The Top 1%: Wealth Inequality and the New Gilded Age

Thursday, August 4, 2011 by Fault Lines / Al-Jazeera
With 1% of Americans controlling 40% of the country's wealth, we examine the gap between the rich and the rest.

The richest one per cent of Americans earn nearly a quarter of the country's income and control an astonishing 40 per cent of its wealth.

Inequality in the US is more extreme than it has been in almost a century - and the gap between the super-rich and the poor and middle class people has widened drastically over the last 30 years.

Meanwhile, in Washington, a bitter partisan debate over how to cut deficit spending and reduce the US' $14.3 trillion debt is underway. As low and middle class wages stagnate and unemployment remains above nine per cent, Republicans and Democrats are tussling over whether to slash funding for the medical and retirement programmes that are the backbone of the US' social safety net, and whether to raise taxes - or to cut them further.

The budget debate and the economy are the battleground on which the 2012 presidential election race will be fought. And the US has never seemed so divided - both politically and economically.

The Change That Didn't Happen

Obama and the Capitalists
By ERIC TOUSSAINT and DANIEL MUNEVAR

With the announcement of the candidacy of Barack Obama for President of the United States in 2012, the campaign trail has officially started. Contrary to what one might have expected two years ago, Obama faces a tough re-election challenge. Furthermore, a victory does not seem guaranteed. Despite the stabilization of the financial system, achieved through a massive handout of public resources without any type of restrictions to the same people responsible for generating the crisis, the real economy is still awaiting the arrival of a true economic recovery.

While 89% of the benefits of economic growth in the United States during the Obama administration have gone to the corporate sector, ordinary citizens continue to face a harsh situation characterized by high levels of unemployment, a reduction of income as well as record numbers of foreclosures across the nation. It is precisely the inability of the administration to provide answers and solutions to the pressing problems of the population that calls into question its ability to win the election, despite having an advertisement budget of more than a billion dollars available for this purpose.

However, this situation is not surprising if we take into consideration the decisions Obama has made since 2008. A large proportion of the millions of voters who supported him were expecting for the new elected president to appoint a team of progressive economists which would  promote a modern version of the New Deal. A large proportion of the millions of voters who supported him were expecting for the new elected president to appoint a team of progressive economists which would  promote a modern version of the New Deal, with the objective of reforming capitalism and starting a new era of regulation of the economy. As it happened, reality was quite different. Obama instead decided to chose the most conservative economists close to the Democrats. Those responsible of promoting the de-regulation of the financial system under President Bill Clinton. When we stop and observe three emblematic names, the coherence of his choice is revealing.

The first of these advisers is Robert Rubin, Secretary of the Treasury from 1995 to 1999. Rubin was co-chair and co-CEO of Goldman Sachs from 1990-92 before he joined the Clinton administration. Upon arrival to the Treasury, Rubin was faced with the first major failure of the neoliberal model in the nineties, the Tequila Crisis in Mexico. Afterwards he strongly supported, along the IMF, the implementation of harsh austerity measures that aggravated the financial crisis experienced by South East Asia countries in 1997-1998, shortly followed by the crisis in Russia and Latin America. Rubin has never doubted the benefits of liberalization and decisively contributed to impose policies on developing countries that undermined the living conditions of its population and greatly increased inequality. In the United States, exerted its powerful influence to secure the repeal of the Glass Steagall Act, enacted in 1933. This law, among other things, made emphasis in the incompatibility of deposit and investment banking, creating a clear cut division among the two activities. Once Glass Steagall was abolished, the door was open for all sorts of greedy rentiers eager for maximum profits regardless of the risk, which ended up creating the conditions for the recent economic crisis. To close the loop, the repeal of the Glass Steagall Act allowed the merger of Citicorp with Travelers Group to form the banking giant Citigroup. In 2000, Robert Rubin joined the leadership of Citigroup, which the U.S. government had to bailout in November 2008, guaranteeing more than 300 billion dollars in assets! Its important to point out that the services provided by Rubin as chairman of Citigroup's executive committee were generously rewarded. According to the Financial Times, Rubin received over 118 million dollars in salary plus bonuses and stock between 1999 and 2008. (3) However, it was during his participation of the Board of Directors when Citigroup plunged into an increasingly risky financial policy that led to the fiasco which ended up costing the U.S. Treasury the astronomical sum of 45 billion dollars.

The second adviser on stage is Lawrence Summers, who inherited the post of director of the National Economic Council at the White House during the first half of the Obama administration. However, his career includes a number of stains which should be permanent. In December 1991, while he was chief economist of the World Bank, Summers dared to write in a memo: "Countries with small populations in Africa have a very low pollution. Air quality is uselessly higher than in Los Angeles or Mexico. It is necessary to encourage the movement of polluting industries to the LDCs. There must be some degree of pollution in countries where wages are lower. I think the economic logic which dictates that toxic waste should be directed where wages are lower is inexorable. [...] The concern [about the toxic agents] will obviously be higher in a country where people live many years and therefore more likely get cancer, than in a country where infant mortality in children under 5 years old, is 200 per thousand.” With Summers in charge, productivist capitalism would enjoy a splendid future.

Having been named Secretary of the Treasury under President Clinton in 1999, Summers put pressure on the World Bank president, James Wolfensohn, to get rid of Joseph Stiglitz who had succeeded him in the post of chief economist of the Bank. Stiglitz was very critical of neoliberal policies that Summers and Rubin pursued in all parts of the world where financial crisis took place. After the arrival of George W. Bush, Summers continued his career by becoming president of Harvard University in 2001. He came back to the spotlight in February 2005, when he won the enmity of the entire university community after a discussion at the National Bureau of Economic Research (NBER) . Asking himself questions about the reasons why there are few women in prominent positions in science, Summers pointed out that women are less equipped than men for science, ruling out any other possible explanation such as social or family background or tendencies towards discrimination. This statement caused great controversy, both inside and outside the university . Despite of apologizing for his remarks, the protests of a majority of teachers and students of Harvard forced him to resign in 2006.

His biography, which is available on the website of Harvard University at the time of his presidency, stated that he "led the effort implementation of most important financial deregulation of the past 60 years". You could not be clearer! Lawrence Summers resigned in September 2010 to his post in the National Economic Council at the White House.

The third adviser in question is Paul Volcker, who as chairman of the Federal Reserve dramatically increased interest rates in the United States in October of 1979. This interest rate hike became the main trigger of the public debt crisis in both South and the North of the planet, in the early 80's . 

The fourth adviser chosen by Obama, Timothy Geithner, has been named Secretary of the Treasury. Before his appointment in the cabinet, Geithner was  the President of the New York Federal Reserve. He was deputy Secretary of the Treasury for International Relations between 1998 and 2001, working under the supervision of Rubin and Summers, and active in Brazil, Mexico, Indonesia, South Korea and Thailand. All these countries which suffered severe crisis during that period and became symbols of the disasters brought by neoliberalism. The policies promoted by the aforementioned group of economists displaced the burden of the cost of the financial crisis upon the back of the population of the countries affected. Rubin and Summers are Geithner mentors. In February 2009, Geithner was about to lose his appointment because the press revealed that he had defrauded the Treasury by hiding a payment received from the IMF. The loss for the Treasury due to uncollected taxes amounted to 34.000 dollars . Finally, to secure his nomination, Geithner repaid his debt to the Treasury. With Obama, Geithner continues to defend the major private financial institutions, deaf to the fundamental human rights, ridiculed in the U.S. and everywhere because of the economic policies he vehemently defends.

Barack Obama's decision was not trivial. He was in a position to change the terms of the policy discussion by appointing advisors with a Keynesian background. Economists like Joseph Stiglitz, Paul Krugman, Nouriel Roubini and James K. Galbraith were willing to take on this responsibility. Nevertheless, Obama chose some economists responsible for the deregulation of the financial sector in the 90‘s. In other words, friends or agents of Wall Street.

The economic policies that Barack Obama and his team enacted in 2009 are far from those proposed in 1933 by Franklin D. Roosevelt's in the first 100 days of his administration.

The Change That Was Not

Despite being elected on the premise of hope and change, 2 years in power have shown that Obama is more than happy to fulfill the role of a mere guardian of the status quo. Contrary to the expectations of certain sectors, the Obama administration stayed on the course set by the Bush administration in key issues on foreign and economic policy. The difference between the two governments has been then more a matter of style than substance.

The lack of concrete actions to address the social crisis that originated in the economic and financial collapse of 2008, have eroded the liberal base which initially supported the Obama administration. To date, 14.4 million families have lost their homes since the beginning of the crisis and about 25 million people are in a situation of unemployment or precarious employment. The policies implemented so far, have been designed to support and ensure the survival of financial institutions responsible for the economic crisis instead of addressing the urgent needs of a large segment of the U.S. population.

Given the composition of the Obama administration's economic team the path followed should not have represented any surprises. People directly responsible for the excesses of financial institutions in their capacity as regulators of the system, such as Timothy Geithner or Ben Bernanke, faced from the beginning serious conflicts of interest. Their interest rest squarely on concealing their responsibility rather than on promoting the implementation of measures aimed at overcoming the economic crisis. Losing sight of this element of individual responsibility, on political and legal terms, would prevent understanding how on the face of allegations of abuse by financial institutions in the eviction of families from their homes or speculation with the bailout funds provided by the government, The White House has defended the interests of Wall Street over and over again.

However, it is clear that the biggest capitulation to the financial sector was the Frank-Dodd Financial Reform Act. Missing on the opportunity to restrain the excesses of financial sector that was presented with the crisis, the Obama administration carried out the implementation of a reform that completely fails to impose controls on critical areas of operation of finance. 

Adopted in 2010, this law not only allows the use of dubious accounting practices which allow to hide losses in the balance sheets of financial institutions, but also strengthens the prerogatives of the institutions deemed "too big to fail". It also completely brushes aside the regulation of financial derivatives. It is this lenient attitude towards the financial sector by the Obama administration which allows to understand how not a single executive of the sector has been prosecuted for a financial collapse, that as early as 2004 the FBI had characterized as an epidemic of mortgage fraud.

On the face of this situation is not surprising that the American people has turned their backs to the Democratic Party in the Congress and Senate elections that were held in November 2010. With an ultra-conservative discourse, and taking advantage of the uncertainty and anxiety cause by the economic crisis, the Republican Party regained control of Congress and threatens to take control of the Senate in 2012. In response to the loss of Congress, Obama ordered some changes in its economic team, with the departure of prominent members, such as Lawrence Summers, Cristina Roehmer and Paul Volcker. However, the name of the replacements indicates that the changes are merely cosmetic in nature. These include Gene Sperling, another former Clinton administration advisor which strongly advocates in favor of tax cuts, and William Daley, the former Midwest Chairman of JPMorgan, running the Chicago office. 

Since taking control of the Congress in of November 2010, the Republicans have consistently blocked all of the initiatives brought forward by the Obama administration, taking full advantage of the control that the Congress has over the government budget and the debt ceiling. The Republican strategy of systematically blocking government efforts, thus decreasing the chances of its reelection, has reached its clearest expression with the ongoing battle to raise the Federal debt ceiling. A prerogative of the Congress of the United States, the debt ceiling sets a maximum amount of debt that can be issued by the Federal Government and was created as a mechanism to exercise control by the legislative branch of the government over the executive power. Historically, the increases of the debt ceiling have been carried out as an afterthought of the political process. However in the current situation, and as it was the case in 1995, the Republicans have used their control of Congress to force the government to make cuts in social spending at the risk of refusing to raise the debt limit. The 2nd of August, Obama gave in to their demands.

If we can learn from recent history, the most affected by cuts in public spending will be the unemployed and poor of the American society, while bankers and speculators will continue to be protected by the Obama administration. This definitely was not the change that the American people had in mind when they voted for Obama in 2008.

Rick Perry's 'Texas Miracle' Includes Crowded Homeless Shelters, Low-Wage Jobs, Worker Deaths

 by Jason Cherkis - 8/4/11 - HuffPo

AUSTIN, Texas -- It was 105 degrees outside late last week when Vanessa Surita, 24, planted herself on the sidewalk and stretched her legs. Her young daughter sat in a stroller within arms length, outside the Austin Resource Center for the Homeless. Her needs were great: housing, a job, a high school diploma. She could mark progress in job applications filled out.

A local pizza chain, a Pizza Hut, a local grocery chain, a Family Dollar -- each the equivalent of a professional lottery ticket.

"I just recently tried to apply at Whataburger," Surita said. "It's been like two weeks ... I've been calling them. They still haven't had a chance to look at my application. There are like 2,000 people that apply every month, so I don't know."

Surita said she and her 21-month-old daughter crash at her sister's place with her two children. "We've been on the waiting list for housing since she was born," she said.

A few days earlier, Kelly Johnson waited patiently in a corner by ARCH's entrance. She sat hugging her backpack. She had lost her job at Subway a month ago. She found temp work sticking price tags on clothes in a warehouse. It was two days a week, and neither day was a sure thing. It did little to prevent her from ending up homeless. Last week was her first without a roof over her head.

"It feels helpless. It feels horrible," Johnson, 31, said. She had a series of jobs she wanted in mind. "I'm looking for customer service, call center, housekeeping like in hotels at the Marriott or "maybe the Omni." One day, she said, she dreams of working in an office, maybe as a paralegal.

Surita and Johnson do not fit in the prevailing narrative about the Lone Star state. According to the Bureau of Labor Statistics, Texas has created more jobs in the last year than any other state. These job openings have become known as the much-hyped, "Texas Miracle." In his February 2011 state-of-the-state address, Governor Rick Perry boasted: "Our economic strength is no accident. It's a testimony to our people, our entrepreneurs, and, yes, to the decisions made in this building. Employers from across the country and around the world understand that the opportunity they crave can be found in Texas, and they're headed our way, with jobs in tow."

Should he ultimately choose to run for the White House, Perry will be spending a lot of his time on the stump repeating those lines. Dig beneath the talking points and you find a more troubling picture: rising unemployment, a glut of low-wage jobs without benefits, overcrowded homeless shelters and public schools facing billions in budget cuts. Surita and Johnson have been airbrushed from the miracle. But they still can be found on the housing waiting lists and shelter entrances.

"If you want a bad job, go to Texas," said Texas Rep. Garnet Coleman (D), who represents a district in Houston, in an interview with The Huffington Post. "If you want to work at Carl's Jr., our doors are open, and if you want to go to a crumbling school in a failing school system, this is the place to come."

The state capital, with its expanded skyline and renovated office parks, will surely be b-roll in any Perry campaign ad. But Austin -- like many across the country -- simply hasn't witnessed across-the-board job stability.

There's a crowd outside the ARCH no matter the heat. The building was designed for 100 dormitory beds, but now sleeps 215 -- including 115 men sleeping on mats on the a second floor dining room and a conference room floor. Even then, Mitchell Gibbs, the director of development and communications, said they are turning away 15 to 50 men a night.

"Austin is supposed to be ground zero of the Texas Miracle," explained Doug Greco, lead organizer with Austin Interfaith, a nonpartisan group of some 30 congregations, schools and unions. "But we have the higher poverty rate and higher child poverty rate--nearly one in three children." He added that the need for shelter, food and clothing has spiked in the city. "It doesn't take much to pierce through the rhetoric," he said.

Texas is struggling right along with every other state. According to the Bureau of Labor and Statistics, Texas had recently bumped up to 8.2 percent unemployment in June which puts it below the national average. Still plenty of states without miracles posted lower unemployment rates; New York, Virginia, Pennsylvania, Minnesota, Louisiana, Arkansas, and Wisconsin, among others are all out performing Texas. Drill down even further into the numbers and there are plenty of residents that haven't felt the miracle.

In May, job growth slowed statewide. According to a recent report in the Houston Chronicle, Houston's not seasonally adjusted unemployment rate jumped to 9 percent. The unemployment rate has hit double digits in the Rio Grande Valley. In Hildago County, it's 12 percent. Quality of life indexes like child poverty rates put Texas further behind. State Sen. Judith Zaffirini (D) told The Huffington Post her state ranks 48th in teen birth rates, 50th in prenatal care and 46th in income disparity -- and 50th in the number of persons who receive a high school diploma by age 25.

With Texas' minimal regulation and low taxes -- and Perry's cheerleading -- a spike in job growth during the past few years became known as the Texas Miracle. The rise in oil and gas prices, as well as a long-time state law protecting homeowners, helped stave off the recession for a while. And as a result, a miracle myth was created, with little exploration as to what impact Perry's policies actually had on the economic picture. The miracle is that anyone would call minimum-wage jobs a miracle. Of the all the jobs in Texas created last year, 37 percent paid at or below minimum wage -- and the state leads the nation in total minimum wage workers, according to a recent New York Times report.

"The important thing to do is not to just count jobs but to look at what kinds of jobs are being created in Texas," explained Dick Lavine, a Senior Fiscal Analyst with the Center for Public Policy Priorities. "Texas is tied for last with Mississippi for the highest percentage of minimum wage jobs and Texas is by far the leader of residents who don't have health insurance. It's low wage jobs without any benefits."

This resonates with Gibbs at the ARCH, which created a 100-bed unit on the third floor for homeless night-shift workers who needed a place to sleep during the day. These workers, Gibbs said, included bakers from downtown hotels who simply couldn't afford Austin rents.

The ARCH may want to think about expanding its homeless worker unit. If there is continued job growth in Texas, the trend continues to point toward the low-skilled, low-wage variety. According to a just-released Georgetown University study, Texas ranks 41 among all 50 states in the percentage of jobs requiring post-secondary education.

When it comes to budget gaps, Texas is just like much of the rest of the country. This year, the state faced a projected budget shortfall totaling as much as $27 billion; the legislature also had to contend with a $4.3 billion deficit in its current budget. The state made massive across-the-board cuts to state agencies -- including $4 billion in public school cuts over two years. Perry and the state legislature also ended up closing out funding for pre-kindergarten programs for roughly 100,000 low-income children. Mass layoffs of public sector workers is expected.

The Texas Miracle may become part of Perry's national pitch, but it's nonsense to state Sen. Zaffrini. "Talking about the so-called 'Texas Miracle," she said in an emailed statement, "is at best disingenuous because it ignores the state's shameful national standing in terms of supporting education and helping the neediest of the needy."

Nor has there been much in the way of adequate job protections. Texas still ranks as the most dangerous state for worker safety. An April study [PDF] produced by the University of Texas and the Workers Defense Project stated that one in five construction workers were injured on the job, while only 45 percent had workers' compensation. The study also noted that a worker dies every 2.5 days and the state sees 16,900 job-related accidents annually.

Emily Timm, a policy analyst with the Workers Defense Project, said that roughly 45 percent of the more than 300 workers surveyed reported being paid wages below the federal poverty line. And one in five workers complained that their employers had paid them less than what they were owed. Being allowed adequate drinking water is even an issue. Nearly a third of the workers surveyed reported that their employers did not provide them with access to drinking water.

Timm said her organization has only seen a further rise in worker problems. "We're seeing more complaints of wage theft than we ever have before," she said. "We're also seeing more and more workers being misclassified as independent contractors." That distinction can be crucial, she said, as it allows the construction companies to not deduct taxes from their paychecks as well as skirt minimum wage and overtime requirements.

In Austin, that lack of income growth has been met with increasing rents and state cuts to safety-net services. This past year, rents have gone up by more than 4 percent. Fred Krebs, a pastor with the Prince of Peace Lutheran Church in central Austin, said he's noticed an increasing number of his congregants are having trouble keeping up. "People's economic level in my congregation has clearly gone down in the last few years," he said. "That's been very clear ... We've had to help our members with meals. Sometimes just $20 to make sure they have milk and eggs and bread ... We just helped a member buy glasses. It was either the glasses or their place to live."

Every Saturday morning, Pastor John Elford serves a free breakfast at University United Methodist Church for Austin's neediest. The number of residents waiting in line, he said, has recently shot up from from 375 to 500.

Elford remembered one family that stuck out. They had left California in the hopes of finding their own piece of the Texas Miracle in Austin. They were in their mid-to-late '30 with two elementary-school aged kids. Things didn't work out so much. "They ran out of money," he said. "They came to us."

Elford's church collected enough money to put the family up in a motel for week. "When I talked with them, they were just worn out from living here and there," he said. At the end of the week, the family moved back to California to live with relatives.

If Conservatives Were Right About the Economy (2 articles)

If Conservatives Were Right About the Economy
August 4th, 2011 by David Frum

Further to yesterday’s post about the respective economic acumen of the Wall Street Journal editorial page vs. Prof. Paul Krugman:

My conservative friends argue that the policies of Barack Obama are responsible for the horrifying length and depth of the economic crisis.

Question: Which policies?

Obama’s only tax increases – those contained in the Affordable Care Act – do not go into effect until 2014. Personal income tax rates and corporate tax rates are no higher today than they have been for the past decade. The payroll tax has actually been cut by 2 points. Total federal tax collections have dropped by 4 points of GDP since 2007, from 18+% to 14+%, the lowest rate since the Truman administration.

If so minded, you could describe Barack Obama as the biggest tax cutter in American history.

We have not seen a major surge in federal regulation, at least by the usual rough metrics: the page count of the Federal Register has risen by less than 5% since George W. Bush’s last year in office. Trade remains as free as it was a decade ago.

While the Affordable Care Act itself will eventually have major economic consequences, most of its provisions remain only impending.

Energy prices have surged, but that’s hardly a response to administration policies.

Conservatives complain about restrictions on drilling in the Gulf of Mexico, but on a planet that produces 63 million barrels of oil per day, a few thousand more or less from the Gulf will not much budge the price of oil. Rising oil prices are a story about Chinese and Indian consumption and Middle Eastern political instability, not about US drilling or lack thereof.

The Dodd-Frank bill does somewhat curtail the activities of some banks and investment firms. But is it seriously argued that this could be the cause?

Conservatives complain about excess government spending. Fine. But isn’t the evil of excess government spending supposed to be inflation rather than recession? And where’s the inflation?

There’s a strong case for condemning Barack Obama for the things he might have done, but did not do. He might have cut payroll taxes more and faster. He might have pushed for more expansionary Federal Reserve governors. He might have designed a better stimulus. All true. But the things he did do? Texas Gov. Rick Perry today urges us to believe that the economy is gripped by the worst slump since the Great Depression because Obama spoke disrespectfully of the owners of private jets. To which I can only say: Really? That’s the indictment? Really?

+++++++

Were Our Enemies Right?
August 3rd, 2011by David Frum


In February 1982, Susan Sontag made a fierce challenge to a left-wing audience gathered at New York’s Town Hall:

Imagine, if you will, someone who read only the Reader’s Digest between 1950 and 1970, and someone in the same period who read only The Nation or The New Statesman. Which reader would have been better informed about the realities of Communism? The answer, I think, should give us pause. Can it be that our enemies were right?

Posing that question won Sontag only boos from an audience that the New York Times described as “startled.” Yet the question has only gained power over the intervening years. It contributed to the rise of a healthier, more realistic left much less tempted to make excuses for “progressive” dictatorships than the left of the last generation. If Hugo Chavez has any defenders on the contemporary American left, I haven’t heard of them.

Think of Susan Sontag as you absorb the horrifying revised estimates of the collapse of 2008 from the Commerce Department. Two years ago, Commerce estimated the decline of the US economy at -0.5% in the third quarter of 2008 and -3.8% in the fourth quarter. It now puts the damage at -3.7% and -8.9%: Great Depression territory.

Those estimates make intuitive sense as we assess the real-world effect of the crisis: the jobs lost, the homes foreclosed, the retirements shattered. When people tell me that I’ve changed my mind too much about too many things over the past four years, I can only point to the devastation wrought by this crisis and wonder: How closed must your thinking be if it isn’t affected by a disaster of such magnitude? And in fact, almost all of our thinking has been somehow affected: hence the drift of so many conservatives away from what used to be the mainstream market-oriented Washington Consensus toward Austrian economics and Ron Paul style hard-money libertarianism. The ground they and I used to occupy stands increasingly empty.

If I can’t follow where most of my friends have gone, it is because I keep hearing Susan Sontag’s question in my ears. Or rather, a revised and updated version of that question:

Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?

America's 4-D Economy: From Deficit Deals to Double Dip

by: Jack Rasmus, Truthout | News Analysis | Thursday 4 August 2011

With the debt ceiling agreement almost a certainty this past Sunday evening, the expectation was the markets and the economy would rebound briskly the following day. After all, weren't we all bombarded for weeks with the message that if the debt ceiling were not raised, the economic sky would fall in? The economy would tank? Economic Armageddon was coming? So, if we raised the debt ceiling, the markets would rebound, right?

On Monday the stock market at first did rebound on the news of the imminent debt deal, but only briefly and modestly. It quickly turned around within hours on Monday, declining sharply by the end of the day. Why? The debt deal was in the bag by Monday. The recalcitrant House and Teapublicans voted for it. Only the formality of the Senate voting on Tuesday remained. Why wouldn't the markets, falling most of the previous week, snap back with the conclusion of the debt deal?

Instead, the markets slumped badly by the close of business on Monday, not because of the debt deal, but in response to a report late that morning showing the July US manufacturing activity index had fallen to 50.9 percent in July from 55.3 percent in June - the largest collapse in years and to the lowest level since June 2009, which was the trough of the recent recession. Fifty percent for the manufacturing index represents no growth. That's stagnation. Even more serious in the report, future orders for manufactured goods fell to 49.2 percent - a clear contraction - the first such since June 2009, as well. In other words, in terms of manufacturing at least, the economy now was right back where it was two years ago.

No wonder the stock market shuddered on Monday, notwithstanding all the "good news" about the debt deal. The performance of the real economy was far more important and "real" than all the huff and puff about debt ceilings and defaults by the US government. The alleged "good news" of the debt agreement was overwhelmed by the undisputable "real news" that the real economy was heading for a relapse.

And it was not just the US economy. Not reported by the US press on Monday was that the US manufacturing index's nearly 5 percentage points drop was being echoed at the same time by a decline in global manufacturing - in Europe, UK, Asia, even China. All reportedly had begun to slip.

On Tuesday, the debt ceiling deal was voted up by the Senate and signed by Obama into law. But the New York Stock Exchange fell by another 265 points and the NASDAQ by a whopping 75. Wait a minute! The debt deal was officially done, wasn't it? No chance of a reversal. So, why did the markets finally respond so negatively? The "real" reason was a further report on Tuesday. Consumer spending - representing 70 percent of the economy - fell by 0.2 percent, the first drop since September 2009.

In the face of this evidence of imminent contraction of the US economy, Congress voted to cut deficits in the amount of $1 trillion for certain, with another minimum $1.2 trillion in spending reductions due before the year end. Granted, much of that $2.2 trillion will be spread over ten years. But there will be about $30 billion in immediate cuts this year from the initial $1 trillion deficit reduction. Most of that will come from education, and still more, and bigger, first year spending cuts before year end.

The second round of $1.2 trillion in cuts will likely equal at least another $50 billion to $100 billion in the short term, most of that from Medicare-Medicaid and a lesser, token amount from defense, this writer predicts. That's about $100 billion in total federal government spending cuts impacting the economy this coming year. Add to that the $38 billion in cuts in spending enacted last spring in revisions to the 2011 budget, plus another $100 billion spending cuts forecasted by state and local governments the coming first year, and what you get is around $250 billion in spending reductions for the coming year.

But this $250 billion's impact must be "multiplied" to get its true, final economic effect. Economists estimate the "multiplier" from government spending at about 1.5. That means for every $1 cut in government spending, about $1.5 dollars are taken out of the economy. The first year of cuts are therefore $375 billion to $400 billion in terms of their economic effect. Ironically, that's about equal to the spending increase from Obama's 2009 initial stimulus package. In other words, we are about to extract from the economy - now showing multiple signs of weakening badly - the original spending stimulus of 2009!

As others have pointed out, that magnitude of spending contraction will result in 1.5 million to 2 million more jobs lost. That's also about all the jobs created since the trough of the recession in June 2009. In other words, the job market will be thrown back two years as well.

With the debt ceiling deal, the US Congress and the president have crossed the bridge into the parched desert of "austerity." This is an historic juncture, shifting from stimulus to grow the economy out of recession, to austerity to thrust it back into recession! But the politicians of both parties are due for a rude surprise. Deficit cutting and austerity will result in worsening deficits and more debt - not reductions in deficits. An economy cannot cut its way out of a deficit and recession any more than a company can cut its way back to long-run profitability. It can only grow its way out by generating more revenue. For a company, that means selling more products and sales revenue; for the economy, that means creating more jobs and raising tax revenue.

Austerity solutions are a dead end. If anyone believes austerity solutions are the answer to recovery, they should simply look at Greece, Ireland, and the rest of the periphery of the eurozone. Imposing austerity there has resulted in a further deepening recession, falling tax revenues and still worsening deficits and debt. Ditto for the conservatives in the United Kingdom, whose recent deficit cutting is now thrusting that economy back into recession. The same is inevitable for the US if it continues toward austerity, deficit and spending reductions as a way to recovery. To employ a metaphor, austerity is like trying to win a race by shooting yourself in the foot at the starting block.

Nevertheless, it appears more austerity is on the agenda in the US - the next round in the 2012 budget negotiations due by October 1 and further in the December cuts that will be mandated by the so-called Bipartisan Committee; and following that, still more cuts, this writer predicts, in 2012, as the recession wipes out a good part of the prior spending cuts.

More cuts will follow because, despite the deficit cutting, the US budget deficit will now actually worsen and not improve. As the economy slides, tax revenues will fall below those officially projected, generating a call for even more cuts from those who believe deficit and debt reduction will restore business confidence and, therefore, investment and recovery.

All the talk about restoring business confidence is, in other words, simply a "confidence game." Collapsing business confidence is a consequence not of deficit cutting, but of consumers being unable to afford to buy their products. Want to change business confidence? Help consumers buy their products and see how fast that confidence returns. Adding two million more to the total jobless will only reduce consumers' income further, exacerbate the decline in consumption already underway and result, in turn, in a further deterioration of business confidence.

The past few days, the US economy has been dealt several severe blows in the reports on manufacturing decline and consumers retreat - a "one-two punch." Over time, the realization will grow that the deficit cuts - $1 trillion now and another $1.2 trillion in a couple months - will do great harm to the economy. The cuts represent another major "body blow" to the economy that is already rapidly weakening. The markets know this. "Business confidence" knows this. Apparently, only the politicians don't.

And more is yet to come. On Friday, the jobs report for July is due for release. July and August employment reports will show even more clearly the serious extent of the economic slide now underway. The coming jobs reports could prove a "knock-out" blow to the economy. The "big money" investors are already betting on that outcome. Dump your stocks and stuff your closet with bonds! The recent debt ceiling debate, in retrospect, appears as just the opening act, with the amateurs (Congress and Obama) flailing at each other, until finally exhausted and calling it a draw, returning to their respective corners to catch their breath. The "main event" is yet to come.

In early 2009, Obama implemented his economic stimulus and recovery plan. The Congress and US Treasury spent $2 trillion and the Federal Reserve more than $9 trillion to bail out the banks. What we got was the weakest and most lopsided recovery since 1940. After a brief twelve months, the economy sagged again in last summer 2010, followed by $600 billion more Fed stimulus, and $350 billion more tax stimulus at year end 2010, which included $250 billion in Bush tax cut extensions. The result? The economy slowed again, even more quickly, to less than 1.0 percent growth in GDP the first six months of 2011. The current third quarter, July-September 2011, will likely prove worse. Stepping into that ring are Congress and Obama. Double-dip recession will be their joint legacy. And if the banking system implodes in Europe, the outcomes will be even worse ... much worse.

Social Security's Biggest Threat: The Debt Deal Super Committee

Russ Feingold - Posted: 8/4/11

This week's deal to raise the debt ceiling should remove any doubt about the power corporate interests have over our government. The deal, hammered out by the president and Republican congressional leaders, places the burden of reducing our long-term budget problems squarely on average Americans, while the wealthiest individuals and corporations are given a free pass.

But the deal poses a larger threat. A provision in the agreement creates an appointed "Super Committee" in Congress that could circumvent normal rules and slash cherished programs like Social Security, Medicare, and Medicaid.

How could this happen? Prior to this week's debt agreement, it's been extremely difficult to cut Social Security benefits, because doing so required 60 votes to overcome an almost certain filibuster in the Senate. And rightly so - Social Security is the most successful and popular government program in the history of the United States.

Yet the so-called Super Committee, which will be appointed by congressional leaders in both parties to consider additional budget cuts, will enjoy authority that no other entity or special legislative process has ever had: it will have the power to propose Social Security reductions that are guaranteed an up-or-down vote in the Senate, and therefore can be adopted by a simple majority. And unlike most measures in the Senate, the Super Committee's recommendations related to Social Security will not be subject to unlimited debate - a standard protection against drastic action. Further, no amendments will be allowed. Make no mistake, those who crafted and agreed to the Super Committee were well aware of this and there can be no doubt Republicans plan to take full advantage.

So ultimately, if the Super Committee's recommendations propose cuts to Social Security, the only means to block them would be to strike down the entire Super Committee bill. But there's a dangerous trapdoor - failing to enact the overall Super Committee bill would trigger automatic across-the-board cuts that will be strongly opposed by powerful constituencies.

In short, unless congressional leaders appoint progressives willing to stand up to moneyed interests, the Super Committee will be nothing less than a chopping block for Social Security.

Here's how it would work: assuming all 6 Republican appointees support Social Security cuts, it would only take one Democratic appointee to include them in the committee's final recommendation. Once cuts to Social Security are included in that final Super Committee bill, the Senate's 47 Republicans would need just four Democrats to produce the majority needed to pass them, and unfortunately finding those four Democrats probably is not all that difficult.

And ironically, the inability to amend the Super Committee legislation will provide some senators with the perfect excuse: "I didn't like the Social Security cuts, but I had to accept them as part of the entire bill."

This means that the identity of the Democratic appointees to the Super Committee will be critical. Because sadly, there are already a handful of Democratic senators ready to take an axe to Social Security; and regrettably, some of them are well positioned to sit on the Super Committee. So it's essential that every Democrat appointed to this perverse Super Committee pledge to reject any cuts to Social Security.

House Minority Leader Nancy Pelosi understands this, and has promised that each of the Democrats she appoints to the Super Committee will oppose entitlement benefit cuts. Democrats should urge Senate Majority Leader Harry Reid to make the same commitment. America's most cherished social program must be protected.

The Debt Deal

Mucous Membrane - Venus of the Hard Sell

I'm a comic book fan--not really superhero comics, but mostly sci-fi, horror and cyberpunk type stuff. One of my favorites is Hellblazer (DC/Vertigo), about the "Laughing Magician," John Constantine (horribly portrayed in the cinema by the movie "Constanteen."). Anyway, he used to sing for a fictional punk band, Mucous Membrane. Out of love for the book, Spiderlegs recorded a version of their song "Venus of the Hard Sell" in 2006. Above is the video compiled by a friend of mine from actual pages in the comic. And below is the fictional history of the song and band. Sorry about the vocals, they were never finished...

Mucous Membrane (1977-1979) were a not so legendary punk band founded by songwriters John Constantine (vocals) and Gary Lester (guitar). Rounding out the band were 'Les' on the bass, and 'Beano' on drums. They played most notably at The Casanova Club in Newcastle, and around London, as well. Their one single, 'Venus of the Hardsell' (for which this music video was made) was released in 1978 by the defunct record label, 'S'not Music. Though it was the band's best known song, it didn't do so well. Soon after they disbanded in 1979, singer John Constantine was committed to the Ravenscar Secure Facility after having gone insane as a result of an unconfirmed questionable supernatural event that unfortunately resulted in the deaths of the Casanova Club's owner, Alex Logue, and his young daughter, Astra.

Now mostly forgotten, the band's rumoured connections with the occult have proven to be of interest to all types of journalists and documentary film makers.

The Recovery Is Dead, Long Live the Recovery

Wednesday, August 3, 2011 by TruthDig.com

by Robert Scheer

 

The die has been cast. Obama’s “nearly complete capitulation to the hostage-taking demands of Republican extremists,” as an editorial in the normally sedate New York Times described the deal to raise the debt ceiling, is a disaster in the making. It rules out a vigorous government response to the persistent economic stagnation in which joblessness, housing foreclosures and an ever-widening gap between the top 2 percent and the rest of Americans have become the norm.

But to use the word “capitulation” is too kind, since this president, as was Bill Clinton before him, is clearly one of those “New Democrats” who welcomes the opportunity to jettison the legacy of Franklin Delano Roosevelt as outmoded political baggage. Otherwise, why would Obama have reached for a “grand bargain” in which he even put Social Security and Medicare cuts on the table before the Republicans rolled him?

That same opportunistic reasoning got us into the Great Recession, thanks to President Clinton joining with congressional Republicans to destroy the sensible controls on Wall Street greed that FDR had put in place in order to prevent a repeat of the Depression. That was also the rationale of the Clinton alums that Obama appointed to clean up the mess they themselves had created. Instead of worrying about jobless workers and swindled homeowners, they bailed out the swindlers, following the example set by George W. Bush.

Those policies caused the 50 percent run-up of the national debt between 2007 and this week, when the debt ceiling had to be raised. While the trillions wasted made the bankers whole, it did nothing for the 50 million Americans losing their homes or the 20 percent of the workforce that can’t find the full-time employment for which they are qualified. The economy has zeroed out in the past six months, relative to population growth, and in June consumer spending had its biggest drop in two years. The fundamentals are rotten, as reflected in the steep descent of the stock market despite the raising of the debt ceiling.

The Republicans in control of the House excluded such dismal facts concerning the actual state of the economy when they set the terms for the debt ceiling debate, terms the president came to accept. Following the back and forth between Congress and the White House, one would have thought that the recession is over and now is the time to fix extraneous problems that are a quarter of a century up the road, like the baby boomer impact on Social Security. If adults, of either party, had been watching the store, raising the debt ceiling would have been a no-brainer. Instead, the obvious obligation to pay debts that Congress had already incurred was turned into an occasion to wage ideological war on the very idea of government.

In the end, Obama agreed to major cuts at a time when the government needs to spend more money on extending unemployment insurance, mortgage relief to avoid foreclosures, and support for state budgets so that more teachers and firemen are not laid off. That would put money in the pockets of people who would spend it, rather than continue the tax breaks for the rich and coddling the corporations that are sitting on a $2 trillion surplus they refuse to invest.

To cut federal expenditures in the midst of a deep and persistent recession would have been viewed as madness by every modern Republican president, from Eisenhower, Nixon, Ford and Reagan to both Bushes. Ronald Reagan had no qualms about doubling the entire national debt that had been accumulated by all previous presidents from George Washington to Jimmy Carter.

In the current debate, Republicans were accurate in reminding that the presidents from their party had to contend with Democratic grandstanding, including by then-Sen. Obama, in opposition to the inevitable lifting of the debt ceiling. But raising the debt ceiling was always assured and never once did the Democrats go so far as to threaten to put the United States of America into default or risk the nation’s perfect credit rating.

Neither party has ever dared to use the deficit ceiling to blackmail the entire nation—until now. And for that, the GOP is the party clearly at fault. But it is also true that, in his zeal for centrist consensus, a preoccupation doomed to failure in a time of tough choices, it was Barack Obama who folded.

Obama Blows a Judas Kiss to the Poor

Wednesday, August 3, 2011 by CommonDreams.org

by Ray McGovern

 

The unconscionable result of the manufactured crisis over the debt ceiling shows that the political Right knows how to play hardball, and that President Obama and his hapless party know how to get rolled.  There are other options; and we, the people, need to press them home.

The Obama-brokered deal on debt and spending was certainly what the Germans call eine schwere Geburt (a difficult birth); this one should have been aborted.

The Obama surrender reminds me of a sermon that Dr. Martin Luther King gave during the turbulent 1950s, in which he peered into the future and issued a prescient warning:

“A nation or a civilization that continues to produce soft-minded men purchases its own spiritual death on an installment plan.”

In promoting and then signing yesterday the so-called “deficit reduction” legislation, President Barack Obama has placed himself squarely in the ranks of those spiritual-death-dealing, “soft-minded” men about whom Dr. King warned so ominously.

Many dyed-in-the-wool Obama supporters may now summon the courage to let the scales fall from their eyes.  Obama’s one-sided “compromise” so clearly promotes the interests of the wealthy over those of the poor that, in Biblical terms, it can readily be seen — literally — as a God-damned deal.

I want to share some thoughts primarily with those among us — believers and non-believers alike — who shudder at the prospect of our children and our children’s children inheriting a country far different from the one promised by the American Dream, a nation approaching “’spiritual death.”

But wait; hold it one more second, those of you just about to press the “delete” key.  If you are not yet concerned over the growing disparity between the rich and poor in this country, take just one more minute to ponder another warning from Dr. King in the same sermon:

“Passively to accept an unjust system is to cooperate with that system, and thereby to become a participant in its evil.”

Those of you still with me, please swallow hard.  For it is a bitter pill, a great disappointment, that the President has turned his back on those for whom the Hebrew and Christian scriptures express God’s deepest concern — those the Bible calls the “anawim.”  Similar concern runs like a thread though the Koran.

Anawim is not just a generic reference to those on the margins of society.  Rather, the word denotes the despised, hated poor so often resented by the well off — the poor who, lacking boots, cannot relate to admonitions to “pull themselves up by their bootstraps.”  The category of anawim includes the widows, orphans, and strangers who, the authors of the Bible make abundantly clear, enjoy priority as recipients of God’s concern and compassion.

My atheist friends regularly remind me of the need to widen my perspective, and they are, of course, correct.  The scriptural mandate to care for the widows, the orphans, the strangers neither requires nor presupposes a faith perspective, but spring from basic human instincts at their best.

Moreover, in modern American history, it also been shown that having a vibrant middle class is good for business, while a society of a few rich and many poor is prone to destructive boom-and-bust cycles.  A huge majority of economists concede that the “deal” Obama signed into law yesterday will do little, if anything, to improve the lives of those of our fellow citizens deprived of work, shelter, medical care, and other necessities.

In sum, Obama — again put in a corner by the Right, which showed itself ready to force the United States into default if it did not get its way — reneged on a promise not to let the burden for coping with the economic/fiscal mess fall primarily on the backs of the poor.

The immediate deficit-cutting plan excludes any additional tax revenues from the rich, a line in the sand drawn by Republicans who were determined to protect even an extravagant tax loophole for corporate jet owners and special tax breaks for oil companies recording record profits.

And Republican leaders have made clear that they will be equally adamant against any new tax revenue from the recommendations of a special congressional committee, meaning that the United States will soon face another budget crisis in which the Republicans will demand even deeper spending cuts.

The Demonic and ScriptureScripture contains many stories in which demons play a central role.  Those texts were always a stretch for me — that is, until I found myself looking closely into, and writing about, our country’s use of kidnapping, torture, and black-site prisons — not to mention targeted assassinations. No longer could I make light of the demonic.

Lessons from the various indignities visited on many of my friends in inner-city Washington have served as confirmation.  Ex-offenders and others in the “justice” system are particularly prominent members of the anawim of our nation’s capital.

If we are to follow Dr. King’s mandate to avoid participation in unjust systems, policies, and practices inevitably exacerbated by the legislation the President signed yesterday, we need to decide how to react.  Hopefully, we will choose to move forward in a wide, justice-and-peace oriented community.

Listening to Jeremiah WrightFrom what is known of Obama’s pastor in Chicago, and the United Church of Christ’s reputation for faithfulness to Hebrew as well as Christian scripture, it is a safe bet that the social gospel was preached again and again to Obama and his co-parishioners in the pews.
There is no way he could have escaped the insight that the ancient Hebrew concept of social justice was something that many in the U.S. power elite today would decry as an un-American activity.  That concept, fully embraced by Jesus of Nazareth challenges modern America and our economic inequality at almost every turn.  It is a particular challenge to those of us with heaps of unearned privilege to do what we can to create a more level playing field.

Take, for example, the Biblical concept of the Jubilee Year, which mandated redistribution of wealth every 50 years.  (See what I mean about “un-American?”)

I believe we can assume that, if Obama were paying attention, he would have assimilated the starkly countercultural Hebrew insight of the Jubilee year — an inspired concept that rejects the idea of accumulated wealth and the outsized power that goes with it.

Bible writers were dead serious in calling for the redistribution of wealth. The Jewish genius was that, over time, any human community would inevitably see immoderate wealth and immoderate poverty co-existing (sound familiar?).  In other words, it was a given — for a bunch of very human reasons — that there would be mal-distribution of wealth.

The concept of Jubilee was to squash it all back down, essentially requiring everyone to return to the same starting point every 50 years as a matter of law.  Debts would be canceled, foreclosed farms returned to previous owners.  Granted, it was a primitive idea for a simple economy, but the Jubilee spirit was the spirit of the God of the Hebrews, who insisted time and time again through the Biblical writers and prophets “there shall be no poor among you.”  And for that to be achieved, there had to be periodic sharing of wealth.

It would, I suppose, be too much to expect that President Obama would have broached something along these lines to House Speaker John Boehner.  But would it be too much too much a stretch to expect some mutual concern — from Republicans and Democrats alike — over the growing disparity between rich and poor in this country?

Boehner is fond of advertising that he is a Catholic.  Me too.  I would be surprised if he had not learned in his 12 years of Catholic schooling that the first thing Jesus of Nazareth said in his inaugural speech was that he had come to “bring good news to the poor.”  Yesterday, there was only bad news for the poor — very bad news in the debt-limit “compromise.”

From Jeremiah Wright to Lord ActonWords about power come to mind — specifically those of 19^th Century Catholic historian and Member of Parliament Lord Acton, who warned “Power tends to corrupt; absolute power corrupts absolutely.”  As familiar as it is, I suspect the adage is a tight fit for our young, still inexperienced President.  If this is the case, we have no choice but to unmask him.  That is our job as citizens in a democracy and people who care about justice.

In Obama’s public appearances there have been a few times when he showed some sensitivity to the problem of extreme accumulation of wealth and power at the top, and the need to rein it in.  He quickly learned that one speaks out on this at one’s own peril.

Remember campaigner Obama’s brief chat with Joe (the Plumber) Wurzlebacher in Toledo on October 12, 2008, when Obama unwittingly hit a live wire — figuratively speaking?

The Democratic nominee had been campaigning hard and must have been tired, for he seemed to forget, momentarily, the difference between Biblical and American justice.  He said:

“My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody … I think when you spread the wealth around, it’s good for everybody.”

The Republicans and right-wing news media pounced on the comment, accusing Obama of running for “redistributionist in chief.”  Fox news played up the following snide statement from a spokesman for John McCain:

“If Barack Obama’s goal as President is to ‘spread the wealth around,’ perhaps his unconditional meetings with Hugo Chavez, Raul Castro, and Kim Jong-Il aren’t so crazy — if nothing else, they can advise an Obama administration on economic policy."

A chastened Obama quickly learned his lesson.  Since the Joe-the-Plumber incident, Obama has avoided any clear suggestion that he might see some benefit in a more equitable sharing of wealth.  Indeed, he has become knee-jerkedly cautious.

On February 7, 2011, the President volunteered to undergo a TV grilling by Fox’s Bill O’Reilly on TV just prior to the Super Bowl and was prepared for O’Reilly’s “when-did-you-stop-beating-your-wife”-type question on sharing wealth:

“Do you deny that you’re a man who wants to redistribute wealth?” asked O’Reilly.

“Absolutely.  Absolutely,” Obama responded.

O’Reilly, who stared at the President with demonstrative incredulity, is himself an interesting case study.  A graduate of Catholic grammar and high schools on Long Island, he earned in 1971 a B.A. in history from Marist College founded by the Catholic order of Marist Brothers in Poughkeepsie, New York, and then taught briefly in a Catholic high school.

There is no indication that anywhere along the line anyone told him of the Jubilee Year concept, or that Jesus of Nazareth said he came to bring “good news for the poor” — or that it was, in fact, a fundamental requirement for those who be Jesus’s followers also to be good news to the poor.  Instead, O’Reilly has been good news for Fox, and Fox for O’Reilly.  Wikipedia records his annual salary at $20,000,000.

Pardon the digression, but O’Reilly reminds me of an anecdote we tell in the Bronx about the “lace-curtain Irish,” many of whom fled the U.S. mainland for more posh surroundings on Long Island.  You do not have to “know the territory” to get my drift, for the syndrome is not peculiar to the Irish.  Surely, you don’t have to be Irish to forget your roots.  Bronxites Colin Powell and Eric Holder, sadly, are proof enough of that.

The anecdote?  “Give an Irishman a clean pair of underwear and he’ll vote Republican every time.”

Given how Obama has now capitulated in “resolving” the manufactured crisis over raising the debt ceiling and other fiscal measures, he seems determined to make good on his declaration to O’Reilly.

Backs of the PoorThe President’s most recent comment on power and wealth appears, in the light of his capitulation in recent days, another damning piece of unintended irony.  On April 20, at a Town Hall meeting at Facebook headquarters in Palo Alto, CA, the President inadvertently gave a hint regarding how easy it would be to do what he actually ended up doing — even while criticizing Republicans for neglecting the poor.

Here’s what Obama said, to loud applause from the well-heeled folks at Facebook:
"Nothing is easier than solving a problem on the backs of people who are poor, people who are powerless and don't have lobbyists or don't have clout.

Then, ostensibly to avoid an unprecedented default on the payment of U.S. debts, Obama ultimately opted for this “easier” course of action, exempting the wealthy and corporations from pitching in to solve the debt problem and bowing to Republican demands that everything come out of cuts on spending.

The outcome of the debt-ceiling battle has left many disillusioned Democrats and progressives convinced that it is foolhardy to expect Obama to behave any differently, even though he continues to promise a vigorous debate the issues he has neglected under pressure from the Right.  The rhetoric, of course, is great; but he seldom delivers.

What to Do? It’s the (War) Economy, Stupid!

1- Face up to the fact that Obama is one of those “soft-minded” men Dr. King warned about, and that if we citizens do not rise to the occasion, we can expect “death on the installment plan” for our democracy and firmer implantation of plutocracy.

2 – Knock on the doors of rectories, synagogues and mosques, just to see if there’s anyone home and if anyone cares about what is happening to those on the margins of our society.  Ask religious leaders if they are aware of what happened in Germany during the Thirties, when Catholic and Lutheran church leaders could not find their voice, and ended up functioning, as Hitler intended, as a force of stability for his regime.  See if we can wake anyone up in the religious institutions who might have ties to the Establishment.

3 – Do all we can to let our citizen sisters and brothers know that 58 cents of each dollar of federal “discretionary spending” now go to the Pentagon.  And make sure that they have heard that the U.S.S.R. — America’s “main enemy,” imploded 20 years ago and that, despite the absence of a threat from a major power, U.S. military spending equals that of all the other countries of the world put together.

4 – Make sure Americans know, not only what President Dwight Eisenhower said in his Farewell Address about the military-industrial complex, but also what Gen. Douglas MacArthur said ten years earlier.  Neither of these generals was exactly a “dove.”  Here’s MacArthur:
“It is part of the general pattern of misguided policy that our country is now geared to an arms economy which was bred in an artificially induced psychosis of war hysteria and nurtured upon an incessant propaganda of fear.” (May 15, 1951)

5 – Since the Obama administration and Congress cannot be counted to pursue traditional American justice (not to mention Biblical/Jubilee-type justice), and since American religious institutions (with few exceptions) are riding shotgun for the system, we might do well to heed the admonitions and challenges that come to us from popular theologian Annie Dillard; Cesar Chavez, co-founder of the United Farm Workers; and Mario Savio of the Berkeley Free Speech Movement of the 60s:
Dillard:  “There is only us; there never has been any other.”
Chavez:  “There are already enough of us.  But without action, nothing is going to happen.”
Savio: “ There comes a time when the operation of the machine becomes so odious, makes you so sick at heart, that you can’t take part, you can’t even passively take part; and you’ve got to put your bodies upon the gears and upon the wheels, upon all the apparatus, and you’ve got to make it stop.”

6 – Join Washington, D.C.’s “Tahrir Square” gathering beginning on October 6, 2011, the tenth anniversary of the U.S. attack on Afghanistan.  Join with other people of conscience in public repudiation of the dysfunctional system bringing us “spiritual death on an installment plan.”  Join in the kind of enduring, nonviolent resistance of the kind we have admired not long ago in Cairo, Egypt, and in Madison, Wisconsin.  (See: http://october2011.org/statement.)

It is true.  We are the one we’ve been waiting for.  See you in October.

$1.5 Trillion Still Owed to Treasury, Federal Reserve

Money Still Owed In Federal Bailout

WASHINGTON - August 3 - A new study released today by the Center for Media and Democracy (CMD) shows that, despite rosy statements about the bailout's impending successful conclusion from federal government officials, $1.5 trillion of the $4.8 trillion in federal bailout funds are still outstanding.

The analysis, presented in charts and an online table and program profiles, is based entirely on government records. This comprehensive assessment of the bailout goes beyond the relatively small Troubled Asset Relief Program (TARP) program to look at the rest of the Treasury and Federal Reserve’s multi-trillion dollar response to the financial crisis. It shows that while the TARP bailout of Wall Street (not including the bailout of the auto industry) amounted to $330 billion, the government also quietly spent $4.4 trillion more in efforts to stave off the collapse of the financial and mortgage lending sectors. The majority of these funds ($3.9 trillion) came from the Federal Reserve, which undertook the actions citing an obscure section of its charter.

“In order to understand the big picture on the bailout, you have to look beyond TARP and examine the trillions the Federal Reserve has disbursed to keep the big banks above water. $4.8 trillion went out the door to aid financial companies and repair the damage they caused to financial markets, and $1.5 trillion of that is still outstanding,” said Mary Bottari, director of CMD’s Real Economy Project.

TOTAL WALL STREET BAILOUT COST TABLE: You can click here to see our a full list of each bailout program, the amount of money disbursed and the amount of money outstanding in each program.

Most of the bailout funds were comprised of aid to banks – the peak outstanding amount was $2.2 trillion in January 2009 – which took place at the height of the financial crisis in the form of loans with below-market interest rates and for questionable collateral to banks directly from the Treasury and Federal Reserve.

Mortgage-Backed Securities Purchases
CMD’s study also shows how the government is continuing to prop up the same banks that caused the crisis in its attempt to help the housing market. The government’s housing program – which peaked at $1.6 trillion outstanding in July 2010 – is aimed at keeping mortgage lending flowing by subsidizing deals Fannie Mae and Freddie Mac make with the banks. Treasury and the Federal Reserve’s main approach has been to buy more than a trillion dollars worth of mortgage-backed securities from Fannie Mae and Freddie Mac so that the two government-sponsored enterprises can continue to purchase and bundle mortgages from the banks, which they sell to Fannie and Freddie at a profit.

The banks also benefit from the hundreds of billions in direct loans the government has made to Fannie and Freddie, which the GSEs then turn around and make in insurance pay-outs to banks for mortgages that have gone bad. This massive effort is in stark contrast to the mere $2 billion the Treasury has spent to directly help homeowners stay in their homes via the widely criticized Home Affordable Mortgage Program (HAMP) program. With housing prices continuing to falter and the United States approaching 9.2 million foreclosure filings since the beginning of 2008, HAMP can be described as nothing less than an abject failure.

“The Federal Reserve and the Treasury have spent $1.6 trillion in a bank-shot to save the mortgage lending market by using the same financial companies that got us into this mess,” said Conor Kenny, lead author of the study. “That’s more than 800 times what they’ve spent directly to keep homeowners in their houses, and the banks have made money off the whole thing.” CMD’s analysis also shows how the $4.8 trillion bailout of the financial sector dwarfs the $600 billion that the Federal Reserve spent on the much-hyped “Quantitative Easing 2” of 2010-2011 that was intended to help the broader economy – not just the financial sector – by lowering interest rates across the board and preventing deflation.

Every Sperm is Sacred

Debt Ceiling Deal Will Cost 1.8 Million Jobs In 2012

(Here is even more proof that the politicians leading the Republican and Democratic parties are fundamentally clueless regarding legislating the nation into recovery from this "small 'd' depression." They are the loyal servants of their wealthy masters, and it shows. With the real unemployment rate, the U6, at 16.2%, this economy can ill afford another 1.8 million lost jobs. Because all these lost jobs aren't coming back--they get replaced by 1/4 as many minimum waged jobs. Mad yet? Come on! And that will seal the end of Obama's feeble presidency. Though, I'm not looking forward to President Perry, either.--jef)

By Marie Diamond on Aug 2, 2011

The Economic Policy Institute, a top nonpartisan think tank, estimates that the deal struck this weekend to raise the nation’s debt limit will end up costing the economy 1.8 million jobs by 2012. Today the Senate is expected to approve the package passed yesterday by the House and send it to President Obama. But while the unemployment rate remains above 9% (U3--the more accurate U6 is 16.2%) the deal does nothing to address chronic joblessness.


The agreement would reduce spending by at least $1 trillion over 10 years, but even the near-term cuts could shrink already sluggish GDP growth by 0.3% in 2012. According to EPI, the plan “not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs.” In particular, the immediate spending cuts and the “failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012.”

Top economists and CEO’s have also weighed in against the deal and said that GOP concessions to the Tea Party will cost our economy dearly. Pimco CEO Mohamed El-Erian warned that the deal will lead to less growth, more unemployment, and more inequality. Nobel Prize-winning economist Paul Krugman called the plan “a disaster” and “an abject surrender” that will “depress the economy even further.”

The Center for American Progress’s Michael Ettlinger and Michael Linden argue that while the deal “goes straight in the wrong direction,” Congress can redeem itself by using the so-called “super committee” mandated by the bill to focus on job creation. The committee, made up of six Republicans and six Democrats, is tasked with finding an additional $1.5 trillion of deficit reduction over the next 10 years, and must report a plan by Thanksgiving.

Linden and Ettlinger write, “It’s especially important for the committee to produce a plan that creates jobs and spurs growth because the committee’s proposals will come on top of a set of already-dramatic spending cuts that will have adverse economic consequences.”

Stocks on long losing streak as economy weakens (2 articles)

(Oh, but the stock market was doing so well, people saw it as a sure sign of recovery...there isn't going to be a recovery folks, not for a decade or longer. We are financially fucked for the foreseeable future--pardon my language, but dig the alliteration!.--jef)

By MARTIN CRUTSINGER - Aug 2, 2011

WASHINGTON (AP) - The stock market is on its longest losing streak since the financial meltdown of 2008, confronted almost every day by fresh evidence that the economy is in serious trouble again.

The Dow Jones industrials declined more than 265 points Wednesday, their worst day in more than two months, and closed below 12,000 for the first time since June 24.

Investors sold all day after a report that the economy, which is barely growing and straining to produce jobs, is getting almost no help from consumer spending. Americans saved more in June and spent less for the first time in almost two years.

The big declines in the stock market came despite the formal end of weeks of uncertainty over whether Congress would raise the federal government's borrowing limit.

President Barack Obama signed into a law a bill that raises the debt ceiling and promises more than $2 trillion in cuts to government spending over the next decade. The bill was passed by the House on Monday and by the Senate earlier Tuesday, 74-26.

But investors were more worried about the economy, and the sell-off only accelerated. It was the eighth consecutive daily drop for the Dow and seventh for the Standard & Poor's 500 index, in both cases the longest since October 2008.

During its eight-day decline, the Dow has lost 858 points, or 6.7 percent. The average closed at 11,866.62. The S&P 500 closed at 1,254.05, and is now down slightly for the year.

"The market is starting to wonder where the growth is going to come from," said Nick Kalivas, a vice president of financial research at MF Global. "It hasn't hit the panic button yet, but that's where we're drifting."

The spending decline in June came after a report last week that the economy grew at an annual rate of less than 1 percent in the first six months of the year - the slowest since the end of the Great Recession in June 2009.

Tuesday's report showed that by June, Americans had only grown more cautious. They are faced with high unemployment, stagnant pay, sliding home values and other challenges.

"With gasoline prices high, incomes not growing and the craziness in Washington creating uncertainty, is it any surprise that people stopped spending?" asked Joel Naroff, chief economist at Naroff Economic Advisors.

The government said consumer spending dropped 0.2 percent in June. It was the first decline since September 2009. Consumer spending fuels about 70 percent of economic growth.

Part of the drop was because food and energy prices have declined a little after sharp increases earlier this year. Gasoline, for example, costs about $3.70 a gallon after the national average flirted with $4 earlier this year.

But Americans also cut back on major goods, such as cars, furniture and appliances. Those purchases help drive growth.

Incomes, which include Social Security checks and other government benefit payments, rose just 0.1 percent. That was the smallest gain since September. Wages and salaries fell.

People socked away more of their payments, perhaps because of increasing worries about the economy and job security. The personal savings rate rose to 5.4 percent of after-tax incomes, the highest since August 2010.

Automakers reported Tuesday that a lack of discounts and a continuing shortage of Japanese cars kept many buyers away and caused sales to sputter for a third straight month.

The only good news for the economy was that the government won't default on its debt. But even the debt could ultimately slow the economy.

The legislation Obama signed Tuesday didn't include an extension of a Social Security tax cut or long-term unemployment benefits. Both are set to expire by year's end. And the deal reduces government spending at a time when the economy is growing too slowly to keep the unemployment rate from rising.

For now, most of the spending cuts begin in 2014 or later, so the damage to the economy will be limited.

Obama has pledged to fight to extend the Social Security tax cut and emergency unemployment benefits. But in Washington's atmosphere of fiscal restraint, that may be difficult.

"We believe the economy will continue to struggle for some time, especially since there has been a move by the federal government toward fiscal consolidation," said Paul Dales, senior U.S. economist at Capital Economics.

The economy added just 18,000 jobs in June, the fewest in nine months, and the unemployment rate is 9.2%(U3) 16.2% (U6), the highest all year. The government will issue the July figures Friday.

The sour news on incomes, spending and auto sales followed a report earlier this week that manufacturing in July grew at its weakest pace in two years.

Dales said he doesn't foresee another recession but expects the economy to remain bumpy.

That's a fine line for most Americans. Many of them still feel as if the economy remains in recession. At the same time, corporations have continued to report strong earnings and amassed huge cash stockpiles.

"What worries me is that businesses are deriving their strong earnings growth through productivity gains, limited wage increases and foreign activities," Naroff said. "While that may be good for an individual firm, when most companies do that, income gains become so limited that spending and ultimately growth fades."

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Stocks now down for year as economic concerns grow
By DAVID K. RANDALL - Aug 2, 2011

NEW YORK (AP) - A sell-off erased this year's gains in the stock market Tuesday as investors grew increasingly concerned about the economy.

The Standard & Poor's 500 - the benchmark for most U.S. mutual funds - lost 2.6 percent and fell to its lowest point of the year. It is down 0.3 percent for the year and is off nearly 8 percent since reaching a high for the year of 1,363 on April 29.

A series of weak economic reports and poor earnings reports from several big companies spurred the decline.

The Commerce Department reported that consumers cut their spending in June for the first time in nearly two years. Analysts had predicted a slight increase. Incomes also rose by the smallest amount since September, reflecting a weak job market.

The report came one day after a weak manufacturing report. And on Friday the government said that in the first half of the year, the economy grew at its slowest pace since the recession ended in June 2009.

"The market is starting to wonder where the growth is going to come from," said Nick Kalivas, a vice president of financial research at MF Global. "It hasn't hit the panic button yet, but that's where we're drifting."

The S&P 500 lost 32.89 points, or 2.6 percent, to 1,254.05. It has fallen for seven straight days, losing 6.8 percent in that time. That's the S&P's longest string of losses since the height of the financial crisis in October 2008.

The Dow Jones industrial average lost 265.87 points, or 2.2 percent, to 11,866.62. The Dow has lost 858 points, or 6.7 percent, in the last eight trading days.

The Nasdaq composite fell 75.37, or 2.7 percent, to 2,669.24. And the Russell 2000, an index of smaller companies that many investors look to as a sign of market optimism about growth, fell 3.3 percent. It is now down 2.2 percent for the year.

All 30 stocks in the Dow lost ground. General Electric Co. (GE), Pfizer Inc. (PFE) and Home Depot Inc. led the index lower with losses of 4 percent or more. All but 13 of the 500 companies in the S&P index fell.

Archer Daniels Midland Co. dropped 6 percent after the agricultural conglomerate said it missed Wall Street's profit forecasts. High-end retailer Coach Inc. lost nearly 7 percent after the company said margins declined, cutting into profits. A pullback in spending could threaten profits at the company; it is making less from each purchase because of higher costs.

The yield on the 10-year Treasury fell to a low for the year of 2.61 percent from 2.75 percent Monday. Yields fall when bond prices rise. Gold, another asset investors buy when they're worried about the direction of the economy, gained 1.4 percent to $1,645 an ounce.

Even with the current streak of losses, the S&P and Dow are near the same levels as they were at the end of June. But some investors say that there's a strong likelihood both indexes will decline further this year because the economy is not as strong as they thought it was in June. At that time, investors still believed the economy was growing at a quicker pace.

And last year when the economy slowed sharply, the Federal Reserve began a bond-buying stimulus program, known as quantitative easing. That was credited with helping the U.S. economy avoid another recession.

Now, the Fed has indicated it does not have plans to implement another round of stimulus. And the new focus on deficit reduction in Washington makes it even less likely that more help could come, analysts said.

"With this debt debate going on, there is not an expectation for more fiscal or monetary stimulus and that's a real concern," said Jim Peters, the head of Tactical Allocation Group, a money manager in Michigan with $1.5 billion under management.

The S&P index fell through its long-term moving average, a measure that technical traders look at to determine whether the market is moving up or down longer term. Many investors use these averages as a sign of when to sell while they can still take some profits.

"The market broke through some pretty critical support levels," said Richard Ross, the global technical strategist at Auerbach Grayson, and dampened market optimism. He said that investors will wait for the market to settle before they buy again.

The S&P, down 8 percent since reaching its highs for the year on April 29, is more than half of the way towards a 10 percent drop that signals a market correction. A drop of more than 20 percent would put an end to the bull market that started in March of 2009.

In 2008, the S&P had a much steeper decline. Over eight straight days of declines, the index lost 22.9 percent when it closed on Oct. 8, 2008. It fell even further over the next six months. Since March 2009, the S&P is up 85 percent, not including dividends.

The consumer spending pullback was the latest indication that the U.S. economy may be slowing. Many economists, including Federal Reserve Chairman Ben Bernanke, have said the U.S. economy would gain momentum in the second half of the year as gas prices fall and Japan's factories recover from the earthquake disaster in March. Slow U.S. manufacturing growth, a weak job market and concerns about spending cuts in the debt deal have cast doubt on those predictions.

The growth of China's and India economies have also slowed recently after their respective central banks raised interest rates. American corporations have counted on increasing profits in China as a way to make up for slower revenue growth in the U.S. As a whole, companies in the S&P 500 index are expected to make nearly half of their profits overseas in 2011.

President Barack Obama signed a compromise bill Tuesday to raise the country's borrowing limit, hours ahead of a midnight deadline after which the U.S. government wouldn't have enough money to pay all its bills. The passage of the bill averted the possibility of a default on U.S. debt.

Four stocks fell for every one that rose on the New York Stock Exchange. Volume was higher than average at 5.3 billion shares.