Article 43

 

Austerity American Style

Sunday, June 06, 2021

Austerity American Style Part 19 - Declining Unemployment In A Depression

image: poor

The corporate world and our government are becoming indistinguishable, which is one of the hallmarks of FASCISM, or more accurately - CORPORATISM.
- War On Consciousness, Paul Levy, Awaken In The Dream, July 2007

There exists a common theme amidst these signs of societal decay: The super-rich keep taking from the middle class as the middle class becomes a massive lower class. Yet the myth persists that we should all look up with admiration at the “self-made” takers who are ripping our society apart.
- Signs of a Dying Society, Paul Buchheit, 2015

The gap between economic growth and job creation reflects three separate but mutually reinforcing factors: US corporate governance, Obama’s economic policies and the deregulation of US labor markets… In the boardrooms of corporate America, profits aren’t everything - they are the only thing. A JPMorgan research report concludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion… Obama’s lopsided recovery also reflects lopsided government intervention.  Apart from all the talk about jobs, the Obama administration never supported a concrete employment plan. The stimulus provided relief, but it was too small and did not focus on job creation.
- Why The Rich Love Unemployment

More Americans than ever (39%) now think that if people can’t find work for an extended period of time, the government should do nothing at all to help them.
- 39% Say Government Should Do Nothing For Long-Term Unemployed, December 5, 2012”

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.
- Kicking Long-term Unemployed to The Curb

A NEW WORKING PAPER from Professor Arindrajit Dube of the University of Massachusetts at Amherst, however, suggests that policymakers need not worry: higher unemployment benefits dont seem to affect employment levels the way many economists assumed.
- What Unemployment Insurance Tells Us About Work During A Pandemi, NPR, March 30, 2021

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‘Terrible economics’: These states are declining federal unemployment funds. Experts say that’s ‘a huge mistake’

By Elizabeth Preza
AlterNet
May 9, 2021

Residents in South Carolina and Montana next month will lose access to federal unemployment benefits over what those states’ Republican governors call a “severe workforce shortage.” Experts say the move by Montana’s Gov. Greg Gianforte and South Carolina’s Gov. Henry McMaster is a “huge mistake.”

As ABC News reports, South Carolina and Montana are the first states “to end participation in the unemployment enhancement programs.” That program offered U.S. WORKERS ACCESS TO EXTRA UNEMPLOYMENT FUNDS as part of the American Rescue Plan signed by President Joe Biden in March.

In a statement announcing SOUTH CAROLINA’S RETURN TO RETUTN TO PREPANDEMIC UNEMPLOYMENT PROGRAM, McMaster complained: “In many instances, these payments are greater than the worker’s previous paychecks.”

“What was intended to be a short-term financial assistance for the vulnerable and displaced during the height of the pandemic has turned into a dangerous federal entitlement,” he said.

In an effort to incentivize Montanans, Gianforte is offering a one-time “‘return-to-work bonus’ of $1,200 will be paid to people who rejoin the labor force and maintain employment for at least one month,” according to ABC News. That money will also come from the federally-funded American Rescue Plan.

But Economy Policy Institute senior economist Heidi Shierholz says McMaster and Gianforte are making “a huge mistake.”

“The idea that states are just going to forego that and allow all that money to be sucked out of their economy is just terrible economics,” Shierholz told ABC News. “I just deeply hope that you don’t see more states following this path because it’s a huge mistake.”

Shierholz said the narrative of a “severe workforce shortage” driven by increased unemployment benefits is based on a FALSE PREMISE. Currently, federal unemployment benefits offer laid-off workers an additional $300 per week, down from $600 at the end of last of July. According to Shierholz, IF MONEY WAS THE MOTIVATOR, that decrease from $600 to $300 would have made a marked difference in the unemployment rate last year.

“You should have seen a bump up in employment, and you can’t see that in the data so it just points to that it wasn’t really causing the labor supply effect,” Shierholz said. “It’s just difficult to imagine that something half that big is having any effect now.”

And Shierholz is far from the only expert who warns that hiring issues in South Carolina and Montana won’t be solved by depriving residents of enhanced unemployment benefits.

ABC News reports:

William E. Spriggs, an economist and professor at Howard University, said in an interview with ABC News that there is no data to prove that unemployment checks are preventing Americans from returning to work.

“There’s no job shortage, in terms of workers. There’s a wage shortage,” said Spriggs, adding that research shows many employers “want to pay rotten wages and have rotten hours.”

Last week, the Washington Post published an analysis that likewise DISPELLED THE FRAMING OF A “WORKER SHORTAGE” BASED ON ENHANCED UNEMPLOYMENT. “At the most basic level, people are still hesitant to return to work until they are fully vaccinated and their children are back in school and daycare full-time,” the Post analysis declares.

Many Americans, the Post reports, are “re-assessing what they want to do and how they want to work, whether in an office, at home or some hybrid combination.”

Still, McMaster and Gianforte are blazing ahead with plans to reopen their respective economies by depriving citizens (and their states) of extra funding during the worst public health crisis in a century. As ABC News reports, experts say “declining to take federal money is going to have a deep effect on the living standards of residents and their families, and likely will worsen those states’ overall economies.”

But for all the hand wringing about disincentivized workers by those states’ Republican governors, Shierholz said the bottom line is “employers are just angry that they are unable to find workers at relatively low wages.”

“The jobs being posted are more stressful, more risky, harder jobs than they were pre-COVID,” she added. “ ... When the job is more stressful, then it should command a higher wage.”

Update Sun. May 9 | 9:25 AM EST -

WMC Action News reports that Arkansas Gov. Asa Hutchinson on Friday also “ordered the state’s DIVISION OF WORKFORCE SERVICES to end Arkansas’ participation in federal pandemic unemployment programs.” That order goes into effect on June 26; the federal unemployment benefit program will run until September.

SOURCE

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If Businesses Are Competing With UI For Workers, They’re Doing Something Wrong

By Eric Sherman
Forbes
May 25, 2021

One state, two states ҅ make it 23 AT LAST COUNT that are cutting the $300 additional weekly unemployment benefit as early as June.

Who says the national government bosses around the states? If they dont want their citizens to have access to that money, they’ll cut the stream like a financial shut-off valve. At least 3.6 million citizens LEARNING WHOSE IN CHARGE, according to the Washington Posts count.

“You’re not the boss of us,” the states say to the federal government, followed by a look at those on unemployment and a sneering, “Now you’ll see whos in charge.”

It comes down to jobs, the proponents of stopping the benefits say. All these people preferring to stay home and getting an extra annualized $15,600 rather than coming in and doing what theyre told for minimum wage, which even if it were $10 an hour nationally, which it isn’t, would be $20,800 a year if the workers got a full 40 hours a week, which it isnt. During April 2021, average weekly hours for retail - one of the lower-wage sectors of the labor economy - were 31.0. FOR LEISURE AND HOSPITALITY, otherwise known as the people who are paid to make you happy while you’re eating, drinking, staying in a hotel, or going to a theme park reopening, it’s 26.7 hours.

At $15 an hour, that means you can make $20,826 for a 52-week year, no vacation. Because if you were just better and worked harder, youd have a job that would give you some time off. But, no, you’re a lazy bum who wants to be on unemployment to make more money than you could do cleaning someone elses toilet or listening to people hurl abuse because their Ҽber burger doesnt have enough mustard on it, damnit.

And companies wonder why they can’t get people to return to their exciting, self-empowered jobs that still expose them to all the walking excretory processing units who refuse to get a vaccine or wear a mask because no one should make demands on them.

SOURCE

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Half Of States Are Ending Pandemic Jobless Aid Early, And The Economy Could Suffer

NPR
June 3, 2021

As the economic recovery picks up steam, new claims for state unemployment benefits have fallen to the lowest level since the start of the pandemic. And, citing a severe shortage of workers, HALF OF THE NATION’S GOVERNORS have decided to end extra federal jobless benefits early - well before they’re due to expire in early September.

But cutting off those extra benefits - which amount to about $10 BILLION PER WEEK - is a big mistake that could hurt the economy just as it’s getting back on its feet, said Dan Alpert, a senior fellow in macroeconomics and finance at Cornell Law School.

“If we terminate those benefits earlier, as many Republicans have suggested, what we’re going to be doing is bringing forward a contraction in spending,” Alpert said in an interview with NPR’s Steve Inskeep on Morning Edition. “And that’s really going to be a problem ... not just for the households, but for the local economies as well.”

Why it’s so difficult to fill low-wage jobs

Alpert said state and federal benefits average about $750 per week across the country, and that can make it difficult for employers in lower-paying jobs to fill openings.

“It’s just common sense,” he said. “If you’re paying $500 a week to your employers, you’re not going to get somebody who’s receiving $750 in benefits back to work.”

But when those benefits run out, Alpert said, “this $10 billion a week, that’s going to be eliminated when these people resume those low-income jobs. And that’s a big problem for the recovery from the pandemic.”

He said it makes no sense for governors to cut off those federal benefits because those receiving $750 a week are “spending pretty much all that money into the economy. So ... you’re effectively removing that money” from the economy.

Governors are citing worker shortages as a reason to cut jobless benefits

On Tuesday, Maryland Gov. Larry Hogan became the latest Republican governor to announce an end to enhanced pandemic federal unemployment benefits. Hogan cited the economic recovery and a high COVID-19 vaccination rate for the state’s adults.

Economy Still Down 8.2 Million Jobs Since Beginning Of Pandemic

“While these federal programs provided important temporary relief, vaccines and jobs are now in good supply, Hogan said. He said businesses “are trying to hire more people, but many are facing severe WORKER SHORTAGES.”

It’s not just Maryland. A lack of available workers has been cited around the country.

“It remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople,” the Federal Reserve said this week in its latest report on economic activity.

Wages are starting to rise as an incentive to hiring

And, the central bank said, a growing number of employers are offering signing bonuses and increased starting wages to attract workers. In its April employment report, the Labor Department said the rising demand for labor as the economy rebounds from the pandemic “may have put upward pressure on wages.”

Average hourly earnings jumped 21 cents in April, to $30.17, though the year-over-year increase was just 0.3%. In May, private economists estimate that earnings surged more than 1% over the past 12 months.

The official jobs report for last month is due from the Labor Department on Friday. Private analysts project that the economy added more than 600,000 jobs in May, up from the weaker-than-expected 266,000 jobs added in April.

New claims for state unemployment benefits dropped by 20,000 - to a level of 385,000 - for the week ending May 29, the Labor Department reported Thursday. That’s the lowest level since March 14, 2020.

“At the current rate, we should be around the typical pre-COVID level for state claims - about 200,000 - later this summer,” said Robert Frick, corporate economist at Navy Federal Credit Union.

SOURCE

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Florida woman sues DEO for unemployment benefits

By Rochelle ALleyne
Fox 4 News
June 28, 2021, updated June 29, 2021

Frustrated and let down. That’s where current wait times for unemployment benefits, have left Nikasha Wells.

“I feel like at a time when I feel like I needed my state the most, that they have really let me down,” she said.

You may remember the West Palm Beach mom from a story we did nearly two months ago when she reached out to FOX 4 to help to get her checks.

At that point, she’d been waiting about four months and the time has continued to drag on.

“I should not have to wait six months to access a state agency,” she said.

In that time she says she’s reached out to the state Department of Economic Opportunity (DEO) for help in getting her account unlocked and getting her money, but claims she’s only gotten radio silence in response.

So today, she got the court involved.

“I had to file a lawsuit in Leon county, basically asking for the money that I am entitled to which at this point is in excess of 10,000 dollars,” she said.

Court filings show that Wells is owed $11,500 in retroactive benefits.

Local lawyer Maria Alaimo tells FOX 4, that the only thing that surprises her about this case is that Wells didn’t file sooner.

“Honestly, I thought it was about time to do something because I’ve heard a lot from different sources and people,” she said, “I think it’s very much a valid case in the sense that it appears from what we can see from the pleadings that she has tried every way she knows how to through and say here’s this problem, I haven’t been paid, I need to be paid, I made my claim.”

Wells tells FOX 4 she thinks it’s ridiculous that it’s come to this, but adds that she hopes that her lawsuit inspires others to follow her lead.

“I’m just infuriated and I am hoping that my lawsuit is the beginning of a wave of change for how this department is operating,” she said.

FOX 4 reached out to the DEO for a response to this lawsuit. They acknowledged our request but didn’t send us an answer in time for broadcast.

The DEO has 20 days to respond to her suit once they’ve been served.

CAPE CORAL, FLA - UPDATE:

Wells has contacted FOX 4 to say that a Florida Department of Economic of Opportunity (DEO) representative has called her and unlocked her account.

A spokesperson for the DEO also sent FOX 4 the following statement:

Thank you again for reaching out to the Florida Department of Economic Opportunity. The Department remains committed to making sure all eligible claimants receive the benefits they are owed as quickly as possible.

The Department is unable to comment on pending litigation.

Listed below is more information about this process:

Claimants who have already verified their identity through ID.me, but their CONNECT accounts remained locked, now have the ability to notify the Department of their “Locked” claim status in their CONNECT account.

Claimants should visit the Reemployment Assistance Help Center [mobile.connect.myflorida.com] to notify the Department that their Reemployment Assistance claim is locked. In the Reemployment Assistance Help Center, select I am a “Claimant,” and then select “Account Login Assistance,” then select the next series of options that match their log-in issue to notify the Department.

Claimants who have successfully completed the verification process with ID.me, do not need to re-verify with ID.me.

If a claimant has not completed the ID.me verification process, click here [hosted-pages.id.me].

SOURCE

Posted by Elvis on 06/06/21 •
Section Dying America • Section Austerity American Style
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Monday, December 10, 2018

Austerity American Style Part 17- An American Invention

image: austerity

How Austerity Ripped the World Apart
How the Worst Idea America Ever Had Came to Rule the World

By Umair Haque
Eudaimonia
December 8, 2018

There’s a force that’s ripping the world apart. Slashing through democracy, the future, and society. Reducing the planet to a smoking, melted wreck. Around the globe, people are revolting against it. In Paris, anger against this force has united the left and right into the gilets jaunes - at least for the moment. Perhaps that revolt will go the way of the British one, Brexit - and descend into paranoia, hubris, and self-destruction - only time will tell.

The force that’s ripping the world apart is austerity. But austerity - a term we use all too casually - deserves to be thought about a little more deeply, which I want to do in this essay. Austerity is an American invention - and funnily, strangely, sadly, today, the world is becoming Americanized because it chose austerity, when it should have chosen precisely the opposite - investment, support, nurturance, care. Britain, Europe, and even Canada - all these societies are now beginning to experience precisely all the same problems as America, hostility between neighbours, enmity to historic allies, extremism, folly, despair, rage, stupidity, superstition, selfishness, greed, violence - all the predictable, catastrophic effects of austerity. When you choose what made America collapse - where should you expect to end up but collapsing like America?

Austerity simply means a lack of investment by societies in themselves, in people, in public goods. Things like healthcare, education, transport, energy, retirement, decent jobs, incomes, savings. The problem is that all those things are what underpin the stability of societies, by ensuring that prosperity is something that is realized by all - not just something greedily seized by a tiny few. But Ill come back to all that. It’s obvious to say that this age of austerity is in a superficial way the result of bank bailouts, which foolish governments though left countries bankrupt (they didn’t). But that is only the beginning of the untold story of austerity.

We don’t often think about it, but Austerity is an American invention. So much so that Americans have never really experienced anything but austerity. America has never invested in itself as a society - building robust public goods, like a national healthcare system, transport network, retirement system, safety nets, and so on. From the time of Jefferson to Reagan to Obama, America has been a society in which people have been told to compete viciously against one another - instead of simply providing each other the things they are competing for, healthcare, retirement, income, jobs, and so forth. Compete with each other! Never invest in each other! That is the rule by which America has always been governed. The results, today, are plain to see: they have been catastrophic. The average American lives a shorter, poorer, meaner, dumber life than anywhere else in the rich world, beset by gruesome and bizarre dilemmas, like his life savings, or his life, when hes ill. Basic medicines like insulin cost up to a thousand times what they do in other societies - - while Americans are forced to watch their kids be massacred at school. All those are effects of a society of competition for the things people should cooperate to freely provide one another. Yet because Americans have never experienced anything but that, which is to say they have been brainwashed into believing austerity is the only way life and society can ever be - they are left unable to conceive of a way out of their own ongoing collapse.

Now, austerity was invented by America as a result of its toxic, terrible legacy of slavery and segregation. Americans do not want to admit it - the truth is too much to bear - but America was an apartheid state until 1971. The problem is that an apartheid state cannot invest in itself - what reason does it have to build healthcare systems for all? Instead, it invests in useless things, which genuinely improves nobody’s life - secret polices, barriers, walls, mechanisms of repression and separation. So because America was born in slavery, it evolved into austerity - which simply means that it could never really invest in itself. Trumpism was the ultimate expression of that legacy - kick those filthy subhumans out!! I will never invest a penny in their healthcare, stability, retirement, or rights! They are not even people!! But then you will never have much of your own, either. Bang! That way lies social collapse. At root, austerity is Social Darwinism by any other name - which is also exactly the mentality of a slave owner. But a society is made of people - and a democracy is made of free and equal ones. When it turns into a bitter battle of predators and prey - it collapses.

Now, the wrinkle in the story is this. The world should have understood all this ח and rejected Americas worst idea in disgust and repulsion. But it didnҒt. In fact, it embraced it. Somehow, austerity came to be embraced even by European social democrats. Even by the British Labour party. In fact, at this juncture, the only society which really rejects austerity is China  and while we might object to political aspects of Chinese growth, the fact is that investing heavily in society has led it to become a major force in the world today. But I digress.

Why was austerity embraced even by European and British social democrats - who should have been its most natural and fierce opponents? The answer to that lies in the ideology behind austerity, which is neoliberalism. Neoliberalism essentially says that nothing - nothing -in a society should be a truly public good. Everything = every single thing in a society, from jails to schools to libraries to parks to power plants - should be privately owned, and run for maximum profit.

Now, a concerned reader might ask: what kind of an illiterate fool would think that? The answer is: American economics makes it sound very smart and intelligent to answer every concern possible about life, society, and being with just that, even if - as now - the planet is melting down. It is built on three crucial assumptions. First, that “markets will regulate themselves."Second, that “social investment, governments, can never do anything good or positive” for anyone, period. Third, that “people are atoms of desire, balls of raw appetite, who should only ever be purely, aggressively, one-dimensionally self-interested.”

(Now, the interesting question is: are these assumptions true? The answer is that they are not. We don’t have to look much further than the history of the 20th century, because its three great lessons - learned after World War II  are precisely the opposite of these three foolish American ideas. Market do not regulate themselves ח that is how the Great Depression came to be. Governments are the only actors who can provide the things that markets cannot, and those things are what raise peoples living standards the most җ like healthcare, transport, retirement, safety nets. People are not just little balls of insatiable greed - they are human beings, who desire decent lives, resonant in meaning, purpose, belonging, justice, fairness, truth, stability, freedom. If societies don’t step in to provide those things, which markets never have and never will, then the result will be rising extremism and fanaticism. People will turn away from democracy, and towards authoritarianism and fascism, just as they did in the 1930s. The result will be social implosion = and America, ironically enough, is the example which proves the folly of its very own thinking.)

And yet American economics wasn’t interested - in the slightest - in thinking about all the above. It simply ignored the great lessons of the 20th century, out of hubris, arrogance, and more than a little exceptionalism. It didn’t even bother studying its own collapse. If we think about it, in fact, American economics was simply restating America’s grim and foolish history - this time as answers to every single issue of socioeconomy - as a proud model to follow for the world. The three assumptions above, after all - markets are perfect! governments are the worst! hands off my property!! more of my own property is the only thing i care about!! - are nothing other than the logic of a plantation-owner, of a slave-master. They cannot be the logic of a person who considers themselves a free and equal citizen of a democracy, if you think about it.

So American economics presented the world a pure distillation of Americas epic mistakes, a windowinto the mind of a society founded on slavery and hatred and subjugation, not freedom and justice and equality - and told the world it was the way to prosperity. The world was dumb, naive, gullible enough to swallow it. Much of it, anyways. LOL. How come no one thought this through?

This bizarre and foolish illogic, which would come to be known as neoliberalism, an eerie restatement of Americas history of slavery and segregation, came to rule the world. A whole generation of European social democrats, in particular, came to be its defenders and champions 0 ironically, weirdly, strangely. How? Why? The answer is probably that by this point neoliberalism was something like a full blown ideology. It was easy to believe childish fairy tales like Facebook would replace democracy and apps would become a nations healthcare system. Easier, at any rate, than actually thinking about the world. Europe’s social democrats remained so only in name, to a large degree - in truth, many were ardent neoliberals, who glorified, lionized, and admired America, never having visited its ruined towns, its wrecked cities, its abandoned villages, never having seen its destroyed lives and shattered future. A comforting fable is always more seductive than a difficult truth.

What do you suppose the effect of believing in the ideology that America created - which brought it to its knees, had caused America to never become a modern society, to end up collapsing before it modernised - might be in the rest of the world? Pretty obvious, no? It would probably make you end up like that, too. Believing American logic would lead to you ending up just like America.

And that is precisely what we see, for example, the world over. In Europe and Britain and Canada - thanks to the disastrous mistake of choosing austerity over investment, these societies are now wracked by the same maladies that ripped through America, imploding it from within in just a few decades. Inequality, and the frustration and resentment it breeds. Rising poverty, rising insecurity, rising injustice. A lack of decent jobs, immobility, inopportunity. The concentration of power and profit amongst the most predatory. A massive failure of social contracts. Mistrust and hostility and a loss of faith in the future. A sense of fury and disgust at it all. Middle class stagnation, and working class fury. The rich, who’ve become ultra-rich, laughing at it all, and profiting all the more, as societies turn to extremists for hope, where there is none to be found in the establishment - because it goes on proposing different flavours of austerity.

These societies are - to different degrees - on the verge, or at least the path, of becoming mini Americas. They are ending up in exactly the same place as America, on the same path now: torn apart by extremism, stupidity, greed, despair, folly, selfishness. Those are precisely all the things which many American institutions, like its political parties, its thinktanks, its famous intellectuals and pundits, still cherish and prize. But they are false beliefs - mistakes. They are the toxic residue of the age-old philosophy of cruelty and supremacy which has always defined America. Austerity is Social Darwinism by any other name, And the problem is that this century must be built on something nobler, truer, and wiser than cruelty for supremacy’s sake. Do you really want to end up like America? That is the question no one has really asked Brits, Europeans and Canadians. But it is exactly where austerity leads.

(In Britain, for example, it was places hardest hit by austerity that voted most for Brexit. That is precisely the pattern of American collapse - and it is spreading to Europe, too, where, for example, in Italy and Germany, we see precisely the same dynamics playing out. We see it beginning in Canada, too - in Ontario and Quebec both.)

Austerity doesn’t solve a single problem that a society has ever had. Inequality, a lack of opportunity, decline, a shrinking middle, crime, the decay of the rule of law, corruption - name a single social problem that a society can ever have, and you will soon see: austerity is a fiction in the sense that it has never, and can never, solve any of these problems. In fact, the greatest lesson of history is exactly the opposite of austerity. Progress in the world did not come to be at all until people began to invest in each other, in their own educations, health, longevity, intelligence, in things like universities, labs, hospitals, parks, roads, town squares. Instead of timidly handing their labour, their money, time, and energy, over to their masters, whether they were called lords, kings, tyrants, emperors, or capitalists.

For exactly that reason - because it cannot solve a single social problem that has ever existed - quite naturally, austerity doesn’t solve any of the great problems the world has today. Inequality, mistrust, stagnation, climate change - these are the big four problems of the 21st century. But austerity makes each one not just worse - but in fact impossible to solve, because the only way to solve these problems is through intense, broad, enduring social investment. Whether in clean energy, or in green management, or in better healthcare and retirement systems, or the jobs that doing all that would bring.

And so austerity is ripping the world apart. It ripped Britain from its friends and partners. It ripped social democracy from the EU. It tore through an age of stability and prosperity. It is tearing ally from ally, neighbour from neighbour, country from country, society from society, union from union. That is because it is making it impossible to solve real problems - and so those real problems have all gotten worse, since that is austerity’s true effect. As those problems get worse, people regress to their primal selves, huddling together in tribes, uttering superstitions, cursing their neighbours, bowing before totems, seeking safety from the very flood that they were told would water their gardens. What else can they do?

Hence, thanks to austerity, the world is turning American now. Britain and Europe and even Canada are beginning to be wracked by just the same problems as America җ division, hostility, outrage, extremism, inequality, rage, hopelessness, authoritarianism, stupidity, the self-destructive behaviour that arises when people become martyrs out of frustration with a broken social contract. Many poorer countries are already on the way to following their lead.

But ending up ruined, just like America, is just the perfectly logical effect of choosing the same astonishingly ignorant ideology that ruined America to run your own society, too. Neoliberalism is literally ignorant of historys greatest lesson. It thinks prosperity comes from austerity җ when in fact, the only lever of human prosperity in the long run has ever  ever, what turned feudalism into freedom ח been people investing in one another. That shattering level of ignorance caused America to never become a modern society, to end up collapsing before it modernised  but now it is causing the world to follow Americaגs lead now, too.

And so the question for the world these days is: can it understand even an inkling of the above? Nobody should end up like America. Not even Americans deserve to be in the terrible, bizarre, tragic situation they are in, really. But they have yet to fully reject the philosophies of supremacy and violence hidden prettily inside the neoliberal dream - and that is why America goes right on collapsing.

The more societies that become Americanized - the more unstable, dangerous, and self-destructive this century will become. Can you imagine a world full of little Americas? A world full of Americas? It would never solve climate change. It would cheer while the planet melted down. It would never solve inequality - it would simply abandon people to die. It would never go anywhere but right back into the dark ages. If you just shuddered - now you understand the stakes.

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Posted by Elvis on 12/10/18 •
Section Dying America • Section Austerity American Style
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Friday, January 03, 2014

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

help.jpg

“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

READ MORE...
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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