Capitalism on the skids to oblivion...

Galbraith on the failed president, which side is he on?

2010-12-07T22:29:00.002-06:00

Galbraith on the failed president, which side is he on?

James K. Galbraith
Economist, Author

Posted: December 6, 2010 10:48 AM

Whose Side Is the White House On?
I want to raise a hard question -- a question on which Americans are divided. It seems to me, though, we will get nowhere unless we realize where we are, what has actually happened, and what the future most likely holds.

Recovery begins with realism and there is nothing to be gained by kidding ourselves. On the topics that I know most about, the administration is beyond being a disappointment. It's beyond inept, unprepared, weak, and ineffective. Four and again two years ago, the people demanded change. As a candidate, the President promised change. In foreign policy and the core economic policies, he delivered continuity instead. That was true on Afghanistan and it was and is true in economic policy, especially in respect to the banks. What we got was George W. Bush's policies without Bush's toughness, without his in-your-face refusal to compromise prematurely. Without what he himself calls his understanding that you do not negotiate with yourself.

It's a measure of where we are, I think, that at a meeting of Americans for Democratic Action, you find me comparing President Obama unfavorably to President George W. Bush.

In economic policy it was said earlier we have a lack of narrative. Recently, Gregory King asked why the people didn't know that the Republican Party is uniformly and massively opposed to job programs, to state and local assistance, and to every legislative measure that might aid and promote economic recovery from the worst crisis and recession in modern times. Why is that that they didn't know? Could it have anything to do with the fact that the White House didn't tell them?

And why was that?

The president deprived himself of any chance to develop a narrative from the beginning by surrounding himself with holdover appointments from the Bush and even the Clinton administrations: Secretary Geithner, Chairman Bernanke, and, since we're here at Harvard, I'll call him by his highest title, President Summers. These men have no commitment to the base, no commitment to the Democratic Party as a whole, no particular commitment to Barack Obama, and none to the broad objective of national economic recovery that can be detected from their actions.

With this team the President also chose to cover up economic crime. Not only has the greatest wave of financial fraud in our history gone largely uninvestigated and unpunished, the government and this administration with its stress tests (which were fakes), its relaxation of accounting standards which permitted banks to hold toxic assets on their books at far higher prices than any investor would pay, with its failure to make criminal referrals where these were clearly warranted, with its continuation in office -- sometimes in acting capacities -- of some of the leading non-regulators of the earlier era, has continued an ongoing active complicity in financial fraud. And the perpetrators, of course, prospered as never before: reporting profits that they would not have been able to report under honest accounting standards and converting tax payer support into bonuses; while at the same time cutting back savagely on loans to businesses and individuals, and ramping up foreclosures, much of that accomplished with forged documents and perjured affidavits.

Could the President and his administration have done something? Yes, they could have. Where was the Federal Deposit Insurance Corporation? Why did they choose not to implement the law -- the Prompt Corrective Action law -- which requires the federal government to take into receivership financial institutions when there is a significant risk of large taxpayer losses to the insurance fund? Where were the FBI and the Department of Justice? Did the President do anything? No. Is he doing anything now? No. Why not? The most likely answer is that he did not want to. My understanding, in fact, is that there was one meeting where this issue was raised, and the President stated that his economic team had assured him they had the situation under control.

On the larger economic policy front, the White House gave away the game from the beginning. How? First by guessing at the scale of the disaster. When leading economic advisers (I believe, in fact, it was President Summers) announced that the unemployment rate would peak at 8%, they not only guessed wrong, but gave away the right to assign responsibility to the previous administration when things got worse. This was either elementary bad politics or deliberate self-sabotage. But it gets worse. The optimistic forecast helped to justify a weak program. Useful things were done, but not nearly enough to convey the impression of a forceful policy to the broader public. Then once the banks were taken care of and the stock market took off again, it seems clear that the team at the White House didn't care anymore.

Again, could they have done differently? Of course. The President could have told the truth, which is that we faced a historic meltdown, a collapse of the core financial institutions of our economy, and that we had really no way of knowing how bad economic conditions might get or how long this would endure and that therefore the situation would require a full mobilization: all resources, all hands on deck, major departures of policy, no holding back, and the responsibility for trouble and failure falling plainly on those who would obstruct the course. None of the people he chose to advise him on economic policy was remotely capable of thinking in those terms.

We've learned from Vic Fingerhut and Mike Lux that the administration went down in public esteem when people realized it was working for the banks and not for them. Why did they think this? Why did they go from "blaming Bush and Wall Street to blaming Obama and Wall Street"? Because plainly they could see what was in front of their faces. Except in manner, President Bush never really pretended to be a President for ordinary folks; President Obama did. Bush was who he was; Obama held out, fostered, and promoted vast hopes, mobilizing the American population behind his leadership on that basis. And he disappointed those hopes -- to use a very harsh word, one could say he has betrayed those hopes. How can one therefore blame the voters for acting as they have acted?

What happens next? Let's again not kid ourselves, we have lost a great many seats in the House of Representatives and the House of Representatives isn't coming back into a Democratic majority in the near future. Simply because of the balance of exposures -- the larger numbers of Democratic Senators exposed to reelection in the next cycle, the greatest likelihood is that the Senate will also go Republican in two years time. President Obama has set his course. He has surrounded himself with the advisers of his choice and as he moves to replace President Summers we hear from the press that the priority is to "repair the rift with his investors on Wall Street." What does that tell you? It tells me that he does not have President Clinton's fighting and survival instincts. I've not heard one good reason all day to believe that we are going to see from this White House the fight that we want, that he could win in two years, or any reason we should be backing him now.

The Democratic Party has become too associated with Wall Street. This is a fact. It is a structural problem. It seems to me that we as progressives need -- this is my personal position -- to draw a line and decide that we would be better off with an under-funded, fighting progressive minority party than a party marked by obvious duplicity and constant losses on every policy front as a result of the reversals in our own leadership.

What is at stake in the long run? Two things, mainly, in my view. First, it seems to me that we as progressives need to make an honorable defense of the great legacies of the New Deal and Great Society -- programs and institutions that brought America out of the Great Depression and bought us through the Second World War, brought us to our period of greatest prosperity, and the greatest advances in social justice. Social Security, Medicare, housing finance -- the front-line right now is the foreclosure crisis, the crisis, I should say, of foreclosure fraud -- the progressive tax code, anti-poverty policy, public investment, public safety, and human and civil rights. We are going to lose these battles-- get used to it. But we need to make an honorable fight, to state clearly what our principles are and to lay down a record which is trustworthy for the future.

Beyond this, bold proposals are what we should be advancing now; even when they lose, they have their value. We can talk about job programs; we can talk about an infrastructure bank; we can talk about Juliet Schor's idea of a four-day work week; we can talk about my idea of expanding Social Security and creating an early retirement option so that people who are older and unemployed or anxious to get out of the labor force can leave on comfortable terms, and so create job openings for younger people who, as we've heard today, are facing very long periods of extremely aggravating and frustrating unemployment; we can talk about establishing a systematic program of general revenue sharing to support state and local governments, we can talk about the financial restructuring we so desperately need and that we'll have to have if we are going to have a country which has a viable private credit system and in which large financial power is not constantly dictating the terms of every political maneuver.

We are not going to get these things, but we should have a clearly defined program so that people know what they are. And then, frankly, as was said earlier today, said most elegantly by Jeff Madrick, in the long run we need to recognize that the fate of the entire country is at stake. Its governance can't be entrusted indefinitely to incompetents, hacks, and lobbyists. Large countries can and do fail, they have done so in our own time. And the consequences are very grave: drastic declines in services, in living standards, in life expectancies, huge increases in social tension, in repression, and in violence. These are the consequences of following through with crackpot ideas such as those embodied in the Bowles-Simpson deficit commission, as Jeff Madrick again outlined, such notions as putting arbitrary limits on the scale of government, or arbitrary limits on the top tax rate affecting the wealthiest Americans.

This isn't a parlor game. The outcome isn't destined to be alright. It will not necessarily end in progress whatever happens. What we do, how we proceed, and how we effectively resist what is plainly about to happen, matters very greatly for the future of our country, of our children, and of another generation to come. We need to lose our fear, our hesitation, and our unwillingness to face the facts. If we thereby lose some of our hopes, let's remember the dictum of William of Orange that "it is not necessary to hope in order to persevere."

The President should know that, as Lincoln said to the Congress in the dark winter of 1862, he "cannot escape history." And we are heading now into a very dark time, so let's face it with eyes open. And if we must, let's seek leadership that shares our values, fights for our principles, and deserves our trust.

This post is adapted from a speech given on November 20, 2010 at the ADA Education Fund's Post-election Conference at the Harvard Kennedy School. It originally appeared on New Deal 2.0.

Obama's Big Sellout

2009-12-11T01:13:00.000-06:00

From Rollingstone Magazine:

http://www.rollingstone.com/politics/story/31234647/obamas_big_sellout/print

Obama's Big Sellout

The president has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway

MATT TAIBBI

Posted Dec 09, 2009

Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

Then he got elected.

What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we've been seeing on TV this fall who Obama really is?

Whatever the president's real motives are, the extensive series of loophole-rich financial "reforms" that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street's political power by institutionalizing the taxpayer's role as a welfare provider for the financial-services industry. At one point in the debate, Obama's top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals.

How did we get here? It started just moments after the election — and almost nobody noticed.

'Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It's fucking amazing. Amazing! And nobody said a thing about it."

Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama's election.

That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama's chief advisers during the campaign, didn't make the cut. Neither did Karen Kornbluh, who had served as Obama's policy director and was instrumental in crafting the Democratic Party's platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive "a Nobel Prize — for evil."

But come November 5th, both were banished from Obama's inner circle — and replaced with a group of Wall Street bankers. Leading the search for the president's new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama's biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).

Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama's economic team, Froman brought in none other than Jamie Rubin, a former Clinton diplomat who happens to be Bob Rubin's son. At the time, Jamie's dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.

Now here's where it gets really interesting. It's three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O'Doul's portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama's economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama's transition team that same month.

So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin's messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that's just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi. "If you had any doubts at all about the primacy of Wall Street over Main Street," former labor secretary Robert Reich declares when the bailout is announced, "your doubts should be laid to rest."

It is bad enough that one of Bob Rubin's former protégés from the Clinton years, the New York Fed chief Geithner, is intimately involved in the negotiations, which unsurprisingly leave the Federal Reserve massively exposed to future Citi losses. But the real stunner comes only hours after the bailout deal is struck, when the Obama transition team makes a cheerful announcement: Timothy Geithner is going to be Barack Obama's Treasury secretary!

Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup — Michael Froman — before the ink is even dry on a massive government giveaway to Citigroup that Geithner himself was instrumental in delivering. In the annals of brazen political swindles, this one has to go in the all-time Fuck-the-Optics Hall of Fame.

Wall Street loved the Citi bailout and the Geithner nomination so much that the Dow immediately posted its biggest two-day jump since 1987, rising 11.8 percent. Citi shares jumped 58 percent in a single day, and JP Morgan Chase, Merrill Lynch and Morgan Stanley soared more than 20 percent, as Wall Street embraced the news that the government's bailout generosity would not die with George W. Bush and Hank Paulson. "Geithner assures a smooth transition between the Bush administration and that of Obama, because he's already co-managing what's happening now," observed Stephen Leeb, president of Leeb Capital Management.

Left unnoticed, however, was the fact that Geithner had been hired by a sitting Citigroup executive who still had a big bonus coming despite his proximity to Obama. In January 2009, just over a month after the bailout, Citigroup paid Froman a year-end bonus of $2.25 million. But as outrageous as it was, that payoff would prove to be chump change for the banker crowd, who were about to get everything they wanted — and more — from the new president.

The irony of Bob Rubin: He's an unapologetic arch-capitalist demagogue whose very career is proof that a free-market meritocracy is a myth. Much like Alan Greenspan, a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters, Rubin has been held in awe by the American political elite for nearly 20 years despite having fucked up virtually every project he ever got his hands on. He went from running Goldman Sachs (1990-1992) to the Clinton White House (1993-1999) to Citigroup (1999-2009), leaving behind a trail of historic gaffes that somehow boosted his stature every step of the way.

As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year's financial crisis: the repeal of the Glass-Steagall Act (passed specifically to legalize the Citigroup megamerger) and the deregulation of the derivatives market. Having set that time bomb, Rubin left government to join Citi, which promptly expressed its gratitude by giving him $126 million in compensation over the next eight years (they don't call it bribery in this country when they give you the money post factum). After urging management to amp up its risky investments in toxic vehicles, a strategy that very nearly destroyed the company, Rubin blamed Citi's board for his screw-ups and complained that he had been underpaid to boot. "I bet there's not a single year where I couldn't have gone somewhere else and made more," he said.

Despite being perhaps more responsible for last year's crash than any other single living person — his colossally stupid decisions at both the highest levels of government and the management of a private financial superpower make him unique — Rubin was the man Barack Obama chose to build his White House around.

There are four main ways to be connected to Bob Rubin: through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project, a think tank Rubin spearheaded under the auspices of the Brookings Institute to promote his philosophy of balanced budgets, free trade and financial deregulation. The team Obama put in place to run his economic policy after his inauguration was dominated by people who boasted connections to at least one of these four institutions — so much so that the White House now looks like a backstage party for an episode of Bob Rubin, This Is Your Life!

At Treasury, there is Geithner, who worked under Rubin in the Clinton years. Serving as Geithner's "counselor" — a made-up post not subject to Senate confirmation — is Lewis Alexander, the former chief economist of Citigroup, who advised Citi back in 2007 that the upcoming housing crash was nothing to worry about. Two other top Geithner "counselors" — Gene Sperling and Lael Brainard — worked under Rubin at the National Economic Council, the key group that coordinates all economic policymaking for the White House.

As director of the NEC, meanwhile, Obama installed economic czar Larry Summers, who had served as Rubin's protégé at Treasury. Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin's Hamilton Project. The appointment of Furman — a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports with titles like "Walmart: A Progressive Success Story" — provided one of the first clues that Obama had only been posturing when he promised crowds of struggling Midwesterners during the campaign that he would renegotiate NAFTA, which facilitated the flight of blue-collar jobs to other countries. "NAFTA's shortcomings were evident when signed, and we must now amend the agreement to fix them," Obama declared. A few months after hiring Furman to help shape its economic policy, however, the White House quietly quashed any talk of renegotiating the trade deal. "The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement," U.S. Trade Representative Ronald Kirk told reporters in a little-publicized conference call last April.

The announcement was not so surprising, given who Obama hired to serve alongside Furman at the NEC: management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be "as beneficial to the U.S. as to the destination country, probably more so."

Joining Summers, Furman and Farrell at the NEC is Froman, who by then had been formally appointed to a unique position: He is not only Obama's international finance adviser at the National Economic Council, he simultaneously serves as deputy national security adviser at the National Security Council. The twin posts give Froman a direct line to the president, putting him in a position to coordinate Obama's international economic policy during a crisis. He'll have help from David Lipton, another joint appointee to the economics and security councils who worked with Rubin at Treasury and Citigroup, and from Jacob Lew, a former Citi colleague of Rubin's whom Obama named as deputy director at the State Department to focus on international finance.

Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler had been instrumental in helping to pass the infamous Commodity Futures Modernization Act of 2000, which prevented deregulation of derivative instruments like CDOs and credit-default swaps that played such a big role in cratering the economy last year. And as head of the powerful Office of Management and Budget, Obama named Peter Orszag, who served as the first director of Rubin's Hamilton Project. Orszag once succinctly summed up the project's ideology as a sort of liberal spin on trickle-down Reaganomics: "Market competition and globalization generate significant economic benefits."

Taken together, the rash of appointments with ties to Bob Rubin may well represent the most sweeping influence by a single Wall Street insider in the history of government. "Rather than having a team of rivals, they've got a team of Rubins," says Steven Clemons, director of the American Strategy Program at the New America Foundation. "You see that in policy choices that have resuscitated — but not reformed — Wall Street."

While Rubin's allies and acolytes got all the important jobs in the Obama administration, the academics and progressives got banished to semi-meaningless, even comical roles. Kornbluh was rewarded for being the chief policy architect of Obama's meteoric rise by being outfitted with a pith helmet and booted across the ocean to Paris, where she now serves as America's never-again-to-be-seen-on-TV ambassador to the Organization for Economic Cooperation and Development. Goolsbee, meanwhile, was appointed as staff director of the President's Economic Recovery Advisory Board, a kind of dumping ground for Wall Street critics who had assisted Obama during the campaign; one top Democrat calls the panel "Siberia."

Joining Goolsbee as chairman of the PERAB gulag is former Fed chief Paul Volcker, who back in March 2008 helped candidate Obama write a speech declaring that the deregulatory efforts of the Eighties and Nineties had "excused and even embraced an ethic of greed, corner-cutting, insider dealing, things that have always threatened the long-term stability of our economic system." That speech met with rapturous applause, but the commission Obama gave Volcker to manage is so toothless that it didn't even meet for the first time until last May. The lone progressive in the White House, economist Jared Bernstein, holds the impressive-sounding title of chief economist and national policy adviser — except that the man he is advising is Joe Biden, who seems more interested in foreign policy than financial reform.

The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers. It's that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants. "Bob Rubin, these guys, they're classic limousine liberals," says David Sirota, a former Democratic strategist. "These are basically people who have made shitloads of money in the speculative economy, but they want to call themselves good Democrats because they're willing to give a little more to the poor. That's the model for this Democratic Party: Let the rich do their thing, but give a fraction more to everyone else."

Even the members of Obama's economic team who have spent most of their lives in public office have managed to make small fortunes on Wall Street. The president's economic czar, Larry Summers, was paid more than $5.2 million in 2008 alone as a managing director of the hedge fund D.E. Shaw, and pocketed an additional $2.7 million in speaking fees from a smorgasbord of future bailout recipients, including Goldman Sachs and Citigroup. At Treasury, Geithner's aide Gene Sperling earned a staggering $887,727 from Goldman Sachs last year for performing the punch-line-worthy service of "advice on charitable giving." Sperling's fellow Treasury appointee, Mark Patterson, received $637,492 as a full-time lobbyist for Goldman Sachs, and another top Geithner aide, Lee Sachs, made more than $3 million working for a New York hedge fund called Mariner Investment Group. The list goes on and on. Even Obama's chief of staff, Rahm Emanuel, who has been out of government for only 30 months of his adult life, managed to collect $18 million during his private-sector stint with a Wall Street firm called Wasserstein-Perella.

The point is that an economic team made up exclusively of callous millionaire-assholes has absolutely zero interest in reforming the gamed system that made them rich in the first place. "You can't expect these people to do anything other than protect Wall Street," says Rep. Cliff Stearns, a Republican from Florida. That thinking was clear from Obama's first address to Congress, when he stressed the importance of getting Americans to borrow like crazy again. "Credit is the lifeblood of the economy," he declared, pledging "the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money." A president elected on a platform of change was announcing, in so many words, that he planned to change nothing fundamental when it came to the economy. Rather than doing what FDR had done during the Great Depression and institute stringent new rules to curb financial abuses, Obama planned to institutionalize the policy, firmly established during the Bush years, of keeping a few megafirms rich at the expense of everyone else.

Obama hasn't always toed the Rubin line when it comes to economic policy. Despite being surrounded by a team that is powerfully opposed to deficit spending — balanced budgets and deficit reduction have always been central to the Rubin way of thinking — Obama came out of the gate with a huge stimulus plan designed to kick-start the economy and address the job losses brought on by the 2008 crisis. "You have to give him credit there," says Sen. Bernie Sanders, an advocate of using government resources to address unemployment. "It's a very significant piece of legislation, and $787 billion is a lot of money."

But whatever jobs the stimulus has created or preserved so far — 640,329, according to an absurdly precise and already debunked calculation by the White House — the aid that Obama has provided to real people has been dwarfed in size and scope by the taxpayer money that has been handed over to America's financial giants. "They spent $75 billion on mortgage relief, but come on — look at how much they gave Wall Street," says a leading Democratic strategist. Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion. And while the government continues to dole out big money to big banks, Obama and his team of Rubinites have done almost nothing to reform the warped financial system responsible for imploding the global economy in the first place.

The push for reform seemed to get off to a promising start. In the House, the charge was led by Rep. Barney Frank, the outspoken chair of the House Financial Services Committee, who emerged during last year's Bush bailouts as a sharp-tongued critic of Wall Street. Back when Obama was still a senator, he and Frank even worked together to introduce a populist bill targeting executive compensation. Last spring, with the economy shattered, Frank began to hold hearings on a host of reforms, crafted with significant input from the White House, that initially contained some very good elements. There were measures to curb abusive credit-card lending, prevent banks from charging excessive fees, force publicly traded firms to conduct meaningful risk assessment and allow shareholders to vote on executive compensation. There were even measures to crack down on risky derivatives and to bar firms like AIG from picking their own regulators.

Then the committee went to work — and the loopholes started to appear.

The most notable of these came in the proposal to regulate derivatives like credit-default swaps. Even Gary Gensler, the former Goldmanite whom Obama put in charge of commodities regulation, was pushing to make these normally obscure investments more transparent, enabling regulators and investors to identify speculative bubbles sooner. But in August, a month after Gensler came out in favor of reform, Geithner slapped him down by issuing a 115-page paper called "Improvements to Regulation of Over-the-Counter Derivatives Markets" that called for a series of exemptions for "end users" — i.e., almost all of the clients who buy derivatives from banks like Goldman Sachs and Morgan Stanley. Even more stunning, Frank's bill included a blanket exception to the rules for currency swaps traded on foreign exchanges — the very instruments that had triggered the Long-Term Capital Management meltdown in the late 1990s.

Given that derivatives were at the heart of the financial meltdown last year, the decision to gut derivatives reform sent some legislators howling with disgust. Sen. Maria Cantwell of Washington, who estimates that as much as 90 percent of all derivatives could remain unregulated under the new rules, went so far as to say the new laws would make things worse. "Current law with its loopholes might actually be better than these loopholes," she said.

An even bigger loophole could do far worse damage to the economy. Under the original bill, the Securities and Exchange Commission and the Commodity Futures Trading Commission were granted the power to ban any credit swaps deemed to be "detrimental to the stability of a financial market or of participants in a financial market." By the time Frank's committee was done with the bill, however, the SEC and the CFTC were left with no authority to do anything about abusive derivatives other than to send a report to Congress. The move, in effect, would leave the kind of credit-default swaps that brought down AIG largely unregulated.

Why would leading congressional Democrats, working closely with the Obama administration, agree to leave one of the riskiest of all financial instruments unregulated, even before the issue could be debated by the House? "There was concern that a broad grant to ban abusive swaps would be unsettling," Frank explained.

Unsettling to whom? Certainly not to you and me — but then again, actual people are not really part of the calculus when it comes to finance reform. According to those close to the markup process, Frank's committee inserted loopholes under pressure from "constituents" — by which they mean anyone "who can afford a lobbyist," says Michael Greenberger, the former head of trading at the CFTC under Clinton.

This pattern would repeat itself over and over again throughout the fall. Take the centerpiece of Obama's reform proposal: the much-ballyhooed creation of a Consumer Finance Protection Agency to protect the little guy from abusive bank practices. Like the derivatives bill, the debate over the CFPA ended up being dominated by horse-trading for loopholes. In the end, Frank not only agreed to exempt some 8,000 of the nation's 8,200 banks from oversight by the castrated-in-advance agency, leaving most consumers unprotected, he allowed the committee to pass the exemption by voice vote, meaning that congressmen could side with the banks without actually attaching their name to their "Aye."

To win the support of conservative Democrats, Frank also backed down on another issue that seemed like a slam-dunk: a requirement that all banks offer so-called "plain vanilla" products, such as no-frills mortgages, to give consumers an alternative to deceptive, "fully loaded" deals like adjustable-rate loans. Frank's last-minute reversal — made in consultation with Geithner — was such a transparent giveaway to the banks that even an economics writer for Reuters, hardly a far-left source, called it "the beginning of the end of meaningful regulatory reform."

But the real kicker came when Frank's committee took up what is known as "resolution authority" — government-speak for "Who the hell is in charge the next time somebody at AIG or Lehman Brothers decides to vaporize the economy?" What the committee initially introduced bore a striking resemblance to a proposal written by Geithner earlier in the summer. A masterpiece of legislative chicanery, the measure would have given the White House permanent and unlimited authority to execute future bailouts of megaconglomerates like Citigroup and Bear Stearns.

Democrats pushed the move as politically uncontroversial, claiming that the bill will force Wall Street to pay for any future bailouts and "doesn't use taxpayer money." In reality, that was complete bullshit. The way the bill was written, the FDIC would basically borrow money from the Treasury — i.e., from ordinary taxpayers — to bail out any of the nation's two dozen or so largest financial companies that the president deems in need of government assistance. After the bailout is executed, the president would then levy a tax on financial firms with assets of more than $10 billion to repay the Treasury within 60 months — unless, that is, the president decides he doesn't want to! "They can wait indefinitely to repay," says Rep. Brad Sherman of California, who dubbed the early version of the bill "TARP on steroids."

The new bailout authority also mandated that future bailouts would not include an exchange of equity "in any form" — meaning that taxpayers would get nothing in return for underwriting Wall Street's mistakes. Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts. In fact, the resolution authority proposed by Frank was such a slurpingly obvious blow job of Wall Street that it provoked a revolt among his own committee members, with junior Democrats waging a spirited fight that restored congressional oversight to future bailouts, requires equity for taxpayer money and caps assistance to troubled firms at $150 billion. Another amendment to force companies with more than $50 billion in assets to pay into a rainy-day fund for bailouts passed by a resounding vote of 52 to 17 — with the "Nays" all coming from Frank and other senior Democrats loyal to the administration.

Even as amended, however, resolution authority still has the potential to be truly revolutionary legislation. The Senate version still grants the president unlimited power over equity-free bailouts, and the amended House bill still institutionalizes a system of taxpayer support for the 20 to 25 biggest banks in the country. It would essentially grant economic immortality to those top few megafirms, who will continually gobble up greater and greater slices of market share as money becomes cheaper and cheaper for them to borrow (after all, who wouldn't lend to a company permanently backstopped by the federal government?). It would also formalize the government's role in the global economy and turn the presidential-appointment process into an important part of every big firm's business strategy. "If this passes, the very first thing these companies are going to do in the future is ask themselves, 'How do we make sure that one of our executives becomes assistant Treasury secretary?'" says Sherman.

On the Senate side, finance reform has yet to make it through the markup process, but there's every reason to believe that its final bill will be as watered down as the House version by the time it comes to a vote. The original measure, drafted by chairman Christopher Dodd of the Senate Banking Committee, is surprisingly tough on Wall Street — a fact that almost everyone in town chalks up to Dodd's desperation to shake the bad publicity he incurred by accepting a sweetheart mortgage from the notorious lender Countrywide. "He's got to do the shake-his-fist-at-Wall Street thing because of his, you know, problems," says a Democratic Senate aide. "So that's why the bill is starting out kind of tough."

The aide pauses. "The question is, though, what will it end up looking like?"

He's right — that is the question. Because the way it works is that all of these great-sounding reforms get whittled down bit by bit as they move through the committee markup process, until finally there's nothing left but the exceptions. In one example, a measure that would have forced financial companies to be more accountable to shareholders by holding elections for their entire boards every year has already been watered down to preserve the current system of staggered votes. In other cases, this being the Senate, loopholes were inserted before the debate even began: The Dodd bill included the exemption for foreign-currency swaps — a gift to Wall Street that only appeared in the Frank bill during the course of hearings — from the very outset.

The White House's refusal to push for real reform stands in stark contrast to what it should be doing. It was left to Rep. Pete Kanjorski in the House and Bernie Sanders in the Senate to propose bills to break up the so-called "too big to fail" banks. Both measures would give Congress the power to dismantle those pseudomonopolies controlling almost the entire derivatives market (Goldman, Citi, Chase, Morgan Stanley and Bank of America control 95 percent of the $290 trillion over-the-counter market) and the consumer-lending market (Citi, Chase, Bank of America and Wells Fargo issue one of every two mortgages, and two of every three credit cards). On November 18th, in a move that demonstrates just how nervous Democrats are getting about the growing outrage over taxpayer giveaways, Barney Frank's committee actually passed Kanjorski's measure. "It's a beginning," Kanjorski says hopefully. "We're on our way." But even if the Senate follows suit, big banks could well survive — depending on whom the president appoints to sit on the new regulatory board mandated by the measure. An oversight body filled with executives of the type Obama has favored to date from Citi and Goldman Sachs hardly seems like a strong bet to start taking an ax to concentrated wealth. And given the new bailout provisions that provide these megafirms a market advantage over smaller banks (those Paul Volcker calls "too small to save"), the failure to break them up qualifies as a major policy decision with potentially disastrous consequences.

"They should be doing what Teddy Roosevelt did," says Sanders. "They should be busting the trusts."

That probably won't happen anytime soon. But at a minimum, Obama should start on the road back to sanity by making a long-overdue move: firing Geithner. Not only are the mop-headed weenie of a Treasury secretary's fingerprints on virtually all the gross giveaways in the new reform legislation, he's a living symbol of the Rubinite gangrene crawling up the leg of this administration. Putting Geithner against the wall and replacing him with an actual human being not recently employed by a Wall Street megabank would do a lot to prove that Obama was listening this past Election Day. And while there are some who think Geithner is about to go — "he almost has to," says one Democratic strategist — at the moment, the president is still letting Wall Street do his talking.

Morning, the National Mall, November 5th. A year to the day after Obama named Michael Froman to his transition team, his political "opposition" has descended upon the city. Republican teabaggers from all 50 states have showed up, a vast horde of frowning, pissed-off middle-aged white people with their idiot placards in hand, ready to do cultural battle. They are here to protest Obama's "socialist" health care bill — you know, the one that even a bloodsucking capitalist interest group like Big Pharma spent $150 million to get passed.

These teabaggers don't know that, however. All they know is that a big government program might end up using tax dollars to pay the medical bills of rapidly breeding Dominican immigrants. So they hate it. They're also in a groove, knowing that at the polls a few days earlier, people like themselves had a big hand in ousting several Obama-allied Democrats, including a governor of New Jersey who just happened to be the former CEO of Goldman Sachs. A sign held up by New Jersey protesters bears the warning, "If You Vote For Obamacare, We Will Corzine You."

I approach a woman named Pat Defillipis from Toms River, New Jersey, and ask her why she's here. "To protest health care," she answers. "And then amnesty. You know, immigration amnesty."

I ask her if she's aware that there's a big hearing going on in the House today, where Barney Frank's committee is marking up a bill to reform the financial regulatory system. She recognizes Frank's name, wincing, but the rest of my question leaves her staring at me like I'm an alien.

"Do you care at all about economic regulation?" I ask. "There was sort of a big economic collapse last year. Do you have any ideas about how that whole deal should be fixed?"

"We got to slow down on spending," she says. "We can't afford it."

"But what do we do about the rules governing Wall Street . . ."

She walks away. She doesn't give a fuck. People like Pat aren't aware of it, but they're the best friends Obama has. They hate him, sure, but they don't hate him for any reasons that make sense. When it comes down to it, most of them hate the president for all the usual reasons they hate "liberals" — because he uses big words, doesn't believe in hell and doesn't flip out at the sight of gay people holding hands. Additionally, of course, he's black, and wasn't born in America, and is married to a woman who secretly hates our country.

These are the kinds of voters whom Obama's gang of Wall Street advisers is counting on: idiots. People whose votes depend not on whether the party in power delivers them jobs or protects them from economic villains, but on what cultural markers the candidate flashes on TV. Finance reform has become to Obama what Iraq War coffins were to Bush: something to be tucked safely out of sight.

Around the same time that finance reform was being watered down in Congress at the behest of his Treasury secretary, Obama was making a pit stop to raise money from Wall Street. On October 20th, the president went to the Mandarin Oriental Hotel in New York and addressed some 200 financiers and business moguls, each of whom paid the maximum allowable contribution of $30,400 to the Democratic Party. But an organizer of the event, Daniel Fass, announced in advance that support for the president might be lighter than expected — bailed-out firms like JP Morgan Chase and Goldman Sachs were expected to contribute a meager $91,000 to the event — because bankers were tired of being lectured about their misdeeds.

"The investment community feels very put-upon," Fass explained. "They feel there is no reason why they shouldn't earn $1 million to $200 million a year, and they don't want to be held responsible for the global financial meltdown."

Which makes sense. Shit, who could blame the investment community for the meltdown? What kind of assholes are we to put any of this on them?

This is the kind of person who is working for the Obama administration, which makes it unsurprising that we're getting no real reform of the finance industry. There's no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America's racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shitheads. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it, leaving even his erstwhile campaign adviser, ex-Fed chief Paul Volcker, concerned about a "moral hazard" creeping over his administration.

"The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted," Volcker told Congress in September, expressing concerns about all the regulatory loopholes in Frank's bill. "Ultimately, the possibility of further crises — even greater crises — will increase."

What's most troubling is that we don't know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it were any other politician, we wouldn't be surprised. Maybe it's our fault, for thinking he was different.

[From Issue 1093 — December 10, 2009] Rollingstone Magazine

Obama wants domestic spending cuts in next budget

2009-11-13T21:20:00.000-06:00

Barack Obama's agenda is now clear:

Wall Street profits; working people pay and suffer... this is "the new normal."

Alan L. Maki

"The flow of red ink has been increased by war spending for Iraq and Afghanistan, recession-fighting stimulus and bank bailout spending and by reduced tax revenues from high unemployment and reduced personal and business income."

Obama wants domestic spending cuts in next budget
Shifting gears, Obama eyes domestic spending freeze, cuts to 5 percent in deficit-cutting bid

http://finance.yahoo.com/news/Obama-wants-domestic-spending-apf-691348121.html?x=0

By Tom Raum and Andrew Taylor, Associated Press Writers
Friday November 13, 2009

WASHINGTON (AP) -- The Obama administration, mindful of public anxiety over the government's mushrooming debt, is shifting emphasis from big-spending policies to deficit reduction. Domestic agencies have been told to brace for a spending freeze or cuts of up to 5 percent as part of a midterm election-year push to rein in record budget shortfalls.

Yet with the economy still in distress and unemployment pushing past 10 percent, prospects for making a dent in a trillion-dollar-plus annual deficit seem slight. And since the Pentagon and Department of Veterans Affairs would likely be shielded from such cuts, overtures toward trimming the deficit may hold more symbolic value than substance.

President Barack Obama is expected to make post-recession spending restraint a key theme of his State of the Union address in January and an important element of the budget he submits to Congress a few weeks later. He is under increasing pressure, including from moderate and conservative members of his own party, to show he is serious about tackling a deficit that has become both an economic and political liability.

Not since billionaire Ross Perot made budget-balancing the centerpiece of his 1992 third-party presidential bid has so much public concern been voiced over the gulf between what the government spends and what it takes in.

White House budget director Peter Orszag on Friday told The Associated Press it is imperative to start curbing the flow of red ink. But he called it a balancing act and said acting too fast could undercut what appears to be a fledgling economic recovery.

Orszag has said the spending blueprint, for the budget year that begins Oct. 1, 2010, would put the nation "back on a fiscally sustainable path" and suggested it would include a mix of spending cuts and new revenue-producing measures.

Democratic officials in the White House and on Capitol Hill say options for locking in budget savings include caps on the amount of money Congress gets to distribute each year for agency operating budgets. They spoke on condition of anonymity to frankly discuss internal deliberations.

The White House told agencies to submit spending plans that would, at the very least, freeze their budgets, and to prepare for cuts as high as 5 percent. That edict is but one round in internal administration deliberations on the budget. Cabinet heads are sure to seek exemptions, and Orszag warned that firm budget decisions haven't been made.

The administration also is weighing committing to debt reduction any unspent funds from the $700 billion bank bailout program. However, such a move would be largely a bookkeeping shift and not likely to yield much in the way of deficit reduction.

The new emphasis at the White House on deficit-reduction follows last month's report showing the economy surged at a 3.5 percent annual pace in the July-September quarter after contracting for four consecutive quarters. That suggested the recession is likely over -- even though job losses are expected to continue for some time.

Congress will soon vote on legislation to raise the debt ceiling -- the limit on how much the government can borrow -- above the present $12.1 trillion. On Friday, the nation's overall debt stood at $11.99 trillion. Some fiscally conservative lawmakers have said they would not vote for further increases in the debt ceiling until the administration took deficit-cutting steps.

The national debt is the accumulation of annual budget deficits. The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms at $1.42 trillion.

The flow of red ink has been increased by war spending for Iraq and Afghanistan, recession-fighting stimulus and bank bailout spending and by reduced tax revenues from high unemployment and reduced personal and business income.

Polls show rising public concern over deficits. Exit polls from elections earlier this month showed clear majorities of Virginia and New Jersey voters said they were worried about the direction of the nation's economy. In both states, Republicans won gubernatorial seats that had been held by Democrats.

Republicans are seeking to capitalize on this month's Democratic election setbacks and rising voter concerns over the burst in federal spending. House Minority Leader John Boehner, R-Ohio, said the Democrats' "so-called `war on deficits' comes about a year late and more than a trillion dollars short."

"Spending in Washington has been out of control for years, and instead of changing it as they promised they would, Speaker Nancy Pelosi and President Obama have stepped on the accelerator," Boehner said in a statement.

Pollster Andrew Kohut, director of the Pew Research Center, said increasingly "the percentage of people naming the deficit as a problem is pretty substantial."

"It may be approaching the level of concern we had in the early 1990s when Ross Perot rode that horse for quite some time politically," Kohut said.

Still, politicians have typically avoided politically painful deficit-cutting steps in election years.

Stanley Collender, a budget expert at Qorvis Communications and a former staff aide to House and Senate budget committees, said if the administration could actually accomplish cuts in discretionary spending on the order of 5 percent -- a big "if" -- it would be a notable step toward bringing down deficits.

Despite today's hard times, putting such measures in play sooner rather than later makes sense since they wouldn't take effect until next Oct. 1, when jobs hopefully will be coming back and the economy humming again, Collender said. "It's sort of like an outfielder trying to catch a fly ball. You try to get to where the ball's going to be rather than where it is at that particular moment."

The deficit-cutting drive comes as Obama traveled to Asia where several nations, especially China, have expressed concerns about the size of U.S. deficits. China is the largest foreign holder of U.S. debt and policymakers worry that alarm over deficits could push foreigners into cutting back on their purchases of Treasury securities.

U.N. Statement on the FINANCIAL AND ECONOMIC CRISIS AND ITS IMPACT ON DEVELOPMENT

2009-06-29T12:52:00.003-05:00

Lots of food for thought...

About MIGUEL D’ESCOTO BROCKMANN, PRESIDENT OF THE United Nation's GENERAL ASSEMBLY

http://en.wikipedia.org/wiki/Miguel_D%27Escoto

ADDRESS BY MIGUEL D’ESCOTO BROCKMANN, PRESIDENT OF THE GENERAL ASSEMBLY, UPON ADOPTION OF THE OUTCOME DOCUMENT OF THE UNITED NATIONS CONFERENCE ON THE WORLD FINANCIAL AND ECONOMIC CRISIS AND ITS IMPACT ON DEVELOPMENT

NEW YORK, 26 JUNE 2009

Excellencies,
United Nations Colleagues,
Representatives of Civil Society,
Brothers and Sisters all,

We have come to the middle of the third day of this historic United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development. I congratulate you all for successfully initiating the global conversation on the economic crisis that continues to unfold around us and for beginning an in-depth, unprecedented review of the international financial and economic architecture.

The world has had the opportunity to hear the voices of the G-192. All the Members of the General Assembly have had and continue to have the chance to express their points of view. Today our efforts have culminated in the adoption by consensus of an outcome document that represents the first step in a long process of putting the world on a new path towards SOLIDARITY, stability and sustainability.

The United Nations General Assembly, the G-192, has now been established as the central forum for the discussion of world financial and economic issues, and this in itself is a major achievement. In addition, the General Assembly has been asked to follow up on these issues through an ad hoc open-ended working group.

The issues to be followed up range from crisis mitigation – including global stimulus measures, special drawing rights (SDRs) and reserve currencies – to topics such as the restructuring of the financial and economic system and architecture, including reform of the international financial institutions and the role of the United Nations; external debt; international trade; investment; taxation; development assistance; South-South cooperation; new forms of financing; corruption and illicit financial flows; and regulation and monitoring.

At the same time, it has been recognized that the financial and economic crisis must not delay the necessary global response to climate change and environmental degradation through initiatives for building a "green economy".

The G-192 has proved itself capable of reaching consensus on the convening and modalities of this Conference and on a substantive outcome document that addresses issues of great importance to humanity. It has also been able to chart a course for carrying the process forward on the basis of the lines of action set out in the Conference outcome document.

We have had three days of very successful work and, now that the outcome document has been formally adopted, it is only fitting that we salute each other's efforts and, in particular, that we congratulate the two facilitators, Ambassador Frank Majoor of the Kingdom of the Netherlands and Ambassador Camilo Gonsalves of Saint Vincent and the Grenadines. Of course, we also express our warmest thanks to the President's Commission of Experts, which was so ably coordinated by Professor Joseph Stiglitz.

We are happy but not content, or rather, not completely satisfied. Other crises loom on the horizon, such as the clean water, global warming, food, energy and humanitarian crises affecting millions of our brothers and sisters, especially children suffering from hunger and thirst.

We must all join forces to confront these crises. The proposals we have adopted today point in this direction. But much remains to be done.

We are heartened by the expressions of political will to shoulder our shared responsibility to cooperate, but we will not be content so long as these pressing issues remain unresolved.

My role as President of this General Assembly, which brings together representatives of all the world's peoples, is to invite you to look beyond today's economic concerns and to hold out hope for the common future of the Earth and of humanity.

We may well ask, what next? Not necessarily in terms of the economy, but in terms of humanity. Where are we headed? At this point it is unlikely that anyone, however wise, can answer this question with certainty. But even without having the answers, we can all seek and build together the consensus that will lead us towards a more hopeful future for us all and for Mother Earth.

This reminds me of the vision of the great French scientist, archaeologist and mystic Pierre Teilhard de Chardin. In China, where he carried out his research on “Homo pekinensis”, he had something like a vision.

Looking at the advances in technology, trade and communications that were shortening distances and laying the foundations for what he liked to call planetization, rather than globalization, Teilhard de Chardin was already saying, in the 1930s, that we were witnessing the emergence of a new era for the Earth and for humanity.

What was about to appear, de Chardin told us, was the noosphere, after the emergence in the evolutionary process of the anthroposphere, the biosphere, the hydrosphere, the atmosphere and the lithosphere. Now comes the new sphere, the sphere of synchronized minds and hearts: the noosphere. As we know, the Greek word noos refers to the union of the spirit, the intellect and the heart.

Where are we headed? I venture to believe and hope that we are all headed towards the slow but unstoppable emergence of the noosphere. Human beings and peoples will discover and accept each other as brothers and sisters, as a family and as a single species capable of love, solidarity, compassion, non-violence, justice, fraternity, peace and spirituality.

Is this a utopia? It is undoubtedly a utopia, but a necessary one. It guides us in our search. A utopia is, by definition, unattainable. But it is like the stars: they are unreachable, but what would the night sky be without stars? It would be nothing but darkness and we would be disoriented and lost. A utopia likewise lends direction and purpose to our lives and struggles.

The noosphere, then, is the next step for humanity. Allow me a small digression: if, in the time of the dinosaurs, which inhabited the Earth for more than 100 million years and disappeared some 65 million years ago, a hypothetical observer had wondered what the next evolutionary step would be, he probably would have thought: more of the same. In other words, even bigger and more voracious dinosaurs.

But that answer would have been wrong. That hypothetical observer never would have imagined that a small mammal no bigger than a rabbit, living in treetops, feeding on flowers and shoots and trembling at the possibility of being devoured by a dinosaur, would eventually become our ancestor.

From that creature, millions of years later, emerged something completely new, with qualities totally different from those of the dinosaurs, including a conscience, intelligence and love: the first human beings, from whom we who are gathered here are descended.

And so it was not more of the same. It was a break, a new step.

I firmly believe that today we are once again on the threshold of a new step in the evolutionary process: a step towards a human family that is united with itself, with nature and with Mother Earth.

I am tempted to echo the words: “I have a dream!”. It is, indeed, a dream. A glorious, beautiful, happy dream.

The main focus of this new step will be life in all its forms, humanity with all its peoples and ethnic groups, the Earth as a mother with all its vitality and an economy that creates the material conditions for making all this possible. We will need the material capital we have built up, but the focus will be on human and spiritual capital, whose most wholesome fruits are fraternity or brotherhood, cooperation, solidarity, love, economic and ecological justice, compassion and the capacity to coexist happily with all our differences, in the same shared home, the great and generous Mother Earth.

They say that Jesus, Buddha, Francis of Assisi, Rumi, Tolstoy, Gandhi, Dorothy Day, Martin Luther King and many other great prophets and teachers of the past and present, of which every country and culture has an exemplar, were ahead of their time in taking this new step.

They are all our most formative teachers, our lodestars, who fan the flame of hope that assures us that we still have a future, a blessed future for all of us.

As our dear brother Joseph Stiglitz aptly put it: “The legacy of this economic and financial crisis will be a worldwide battle of ideas”.

I firmly believe that new ideas, new visions and new dreams will galvanize our spirits and our hearts. The old gods are dying out, and new ones are emerging with the vigor of newborn infants. My reflections are meant to bring energy and enthusiasm to this battle of ideas and visions.

If we humans are to take a qualitative leap forward, we must give up our quest to become the lords and masters of creation, forgetting that we are not owners but only caretakers, which, after all, is no small thing.

Only when we accept the fact that we are caretakers and not owners and that we will one day be held to account for our stewardship will the grandeur of our humanity shine forth.

Is The Global Recession Over?

2009-06-25T12:24:00.002-05:00

This is a very interesting and important question being posed here. The same question is being posed in a variety of publications ranging from conservative to the left.

Here we get an interesting take from one of the largest, most powerful and influential communist parties in the world.

However, noticeably absent is any reference to what these huge debts being incurred in the name of "economic stimulus" are really doing to nations and people.

This accumulation of debt may be having some short-term results as far as alleviating the problems associated with the collapsing capitalist economy which is certain to negatively impact all the countries the United States is trying to use to shore up its own economy.

But, there can only be one consequence of this huge accumulating debt aimed at trying to save the capitalist system, not just from complete collapse, but saving the system itself... we are already well into a full-blown depression.

What is the consequence of all this debt that is not considered in this article? Poverty. Massive poverty will be the result of these huge accumulations of debt. Masses of people who have never experienced poverty will be experiencing poverty and everything that goes with such poverty.

One need only examine what the western imperialist governments and their bankers did to socialist Poland to figure this out.

Debt equals poverty... massive debt equals massive poverty.

Recession, depression or whatever happens with the capitalist economy this massive, massive, massive debt is going to result in the most devastating and massive world-wide poverty the human race has ever experienced.

Something to think about and ponder as you gather around the dinner table... you might also contemplate how much longer you will have food to put on the dinner table for your family...

The leading capitalists, headed by Wall Street, are taking advantage of this depression as capitalists always do--- using this economic depression to drive down that standards of living of working people across the globe.

It is no wonder so many working people are turning to Karl Marx for answers... one only has to read the very short Chapter 26 from Volume One of Marx' "Capital" to understand what is taking place in the world today... if you have never read or studied Karl Marx before, I would urge you to get to your nearest public library and check out Volume One of "Capital" and give it a good, thorough read because what the bankers did to Poland they are now doing to the entire world... the United States included.

Alan L. Maki

People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)

--------------------------------------------------------------------------------
Vol. XXXIII

No. 25

June 21, 2009

Is The Global Recession Over?

C P Chandrasekhar

FINANCE ministers of the G8, meeting at Lecce in Italy during the latter part of week ending June 14, were cautiously optimistic. The final communiqué noted that in the aftermath of efforts at financial stabilisation and fiscal stimulation “there are signs of stabilisation in our economies, including a recovery of stock markets, a decline in interest rate spreads, (and) improved business and consumer confidence”. But, the ministers cautioned “the situation remains uncertain and significant risks remain to economic and financial stability”.

There were two elements of the communiqué that pointed to a compromise between the differing perceptions of the US and UK, on the one hand, and Germany and France, on the other, regarding the principal problems and tasks at hand. The first of these elements was the reference to the persistence of “significant risks” which was not there in the original draft of the communiqué, and was ostensibly inserted by those countries (UK and US) who feel that it is not yet time to decide that the recovery is here and the stimulus provided thus far has been adequate. Moreover, the mention of “encouraging figures in the manufacturing sector” that figured in the draft was dropped, since it went against the evidence that industrial production in the eurozone area had fallen by 21 per cent in April, relative to the corresponding month of the previous year.

LEADING POWERS DIFFER ON EMPHASIS

The second element of the communiqué of interest is that it pushes for going beyond thinking of recovery and formulating national level “exit strategies” “for unwinding the extraordinary policy measures taken to respond to the crisis.” The reference here is to the huge budget deficits and high levels of public debt that many countries, especially the US, have accumulated in the wake of the bail-outs and the stimulus packages they have put in place. Though the US and UK have played down this aspect of the discussions, there is clearly a difference in emphasis among the leading powers on where the world economy stands and what is the immediate priority in terms of action.

The difference hinges, quite clearly, on the extent to which different sections believe that the worst is over. The reason for uncertainty regarding a potential recovery is that the figures are yet to point to a definitive revival. As of May 2009, nearly two years since the financial crisis broke and a year-and-a-half after the onset of the global recession, the economic scenario remains uncertain, if not bleak. The rate of unemployment in the US, which stood at less than 5 per cent in the first quarter of 2008, had risen to 8.1 per cent in the first quarter of 2009 and is estimated to have touched 9.4 per cent in May 2009—its highest rate for the last 26 years. This possibly explains US pessimism. It is true that the unemployment rate in the European Union had also risen from 6.8 to 8.1 per cent between the first quarters of 2008 and 2009. But the higher base level may be making the problem appear less alarming to ruling governments there than in the US, influencing their perceptions.

Output growth too gives no cause for optimism. Quarter-on-quarter growth rates of US GDP (as measured relative to the corresponding quarter of the previous year) had declined sharply in the last quarter of 2008 and first quarter of 2009 across the G7. This decline was even sharper in the UK and the EU, than the US). The crisis had clearly not gone away by the beginning of April, despite signs of recovery in the stock market. The disconcerting element is that this situation prevails despite huge infusion of funds by G7 governments. According to one estimate, the US Federal Reserve had by April 2009 offered about $12.7 trillion in guarantees and commitments to the US financial sector, and spent a little over $4 trillion in combating the crisis. As a result the federal deficit has risen to more than 12 per cent of GDP, frightening fiscal conservatives who predict the onset of stagflation. The big thrust seems to be over and the recovery is still not in sight. What it has possibly done, and even that is not certain, is prevent the recession from turning into a depression.

OPTIMISM BASED ON STILL TENUOUS EVIDENCE

Despite this evidence relating to the period till the last full quarter for which numbers are available, speculation that the downturn has bottomed out and the developed world is on the verge of recovery proliferates. This optimism is based on still tenuous evidence, including evidence that the rate of decline of economies is slowing. The most important of these is that the monthly decline in employment in the US is down sharply. In May 2009 nonfarm payroll employment fell by 345,000, which is around half the average monthly decline over the previous six months and well below the close to 750,000 fall in January this year. Associated with this fall in monthly employment declines is a fall in new unemployment claims. Economist Robert Gordon of Northwestern University in the US, a respected analyst of growth and productivity trends in the US, has found that past recessions came to an end four to six weeks after new unemployment claims peaked, which they have now done. So he conjectures that the business cycle will find its trough in May or June (Financial Times, June 3, 2009). While these developments are reassuring, we should view them in the light of the fact that the unemployment rate is at record levels and new unemployment claims are still above the figures they touched in the worst months of the last recession.

A second cause for optimism is that US producers may be reaching the phase of their inventory cycle where an increase in production is inevitable. By April, wholesale inventories had fallen for the eighth month running as firms cut back production to clear the excess inventories generated by falling demand. Having made those adjustments, it is argued, firms are now in a position where they would have to step up production, especially if demand begins to stabilise. In other words, the argument is that since things are so bad, they can only get better. But the figures do not support even this position. Thus, after seven months of decline, inventories in April fell 1.4 per cent relative to the year before and 6.4 per cent relative to the corresponding month of the previous year. That was because sales fell by 0.4 per cent in April, led by automobiles and parts. Sales of durable goods too were down 1.9 per cent during the month and 23.4 per cent over the year.

The third potential cause for comfort is the sign that relative to previous months the decline in production is slowing. The available evidence shows that the decline in GDP relative to the immediately preceding quarter, which was rising till the first quarter of 2009, seems to have bottomed out in the US and to a lesser extent in the EU. What is more, this trend seems to be reflected even in the month-on-month annual growth rates of industrial production, with the rate of decline in April 2009 relative to the corresponding month of the previous year showing signs of reversing its hitherto continuous increase in the US, UK and EU.

While this third factor may be adequate reason for optimism for some, there are two reasons why we should not read too much into this data. To start with, even if the downturn is touching bottom in terms of the stabilisation of the rate of decline, the decline could persist and the economy could “bounce along the bottom” as some analysts reportedly speculate. That is, there is no “statistical” reason why a stable rate of decline should automatically lead to lower rates of decline and positive rates of growth in the coming months or quarters.

Further, it is unclear whether there would be adequate alternative stimuli to sustain the recovery when the effects of the already implemented fiscal stimulus wane. Governments could hold back on providing any fresh stimulus because of arguments of the kind espoused by conservative economists, representatives of the financial sector and even some European governments, which emphasise the dangers of inflation. If that happens, recovery would depend on the return of the consumer to the market.

But here too the prognosis is not all too happy. Fears generated by the recession and rising unemployment and the increased desire to save to make up for the decline in the values of accumulated housing and financial assets is encouraging savings even in the US. According to a recent estimated of the Federal Reserve, the net worth of US households had fallen 2.5 per cent or by $1,300 billion in just the first three months of 2009. This comes on top of the 18 per cent fall in the previous year which was the worst since the Fed began estimating household wealth in 1946.The net result is that household savings rates in the US are rising and consumer spending was falling in March and April this year.

In the event many still remain sceptical. The Financial Times quotes Martin Feldstein as saying that “it is possible but unlikely” that the recession is over. “I think it is a more likely scenario that we are seeing the favourable effects of the fiscal stimulus,” he reportedly said. “That, for a while, will offset the general diminished trend we have seen over the past two quarters, but it is a one-shot thing.” Put otherwise, there could be more bad news ahead.

PEOPLE BEFORE PROFITS False hope on the economy — unless …

2009-06-24T12:23:00.000-05:00

Wednesday, June 24, 2009

A guest blog, placed by reader request.

PEOPLE BEFORE PROFITS False hope on the economy — unless …

Author: Art Perlo
People's Weekly World Newspaper, 06/23/09

In March, Federal Reserve Chair Ben Bernanke saw "green shoots" in the economy. Since then, various economists and government officials have seen signs that the recession may be bottoming out, with hopes that economic growth may start later this year. And many journalists in the business media are joining in, acting like paid touts for the stockbrokers.

This chorus has been fueled by a series of reports. Some banks are showing profits again. The stock market is up. Job losses in May, while horrific by any previous standard, weren't as bad as earlier this year. Housing starts in May were a little higher than in April.

There are more than a few skeptics. Much of the "good" news is really "slightly less bad news" or reflects temporary factors. And even in the most optimistic scenarios, unemployment will continue to rise well into next year.

I am more than skeptical. There are major economic obstacles to even a weak recovery. Without decisive government action, these will continue to depress the economy, pushing unemployment to a post-World-War-II record and devastating more families than 100 years’ worth of hurricanes. Four of the obstacles to recovery:

1) One-third of all home mortgages are under water — the homeowners owe more than the house is worth. We are in for another year of record foreclosures and many years of depressed purchasing power, as the banks try to squeeze every last penny out of working class homeowners. Federal and state initiatives are providing some relief, but the majority of homeowners who are in trouble are headed for eviction, and their communities are headed to further decline.

2) The collapse of the auto industry and its ripple effects are devastating the part of the economy — manufacturing — which actually produces things that people need. The layoffs, plant closings, and loss of tax revenue are just beginning. As suppliers and support services cut back, the effects will be felt far beyond the Midwest. Michigan's unemployment rate of 12.9% (and rising) could be headed to your state, too.

3) State and local government fiscal crises are already causing layoffs and cutbacks, overwhelming the positive effects of February's federal stimulus package. This will only worsen as local revenues continue to decline and governments run out of reserves and accounting tricks.

4) For nearly 30 years, there has been a growing gap between rising productivity and stagnant real wages. This has translated into extra corporate profits and extra income for the super-rich. Part of this wealth has been loaned back to the working class to finance homes, cars, education, medical care and daily expenses. Result: financial crisis for working families, instability for the financial system. Part of the wealth has been invested in the unproductive, speculative financial sector, or in real “development” projects (homes, shopping malls, resorts) that outstrip the demand from cash-strapped consumers. Result: more overcapacity, corporate bankruptcies, layoffs, and instability.

These problems — and others — could result in a new wave of financial and industrial crises, with the economy declining into a full-blown depression. It will require radical action to protect working families, and to reorient the economy, not only for growth, but for meeting the needs of people and the environment.

The stimulus package enacted by the Obama administration in February contains many positive features that are only beginning to kick in. But they are inadequate in the face of the developing global depression.

A people's economic program would have two essential features. 1) Return to the working class a greater portion of the wealth it creates, wealth that now lines the pockets of the very rich. 2) Directly meet real needs of the nation and its working families, instead of relying exclusively on the magic of a broken corporate system.

This means higher taxes on the super-rich, on corporate profits and financial transactions, to ease the burden on the working class, especially at the state and local level. And it requires that government play an active role in developing energy, transportation, health, environment and infrastructure policies. It would take direct measures where necessary to put the millions of unemployed to work meeting these vital needs.

Winning even part of such a program requires challenging the entrenched corporate and financial interests that, until now, have been able to shape and plunder the U.S. and global economies as they will. This will not be an easy fight. The huge movements for a national single-payer health plan (or at least a strong public option) and the Employee Free Choice Act are only the start of what is needed to win the kind of change we really need.

Art Perlo can be reached via his e-mail: econ4ppl@cpusa.org

Posted by Alan L. Maki

Thin Ice From Here to the Horizon

2009-04-20T07:38:00.001-05:00

Thin Ice From Here to the Horizon

By ALEXANDER COCKBURN

On any rational assessment the popular new president is skating on thin ice. Pollyanna bulletins about the economy puff up from the White House and Federal Reserve, like auguries of a new Pope through the Vatican chimney. “Habemus spem.” We have hope. We’ve just heard it from President Obama: "We are starting to see glimmers of hope across the economy." From Fed Chairman Ben Bernanke, who’s so far unleashed $12 trillion in booster money, we get the always sinister reassurance, like Death giving the Appointee in Samarra a friendly tap on the shoulder, "the foundations of our economy are strong".

The economic news in the near and medium term is ghastly, as Mike Whitney outlined on this site last Thursday. Retail sales crashed again in March, nowhere worse than in the car market, though electronics and building materials were way off too. They now reckon there’ll be just over two million housing foreclosures in 2009, up 400,000 from 2008. Industrial output is going through the floor at an annual rate of 20 per cent, the biggest quarterly drop since the end of the Second World War. US industry is now running at only 70 per cent of capacity, the worst number since they started tracking this stat in 1967. Job losses are currently running at 650,000 a month.

Round the next corner is credit card delinquency and the long-heralded slump in commercial real estate, where vacancy rates are already running at 15 per cent,. Capital One, a huge issuer of Visa and Mastercard, just said the annualized net charge-off rate for U.S. credit cards -- debts the company reckons will never be paid -- rose to 9.33 percent in March from 8.06 percent in February. In other words, Capital One – whose credit card promotions take up hefty space in the mailbag of every US postman – is in big trouble, and under one in ten of these credit card holders will have a messed up credit rating for several years to come.

Wall Street and its boosters are trying to pretend that indeed the worst is over. The Dow and S&P Index have been rallying for five weeks. Wells Fargo, the huge San Francisco-based bank, second biggest home lender, announced that first quarter net income rose 50 per cent to $3 billion. No one seriously believes the bank is in anything other than continuing huge trouble, and will soon need – so Blomberg News surmises - $50 billion to settle near-term commitments. The profit figure stems from newly relaxed rules about the valuation of Wells Fargo’s assets.

In other words it’s thin economic ice from here to the horizon. Robert Reich, now teaching economics at Berkeley and formerly labor secretary in the Clinton administration, wrote a piece recently, titled "Why We're Not at the Beginning of the End, and Probably Not Even At the End of the Beginning". There are huge problems with the whole orientation of the US economy. The “free market” outsourcing model has failed. Even at the best of times the US consumers who account for over 70 per cent of all economic activity in the country, don’t have purchasing power to keep the whole show on the road, unless they put it on the credit cards which are now maxed out and going into default, or borrow on houses they can’t afford.

Amid a hail of well founded criticism from liberal and conservative economists alike, Obama, with Geithner, Summers and Bernanke at his elbow, remains absolutely committed to giving the bankers everything they ask for, trillion upon trillion. As William Black, deputy director at the former Federal Savings and Loan Insurance Corp. during the thrift crisis of the 1980s, recently remarked in an acrid interview in Barron’s, (reprinted here last week) “ Unless the current administration changes course pretty drastically, the scandal will destroy Obama's administration, both economically and in terms of integrity. We have failed bankers giving advice to failed regulators on how to deal with failed assets. How can it result in anything but failure?”

In foreign policy the ice is just as treacherous. As the nation emerges from its disastrous adventure in Iraq, Obama redeploys to the Afghan-Pakistan theater. The administration delightedly touts claims that its remote-controlled missiles are decimating al-Q’aida. The Washington-based journalist Gareth Porter last Thursday cited here data leaked by the Pakistani government showing that only ten out of 60 drone attack in February and March hit al Qaida leaders and the rest did what bombs and missiles usually do, namely kill civilians, 537 of them – thus immeasurably strengthening the hand of the Taliban in the battle for hearts and minds.

Obama is no doubt unworried by this since the hearts and minds he’s mostly interested in belong to the American people and especially opinion-forming elites, who remain unflustered when high explosive falls on a wedding party in Waziristan. Failure in Iraq was re-labeled “victory” and in terms of domestic politics the chickens only come home to roost when there’s film of people climbing off the roof of the US embassy into a helicopter, or when the casualty rates among US soldiers start soaring. Soaring Pentagon budgets are popular with Congress, whose members nix any effort to cut back.

Where the ice is giving way for Obama is among those who thought he might strike out in a new direction in foreign policy. There’s not much sign of that. Whether it’s a sell-out of Haiti’s poor or acquiescence in Israel’s grim plans for the Palestinians, Obama’s game is strictly business as usual, up to and including the Cuban blockade whose damage, as Fidel Castro said here last week, “cannot be calculated only on the basis of its economic effects, for it constantly takes human lives and brings painful suffering to our people. Numerous diagnostic equipment and crucial medicines --made in Europe, Japan or any other country-- are not available to our patients if they carry U.S. components or software.”

Obama has welshed on promises that America will stop kidnapping its enemies and “rendering” them to secret prisons overseas. As under Bush, enemy combatants languish without rights or recourse in prisons like Bagram. The torturers who flourished in the Bush years will not be prosecuted. Electronic eavesdropping continues unabated. It seems, so CounterPunch’s Fred Gardner is reporting in exclusives on this site, he and his attorney general are welshing on commitments not to harass medical marijuana operations in states where local laws sanction such activity.

Will the liberal-left mutiny? Never. Remember, Bill Clinton bombed Yugoslavia and kicked away life supports of America’s poorest and most of the liberal-left stayed loyal to the end and cherish his memory. The labor movement has already seen defeat for its cherished “card check” bill, designed to win a level playing field for union organizers, thus presumptively boosting effective purchasing power among working people, vital to the nation’s economic well-being. They’re not really blaming this on Obama, even though it is his chief aide, Rahm Emmanuel who, in his years on the Hill, picked Democratic candidates who feel no loyalty to labor and refused to push for the card check bill, and though Obama recently stressed he is a “new” Democrat – transparent code for someone distancing himself from the labor movement.

Obama’s polling numbers remain good. He has only to say there are “glimmers of hope” and the pollsters duly find increasing sentiment among Americans that they feel the economy is moving in a “positive” direction. He gets good assessments from Democrats and Independents. Many Republicans don’t like him but here again Obama is lucky, just as he was lucky – at least in the near term - to have three Navy SEALS off the horn of Africa who were good shots. The Republican opposition is in appalling shape, lumbering from one ill-conceived stunt to the next.

Obama’s lucky to have succeeded a terrible president. He gets out a lot and talks a great game. His problem is the same as the country’s. The economic ice is cracking under his feet, and the “stimulus” is going to be about as efficacious as those cushions under the seats the flight attendants assure us are going to come in handy when the plane goes down in the North Atlantic.

An Open Letter to President Barack Obama from Sidney J. Gluck

2009-03-31T12:42:00.002-05:00

Attached is an open letter to President Barack Obama.

I don't know whether you agree with my point of view or not; but I am functioning out of the feeling that the negative aspects of capitalism are becoming obvious to people all around the world regardless of class positions, that understanding its avaricious nature brings them closer to Marx's analysis of the system which all of you can read his seminal word on "Capital." Chapter 26 which deals with the law of capitalist accumulation will give you the prototype of which the USA's capitalism is the arch example of its worst (together with the British who started out but are following along with the USA).

Globalization is a mess and everyone knows that the USA has created more poverty with its capital investments than existed before the global expansion. We know that formal colonial countries are seeing through this domination and are moving in directions which reject the control of foreign capital in their own developments. WE ARE LIVING IN A CENTURY OF EPOCHAL CHANGE. Our hope is that the change which is now developing in the form of a bipolar economic structure will continue to redevelop economies technologically and sustainably. We hope too that the ultimate resolution of differences between the double-structured world economic system will not be resolved by warfare. That is the most important struggle we must be involved with. A peaceful acceptance of epochal change and the survival of all in a better world.

Sincerely,

Sidney J. Gluck

Dear President Obama,

The world economic crisis sparked by the financial sector of our country has put the capitalist system on a defensive more openly than any other time in history. I am one of many who strongly supported your candidacy based on your vocalization of much of what we felt had to be changed in our country to make it more livable for those of us who produce the wealth and intellectual atmosphere.

You are facing the sharpest attack from the ranks of the Republican Party. We all admire your diplomatic ability to deal with those who disagree with you; but, the time has come when you must take an ideological position in order to clarify the issues involved in building a new type of economic structure in the country. This means that the dominance of the financial institutions in the political decisions affecting the majority must be defended openly against misrepresentations and manipulations which we all now know come from the unsupported defense of government that gives primacy to capital accumulation whether it be finance capital or industrial capital.

You do not have to embrace socialism. That is not the ideological position that put you in power. You were put in the White House with a promise to govern in the name of the working majority. True, you would like to have support from all sections of political and economic forces, but YOU WILL NOT GET IT.

If you continue to move along supporting the program of the financial circles in our country, your presidency is DOOMED. Listen to the needs of the majority and cater to it.

You can announce openly that you are not for socialism but you are for correcting the ills of the capitalist system and to relinquish domination of other countries allowing them to move independently as their people desire.

The Republican Party is pressing for the continuation of the kind of economic distortions that has dragged the world down. Openly facing this fact will help you reshape our country’s goals.

We are in an epoch of change. We must remove barriers and encourage each nation to resolve their day to day problems created by greed and distorted wealth accumulation. It does not make you a socialist to talk for Main Street but they need a spokesman in high places that will act for them.

You are in an enviable yet complicated position. Exposing the negative effect of unregulated finance capital which dominates humanity today would memorialize you for the next thousand years. The Bush Administration preempted the first move to deal with the economic crisis by bailing out the perpetrators who squandered every cent in bonuses and bashes. You are now faced with additional steps to bail out the industrial capitalists who have the responsibility of reshaping these enterprises into a new technological and green economy whose purpose is to raise the living standards of all.

The fulfillment of your promises requires that you take an ideological position. You will go down in history as having broken the racial barrier but it will end at that if you continue to be consumed by the economic crisis. OUR SYSTEM NEEDS CHANGE. Do what you can within that system. This means openly opposing the Republican Party’s program already on the road to capturing the presidency and congress in 2010 before they bring us further down. Don’t let them bully you with the “socialist” label.

The ball is in your court to change the situation. In your most diplomatic way you must take an ideological position to correct the problems of the system as you promised and restore true democracy which favors the needs of the majority.

Sincerely,

Sidney J. Gluck

Why the economic crisis, and its solution, are bigger than you think

2009-03-28T20:34:00.003-05:00

No Return To Normal; Why the economic crisis, and its solution, are bigger than you think; by James K. Galbraith.

As I read the article at the bottom (or read it here: http://www.washingtonmonthly.com/features/2009/0903.galbraith.html) I had these thoughts reading it:

I think working people pretty much have known this is much bigger than what all the economists have let on.

And working people are supposed to endure twenty years of hardship, suffering and pain to save capitalism? Is Galbraith nuts?

This analysis has not even taken into account the obscene military spending that is bleeding this country to death as it leaves in its wake massive death and destruction with three wars in progress, support for the Israeli killing machine and a vast network of over 800 U.S. foreign military bases spread out across the globe when what the American people need is a network of 800 public health care centers spread out across the United States--- 16 in each of the 50 states which would create over four-million jobs... good paying jobs and decent work.

I disagree with this approach being put forward by Galbraith which is only meant to lure the left into a trap of continued support for capitalism while his make work on socially useful projects should be vigorously supported on a much larger scale than Roosevelt undertook... and let's be clear about one thing... the Roosevelt projects were almost all public works projects from which no one profited but people were gainfully employed (wages should have and could have been much higher) but the counter to the low wages was that society received very valuable assets lasting many years in return.

Unfortunately, because the left has been so weak many of the environmental projects cited by Galbraith have been ruined... like the Big Bog up here in northern Minnesota which is now being mined for peat by a Canadian corporation which will truck away the profits on roads and infrastructure compliments of tax-payers.

Obama's so-called "economic stimulus" programs are nothing more than a fiasco designed to enable Wall Street to feed at the public trough and gorge itself in a profit-orgy at the expense of the people; Galbraith ignores this... at least 40% will be sucked off in profits and who knows how much in graft and corruption.

I also think Galbraith gives Roosevelt way too much credit in completely ignoring the massive people's movements of the 1930's which pushed Roosevelt in the direction he went creating massive public works programs... and it was those people who were ready to dump capitalism for socialism who Galbraith says had given up on the system who were the very people who pushed Roosevelt.

In my opinion what the left needs to push for is a comprehensive people's bailout that is aimed at trying to solve the pressing problems people are experiencing.

There are those on the left pitching a cooperative effort in what they call a "solidarity economy" where "high road" (good) capitalists are brought in to profit from doing good... turning the entire capitalist system into some kind of philanthropic endeavor or something.

Capitalism is down and going down even further... now is the time for the left to get moving and give it some good hard kicks so it stays down as we do like Galbraith suggests--- educate people really fast to get rid of this rotten system which breeds so much misery once and for all.

This is a very unique "socialist moment" for the very reason that this "is not your garden variety recession." Call it a recession or depression, whatever you like... it is in fact a depression and it is going to be long-term and any recovery will not be of any use to most working people.

This myth of the creation of the "middle class" is a bunch of crap... these are working class people and it is these very people, many of whom suffered as children through the depression of the 1930's have been robbed of their life savings now.

Some working people had a good twenty or thirty years; but these were few and far between... many of them invested substantially in 401k's which have been gutted by 40% to 70% so in effect those so-called "middle class wages" they got don't amount to beans... they would have been better off sticking their wages in a little section of their pillows.

Those like Galbraith are the real middle class and they have no sense of urgency suggesting that working people should stick with this system for another 20 years, quite possibly much longer knowing most of us will be dead by then and our grandchildren will be left with a system more parasitic, cannibalistic and barbaric than what we have now. Who in their right mind wants to put their offspring through something like Galbraith is suggesting... he has never had to work a day in his life.

We need to reorder priorities, advance some kind of anti-monopoly agenda that will put us on the road to socialism... there is no other way out.

This mess is obviously bigger than even Galbraith thinks because he will not have to endure the suffering and hardship, factors that no economist or middle class intellectual can analyze, project or measure.

We better start getting socialist ideas into the hands and heads of working people because the right-wing in this country is on the ball and wasting no time... Obama is providing them the perfect target to enable them to take this country so far to the right we will never even recognize it.

Yours in the struggle,
Alan L. Maki

58891 County Road 13
Warroad, Minnnesota, 56763

alternate E-Mail: amaki000@centurytel.net

phone: (218) 386-2432

Please check out my daily blog:
http://thepodunkblog.blogspot.com/

--------------------------------------------------------------------------------
Why the economic crisis, and its solution, are bigger than you think

No Return To Normal
Why the economic crisis, and its solution, are
bigger than you think.

By James K. Galbraith

Washington Monthly

March/April 2009

http://www.washingtonmonthly.com/features/2009/0903.galbraith.html

Barack Obama's presidency began in hope and goodwill,
but its test will be its success or failure on the
economics. Did the president and his team correctly
diagnose the problem? Did they act with sufficient
imagination and force? And did they prevail against the
political obstacles-and not only that, but also against
the procedures and the habits of thought to which
official Washington is addicted?

The president has an economic program. But there is, so
far, no clear statement of the thinking behind that
program, and there may not be one, until the first
report of the new Council of Economic Advisers appears
next year. We therefore resort to what we know about the
economists: the chair of the National Economic Council,
Lawrence Summers; the CEA chair, Christina Romer; the
budget director, Peter Orszag; and their titular head,
Treasury Secretary Timothy Geithner. This is plainly a
capable, close-knit group, acting with energy and
commitment. Deficiencies of their program cannot,
therefore, be blamed on incompetence. Rather, if
deficiencies exist, they probably result from their
shared background and creed-in short, from the
limitations of their ideas.

The deepest belief of the modern economist is that the
economy is a self-stabilizing system. This means that,
even if nothing is done, normal rates of employment and
production will someday return. Practically all modern
economists believe this, often without thinking much
about it. (Federal Reserve Chairman Ben Bernanke said it
reflexively in a major speech in London in January: "The
global economy will recover." He did not say how he
knew.) The difference between conservatives and liberals
is over whether policy can usefully speed things up.
Conservatives say no, liberals say yes, and on this
point Obama's economists lean left. Hence the priority
they gave, in their first days, to the stimulus package.

But did they get the scale right? Was the plan big
enough? Policies are based on models; in a slump, plans
for spending depend on a forecast of how deep and long
the slump would otherwise be. The program will only be
correctly sized if the forecast is accurate. And the
forecast depends on the underlying belief. If recovery
is not built into the genes of the system, then the
forecast will be too optimistic, and the stimulus based
on it will be too small.

Consider the baseline economic forecast of the
Congressional Budget Office, the nonpartisan agency
lawmakers rely on to evaluate the economy and their
budget plans. In its early-January forecast, the CBO
measured and projected the difference between actual
economic performance and "normal" economic performance-
the so-called GDP gap. The forecast has two astonishing
features. First, the CBO did not expect the present
recession to be any worse than that of 1981-82, our
deepest postwar recession. Second, the CBO expected a
turnaround beginning late this year, with the economy
returning to normal around 2015, even if Congress had
taken no action at all.

With this projection in mind, the recovery bill pours a
bit less than 2 percent of GDP into new spending per
year, plus some tax cuts, for two years, into a GDP gap
estimated to average 6 percent for three years. The
stimulus does not need to fill the whole gap, because
the CBO expects a "multiplier effect," as first-round
spending on bridges and roads, for example, is followed
by second-round spending by steelworkers and road crews.
The CBO estimates that because of the multiplier effect,
two dollars of new public spending produces about three
dollars of new output. (For tax cuts the numbers are
lower, since some of the cuts will be saved in the first
round.) And with this help, the recession becomes fairly
mild. After two years, growth would be solidly
established and Congress's work would be done. In this
way, the duration as well as the scale of action was
driven, behind the scenes, by the CBO's baseline
forecast.

Why did the CBO reach this conclusion? On depth, CBO's
model is based on the postwar experience, and such
models cannot predict outcomes more serious than
anything already seen. If we are facing a downturn worse
than 1982, our computers won't tell us; we will be
surprised. And if the slump is destined to drag on, the
computers won't tell us that either. Baked into the CBO
model we find a "natural rate of unemployment" of 4.8
percent; the model moves the economy back toward that
value no matter what. In the real world, however, there
is no reason to believe this will happen. Some
alternative forecasts, freed of the mystical return to
"normal," now project a GDP gap twice as large as the
CBO model predicts, and with no near-term recovery at
all.

Considerations of timing also influenced the choice of
line items. The bill tilted toward "shovel-ready"
projects like refurbishing schools and fixing roads, and
away from projects requiring planning and long
construction lead times, like urban mass transit. The
push for speed also influenced the bill in another way.
Drafting new legislative authority takes time. In an
emergency, it was sensible for Chairman David Obey of
the House Appropriations Committee to mine the
legislative docket for ideas already commanding broad
support (especially within the Democratic caucus). In
this way he produced a bill that was a triumph of fast
drafting, practical politics, and progressive principle-
a good bill which the Republicans hated. But the scale
of action possible by such means is unrelated, except by
coincidence, to what the economy needs.

Three further considerations limited the plan. There
was, to begin with, the desire for political consensus;
President Obama chose to start his administration with a
bill that might win bipartisan support and pass in
Congress by wide margins. (He was, of course, spurned by
the Republicans.) Second, the new team also sought
consensus of another type. Christina Romer polled a
bipartisan group of professional economists, and Larry
Summers told Meet the Press that the final package
reflected a "balance" of their views. This procedure
guarantees a result near the middle of the professional
mind-set. The method would be useful if the errors of
economists were unsystematic. But they are not.
Economists are a cautious group, and in any extreme
situation the midpoint of professional opinion is bound
to be wrong.

Third, the initial package was affected by the new
team's desire to get past this crisis and to return to
the familiar problems of their past lives. For these
protégés of Robert Rubin, veterans in several cases of
Rubin's Hamilton Project, a key preconception has always
been the budget deficit and what they call the
"entitlement problem." This is D.C.-speak for rolling
back Social Security and Medicare, opening new markets
for fund managers and private insurers, behind a wave of
budget babble about "long-term deficits" and "unfunded
liabilities." To this our new president is not immune.
Even before the inauguration Obama was moved to commit
to "entitlement reform," and on February 23 he convened
what he called a "fiscal responsibility summit." The
idea took hold that after two years or so of big
spending, the return to normal would be under way, and
the costs of fiscal relief and infrastructure
improvement might be recouped, in part by taking a pound
of flesh from the incomes and health care of the old.

The chance of a return to normal depends, in turn, on
the banking strategy. To Obama's economists a "normal"
economy is led and guided by private banks. When
domestic credit booms are under way, they tend to
generate high employment and low inflation; this makes
the public budget look good, and spares the president
and Congress many hard decisions. For this reason the
new team instinctively seeks to return the bankers to
their normal position at the top of the economic hill.
Secretary Geithner told CNBC, "We have a financial
system that is run by private shareholders, managed by
private institutions, and we'd like to do our best to
preserve that system."

But, is this a realistic hope? Is it even a possibility?
The normal mechanics of a credit cycle do involve
interludes when asset values crash and credit relations
collapse. In 1981, Paul Volcker's campaign against
inflation caused such a crash. But, though they came
close, the big banks did not fail then. (I learned
recently from William Isaac, Ronald Reagan's chair of
the FDIC, that the government had contingency plans to
nationalize the large banks in 1982, had Mexico,
Argentina, or Brazil defaulted outright on their debts.)
When monetary policy relaxed and the delayed tax cuts of
1981 kicked in, there was both pent-up demand for credit
and the capacity to supply it. The final result was that
the economy recovered quickly. Again in 1994, after a
long period of credit crunch, banks and households were
strong enough, even without a stimulus, to support a
vast renewal of lending which propelled the economy
forward for six years.

The Bush-era disasters guarantee that these happy
patterns will not be repeated. For the first time since
the 1930s, millions of American households are
financially ruined. Families that two years ago enjoyed
wealth in stocks and in their homes now have neither.
Their 401(k)s have fallen by half, their mortgages are a
burden, and their homes are an albatross. For many the
best strategy is to mail the keys to the bank. This
practically assures that excess supply and collapsed
prices in housing will continue for years. Apart from
cash-protected by deposit insurance and now desperately
being conserved-the American middle class finds today
that its major source of wealth is the implicit value of
Social Security and Medicare-illiquid and intangible but
real and inalienable in a way that home and equity
values are not. And so it will remain, as long as future
benefits are not cut.

In addition, some of the biggest banks are bust, almost
for certain. Having abandoned prudent risk management in
a climate of regulatory negligence and complicity under
Bush, these banks participated gleefully in a poisonous
game of abusive mortgage originations followed by rounds
of pass-the-bad-penny-to-the-greater-fool. But they
could not pass them all. And when in August 2007 the
music stopped, banks discovered that the markets for
their toxic-mortgage-backed securities had collapsed,
and found themselves insolvent. Only a dogged political
refusal to admit this has since kept the banks from
being taken into receivership by the Federal Deposit
Insurance Corporation-something the FDIC has the power
to do, and has done as recently as last year with
IndyMac in California.

Geithner's banking plan would prolong the state of
denial. It involves government guarantees of the bad
assets, keeping current management in place and
attempting to attract new private capital. (Conversion
of preferred shares to equity, which may happen with
Citigroup, conveys no powers that the government, as
regulator, does not already have.) The idea is that one
can fix the banks from the top down, by reestablishing
markets for their bad securities. If the idea seems
familiar, it is: Henry Paulson also pressed for this, to
the point of winning congressional approval. But then he
abandoned the idea. Why? He learned it could not work.

Paulson faced two insuperable problems. One was
quantity: there were too many bad assets. The project of
buying them back could be likened to "filling the
Pacific Ocean with basketballs," as one observer said to
me at the time. (When I tried to find out where the
original request for $700 billion in the Troubled Asset
Relief Program came from, a senior Senate aide replied,
"Well, it's a number between five hundred billion and
one trillion.")

The other problem was price. The only price at which the
assets could be disposed of, protecting the taxpayer,
was of course the market price. In the collapse of the
market for mortgage-backed securities and their
associated credit default swaps, this price was too low
to save the banks. But any higher price would have
amounted to a gift of public funds, justifiable only if
there was a good chance that the assets might recover
value when "normal" conditions return.

That chance can be assessed, of course, only by doing
what any reasonable private investor would do: due
diligence, meaning a close inspection of the loan tapes.
On the face of it, such inspections will reveal a very
high proportion of missing documentation, inflated
appraisals, and other evidence of fraud. (In late 2007
the ratings agency Fitch conducted this exercise on a
small sample of loan files, and found indications of
misrepresentation or fraud present in practically every
one.) The reasonable inference would be that many more
of the loans will default. Geithner's plan to guarantee
these so-called assets, therefore, is almost sure to
overstate their value; it is only a way of delaying the
ultimate public recognition of loss, while keeping the
perpetrators afloat.

Delay is not innocuous. When a bank's insolvency is
ignored, the incentives for normal prudent banking
collapse. Management has nothing to lose. It may take
big new risks, in volatile markets like commodities, in
the hope of salvation before the regulators close in. Or
it may loot the institution-nomenklatura privatization,
as the Russians would say-through unjustified bonuses,
dividends, and options. It will never fully disclose the
extent of insolvency on its own.

The most likely scenario, should the Geithner plan go
through, is a combination of looting, fraud, and a
renewed speculation in volatile commodity markets such
as oil. Ultimately the losses fall on the public anyway,
since deposits are largely insured. There is no chance
that the banks will simply resume normal long-term
lending. To whom would they lend? For what? Against what
collateral? And if banks are recapitalized without
changing their management, why should we expect them to
change the behavior that caused the insolvency in the
first place?

The oddest thing about the Geithner program is its
failure to act as though the financial crisis is a true
crisis-an integrated, long-term economic threat-rather
than merely a couple of related but temporary problems,
one in banking and the other in jobs. In banking, the
dominant metaphor is of plumbing: there is a blockage to
be cleared. Take a plunger to the toxic assets, it is
said, and credit conditions will return to normal. This,
then, will make the recession essentially normal,
validating the stimulus package. Solve these two
problems, and the crisis will end. That's the thinking.

But the plumbing metaphor is misleading. Credit is not a
flow. It is not something that can be forced downstream
by clearing a pipe. Credit is a contract. It requires a
borrower as well as a lender, a customer as well as a
bank. And the borrower must meet two conditions. One is
creditworthiness, meaning a secure income and, usually,
a house with equity in it. Asset prices therefore
matter. With a chronic oversupply of houses, prices
fall, collateral disappears, and even if borrowers are
willing they can't qualify for loans. The other
requirement is a willingness to borrow, motivated by
what Keynes called the "animal spirits" of
entrepreneurial enthusiasm. In a slump, such optimism is
scarce. Even if people have collateral, they want the
security of cash. And it is precisely because they want
cash that they will not deplete their reserves by
plunking down a payment on a new car.

The credit flow metaphor implies that people came
flocking to the new-car showrooms last November and were
turned away because there were no loans to be had. This
is not true-what happened was that people stopped coming
in. And they stopped coming in because, suddenly, they
felt poor.

Strapped and afraid, people want to be in cash. This is
what economists call the liquidity trap. And it gets
worse: in these conditions, the normal estimates for
multipliers-the bang for the buck-may be too high.
Government spending on goods and services always
increases total spending directly; a dollar of public
spending is a dollar of GDP. But if the workers simply
save their extra income, or use it to pay debt, that's
the end of the line: there is no further effect. For tax
cuts (especially for the middle class and up), the new
funds are mostly saved or used to pay down debt. Debt
reduction may help lay a foundation for better times
later on, but it doesn't help now. With smaller
multipliers, the public spending package would need to
be even larger, in order to fill in all the holes in
total demand. Thus financial crisis makes the real
crisis worse, and the failure of the bank plan
practically assures that the stimulus also will be too
small.

In short, if we are in a true collapse of finance, our
models will not serve. It is then appropriate to reach
back, past the postwar years, to the experience of the
Great Depression. And this can only be done by
qualitative and historical analysis. Our modern
numerical models just don't capture the key feature of
that crisis-which is, precisely, the collapse of the
financial system.

If the banking system is crippled, then to be effective
the public sector must do much, much more. How much
more? By how much can spending be raised in a real
depression? And does this remedy work? Recent months
have seen much debate over the economic effects of the
New Deal, and much repetition of the commonplace that
the effort was too small to end the Great Depression,
something achieved, it is said, only by World War II. A
new paper by the economist Marshall Auerback has
usefully corrected this record. Auerback plainly
illustrates by how much Roosevelt's ambition exceeded
anything yet seen in this crisis:

[Roosevelt's] government hired about 60 per cent of the
unemployed in public works and conservation projects
that planted a billion trees, saved the whooping crane,
modernized rural America, and built such diverse
projects as the Cathedral of Learning in Pittsburgh, the
Montana state capitol, much of the Chicago lakefront,
New York's Lincoln Tunnel and Triborough Bridge complex,
the Tennessee Valley Authority and the aircraft carriers
Enterprise and Yorktown. It also built or renovated
2,500 hospitals, 45,000 schools, 13,000 parks and
playgrounds, 7,800 bridges, 700,000 miles of roads, and
a thousand airfields. And it employed 50,000 teachers,
rebuilt the country's entire rural school system, and
hired 3,000 writers, musicians, sculptors and painters,
including Willem de Kooning and Jackson Pollock.

In other words, Roosevelt employed Americans on a vast
scale, bringing the unemployment rates down to levels
that were tolerable, even before the war-from 25 percent
in 1933 to below 10 percent in 1936, if you count those
employed by the government as employed, which they
surely were. In 1937, Roosevelt tried to balance the
budget, the economy relapsed again, and in 1938 the New
Deal was relaunched. This again brought unemployment
down to about 10 percent, still before the war.

The New Deal rebuilt America physically, providing a
foundation (the TVA's power plants, for example) from
which the mobilization of World War II could be
launched. But it also saved the country politically and
morally, providing jobs, hope, and confidence that in
the end democracy was worth preserving. There were many,
in the 1930s, who did not think so.

What did not recover, under Roosevelt, was the private
banking system. Borrowing and lending-mortgages and home
construction-contributed far less to the growth of
output in the 1930s and '40s than they had in the 1920s
or would come to do after the war. If they had savings
at all, people stayed in Treasuries, and despite huge
deficits interest rates for federal debt remained near
zero. The liquidity trap wasn't overcome until the war
ended.

It was the war, and only the war, that restored (or,
more accurately, created for the first time) the
financial wealth of the American middle class. During
the 1930s public spending was large, but the incomes
earned were spent. And while that spending increased
consumption, it did not jumpstart a cycle of investment
and growth, because the idle factories left over from
the 1920s were quite sufficient to meet the demand for
new output. Only after 1940 did total demand outstrip
the economy's capacity to produce civilian private
goods-in part because private incomes soared, in part
because the government ordered the production of some
products, like cars, to halt.

All that extra demand would normally have driven up
prices. But the federal government prevented this with
price controls. (Disclosure: this writer's father, John
Kenneth Galbraith, ran the controls during the first
year of the war.) And so, with nowhere else for their
extra dollars to go, the public bought and held
government bonds. These provided claims to postwar
purchasing power. After the war, the existence of those
claims could, and did, establish creditworthiness for
millions, making possible the revival of private
banking, and on the broadly based, middle-class
foundation that so distinguished the 1950s from the
1920s. But the relaunching of private finance took
twenty years, and the war besides.

A brief reflection on this history and present
circumstances drives a plain conclusion: the full
restoration of private credit will take a long time. It
will follow, not precede, the restoration of sound
private household finances. There is no way the project
of resurrecting the economy by stuffing the banks with
cash will work. Effective policy can only work the other
way around.

That being so, what must now be done? The first thing we
need, in the wake of the recovery bill, is more recovery
bills. The next efforts should be larger, reflecting the
true scale of the emergency. There should be open-ended
support for state and local governments, public
utilities, transit authorities, public hospitals,
schools, and universities for the duration, and generous
support for public capital investment in the short and
long term. To the extent possible, all the resources
being released from the private residential and
commercial construction industries should be absorbed
into public building projects. There should be
comprehensive foreclosure relief, through a moratorium
followed by restructuring or by conversion-to-rental,
except in cases of speculative investment and borrower
fraud. The president's foreclosure-prevention plan is a
useful step to relieve mortgage burdens on at-risk
households, but it will not stop the downward spiral of
home prices and correct the chronic oversupply of
housing that is the cause of that.

Second, we should offset the violent drop in the wealth
of the elderly population as a whole. The squeeze on the
elderly has been little noted so far, but it hits in
three separate ways: through the fall in the stock
market; through the collapse of home values; and through
the drop in interest rates, which reduces interest
income on accumulated cash. For an increasing number of
the elderly, Social Security and Medicare wealth are all
they have.

That means that the entitlement reformers have it
backward: instead of cutting Social Security benefits,
we should increase them, especially for those at the
bottom of the benefit scale. Indeed, in this crisis,
precisely because it is universal and efficient, Social
Security is an economic recovery ace in the hole.
Increasing benefits is a simple, direct, progressive,
and highly efficient way to prevent poverty and sustain
purchasing power for this vulnerable population. I would
also argue for lowering the age of eligibility for
Medicare to (say) fifty-five, to permit workers to
retire earlier and to free firms from the burden of
managing health plans for older workers.

This suggestion is meant, in part, to call attention to
the madness of talk about Social Security and Medicare
cuts. The prospect of future cuts in this modest but
vital source of retirement security can only prompt
worried prime-age workers to spend less and save more
today. And that will make the present economic crisis
deeper. In reality, there is no Social Security
"financing problem" at all. There is a health care
problem, but that can be dealt with only by deciding
what health services to provide, and how to pay for
them, for the whole population. It cannot be dealt with,
responsibly or ethically, by cutting care for the old.

Third, we will soon need a jobs program to put the
unemployed to work quickly. Infrastructure spending can
help, but major building projects can take years to gear
up, and they can, for the most part, provide jobs only
for those who have the requisite skills. So the federal
government should sponsor projects that employ people to
do what they do best, including art, letters, drama,
dance, music, scientific research, teaching,
conservation, and the nonprofit sector, including
community organizing-why not?

Finally, a payroll tax holiday would help restore the
purchasing power of working families, as well as make it
easier for employers to keep them on the payroll. This
is a particularly potent suggestion, because it is large
and immediate. And if growth resumes rapidly, it can
also be scaled back. There is no error in doing too much
that cannot easily be repaired, by doing a bit less.

As these measures take effect, the government must take
control of insolvent banks, however large, and get on
with the business of reorganizing, re-regulating,
decapitating, and recapitalizing them. Depositors should
be insured fully to prevent runs, and private risk
capital (common and preferred equity and subordinated
debt) should take the first loss. Effective compensation
limits should be enforced-it is a good thing that they
will encourage those at the top to retire. As Senator
Christopher Dodd of Connecticut correctly stated in the
brouhaha following the discovery that Senate Democrats
had put tough limits into the recovery bill, there are
many competent replacements for those who leave.

Ultimately the big banks can be resold as smaller
private institutions, run on a scale that permits
prudent credit assessment and risk management by people
close enough to their client communities to foster an
effective revival, among other things, of household
credit and of independent small business-another lost
hallmark of the 1950s. No one should imagine that the
swaggering, bank-driven world of high finance and credit
bubbles should be made to reappear. Big banks should be
run largely by men and women with the long-term
perspective, outlook, and temperament of middle
managers, and not by the transient, self-regarding
plutocrats who run them now.

The chorus of deficit hawks and entitlement reformers
are certain to regard this program with horror. What
about the deficit? What about the debt? These questions
are unavoidable, so let's answer them. First, the
deficit and the public debt of the U.S. government can,
should, must, and will increase in this crisis. They
will increase whether the government acts or not. The
choice is between an active program, running up debt
while creating jobs and rebuilding America, or a passive
program, running up debt because revenues collapse,
because the population has to be maintained on the dole,
and because the Treasury wishes, for no constructive
reason, to rescue the big bankers and make them whole.

Second, so long as the economy is placed on a path to
recovery, even a massive increase in public debt poses
no risk that the U.S. government will find itself in the
sort of situation known to Argentines and Indonesians.
Why not? Because the rest of the world recognizes that
the United States performs certain indispensable
functions, including acting as the lynchpin of
collective security and a principal source of new
science and technology. So long as we meet those
responsibilities, the rest of the world is likely to
want to hold our debts.

Third, in the debt deflation, liquidity trap, and global
crisis we are in, there is no risk of even a massive
program generating inflation or higher long-term
interest rates. That much is obvious from current
financial conditions: interest rates on long-maturity
Treasury bonds are amazingly low. Those rates also tell
you that the markets are not worried about financing
Social Security or Medicare. They are more worried, as I
am, that the larger economic outlook will remain very
bleak for a long time.

Finally, there is the big problem: How to recapitalize
the household sector? How to restore the security and
prosperity they've lost? How to build the productive
economy for the next generation? Is there anything today
that we might do that can compare with the
transformation of World War II? Almost surely, there is
not: World War II doubled production in five years.

Today the largest problems we face are energy security
and climate change-massive issues because energy
underpins everything we do, and because climate change
threatens the survival of civilization. And here,
obviously, we need a comprehensive national effort. Such
a thing, if done right, combining planning and markets,
could add 5 or even 10 percent of GDP to net investment.
That's not the scale of wartime mobilization. But it
probably could return the country to full employment and
keep it there, for years.

Moreover, the work does resemble wartime mobilization in
important financial respects. Weatherization,
conservation, mass transit, renewable power, and the
smart grid are public investments. As with the armaments
in World War II, work on them would generate incomes not
matched by the new production of consumer goods. If
handled carefully-say, with a new program of deferred
claims to future purchasing power like war bonds-the
incomes earned by dealing with oil security and climate
change have the potential to become a foundation of
restored financial wealth for the middle class.

This cannot be made to happen over just three years, as
we did in 1942-44. But we could manage it over, say,
twenty years or a bit longer. What is required are
careful, sustained planning, consistent policy, and the
recognition now that there are no quick fixes, no easy
return to "normal," no going back to a world run by
bankers-and no alternative to taking the long view.

A paradox of the long view is that the time to embrace
it is right now. We need to start down that path before
disastrous policy errors, including fatal banker
bailouts and cuts in Social Security and Medicare, are
put into effect. It is therefore especially important
that thought and learning move quickly. Does the
Geithner team, forged and trained in normal times, have
the range and the flexibility required? If not,
everything finally will depend, as it did with
Roosevelt, on the imagination and character of President
Obama.

LONDON DECLARATION: Statement to the London G20 Summit GLOBAL UNIONS

2009-03-23T09:21:00.009-05:00

This is very typical of the social democratic view of the world... what I find interesting is the statement from these trade union organizations which continue to support and advocate for capitalism come up with this conclusion:

"The Global Union organisations are ready to play their part in building this fairer and greener future."

There is a real problem with this conclusion because the working class has had no part in creating this economic mess.

Capitalists created the problems in quest of greater and maximum profits so why should working people have to shoulder any of the burdens in solving the problems... obviously these union leaders never consulted with rank-and-file workers before issuing this statement.

For a long time now the International Trade Union Confederation has been pretending to support the United Nations' Universal Declaration of Human Rights; but, when it comes to using the Declaration of Human Rights as a guide to action regarding how to solve the problems of working people the Declaration of Human Rights is forgotten by these apologists for capitalism.

In solving the problems created by capitalism, working people across the globe have to keep two important factors mind:

1. Standard of living;

2. Cost of living.

We are either entitled to wages which will enable us to live meaningful and decent lives in keeping with what is articulated in the United Nations' Universal Declaration of Human Rights; or, we are entitled to adequate social programs which help us achieve a standard-of-living in keeping with the requirements stated in the United Nations' Universal Declaration of Human Rights... in reality, it will take a combination of real living wages and adequate social programs for workers in all countries to attain the rights and standard-of-living articulated so eloquently in the United Nations' Universal Declaration of Human Rights which should be our guide to extracting us from this economic quagmire we are bogged down in.

The International Trude Union Confederation, like its capitalist counterparts of the G-20 and other capitalist governments brings out--- if they even bring it out--- the United Nations' Universal Declaration of Human Rights every December 10 to mark its approval and signing by world leaders... just as world leaders, including President Bill Clinton, signed the Millennium Statement pledging to uphold the Declaration of Human Rights and declared their intent to end poverty.

Well, common sense tells us that we are far from the target and goal they established for ending poverty.

To end poverty requires a minimum wage and/or a living income for all working people that makes the United Nations' Universal Declaration of Human Rights a living reality for everyone. In keeping with this, I am releasing part of an exchange between myself and Guy Ryder who heads up the International Trade Union Confederation:

Brother Ryder;

Yes, the ITUC response in opposing Israel’s actions in Gaza Strip was most welcome and a parting with imperialism. I have attached the personal letter Ken Georgetti sent me along with the official position of the CLC which I distributed widely along with your own. However, as you must be fully aware, the AFL-CIO has remained silent. I sent you my communications and telephone journal from my discussion with Josh Scannell.

[…

…]

I am glad you appreciated my sense of humour regarding what I consider the short-comings of the ITUC.

On the serious side, I do think that working people are going to have to take a good hard look at our demands to increase unemployment compensation as a package tied to how the minimum wage is established.

I think the minimum wage should be established by national legislation (actually globally). Here is what I have been arguing for:

If a job needs to be done, the employer hiring workers to do the job/s should have to pay a real living wage/s to the worker/s doing the job/s or let the employer/s do the job/s themselves.

That real living minimum wage should be based upon all cost-of-living factors.
Those cost-of-living factors should be all those factors monitored and recorded by the Federal Department of Labour (those factors important when not presently included in calculations should be added).

The minimum wage should be adjusted quarterly or when the cost-of-living is reported in each nation; computer technology makes this all easily possible.

All forms of welfare including unemployment compensation to Social Security (Social Insurance/pensions) should be no less than the real living minimum wage.

I made a presentation to the Minnesota State Legislature based on these five things while going through all the points in the United Nations’ Universal Declaration of Human Rights as being the primary points which should be considered when factoring cost-of-living and talking about standard-of-living; arguing that this would be the only way to arrive at real living incomes for working people all over the world in order to try to prevent outsourcing and run-away plants and industries a major factor in high unemployment rates as well as the one and only way to eliminate poverty. I argued that every single job is a good job provided:

* It pays at least a real living wage;

* There are adequate benefits;

* Workers are employed under adequate health and safety protections;

* A freely negotiated union contract is in place.

* All anti-labor legislation from "right-to-work" to "at-will hiring and at-will firing" should be removed as the major impediments to union organizing.

A good union contract is usually better than any government anti-poverty program, which is usually nothing approximating a living income.

I pointed out that labor creates all wealth as far as I know; and, if anyone could prove otherwise I would be willing to modify my proposals to share some of the wealth with them; otherwise I didn’t believe in free lunches except for children going to school and in pre-school and child care programs; however if the state legislator wanted to mandate free meals for all workers I wouldn’t object.

A small group of progressive legislators said it was the best and most articulate presentation they ever heard; the head of the Minnesota AFL-CIO said it was just more Communist propaganda from a guy trying to paint Minnesota red again, and a Republican said it was my way of driving businesses out of business so Communists could take over without a revolution. One state representative who has a great big picture of Che hanging in his office then suggested that Minnesota’s Minimum wage should be raised by $5.00 an hour to “get us on the right track the way Maki is talking about.”

I explained to the legislators that by using my formula to establish the minimum wage I was actually helping employers reduce the minimum wage.

A Republican said, “Maki, you are an idiot. If we raised the minimum wage to the level you are recommending it would be $25.00 an hour; do you really think someone sweeping floors should get $25.00 an hour?” I responded, “Since you get paid more than $25.00 an hour for doing nothing I can’t see why someone sweeping a floor shouldn’t get paid more than you do.” I continued, “Wow, I didn’t know there were such brilliant Republicans who can calculate so well without a calculator.” I then went on to start explaining how the minimum wage could be lowered and he got up and left the room because the Chair of the Committee would not stop me from talking.

So here is how I explained it:

I told them if they instituted adequate social programs, the more social programs they implement this would drive down the cost-of-living while raising the standard-of-living for working people while reducing the minimum wage as everyone has a real living income: free health care, free college tuitions, free school breakfasts and lunches, free pre-school and child-care, lower mass transit fees, more heavily government subsidized low and moderate-income public housing, etc.

I told them they could charge for all these social programs but the more they charged the higher the minimum wage would have to go and we don’t want to upset the Chamber of Commerce or the National Association of Manufacturers or the Summit Hill Club (that’s the high income neighborhood in St. Paul, MN USA)

One of the remaining Republicans asked me where the money was going to come from.

I told him, “Well, all these rich people Bernie Madoff swindled have so much money they didn’t even know they had been swindled for over twenty years. Why should they mind if we taxed them at the same rate Madoff swindled them since they would at least get something like free health care and free college tuitions for their children instead of getting nothing from their investments with Madoff?” Like you I agree the Madoff swindle is only the tip of the ice-berg.

Then I told them to cut the military budget and let the generals hold bake-good sales and sell candy bars and flower seeds from door-to-door to finance their military madness and stop the wars and close down the more than 800 U.S. military bases on foreign soil we need like we need holes in our heads made from shrapnel from cluster bombs. I suggested they get together with federal legislators and set up 800 health care centers across the United States based upon the Mt. Carmel Clinic model in Winnipeg, MB, Canada to replace the 800 foreign military bases... pointing out that Minnesota’s share would be at least sixteen of the centers, maybe more if Rhode Island didn’t need as many.

And I told them, “If this won’t cover the costs of such social programs, than increase the taconite tax on the mining industry and stumpage fees on the forestry industry… Now, since I have solved all your problems when you get your next government payroll check can you have my name put on it for doing your job in solving all the problems for you.”

Then a “moderate” Democrat said, “It sounds to me like you are trying to get out of us what you have failed to win at the bargaining table for casino workers.” I said, “Bingo!… you are a genius. I might as well be sitting here representing the entire working class since the President of the Minnesota AFL-CIO isn’t doing his job, either… let me see if I get my name on his pay check, too; it looks like I am going to walk out of this hearing a wealthy man.”

I do intend to re-submit these ideas as part of my testimony for the “Minnesota People’s Bailout” which has now been introduced in the Minnesota State Legislature by a handful of progressive politicians.

I will pass that on to you; it will also be posted on my blog along with other info on the “Minnesota People’s Bailout” posted in the upper right-hand corner of my blog.

I guess I better resend this to everyone in case anyone else got the wrong idea, too.

Hopefully, I have ended any confusion.

I appreciate the opportunity to discuss and float these ideas with you and the ITUC even though we have some major disagreements about replacing capitalism with socialism and over China.

If you have questions, suggestions, criticisms further comments, let me know. I appreciated you circulating this communication further. Ken Georgetti is very sympathetic to this approach to unemployment compensation.

You will find that our Organizing Council endorsed your petition for “Decent Work, Decent Life” long ago… I believe on the day you introduced it. Again, my problem with this is not that it is wrong-headed--- I never implied that--- but, rather, that you have not released the funding or put the required resources forward needed for making this a real international working class campaign. I don’t think this is a matter of difference of opinion, as you suggest; it is a fact anyone can see.

Fraternally,

Alan

Alan L. Maki

Director of Organizing,

Midwest Casino Workers Organizing Council

58891 County Road 13

Warroad, Minnesota 56763

Phone: 218-386-2432

Cell phone: 651-587-5541

E-mail: amaki000@centurytel.net

I think it is very important to point out that the "London Statement" below completely evades the issues of militarization, preparation for war and wars. One wonders what the heads of so many labor unions are thinking when they address these capitalist governments about these issues and do not even mention the need for peace since there is no more waste of human and natural resources than what comes from militarization and wars.

For instance, if the 800 U.S. foreign military bases around the globe were closed and abandoned, we could establish 800 community health care centers across the United States--- 16 in each state where health care would be free of all charges without the need for any premiums... we would be keeping the American people healthy and have a better chance of getting people well when sick. A network of 800 public health care centers would create over four-million jobs providing people with decent jobs and real living wages... this is what a real "stimulus program" would be like.

If wars and militarism would come to an end these kinds of health care programs could be established in every country... instead, the militarization of outer space is being contemplated as wars engulf many countries today, with the Obama Administration leading the way to militarization of outer space and the drive to wars.

One of the worst examples we see of this militarization is with the Israeli killing machine being financed by the American tax-payers to thwart the democratic aspirations of the Palestinian people to live in peace in their own homeland.

It does little good to talk about:

"The Global Union organisations are ready to play their part in building this fairer and greener future."

when the world's resources--- human resources and natural resources--- are being squandered on militarization and war... the very resources required to begin creating socially and economically just societies these social democratic trade union leaders say they are for.

We cannot have social and economic justice AND huge expenditures on militarization and wars.

In addition to ignoring wars and militarization, the "London Statement" does not articulate specific solutions to any problems. For instance, solutions like "The Minnesota People's Bailout" are completely ignored... this is legislation which could pretty much be used as a template for legislation in any country in fighting against the very worst problems working people are experiencing as a result of this global capitalist recession/depression.

Read the statement below, or go to the ITUC web site with the link provided where it will be easier for you to read the entire "London Statement."

Progressive trade unionists need to provide a united response and vigorously involve themselves in this discussion, dialog and debate. The battle of ideas in our modern world is nothing to shy away from.

There is nothing fair for working people when it comes to capitalism... and, the only thing "green" capitalists comprehend is money.

These trade union leaders from the International Trade Union Confederation seem oblivious, unaware and unmindful to the fact that capitalism is on the skids to oblivion and we are all on the very dangerous, bumpy road to perdition... it is like they don't even understand that working people don't have to go to the end of this road to perdition... we can take a "left" turn towards socialism--- before the end of the road to war, poverty and untold human misery--- without the permission of our capitalist masters.

Alan L. Maki

Below is the

Statement to the London G20 Summit GLOBAL UNIONS

LONDON DECLARATION

http://www.ituc-csi.org/IMG/pdf/No_16_-_G20_London_Declaration_FINAL.pdf

April 2009

I. Introduction and Summary

1 The world economy is in the midst of an all-encompassing, triple crisis,
which started in the U.S. housing market, spread through the un-regulated
shadow financial system and resulted in first the credit market crisis
and then the employment crisis. It has now evolved into a complex and
dangerous vicious circle, with falling house prices and rising unemployment
combining to feed the crisis in the credit market. This crisis is
extending across industrialised, emerging and developing economies.

2 When the G20 Leaders first met in November 2008 in Washington, the
world was already facing an unprecedented slowdown in growth with
output falling in the industrialised countries. The situation is now dramatically
worse. Staggering falls in GDP were recorded in the final quarter of
2008. At an annualised rate, GDP shrank by 6 per cent in the G7 economies,
the European Union and the OECD as a whole1. These are the worst
figures ever recorded. The contagion has spread to emerging and developing
economies where growth has now stalled and GDP per capita is
falling. The impact of the recession is rapidly intensifying in developing
regions in 2009, because of the sharp decline in exports and a drying up of
private capital flows. 26 low-income developing countries in Africa, Asia,
the Americas and Eastern Europe have been identified by the International
Monetary Fund (IMF) as being “highly vulnerable” to the adverse
effects of the global recession in 20092. The achievement of the Millennium
Development Goals, which set minimum objectives for a global

1 OECD, Quarterly National Accounts, 18 February 2009

2 IMF, The Implications of the Global Financial Crisis for Low-Income Countries, 2009

I. Introduction and Summary 1

II. A Coordinated International

Recovery and Sustainable

Growth Plan 3
The need for coordination 3
Public Expenditure Targeted on Employment 3
Green Investment and Jobs 4
Quality Public Services 4
Active Labour Market Polices 4
Support for Emerging and Developing
Economies 5
Restore Public Support for the Global Trading
System 6

III. New Rules for Global Financial

Markets 7
Restore Confidence, Nationalise the Banks 7
Reform the Financial System 7
Protect Workers’ Pensions 9

IV. Stopping Wage Deflation and
Combating the Crisis of Distributive

Justice 10

V. Laying the Foundations for an
International Agreement to Mitigate
Climate Change 11

VI. Effective and Accountable Global
Economic Governance 12

VII. Conclusion 13

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effort to tackle many of the root causes of poverty, is being jeopardized by
the economic crisis. Ten years of progress in poverty reduction has been
undone in just a few months.

3 Unemployment has continued to surge in the first months of 2009. It
now appears likely that the ILO’s ‘worst-case’ scenario of unemployment
increasing by 50 million worldwide in 2009 will turn out to be over-optimistic3.
Over 200 million workers could be pushed into extreme poverty,
mostly in developing and emerging countries where there are no social
safety nets, meaning that the number of working poor – earning below
2 USD per day for each family member – may rise to 1.4 billion. 60 per
cent of the world’s poor are women. Workers around the world, who are
losing their jobs and their homes, are the innocent victims of this crisis:
a crisis precipitated by greed and incompetence in the financial sector,
but which is underpinned by the policies of privatisation, liberalisation
and labour market deregulation of recent decades. The effects of these
policies – stagnating wages, cuts in social protection, erosion of workers’
rights, increased precarious work, and financialisation – have combined
to increase inequality and vulnerability. The scale of this crisis serves as
testimony to the failure of these policies. Without a radical response by
governments, this most serious economic crisis since the Great Depression
of the 1930s will transform into a social and, ultimately, political
crisis as well.

4 When our economies begin to recover there can be no return to ‘business
as usual’. The crisis must mark the end of an ideology of unfettered
financial markets, where self-regulation has been exposed as a fraud and
greed has overridden rational judgement to the detriment of the real
economy. A new national and global regulatory architecture needs to
be built, which restores financial markets to their primary function of
ensuring stable and cost-effective financing of productive investment in
the real economy. Beyond this, there is a need to establish a new model
of economic development that is economically efficient, socially just and
environmentally sustainable. It must bring to an end the policies that have
generated massive inequality over the past two decades. This requires a
paradigm shift in policy-making. G20 Leaders must begin a multilateral
process, working together with other governments, the UN and other
institutions, to redraw the governance of the global economy such that
social and environmental issues are assigned the same level of priority as
trade and finance.

5 The global trade union movement therefore calls on G20 Leaders, working
with other governments and international institutions, to develop a fivepoint
strategy, to first tackle the crisis and then build a fairer and more
sustainable world economy for future generations. The strategy must:
mm implement a coordinated international recovery and sustainable growth
plan with maximum impact on job creation focussing on public investment,
active labour market policies, protecting the most vulnerable
through extended social safety nets, and ‘green economy’ investments
that can shift the world economy onto a low-carbon growth path.
3 ILO Global Employment Trends, 28 January 2009
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Developing and emerging economies must be given the resources and
the policy space to undertake counter-cyclical policies (§ 6-17);
mm nationalise insolvent banks immediately so as to restore confidence
and lending in the financial system and beyond this establish the
new rules and mechanisms to control global finance with full stakeholder
engagement. We propose an eight point-action plan to this end
(§ 18-22);
mm combat the risk of wage deflation and reverse the growth of income
inequality by extending the coverage of collective bargaining and
strengthening wage setting institutions so as to establish a decent floor
in labour markets (§ 23-26);
mm prepare the ground for a far-reaching and ambitious international
agreement on climate change at COP15 in Copenhagen, in December
2009 (§ 27-29);
mm establish a legal benchmark of norms and instruments of the international
economic and social institutions – the ILO, IMF, World Bank,
WTO and the OECD – and beyond this reform these institutions and
build effective and accountable global economic governance (§ 30-33).

II. A Coordinated International Recovery and Sustainable Growth Plan The need for coordination

6 The first priority for G20 leaders must be to restore confidence by halting
the freefall in world growth and reversing the decline in employment.
Governments must take all necessary measures to this end and must use
their leverage with the banks to get credit moving again and provide additional
liquidity. Since November 2008, most G7 countries and others in the
G20 and beyond have announced or implemented fiscal measures to boost
growth. These measures would have twice the impact on jobs and growth
if they were coordinated and complemented internationally4. So far such
coordination is missing: the US stimulus amounts to at least 2 per cent of
GDP per year, whereas the EU country measures announced by the beginning
of February 2009 amounted to less than 1 per cent of the EU’s GDP.
The G20 must get the current “free-riders” to act and take coordinated
measures to stimulate the world economy – with those with trade surpluses
taking the lead. We reiterate our call for a global recovery plan amounting
to a least 2 per cent of world output. Central banks should continue to cut
interest rates and undertake quantitative easing of monetary policy so that
government investment can be financed at a low interest rate cost.

Public Expenditure Targeted on Employment

7 Measures must also be targeted within countries so as to have the biggest
impact on growth and employment. There is a need to draw a new
economic map, which identifies the sectors that provide the greatest opportunities
for future growth. Governments should bring forward infrastructure
investment programmes that stimulate demand growth in the short
4 IMF, Fiscal Policy for the Crisis, December 29, 2008
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term and raise productivity growth throughout the real economy in the
medium term. Measures should be introduced to support the purchasing
power of low income earners, including single earner households, which
are predominantly female-headed. Putting more money into the pockets
and purses of people on low incomes will boost the economy as they are
more likely to spend any extra cash quickly, ensuring that it helps beat the
recession. This can be done through increasing benefits, direct job creation
schemes and changes in tax. Resources should not be wasted on ineffective,
generalised tax cuts: during a downturn, spending on social safety
nets and transfers for local government services, including education and
health, will have almost twice as much impact as tax cuts.

Green Investment and Jobs

8 There has never been a better time to launch the ‘Green New Deal’ called
for by the United Nations Environment Programme (UNEP). The ‘Green
Jobs’ agenda requires governments to undertake large-scale investment in
green infrastructure, such as energy efficiency and renewable energies
– thereby stimulating the creation of high quality employment across a
range of sectors – as well as to scale-up financial resources for research
and development, diffusion and deployment of new technologies, and to
upgrade skills development schemes.

Quality Public Services

9 As part of a new development model governments must enhance the role
of the public sector – national and municipal – in the provision of quality,
essential services such as education, health, water, sanitation, law, safety and
security, fire-fighting and civil protection. Quality public services can make
a vital contribution to social cohesion and equity, which alongside effective
and ethical administration of legislation and the application of regulatory
frameworks are the cornerstones of healthy democratic societies.

10 This is also the time to invest in people – in their education and health, and
in care for the very young and the aged. Given the accelerating job losses
in industries affected by the crisis, there is a clear rationale for investing
in education and training so as to support the transfer of workers into
sectors where there is a need for more jobs. In the health/care sectors, for
example, due inter alia to the ageing population, the World Health Organisation
(WHO) estimates a need for an additional 4.2 million jobs worldwide.
In education, an estimated eighteen million new teachers must be
trained to meet the goal of providing quality education for all primary
age children by the year 2015. Millions more teachers and instructors are
needed for vocational education and training for skills that underpin the
real economy and for retraining of working people as economies restructure.
In addition, governments must step up efforts to reduce poverty
among women, who today constitute the majority of the world’s poor.

Active Labour Market Polices

11 The priority must be to keep people at work, workforces together and
workers in activity. Active Labour Market Policies (ALMPs) have a crucial
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role to play, yet spending on ALMPs has been only a tiny part of the
fiscal packages adopted by most countries. Programmes must be implemented
to reduce the risk of unemployment and wage losses, as well as
to provide income support. In these difficult times, companies must be
socially responsible and retain their workers as long as possible. At the
ILO, workers, government and employers have agreed that “restructuring
should be based on dialogue between management, unions and workers’
representatives”5. Those companies receiving public assistance need to
respect agreements with governments and trade unions to undertake
agreed restructuring programmes that include employment and training
components.

12 Governments must put in place labour market policies that:
mm discourage companies from hitting the redundancy button at the first
signs of trouble and provide support for businesses affected by temporary
credit difficulties;
mm focus on groups most affected by the crisis, such as the young, older
and unskilled workers, temporary and part-time workers, women and
migrants;
mm increase efforts to eliminate the gender pay gap, which is estimated to
stand at more than 22 per cent6;
mm provide income support, in particular through expanded unemployment
benefits;
mm ensure full respect of national and international standards on workers’
rights regarding termination of employment;
mm promote investment in people and offer improved training opportunities
in order to facilitate the acquisition of new skills by workers of all
ages;
mm assure migrant workers the same rights as other citizens, as their stigmatisation
not only leads to xenophobia, but ultimately exacerbates
poverty.

Support for Emerging and Developing Economies

13 As global unemployment surges, most of the world’s workers do not have
recourse to unemployment benefits when they lose their jobs and can rely
only on their own savings or their family’s support when they reach old
age. The crisis presents both an obligation and an opportunity to establish
decent social safety nets that can act as automatic stabilisers in countries
that do not currently have them, irrespective of the level of development.

14 Increasing workers’ incomes and expanding social protection will be
particularly important for the recovery of emerging economies that had
achieved high growth through export-led development but are now facing
a collapse of their major export markets. Economic recovery in these countries,
and also the achievement of sustainable longer-term growth, will
depend on their capacity to build up a stronger domestic demand base. This
5 ILO Global Dialogue Forum on the Impact of the Financial crisis on Finance Sector Workers 24-25 February
2009
6 ITUC, Gender inequality in the labour market: an overview of global trends and developments, 2009
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will require improved observance of workers’ rights so that trade unions
can negotiate wage increases commensurate with increased productivity,
and more comprehensive social protection through programmes, such as
old-age pensions and health care. Such strategies will help to correct the
‘global imbalances’ in trade and financial flows and reverse the increased
income inequality experienced in many of these countries.
15 As industrialized and emerging economies strive for recovery there is a
risk of leaving the low-income countries on the sidelines. The poor are
still reeling from the food crisis. Whilst food and commodity prices
have moderated with the global recession, the effects continue to be felt:
cereal prices, for example, today are still 71 per cent higher than in 2005.
The economic crisis will through falling incomes further exacerbate the
effects of the food crisis, with the most affected being the rural and urban
poor, landless farmers, female-headed households and those recently
made unemployed, including migrant workers. It is absolutely critical to
maintain and enhance levels of official development assistance (ODA).
Development assistance budgets, particularly for the Least Developed
Countries (LDCs) need to be maintained with the adoption of binding
commitments and a timetable to meet the UN target of 0.7% of GDP.
Governments must keep food security on the agenda and work together
to build longer term agricultural resilience to ensure that people can afford
basic staples and enjoy secure and sustainable access to food.
16 Most developing and some emerging countries are operating pro-cyclical
fiscal policies, because they are pressured by the International Financial
Institutions (IFIs) to practice ‘fiscal discipline’ at times of crisis. The international
community must support expansionary recovery programmes
in developing countries, which are necessary to prevent poverty from
growing further and to contribute to global demand. The international
and regional development banks, as well as other agencies, have an important
role to play in ensuring that all regions of the world take part in the
recovery effort. This requires both increased financial assistance from IFIs
and donor countries and an end to the harmful economic policy conditionality
attached to assistance from the IFIs. The IFIs should expand
their debt relief initiatives and undertake governance reforms so that the
countries most affected by their actions have a greater say in setting their
policies.

Restore Public Support for the Global Trading System

17 Trade is collapsing, but more due to the shrinking of the real economy
than protectionism. We must avoid the mistakes of the crisis of the 1930s
of reverting to ‘beggar thy neighbour’ policies. Trade can boost economic
growth, recovery and development, but only under the right conditions.
Restoring the legitimacy of, and public support for, the world trading
system and concluding the Doha Round of trade negotiations, requires
progress on the enforcement of the protection of fundamental workers’
rights. It also requires ensuring that developing countries are able to
achieve economic recovery, decent employment and future industrial
development and where necessary control short-term capital flows to
meet development objectives. It would also require developing further
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mechanisms, including buffer stocks and compensatory mechanisms, to
protect low-income countries against primary commodity market volatility.

III. New Rules for Global Financial Markets

18 G20 Leaders must take immediate action to restore liquidity and solvency
in the banking system so that it fulfils its essential role of financing productive
investment. Beyond this, G20 Leaders must start the process of fundamental
reform of the global financial system, so as to bring to an end the
financialisation that has devastated the real economy. Governments must
ensure that a crisis on this scale never happens again.

Restore Confidence, Nationalise the Banks

19 The banking sector contains a large number of insolvent banks, which
would have already gone out of business were it not for the magnitude of
the crisis and the fact that some are simply ‘too big to fail’. Governments
are faced with two options: (i) create taxpayer-sponsored ‘bad asset’
pools, where bankers can dispose of their toxic assets; or (ii) nationalise
all weak banks on the basis of the risk they present to the system. The first
option will neither separate the ‘bad’ assets from the ‘good’, nor restore
confidence, serving only to worsen the state of the public finances. Also,
such ‘bailing out’ of bank shareholders would amount to a transfer from
working people to the world’s wealthiest households, who are disproportionately
represented among the shareholders of financial institutions.
Under current circumstances, nationalisation is the only way to restore
confidence, provide fair risk-sharing and ensure that taxpayers benefit
from any gains once solvency is restored.

Reform the Financial System

20 Governments must also correct the democratic deficit that has characterised
efforts to re-design the post-crisis financial architecture. They should
not leave the reform of the financial system to the experts of the Financial
Stability Forum (FSF) – the same experts who created the current system
that has now collapsed so disastrously. Furthermore, the FSF has failed in
the past to engage with trade union, civil society or other stakeholders,
including the UN and the ILO, and does not have the appropriate governance
structure, expertise or resources to enable it to do so in the future.

21 The current crisis has revealed the limits of the ‘delegated supervision’
approach, which prescribes that only a small part of the financial
system (e.g., commercial banks) requires proper oversight. Several post-
September 2008 initiatives have identified the need to reverse the light
regulatory approach to global finance of the past7. Now is the time for
binding regulation to ensure public control and oversight of all financial
7 Modernizing the American Financial Regulatory System, Congressional Oversight Panel (COP), Special Report
on Regulatory Reform, January 2009: http://cop.senate.gov/documents/cop-012909-report-regulatoryreform.
pdf ; Principles for a New Financial Architecture, Stiglitz, UN Commission of Experts of the President of the
UN General Assembly on Reforms of the International Monetary and Financial System, January 2009; http://www.
un.org/ga/president/63/commission/newfinancialarchitecture.pdf
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institution, products and transactions. We propose the following eight
point action plan:
> Clamp down on the ‘shadow’ financial economy. Governments must
ensure full regulatory coverage of all institutions, products and transactions.
In particular, private pools of capital (hedge funds and private
equity) must not be exempted from regulation that applies to other asset
management entities, which provides for accountability to investors,
transparency and, where needed, employer responsibilities. All forms of
credit-related, off-balance sheet transactions must be prohibited. Financial
products that transfer credit risk (such as credit default swaps and
obligations) and other opaque ‘structured products’ that are securitised
on the markets must come under the oversight of public authorities. As a
general rule, trading should be tied to beneficial ownership. Credit rating
agencies must be properly regulated so as to avoid conflicts of interest in
the valuation of products and institutions.

> End tax and regulatory havens and create new international taxation
mechanisms. G20 Leaders must agree on international cooperation
measures so as to bring tax havens, offshore financial centres (OFCs) and
bank secrecy jurisdictions – including but not limited to the 38 territories
on the OECD watch list – in line with international standards. They
must also act to stop the ‘race to the bottom’ between tax jurisdictions,
which is eroding the tax revenue source of many countries. Governments
should develop a package of sanctions to protect their tax base, including
investment restrictions for institutional investors and higher penalties for
tax crimes. Moreover, international taxation of financial transactions, such
as on short-term movements, should be introduced in order to finance
taxpayer funded public debt incurred as a result of the crisis. Such a tax
could help protect developing countries against global market volatility.

> Ensure fair and sustainable access to international finance for developing
countries. Developing countries should be given access to credit
lending terms that are commensurate to their needs and capacities.
Measures include activating the IMF Special Drawing Rights (SDRs)
programme, accelerating regional currency cooperation, and re-directing
the capital flows of current account surplus countries, including their
Sovereign Wealth Funds, towards development objectives.

> Reform the private banking business model to prevent asset bubbles
and reduce leverage risks. Capital adequacy rules – the amount of capital
banks are required to put aside as collateral for their lending – must be
further tied to the growth of the bank’s holdings in assets and to the degree
of risk borne by those assets. This would discourage banks from exposing
themselves to excessive asset risk. It would also help drive asset allocation
towards socially desirable goals and facilitate the control of asset price
inflation by central banks.

> Control executive, shareholder and other financial intermediary
remuneration. Remuneration schemes must be regulated by law to reflect
and promote long-term economic, social and environmental performance
and allow companies to allocate profits to the company’s reserves for reinvestment
in productive assets. Remuneration of management and traders
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should be capped in line with workers’ pay and pensions and, in the case
of financial services, linked to responsible sales and lending practices. The
cashing-in of bonuses and other performance-related schemes within five
years should be prohibited. Shareholders must be prevented from plundering
the wealth of companies during growth times through dividends
and ‘share buy-back’ programmes, which leave companies with undercapitalised
balance sheets during economic downturns. Private equity in
particular has put millions of jobs at risk due to its unsustainable, leveraged
buy-out takeover model.

> Protect working families against predatory lending. Governments
should take steps to increase the security of lending for working families
by providing for the transparency of financial contracts (housing, credit
cards, insurance), access to effective recourse, proximity of services and
affordability (ceilings on interest rates and fees). The remuneration and
incentive schemes of banks, their employees and other credit-suppliers
should be designed to ensure responsible sales and lending practices,
which serve the interests of customers.

> Consolidate and enhance the public accountability, mandate and
resources of supervisory authorities. Governments must act to end the
fragmented approach to financial regulation, which is currently divided
according to business activity and national jurisdiction. There must be
supra-national consolidation where needed, notably in Europe. Supervisory
authorities must be assigned sufficient enforcement powers and
resources that are commensurate with their tasks. In particular, their
mandate should be extended to cover monitoring of asset price inflation.
A trade union voice must be heard in their governance structure. In
addition, the supervisory framework, including ‘colleges of supervisors’,
should provide for the cooperation of financial authorities with trade
unions and other workplace employee representative structures in the
financial sector: e.g., works councils and international framework agreements
that are drawn up between Global Union Federations and multinational
companies.

> Restructure and diversify the banking sector. A diversity of business
models and legal forms is needed to help build balanced and robust
domestic financial services that serve the real economy and meet the
needs of working families. Governments should promote alternative
models to for-profit banking and insurance services, such as credit unions,
cooperative banking, mutual insurance, and other community-based and
public financial services. They should also take steps to ensure that there
is no future creation of large conglomerates that are either ‘too big to fail’,
or which combine different types of business: banking, insurance, investment
banking, etc. Restructuring must be carried out on the basis of the
highest standards of social dialogue and any employment impacts must be
mitigated.

Protect Workers’ Pensions

22 G20 Leaders must also take action to protect pre-funded pension
schemes. The crisis has revealed the danger of unlimited investment of
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workers’ pensions in the ‘shadow’ financial sector. OECD-based pension
funds have declined in value by over USD 3.3 trillion, 20 per cent in real
terms, in 2008, due to the fall in value of equity, fixed-income assets, hedge
funds and structured products. The immediate impact of the crisis will
be felt most by those nearing retirement age, whose pensions fall under
un-protected ‘defined contribution’ schemes, where the final level of
pension depends on the performance of the pension fund. Governments
should take steps to ensure an adequate retirement for workers under
pre-funded schemes, including ensuring employers take their share of the
pension risk and funding, strengthening existing government guarantee
schemes and pension fund investment regulation at large.

IV. Stopping Wage Deflation and Combating the Crisis of
Distributive Justice

23 The ‘flexibilisation’ of labour markets that has occurred in most economies
over the past 25 years has increased the risk of wage deflation contributing
to the crisis due to purchasing power being cut and increasing insecurity.
Governments must not make the same mistake as in the 1930s and allow
competitive wage cuts. Rather than pursuing policies that weaken worker
protection and increase the precariousness of work, governments must
ensure that floors are put in labour markets to prevent a worsening spiral
of deflation of earnings and prices. They must act to protect workers’
core rights and the extension of collective bargaining and encourage the
rebuilding of the institutions that help distribute income and wealth more
fairly. Minimum wages need to be high enough to ensure that workers
and their families have decent living conditions, so as to prevent further
increases in the number of the working poor. Women represent the
majority of those for whom working conditions are the most precarious
and achieving gender equity and the elimination of discrimination against
women in employment must become a priority of the national and international
policy agenda.

24 Prior to the crisis, income inequality had risen both within and between
nations. Increases in wages had fallen behind wider growth rates in productivity
in two-thirds of the wealthiest countries that make up the OECD8,
and the share of wages in national income had fallen in all countries for
which there are data. In developing nations, even before the food price
crisis of 2007-2008 and the current financial crisis, the World Bank noted
that in 46 out of 59 examined, inequality had increased over the previous
decade. The worsening economic situation, on top of the crisis in the
world food system, will exacerbate these existing inequalities. Instead
of steady economic growth built on investment, productivity and the
growing prosperity of working people, we have had a series of speculative
bubbles that have increased the wealth of the few, but are now being paid
for by the many. We need a new model of economic development that
is environmentally sustainable and ensures balanced real wage growth, in
line with productivity increases. We also require a fairer tax system, which
tackles inequality by shifting taxation from labour on to capital.
8 “Growing Unequal”, OECD October 2008
Page 11 www.ituc-csi.org www.tuac.org www.global-unions.org
25 In most developing countries, labour market institutions are even weaker
than in industrialised countries and large proportions of the labour force
are sidelined in the ‘informal economy’, where workers have no protection
of any sort. Basic labour market regulations – such as minimum wages,
maximum hours, severance pay in case of job loss and limitations on the
use of short-term contracts – are essential for protecting workers against
abuse, as is full respect of the core labour standards so that workers can
organise and bargain collectively to improve their wages and working
conditions. The IFIs should not promote further labour market deregulation
in developing countries during the current crisis, as this will only
exacerbate the situation of workers, especially since the vast majority of
developing-country workers have no income support programmes to
fall back on. The IFIs should work jointly with the ILO in its efforts to
promote the creation of safe employment with adequate wages, social
protection and rights.

26 Looking to the longer term, the tripartite structures for economic and
social consultation and policy planning that provided the springboard
for the 30 years of high economic growth and improving living standards
of the post-war period need to be recreated. Involving representatives
of working people in the decisions that determine employment and
economic growth is not only consistent with democratic principles, but
makes good economic sense. The alternative neo-liberal model condemns
us to repeating the mistakes of the 1920s and 1990s and maintaining the
levels of spiralling inequality that resulted in financial instability and ultimately
stock market crash.

V. Laying the Foundations for an International Agreement to Mitigate Climate Change

27 G20 Leaders must ensure that the urgent measures needed to tackle
climate change are not derailed by this crisis. Rather, as called for in this
declaration, governments must use the coordinated global fiscal response
to the crisis to move ahead with the ‘green economy agenda’, thus preparing
the ground for an ambitious climate agreement this year in Copenhagen.
These are essential steps if we are to prevent the world’s average temperature
rising more than 2 per cent and to avert widespread climate disaster:
at best, the loss of 5 per cent global output “now and forever” according
to the Stern report, or, at worst, the collapse of societies as predicted by
current models of long-term environmental and economic interactions.
It is essential that the G20 meeting sends a strong message on the need
to reach an agreement in Copenhagen. Such an agreement must include
ambitious targets for Greenhouse Gas (GHG) emission reduction in
developed countries, as well as effective action for achieving GHG emission
reduction or controlled increases to bring about low carbon development
in developing countries.

28 Governments must recognise that reaching such an agreement on climate
change depends on building a broad and sustainable political consensus on
goals, as well as the means of achieving them. The agreement must show
that signatory governments recognise the social and economic impacts of
its implementation by providing a clear strategy for addressing them since,
Page 12 www.ituc-csi.org www.tuac.org www.global-unions.org
to date, the employment challenges, together with the potential benefits,
have remained unaddressed. Furthermore, the new climate change agreement
must call on governments to consult on, plan and implement a ‘just
transition’ strategy, aimed at protecting the most vulnerable from climate
change risks and from the consequences of climate change adaptation or
mitigation measures. These ‘transitional’ strategies must include, inter alia,
provision for consultation with unions, business and civil society, skills
development schemes, social protection policies and economic diversification.

29 Developed countries should make financial and other support available
to the poorest countries to enable them take up the challenges of climate
change, including through the United Nations Framework Convention on
Climate Change (UNFCCC) Adaptation Fund.

VI. Effective and Accountable Global Economic Governance

30 In 1944 the world’s major countries came together in Bretton Woods to
set up new global financial arrangements that would support economic
recovery. Today we need to show greater ambition: change must go
beyond financial regulation. The crisis has revealed serious weaknesses in
the governance mechanisms for the global economy. While there is no one
blueprint for optimal world governance, governments can start by identifying
the requirements of global coherence in areas such as environment,
finance, development assistance, migration, labour, health and energy,
where it is self-evident that national governance alone is deficient and that
a new world institutional architecture is required in a ‘grand global deal’.
If the trade agenda is to move forward, a much stronger social pillar is
needed in order to anticipate and smooth the employment shifts that more
intense competition will provoke. The G20 process contains some of the
necessary elements, but remains heavily weighted towards finance issues.
The real economy, decent work and poverty reduction are currently being
treated as marginal to its discussions. Furthermore, countries representing
one third of the world’s population are not represented at the table and
have no means of influencing the G20’s work.

31 There is a need for a new decision-making forum on economic and social
policies at a global level which combines effectiveness, legitimacy and
accountability. A possible starting point is the charter or legal instrument
on global economic and social governance based on OECD, WTO, ILO,
IMF and World Bank instruments proposed by the German Chancellor
and the Italian Minister of Finance. This Charter would provide a synthesis
of the guiding principles of these bodies, referencing standards such as
the core labour standards of the ILO and the OECD’s MNE Guidelines,
Anti-bribery Convention and Principles for Corporate Governance. This
would combine rules concerning market behaviour with the “complementary
elements regarding employment and enterprise development,
social protection, humane working conditions, sound labour relations and
rights at work”9, of the ILO’s Decent Work agenda. We urge G20 leaders
to give serious consideration to this proposal and to begin the process of
9 Statement by the ILO, WTO, IMF, OECD, World Bank and Germany February 5 2009.available at http://
www.oecd.org/document/32/0,3343,en_2649_34487_42124384_1_1_1_1,00.html
Page 13 www.ituc-csi.org www.tuac.org www.global-unions.org
consultation that is required to build support for the truly authoritative
global summit of world leaders that is needed to manage our increasingly
interdependent world economy.

32 Governments must start the work, but it cannot be left to bankers and
finance ministry officials meeting behind closed doors. Trade unions are
ready to engage constructively in this process and call on governments
to give trade unions a seat at the table. Trade unions need to be a full
part of new governance and advisory structures to international organisations,
just as they are at the OECD. In line with the mandate provided
by the Declaration on Social Justice for a Fair Globalization adopted by the
International Labour Conference in June 2008, the ILO needs to be at the
centre of a new multilateral architecture that can respond effectively to
the current crisis in market-driven globalisation by placing employment,
social priorities and the promotion of decent work at the heart of decision-
making.

33 There is need to increase the representation and strength of the poorer
countries in global institutions and processes. Emerging economy and
developing country governments must play a full part in the institutions
of a new economic order. In particular the World Bank, whose focus is
developing countries, must give them voting rights – based on economic
but also social criteria – that are at least equal to those of the industrialised
countries. The IMF is equally in urgent need of reform and should change
its governance structure to increase the representation of the low-income
‘client’ countries, and of the emerging economies whose role in the global
economy has increased over the past several years. G20 Leaders have
already agreed to commit greater resources to the IFIs10, but in return, both
the Bank and the IMF must stop imposing the conditionality on developing
and emerging countries that pushes them in to pro-cyclical policies.
For example, emergency IMF loan agreements negotiated with several
governments since October 2008 included interest rate hikes, reduction
of wages and pensions, increased fees for public services and privatisation
of state-owned entities with several agreements including the obligation to
carry out reforms of social protection that could eliminate its availability
to those who are not among the most vulnerable. Instead the attainment
of decent work and observation of core labour standards must underpin
the new arrangements. Regional bodies such as the African Union (AU),
the Association of Southeast Asian Nations (ASEAN) and the Organisation
of American States (OAS) should have a place in the G20, just as the
European Commission (EC) does.

VII. Conclusion

34 Trade unions have long been critics of the imbalances in the relative
priority given to economic and social institutions and the growing dominance
of unregulated and unmanageable financial markets to the detriment
of the financing needs of the real economy, undermining its ability
to provide decent work for all. Governments, working together with the
social partners and with the input of relevant international organisations
10 G20 Finance Ministers’ and Central Bank Governors’ Communiqué - 14 March, 2009
Page 14 www.ituc-csi.org www.tuac.org www.global-unions.org
such as the ILO, must create a new economic world order. This requires
a paradigm shift in policy-making that ‘puts people first’. Trade unions
and the workers we represent, however, have no confidence that this time
governments and bankers will get it right. Working people must have a seat
at the table. There must be full transparency, disclosure and consultation.
The Global Union organisations are ready to play their part in building
this fairer and greener future.

Obama to working class home owners: Drop Dead

2009-03-04T18:58:00.003-06:00

Housing plan aims to help 9M, but leaves out many

WASHINGTON – The Obama administration's housing plan is intended to help 9 million struggling homeowners avoid foreclosure, but it leaves out tens of thousands of borrowers in the most battered housing markets who won't qualify because their homes have lost too much value.

The program detailed Wednesday offers refinanced mortgages or modified loans with lower monthly payments. Yet its refinancing plan is limited to borrowers who owe up to 5 percent more than their home's current value. Loan modifications, supported by $75 billion in federal funding, are unlikely for severely "underwater" borrowers.

In the California cities of Stockton, Modesto and Merced, more than one out of every 10 homeowners with a mortgage won't qualify for any help because they owe more than 50 percent more than their house's current value, according to data from real-estate Web site Zillow.com.

The ineligible households are concentrated in speculator-driven markets in California, Florida, Nevada and Arizona, but can also be found in struggling cities such as Detroit and Grand Rapids, Mich. Even houses in the outlying suburbs of the nation's capital, where the economy is relatively healthy, have dropped substantially in value.

For a homeowner who borrowed $380,000 and now has a house worth $270,000, "I just don't know what you do with that," said Jared Martin, a mortgage broker in Bethesda, Md.

Government officials acknowledge that the initiatives are only a partial fix for a sweeping problem that has helped plunge the U.S. economy into the worst recession in decades.

"This is not going to save every person's home," said Robert Gibbs, the White House press secretary. "The plan is not intended to ... augment somebody's loan for a house that they couldn't afford under any economic situation, good or bad."

Of the nearly 52 million U.S. homeowners with a mortgage, almost 14 million, or nearly 27 percent, owe more on their mortgage than their house is now worth, according to Moody's Economy.com. Nearly half of all borrowers in Nevada were "under water" on their home loans as of December, according to First American CoreLogic.

In troubled Stockton, nearly one in five borrowers owe more than 50 percent above what their home is now worth, making it unlikely that they will qualify for any aid.

Though banks such as JPMorgan Chase and Wells Fargo & Co. issued statements praising the plan, there was also skepticism that banks would be willing to participate.

"I've just seen so many of the programs not work," said Pava Leyrer, president of Heritage National Mortgage in Grandville, Mich. "It gets borrowers' hopes up. They call and call for these programs and we can't get anybody to do them."

The program has two parts: one to work with lenders to modify the loan terms for up to 4 million homeowners, the second to refinance up to 5 million homeowners into more affordable fixed-rate loans.

For the modification program, which runs through 2012, borrowers who are eligible will have to provide their most recent tax return and two pay stubs, as well as an "affidavit of financial hardship" to qualify. In the affidavit, applicants will have to cite the reasons behind their financial woes, such as job loss or a drop in income. The government will then take steps to verify the information.

Borrowers are only allowed to have their loans modified once, and the program applies for loans made on Jan. 1, 2009, or earlier. Mortgages for single-family properties that are worth more than $729,750 are excluded.

Lenders could reduce a borrower's interest rate to as low as 2 percent for five years. Rates would then rise to about 5 percent until the mortgage is repaid.

If the plan works as intended, it could be a big plus for borrowers such as Nick Kavalary, a network cable installer who lives outside Milwaukee.

Kavalary, 42, struggled to get a loan modification from JPMorgan Chase. He was finally approved for one this year, but it only cuts his interest rate to about 9.8 percent from 10.75 percent. Even at the lower rate, he said, making the payment is nearly impossible.

"If I can't pick up a second job, I'm going to lose this house," he said. "With the job market being the way it is, nobody's hiring nobody."

The refinance program is only offered to homeowners with loans held by Fannie Mae or Freddie Mac. They have until June 2010 to apply.

Consumers should contact their loan servicer — the company that sends out their monthly bill — to find out if their mortgages are held by Fannie or Freddie. The two mortgage finance companies own or guarantee almost 31 million home loans, more than half of all U.S home mortgages, and say they are lowering some fees to allow more borrowers to qualify.

In Seattle, home prices are down about 13 percent from a year ago, compared with about 30 percent in Las Vegas, Miami and San Francisco. Seattle area mortgage broker Rhonda Porter says the plan is likely a big plus. "I think we're going to be inundated with business," she said.

In the coming months, figuring out a way to qualify will be a big concern for many borrowers.

Kevin Romanowski, 48, of Grand Rapids, Mich., has been trying to refinance for months, but hasn't had any luck because his property's value has sunk from about $115,000 two years ago to somewhere around $75,000 or $80,000.

Romanowski, who works for an auto parts supplier, owes about $85,000 on his mortgage, so whether he qualifies for the new program hinges on his house's current value.

"I've got good credit," he said, "I've got money in the bank, but yet I'm being affected" by the mortgage crisis.

Rosy Scenario

2009-02-27T10:27:00.002-06:00

Question: Did the military budget torpedo any chance that Obama's dubious "stimulus package" might have had in aiding an economic recovery?

Is Rosy Scenario really back in town after the nation was promised open and honest government by Barack Obama?

Economists question budget's economic assumptions

http://news.yahoo.com/s/ap/20090227/ap_on_go_pr_wh/budget_economy

AP Economics Writer Martin Crutsinger,

In unveiling his budget, President Barack Obama pledged to bring "honesty and fairness" back to the budget process by getting rid of the gimmicks past administrations had used to hide the real costs of government programs and proposed tax cuts.

But many economists who examined the economic assumptions that undergird the spending plan believe that Obama may have resorted to one of the oldest gimmicks around — relying on overly optimistic economic assumptions to make it look like you are dealing with soaring budget deficits when in reality you are only closing the gap on paper.

"They used to joke during the Reagan years that the highest-ranking woman in the administration was Rosy Scenario," said Nariman Behravesh, the chief economist at IHS Global Insight, a major private forecasting firm.

Rosy may be back in town, said Behravesh, who called the Obama administration's forecasts "way too optimistic."

For its part, the administration insisted that it hadn't cooked the books to show greater growth, and thus more tax revenues, in coming years. But the administration forecast is far higher than the projections for growth in the overall economy, as measured by the gross domestic product, of many private analysts.

On Friday the government said the economy shrunk by a staggering 6.2 percent in the final quarter of last year, much faster than its earlier GDP estimates. And with layoffs piling up and spending drying up, economists expect rough months ahead.

GDP plays the biggest role in determining the accuracy of deficit forecasts because weaker-than-expected growth swells government payments for such things as unemployment benefits and food stamps and reduces tax receipts.

In its budget, the administration predicted that the overall economy, as measured by the gross domestic product, will shrink by 1.2 percent this year but will grow by a solid 3.2 percent in 2010. That growth would be followed by even stronger increases of 4 percent in 2011, 4.6 percent in 2012 and 4.2 percent in 2013.

By contrast, the consensus of forecasters surveyed by Blue Chip Economic Indicators in February predicted that the GDP will fall by a larger 1.9 percent this year and then increase at weaker rates of 2.1 percent in 2010, 2.9 percent in 2011 and 2012 and 2.8 percent in 2013.

Many private analysts believe that the current recession and rebound will be more U-shaped than V-shaped.

"When a country is griped by a financial crisis, the ensuing downturn often lasts much longer than normal," said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University. "I think this downturn is gong to last longer and the rebound will be fairly anemic."

Christina Romer, the head of the president's Council of Economic Advisers, defended the administration's stronger GDP forecast, contending that in previous severe recessions, the pattern often showed a stronger rebound once the downturn was over. She cited the Great Depression as one such episode when the economy rebounded by strong rates after years of sizable declines.

Romer also suggested that many private forecasters may not be adequately taking account of the size of the government support that has been put forward, including the recently passed $787 billion economic stimulus bill.

"If there is ever a time when we think policy is going to contribute ... now is the time," she told reporters at a budget briefing on Thursday.

But Mark Zandi, chief economist at Moody's Economy.com, said he believed the extent of the downturn will be more severe than the administration's forecast for this year and that this will prompt even larger policy responses on the part of the government, including increased help for homeowners facing foreclosure and another stimulus from Congress a year from now.

The administration's budget projects that the downturn will result in a 13.4 percent drop in government receipts this year, one of the contributing factors to the administration's forecast that the deficit will hit an all-time high of $1.75 trillion.

For 2010, when the administration is forecasting the deficit will decline to $1.17 trillion, the administration is forecasting that the rebounding economy will boost revenues by 8.9 percent. Based on the stronger growth, the administration is forecasting steadily declining deficits in coming years with the deficit dropping to $912 billion in 2011, $581 billion in 2012 and $533 billion in 2013.

Soros sees no bottom for world financial "collapse"

2009-02-21T20:04:00.002-06:00

http://www.reuters.com/article/newsOne/idUSTRE51K0A920090221

Soros sees no bottom for world financial "collapse"

Sat Feb 21, 2009 4:19pm EST

NEW YORK (Reuters) - Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.

(Reporting by Pedro Nicolaci da Costa and Juan Lagorio; Editing by Gary Hill)

Economy Strains Under Weight of Unsold Items

2009-02-17T12:37:00.014-06:00

If I am not mistaken, the Washington Post used to call this kind of thinking "Marxism" before they proclaimed Marxism dead... a couple times dead over the years.

I searched hard, to no avail, for the use of the word d-e-p-r-e-s-s-i-o-n in this article but couldn't find it... but, the description of what Karl Marx and Frederick Engels called a capitalist economic depression is classic and unmistakable.

Of course, like all the other articles we are reading; there is no mention of what happens under these circumstances when a president brings forward an economic policy of guns and butter which on the one hand contains an "economic stimulus package" loaded with pork in the form of corporate profits while on the other hand pumping the same amount of tax-payer money into militarization and wars while having previously turned over, again, the same amount of money to bail out Wall Street Banks.

Two-trillion two-hundred fifty billion dollars ($2,250,000,000,000.00)forked over to the military-financial-industrial complex without any accountability or oversight and still counting, and no one wants to venture a guess of where this country is headed?

Capitalism is obviously on the skids to oblivion putting the entire planet on the road to perdition.

Some people are hard at work trying to find solutions to this economic mess and looking everyplace except towards socialism as the solution.

The capitalist sooth-Sayers are hard at work trying to give this all the best face they can as the Wall Street coupon clippers stuff their pockets.

If we aren't all socialists now as Newsweek boldly proclaimed... we better study up on Marxism and the socialist alternative to capitalism because the road to perdition as this baby goes down might not be all that long, and where the road to perdition ends just might not be where we want to go.

No doubt this UAW trustee/committeeman pictured in the Washington Post article was busy making phone calls to turn out votes for Barack Obama a few months ago... we should all take note of the way Barack Obama has rewarded his most loyal supporters in the UAW.

United Auto Workers union Local 2999 Trustee/Committeeman Richie Franklin, pictured below in this Washington post story, might want to start thinking about how he is going to lead a discussion on Marx' "Capital."

I notice he doesn't seem to be as happy in the Washington Post photograph as he was in this picture with Walter Reuther and Henry Ford:

Think about this:

Two-trillion two-hundred fifty billion dollars ($2,250,000,000,000.00) and "the pump still hasn't been primed."

Lots of pumping going on... but the pump won't hold the prime... too many leaky gaskets.

Barack Obama would be well advised not to even think about a second term... he should probably start thinking about not being too quick to unpack his bags and getting settled into the White House... I hear Bernie Madoff is looking for a partner to run his new office in the Cayman Islands... maybe Ron Gettelfinger and the UAW will be their first investment partners.

Alan L. Maki

Economy Strains Under Weight of Unsold Items

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601391.html

By Annys Shin

Washington Post Staff Writer

Tuesday, February 17, 2009; A01

The unsold cars and trucks piling up at dealerships and assembly lines as consumers cut back and auto companies scramble for federal aid are just one sign of a major problem hurting the economy and only likely to get worse.

Richie Franklin of the United Auto Workers Local 2999 in Strasburg, Va. The local's plant lost 200 workers as demand for auto parts sags. (By Kevin Clark -- The Washington Post)

The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores. Japan yesterday said its economy shrank at an 12.7 percent annual pace in the last three months of 2008 as global demand evaporated for Japanese cars and electronics. Business everywhere are scrambling to bring supply in line with demand.

Downsizing can be tricky, though. No one knows how much worse the economy will get, and while everyone waits for the recession to peter out, businesses are grappling with how to cut costs and survive without sabotaging their ability to grow when the economy picks up.

And there is a lot to cut.

"There is over-capacity in everything," from "retail to manufacturing to housing," said Richard Yamarone, chief economist at Argus Research. "If capacity is too large, you don't need that many people employed, which is another reason we're seeing such high job losses."

As long as capacity far outstrips demand, businesses have little reason to expand, buy new equipment or hire workers. Even if the government funds bridge repairs and banks step up lending, many industries still have to go through massive restructuring before growth can resume. But executives say they have to tread carefully. If they put off critical investments in technology or research for too long, they could hobble their recovery and even the economy's.

Few industries have been as stung as severely by excess capacity as the U.S. auto industry, which produces millions more vehicles than it can sell. In 2008, there were enough automotive assembly plants in North America to churn out 18.3 million vehicles a year, according to the Center for Automotive Research. Analysts estimate that consumers this year will buy about 11 million. At current sales levels, it would take 116 days to sell all the cars and trucks clogging lots.

Automakers are scheduled to submit plans today outlining how they hope to restructure their operations to deal with a smaller marketplace, while still developing the new fuel-efficient cars that may be key to their future.

Auto suppliers are also trying to figure out how to survive in the face of massive excess capacity globally.

At its plant in Strasburg, Va., International Automotive Components, a Michigan-based supplier, secured wage and benefit concessions from workers in 2007 in hopes of staying competitive. But when Ford closed a factory in Norfolk, IAC had to lay off more than 200 workers, a third of the workforce in Strasburg. Since then, IAC has been able to line up more work for the plant.

"The unfortunate thing is we know . . . it comes at the cost of other workers whose plants were unable to survive," said Karen Foster, president of United Auto Workers Local 2999, which represents the IAC employees at the affected plant.

There are echoes of the automakers' plight throughout the economy. Sandra Berg, chief executive of Ellis Paint in Los Angeles, an industrial paint and coating manufacturer, recently found herself confronting over-capacity head on. Her company had been growing steadily since 2000 and was able to hand out bonuses for 2008. The downturn started to affect business toward the end of last year. Then came January, and "we just slammed into a brick wall," Berg said.

Since the new year, as sales have plummeted, Ellis Paint has announced two rounds of layoffs, imposed a hiring freeze and cut pay for management by 5 percent. The company has cut everywhere but sales, marketing, and research and development. "Our goal is to keep our expenses at the level of sales. I don't need to make a lot of money. I just need to break even . . . and look for the opportunities," Berg said.

Non-manufacturing sectors are trying to get rid of excess capacity as well. Retail chains such as Ann Taylor and Gap are closing stores after years of expansion, and others, such as Mervyns, are closing for good. "We've tremendously expanded the square feet of stores but not the number of yuppies occupying them," said Standard & Poor's economist David Wyss.

Some analysts say over-capacity is so rampant that it will stymie government efforts to unfreeze credit markets. Banks have little reason to lend not only because they still have bad debt on their books but also because businesses don't have a pressing need to expand, said Mike Shedlock, an investment analyst with Seattle-based Sitka Pacific who writes the popular blog Mish's Global Economic Trend Analysis.

"What is it that we need more of?" Shedlock said. "Do we need more Wal-Marts, more Pizza Huts, more nail salons?"

Strip malls and stores proliferated alongside housing developments, but many of those houses are empty; there were never enough people to fill them in the first place, and there won't be anytime soon.

Harvard economist Edward Glaeser estimates that from 2002 to 2007, the country's housing stock increased by 8.65 million units, outpacing the number of new households, which increased only by 6.7 million over the same period. Taking into account a rise in the number of vacation homes, Glaeser estimates an overhang of about 1.3 million vacant units. Absorbing that excess, he said, could take an additional two years.

Over-capacity in the housing industry has spilled over into countless other peripheral industries -- forcing cuts at chemical companies, home improvement stores and furniture manufacturers. The slump has prompted layoffs at PPG Industries, a leading paint company; Owens Corning, which makes roof shingles; and Therma-Tru, a door-manufacturing company. Therma-Tru recently moved up plans to close its plant in Fredericksburg later this year, citing "weaker-than-expected business forecasts."

Some businesses that were careful to manage inventories during the boom are facing a hard adjustment.

Ben Anderson-Ray, who runs Hubbardton Forge, a small maker of high-end lighting fixtures in Vermont, said he's had to lay off 26 employees after initially cutting hours, even though he expanded the business steadily and his customers aren't stuck with massive quantities of unsold goods.

For now, Anderson-Ray said, he has not scaled back work on new products; he simply cannot afford to do so. As one of the last lighting companies that manufactures its goods in the United States, Hubbardton Forge has survived in part because of its original designs and constant innovation. It cannot compete with overseas producers on price.

"If our order rates improve, we have the capacity in place to come back," Anderson-Ray said. But if order levels fall further over the next few months, he may have to consider further cuts. "We are watching our orders every day," he said.

Some analysts see ending the credit crunch as soon as possible as critical to preventing lasting damage. Harvard economist Diego A. Comin, in his research on Japan's decade-long bout of economic stagnation in the 1990s, found that demand stayed low long enough that businesses didn't make necessary investments. Computer adoption rates, for example, slowed, as did productivity growth. Businesses lost ground to competitors in countries such as South Korea, which made it harder for Japan to emerge from its slump.

Investing in new products and processes matters even more in highly competitive global industries plagued by over-capacity.

"In China, during the boom, there was huge over-capacity in various lines of activity ranging from shoes and clothing, light manufacturing -- all of that stuff. So that is why from the perspective of U.S. companies, we have found it so important to be on the innovative edge," said Harvard business professor Joseph L. Bower. "The only way to create value is to be on the innovative, high-tech, fashion-forward side."

If the credit crunch in the United States persists, "companies will find it difficult to invest in technology for a while, and then once the financial markets are back on track and demand recovers, companies will find themselves in a difficult position," Comin said. "Productivity growth will be declining for a while. They will have a hard time catching up."

Emanuel Wallerstein: The Politics of Economic Disaster

2009-02-16T10:51:00.000-06:00

-----Original Message-----
From: Alan Maki [mailto:amaki000@centurytel.net]
Sent: Monday, February 16, 2009 10:50 AM
To: 'immanuel.wallerstein@yale.edu'
Cc: 'sen.david.tomassoni@senate.mn'; 'artnorth@cpinternet.com'; 'ddepass@startribune.com'; 'Randy Furst'; 'carl.pope@sierraclub.org'; 'carld717@aol.com'; 'peter.makowski@mail.house.gov'; 'rgettel@uaw.net'; 'mzweig@notes.cc.sunysb.edu'
Subject: Re: Wallerstein commentary 251--- The Politics of Eonomic Disaster

Mr. Wallerstein,

I found your commentary #251 here very interesting.

“Economic Disaster;” boy, you sure got that right.

I agree with you that capitalism is in for a long, deep depression which has just barely begun.

However, I disagree with your conclusion that the real struggle to reshape society begins after the storm has blown over… I think the real struggle begins right now in fighting for a way to help working people survive as we struggle to get rid of this entire rotten system.

Hopefully you will give consideration to what it will take to win a “People’s Bailout” which will help people get some kind of work, keep them in their homes and keep families fed.

You seem to tend towards the view of talking about economics in one commentary and the need for peace in other commentaries… perhaps you might want to think about how military spending and aid to Israel could be halted as a means to put this capital to work solving the problems of the working people created by capitalism.

Here in Minnesota, a small group of public officials led by State Senator David Tomassoni have put together a legislative package they call “The People’s Bailout.”

Perhaps you might want to contact Senator Tomassoni to see how you could help win support for his endeavors and convince “Progressives for Obama” of which I see you are a member to mobilize liberal, progressive, left support behind this “People’s Bailout” with the idea of winning over Barack Obama to put forward such a program at the national level.

I am “Cc’ing” this to Senator Tomassoni and below is his contact information… I am sure he would be most interested in hearing from you. Senator Tomassoni represents the area which includes the community college in Virginia, Minnesota located in the heart of the Mesaba Iron Range… it was from Don Johnson, an anthropology instructor at this college, where I was first introduced to your ideas. Maybe some kind of forum or panel discussion (maybe a day-long seminar or something) could be arranged with yours and Senator Tomassoni’s participation at the Mesaba Range Community College in Virginia where the public could come and explore alternatives to the mess we are in:

Senator David Tomassoni
Home: 412 N.W. 2nd St., Chisholm, Minnesota 55719, (218) 254-3430
Minnesota Capitol: 321 State Capitol, St. Paul, Minnesota 55155, (651) 296-8017
E-mail: sen.david.tomassoni@senate.mn

Anyways, I appreciate your commentaries even if I disagree with your support for Barack Obama who appears to me to be more of an Elmer Gantry and flim-flam man than a carrying and considerate person as he is made out to be… it isn’t surprising to me that Bernie Madoff was one of his biggest supporters.

I am also enclosing below a letter I sent to Senator Tomassoni supporting his “People’s Bailout.”

Together with the “Politics of Economics Disaster” comes the “Politics and Economics of Livelihood--- working class politics,” which I believe we need to begin to focus on… the entails “The People’s Bailout.”

Alan L. Maki

-----Original Message-----
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Sent: Monday, February 16, 2009 9:09 AM
To: COMMENT@LISTSERV.BINGHAMTON.EDU
Subject: Wallersein commentary 251

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Commentary No. 251, Feb. 15, 2009

"The Politics of Economic Disaster"

Every day, I read another economist, journalist, or government official opining on how best to achieve economic recovery in this country or that. Needless to say, the remedies all contradict each other. But almost all of these pundits seem to me to live in fantasyland. They actually seem to believe their remedies will work in some relatively short period of time.

The fact is that the world is only at the beginning of a depression that will last for quite a while and will get far worse than it is now. The immediate issue for governments is not how to recover but how to survive the growing popular anger they are all, without exception, facing.

Let us start with the economic realities of the present. Just about everybody throughout the world - governments, enterprises, individuals - has been living above their income for the last 10-30 years, and doing it by borrowing. The world went giddy with inflated earnings and inflated consumption. Bubbles have to burst. This one has now burst (or actually several bubbles have burst). The impossibility of continuing on this path has sunk into consciousness, and suddenly everyone has gotten scared that they are running out of real money - governments, enterprises, individuals.

When that fear takes over, people stop spending, or lending. And when spending and lending declines significantly, enterprises stop producing or slow down. They may close down entirely, or at least fire workers. This is a vicious cycle, since closing down or firing workers leads to lower real demand and causes further reluctance to spend or to lend. It's called depression, and deflation.

For the moment, the United States government, which is still in a position to borrow money and print money, intends to throw some new money into circulation. This might work if the government threw an awful lot, and threw it wisely. But quite probably, it won't do it wisely. And quite probably throwing the amount that might work amounts to little more than creating another bubble. And the dollar might then really fall much faster than other currencies, pulling down the last important prop to the world-economy.

In the meantime, there is less and less money for daily consumption of all kinds for the bottom 90% of the world's population (and it's not so good for the top 10%). People are getting restless. Just in the last month, we have seen people in the streets protesting economic difficulties in a growing number of countries - Greece, Russia, Latvia, Great Britain, France, Iceland, China, South Korea, Guadeloupe, Reunion, Madagascar, Mexico - and probably a lot more that haven't been noticed by the world press. In fact, it's been relatively mild up to now, but the governments are all on edge.

What do governments do when their primary concern is dealing with internal unrest? They really have two choices - shoot the protestors, or appease them. Shooting works only up to a point. For one thing, the agents of force must themselves be well-enough paid to be willing to do it. And when there is a serious economic downturn, arranging this is not all that easy for the regimes.

So the regimes begin to appease their populations. How? First of all, by protectionism. Everyone has begun to complain about the protectionism of other countries. But the complainers are all practicing it themselves. And they will do a lot more of it. The free market economists all tell us that protectionism makes the overall economic situation still worse. That's probably true, but politically quite irrelevant, when there are people in the streets wanting jobs - now!

The second way governments appease when there is unrest is by social-democratic welfare measures. But to do that, governments need money. And governments get money from taxes. The free market economists all tell us that raising taxes (of any kind) during an economic downturn makes the overall economic situation still worse. That may be true, but in the short run that's also irrelevant. As it is, in a downturn, tax receipts fall. Governments can't keep up even with current expenditures, not to speak of paying for increased expenditures. So they will tax in one way or another. Or they will print money.

Finally, the third way they appease is by a healthy dose of populism. The real income gap between the top 1% and the bottom 20% both within countries and worldwide has grown enormously in the last thirty years. The gap will now be reduced to the more "normal" gap that existed in 1970, which is still very large, but somewhat less scandalously large. Hence, you have governments talking now of "income caps" for bankers, as in the United States and France. Or you can prosecute people for corruption, as in China.

It's a bit like being in the path of a tornado. The worst can come upon governments suddenly. When that happens, they have only minutes to take shelter in their cellars. The tornado then passes, and if one is still alive, one comes out to survey the damage. The damage will turn out to be very extensive. Yes, one can rebuild. But then the real argument begins - about how one rebuilds, and how fairly one shares the benefits of rebuilding.

How long will this gloomy picture prevail? No one knows or can be sure, but it will probably be a good number of years. In the meantime, governments will face elections, and voters will not be kind to the incumbents. Protectionism and social-democratic welfare serve governments the way the cellar does during a tornado. The quasi-nationalization of banks is another way of taking shelter in the cellars.

What we the people have to think about and prepare for is what we do when we emerge from the cellar, whenever that is. The fundamental question is how are we going to rebuild. That will be the real political battle. The landscape will be unfamiliar. And all our past rhetorics will be suspect. The key thing to realize is that rebuilding can take us into a far better world - but it can also take us into a far worse one. In either case, it will be a far different one.

by Immanuel Wallerstein

[Copyright by Immanuel Wallerstein, distributed by Agence Global. For rights and permissions, including translations and posting to non-commercial sites, and contact: rights@agenceglobal.com, 1.336.686.9002 or 1.336.286.6606. Permission is granted to download, forward electronically, or e-mail to others, provided the essay remains intact and the copyright note is displayed. To contact author, write: immanuel.wallerstein@yale.edu.

These commentaries, published twice monthly, are intended to be reflections on the contemporary world scene, as seen from the perspective not of the immediate headlines but of the long term.]

http://thepodunkblog.blogspot.com/2009/02/original-message-from-alan-maki.html

Thursday, February 12, 2009
Support S.F. 542 "The People's Bailout" by Minnesota DFL State Senator David Tomassoni
Support and follow this legislation:

https://www.revisor.leg.state.mn.us/revisor/pages/search_status/status_detail.php?b=Senate&f=SF0542&ssn=0&y=2009

-----Original Message-----

From: Alan Maki [mailto:amaki000@centurytel.net]

Sent: Thursday, February 12, 2009 8:53 PM

To: sen.david.tomassoni@senate.mn; rep.al.juhnke@house.mn; rep.bill.hilty@house.mn; rep.dave.olin@house.mn; rep.tom.anzelc@house.mn; rep.tom.Rukavina@house.mn; rep.tony.sertich@house.mn; peter.makowski@mail.house.gov; teresa_detrempe@klobuchar.senate.gov; amy_berglund@levin.senate.gov; elizabeth_reed@levin.senate.gov; 'Peter Rachleff'; mzweig@notes.cc.sunysb.edu; info@jamesmayer.org; rgettel@uaw.net; DLONG@uaw.net; debssoc@sbcglobal.net; 'Ley and Lea Soltis'; 'Joshua Frank'; carl.pope@sierraclub.org; carld717@aol.com

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Subject: Re: People's Bailout (SF 542)

Re: SF 542; The People’s Bailout

Senator David Tomassoni;

First, let me commend you for having the courage to bring this legislation forward; I am sure the opposition will be enormous even from your DFL colleagues, not to mention from Republicans and Governor Pawlenty.

I hope you intend to call for roll call votes at each step of the process on (SF 542) The People’s Bailout so there is more accountability than we had on S.F. 607 to save the Ford Plant; legislation you so courageously brought forward in the Senate Committee on Business, Industry and Labor where your fellow DFL'ers so shamefully let you, and more importantly, Ford Workers and Minnesotans, down. We need to keep in mind in the struggle ahead over The People's Bailout--- S.F. 542, that it was in this same Senate Committee where you failed to get help from your DFL colleagues in moving S.F. 607 forward--- out of Committee and through the Minnesota State Legislature and onto the Governor's desk.

We need to keep in mind that Senator Jim Metzen, while being a DFL'er, is also a banker--- an officer with Key Community Bank known for its very dirty deeds against working people. It is up to you and the rest of us to push Senator Metzen to do his job as Chair of the all-important, heavily DFL dominated Committee on Business, Industry and Labor and twist the arms needing twisting to get The People's Bailout through the Committee... again, I stress the need for a roll call vote to assure Minnesotans have complete accountability--- unlike with S.F. 607 where you received no support from your DFL colleagues yet none of the other Democrats or Republicans would acknowledge their very dirty and shameful role in sending S.F. 607 down to defeat.

Why haven’t you included something along the lines of SF 607 to automatically apply to any business closing which has received any kind of local, state or federal subsidies, tax abatement or public assistance of any kind in your People’s Bailout? This would be particularly important in trying, again, to save the St. Paul Ford Twin Cities Assembly Plant.

I am very leery that this is one more gimmick the DFL is using to make it appear the DFL is trying to do something when the intent is all show since the DFL did nothing to push SF 607 through the legislature; hopefully I am wrong about this since many, many Minnesotans will need such assistance.

Might I also suggest that you include rescinding “at-will hiring, at-will firing” legislation as part of The People’s Bailout since this would place Minnesota workers in line to benefit from the Employee Free Choice Act.

Also, might I suggest that you include a provision in this legislation that would establish the minimum wage in Minnesota to be in accordance with the calculations of the United States Department of Labor and its Bureau of Labor Statistics based upon the scientific facts pertaining to real cost of living factors and the minimum wage should be recalculated every time these cost of living factors are recalculated.

I agree with you that we can not spend our way out of this economic crisis and instead we need to work our way out of this mess which obviously requires all working people to be paid real living wages as a way to completely and thoroughly redistribute wealth in this country.
At the heart of this economic mess is the fact that wealth created by the working class has in fact been stolen in the form of huge profits by corporations not paying workers real living wages in accordance with cost of living factors; common sense tells us that depressions occur when working people cannot purchase back the goods they have produced which are required for human survival.

Common sense also dictates that we cannot allow the Ford Motor Company to start bringing Ford Rangers produced in Thailand into the United States instead of continuing production at the St. Paul Ford Twin Cities Assembly Plant.

Hopefully you will include something in this legislation protecting the rights of Minnesota’s 30,000 workers employed in the Indian Gaming Industry who are forced and compelled to work in smoke-filled casinos at poverty wages without any rights under state or federal labor laws… I am sure you understand with so many workers employed under these deplorable conditions these workers serve to drive down the standard of living of all workers in Minnesota. I am sure you are aware that casino workers, such as the thousands of workers employed at casinos like Mystic Lake Casino are forced to sign their names to statements that they know they will be terminated should they engage in union organizing. I think you should include something in this People’s Bailout directing the Minnesota Department of Employment and Economic Development that casino workers fired for union organizing cannot be denied unemployment benefits as they presently are.

In order to protect the rights of all workers in Minnesota to unemployment compensation which you want to extend (and your proposal for such extension is not long enough in my opinion given the fact that this economic mess is going to be with us for many years--- perhaps you should include unemployment coverage from time of layoff/firing to time of re-employment); but, getting back to the rights of workers to receive unemployment benefits in the first place, you need to eliminate the right of employers to challenge a worker’s right to unemployment benefits without having to provide a reason for the challenge.

Combined with “at-will hiring, at-will firing” this places workers in a real bind… fired without reason and then subjecting workers to the further injustice of being denied unemployment compensation due to an employer’s challenge without that employer having to provide a reason… this process can drag on for many months leaving workers without any income or public assistance--- meager as public assistance is in Minnesota… not to mention leaving workers and their families without health care. But, it does little good to extend unemployment compensation if employers are allowed to challenge a worker’s right to compensation without reason or just cause.

Without massive mobilization of members from the unions affiliated with the AFL-CIO and Change To Win this legislation has no chance of passing as you fully know and understand.

Have you heard from labor’s registered lobbyists concerning this legislation?

What have you heard from the Chamber of Commerce and other organizations representing employers and the business community regarding this legislation?

When will the first reading of this People’s Bailout take place? I can’t find anything on the legislature’s on-line calendar.

Please keep me informed of any hearings on this legislation as I would like to testify in support of this legislation.

Don’t forget; request there be recorded roll call vote at each step in the process so Minnesotans have full accountability; this not only assures accountability, but will cause those business oriented DFL’ers in the Summit Hill Club to think twice should they decide they want to join with their Republican colleagues in opposing this legislation.

Might I suggest you develop a newsletter--- printed in hard copy and e-mail format--- pertaining solely to SF 542 (The People’s Bailout) to keep its supporters in and out of the legislature fully and completely informed; a newsletter which requests supporters to do specific tasks in bringing the full weight of Minnesota’s working class--- organized and unorganized--- into support for this important piece of legislation… we certainly don’t want a repeat of only a handful of proponents showing up like what happened with SF 607. We should do everything possible to make sure that Minnesota’s working class “owns” this legislation and that we work together to mobilizes huge turn outs of working people supporting this legislation at each and every stage in the legislative process.

In my opinion, we should be looking at organizing Minnesota’s workers to mobilize fully in support of this important piece of legislation, S.F. 542 The People's Bailout, you are bringing forward.

You are most certainly aware that your legislation can serve as a model in winning new needed reforms comprising an extension of Franklin Roosevelt’s New Deal; just as the struggles for Roosevelt’s New Deal received powerful, decisive support from Minnesota’s socialist Governors Floyd Olson, Elmer Benson and John Bernard and other Farmer-Labor Party elected officials along with Minnesota’s working class--- especially the “red” Finns of the Iron Range. Let “The People’s Bailout” become a rallying point for the working class movement, and become a model for Barack Obama and the United States Congress along with other states to emulate and follow through on.

I assume you have spoken with Congressman Jim Oberstar and U.S. Senator Amy Klobuchar about developing similar legislation in Congress.

Might I suggest you request an appearance on Amy Goodman’s television program--- “Democracy Now!” to promote national working class unity in support of The People's Bailout.

I hope you will suggest to the Minnesota AFL-CIO and Change To Win they bring all their affiliated unions into support for this legislation and these unions in turn fully mobilize their memberships to every extent possible.

Your final item regarding state employees is very weak given the intent of leading Republicans to push for things like using the powers of state government to abrogate union contracts. As you know, Barack Obama and Congress are already doing the same thing with autoworkers; whereas, in France the government is prohibiting the abrogation of union contracts and requiring those businesses receiving government bailouts not to cut employment. You might want to take a look at what the French government is doing to protect the rights and jobs of working people.

I would encourage you to look at what action can be taken to make the Minnesota government the employer of choice for road building, bridge repair and maintenance so more jobs are created rather than contractors and engineering firms reaping huge profits, keeping in mind the reason for New Deal make work projects being so successful was that the government was the employer--- not private industry and corporations… again, common sense dictates that when you cut out profits more can be paid out in wages for more workers thus, as you say, and I agree, we work our way out of this mess rather than trying to spend our way out of this most severe crisis.

In conclusion, I would encourage you to consider some type of resolution calling on President Obama to discontinue his wars in Iraq, Afghanistan and Pakistan as well as cutting all funding for Israel since it makes little sense to pump three-quarters of a trillion dollars into economic “stimulus” while continuing to squander the exact same amount on wars and militarization, which is like taking our human and natural resources and tossing them into one of those polluted, water-filled, abandoned mining pits on the Iron Range or into U.S. Steel’s “Clear Water Reservoir” in Mountain Iron.

Also, as much as I am for road-building and repair to create jobs… I can’t see spending millions of dollars building a road from Minnesota Highway 71 out into the Big Bog for a Canadian peat mining operation to truck away the profits… you might want to mention to Congressman Oberstar that Franklin Roosevelt spent hundreds of thousands of dollars putting the Civilian Conservation Corps to work trying to protect this very sensitive ecosystem; it just destroys our credibility advocating for public works programs when Oberstar has spent millions destroying the good work the CCC did in trying to protect and save the Big Bog. I find it rather ironic this peat mining boon-doggle is taking place right at the site of the Civilian Conservation Corps camp site in the Pine Island State Forest in the Big Bog.

S.F. No. 542, as introduced - 86th Legislative Session (2009-2010) Posted on Feb 06, 2009
1.1A bill for an act
1.2relating to economic development; extending MFIP assistance; modifying
1.3unemployment compensation; augmenting foreclosure provisions; establishing a
1.4jobs creation program; limiting certain layoffs; appropriating money;amending
1.5Minnesota Statutes 2008, sections 256J.42, by adding a subdivision; 268.035,
1.6subdivisions 4, 21a; 268.07, subdivision 1; 268.085, subdivision 15; 504B.151;
1.7proposing coding for new law in Minnesota Statutes, chapter 582.
1.8BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9 Section 1. Minnesota Statutes 2008, section 256J.42, is amended by adding a
1.10subdivision to read:
1.11 Subd. 1a. Temporary 60-month time limit extension. For assistance units that
1.12have reached the 60-month time limit under subdivision 1 or assistance units that will
1.13reach the 60-month time limit under subdivision 1 before the sunset of this subdivision,
1.14MFIP benefits are extended to eligible assistance units until the sunset of this subdivision.
1.15This subdivision sunsets July 1, 2011.

1.16 Sec. 2. Minnesota Statutes 2008, section 268.035, subdivision 4, is amended to read:
1.17 Subd. 4. Base period. (a) "Base period," unless otherwise provided in this
1.18subdivision, means the last four completed calendar quarters before the effective date of
1.19an applicant's application for unemployment benefits if the application has an effective
1.20date occurring after the month following the last completed calendar quarter. The base
1.21period under this paragraph is as follows:
1.22
1.23
1.24 If the application for unemployment
benefits is effective on or between these
dates: The base period is the prior:
1.25 February 1 - March 31 January 1 - December 31
2.1 May 1 - June 30 April 1 - March 31
2.2 August 1 - September 30 July 1 - June 30
2.3 November 1 - December 31 October 1 - September 30
2.4 (1) (b) If an application for unemployment benefits has an effective date that is
2.5during the month following the last completed calendar quarter, then the base period is
2.6the first four of the last five completed calendar quarters before the effective date of an
2.7applicant's application for unemployment benefits. The base period under this paragraph
2.8is as set forth below follows:
2.9
2.10
2.11 If the application for unemployment
benefits is effective on or between these
dates: The base period is the prior:
2.12 January 1 - March January 31 October 1 - September 30
2.13 April 1 - June April 30 January 1 - December 31
2.14 July 1 - September 30 July 31 April 1 - March 31
2.15 October 1 - December October 31 July 1 - June 30
2.16 (2) (c) If the applicant has insufficient wage credits to establish a benefit account
2.17under clauses (1) and (3), and paragraph (a) or (b), but during the base period under
2.18clause (1) paragraph (a) or (b) an applicant received workers' compensation for temporary
2.19disability under chapter 176 or a similar federal law or similar law of another state, or
2.20if an applicant whose own serious illness caused a loss of work for which the applicant
2.21received compensation for loss of wages from some other source, the applicant may
2.22request an extended base period as follows:
2.23 (i) (1) if an applicant was compensated for a loss of work of seven to 13 weeks, the
2.24base period is the first four of the last six completed calendar quarters before the effective
2.25date of the application for unemployment benefits;
2.26 (ii) (2) if an applicant was compensated for a loss of work of 14 to 26 weeks, the
2.27base period is the first four of the last seven completed calendar quarters before the
2.28effective date of the application for unemployment benefits;
2.29 (iii) (3) if an applicant was compensated for a loss of work of 27 to 39 weeks,
2.30the base period is the first four of the last eight completed calendar quarters before the
2.31effective date of the application for unemployment benefits; and
2.32 (iv) (4) if an applicant was compensated for a loss of work of 40 to 52 weeks, the
2.33base period is the first four of the last nine completed calendar quarters before the effective
2.34date of the application for unemployment benefits;.
2.35 (3) if the applicant has insufficient wage credits to establish a benefit account under
2.36clause (1), an alternate base period of the last four completed calendar quarters before the
2.37date the applicant's application for unemployment benefits is effective will be used. This
3.1base period can be used only 30 calendar days or more after the end of the last completed
3.2quarter, when a wage detail report has been, or should have been, filed for that quarter
3.3under section 268.044; and
3.4 (4) (d) No base period under clause (1), (2), or (3) paragraph (a), (b), or (c) may
3.5include wage credits upon which a prior benefit account was established.
3.6(e) Notwithstanding paragraph (a), the base period calculated under paragraph (b)
3.7using the first four of the last five complete calendar quarters before the effective date of
3.8the applicant's application for unemployment benefits must be used for an applicant if the
3.9applicant has more wage credits under that base period than under the base period in
3.10paragraph (a).
3.11EFFECTIVE DATE.This section is effective for applications for unemployment
3.12benefits filed effective on or after July 1, 2009.

3.13 Sec. 3. Minnesota Statutes 2008, section 268.035, subdivision 21a, is amended to read:
3.14 Subd. 21a. Reemployment assistance training. (a) An applicant is in
3.15"reemployment assistance training" when:
3.16 (1) a reasonable and opportunity for suitable employment for the applicant does not
3.17exist in the labor market area and it is necessary that the applicant receive additional
3.18training in order to obtain will assist the applicant in obtaining suitable employment;
3.19 (2) the curriculum, facilities, staff, and other essentials are adequate to achieve the
3.20training objective;
3.21 (3) the training is vocational in nature or short term academic training vocationally
3.22directed to an occupation or skill for which there are reasonable that will substantially
3.23enhance the employment opportunities available to the applicant in the applicant's labor
3.24market area;
3.25 (4) the training course is considered full time by the training provider; and
3.26 (5) the applicant is making satisfactory progress in the training.
3.27 (b) Full-time training provided through the dislocated worker program, the Trade
3.28Act of 1974, as amended, or the North American Free Trade Agreement is considered
3.29"reemployment assistance training," if that training course is in accordance with the
3.30requirements of that program.
3.31 (c) Apprenticeship training provided in order to meet the requirements of an
3.32apprenticeship program under chapter 178 is considered "reemployment assistance
3.33training."
3.34(d) An applicant is considered in reemployment assistance training only if the
3.35training course has actually started or is scheduled to start within 30 calendar days.
4.1EFFECTIVE DATE.This section is effective for determinations and appeal
4.2decisions issued on or after the day following final enactment.

4.3 Sec. 4. Minnesota Statutes 2008, section 268.07, subdivision 1, is amended to read:
4.4 Subdivision 1. Application for unemployment benefits; determination of benefit
4.5account. (a) An application for unemployment benefits may be filed in person, by mail,
4.6or by electronic transmission as the commissioner may require. The applicant must be
4.7unemployed at the time the application is filed and must provide all requested information
4.8in the manner required. The commissioner shall accept a valid individual taxpayer
4.9identification number from an applicant who is applying for benefits. If the applicant is
4.10not unemployed at the time of the application or fails to provide all requested information,
4.11the communication is not considered an application for unemployment benefits.
4.12 (b) The commissioner shall examine each application for unemployment benefits to
4.13determine the base period and the benefit year, and based upon all the covered employment
4.14in the base period the commissioner shall determine the weekly unemployment benefit
4.15amount available, if any, and the maximum amount of unemployment benefits available, if
4.16any. The determination is known as the determination of benefit account. A determination
4.17of benefit account must be sent to the applicant and all base period employers, by mail or
4.18electronic transmission.
4.19 (c) If a base period employer did not provide wage information for the applicant as
4.20provided for in section 268.044, or provided erroneous information, the commissioner
4.21may accept an applicant certification as to wage credits, based upon the applicant's records,
4.22and issue a determination of benefit account.
4.23 (d) The commissioner may, at any time within 24 months from the establishment of
4.24a benefit account, reconsider any determination of benefit account and make an amended
4.25determination if the commissioner finds that the determination was incorrect for any
4.26reason. An amended determination must be promptly sent to the applicant and all base
4.27period employers, by mail or electronic transmission.
4.28 (e) If an amended determination of benefit account reduces the weekly
4.29unemployment benefit amount or maximum amount of unemployment benefits available,
4.30any unemployment benefits that have been paid greater than the applicant was entitled
4.31is considered an overpayment of unemployment benefits. A determination or amended
4.32determination issued under this section that results in an overpayment of unemployment
4.33benefits must set out the amount of the overpayment and the requirement under section
4.34268.18, subdivision 1 , that the overpaid unemployment benefits must be repaid.

5.1 Sec. 5. Minnesota Statutes 2008, section 268.085, subdivision 15, is amended to read:
5.2 Subd. 15. Available for suitable employment defined. (a) "Available for suitable
5.3employment" means an applicant is ready and willing to accept suitable employment in
5.4the labor market area. The attachment to the work force must be genuine. An applicant
5.5may restrict availability to suitable employment, but there must be no other restrictions,
5.6either self-imposed or created by circumstances, temporary or permanent, that prevent
5.7accepting suitable employment.
5.8(b) Unless the applicant is in reemployment assistance training, to be considered
5.9"available for suitable employment," a student who has regularly scheduled classes must
5.10be willing to quit school discontinue classes to accept suitable employment when:
5.11(1) class attendance restricts the applicant from accepting suitable employment; and
5.12(2) the applicant is unable to change the scheduled class or make other arrangements
5.13that excuse the applicant from attending class.
5.14(c) An applicant who is absent from the labor market area for personal reasons, other
5.15than to search for work, is not "available for suitable employment."
5.16(d) An applicant who has restrictions on the hours of the day or days of the week
5.17that the applicant can or will work, that are not normal for the applicant's usual occupation
5.18or other suitable employment, is not "available for suitable employment." An applicant
5.19must be available for daytime employment, if suitable employment is performed during
5.20the daytime, even though the applicant previously worked the night shift.
5.21(e) An applicant must have transportation throughout the labor market area to be
5.22considered "available for suitable employment."
5.23EFFECTIVE DATE.This section is effective for determinations and appeal
5.24decisions issued on or after the day following final enactment.

5.25 Sec. 6. Minnesota Statutes 2008, section 504B.151, is amended to read:
5.26504B.151 RESTRICTION ON RESIDENTIAL LEASE TERMS FOR
5.27BUILDINGS IN FINANCIAL DISTRESS; REQUIRED NOTICE OF PENDING
5.28FORECLOSURE; RIGHTS OF TENANTS OF FORECLOSED PROPERTY.
5.29 Subdivision 1. Limitation on lease and notice to tenant. (a) Once a landlord
5.30has received notice of a contract for deed cancellation under section 559.21 or notice of
5.31a mortgage foreclosure sale under chapter 580 or 582, the landlord may only enter into
5.32(i) a periodic residential lease agreement with a term of not more than two months or
5.33the time remaining in the contract cancellation period or the mortgagor's redemption
6.1period, whichever is less or (ii) a fixed term residential tenancy not extending beyond the
6.2cancellation period or the landlord's period of redemption until:
6.3(1) the contract for deed has been reinstated or paid in full;
6.4(2) the mortgage default has been cured and the mortgage reinstated;
6.5(3) the mortgage has been satisfied;
6.6(4) the property has been redeemed from a foreclosure sale; or
6.7(5) a receiver has been appointed.
6.8(b) Before entering into a lease under this section and accepting any rent or security
6.9deposit from a tenant, the landlord must notify the prospective tenant in writing that the
6.10landlord has received notice of a contract for deed cancellation or notice of a mortgage
6.11foreclosure sale as appropriate, and the date on which the contract cancellation period or
6.12the mortgagor's redemption period ends. The landlord must also inform the prospective
6.13tenant of the tenant's right to continued utility services if the landlord defaults on utility
6.14payments during the foreclosure process.
6.15(c) This section does not apply to a manufactured home park as defined in section
6.16327C.01, subdivision 5 .
6.17 Subd. 2. Exception allowing a longer term lease. This section Subdivision 1
6.18does not apply if:
6.19(1) the holder or the mortgagee agrees not to terminate the tenant's lease other than
6.20for lease violations for at least one year from the commencement of the tenancy; and
6.21(2) the lease does not require the tenant to prepay rent for any month commencing
6.22after the end of the cancellation or redemption period, so that the rent payment would be
6.23due prior to the end of the cancellation or redemption period.
6.24For the purposes of this section, a holder means a contract for deed vendor or a
6.25holder of the sheriff's certificate of sale or any assignee of the contract for deed vendor or
6.26of the holder of the sheriff's certificate of sale.
6.27 Subd. 3. Transfer of tenancy by operation of law. (a) A tenant who enters into a
6.28lease under subdivision 2 is:
6.29(1) deemed by operation of law to become the tenant of the holder immediately upon
6.30the holder succeeding to the interest of the landlord under the lease; and
6.31(2) bound to the holder under all the provisions of the lease for either the balance of
6.32the lease term or for one year after the start of the tenancy, whichever occurs first.
6.33(b) A tenant who becomes the tenant of the holder under this subdivision is not
6.34obligated to pay rent to the holder until the holder mails, by first class mail to the tenant at
6.35the property address, written notice that the holder has succeeded to the interest of the
7.1landlord. A letter from the holder to the tenant to that effect is prima facie evidence that
7.2the holder has succeeded to the interest of the landlord.
7.3 Subd. 4. Holder not bound by certain acts. A holder succeeding to an interest in
7.4a lease lawfully entered into under subdivision 2 is not:
7.5(1) liable for any act or omission of any prior landlord;
7.6(2) subject to any offset or defense which the tenant had against any prior landlord; or
7.7(3) bound by any modification of the lease entered into under subdivision 2, unless
7.8the modification is made with the holder's consent.
7.9 Subd. 5. Rights of tenant of foreclosed property. (a) When a holder takes over a
7.10rental property as the result of a foreclosure:
7.11(1) a tenant is deemed by operation of law to become the tenant of the holder; and
7.12(2) all leases, verbal or written, and all terms and conditions of those agreements
7.13shall be transferred to the holder.
7.14(b) A holder shall:
7.15(1) maintain as rental property, property that was used as rental property by the
7.16landlord;
7.17(2) offer renewal leases to tenants of the foreclosed property; and
7.18(3) keep affordable rent levels in place.
7.19 Subd. 6. Eviction. Notwithstanding any other law to the contrary, a holder must not
7.20begin an eviction action against a tenant without cause.
7.21 Subd. 7. Termination of tenancy. Except for lease violations, a holder must not
7.22terminate the tenancy of a tenant of foreclosed property without cause.
7.23 Subd. 8. Periodic leases. A holder must offer a fixed-term lease option to a tenant
7.24with a periodic lease in place at the time the tenant becomes a tenant of the holder.
7.25 Subd. 9. Applicability. The provisions of subdivisions 5 to 8 apply to all tenants
7.26regardless of when a tenant entered into a rental agreement with the property owner or at
7.27what stage the foreclosure process was in when the rental agreement was entered.

7.28 Sec. 7. [582.33] FORECLOSURE MORATORIUM.
7.29 Subdivision 1. Emergency declared to exist. The legislature of the state of
7.30Minnesota declares that a public economic emergency exists in the state of Minnesota
7.31due to the increase in foreclosure rates. The legislature declares that these conditions
7.32have created a housing emergency that justifies legislation creating a moratorium on
7.33mortgage foreclosures.
7.34 Subd. 2. Court stay. In an action to foreclose a mortgage upon residential property
7.35under chapter 580 or 581, in which a judgment of foreclosure has not been entered by the
8.1effective date of this section, the district court having jurisdiction over the matter, upon
8.2motion of a defendant, shall order the action stayed for two years after the entry of the
8.3stay. The court may order that certain conditions relating to the property are met during
8.4the stay, including, but not limited to, possession of the property, payments by the person
8.5in possession, and preservation of the property.
8.6 Subd. 3. Application. This section applies only to mortgages executed before
8.7the effective date of this section.
8.8EFFECTIVE DATE.This section is effective the day following final enactment.

8.9 Sec. 8. SPECIAL STATE EMERGENCY UNEMPLOYMENT COMPENSATION
8.10PROGRAM.
8.11 Subdivision 1. Purpose. Federal law currently provides for a federally funded
8.12extension of unemployment insurance benefits for applicants who have exhausted
8.13entitlement to regular Minnesota unemployment insurance benefits. But, because federal
8.14law contains a special requirement that an applicant has earned a certain amount of base
8.15period insured wages, a significant group of applicants who exhausted their regular
8.16Minnesota unemployment insurance benefits do not qualify for the federally funded
8.17extension. The purpose of this section is to provide a state-funded extension to that group.
8.18 Subd. 2. Eligibility. (a) Special state emergency unemployment insurance benefits
8.19are payable to an applicant who does not qualify for a federally funded extension
8.20of unemployment insurance benefits solely because the applicant does not meet the
8.21requirement under section 4001(d)(2)(a) of the federal Supplemental Appropriations
8.22Act of 2008 that an applicant have wage credits of not less than 40 times the applicant's
8.23weekly benefit amount.
8.24(b) Except as provided in paragraph (a), all requirements for federally funded
8.25extended unemployment benefits and all requirements of Minnesota Statutes, chapter
8.26268, must be met in order for the applicant to be eligible for special state emergency
8.27unemployment insurance benefits.
8.28(c) Special state emergency unemployment insurance benefits are payable in the
8.29same amounts, the same duration, and for the same time period as provided for under the
8.30federal Supplemental Appropriations Act of 2008, and any later amendments, but shall
8.31be no less than 13 times the applicant's weekly special state emergency unemployment
8.32insurance benefit amount.
8.33 Subd. 3. Payment from trust fund. Special state emergency unemployment
8.34insurance benefits are payable from the Minnesota unemployment insurance trust fund.
8.35Special state emergency unemployment insurance benefits will not be used in computing
9.1the future unemployment insurance tax rate of a taxpaying employer nor will they be
9.2charged to the reimbursing account of government or nonprofit employers.
9.3 Subd. 4. Expiration. This section expires on June 30, 2010, and no benefits shall be
9.4paid under this section for a week beginning after that date.
9.5EFFECTIVE DATE.This section is effective the Sunday following final enactment
9.6and applies only to weeks of unemployment after that date.

9.7 Sec. 9. JOBS CREATION GRANT PROGRAM.
9.8 Subdivision 1. Establishment. The commissioner of employment and economic
9.9development shall develop and implement a jobs creation grant program to make grants
9.10available to cities and towns for public and private projects that will generate new jobs
9.11and produce a stronger state economy.
9.12 Subd. 2. Fund distribution. In distributing funds, the commissioner shall give
9.13priority consideration to projects that are available to begin immediately and to projects
9.14that promote environmental sustainability and a green economy.
9.15 Subd. 3. Funding. To the extent that the commissioner receives funds for this
9.16purpose in fiscal year 2009, funding for the jobs creation grant program shall be done
9.17through federal stimulus dollars. If federal stimulus dollars are not available, funds shall
9.18come from state sources.
9.19 Subd. 4. Appropriation. $....... is appropriated from the general fund to the
9.20commissioner of employment and economic development to develop and implement
9.21a jobs creation grant program. This appropriation is only available if federal stimulus
9.22dollars are not available. This appropriation is available until expended.
9.23EFFECTIVE DATE.This section is effective the day following final enactment.

9.24 Sec. 10. STATE EMPLOYEE LAYOFFS.
9.25For the 2010 and 2011 biennium, in order to prevent increased unemployment and to
9.26protect jobs, the legislature shall not mandate layoffs of state employees, including, but
9.27not limited to, employees of the University of Minnesota.
9.28EFFECTIVE DATE.This section is effective the day following final enactment.

Please direct all comments concerning issues or legislation
to your House Member or State Senator.
For Legislative Staff or for directions to the Capitol, visit the Contact Us page.
General questions or comments.
last updated: 01/30/2009

Again, thanking you for having the moral and political courage in standing up and fighting for the rights and livelihoods of Minnesota's working class, and for having the common sense and intelligence to know that we cannot spend our way out of this economic crisis; rather, understanding and explaining that for working people and the working class the way out of this crisis, and the way to a better future, will be found in working our way out of this crisis.

In full support of your leadership in bringing forward The People's Bailout--- Senate File 542...

For a living wage job, justice and equality along with a voice at work for each and every worker in Minnesota...

On behalf of Minnesota's 30,000 workers in the Indian Gaming Industry organizing and struggling to survive while employed in smoke-filled casinos at poverty wages, without any rights under state or federal labor laws...

Sincerely,

Alan L. Maki
Director of Organizing,
Midwest Casino Workers Organizing Council

The recovery plan: shock & awe for a shaken nation

2009-02-14T16:28:00.003-06:00

Barack Obama's and the Democrat's priorities are as screwed up as are the Republicans.

There is no evidence--- credible or otherwise from anyone--- that any of this will lead to "economic recovery." Even Obama acknowledges this.

Obama and the Democrats are tinkering, at best, with a problem they obviously know nothing about, other than, they want to make sure their corporate buddies who put up the big bucks for his campaign get their "pay-back."

If these people had even a modicum of concern for the plight of those being hurt the most by this economic depression--- or "downturn in the economy," "recession" or whatever one chooses to call what is happening--- the first priority would have been to put in place programs to help working people... the most hurt and hardest hit working people. Instead, Obama and the Democrats continue talking about helping "the middle class purchase new cars and homes with tax write-offs."

There are tens of thousands of unsold cars right now and no matter how big nor how many tax write-offs are given to the middle class car sales will only be a fraction of unsold vehicles.

As for first-time home purchases... what is this, some kind of sick joke? People making sixty-thousand dollars a year are losing their homes and tens of thousands of white-collar jobs have been lost in the auto industry. There are so many vacant homes the result of foreclosures and evictions with the middle class lucky to be able to afford to pay the heating bills for these homes if they were distributed free like quarter candy at Halloween.

What this article--- and Democrats and Republicans--- fail to mention, is that every single dollar spent on bombs and bullets steals away a dollar from this program--- a program that will exacerbate an already bad situation because it creates more debt. Debt equals greater poverty and all the misery associated with poverty.

Is the objective here to make life better for people or trying to save a system which can't be fixed simply because there is nothing wrong with the system. Capitalism is working just as is expected... we are at the bust part of the cycle of the boom-bust cycle from which capitalism cannot escape... there is no "fix" to a depression... as capitalism was growing and expanding through wars of thievery there was some wiggle room for the system to "rebound." That "wiggle room" is now gone. We are living in the most decadent, barbaric and cannibalistic stage of capitalism, its final imperialist stage... for working people there is no place to go but down; with capitalism on the skids to oblivion we are on the road to perdition... of course, if you can be dazzled by big bombs and bigger debts... Obama's "shock and awe" relating to the economy might be just as impressive as Bush's "shock and awe" in Iraq... in fact, Obama has indulged in the two greatest sins of all... expanded wars financed on borrowed money and increasing debt to bolster Wall Street profits... there are no two other ingredients as sure to destroy a nation and wreak havoc with working people's lives... there is no way for our grandchildren to pay for Obama's three wars and no way for them to repay the Wall Street bankers, either; so they will be far worse off than we are right now. This is "progress?"

This article talks about those dollars which will go right into wallets and right out again... what this article doesn't say is that in paying for Obama's three wars you might just as well take your wallet and its contents and toss it all into Lake Superior.

Anyone with an ounce of common sense knows--- and understands--- there is no return to society for a bullet coming from the barrel of a gun or in bombs dropped.

Anyone with an ounce of common sense knows--- and understands--- that you cannot spend 800 billion dollars on wars and turn around and spend another 800 billion dollars claiming to be "stimulating" the economy... because, at best, financially, you end up even; even, that is, until you figure out the price paid for borrowing money for each "endeavor"... once you factor the cost of financing these boon-doggles on borrowed money you find out very quickly what millions of home-owners have found out... you simply can't make it and the bank is going to take your home... well, in the same way these Wall Street banksters--- new kinds of gangsters--- are stealing our nation right out from under us with the help of Barack Obama and the Democrats.

Oh gees, what happens if we figure in what we could have done for people with this money being wasted on war? WoW! We wouldn't be talking about a "stimulus package" at all! We would be smiling with kids going to college and health care for all with everyone working.

We aren't supposed to be thinking about 800-billion dollars being squandered on wars while Obama is shoving an 800-billion dollar "stimulus package" down our throats... no doubt, this is why all of this had to be done so quickly before we put two and two together.

Capitalism can't be fixed; it can't be saved... what can you salvage from an apple rotten to the core? Nothing. You chuck it. If ever there was a system thoroughly rotten from greed, exploitation, unemployment, racism, poverty, pollution and wars it is American capitalism--- chuck it.

Not ready to chuck this rotten system? Well check out what Barack Obama and the Democrats are giving you for a life-time of hard work under the guise of "economic stimulus:"

"The stimulus plan will mean thousands of dollars in tax breaks for first-time home buyers and people buying new cars. Lower- and middle-income taxpayers will get an extra $13 a week in their paychecks this year, and about $8 a week next year. Unemployment checks will go up $25 a week, and keep coming longer. Food stamp benefits for 30 million Americans will rise. Short-term health insurance will become more affordable for many losing their jobs."

These people must think we are completely stupid or something. They don't even have the common decency to mention that over 60 million people in this country are already so poor they don't have to file tax returns... what do they get from Obama's "stimulus" package? Shit.

And then we get this crap...

"The success of the stimulus package may be measured less by visible achievements than by what does not happen — the home that is not foreclosed, the family that doesn't slip into poverty, the disease that does not go undiagnosed."

So, now we measure "success" in terms of that which is unknown and unmeasurable with the same kind of accountability we get from these same dirty politicians who use voice votes to escape accountability.

We are supposed to ignore the rising numbers of people living in poverty and be satisfied as long as there are more people living in homes than are homeless; we are supposed to be happy there are more people employed than unemployed. What kind of convoluted logic is this? The same kind of convoluted logic that allowed Barack Obama to remain silent as Israel carried out a bestial killing spree and 22-day pogrom against the Palestinian people financed with billions our tax-dollars which should have been spent on a public health care system.

The convoluted logic being used to defend Israel's carnage is the same convoluted logic we are now told we must use to measure the success of this so-called "stimulus plan."

We are supposed to look at each and every aspect of how things are done, and at life in America as unrelated to one another... because, to look at the big picture one sees nothing but a system rotten to the core and the last thing the capitalist sooth-Sayers want us to think about doing is chucking a thoroughly rotten system.

"Poof — you just lost $15,000 that legislators had considered providing."

"Poof?"

Poof; some Palestinian child just lost their mother. Poof; some Palestinian mother just lost her children. Poof; someone just lost their home. Poof; some worker just lost her/his job. Poof; someone just died because they couldn't afford health care. Poof; someone just lost their pension fund. Poof; a bridge collapsed. Poof; someone just died from contaminated peanut butter. Poof; some homeless person just froze to death. Poof; some kid couldn't afford to continue in college. Poof; twenty-two poor suckers living in caves in Pakistan because they were too poor to live in a real home were killed by an un-manned drone in Pakistan because only terrorists live in caves.

What the hell... are we supposed to look at what Israel just did in Gaza with our tax-dollars and chalk that up to "shock and awe," too?

Poof; Barack Obama has destroyed an entire nation in less than a month giving us bullets to bite on!

Alan L. Maki

By NANCY BENAC and CALVIN WOODWARD, Associated Press Writers Nancy Benac And Calvin Woodward, Associated Press Writers – Sat Feb 14, 9:44 am ET

WASHINGTON – America is bringing shock and awe to the home front, using dollars instead of bombs.

It's the military doctrine of lightning force — fast and brute, or as brute as the shaken country can manage — applied to the campaign for economic recovery.

With a record-busting stimulus plan, the U.S. is marshaling resources against economic catastrophe in ways not seen since Franklin Roosevelt put the New Deal in motion.

President Barack Obama is going with the best deal he could get. The stimulus bill is a landmark legislative achievement for a new president who inherited economic spoilage along with the spoils of power. Now the nation anxiously waits to see if it works.

Undermining federal balance sheets that were already deeply in the red, Obama and Congress settled on a nearly $800 billion plan that aims to spend more on the crisis at hand than the government has spent waging the Iraq war for six years.

The idea: fast cash, and lots of it, but with a strategic view to the future.

Some dollars will flow quickly into wallets — and right out again.

The stimulus plan will mean thousands of dollars in tax breaks for first-time home buyers and people buying new cars. Lower- and middle-income taxpayers will get an extra $13 a week in their paychecks this year, and about $8 a week next year. Unemployment checks will go up $25 a week, and keep coming longer. Food stamp benefits for 30 million Americans will rise. Short-term health insurance will become more affordable for many losing their jobs.

The success of the stimulus package may be measured less by visible achievements than by what does not happen — the home that is not foreclosed, the family that doesn't slip into poverty, the disease that does not go undiagnosed.

"The one thing we'll never know is what would have happened if we didn't do it," said Nigel Gault, chief U.S. economist for IHS Global Insight.

It's not FDR's deal and these aren't his times.

No federally subsidized artists will paint murals glorifying the muscle of American workers or the progress belching from smokestacks, as they did in Roosevelt's day.

No grand compact is to be formed between generations like the one that promised everyone a federal pension. No institutions will rise to try something brand new.

"We're not reinventing government," said historian Kenneth C. Davis, author of the best-selling "Don't Know Much About" series. "We're modifying things that exist."

Yet as the share of the economy taken up by federal spending rises to an anticipated 30 percent, the nation is grappling again with big questions about Washington's place in people's lives.

"The stakes are so high now, this is such a big bill, average Americans are following it," says Princeton historian Julian Zelizer. "It's become a bill that is an argument about what government can or can't do.

"If there is no effect and in six months we are talking about the same economy or a worse economy, I think it would be a devastating blow to the president, Democrats, and to liberal claims about what government can do."

To critics such as Senate Republican leader Mitch McConnell, the package is the "Europeanization of America." Others call it "Rooseveltian" or "generational theft" in reference to the debt passed on to the future.

They might envision murals glorifying little more than filled potholes, insulated windows, depreciated computers.

Obama said it's about more than that, and drew parallels with FDR in speaking Friday to the Business Council, formed by corporate leaders in the 1930s to advise Roosevelt's administration.

"We adapted, we changed," he said about those days — and these. "President Roosevelt understood the new role of government in this new world, that while extraordinary actions on its part might be the source of recovery, no action on the part of government, no matter how extraordinary, would alone be the source of our prosperity."

In his radio address Saturday, Obama said he believed the country "will turn this crisis into opportunity and emerge from our painful present into a brighter future."

Democrats and just enough Republicans in Congress — three — saw the package as the best chance to tamp down the economic wildfires breaking out across the landscape.

Obama came into office saying he wished to be judged on his first 1,000 days instead of the usual benchmark of 100. In some ways he will be judged on his first 10 or 20.

Not even Roosevelt, fast off the mark to deal with a bank crisis, was as fast as this in achieving something so sweeping, so early.

The enormity of the package left politicians grasping for concrete ways to convey its size.

Sen. John Thune, R-S.D., spoke of a stack of hundred-dollar bills 689 miles high, and of bills wrapped side-by-side that would encircle the Earth nearly 39 times. House Republicans predicted that the package's costs — with interest on the necessary borrowing — could total more than a trillion dollars, enough money to buy about 1,000 boxes of Girl Scout cookies for every American.

It was enough to prompt comic Jon Stewart to riff that if you sewed the $100 bills together, "you would make a blanket for Jupiter."

The stimulus wasn't just about throwing cash at the economy, though.

The package is filled with billions for some of the same goals that Obama preached about on the presidential campaign trail — renewable energy and green jobs, computerized medical records, broadband Internet service for underserved areas.

"There are seeds in this bill for long-term change," says Zelizer. "There are things that can develop out of the research that can change our lives."

Obama sounded a drumbeat of warnings about the consequences of failing to act. But Americans didn't need their president to tell them how grim the economic situation was — and could become.

Forty percent of Americans already have been affected by some sort of job problem in the past year, be it unemployment, underemployment, layoffs, reductions in pay or hours, or job losses by members of their households, according to a poll released Friday by the Pew Research Center. Fifty-six percent expect things to be worse or about the same a year from now — and they've got solid grounds for their pessimism.

The country could well suffer a net loss of 2 million to 3 million or more jobs this year, economists believe. And the unemployment rate, now 7.6 percent, could top 9 percent by spring of 2010.

The stimulus pull-together was a colossal game of winners and losers shaped and reshaped by the latest set of hands on the package. The fortunes of people, schools, towns and other varied interests rose and fell in blinks of time.

Ready to buy another home?

Poof — you just lost $15,000 that legislators had considered providing.

Buying a first home? You're still in luck — the government plans to give you an $8,000 credit if you buy by the end of November.

A new car? You'll be able to deduct the thousands in sales taxes from your income tax but not — as was initially proposed — your loan interest as well.

One day, the government proposed to pay 65 percent of the cost of health coverage for a year for jobless people who lose their workplace insurance. Days later, it was down to half. Ultimately, the subsidy zigzagged back up to 65 percent, but it expires before the end of the year.

Obama declared an end to pork-barrel politics, but legislators still managed to look out for favorite projects.

Senate Majority Leader Harry Reid, D-Nev., was quick to point out that a big chunk of the $8 billion set aside to construct high-speed rail lines could go to a proposed Los Angeles-to-Las Vegas route. Sen. Arlen Specter, R-Pa., helped make sure $10 billion was set aside for the National Institutes of Health, a priority of his.

Long after the dust has settled from the horse trading, the government will be seen to have moved with unaccustomed speed on policies normally subjected to years of deliberation and gridlock.

Deficit hawks found their wings clipped as both parties reached for the treasury. Democrats mainly wished to spend; Republicans, mainly to cut taxes.

After last November, guess who got their way?

Democratic House Speaker Nancy Pelosi said flatly: "We won the election; we wrote the bill."

The debate was both large and small. Negotiators considered the proper role of government — and how fast a business can depreciate its equipment.

Entering the 1930s, Americans mainly saw the national government as the entity that fought wars, ran post offices and enforced a ban on liquor. Federal spending was only 3.4 percent of the economy.

That more than tripled during the New Deal, topping 10 percent, because of the explosion of public works and other labor programs, rural modernization, bank support, and farm and industrial aid.

"It was a transformation of society in a way that hadn't been done since the end of the Civil War and the end of slavery," Davis said.

The government became the entity that guaranteed a minimum wage, controlled farm production, supported artists, set workplace standards, insured deposits in regulated banks and cast the first national safety net for the elderly and handicapped under Social Security.

"The whole scope of what Roosevelt was trying to do is different but the intent is clearly the same: relief and recovery during a time of economic stress," said John Halpin, senior fellow at the Center for American Progress.

The package won by Obama offers "very important but more subterranean changes in the way the economy works," he said.

Federal spending as a share of the economy shot above 40 percent during World War II and has hovered around 20 percent most of the years since. That share was already projected to approach 25 percent before Obama's stimulus plan.

To be sure, there's still considerable disagreement about how much the New Deal helped to end a depression finally crushed by the humming factories of World War II.

Even FDR's transformation of the federal government was not universally recognized at the time for what it was. It may be years before the full measure of Obama's efforts are taken, too.

In 1936, The Economist magazine pronounced the New Deal a "striking success" in improving conditions that existed when FDR took office three years earlier.

But what of the legacy?

What legacy?

"If the criterion be Utopian, the achievements of the New Deal appear to be small," the editors sniffed. "The great problems of the country are hardly touched."

___

Associated Press writer Alan Fram contributed to this report.

No to the casino economy!

2009-01-28T14:53:00.003-06:00

Note: You may find opening this pdf file easier to read:

International Trade Union Confederation (ITUC)

World Social Forum

Belém do Para, Brazil,

27 January -1 February 2009

No to the casino economy!

The increasingly insecure living and working conditions of millions of
workers worldwide is one of the main causes of the crisis we currently
face. This crisis primarily concerns the unfair distribution of wealth, which
has distorted the global economy. The financial crisis, which is the result
of a long process of financialisation of the economy, has further
aggravated existing economic problems, in both the North and the South.

The developing countries have a huge shortage of decent jobs, since the
latter are not being generated by their economic growth. This decent work
crisis is compounded by the high cost of living and the impact of the world
food crisis. This is leading to situations of endemic poverty. The
industrialised countries are not immune either: the number of working
poor in the United States rose sharply over the eight years of the Bush
administration. In Europe, wage moderation - despite the rise in both
inflation and productivity- has reduced purchasing power.

Almost all countries have increasingly insecure employment conditions,
with a casualisation of the employment relationship and a deregulation of
labour markets. We face a poverty crisis, certainly, but also, and above all,
a crisis based on blatant inequalities, which have become intolerable from
both a social and economic viewpoint. The neo-liberal policies of the last
20 years have reached their limit, since, for the aforementioned reasons,
impoverished workers are no longer consuming enough to keep the
economy running.

The United States is the largest consumer in the world and the reduction
of the real purchasing power of its middle class has repercussions well
beyond its borders. The high level of consumption in the US was sustained
not through wages but through credit. As a result US workers spent
beyond their means and become indebted. The ease with which
mortgages could be obtained, including for the poorest families via the
subprime mortgages, relied on the price of houses, which was pushed
artificially high by a speculation bubble. Complex financial products were
created in order to pass on these “toxic assets” to the financial markets.

The relentless pursuit of short-term profits, against a background of
reckless economic and financial liberalisation, is what chiefly characterises
today’s financial markets. Casino capitalism is largely responsible for the
extension of the crisis to the whole planet. The financial markets have
become a source of easy money and no longer fulfil their main task of
financing the real economy. During the last few decades, speculation on
financial markets has provided much better opportunities for short-term
profit than providing loans to companies willing to innovate, win new
markets or create decent jobs. As a result, workers’ futures have been
sacrificed to feed the offshore bank accounts of some unscrupulous
speculators. Governments and the international institutions have closed
their eyes, adopting the “laissez faire” principle in its most literal sense,
and as such have been accomplices.

The other key aspect of this crisis relates to the excessive opening of
markets and non-intervention by states. By way of example, China has
managed to accumulate huge reserves that are allowing it to finance the
US debt. Chinese workers, who are not allowed the freedom to form unions
to defend their collective interests, have made spectacular increases in
their productivity levels over the last 20 years. They work on 21st century
machines but are paid 19th century salaries! This globalisation has pitted
the workers of the North against those of the South to the benefit of the
multinationals and private investment funds whose profits have
continuously increased.

Huge imbalances have also developed between the financial sector and
the real economy, between rich and poor countries, between overpaid
managers and underpaid workers. Inequalities between men and women
have remained large. And the policies of repression and discrimination
against trade unionists, which have contributed to the process of wealth
concentration, have directly reduced the bargaining power of workers
compared to that of their employers.

Whilst the current crisis is financial, economic and social, it also has an
environmental dimension. It has become clear that our planet’s resources
will not cope with the extension of the consumption model of the
industrialised countries to the rest of the 6 billion people that inhabit it.
That is compounded by the effects of climate change, which are forcing us
to take collective measures to reduce greenhouse gases. There are glaring
inequalities here too, since the poor peoples are suffering more acutely
from the negative impact of climate change. The measures taken need not
only to be environmentally efficient but also socially just.

What model can we put forward to get out of this multifaceted crisis?
This crisis is proof of the unsustainable nature of the neo-liberal policies
adopted in the last few decades, which have promoted the deregulation
and liberalisation of markets and the privatisation of public services. This
market fundamentalism has concentrated wealth whilst thumbing its nose
at global public goods such as the environment, health, social protection,
food safety and, indeed, global financial stability.

The current recovery plans are necessary, but insufficient. It is not enough
to inject money into the economy, we need to change its principles to
make sure it generates social justice, development for all, equity, stability
and long-term prosperity.

Tomorrow’s world will no longer have a single superpower but will be
multipolar, as the regional integration processes intensify. Multilateralism
needs to be protected within this multipolar world, which otherwise runs
the risk of exacerbating poverty and creating deeper inequalities between
countries. But it is high time that this multilateralism embraced social
issues. The unions and the whole of civil society must insist that
employment related issues are placed at the core of the new system of
global economic governance that still needs to be built. The ILO has a vital
role to play here.

Within this multipolar world, the state needs to recover its rightful position
and assume its role. It must ensure a socially just and environmentally
responsible new economic system is established. Public intervention is the
sole guarantor of social cohesion. However the corruption of certain public
bodies must be penalised and opposed by organised groups, including the
unions. The central banks must become publicly accountable and stop
bowing to the demands of the powerful financial lobby.

The strengthening and broadening of public social protection systems is
urgently needed. A Global Social Protection Fund to help the poorest
countries needs to be established. Increasing the levels and quality of
state aid to developing countries is essential. Establishing socially just
transitions towards ecologically sustainable forms of production is vital.

Setting fair rules for world trade to support national development plans
and prevent inequalities from deepening, is crucial. The priority must be to
establish decent minimum wages and real salaries in line with productivity
gains. And respect of the right of workers to form free trade unions and
negotiate collectively on the redistribution of profits is a key requirement.

The relations between industrial, emerging and developing countries need
to be established on a new basis. The current global economic and
financial system is not serving the interests of the workers in developing
countries. Reimbursing the foreign debt is strangling the poorest
countries. The terms under which they can borrow are unfair, as they are
made to bear all the fluctuation risks. The current system allows
industrialised countries to pursue counter-cyclical monetary and fiscal
policies by imposing pro-cyclical policies on developing countries. That
means the international financial institutions (IFIs) are partly responsible
for the disastrous social consequences in these countries and also for the
global financial instability. The economic and financial conditionality
imposed by the IFIs must end and the latter’s governance needs to be fair.

The time has come to build a new global economic and financial
architecture. However, none of the existing institutions has the legitimacy
or the credibility to fulfil that task successfully.

Regulation of the financial markets is required urgently. The speculation
needs to be restricted and markets must focus on financing the real
economy. More particularly, speculation on commodity markets must be
banned. Derivatives markets need to be brought back under the control of
the public authorities. Off-shore financial centres and other fiscal havens
need to be closed. Taxation of financial transactions can provide new
funds to help reduce inequalities. The obscene salaries of managers,
bankers and other financial intermediaries should be regulated. As part of
the necessary reform of the financial sector, priority must be given to the
social economy by promoting cooperatives, mutual societies and microcredit
agencies, including in developing countries.

The new economic system needs to generate green growth. As well as the
urgent need to ensure the survival of our planet, environmental protection
provides huge opportunities for job creation. Public investment in
infrastructure, public transport and renewable energies are needed all
over the world. Economic growth needs to be supported by ecologically
responsible investment.

In conclusion

It is time to build an economic system that is environmentally sustainable,
socially just and balanced in geo-political terms. This model will need to
take into account the aspirations of peoples and the proposals of the trade
union movement and the other players of civil society. From now on,
economic growth should create decent jobs and protect the environment
and its benefits should be shared, so that the unprecedented level of
inequalities we face today is significantly reduced.

Economic crisis to claim 51M jobs

2009-01-28T11:29:00.001-06:00

Economic crisis to claim 51M jobs

http://www.presstv.ir/detail.aspx?id=83958§ionid=3510213

Wed, 28 Jan 2009 15:35:16 GMT

The number of the world's unemployed could reach 230 million.
The economic downturn could result in the loss of up to 51 million jobs worldwide by the end of this year, a UN agency has predicted.

The International Labor Organization (ILO) said on Wednesday that its most optimistic scenario is for 18 million more unemployed at the end of the year, putting the global unemployment rate at 6.1 percent.

"If the recession deepens in 2009, as many forecasters expect, the global jobs crisis will worsen sharply," the ILO said in its report, Global Employment Trends 2009.

"We can expect that for many of those who manage to keep a job, earnings and other conditions of employment will deteriorate."

The ILO also predicted a worse scenario in which 51 million more jobs could be lost by the end of 2009, leading to a 7.1 percent global unemployment rate.

The UN agency said a more realistic scenario would be the loss of 30 million more jobs if the global financial crisis continued for a second a year in 2009, pushing up the world's unemployment rate to 6.5 percent, compared to 6.0 percent in 2008 and 5.7 percent in 2007.

Considering the three scenarios, the total number of unemployed individuals in the world would reach between 198- 230 million people.

The ILO said developing countries suffer most from additional job losses while Sub-Saharan Africa and South Asia standing out as regions with extremely harsh labor market conditions.

The International Monetary Fund (IMF) has cut its forecast for global growth in 2009 to a slight 0.5 percent, the weakest since World War II.
According to ILO estimates, North Africa and the Middle East had the highest unemployment rate at the end of 2008, at 10.3 percent and 9.4 percent respectively.

East Asia had the lowest rate at 3.8 percent, but the ILO said the region could also experience a jump to 4.5-5.5 percent in a year.

"While major capital-intensive new infrastructure projects take time to translate into increased employment, labor-based approaches can generate jobs and much-needed infrastructure quite quickly," the report said.

The report added that 190 million people lost their jobs by the end of 2008 after 11 million jobs were cut worldwide.

The understatement of the 21st Century: No "garden variety" recession

2008-11-17T07:49:00.002-06:00

THE QUESTION: Recession or Depression?

Comment: Instead of asking capitalist sooth-Sayers and economic forecasters if this is a depression or a recession, maybe the mainstream media should be asking unemployed workers, those living in poverty and working class families facing foreclosures and evictions for the answer to this question.

The real question is: Why did Barack Obama and the Democrats join Republicans in telling lies about the real state of the economy throughout most of the campaign until everything came tumbling down?

Forecasters: tough road ahead for the economy

http://apnews.myway.com//article/20081117/D94GM8G00.html

Nov 17, 7:27 AM (ET)

By JEANNINE AVERSA

WASHINGTON (AP) - The country is sinking deeper into the economic doldrums, and it's likely to stay there for a while.

That's part of the latest outlook from forecasters in a survey to be released Monday by the National Association for Business Economics, also known by its acronym, NABE.

Approximately 96 percent of the economists polled believe that a recession has started, and nearly three-fourths think it could persist beyond the first quarter of 2009.

Under one definition, a recession happens when the economy shrinks for two quarters in a row. The economy contracted 0.3 percent in the third quarter as battered consumers cut back sharply on spending, the government reported last month. It was the worst showing since 2001, when the country was last in a recession.

NABE economists, among other experts, predict activity will continue to shrink in both the final quarter of this year and the first quarter of next year as weary consumers hunker down further under the stresses of rising unemployment, shrinking nest eggs and falling home values.

"Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," said NABE president Chris Varvares, president of Macroeconomic Advisers.

NABE economists are now forecasting the economy to shrink at a 2.6 percent pace in the final quarter of this year and then at a 1.3 percent pace in the first three months of 2009. The new projections marked downgrades from the association's previous survey, which called for growth of just 0.1 percent in the final quarter of this year and a 1.3 percent growth rate in the following quarter.

For all of 2008, the association's economists are predicting the economy's growth will slow to 1.4 percent, down from 2 percent in 2007. If the new, lower projection proves correct, it would mark the weakest performance since the 2001.

The picture would turn worse in 2009. The NABE economists are projecting the economy will jolt into reverse, shrinking by 0.2 percent for all of next year. If that happens, it would mark the worst showing since 1991, when the country was starting to pull out of a recession.

With the economy losing traction, the nation's unemployment rate will climb to 7.5 percent by the end of next year, the economists predict. Other analysts think it could rise to 8 percent at that time, or even hit 10 percent or higher if a U.S. auto company were to go under.

The nation's unemployment rate bolted to 6.5 percent in October, a 14-year high, the government reported earlier this month.

To cushion the fallout, the Federal Reserve has slashed a key interest rate, dropping it to just 1 percent, a level seen only once before in the last half-century.

Fed Chairman Ben Bernanke has warned that the country's economic weakness could last for some time - even if the government's unprecedented $700 billion financial bailout package and other steps do succeed in getting financial and credit markets to operate more normally.

In a speech Friday, Bernanke left the door open to another rate reduction, warning that financial markets remain under "severe strain."

Wall Street investors and economists believe the Fed probably will lower interest rates again on Dec. 16, its last regularly scheduled meeting this year, by one-quarter or even one-half percentage point.

The NABE survey of 50 forecasters was taken Oct. 28 through Nov. 7.

The raft of grim economic news prompted Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, to say in a speech Friday that the data to date "tells me that the economy is now in a recession."

"At the moment, the signs point to a recession beyond just a 'garden variety' downturn," she said. "The length and severity of the recession will depend on how quickly credit markets return to normal."

Depression Economics Returns

2008-11-16T13:49:00.002-06:00

A question: Based on your own circumstances do you think Krugman is correct in assuming there will be no replay of the Great Depression?

November 14, 2008

Op-Ed Columnist

Depression Economics Returns

http://www.nytimes.com/2008/11/14/opinion/14krugman.html?_r=1&oref=slogin&pagewanted=print

By PAUL KRUGMAN

The economic news, in case you haven’t noticed, keeps getting worse. Bad as it is, however, I don’t expect another Great Depression. In fact, we probably won’t see the unemployment rate match its post-Depression peak of 10.7 percent, reached in 1982 (although I wish I was sure about that).

We are already, however, well into the realm of what I call depression economics. By that I mean a state of affairs like that of the 1930s in which the usual tools of economic policy — above all, the Federal Reserve’s ability to pump up the economy by cutting interest rates — have lost all traction. When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.

To see what I’m talking about, consider the implications of the latest piece of terrible economic news: Thursday’s report on new claims for unemployment insurance, which have now passed the half-million mark. Bad as this report was, viewed in isolation it might not seem catastrophic. After all, it was in the same ballpark as numbers reached during the 2001 recession and the 1990-1991 recession, both of which ended up being relatively mild by historical standards (although in each case it took a long time before the job market recovered).

But on both of these earlier occasions the standard policy response to a weak economy — a cut in the federal funds rate, the interest rate most directly affected by Fed policy — was still available. Today, it isn’t: the effective federal funds rate (as opposed to the official target, which for technical reasons has become meaningless) has averaged less than 0.3 percent in recent days. Basically, there’s nothing left to cut.

And with no possibility of further interest rate cuts, there’s nothing to stop the economy’s downward momentum. Rising unemployment will lead to further cuts in consumer spending, which Best Buy warned this week has already suffered a “seismic” decline. Weak consumer spending will lead to cutbacks in business investment plans. And the weakening economy will lead to more job cuts, provoking a further cycle of contraction.

To pull us out of this downward spiral, the federal government will have to provide economic stimulus in the form of higher spending and greater aid to those in distress — and the stimulus plan won’t come soon enough or be strong enough unless politicians and economic officials are able to transcend several conventional prejudices.

One of these prejudices is the fear of red ink. In normal times, it’s good to worry about the budget deficit — and fiscal responsibility is a virtue we’ll need to relearn as soon as this crisis is past. When depression economics prevails, however, this virtue becomes a vice. F.D.R.’s premature attempt to balance the budget in 1937 almost destroyed the New Deal.

Another prejudice is the belief that policy should move cautiously. In normal times, this makes sense: you shouldn’t make big changes in policy until it’s clear they’re needed. Under current conditions, however, caution is risky, because big changes for the worse are already happening, and any delay in acting raises the chance of a deeper economic disaster. The policy response should be as well-crafted as possible, but time is of the essence.

Finally, in normal times modesty and prudence in policy goals are good things. Under current conditions, however, it’s much better to err on the side of doing too much than on the side of doing too little. The risk, if the stimulus plan turns out to be more than needed, is that the economy might overheat, leading to inflation — but the Federal Reserve can always head off that threat by raising interest rates. On the other hand, if the stimulus plan is too small there’s nothing the Fed can do to make up for the shortfall. So when depression economics prevails, prudence is folly.

What does all this say about economic policy in the near future? The Obama administration will almost certainly take office in the face of an economy looking even worse than it does now. Indeed, Goldman Sachs predicts that the unemployment rate, currently at 6.5 percent, will reach 8.5 percent by the end of next year.

All indications are that the new administration will offer a major stimulus package. My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion.

So the question becomes, will the Obama people dare to propose something on that scale?

Let’s hope that the answer to that question is yes, that the new administration will indeed be that daring. For we’re now in a situation where it would be very dangerous to give in to conventional notions of prudence.

2008-11-14T13:59:00.000-06:00

INTERNATIONAL TRADE UNION CONFEDERATION (ITUC)

ITUC OnLine
192/131108

Economic Crisis: World's Trade Unions Put Recovery and Reform Plan to
G20

Brussels, 13 November (ITUC OnLine): Trade union leaders from the G20
countries will put forward a comprehensive plan to turn around the
global economy, in meetings with world leaders in Washington DC on the
eve of the financial crisis summit hosted by the US government on 15
November. The top level union delegation will discuss the plan with
IMF Managing Director Dominique Strauss-Kahn, World Bank President
Robert Zoellick and heads of government from the G20 countries.

The world's unions are calling for a series of urgent actions to stave
off the prospect of deep and long-lasting global recession, coupled with
major changes in the running of the global economy to turn back decades
of deregulation policies that have caused the current crisis. A fresh
push for development and decent work is needed, as well as a "Green New
Deal" to tackle climate change effectively. The detailed union
proposals are set out in a recovery and reform programme entitled the
"Washington Declaration"
http://www.ituc-csi.org/IMG/pdf/0811t_gf_G20.pdf

"Immediate action is needed to get the world economy moving and boost
employment. Governments need to be prepared to make further,
coordinated, cuts in interest rates and to front-load investment in
infrastructure, education and health to help stimulate demand growth and
reinforce public services. This needs to be accompanied by tax and
spending measures to support the purchasing power of low- and
middle-income earners, and concrete steps to launch investment in green
goods and services, to help address climate change", said John Evans,
General Secretary of the OECD-TUAC.
The ITUC and TUAC are co-organising the union summit which will be
hosted by the US trade union centre AFL-CIO at its Washington DC
Headquarters.

"The outcome of the US elections reflects a world-wide rejection of the
fundamentalist right-wing ideology that has made a small number of
people incredibly rich, while inequality and economic insecurity have
grown, development has stalled, and the world stands on the edge of
economic calamity. Tens of millions of workers are facing the loss of
their jobs and more and more people are falling into poverty, with women
frequently the worst affected" said ITUC General Secretary Guy Ryder.
"Now is the time for a complete change in direction, and we will be
putting the case for that change to governments, including the incoming
Obama Administration in the USA", he added.

Along with the immediate steps to stimulate the world economy, the trade
unions are putting forward a comprehensive regulatory package to ensure
global governance of the global economy with a strong role for the ILO
in line with the new ILO Social Justice Declaration. Key elements of
the package include:

* Better accountability of central banks
1 Regulation of hedge funds and private
equity
2 Proper supervision of banks and global
conglomerates
3 Reform and control of executive pay and
profit distribution
4 Taxation of international financial
transactions
5 Reform of the credit rating industry
6 Ending tax havens
7 Protection against predatory lending
8 Active policies for housing and for
community-based financial services.

The Washington Declaration also draws attention to the plight of the
world's poorest countries, where the impacts of global downturn will hit
hardest. It calls on richer countries to ensure that international
targets on development aid and the UN Millennium Development Goals are
met, and urges action to ensure that basic commodities, especially food,
become affordable for the poorest.
The Declaration sets out the global trade union movement's platform for
a new governance structure for the world economy. This must not be
limited only to financial markets and currency flows. The new structure
must overcome the major flaws in the current system, and ensure that
emerging economies and developing countries have their rightful place at
the centre of policy-making.

Decent Work must be a primary objective of the new approach, with job
creation, fundamental workers' rights, social protection and social
dialogue central to reversing the massive inequality which is at the
root of the present crisis. Trade unions have a major contribution to
make in charting the necessary international reform, and the statement
calls on governments to ensure their full involvement in the process.
"Governments have found it easy for the past three decades to withdraw
from their proper role in regulating markets and ensuring that
multinational companies meet global standards on workers' rights.
Getting good government policies back in the driving seat will be much
more difficult, as no government can achieve this alone. Now is the
time for coordinated action to restore proper regulation to put the
markets at the service of the people," said Ryder.

The ITUC represents 168 million workers in 155 countries and territories
and has 311 national affiliates. http://www.ituc-csi.org
http://www.youtube.com/ITUCCSI

For more information, please contact the ITUC Press Department on the
following numbers: +32 2 224 0204 or +32 476 621 018.

Greenspan "in a state of shocked disbelief" about deregulation

2008-10-24T22:14:00.006-05:00

Professor Norman Markowitz trying to explain the need to "regulate" and provide "oversight" for the capitalist economy to students wondering how they are going to pay off their student loans...

This is a very typical middle class/liberal/Democratic Party perspective. Norman Markowitz is a Barack Obama booster who sees the salvation of capitalism in regulation and oversight.

Typical of this middle class/liberal/Democratic Party perspective is the absence of any concern for, or acknowledgment of, the day-to-day problems of working people. Also noticeable is the lack of concrete solutions.

Professor Markowitz has been known to flirt with Marxism from time-to-time but the Professor has obviously failed to grasp the fact that capitalists have made tremendous profits and left the working class with all the problems.

However, given these noted shortcomings of Alan Greenspan's ideas by this wannabe Marxist Professor, Markowitz does bring forward some very significant points regarding the limitations of Alan Greenspan's thinking and ideas which served his corporate clients so well--- until now.

Unfortunately, Professor Markowitz fails to bring forward what kind of thinking and ideas are needed to replace all this "free market" ideology of Alan Greenspan and his little Ayn Rand led "think tank" which met regularly in Rand's home.

Markowitz gloats with Congressman Waxman exposing the failure of Greenspan's ideology; but, the Professor never wonders why Waxman has refused to ask the all important question of Greenspan or any of the other capitalist sooth-Sayers:

Can capitalism escape a major depression?

Of course in answering this question one then has to ask the question:

Is the problem one of a failed ideology or a failure of the capitalist system?

Perhaps Professor Markowitz would like to answer these questions here.

Without answers to these two questions from middle-class/liberal/Democratic Party intellectuals we really can't say that Professor Norman Markowitz and the Obama crowd have any better ideas than Alan Greenspan when it comes to finding solutions to the problems of working people.

No wonder Karl Marx has become a best-selling author in spite of being buried numerous times in university classrooms and in the pages of the mainstream media, only to be resurrected as this capitalist economic crises deepens--- could there really be something to the Marxist idea that the capitalist economy operates in boom-bust cycles and the system is taking one hard belly-flop?

We are living in what is increasingly being referred to as a "Marx moment."

Professor Norman Markowitz might blow the dust off all those copies of Marx' "Capital" stored away in the Rutger's University Library and get his students reading because it doesn't look like this little blip in what George Bush describes as a "robust free market economy... the strongest in the world," is going to pass by the world of Ivory Towers... whether Oxford or Rutgers.

Alan L. Maki

Thursday, October 23, 2008

by Norman Markowitz, Professor, Rutgers University

Alan Greenspan told a House Committee investigating the deluge in finance today of his shock that banks could not regulate themselves. Greenspan then went on to say that he had "found a flaw" in his "free market" world view, adding "I don't know how significant or permanent it is. But I have been very distressed by that fact." When asked by committee chair Henry Waxman if "your ideology was not right, it was not working," Greenspan added Absolutely, precisely....the reason I have been shocked because I have been going for forty years with very considerable evidence that it was working exceptionally well."

Forty years? Exceptionally well? A flaw? Don't know how significant or permanent it is? These are the comments of the man who was Chair of the Federal Reserve, the the second most powerful executive position in the U.S., for eighteen years? And this ahistorical irrational and comical response to a disaster of this dimension is what he has to say?

First, Greenpan's statements make little historical sense because the deregulation that we are talking about didn't develop forty years ago during the Johnson administration but a generation ago in the Reagan administration, and not all at once. Maybe Greenspan forgot that because in the 1960s, he was a follower of Ayn Rand, whose Objectivist cult looked to free market Supermen,a sort of extreme right-wing individualist anarchism as far removed from reality as the extreme left collectivist underground of the Weathermen which Bill Ayers belonged to at the time. Of course, Randians were never connected to acts of violence against the government. Of course, But then again, Weathermen never served in cabinet positions, not to mention chair of the Federal Reserve.

The Savings and Loan collapse of that period which occurred when Paul Volcker, Greenspan's predecessor, was Chair of the Federal Reserve, might have suggested to Alan that there was a "flaw" in this kind of policy, but it apparently didn't. The decline in real wages, huge rise in income inequality, increase in human suffering that these policies visibly produced in the U.S. didn't factor into Greenspan's thinking either, since the great majority of the victims, particularly children, were either marginal or completely outside of a political process where less than half the eligible voters were voting and non voters were drawn overwhelmingly from lower-income groups whose living standards were deteriorating.

As I read Greenspan I see an interesting hybrid of man, someone who was smart on the specifics, know about the ins and outs of finance, but was totally out of it in terms of the larger picture, a "perfect fool" so to speak for those who would rob the system blind because he was completely blind to their abuses until they overwhelmed the economy--a bit like those in the 1920s Republican governments who didn't have to be bribed to hand over to corporations public property because they believed in a kind of divine right of business.

Perhaps if Greenspan had not gone from being a not so successful Jazz saxophonist to being a follower of Ayn Rand, he might have discovered that the "flaw" in his argument was discovered by capitalist economists in the late 19th century, those who didn't need Karl Marx to explain to them that the way real markets worked had little to do with the theory of the a "self regulating" rational "free market" governed by a "law of supply and demand" where rational "economic man" ate fish when the price of meat was to high and then the price of meat would come down, and bankers invested their capital prudently to seek both the highest and the safest investment and those who didn't would run out of money and collapse just as the economic man who continued to eat meat would run out of money and starve. That system, even without bailouts for the banks or food stamps for the economic man, never had any relationship to reality with the rise of mass production industrial capitalism

Alan Greenspan won't lose his home and I am sure can protect his pension. His distress will be very different from the millions who have for years faced the economic consequences of the policies that he championed, the "forgotten millions" of the 1980s and 1900s whose jobs and pensions were casualties of what some called "the Reagan revolution." Now, when those millions are on the brink of multiplying, when a greatly weakened and under supplied safety net is about to face a huge increase in demand for services, Alan Greenspan's economic theories and policies should be returned to the pre Ragtime nineteenth century world where they already considered relics by many.

Greenspan denies blame for crisis, admits 'flaw'

2008-10-23T21:53:00.002-05:00

Oct 23, 9:16 PM (ET)

By MARTIN CRUTSINGER and MARCY GORDON

WASHINGTON (AP) - Badgered by lawmakers, former Federal Reserve Chairman Alan Greenspan denied the nation's economic crisis was his fault on Thursday but conceded the meltdown had revealed a flaw in a lifetime of economic thinking and left him in a "state of shocked disbelief."

Greenspan, who stepped down in 2006, called the banking and housing chaos a "once-in-a-century credit tsunami" that led to a breakdown in how the free market system functions. And he warned that things would get worse before they get better, with rising unemployment and no stabilization in housing prices for "many months."

Gloomy economic reports backed him up. New jobless claims soared to just under 500,000 for last week, and Goldman Sachs, Chrysler and Xerox all said they were cutting thousands more workers. On Wall Street, the Dow Jones industrials bounced erratically all day before finishing up 172 points - after a two-day drop of nearly 750.

The financial crisis even prompted the Republican Greenspan, a staunch believer in free markets, to propose that government consider tougher regulations, including requiring financial firms that package mortgages into securities to keep a portion as a check on quality.

He said other regulatory changes should be considered, too, in such areas as fraud.

Also looking for solutions, another banking regulator told Congress the government was working on a loan-guarantee plan that could help many homeowners escape foreclosure as part of the $700 billion bailout legislation. That plan is being discussed by the Treasury Department and the Federal Deposit Insurance Corp., said FDIC Chairman Sheila Bair, who is pushing the idea.

Greenspan's interrogation by the House Oversight Committee was a far cry from his 18 1/2 years as Fed chairman, when he presided over the longest economic boom in the country's history. He was viewed as a free-market icon on Wall Street and held in respect bordering on awe by most members of Congress.

Not now. At an often contentious four-hour hearing, Greenspan, former Treasury Secretary John Snow and Securities and Exchange Commission Chairman Christopher Cox were repeatedly accused by Democrats on the committee of pursuing an anti-regulation agenda that set the stage for the biggest financial crisis in 70 years.

"The list of regulatory mistakes and misjudgments is long," panel chairman Henry Waxman declared.

Greenspan, 82, acknowledged under questioning that he had made a "mistake" in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that "a flaw in the model ... that defines how the world works."

He acknowledged that he had also been wrong in rejecting fears that the five-year housing boom was turning into an unsustainable speculative bubble that could harm the economy when it burst. Greenspan maintained during that period that home prices were unlikely to post a significant decline nationally because housing was a local market.

He said Thursday that he held to that belief because until the current housing slump there had never been such a significant decline in prices nationwide. He said the current financial crisis had "turned out to be much broader than anything that I could have imagined."

Greenspan's much-anticipated appearance before the House panel came as the Senate Banking Committee held its own hearing on what the government is doing now to get out of the mess.

Assistant Treasury Secretary Neel Kashkari, who is overseeing the $700 billion financial rescue effort that passed Congress on Oct. 3, said the administration was not only working to get federal purchases of bank stock started quickly but also the program to mop up troubled mortgage-related assets. He also said the government was working to make sure that directives in the legislation to help struggling homeowners avoid foreclosure were being addressed.

Kashkari said the plan could include setting standards that banks should follow for reworking mortgages to make them more affordable. He said the administration was considering a recommendation to provide government loan guarantees to cover the reworked mortgages to make the program more attractive to banks.

"We are passionate about doing everything we can to avoid preventable foreclosures," Kashkari told the committee.

The FDIC's Bair told the same Senate panel that the government needs to do more to help tens of thousands of people avoid foreclosure.

She said the FDIC was working "closely and creatively" with the Treasury Department to come up with a plan.

Greenspan was asked to defend a variety of actions he took as Federal Reserve chairman - resisting recommendations to use the Fed's powers to crack down on subprime mortgages, for one. And opposing efforts to impose regulations on derivatives, the complex financial instruments that include credit default swaps, which have also figured prominently in the current crisis.

He said that outside of credit default swaps, the bulk of financial derivatives had not caused major problems. He said the boom in subprime lending occurred because of the huge demand for investment opportunities in a global economy, and he blamed the crash on a failure by investors to properly assess the risks from such mortgages, which went to borrowers with weak credit.

As for firms that package mortgages into securities, he said, "As much as I would prefer it otherwise, in this financial environment I see no choice but to require that all securitizers retain a meaningful part of the securities they issue."

On the billions of dollars of losses suffered by financial institutions because of their investments in subprime mortgages, Greenspan said he had been shocked by the failure of banking officials to protect their shareholders from their bad loan decisions.

"A critical pillar to market competition and free markets did break down," Greenspan said. "I still do not fully understand why it happened."

SEC Chairman Cox told the House panel that "somewhere in this terrible mess, laws were broken." And Snow said that lawmakers should have responded more quickly to his pleas for stronger regulation for mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), which were taken over by the government last month.

In the meantime, Kashkari, the Treasury official overseeing the bailout program, said there has been much progress, resulting in "numerous signs of improvement in our markets and in the confidence in our financial institutions." Still, he cautioned, "the markets remain fragile."

The Depression: A Long-Term View

2008-10-15T08:27:00.001-05:00

Note: I have placed several things in bold.

Please do not reply to the listserv. To correspond with the author, write <immanuel.wallerstein@yale.edu>. To correspond with us about your e-mail address on the listserv, write <dunlop@binghamton.edu>. Thank you.

Commentary No. 243, Oct. 15, 2008

"The Depression: A Long-Term View"

By: Immanuel Wallerstein

The depression has started. Journalists are still coyly enquiring of economists whether or not we may be entering a mere recession. Don't believe it for a minute. We are already at the beginning of a full-blown worldwide depression with extensive unemployment almost everywhere. It may take the form of a classic nominal deflation, with all its negative consequences for ordinary people. Or it might take the form, a bit less likely, of a runaway inflation, which is simply another way in which values deflate, and which is even worse for ordinary people.

Of course everyone is asking what has triggered this depression. Is it the derivatives, which Warren Buffett called "financial weapons of mass destruction"? Or is it the subprime mortgages? Or is it oil speculators? This is a blame game, and of no real importance. This is to concentrate on the dust, as Fernand Braudel called it, of short-term events. If we want to understand what is going on, we need to look at two other temporalities, which are far more revealing. One is that of medium-term cyclical swings. And one is that of the long-term structural trends.

The capitalist world-economy has had, for several hundred years at least, two major forms of cyclical swings. One is the so-called Kondratieff cycles that historically were 50-60 years in length. And the other is the hegemonic cycles which are much longer.

In terms of the hegemonic cycles, the United States was a rising contender for hegemony as of 1873, achieved full hegemonic dominance in 1945, and has been slowly declining since the 1970s. George W. Bush's follies have transformed a slow decline into a precipitate one. And as of now, we are past any semblance of U.S. hegemony. We have entered, as normally happens, a multipolar world. The United States remains a strong power, perhaps still the strongest, but it will continue to decline relative to other powers in the decades to come. There is not much that anyone can do to change this.

The Kondratieff cycles have a different timing. The world came out of the last Kondratieff B-phase in 1945, and then had the strongest A-phase upturn in the history of the modern world-system. It reached its height circa 1967-73, and started on its downturn. This B-phase has gone on much longer than previous B-phases and we are still in it.

The characteristics of a Kondratieff B-phase are well-known and match what the world-economy has been experiencing since the 1970s. Profit rates from productive activities go down, especially in those types of production that have been most profitable. Consequently, capitalists who wish to make really high levels of profit turn to the financial arena, engaging in what is basically speculation. Productive activities, in order not to become too unprofitable, tend to move from core zones to other parts of the world-system, trading lower transactions costs for lower personnel costs. This is why jobs have been disappearing from Detroit, Essen, and Nagoya and factories have been expanding in China, India, and Brazil.

As for the speculative bubbles, some people always make a lot of money in them. But speculative bubbles always burst, sooner or later. If one asks why this Kondratieff B-phase has lasted so long, it is because the powers that be - the U.S. Treasury and Federal Reserve Bank, the International Monetary Fund, and their collaborators in western Europe and Japan - have intervened in the market regularly and importantly - 1987 (stock market plunge), 1989 (savings-and-loan collapse), 1997 (East Asian financial fall), 1998 (Long Term Capital Management mismanagement), 2001-2002 (Enron) - to shore up the world-economy. They learned the lessons of previous Kondratieff B-phases, and the powers that be thought they could beat the system. But there are intrinsic limits to doing this. And we have now reached them, as Henry Paulson and Ben Bernanke are learning to their chagrin and probably amazement. This time, it will not be so easy, probably impossible, to avert the worst.

In the past, once a depression wreaked its havoc, the world-economy picked up again, on the basis of innovations that could be quasi-monopolized for a while. So, when people say that the stock market will rise again, this is what they are thinking will happen, this time as in the past, after all the damage has been done to the world's populations. And maybe it will, in a few years or so.

There is however something new that may interfere with this nice cyclical pattern that has sustained the capitalist system for some 500 years. The structural trends may interfere with the cyclical patterns. The basic structural features of capitalism as a world-system operate by certain rules that can be drawn on a chart as a moving upward equilibrium. The problem, as with all structural equilibria of all systems, is that over time the curves tend to move far from equilibrium and it becomes impossible to bring them back to equilibrium.

What has made the system move so far from equilibrium? In very brief, it is because over 500 years the three basic costs of capitalist production - personnel, inputs, and taxation - have steadily risen as a percentage of possible sales price, such that today they make it impossible to obtain the large profits from quasi-monopolized production that have always been the basis of significant capital accumulation. It is not because capitalism is failing at what it does best. It is precisely because it has been doing it so well that it has finally undermined the basis of future accumulation.

What happens when we reach such a point is that the system bifurcates (in the language of complexity studies). The immediate consequence is high chaotic turbulence, which our world-system is experiencing at the moment and will continue to experience for perhaps another 20-50 years. As everyone pushes in whatever direction they think immediately best for each of them, a new order will emerge out of the chaos along one of two alternate and very different paths.

We can assert with confidence that the present system cannot survive. What we cannot predict is which new order will be chosen to replace it, because it will be the result of an infinity of individual pressures. But sooner or later, a new system will be installed. This will not be a capitalist system but it may be far worse (even more polarizing and hierarchical) or much better (relatively democratic and relatively egalitarian) than such a system. The choice of a new system is the major worldwide political struggle of our times.

As for our immediate short-run ad interim prospects, it is clear what is happening everywhere. We have been moving into a protectionist world (forget about so-called globalization). We have been moving into a much larger direct role of government in production. Even the United States and Great Britain are partially nationalizing the banks and the dying big industries. We are moving into populist government-led redistribution, which can take left-of-center social-democratic forms or far right authoritarian forms. And we are moving into acute social conflict within states, as everyone competes over the smaller pie. In the short-run, it is not, by and large, a pretty picture.

by Immanuel Wallerstein

[Copyright by Immanuel Wallerstein, distributed by Agence Global. For rights and permissions, including translations and posting to non-commercial sites, and contact: rights@agenceglobal.com, 1.336.686.9002 or 1.336.286.6606. Permission is granted to download, forward electronically, or e-mail to others, provided the essay remains intact and the copyright note is displayed. To contact author, write: immanuel.wallerstein@yale.edu.

These commentaries, published twice monthly, are intended to be reflections on the contemporary world scene, as seen from the perspective not of the immediate headlines but of the long term.]

Becky Dunlop, Secretary
Fernand Braudel Center
http://fbc.binghamton.edu/

Anti-democratic nature of US capitalism is being exposed

2008-10-13T07:14:00.001-05:00

By: Noam Chomsky

Friday, October 10, 2008

Bretton Woods was the system of global financial management set up at the end of the second World War to ensure the interests of capital did not smother wider social concerns in post-war democracies. It was hated by the US neoliberals - the very people who created the banking crisis writes Noam Chomsky

THE SIMULTANEOUS unfolding of the US presidential campaign and unravelling of the financial markets presents one of those occasions where the political and economic systems starkly reveal their nature.

Passion about the campaign may not be universally shared but almost everybody can feel the anxiety from the foreclosure of a million homes, and concerns about jobs, savings and healthcare at risk.

The initial Bush proposals to deal with the crisis so reeked of totalitarianism that they were quickly modified. Under intense lobbyist pressure, they were reshaped as "a clear win for the largest institutions in the system . . . a way of dumping assets without having to fail or close", as described by James Rickards, who negotiated the federal bailout for the hedge fund Long Term Capital Management in 1998, reminding us that we are treading familiar turf. The immediate origins of the current meltdown lie in the collapse of the housing bubble supervised by Federal Reserve chairman Alan Greenspan, which sustained the struggling economy through the Bush years by debt-based consumer spending along with borrowing from abroad. But the roots are deeper. In part they lie in the triumph of financial liberalisation in the past 30 years - that is, freeing the markets as much as possible from government regulation.

These steps predictably increased the frequency and depth of severe reversals, which now threaten to bring about the worst crisis since the Great Depression.

Also predictably, the narrow sectors that reaped enormous profits from liberalisation are calling for massive state intervention to rescue collapsing financial institutions.

Such interventionism is a regular feature of state capitalism, though the scale today is unusual. A study by international economists Winfried Ruigrok and Rob van Tulder 15 years ago found that at least 20 companies in the Fortune 100 would not have survived if they had not been saved by their respective governments, and that many of the rest gained substantially by demanding that governments "socialise their losses," as in today's taxpayer-financed bailout. Such government intervention "has been the rule rather than the exception over the past two centuries", they conclude.

In a functioning democratic society, a political campaign would address such fundamental issues, looking into root causes and cures, and proposing the means by which people suffering the consequences can take effective control.

The financial market "underprices risk" and is "systematically inefficient", as economists John Eatwell and Lance Taylor wrote a decade ago, warning of the extreme dangers of financial liberalisation and reviewing the substantial costs already incurred - and proposing solutions, which have been ignored. One factor is failure to calculate the costs to those who do not participate in transactions. These "externalities" can be huge. Ignoring systemic risk leads to more risk-taking than would take place in an efficient economy, even by the narrowest measures.

The task of financial institutions is to take risks and, if well-managed, to ensure that potential losses to themselves will be covered. The emphasis is on "to themselves". Under state capitalist rules, it is not their business to consider the cost to others - the "externalities" of decent survival - if their practices lead to financial crisis, as they regularly do.

Financial liberalisation has effects well beyond the economy. It has long been understood that it is a powerful weapon against democracy. Free capital movement creates what some have called a "virtual parliament" of investors and lenders, who closely monitor government programmes and "vote" against them if they are considered irrational: for the benefit of people, rather than concentrated private power.

Investors and lenders can "vote" by capital flight, attacks on currencies and other devices offered by financial liberalisation. That is one reason why the Bretton Woods system established by the United States and Britain after the second World War instituted capital controls and regulated currencies.*

The Great Depression and the war had aroused powerful radical democratic currents, ranging from the anti-fascist resistance to working class organisation. These pressures made it necessary to permit social democratic policies. The Bretton Woods system was designed in part to create a space for government action responding to public will - for some measure of democracy.

John Maynard Keynes, the British negotiator, considered the most important achievement of Bretton Woods to be the establishment of the right of governments to restrict capital movement.

In dramatic contrast, in the neoliberal phase after the breakdown of the Bretton Woods system in the 1970s, the US treasury now regards free capital mobility as a "fundamental right", unlike such alleged "rights" as those guaranteed by the Universal Declaration of Human Rights: health, education, decent employment, security and other rights that the Reagan and Bush administrations have dismissed as "letters to Santa Claus", "preposterous", mere "myths".

In earlier years, the public had not been much of a problem. The reasons are reviewed by Barry Eichengreen in his standard scholarly history of the international monetary system. He explains that in the 19th century, governments had not yet been "politicised by universal male suffrage and the rise of trade unionism and parliamentary labour parties". Therefore, the severe costs imposed by the virtual parliament could be transferred to the general population.

But with the radicalisation of the general public during the Great Depression and the anti-fascist war, that luxury was no longer available to private power and wealth. Hence in the Bretton Woods system, "limits on capital mobility substituted for limits on democracy as a source of insulation from market pressures".

The obvious corollary is that after the dismantling of the postwar system, democracy is restricted. It has therefore become necessary to control and marginalise the public in some fashion, processes particularly evident in the more business-run societies like the United States. The management of electoral extravaganzas by the public relations industry is one illustration.

"Politics is the shadow cast on society by big business," concluded America's leading 20th century social philosopher John Dewey, and will remain so as long as power resides in "business for private profit through private control of banking, land, industry, reinforced by command of the press, press agents and other means of publicity and propaganda".

The United States effectively has a one-party system, the business party, with two factions, Republicans and Democrats. There are differences between them. In his study Unequal Democracy: The Political Economy of the New Gilded Age, Larry Bartels shows that during the past six decades "real incomes of middle-class families have grown twice as fast under Democrats as they have under Republicans, while the real incomes of working-poor families have grown six times as fast under Democrats as they have under Republicans".

Differences can be detected in the current election as well. Voters should consider them, but without illusions about the political parties, and with the recognition that consistently over the centuries, progressive legislation and social welfare have been won by popular struggles, not gifts from above.

Those struggles follow a cycle of success and setback. They must be waged every day, not just once every four years, always with the goal of creating a genuinely responsive democratic society, from the voting booth to the workplace.

* The Bretton Woods system of global financial management was created by 730 delegates from all 44 Allied second World War nations who attended a UN-hosted Monetary and Financial Conference at the Mount Washington Hotel in Bretton Woods in New Hampshire in 1944.

Bretton Woods, which collapsed in 1971, was the system of rules, institutions, and procedures that regulated the international monetary system, under which were set up the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF), which came into effect in 1945.

The chief feature of Bretton Woods was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value.

The system collapsed when the US suspended convertibility from dollars to gold. This created the unique situation whereby the US dollar became the "reserve currency" for the other countries within Bretton Woods.

Noam Chomsky is professor emeritus of linguistics at the Massachusetts Institute of Technology. This article appeared first in the New York Times

From: The Irish Times

A Legislative Agenda for the First 100 Days

2008-10-12T14:02:00.002-05:00

Note: Bill Fletcher, Jr. is a co-author of the book: Solidarity Divided, the crisis in organized labor and a new path toward social justice. Fletcher is also the founder of "Progressives for Obama."

Like all social democrats, Fletcher has a lot of ideas but no way to put those ideas into practice.

Over three-hundred authors, professors, entertainers and labor bureaucrats comprise "Progressives for Obama" but none are engaged in grassroots/rank-and-file campaigns which would exert the kind of pressure required to coerce an Obama Administration down this road.

This is classic social democracy... all talk, no action.

Before reading Fletcher's fairy-tale, perhaps read today's Associated Press reports first:

Link: http://apnews.myway.com//article/20081012/D93P0I680.html

Efforts on global warming chilled by economic woes

Oct 12, 10:22 AM (ET)

By DINA CAPPIELLO

WASHINGTON (AP) - The economic free fall gripping the nation may bring down one of the main environmental objectives: capping the greenhouse gases that are blamed for global warming.

Democratic leaders in the House and the Senate, and both presidential candidates, continue to rank tackling global warming as a chief goal next year. But the focus on stabilizing the economy probably will make it more difficult to pass a law to reduce carbon dioxide and other greenhouse gases. At the very least, it will push back when the reductions would have to start.

As one Republican senator put it, the green bubble has burst.

"Clearly it is somewhere down the totem pole given the economic realities we are facing," said Tom Williams, a spokesman for Duke Energy Corp., an electricity producer that has supported federal mandates on greenhouse gases. Duke is a member of the U.S. Climate Action Partnership, an association of businesses and nonprofit groups that has lobbied Congress to act.

Just months ago, chances for legislation passing in the next Congress and becoming law looked promising. The presidential candidates support mandatory cuts and a Democratic majority is ready to act on the problem after years of the Bush administration's resisting federal controls.

But the most popular remedy for slowing global warming, a mechanism know as cap-and-trade, could put further stress on a teetering economy.

Under such a system, the government would establish a market for carbon dioxide by giving or selling credits to companies with operations that emit greenhouse gases. The companies can then choose whether to invest in technologies to reduce emissions to meet targets or instead buy credits from other companies who have already met them.

In an interview with The Associated Press, Rep. Rick Boucher, D-Va., said that in light of the economic downturn, a bill that would give polluters permits free of charge would be preferable.

"The first way we can control program costs is by not charging industrial emitters," said Boucher, who released a first draft of a bill this past week with the chairman of the House Energy and Commerce Committee, Rep. John Dingell, D-Mich. Giving away right-to-pollute permits was one of the options.

Other Democrats, however, see a cap-and-trade bill - and the government revenues it would generate from selling permits - as an engine for economic growth. Democratic presidential nominee Barack Obama supports auctioning off all permits, using the money to help fund alternative energy.

"If you see this as a job creation opportunity for the U.S. to develop the products that are then sold around the world, then you should be optimistic about what the impact of passage would mean for the American economy," said Rep. Edward Markey, D-Mass.

Conservative Republicans who were never fans of a law to curb greenhouse gases have used the economic downturn as a rallying cry.

Oklahoma Sen. James Inhofe, the senior Republican on the Senate Environment and Public Works Committee, in a blog entry this month criticized 152 House members for releasing a set of principles to tackle global warming in the midst of the economic turmoil.

"The current economic crisis only reinforces the public's wariness about any climate bill that attempts to increase the costs of energy and jeopardizes jobs," Inhofe said.

Rep. Joe Barton, R-Texas, took the argument a step further when he said the Boucher-Dingell bill could lead the country "off the economic cliff."

But even supporters of federal regulation of greenhouse gases acknowledge that something has to give given the state of the economy.

Sen. John Warner, R-Va., a lead sponsor of a Senate bill to curb greenhouse gases that failed this year, acknowledged that the economy could delay when reductions in carbon dioxide would start.

Warner told the AP that any bill should allow the president to decide.

"We must continue to think and devise a piece of legislation that will enable the president of the United States to control timing ... dependent on the president's analysis for the ability of the economy to assume the financial burdens," he said.

The U.S. is not alone. As the economic crisis has spread to markets across the globe, work to curb greenhouse gases elsewhere has stalled.

Earlier this past week, Rajendra Pachauri, head of the U.N. climate panel, said discussions about global warming solutions were "on the back burner." Pachauri shared the 2007 Nobel Peace Prize with former Vice President Al Gore for their work on climate change.

"I'm absolutely sure that climate change will be the last thing people will think about at this point in time," he said. "Sooner or later, they will come back to it."

The upside is that in hard economic times, and with high energy prices, the amount of pollution in the air tends to decline.

That will slow global warming somewhat, but there are already enough heat-trapping gases in the atmosphere to cause the temperature to rise.

"I really wish that the science of global warming would look at the newspaper, and say we have an economic crisis so the Earth will stop warming," said Dave Hamilton, director of the Sierra Club's global warming and energy program. "But that is not going to happen."

Alan L. Maki

By Bill Fletcher, Jr.

The following piece is from the fall 2008 issue of New Labor Forum.

Preface/The Setting

Two days after the November 2008 elections, Democrats
and their allies are still celebrating the decisive
defeat of Republican John McCain. With his defeat comes
the chance to render unto history the remnants of the
Bush/Cheney regime that so ruined the lives of the
bottom 80 percent of the U.S. population, and turned
most of the world against the U.S. Eight years of
Bush/Cheney have brought incompetence, jingoism, and
neoliberalism. The wars in Iraq and Afghanistan,
disasters such as Hurricane Katrina, and the deepening
economic crisis have served to discredit much of the
conservative agenda, even going so far as to generate
despair among the right-wing evangelical base.

Let's imagine that, after several months of drafting,
the final touches are being placed on what has come to
be known as The First 100 Days: A Working People's
Agenda for the First 100 Days of the Incoming Democratic
Administration. This project, initiated by members of
the AFL-CIO, Change To Win, as well as several
independent unions and other progressive working-class
organizations, has identified several key areas where
the new Democratic administration must take bold steps
within its first 100 days. Let's also imagine that the
drafting committee collected hundreds of ideas and
developed an extensive list of recommendations for an
even more comprehensive agenda; but the committee's
delicate task was to focus first and foremost on the
emergency steps required to rescue the country from the
potentially deep, and already devastating recession, and
two disastrous wars.

Within a week, the document will be presented to the
President-elect and his transition team. The atmosphere
in this final meeting is one of both excitement and
anxiety as everyone realizes that just as this document
is being drafted, several other documents are being
drafted by various forces representing constituencies
whose interests are antithetical to those of working
people. The responsiveness of the President-elect to
The First 100 Days will depend not only on the logic and
persuasiveness of the document itself, but also on the
capacity of the constituencies uniting behind this
document to back up each word with people power.

The Crisis

The U.S. has plunged into a significant economic crisis
which, at a minimum, is heading toward a conceivably
severe recession. Yet the crisis is not simply about
the immediate economic situation. A series of factors
have contributed to an economic unraveling that is
fueled by political uncertainty:

The living standard has declined for the average U.S.
worker since the mid-1970s. While productivity has
increased, workers' pay has decreased. Structural
unemployment has worsenend as sectors of the economy
have begun to reorganize, move, or disappear altogether.
In addition, the adoption of neoliberalism as the given
economic framework in the capitalist world generally and
the U.S. in particular, has meant an assault on the
public sector and public service, a factor that became
tragically apparent when Hurricane Katrina hit.
Meanwhile, the domino effects of a credit crisis (that
began as part of the speculative boom in housing prices
and values), continue to destroy the lives and savings
of millions of working people.

Neoliberal globalization, in both its military and
non-military forms, has brought unprecedented levels of
migration. In the U.S., as part of this global
migration, we have seen a steady increase in immigration
from the 1970s (particularly from Indochina), through
the 1980s (largely as a result of the Central American
wars), into the 1990s and today (stemming from the
collapse of the Soviet bloc, along with the passage of
the North American Free Trade Agreement (NAFTA) and the
migration of Mexicans into the U.S.).

Efforts at some form of national health care have been
undermined since World War II, largely by the political
Right. Renewed attention to the more than 44,000,000
people lacking any health insurance, along with the
legions of people who have inadequate healthcare
coverage, surfaced in the early 2000s.

An environmental crisis has enveloped planet Earth
sooner than many people, including many scientists,
expected.

Workers remain under attack, and not just as a result
of a problematic economy. The ability of workers to
join or form unions has worsened with each year.

The global community is becoming more unequal. In
terms of income and wealth, inequality has consistently
grown under the neoliberal order. In the U.S., the top
one percent controls more than 35 percent of the wealth.
At the global level, the richest 225 individuals have
more wealth than the bottom 47 percent of the world's
population. This dramatic wealth disparity, not seen in
the U.S. since the 1920s, is a major source of social
instability and resentment, undermining the entire
notion of democracy.

Inequality in the U.S. also has a racial and gendered
face to it, due to a regression from the victories of
the civil rights and women's movements, along with the
growing tendency to blame the setbacks of white men on
those who have been subjected to historic
discrimination.

War (in Iraq and Afghanistan) and the national
security/neoliberal authoritarian state have changed the
terms of domestic and international politics. In
addition to destroying the countries involved, these
wars are a tremendous drain on the U.S. budget (with a
cost of approximately $845 billion by the end of
2008).[1] Insecurity in the U.S. has also increased in
response to the rising global resentment toward.U.S.
policies abroad. The growth of the neoliberal
authoritarian state has brought a decrease in actual
democracy and civil liberties.

While the situation facing the U.S. and the rest of the
world could be described in greater detail, the
preceding depicts the key elements of the current
emergency. The Bush administration and its allies (as
well as the McCain campaign) have lived in denial,
perpetuated lies (such as those in connection with the
illegal U.S. invasion of Iraq, as well as the hostility
toward Iran), and promoted the interests of the rich.

The time has now come to fight for the bottom 80
percent.

The Federal Emergency Response

The new administration's first initiatives must be both
domestic and global in scope. There is little time to
engage in the politics of symbolism, playing to a
particular constituency, rallying troops to the 'flag,'
without speaking to the deep-seated nature of the
challenges that we face.

At the same time, it must be understood that the efforts
within the first 100 days cannot represent the totality
of the new administration's program. A mandate to bring
about more sweeping change must be organized and
mobilized over the coming months and years. This will
require a combination of movement-building and building
a broader social consensus in favor of significant
structural change.

With that in mind, let us itemize the agenda:

1. Immediate withdrawal of U.S. troops, bases, and
mercenaries from Iraq and Afghanistan.

This should involve the following:

Asking the United Nations (UN) and Arab League for
assistance in creating a multi-national, transitional
team to bring the various forces on the ground together,
along with regional powers, to negotiate a long-term
resolution of the conflict and the stabilization of
Iraq.

The elimination of any obligation on the part of the
Iraqi government to fulfill agreements imposed upon Iraq
during the reign of Paul Bremer.

Bilateral discussions with Iran regarding future
policies and relations with the U.S.

Multi-party discussions between the U.S., Pakistan, and
the various political forces in Afghanistan regarding a
permanent political settlement.

Reparations from the U.S. (and any other country or
group that interfered in the internal affairs of Iraq
and Afghanistan) placed into a reconstruction fund
established by the UN.

A renouncement of any U.S. intentions to have permanent
bases in Iraq or Afghanistan; a withdrawal of U.S. bases
from Saudi Arabia; a renouncement of U.S. intentions to
secure control over oil and/or natural gas reserves in
the region.

Immediate talks toward establishing a U.S./European
Union/Russian/Arab League/Israeli/Palestinian joint
committee on the resolution of the Israeli/Palestinian
conflict. Deployment of a special envoy to lay the
foundations for this project.

2. Economic Triage.

The ongoing economic meltdown, particularly the collapse
of the housing bubble and the lending/credit/foreclosure
calamity, calls for both immediate relief and long-term
management. This will require the sort of economic aid
that has been diverted to cover the Iraq/Afghan war
costs, and attention must ultimately be paid to
reversing the more than thirty years of attacks on
working people and their declining living standards. In
the short-term, however, several steps need to be taken,
including, but not limited to:

A moratorium on foreclosures and evictions. Immediate
steps must be taken to halt foreclosures and evictions,
while providing immediate assistance to those affected
by these actions to renegotiate the terms of their debt.
This may mean federal assistance to pull individuals out
of usurious loans, allowing them to more comfortably
rebuild their financial standing; this would be a step
just short of declaring personal bankruptcy. The
Republicans' efforts to restrict individuals' ability to
declare personal bankruptcy must be reversed. The new
administration must also re-establish the Home Owners'
Loan Corporation (HOLC). This would be a 21st century
version of the New Deal measure that statutorily
arranged a temporary corporation to stabilize uncertain
mortgage markets.[2] Upon any reinstitution of it
today, the HOLC would acquire defaulted loans from
mortgage lenders and offer sustainable refinancing
options for homeowners to prevent future
foreclosures.[3]

An extension of both unemployment and food stamp
benefits. The Bush administration has adamantly held the
line against such expansion. But greater numbers of the
working poor have come to depend on food stamps in order
to survive, and the current apportionment insufficiently
reflects today's cost of living. The U.S. Department of
Agriculture (USDA) estimates that the current food stamp
benefit averages about $1 per meal per individual.[4]
Benefit amounts are based on the USDA's "Thrifty Food
Plan"— a theoretical diet created in the 1930s to
provide a minimally adequate diet at a low cost —which
hasn't been updated since 2003.[5] Additionally,
according to the Bread for the World group, most food
stamp households spend 80 percent of their benefits by
the 14th of each month.[6] Thus, the food stamp system
must be retooled to meet the full nutritional needs of
its recepients.

Immediate public service job creation. The federal
government needs to infuse the economy with funds to
prevent further collapse. As part of a longer-term
initiative, the federal government must begin emergency
public sector reconstruction work, focusing on bridges,
tunnels, and levees. We need a program along the lines
of that proposed by Barack Obama, who suggested the
dedication of $210 billion to create construction and
environmental jobs: $60 billion would be directed to a
National Infrastructure Reinvestment Bank to rebuild
public projects such as highways, bridges, airports; and
$150 billion would be earmarked for the creation of five
million green-collar jobs to develop more
environmentally friendly energy sources.[7] This would
be funded through cuts in military spending.[8]

Federal intervention to halt the collapse of student
loan programs. A hidden crisis, that is part of the
larger credit crunch, has been the declining number of
banks that offer affordable student loans. This has
resulted in a higher demand for available loans and the
elimination of higher education opportunities for many
students. A federal intervention, therefore, is needed
to make sufficient funds available. This could take the
form of legislation proposed by Senator Kennedy in April
2008 to increase federal student aid. This proposal
would, among other things, reduce students' need to take
out costly private loans by increasing their access to
guaranteed low-interest federal loans.[9] The bill would
increase federal loan limits by $1000 a year for
dependent undergraduates, and by $2000 a year for
independent undergraduates and students whose parents'
credit score disqualifies them for federal parent
loans.[10] The new administration should also take
steps aimed to restrain predatory lending.

Elimination of Bush tax cuts. Bush's tax cuts, along
with the Iraq and Afghan wars, have been bleeding the
economy. Steps must be taken to reclaim the money that
has been disproportionately funneled to corporations and
the wealthy. Though longer-term tax reform will be
necessary, the first step is to stop the hemorrhaging.

Federal aid to the states. Despite growing constraints
on state budgets (particularly within the context of the
rising unemployment and foreclosure rates), the federal
government has increasingly meted out severe budget
cuts. Federal assistance should provide the states with
more of a safety net as they struggle to balance their
budgets.

3. A Marshall Plan for U.S. cities and depressed
regions.

The Hurricane Katrina disaster and the 2007 Minneapolis
bridge collapse exposed significant problems with our
political leadership, economic choices, and the basic
U.S. infrastructure (not to mention race, gender, and
class politics when it came to Katrina). Another
assortment of projects must be undertaken to make the
infrastructure address our environmental crisis. With
all of this in mind, the following initiatives should be
announced:

A national commitment to launch a domestic version of
the Marshall Plan. This program would involve a renewal
of the U.S. physical and social infrastructures. With
regard to the physical infrastructure, in 2005, the
American Society of Civil Engineers estimated that
rehabilitation should cost $1.6 trillion over five
years. The National Urban League, which has been a
strong proponent of a social Marshall Plan, has
identified ten areas that are integral to revamping the
socio-economic infrastructure.[11] We must combine the
elements of these two proposals in order to lift the
U.S. from the abyss. A successful modern-day Marshall
Plan would also build upon the work of groups such as
the National Jobs for All Coalition, which has proposed
a 21st-Century Public Investment Act, featuring: a
Public Works Authority that, while working with state
and local authorities to create permanent jobs, would
provide long-term funding for high priority public works
and infrastructure projects, ensuring that these
projects employ the unemployed and underemployed; a
Public Investment Fund that would fund a Public Service
Employment Program designed to close job gaps, while
continuing to encourage job creation; and a National
Employment Accounting Office that would evaluate
progress and assess ongoing needs for job creation and
public investment.[12]

The immediate establishment of a regional public agency
to oversee the reconstruction of the post-Katrina Gulf
Coast and the repatriation of its native population.

The establishment of a 21st century version of the Works
Progress Administration to oversee the
infrastructure-related work. Priority in employment
would go to the chronically and structurally unemployed.
Wages would be paid according to the Davis-Bacon
Act.[13] Building trades contractors and unions would
agree to 50 percent residential set-asides for entry
into apprenticeship programs and journeyman work in
connection with any of these efforts. At least 25
percent of such jobs should be staffed by people of
color, with at least another 25 percent staffed by
women.

Regional planning authorities should be established in
depressed regions bringing together the business
community, worker organizations including, but not
limited to, unions, academia, and governmental
representatives. Such authorities would explore
economic development strategies such as industrial
cooperatives, public/private partnerships, and
governmental incentives to encourage the creation of new
industries or the introduction of industries which had
been discouraged from emerging.

Emergency measures to provide more low-income housing.
This would include an Executive commitment to push
through: the National Affordable Housing Trust Fund
Act,[14] which would establish a federal housing trust
fund to ensure housing for the lowest income earners who
have the most serious housing problems; and the Housing
Assistance Tax Act which would, among other provisions,
provide tax credits to first-time homebuyers, while
improving access to low-income housing, allowing
families to deduct property taxes.[15]

4. Immediate signing of the Kyoto Protocol.

The U.S. is way behind the rest of the world on the
environment, and the Bush administration has flouted the
gravity of the matter. Our over-dependence on fossil
fuels has straightjacketed the global economy (making
the greater international community highly dependent on
oil), which has contributed to the rising global
temperature. The environmental crisis, however, is not
limited to global warming. The epidemic of bee colony
die-offs and the endangerment of various species paints
a disturbing picture of an unraveling ecology. Most
urgently, the new administration must:

Sign the Kyoto Protocol, while making a commitment to
launch international negotiations toward a new and
stronger pact.

Push through the Renewable Energy and Job Creation
Act[16] to promote renewable energy, green-collar jobs,
and tax benefits to middle-class families.

Establish a "Green Commission" that brings together
labor, business, environmental groups, community-based
organizations, and government representatives to
recommend technological, economic, and developmental
changes geared toward building a sustainable economy.

5. Pass and sign the Employee Free Choice Act (EFCA).

As a step toward jettisoning the one-sided class war
against workers, the new administration must:

Reaffirm the National Labor Relations Act (NLRA)'s
mandate that it is within U.S. public policy to promote
collective bargaining.

Sign the EFCA.

Draft legislation that proscribes any employer
involvement in their workers' choice of bargaining
representatives.

6. A universal health care initiative.

Universal, single-payer health care cannot take flight
within the first 100 days. The groundwork, however,
must be laid immediately. The new administration must:

Expand the State Children's Health Insurance Program
(SCHIP), as proposed by the Democratic Congressional
leadership in 2007.[17]

Establish a commission to draft legislation for
universal, single-payer coverage. Plan for a one year
drafting period, followed by national town meetings and
hearings. Aim for passage before the midterm elections.

7. Immigration reform.

Immediate steps must be taken to lay out an immigration
reform program that is coupled with changes in U.S.
foreign policy (therefore, points # 7 and # 8 are
integrally linked). This program must include:

Amnesty (in the form of permanent residency status) for
undocumented workers who have no criminal record.

Priority given to family reunification interests.

A revised application process that gives priority to
refugees from areas of political conflict where the U.S.
has been historically involved.

Elimination of guest worker programs. Investigation of
already existing guest worker programs' impact on both
domestic and foreign born workers.

Unionization rights for all workers within U.S. borders,
irrespective of their immigration status.

8. Forge global partnerships.

Changing U.S. foreign policy is an uphill, long-term
process. Nevertheless, certain immediate measures are
imperative. In addition to withdrawing from Iraq and
Afghanistan, the new administration must:

Create a 21st Century Partnership Program to develop
foreign aid and trade programs designed to promote more
self-reliance among nation-states, while responding to
the civilian needs in those areas.

Develop targeted programs of repair in areas where U.S.
involvement has distorted regional development (e.g.,
Southeast Asia, Angola, and Central America).

Promote trade relations that are based on fairness
rather than on corporate interests. Explore a
renegotiation of NAFTA.

Implement the Nuclear Non-Proliferation Treaty with
steps toward de-nuclearization.

Employ special envoys for peace and development who will
work with regional representatives to address matters
such as political conflict, economic underdevelopment,
and environmental devastation.

Conclusion/A Qualifying Thought

This agenda will be moot without a strong backing from
social forces that are prepared to press for its
implementation. Any demobilization of those who
successfully brought the Democratic candidate to victory
will buoy the political Right's leverage to assert its
own agenda. Right-wing forces will push for a
continuation of the Bush administration's
anti-progressive policies. Thus, if we are not prepared
to consistently place enough pressure on our "friend" in
the White House, we should expect a repeat of the Bill
Clinton years—an era in which there was (technically) a
high degree of access to the President and top cabinet
officials, but the progressive social movements were
afforded very little actual power.

The choice is ours, and we have precious little time to
decide how we want to proceed.

[1] See "Iraq war will cost $12 billion a month,"
Associated Press, March 9, 2008,
http://www.msnbc.msn.com/id/23551693/ (citing Joseph E.
Stiglitz and Linda J. Bilmes, The Three Trillion Dollar
War:The True Cost of the Iraq War,W.W. Norton, 2008).

[2] See HOLC_release.html>http://www.house.gov/apps/list/press/
il10_kirk/HOLC_release.html,

accessed July 7, 2008.

[3] See id.

[4] See www.
results.org/website/article.asp?id=358,

accessed July 7, 2008.

[5] See id.

[6] See id.

[7] See "Obama vows $210 billion for 'green,' building
jobs," The Los Angeles Times, February 14, 2008,
obama14>http://articles.latimes.com/2008/feb/14/nation/
na-obama14,

accessed July 7, 2008.

[8] See "Obama's Pocketbook Speech," Jason Horowitz, The
New York Observer, May 3, 2008,

http://www.observer.com/2008/obamas-pocketbook-speech,

accessed July 7, 2008.

[9] See
=C7BF90E6-D809-4274-900D-109ADC11ED76>http://kennedy.
senate.gov/newsroom/press_release.cfm?id=C7BF90E6-D809-
4274-900D-109ADC11ED76,

accessed July 7, 2008.

[10] See id.

[11] Their proposal, as of July 2007, included areas
such as mandatory early childhood education beginning at
age 3, universal healthcare, building economic
self-sufficiency for working people, and an urban
infrastructure bank. See

www.nul.org/PressReleases/2007/2007PR417.html,

accessed July 7, 2008.

[12] See the National Jobs for All Coalition's Shared
Prosperity and the Drive for Decent Work report,
www.njfac.org/
sharedpros/pdf.

[13] Under the Davis-Bacon Act, federal government
construction contracts are required to include
provisions for paying workers nothing less than the
prevailing
wages paid for similar projects in the geographical
area.

[14] This bill passed in the Senate in May 2008, after
an overwhelming passage in the House. See
http://www
.nlihc.org/template/page.cfm?id=40,

accessed July 7, 2008.

[15] In April 2008, Congressman Charles Rangel
introduced this bill in the House. See
index.php#hata>http://www.novoco.com/low_income_housing/
legislation/index.php#hata,

accessed July 7, 2008.

[16] See
GreenEnergyBill.shtml>http://moran.house.gov/apps/list/
press/va08_moran/GreenEnergyBill.shtml,

accessed July 7, 2008.

[17] See
http://www.schip-info.org/.

Reversal of Fortune

2008-10-12T11:02:00.004-05:00

The Economy

The past as prologue? Lining up for food and water, Louisville, Kentucky, 1937. By Margaret Bourke-White/Time & Life Pictures/Getty Images.

Reversal of Fortune

Describing how ideology, special-interest pressure, populist politics, and sheer incompetence have left the U.S. economy on life support, the author puts forth a clear, commonsense plan to reverse the Bush-era follies and regain America’s economic sanity.

By: Joseph E. Stiglitz

From: Vanity Fair

November 2008

When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.

Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory—in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion.

This tangled knot of problems will be difficult to unravel. Standard prescriptions call for raising interest rates when confronted with inflation, just as standard prescriptions call for lowering interest rates when confronted with an economic downturn. How do you do both at the same time? Not in the way that some politicians have proposed. With gasoline prices at all-time highs, John McCain has called for a rollback of gas taxes. But that would lead to more gas consumption, raise the price of gas further, increase our dependence on foreign oil, and expand our already massive trade deficit. The expanding deficit would in turn force the U.S. to continue borrowing gargantuan sums from abroad, making us even more indebted. At the same time, the higher imports of oil and petroleum-based products would lead to a weaker dollar, fueling inflationary pressures.

Millions of Americans are losing their homes. (Already, some 3.6 million have done so since the subprime-mortgage crisis began.) This social catastrophe has severe economic effects. The banks and other financial institutions that own these mortgages face stunning reverses; a few, such as Bear Stearns, have already gone belly-up. To prevent America’s $5.2 trillion home financiers, Fannie Mae and Freddie Mac, from following suit, Congress authorized a blank check to cover their losses, but even that generosity failed to do the trick. Now the administration has taken over the two entities completely, a stunning feat for a supposedly market-oriented regime. These bailouts contribute to growing deficits in the short run, and to perverse incentives in the long run. Market economies work only when there is a system of accountability, but C.E.O.’s, investors, and creditors are walking away with billions, while American taxpayers are being asked to pick up the tab. (Freddie Mac’s chairman, Richard Syron, earned $14.5 million in 2007. Fannie Mae’s C.E.O., Daniel Mudd, earned $14.2 million that same year.) We’re looking at a new form of public-private partnership, one in which the public shoulders all the risk, and the private sector gets all the profit. While the Bush administration preaches responsibility, the words are addressed only to the less well-off. The administration talks about the impact of “moral hazard” on the poor “speculator” who borrowed money and bought a house beyond his ability to pay. But moral hazard somehow isn’t an issue when it comes to the high-stakes speculators in corporate boardrooms.

How Did We Get into This Mess?

A unique combination of ideology, special-interest pressure, populist politics, bad economics, and sheer incompetence has brought us to our present condition.

Ideology proclaimed that markets were always good and government always bad. While George W. Bush has done as much as he can to ensure that government lives up to that reputation—it is the one area where he has overperformed—the fact is that key problems facing our society cannot be addressed without an effective government, whether it’s maintaining national security or protecting the environment. Our economy rests on public investments in technology, such as the Internet. While Bush’s ideology led him to underestimate the importance of government, it also led him to underestimate the limitations of markets. We learned from the Depression that markets are not self-adjusting—at least, not in a time frame that matters to living people. Today everyone—even the president—accepts the need for macro-economic policy, for government to try to maintain the economy at near-full employment. But in a sleight of hand, free-market economists promoted the idea that, once the economy was restored to full employment, markets would always allocate resources efficiently. The best regulation, in their view, was no regulation at all, and if that didn’t sell, then “self-regulation” was almost as good.

The underlying idea was, on the face of it, absurd: that market failures come only in macro doses, in the form of the recessions and depressions that have periodically plagued capitalist economies for the past several hundred years. Isn’t it more reasonable to assume that these failures are just the tip of the iceberg? That beneath the surface lie a myriad of smaller but harder-to-assess inefficiencies? Let me venture an analogy from biology: A patient arrives at a hospital in serious condition. Now, it may be that the patient has simply fallen victim to one of those debilitating ailments that go around from time to time and can be cured by a massive dose of antibiotics. In this case we have a macro problem with a macro solution. But it could instead be that the patient is suffering from a decade of serious abuse—smoking, drinking, overeating, lack of exercise, a fondness for crystal meth—and that it has not only taken a catastrophic toll but also left him open to opportunistic infections of every kind. In other words, a buildup of micro problems has led to a macro problem, and no cure is possible without addressing the underlying issues. The American economy today is a patient of the second kind.

We are in the midst of micro-economic failure on a grand scale. Financial markets receive generous compensation—in the form of more than 30 percent of all corporate profits—presumably for performing two critical tasks: allocating savings and managing risk. But the financial markets have failed laughably at both. Hundreds of billions of dollars were allocated to home loans beyond Americans’ ability to pay. And rather than managing risk, the financial markets created more risk. The failure of our financial system to do what it is supposed to do matches in destructive grandeur the macro-economic failures of the Great Depression.

Economic theory—and historical experience—long ago proved the need for regulation of financial markets. But ever since the Reagan presidency, deregulation has been the prevailing religion. Never mind that the few times “free banking” has been tried—most recently in Pinochet’s Chile, under the influence of the doctrinaire free-market theorist Milton Friedman—the experiment has ended in disaster. Chile is still paying back the debts from its misadventure. With massive problems in 1987 (remember Black Friday, when stock markets plunged almost 25 percent), 1989 (the savings-and-loan debacle), 1997 (the East Asia financial crisis), 1998 (the bailout of Long Term Capital Management), and 2001–02 (the collapses of Enron and WorldCom), one might think there would be more skepticism about the wisdom of leaving markets to themselves.

The new populist rhetoric of the right—persuading taxpayers that ordinary people always know how to spend money better than the government does, and promising a new world without budget constraints, where every tax cut generates more revenue—hasn’t helped matters. Special interests took advantage of this seductive mixture of populism and free-market ideology. They also bent the rules to suit themselves. Corporations and the wealthy argued that lowering their tax rates would lead to more savings; they got the tax breaks, but America’s household savings rate not only didn’t rise, it dropped to levels not seen in 75 years. The Bush administration extolled the power of the free market, but it was more than willing to provide generous subsidies to farmers and erect tariffs to protect steelmakers. Lately, as we have seen, it seems willing to write blank checks to bail out its friends on Wall Street. In each of these cases there are clear winners. And in each there are clear losers—including the country as a whole.

What Is to Be Done?
As America attempts to work its way out of the present crisis, the danger is that we will listen to the same people on Wall Street and in the economic establishment who got us into it. For them, our current predicament is another opportunity: if they can shape the government response appropriately, they stand to gain, or at least stand to lose less, and they may be willing to sacrifice the well-being of the economy for their own benefit—just as they did in the past.

There are a number of economic tools at the country’s disposal. As noted, they can yield contradictory results. The sad truth is that we have reached the limits of monetary policy. Lowering interest rates will not stimulate the economy much—banks are not going to be willing to lend to strapped consumers, and consumers are not going to be willing to borrow as they see housing prices continue to fall. And raising interest rates, to combat inflation, won’t have the desired impact either, because the prices that are the main sources of our inflation—for food and energy—are determined in international markets; the chief consequence will be distress for ordinary people. The quandaries that we face mean that careful balancing is required. There is no quick and easy fix. But if we take decisive action today, we can shorten the length of the downturn and reduce its magnitude. If at the same time we think about what would be good for the economy in the long run, we can build a durable foundation for economic health.

To go back to that patient in the emergency room: we need to address the underlying causes. Most of the treatment options entail painful choices, but there are a few easy ones. On energy: conservation and research into new technologies will make us less dependent on foreign oil, reduce our trade imbalance, and help the environment. Expanding drilling into environmentally fragile areas, as some propose, would have a negligible effect on the price we pay for oil. Moreover, a policy of “drain America first” will make us more dependent on foreigners in the future. It is shortsighted in every dimension.

Our ethanol policy is also bad for the taxpayer, bad for the environment, bad for the world and our relations with other countries, and bad in terms of inflation. It is good only for the ethanol producers and American corn farmers. It should be scrapped. We currently subsidize corn-based ethanol by almost $1 a gallon, while imposing a 54-cent-a-gallon tariff on Brazilian sugar-based ethanol. It would be hard to invent a worse policy. The ethanol industry tries to sell itself as an infant, needing help to get on its feet, but it has been an infant for more than two decades, refusing to grow up. Our misguided biofuel policy is taking land used for food production and diverting it to energy production for cars; it is the single most important factor contributing to higher grain prices.

Our tax policies need to be changed. There is something deeply peculiar about having rich individuals who make their money speculating on real estate or stocks paying lower taxes than middle-class Americans, whose income is derived from wages and salaries; something peculiar and indeed offensive about having those whose income is derived from inherited stocks paying lower taxes than those who put in a 50-hour workweek. Skewing the tax rates in the other direction would provide better incentives where they count and would more effectively stimulate the economy, with more revenues and lower deficits.

We can have a financial system that is more stable—and even more dynamic—with stronger regulation. Self-regulation is an oxymoron. Financial markets produced loans and other products that were so complex and insidious that even their creators did not fully understand them; these products were so irresponsible that analysts called them “toxic.” Yet financial markets failed to create products that would enable ordinary households to face the risks they confront and stay in their homes. We need a financial-products safety commission and a financial-systems stability commission. And they can’t be run by Wall Street. The Federal Reserve Board shares too much of the mind-set of those it is supposed to regulate. It could and should have known that something was wrong. It had instruments at its disposal to let the air out of the bubble—or at least ensure that the bubble didn’t over-expand. But it chose to do nothing.

Throwing the poor out of their homes because they can’t pay their mortgages is not only tragic—it is pointless. All that happens is that the property deteriorates and the evicted people move somewhere else. The most coldhearted banker ought to understand the basic economics: banks lose money when they foreclose—the vacant homes typically sell for far less than they would if they were lived in and cared for. If banks won’t renegotiate, we should have an expedited special bankruptcy procedure, akin to what we do for corporations in Chapter 11, allowing people to keep their homes and re-structure their finances.

If this sounds too much like coddling the irresponsible, remember that there are two sides to every mortgage—the lender and the borrower. Both enter freely into the deal. One might say that both are, accordingly, equally responsible. But one side—the lender—is supposed to be financially sophisticated. In contrast, the borrowers in the subprime market consist mainly of people who are financially unsophisticated. For many, their home is their only asset, and when they lose it, they lose their life savings. Remember, too, that we already give big homeowner subsidies, through the tax system, to affluent families. With tax deductions, the government is paying in some states almost half of all mortgage interest and real-estate taxes. But many lower-income people, whose deductions are meaningless because their tax bill is too small, get no help. It makes much more sense to convert these tax deductions into cashable tax credits, so that the fraction of housing costs borne by the government for the poor and the rich is the same.

About these matters there should be no debate—but there will be. Already, those on Wall Street are arguing that we have to be careful not to “over-react.” Over-reaction, we are told, might stifle “innovation.” Well, some innovations ought to be stifled. Those toxic mortgages were certainly innovative. Other innovations were simply devices to circumvent regulations—regulations intended to prevent the kinds of problems from which our economy now suffers. Some of the innovations were designed to tart up the bottom line, moving liabilities off the balance sheet—charades designed to blur the information available to investors and regulators. They succeeded: the full extent of the exposure was not clear, and still isn’t. But there is a reason we need reliable accounting. Without good information it is hard to make good economic decisions. In short, some innovations come with very high price tags. Some can actually cause instability.

The free-market fundamentalists—who believe in the miracles of markets—have not been averse to accepting government bailouts. Indeed, they have demanded them, warning that unless they get what they want the whole system may crash. What politician wants to be blamed for the next Great Depression, simply because he stood on principle? I have been critical of weak anti-trust policies that allowed certain institutions to become so dominant that they are “too big to fail.” The harsh reality is that, given how far we’ve come, we will see more bailouts in the days ahead. Now that Fannie Mae and Freddie Mac are in federal receivership, we must insist: not a dime of taxpayer money should be put at risk while shareholders and creditors, who failed to oversee management, are permitted to walk away with anything they please. To do otherwise would invite a recurrence. Moreover, while these institutions may be too big to fail, they’re not too big to be reorganized. And we need to remember why we’re bailing them out: in order to maintain a flow of money into mortgage markets. It’s outrageous that these institutions are responding to their near-monopoly position by raising fees and increasing the costs of mortgages, which will only worsen the housing crisis. They, and the financial markets, have shown little interest in measures that could help millions of existing and potential homeowners out of the bind they’re in.

The hardest puzzles will be in monetary policy (balancing the risks of inflation and the risk of a deeper downturn) and fiscal policy (balancing the risk of a deeper downturn and the risk of an exploding deficit). The standard analysis coming from financial markets these days is that inflation is the greatest threat, and therefore we need to raise interest rates and cut deficits, which will restore confidence and thereby restore the economy. This is the same bad economics that didn’t work in East Asia in 1997 and didn’t work in Russia and Brazil in 1998. Indeed, it is the same recipe prescribed by Herbert Hoover in 1929.

It is a recipe, moreover, that would be particularly hard on working people and the poor. Higher interest rates dampen inflation by cutting back so sharply on aggregate demand that the unemployment rate grows and wages fall. Eventually, prices fall, too. As noted, the cause of our inflation today is largely imported—it comes from global food and energy prices, which are hard to control. To curb inflation therefore means that the price of everything else needs to fall drastically to compensate, which means that unemployment would also have to rise drastically.

In addition, this is not the time to turn to the old-time fiscal religion. Confidence in the economy won’t be restored as long as growth is low, and growth will be low if investment is anemic, consumption weak, and public spending on the wane. Under these circumstances, to mindlessly cut taxes or reduce government expenditures would be folly.

But there are ways of thoughtfully shaping policy that can walk a fine line and help us get out of our current predicament. Spending money on needed investments—infrastructure, education, technology—will yield double dividends. It will increase incomes today while laying the foundations for future employment and economic growth. Investments in energy efficiency will pay triple dividends—yielding environmental benefits in addition to the short- and long-run economic benefits.

The federal government needs to give a hand to states and localities—their tax revenues are plummeting, and without help they will face costly cutbacks in investment and in basic human services. The poor will suffer today, and growth will suffer tomorrow. The big advantage of a program to make up for the shortfall in the revenues of states and localities is that it would provide money in the amounts needed: if the economy recovers quickly, the shortfall will be small; if the downturn is long, as I fear will be the case, the shortfall will be large.

These measures are the opposite of what the administration—along with the Republican presidential nominee, John McCain—has been urging. It has always believed that tax cuts, especially for the rich, are the solution to the economy’s ills. In fact, the tax cuts in 2001 and 2003 set the stage for the current crisis. They did virtually nothing to stimulate the economy, and they left the burden of keeping the economy on life support to monetary policy alone. America’s problem today is not that households consume too little; on the contrary, with a savings rate barely above zero, it is clear we consume too much. But the administration hopes to encourage our spendthrift ways.

What has happened to the American economy was avoidable. It was not just that those who were entrusted to maintain the economy’s safety and soundness failed to do their job. There were also many who benefited handsomely by ensuring that what needed to be done did not get done. Now we face a choice: whether to let our response to the nation’s woes be shaped by those who got us here, or to seize the opportunity for fundamental reforms, striking a new balance between the market and government.

Joseph E. Stiglitz, a Nobel Prize–winning economist, is a professor at Columbia University.

Rescue Wall Street--and the Rest of Us

2008-10-11T19:25:00.002-05:00

By: United States Senator Bernie Sanders

[Note: Bernie Sanders from Vermont is the only socialist in the United States Senate.]

For years, as a member of the House Banking Committee and now as a member of the Senate Budget Committee, I have heard the Bush administration tell us how "robust" our economy was and how strong the "fundamentals" were. That was until a few days ago. Now, we are being told that if Congress does not act immediately and approve the $700 billion Wall Street bailout proposal these "free marketers" have just written up, there will be an unprecedented economic meltdown in the United States and an unraveling of the global economy.

This proposal as presented is an unacceptable attempt to force middle-income families (and our children) to pick up the cost of fixing the horrendous economic mess that is the product of the Bush administration's deregulatory fever and Wall Street's insatiable greed. If the potential danger to our economy was not so dire, this blatant effort to essentially transfer $700 billion up the income ladder to those at the top would be laughable.

Let us be clear. If the economy is on the edge of collapse we need to act. But rescuing the economy does not mean we have to just give away $700 billion of taxpayer money to the banks. (In truth, it could be much more than $700 billion. The bill only says the government is limited to having $700 billion outstanding at any time. By selling the mortgage-backed assets it acquires--even at staggering losses--the government will be able to buy even more resulting is a virtually limitless financial exposure on the part of taxpayers.) Any proposal must protect middle-income and working families from bearing the burden of this bailout.

I have proposed a four-part plan to accomplish that goal that includes a five-year, 10 percent surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don't freeze in the winter or die because they lack access to primary healthcare.

Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement and even the illegal conduct of these companies' executives.

These are the last days of the Bush administration, the most dishonest and incompetent in modern American history. It is imperative that, at this important moment, Congress stand up for the middle class and for fiscal integrity. The future of our country is at stake.