Article 43

 

Austerity American Style

Friday, January 03, 2014

Austerity American Style Part 16 - Kicking Long-Term Unemployed To The Curb

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“Austerity" is a bloodless term for gross economic mismanagement, animated by heartlessness. That robotic cut-cut-cut mentality that deprives us of jobs, of public services, of safety, of health, of infrastructure, of help for the needy, and - ultimately - of our economic equilibrium and the ability to survive. The mentality that ushers in, and welcomes, a vicious war of all against all. Austerity is destroying an entire country, right before our eyes.”
- Rep. Alan Grayson

“True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.”
- FDR

“The test of our progress is not whether we add more to the abundance of those who have much it is whether we provide enough for those who have little.”
- FDR

Although long-term unemployment is still at it’s HIGHEST LEVELS SINCE WORLD WAR II, our leaders are starting 2014 by screwing the long-term unemployed worse than in PRIOR years.

IN FLORIDA - unemployemet insurance will go down to 16 weeks.  That’s the LOWEST it’s ever been.  The 26 WEEK UI safety net that’s been around since the days of FDR is almost CUT IN HALF:

For all claims filed on or after January 1, 2014, the duration of benefits will be 16 weeks, which is adjusted from the current maximum of 19 weeks.  This is based upon the seasonally adjusted average total unemployment rate in Florida for the three months ending September 30 of the year prior to the filing date of the claim as required by section 443.111(5), Florida Statutes. 

Around the country - Emergency Unemploymet Compensation (EUC) is gone.

It’s looking to be another bad year ahead for America’s jobless.

The long-term unemployed are doomed.

FDR must be turning in his grave.

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The Long-Term Unemployment Trap Could Get Worse

Bill Moyers
November 20, 2013

The emergency support program for the long-term unemployed which was first enacted in 2008 could face big cuts with the start of the New Year, even though the recovery remains tepid and unemployment figures remain higher than at this point in any previous recession. And many experts are saying that further austerity would bring more bad news for the economy.

CHAD STONE, chief economist at the Center for Budget and Policy Priorities a think tank focused on policies to help low- and moderate-income Americans - writes,” the mainstream explanation for why unemployment is so high is that businesses still don’t have enough sales to justify hiring enough workers to restore normal levels of employment.” Failing to renew the Emergency Unemployment Compensation (EUC) program, which has been extended a number of times since 2008 to help those struggling during the Great Recession, will have the opposite effect of what is needed - Americans out-of-work for long periods will have even less to spend, which will further blunt the already-pretty-blunt recovery.

“With an unemployment rate of 7.3 percent, we need to raise the emergency unemployment insurance (UI) and push for extensions to 2014,” Gene Sperling, director of the White Houses National Economic Council, said at a public forum last week. Sperling claimed he “sees a good chance to get a new reform through Congress,” the MNI financial news service REPORTED.

But right now, House Republicans have not shown much interest in coming to an agreement to extend the program."The current EUC program already has served up about 10 times as many weeks of federal extended benefits as the most recent program that operated in the wake of the 2001 recession and terror attacks, and nearly six times as many weeks as the program that ran from 1991 through 1994,” said the House Ways and Means Committee chairman Dave Camp (R-MI) in a PRESS RELEASE. “And despite Democrat claims that such spending on UI benefits is the best stimulus, all this record-setting benefit spending has bought is the slowest recovery on record.”

Stone says that is an unfair characterization based on an analysis that puts the cart in front of the horse. “To be sure, EUC has lasted a lot longer, helped a lot more unemployed workers and paid out substantially more in benefits than the programs enacted in past recessions. But that’s because the blow to the economy and especially the labor market from the Great Recession was so much worse. In fact, without the consumer spending UI generated, the recession would have been even deeper and the recovery even slower, according to conventional economic analysis.”

Annie Lowry WROTE in The New York Times this weekend that long-term unemployment is a trap that becomes more and more difficult to escape with each passing month. Since the Great Recession started, long-term joblessness is up 213 percent, and economists are unclear about whether faster growth will improve the situation. Many of the long-term unemployed have rusty job skills that will make re-entering the workforce tough, even if more jobs become available. Others have ruined credit ratings, which employers increasingly rely on to screen new hires. And unemployment carries a heavy stigma that keeps people out of work. We don’t hire the unemployed, a potential employer told Jenner Barrington-Ward, a 53-year-old college graduate who had worked steadily for 30 years before being unemployed for the past five.

Lowry writes:

[T]he slack economy remains the primary culprit behind all the pain in the labor market, economists say. “We’ve got to be doing everything we can,” said Professor Rothstein at Berkeley. “That means direct hiring with the government providing jobs - employment tax credits, just about anything you could think of.”

But the government is now doing the opposite. The mandatory federal budget cuts known as sequestration took as much as 60 percent out of unemployment checks this summer and fall. And, as of this winter, the federal emergency program that extends the maximum number of weeks of jobless payments will end, though the White House is pushing to extend it again.

Some fear that it may already be too late to prevent long-term joblessness from permanently scarring the American work force and broader economy. International Monetary Fund researchers estimate that the level of structural unemployment has increased significantly since the recession. And striking new Federal Reserve research shows that the scars from the recession have knocked the economy off its long-term growth trend.

I’tll fall to Congress - specifically, to the House of Representatives - to determine whether unemployed Americans, and by extension all Americans, have a depressing New Year.

SOURCE

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Congress Chooses Austerity Over Job Creation and Economic Growth

By John Nichols
The Nation
December 13, 2013

Most members of Congress were pleased with themselves Thursday.

They agreed to agree - crossing lines of partisanship and ideology - on an austerity budget that, as Oregon Congressman Peter DeFazio has noted, “won’t create jobs, get the economy back on track, or meaningfully cut the deficit.”

That’s not the worst of it.

At the end of the day, “the bill abandons 1.3 million Americans who desperately need unemployment insurance, and does nothing to promote economic growth or job creation,” Congressman Mark Pocan, D-Wisconsin, explained Thursday. “Furthermore, the legislation is paid for on the backs of the middle class and military families, while not touching the wealthiest amongst us and allowing corporations to continue to benefit from tax loopholes.”

Pocan and DeFazio could not bring themselves to back the deal.

But they were outliers, two of the 32 Democrats who voted no, along with 62 Republicans.

The vast majority of House members—from both parties—backed the deal, which prevailed on a 332-94 vote.

So where does that leave America?

Let’s turn to National Nurses United, a union that parts company with both major parties on questions of public welfare, for a diagnosis.

There is no reason to cheer an agreement that requires unwarranted pension cuts for federal workers, including VA nurses who earned that pension, underfunds nutrition programs and fails to extend assistance for the long-term unemployed,” says union co-president Jean Ross, RN.

NNU refused to get on board for the bipartisan deal that takes the worst ideas of Wall Street-aligned Republicans and puts a Democratic stamp of approval on them.

Why? Because they understand the agreement—which was developed by a conference committee on which House Budget Committee chair Paul Ryan, R-Wisconsin, played a defining role - as an expression of the austerity agenda that has stalled economic recovery and job growth in the United States and abroad.

“Austerity budgeting, reflected in this latest deal, continues the disturbing focus by politicians in both parties in Washington, who should be fighting for jobs at living wages, restoration of the disgraceful cuts in food stamps, healthcare for all, housing assistance, and other human needs, not simply how to please Wall Street and the banks,” says NNU’s Ross. “For our patients and our communities, it is past time to replace cuts for workers with revenues from Wall Street to revive Main Street.”

There was a time when austerity budgeting was accepted as valid - or, at least, necessary - to addressing the circumstance of countries where deindustrialization and economic setbacks have caused revenue shortfalls. But, in recent years, The Economist magazine, the Financial Times newspaper and the International Monetary Fund have recognized that austerity agendas based on in budget cuts and a failure to invest in infrastructure and development tend to lock in patterns of high unemployment and slow growth.

Countries fall into dysfunctional patterns making cuts that lead to more cuts and this stalls job creation, reduces labor-force participation and makes recovery more difficult. It is, as economist Paul Krugman suggests, an “awesomely destructive” pattern.

Congress should get this by now. Unfortunately, as an analysis from the budget analysts at the Campaign for America’s Future notes, “Somehow Washington has failed to get the message. This deal doesn’t end the cutting; it only reduces its severity. It doesn’t generate jobs; it only cuts fewer of them. It doesn’t help the economy; it only reduces the harm to it. Surely we can do better than that.”

The nurses have an idea for how to do better. The union wants a Robin Hood Tax on high-stakes Wall Street trading - particularly speculation in stocks, bonds, derivatives and currencies. This tax is outlined in legislation developed by Congressman Keith Ellison, D-Minnesota, who proposes “a small tax on Wall Street transactions to meet the needs of our nation.”

Ellison voted against the budget deal Thursday, saying: ”The budget deal passed today is a compromise - it compromises the financial security of federal employees, the long-term unemployed and working families. ... This is a case where compromise in Washington means asking Americans to sacrifice more.”

The nurses agree.

“The sham of the present debate in Washington, DC, is that real fiscal solutions to slow growth and high unemployment, hunger, disease and poverty exist, but have been taken off the table by lobbyists for Wall Street,” says Ross. I"t’s time Congress proves to the American people that Wall Street doesnt run our government.”

SOURCE

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Resolution for Congress: Help the unemployed

By Frank Clemente
Americans for Tax Fairness
January 1, 2014

When holiday shoppers make a bad choice, the worst result may be an ugly sweater. But Congress recently made a bad choice that will ruin the holidays for more than a million families and will spoil the coming new year for millions more.

That was the decision not to extend unemployment benefits for the long-term jobless, while maintaining huge tax loopholes for wealthy Wall Streeters and multinational corporations. Congress can reverse its choice in early January, but the clock is ticking.

We are emerging from the worst employment crisis in three-quarters of a century. Job losses in the Great Recession were very deep. The unemployment rate hit 10 percent for only the second time since the 1930s. Moreover, the ranks of the long-term unemployed ח those out of work for more than 6 months hit a post-World War II record. Even now, over a third of those out of work have been so long term.

And little wonder: in November, there were almost three unemployed people for every job opening. The problem isnגt that people dont want to work; itҒs that there arent enough jobs.

Faced with this cruel reality, in the recent budget deal members of Congress had the chance to extend unemployment benefits for 1.3 million Americans җ including 20,000 recent veterans whose benefits ran out three days after Christmas. Instead, they turned their backs on those in need and headed home for the holidays. Whatגs more, without Congressional action, another 3.6 million long-term unemployed will lose their benefits in 2014.

Extending unemployment benefits is not only a lifeline for the jobless; it also boosts our economy, as hard-pressed families immediately use the money to buy essentials.

While playing Scrooge to constituents Congress played Santa Claus to campaign contributors by refusing in the budget deal to close any tax loopholes that benefit corporations and the wealthy. Closing just three tax loopholes would raise four times more revenue than the $25 billion it costs to extend expiring unemployment benefits for millions of Americans. A recent poll by Hart Research Associates shows that the American public strongly supports such measures.

Congress could raise $60 billion if it closed one loophole that subsidizes the offshoring of American jobs. CORPORATIONS ARE ALLOWED TO DEDUCT FROM THEIR FEDERAL INCOME TAX ALL THE COSTS OF SENDING A US PLANT OR OFFICE OFFSHORE. Yet, COMPANIES DON’T HAVE TO PAY U.S. taxes on the foreign operations’ profits until those earnings are brought home, which many companies never do. The American public supports closing this corporate tax loophole by a whopping 62 percent to 36 percent margin.

If Wall Street billionaires were required to simply treat their salaries as salaries - rather than more lightly taxed capital gains - we could bring in $17.4 billion, according to the Congressional Budget Office. Right now, hedge fund chiefs and other money managers can cut their tax bill almost in half by claiming their huge earnings are eligible for a 23.8 percent rate, when they should be paying 39.6 percent. The American people strongly disapprove of this “carried interest” loophole, 68 percent to 28 percent.

So Congress has to reverse course. Its already spoiled the Christmas holiday for more than a million out-of-work Americans. Now it needs to make New YearҒs resolution that the first order of business when it returns in January will be to renew benefits for the long-term unemployed. And if it wants to pay for it, close a tax loophole or two to make sure big corporations and wealthy money managers pay a fairer share of taxes.

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1.3 Million People Lost Unemployment Benefits. It Could Get Ugly

By Joshua Green
Business Week
January 2, 2014

When Congress reconvenes on Jan. 6, one of the first issues it will take up is whether to renew an emergency federal unemployment program that expired on Dec. 28, cutting off 1.3 million jobless workers. Enacted in 2008 at the start of the recession, it provided up to 47 weeks of benefits for those still looking for work when their state unemployment benefits ran out. Senate Majority Leader Harry Reid says hell try to pass a temporary extension, but most Republicans have balked at the $25 billion-a-year cost. If the program isnҒt revived, the impact could be significantnot just for the 1.3 million people losing a vital lifeline but on the broader economy.

How will these workers fare? One place to look for answers is North Carolina. Last February, at the behest of the business community, Republican Governor Pat McCrory signed a bill cutting the amount and duration of state jobless benefits, even though North Carolinaגs unemployment rate ranked among the highest in the country. The state had exhausted its unemployment trust fund, paid for by business taxes, and had borrowed $2.5 billion from the federal government to pay jobless claims. We’re going to pay down that debt, make the system solvent, and provide an economic climate that allows businesses, large and small, to put people back to work, McCrory said at the time. When the new law took effect on July 1, the maximum weekly benefit fell from $535 to $350 and its duration fell to between 12 and 20 weeks (depending on the state’s unemployment rate) from 26 weeks - the standard in most other states.

That was only half the blow. Reducing state benefits violated the terms of the federal programחwhich is intended to supplement, not replace, state aidso workers in North Carolina were also disqualified from receiving federal benefits. In essence, the state’s experience over the last six months is a harbinger of what may be in store for the rest of the country. “This doesn’t have to be a thought experiment, because you can just look at what’s happened in North Carolina,” says Aaron Chatterji, an economist at Duke Universitys Fuqua School of Business."The 1.3 million people losing their benefits are going to be in the same position as the 170,000 people here who have lost theirs.”

At first glance, the effect appears to be positive. North Carolina’s unemployment rate dropped dramatically, from 8.8 percent to 7.4 percent between July and November. By comparison, the national unemployment rate fell by 0.6 percent over the same period. A CLOSER LOOK, however, suggests that North Carolina’s unemployment numbers have fallen not because the long-term jobless have found work but because they’ve quit looking altogether. As a result, the state no longer counts them as unemployed.

“The decline in the unemployment rate gives you a very limited view of what’s going on in our labor market,” says John Quinterno, founder of South by North Strategies, an economic research firm in Chapel Hill, N.C. “Year over year, the number of employed people in North Carolina ticked up by 6,082, while the unemployed fell by 101,901. That means the labor force contracted by 95,009. So the improvement has not necessarily been driven by more people going to work and is actually being driven to a large degree by people leaving the labor force.” In October the state’s labor force participation rate hit a 37-year low. One benefit of unemployment insurance is that it has an “anchoring effect,” says Quinterno, because you have to be looking for work to qualify for benefits.

Though the job market hasn’t fully recovered from the recession, many Republicans believe extending jobless benefits saps workers’ motivation to seek employment or accept positions they deem less than ideal. I do support unemployment benefits for the 26 weeks that they’re paid for, Kentucky Senator Rand Paul said on Fox News on Dec. 8. “Beyond that, you do a disservice to these workers. When you allow people to be on unemployment insurance for 99 weeks, youre causing them to become part of this perpetual unemployed group.”

Economic research has shown that some job seekers do become less selective about the jobs they’re willing to take once their unemployment insurance expires - the so-called “employment effect.” There’s evidence this may be occurring in North Carolina. A Dec. 20 note from JPMorgan Chase’s chief U.S. economist, Michael Feroli, pointed out that the state’s employment growth has outpaced national growth since July. Yet he also noted that labor force participation has fallen much faster than it has nationally. “In this case,” he concluded, “it would appear both channels are operative but the participation effect may be more important.”

It’s hard to draw firm conclusions from limited data. But if the expiration of jobless benefits is prompting large numbers of North Carolinians to give up looking for work, it would augur poorly for the state’s economy and the country’s, too. Working-age Americans who cant find gainful employment REPRESENT LOST ECONOMIC VALUE and unmet U.S. growth potential. While some may settle for part-time work, others will try to qualify for disability. Long stretches of unemployment reduce the likelihood of finding a job, as skills and connections atrophy.

As people cycle in and out of the unemployment system this year, an additional 3.6 million workers will lose access to benefits if federal insurance isn’t restored, according to a December report by the White House Council of Economic Advisers. “That’s a lot of misery and squandered economic potential. It’s also why the ‘Tar Heel test tube,’ as Feroli has dubbed it, is worth paying attention to. Says Chatterji, The statistics are so dramatic.”

SOURCE

SOURCE
Austerity American Style
[PART 1] - Ending The Safety Net
[PART 2] - Enough Is Enough
[PART 3] - Big, Bad Businessmen
[PART 4] - Big, Bad Banks
[PART 5] - Selling Out The Public
[PART 6] - No Jobs Plan
[PART 7] - Big, Bad Cronies
[PART 8] - Red-State Model
[PART 9] - Inflicting Pain
[PART 10] - The Grand Betrayal
[PART 11] - The Sequester ACT III
[PART 12] - The Sequester ACT IV
[PART 13] - Austerity Kills
[PART 14] - Bail-In Comes To America
[PART 15] - Corporate Welfare Redux
[PART 16] - Long-Term Unemployed Are Doomed

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Posted by Elvis on 01/03/14 •
Section Dying America • Section Austerity American Style
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Monday, September 23, 2013

Austerity American Style Part 15 - Corporate Welfare Redux

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The Average American Family Pays $6,000 a Year in Subsidies to Big Business
That’s more than an insult - it’s an attack.

By Paul Bucheit
Alternet
September 23, 2013

The average American family pays $6,000 a year in subsidies to big business.

That’s over and above our payments to the big companies for energy and food and housing and health care and all our tech devices. It’s $6,000 that no family would have to pay if we truly lived in a competitive but well-regulated free-market economy.

The $6,000 figure is an average, which means that low-income families are paying less. But it also means that families (households) making over $72,000 are paying more than $6,000 to the corporations.

1. $870 for Direct Subsidies and Grants to Companies

The Cato Institute ESTIMATES that the U.S. federal government spends $100 billion a year on corporate welfare. That’s an average of $870 for each one of America’s 115 MILLION FAMILIES. Cato NOTES that this includes “cash payments to farmers and research funds to high-tech companies, as well as indirect subsidies, such as funding for overseas promotion of specific U.S. products and industries… It does not include tax preferences or trade restrictions.”

It does include PAYMENTS to 374 individuals on the plush Upper East Side of New York City, and others who own farms, including Bruce Springsteen, Bon Jovi, and Ted Turner. Wealthy heir Mark Rockefeller received $342,000 to not farm, to allow his Idaho land to return to its natural state.

It also includes fossil fuel subsidies, which could be anywhere from $10 BILLION to $41 BILLION per year for research and development. Yet this may be substantially underestimated. The IMF REPORTS U.S. fossil fuel subsidies of $502 billion, which would be almost $4,400 per U.S. family by taking into account “the effects of energy consumption on global warming [and] on public health through the adverse effects on local pollution.” According to GRIST, even this is an underestimate.

2. $696 for Business Incentives at the State, County, and City Levels

The subsidies mentioned above are federal subsidies. A New York Times INVESTIGATION found that states, counties and cities give up over $80 billion each year to companies, with beneficiaries COMING FROM “virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains.”

$80 billion a year is $696 for every U.S. family. But the Times notes that “The cost of the awards is certainly far higher.”

3. $722 for Interest Rate Subsidies for Banks

According to the HUFFINGTON POST, the “U.S. Government Essentially Gives The Banks 3 Cents Of Every Tax Dollar."They cite RESEARCH that calculates a nearly 1 percent benefit to banks when they borrow, through bonds and customer deposits and other liabilities. This amounts to a taxpayer subsidy of $83 billion, or about $722 from every American family.

The wealthiest five banks—JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs—account for three-quarters of the total subsidy. The Huffington Post article notes that without the taxpayer subsidy, those banks would not make a profit. In other words, “the profits they report are essentially transfers from taxpayers to their shareholders.”

4. $350 for Retirement Fund Bank Fees

This was a tough one to calculate. Demos REPORTS that over a lifetime, bank fees can “cost a median-income two-earner family nearly $155,000 and consume nearly one-third of their investment returns.” Fees are well over one percent a year.

However, the Economic Policy Institute NOTES that the average middle-quintile retirement account is $34,981. A conservative one percent annual management fee translates to about $350 per family. This, again, is an average; many families have no retirement account. But many families pay much more than 1% in annual fees.

5. $1,268 for Overpriced Medications

According to DEAN BAKER, “government granted patent monopolies raise the price of prescription drugs by close to $270 billion a year compared to the free market price.” This represents an astonishing annual cost of over $2,000 to an average American family.

OECD FIGURES on pharmaceutical expenditures reveal that Americans spend almost twice the OECD average on drugs, an additional $460 per capita. This TRANSLATES to $1,268 per household.

6. $870 for Corporate Tax Subsidies

WE’VE HEARD a lot about TAX AVOIDANCE and tax breaks for the super-rich. With regard to corporations alone, the TAX FOUNDATION HAS CONCLUDED that their “special tax provisions” cost taxpayers over $100 billion per year, or $870 per family. Corporate benefits include items such as Graduated Corporate Income, Inventory Property Sales, Research and Experimentation Tax Credit, Accelerated Depreciation, and Deferred taxes.

Once again, it may be even worse. Citizens for Tax Justice CITE a Government Accountability Office report that calculated a loss to the Treasury of $181 billion from corporate tax expenditures. That would be almost $1,600 per family.

7. $1,231 for Revenue Losses from Corporate Tax Havens

U.S. PIRG recently REPORTED that the average 2012 taxpayer paid an extra $1,026 in taxes to make up for the revenue lost from offshore tax havens by corporations and wealthy individuals. With 138 MILLION taxpayers (1.2 per household), that comes to $1,231 per household.

Much More Than an Insult

Overall, American families are paying an annual $6,000 subsidy to corporations that have DOUBLED THEIR PROFITS and cut their taxes in half in ten years while CUTTING 2.9 MILLION JOBS in the U.S. and adding almost as many jobs OVERSEAS.

This is more than an insult. It’s a devastating attack on the livelihoods of tens of millions of American families. And Congress just lets it happen.

SOURCE

Austerity American Style
[PART 1] - Ending The Safety Net
[PART 2] - Enough Is Enough
[PART 3] - Big, Bad Businessmen
[PART 4] - Big, Bad Banks
[PART 5] - Selling Out The Public
[PART 6] - No Jobs Plan
[PART 7] - Big, Bad Cronies
[PART 8] - Red-State Model
[PART 9] - Inflicting Pain
[PART 10] - The Grand Betrayal
[PART 11] - The Sequester ACT III
[PART 12] - The Sequester ACT IV
[PART 13] - Austerity Kills
[PART 14] - Bail-In Comes To America
[PART 15] - Corporate Welfare Redux
[PART 16] - Long-Term Unemployed Are Doomed

Posted by Elvis on 09/23/13 •
Section Dying America • Section Austerity American Style
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Sunday, August 11, 2013

Austerity American Style Part 14 - Bail-In Comes To America

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The Detroit Bail-In Template: Fleecing Pensioners to Save the Banks

By Ellen Brown
Web Of Debt
August 12, 2013

The Detroit bankruptcy is looking suspiciously like the BAIL-IN TEMPLATE originated by the G20s Financial Stability Board in 2011, which exploded on the scene in Cyprus in 2013 and is now BECOMING THE MODEL globally. In Cyprus, the depositors were “bailed in” (stripped of a major portion of their deposits) to re-capitalize the banks. In Detroit, it is the municipal workers who are being bailed in, stripped of a major portion of their pensions to save the banks.

Bank of America Corp. and UBS AG HAVE BEEN GIVEN PRIORITY over other bankruptcy claimants, meaning chiefly the pensioners, for payments due on interest rate swaps they entered into with the city. Interest rate swaps the exchange of interest rate payments between counterparties - are sold by Wall Street banks as a form of insurance, something municipal governments should do to protect their loans from an unanticipated increase in rates. Unlike ordinary insurance, however, swaps are actually just bets; and if the municipality loses the bet, it can owe the house, and owe big. The swap casino is almost entirely unregulated, and it is a rigged game that the house virtually always wins. Interest rate swaps are based on the LIBOR rate, which has now been proven to be manipulated by the rate-setting banks; and they were a MAJOR CONTRIBUTOR to Detroit’s bankruptcy.

Derivative claims are considered secured because the players must post collateral to play. They get not just priority but super-priority in bankruptcy, meaning they go first before all others, a deal pushed through by Wall Street in the Bankruptcy Reform Act of 2005. Meanwhile, the municipal workers, whose pensions are theoretically protected under the Michigan Constitution, are classified as unsecured claimants who will get the scraps after the secured creditors put in their claims. The banking casino, it seems, trumps even the state constitution. The banks win and the workers lose once again.

Systemically Dangerous Institutions Are Moved to the Head of the Line

The argument for the super-priority of derivative claims is that nonpayment on these bets represents a systemic risk to the financial scheme. Derivative bets are cross-collateralized and are so inextricably entwined in a $600-plus trillion house of cards that the whole financial scheme could go down if the betting scheme were to collapse. Instead of banning or regulating this very risky casino, Congress has been persuaded by the masterminds of Wall Street that it needs to be preserved at all costs.

The same tortured logic has been used to justify the fact that the federal government designed to bail out Wall Street but not Detroit. Supposedly, the mega-banks pose a systemic risk and Detroit doesn’t. On July 29th, former Obama administration economist Jared Bernstein pursued this line of reasoning on his blog, writing:

[T]he correct motivation for federal bailouts meaning some combination of managing a bankruptcy, paying off creditors (though often with a haircut), or providing liquidity in cases where thatגs the issue as opposed to insolvency is systemic risk. The failure of large, major banks, two out of the big three auto companies, the secondary market for housing - all of these pose unacceptably large risks to global financial markets, and thus the global economy, to a major industry, including its upstream and downstream suppliers, and to the national housing sector.

Because a) theres not much of a case that Detroit is systemically connected in those ways, and b) Chapter 9 of the bankruptcy code appears to provide an adequate way for it to deal with its insolvency, I don’t think anything like a large scale bailout is forthcoming.

Holding Main Street Hostage

DETROIT’S bankruptcy poses no systemic risk to Wall Street and global financial markets. Fine. But it does pose a systemic RISK TO MAIN STREET, local governments, and the contractual rights of pensioners. Credit rating agency MOODY’S STATED IN A RECENT REPORT that if Detroit manages to cut its PENSION OBLIGATIONS, other struggling cities could follow suit. The Detroit bankruptcy is establishing a template for wiping out government pensions everywhere. Chicago or New York could be next.

There is also the systemic risk posed to the municipal bond system. Bryce Hoffman, WRITING IN THE DETROIT NEWS on July 30th, warned:

Detroit’s bankruptcy threatens to change the rules of the municipal bond game and already is making it more expensive for the state’s other struggling towns and school districts to borrow money and fund big infrastructure projects.

In fact, one bond analyst told The Detroit News that he has spoken to major institutional investors who have already decided to stop, for now, buying any Michigan bonds.

The real concern of bond investors, says Hoffman, is not the default of Detroit but the precedent the city is setting. General obligation municipal bonds have always been viewed as a virtually risk-free investment. They are unsecured, but bondholders have considered themselves protected because the bonds are backed by the unlimited taxing authority of the government that issued them. Detroit, however, has shown that the city’s taxing authority is far from unlimited.  It already has the highest property taxes of any major city in the country, and it is bumping up against a ceiling imposed by the state constitution. If Detroit is able to cut its bond debt in half or more by defaulting, other distressed cities are liable to look very closely at following suit. Hoffman writes:

The bond market is warning that this will make Michigan a pariah state and raise borrowing costs - not just for Detroit and other troubled municipalities, but also for paragons of fiscal virtue such as Oakland and Livingston counties.

However, writes Hoffman:

Gov. Rick Snyder dismisses that threat and says the bond market is just trying to turn Detroit away from a radical solution that could become a model for other struggling cities across America.

A Safer, Saner, More Equitable Model

Interestingly, Lansing Mayor Virg Bernero, Snyders Democratic opponent in the last gubernatorial race, PROPOSED A SOLUTION that could have avoided either robbing the pensioners or scaring off the bondholders: a state-owned bank. If the state or the city had its own bank, it would not need to borrow from Wall Street, worry about interest rate swaps, or be beholden to the bond vigilantes. IT COULD BORROW FROM IT’S ONE BANK, which would leverage the local government’s capital into credit, back that credit with the deposits created by the governments own revenues, and return the interest to the government as a dividend, following the ground-breaking model of the state-owned Bank of North Dakota.

There are other steps that need to be taken, and soon, to prevent a cascade of municipal bankruptcies.  The super-priority of derivatives in bankruptcy needs to be repealed, and the protections of Glass Steagall need to be restored. While we are waiting on a very dilatory Congress, however, state and local governments might consider protecting themselves and their revenues by setting up their own banks.

Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt and its 2013 sequel, The Public Bank Solution. Her websites are WEB OF DEBT, PUBLIC BANK SOLUTION, and PUBLIC BANKING INSTITUTE.

SOURCE

Austerity American Style
[PART 1] - Ending The Safety Net
[PART 2] - Enough Is Enough
[PART 3] - Big, Bad Businessmen
[PART 4] - Big, Bad Banks
[PART 5] - Selling Out The Public
[PART 6] - No Jobs Plan
[PART 7] - Big, Bad Cronies
[PART 8] - Red-State Model
[PART 9] - Inflicting Pain
[PART 10] - The Grand Betrayal
[PART 11] - The Sequester ACT III
[PART 12] - The Sequester ACT IV
[PART 13] - Austerity Kills
[PART 14] - Bail-In Comes To America

Posted by Elvis on 08/11/13 •
Section Dying America • Section Austerity American Style
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Monday, August 05, 2013

Austerity American Style Part 13 - Austerity Kills

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How Austerity Kills

By David Stuckler and Sanjay Basu
NY Times
May 25, 2013

Early last month, a triple suicide was reported in the seaside town of Civitanova Marche, Italy. A married couple, Anna Maria Sopranzi, 68, and Romeo Dionisi, 62, had been struggling to live on her monthly pension of around 500 euros (about $650), and had fallen behind on rent.

Because the Italian governments austerity budget had raised the retirement age, Mr. Dionisi, a former construction worker, became one of Italy’s esodati (exiled ones) older workers plunged into poverty without a safety net. On April 5, he and his wife left a note on a neighbor’s car asking for forgiveness, then hanged themselves in a storage closet at home. When Ms. Sopranzis brother, Giuseppe Sopranzi, 73, heard the news, he drowned himself in the Adriatic.

The correlation between unemployment and suicide has been observed since the 19th century. People looking for work are about twice as likely to end their lives as those who have jobs.

In the United States, the suicide rate, which had slowly risen since 2000, jumped during and after the 2007-9 recession. In a new book, we estimate that 4,750 “excess suicides” - that is, deaths above what pre-existing trends would predict occurred from 2007 to 2010. Rates of such suicides were significantly greater in the states that experienced the greatest job losses. Deaths from suicide overtook deaths from car crashes in 2009.

If suicides were an unavoidable consequence of economic downturns, this would just be another story about the human toll of the Great Recession. But it isnגt so. Countries that slashed health and social protection budgets, like Greece, Italy and Spain, have seen starkly worse health outcomes than nations like Germany, Iceland and Sweden, which maintained their social safety nets and opted for stimulus over austerity. (Germany preaches the virtues of austerity for others.)

As scholars of public health and political economy, we have watched aghast as politicians endlessly debate debts and deficits with little regard for the human costs of their decisions. Over the past decade, we mined huge data sets from across the globe to understand how economic shocks ח from the Great Depression to the end of the Soviet Union to the Asian financial crisis to the Great Recession affect our health. What weגve found is that people do not inevitably get sick or die because the economy has faltered. Fiscal policy, it turns out, can be a matter of life or death.

At one extreme is Greece, which is in the middle of a public health disaster. The national health budget has been cut by 40 percent since 2008, partly to meet deficit-reduction targets set by the so-called troika the International Monetary Fund, the European Commission and the European Central Bank - as part of a 2010 austerity package. Some 35,000 doctors, nurses and other health workers have lost their jobs. Hospital admissions have soared after Greeks avoided getting routine and preventive treatment because of long wait times and rising drug costs. Infant mortality rose by 40 percent. New H.I.V. infections more than doubled, a result of rising intravenous drug use as the budget for needle-exchange programs was cut. After mosquito-spraying programs were slashed in southern Greece, malaria cases were reported in significant numbers for the first time since the early 1970s.

In contrast, Iceland avoided a public health disaster even though it experienced, in 2008, the largest banking crisis in history, relative to the size of its economy. After three main commercial banks failed, total debt soared, unemployment increased ninefold, and the value of its currency, the krona, collapsed. Iceland became the first European country to seek an I.M.F. bailout since 1976. But instead of bailing out the banks and slashing budgets, as the I.M.F. demanded, Icelandגs politicians took a radical step: they put austerity to a vote. In two referendums, in 2010 and 2011, Icelanders voted overwhelmingly to pay off foreign creditors gradually, rather than all at once through austerity. Icelands economy has largely recovered, while GreeceҒs teeters on collapse. No one lost health care coverage or access to medication, even as the price of imported drugs rose. There was no significant increase in suicide. Last year, the first U.N. World Happiness Report ranked Iceland as one of the worlds happiest nations.

Skeptics will point to structural differences between Greece and Iceland. Greece’s membership in the euro zone made currency devaluation impossible, and it had less political room to reject I.M.F. calls for austerity. But the contrast supports our thesis that an economic crisis does not necessarily have to involve a public health crisis.

Somewhere between these extremes is the United States. Initially, the 2009 stimulus package shored up the safety net. But there are warning signs beyond the higher suicide rate ח that health trends are worsening. Prescriptions for antidepressants have soared. Three-quarters of a million people (particularly out-of-work young men) have turned to binge drinking. Over five million Americans lost access to health care in the recession because they lost their jobs (and either could not afford to extend their insurance under the Cobra law or exhausted their eligibility). Preventive medical visits dropped as people delayed medical care and ended up in emergency rooms. (President Obamas health care law expands coverage, but only gradually.)

The $85 billion “sequester” that began on March 1 will cut nutrition subsidies for approximately 600,000 pregnant women, newborns and infants by year’s end. Public housing budgets will be cut by nearly $2 billion this year, even while 1.4 million homes are in foreclosure. Even the budget of the Centers for Disease Control and Prevention, the nations main defense against epidemics like last year’s fungal meningitis outbreak, is being cut, by $293 million this year.

To test our hypothesis that austerity is deadly, we’ve analyzed data from other regions and eras. After the Soviet Union dissolved, in 1991, Russia’s economy collapsed. Poverty soared and life expectancy dropped, particularly among young, working-age men. But this did not occur everywhere in the former Soviet sphere. Russia, Kazakhstan and the Baltic States (Estonia, Latvia and Lithuania) which adopted economic דshock therapy programs advocated by economists like Jeffrey D. Sachs and Lawrence H. Summers - experienced the worst rises in suicides, heart attacks and alcohol-related deaths.

Countries like Belarus, Poland and Slovenia took a different, gradualist approach, advocated by economists like Joseph E. Stiglitz and the former Soviet leader Mikhail S. Gorbachev. These countries privatized their state-controlled economies in stages and saw much better health outcomes than nearby countries that opted for mass privatizations and layoffs, which caused severe economic and social disruptions.

Like the fall of the Soviet Union, the 1997 Asian financial crisis offers case studies in effect, a natural experiment ח worth examining. Thailand and Indonesia, which submitted to harsh austerity plans imposed by the I.M.F., experienced mass hunger and sharp increases in deaths from infectious disease, while Malaysia, which resisted the I.M.F.s advice, maintained the health of its citizens. In 2012, the I.M.F. formally apologized for its handling of the crisis, estimating that the damage from its recommendations may have been three times greater than previously assumed.

America’s experience of the Depression is also instructive. During the Depression, mortality rates in the United States fell by about 10 percent. The suicide rate actually soared between 1929, when the stock market crashed, and 1932, when Franklin D. Roosevelt was elected president. But the increase in suicides was more than offset by the “epidemiological transition” improvements in hygiene that reduced deaths from infectious diseases like tuberculosis, pneumonia and influenza - and by a sharp drop in fatal traffic accidents, as Americans could not afford to drive. Comparing historical data across states, we estimate that every $100 in New Deal spending per capita was associated with a decline in pneumonia deaths of 18 per 100,000 people; a reduction in infant deaths of 18 per 1,000 live births; and a drop in suicides of 4 per 100,000 people.

OUR research suggests that investing $1 in public health programs can yield as much as $3 in economic growth. Public health investment not only saves lives in a recession, but can help spur economic recovery. These findings suggest that three principles should guide responses to economic crises.

First, do no harm: if austerity were tested like a medication in a clinical trial, it would have been stopped long ago, given its deadly side effects. Each nation should establish a nonpartisan, independent Office of Health Responsibility, staffed by epidemiologists and economists, to evaluate the health effects of fiscal and monetary policies.

Second, treat joblessness like the pandemic it is. Unemployment is a leading cause of depression, anxiety, alcoholism and suicidal thinking. Politicians in Finland and Sweden helped prevent depression and suicides during recessions by investing in active labor-market programs that targeted the newly unemployed and helped them find jobs quickly, with net economic benefits.

Finally, expand investments in public health when times are bad. The clich that an ounce of prevention is worth a pound of cure happens to be true. It is far more expensive to control an epidemic than to prevent one. New York City spent $1 billion in the mid-1990s to control an outbreak of drug-resistant tuberculosis. The drug-resistant strain resulted from the citys failure to ensure that low-income tuberculosis patients completed their regimen of inexpensive generic medications.

One need not be an economic ideologue 钗 we certainly arent - to recognize that the price of austerity can be calculated in human lives. We are not exonerating poor policy decisions of the past or calling for universal debt forgiveness. Its up to policy makers in America and Europe to figure out the right mix of fiscal and monetary policy. What we have found is that austerity - severe, immediate, indiscriminate cuts to social and health spending is not only self-defeating, but fatal.

SOURCE

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Book: The Body Economic
Why Austerity Kills
David Stuckler (Author), Sanjay Basu (Author)
May 2013

Politicians have talked endlessly about the seismic economic and social impacts of the recent financial crisis, but many continue to ignore its disastrous effects on human health - and have even exacerbated them, by adopting harsh austerity measures and cutting key social programs at a time when constituents need them most. The result, as pioneering public health experts David Stuckler and Sanjay Basu reveal in this provocative book, is that many countries have turned their recessions into veritable epidemics, ruining or extinguishing thousands of lives in a misguided attempt to balance budgets and shore up financial markets. Yet sound alternative policies could instead help improve economies and protect public health at the same time.

In The Body Economic, Stuckler and Basu mine data from around the globe and throughout history to show how government policy becomes a matter of life and death during financial crises. In a series of historical case studies stretching from 1930s America, to Russia and Indonesia in the 1990s, to present-day Greece, Britain, Spain, and the U.S., Stuckler and Basu reveal that governmental mismanagement of financial strife has resulted in a grim array of human tragedies, from suicides to HIV infections. Yet people can and do stay healthy, and even get healthier, during downturns. During the Great Depression, U.S. deaths actually plummeted, and today Iceland, Norway, and Japan are happier and healthier than ever, proof that public wellbeing need not be sacrificed for fiscal health.

Full of shocking and counterintuitive revelations and bold policy recommendations, The Body Economic offers an alternative to austerity one that will prevent widespread suffering, both now and in the future.
About the Authors
Dr. David Stuckler is a Senior Research Leader at Oxford University and Honorary Research Fellow at the London School of Hygiene & Tropical Medicine. He lives in Oxford, England.

Dr. Sanjay Basu is an Assistant Professor of Medicine and an epidemiologist at the Prevention Research Center of Stanford University. A former Rhodes Scholar, he lives in San Francisco.

SOURCE

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How to Destroy an Entire Country

By Alan Grayson
December 14, 2013

From a recent 188-page REPORT by the World Health Organization come these ghastly and appalling factoids:

Suicide rates rose 40 percent in the first six months of 2011 alone.

Murder has doubled.

9,100 doctors in Greece, roughly one out of every seven, have been laid off.

Joining those doctors in joblessness are 27.6 percent of the entire Greek labor force. By comparison, in the depths of the Great Depression, unemployment in the United States peaked at a lower percentage than that. Among Greek young adults under 25 years old, unemployment reached an abominable 64.9 percent in May. (Yet the unemployment rate in Greece was as low as 7 percent as recently as 2008.)

I’m sure that my Tea Party friends will blame universal healthcare, paid sick leave and “generous” unemployment benefits for this catastrophe. “If we simply stopped helping people, then they wouldn’t need our help,” they would say. You can see where that “logic” leads. The dead need no help whatsoever, except possibly burial. Sort of like this: “The Republican healthcare plan: Don’t Get Sick. And if you do get sick, Die Quickly."]

Maybe you think that I’m kidding about what my Tea Party friends would do. I’m not. A few years ago here in Florida, we had a children’s health insurance program called KidCare, with a waiting list of over 100,000. The Tea Party Republicans didn’t like that. So they eliminated the waiting list.

But back to Greece. A lot of people blame Greek government debt for the current suffering. According to the Central Intelligence Agency, that most authoritative of all conceivable sources, Greek government debt stands at 160 percent of GDP, which seems like a lot. But Japanese government debt stands at 215 percent of GDP, and the unemployment rate in Japan is only 4 percent.

Moreover, Spain’s unemployment rate is virtually as high as Greece’s, but Spain’s government debt stands at only 85 percent of GDP. That’s less debt than Singapore’s, and Singapore’s unemployment rate is 1.8 percent.

So we cannot properly attribute the catastrophe in Greece to labor protection, nor can we attribute it to government borrowing. What is the cause, then? The World Health Organization has the answer: austerity. “Austerity" is a bloodless term for gross economic mismanagement, animated by heartlessness. That robotic cut-cut-cut mentality that deprives us of jobs, of public services, of safety, of health, of infrastructure, of help for the needy, and—ultimately—of our economic equilibrium and the ability to survive. The mentality that ushers in, and welcomes, a vicious war of all against all. Austerity is destroying an entire country, right before our eyes.

Or, as the World Health Organization put it: “These adverse trends in Greece pose a warning to other countries undergoing significant fiscal austerity, including Spain, Ireland and Italy. It also suggests that ways need to be found for cash-strapped governments to consolidate finances without undermining much-needed investments in health.”

In America, we have a rich and powerful lobby that has the same prescription for every economic malady: austerity. Cut-cut-cut. Cut Social Security and Medicare. Cut teacher and police and firefighter jobs. Cut health care. Cut pay and cut pensions. It all boils down to that one ugly word: austerity. And austerity always brings disarray, disaster, decay and death.

People often ask me my position on various issues. Well, I’m for certain things, and I’m against others. But on one issue, I’m very consistent. I’m against pain and suffering. Especially avoidable pain and suffering. And therefore, I’m against austerity. It begins with seemingly innocuous budget cuts. It then leads inexorably to the destruction of countless lives.

Why am I telling you about Greece? In 1935, Sinclair Lewis wrote a book called It Can’t Happen Here. But it can. And it’s up to us to prevent it.

Courage,

Rep. Alan Grayson

SOURCE

Austerity American Style
[PART 1] - Ending The Safety Net
[PART 2] - Enough Is Enough
[PART 3] - Big, Bad Businessmen
[PART 4] - Big, Bad Banks
[PART 5] - Selling Out The Public
[PART 6] - No Jobs Plan
[PART 7] - Big, Bad Cronies
[PART 8] - Red-State Model
[PART 9] - Inflicting Pain
[PART 10] - The Grand Betrayal
[PART 11] - The Sequester ACT III
[PART 12] - The Sequester ACT IV
[PART 13] - Austerity Kills
[PART 14] - Bail-In Comes To America

Posted by Elvis on 08/05/13 •
Section Dying America • Section Austerity American Style
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Sunday, July 14, 2013

Austerity American Style Part 12 - The Sequester Act IV

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Sequester Hits the Long-Term Unemployed

By Catherine Rampbell
NY Times Economix
July 2, 2013

Sunday was the five-year anniversary of the EMERGENCY UNEMPLOYMENT COMPENSATION program, a federal program signed into law by President George W. Bush that initially added 13 weeks of unemployment benefits to the standard 26 weeks states already offered eligible jobless workers. The 13 additional weeks of benefits were intended to be temporary, but as the recession worsened, Congress decided to keep the program going and even lengthened the amount of time that workers could receive benefits. For a while workers could receive as many as 99 weeks in some states, the longest duration of jobless benefits on record.

Those benefits have been pared back over the last year and a half, though, and are being cut more severely now as a result of the across-the-board spending cuts known as the sequester.

A new REPORT from the National Employment Law Project calculates exactly how much: Of the more than $80 billion in automatic budget cuts that must occur between March 1 and Sept. 30, about $2.4 billion is being slashed from the federal emergency unemployment benefits program, says NELP, a labor-oriented research and advocacy group.

The organization estimates that upward of 3.8 million unemployed workers will ultimately be affected by the cuts. The average weekly benefit check of $289 is being cut by $43, or about 15 percent.

“It is the workers who have benefited least from the economic recovery who are bearing the largest share of the burden of the sequester,” the organization said in a statement.

Almost every state has carried out the federally mandated cuts to its unemployment benefits at this point, but many waited until recently to do so. The longer the states took to put the cuts into effect, the sharper the reduction in each remaining weekly benefit check.

For example, the 20 states that cut their benefits starting on March 31 or April 6 trimmed 10.7 percent from each weekly benefit check, whereas Maryland and New Jersey started decreasing benefits on June 30, which required slashing all future weekly checks by 22.2 percent to achieve the total required savings.

The advocacy group has put together a table showing whats happening in each state.

Note that there is one outlier in North Carolina, which on Monday ended its participation in the federal Emergency Unemployment Compensation program altogether. ThatҒs for reasons unrelated to the sequester; basically North Carolina reduced its state-level jobless benefits (which workers go on before qualifying for the later tier of Emergency Unemployment Compensation benefits) by so much that it is no longer legally eligible for the federal extended benefits.

The National Employment Law Project estimated that North Carolina, which has the fifth-highest unemployment rate in the country, is cutting off federal benefits for an estimated 70,000 workers.

SOURCE

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Drastic Cuts to Long-Term Unemployment Assistance Cause Concerns

July 12, 2013

When sequestration policy went into effect July 1, emergency federal unemployment benefits for the long-term jobless were cut, affecting millions of Americans. Also, a number of states scaled back their unemployment benefits to lows not witnessed since the federal government established the program in 1935, USA Today REPORTED.

“These are historic and disturbing cuts,” said Mike Leachman with the Center on Budget and Policy Priorities. “When the next recession hits, the unemployment system of the country is going to be significantly less effective. And it means the next recession will be deeper than it otherwise would have been.”

Last week, North Carolina halted benefits for tens of thousands of residents and reduced the time jobless people can collect such assistance. This was in large part because the state still owes $2.5 billion on a loan from the federal government, which it used to buoy its unemployment assistance program. In addition, North Carolina is the first state to end its participation in the federal emergency unemployment benefits program, which kicks in when an unemployed person has exhausted all of his or her state benefits. Consequently, about 80,000 North Carolinans lost their supplemental federal monies.

Georgia has also made changes to its unemployment plan; its jobless benefits now run out after 18 weeks compared to its previous 26-week limit. Five other states have lowered their maximums to 19 or 20 weeks.

According to CNBC, some states have also cut their payment benefit amounts. New Jersey and Maryland, for example, cut benefits the most, by 22.2 percent, followed by Montana (19.6 percent), Connecticut (19.2 percent), and Arizona and Illinois (16.8 percent). Texas, which has an unemployment rate below the national average at 6.5 percent, trimmed 10.2 percent.

Currently, federal emergency unemployment benefits are helping to lessen the impact of the state’s new cuts. The duration of that aid is based on each state’s jobless rate; in those with the lowest, 14 weeks is the standard. However, the program is set to expire at year’s end and Congress may not opt to extend it.

In addition, as of July 1, under sequestration rules, the federal government cut overall monies for the long-term unemployed by about $2.4 billion, approximately a 15 percent reduction, U.S. News & World Report explained. The average weekly benefit of $289 dropped by $43 due to sequestration. However, some states experienced even more drastic reductions; for example, unemployment compensation fell 22.2 percent in New Jersey, amounting to about an $85 reduction from the typical $382 amount.

Against a backdrop of diminished unemployment benefits, long-term joblessness persists, USA Today noted. Federal numbers show nearly one-third (4.3 million) of the nation’s 11.8 million jobless have been unemployed for 27 weeks or longer. While down from the high of 6.7 million in 2010, the number remains well above the 1.1 million unemployed during the pre-recession period in the mid-2000s, according to U.S. News & World Report.

SOURCE

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U.S. budget cuts hitting long-term unemployed hard

By Paige Gance, additional reporting by Lucia Mutikani; Editing by Dan Burns and Leslie Gevirtz
Reuters
August 13, 2013

Phyllis Kennedy is facing a bleak future. U.S. government budget tightening has slashed her weekly unemployment check by more than a fifth, and her prospects of finding a job are grim after over a year of unemployment.

Kennedy, 57, from Little Falls, New Jersey, had her $380 weekly unemployment check cut by $85 at the end of June. Just when she was coming to terms with the blow, she learned her benefits would end altogether in three weeks, more than two months earlier than she had anticipated.

She is among the 4.3 million in the United States who are officially counted as being unemployed for more than six months. According to the U.S. Labor Department, only 37 percent of that group received benefits in July compared with a peak of 93 percent in February 2010 when there were 6.2 million long-term unemployed.

The economy’s slow recovery and federal and state cuts to unemployment insurance programs have slashed the numbers receiving benefits.

“For people that are on their own, like me, a cut like this is devastating,” said Kennedy, who lost her job as a mental health center administrator, and a $32,000 salary with it, more than a year ago. “I have very little emergency money left.”

Thousands of miles away in Las Vegas, John Payne is also reeling from benefit cuts, which reduced his weekly check by a third to about $250. The 55-year-old commercial glass installer has not had regular work since late 2009.

“Not even when I moved out of the house as a teenager did I struggle this much,” said Payne, who plugs the gaps between sporadic construction projects with unemployment insurance. “I was stunned. I knew the cuts were coming, but I never imagined it would be that much.”

Benefit reductions like those suffered by Kennedy and Payne, part of the federal budget cuts known as sequester, have hammered those who have struggled the most to find jobs in this listless recovery.

The $2.4 billion cut in emergency unemployment benefits, which began to go into effect on March 1, are part of a wider push to reduce the federal government’s budget deficit.

EMERGENCY AID IS SHORTENED

Even before sequester, benefits had dropped in most states as jobless rates fell below levels that allow the jobless to claim for additional weeks. In July, the unemployment rate dropped to a post-recession low of 7.4 percent.

Before the 2007-09 recession states would pay at least 26 weeks of benefits. Since 2008, federal emergency benefits have provided additional weeks of aid based on each state’s unemployment rate.

States can receive up to four tiers of these benefits, with all tiers except the first requiring a certain level of unemployment in the state.

Only three states currently qualify for the 10 weeks of tier four emergency benefits, for a total of 47 weeks: Illinois, Mississippi and Nevada. On Sunday, California and Rhode Island became the most recent states whose residents will lose access to those extra weeks, meaning more than 100,000 of the long-term jobless population will soon lose assistance.

Emergency benefits offered a maximum of 53 weeks before Congress scaled back the program last year. The program will expire on December 28 without a renewal by Congress, leaving only state benefits.

New Jersey’s average unemployment rate fell to 8.7 percent in June, below the tier four threshold, so Kennedy will not receive the extra 10 weeks of benefits once her already trimmed checks end.

“I might have to sell my home,” said Kennedy, who has a $1,200 monthly mortgage payment and owes $115,000 on a house worth about $250,000.

Kennedy said she has considered moving to another state where the cost of living is cheaper. “It would kill me to leave my children, but I might just be pushed out,” she added.

Her three grown children also live in New Jersey.

STATES ALSO TARGET BENEFITS

Though the recession ended four years ago, the pace of economic growth has been too slow to generate sufficient employment, leaving millions of workers unable to find jobs before their benefits run out.

Adding to the squeeze, eight states have cut their weeks of state benefits to between 18 and 25 from the standard 26.

North Carolina not only reduced the initial number of weeks residents could receive aid to 20, but slashed state jobless benefit checks by more than one-third.

This violated a provision of emergency unemployment aid that prohibits states from reducing average weekly benefits, according to the Department of Labor.

After June 28, emergency benefits ended in North Carolina and 65,000 immediately lost assistance. The move allows the state to pay back $2.6 billion to the federal government three years earlier, said North Carolina commerce department spokesman Josh Ellis, sparing businesses from higher unemployment insurance taxes.

CALIFORNIA ‘PIPE DREAM’

In Nevada, where the unemployment rate is 9.6 percent, Payne is contemplating moving to northern California, but the lack of money makes it a challenge. He has been unable to fix his car and often takes public transport, to go to temporary jobs, while carrying heavy tools.

“My ability to move to northern California is a pipe dream because I don’t even have the money for that,” said Payne.

Sharon Williams of Newark, New Jersey is also feeling the pinch after the 22 percent cut to her weekly unemployment check.

“I don’t sleep well at night because I don’t know what utility will get shut off next,” said the 62-year-old licensed practical nurse.

Her license is limited to New Jersey and she did not update it with currently required skills.

Lisha Fields, 36, a single mom laid off a year ago after 10 years with Verizon Wireless in Chicago, has only received minimum wage job offers that amount to less than her unemployment benefits. Accounting for child care costs, these offers are not feasible, she said.

The risk is that the longer she and the others remain unemployed, the less the chances of them finding jobs.

A study by the Boston Federal Reserve Bank released earlier this year found that callback rates dropped precipitously for those unemployed longer than half a year.

“There’s this concern that you have all these workers who might become a permanent class of the unemployed,” said Kory Kroft, a professor of economics at the University of Toronto.

“People think we’re unemployed because we want to be,” Fields said. “No.”

SOURCE

Austerity American Style
[PART 1] - Ending The Safety Net
[PART 2] - Enough Is Enough
[PART 3] - Big, Bad Businessmen
[PART 4] - Big, Bad Banks
[PART 5] - Selling Out The Public
[PART 6] - No Jobs Plan
[PART 7] - Big, Bad Cronies
[PART 8] - Red-State Model
[PART 9] - Inflicting Pain
[PART 10] - The Grand Betrayal
[PART 11] - The Sequester ACT III
[PART 12] - The Sequester ACT IV
[PART 13] - Austerity Kills

Posted by Elvis on 07/14/13 •
Section Dying America • Section Austerity American Style
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