Thursday, December 27, 2012

Weekly Funnies

Approaching the Twilight of the Labor Movement

We're Sunk

Private sector union membership in the U.S. stands at about 7-percent, meaning that 93-percent of all private sector jobs in this country are non-union, which makes those accusations of unions of being “too powerful” even more ridiculous and hysterical than they already were. (Not to resort to one of those tiresome Nazi analogies, but didn’t Hitler use the Big Lie to great effect?)

Yet, even with these depressingly low membership numbers, if America’s non-union workers rooted for unions to succeed, and aspired to join a union themselves, it would mean, at least in theory, that the labor movement was alive and well and had a decent chance of succeeding.

Unfortunately, that doesn’t seem to be the case. Alas, many (too many) non-union workers not only don’t admire or respect labor unions, they hate them. They envy them. They fear them. They resent them. It’s as if America’s corporate masters had gathered together all the underpaid, under-benefited non-union workers and done some hideous Manchurian Candidate brain-washing number on them, convincing them they could trust the profit-motive more than they could trust a workers alliance.

As a college student, I worked part-time as a breakfast cook. I’m not exaggerating when I say that, back in those days, it was the dream of every cook to get a job in a union manufacturing plant. That was their life goal. These guys didn’t dream of being millionaires or lottery winners or entrepreneurs; they dreamed of working in an industrial setting where the wages, benefits, and working conditions were first-rate.

Which is why it’s such a stunning disappointment to see so much antipathy directed toward unions today. One of the main complaints you hear is that workers shouldn’t be forced to join a union or forced to pay dues. That objection has always puzzled me. You hire into a union shop because the wages and benefits are roughly 15-percent better than non-union facilities, and yet you balk at having to embrace the very organization that made those wages and benefits possible?

In an odd way, the resentment at being “forced” to join a union (despite the obvious advantages) reminds me of the South’s resistance to desegregation. Southerners wouldn’t accept the fact that the federal government could tell a restaurant in Alabama that it no longer had the right to choose whom it could and couldn’t serve. Even though this was private property, your “Whites Only” signs had to come down. It was a concept people couldn’t absorb. Perhaps that same mind-set applies to union membership.

This classic labor vs. management adversarial relationship has been in place in the U.S. ever since the mid-19th century, and has existed in Europe far longer. Because everything and everyone—the Congress, the media, the police, the banks, the city fathers—were arrayed against the unions, it was a constant struggle, and any progress labor made came at a steep price.

But the one enduring resource unions could always count on—the one built-in advantage they had—was the support of working men and women. Because workers felt they were all pretty much in the same boat, this was truly an all-encompassing “labor movement.” Moreover, it was this grassroots, across-the-board solidarity that management feared the most because they had no way of combating it, other than by giving workers a larger slice of the pie.

Which is what makes the current anti-unionism so disturbing. Despite statistics clearly showing that the middle-class is losing more ground every year, the average worker, for whatever reason, continues to place more faith in the generosity and infallibility of the so-called “free market” than he does in the only lobbying organization working people have ever had.

If the support of decent, hard-working men and women continues to evaporate, it means we’re sunk. It means we’re more or less finished. It means Corporationism has won and the Working Majority has lost. And who knows? Maybe this is a done deal. Maybe we’ve already crossed that dreadful threshold.

What’s Wrong with the Economy?

Quantitative Easing is a Bust

The reason the US economy is still sluggish 4 years after Lehman Brothers defaulted, is of lack of demand. Demand dropped off after the housing bubble burst and has never really recovered. Economist Dean Baker calculates that hit to demand is somewhere in the neighborhood of $1 trillion per year, a sum that’s been impossible to replace. Here’s how Baker breaks down the costs in terms of GDP and weak consumption:
“We saw a sharp falloff of residential construction as we went from a near record boom, with construction exceeding more than 6.0 percent of GDP at the 2005 peak, to a bust where it fell below 2.0 percent of GDP. This meant a loss in annual demand of more than $600 billion a year.

We also saw a large falloff in consumption due to the loss of $8 trillion in housing wealth. The housing wealth effect is one of the oldest and most widely accepted concepts in economics. It is generally estimated people spend between 5 and 7 cents each year per dollar of housing wealth. This means that the collapse of the bubble would be expected to cost the economy between $400 billion and $560 billion in annual demand.

There is no mechanism that would allow the economy to easily replace the combined loss of between $1 trillion and 1.2 trillion in demand that would be predicted from the collapse of the housing bubble.” (“Underwater Homeowners Cannot Explain the Weak Recovery, Dean Baker, CEPR)

So, while household indebtedness, off-shoring of jobs and so called “onerous” regulations may have dampened overall activity, the proximate cause of the slowdown is the housing bubble which blasted a trillion dollar hole in demand.

The Obama administration tried to address the situation in 2009 by implementing the American Recovery and Reinvestment Act (ARRA). The $800 billion fiscal stimulus package narrowed the output gap, reduced unemployment and raised GDP, but it failed to produce the strong and sustainable recovery that was promised. That said, the ARRA did lift the economy out of recession and put 3 million people back to work, which is certainly a step in the right direction. The administration used the budget deficits exactly as British economist John Maynard Keynes suggested they be used, to sustain activity when the private sector had dramatically cut-back on spending and investment. When the businesses and consumers cannot sustain demand, then government must increase its spending or the economy will slip into a long-term slump. (Compare the recovery in the US to developments in the eurozone where discredited contractionary “austerity” policies have pushed the 17 member monetary union deeper into recession and social malaise.)

Of course there are other factors that have weighed heavily on demand, too, like high unemployment (7.7 percent) and wage stagnation.. According to economist Jared Bernstein, the real “pretax” earnings of middle wage workers have never grown more slowly than they have in 2012. (See chart here.) Also, the Commerce Department reports that employee pay is a smaller share of the economy today than it has been since the government started collecting wage and salary data. (which dates back to 1929.) Naturally, if wages are shrinking and unemployment is high, then demand is going to be weak and the economy is going to underperform. And that’s exactly what’s happening.

And then, there is growing inequality. Check this out from Pam Martens at Wall Street on Parade:
“A study conducted by Edward N. Wolff for the Levy Economics Institute of Bard College in March 2010 made the following findings:

‘The richest 1 percent received over one-third of the total gain in marketable wealth over the period from 1983 to 2007. The next 4 percent also received about a third of the total gain and the next 15 percent about a fifth, so that the top quintile collectively accounted for 89 percent of the total growth in wealth, while the bottom 80 percent accounted for 11 percent.

Debt was the most evenly distributed component of household wealth, with the bottom 90 percent of households responsible for 73 percent of total indebtedness.

Wealth concentration in too few hands while the general populace is saddled with too much debt to buy the goods and services produced by the corporations, is a replay of the conditions leading to the crash of 1929 and the ensuing Great Depression.” (“Consumers Have Powerful Weapons Against Wall Street’s Bad Practices”, Pam Martens, Wall Street on Parade)
While the upward distribution of wealth speaks to the implicit unfairness of the system, its impact on demand can be offset by increases to government spending vis a vis fiscal stimulus. Unfortunately, policymakers have abandoned fiscal policy altogether and transferred de facto control of the economy to the Central Bank. The Fed is not just calling all the shots, it’s doing so in a way that reflects its bias towards big finance. This is why the recovery has been so abysmal, because the policy has focused on boosting profits for Wall Street instead of revitalizing the broader economy. Even so, Fed chairman Ben Bernanke has acknowledged that the real reason unemployment is still so high, is not “structural”, (as conservatives argue) but lack of demand. Here’s what he said in a recent appearance before Congress:
“Is the current high level of long-term unemployment primarily the result of cyclical factors, such as insufficient aggregate demand, or of structural changes, such as a worsening mismatch between workers’ skills and employers’ requirements? … I will argue today that, while both cyclical and structural forces have doubtless contributed to the increase in long-term unemployment, the continued weakness in aggregate demand is likely the predominant factor.”

Bernanke’s admission is further underscored by a McKinsey survey of corporate managers from around the world which found that “the single greatest fear among executives everywhere is weak consumer demand for their companies’ products and services.” (CBS News)

So the question we should be asking ourselves is this: Why is so hard to get a second round of fiscal stimulus when Keynesian remedies have been used for more than 60 with great success? What’s changed?

What changed is the orientation of the people in power, most of whom are either closely-aligned to or former employees of Wall Street. Today’s political class is a subsidiary of the financial oligarchy. And that goes double for the Fed who invariably puts the interests of the big investment banks and brokerages above those of ordinary working people. Proof of “regulatory capture” is evident in the manner that the recovery has been managed. (or mismanaged!) Trillions of dollars in loans and bailouts have been showered on the banks and financial institutions while homeowners, consumers and working stiffs have been asked to cut back on vital social programs for the sick, elderly, and unemployed. These policies are largely responsible for today’s anemic, sputtering recovery, a condition that’s ideal for restructuring the economy in a way that better serves the interests of the big corporations and Wall Street.

Why, for example, would the Fed want to reduce unemployment if high unemployment pushes down labor costs and boosts profits for its corporate constituents? And why would Bernanke want to rev-up the economy when the ongoing crisis creates the rationale for gutting social programs and slashing public spending? And why would the Fed want to normalise interest rates, when the low rates force savers and retirees on fixed income back into the stock market, while–at the same time– provide unlimited sums of money to the banks at zilch cost to themselves?

The wretched state of the economy is no accident. It is by design. And it’s easy to figure out who’s benefiting from the present arrangement by tracing the torrent of capital that flows upwards to the corporate boardrooms and off-shore hideaways where the 1% stash their loot. Check this out: “Corporate profits as a share of GDP is at an all-time high while wages and salaries are at all-time lows“, The Big Picture)

The fact is, that the ongoing slump helps some while it hurts others. Regrettably, it’s the sick, the elderly, and working people who are hurt most by Central Bank policy.

So how effect has quantitative easing (QE) had on demand?

Not much, really. In fact, housing sales and refinancings have actually dropped since Bernanke launched QE3 in September. At the same time, private sector borrowing is still in the doldrums, which means that Bernanke’s zero rates and bond buying programs haven’t sparked another credit expansion. Even worse, QE might be doing some real harm as Bloomberg analyst Michael Mckee points out in a recent interview. Here’s what he said:
“Look at the corporate bond market, we’re seeing a rush of corporate bond sales at the end of the year, but not to invest in the economy, but in order to pay special dividends before tax rates go up at the end of the year.” (Bloomberg)
So, QE hasn’t boosted investment after all, in fact, it’s triggered a selloff in bonds as corporations take-the-money-and-run instead of trying to find productive outlets for future investment. What does that tell you? It tells you that Bernanke’s wacky theory is weakening demand by discouraging investment. The whole thing has backfired. This point is further confirmed by economist Frances Coppola who summed it up like this in a recent post:
“QE is effective in bringing down real interest rates – but not for borrowers at commercial banks. They are paying as much or more than two years ago. The effective interest rate is depressed because of lower rates paid to savers, not lower rates charged to borrowers. Credit spreads are widening.

This suggests that QE, far from being a stimulus, is actually contractionary for the real economy. If rates to both savers AND borrowers were falling, and bank lending volumes were normal, then QE could be said to be a stimulus, because it would encourage more borrowing, and falling returns to savers might encourage them to spend rather than save. But that’s not the case. Lending volumes are reduced and interest rates to borrowers remain high, while interest rates to savers are depressed: people on fixed incomes are spending less, not more, because their income is reduced, and borrowers faced with high interest rates are choosing to cut spending in order to maintain debt repayments. The overall effect is to take money from the real economy and transfer it to banks, who use it to shore up their damaged balance sheets. This raises questions about exactly what QE is supposed to stimulate and who it is supposed to help.” (“QE: The problem, not the solution”, The Coppola Comment)
So, QE is actually contractionary?

It sure looks that way. If the banks are not passing along the savings from the Fed’s low rates to consumers, but skimming heftier profits for themselves on the widening spreads, then the net-impact of the low rates is zero. In other words, QE will not lead to another credit expansion because the transmission mechanism (“the banks”) is not functioning as Bernanke had hoped. The banks have sabotaged the policy in order to make more money for themselves. What a surprise!

On Wednesday, the Mortgage Bankers Association produced more proof that QE is not working. The MBA announced that mortgage applications had decreased by 12.3 percent in the last week. Even though mortgage rates are lower now than anytime in history, people are still turning up their noses at housing. QE is not working.

So how do you shore up demand when monetary policy is ineffective? How do you shore up demand when small-business optimism has plunged to levels not seen since the middle of the financial crisis? (“NFIB small-business optimism index plunges“, Marketwatch)

How do you shore up demand when workers’ wages are shrinking? (“Modest Job Growth, Less Take-Home Pay Is Recipe for Depressed Consumer“, Wall Street Journal)

How do you shore up demand when the consumer is under pressure and disposable income is dwindling? (“Consumer Spending Wobbles“, Wall Street Journal) Here’s an excerpt from the article:
“U.S. consumer spending, a rare pillar of economic strength in recent months, is showing signs of weakening….In recent weeks government data have shown spending was slower over the summer than previously believed, and it has started off the final three months of the year on an even weaker footing.” (WSJ)
How do you shore up demand when businesses are hoarding cash and handing out dividends instead of reinvesting in the economy? (“$8.4 trillion: Number of the Week: As Companies Borrow More, Where Is Money Going?“, Wall Street Journal)

How do you shore up demand when unemployment is stuck at 7.7 percent, when the labor force is shrinking, when consumer spending is falling (“Consumer Spending Declines 0.2%”, Wall Street Journal) when manufacturing is contracting, when consumer sentiment is slipping, and when the “the median net worth of U.S. households has dropped by 47 percent in the last 4 years? (“The Recession’s Toll: How Middle Class Wealth Collapsed to a 40-Year Low“, The Atlantic)

Finally, how do you shore up demand when business investment has fallen off a cliff? Check this out from the Wall Street Journal:
“U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.
Half of the nation’s 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.
Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009. Corporate investment in new buildings has declined. At the same time, exports are slowing or falling to such critical markets as China and the euro zone as the global economy downshifts, creating another drag on firms’ expansion plans. (“Investment Falls Off a Cliff,” Wall Street Journal)
Keyenes provides a straightforward antidote for weak demand, that is, increase government investment via fiscal stimulus. That means using the budget deficits to reduce unemployment, boost growth, and put the economy back on solid footing. Monetary policy alone will not produce a strong, self sustaining recovery, which is a point that Keynes makes in Chapter 12 of “The General Theory of Employment, Interest and Money”. Here’s what he says:
“For my own part I am now somewhat sceptical of the success of a merely monetary policy directed towards influencing the rate of interest. I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organising investment; since it seems likely that the fluctuations in the market estimation of the marginal efficiency of different types of capital, calculated on the principles I have described above, will be too great to be offset by any practicable changes in the rate of interest.” (John Maynard Keynes, “The General Theory of Employment, Interest and Money”,, 2002)
So there you have it; governments have a role to play in maintaining demand. By “directly organising investment” the state can ease the business cycle, reduce unemployment, and mitigate the impact of financial crises and recessions.

In that same vein, economist James K. Galbraith thinks we should be pursuing a long-term strategy that includes “government jobs programs”, “an infrastructure bank, a four-day work week, and expansion of Social Security, an early retirement option, a systematic program of general revenue sharing to support state and local governments.” Here’s how Galbraith summed it up in an article in The Washington Monthly:
“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…
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.” (“No Return to Normal”, James K Galbraith, Washington Monthly)
Progressive economists like Galbraith have figured out how to sustain demand and address our most pressing ecological and energy problems at the same time. This is the best way forward, not Quantitative Easing which has largely been a bust.

Wednesday, December 26, 2012

Free Trade in Medicare

An Alternative to Austerity

Washington policy debates are chock full of rich people telling poor and middle-class people that they will have to tighten their belts. In fact, in the crazy upside down world of Washington this passes for “courage.”

Cutting back Medicare is one of the favorite forms of belt-tightening being pushed by the elites. Many of the advocates of deficit reduction argue for raising the age of eligibility for Medicare from 65 to 67. Another favorite among this group is to require larger premium payments for Medicare from middle-class beneficiaries. Of course many Republicans would simply privatize Medicare and replace it with a voucher, which almost certainly would not be sufficient to cover the cost of health care.

It is striking in this discussion that no one advocating Medicare cuts ever proposes taking advantage of the lower cost health care systems in other countries. As every policy analyst knows, the problem of Medicare costs stems almost entirely from the fact that our health care system is incredibly inefficient. We pay more than twice as much per person for our health care as people in other wealthy countries even though we have almost nothing to show for it in the way of better health outcomes.

This enormous gap in costs suggests an easy opportunity for massive gains from trade. If people in the United States can get their health care from other countries there would be huge savings.
While it may impractical for most of the population to go to another country for most of their health care needs, this is not true for Medicare beneficiaries, the vast majority of whom are retired. Many retirees have friends and/or family in other countries. If they opted to move to another country to get their health care, there could be enormous savings that they could share with the government.

To take a simple example, the Medicare trustees project that the cost to the program for an average beneficiary in 2020 will be close to $16,000. Suppose the cost of providing care in the United Kingdom is half as much or $8,000 a year.

If Medicare paid for a beneficiary to get care in the U.K. instead of the United States, the savings would be $8,000 a year. It could pay half of this money, or $4,000 a year, to the beneficiary and still save $4,000 for each beneficiary that opted to go to the U.K. to get care. If 1 million beneficiaries (at 2 percent of beneficiaries) opted to take advantage of this sort of deal, the savings would be $4 billion a year. If 5 million beneficiaries took advantage of this opportunity the savings would be $20 billion a year.

Over a longer horizon the gains would be projected to get much larger as U.S. health care costs are projected to hugely outstrip the increase in costs in other countries. As a result, the savings from going to the U.K. or elsewhere could easily exceed $16,000 a year by 2030. This would mean both that the government’s savings would be increasing for each person that took advantage of this deal and also that many more beneficiaries would likely opt to get their care from other countries.

Once we go out 20 years, for many beneficiaries their share of the projected savings would more than double their income. The projected gap in health care costs are so enormous than the U.S. government could even pay a premium of 10-20 percent above the cost of health care in other countries and still have enough money left over to allow large payments to beneficiaries and huge savings to the government.

The point is simple. The story of those incredibly scary long-term deficit projections is a story of exploding health care costs. If these projections of exploding health care costs prove accurate, then the country would enjoy enormous savings by having Medicare beneficiaries get their health care from the more efficient health care systems in other countries.

If we were having an honest policy debate this sort of proposal for free trade in health care services would be front and center on the national agenda. After all, which is a better way to save money on Medicare, making people wait until age 67 to qualify for benefits or giving beneficiaries the option to get health care in another country and to put some money in their pockets?

However you won’t hear about free trade in health care in the Washington policy debates. The Washington policy elites love trade when it can be used to beat down the wages of auto workers or truck drivers. However when trade might jeopardize the income of the pharmaceutical and the insurance industries, and highly paid medical specialists, they don’t even want it to be part of the discussion. And since the elites control the Washington policy debate, folks can expect to wait until age 67 for their Medicare and/or pay higher premiums.

Banning BPA

 And there was rejoicing!-jef

A Poisonous Coating

It’s what the county legislature in Suffolk County, New York is noted for—passing first-in-the-nation laws. It’s done that with laws banning the hand-held use of cell phones while driving, the sale of drop-side cribs and the supplement ephedra, and many statutes prohibiting smoking in public places. The measures have often been replicated statewide and nationally.

And the panel did it again this month passing a measure that bans receipts coated with the chemical BPA. BPA, the acronym for Bisphenol-A, has been found to be a cause of cancer and other health maladies.
“Once again this institution is going to set the standard for other states to follow,” declared Legislator Steve Stern of Huntington after the passage of his bill December 4.

The top elected official of Suffolk County, which encompasses eastern Long Island, County Executive Steve Bellone plans to sign the measure into law next week.

BPA has become common. It is used widely to harden plastics and as a coating inside cans of beverages and food. Another use is coating the paper used for receipts enabling it to become “thermal paper” and react to heat to print numbers and words.

In 2009, the Suffolk County Legislature enacted a first-in-the-nation law—also authored by Stern—prohibiting the use of BPA in baby bottles and other beverage containers used by children under three. Stern was made aware of the health dangers of BPA by Karen Joy Miller, founder of Prevention is the Cure, an initiative of the Huntington Breast Cancer Action Coalition. Prevention is the Cure emphasizes the elimination of the causes of cancer.

Ms. Miller testified at the legislative session at which the measure passed 16-to-1: “We’ve got to end this disease [cancer], and a bad-acting chemical like [BPA] is at the top of the list.” After the vote, she applauded “Legislator Stern and the Suffolk County Legislature for taking this important step to protect public health.”

Stern’s “Safer Sales Slip Act” was also backed by Dr. Philip Landrigan, chair of the Department of Preventive Medicine and dean for Global Health with the Children’s Environmental Health Center at Mt. Sinai School of Medicine in New York City. It will protect “the health of the public by reducing exposures to BPA for all Suffolk County families and, most especially, pregnant or nursing women, and women of childbearing age…As leaders in pediatrics and preventive medicine, we strongly support this legislation.”

Meanwhile, claiming at the legislative session that BPA is safe was Stephen Rosario of the American Chemistry Council. Millions of tons of BPA are now manufactured annually and the American Chemistry Council has led in defending the substance.

The Stern bill declares that the Suffolk Legislature “finds and determines that BPA is a synthetic estrogen which disrupts healthy development and can lead to an altered immune system, hyperactivity, learning disabilities, reproductive health problems, increased risk of breast and prostate cancer, obesity and diabetes.”

It refers to his earlier “Toxin Free Toddlers and Babies Act” and notes that since the passage of “this groundbreaking ban,” a national counterpart of the measure was enacted—“finally, this summer”—by the U.S. Food and Drug Administration.

Of receipts coated with BPA, the BPA on this “thermal paper can transfer onto anything it contacts, including skin” and through the skin “be absorbed…into the body,” says the bill.

This “dermal exposure to BPA poses a risk to public health and particularly to those whose employment requires distribution of such receipts.” Moreover, “the thermal paper containing BPA is also utilized in bank receipts and at Automated Teller Machines and gas pump receipts, creating multiple and ubiquitous points of exposure in daily life.”

Further, research has determined that “workers employed at retail and food service industries, where BPA-containing thermal paper is most commonly used, have an average of 30% more BPA in their bodies than adults employed in other professions.”

And, critically, as the measure notes, “there are several manufacturers that produce thermal paper that does not contain BPA.” That’s the way it is for toxic products and processes: there are safe alternatives for them. There are safe substitutes for virtually every deadly product and process. The problem: the vested interests that continue to push and defend them.

The Stern law carries penalties of $500 for the first violation and $1,000 “for each subsequent violation.”

It hopefully will be replicated far and wide. And, bans on BPA should be extended to the use of all plastics with BPA along with cans of beverages and food that have a coating of this poison inside.

Treasury Dept. warns of ‘extraordinary measures’ amid fiscal cliff deadlock

(The fact the Democrats are playing along with this fake fiscal cliff lowers the little credibility they had almost down to nothing. Both parties are using this scare tactic to justify cutting social security and the people aren't going to fall for it.--jef)

By Dominic Rushe, The Guardian
Wednesday, December 26, 2012

Barack Obama cuts short holiday to tackle budget crisis as country faces breaching its $16.4tn debt limit

US Treasury secretary Tim Geithner warned on Wednesday he would have to take “extraordinary measures” to avoid a default on the US’s legal obligations as the country is set to breach its $16.4tn (£10.16tn) debt limit.

In a letter to Congress, Geithner said the debt ceiling would be reached on 31 December and that the Treasury could raise $200bn (£124bn) to fund government spending as a stopgap measure. But he warned that the current impasse over the fiscal cliff budget crisis meant it was uncertain how long that money would last.

“Under normal circumstances, that amount of headroom would last approximately two months.

“However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures,” Geithner warned.

In the two-paragraph letter Geithner also warned that “the extent to which the upcoming tax filing season will be delayed as a result of these unresolved policy questions is also uncertain.”

A similar row over increases in the debt ceiling in the summer of 2011 led to a historic downgrade of the US’s credit rating and panic on stock markets around the world.

The Treasury secretary’s warning comes as Barack Obama prepared to cut short his Christmas holiday in Hawaii, with the intention of returning to Washington in the hope of restarting the stalled budget talks.

Discussions with House speaker John Boehner collapsed last week after the top ranking Republican launched his own “Plan B” aimed at tackling the year-end budget crisis. But Boehner’s plan also fell after members of his own party threatened to block any deal that would raise taxes.

Boehner and other senior Republicans released a statement on Wednesday saying: “The lines of communication remain open, and we will continue to work with our colleagues to avert the largest tax hike in American history, and to address the underlying problem, which is spending.”

Obama is hoping to pass a stop-gap deal through the Senate, where he has some support from Republicans. The president wants to implement measures that would raise taxes on those earning over $250,000 (£155,000) while preserving most of the other tax cuts under threat, delaying spending cuts and extending unemployment benefits for the long-term unemployed.

Boehner said the Senate would have to make the first move before the House would commit to voting on any bill. He said two bills had already been put forward to tackle the crisis.

“If the Senate will not approve and send them to the president to be signed into law in their current form, they must be amended and returned to the House. Once this has occurred, the House will then consider whether to accept the bills as amended, or to send them back to the Senate with additional amendments,” he said.

The Treasury said it can free up around $200bn (£124bn) by taking four “extraordinary measures.” Nearly all the measures relate to peripheral investments that the Treasury makes in certain funds.

In essence, the Treasury will act like an indebted consumer who stops running up his credit card when he already has more bills than he can pay. The result: the Treasury will not cut its debt, but only stop spending until its credit limit is raised again. Only Congress can raise the debt limit.

The department took similar measures last year, when the US passed the debt ceiling limit in May and Congress didn’t increase it again until August. The most remarkable of the extraordinary measures includes allowing the Treasury to redeem, or stop, any investments in two major pension funds.

The first is the civil service retirement and disability fund. The CSRDF, as it is known, is a kind of pension fund that provides defined benefits (stock market-linked retirement incomes) to retired and disabled federal employees.

The US Treasury puts about $6bn (£4bn)a month into the fund – not in cash, but in Treasury securities. The Treasury would either redeem some of those securities or suspend new payments. It could also choose to continue to make payments to the fund, but if the debt ceiling is not raised within two months, the Treasury would have to stop.

The second major pension fund is the government securities investment fund, or G Fund, which is part of the federal employees’ retirement system thrift savings plan. Like the CSRDF, the G Fund is invested in special securities. But, because the G Fund matures every day, the Treasury can immediately free up money by suspending the whole thing. Suspending the G Fund will do the most to make room for the Treasury, freeing up $156bn (£96bn) of the $200bn (£124bn) it’s aiming for.

After Congress raises the debt ceiling, the Treasury has to make up for all the payments it missed to the pension funds, so none of the employees will be hurt.

The Treasury will also temporarily stop issuing state and local government securities or SLGS – bonds it created to help state and local governments reinvest any profits made from issuing regular municipal securities.

Since state and local governments are not allowed to reinvest their profits in other, riskier kinds of investments, the Treasury gives them SLGS bonds as a way of holding their money safe.

But stopping SGLS bonds won’t cut the country’s debt; it will only avoid adding to it. In its most minor move, the Treasury will stop contributing to the exchange stabilisation fund, which it uses to buy foreign currencies. The public debt of the US is increasing at about $100bn per month, the Treasury said.

Tuesday, December 25, 2012

M░E░R░R░Y░░░░ C░H░R░I░S░T░M░A░S░░░░░░

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Sunday, December 23, 2012

Are Drug-Pushing Shrinks Manufacturing a Generation of Spree-Shooters?

Another Killer on Anti-Depressants

Well, you probably don’t want to look at more than 60 different documented school shooters and stabbers who were on antidepressant drugs when they attacked innocent children in suicidal, violent outbursts. Not if your mind is already made up that “it’s the guns” and that yet another “gun control” law will suddenly fix things. It won’t. Nor will the congressional testimony of Dr. Peter Breggin on the dangers of SSRIs and the proven links to suicide and violent ideation interest you, as long as there is one factor, and one solution, and this sort of information doesn’t fit into your preconception.

If this latest psycho-killer boy, Adam Lanza, had stolen a car and run over 26 people, would the most glaring problem be not enough car regulations?

Or if he had chosen to run around with a chainsaw instead, would the call now be for more chainsaw control? Or would the focus have turned to just banning the Texas Chainsaw Massacre films?

Why do they do it?

More than a little evidence suggests that antidepressant medications, prescribed by psychiatrists – who have a vested stake in the public perception of this issue – are a contributing factor in the majority of such spree massacres. The drug corporations, which produce these medications and which pay for massive advertising campaigns on TV, in newspapers, on the radio and in magazines, certainly want their friendly press outlets to come up with a different culprit. However, the lengthy list of warnings, right on the labels of these drugs, is an indication that the links are real, not very well understood, and potentially catastrophic.

Even Time Magazine reported on links between prescription drugs and violence:
Desvenlafaxine (Pristiq) … 7.9 times more likely to be associated with violence than other drugs. 
Venlafaxine (Effexor) … 8.3 times…

Fluvoxamine (Luvox) … 8.4 times…

Triazolam (Halcion) … 8.7 times…

Atomoxetine (Strattera) … 9 times…

Mefoquine (Lariam) … 9.5 times…

Amphetamines: (Various) … 9.6 times…

Paroxetine (Paxil) … 10.3 times…

Fluoxetine (Prozac) … 10.9 times…

Varenicline (Chantix) … 18 times… (Time)

As Dr. Breggin calls it on his website:
Antidepressants cause emotional anesthesia and numbing or sometimes euphoria, providing a fleeting, artificial relief from emotional suffering. … In the long run, all psychiatric drugs tend to disrupt the normal processes of feeling and thinking, rendering the individual less able to deal effectively with personal problems and with life’s challenges. They worsen the individual’s overall mental condition and produce potentially irreversible harm to the brain.”
Breggin provided expert testimony and dire warnings to a congressional committee and cautioned against dispensing antidepressants to military personnel out of a very real fear of resulting violence by well-armed troops.
Even the FDA has had to impose stronger warnings on these “medicines” over the years, in response to the real world data. The 2007 update to the “Black Box” warnings, which are mandatory and included with all antidepressants says:
Clinical Worsening and Suicide Risk: Patients, their families, and their caregivers should be encouraged to be alert to the emergence of anxiety, agitation, panic attacks, insomnia, irritability, hostility, aggressiveness, impulsivity, akathisia (psychomotor restlessness), hypomania, mania, other unusual changes in behavior, worsening of depression, and suicidal ideation, especially early during antidepressant treatment and when the dose is adjusted up or down. Families and caregivers of patients should be advised to look for the emergence of such symptoms on a day-to-day basis, since changes may be abrupt. … Symptoms such as these may be associated with an increased risk for suicidal thinking and behavior and indicate a need for very close monitoring and possibly changes in the medication.” (FDA, emphasis added)
The United States abandoned its mentally ill citizens back in the 1980s. Now they live under bridges. I see them with their tent city near my favorite Chinese restaurant. The great shining city on the hill doesn’t give a damn who’s living outdoors now. The stigma about mental illness has worked its way through the rest of society, but not in the obvious way.

People don’t reject “treatment” as long as it’s a pill you can take, a brain fix-all. This convenience culture idea of the quick fix is what has lived on, and now psychiatric “treatment” consists primarily of trying various drugs on patients, having them report the way the drugs affected them, and then trying other drugs. Repeat ad infinitum. This guinea pig approach to psychiatry is what I have witnessed for many years, and with a variety of different psychiatrists. They no longer seek out the underlying traumas of patients, as in the old quaint days. It is all about the drugs today, and nothing else is even discussed.

Psychiatrists are corporate America’s drug pushers.

Banning Guns For Citizens?

Now I’m going to get a lot of hostile responses for bucking the knee-jerk hysteria about banning assault rifles that’s going around. It seems to me like this issue was custom-tailored to distract the nation from the “fiscal cliff” backroom betrayals currently gutting your Social Security and Medicare inside the centers of power. There are numerous massacres, unfortunately. The media volume generated by this particular one is like a tsunami and changes the top story away from the machinations of the White House and Congress, where their long-planned deal-making could potentially kill many, many more people than the occasional shooting spree. They actually do kill many, many more children in Afghanistan, Pakistan, Yemen and elsewhere… but that’s a different article.

I see no problem clamping down on high-capacity assault rifles. But I don’t for a second believe that’s going to change anything. What exactly can you do with an assault rifle, that you can’t do with a thousand other different kinds of guns? Reloading isn’t really that time-consuming or difficult. Multiple weapons are easy to obtain, especially if one is motivated enough and doesn’t care if they make it out alive. So how does that solve the problem?

Similarly, the “background checks” don’t catch spree shooters who don’t have criminal records and just one day snap. There’s nothing to check, and future-crime has not been wiped out yet.

Ah, the nuclear option – ban all the guns. That’s next.

There’s an interesting idea. With 300,000,000 guns in America, it should be no problem to just collect them all. Criminals would be first to line up at the weapon depository and rape scan center. Once the criminals are disarmed, things will go smoothly.

Some suggest that the population doesn’t need to be armed, as an armed rebellion against a tyrannical regime is futile. That’s a selective reading of history (and of the Bill of Rights), but even granted it was true, weapons are useful for self-defense from whomever. They can be indispensable in times of chaos or collapse. We do retain the right to defend ourselves, but apparently a lot of liberal/left types would make that technically impossible, by forcibly disarming everyone who complies.

Oh, no doubt, you could be re-armed by enlisting in some civilian human-drone force, as Obama first proposed back in 2008. Selective service in some organized policing force or military unit in order to graduate from high school was a wet dream proposal of the current president’s. There explains the “450 million rounds of 40 caliber” hollow-point ammunition that the Department of Homeland Security just ordered. Perhaps forced teenage DHS police labor can replace professional local police forces, which can be laid off in order to enact even more budget cuts around the nation. There’s a great idea.

But guns are here to stay. They aren’t going anywhere. America is an “armed madhouse” as Greg Palast phrased it, so perhaps it’s time to take a closer look at the “mad” part of the equation.

Democrats, Social Security and the Fiscal Cliff

A Web of Convenient Fictions

With democrats ecstatic that political dysfunction has postponed their cutting the social insurance programs that Americans have paid for and count on for a few weeks, discussion of the intricacies of ‘chained CPI’ (Consumer Price Index) versus other measures of inflation used to adjust Social Security can now apparently wait for the New Year. Still, this probably isn’t a bad time to ask: why? Why cut Social Security? The program is currently solvent, is expected to remain solvent for decades to come, and projected shortfalls in the future could be better addressed by raising the incomes of the people who pay into the program, not by cutting payments to those who depend on them. What is to be gained by ‘solving’ a problem that isn’t?

If cutting Social Security isn’t necessary, why then is it being proposed?
Barack Obama provided copious evidence in prior proposals, television interviews and speeches that doing so is his intent. Congressional democrats and labor leaders quickly acceded to his proposal to do so, with former House Speaker Nancy Pelosi going so far as to actively lie that proposed cuts will ‘strengthen’ the program. And given the cuts will eventually put tens of millions of Americans into dire poverty from a program they paid into for all of their working lives, what rationale could possibly justify doing so?

The reason I ask is a coalition of democrats, labor, liberals and progressives just re-elected Mr. Obama and democrats in Congress to what—cut Social Security? Mr. Obama created the ‘fiscal cliff’ to first push his stacked (in favor of cutting social insurance programs) ‘deficit commission’ to develop a plan to cut government spending and second, to force the issue to be revisited immediately after the election if no plan was agreed to. And Republican threats to refuse to raise the debt ceiling for leverage to ‘force’ spending cuts are idiotic—George W. Bush and congressional Republicans just led the largest increase in government spending in modern history. And that is not a difficult point to make. (And had it been on beneficial programs, it would have been laudable).

Ultimately the entire ‘debate’ is nonsense—the U.S. doesn’t fund spending directly from taxes. As the Federal Reserve is in the process of demonstrating with its QE (Quantitative Easing) programs, it can buy an unlimited quantity of government debt with money it ‘creates’ –the ‘debt limit’ is an arbitrary misdirection. This isn’t to argue that there is no relationship between economic production and money creation, but it is to point out that the ‘Federal budget’ is a convenient fiction. So, given his repeated analogy of the Federal budget to a family budget, is Mr. Obama ignorant of government finances or does he understand them and is purposely using the misleading analogy to further unstated goals?

The ‘Fix the Debt’ committee of politicians, corporate executives and connected financiers claiming to be concerned about the Federal deficit isn’t discussing eliminating the ‘carried interest’ deduction that benefits billionaire hedge fund managers, raising effective corporate tax rates that are currently the lowest in modern history, materially cutting end-of-empire levels of military spending and raising personal income tax rates on the titans of finance who would be begging for change in the street were it not for Federal government largesse in the (ongoing) bank bailouts. But they are deeply concerned about the Federal deficit, as are Mr. Obama and congressional democrats.

But again, why? The web of convenient fictions currently in play amongst both democrats and republicans in Washington—corporate tax cuts promote economic growth and job creation, government spending ‘crowds out’ more productive private sector spending, ‘excessive’ government debt will cause a financial market rebellion (bond vigilantes) and handing social insurance programs to private market profiteers is beneficial to the insured, are all demonstrably nonsense with only a cursory look at ‘the evidence.’

Effective corporate tax rates are the lowest in modern history
and job creation, even before the economic calamity began in 2008, is the weakest since the 1930s. As global warming caused by largely private production and the predatory, dysfunctional private sector demonstrate on a daily basis, the ‘efficiencies’ of private production come from cost shifting, not by levels of human motivation intrinsic to capitalism. As QE is demonstrating, the Federal Reserve can control both short and long term interests rates—the ‘bond vigilantes’ are only in control when they provide cover for private interests. And Barack Obama didn’t choose the ‘least bad’ option with his healthcare ‘reform,’ he chose the private option to which he is ideologically committed.

Without apparent irony, these convenient fictions are straight from the IMF (International Monetary Fund) and World Bank playbooks circa 1980. While couched in the language of ‘economic development,’ IMF policies were / are extractive, designed to exert control over political economies and were / are tools of economic imperialism. The ‘austerity’ of IMF policies, cutting social spending to divert funds to service external debt, was rarely accompanied by even the pretense it benefited those whose social insurance programs were being looted. Cut to Mr. Obama and Democratic Speaker Nancy Pelosi mirroring the Vietnam Warism that to strengthen Social Security we must weaken it. Welcome to neo-Colonial America.

Also without apparent irony, the neo-Keynesian wing of the Democratic Party claims to have correctly analyzed current economic travails and prescribed the necessary and sufficient solutions if only Mr. Obama and the DC democrats would listen. In the first, this leaves the great mystery of why they haven’t listened and have actively articulated the policies of the radical right instead? In the second, Keynesian solutions imply that ‘we are all in this together,’ economically speaking, decades after official Washington and America’s plutocracy made it abundantly clear they believe they are responsible for their lot and we for ours, except when they need a few trillion dollars for a bailout. Finally, the ‘we’re all in this together’ monetary policies of the neo-Keynesians have benefited America’s richest 10% who own financial assets alone. (For explanations see Minsky’s essays on inflation and Marx’s Capital, Volume II).

With no respect whatsoever, this leads to the observation that Mr. Obama and his co-conspirators in the Democratic Party haven’t ‘caved,’ ‘capitulated,’ ‘relented,’ ‘given in,’ ‘submitted’ or ‘yielded’ by agreeing to cut social insurance programs. Mr. Obama’s far-right-of-center policies of his first term were just affirmed by the coalition that re-elected him. He will propose cutting Social Security again in just a few weeks. And democrats, labor, liberals and progressives will again be sincerely debating the merits of chained CPI versus other measures of inflation by which to cut Social Security. But while the effects of cuts will be real, the ‘debate’ won’t be. Put another way, the goal is to cut Social Security, not to ‘strengthen’ it.

In his speech at the Hamilton Project launch (link above) in 2006 Mr. Obama articulated the ‘slippery slope’ argument he believed was the ‘left’ position against ‘modernizing’ America’s social insurance programs. He argued supporters of these programs feared minor ‘adjustments’ were a pretext for the wholesale cuts desired by the radical right. But what this explanation leaves out is context. Were the ‘discussion’ taking place as the economic prospects of the poor and working classes were dramatically rising– rapid income gains, increasing income security, rising food security and income and wealth distribution resembling economic democracy, interpreted intent might be benign. But with Mr. Obama and congressional democrats several decades into giving voice to the desires and policies of the radical right, it would require a fool to believe benign intent today.

Hopefully I am underestimating the political pushback proposed cuts will engender. But given the propensity of democrats, labor, liberals and progressives to sincerely debate irrelevancies while giving unwavering support to the increasingly debased policies of their leaders, I doubt it. The bourgeois of these constituencies will likely break with the poor and working class and accede to the bogus rationale that the programs must be weakened so they may be strengthened, calculating that they’ll be all right in any case. And the pundit class will do the narrow calculus of cutting this program to save that without noticing the unwavering trajectory toward neo-liberal hell of the last forty years. To the folks who support the Democratic Party without apparently knowing what their policies are, good luck with that Social Security thing and all. To everyone else, we didn’t ask for this, but it’s coming our way anyhow.

Banks Don’t Go to Prison

The Punishment and the Crime

It was just an unfortunate coincidence that the reports were almost juxtaposed--the reports of the punishment given Stephanie George and that given HSBC and UBS. Stephanie, of course, was not the first.

William James Rummel has been imprisoned since the late 1970s and will be there for the rest of his life. That is because he was convicted of three crimes. He used a credit card to obtain $80 worth of goods and services, a crime for which he served 3 years in jail. When he got out he passed a forged check in the amount of $23.86 which bought him 4 years in jail. He ended his career as an air conditioning repairman, charging a customer $120.75 for a repair with which the customer was not satisfied. He refused to return the money and was convicted of obtaining money under false pretenses. Since that was his third conviction he was sentenced to life in prison. In reviewing his sentence the U.S. Supreme Court said his life sentence did not constitute cruel and unusual punishment. Commenting on the Court’s finding Justice Rehnquist said: “We all of course, would like to think that we are ‘moving down the road toward human decency. . . .’ Within the confines of this judicial proceeding, however, we have no way of knowing in which direction that road lies.” Some legal cartographers could probably have helped the Justice out.

On December 12, 2012 the New York Times described the plight of Stephanie George. Her boyfriend stashed a lockbox with a half-kilogram of cocaine in her attic and when the police found it she was charged with its possession even though she claimed not to have known of its presence in her house. The judge said he thought the sentence unreasonable but he was compelled by governing statutes to sentence Ms. George to life in prison. In contemplating their fates Ms. George and Mr. Rummel (and many others) may well wonder how things could have come out differently for them. The answer is, they should have been banks. Banks don’t go to prison even though they are persons and even when their offenses involve billions of dollars.

On the same day that Ms. George’s plight was described, HSBC agreed to pay $1.92 billion for worse things than failing to properly repair an air conditioning unit or store a bit of coke. According to the Senate Subcommittee on Investigations in a report issued in July 2012, the bank “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering controls.” The banks’ conduct enabled Mexican drug cartels to launder tainted money through the American financial system, and the bank worked closely with Saudi Arabian banks linked to terrorists.
The bank is a person for purpose of making political contributions to assorted candidates but it is not a person for purposes of being charged with criminal wrongdoing or going to jail.

A criminal indictment of either the bank person or a human person, we are told, might place the institution at risk of collapse. Critics can take comfort in knowing that the bank did not get off scot-free. In addition to paying $1.92 billion to settle the charges against it, it will enter into a deferred prosecution agreement that suggests if it or a human person doesn’t mend its ways criminal charges might yet be brought. Lanny Breuer, the head of the Justice Department’s criminal division said that: “HSBC is being held accountable for stunning failures of oversight-and worse-that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries.” Having described its actions he nonetheless defended the punishment saying it was a “just, very real and very powerful result.” He’s right. $1.92 billion is a lot of money and it means that instead of HSBC having a 2011 profit of $22 billion it will only have a profit of about $20 billion.

December 19 we learned that UBS had settled with U.S. and British regulators for having manipulated LIBOR rates. (LIBOR is the interest rate banks charge each other for inter-bank loans. Depending on what time period one is examining the bank was either reporting artificially high rates or artificially low rates in order to deceive regulators and/or make money.) According to the Wall Street Journal, its review of a federal report suggests Fannie Mae and Freddie Mac may have lost more than $3 billion as a result of the manipulation of LIBOR. UBS is not facing criminal charges since they might endanger its stability. Its Japanese branch “has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen Libor.” The bank is not going to jail for the same reason HSBC is not going to jail. Federal Regulators said if criminal charges were brought the bank’s stability would be threatened.

Mr. Rummel and Ms. George greatly regret the fact that they were not in the banking business. Their incarceration has greatly affected their stability.