Article 43

 

Austerity American Style

Saturday, January 05, 2013

Austerity American Style Part 6 - No Jobs Plan

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What you most certainly did not hear from the MSM is that the NASDAQ is still down 42% from its 2000 high of 5,048. None of the brain dead twits on CNBC pointed out the S&P 500 is trading at the exact same level it reached on April 8, 1999. The false storyline last week was the dramatic surge in new jobs...They create new categories of Americans to pretend they arent really unemployed. They use more models to make adjustments for seasonality. Then they make massive one-time adjustments for the Census.
- Illusion Of Recovery, Washington’s Blog, February 2012

President Obama says he wants to help American manufacturers. But cutting their already very low taxes even further is not the way to do so. Repairing our decaying infrastructure and better educating our workforce would be much more promising approaches.
- Obama Promoting Tax Cuts at Boeing, a Company that Paid Nothing in Net Federal Taxes Over Past Decade, Citizens For Tax Justice, February 2012

“Obama’s biggest blemish remains the ongoing tragedy of mass unemployment. Not only does this have a human element - the countless lives harmed or destroyed by poverty and desperation - but it is a huge drag on our economy. Mass unemployment reduces spending - THE ENGINE of our economy - which in turn, reduces growth. And without meaningful growth, there’s no way to reduce long-term debt without inflicting a large dose of harmful austerity. That, in my view, is unacceptable.”
- Obama’s Biggest Blemish, Jamelle Bouie, American Prospect, January 3, 2013

From WIKIPEDIA on the Fiscal Cliff deal; 12/31/2012

Tax effects:

Marginal income and capital gains tax rates would increase relative to their 2012 levels for those with annual income over $400,000 for individuals and $450,000 for couples, but the rates below these levels would remain at their 2012 levels. The income rate of 39.6% (effective on January 1, 2013 under the expiration of the Bush Tax Cuts) is retained, and the capital gains rate increases from 15% to 20%.

A phase-out of tax deductions and credits for incomes over $250,000 for individuals and $300,000 for couples is reinstated. Limits on deductions had existed before the Bush tax cuts, and had disappeared in 2010.

Estate taxes are set at 40% of the value above $5,250,000, indexed for inflation, an increase from the 2012 rate of 35% of the value over $5,120,000.

Changes are made to the Alternative Minimum Tax to permanently index it to inflation and thus to avoid the annual “patch” that was previously required to prevent it from impacting middle-class families.

The two-year old cut to payroll taxes expires. (FICA goes up 2 percent to 6.2 percent.)

Some tax credits for poorer families are extended for five years, including ones for college tuition and an expansion of the Earned Income Tax Credit.

A number of corporate tax breaks are extended, including the “active financing” tax exemption for major corporations (cost $9 billion), a rum tax supporting Puerto Rico rum industry ($547 million in 2009), a tax benefit for NASCAR racetrack owners (around $43 million), tax credits for two- and three-wheeled electric vehicles and hiring of individuals who are members of a Native American tribe.

In all, the bill included $600 billion over ten years in new tax revenue, about one-fifth of the revenue that would have been raised had no legislation been passed. For the tax year 2013, some taxpayers will experience the first year-to-year income-tax rate increase since 1993, although the rate increase came about not as a result of the 2012 Act, but as a result of the expiration of the Bush Tax Cuts. The new rates for income, capital gains, estates, and the alternative minimum tax would be made permanent.

Spending provisions:

The budget sequestration created by the Budget Control Act of 2011 is delayed by two months, to give time for further negotiations on deficit reduction. The $24 billion cost would be offset by a provision allowing 401(k) accounts to be rolled over into Roth IRA plans, requiring taxes to be paid on the assets,as well as a requirement for unspecified cuts of $4 billion for the remainder of FY2013 and $8 billion in FY 2014.

Federal unemployment benefits are extended for a year without a budget offset elsewhere, a cost of $30 billion.

The Medicare doc fix is extended for one year.

A pay freeze for members of Congress is extended, but a general pay freeze for government workers is not.

Some portions of the farm bill that had expired in September would be extended for nine months, but without changes supported by dairy farmers and legislators.

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So What’s Next, Mr. President?
Nearly every decision made during Obama’s presidency has been conducted under the canopy of catastrophe.

David Harsanyi
Reason
January 3, 2013

The worst part of the fiscal cliff deal isn’t the specifics - though they do stink. It’s being reminded again how utterly detached Washington is from reality.

The question, now that we’ve finally hiked taxes on the rich (and doesn’t everyone feel better knowing that life is that much fairer?), is: How are we going to continue paying for the government we’ve been promised? As it turns out, RAISING TAXES rates on the “wealthy,” the most pressing issue of the Obama Age, amounts to a mere $62 billion of new revenue.

To put it in perspective, the deficit spending this year alone was more than $1 trillion. So the fiscal deal will supposedly bring in $620 billion in new revenue over the next decade, which is less than any year’s worth of debt under President Barack Obama. If redirecting resources from private-sector investments to green energy subsidies feels like a victory, congratulations.

But if you’re not a class warrior, a Hollywood studio, a maker of electric motorcycles, a booze producer from Puerto Rico, an algae grower or NASCARall of which are subsidized in the bill - you’re out of luck. For the rest of you, there are higher taxes. The expiration of the payroll tax holiday means that Washington will continue to pretend Social Security and Medicare are “paid for,” and according to the Tax Policy Center, 77 percent of you will see your taxes rise an average of $1,635 per year.

The ”AMERICAN TAXPAYER RELIEF ACT OF 2012” indeed.

For all of you, there is also more debt, as the Congressional Budget Office found that the fiscal cliff deal increases the deficit by $4 trillion.

Yes, this is what Americans voted for in November. But if we’re supposed to believe that this deal reflects a “balanced, responsible” approach as the president asserts, what does the future hold? The GOP has surrendered on its core issue: It voted for a tax hike. Obama? No spending cuts. No tax reform. No debt reduction. No entitlement reform. There is no balance. And none is coming.

How can we expect any useful POLICY to emerge from manufactured crisis, anyway? Nearly every decision made during Obama’s presidency has been conducted under the canopy of catastrophe. The result is hastily assembled legislation that is larded up with goodies. It’s no accident.

And a newly elected Congress will be immediately submerged into another round of “negotiations,” this time centered on the debt ceiling (which we’ve already hit). Failure to surrender to the president’s demands allows the media to portray Republicans as the ones pushing the nation into default/over cliffs/etc. Low-information voters will soon be informed by Democrats that the debt ceiling, rather than debt, is the villain.

Even if we concede that Republicans, with no leverage or leadership to speak of, did the best they could in averting even higher taxes, they still lost. And the dynamics of the debate have not changed. This might be politically fortuitous for the president, but it is a disaster for the rest of us. Obama is unserious about debt because anything that cuts the size of Washington threatens his agenda. But a looming $50 trillion unfunded entitlement crisis is real. And the party in charge hasn’t offered any concrete ideas on how to deal with it.

So now that the rich pay more, it’d be nice if we could stop incessantly complaining about how dysfunctional Washington has becomeas if ideological unanimity were something to be desired in a free nation - and start talking about how indifferent the president has been on one of the critical issues we face.

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Surviving the Fiscal Cliff: Americas Middle Class Has Been “Saved” - Or Has It?

By Danny Schechter
Global Research
January 7, 2013

Long live the middle class now that it has survived the fiscal cliff and been “saved.”

President Obama is basking in the glory of having averted the deepening of a crisis that is more structural than political and hardly resolved.

The markets are cheering, it is said, because markets love stability, unless there is money to be made off of volatility of their own making.

Forget the working class. The term is passe, as is the so-called and usually undefined great mushy middle class moves into its rightful place at the center of everyone’s concerns.

(When asked what class they are in - or aspire to be in - workers, and even the poor say Middle Class. Unless survey questions include the choice of working class that they usually don’t.)

Analysts who looked closely at the big deal so hysterically pushed through Congress as the dramatic end-piece of a year of political warfare, say that there will be very little gain for the middle class with income taxes down but payroll taxes up, insuring that it will be more, at best, of a wash than a redistribution of wealth on any level. Many Americans, not just the rich, will be shelling out more, not less.

Economist Lambert Strether calls it the “fecal cliff,” noting, cuts and tax increases (especially on the rich) are not commensurate. A “sacrifice” where some give up luxuries and others give up necessities is in no way “shared.” A marginal sacrifice for the rich is not commensurate to core sacrifices for the rest of us.

This is an obvious point, but you will have to search through all the sturm und drang in the media about the votes in Congress to find it. Our media prefers to look up at leaders on the national stage than down on the people who have to cope with their decisions.

The headlines, speak of a victory for the middle class while the deal’s details show what an illusion that is.

There is a deeper attack on the middle class underway that is not yet “breaking news.” We can see it at the measures designed to destroy unions and attacks on teachers. We see it in limits imposed on pensions, and inflation that is making everything pricier.

With a new wave of big cuts still to come, its not clear who will benefit - especially not that part of the middle class that relies on public education as the key to their upward mobility,

In city after city, public education is in trouble, underfunded, trapped in bureaucratic warfare, with many public schools facing closure and others cutbacks.

There is a privatization of middle class education underway with the privately run charter school industry hovering in the background, hoping to turn all of education into a business.

In Philadelphia, 17,000 students and more than 1000 teachers are facing whats being called euphemistically a “downsizing” with 37 public schools on the chopping block.

Writes Bruce Dixon in the Black Agenda report: “The fix has been in for a long time, and not just in Philadelphia. Philly’s school problems are anything but unique. The city has a lot of poor and black children. Our ruling classes don’t want to invest in educating these young people, preferring instead to track into lifetimes of insecure, low-wage labor and/or prison. Our elites don’t need a populace educated in critical thinking. So low-cost holding tanks that deliver standardized lessons and tests, via computer if possible, operated by profit-making “educational entrepreneurs” are the “way to go.”

These changes are always advanced in the name of better education “ innovation” in the same way that the “reforms” that deregulated financial markets and led to their crash were labeled “modernization.”

In the Bronx, New York, the venerable De Witt Clinton High School that for over 100 years educated several hundred thousand students, positioning many for the middle class with many famous grades exercising leadership role in private industry, media, the arts and public life, is being threatened with closure as the neighborhoods that sent kids there became poorer and darker, (Disclosure; it was at that high school that I first learned journalism on the school paper.)

Students, teachers and alumni are up in arms fighting the threat with rallies at the school and a petition on line. I have been working for months on a documentary to showcase the School - once the largest in America - and its century of achievement. You can see our trailer on line HERE.

Behind all of this is an unseen, but fundamental shift in our economy, explains economist Michael Hudson:

Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers.

Finance has moved to capture the economy at large, industry and mining, public infrastructure (via privatization) and now even the educational system. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no larger military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers.

In short, debt is often profitable, and will be fought over for years to come.

These stealth trends float beneath the surface of media coverage and public political debate and get lost in the miasma of partisan talking points.

We don’t what we dont see, and all we do see are posturing politicians whose main goal seems to be always appearing to do something but usually in the service of the status quo.

News Dissector Danny Schechter blogs at Newsdissector.net. He made the film “In Debt We Trust” warning of the financial crisis in 2006. He hosts a radio show at PRN.FM. Comments to dissector at mediachannel dot org

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Washingtons Hegemonic Ambitions Are Not in Sync With Its Faltering Economy

By Dr. Paul Craig Roberts
January 9, 2013

In November the largest chunk of new jobs came from retail and wholesale trade. Businesses gearing up for Christmas sales added 65,700 jobs or 45% of Novembers 146,000 jobs gain.

With December sales a disappointment, these jobs are likely to reverse when the January payroll jobs report comes out in February. Family Dollar Stores CEO Howard Levine told analysts that his company’s customers were unable to afford toys this holiday season and focused instead on basic needs such as food. Levine said that his customers clearly don’t have as much for discretionary purchases as they once did.

For December’s new jobs we return to the old standbys: health care and social assistance and waitresses and bartenders. These four classifications accounted for 93,000 of Decembers new jobs, 60% of the 155,000 jobs.

Obviously, the economy is not going anywhere except down. It takes approximately 150,000 new jobs each month to stay even with population growth and new entrants into the work force. Few of the jobs that are being created pay well, and the constant, consistent demand for more poorly paid waitresses, bartenders and hospital orderlies is difficult to believe. If Americans cannot afford toys for their kidҒs Christmas, how can they afford to eat and drink out?

Media spin seeks to create a recovery out of thin air, but these graphs from John Williams (shadowstats dot com) show the reality:

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Keep in mind that the 7.8% unemployment rate (U.3) that is headlined by the financial media does not include discouraged workers who have ceased to look for jobs. The governments U.6 rate includes workers who have been too discouraged to seek work for less than a year. This rate of unemployment is 14.4%, almost twice the U.3 rate that the media prefers to report.

In 1994 the US government defined out of existence unemployed Americans who have been discouraged from finding work for more than a year. John Williams estimates the long term discouraged workers. When his estimate is added to the U.6 measure, the US unemployment rate stands at 23%, three times the reported rate.

The rate of unemployment is so high because millions of US jobs have been offshored and given to Chinese, Indian, and other workers and because remaining businesses have been concentrated in few hands in violation of the anti-trust laws. (Go to THIS URL to see the concentration of the media)

We need to be concerned about a financial media and economics profession that believes a recovery is underway when the unemployment rate is so high and the real median income is so low. It is a mystery how any set of policymakers could possibly have believed that a country whose economy is driven by consumer expenditures can continue to expand when the jobs that produce the incomes that drive the economy are given to foreigners in foreign lands.

Essentially, Americans were told a packet of lies designed to win their gullible acceptance to an economy that produces high returns for Wall Street, shareholders, and corporate executives at the expense of everyone else in the country. The wage savings from the use of overseas labor means large rewards for the one percent and Family Dollar customers who cannot afford to buy toys for their children at Christmas.

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Austerity doesn’t work: New IMF report details the damage

By Georgia Logothetis
Daily Kos
January 3, 2013

What’s the cost of austerity?

The actual cost of severe austerity can’t be calculatedthe number of lives lost or dreams killed because of families free-falling into poverty isn’t an easy number to add up. Now, a new report from the International Monetary Fund has at least quantified the economic damage of austerity ... and it’s a number that will shock you.

First, some background. Back in October 2012, THIS IS WHAT THE IMF REPORTED:

Earlier this week, the International Monetary Fund made a striking admission in its new World Economic Outlook. The IMFҒs chief economist, Olivier Blanchard, explained that recent efforts among wealthy countries to shrink their deficits through tax hikes and spending cuts - have been causing far more economic damage than experts had assumed. (emphasis added)

At the time, Brad Plumer at The Washington Post explained the importance:

Economists tend to agree that tax increases and spending cuts hurt growth. The question is how much they hurt growtha variable that usually changes at different points in time.

This matters a lot for policy. If tax hikes and spending cuts only hurt growth a little bit, then a government with debt problems will want to enact some austerity measures. If a tax increase, on average, raises $10 in revenue but reduces output by $6, that might be painful, but it will ultimately shrink the deficit. (Indeed, those are basically the numbers that policymakers in Britain and elsewhere had been using.) [...]

Blanchard is now arguing that the fiscal multiplier appears to have been much higher over the past few years than policymakers, including the IMF, had assumed. Itԗs not 0.6. Its somewhere between 0.9 or 1.7. If true, then countries in Europe and the United States should have been pursuing stimulus measures to boost growthҗand not insisting on budget cuts. (Not surprisingly, Paul Krugman is claiming vindication, since this was his view all along.) (emphasis added)

Now, a NEW IMF WORKING PAPER released today details the true damage of austerity:

In a new paper published Thursday, IMF Economic Counsellor Olivier Blanchard and research-department economist Daniel Leigh show the IMF recommended slashing budgets too fast early in the euro crisis, starving many economies of much-needed growth.

In “Growth Forecast Errors and Fiscal Multipliers,” Messrs. Blanchard and Leigh calculate IMF and European economists underestimated the euro-for-euro effect of cutting government budgets. While economists expected that cutting a euro from the budget would cost around 50 cents in lost growth, the actual impact was more like 1.50 per euro.

You can read the paper HERE and Howard Sneider’s take on it over at The Washington Post HERE.

In Greece, which has implemented draconian austerity measures at the request of the IMF, the European Commission and the European Central Bank in order to receive bailout funding, the results are seen on the streets where a middle class has plummeted into poverty. One out of three Greeks now lives in poverty and average salaries have been slashed to just several hundred net euros a month. Homelessness, which was rarely seen in that country, is now endemic in certain parts of Athens. The unemployment rate has reached a record 26 percent, with more than 50 percent of Greece’s youth out of a job.

Greece received billions of euros in bailout funds, but a large part of why austerity didn’t work in Greece is because it wasn’t offset by any growth strategy. In a shocking example of how twisted reality became, Greece’s bailout funds at one time were simply wired into an escrow account that the government couldn’t touch and then wired back for debt service to European banks just days later (read the NYT report HERE). In other words, not only was there painful cuts, but any money coming into the country was spent almost exclusively on debt reduction rather than on stimulating the economy.

You would think that politicians and analysts here in the United States would take a lesson from the tragedy that has befallen Greece. Instead, aAS MEDIA MATTERS DOCUMENTS today, pundits are using the situation there to call for more austerity here at home. (More great stuff from Albert Kleine over at Media Matters HERE)

Some politicians recognize that austerity without a corresponding growth strategy is a recipe for disaster. Today, PORTUGAL’S PRESIDENT FOUGHT BACK:

President Anibal Cavaco Silva called for urgent action to halt the “recessionary spiral”, warning Europe’s leaders that the current course had become “socially unsustainable.”

In a speech to the nation, he said Portugal would “honour its international obligations,” but in the same breath called for a tough line with the European Union-International Monetary Fund Troika over the pace of fiscal tightening under Portugal’s 78bn (#63bn) loan package. “We have arguments, and we should use them firmly,” he said.

“Fiscal austerity is leading to declining output and lower tax revenue. We must stop this vicious circle,” he said, cautioning the Troika that “there would be no way out of the crisis until policy was set in the interests of the Portuguese people” as well as foreign creditors.

Portugal’s president has also “asked the constitutional court to rule on the legality of tax rises that come into force this January as well as on further moves to dismantle the welfare state in the 2013 budget,” saying that “[t]here are well-founded doubts over whether the distribution of sacrifice is just.”

Austerity born on the backs of the 99 percent doesn’t work. It not only doesn’t fix the problem, it makes it worse by exacerbating a country’s economic problems. The fact that austerity in Europe resulted in 1.50 euros of lost growth for every euro cut should serve as a major wake-up call to American politicians here at home. Giving in to the debt fetishists and cutting simply for the sake of cuttingand cutting from society’s safety netsҒwhile neglecting at the same time to push forward any robust pro-growth strategy ensures a nightmare situation. The middle class can’t be sacrificed in an attempt to bring a country’s books into the black.

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The Big Fail

By Paul Krugman
NY Times
January 6, 2012

Its that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis.

This isnt how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now wedd be talking about how the great slump ended, not why it still continues.

So what went wrong? The answer, mainly, is the triumph of bad ideas.

Its tempting to argue that the economic failures of recent years prove that economists don’t have the answers. But the truth is actually worse: in reality, standard economics offered GOOD ANSWERS, but political leaders and all too many economists - chose to forget or ignore what they should have known.

The story, at this point, is fairly straightforward. The financial crisis led, through several channels, to a sharp fall in private spending: residential investment plunged as the housing bubble burst; consumers began saving more as the illusory wealth created by the bubble vanished, while the mortgage debt remained. And this fall in private spending led, inevitably, to a global recession.

For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall and unemployment will soar.

So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.

At that point governments needed to step in, spending to support their economies while the private sector regained its balance. And to some extent that did happen: revenue dropped sharply in the slump, but spending actually rose as programs like unemployment insurance expanded and temporary economic stimulus went into effect. Budget deficits rose, but this was actually a good thing, probably the most important reason we didn’t have a full replay of the Great Depression.

But it all went wrong in 2010. The crisis in Greece was taken, wrongly, as a sign that all governments had better slash spending and deficits right away. Austerity became the order of the day, and supposed experts who should have known better cheered the process on, while the warnings of some (but not enough) economists that austerity would derail recovery were ignored. For example, the president of the European Central Bank confidently asserted that"the idea that austerity measures could trigger stagnation” is incorrect.

Well, someone was incorrect, all right.

Of the papers presented at this meeting, probably the biggest flash came from one by Olivier Blanchard and Daniel Leigh of the International Monetary Fund. Formally, the paper represents the views only of the authors; but Mr. Blanchard, the I.M.F.s chief economist, isnt an ordinary researcher, and the paper has been widely taken as a sign that the fund has had a major rethinking of economic policy.

For what the paper concludes is not just that austerity has a depressing effect on weak economies, but that the adverse effect is much stronger than previously believed. The premature turn to austerity, it turns out, was a terrible mistake.

I’ve seen some reporting describing the paper as an admission from the I.M.F. that it doesnt know what it’s doing. That misses the point; the fund was actually less enthusiastic about austerity than other major players. To the extent that it says it was wrong, its also saying that everyone else (except those skeptical economists) was even more wrong. And it deserves credit for being willing to rethink its position in the light of evidence.

The really bad news is how few other players are doing the same. European leaders, having created Depression-level suffering in debtor countries without restoring financial confidence, still insist that the answer is even more pain. The current British government, which killed a promising recovery by turning to austerity, completely refuses to consider the possibility that it made a mistake.

And here in America, Republicans insist that the’ll use a confrontation over the debt ceiling a deeply illegitimate action in itself - to demand spending cuts that would drive us back into recession.

The truth is that we’ve just experienced a colossal failure of economic policy - and far too many of those responsible for that failure both retain power and refuse to learn from experience.

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Austerity Will Cost the U.S. 3 Million Jobs By 2020

By Chad Kolinsky
Policy Mic
April 22, 2013

With all this talk of austerity, one key aspect of our recovery is lost in the noise. Where is the discussion of growth? How will Washington help the American economy prosper in the 21st century? We might be able to cut our way to lower deficits, but we cannot cut our way to more economic growth. What better way to increase revenues, than through growth inspired policies? The faster the economy develops, the quicker a solution to our debt will emerge.

Like it or not, the government plays an instrumental role in steering the economy. It is time to move beyond the ideology of how we would like our government to be and accept the reality of what government is. Washington has played an important role in the economy for generations. President Eisenhower, a Republican, invested in America’s infrastructure and helped build the interstate highway system which revolutionized interstate commerce. The Apollo program provided advances in technologies ranging from kidney dialysis, to semi-conductors, to athletic shoes. Recall that the Military played an instrumental role in developing the internet - in turn; the technology brought us Google, Facebook and helped propel the Arab Spring.

Imagine what our economy would look like today if the government spent billions on research and development, education, and infrastructure rather than bailing out big banks. What we need today is a smarter government that invests its limited funds efficiently; not a smaller government that you can “drown in a bathtub.”

Investment in infrastructure creates more “bang for our buck” than almost any other type of government spending. A study from the San Francisco Federal Reserve found that, on average, each dollar of infrastructure spending increased state GDP by at least $2 dollars. That is more than a 100% return on investment.

As President Obama stated in the late State of the Union, Americans continue to drive over more than 60,000 structurally deficient bridges everyday. The lack of investment in infrastructure left us in a crisis. In 2002, American infrastructure ranked 5th globally; by 2012 we were 25th, behind countries like Saudi Arabia, Barbados, and Spain to name a few. The American Society of Civil Engineers claims that without investing an additional $157 billion per year in infrastructure, the United States will lose over 3 million jobs and trillions of dollars in GDP by 2020 (and we thought the $85 billion sequester was bad!).

The United States must close our infrastructure gap to stay competitive. Today, China has over 20,000 km of high-speed rail; compared to our one track. The port of Shanghai, handles more containers than the eight largest U.S. ports combined. Sitting back and allowing our nation to fall further behind should not be an option.

We can choose to elect representatives who will maintain the status quo; who will not reform the entitlement spending that is bankrupting our nation. Or we can elect individuals that will make the necessary investments for our country to succeed. For the first time, this past election, more millennials (18-35) voted than senior citizens. As a generation, we must find our voice and make it heard in Washington. We must get out and demand bipartisan solutions to our nations problems and investments in our future!

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5 Reasons Congress Should Be Deeply Ashamed About Jobs
Congress has not only made the job search more difficult for average Americans, but has also impeded the process.

By Paul Buchheit
Alternet
August 13, 2013

U.S. Representative Marlin Stutzman said, “Most people will agree that if you are an able-bodied adult without any kids you should find your way off food stamps.”

That depends on whether those ways can be found. If Stutzman and other members of Congress believe it’s that easy to find a job with a living wage, they’re either ignorant of middle-class life or they are victims of free-market delusion. In either case, Congress, with its shameful response to the people who elected them, has not only made the job search more difficult for average Americans, but has also impeded the process.

Senate Republicans killed a proposed $447 billion jobs bill in 2011 that would have added about 2 million jobs to the economy. They filibustered Nancy Pelosi’s Prevention of Outsourcing Act, and temporarily blocked the “Small Business Jobs Act.” Most recently, only one member of Congress bothered to show up for a hearing on unemployment.

Congress’ unwavering support of big business donors shows a callous disregard for the needs of the millions of Americans they’re supposed to be representing. Here are five of the paralyzing consequences.

1. They’ve stifled the growth of millions of young adults.

In the U.S., more than half of college graduates were jobless or underemployed in 2011. Over the last 12 years, according to a New York Times report, the United States has gone from having the highest share of employed 25- to 34-year-olds among large, wealthy economies to having among the lowest. The Wall Street Journal recently noted that nearly 300,000 people with at least a bachelor’s degree were making the minimum wage in 2012, double the number in 2007. Not since the 1960s have so many young adults been living with their parents.

2. They’ve mocked the concept of a “living wage.”

At the very least, one would think, workers should be able to sustain their lifestyles over the years, to keep from falling backward in earnings. But they’ve lost 30 percent of their purchasing power since 1968. This happened during a time of steady American productivity. It has been estimated that a minimum wage tied to productivity should now be $16.54 per hour, but the current $7.25 is less than half of that, and below poverty level. It’s been getting worse in the last five years.

While 21 percent of post-recession job losses were considered low-wage positions, 58 percent of jobs added during the recovery were considered low-wage. Congress fiddles while more and more American families lose their earning power.

3. They’ve allowed nearly half of America to go into debt.

Our young adults are not only underemployed, but the college graduates among them are dealing with an average of $26,600 in debt, which translates, according to Demos, into $100,000 of lifetime wealth loss. Total student debt has quadrupled in just 10 years.

It goes beyond students to the population at large, many of whom survived the boom years by borrowing heavily on homes and credit cards. In 1983 the poorest 47 percent of America owned an average of $15,000 per family, 2.5 percent of the nation’s wealth. By 2009 the poorest 47 percent of America, as a group, owned zero percent of the nation’s wealth. Their debt exceeds their assets. Yet Congress caters to too-big-to-fail financial institutions while too-little-to-matter American homeowners don’t earn enough to stay out of debt.

4. They’ve persisted with the trickle-down “job creator” myth.

The “low tax = job creation” argument is absurd. Congress need only look at four of its pet projects: Bank of America, Citigroup, Pfizer, and Apple. Each of the first three made much of their revenue in the U.S. over the last two years, but claimed billions of dollars of U.S. losses (big foreign gains, though). Yet with almost zeroU.S. taxes among them, all three companies are among the top 10 job cutters.

Apple is a special case. Rand Paul fumed, “What we need to do is apologize to Apple and compliment them for the job creation they’re doing.” But Apple only has 50,000 U.S. employees, and despite earning about $400,000 per employee, they were the biggest U.S. tax avoider in 2012.

As America waits in vain for corporate job growth, Congress might look in its own backyard for the very worst job cutter, the federal government itself, which has begun to slice up a longtime model of public service, the Post Office.

5. They’ve aligned against the one area that would ensure jobs and a safer future.

A study at the University of Massachusetts concluded that at least 1.7 million jobs could be generated by a commitment to clean energy, about three times as many as in the fossil fuel industry. Half of them would be labor-intensive jobs requiring at most a high school education. And all these new employees would help to reduce their own home heating costs. A recent report by a Kansas energy group, which analyzed data from 19 wind projects, concluded that wind energy generation “is equivalent to, or in some cases significantly cheaper than, new natural gas peaking generation.”

If Congress were really concerned about job creation, and about the cost and environmental impact of energy choices, and about the implications of falling behind China and Germany in clean technologies, they would see that a transition to wind and solar power is necessary. But oil, gas and coal received over twice the level of subsidies provided for renewable fuels from 2002 to 2008. Globally it’s six times more, with U.S. post-tax fossil fuel subsidies of $502 billion leading the world. Even with their subsidy advantage, right-wing groups, funded by Koch Industries, are seeking to repeal renewable energy initiatives in individual states. Their deceitfully named “Electricity Freedom Act” will keep the money flowing to dirty energy. But not the jobs.

Shame, Shame

How can we explain the job-defeating behavior of congressional Republicans? I suggested earlier that they’re either ignorant of middle-class life or victims of free-market delusion. Perhaps it’s more insidious. Thom Hartmann reports on a dinner meeting the night of Jan. 20, 2009, when “Republican conspirators vowed to bring Congress to a standstill, regardless of how badly congressional inaction would hurt the already hurting American economy and people.” In short, they don’t want President Obama to look good. If that’s true, it goes beyond shame. It’s a disgrace.

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

Posted by Elvis on 01/05/13 •
Section Dying America • Section Austerity American Style
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Monday, December 31, 2012

Austerity American Style Part 5 - Selling Out The Public

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“With the Bush administration, the underlying evil that informs systems of government that are based on “power over” instead of “liberty for” is coming out from hiding in the shadows”
- War On Consciousness, Paul Levy, June 2007

The game isn’t over in the US, but the smart money is that the first revolution in the US isn’t going to be a revolution of the left, its going to be a nutbar revolution from the right, and it is going to be extraordinarily ugly. In the meantime, if you have to stay, make sure you’re on good terms with your neighbors, your spouse, your friends and your family.  Figure out how to grow food wherever you are and how to reduce your dependence on anything but people you trust.  (Don’t trust any corporation.) And, if you can, organize.  Organize locally, organize at the State level, organize nationally.  Understand the age of compromise is over. It is now too late to save the old system.  It’s over.  We tried, and we failed.  It is beyond reform, it is GOING TO FLAME OUT, the only question is how many people it will burn to death as it does so.
- An American Future, Newshoggers, December 2010

The idea that raising taxes on the rich in these dismal economic times in any way represents some injustice is such baloney that one should wonder how any American can possibly eat this Republican garbage. Similarly, the nonsense about job creators somehow not creating new jobs because of higher taxes flies in the face of reality, because very low taxes have not caused them to create significant new jobs. Nor did higher taxes for some decades for decades after World War II stop high rates of new job creation.
- Are you A Victim Of Political Propoganda, August 30, 2012

The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy.  Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.

...the entire economic policy of the United States is dedicated to saving four banks that are too large to fail. The banks are too large to fail only because deregulation permitted financial concentration, as if the Anti-Trust Act did not exist.
- The “Fiscal Cliff” Is A Diversion, Paul Craig Roberts, December 17, 2012

“The simple truth is that Social Security has not contributed a nickel to the national debt so it makes no sense for it to be part of deficit negotiations,
- Senator Bernie Sanders, November 27, 2012

“Every time I hear a political speech or I read those of our leaders, I am horrified at having, for years, heard nothing which sounded human. It is always the same words telling the same lies. And the fact that men accept this, that the peoples anger has not destroyed these hollow clowns, strikes me as proof that men attribute no importance to the way they are governed; that they gamble - yes, gamble - with a whole part of their life and so called ‘vital interests.’”
- Albert Camus, 1937

We must remember that every right, we enjoy has been wrestled from the hands of power, at great personal cost by ordinary people like you and I.  We have been entrusted with the honor of remembering their struggle and defending these rights by helping to educate others and holding to the belief that compassion and understanding arise from an awareness that we are all just reflections of each other.
- Tom Feely, Information Clearinghouse

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Obama Hits Social Security In Fiscal Cliff Offer Friendlier To The Wealthy
President Barack Obama, with his latest fiscal cliff offer, proposes extending the Bush tax cuts for everyone earning less than $400,000 a year, and paying for it by increasing taxes on the middle class and cutting Social Security and Medicare.

By Ryan Grim
Huffington Post
December 18, 2012

Obama’s offer would allow the payroll tax holiday to expire, meaning middle class workers will see smaller paychecks in 2013. Economists have warned that the recovery is too fragile to risk a broad tax hike on workers. IT WOULD also gradually reduce Social Security, pension and Medicare benefits seniors are due to receive, taking a small bite up front, but building up to much larger cuts over time.

Obama’s concession to Republicans is opposed by a majority of Americans, according to a HuffPost/YouGov poll. Fifty-two percent of survey respondents said the payroll tax cut should be extended to avoid raising taxes on the middle class, while 22 percent said that it should be allowed to expire to help pay down the debt. Extending the payroll tax cut received bipartisan support: 64 percent of Democrats and 57 percent of Republicans in the survey said they supported the extension. 

MOVE ON, the largest online progressive organization in Washington, reacted angrily Monday night to reports that Obama was softening. The group’s quick reaction to a possible deal that has yet to be announced publicly shows there will be fierce opposition to cuts that hit Social Security, Medicare or Medicaid beneficiaries.

One top GOP aide predicted a deal, within the next day, that House Republicans would have no choice but to accept. A second said that many details still needed to be filled in, and that the president was dug in at $1.2 trillion in revenue, more than Republicans wanted.

Obama, according to Senate Majority Leader Harry Reid (D-Nev.), had previously told fiscal cliff negotiators that “Social Security is not going to be part of this.” That TURNED OUT TO BE A FALSE ASSERTION, given Monday’s offer to target the elderly. The proposed Social Security reform is known as “chained CPI” and is an alternate measure of inflation that accounts for the way consumers react to higher prices by switching to similar products that are less costly. Or, as the Bureau of Labor Statistics put it, “If the price of pork increases while the price of beef does not, consumers might shift away from pork to beef.”

The CHAINED CPI proposal is unpopular across the political spectrum. Fifty-six percent of Republicans, along with 67 percent of Democrats and 46 percent of independents, said they thought the proposal was a bad idea. Older Americans were most likely to oppose the measure, with 77 percent of those age 65 and older saying that the proposal was a bad idea. Adults under 30 were the least likely to have an opinion: 50 percent said they weren’t sure whether the proposal was a good or bad idea, while 21 percent said it was a good idea and 29 percent said it was a bad idea.

Justin Ruben, head of MoveOn, said in a statement that the group’s members agree. “MoveOn members overwhelmingly oppose cuts to Social Security, Medicare, and Medicaid benefits, and they’ve made clear that they would see any fiscal agreement that cuts such benefits as a betrayal that sells out working and middle class families—whether the cuts come via a chained CPI, increased Medicare eligibility age, or in some other form,” Ruben said.

Ruben said that his organization would encourage Democrats to block such a bargain. “If such a deal were proposed by the president and speaker, MoveOn members would expect every Senate and House Democrat to do everything in their power to block it,” Ruben said. “Senate Majority Leader Reid would play a crucial role, as MoveOn members would count on him and other senators to remain true to their repeated promises to keep Social Security benefits off the table.”

Reid has indeed been adamant. “I have made it very clear, I have told anyone that will listen—including everyone in the White House, including the president—that I am not going to be part of having Social Security as part of these talks relating to this deficit,” Reid told reporters earlier.

Alex Lawson, executive director of Social Security Works, which opposes cuts to the program, said the chained CPI is painful policy. “Almost every elected official just spent an entire election season saying they wouldn’t cut the benefits of those 55 and older. The truth is the chained CPI hits everyone’s benefits on day one,” he said. “It hits the oldest of the old and disabled veterans the hardest. If it wasn’t being bandied about as being ‘on the table,’ I would guess that it was created as an office joke to see who could create the most noxious and offensive policy possible.”

Boehner included the chained CPI in his counteroffer to Obama earlier, which also called for broader reform of social insurance programs. In 2011, Boehner and Obama reportedly agreed to a “Grand Bargain” that included the chained CPI, but the deal fell apart.

SOURCE

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Proposed Social Security Bargain Makes No Sense for the Elderly

By Dean Baker
Center For Economic Policy And Research
December 18, 2012

According to reliable sources, the Obama administration is seriously contemplating a deal under which the annual cost of living adjustment for Social Security benefits would be indexed to the chained consumer price index rather than the CPI for wage and clerical workers (CPI-W) to which it is now indexed. This will lead to a reduction in benefits of approximately 0.3 percentage points annually. This loss would be cumulative through time so that after 10 years the cut would be roughly 3 percent, after 20 years 6 percent, and after 30 years 9 percent. If a typical senior collects benefits for twenty years, then the average reduction in benefits will be roughly 3 percent. 

There are a few quick points worth addressing:

The claim that the chained CPI provides a more accurate measure of the cost of living;

Whether Social Security benefits are now and will in the future be sufficient to allow for a decent standard of living for retirees; and

Whether this is a reasonable way to be dealing with concerns over the budget.

This are taken in turn below.

Is the Chained CPI More Accurate?

While many policy types and pundits have claimed that the chained CPI would provide a more accurate measure of the cost of living for seniors, they have no basis for this claim. The chained CPI is ostensibly more accurate for the population as whole because it picks up the effect of consumer substitution as people change from consuming goods that increase rapidly in price to goods with less rapid price increases.

While this is a reasonable way to construct a price index, it may not be reasonable to apply the consumption patterns and the substitution patterns among the population as a whole to the elderly. The Bureau of Labor Statistics (BLS) has CONSTRUCTED AN EXPERIMENTAL ELDERLY INDEX (CPI-E) which reflects the consumption patterns of people over age 62. This index has shown a rate of inflation that averages 0.2-0.3 percentage points higher than the CPI-W.

The main reason for the higher rate of inflation is that the elderly devote a larger share of their income to health care, which has generally risen more rapidly in price than other items. It is also likely that the elderly are less able to substitute between goods, both due to the nature of the items they consume and their limited mobility, so the substitutions assumed in the chained CPI might be especially inappropriate for the elderly population.

While the CPI-E is just an experimental index, if the concern is really accuracy, then the logical route to go would be for the BLS to construct a full elderly CPI. While this would involve some expense, we will be indexing more than $10 trillion in Social Security benefits over the next decade. It makes sense to try to get the indexation formula right.

Are Social Security Benefits Adequate?

While some people have tried to foster a myth of the elderly as a high living population, the facts dont fit this story. The median income of people over age 65 is LESS THAN $20,000 A YEAR. Nearly 70 percent of the elderly rely on Social Security benefits for more than half of their income and NEARLY 40 PERCENT RELY ON SOCIAL SECURITY FOR MORE THAN 90 PERCENT OF THEIR INCOME. These benefits average less than $15,000 a year.

The reason that seniors are so dependent on Social Security is that the other pillars of the retirement stool, employer pensions and individual savings, have largely collapsed. Defined benefit pensions are rapidly disappearing. Defined contribution plans, like 401(k)s have also proved grossly inadequate. Only around half of the work force even has a defined contribution plan available to them at their workplace. In a period of stagnant wages and limited employer contributions, workers have generally been unable to accumulate much wealth in these plans. According to the Retirement Research Center at Boston College, the median value of 401(K) and other defined contribution plans for those near retirement who have a plan is $120,000, ENOUGH TO GET AN ANNUITY PAYING $575 PER MONTH.

For most workers the vast majority of their wealth was in their homes. The collapse of the housing bubble destroyed much of this equity. Counting all forms of wealth, including equity in a home, the median household approaching retirement HAD JUST $170,000 IN WEALTH IN 2011.

The proposed cut in the annual cost of living adjustment will be a substantial hit to a population that for the most part is ill-prepared to see a cut in its income. The effect of this cut on the income of the typical beneficiary will be larger, measured as a share of income, than the return to Clinton era tax rates on the richest 2 percent will be to the people affected. It is also worth noting that this cut to benefits will affect current retirees, not just people who will be collecting benefits 10 or 15 years in the future, who might have some opportunity to adjust to a cut.

Is the Chained CPI a Reasonable Way to Deal with the Budget

It is important to remember that under the law Social Security is supposed to be treated as a separate program that is financed by its own stream of designated revenue. This means that it cannot contribute to the budget deficit under the law, because it is only allowed to spend money from the Social Security trust fund.

This is not just a rhetorical point. There is no commitment to finance Social Security out of general revenue. The projections from the Social Security trustees show the program first facing a shortfall in 2033 after which point it will only be able to pay a bit more than 75 percent of scheduled benefits. While this date is still fairly far in the future, at some point it will likely be necessary to address a shortfall.

It is reasonable to expect that the changes needed to keep the program fully funded will involve some mix of revenue increases and benefit cuts. However if the chained CPI is adopted as part of a budget deal unconnected to any larger plan for Social Security then it effectively means that there will have been a substantial cut to Social Security benefits without any quid pro quo in terms of increased revenue. This hardly seems like a good negotiating move from the standpoint of those looking to preserve and strengthen the program.

There is also the question of whether the Social Security trustees will even score this cut accurately. In the 1990s there were changes to the CPI that had the effect of reducing the measured rate of inflation by at least 0.5 percentage points annually (Economic REPORT TO THE PRESIDENT 1998 Box 2-6). This would have implied a reduction in the annual cost of living adjustment by this amount and a corresponding improvement in the Social Security trust fund’s prospects. However, there is no evidence of this improvement in the programs finances during this period. In fact the projected rate of real wage growth (the difference between the nominal rate of wage growth and the measured CPI) was 1.0 PERCENT IN 1995, before the changes to the CPI. The projected long-run rate of real wage growth had actually been lowered to 0.9 percent in the 1998 TRUSTEE REPORT (Table II.D.1) which was issued after all the reductions in the CPI had been put in place.

It is important to remember that the trustees projections come from the trustees, not the professional staff of the Social Security Administration. Four of the six trustees are political appointees of the president. It is certainly possible that the cuts associated with the adoption of the CPI will not be factored into the trustees projections just as the even larger cuts associated with the changes in the CPI in the 1990s were not factored into the trustees projections.

Finally, it is worth commenting on the idea of tampering with statistical measures to achieve budgetary goals. The United States has been fortunate in having independent statistical agencies that have fiercely resisted efforts to manipulate data for political ends. In fact, in the 1990s there was considerable pressure placed on the Bureau of Labor Statistics to make adjustments to the CPI which would reduce Social Security and other indexed benefits. Katherine Abraham, the then head of the agency was steadfast in refusing to make any changes to the index that were not justified by BLS research.

The current effort has the spirit of using statistics for political ends, for example by refusing to have BLS produce a full elderly CPI so we would actually know the inflation rate experienced by the elderly. There also has been some discussion of leaving some programs, such as Supplemental Security Income, tied to the current CPI so as not to hurt a seriously disadvantaged population.

Congress can decide the benefit formula for these programs as it chooses. The honest way to cut benefits is for Congress to explicitly vote to cut benefits, not to try to hide a cut behind a statistical manipulation. This is the sort of behavior that encourages public contempt for politicians and the political process. 

SOURCE

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I May Lose My Unemployment Benefits

By Jennifer Liberto
CNN Money
December 20, 2012

This could be Karen Duckett’s worst New Year, ever.

Duckett, 51, of Laurel, Md., is among 2.1 million jobless Americans whose unemployment benefits will end on Dec. 29, if Congress doesn’t act.

After a 30-year career, managing housekeeping staff at a retirement community, Duckett was laid off last year. Despite looking for a job every day, she hasn’t been able to find work. Duckett says if her unemployment benefits run out, she and her 14-year-old grandson, who lives with her, won’t have enough money to eat.

“It’s been a very difficult year,” Duckett said. “The check keeps a roof over our head. ... I can’t even imagine what we’re going to do without that check.”

She is among 2.1 million Americans who will no longer be able to apply for unemployment benefits in the New Year. Another 1 million people who don’t have jobs will also exhaust their state benefits in early 2013 and lose their benefits, according to the National Employment Law Project, an advocacy group.

During the recession, as unemployment rates rose over 10%, the government put in place an emergency program to extend federal benefits to the jobless, whose state unemployment insurance had run out. Currently, federal unemployment benefits are available for up to 47 weeks, depending on the state.

The cost to extend the benefits by another year is $30 billion, according to the Congressional Budget Office. It’s a little piece of the $7 trillion in tax increases and spending cuts that will take effect as part of the fiscal cliff. It’s also a relatively small cost compared to other expenses, such as the payroll tax cut, which will cost $115 billion.

Majority of Americans have received government aid

Democrats have championed an extension of the benefits. President Obama said Wednesday during a press conference that he wasn’t willing to give tax breaks to millionaires while “not providing unemployment insurance for 2 million people who are still out there looking for work.”

Republicans have been cool to the extension. They say they’re open to the idea only if it doesn’t add to federal deficits. Finding $30 billion to “pay for” rising deficits could be tricky enough to scuttle a deal.

Several economists have said the economic recovery needs it.

“It is important to continue on with the emergency unemployment insurance program. It is providing a boost to economic growth,” said Mark Zandi, chief economist of Moody’s Analytics.

If Congress does extend unemployment benefits, it would be the 10th extension since the Great Recession began in December 2007. Congress first enacted an extension to the federal benefits package in June 2008.

Some 40% of the roughly 12 million people currently unemployed have been jobless for more than six months, according to NELP.

Duckett is one of the long term unemployed. That’s why she hit Capitol Hill on Tuesday, along with 50 other unemployed workers—organized by the Philadelphia Unemployment Project. The advocacy group hoped their stories would push lawmakers to work toward a deal to extend federal benefits until the economy improves.

“I opened my mailbox a week ago and got the notice warning me that I would not be receiving any more checks,” said Duckett, a breast cancer survivor, with tears streaming down her cheeks. “That gives me two weeks to see what we’re going to do.”

SOURCE

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Obama’s Grand Charade: Say No to the Staged Dismantling of Medicare and Social Security

By Margaret Flowers
Global Research
December 7, 2012

Here we go again. President Obama is in round three of his ongoing efforts to cut our important social insurances, such as Social Security and Medicare. Whether he succeeds or not is up to us. We can create a stronger economy and healthier population by strengthening and expanding our social insurances and switching to a green energy economy.

Round 1: In April, 2010, shortly after President Obama signed into law a health bill that further privatizes our health care system and while all attention was on this “historic achievement,” Obama created the NATIONAL COMMISSION FOR FISCAL RESPONSIBILITY AND REFORM. He appointed Alan Simpson and Erskine Bowles as chairs of what was commonly known as the Deficit Commission and loaded the panel with 14 deficit hawks out of the total of 18 appointees. The commission was given the power to create a deficit plan that would go to Congress for an up or down vote.

If there was still any question about the intent of the commission, those should have been answered by the fact that the PETER G. PETERSON FOUNDATION was working closely with them, providing support staff and hosting the America Speaks gatherings in the summer of 2010. Billionaire Pete Peterson has SPENT DECADES arguing for cuts to social insurances.

I attended an America Speaks event in Detroit in June, 2010 and it felt very similar to the Health Care House Parties that the Obama campaign promoted in December, 2008. The event materials were designed to manufacture consensus on how much to cut our social insurances. But, the people weren’t fooled and when the question of how much to cut Medicare was raised, many people demanded Medicare for all as a choice.

I also testified before the Deficit Commission in late June, 2010, arguing that Medicare for all would solve both our health and financial crises. But the Commission wasnt concerned with effective solutions, instead it was laying the groundwork for the Grand Charade that would lead Americans to believe we have a deficit crisis and accept austerity measures.

The commissionwas unable to get enough votes among its members by its December deadline for issuing a report, so there was no vote in Congress on their recommendations, but many of their ideas appeared in Paul Ryan’s “Path to Prosperity” in early 2011. Simpson and Bowles also issued their own report which is often mistakenly labeled the report of the commission.

Round 2: In August, 2011, another committee was created and given the same power as the Deficit Committee. This group of 12 members of Congress, 6 from each body and 6 from each party, was known as the Super Committee.  This small committee with extraordinary power was unprecedented and represented a serioususurpation of the democratic process.

The Super Committee held hearings during the fall and was required to issue recommendations by Thanksgiving. From the start, the committee stated that everything was on the table, including social insurances. While they went through the motions of public hearings, the agreements were already being made in secret negotiations and they included cuts to vital programs.

In fact, by this time it was clear that President Obama was not only willing to accept cuts to Social Security and Medicare, two programs that are the pride of the Democratic Party, but was DRIVING THE PROCESS. Documents leaked show that Obama offered Boehner a “Grand Bargain” that included cuts to a broad array of social programs that would have hurt every American.

Like the Deficit Committee, the Super Committee failed to reach a consensus by the deadline. No doubt mobilized resistance to cuts to social programs made their task more difficult. The Occupy movement was in full swing, occupiers protested the Super Committee and some even walked to DC from NY, Philadelphia and Baltimore to protest. In Washington, DC, the occupation at Freedom Plaza held our own Super Committee Hearing.Our report, The 99%s Deficit Proposal: How to create jobs, reduce the wealth divide and control spending, showed that there were real solutions to our crises that were better for the people and were supported by supermajorities of the population.

Round 3: The so-called Fiscal Cliff is the current attempt to convince people that we will have to accept cuts to important programs. If enough people can be convinced that the sky is falling, then President Obama can make the cuts he has sought to make for years. No doubt giving Wall Street what it has wanted for a long time will be rewarded with high-paid speeches to big business when his presidency ends.

And this time, the President has the help of more than 80 CEOs, led by Simpson and Bowles, to get the job done. The new “Fix the Debt” campaign is starting with a budget of $60 million for public ads and lobbying Congress. Why is big business getting involved? Cuts to social insurances will allow further cuts in corporate taxes.

This is reminiscent of a similar campaign called “Health Care for America Now” that helped the President pass a Wall Street health care bill. Like Health Care for America Now, the public will be convinced through a strategic propaganda campaign to make demands from Congress that go against their own interests. But, we shouldn’t expect anything less from a president who WON marketing campaign of the year in 2008.

So, the president has upped the ante in this ongoing Grand Charade. And unless we take action, cuts to our important programs will cause real suffering and more preventable deaths. There are solutions to all of the crises that we face. We must demand that human needs and protection of the planet be a higher priority than corporate profits.

For example, if we improved Medicare and expanded it to every person in the US, we could effectively control our health care costs which are growing faster than GDP. Former president CLINTON ACKNOWLEDGED that the U. S. could save $1 trillion each year by adopting a single payer system like almost every other developed nation. We would also improve health outcomes and end bankruptcy due to medical illness and costs.

Just like with health care, if we put in place the right policy for retirement we solve the problem and help the economy. The CENSUS BUREAU REPORTS that in the last decade there has been a 78% increase in Americans over 60 facing the threat of hunger and one in six seniors live in poverty.  DOUBLING SOCIAL SECURITY would bring seniors out of poverty and be a giant stimulus to the economy. It would also be a great relief to every family.

Another popular solution is the GREEN NEW DEAL promoted by the Jill Stein campaign. The Green New Deal would create high quality jobs and transition the US to a renewable energy economy.

It’s time to end this Grand Charade. We mustn’t be fooled by this Wall Street agenda. AS WE’VE SEEN IN EUROPE, austerity measures are harmful to people and the economy. For ideas on organizing resistance to these measures, see SOLIDARITY AGAINST AUSTERITY and VIA 22.

Margaret Flowers is co-director of IT’S OUR ECONOMY, co-host of Clearing the FOG Radio and an organizer of the occupation of Freedom Plaza in Washington, DC. She is also with the Health Care is a Human Right campaign in Maryland.

SOURCE

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Americas Deceptive 2012 Fiscal Cliff, Part II - The Financial War Against the Economy at Large

By Michael Hudson
Naked Capitalism
December 31, 2012

Today’s economic warfare is not the kind waged a century ago between labor and its industrial employers. Finance has moved to capture the economy at large, industry and mining, public infrastructure - via PRIVATIZATION - and now even the EDUCATIONAL SYSTEM. (At over $1 trillion, U.S. student loan debt came to exceed credit-card debt in 2012.) The weapon in this financial warfare is no larger military force. The tactic is to load economies (governments, companies and families) with debt, siphon off their income as debt service and then foreclose when debtors lack the means to pay. Indebting government gives creditors a lever to pry away land, public infrastructure and other property in the public domain. Indebting companies enables creditors to seize employee pension savings. And indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers.

Workers have become so deeply indebted on their home mortgages, credit cards and other bank debt that they FEAR TO STRIKE or even to complain about working conditions. LOSING WORK means missing payments on their monthly bills, enabling banks to jack up interest rates to levels that used to be deemed usurious. So debt peonage and unemployment loom on top of the wage slavery that was the main focus of class warfare a century ago. And to cap matters, credit-card bank lobbyists have rewritten the BANKRUPTCY LAWS to curtail debtor rights, and the referees appointed to adjudicate disputes brought by debtors and consumers are subject to veto from the banks and businesses that are mainly responsible for inflicting injury.

The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society. In contrast to the promise of democratic reform nurturing a middle class a century ago, we are witnessing a regression to a world of special privilege in which one must inherit wealth in order to avoid debt and job dependency.

The emerging financial oligarchy seeks to shift taxes off banks and their major customers (real estate, natural resources and monopolies) onto labor. Given the need to win voter acquiescence, this aim is best achieved by rolling back everyones taxes. The easiest way to do this is to shrink government spending, headed by Social Security, Medicare and Medicaid. Yet these are the programs that enjoy the strongest voter support. This fact has inspired what may be called the Big Lie of our epoch: the pretense that governments can only create money to pay the financial sector, and that the beneficiaries of social programs should be entirely responsible for paying for Social Security, Medicare and Medicaid, not the wealthy. This Big Lie is used to reverse the concept of progressive taxation, turning the tax system into a ploy of the financial sector to levy tribute on the economy at large.

Financial lobbyists quickly discovered that the easiest ploy to shift the cost of social programs onto labor is to conceal new taxes as user fees, using the proceeds to cut taxes for the elite 1%. This fiscal sleight-of-hand was the aim of the 1983 Greenspan Commission. It confused people into thinking that government budgets are like family budgets, concealing the fact that governments can finance their spending by creating their own money. They do not have to borrow, or even to tax (at least, not tax mainly the 99%).

The Greenspan tax shift played on the fact that most people see the need to save for their own retirement. The carefully crafted and well-subsidized deception at work is that Social Security requires a similar pre-funding - by raising wage withholding. The trick is to convince wage earners it is fair to tax them more to pay for government social spending, yet not also to ask the banking sector to pay similar a user fee to pre-save for the next time it itself will need bailouts to cover its losses. Also asymmetrical is the fact that nobody suggests that the government set up a fund to pay for future wars, so that future adventures such as Iraq or Afghanistan will not run a deficit to burden the budget. So the first deception is to treat only Social Security and medical care as user fees. The second is to aggravate matters by insisting that such fees be paid long in advance, by pre-saving.

There is no inherent need to single out any particular area of public spending as causing a budget deficit if it is not pre-funded. It is a travesty of progressive tax policy to only oblige workers whose wages are less than (at present) $105,000 to pay this FICA wage withholding, exempting higher earnings, capital gains, rental income and profits. The raison de’tre for taxing the 99% for Social Security and Medicare is simply to avoid taxing wealth, by falling on low wage income at a much higher rate than that of the wealthy. This is not how the original U.S. income tax was created at its inception in 1913. During its early years only the wealthiest 1% of the population had to file a return. There were few loopholes, and capital gains were taxed at the same rate as earned income.

The governments seashore insurance program, for instance, recently incurred a $1 trillion liability to rebuild the private beaches and homes that Hurricane Sandy washed out. Why should this insurance subsidy at below-commercial rates for the wealthy minority who live in this scenic high-risk property be treated as normal spending, but not Social Security? Why save in advance by a special wage tax to pay for these programs that benefit the general population, but not levy a similar user fee tax to pay for flood insurance for beachfront homes or war? And while we are at it, why not save another $13 trillion in advance to pay for the next bailout of Wall Street when debt deflation causes another crisis to drain the budget?

But on whom should we levy these taxes? To impose user fees for the beachfront reconstruction would require a tax falling mainly on the wealthy owners of such properties. Their dominant role in funding the election campaigns of the Congressmen and Senators who draw up the tax code suggests why they are able to avoid prepaying for the cost of rebuilding their seashore property. Such taxation is only for wage earners on their retirement income, not the 1% on their own vacation and retirement homes.

By not raising taxes on the wealthy or using the central bank to monetize spending on anything except bailing out the banks and subsidizing the financial sector, the government follows a pro-creditor policy. Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default. This enables bondholders to treat the government in the same way that banks treat a bankrupt family, forcing the debtor to sell off assets - in this case the public domain as if it were the family silver, as Britain’s Prime Minister Harold MacMillan characterized Margaret Thatcher’s privatization sell-offs.

In an Orwellian doublethink twist this privatization is done in the name of free markets, despite being imposed by global financial institutions whose administrators are not democratically elected. The International Monetary Fund (IMF), European Central Bank (ECB) and EU bureaucracy treat governments like banks treat homeowners unable to pay their mortgage: by foreclosing. Greece, for example, has been told to start selling off prime tourist sites, ports, islands, offshore gas rights, water and sewer systems, roads and other property.

Sovereign governments are, in principle, free of such pressure. That is what makes them sovereign. They are not obliged to settle public debts and budget deficits by asset selloffs. They do not need to borrow more domestic currency; they can create it. This self-financing keeps the national patrimony in public hands rather than turning assets over to private buyers, or having to borrow from banks and bondholders.

SOURCE

AMERICA’S DECEPTIVE 2012 FISCAL CLIFF PART ONE

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The Biggest Bubble In History: Fraud

By Washington’s Blog
January 24, 2013

Forget the Housing, Bond or Derivatives Bubbles Fraud Is the Biggest Bubble of All Time

The housing bubble which burst in 2007 or so was the BIGGEST BUBBLE OF ALL TIME.

Many argue that the bubble in U.S. bonds has surpassed the housing bubble as the largest ever.

Of course, given that the derivatives market is more than A THOUSAND TRILLION DOLLARS, and that is is backed by THOUSANDS OF TIMES LESS collateral, a good case can be made for arguing that derivatives are the biggest bubble.

But if you really think about it, the largest bubble in history is fraud, because it includes all of the above and more.

Specifically, the housing crisis was CAUSED BY FRAUD.  The government ENCOURAGED FRAUD, AND HELPED COVER IT UP.

Huge swaths of the derivatives market are manipulated by fraud.  See THIS, THIS, THIS and THIS. But instead of cracking down on the fraud, the government is BACKING IT.

And the bubble in bonds was caused by super-low interest rates.  See THIS, THIS, and THIS.

Low interest rates - in turn - are caused by the government’s zero interest rate policy and QUANTITATIVE EASING.

And how did the government sell these programs? By saying that they were necessary to help the economy and create more jobs.

But in reality, zero interest rate policy is just ANOTHER STEALTH BAILOUT FOR THE BIG BANKS.  And quantitative easing ONLY HELPS THE SUPER-ELITE...and hurt the economy and the little guy (Bernanke KNEW BACK IN 1988 that QE doesn’t work for its advertised purposes.)

In other words, the governments low interest rate policies were based upon a FUNDAMENTAL MISREPRESENTATION as to their purpose and probable effect.

Indeed, experts say that ALL BUBBLES are enabled by fraud.

But there are signs that the fraud bubble is collapsing.

Trust is falling to all-time lows as to many government and private institutions.  Why?  Because institutional corruption is so rampant that it is becoming obvious to everyone from JOE SIXPACK to amateur and SOPHISTICATED PROFESSIONAL INVESTORS.

While liberals tend to distrust big corporations and conservatives tend to distrust the federal government, we all agree that the MALIGNANT, SYMBIOTIC RELATIONSHIP between the two is the root problem.  Indeed, when GOVERNMENT SND CORPORATISM MERGE, it is hard for anyone to trust what is going on.

When government officials are AS CORRUPT as the CRIMINAL ENTERPRISES they are suppose to regulate, even the mainstream media CAN’T IGNORE IT ANY LONGER.

And the people lose all trust in the system.

No matter HOW HARD the boys WORK to COVER UP THEIR ONGOING MISDEEDS, the fraud bubble may finally be popping

See examples of a popping fraud bubble HERE, HERE, and HERE.

SOURCE

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Treasury approved excessive pay for executives at bailed-out AIG, GM and Ally

Associated Press
January 28, 2013

A government report Monday criticized the U.S. Treasury Department for approving “excessive” salaries and raises at firms that received taxpayer-funded bailouts during the financial crisis.

The Special Inspector General for the Troubled Asset Relief Program said Treasury approved all 18 requests it received last year to raise pay for executives at American International Group Inc., General Motors Corp. and Ally Financial Inc. Of those requests, 14 were for $100,000 or more; the largest raise was $1 million.

Treasury also allowed pay packages totaling $5 million or more for nearly a quarter of the executives at those firms, the report says.

Also noted: A $200,000 raise was approved for an executive of Allys mortgage-lending subsidiary Residential Capital LLC just weeks before ResCap filed for bankruptcy protection. Ally was GMҒs financial arm until it was taken over by the government in the bailout.

“We ... expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay,” said Christy Romero, the special inspector general for TARP. Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.

The report says Treasury bypassed rules under the 2008 bailout that limited pay. Treasury approved raises that exceeded pay limits and in some cases failed to link compensation to performance, it notes.

Romero said the guidelines say compensation should not exceed the 50th percentile of pay for executives in similar positions at other financially distressed companies.

But pay surpassed that level for 63 percent of the executives whose pay was approved, according to the report.

The report also said Treasury officials had been warned a year ago that the department needed to reform its procedures to ensure that the pay guidelines are followed.

Patricia Geoghegan, the Treasury official who approved the raises, disputed the findings of the report.

In a letter to Romero, Geoghegan said it’s unfair to call the pay excessive. She said Treasury must strike a balance between limiting compensation and approving pay packages that are consistent with executives in similar jobs.

Geoghegan called the 50th percentile “a benchmark” She noted that some pay packages at the three companies exceeded that level in 2012. But she said more than half at AIG were at or below that level, while nearly half at GM and Ally were below it.

A Treasury Department spokesman had no additional comment Monday and referred to Geoghegans letter.

The three companies received a total $248.7 billion in the financial bailout in 2008. AIG has repaid the $182 billion it received; GM still owes $21.5 billion on the $49.5 billion it received and Ally owes $11.4 billion on $17.2 billion in aid.

In a statement, AIG said it has overhauled its compensation practices to align pay with the company’s goal of balancing profit and risk. The company also is reviewing pay policies to ensure that compensation is tied to performance, AIG said.

GM and Ally said they are complying with all pay restrictions under the bailout rules.

SOURCE

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Obama Pushes Austerity in the Guise of Defending the Middle Class

By Patrick Martin
World Socialist Web Site
February 12, 2013

In the days leading up to Tuesday nights State of the Union address, the Obama administration has combined calls for austerity measures to slash social spending with demagogic attacks on congressional Republicans for advocating even larger cuts in domestic social programs.

Obama’s speech comes as back-room discussions continue between the White House and congressional leaders of both parties, driven by two imminent deadlines: the March 1 sequester, when $85 billion in across-the-board spending cuts take effect, and the March 27 expiration of authorization for spending by all federal government departments.

The sequester is a consequence of the 2011 Budget Control Act, a bipartisan deal between Obama and congressional Republicans, while the March 27 cutoff comes as a result of the expiration of another bipartisan agreement, the six-month continuing resolution passed last October to avoid a shutdown of the federal government during the 2012 election campaign.

If the sequester takes effect, budget cuts will hit both defense spending and a wide range of domestic social programs. The military cuts would have only a marginal effect in the vast Pentagon budget, which dwarfs the combined military spending of the next 15 countries in the world. The domestic cuts largely spare the major entitlement programs, Social Security, Medicare and Medicaid, but will devastate smaller programs like Head Start education for pre-kindergarten children.

On Friday, the White House published a list of the most egregious consequences of the domestic spending cuts looming under sequestration, as part of an effort to blame the Republicans for cuts for which both corporate-controlled parties are responsible. The list details the cumulative effect of the cuts, which total nearly $500 billion in domestic spending over the next ten years. Among the cutbacks:

An estimated 600,000 women and children would lose food stamps.

100,000 formerly homeless people would lose their government-financed housing.

Head Start cuts would eliminate early education slots for as many as 70,000 poor children.

Federal support would be eliminated for 7,200 school employees who serve special-needs children.

Job safety and food safety inspectors would face unpaid furloughs.

Federal loans to small businesses would be reduced by $500 million.

President Obama devoted his Saturday radio and Internet address to the sequester, warning of thousands of federal layoffs or furloughs and a huge blow to middle class families and our “economy as a whole” if the cuts took effect.

He argued, At a time when economists and business leaders from across the spectrum have said that our economy is poised for progress, we shouldn’t allow self-inflicted wounds to put that progress in jeopardy. This is a transparent effort to put the blame on congressional Republicans for a deepening economic crisis that implicates the entire capitalist system and all its political representatives, as reports in the US and globally suggest that world capitalism is already sinking back into renewed slump, more than four years after the Wall Street crash.

At the same time, Obama has renewed his appeal to the Republicans to join him in reaching a grand bargain that will include unprecedented cuts in Social Security, the government retirement benefits program, and Medicare, the federal health care program for the elderly.

Obama’s alternative to the sequester is simply a different set of deficit-reduction measures. In his Saturday address, he called for a balanced mix of “spending cuts” and the closure of “tax loopholes.” There’s certainly no reason that middle class families and small businesses should suffer just because Washington couldn’t come together and eliminate a few special-interest tax loopholes, or government programs that just don’t work, he concluded.

One policy choice by Obama speaks volumes about the real class basis of his administration. He proposed a pay raise for federal civilian workers of only one percent, after several years in which their pay has been frozen. According to the National Treasury Employees Union, federal workers have already accounted for $103 billion in deficit-reduction from the pay freeze and increased pension contributions. Since statutory pay guidelines call for at least a 1.8 percent pay raise, matching the level in equivalent non-government jobs, Obama’s 1.0 percent raise would take another $18 billion out of the pockets of federal workers.

The White House is seeking to conceal its anti-working-class program with another deluge of demagogy about Republicans defending the super-rich. White House senior adviser Dan Pfeiffer, in a blog post on the White House web site, decried the refusal of the Republicans to close loopholes for millionaires and billionaires.

The cynicism of this rhetoric is demonstrated by reports that Obama will name his longtime financial backer Penny Pritzker, heiress to the billion-dollar Hyatt Hotel fortune, as his next secretary of commerce, and choose the CEO of REI sportswear, Sally Jewell, a former Mobil oil executive, for the post of secretary of the interior.

In the presidents radio speech, and in statements by other spokesmen, the Obama administration has laid special emphasis on the need to avoid cuts in military spending. Obama cited the Navy’s decision to delay dispatch of a second aircraft carrier to the Persian Gulf, due to the uncertainty of funding.

Outgoing Secretary of Defense Leon Panetta issued several warnings about the supposedly catastrophic impact of the minor trim in Pentagon spending, and the uniformed chiefs of the various armed services are to appear before congressional committees Tuesday and Wednesday to reinforce the message.

An Army memorandum to Congress complained of a rapid atrophy of unit combat skills with a failure to meet demands of the National Military Strategy by the end of this year, while the Air Force warned that shortfall and sequestration will have drastic/long lasting impacts on the US nuclear arsenal.

While sections of the congressional Republicans associated with the ultra-right Tea Party have called for the sequester to go ahead, as a down payment on the gutting of federal domestic spending, those Republicans with the closest ties to the military-intelligence apparatus have joined forces with Panetta and Obama to oppose the sequester.

The Foreign Policy Initiative sent a letter to congressional leaders opposing the sequestration cuts in military spending, signed by the bulk of the neo-conservative Republicans who spearheaded the war in Iraq, including William Kristol, Robert Kagan, Paul Bremer and Elliott Abrams, as well as Robert Gates, defense secretary in both the Bush and Obama administrations, and former senators Joseph Lieberman, Jim Talent (a top Romney adviser) and Norm Coleman.

Senate Democrats have drafted a measure to largely eliminate the cuts in the Pentagon budget, reducing it by only $3 billion a year instead of the planned reduction of more than 15 times that amount. The military cuts would be offset by equivalent deficit reduction through cuts in farm subsidies and implementation of the so-called Buffett Rule imposing a minimum tax rate on multi-millionaires.

SOURCE

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Austerity cant solve crises of capitalism

By Gene Clancy
International Action Center
February 8, 2013

Millions of workers across the United States received a rude and unpleasant jolt this January when they discovered that their take-home pay had just shrunk by 2 percent. The Social Security payroll tax cut of 2009 was restored, costing workers an average amount of $850 a year, a significant wage decrease for workers on the edge of financial ruin.

This de facto pay cut is part of a march towards government austerity going on in the U.S. and around the world. What austerity really means is cutting government spending for social benefits and/or raising taxes to guarantee loan payments to banks. Austerity is an article of faith not only for the right wing, but for centrist politicians like the Obama administration and most European governments.

There was little to no discussion of the increase in the payroll tax, which will have a far greater negative economic impact than the small increases in taxes on the very rich that were ballyhooed in December.

More dangerous even than restoring the payroll tax are the proposed cuts in federal spending, including cuts to Social Security benefits. A preposterous lie, generated by the ruling class and its lackey media, is that Social Security and other benefits based on earlier contributions are somehow responsible for the large deficit, and that ғreforms must be made in order to ԓsave them.

In reality, Social Security has $2.6 trillion in its trust fund, enough to adequately fund it for at least the next 25 years, according to Jack Lew, President Barack ObamaԒs former budget director and new nominee for secretary of the Treasury. (Forbes.com, July 13, 2011)

Social Security should not even be included as part of the federal budget, and certainly not seen as a way to reduce the deficit.Ӕ Its trust fund has been accumulated from the lifetime contributions of millions of workers through its own payroll taxes and should be used for that purpose only. To reduce the benefits of older workers in order to reduce the deficit is outright robbery of the working class.

Deficits, austerity and economic growth

There are many reasons why most capitalist governments worldwide have inadequate revenue to cover costs. For the U.S., they include outrageous military spending (over a trillion dollars on the Iraq and Afghanistan wars alone), tax cuts for big business and the very wealthy, and gigantic bailouts for the banks.

Most important though is the worldwide economic crisis, which has impoverished the working class by permanently removing tens of millions of jobs, thus reducing the tax base. There has been no capitalist upturn following the 2008 crash. Every attempt to start new production involves bringing in new technology that destroys more jobs than it creates. Thus, capitalism has reached a dead end.

The ruling classes, desperate to have governments guarantee loan and interest payments to banks, have ignored the advice of many of their own economists and agencies, and embarked on a policy of governmental austerity that only exacerbates the overall capitalist crisis.

For example, an International Monetary Fund study of 17 countries that implemented austerity plans in the last 30 years showed that alleged debt-reduction plans, aimed at reducing debt and leading to prosperity, on the whole failed to do so. (Allvoices.com, Jan 29)

Moreover, says the IMF, Income and employment donӒt fully recover even five years after the austerity program is enacted. (Washington Post, May 7)

Since the IMFԒs own study shows that its austerity policies reduce economic growth, why does it continue to dictate such measures to governments all around the globe, especially in Africa, Asia and Latin America, and lately in southern Europe?

Policies please the banks, corporations

The answer is that these policies please the big capitalists and imperialists, especially the banks. They also please multinational corporations since they weaken unions and lower labor costs. The IMFs real goal is not to grow any economy but to increase the power of capital over labor and the power of the imperialist countries and their allies over oppressed nations.

For example, five years of austerity in Greece has resulted in deep economic depression and increasing misery for Greek workers. The Greek gross domestic product, which is a measure of the value of the total goods and services produced in a country, stands at only 70 percent of what it was before the European Union and IMF imposed austerity measures on Greece.

The 17 eurozone governments, which have embarked on a policy of severe austerity, have not only produced a “double dip” recession throughout Europe. They have not even been able to significantly decrease their debt. (See “Eurozone Debt Burden Stuck Amid Low Growth,” AP, Jan 23)

The latest official estimate of U.S. economic growth, released Jan. 30 by the Department of Commerce, has provided further proof that budgetary austerity depresses the economy. According to this report, “the just-completed fiscal cliff deal is expected to trim anywhere from 1 to 1.7 percent from economic growth this year.” With economic growth averaging 1.8 to 2.4 percent over the past three years, the impact of the just passed budget packageŅ may bring economic growth to a standstill. (Beforeitsnews.com, Feb 1, 2013)

Capitalism is, in fact, AT A DEAD END. Unable to solve the economic crisis which it caused, the ruling classes seek to squeeze a solution out of the world’s working and poor people through a combination of higher taxes and draconian cuts in needed health and social services. Progressives around the world must see to it that the rulers lies are exposed and that workers are not made to pay the price for the crises caused by capitalism.

SOURCE

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GOP sequester strategy: Hurt the poor, harm national security, and destroy jobs to screw old folks

By Jed Lewison
Daily Kops
February 25, 2013

Let’s be clear about one thing: the harsh automatic budget cuts of the sequester that will kick in on March 1 have nothing to do with responsible fiscal policy. They are a political gimmick run amok and despite their bipartisan origins, the political party that is now most intent on wielding them as a weapon is the GOP. Their goal: enact deep cuts to Social Security, Medicare, and Medicaid benefits while preserving benefits from tax loopholes and deductions for the wealthiest Americans.

Congressional Republicans are standing their ground, a position they say is strategic. The federal governments growing debt cannot be controlled through the spending at the annual discretion of Congress, and after the cuts take effect, that part of the federal budget will drop to levels not seen in five decades as measured against the size of the economy. Long term, the problem is entitlements, especially Medicare and Social Security.

The pain of further cuts to discretionary programs could bring Mr. Obama to the negotiating table on them by the spring, if not by midsummer, when Congress must once again raise the government’s borrowing limit.

“Because the Democratic-controlled Senate and the president refuse to negotiate, the only way to potentially bring them to the table to negotiate is to go forward with the spending reductions as they are,” [Georgia Republican Rep. Tom] Price said.

They aren’t satisfied with the chained CPI Social Security benefit cut President Barack Obama has said he would be willing to accept in exchange for closing loopholes and deductions. They look at the fact that the budget deficit has dropped by roughly half since President Obama’s first year and scoff. They hear that projected Medicare spending has already dropped by more than Simpson-Bowles originally sought and think to themselves that this is a good idea:

Nearly two million people who have been out of work for more than six months could see unemployment payments drop by 11 percent in checks that arrive in late March or the first days of April, according to the White House budget office, an average of $132 a month. [...]

The National Institutes of Health, for instance, would need to cut about 5 percent of its annual budget in just seven months, meaning hundreds fewer research grants, said Kathleen Sebelius, the health secretary. Money for food safety inspection and air traffic controllers would also be cut.

Roughly 600,000 low-income women and children would stop receiving food aid.

There’s no question that President Obama and congressional Democrats shoulder some of the responsibility for getting us to this point. But for the most part, the thing they’ve done wrong is failing to fight against insane Republican ideas - and to assume that today’s GOP is capable of operating in good faith. But what Republicans are doing here is going after one group of vulnerable Americans to screw over another group of vulnerable Americans, and this pattern of destructive crisis after destructive crisis isn’t going to stop until they stop.

SOURCE

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Monday, December 17, 2012

Austerity American Style Part 4 - Big Bad Banks

Corporate Welfare

Markets are a creation of government, just as corporations exist only by authorization of government. Governments set the rules of the market. And, since our government is of, by, and for We The People, those rules have historically been set to first maximize the public good resulting from people doing business.
- Democracy - Not The “Free Market” - Will Save Americas Middle Class, Thom Hartman, March 12, 2004

The ability of the financial sector to block meaningful reform after bringing the world to the brink of a second great depression proves how exceptional IT’S POWERS are to corrupt nearly every critical sector of American public and economic life.
- How the Servant Became a Predator, Neww Deal 2.0, October 12, 2009

Plundering U.S. cities is what large financial firms do. This is a troubling reality. A bankruptcy attorney featured on the NBC News report about Scranton offered this grim assessment: cutting worker pay is necessary to avoid more drastic measures. The reporter didnt explain this statement, leaving viewers to imagine what terrible fate awaits those who don’t accept the reigning neoliberal orthodoxy that city budgets must be balanced by cutting worker pay, gutting public services, and issuing more debt to profit the 1 percent.
- Cities in the Red: Austerity Hits America. Dissent, November 16, 2012

The money printing by the Fed is at the heart of the massive debt crisis. But it has been great for the bankers, with compensation at the 32 largest banks slated to hit an all-time high of $207 billion this year, according to a Wall Street Journal estimate. This reward for ripping off the public is almost three times the amount the federal government spends on education. Once again the bankers are blessed for their failures, receiving such wildly excessive compensation despite the fact that banking revenue is down 7.2 percent over the last two years.

The ugly tale of Americas Great Recession is inextricably entwined with the deplorable practices of Citigroup, the too-big-to-fail bank made legal by Bill Clinton’s signing off on reversing the Glass-Steagall law that prevented the merger of investment and commercial banks. The first beneficiary of the revised law was the newly created Citigroup, saved from bankruptcy a decade later by the taxpayers.
- A Sign That Obama Will Repeat Economic Mistakes, TruthDig, December 7, 2012

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A Sign That Obama Will Repeat Economic Mistakes

By Robert Scheer
TruthDig
December 7, 2012

Please don’t tell me that these reports in the business press touting Sallie Krawcheck as a front-runner for chairman of the SEC or even a possible candidate to be the next Treasury secretary are true. Who is she? Oh, just another former Citigroup CFO, and therefore a prime participant in the great banking hustle that has savaged the world’s economy. Krawcheck was paid $11 million in 2005 while her bank contributed to the toxic mortgage crisis that would cost millions their jobs and homes.

Not that you would know that sordid history from reading the recent glowing references to Krawcheck in the New York Times, the Wall Street Journal and Bloomberg News that stress her pioneering role as a leading female banker - a working mother no less - but manage to avoid her role in a bank that led the way in destroying the lives of so many women, men and their children. Nor did her financial finagling end with Citigroup, as Krawcheck added a troubling stint in the leadership at Merrill Lynch and Bank of America to her rsum.

A woman who would be an excellent choice as the most experienced as well as principled candidate to head the SEC or Treasury is Sheila Bair, former head of the FDIC, who labored to protect consumers rather than undermine them. Indeed, her outstanding book “Bull by the Horns,” chronicling her fight in the last two administrations to hold the banksters accountable, should be required reading for the president and those who are advising him on selecting his new economic team.

The SEC is supposed to supervise the banks rather than abet them in their chicanery. And although the Treasury Department has been a captive of Wall Street lobbyists for most of the modern era, one would expect something better from the second coming of Barack Obama. Those are key appointments in determining whether the president can turn around the still-moribund economy by channeling the spirit of Franklin D. Roosevelt. Or will he continue to plod along on the course set by George W. Bush, bailing out the banks while ignoring beleaguered homeowners and the many other victims of this banking-engineered crisis?

Obama was given a pass on the economy by voters only because Mitt Romney was an even more craven enabler of Wall Street greed. But the outlines of the Bush Wall Street payoff remain in place, with the Federal Reserve continuing to bail out the banks with virtually free money and the purchase of $40 billion in toxic mortgage-based bonds every month to add to the more than trillion dollars in that junk that the Fed previously had taken off the banks’ books.

The money printing by the Fed is at the heart of the massive debt crisis. But it has been great for the bankers, with compensation at the 32 largest banks slated to hit an all-time high of $207 billion this year, according to a Wall Street Journal estimate. This reward for ripping off the public is almost three times the amount the federal government spends on education. Once again the bankers are blessed for their failures, receiving such wildly excessive compensation despite the fact that banking revenue is down 7.2 percent over the last two years.

A prime example is Krawchecks old bank, Citigroup, whose new CEO this week announced that the company has been forced to engage in a major retrenchment, eliminating 11,000 jobs and closing 84 branches. The bank has been deeply troubled ever since the housing meltdown it helped trigger first began, and it was saved from bankruptcy only by a direct infusion of $45 billion in taxpayer money and a commitment of an additional $300 billion in underwriting of Citigroup’s bad paper.

The ugly tale of Americas Great Recession is inextricably entwined with the deplorable practices of Citigroup, the too-big-to-fail bank made legal by Bill ClintonҒs signing off on reversing the Glass-Steagall law that prevented the merger of investment and commercial banks. The first beneficiary of the revised law was the newly created Citigroup, saved from bankruptcy a decade later by the taxpayers.

I shouldnt be surprised that Krawcheck would be considered a viable nominee for a central position in managing our economy. After all, her colleague in the top ranks at Citigroup during the years of financial depravity, Robert Rubin, is considered a significant adviser to the Obama administration, and his protҩgs, led by Treasury Secretary Timothy Geithner, are still directing policy. It was Rubin who pushed through the reversal of Glass-Steagall, an act of betrayal of the public interest that was rewarded with obscene amounts of money when he ultimately took the job of leading the bank he made legal.

The very fact that these folks remain influential, as witnessed by Krawcheck being considered to head the SEC rather than being the subject of one of its much-needed investigations, gives further evidence of the enduring but ultimately terminal illness of crony capitalism.

SOURCE

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Top Fed Official: The Moment Is Now to Break Up Big Banks

By Sarah Moughty
Frontline
April 2, 2012

The nations largest banks are “a perversion of capitalism” and a clear and present danger to the U.S. economy. The Dodd-Frank financial reform legislation passed in the wake of the crisis “may actually perpetuate an already dangerous trend of increasing banking industry concentration.”

These arguments come not from an Occupy Wall Street activist, not from a Tea Party member, but from a SCATHING REPORT released last week by one of the nation’s top banking regulators, the Federal Reserve Board of Dallas. In a column for ProPublica and The New York Times, reporter Jesse Eisenger described the report as a radical indictment of the nation’s financial system.

FRONTLINE sat down on Saturday with the Dallas Fed CEO and president, former banker Richard W. Fisher, to talk about the report and its core argument about “too big to fail” institutions. According to their calculation, the five biggest commercial banks - JPMorgan, Bank of America, Citigroup, Wells Fargo and U.S. Bancorp hold 52 percent of all U.S. deposits, which means the “too big to fail: problem is with us now more than ever.

Dodd-Frank proposes to solve this problem by giving the government “resolution authority” to dismantle a big bank, but Fisher suggests a better solution is to not allow banks to get so big.

Fisher argues that now is an ideal time to solve this problem. Regulators feared that aggressive steps to end the too big to fail problem during the crisis would further destabilize an already delicate system. But now that the financial system is healthier, and the normal lending and borrowing that keeps the system liquid has been restored, the risks have lessened.

FRONTLINE producer MICHAEL KIRK (Inside the Meltdown, The Warning) interviewed Fisher for our upcoming series Money, Power and Wall Street, airing April 24 and May 1 (check local listings).  In this special four-hour investigation, FRONTLINE will tell the inside story of the struggles to rescue and repair a shattered economy, exploring key decisions, missed opportunities, and the unprecedented and uneasy partnership between government leaders and titans of finance that affects the fortunes of millions of people around the world.

SOURCE

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The “Fiscal Cliff” Is A Diversion: The Derivatives Tsunami and the Dollar Bubble

By Paul Craig Roberts
December 17, 2012

The “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.

The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes.  In other words, the “fiscal cliff” is going to happen either way.

The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy.  Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.

Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.

The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian REPORTS that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget.  More simply, just divide $1.3 trillion by ten and it comes to $130 billion per year. This can be done by simply taking a three month vacation each year from Washingtons wars.

The Derivatives Tsunami and the bond and dollar bubbles are of a different magnitude.

Last June 5 in “Collapse At Hand”, I POINTED OUT that according to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.

Prior to financial deregulation, essentially the repeal of the Glass-Steagall Act and the non-regulation of derivativesa joint achievement of the Clinton administration and the Republican Party - Chase, Bank of America, and Citibank were commercial banks that took depositors deposits and made loans to businesses and consumers and purchased Treasury bonds with any extra reserves.

With the repeal of Glass-Steagall these honest commercial banks became gambling casinos, like the investment bank, Goldman Sachs, betting not only their own money but also depositors money on uncovered bets on interest rates, currency exchange rates, mortgages, and prices of commodities and equities.

These bets soon exceeded many times not only US GDP but world GDP.  Indeed, the gambling bets of JP Morgan Chase Bank alone are equal to world Gross Domestic Product.

According to the first quarter 2012 report from the Comptroller of the Currency, total derivative exposure of US banks has fallen insignificantly from the previous quarter to $227 trillion. The exposure of the 4 US banks accounts for almost of all of the exposure and is many multiples of their assets or of their risk capital.

The Derivatives Tsunami is the result of the handful of fools and corrupt public officials who deregulated the US financial system. Today merely four US banks have derivative exposure equal to 3.3 times world Gross Domestic Product.  When I was a US Treasury official, such a possibility would have been considered beyond science fiction.

Hopefully, much of the derivative exposure somehow nets out so that the net exposure, while still larger than many countries’ GDPs, is not in the hundreds of trillions of dollars. Still, the situation is so worrying to the Federal Reserve that after announcing a third round of quantitative easing, that is, printing money to buy bonds - both US Treasuries and the banks’ bad assets - the Fed has just announced that it is doubling its QE 3 purchases.

In other words, the entire economic policy of the United States is dedicated to saving four banks that are too large to fail. The banks are too large to fail only because deregulation permitted financial concentration, as if the Anti-Trust Act did not exist.

The purpose of QE is to keep the prices of debt, which supports the banks’ bets, high. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales.  But the Feds policy is hurting the economy by depriving savers, especially the retired, of interest income, forcing them to draw down their savings.  Real interest rates paid on CDs, money market funds, and bonds are lower than the rate of inflation.

Moreover, the money that the Fed is creating in order to bail out the four banks is making holders of dollars, both at home and abroad, nervous.  If investors desert the dollar and its exchange value falls, the price of the financial instruments that the Fed’s purchases are supporting will also fall, and interest rates will rise. The only way the Fed could support the dollar would be to raise interest rates. In that event, bond holders would be wiped out, and the interest charges on the governments debt would explode.

With such a catastrophe following the previous stock and real estate collapses, the remains of people’s wealth would be wiped out. Investors have been deserting equities for safe US Treasuries.  This is why the Fed can keep bond prices so high that the real interest rate is negative.

The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the US dollar and bond market of the Federal Reserves commitment to save four US banks.

Once again, the media and its master, the US government, hide the real issues behind a fake one.  The fiscal cliff has become the way for the Republicans to save the country from bankruptcy by destroying the social safety net put in place during the 1930s, supplemented by Lyndon Johnson’s “Great Society” in the mid-1960s.

Now that there are no jobs, now that real family incomes have been stagnant or declining for decades, and now that wealth and income have been concentrated in few hands is the time, Republicans say, to destroy the social safety net so that we don’t fall over the fiscal cliff.

In human history, such a policy usually produces revolt and revolution, which is what the US so DESPERATELY NEEDS.

Perhaps our STUPID AND CORRUPT policymakers are doing us a favor after all.

SOURCE

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How to Cut Megabanks Down to Size

By Gretchen Mogenson
NY Times
January 19, 2013

IT is a prevailing myth in Washington: big bailouts are over for good. Never again, the line goes, could giant financial institutions imperil the nations economy.

This is nonsense, of course. Whatever regulators and lawmakers say, the Dodd-Frank financial overhaul lacks any guarantee that taxpayers won’t have to come to the rescue again.

So it was refreshing to hear a member of the Federal Reserve Board debunk the bailouts-are-gone theory last week.

The official was Richard W. Fisher, the president of the Federal Reserve Bank of Dallas and a longstanding truth-teller about too-big-to-fail banks. On Wednesday, in a speech in Washington, Mr. Fisher laid out a compelling proposal for shrinking financial giants in order to protect taxpayers. He suggested that megabanks be chopped into pieces, so that no one of them could endanger the financial system if it ran into trouble.

That may sound like a return to the Glass-Steagall Act, the Depression-era law that separated investment banking and commercial banking until it was dismantled in 1999. But Mr. Fishers plan is more sophisticated than Glass-Steagall, in that it recognizes how complex big financial institutions have become. Glass-Steagall concerned only old-school banking businesses, like making loans, and Wall Street businesses, like trading stocks. TodayҒs financial behemoths are in so many different businesses that a top-to-bottom restructuring is required.

Why? Mr. Fisher argued that megabanks not only threaten taxpayers with bailouts, but that their continuing failure to lend is also thwarting the Feds efforts to jump-start the economy by keeping interest rates low. “I submit that these institutions, as a result of their privileged status, exact an unfair tax upon the American people,” he told his audience. “Moreover, they interfere with the transmission of monetary policy and inhibit the advancement of our nations economic prosperity.”

Smaller institutions, by contrast, have continued to lend in the post-crisis years, especially to the kinds of modest-size businesses that create so many jobs across the country. According to figures compiled by Mr. Fisher’s colleagues at the Dallas Fed, community banks - defined as those with no more than $10 billion in assets hold less than one-fifth of the nation’s banking assets. Nevertheless, they hold more than half of the industry’s small-business loans.

“Huge banks must be restructured and their access to the safety net scaled back”, Mr. Fisher said, “because neither regulators nor market participants have proved effective in monitoring risks at these institutions.”

The manic years before the credit crisis proved that regulators canҒt police financial institutions appropriately. And while market discipline has worked to keep smaller institutions on the straight and narrow, it has been ineffective with megabanks, Mr. Fisher said. He noted, for example, that community banks typically have a few large shareholders scrutinizing the risks in their operations. But too-big-to-fail institutions, with millions of disparate shareholders, dont benefit from this kind of concentrated policing mechanism.

Big banks’ creditors - like bond holders - don’t impose discipline, either. They know they will be protected by a taxpayer rescue should a large institution teeter.

Fairness is at the heart of Mr. Fisher’s argument. “Large institutions,” he said, “are financial firms whose owners, managers and customers believe themselves to be exempt from the processes of bankruptcy and creative destruction.” In other words, small institutions must submit to the rigors of the free market. Those too big to fail do not.

There are roughly 5,600 commercial banking institutions in the country, Mr. Fisher noted. Some 5,500 of them are community banks. While these organizations account for 98.6 percent of all banks, they hold only 12 percent of total industry assets. They are routinely allowed to fail if they get into trouble. Few of them did during the crisis.

Contrast these figures with those of the nations 12 largest banks, whose assets range from $250 billion to $2.3 trillion. They account for 0.2 percent of all banks but hold 69 percent of industry assets. These are the banks that enjoy all the perquisites of the federal safety net: significantly lower borrowing costs and a taxpayer backstop, for example.

Understanding that it will be a tough battle to break up the megabanks, Mr. Fisher suggests that in the meantime, only commercial banking operations receive protection from the federal safety net in the form of federal deposit insurance. An institutionҒs other activities securities trading, insurance operations and real estate, for example ח should fall outside any backstop. Furthermore, he recommends that these banks require customers and trading partners to sign an agreement stating that they understand the business they are conducting is not covered by any federal protection or guarantees. That would begin to reduce the perception that all of these institutions counterparties would be protected in a disaster.

“Financial stability rests on a level playing field that rewards sound judgment and integrity and penalizes excessive risk and complexity financed by taxpayer dollars,” Mr. Fisher said in his speech. “Government must retain its role as the financial systems watchdog, but it should render no institution immune to market discipline.”

IN an interview after the speech, Mr. Fisher said he believed his plan could appeal to both liberals and conservatives. “It’s politically palatable on both sides of the aisle,” he said. “This is one thing that both Republicans and Democrats can agree on.”

Or, as he said more pointedly in his speech: “If the administration and the Congress could agree as recently as two weeks ago on legislation that affects 1 percent of taxpayers, surely it can process a solution that affects 0.2 percent of the nation’s banks and is less complex and far more effective than Dodd-Frank.”

“The response to Mr. Fishers proposal has been resoundingly positive,” he said. Immediately after the speech was posted Wednesday evening on the Dallas Fed’s Web site, heavy traffic caused the site to shut down.

“I do think that this is something that can actually bring people on Capitol Hill together,” he said.

Wouldnt that be nice?

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

Posted by Elvis on 12/17/12 •
Section Dying America • Section Austerity American Style • Section Next Recession, Next Depression
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Friday, December 07, 2012

Austerity American Style Part 3 - Big Bad Businessmen

Evil Executive

Plundering U.S. cities is what large financial firms do. This is a troubling reality. A bankruptcy attorney featured on the NBC News report about Scranton offered this grim assessment: cutting worker pay is necessary to avoid more drastic measures. The reporter didnt explain this statement, leaving viewers to imagine what terrible fate awaits those who don’t accept the reigning neoliberal orthodoxy that city budgets must be balanced by cutting worker pay, gutting public services, and issuing more debt to profit the 1 percent.
- Cities in the Red: Austerity Hits America. Dissent, November 16, 2012

The money printing by the Fed is at the heart of the massive debt crisis. But it has been great for the bankers, with compensation at the 32 largest banks slated to hit an all-time high of $207 billion this year, according to a Wall Street Journal estimate. This reward for ripping off the public is almost three times the amount the federal government spends on education. Once again the bankers are blessed for their failures, receiving such wildly excessive compensation despite the fact that banking revenue is down 7.2 percent over the last two years.

The ugly tale of Americas Great Recession is inextricably entwined with the deplorable practices of Citigroup, the too-big-to-fail bank made legal by Bill Clinton’s signing off on reversing the Glass-Steagall law that prevented the merger of investment and commercial banks. The first beneficiary of the revised law was the newly created Citigroup, saved from bankruptcy a decade later by the taxpayers.
- A Sign That Obama Will Repeat Economic Mistakes, TruthDig, December 7, 2012

Five Job-Destroying CEOs Trying to Fix the Debt by Slashing Corporate Taxes and Cutting Social Security Benefits
Let’s name them and shame them.

By Sarah Anderson
AlterNet
December 7, 2012

In poll after poll, the American people say they are far more concerned about the jobs crisis than the DEBT CRISIS. A powerful coalition of CEOs says they have an answer for both problems.

Give us more tax breaks, they say, and well use the money to invest and create jobs. The national economic pie will expand and Uncle Sam will get plenty of the frothy meringue without having to raise tax rates.

That’s the line of the Fix the Debt campaign. Led by more than 90 CEOs, this turbo-charged PR / LOBBYING machine is blasting the message that such pro-growth tax reform should be a pillar of any deficit deal (along with cuts to benefit programs like Social Security and Medicare).

And it might be a good line if not for some pesky real-world facts. You see the same corporations peddling this line have already been paying next to nothing in taxes. And instead of creating jobs, they’ve been destroying them. Here are five examples of job-cutting, tax-dodging CEOs who are leading Fix the Debt.

1. Randall Stephenson, AT&T

U.S. jobs destroyed since 2007: 54,000

Average effective federal corporate income tax rate, 2009-2011: 6.3%

Randall Stephenson presides over the biggest job destroyer among the Fix the Debt corporate supporters, having eliminated 54,000 jobs since 2007. The company also has one of the largest deficits in its worker pension fund a gaping hole of $10 billion.

Can Stephenson blame all this belt-tightening on the Tax Man? Not exactly. Over the last three years, AT&Tגs tax bills have been miniscule. According to the firms own financial reports, they’ve paid Uncle Sam only 6.3 percent on more than $43 billion in profits. If the telecom giant had paid the standard 35 percent corporate tax rate over the last three years, the federal deficit would be $12.5 billion lower.

So WHERE HAVE AT&Ts profits gone? A huge chunk has landed in Stephenson’s own PENSION fund. His $47 million AT&T retirement account is the third-largest among Fix the Debt CEOs. If converted to an annuity when he hits age 65, it would net him a retirement check of more than a quarter million dollars every month for the rest of his life.

While his economic future is more than secure, Stephenson emerged from a meeting with President Obama on November 28 optimistic about the chances of reforming (i.e., cutting) Social Security as part of a deal to avoid the so-called “fiscal cliff.”

2. Lowell McAdam, Verizon

U.S. jobs destroyed since 2007: 30,000

Average effective federal corporate income tax rate, 2009-2011: -3.3%

Another telecommunications giant, Verizon, is close behind AT&T in the layoff leader race, with 30,000 job cuts since 2007. Like its industry peer AT&T, Verizon also has a big deficit in IT’S PENSION ACCOUNTS. It would need to cough up $6 billion to meet its promised pension benefits to employees and another $24 billion to meet promised post-retirement health care benefits.

Did the blood-sucking IRS leave Verizon no choice but to slash jobs and underfund worker pensions? Far from it. The company actually got money back from Uncle Sam, despite reporting $34 billion in U.S. profits over the last three years. If Verizon had paid the full corporate tax rate of 35 percent, last years national deficit would have been $13.1 billion less. Had that amount been used for public education, it could have covered the cost of employing more than 190,000 elementary teachers for a year.

Verizon’s new CEO, Lowell McAdam, already has $8.7 million in Verizon pension assets, enough to set him up for a $47,834 monthly retirement check. McAdams predecessor, Ivan Seidenberg, who has also signed up as a Fix the Debt supporter, retired with more than $70 million in his Verizon retirement package.

3. David Cote, Honeywell

U.S. jobs destroyed since 2007: 4,000

Average effective federal corporate income tax rate, 2009-2011: -14.8%

Honeywell has created 10,000 new jobs since 2007 Җ outside the United States. At home, the firm has eliminated 4,000 jobs. In July, Honeywell announced it was closing a Metropolis, Illinois plant, laying off 230 workers, and selling another Illinois property, Sensata Technologies, to Bain Capital, Mitt Romneys old private equity firm. Bain, another Fix the Debt supporter, immediately announced it was closing the 175-worker plant and shipping the jobs to China.

Are Honeywell’s U.S. job losses the result of Uncle Sam strangling all the life out of the company? Hardly. Over the last three years, the firm has been highly profitable each year, with total U.S. profits of $2.5 billion. And yet Honeywell used deductions, credits, and loopholes to garner refunds totaling $377 million over the last three years an effective tax rate of negative 14.8 percent. If Honeywell had paid the full 35 percent corporate tax since 2009, the U.S. deficit would have been reduced by $1.3 billion.

Honeywell is not only near the front of the IRS refund line, it is also among the top recipients of government contracts. In 2011, the firm got $725 million in government deals, making it the 35th-largest federal contractor. Tax refunds go in one pocket, while taxpayer-financed government contracts go in the other.

Still, Honeywell’s nearly tax-free status hasn’t kept CEO Cote from being one of the most outspoken advocates for more corporate tax cuts. One of his favorite proposals is a shift to a territorial tax system, which would permanently exempt all foreign earnings of U.S. corporations from U.S. income taxes. Cote was one of 12 big company CEOs who met with President Obama on November 14 to plead for this tax break. Honeywell has more than $8 billion stashed offshore and could receive an immediate tax windfall of more than $2 billion if Congress approved this shift to a territorial tax system. According to an Institute for Policy Studies report, Fix the Debt corporations as a whole would stand to gain $134 billion.

Perhaps even more galling is Cote’s demand for cuts to earned benefit programs. Cote has $78 million in his Honeywell retirement accounts, enough to qualify for monthly retirement checks of $428,000 starting at age 65. In contrast the average retiree receives just $1,237 a month from Social Security.

4. Kenneth Frazier, Merck

U.S. jobs destroyed since 2007: 13,000

Average effective federal corporate income tax rate, 2009-2011: 13.2%

In 2009, Merck merged with Schering Plough to become the worlds second-largest pharmaceutical company. Less than a year later, Merck slashed 15 percent of its workforce, including closing facilities in Miami Lakes, Florida and Cambridge, Massachusetts. All told, between 2007 and 2011, Merck destroyed nearly 25,000 jobs, including at least 13,000 in the United States.

Merck’s radical downsizing has little to do with burdensome taxes. Between 2009 and 2011, the drug giant paid just 13.2 percent of its $9 billion of U.S. income in federal corporate income taxes. If Merck had paid the full 35 percent rate over the three-year period, the U.S. debt would have been reduced by nearly $2 billion, enough to pay for college scholarships for more than 250,000 students. But that’s not a low enough tax rate for Merck. As a part of Fix the Debt, CEO Kenneth Frazier is telling Congress the prescription to restore the U.S. economy should include a permanent corporate tax holiday for offshore earnings. If Congress fills that prescription, Merck could receive a $15 billion windfall on the $44 billion it has stashed offshore.

5. Terry Lundgren, Macy’s

U.S. jobs destroyed since 2007: 7,000

Average effective federal corporate income tax rate, 2009-2011: 20.7%

Though Macys sales have rebounded from their recessionary slump, the department store owner’s workforce is still down by 7,000 compared to 2007. Meanwhile, Macys CEO Terry Lundgren has seen his pay more than double over the period, from $8.7 million in 2007 to $17.6 million last year. Macy’s has also showered Lundgren with generous retirement benefits, currently worth more than $16.7 million. Over the last three years, Macys has taken advantage of various tax credits and deductions to lower its federal income tax rate to 20.7 percent. Lundgren also attended the November 28 meeting with President Obama, where Fix the Debt CEOs pushed cuts to Social Security and Medicare.

Another Way to Fix the Debt: End Corporate Entitlements, Demand Big Business Pays Its Fair Share

The five companies profiled here have contributed enormously to the national debt by eliminating livelihoods - together they’ve destroyed 108,000 jobs since 2007 - and through tax-dodging. If they had simply been required to pay the full statutory corporate tax rate of 35 percent, they would’ve paid $48 billion in additional federal income taxes over the last three years. And now these CEOs expect us to fall for their argument that even more tax breaks will be good for American workers.

There is an entitlement problem at the center of the debt debate - it is the entitlement of CEOs with track records of job destruction and tax dodging lecturing the rest of us on how to fix the debt. 

Sarah Anderson is Global Economy Project Director and Scott Klinger is an Associate Fellow of the Institute for Policy Studies. They are co-authors of the report “A Pension Deficit Disorder.”

SOURCE

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CEO Council Demands Cuts To Poor, Elderly While Reaping Billions In Government Contracts, Tax Breaks

By Christina Wilkie and Ryan Grim
Huffington Post
November 25, 2012

The corporate CEOs who have made a high-profile foray into deficit negotiations have themselves been substantially responsible for the size of the deficit they now want closed.

The companies represented by executives working with the Campaign To Fix The Debt have received trillions in federal war contracts, subsidies and bailouts, as well as specialized tax breaks and loopholes that virtually eliminate the companies’ tax bills.

The CEOs are part of a campaign run by the Peter Peterson-backed Center for a Responsible Federal Budget, which plans to spend at least $30 million pushing for a deficit reduction deal in the lame-duck session and beyond.

During the past few days, CEOs belonging to what the campaign calls its CEO FISCAL LEADERSHIP COUNCIL - most visibly, Goldman Sachs’ Lloyd Blankfein and Honeywell’s David Cote—have barnstormed the media, making the case that the only way to cut the deficit is to severely scale back social safety-net programs—Medicare, Medicaid, and Social Security—which would disproportionately impact the poor and the elderly.

As part of their push, they are advocating a “territorial tax system” that would exempt their companies’ foreign profits from taxation, netting them about $134 billion in tax savings, according to a new report from the Institute for Policy Studies titled “The CEO Campaign to Fixђ the Debt: A Trojan Horse for Massive Corporate Tax Breaks”—money that could help pay off the federal budget deficit.

Yet the CEOs are not offering to forgo federal money or pay a higher tax rate, on their personal income or corporate profits. Instead, council recommendations include cutting “entitlement” programs, as well as what they call “low-priority spending.”

Many of the companies recommending austerity would be out of business without the heavy federal support they get, including Goldman Sachs and JPMorgan Chase, which both received billions in direct bailout cash, plus billions more indirectly through AIG and other companies taxpayers rescued.

Just three of the companies—GE, Boeing and Honeywell—were handed nearly $28 billion last year in federal contracts alone. A spokesman for Campaign To Fix The Debt did not respond to an email from The Huffington Post over the weekend.

The CEO council recommends two major avenues that it claims will produce “at least $4 trillion of deficit reduction.” The first is to “replace mindless, abrupt deficit reduction with thoughtful changes that reform the tax code and cut low-priority spending.” The second is to “keep debt under control over the long-term by focusing on the long-term growth of entitlement programs.”

CEOs are encouraged to present a Fix-The-Debt PowerPoint presentation to their “employee town hall [meetings and] company meetings.” To further help get the word out, the campaign borrowed a page from the CEOs this fall who wrote letters encouraging their employees to vote for Mitt Romney, or face job cuts. This time, the CFD has created two templates for bosses to use at their companies.

But in the past week, in order to make their case to the millions of Americans who don’t work for them, CEOs fanned out into television, to convince the rest of the country that slashing the social safety net is the only way to reduce the deficit.

In an interview aired Monday, Goldman Sachs chairman and CEO Lloyd Blankfein said Social Security “wasn’t devised to be a system that supported you for a 30 year retirement after a 25-year career.” The key to cutting Social Security, he said, was simply a matter of teaching people to expect less.

“You’re going to have to do something, undoubtedly, to lower people’s expectations of what they’re going to get,” Blankfein told CBS, “the entitlements, and what people think they’re going to get, because you’re not going to get it.”

Blankfein and Goldman Sachs don’t have to worry about lowering expectations. After receiving a $10 billion federal bailout in 2008, and paying it back a few years later, Goldman Sachs recently exceeded Wall Street analysts’ expectations by announcing $8.4 billion in third quarter revenues for 2012. On the heels of a great year, Blankfein is expected to take home an even larger salary than he did in 2011, when he made $16.1 million.

To understand the importance of banking profits to the members of the deficit council, one need look no further than the two top-ranking members of the Campaign To Fix The Debt’s steering committee, former New Hampshire Sen. Judd Gregg (R) and former Pennsylvania Gov. Ed Rendell, a Democrat. Gregg is currently employed as an international adviser to Goldman Sachs, while Rendell collects his paycheck from the boutique investment bank Greenhill & Co.

Following Blankfein’s evening news appearance on Monday, Cote, the Honeywell CEO, sat down with the same network on Tuesday, and said essentially the same thing that Blankfein did.

Cote ranked 11th on a list compiled in a recent study conducted by the Institute for Policy Studies of executives who have saved the most from the Bush tax cuts. According to the IPS, Cote’s taxable compensation for 2011 was a bit more than $55 million, and he did not pay about $2.5 million thanks to the Bush tax cuts.

After mentioning a few scary-sounding deficit statistics, he suggested the government raise revenue by ending individual tax credits and deductions, which he said amounted to a $1 trillion “giveaway” in 2011. It was clear, however, that Cote hadn’t come on the show to talk about taxes.

“The big nut is going to have to be [cuts to] Medicare/Medicaid especially with the baby boomer generation retiring. It’s going to literally crush the system.”

But while Cote strongly recommends cutting those benefits, when it comes to the tax obligations of corporations, he’s clear about what he wants: a corporate tax rate of zero.

“From a fairness perspective, nobody would be able to stand [a zero tax rate on corporate profits],” but if the U.S. really wanted to create jobs, he said this spring, “we would have the lowest rate possible.”

At Honeywell, Cote practices what he preaches. Between 2008-2010, the company avoided paying any taxes at all. Instead, the company got taxpayer-funded rebates of $34 million off of profits totaling nearly $5 billion.

Part of what makes the lobbying blitz around the fiscal cliff so complex for CEOs on the Fiscal Leadership Council is that many of them need more than just low tax rates. They also need Congress and the White House to maintain current defense spending levels so they can continue winning enormous contracts.

In 2011, $40 billion of taxpayer money was divided among just nine CFD member companies, led by defense giant Boeing, which raked in $22 billion in federal contracts alone, more than the other eight companies combined. For his efforts as CEO, Boeing’s Jim McNerney took home nearly $23 million in compensation last year.

But even as McNerney lends his name to the deficit commission, his company has quietly begun laying off U.S. workers ahead of defense cuts that are expected to be part of a deficit reduction deal. The company denies that federal spending has anything to do with the job cuts, but defense industry analysts aren’t convinced.

At least one faction of Boeing’s workforce is thriving: Boeing lobbyists in Washington have made $12 million since January fighting proposed cuts to defense and aerospace projects.

SOURCE

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Men who have never done a day of physical work call to raise the retirement age to 70

By Mark E. Andersen
Daily Kos
January 18, 2013

There is a group of CEOs who think it is a great idea to raise the RETIREMENT AGE. These rich men, these titans of industry have a plan to fix Social Security and Medicare. A plan that includes raising the retirement age to 70 for those under 55. I am 45 years old, and back in May of 2012 I WROTE:

I am still somewhat bitter over the fact the retirement age was raised to 67 for my generation before we even had the ability to vote. I turned 18 in 1985 and just six days before my 16th birthday Ronald Reagan signed HR 1900 into law.

So not only did I get screwed over by Ronald Reagan, now a bunch of rich men who have likely never done an ounce of backbreaking labor want to tell me I cannot retire until I am 70?

These same men who actually had the balls to say,

[T]he group rejected shoring up Social Security by making incomes above the maximum annual threshold - which in 2012 was $110,100 - subject to payroll taxes, saying that would hurt the economy.

“You would have to raise the base upon which the taxes are applied very substantially to drive a sufficient level of revenue to address the long-term solvency of the program,” Loveman said.

“That would be far more damaging to economic growth than what we’re asking people to consider,” he added. “If you raise the tax rate on people who earn over the current threshold, you’ll have an immediate deleterious effect on employment and economic activity.”

So the gentlemen of the BUSINESS ROUNDTABLE think I should wait until I am 70 to retire; however, they are not going to give one more dime to preserve the solvency of Social Security?

I am going to be quite blunt in my response to the MEMBERS of the business roundtable. Fuck You! You want the retirement age raised - fine. Get a job as an electrician, plumber, coal miner, truck driver, construction worker, iron worker, etc. and see how long you last in the job. Raising the retirement age is not a fix, and the excuse that you can’t raise taxes on those that can afford it because it would slow the economy down ... well, that is absolute and utter bullshit.

Allowing the Business Roundtable an influential seat at the table is is like letting the fox guard the hen house. Do not be fooled the supposed business acumen possessed by these men (and very, very few women) is just that business. They do not have the common person’s best interests in mind.

SOURCE

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Bernie Sanders’ Top 10 Tax Avoiders

By Michael Mechanic
Mother Jones
March 29, 2011

In a Sunday press release calling on wealthy individuals and corporations to pay their share, Senator Bernie Sanders of Vermont offered a list of what he calls “some of the 10 worst corporate income tax avoiders.”

Sanders, you’ll recall, made headlines for his epic 8.5-hour speech/filibuster this past December, dealing with how Obama’s pending tax-cut deal with the GOP would be bad for America. The speechpublished this month as a paperback simply titled The Speechחwas in vain: Congress passed the deal, extending tax breaks not merely to the poor and middle-class, but to America’s richest people.

It also slashed the estate tax from 55 percent to 35 percent and exempted the first $5 million of an estate’s value ($10 million for a couple)up from $1 million pre-Bush. In his speech, Sanders warned against this change, noting, “Let us be very clear: This tax applies only - only - to the top three-tenths of 1 percent of American families; 99.7 percent of American families will not pay one nickel in an estate tax. This is not a tax on the rich, this is a tax on the very, very, very rich. (Click HERE for our blockbuster charts showing just how rich the very, very, very rich actually are.)

If the estate tax - which Republicans have cleverly rebranded the “death tax” - were to be eliminated entirely (another GOP goal), Sanders says it would cost US taxpayers $1 trillion over 10 years. “Families such as the Walton family, of Walmart fame, would have received, just this one family, about a $30 billion tax break,” he said in the speech.

As one of few voices in Congress calling seriously for balance between cuts and new revenues, Sanders wants to close corporate tax loopholes and get rid of tax breaks for Big Oil. He’s put forth a bill that would impose a 5.4 percent surtax on household income north of $1 million, and earmark that money for deficit reduction. He estimates it would bring in $50 billion a year, whereas Congress’ recent tax-cut deal will add around $700 billion to the deficit.

So, without further ado, here’s Bernie’s tax-avoiders list. In this case, one of his staffers informed me, “refund” means “negative federal income tax liability.” If you have any quibbles with his facts, let us know in the comments.

1) ExxonMobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings. [Note: Our post last April reported that ExxonMobil was owed $46 million by the IRS.]

2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.

3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.

4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009.

5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year.

6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.

7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department.

8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.

9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction.

10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.

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

Posted by Elvis on 12/07/12 •
Section Dying America • Section Austerity American Style • Section Next Recession, Next Depression
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Wednesday, December 05, 2012

Austerity American Style Part 2 - Enough Is Enough

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Cities in the Red: Austerity Hits America

By Ann Larson
November 16, 2012

The European debt crisis, and the ensuing AUSTERITY-FUELED CHAOS, can seem to Americans like a distant battle that portends a dark future. Yet a closer look reveals that THE FUTURE IS ALREADY HERE. American austerity has largely taken the form of municipal budget crises precipitated by predatory Wall Street lending practices. The debt financing of U.S. cities and towns, a neoliberal economic model that long precedes the current recession, has inflicted deep and growing suffering on communities across the country.

In July 2012, Mayor Christopher Doherty of Scranton, Pennsylvania, reduced all city employees salaries to the minimum wage. With a stroke of his pen, wages for teachers, firefighters, police, and other municipal workers, many of whom had been on the job for decades, dropped to $7.25 per hour. The city, the mayor explained, simply could not pay them more. Ron Allen, who reported the story for NBC Nightly News, repeated this assessment. Cities like Scranton, HE SAID, “just don’t have the money” to pay city employees more than the minimum wage. Officials blamed the crisis on a declining tax base, on reduced revenue from the state, and on public sector labor contracts that the city could no longer afford.

What does it mean to say that a former steel town in decline just doesn’t have the money to pay its bills? It means that it no longer has access to credit markets controlled by the BIG BANKS. For years, Scranton officials, like officials across the United States, have been selling municipal bonds to finance everything from basic services to development projects. Scranton’s problems careened out of control when they citys parking authority threatened to default on its bonds. Wall Street responded aggressively by cutting off its credit line, and city workers paid a steep price. American-style austerity arrived in Scranton under the guise of budget cuts blamed on public employees, whose salaries and pensions had nothing to do with the economic crisis.

Scranton’s problems are HARDLY UNIQUE. Municipalities across the country are grappling with declining local tax revenue and reduced federal funding in an era when growth and development are equated with prosperity. This toxic mix has produced a $3.7 trillion municipal debt market, a revenue juggernaut for Wall Street. Municipal bonds are issued by virtually every city, county, and development agency in the United States. The number of taxpayer-backed bonds in circulation is five times higher than only ten years ago. This means that the worlds largest financial firms now hold the purse strings for everything from essential services like sewage treatment plants to large-scale developments such as sports arenas. Municipal bonds are extremely profitable for investors because they are tax-exempt and, like mortgages, can be packaged into securities.

How Did We Get Here?

Part of the municipal debt story can be traced to New York City’s 1975 fiscal crisis, when the city almost defaulted on its debt. New York was able to avoid bankruptcy at the last moment by issuing guaranteed bonds backed by public pension funds. As a result, the Emergency Financial Control Board, the municipal body that controlled the citys bank accounts, was in the position of rewriting the social contract, exerting control over labor at every level. Union leadership agreed to the deal because they feared a bankruptcy filing would void labor contracts. Only after the city had disciplined the unions did the federal government move in with rescue loans.

New York City had been debt-financed since the 1960s. But the fiscal crisis of 1975 inaugurated a new funding paradigm for distressed municipalities: taxpayer-backed debt is issued to service the debt already on the books. American municipalities are now increasingly financed not with public money, but with private loans, and the pace of this shift has accelerated since 2008. The Center on Budget Policy and Priorities recently reported that thirty-one states will face unsustainable budget gaps in 2013.

Few public assets are safe from Wall Street’s profit imperative. Public transportation has long been a cash cow for investors. Since 2008, the New York Metropolitan Transportation Authority (MTA) has lost over $600 million as a result of interest rate swaps with JP Morgan Chase, Citigroup, and other big banks. As a result, thousands of transit workers have lost their jobs and hundreds of bus and subway lines have been cut. That is not enough to satisfy the bond market. In March 2013 New York transit riders can expect a new round of fare hikes. Most subway and bus riders are working-class New Yorkers, immigrants, and people of color. They will soon pay even more for the privilege of lining Jamie Dimons pockets.

The MTA is not the only municipal organization in the country that runs on debt. The Refund Transit Coalition, a public transportation advocacy group, has uncovered at least 1,100 of these swaps at more than 100 government agencies costing taxpayers $2.5 billion a year. None is more indebted than Boston’s Massachusetts Bay Transportation Authority (MBTA). The story is a familiar one: in 2000 state legislators ended most public subsidies for the MBTA, which was additionally saddled with almost $2 billion in debt, much of it left over from the infamous Big Dig. Wall Street was happy to provide loans so the MBTA could maintain the systems aging infrastructure and finance expansions.

Twelve years later, Boston’s transit authority spends 33 cents of every dollar it takes in to service its debt. Lawmakers, who have learned the lessons of Scranton all too well, are unwilling to challenge Wall Street. Instead, they have proposed cutting services and raising fares by as much as 43 percent. No one believes this represents a long-term solution. As one Occupy Boston activist noted, the MBTA has never even asked the banks and bondholders who continue to profit from the [transit system’s] enormous debt to take a similar cut, effectively giving the banks a free ride, while forcing T riders - working people, the unemployed, students, seniors, and the disabled - to bear more of the burden.

Increasing debt loads, along with other neoliberal policies demanding that municipalities do more with less, put cities under enormous pressure to promote private economic growth in lieu of spending public funds on public goods. This imperative is one reason that city officials have pursued controversial development strategies such as declaring a parcel of land ԓblighted to allow it to be seized by eminent domain and auctioned to the highest bidder. For example, the Barclays Center, the new arena for the Brooklyn Nets, was built partially on land that was condemned before being transferred to a developer. Cities also generate revenue by leasing public assets to the private sector. In Chicago, for example, the Skyway toll road has been leased to a private company for ninety-nine years. Atlanta even privatized the city water supply, only to cancel the contract years later when residents complained about tainted water.

As the privatization of everything from land to transportation makes clear, taxpayers rarely have a direct say in which bonds are issued and which public assets are sold out from under them. But with municipalities guaranteeing loans by promising that bondholders will be repaid with tax dollars or revenue generated by the debt-funded project, taxpayers are often left footing the bill.

Meanwhile, it remains nearly impossible for MUNICIPALITIES to cancel bond deals. By law, most states cannot declare bankruptcy. And, in many cases, federal bankruptcy codes guarantee that creditors will be repaid. In 1994, Orange County, California declared bankruptcy to repair the damage done when its treasurer took out loans on behalf of the city and then lost $1.6 billion in the securities market. Following what was then the largest bankruptcy filing in U.S. history, the county still paid its bondholders to avoid a tarnished credit rating. Another California city, Stockton, has been implementing severe austerity measures ever since the housing market tanked in 2008 in order to MAKE PAYMENTS TO BONDHOLDERS. The city cut 25 percent of its police officers, 30 percent of its firefighters, and over 40 percent of all other city employees. The crime rate in Stockton has skyrocketed and unemployment surged, and the city is now considering CUTTING PENSION BENEFITS for retirees to pay its debts. The capital of the Golden State, Sacramento, has also cut its police force, by 30 percent, to fill a budget gap, and has seen a similar rise in crime - gun violence, rapes, and robberies have increased dramatically. Communities long ago abandoned by the state are also suffering from austerity. Camden, New Jersey, one of the poorest cities in the United States, recently privatized its police force, laying off officers and canceling union contracts. Today, the Camden police force often does not have the numbers to respond to crimes that don’t involve murder or serious injury.

As cities like Scranton seek to eliminate unsustainable debts, investors grow more demanding. Bond insurers involved in bankruptcy negotiations in Stockton and San Bernardino have even suggested that BONDHOLDERS HAVE A CLAIM TO CALPERS, the retirement fund for California’s public workers. Though the retirement system is constitutionally protected, this is a troubling development because bondholders demands are almost always given priority. A recent CBO REPORT noted that “of the 18,400 municipal bond issuers rated by Moodys Investors Service from 1970 to 2009, only 54 defaulted during that period.” Bonds are bets that banks don’t lose.

Though the debt financing of U.S. cities is not illegal, that doesn’t mean deals are made fairly and transparently. We recently learned that interest rates around the world have been manipulated for years for the benefit of a few firms. Yet the LIBOR scandal is not surprising when one considers that municipal interest rate fraud has been going on for years with no public outcry. In his report on municipal bond rigging in Rolling Stone, Matt Taibbi explained how Wall Street has skimmed untold billionsӔ from hundreds of municipalities - and how they continued to invest in bonds even after they were caught. “Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again,” Taibbi wrote. “Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.” The debt financing of municipal government is an activity promoted and protected by the regulatory arm of the federal government.

What Can Be Done?

STRIKE DEBT, a group (of which I am a member) inspired by Occupy Wall Street, has begun to address municipal bonds as part of a larger critique of debt as a system of wealth extraction. Strike Debt asserts that debt is a primary mechanism through which the 1 percent profits from the 99 percent. Debt affects everyone, especially those who are too poor to access low-interest credit. And Wall Street is the primary culprit. Framing municipal debt as part of a global system poses significant opportunities for organizers because it connects anti-austerity movements abroad to debt resistance efforts at home. Once we reframe debt as a problem that affects us allԗas municipal debt obviously doesit becomes easier to imagine that we have enormous power to withdraw our consent.

Strike Debt’s analysis of debt as a system of wealth extraction is also a critique of capitalism. Municipal debt is more than just another example of Wall Street greed and local corruption. It may be the biggest scandal yet because it is not a scandal it all. U.S. cities, towns, and districts are now increasingly debt financed, which means they cannot operate without access to the credit markets controlled by the big banks. This illustrates that Wall Streets class war against cities cannot be mitigated with more regulation. In fact, the SEC protects investors, not municipalities, from the consequences of bond deals gone bad. Even renegotiating debt often requires new loans. ғWhen muni bond issuers unwind deals and pay enormous exit fees to Wall Street, the New York Times recently reported, ԓthey typically issue new debt to do so. In recent years, for example, New York State has paid $243 million to terminate such transactions; $191 million was financed by new debt issuance. Raiding cities for wealth, which produces a cycle of indebtedness, is not illegal or unusual. It is simply the way Wall Street does business.

The idea that some debts cannot and should not be paid is gaining traction. In 2011, for example, Jefferson County, Alabama declared bankruptcy (the largest in U.S. history) to rid itself of $4 billion in debt, much of it issued by corrupt officials to finance a sewer project that left people in a predominantly low-income, African-American community without a functioning sewer. Some do not want to renegotiate the debt. Instead, they reject it outright. As one Occupy activist in Birmingham noted, “[the debt] shouldn’t ever have been issued, and therefore it shouldn’t exist. It shouldnt have been spent. Since it shouldn’t have existed, were not going to pay it.” This statement could become a slogan for debt resistance movements across the country because it insists that debtors are a class, a collective we that can decide when enough is enough.

Some municipalities are fighting back, too. After their pay was cut to minimum wage, Scranton’s municipal unions sued the city, and their wages were restored. Baltimore, a city where more than 80 percent of school children qualify for free- or reduced-price lunch, is suing more than a dozen big banks for manipulating LIBOR, the benchmark for interest rates on many financial products. In July, a group called Boston Fare Strike declared a Free Fare Day and held turnstiles open for subway riders to protest fare hikes that enrich the 1 percent. Activists in Chicago are organizing community debt audits with the goal of identifying illegitimate debts that must be abolished. And finally, in a case that has gained national attention, Oakland, CA is trying to sever its relationship with Goldman Sachs for good. In the late 1990s, Oakland issued $187 million in bonds as part of an interest-rate swap. After the credit markets froze in 2008, Oakland could no longer make its payments to Goldman. The city council voted to cancel the deal, though Goldman insists the city must pay. CEO Lloyd Blankfein explained his firmԒs unwillingness to let Oakland out of its contract. The fact of the matter is,ғ he said, we’re a bank.

Blankfein is not wrong. Plundering U.S. cities is what large financial firms do. This is a troubling reality. A bankruptcy attorney featured on the NBC News report about Scranton offered this grim assessment: cutting worker pay is necessary to avoid “more drastic measures.” The reporter didn’t explain this statement, leaving viewers to imagine what terrible fate awaits those who don’t accept the reigning neoliberal orthodoxy that city budgets must be balanced by cutting worker pay, gutting public services, and issuing more debt to profit the 1 percent.

In fact, it is Wall Street that should be afraid of any disruption to business as usual. The cycle of debt illustrates that we cannot fix the problem through austerity. This tactic only deepens the devastation, since low wages further erode the tax base for cities, leaving them vulnerable to predatory lenders. It’s difficult to imagine how the debt financing of American cities could be scaled back without completely rethinking our economic system. Strike Debt is making the case that, in the United States as in Europe, the solution lies not in austerity but in investing in a genuine commons and in providing equitable access to public resources. “These are precisely the drastic measures” alluded to on NBC News. The question we must ask is, drastic for whom?

Ann Larson is an organizer of Strike Debt. She is also a teacher, a writer, and a resident of Brooklyn.

SOURCE

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This week in the War on Workers: 19 protesters arrested as Philadelphia closes 23 schools

By Laura Clawson
Daily Kos
March 9, 2013

Nineteen protesters, including Philadelphia students and American Federation of Teachers President Randi Weingarten, were arrested in Philadelphia Thursday as they protested the city’s school closings plan. The arrests came as the group tried to block members of the city’s School Reform Commission from entering a meeting at which the commission approved a plan to CLOSE 23 PUBLIC SCHOOLS.

This is school “choice” in Philadelphia. Students have the choice of a substandard online school. They have the choice to leave their neighborhoods to go one of the city’s notoriously corrupt charter schools. But now, for many, there’s no choice to go to a public school in their neighborhoods.

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

Posted by Elvis on 12/05/12 •
Section American Solidarity • Section Dying America • Section Austerity American Style • Section Next Recession, Next Depression
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