commercial and agricultural areas, however, some areas of trade are likely to remain outside the negotiations. Genetically modified food and raw meat fromhormone-treated cattle could be a stumbling block as the European Union isn’t likely to allow these imports within its zone.

The idea of a transatlantic free trade deal has been under discussion for years and was finally shaped following the formation of a working group in 2011.

SOURCE

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TPP: Corporate Power Tool of the 1%

Have you heard? The ”TRANS-PACIFIC PARTNERSHIP (TPP) free trade agreement” is a stealthy policy being pressed by corporate America, a dream of the 1 percent, that in one blow could:

offshore millions of American jobs,

free the banksters from oversight,

ban Buy America policies needed to create green jobs and rebuild our economy,

decrease access to medicine,

flood the U.S. with unsafe food and products,

and empower corporations to attack our environmental and health safeguards.

Closed-door talks are on-going between the U.S. and Australia, Brunei, Canada, Chile, Mexico, New Zealand, Peru, Singapore, Malaysia and Vietnam; with countries like Japan and China potentially joining later. 600 corporate advisors have access to the text, while the public, Members of Congress, journalists, and civil society are excluded. And so far what we know about what’s in there is very scary!

SOURCE

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Barack Obama is being urged to focus on Asia partners

BBC News
January 21, 2013

US President Barack Obama is being urged to ensure his second term in office is marked by strengthening economic relations across the Pacific in Asia.

The prospects for growth of the region’s economies are very positive and with America’s trading partners in Europe mired in a debt crisis trade, relations with Asia look attractive.

Steven Okun, the Chairman of the Asia-Pacific Council of American Chambers of Commerce (APCAC) told the BBC’s Rico Hizon why the Trans Pacific Partnership agreement is so important.

SOURCE

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Everyone but China TPP Trade Deal Threatens Sovereignty and Public Ownership
Margaret Flowers and Kevin Zeese: Obama led trade initiative Trans Pacific Partnership aims to isolate China while strengthening corporate legal rights.

Real News
March 31, 2013

Kevin Zeese is co-director of It’s Our Economy, an organization that advocates for democratizing the economy. He’s also an attorney who is one of the original organizers of the National Occupation of Washington, DC. He has been active in independent and third party political campaigns including for state legislative offices in Maryland, governor of California and U.S. president, where he served as press secretary and spokesperson for Ralph Nader in 2004. He ran for the U.S. Senate in 2006 and was the only person ever nominated by the Green Party, Libertarian Party and Populist Party.

Dr. Margaret Flowers is a pediatrician from Baltimore who advocates for a national single payer health system, Medicare for all. She is an organizer of October2011.org/Occupy Washington, DC and co-director of ItsOurEconomy.us.

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.

The Trans-Pacific Partnership, a new trade agreement that President Obama and his administration is leading the charge on, well, critics say this agreement--right now, at any rate--is a lot of Asian countries but China. And people are calling it everybody but China agreement so far, at any rate. It also, critics say, is going to increase corporate rights and decrease sovereign rights.

Now joining us are two people who’ve been very active on this whole question. First of all, Margaret Flowers is a pediatrician from Baltimore who advocates for a single-payer health-care system, but she’s been very active on the TPP issue.

And Kevin Zeese. He’s codirector of It’s Our Economy, an organization that advocates for democratizing the economy. He’s an attorney and was one of the original organizers of the national occupation of Washington.

Thank you both for joining us.

KEVIN ZEESE, CODIRECTOR, IT’S OUR ECONOMY: Glad to be here.

MARGARET FLOWERS, CODIRECTOR, IT’S OUR ECONOMY: Thank you for having us.

JAY: So, Kevin, kick us off. TPP is what and matters why?

ZEESE: The Trans-Pacific Partnership has been in 16 rounds of negotiations over three years, pretty much in secret except for the 600 corporate advisers that have been working with the Obama administration to develop the terms. And it’s called a trade agreement, but it’s really much more than that. If you care about internet privacy, if you care about health care, financial regulation, labor rights, the environment, all these issues will be affected by the Trans-Pacific Partnership, and they’ll give corporations more power than governments to control these issues, because profits will be the ultimate goal, much more important than people’s necessities or protection of the planet.

JAY: Which is a character of most of the free trade agreements, so-called free trade agreements, even NAFTA and some of the other ones that have been done.

FLOWERS: Right.

JAY: Dig into parts of the agreement, Margaret, that concern you most.

FLOWERS: One of the things that’s unique about this agreement is that it has something called a docking agreement. So the intention is that this may be the last trade agreement that is ever agreed to, that it may become the template for the rest of the world trade and that other countries will then dock onto it. But they have to agree to everything that’s already been negotiated.

And where there are about 26 chapters, what we know is what has been leaked. Out of those 26 chapters, only about five of them have to do with traditional trade. So what we see in this agreement is that it’s not really about trade; it’s about creating a backdoor for corporations to get some of the changes that they want. So deregulation of the financial industry, longer patent protections for the pharmaceutical industries, internet privacy restrictions, you know, these are the things that these corporations have wanted to get but they haven’t been able to so far, and this is a vehicle for doing that.

JAY: I mean, it’s interesting. I think one of the things that TPP would do, it would prevent - if CYPRUS, for example, was actually one of these countries that agreed, they couldn’t have introduced capital controls that would have stopped money leaving Cyprus when they were trying to control their banks.

ZEESE: Under the TPP, money can go into and out of countries without much control by the government. So the corporations, the big banks, will have much more control over the capital controls of a country than the country will. And if a country takes a step to try to regulate the financial industry or set up a public bank to represent public interests, they could be sued.

JAY: By individual corporations.

ZEESE: By individual corporations in a trade tribunal, which is a three-person tribunal. Most of the judges will be corporate lawyers on leave from their corporate job, putting on their robe and being a judge, deciding in favor of the corporation, no doubt, and then going back to their corporate job. And what they’re suing for is the potential loss damages, not actual damages. But we planned on making money here. Here’s how we were going to do it. We were going to--now you--we’re going to lose $10 million because of you. The country then has to pay $10 million in damages for a labor agreement, a finance agreement, consumer protection, environmental protection. Whatever it is the country wants to do, it can be stopped by a corporation suing a trade tribunal.

FLOWERS: I think an excellent example of that is what’s happening with Canada. Right now there’s a company in the U.S. called Lone Pine Industries that wants to frack in an area of Canada that’s banned fracking.

ZEESE: Under the Saint Lawrence River.

FLOWERS: So they’re suing the Canadian government for $250 million for loss of expected profit.

JAY: Now, some of this mechanisms already exist under WTO agreements and other trade agreements. Some people have pointed out that one of the important things about this agreement is in fact that it’s everybody but China, that this seems to be part of this Asian pivot of the Obama administration to kind of reestablish the United States in Asia and make America trade the center of activity, not so much China, which seems like a King Canute facing--stopping the waves or whatever it was.

ZEESE: It really puts China in a lose-lose situation. It’s not a coincidence this is happening at the same time that Obama’s moving 60 percent of the Navy into the Asian waters, the Asian pivot, which is a military pivot. This is an economic pivot. And it’s a lose-lose for China either way. If they’re excluded from the agreement, which is the current status, then they are out of a lot of trade going on in their own backyard. If they’re included, then they’re stuck with these trade tribunals in their neoliberal, privatization, anti-government, opposed to state-owned enterprises model, and the Chinese economy is based on the state-enterprise model approach. And so they would be able to be taken to court by these--in these tribunals and have their economy totally changed by corporations. So either way, China loses.

Now, the good news is--in my view, at least, ‘cause I’m opposed to the TPP--the good news to me is that Japan said when they were joining the TPP that the higher priority for them is negotiation with Korea and China. That triangle to them is much more important than the TPP. And I think that’s the right move for all these Asian countries.

China’s the up-and-coming economy. We’re going to be struggling for a long time. It makes much more sense for that to happen.

So I don’t really understand why a lot of these countries even are considering the TPP. It’s going to undermine their economies. It’s certainly not going to be good for our economy. The history of these trade agreements is not good for the U.S. economy.

JAY: I mean, how might it affect some of the countries that are signing on?

FLOWERS: Well, I mean, one of the--is the tribunal, of course. So if Vietnam wants to have some sort of worker rights, you know, minimum wage or something like that, and a corporation says that, you know, that’s going to cause them to lose expected profits, and they would sue Vietnam, Vietnam doesn’t have the resources to handle that kind of a case.

JAY: One of the big issues seems to be intellectual copyright, and particularly pharmaceuticals. So I suppose a lot of it has to do with the sort of generic drug making that was going on in India. They want to stop it in India, but they also don’t want it to spread to other countries.

FLOWERS: This is of huge concern, because right now it looks like what they’re trying to do is give the pharmaceutical corporations a 20-year patent. But in addition to that, if there’s any kind of change in the medication, a new indication, a new formulation of it, that 20-year patent starts over again. So it delays the time to generics being allowed to be on the market. And that means--for these lower-income countries, it really means that they won’t have access to life-saving medications. This is a huge issue.

ZEESE: And it threatens not just the low-income countries. Japan, according to the World Health Organization, has the number-three ranked health-care system in the world. If the pharmaceuticals are allowed to keep these ongoing evergreen patents, their prices for their health-care system is going to go way up because the medications are going to go way up. And there’s even talk about--and doctors in Japan have said this--they’re worried that this agreement will threaten their health-care system. They don’t want people being stuck like we are coming to a doctor’s office and saying, what kind of insurance do you have? They don’t want to have that in Japan.

JAY: And it’s going to, again, slow down the creation of generic drugs, because the patents go on and on.

ZEESE: Exactly. So prices of health care, public health care will go up.

JAY: Yeah, which is clearly--I mean, we’ve talked about this in earlier interviews. I mean, pharma and the power of pharma in the United States is one of the biggest cost factors for why health care costs so much in the United States. And this new health-care plan did nothing, really, to control pharma.

FLOWERS: Correct. Right. Yeah.

JAY: So if you go back to, then, what you were saying earlier, Kevin, I wonder if TPP really does come to pass. I mean, is this kind of almost a propaganda show, in a way, that you get all these countries at the table and they all kind of play along, but if in the end this is going to wind up confrontationally with China, it’s hard to imagine why any of these Asian countries would get into that position?

ZEESE: Well, the Obama administration’s very serious about it. They are not playing along. They’re not just mouthing words. They’re not [incompr.] They want this to pass. This is a major gift to the transnational corporations from President Obama, his outgoing gift to them. I’m sure it’ll be great for his fundraising for the Obama library and presidential center.

But this agreement can be stopped. I think that’s the most important thing.

People did not like NAFTA, and this is NAFTA on steroids. People do not like the WTO, and this is WTO on steroids. This is a global corporate coup no matter what issue you care about, whether it’s wages, jobs, protecting the environment, stopping the use of coal, stopping fracking. You pick the issue. This issue is going to adversely affect it. So every activist in this country should be working right now helping to stop the TPP.

JAY: And what’s the timeline?

ZEESE: And the key thing on stopping the TPP is two things. First, this summer Obama’s pushing hard for a fast-track provision which essentially gets Congress out of it. It allows him to push forward without Congress [incompr.] the agreement, writethe legislation to put the agreement into effect. Congress gets an up-or-down vote. No debate, no hearings, no nothing. And it keeps the people out, too. So the first battle is stop fast-track. So everyone’s got to tell their member of Congress and Senate no to fast-track.

Second, in October we expect we’ll start to see this come to the Congress, if it gets that far, for passage. And that’s going to be a key fight. We’re going to have to have a no vote on the Trans-Pacific Partnership, or we’re going to look back at this global corporate coup that occurs in the Obama administration the way we’re looking back now on corporate personhood in the 1880s and ‘90s. It’s that kind of a major shift in creating a whole new system of laws that’s going to empower corporations for generations to come.

JAY: Alright. Well, we’ll come back to this as the legislation heads maybe towards Congress. Thanks, Kevin. Thanks, Margaret.

FLOWERS: Thank you for having us.

JAY: And thank you for joining us on The Real News Network.

SOURCE

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The Free-Trade Blues

By Nancy Folbre
NY Times
August 5, 2013

President Obama publicly deplores growing economic inequality in the United States. At the same time, he is pushing for a new Trans-Pacific Trade Agreement on top of the trade agreements he won in 2011. Evidently, he sees no inconsistency here, but a growing body of economic research points to the adverse effects of lowered tariff barriers on manufacturing workers and their communities. Whether or not the losers are beginning to outnumber the winners, free trade is increasing the economic distance between the two.

Many economists continue to believe that increased foreign trade is a rising tide that will eventually lift all boats. Still, the discipline has been shaken by interpretations of trade theory that challenge this view, especially when articulated by highly respected scholars such as the late Paul Samuelson of the Massachusetts Institute of Technology.

The persistence of high long-term unemployment - conveniently assumed out of existence by standard trade models - has also taken an ideological toll. Economists once celebrated the resilience of the United States labor market. Not any more. Employment REMAINS LOWER than it was in December 2007.

Whatever their political predilections, empirical researchers have a hard time isolating the effect of increased trade in an economy experiencing financial shocks, rapid technological change and forms of outsourcing that aren’t counted as either imports or exports. Effects spill over. In the long run, lower prices can lead to shifts in demand and expansion of employment in new sectors. Or not. Even relatively short-run effects are difficult to measure.

The A.F.L.-C.I.O. has BITTERLY COMPLAINED of trade-related job losses, and Robert E. Scott of the Economic Policy Institute published a REPORT last year calculating both overall and state-level job losses attributable to trade with China. Many academic researchers, discounting estimates not published in peer-reviewed journals, remained skeptical.

But a sophisticated econometric ANALYSIS by the economists David H. Autor, David Dorn and Gordon H. Hanson, forthcoming in The American Economic Review, offers new evidence of a significant negative impact, controlling to the extent possible for OTHER FACTORS such as automation.

Titled The China Syndrome: Local Labor Market Effects of Import Competition in the U.S., the article examines the period between 1990 and 2007, during which the share of all manufacturing imports to the United States coming from low-income countries increased to about 28 percent from about 9 percent. This increase was largely driven by ChinaԒs export success in an increasingly open global economy.

The authors compare changes in employment and labor force participation in areas of the United States with differing levels of regional specialization and vulnerability to import competition. They conclude that import competition explains about one-quarter of the aggregate decline in United States manufacturing employment over the period.

Many of those who lost jobs dropped out of the labor force rather than wait in the unemployment line. Family and community ties may have inhibited some from moving to other areas of the country with more job openings.

Average wages in manufacturing were not affected, partly because low-wage jobs were the most likely to be eliminated. But workers in other sectors in strongly affected areas often saw their wages decline. A wide swath of households including many that could be characterized as middle class ֖ experienced a loss of income. Government transfers, including disability payments, increased significantly as a result, imposing costs on taxpayers.

The specific estimates of economic losses lend support to critics of free trade. Unfortunately, their political impact may be diminished by sheer faith that such losses will be countervailed by benefits like lower prices or higher income growth in less developed countries.

Trade theory emphasizes that those who benefit from free trade should be able to compensate those who suffer, making everyone better off. What trade theory doesnt explain is why the beneficiaries would offer such compensation unless they are forced to do so.

In a global economy heavily influenced by government policies, including currency valuation, export subsidies and safety net programs, the effects of free trade on political bargaining power may overshadow the direct effects of job loss.

The winners in the last round of trade agreements can invest their profits in campaign contributions and political lobbying strategies to ensure their victory in the next round. In other words, winner takes all.

SOURCE

Posted by Elvis on 03/31/13 •
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Tuesday, March 26, 2013

Bad Moon Rising Part 60 - The Bank Account Tax

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Today Cyprus. Tommorrow it could be everybopdy else.
When are we going to do something as a collective?

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Euro Group Head: Looting of Bank Accounts a Template For EU
More deposits to be plundered across continent

Paul Joseph Watson
Infowars
March 25, 2013

The looting of private bank accounts to cover the gambling losses of big banks is a new template for the euro zone, according to Dutch Finance Minister and President of the Eurogroup of euro zone finance ministers Jeroen Dijsselbloem

With savers in Cyprus set to have 40% of their wealth plundered in order to fund an EU bailout package, Dijsselbloem indicated that this new model of bank “restructuring” was set to be replicated across the continent.

"If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?. If the bank can’t do it, then well talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” Dijsselbloem TOLD REUTERS.

“Uninsured deposit holders means anyone unfortunate enough to have squirreled away more than 100,000 euros under the delusion that it wouldn’t be swiped from under their noses by EU technocrats.”

His remarks helped send the euro single currency plummeting, before a spokeswoman for Dijsselbloem LUDICROUSLY ATTEMPTED TO REWRITE HISTORY and claim that he didn’t say Cyprus was a template for bank restructurings.

In reality, the minister is merely echoing what other banking chiefs have already admitted in the wake of the Cyprus crisis - that no one in Europe is safe from having their savings looted.

Hours after the announcement that Cypriot savers were set to see their deposits plundered, Joerg Kraemer, chief economist of the German Commerzbank, called for private savings accounts IN ITALY to be similarly plundered. “A tax rate of 15 percent on financial assets would probably be enough to push the Italian government debt to below the critical level of 100 percent of gross domestic product,” he told Handelsblatt.

As Zero Hedge REPORTS, by calling the Cyprus looting a bank restructuring and not a tax, technocrats were able to bypass the democratic process.

What Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout passed (at least so far) is because it was structured as a bank restructuring, a financial system resolution, not a tax, and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply wont fly.

SOURCE

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A Word Out Of Place Sends Europe Tumbling

By Tyler Durden
ZeroHedge
March 25, 2013

Perhaps the best example of a “word out of place” comes from the new Eurogroup head, Dijsselbloem, also phonetically known as Diesel-BOOM, who just may have ushered in the next, next wave of the Eurozone crisis:

Cyprus a Template For EU

Er… wasn’t it a special case, inside a unique case, wrapped in a one-time case? We will ignore the rather hilarious Freudian slip, and focus on what he was explicitly talking about with REUTERS, which is the resolution model which was just put in place in Cyprus:

A rescue programme agreed for Cyprus on Monday represents a new template for resolving euro zone banking problems and other countries may have to restructure their banking sectors, the head of the region’s finance ministers said.

“What we’ve done last night is what I call pushing back the risks,” Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times hours after the Cyprus deal was struck.

“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’. If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he said.

After 12 hours of talks with the EU and IMF, Cyprus agreed to shut down its second largest bank, with insured deposits - those below 100,000 euros - moved to the Bank of Cyprus, the country’s largest lender. Uninsured deposits, those accounts with more than 100,000 euros, face losses of 4.2 billion euros.

Uninsured depositors in the Bank of Cyprus will have their accounts frozen while the bank is restructured and recapitalised. Any capital that is needed to strengthen the bank will be drawn from accounts above 100,000 euros.

The agreement is what is known as a “bail-in”, with shareholders and bondholders in banks forced to bear the costs of the restructuring first, followed by uninsured depositors. Under EU rules, deposits up to 100,000 euros are guaranteed.

The punchline:

The approach marks a radical departure for euro zone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments via multiple rescue programmes.

That process, with governments and taxpayers bearing the costs and providing the back stop, had to stop, Dijsselbloem said. Recent financial market calm meant now was the time to make the change, although he conceded there was some concern that it could unsettle markets again.

If adopted by the euro zone, Dijsselbloem’s template could also sound a death knell for a plan hatched nine months ago when the euro zone debt crisis was threatening to blow the currency area apart.

Then, euro zone leaders agreed that the bloc’s future rescue fund should be allowed to recapitalise banks directly, thereby breaking the debilitating link between teetering banks and weak governments forced to bail them out. That may now never happen.

Asked what the new approach meant for euro zone countries with highly leveraged banking sectors, such as Luxembourg and Malta, and for other countries with banking problems such as Slovenia, Dijsselbloem said they would have to shrink banks down.

“It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realise that if a bank gets in trouble, the response will no longer automatically be that we’ll come and take away your problem. We’re going to push them back. That’s the first response we need. Push them back. You deal with them.”

Translation: it now officially sucks to be an unsecured creditor in Europe. In other words: an uninsured depositor.

Why this ad hoc dramatic shift in the European approach to bank solvency, which if anything makes the link between bank and sovereign closer than ever, and crushes all that Draghi achieved in the summer of 2012?

Simple: because what Cyprus allowed was the effective usurpation of democracy - the only reason the Cypriot bailout “passed” (at least so far) is because it was structured as a bank restructuring, a financial system “resolution”, not a tax, and thus not in need of a parliamentary, democratic vote. Because as Cyprus also showed, votes to deprive depositors of cash, whether insured or uninsured, simply won’t fly.

Hence the shift.

However, there is a problem: it means that depositors are now fair game everywhere, and that the ESM or EFSF, with their unlimited scope but “democratic” impleention pathway, are on the backburner.

And now, the scramble to pull uninsured deposits out of banks everywhere begins. Thanks to the new Eurogroup head.

“You ask for miracles, Theo. I give you Diesel-BOOM”

And now, every European depositor is going to their local financial dictionary to look up the definition of General Unsecured Claims, only to see a picture of… themselves.

SOURCE

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Cyprus loan deal is like planting a bomb in the financial system

RT News
March 26, 2013

Cyprus new deal isn’t a bailout at all it’s an overnight assassination, Chrysostomos Adamides from the Wake up Cyprus’ group told RT.

He added that the governments plan is like planting a bomb in the structure of the financial system itself.

Adamides’ thoughts were echoed by thousands of high school and university students on Tuesday, as they marched to the presidential palace in the Cypriot capital of Nicosia. The demonstrators chanted slogans and said their future had been stolen.

Cyprus bailout plan has angered the island nation, as the government threatens to take a 40 per cent tax from accounts held in the country’s two largest banks.

Financial institutions across the country are shut down until Thursday to prevent a massive run on accounts.

RT: You’re in the Cypriot capital - how are people responding to the financial turbulence? And how much patience do you think they have left?

Chrysostomos Adamides: The people are shocked because at the end of the day they did not expect these decisions from the Eurogroup. I dont think it’s correct to speak for a bailout. This is not a bailout. It can be best described as an overnight assassination.

Because with the decision that the Eurogroup has taken, they have pretty much destroyed 40% of the economy and now they will also add on top of the debt problem that we already have, another loan, and you have to understand that the math will not work.

RT: You talk about 40% of what they call taxes, 40% being taken out of certain various bank accounts with more than 100,000 euros. Not just the big players, the little average people are also being hurt by this. The banks are closed until Thursday - how are people expected to survive?

CA: Obviously were facing a new paradigm in the EU. This is the first time that this has been done but obviously you do understand it’s like planting a bomb in the structure of the financial system itself. Therefore I cant see how any investor or people can keep their money in the banks when now that we will have a debt problem twice or more as bad as it was before. Obviously they will be afraid for a new levy on bank deposits so how are they expected to keep their deposits in the bank and if they are not, how do the banks expect to continue?

RT: The head of the largest Cypriot bank resigned after it was announced that the Bank of Cyprus will inherit billions of toxic assets from Laiki bank. Do you believe that the country’s banking system will withstand such a challenge?

CA: This has been done elsewhere, we all know the example of Greece. And the head of the bank of Cyprus has resigned for a very good reason because he obviously acknowledges that they cannot go on with these terms and conditions demanded by the Troika. Therefore, there is no other solution. They should have said no to these demands from the beginning and if they would like us to continue as partners in the EU, then obviously we need to remain partners and not just be pushed around because of our political position and because of the problems we’ve been facing since 1974 and the illegal occupation of Turkey.

RT: A lot of the bankers on Cyprus have been pressured from Brussels by the EU politicians there. However, at the end of the day, do you trust the bankers now?

CA: That is a very funny question. Who can trust the bankers? Dont forget that this whole debacle started from the banks themselves. Now we are being asked to trust the banks. This is a joke. It cannot be asked of the people to do that. What the regulators should have done is have the mechanisms in place since obviously they cannot control the market, to actually have a face save mechanism when things go wrong, to be able to control it somehow. Instead, in the EU they are still discussing about the mechanisms and every single bailout has new terms and conditions. We have seen this five times. No two bailouts are exactly the same in the Eurozone. And obviously this is not something that has started now. It’s been going on since the 70s.

SOURCE

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The Confiscation of Bank Savings to Save the Banks: The Diabolical Bank “Bail-In” Proposal

By Prof Michel Chossudovsky
Global Research
April 2, 2013

Is the Cyprus’ “Bank Bail-in” a “dress rehearsal” for things to come?

Is a “Savings Heist” in the European Union and North America envisaged which could result in the outright confiscation of bank deposits?

In Cyprus, the entire payments system has been disrupted leading to the demise of the real economy.

Pensions and wages are no longer paid. Purchasing power has collapsed.

The population is impoverished.

Small and medium sized enterprises are spearheaded into bankruptcy.

Cyprus is a country with a population of one million.

What would happen if similar “hair cut” procedures were to be applied in the U.S. or the European Union?

According to the Washington based INSTITUTE OF INTERNATIONAL FINANCE (IIF) (right) which represents the consensus of the global financial establishment,” the Cyprus approach of hitting depositors and creditors when banks fail, would likely become a model for dealing with collapses elsewhere in Europe. (ECONOMIC TIMES, March 27, 2013).

It should be understood that prior to the Cyprus onslaught, the confiscation of bank deposits had been contemplated in several countries. Moreover, the powerful financial actors who triggered the bank crisis in Cyprus, are also the architects of the socially devastating austerity measures imposed in the European Union and North America.

Does Cyprus constitute a model or scenario?

Are there “lessons to be learned” by these powerful financial actors, to be applied elsewhere, at some later stage, in the Eurozones banking landscape?

According to the Institute of International Finance (IIF), “hitting depositors” could become the “new normal” of this diabolical project, serving the interests of the global financial conglomerates.

This new normal is endorsed by the IMF and the European Central Bank.  According to the IIF which constitutes the banking elites mouthpiece, “Investors would be well advised to see the outcome of Cyprus as a reflection of how future stresses will be handled.” (quoted in ECONOMIC TIMES, March 27, 2013)

“Financial Cleansing.” Bail-ins in the US and Britain

What is at stake is a process of “financial cleansing” whereby the too big to fail banks in Europe and North America (e.g. Citi, JPMorgan Chase, Goldman Sachs, et al ) displace and destroy lesser financial institutions, with a view to eventually taking over the entire banking landscape.”

The underlying tendency at the national and global levels is towards the centralization and concentration of bank power, while leading to the dramatic slump of the real economy.

Bail ins have been envisaged in numerous countries. IN NEW ZEALAND - A HAIRCUT PLAN was envisaged as early as 1997 coinciding with Asian financial crisis.

There are provisions in both the UK and the US pertaining to the confiscation of bank deposits.  In a joint documentof the Federal Deposit Insurance Corporation (FDIC) and the Bank of England, entitled Resolving Globally Active, Systemically Important, Financial Institutions, explicit procedures were put forth whereby the original creditors of the failed company, meaning the depositors of a failed bank, would be converted into equity. (See Ellen Brown, IT CAN HAPPEN HERE: The Bank Confiscation Scheme for US and UK Depositors,Global Research, March 2013)

What this means is that the money confiscated from bank accounts would be used to meet the failed banks financial obligations. In return, the holders of the confiscated bank deposits would become stockholders in a failed financial institution on the verge of bankruptcy.

Bank savings would be transformed overnight into an illusive concept of capital ownership. The confiscation of savings would be adopted under the disguise of a bogus compensation in terms of equity.

What is envisaged is the application of a selective process of confiscation of bank deposits, with a view to collecting debt while also triggering the demise of weaker financial institutions. In the US, the procedure would bypass the provisions of the Federal Deposit Insurance Corporation (FDIC) which insures deposit holders against bank failures:

No exception is indicated for insured deposits in the U.S., meaning those under $250,000, the deposits we thought were protected by FDIC insurance. This can hardly be an oversight, since it is the FDIC that is issuing the directive. The FDIC is an insurance company funded by premiums paid by private banks.  The directive is called a resolution process, DEFENED ELSEWHERE as a plan that would be triggered in the event of the failure of an insurer . . . . The only mention of insured deposits is in connection with existing UK legislation, which the FDIC-BOE directive goes on to say is inadequate, implying that it needs to be modified or overridden. (Ibid)

Because depositors are provided with a bogus compensation, they are not eligible to the FDIC deposit insurance.

Canada’s Deposit Confiscation Proposal

The most candid statement of confiscation of bank deposits as a means to saving the banksӔ is formulated in a recently released documentof the Canadian government entitled Jobs, Growth and Long Term Prosperity: Economic Action Plan 2013″.

The latter was submitted to the House of Commons by CanadaӒs Minister of Finance Jim Flaherty on March 21 as part of a so-called pre-budgetӔ proposal.

A short section of the 400 report entitled Risk Management Framework for Domestic Systemically Important BanksӔ identifies bail-in procedure for Canadas chartered banks. The word confiscation is not mentioned. Financial jargon serves to obfuscate the real intent which essentially consists in stealing peopleҒs savings.

Under the Canadian Risk Management project:

The Government proposes to implement a bail-inђ regime for systemically important banks.

This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.

This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.

What this signifies is that if one or more banks (or credit unions) were obliged to systemically deplete their capital to meet the demands of their creditors, the banks would be recapitalized through the conversion of certain bank liabilities into regulatory capital.

The certain bank liabilities pertains (in technical jargon) to the money they owe their customers, namely to their depositors, whose bank accounts would be confiscated in exchange for shares (equity) in a failing banking institution.

This will reduce risks for taxpayers is a nonsensical statement. What this really means is that the government will not provide funding to compensate depositors who are victims of a failed banking institution, nor will it come to rescue of the failed institution.

Instead the depositors will be obliged to give up their savings. The money confiscated will then be used by the bank to meet their liabilities contracted with major financial creditor institutions. In other words, this entire scheme is “a safety net” for too big to fail banks, a mechanism which enables them as creditors to overshadow lesser banking institutions including credit unions, while precipitating either their collapse or their takeover.

Canada’s Financial Landscape

The Risk Management Bail in initiative is of crucial significance for Canadians across the land: once it is adopted by the House of Commons as part of the budget package, the Bail-in procedures could be applied.

The Conservative government has a parliamentary majority. There is a good likelihood that the Economic Action Plan 2013″ which includes the Bail-in procedure will be adopted.

While Canadas Risk Management Framework intimates that Canada’s banks are at risk, particularly those which have accumulated large debts (as a result of derivative losses), a generalised across the board application of the “Bail in is not contemplated.

The likely scenario in the foreseeable future is that Canadas “big five” banks, Royal Bank of Canada, TD Canada Trust, Scotiabank, Bank of Montreal and CIBC (all of which have powerful affiliates operating in the US financial landscape) will consolidate their position at the expense of lesser (provincial level) banks and financial institutions.

The Government documentintimates that the Bail-in could be used selectively in the unlikely event that one [bank] becomes non-viable. What this suggests is that at least one or more of Canada’s lesser banks could be the object of a bail-in. Such a procedure would inevitably lead to a greater concentration of bank capital in Canada, to the benefit of the larger financial conglomerates.

Displacement of Provincial Level Credit Unions and Cooperative Banks

There is an important network of over 300 provincial level credit unions and cooperative banks including the powerful Desjardins network in Quebec, the Vancouver City Savings Credit Union (Vancity) and the Coastal Capital Savings in British Columbia, Servus in Alberta, Meridian in Ontario, the caisses populaires in Ontario (affiliated to Desjardins), among many others, which could be the target of selective Bail-in operations.

In this context, what is likely to occur is a significant weakening of provincial level cooperative financial institutions, which have a governance relationship to their members (including representative councils) and which, in the present context, offer an alternative to the Big Five chartered banks. According to recent data, there are more than 300 credit unions and caisses populaires in Canada which are members of the Credit Union Central of Canada.

New Normal: International Standards Governing the Confiscation of Bank Deposits

Canada’s Economic Action Plan 2013 acknowledges that the proposed Bail-in framework “will be consistent with reforms in other countries and key international standards.” Namely, the proposed pattern of confiscating bank deposits as described in the Canadian government documentis consistent with the model contemplated in the US and the European Union.  This model is currently a “talking point” (behind closed doors) at various international venues regrouping central bank governors and finance ministers.

The regulatory agency involved in these multilateral consultations is the Financial Stability Board (FSB) based in Basel, Switzerland and hosted by the Bank for International Settlements (BIS) (image right). The FSB happens to be chaired by the governor of the Bank of Canada, Mark Carney, who was recently appointed by the British government to head the Bank of England starting in June 2013.

Mark Carney, as Governor of the Bank of Canada, was instrumental in shaping the provisions of the Bail-in for Canada’s chartered banks. Before his career in central banking, he was a senior executive at Goldman Sachs, which has played a behind the scenes role in the implementation of the bank bailouts and austerity measures in the EU.

The FSBs mandate would be to coordinate the bail-in procedures, in liaison with the national financial authorities and international standard setting bodies which include the IMF and the BIS. It should come as no surprise: the deposit confiscation procedures in the UK, the US and Canada examined above are remarkably similar.

Bank “Bail-ins” vs. Bank “Bail-outs”

The bailouts are rescue packages whereby the government allocates a significant portion of State revenues in favor of failed financial institutions. The money is channeled from the coffers of the State to the banking conglomerates.

In the US in 2008-2009, a total of $1.45 trillion was channeled to Wall Street financial institutions as part of the Bush and Obama rescue packages.

These bailouts were considered as a De facto government expenditure category. They required the implementation of austerity measures. Together with massive hikes in military expenditure, the bailouts were financed through drastic cuts in social programs including Medicare, Medicaid and Social Security.

In contrast to the Bailout, which is funded from the public purse, the Bail-in requires the (in-house) confiscation of bank deposits. The bail-ins are implemented without the use of public funds. The regulatory mechanism is established by the central bank.

At the outset of Obama’s first term in January 2009, a bank bailout of the order of $750 billion was announced by Obama, which was added on to the 700 billion dollar bailout money allocated by the outgoing Bush administration under the Troubled Assets Relief Program (TARP).

The total of both programs was a staggering 1.45 trillion dollars to be financed by the US Treasury. (It should be understood that the actual amount of cash financial aid to the banks was significantly larger than $1.45 trillion. In addition to this amount defence allocations to fund Obama’s war economy (FY 2010) was a staggering $739 billion. Namely the bank bailouts plus defence combined ($2189 billion) eat up almost the totality of the federal revenues which in FY 2010 amounted to $2381 billion.

Concluding remarks

What is occurring is that the bank bailouts are no longer functional. At the outset of Obama’s Second term, the coffers of the state are empty. The austerity measures have reached a deadlock.

The bank “bail-ins” are now being contemplated instead of the “bank bailouts.”

The lower and middle income groups which are invariably indebted will not be the main target. The appropriation of bank deposits would essentially target the upper middle and upper income groups which have significant bank deposits. The second target will be the bank accounts of small and medium sized firms.

This transition is part of the evolution of the global economic crisis and the impasse underlying the application of the austerity measures.

The purpose of the global financial actors is to wipe out competitors, consolidate and centralize bank power and exert an overriding control over the real economy, the institutions of government and the military.

Even if the bail-ins were to be regulated and applied selectively to a limited number of failing financial institutions, credit unions, etc, the announcement of a program of confiscation of deposits could potentially lead to a generalized run on the banks. In this context, no banking institution would be regarded as safe.

The application of Bail-in procedures involving deposit confiscation (even when applied locally or selectively) would create financial havoc. It would interrupt the payments process. Wages would no longer be paid. Purchasing power would collapse. Money for investment in plant and equipment would no longer be forthcoming. Small and medium sized businesses would be precipitated into bankruptcy.

The application of a Bail-In in the EU or North America would initiate a new phase of the global financial crisis, a deepening of the economic depression, a greater centralization of banking and finance, increased concentration of corporate power in the real economy to the detriment of regional and local level enterprises.

In turn, an entire global banking network characterized by electronic transactions (which govern deposits, withdrawals, etc), not to mention money transactions on the stock and commodity markets - could potentially be the object of significant disruptions of a systemic nature.

The social consequences would be devastating. The real economy would plummet as a result of the collapse in the payments system.

The potential disruptions in the functioning of an integrated global monetary system could result in a a renewed global economic meltdown as well as a drop off in international commodity trade.

It is important that people across the land, in the European Union and North America, nationally and internationally, forcefully act against the diabolical ploys of their governments - acting on behalf of dominant financial interests - to implement a selective process of bank deposit confiscation.

SOURCE

Posted by Elvis on 03/26/13 •
Section Bad Moon Rising
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Sunday, March 24, 2013

Bitcoin Privacy

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Bitcoin Privacy Extension to Have Backdoor for Government Snooping?

By Eric Blair
Activist Post
March 24, 2013

Bankers are desperate to force governments into regulating decentralized virtual currencies like Bitcoin. With good reason.

As currency wars rage with a rush to devaluation while banker bureaucrats openly ROB DEPOSITORS IN CYPRUS and as FINANCIAL PRIVACY DISAPPEARS, Bitcoin has become a SAFE HAVEN CURRENCY to a growing number of people. Bankers and governments can’t control it or tax it, but now they’re attempting to do fix that.

Andrew Leonard of Salon WRITES:

The more popular Bitcoin gets, whether as a symbol of resistance or a perceived safe haven in financially troubled times, the more government attention it will inevitably draw, and the more inexorably it will be sucked into existing regulatory structures. Incomes denominated in Bitcoins will be taxed. Efforts at money laundering will be cracked down upon. Its the price of success. Resistance is futile.

Last week, the Financial Crimes Enforcement Network (FinCEN) revealed their INITIAL GUIDELINES TO REGULATE VIRTUAL CURRENCIES. Although it said that users of virtual currencies are not subject to FinCEN regulations, exchanges for that currency are:

A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations. However, an administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. An administrator or exchanger is not a provider or seller of prepaid access, or a dealer in foreign exchange, under FinCEN’s regulations.

Additionally, the CIA’s venture capital firm IN-Q-TEL has taken a great interest in Bitcoin and has called some of its DEVELOPERS TO GIVE A PRESENTATION about Bitcoin this June, which is troublesome for the prospect of freedom and privacy.

But resistance is not futile as Andrew Leonard would like his readers to believe. Other developers are working on Bitcoin extensions to add further privacy for users. Bitcoin transactions are already fairly anonymous even though they can be viewed on a public open-source record.

Privacy lacks for Bitcoin users, not in the transaction, but in where the coins are stored. Specific encrypted coins can be traced through a transaction to a certain wallet whose owner is may or may not be anonymous. Even if the wallet is anonymous, everyone knows where their specific coins have been which could potentially expose the wallet owner’s activity and identity.

A new Bitcoin privacy extension, Zerocoin, is seeking to solve this privacy concern. Zerocoin, being developed by Johns Hopkins University, will basically pool Bitcoins in escrow and scramble them between buyers and sellers to hide the origin and destination of specific coins.

New Scientist REPORTS:

Called Zerocoin, it’s a cryptographic add-on to Bitcoin that allows for transactions which cannot be linked together. The key is that it does this without introducing any new centralised elements into the network or using laundering, whereby coins are spent through intermediaries to hide the root purchaser’s wallet address.

Zerocoin works by allowing Bitcoin users to leave their coins floating on the network for someone else to redeem, on the condition that they can redeem the same amount of Bitcoin, similarly left floating on the network, at an arbitrary time in the future.

Jon Matonis of the American Banker INTERVIEWED Johns Hopkins research professor Matthew Green, who said:

“Zerocoin creates an ‘escrow pool’ of bitcoins, which users can contribute to and then later redeem from,” Green explained. Users receive different coins than they put in (though the same amount) and there is no entity that can trace your transactions or steal your money. “Unlike previous e-cash schemes, this whole process requires no trusted party. As long as all the nodes in the network support the Zerocoin protocol, the system works in a fully distributed fashion,” added Green.

Green is due to present his paper Zerocoin: Anonymous Distributed E-Cash from Bitcoin at the IEEE SYMPOSIUM ON SECURITY AND PRIVACY this May.

It sounds like an amazing innovation for a CURRENCY THAT IS FAR SUPERIOR IN MANY WAYS to establishment currencies and banking. However, Green adds one disturbing statement with huge implications for the legitimacy of Zerocoin.

Green told the New Scientist, “Zerocoin would give you this incredible privacy guarantee, then we could add on some features which let the police, for instance, to be able to track money laundering. A back door.”

Apparently Green has received a lot of grief for attempting to provide an anonymous privacy protocol that would allow back-door snooping, and he has since backed off his previous statement even if it still appears in his paper.

“The back door isn’t part of Zerocoin. There’s absolutely no need for it, and building one in would take significant additional effort. In fact, we only mentioned it as a brief note in the conclusion of our paper, mostly to motivate future research work,” Green told the American Banker.

So Green included the idea of a backdoor to “motivate future research work”?  In other words, he seems to be seeking public funding to continue creating this backdoor. Obviously, the “authorities” would be the only ones interested in this pursuit which answers the question about who he is trying to motivate. The bigger question is who funded this work?

In an attempt to put the issue to rest, Green claimed that a backdoor was impossible, anyway; “If someone did try to build a back door for any reason, the open source Zerocoin would quickly become Zero-adoption.”

In any respect, creating a random escrow pool for Bitcoin transactions is a brilliant concept and an innovation that can be used alongside other open-source programs like COIN CONTROL which allows users to choose what wallet they want individual transactions to go to.

Yet as Bitcoin developers are hard at work finding ways to make it even more anonymous, will they be successful in preventing backdoors for government access, thwarting FinCEN regulations, and involvement by the CIA?

SOURCE

Posted by Elvis on 03/24/13 •
Section Privacy And Rights • Section Broadband Privacy
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Amazon And The CIA

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Our Privacy.... It’s Disappeared into the “Clouds”

By Perrie Halpern
The News Talkers
March 20, 2013

Quiz: What does the CIA and Amazon have in common?

A. Too much power

B. Invasion into our privacy

C. A big investment in the computer business

D. All of the above

The old saying goes that every cloud has a silver lining. Of course in real life, we know that some clouds are dark an ominous. In our tech world, some clouds can’t even be seen. Usually, it’s the things that we can’t see that should be feared the most.

Today in New York City, the CIA’s technology officer, Ira “Gus” Hunt outlined the agency’s new concept for the CIA’s view of information gathering.

“The value of any piece of information is only known when you can CONNECT IT WITH SOMETHING ELSE that arrives at a future point in time,” Hunt said. “Since you can’t connect dots you don’t have, it drives us into a mode of, we fundamentally try to collect everything and hang onto it forever.”

Everything is a lot and everything is a very long time. There must be a plan! And so there is! But unlike any spy novel, there is no secret agency involved. No spooks, spooks, no MI6. Instead, the CIA has enlisted the help of an unlikely ally, AMAZON. In it’s quest for “big data”.. which is so big that the CIA has a dedicated job recruitment site page on its website pitching big data jobs to prospective employees.

These comments come two days after Federal Computer Week reported, that the CIA is joining with Amazon in a 10 year, $600 million cloud service with storage and analysis capabilities on a massive scale. In a slide during Hunt’s presentation, his pronouncement was made, “It is nearly within our grasp to compute on all human generated information.” He continued:

“You’re already a walking sensor platform,” he said, nothing that mobiles, smartphones and iPads come with cameras, accelerometers, light detectors and geolocation capabilities.

“You are aware of the fact that somebody can know where you are at all times, because you carry a mobile device, even if that mobile device is turned off,” he said. “You know this, I hope? Yes? Well, you should.”

As for privacy and law, all Hunt had to say was, “Technology in this world is moving faster than government or law can keep up,” he said. “It’s moving faster I would argue than you can keep up: You should be asking the question of what are your rights and who owns your data.

Yes, ominous clouds are forming. Clouds that store your personal information....that you will be actually helping grow with each and every purchase of a KINDLE Fire, and maybe IPHONE or a Nexus 7.

BTW, the answer to the question is D. 

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Posted by Elvis on 03/24/13 •
Section Privacy And Rights • Section Broadband Privacy
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Disabled Workers

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Unfit for Work
The startling rise of disability in America

By Chana Joffe-Walt
NPR
March 22, 2013

In the past three decades, the number of Americans who are on disability has skyrocketed. The rise has come even as medical advances have allowed many more people to remain on the job, and new laws have banned workplace discrimination against the disabled. Every month, 14 million people now get a disability check from the government.

The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. Yet people relying on disability payments are often overlooked in discussions of the social safety net. People on federal disability do not work. Yet because they are not technically part of the labor force, they are not counted among the UNEMPLOYED.

In other words, people on disability don’t show up in any of the places we usually look to see how the economy is doing. But the story of these programs—who goes on them, and why, and what happens after that—is, to a large extent, the story of the U.S. economy. It’s the story not only of an aging workforce, but also of a hidden, increasingly expensive safety net.

For the past six months, I’ve been reporting on the growth of federal disability programs. I’ve been trying to understand what disability means for American workers, and, more broadly, what it means for poor people in America nearly 20 years after we ended welfare as we knew it. Here’s what I found.

One In Four

In Hale County, Alabama, 1 in 4 working-age adults is on disability. On the day government checks come in every month, banks stay open late, Main Street fills up with cars, and anybody looking to unload an old TV or armchair has a yard sale.

Sonny Ryan, a retired judge in town, didn’t hear disability cases in his courtroom. But the subject came up often. He described one exchange he had with a man who was on disability but looked healthy.

“Just out of curiosity, what is your disability?” the judge asked from the bench.
“I have high blood pressure,” the man said.
“So do I,” the judge said. “What else?”
“I have diabetes.”
“So do I.”

There’s no diagnosis called disability. You don’t go to the doctor and the doctor says, “We’ve run the tests and it looks like you have disability.” It’s squishy enough that you can end up with one person with high blood pressure who is labeled disabled and another who is not.

I talked to lots of people in Hale County who were on disability. Sometimes, the disability seemed unambiguous.

“I was in a 1990 Jeep Cherokee Laredo,” Dane Mitchell, a 23-year-old guy I met in a coffee shop, told me. “I flipped it both ways, flew 165 feet from the Jeep, going through 12 to 14,000 volts of electrical lines. Then I landed into a briar patch. I broke all five of my right toes, my right hip, seven of my vertebrae, shattering one, breaking a right rib, punctured my lung, and then I cracked my neck.”

Other stories seemed less clear. I sat with lots of women in Hale County who told me how their backs kept them up at night and made it hard for them to stand on the job. “I used to cry to try to work,” one woman told me. “It was so painful.”

People don’t seem to be faking this pain, but it gets confusing. I have back pain. My editor has a herniated disc, and he works harder than anyone I know. There must be millions of people with asthma and diabetes who go to work every day. Who gets to decide whether, say, back pain makes someone disabled?

As far as the federal government is concerned, you’re disabled if you have a medical condition that makes it impossible to work. In practice, it’s a judgment call made in doctors’ offices and courtrooms around the country. The health problems where there is most latitude for judgment—back pain, mental illness—are among the fastest growing causes of disability.

In Hale County, there was one guy whose name was mentioned in almost every story about becoming disabled: Dr. Perry Timberlake. I began to wonder if he was the reason so many people in Hale County are on disability. Maybe he was running some sort of disability scam, referring tons of people into the program.

After sitting in the waiting room of his clinic several mornings in a row, I met Dr. Timberlake. It turns out, there is nothing shifty about him. He is a doctor in a very poor place where pretty much every person who comes into his office tells him they are in pain.

“We talk about the pain and what its like,” he says. “I always ask them, ‘What grade did you finish?’”

What grade did you finish, of course, is not really a medical question. But Dr. Timberlake believes he needs this information in disability cases because people who have only a high school education aren’t going to be able to get a sit-down job.

Dr. Timberlake is making a judgment call that if you have a particular back problem and a college degree, you’re not disabled. Without the degree, you are.

Over and over again, I’d listen to someone’s story of how back pain meant they could no longer work, or how a shoulder injury had put them out of a job. Then I would ask: What about a job where you don’t have to lift things, or a job where you don’t have to use your shoulder, or a job where you can sit down? They would look at me as if I were asking, “How come you didn’t consider becoming an astronaut?”

One woman I met, Ethel Thomas, is on disability for back pain after working many years at the fish plant, and then as a nurse’s aide. When I asked her what job she would have in her dream world, she told me she would be the woman at the Social Security office who weeds through disability applications. I figured she said this because she thought she’d be good at weeding out the cheaters. But that wasn’t it. She said she wanted this job because it is the only job she’s seen where you get to sit all day.

At first, I found this hard to believe. But then I started looking around town. There’s the McDonald’s, the fish plant, the truck repair shop. I went down a list of job openings—Occupational Therapist, McDonald’s, McDonald’s, Truck Driver (heavy lifting), KFC, Registered Nurse, McDonald’s.

I actually think it might be possible that Ethel could not conceive of a job that would accommodate her pain.

We’re Just Hiding You Guys

There’s a story we hear all the time these days that doesn’t, on its face, seem to have anything to do with disability: Local Mill Shuts Down. Or, maybe: Factory To Close.

Four years ago, when I was working as a reporter in Seattle, I did that story. I stood with workers in a dead mill in Aberdeen, Washington and memorialized the era when you could graduate from high school and get a job at a mill and live a good life. That was the end of the story.

But after I got interested in disability, I followed up with some of the guys to see what happened to them after the mill closed. One of them, Scott Birdsall, went to lots of meetings where he learned about retraining programs and educational opportunities. At one meeting, he says, a staff member pulled him aside.

“Scotty, I’m gonna be honest with you,” the guy told him. “There’s nobody gonna hire you We’re just hiding you guys.” The staff member’s advice to Scott was blunt: “Just suck all the benefits you can out of the system until everything is gone, and then you’re on your own.”

Scott, who was 56 years old at the time, says it was the most real thing anyone had said to him in a while.

There used to be a lot of jobs that you could do with just a high school degree, and that paid enough to be considered middle class. I knew, of course, that those have been disappearing for decades. What surprised me was what has been happening to many of the people who lost those jobs: They’ve been going on disability.

Scott tried school for a while, but hated it. So he took the advice of the rogue staffer who told him to suck all the benefits he could out of the system. He had a heart attack after the mill closed and figured, “Since I’ve had a bypass, maybe I can get on disability, and then I won’t have worry to about this stuff anymore.” It worked; Scott is now on disability.

Scott’s dad had a heart attack and went back to work in the mill. If there’d been a mill for Scott to go back to work in, he says, he’d have done that too. But there wasn’t a mill, so he went on disability. It wasn’t just Scott. I talked to a bunch of mill guys who took this path—one who shattered the bones in his ankle and leg, one with diabetes, another with a heart attack. When the mill shut down, they all went on disability.

I don’t know what that rogue staffer meant when he told Scott Birdsall they were trying to hide those mill guys. But signing up for disability benefits is an excellent way to stay hidden in one key way: People on disability are not counted among the unemployed.

“That’s a kind of ugly secret of the American labor market,” David Autor, an economist at MIT, told me. “Part of the reason our unemployment rates have been low, until recently, is that a lot of people who would have trouble finding jobs are on a different program.”

Part of the rise in the number of people on disability is simply driven by the fact that the workforce is getting older, and older people tend to have more health problems.

But disability has also become a de facto welfare program for people without a lot of education or job skills. But it wasn’t supposed to serve this purpose; it’s not a retraining program designed to get people back onto their feet. Once people go onto disability, they almost never go back to work. Fewer than 1 percent of those who were on the federal program for disabled workers at the beginning of 2011 have returned to the workforce since then, one economist told me.

People who leave the workforce and go on disability qualify for Medicare, the government health care program that also covers the elderly. They also get disability payments from the government of about $13,000 a year. This isn’t great. But if your alternative is a minimum wage job that will pay you at most $15,000 a year, and probably does not include health insurance, disability may be a better option.

But going on disability means you will not work, you will not get a raise, you will not get whatever meaning people get from work. Going on disability means, assuming you rely only on those disability payments, you will be poor for the rest of your life. That’s the deal. And it’s a deal 14 million Americans have signed up for.

As I got further into this story, I started hearing about another group of people on disability: kids. People in Hale County told me that what you want is a kid who can “pull a check.” Many people mentioned this, but I basically ignored it. It seemed like one of those things that maybe happened once or twice, got written up in the paper and became conversational fact among neighbors.

Then I looked at the numbers. I found that the number of kids on a program called Supplemental Security Income—a program for children and adults who are both poor and disabled—is almost seven times larger than it was 30 years ago.

Jahleel Duroc (pictured above) is gap-toothed, 10 and vibrating with enthusiasm. He’s excited to talk to someone new, excited to show me his map of his neighborhood in the Bronx. He’s disabled in the eyes of the government because he has a learning disability.

“I like school,” he told me. “My favorite periods are math and science and art, and lunch and recess and snack social studies and writing are my favorite.”

His favorite thing about school, in other words, is everything.

When you are an adult applying for disability you have to prove you cannot function in a “work-like setting.” When you are a kid, a disability can be anything that prevents you from progressing in school. Two-thirds of all kids on the program today have been diagnosed with mental or intellectual problems.
Jahleel is a kid you can imagine doing very well for himself. He is delayed. But given the right circumstances and support, it’s easy to believe that over the course of his schooling Jahleel could catch up.

Let’s imagine that happens. Jahleel starts doing better in school, overcomes some of his disabilities. He doesn’t need the disability program anymore. That would seem to be great for everyone, except for one thing: It would threaten his family’s livelihood. Jahleel’s family primarily survives off the monthly $700 check they get for his disability.

Jahleel’s mom wants him to do well in school. That is absolutely clear. But her livelihood depends on Jahleel struggling in school. This tension only increases as kids get older. One mother told me her teenage son wanted to work, but she didn’t want him to get a job because if he did, the family would lose its disability check.

I haven’t taken a survey or anything, but I’m guessing a large majority of Americans would be in favor of some form of government support for disabled children living in poverty. We would have a hard time agreeing on exactly how we want to offer support, but I think there are some basic things we’d all agree on.

Kids should be encouraged to go to school. Kids should want to do well in school. Parents should want their kids to do well in school. Kids should be confident their parents can provide for them regardless of how they do in school. Kids should become more and more independent as they grow older and hopefully be able to support themselves at around age 18.

The disability program stands in opposition to every one of these aims.

The End Of Welfare As We Knew It

A federal program for disabled people was first proposed in the 1930s. Even then, a Social Security actuary was worried. “You will have workers like those in the Dust Bowl area, people who have migrated to California and elsewhere, who perhaps have not worked in a year or two, who will imagine they are disabled,” the actuary wrote. The cost of the program could be higher than “anything that can be forecast.”

The actuary’s warning gets at a central tension in a much bigger debate: What should we, as a country, do for people who aren’t making it? Americans want to be generous. But Americans don’t want to be chumps.

The first key pieces of the modern safety net were created in the 1930s, under Franklin Roosevelt. The first federal disability program was created in the ‘50s. A few years later, Lyndon Johnson pushed to expand the federal safety net further.

In the ‘80s, Ronald Reagan argued that a robust economy would do more to eliminate poverty than any federal program. When Reagan used the term “welfare queen,” it was clear where he stood. He didn’t want to be a chump.

Bill Clinton tried to appease both sides. He expanded many programs for the working poor, but he also promised to “end welfare as we know it”—to nudge people off of public assistance, give them some job training, and force them to make it on their own. “A society rooted in responsibility must first promote the value of work, not welfare,” Clinton said. History has judged Clinton’s welfare reform a big success.

But when you include disability in the story of welfare reform, the picture looks more ambiguous.

Part of Clinton’s welfare reform plan pushed states to get people on welfare into jobs, partly by making states pay a much larger share of welfare costs. The incentive seemed to work; the welfare rolls shrank. But not everyone who left welfare went to work.

A person on welfare costs a state money. That same resident on disability doesn’t cost the state a cent, because the federal government covers the entire bill for people on disability. So states can save money by shifting people from welfare to disability. And the Public Consulting Group is glad to help.

PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability. “What we’re offering is to work to identify those folks who have the highest likelihood of meeting disability criteria,” Pat Coakley, who runs PCG’s Social Security Advocacy Management team, told me.

The company has an office in eastern Washington state that’s basically a call center, full of headsetted women in cubicles who make calls all day long to potentially disabled Americans, trying to help them discover and documenttheir disabilities:

“The high blood pressure, how long have you been taking medications for that?” one PCG employee asked over the phone the day I visited the company. “Can you think of anything else that’s been bothering you and disabling you and preventing you from working?”

The PCG agents help the potentially disabled fill out the Social Security disability application over the phone. And by help, I mean the agents actually do the filling out. When the potentially disabled don’t have the right medical documentation to prove a disability, the agents at PCG help them get it. They call doctors’ offices; they get records faxed. If the right medical records do not exist, PCG sets up doctors’ appointments and calls applicants the day before to remind them of those appointments.

PCG also works very, very hard to make the people who work at the Social Security happy. Whenever the company wins a new contract, Coakley will personally introduce himself at the local Social Security Administration office, and see how he can make things as easy as possible for the administrators there.

“We go through even to the point, frankly, of do you like things to be stapled or paper-clipped?” he told me. “Paper clips wins out a lot of times because they need to make photocopies and they don’t want to be taking staples out.”

There’s a reason PCG goes to all this trouble. The company gets paid by the state every time it moves someone off of welfare and onto disability. In recent contract negotiations with Missouri, PCG asked for $2,300 per person. For Missouri, that’s a deal—every time someone goes on disability, it means Missouri no longer has to send them cash payments every month. For the nation as a whole, it means one more person added to the disability rolls.

The Disability-Industrial Complex

In the past few decades, an entire disability-industrial complex has emerged. It has just one goal: Push more people onto disability. And, sometimes, it seems like the government is outmatched. This is especially true in the legal system.

Daytime TV in many places is full of ads from lawyers who promise to fight the government and win the disability benefits you deserve. There are tons of YouTube videos about getting disability—one lawyer, one webcam. The standard form is a let’s-get-real chat about how to win this thing.

There is one man who takes much of the credit for this industry: Charles Binder. “When we started,” Binder told me, “I don’t think anybody else was advertising.” What’s more, most people who applied for disability were denied and never had a hearing. Binder, and the lawyers who followed him, changed that. “I’ve created some of the problems for the government because so many people appeal,” Binder says.

When he started in 1979, Binder represented fewer than 50 clients. Last year, his firm represented 30,000 people. Thirty thousand people who were denied disability appealed with the help of Charles Binder’s firm. In one year. Last year, Binder and Binder made $68.7 million in fees for disability cases.

The way Binder tells it, he’s is a guy helping desperate people get the support they deserve. He is a cowboy-hatted Lone Ranger going to court to fight the good fight for the everyman.

Who is making the case for the other side? Who is defending the government’s decision to deny disability?

Nobody.

“You might imagine a courtroom where on one side there’s the claimant and on the other side there’s a government attorney who is saying, ‘We need to protect the public interest and your client is not sufficiently deserving,’” the economist David Autor says. “Actually, it doesn’t work like that. There is no government lawyer on the other side of the room.”

The Social Security Administration says disability hearings were never meant to be adversarial. In these courtrooms, the judges are employees of Social Security. So the judges are supposed to both represent the government and make a fair and objective determination. But the judges themselves say this role can be difficult.

Judge Randy Frye, who hears disability cases in North Carolina, told me he often finds himself glancing to where he imagines there should be a chair for the government attorney, as there would be in a normal case. “There are always moments where you are concerned maybe you missed something,” he says.

“You would turn to that chair and say, ‘Counsel, I’m having trouble with this issue. Why does the government think this case should not be reversed?’”

Somewhere around 30 years ago, the economy started changing in some fundamental ways. There are now millions of Americans who do not have the skills or education to make it in this country.

Politicians pay lip service to this problem during election cycles, but American leaders have not sat down and come up with a comprehensive plan.

In the meantime, federal disability programs became our extremely expensive default plan. The two big disability programs, including health care for disabled workers, cost some $260 billion a year.

People at the Social Security Administration, which runs the federal disability programs, say we cannot afford this. The reserves in the disability insurance program are on track to run out in 2016, Steve Goss, the chief actuary at Social Security, told me.

Goss is confident that Congress will act to keep disability payments flowing, probably by taking money from the Social Security retirement fund. Of course, the retirement fund itself is on track to run out of money by 2035.

Goss and his colleagues have worked out a temporary fix under which the retirement and disability funds will both run out of money by 2033. He says he hopes the country will have come up with a better plan by then.

SOURCE

Posted by Elvis on 03/24/13 •
Section Dying America
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