Showing posts with label Corporate America. Show all posts
Showing posts with label Corporate America. Show all posts
Saturday, June 9, 2012
Friday, January 13, 2012
America Isn’t a Corporation
Published: January 12, 2012
“And greed — you mark my words — will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”
Fred R. Conrad/The New York Times
That’s how the fictional Gordon Gekko finished his famous “Greed is good” speech in the 1987 film “Wall Street.” In the movie, Gekko got his comeuppance. But in real life, Gekkoism triumphed, and policy based on the notion that greed is good is a major reason why income has grown so much more rapidly for the richest 1 percent than for the middle class.
Today, however, let’s focus on the rest of that sentence, which compares America to a corporation. This, too, is an idea that has been widely accepted. And it’s the main plank of Mitt Romney’s case that he should be president: In effect, he is asserting that what we need to fix our ailing economy is someone who has been successful in business.
In so doing, he has, of course, invited close scrutiny of his business career. And it turns out that there is at least a whiff of Gordon Gekko in his time at Bain Capital, a private equity firm; he was a buyer and seller of businesses, often to the detriment of their employees, rather than someone who ran companies for the long haul. (Also, when will he release his tax returns?) Nor has he helped his credibility by making untenable claims about his role as a “job creator.”
But there’s a deeper problem in the whole notion that what this nation needs is a successful businessman as president: America is not, in fact, a corporation. Making good economic policy isn’t at all like maximizing corporate profits. And businessmen — even great businessmen — do not, in general, have any special insights into what it takes to achieve economic recovery.
Why isn’t a national economy like a corporation? For one thing, there’s no simple bottom line. For another, the economy is vastly more complex than even the largest private company.
Most relevant for our current situation, however, is the point that even giant corporations sell the great bulk of what they produce to other people, not to their own employees — whereas even small countries sell most of what they produce to themselves, and big countries like America are overwhelmingly their own main customers.
Yes, there’s a global economy. But six out of seven employed American workers are employed in service industries, which are largely insulated from international competition, and even our manufacturers sell much of their production to the domestic market.
And the fact that we mostly sell to ourselves makes an enormous difference when you think about policy.
Consider what happens when a business engages in ruthless cost-cutting. From the point of view of the firm’s owners (though not its workers), the more costs that are cut, the better. Any dollars taken off the cost side of the balance sheet are added to the bottom line.
But the story is very different when a government slashes spending in the face of a depressed economy. Look at Greece, Spain, and Ireland, all of which have adopted harsh austerity policies. In each case, unemployment soared, because cuts in government spending mainly hit domestic producers. And, in each case, the reduction in budget deficits was much less than expected, because tax receipts fell as output and employment collapsed.
Now, to be fair, being a career politician isn’t necessarily a better preparation for managing economic policy than being a businessman. But Mr. Romney is the one claiming that his career makes him especially suited for the presidency. Did I mention that the last businessman to live in the White House was a guy named Herbert Hoover? (Unless you count former President George W. Bush.)
And there’s also the question of whether Mr. Romney understands the difference between running a business and managing an economy.
Like many observers, I was somewhat startled by his latest defense of his record at Bain — namely, that he did the same thing the Obama administration did when it bailed out the auto industry, laying off workers in the process. One might think that Mr. Romney would rather not talk about a highly successful policy that just about everyone in the Republican Party, including him, denounced at the time.
But what really struck me was how Mr. Romney characterized President Obama’s actions: “He did it to try to save the business.” No, he didn’t; he did it to save the industry, and thereby to save jobs that would otherwise have been lost, deepening America’s slump. Does Mr. Romney understand the distinction?
America certainly needs better economic policies than it has right now — and while most of the blame for poor policies belongs to Republicans and their scorched-earth opposition to anything constructive, the president has made some important mistakes. But we’re not going to get better policies if the man sitting in the Oval Office next year sees his job as being that of engineering a leveraged buyout of America Inc.
Thursday, September 1, 2011
Pouring the Red Ink Down the Sink
September 1, 2011
The US consumer’s decade-long spending spree has ended, but there’s still an ocean of red ink left to mop up. And with housing prices falling and unemployment tipping 9 per cent, it will take longer to clear the family balance sheet than many had anticipated.
Traditionally, the government has helped to ease the pain of deleveraging by providing fiscal stimulus to boost economic activity and lower the real cost of debt. But Capitol Hill is now in the grips of deficit hawks who frown on such Keynesian remedies, so households and consumers will have to fend for themselves and pay-down debts as best as they can or default when repayment is no longer possible . That’s bad news for the economy that depends on consumers for 71 percent of GDP. Without a healthy consumer, the economy will face years of sluggishness and stagnation.
U.S. household debt as a share of annual disposable income is currently 115 percent, down from the peak of 135 percent in 2008. But, while consumers are making headway in paring down their debts, there’s still a lot of work to do. Economists believe that the figure will eventually return to its historic range of 75 percent, which means slower growth for years to come unless someone else makes up the difference in spending.
But what sector is big enough to make up for the loss in consumer spending? Business? Government?
Business spending is still significantly below pre-crisis levels of investment. Naturally, businesses aren’t going hire more workers and produce more products if demand is weak. And, demand is bound to stay weak if there’s no rebound in consumption. But how can the consumer rebound when he’s buried under a mountain of debt and making every effort to increase his savings? Surely, if wages were growing, then it would be easier to pay down debts while increasing spending at the same time. But wages aren’t growing, in fact, they are falling in inflation-adjusted terms. So personal consumption–which typically leads the way out of recession–will continue to disappoint. This is from an article by Stephen Roach titled “One Number Says it All”:
Absent the Obama administration’s fiscal intervention, there would have been no recovery. This is worth considering in view of the fact that households continue to pay-down debts and will do so for the forseeable future. If the government doesn’t provide additional stimulus, then the economy will slip back into negative territory. And that’s precisely what’s happening now. Here’s an excerpt from an article by John P. Hussman, Ph.D, Hussman Funds who connects the dots drawing from recent data:
Keep in mind, that during the peak bubble years of 2000 to 2007 households nearly doubled their “outstanding debt to $13.8 trillion” and “personal consumption grew by 44 per cent from $6.9 trillion to $9.9 trillion”. Also, from 2003 to the third quarter 2008 US households extracted $2.3 trillion of equity from their homes in the form of home equity loans and cash-out refinancings” (figures from “Will US Consumer Debt Cripple the Recovery”, McKinsey Global Institute)
$2.3 trillion! Think about that. That’s nearly $500 billion that was being pumped into the economy every year, which is more than Obama’s $787 stimulus distributed over a two-year period. That’s why unemployment stayed low while housing prices ballooned, because loose lending standards and easy money inflated the biggest credit bubble of all time. But now the trend has reversed itself and debt-deflation dynamics are in play forcing consumers to cut spending, increase saving, and pay down their debts. Only the federal government has the ability and the wherewithal to support the flagging economy while the process continues. The government must boost its spending, increase the deficits, and assist in the deleveraging process. This is from an article by economist Laura Tyson titled “Recovering from a Balance-Sheet Recession”:
First, the government must be committed to long-term “sustained” fiscal stimulus until the share of household debt to disposable income returns to normal. Second, there should be a restructuring of household and personal debts “including”,– as economist Carmen Reinhart says– “debt forgiveness for low-income Americans”….
“Until we deal head-on with the fact that some of those debts are not ever going to be repaid, we will continue to have this shadow over growth”, Reinhart told Bloomberg News last weekend.
Debt repudiation, principle write-downs on underwater mortgages and amnesty on delinquent student loans should all be added to the mix of stimulants to future growth.
Finally–along with federally-funded government jobs programs (a revised WPA, etc)–Congress needs to address the chronic supply-demand imbalance that has emerged from Labor’s dwindling share in corporate profits. The imbalance has now reached historic levels which has widened gross inequality and threatens to keep the economy in a semi-permanent state of Depression. Here’s a quick summary from Barry Ritholtz’s “The Big Picture”:
At the same time, corporate profits have continued to skyrocket. As the Wall Street Journal’s Kelly Evans notes, “Since the recession ended in mid-2009, U.S. corporate profits have jumped by about 43 per cent to a record $1.45 trillion as of the first quarter, after taxes, inventory and accounting adjustments, according to the Commerce Department.” (“More Liquidity Only Douses Growth Sparks”, Wall Street Journal)
So, despite sky-high unemployment, household deleveraging, historic inequality and slow growth; profits keep rising. Is there any doubt about whose interests are being served.
The only way out of the mess that workers find themselves in, is through politics. And–on that score–FDR said it best:
Traditionally, the government has helped to ease the pain of deleveraging by providing fiscal stimulus to boost economic activity and lower the real cost of debt. But Capitol Hill is now in the grips of deficit hawks who frown on such Keynesian remedies, so households and consumers will have to fend for themselves and pay-down debts as best as they can or default when repayment is no longer possible . That’s bad news for the economy that depends on consumers for 71 percent of GDP. Without a healthy consumer, the economy will face years of sluggishness and stagnation.
U.S. household debt as a share of annual disposable income is currently 115 percent, down from the peak of 135 percent in 2008. But, while consumers are making headway in paring down their debts, there’s still a lot of work to do. Economists believe that the figure will eventually return to its historic range of 75 percent, which means slower growth for years to come unless someone else makes up the difference in spending.
But what sector is big enough to make up for the loss in consumer spending? Business? Government?
Business spending is still significantly below pre-crisis levels of investment. Naturally, businesses aren’t going hire more workers and produce more products if demand is weak. And, demand is bound to stay weak if there’s no rebound in consumption. But how can the consumer rebound when he’s buried under a mountain of debt and making every effort to increase his savings? Surely, if wages were growing, then it would be easier to pay down debts while increasing spending at the same time. But wages aren’t growing, in fact, they are falling in inflation-adjusted terms. So personal consumption–which typically leads the way out of recession–will continue to disappoint. This is from an article by Stephen Roach titled “One Number Says it All”:
“There are two distinct phases to this period of unprecedented US consumer weakness. From the first quarter of 2008 through the second period of 2009, consumer demand fell for six consecutive quarters at a 2.2 per cent annual rate. Not surprisingly, the contraction was most acute during the depths of the Great Crisis, when consumption plunged at a 4.5 per cent rate in the third and fourth quarters of 2008.
As the US economy bottomed out in mid-2009, consumers entered a second phase – a very subdued recovery. Annualized real consumption growth over the subsequent eight-quarter period from the third quarter of 2009 through the second quarter of 2011 averaged 2.1 per cent. That is the most anemic consumer recovery on record – fully 1.5 percentage points slower than the 12-year pre-crisis trend of 3.6 per cent that prevailed between 1996 and 2007.
These figures are a good deal weaker than originally stated. As part of the annual reworking of the US National Income and Product Accounts that was released in July 2011, Commerce Department statisticians slashed their earlier estimates of consumer spending. The 14-quarter growth trend from early 2008 to mid-2011 was cut from 0.5 per cent to 0.2 per cent; the bulk of the downward revision was concentrated in the first six quarters of this period – for which the estimate of the annualized consumption decline was doubled, from 1.1 per cent to 2.2 per cent.
I have been tracking these so-called benchmark revisions for about 40 years. This is, by far, one of the most significant I have ever seen. We all knew it was tough for the American consumer – but this revision portrays the crisis-induced cutbacks and subsequent anemic recovery in a much dimmer light.” (“One Number Says it All”, Stephen S. Roach, Project Syndicate)Roach’s timeline is key to understanding what’s going on. He says: “the subsequent eight-quarter period from the third quarter of 2009 through the second quarter of 2011 averaged 2.1 per cent.” The period that Roach calls a “very subdued recovery” coincides with the implementation of the $787 billion fiscal stimulus (ARRA).
Absent the Obama administration’s fiscal intervention, there would have been no recovery. This is worth considering in view of the fact that households continue to pay-down debts and will do so for the forseeable future. If the government doesn’t provide additional stimulus, then the economy will slip back into negative territory. And that’s precisely what’s happening now. Here’s an excerpt from an article by John P. Hussman, Ph.D, Hussman Funds who connects the dots drawing from recent data:
“It is now urgent for investors to recognize that the set of economic evidence we observe reflects a unique signature of recessions comprising deterioration in financial and economic measures that is always and only observed during or immediately prior to U.S. recessions. These include a widening of credit spreads on corporate debt versus 6 months prior, the S&P 500 below its level of 6 months prior, the Treasury yield curve flatter than 2.5 per cent…, year-over-year GDP growth below 2 per cent, ISM Purchasing Managers Index below 54, year-over-year growth in total nonfarm payrolls below 1 per cent, as well as important corroborating indicators such as plunging consumer confidence. There are certainly a great number of opinions about the prospect of recession, but the evidence we observe at present has 100 per cent sensitivity (these conditions have always been observed during or just prior to each U.S. recession) and 100 per cent specificity (the only time we observe the full set of these conditions is during or just prior to U.S. recessions). This doesn’t mean that the U.S. economy cannot possibly avoid a recession, but to expect that outcome relies on the hope that “this time is different.” (“A Reprieve from Misguided Recklessness”, John P. Hussman, Ph.D, Hussman Funds)Policy should be based on more than hope. It should be grounded in a firm grasp of macroeconomics and a commitment to the common good.
Keep in mind, that during the peak bubble years of 2000 to 2007 households nearly doubled their “outstanding debt to $13.8 trillion” and “personal consumption grew by 44 per cent from $6.9 trillion to $9.9 trillion”. Also, from 2003 to the third quarter 2008 US households extracted $2.3 trillion of equity from their homes in the form of home equity loans and cash-out refinancings” (figures from “Will US Consumer Debt Cripple the Recovery”, McKinsey Global Institute)
$2.3 trillion! Think about that. That’s nearly $500 billion that was being pumped into the economy every year, which is more than Obama’s $787 stimulus distributed over a two-year period. That’s why unemployment stayed low while housing prices ballooned, because loose lending standards and easy money inflated the biggest credit bubble of all time. But now the trend has reversed itself and debt-deflation dynamics are in play forcing consumers to cut spending, increase saving, and pay down their debts. Only the federal government has the ability and the wherewithal to support the flagging economy while the process continues. The government must boost its spending, increase the deficits, and assist in the deleveraging process. This is from an article by economist Laura Tyson titled “Recovering from a Balance-Sheet Recession”:
“In other recoveries during the last 50 years, public-sector employment increased. This time it is falling: during the last year the private sector added 1.8 million jobs while the public sector cut 550,000.
What should policy makers do to combat the large and lingering job losses that result from a financial crisis and balance-sheet recession? Mr. Koo, whose book on Japan’s experience should be required reading for members of Congress, showed that when the private sector is curtailing spending, fiscal stimulus to increase growth and reduce unemployment is the most effective way to reduce the private-sector debt overhang choking private spending.
When the Japanese government tried fiscal consolidation to slow the growth of government debt in response to International Monetary Fund advice in 1997, the results were economic contraction and an increase in the government deficit. In contrast, when the Japanese government increased government spending, the pace of recovery strengthened and the deficit as a share of gross domestic product declined….” (“Recovering from a Balance-Sheet Recession”, Laura D’Andrea Tyson, New York Times)Did you catch that? When the Japanese government tried to decrease the deficits by slashing spending, they increased the deficits. This is the lesson that every country in the EU –which has applied the ECB-IMF austerity measures—has learned. Cutting spending when the economy is weak is bad policy and bad economics. Struggling economies must "growth" their way out off of recession by spending liberally and putting people back to work, thus adding to government revenues. Here’s Tyson again explaining why this is so:
“The market understands that the most important driver of the fiscal deficit in the short to medium run is weak tax revenues, reflecting slow growth and high unemployment, and that additional fiscal measures to put people back to work are the most effective way to reduce the deficit.
“Every one percentage point of growth adds about $2.5 trillion in government revenue. An extra percentage point of growth over the next five years would do more to reduce the deficit during that period than any of the spending cuts currently under discussion. And faster growth would make it easier for the private sector to reduce its debt burden….Under these conditions, slow growth leads to a higher debt ratio, not vice versa…” (“Recovering from a Balance-Sheet Recession”, Laura D’Andrea Tyson, New York Times)So, how do we speed up the deleveraging process so the economy can get back on track?
First, the government must be committed to long-term “sustained” fiscal stimulus until the share of household debt to disposable income returns to normal. Second, there should be a restructuring of household and personal debts “including”,– as economist Carmen Reinhart says– “debt forgiveness for low-income Americans”….
“Until we deal head-on with the fact that some of those debts are not ever going to be repaid, we will continue to have this shadow over growth”, Reinhart told Bloomberg News last weekend.
Debt repudiation, principle write-downs on underwater mortgages and amnesty on delinquent student loans should all be added to the mix of stimulants to future growth.
Finally–along with federally-funded government jobs programs (a revised WPA, etc)–Congress needs to address the chronic supply-demand imbalance that has emerged from Labor’s dwindling share in corporate profits. The imbalance has now reached historic levels which has widened gross inequality and threatens to keep the economy in a semi-permanent state of Depression. Here’s a quick summary from Barry Ritholtz’s “The Big Picture”:
“Labor share averaged 64.3 percent from 1947 to 2000. Labor share has declined over the past decade, falling to its lowest point in the third quarter of 2010, 57.8 percent. The change in labor share from one period to the next has become a major factor contributing to the compensation–productivity gap in the nonfarm business sector….
While Labor Share has recently plummeted to all-time lows since record keeping began, Median Household Income has stagnated for the past 12 years. In the last recession (2001), incomes had only begun to decline…. One decade later, Labor Share has collapsed, incomes have gone nowhere, and credit availability… has all but vanished except for the most creditworthy…” (“The Heart of the Matter”, The Big Picture)Not only is labor getting a smaller and smaller piece of the pie, but, also, financial engineering–spurred-on by low interest rates and deregulation–has given rise to consecutive credit bubbles which have transferred a larger share of pension and retirement fund-wealth to Wall Street speculators. So, working people are not just getting screwed on their labor, the government and central bank are actually helping to facilitate the pilfering of their savings.
At the same time, corporate profits have continued to skyrocket. As the Wall Street Journal’s Kelly Evans notes, “Since the recession ended in mid-2009, U.S. corporate profits have jumped by about 43 per cent to a record $1.45 trillion as of the first quarter, after taxes, inventory and accounting adjustments, according to the Commerce Department.” (“More Liquidity Only Douses Growth Sparks”, Wall Street Journal)
So, despite sky-high unemployment, household deleveraging, historic inequality and slow growth; profits keep rising. Is there any doubt about whose interests are being served.
The only way out of the mess that workers find themselves in, is through politics. And–on that score–FDR said it best:
“We cannot allow our economic life to be controlled by that small group of men whose chief outlook upon the social welfare is tinctured by the fact that they can make huge profits from the lending of money and the marketing of securities–an outlook which deserves the adjectives ‘selfish’ and ‘opportunist.’” –Franklin Delano Roosevelt, “FDR Explains the Crisis: Why it feels like 1932″, Pam Martens, CounterPunch.
Monday, June 13, 2011
The Rich Are Destroying the Economy
Sunday, June 12, 2011 by CommonDreams.org
Ever since the Great Recession shook the foundations of the U.S. economy, President Obama has been promising recovery. Evidence of this recovery, we were told, was manifested in the massive post-bailout profits corporations made. Soon enough, the President assured us, these corporations would tire of hoarding mountains of cash and start a hiring bonanza, followed by raising wages and benefits. It was either wishful thinking or conscious deception. The recent stock market meltdown has squashed any hope of a corporate-led recovery.
The Democrats fought the recession by the same methods the Republicans used to create it: allowing the super rich to recklessly dominate the economy while giving them massive handouts. This strategy, commonly referred to as Reaganomics or Trickle Down Economics, is now religion to both Democrats and Republicans; never mind the staged in-fighting for the gullible or complicit media.
When it becomes obvious to even the President that the economic recovery never existed beyond the bank accounts of the rich, questions will have to be answered. Why, for example, did nobody in either political party foresee the disastrous consequences of the bailouts? Not only did the U.S. deficit drastically increase but the same U.S. corporations that caused the recession were given reinforcement for their destructive actions, ensuring that it would continue unabated.
In his book, Crisis Economics, Nouriel Roubini outlines the insane response to the recession by Republicans and Democrats. Because both parties simply threw money at the banks and hedge funds instead of punishing them, a condition of "moral hazard" was created, meaning, that banks would assume another bailout would come their way if they destroyed the economy again -- too big too fail, remember? Roubini explains how the Democrats allowed the "too big" banks to get even bigger; how Wall Street salaries based on short-term profits went unregulated; how the regulations that were put into place were inadequate and filled with loopholes; how nothing of any significance changed.
Roubini has also written extensively about how the post-bailout Federal Reserve policies were fueling a commodity bubble that may be in the midst of bursting, possibly triggering a double dip recession. Essentially the big banks and rich investors were borrowing cheap dollars from the Fed and investing abroad in commodities with the hopes of higher returns. Roubini states:
Another mainstream economist, Paul Krugman, also admits that the rich's death-grip on the U.S. political and economic system is causing pain for everybody else:
Krugman's repeated calls to Democrats and Republicans to create jobs have fallen on deaf ears. Both parties agree that the "private sector" [corporations] should create jobs; until they decide to hire, nothing will happen. This is not merely "bad policy,” as liberals like Krugman like to fret about, but the conscious agenda of the rich. Corporations and rich investors love high unemployment. The Kansas City Star explains why:
This process is an extension of the bailouts, in the sense that more wealth is being transferred from working people to the corporations. Since consumer spending accounts for 70 percent of the U.S. economy, policies like these ensure that another crisis is inevitable.
Further complicating matters is the ending of the Federal Reserve's Quantitative Easing program (printing money), which amounted to the Fed buying $600 billion in U.S. Treasury bonds since last fall, essentially funding the U.S. debt and driving down interest rates.
Since the Fed was buying 60 percent of the bonds, a new creditor will need to be found; and this lender will likely require higher interest rates before loaning to the U.S. government, to make sure the loan is profitable. And although different nations buy U.S. debt for different reasons, much of this debt is bought by rich U.S. citizens, who will put the squeeze on the rest of us that have to pay back this debt. The Washington Times explains:
This insanity cannot be stopped by conventional measures, since politicians are tone deaf to anything that doesn't ring of corporate cash. The jobs crisis continues as a result of the policy agreed to by both Democrats and Republicans. The labor movement has a special role to play in reversing the above policies.
The corporate-led discussion around cutting social programs to fix the deficits -- on a state and national level -- can be challenged by a nationally coordinated campaign of unions and community allies demanding: Tax the Rich! This demand is significant because it can address both the deficits and the jobs crisis: a massive public works program can be funded by taxing the corporations and the wealthy to pre-Reagan levels. And it makes complete sense because the growing inequalities in wealth over the past three decades has meant a spectacular concentration of wealth at the top. The rich have plenty of money to spare.
Organized labor needs to bring masses of people in the street all over the country in order to get attention and pressure the government to respond to these demands. And it can succeed, especially if it organizes a serious, protracted campaign and especially if this campaign does not get funneled into supporting Democratic candidates, the surest way to kill campaign momentum.
AFL-CIO President Richard Trumka recently spoke in favor of a strong, independent labor movement. This is the direction it must take, rather than relying on the Democrats. The labor movement must get its act together, unite to put up a fight and demand specific policies that can concretely address the crisis faced by millions of working people.
The Democrats fought the recession by the same methods the Republicans used to create it: allowing the super rich to recklessly dominate the economy while giving them massive handouts. This strategy, commonly referred to as Reaganomics or Trickle Down Economics, is now religion to both Democrats and Republicans; never mind the staged in-fighting for the gullible or complicit media.
When it becomes obvious to even the President that the economic recovery never existed beyond the bank accounts of the rich, questions will have to be answered. Why, for example, did nobody in either political party foresee the disastrous consequences of the bailouts? Not only did the U.S. deficit drastically increase but the same U.S. corporations that caused the recession were given reinforcement for their destructive actions, ensuring that it would continue unabated.
In his book, Crisis Economics, Nouriel Roubini outlines the insane response to the recession by Republicans and Democrats. Because both parties simply threw money at the banks and hedge funds instead of punishing them, a condition of "moral hazard" was created, meaning, that banks would assume another bailout would come their way if they destroyed the economy again -- too big too fail, remember? Roubini explains how the Democrats allowed the "too big" banks to get even bigger; how Wall Street salaries based on short-term profits went unregulated; how the regulations that were put into place were inadequate and filled with loopholes; how nothing of any significance changed.
Roubini has also written extensively about how the post-bailout Federal Reserve policies were fueling a commodity bubble that may be in the midst of bursting, possibly triggering a double dip recession. Essentially the big banks and rich investors were borrowing cheap dollars from the Fed and investing abroad in commodities with the hopes of higher returns. Roubini states:
This investor-created commodity bubble pushed up prices in oil, food, and other basic products, causing further pain for working families and the economy as a whole. This speculative bubble was easily predictable but ignored by both political parties, since they claimed the bubble was a sign of recovery.“The risk is that we are planting the seeds of the next financial crisis...this asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals." (October 27, 2009).
Another mainstream economist, Paul Krugman, also admits that the rich's death-grip on the U.S. political and economic system is causing pain for everybody else:
Krugman explains that this process continues because the rich dominate the political system through campaign contributions, "access to policy makers,” promises of high paying corporate jobs after their congressional term is over, and good o'l fashion corruption. Because he's a true blue Democrat at heart, Krugman nevertheless focuses most of his rage on Republicans."Far from being ready to spend more on job creation, both parties agree that it's time to slash spending - destroying jobs in the process - with the only difference being one of degree...policy makers are catering almost exclusively to the interests of rentiers [rich investors] - those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense." (June 10, 2011)
Krugman's repeated calls to Democrats and Republicans to create jobs have fallen on deaf ears. Both parties agree that the "private sector" [corporations] should create jobs; until they decide to hire, nothing will happen. This is not merely "bad policy,” as liberals like Krugman like to fret about, but the conscious agenda of the rich. Corporations and rich investors love high unemployment. The Kansas City Star explains why:
It really is that simple. High unemployment creates a downward pressure on wages, allowing employers to work the remaining employees harder and thus to increase profits. This dynamic, combined with the above commodity speculation, has been the entire basis for the corporate recovery, while working people have literally seen nothing beneficial."Last year [2010], for the second year in a row, U.S. companies got more work out of their employees while spending less on overall labor costs." (February 3, 2011)
This process is an extension of the bailouts, in the sense that more wealth is being transferred from working people to the corporations. Since consumer spending accounts for 70 percent of the U.S. economy, policies like these ensure that another crisis is inevitable.
Further complicating matters is the ending of the Federal Reserve's Quantitative Easing program (printing money), which amounted to the Fed buying $600 billion in U.S. Treasury bonds since last fall, essentially funding the U.S. debt and driving down interest rates.
Since the Fed was buying 60 percent of the bonds, a new creditor will need to be found; and this lender will likely require higher interest rates before loaning to the U.S. government, to make sure the loan is profitable. And although different nations buy U.S. debt for different reasons, much of this debt is bought by rich U.S. citizens, who will put the squeeze on the rest of us that have to pay back this debt. The Washington Times explains:
When the Federal Reserve raises interest rates to satisfy these rich investors, the economy will likely take a further nosedive. It appears, then, that the rich have a win-win situation: they got free bailout money, which increased the deficit; and because the deficit is too high, the rich want higher interest rates for investing in U.S. Treasury Bonds. In both instances working people pay the bills."...Bill Gross, the head of America's own Pimco bond fund, the largest buyer of bonds worldwide, recently reduced Pimco's holdings of Treasuries to zero out of concern that they weren't yielding enough given the risks of inflation and deficit spending." (June 7, 2011)
This insanity cannot be stopped by conventional measures, since politicians are tone deaf to anything that doesn't ring of corporate cash. The jobs crisis continues as a result of the policy agreed to by both Democrats and Republicans. The labor movement has a special role to play in reversing the above policies.
The corporate-led discussion around cutting social programs to fix the deficits -- on a state and national level -- can be challenged by a nationally coordinated campaign of unions and community allies demanding: Tax the Rich! This demand is significant because it can address both the deficits and the jobs crisis: a massive public works program can be funded by taxing the corporations and the wealthy to pre-Reagan levels. And it makes complete sense because the growing inequalities in wealth over the past three decades has meant a spectacular concentration of wealth at the top. The rich have plenty of money to spare.
Organized labor needs to bring masses of people in the street all over the country in order to get attention and pressure the government to respond to these demands. And it can succeed, especially if it organizes a serious, protracted campaign and especially if this campaign does not get funneled into supporting Democratic candidates, the surest way to kill campaign momentum.
AFL-CIO President Richard Trumka recently spoke in favor of a strong, independent labor movement. This is the direction it must take, rather than relying on the Democrats. The labor movement must get its act together, unite to put up a fight and demand specific policies that can concretely address the crisis faced by millions of working people.
Tuesday, April 19, 2011
The Process of Creating a New and Enduring American Underclass
By Joshua Holland, AlterNet
Posted on April 19, 2011
Corporate America appears to be prospering with far fewer workers than it employed before the crash. Wages are down, the stock market is up and firms are expanding their operations overseas. Meanwhile, Congress is suffering from the delusion that our greatest problem is the deficit, rather than the extreme economic insecurity so many Americans are suffering from today. And that focus will only exacerbate the crisis on “Main Street.”
The question is whether these trends will become “the new normal,” consigning millions to an emerging American underclass. Is our notably cruel brand of capitalism ultimately leading to something that looks more like feudalism – with low-paid serfs feeling fortunate just to have an opportunity to toil for their lords' enrichment?
Consider a bleak snapshot of our ailing economy: Real corporate profits are now near an all-time high, yet one out of six working people are either out of a job or have no choice but to work part-time.
We just saw a huge two-year gain in productivity – the amount of goods and services produced per worker. In 2009, it rose by 3.5 percent, and last year we saw a 3.6 percent increase, the largest in eight years.
At the same time, labor costs – the value of wages and benefits – have seen their steepest decline since 1962-'63.
This is the result of companies putting the big squeeze on their workers – threatening to cast them into a sea of unemployed Americans if they don't produce more for the same wages. These numbers tell us that an economy that now employs seven million fewer workers than it did in 2008 can produce the same amount of stuff, albeit at a great social cost.
Lower Wages, Fewer Jobs
According to an analysis of Census data by USA Today, just 45 percent of the population now holds a job, the lowest share since 1983. Over the past decade, the number of non-working adults in the U.S. has increased by 27 million.
Those who have been laid off and were then lucky enough to get rehired aren't faring well. In an employers' market, over half of all full-time workers laid off after at least three years at the same job return to the workforce with lower wages. According to the Wall Street Journal, more than a third of them lose 20 percent or more of their previous income.
The average length of joblessness among the unemployed is now 39 weeks, shattering the record set during the 1981-'81 recession by around 17 weeks. The long-term unemployed face unique barriers to reentering the labor force – many have bad credit and anecdotal evidence suggests that employers tend to discriminate against them for the crime of being unemployed for an extended period. There are about five jobless workers for every full-time opening, but when you include involuntary part-timers, that ratio rises to 8:1.
The impact of that kind of extended unemployment can reverberate for decades, long after the economy has recovered. Columbia University labor economist Till von Wachter studied the fortunes of workers who faced sudden lay-offs during the 1981-1982 recession in the period since that time. He found that even after 20 years, those workers' wages were still 20 percent lower than comparable workers who had held onto their jobs in the early 1980s downturn.
According to the Wall Street Journal, the impact of this kind of joblessness can span generations:
Research shows that children of workers who lose jobs and go back to work at lower wages appear to suffer from lower wages, too. In a 2008 study, a group of economists tracked the wages of 60,000 father-child pairs from 1978 to 1999. Children whose fathers went through mass layoffs in the 1982 recession ended up with 9% lower earnings than similar children whose fathers didn't experience the job cuts.
Race to the Bottom
The squeeze is widespread. A survey of American businesses conducted by the Society for Human Resource Management found that over the last six months of 2010, almost four in 10 companies laid off workers, froze wages and suspended bonuses. Twenty percent reduced employee benefits and six in 10 said they hadn't rehired any laid-off workers. Only 11 percent had “restructured executive compensation” – those in the executive suite appear to be doing OK.
“This is the worst I’ve ever seen it,” Lewis Maltby, president of the National Workrights Institute, told NBC News. “Employers in financial trouble are tightening their belts and squeezing employees,” he said. “In other cases, profitable employers are taking advantage of a dismal job market to squeeze workers harder.”
What Is Corporate America Doing With All Its Loot?
U.S. firms are now sitting on $1.9 trillion. What are businesses doing with all that cash sloshing around? First, they're investing more overseas – in the first half of 2006, the last year before the crash, American multinationals invested $30 billion more abroad than foreign companies invested here. In the first half of last year, that number was up to $220 billion. Companies are investing abroad because that's where the customers are.
That continues a longer trend – between 1999 and 2008, U.S.-based multinationals cut 1.9 million net jobs in this country while creating over 2.4 million overseas.
Annie Lowery, writing for Slate, notes that companies are also pursuing a variety of strategies that “make investors wealthier.” They've increased dividend payments to investors, bought up smaller companies and bought back stock.
Those are the big boys. But with demand in a trough, the “Main Street” economy has seen a steep decline in entrepreneurship – people aren't starting new businesses. According to the New York Times, “In 2009, 115,795 fewer employer businesses were founded than in 2007, a 17.3 percent decline in firm formation.” New layoffs have slowed dramatically since the peak of the recession, but the unemployment rate remains stubbornly high because there aren't enough new jobs being created.
Meanwhile, the mortgage crisis rages on unabated. Home prices are still in decline, which will further squeeze consumer demand – which accounts for around 70 percent of our economic activity – through what's known as the “wealth effect”– the more accumulated wealth people own, the more they spend. For every dollar lost in U.S. housing wealth, economists estimate that the economy will lose between 5 and 7 cents in consumer demand.
It's important to understand that this bleak economic picture is an extension of our broken politics. Washington could have approached these problems with the seriousness they merit. They could have passed a much larger stimulus package, as many economists argued was necessary. They could have ameliorated the foreclosure crisis by allowing judges to reduce the outstanding principle on “underwater” mortgages. They could have directly created jobs like we did during the Great Depression. But all of that was, and is, off the table.
More troubling is the fact that nobody knows what the next “engine of job growth” might be. The big winners in this economic recovery appear to be large financial institutions that have less competition after several large players went under during the crash, and that's not the kind of broad growth that will help the job market.
These trends raise the frightening prospect that we're in the process of creating a permanent underclass in the United States. At the very least, history tells us that the big squeeze corporations are now putting on American workers will have enduring effects on our economic wellbeing for many years to come.
Top US Corporations Outsourced 2.4 Million+ US Jobs in the Last Decade
by: Zaid Jilani, ThinkProgress
A Washington Post/ABC News poll released this morning finds that 44 percent, a plurality, of Americans think the economy is getting worse, rather than staying the same or getting better. With unemployment hovering around 9.6 percent (20% in reality) while economic inequality is at levels not seen since the Depression, many Americans feel as if the economy is leaving them behind.
The Wall Street Journal reports today that Corporate America certainly isn’t doing its part to help bring America out of its economic malaise. The paper surveyed employment data by some of the nation’s largest corporations — General Electric, Caterpillar, Microsoft, Wal-Mart, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, and Oracle — and found that they cut their US workforces by 2.9 million people over the last decade while hiring 2.4 million people overseas.
The paper notes that this is actually a sharp reversal from trends in the late 1990s, when these major companies were creating more jobs in the United States than overseas. Yet by 2001, things took a turn for the worse, and these corporations have been adding more jobs abroad than at home, as is illustrated here:
Another question asked of the executives found that the top reason for companies to outsource was to “reduce operating costs” (46 percent of respondents). Only 12 percent of respondents said their reason for outsourcing was “access to world class capabilities.” This means companies are outsourcing to save themselves money, not make better products.
Unfortunately, for some of these companies, sending American jobs overseas isn’t enough. They also want to bring the profits back into the United States with as little tax liability as possible. Cisco Systems, which had 26 percent of its workforce abroad at the start of the decade but 46 percent of its workforce abroad by the end, is currently involved in a lobbying campaign titled “Win America” calling for a tax repatriation holiday that would let big corporations “bring money they have stashed overseas back to the U.S. at a dramatically lower tax rate.” A similar tax break in 2004 actually increased the amount of money companies store overseas..
A Washington Post/ABC News poll released this morning finds that 44 percent, a plurality, of Americans think the economy is getting worse, rather than staying the same or getting better. With unemployment hovering around 9.6 percent (20% in reality) while economic inequality is at levels not seen since the Depression, many Americans feel as if the economy is leaving them behind.
The Wall Street Journal reports today that Corporate America certainly isn’t doing its part to help bring America out of its economic malaise. The paper surveyed employment data by some of the nation’s largest corporations — General Electric, Caterpillar, Microsoft, Wal-Mart, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, and Oracle — and found that they cut their US workforces by 2.9 million people over the last decade while hiring 2.4 million people overseas.
The paper notes that this is actually a sharp reversal from trends in the late 1990s, when these major companies were creating more jobs in the United States than overseas. Yet by 2001, things took a turn for the worse, and these corporations have been adding more jobs abroad than at home, as is illustrated here:
As you can see from the chart, the economic recession has had little impact on Corporate America’s patriotism. In fact, in 2009, representatives of many of the nation’s most powerful corporations attended the “2009 Strategic Outsourcing Conference” to talk about how to send American jobs overseas. Conference organizers polled the more than 70 senior executives who attended the conference about the behavior of their companies in response to the recession. The majority said their companies increased outsourcing in response to the downturn, with only 9 percent saying they terminated some outsourcing agreements:
Another question asked of the executives found that the top reason for companies to outsource was to “reduce operating costs” (46 percent of respondents). Only 12 percent of respondents said their reason for outsourcing was “access to world class capabilities.” This means companies are outsourcing to save themselves money, not make better products.
Unfortunately, for some of these companies, sending American jobs overseas isn’t enough. They also want to bring the profits back into the United States with as little tax liability as possible. Cisco Systems, which had 26 percent of its workforce abroad at the start of the decade but 46 percent of its workforce abroad by the end, is currently involved in a lobbying campaign titled “Win America” calling for a tax repatriation holiday that would let big corporations “bring money they have stashed overseas back to the U.S. at a dramatically lower tax rate.” A similar tax break in 2004 actually increased the amount of money companies store overseas..
Saturday, January 29, 2011
New Hope for Bridging America’s Economic Divide
The civil rights movement ended the legal basis of white supremacy in the United States several decades ago yet vast inequalities of wealth still persist, making equal rights a stubbornly elusive goal. There have been modest advances in reducing the black-white income gap. But if African American incomes continue to rise in the future at the same rate as they did between 1968 and 2001, it would take 581 years for black America to reach income parity with white America.
In 2004, the median family net worth of African Americans was $20,400, only 14.6 percent of the median white family net worth of $140,700. The median net worth for Latino families was $27,100.
Our nation needs to make a dramatic reinvestment in broadening wealth and opportunity for Americans who have been historically left out of prosperity. Massive government investments of the past that helped reduce the income gap, such as the nineteenth-century Homestead Act and post–World War II veterans and housing benefits, were effectively “whites only.” Since the end of legal discrimination in the 1960s, there has not been a similar mass investment in economic opportunity that African Americans and other people of color could benefit from as equal citizens.
Where Wealth Originates
One barrier to new programs that could elevate the economic standing of lower-income Americans is a widespread misunderstanding of how private wealth is created. Both the media and popular mythology extol rich people as the best and brightest, with the assumption that they made it on their own. Yet no one amasses wealth entirely alone. In truth, many, if not most, wealthy Americans inherited a substantial portion of their net assets. And even for those who did not, private wealth (savings, home ownership, investment wealth) was created from a combination of individual enterprise and the commons.
The story of wealth creation in the United States needs to be revisited from the perspective of both race and the commons. There is a long and unseemly history of the U.S. government channeling common wealth to expand the individual wealth and opportunity of the most privileged citizens, almost all of them white.
Even before the existence of the United States as a nation, Europeans confiscated and enclosed land and natural resources from indigenous peoples, creating the base of wealth on which our modern economy was built. Similarly, the United States— often through military intervention—appropriated the resources of foreign people.
Black laborers—first slaves, later sharecroppers and low-wage workers—have generated immense wealth for the richest white Americans and gotten very little in return. While workers of all ethnicities have been exploited, African Americans, along with other minorities, were systematically singled out for the lowest pay, worst working conditions, and greatest environmental impact on their communities. We can look back at the robber-baron fortunes of the industrial revolution, which were amassed by white elites who gained free access to the nation’s commons resources to exploit for personal enrichment. Companies, buildings, and charitable institutions still carry the names of the individuals who cornered markets built on the natural commons, including oil, timber, and minerals, as well as socially created wealth, such as railroads and the stock markets.
But even the historical government programs most celebrated for boosting the fortunes of ordinary citizens generally excluded Latinos, Asians, Native Americans, and especially African Americans. The Homestead Act, the most extensive nineteenth-century program for creating family wealth, expropriated indigenous people’s lands and enclosed large tracts of common property to grant private property titles to white homesteaders.
Affirmative Action for White People
In the twentieth century, the programs of the New Deal and GI Bill are often praised as bold initiatives to expand the American middle class. But as Ira Katznelson chronicles in When Affirmative Action Was White, Social Security, the educational benefits of the GI Bill, and home-ownership programs of the 1950s all deepened the racial wealth divide.
These programs were designed by a Congress in which white supremacists still wielded wide power, and in many states they were implemented so as not to upset local white rule. As a result, the first two decades of Social Security excluded agricultural and domestic workers, occupations disproportionately held by African Americans. During World War II, African Americans faced unequal treatment in the segregated military and were less able to access the bountiful benefits of the GI Bill upon their return.
The postwar economic boom was fueled by subsidized housing assistance to more than 35 million Americans between 1948 and 1972 in the form of VA and other federal loan subsidies. The biggest beneficiary was “whites only” suburbia, which also benefited the most from mortgage interest tax deductions.
Due to economic inequality and various racist practices—such as redlining, bigoted realtors, and outright racist violence used to maintain segregated neighborhoods—most African American families were excluded from this huge infusion of government investment in the middle class. By 2004, 76 percent of whites owned their own home, compared to 49.1 percent of blacks and 48.1 percent of Latinos.
Today, the children and grandchildren of GI Bill recipients benefit from intergenerational wealth transfers that enable them to purchase homes, attend top colleges, and start businesses. But they probably don’t think of themselves as beneficiaries of “white affirmative action.”
It will be difficult to overcome this gaping racial economic divide if we ignore the role of the commons in creating wealth. We must start with the seldom recognized premise that much of what we consider personal wealth derives from common wealth.
Yet the American myth endures that people’s level of wealth is a reflection of their individual effort and achievement. As long as privileged whites believe their wealth derives largely from their own effort, it will be difficult to build political support for an inclusive initiative to spread economic opportunity more widely.
In The American Dream and the Power of Wealth (Routledge, 2006), sociologist Heather Beth Johnson interviewed more than two hundred privileged white families about their attitudes toward family wealth. While these individuals acknowledged the role that financial support from their parents made in providing their children and themselves with tremendous educational advantages, they still deeply believed that one’s station in life is determined by individual effort. These interview subjects saw no relationship between the privileges offered by their own wealth and the inability of others to achieve the American Dream.
Anyone who boasts that they are selfmade is ignoring the crucial role of common wealth in creating personal riches. Individual initiative matters, of course, but is often akin to adding the cherry and whipped cream to the top of the existing sundae of common wealth.
Our best hope for eliminating the historical racial wealth divide lies in people recognizing that each of us has a birthright to share in the bounty of the commons for our sustenance and livelihood. People chafe at the notion of “giving people something for nothing.” Yet we don’t think twice about corporations and generations of privileged families growing rich from the commons for nothing.
Even white middle-class achievement needs to be understood in the context of preferential access to government programs and common wealth that was built on behalf of and through the efforts of all Americans, some of whom have not benefited from their own efforts.
Common Wealth for the Common Good
While private wealth is distributed unequally, common wealth belongs to all, and its benefits should, wherever possible, be universally shared. Income from commons-based resources should be used to reduce inequality and expand opportunity. At the same time, common wealth should be managed not just on behalf of those living now, but also on behalf of future generations. Each generation has an obligation to preserve its shared inheritances and pass them on, undiminished, to the next.
Collectively we have a pretty good sense of what needs to be done to broaden opportunity and at the same time remedy the inequality created by whites-only programs, which were successful in improving the opportunities for a segment of the population. Here are some practical ideas on how we can share the wealth of the commons, which rightfully belongs to all Americans:
How will we pay for these wealth-broadening initiatives? It makes sense to fund these efforts by harnessing income from commons-based sources.
Paying the Owners (All of Us) for Using Natural Resources
Historically, polluters have dumped their waste into the natural commons without cost. If we charge for the use of our shared natural resources, we create both incentives to reduce pollution and a revenue stream for programs like those described above. This is at the heart of the commons-based cap-and-dividend proposal to curb climate change.
Common Wealth Recycling Program
If we recognize that large accumulations of private individual wealth came from using the commons, then it’s obvious that we should tax inheritances more aggressively. There is also a moral rationale for taxing inheritances. Wealth created from the bounty of the commons may be temporarily claimed by individuals, but at some point much of it should return to society as a whole to be recycled into opportunities for others. Inheritance taxes could be dedicated to a Wealth Opportunity Fund to serve as a source for several of the uses de- scribed above.
Socially Created Wealth Captured by Corporations
The wealth of most corporations, like individuals, was generated thanks to commonly held resources. Peter Barnes, author of Capitalism 3.0, outlines the many often unacknowledged ways this happened. First, we grant them special privileges that are not available to real human beings, such as limited liability and perpetual life. We supplement these gifts with other socially created privileges, such as patents and copyrights that enable them to charge higher prices than a truly competitive market would allow. On top of that, society provides public infrastructure—roads, the Internet, regulated capital markets, and trade policies—that greatly enhances corporate wealth. And even more, we often give corporations commons resources worth billions: land to railroad companies, minerals to mining companies, the airwaves to broadcasters, pollution rights to polluters.
We rationalize these lavish gifts by arguing that corporations create jobs and strengthen our economy. But in reality, most of these benefits flow to privileged elites who own most of the corporation’s stock and are disproportionately white. Corporations historically paid back a portion of this through corporate income taxes, but over recent decades this contribution has shrunk to almost nothing for some of the country’s most profitable enterprises. Barnes proposes a levy on corporate wealth, placing a percentage of stock into an American Permanent Fund, to be managed on behalf of the common good.
The idea of the commons provides us with a new lens and a host of practical measures to reduce the racial wealth divide and remedy centuries of exclusion of African Americans and other people of color from America’s common wealth.
In 2004, the median family net worth of African Americans was $20,400, only 14.6 percent of the median white family net worth of $140,700. The median net worth for Latino families was $27,100.
Our nation needs to make a dramatic reinvestment in broadening wealth and opportunity for Americans who have been historically left out of prosperity. Massive government investments of the past that helped reduce the income gap, such as the nineteenth-century Homestead Act and post–World War II veterans and housing benefits, were effectively “whites only.” Since the end of legal discrimination in the 1960s, there has not been a similar mass investment in economic opportunity that African Americans and other people of color could benefit from as equal citizens.
Where Wealth Originates
One barrier to new programs that could elevate the economic standing of lower-income Americans is a widespread misunderstanding of how private wealth is created. Both the media and popular mythology extol rich people as the best and brightest, with the assumption that they made it on their own. Yet no one amasses wealth entirely alone. In truth, many, if not most, wealthy Americans inherited a substantial portion of their net assets. And even for those who did not, private wealth (savings, home ownership, investment wealth) was created from a combination of individual enterprise and the commons.
The story of wealth creation in the United States needs to be revisited from the perspective of both race and the commons. There is a long and unseemly history of the U.S. government channeling common wealth to expand the individual wealth and opportunity of the most privileged citizens, almost all of them white.
Even before the existence of the United States as a nation, Europeans confiscated and enclosed land and natural resources from indigenous peoples, creating the base of wealth on which our modern economy was built. Similarly, the United States— often through military intervention—appropriated the resources of foreign people.
Black laborers—first slaves, later sharecroppers and low-wage workers—have generated immense wealth for the richest white Americans and gotten very little in return. While workers of all ethnicities have been exploited, African Americans, along with other minorities, were systematically singled out for the lowest pay, worst working conditions, and greatest environmental impact on their communities. We can look back at the robber-baron fortunes of the industrial revolution, which were amassed by white elites who gained free access to the nation’s commons resources to exploit for personal enrichment. Companies, buildings, and charitable institutions still carry the names of the individuals who cornered markets built on the natural commons, including oil, timber, and minerals, as well as socially created wealth, such as railroads and the stock markets.
But even the historical government programs most celebrated for boosting the fortunes of ordinary citizens generally excluded Latinos, Asians, Native Americans, and especially African Americans. The Homestead Act, the most extensive nineteenth-century program for creating family wealth, expropriated indigenous people’s lands and enclosed large tracts of common property to grant private property titles to white homesteaders.
Affirmative Action for White People
In the twentieth century, the programs of the New Deal and GI Bill are often praised as bold initiatives to expand the American middle class. But as Ira Katznelson chronicles in When Affirmative Action Was White, Social Security, the educational benefits of the GI Bill, and home-ownership programs of the 1950s all deepened the racial wealth divide.
These programs were designed by a Congress in which white supremacists still wielded wide power, and in many states they were implemented so as not to upset local white rule. As a result, the first two decades of Social Security excluded agricultural and domestic workers, occupations disproportionately held by African Americans. During World War II, African Americans faced unequal treatment in the segregated military and were less able to access the bountiful benefits of the GI Bill upon their return.
The postwar economic boom was fueled by subsidized housing assistance to more than 35 million Americans between 1948 and 1972 in the form of VA and other federal loan subsidies. The biggest beneficiary was “whites only” suburbia, which also benefited the most from mortgage interest tax deductions.
Due to economic inequality and various racist practices—such as redlining, bigoted realtors, and outright racist violence used to maintain segregated neighborhoods—most African American families were excluded from this huge infusion of government investment in the middle class. By 2004, 76 percent of whites owned their own home, compared to 49.1 percent of blacks and 48.1 percent of Latinos.
Today, the children and grandchildren of GI Bill recipients benefit from intergenerational wealth transfers that enable them to purchase homes, attend top colleges, and start businesses. But they probably don’t think of themselves as beneficiaries of “white affirmative action.”
It will be difficult to overcome this gaping racial economic divide if we ignore the role of the commons in creating wealth. We must start with the seldom recognized premise that much of what we consider personal wealth derives from common wealth.
Yet the American myth endures that people’s level of wealth is a reflection of their individual effort and achievement. As long as privileged whites believe their wealth derives largely from their own effort, it will be difficult to build political support for an inclusive initiative to spread economic opportunity more widely.
In The American Dream and the Power of Wealth (Routledge, 2006), sociologist Heather Beth Johnson interviewed more than two hundred privileged white families about their attitudes toward family wealth. While these individuals acknowledged the role that financial support from their parents made in providing their children and themselves with tremendous educational advantages, they still deeply believed that one’s station in life is determined by individual effort. These interview subjects saw no relationship between the privileges offered by their own wealth and the inability of others to achieve the American Dream.
Anyone who boasts that they are selfmade is ignoring the crucial role of common wealth in creating personal riches. Individual initiative matters, of course, but is often akin to adding the cherry and whipped cream to the top of the existing sundae of common wealth.
Our best hope for eliminating the historical racial wealth divide lies in people recognizing that each of us has a birthright to share in the bounty of the commons for our sustenance and livelihood. People chafe at the notion of “giving people something for nothing.” Yet we don’t think twice about corporations and generations of privileged families growing rich from the commons for nothing.
Even white middle-class achievement needs to be understood in the context of preferential access to government programs and common wealth that was built on behalf of and through the efforts of all Americans, some of whom have not benefited from their own efforts.
Common Wealth for the Common Good
While private wealth is distributed unequally, common wealth belongs to all, and its benefits should, wherever possible, be universally shared. Income from commons-based resources should be used to reduce inequality and expand opportunity. At the same time, common wealth should be managed not just on behalf of those living now, but also on behalf of future generations. Each generation has an obligation to preserve its shared inheritances and pass them on, undiminished, to the next.
Collectively we have a pretty good sense of what needs to be done to broaden opportunity and at the same time remedy the inequality created by whites-only programs, which were successful in improving the opportunities for a segment of the population. Here are some practical ideas on how we can share the wealth of the commons, which rightfully belongs to all Americans:
- Debt-free higher education, like the ear- lier GI Bill and Pell grants that enabled millions to graduate from college with- out deep debts.
- KidSave accounts, such as the proposal to grant every child born in the United States a tax-free inheritance of $5,000. Something similar is already done in the United Kingdom. When the child reaches eighteen, these funds (which have earned interest over nearly two decades) can be withdrawn for educa- tion, first home purchase, or starting a business.
- Expanded home ownership, through various first-time home owner programs, such as soft second mortgages and subsidized interest rates.
- Annual dividends to supplement wages. Alaska residents receive an annual dividend from the Alaska Permanent Fund, a portion of the state’s oil wealth. Other sources of commons wealth could be used to fund similar state or federal programs.
- Establishment of “community wealth- building” funds—pools of capital to provide support for community development corporations, nonprofit hous- ing organizations, employee-owned firms, social enterprises, community land trusts, and other efforts that help people in underprivileged communities gain financial assets.
- Commons-based revenue invested in programs that expand opportunity. In Texas, a percentage of oil wealth contributes to several trust funds that pay for K-12 and higher education.
How will we pay for these wealth-broadening initiatives? It makes sense to fund these efforts by harnessing income from commons-based sources.
Paying the Owners (All of Us) for Using Natural Resources
Historically, polluters have dumped their waste into the natural commons without cost. If we charge for the use of our shared natural resources, we create both incentives to reduce pollution and a revenue stream for programs like those described above. This is at the heart of the commons-based cap-and-dividend proposal to curb climate change.
Common Wealth Recycling Program
If we recognize that large accumulations of private individual wealth came from using the commons, then it’s obvious that we should tax inheritances more aggressively. There is also a moral rationale for taxing inheritances. Wealth created from the bounty of the commons may be temporarily claimed by individuals, but at some point much of it should return to society as a whole to be recycled into opportunities for others. Inheritance taxes could be dedicated to a Wealth Opportunity Fund to serve as a source for several of the uses de- scribed above.
Socially Created Wealth Captured by Corporations
The wealth of most corporations, like individuals, was generated thanks to commonly held resources. Peter Barnes, author of Capitalism 3.0, outlines the many often unacknowledged ways this happened. First, we grant them special privileges that are not available to real human beings, such as limited liability and perpetual life. We supplement these gifts with other socially created privileges, such as patents and copyrights that enable them to charge higher prices than a truly competitive market would allow. On top of that, society provides public infrastructure—roads, the Internet, regulated capital markets, and trade policies—that greatly enhances corporate wealth. And even more, we often give corporations commons resources worth billions: land to railroad companies, minerals to mining companies, the airwaves to broadcasters, pollution rights to polluters.
We rationalize these lavish gifts by arguing that corporations create jobs and strengthen our economy. But in reality, most of these benefits flow to privileged elites who own most of the corporation’s stock and are disproportionately white. Corporations historically paid back a portion of this through corporate income taxes, but over recent decades this contribution has shrunk to almost nothing for some of the country’s most profitable enterprises. Barnes proposes a levy on corporate wealth, placing a percentage of stock into an American Permanent Fund, to be managed on behalf of the common good.
The idea of the commons provides us with a new lens and a host of practical measures to reduce the racial wealth divide and remedy centuries of exclusion of African Americans and other people of color from America’s common wealth.
Friday, January 21, 2011
Court Sides With Big Oil
Chevron's Crude Attacks
By MICHAEL WINSHIP
Joe Berlinger's back is against the wall. Last week the independent filmmaker, already facing crushing debt from legal bills, was dealt a major blow in his continuing fight against the third largest company in America, Chevron.
It's a battle that epitomizes the hardship individuals face trying to challenge corporate giants that punch back with a knockout force of high-powered lawyers and unlimited cash.
What's more, Joe's struggle continues to raise serious First Amendment issues and -- as we approach the first anniversary of the Supreme Court's Citizens United decision -- throws yet another spotlight on the increasingly pro-business stance of the nation's legal system.
It was this past May when my friend and colleague Bill Moyers and I first wrote about Joe's documentary Crude and its legal troubles. The film tells the story of how Ecuadorians challenged the pollution of rivers and wells from Texaco's drilling in the Lago Agrio oil field, a rainforest disaster savagely damaging the environment and the local population's health that's been described as the Amazon's Chernobyl. When the petrochemical behemoth Chevron acquired Texaco in 2001 and attempted to dismiss claims that it was now responsible, the indigenous people and their lawyers fought back in court.
In May, Federal Judge Lewis A. Kaplan ordered Berlinger to turn over to Chevron more than 600 hours of raw footage used to create the film. On appeal, the United States Court of Appeals for the Second Circuit limited the amount of footage to be turned over (although it still amounts to more than 500 hours), but ordered Berlinger to submit to depositions.
Now, on January 13, that same court ruled, as reported in The New York Times, that Joe "could not invoke a journalist's privilege in refusing to turn over that footage because his work on the film did not constitute an act of independent reporting," and that the argument "that he was protected as a journalist from being compelled to share his reporting materials was not persuasive." As evidence, the court said that the film "was solicited by the plaintiffs in the Lago Agrio litigation for the purpose of telling their story, and changes to the film were made at their instance."
Berlinger responded, "While the idea for Crude was pitched to me by Steven Donziger, one of the Lago Agrio Plaintiffs' lawyers, this was not a commissioned film. I had complete editorial independence, as did 60 Minutes and Vanity Fair who also produced stories on this case that were solicited by Mr. Donziger. The decision to modify one scene in the film based on comments from the plaintiffs' lawyers after viewing the film at the Sundance Film Festival was exclusively my own and in no way diminishes the independence of this production from its subjects. I rejected many other suggested changes and my documentary Crude has been widely praised for its balance in the presentation of Chevron's point of view as well as the plaintiffs'."
Were mistakes made, errors in judgment? Perhaps. But the court's ruling fails to fully understand the nature of news and documentary reporting and will have a chilling effect on journalists who constantly receive information and suggestions from sources representing a variety of interests and points of view. It's the professional journalist's job to sort through them on the way to determining the truth. As Moyers and I wrote in May, "This is a serious matter for reporters, filmmakers and frankly, everyone else. Tough, investigative reporting without fear or favor -- already under siege by severe cutbacks and the shutdown of newspapers and other media outlets -- is vital to the public awareness and understanding essential to a democracy."
Just as dismaying about this latest ruling is the endless sinking feeling that the courts more than ever are stacked against the individual seeking redress against big business. In the 39 states where judges are elected, corporate cash has poured into judicial races -- contributions have more than doubled in recent years, prompting Sandra Day O'Connor to say, "No state can possibly benefit from having that much money injected into a political campaign." And in the federal courts, well, suppose Joe Berlinger's case were to make it all the way to the Supreme Court. A recent Fortune magazine cover proclaimed it "the most pro-business court we have ever seen," and as the Times more understatedly noted last month, "It is clear... that the Supreme Court these days is increasingly focused on business issues."
In case you missed the Times story over the holidays, it was headlined "Justices Offer Receptive Ear to Business Interests." Scholars at Northwestern University and the University of Chicago prepared a report analyzing nearly 1500 Supreme Court decisions across almost six decades. It found, "The Roberts court, which has completed five terms, ruled for business interests 61 percent of the time, compared with 46 percent in the last five years of the court led by Chief Justice William H. Rehnquist, who died in 2005, and 42 percent by all courts since 1953."
According to the Times' Adam Liptak, "The Roberts court's engagement with business issues has risen along with the emergence of a breed of lawyers specializing in Supreme Court advocacy, many of them veterans of the United States solicitor general's office, which represents the federal government in the court. These specialists have been extraordinarily successful, both in persuading the court to hear business cases and to rule in favor of their clients."
Many of these lawyers work for or with the US Chamber of Commerce and its National Chamber Litigation Center, which calls itself "the voice of business in the courts on issues of national concern to the business community."
The Times reported, "The chamber now files briefs in most major business cases. The side it supported in the last term won 13 of 16 cases. Six of those were decided with a majority vote of five justices, and five of those decisions favored the chamber's side. One of them was Citizens United, in which the chamber successfully urged the court to guarantee what it called 'free corporate speech' by lifting restrictions on campaign spending."
The court's independence -- and historic skepticism about the needs of corporate America -- are relics of the past. Here's what was in a 2007 edition of BusinessWeek magazine: "Robin S. Conrad, head of the Chamber of Commerce's litigation arm, notes that the judicial branch offers an alternative forum where business can seek changes it has failed to win from other branches of government. In the 1990s, the chamber and other business groups made this a vital part of their tort reform strategy on a state level, pouring money into local judicial campaigns to reshape state supreme courts and, ultimately, state laws. Now with a US Supreme Court that's not allergic to business cases, the approach is playing out on a national level..."
It was President Calvin Coolidge who in 1925 famously declared, "The chief business of the American people is business," a sentiment this Supreme Court and much of the American judicial system would stoutly embrace. But ironically -- especially for journalists and filmmakers like Joe Berlinger -- he made the remark in a speech to the American Society of Newspaper Editors. Its title: "The Press under a Free Government."
Truth and freedom, Coolidge said, "are inseparable." There is "no justification for interfering with the freedom of the press, because all freedom, though it may sometime tend toward excesses, bears within it those remedies which will finally effect a cure for its own disorders."
By MICHAEL WINSHIP
Joe Berlinger's back is against the wall. Last week the independent filmmaker, already facing crushing debt from legal bills, was dealt a major blow in his continuing fight against the third largest company in America, Chevron.
It's a battle that epitomizes the hardship individuals face trying to challenge corporate giants that punch back with a knockout force of high-powered lawyers and unlimited cash.
What's more, Joe's struggle continues to raise serious First Amendment issues and -- as we approach the first anniversary of the Supreme Court's Citizens United decision -- throws yet another spotlight on the increasingly pro-business stance of the nation's legal system.
It was this past May when my friend and colleague Bill Moyers and I first wrote about Joe's documentary Crude and its legal troubles. The film tells the story of how Ecuadorians challenged the pollution of rivers and wells from Texaco's drilling in the Lago Agrio oil field, a rainforest disaster savagely damaging the environment and the local population's health that's been described as the Amazon's Chernobyl. When the petrochemical behemoth Chevron acquired Texaco in 2001 and attempted to dismiss claims that it was now responsible, the indigenous people and their lawyers fought back in court.
In May, Federal Judge Lewis A. Kaplan ordered Berlinger to turn over to Chevron more than 600 hours of raw footage used to create the film. On appeal, the United States Court of Appeals for the Second Circuit limited the amount of footage to be turned over (although it still amounts to more than 500 hours), but ordered Berlinger to submit to depositions.
Now, on January 13, that same court ruled, as reported in The New York Times, that Joe "could not invoke a journalist's privilege in refusing to turn over that footage because his work on the film did not constitute an act of independent reporting," and that the argument "that he was protected as a journalist from being compelled to share his reporting materials was not persuasive." As evidence, the court said that the film "was solicited by the plaintiffs in the Lago Agrio litigation for the purpose of telling their story, and changes to the film were made at their instance."
Berlinger responded, "While the idea for Crude was pitched to me by Steven Donziger, one of the Lago Agrio Plaintiffs' lawyers, this was not a commissioned film. I had complete editorial independence, as did 60 Minutes and Vanity Fair who also produced stories on this case that were solicited by Mr. Donziger. The decision to modify one scene in the film based on comments from the plaintiffs' lawyers after viewing the film at the Sundance Film Festival was exclusively my own and in no way diminishes the independence of this production from its subjects. I rejected many other suggested changes and my documentary Crude has been widely praised for its balance in the presentation of Chevron's point of view as well as the plaintiffs'."
Were mistakes made, errors in judgment? Perhaps. But the court's ruling fails to fully understand the nature of news and documentary reporting and will have a chilling effect on journalists who constantly receive information and suggestions from sources representing a variety of interests and points of view. It's the professional journalist's job to sort through them on the way to determining the truth. As Moyers and I wrote in May, "This is a serious matter for reporters, filmmakers and frankly, everyone else. Tough, investigative reporting without fear or favor -- already under siege by severe cutbacks and the shutdown of newspapers and other media outlets -- is vital to the public awareness and understanding essential to a democracy."
Just as dismaying about this latest ruling is the endless sinking feeling that the courts more than ever are stacked against the individual seeking redress against big business. In the 39 states where judges are elected, corporate cash has poured into judicial races -- contributions have more than doubled in recent years, prompting Sandra Day O'Connor to say, "No state can possibly benefit from having that much money injected into a political campaign." And in the federal courts, well, suppose Joe Berlinger's case were to make it all the way to the Supreme Court. A recent Fortune magazine cover proclaimed it "the most pro-business court we have ever seen," and as the Times more understatedly noted last month, "It is clear... that the Supreme Court these days is increasingly focused on business issues."
In case you missed the Times story over the holidays, it was headlined "Justices Offer Receptive Ear to Business Interests." Scholars at Northwestern University and the University of Chicago prepared a report analyzing nearly 1500 Supreme Court decisions across almost six decades. It found, "The Roberts court, which has completed five terms, ruled for business interests 61 percent of the time, compared with 46 percent in the last five years of the court led by Chief Justice William H. Rehnquist, who died in 2005, and 42 percent by all courts since 1953."
According to the Times' Adam Liptak, "The Roberts court's engagement with business issues has risen along with the emergence of a breed of lawyers specializing in Supreme Court advocacy, many of them veterans of the United States solicitor general's office, which represents the federal government in the court. These specialists have been extraordinarily successful, both in persuading the court to hear business cases and to rule in favor of their clients."
Many of these lawyers work for or with the US Chamber of Commerce and its National Chamber Litigation Center, which calls itself "the voice of business in the courts on issues of national concern to the business community."
The Times reported, "The chamber now files briefs in most major business cases. The side it supported in the last term won 13 of 16 cases. Six of those were decided with a majority vote of five justices, and five of those decisions favored the chamber's side. One of them was Citizens United, in which the chamber successfully urged the court to guarantee what it called 'free corporate speech' by lifting restrictions on campaign spending."
The court's independence -- and historic skepticism about the needs of corporate America -- are relics of the past. Here's what was in a 2007 edition of BusinessWeek magazine: "Robin S. Conrad, head of the Chamber of Commerce's litigation arm, notes that the judicial branch offers an alternative forum where business can seek changes it has failed to win from other branches of government. In the 1990s, the chamber and other business groups made this a vital part of their tort reform strategy on a state level, pouring money into local judicial campaigns to reshape state supreme courts and, ultimately, state laws. Now with a US Supreme Court that's not allergic to business cases, the approach is playing out on a national level..."
It was President Calvin Coolidge who in 1925 famously declared, "The chief business of the American people is business," a sentiment this Supreme Court and much of the American judicial system would stoutly embrace. But ironically -- especially for journalists and filmmakers like Joe Berlinger -- he made the remark in a speech to the American Society of Newspaper Editors. Its title: "The Press under a Free Government."
Truth and freedom, Coolidge said, "are inseparable." There is "no justification for interfering with the freedom of the press, because all freedom, though it may sometime tend toward excesses, bears within it those remedies which will finally effect a cure for its own disorders."
Tuesday, January 18, 2011
Obama Launches Rule Review, Pledging to Spur Jobs, Growth
(OK, first, none of the legislation during Obama's administration even comes close to real regulation because the laws were written by corporate lobbyists, like 99% of our laws are. And now he's going to "take it easy" on big business so they'll hire more people? We DO need jobs, but this president caves into corporate interests quicker than they come--no one has ever folded with a better hand than Obama has had, and he does it routinely. He IS the corporate special interests "go to guy," after all. When I hear people complaining that Obama is 'anti-big business', I'm just like "What planet are you on?" After it's all said and done, when history looks back on this period in America, Obama will be viewed as one of the most corporate-friendly presidents there ever was, rivaling both Bush and Clinton at making it easier on the corporations while simultaneously making it more difficult on the lives of American families who are not wealthy.--jef)
***
Obama Launches Rule Review, Pledging to Spur Jobs, Growth
By ELIZABETH WILLIAMSON - The Wall Street Journal
WASHINGTON—President Barack Obama plans a government-wide review of federal regulations, aiming to eliminate rules that stymie economic growth.
In an article published in the opinion pages of The Wall Street Journal, Mr. Obama said he intends to issue an executive order initiating a review to "make sure we avoid excessive, inconsistent and redundant regulation," focusing on rules that "stifle job creation and make our economy less competitive." He also suggested future regulations must do their job "while promoting economic growth."
The move is the latest effort by the White House to repair relations with corporate America, hoping to spur investment by the nation's largest multinationals and reduce unemployment.
Business leaders say an explosion in new regulations stemming from the president's health-care and financial regulatory overhauls has, along with the sluggish economy, made them reluctant to spend on expanding and hiring. Companies are sitting on nearly $2 trillion in cash and liquid assets, the most since World War II.
In recent weeks, the administration has made new efforts to push stalled free-trade agreements with Korea and others through Congress, and signaled its eagerness to consider an overhaul of the U.S. corporate tax code. The president invited chief executives to the White House last month, where they formed task forces to work on specific issues, including export growth and taxes.
On Feb. 7, Mr. Obama will visit the U.S. Chamber of Commerce—a chief opponent to his administration's regulatory approach—for a discussion on how the White House can work with the group to create jobs. The efforts are designed to give companies more confidence in the president's stewardship of the economy, and bolster his re-election prospects among a wealthy constituency not traditionally allied with Democrats.
In Tuesday's article, the president defended his administration's efforts to strike "the proper balance" between protecting the public and not interfering with economic growth.
The president said the government sometimes failed to meet its "basic responsibility to protect the public interest," citing the run-up to the financial crisis. He also acknowledged the cost of regulation and said that sometimes "rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs."
He also said: "Where necessary, we won't shy away from addressing obvious gaps: new safety rules for infant formula; procedures to stop preventable infections in hospitals; efforts to target chronic violators of workplace safety laws. But we are also making it our mission to root out regulations that conflict, that are not worth the cost, or that are just plain dumb."
For close to a year, the White House has been asking leading business groups in the capital to identify regulations they believe are obstacles to job-creating private investment. But these efforts are being dwarfed by complaints about the administration's unfriendly rhetoric toward the financial industry and large corporations, and regulations stemming from its legislative agenda.
Even some of the president's corporate allies have joined criticism of the White House's regulatory and tax policies. The Business Roundtable, an association of chief executives of many of the largest U.S. corporations, last year compiled a 54-page report that includes proposals to streamline rules proposed by the Environmental Protection Agency and the Federal Communications Commission, among scores of others. It was accompanied by public criticism from the Roundtable, whose members have frequently advised the White House on the economy.
At the same time, the administration faces pressure from the left not to appear to be too close to Wall Street and corporate interests. Liberals were irked most recently when Mr. Obama tapped political veteran and J. P. Morgan Chase & Co. executive William Daley as his chief of staff.
Friday, January 14, 2011
The Class War Launched by America's Wealthiest Is Getting More Savage
Countries with wide income inequality are unstable: they have large underclasses, high rates of crime and little opportunity.
By Larry Beinhart, AlterNet
Posted on January 13, 2011
We’re in a class war.
It’s the corporations and the very wealthiest against all the rest of us. We’re losing.
In 1962 the wealthiest 1 percent of American households had 125 times the wealth of the median household. Now it’s 190 times as much. Is that a case of a rising tide lifting all boats, just a few of them a little bit higher? No.
From 1950 to 1965, median family income rose from $24,000 a year to $38,000 a year. That’s close to 4 percent a year, close to 60 percent over 15 years. That’s a rising tide.
In 1964 there was a big tax cut. That’s when things started to slow down for average people. By the mid-'70s the rise of the middle class stalled. From 1975 to 2010 median family income rose $42,936 to $49,777. That’s not quite 16 percent over 25 years, less than six-tenths of 1 percent per year.
Briefly, when taxes went up under Clinton, median income rose, peaked at $52,587 in 1999, and then, after Bush cut taxes, declined. Keep in mind that this is median family income. In the '50s and '60s, family income was usually earned by a single person. Today, family income normally comes from at least two people.
At the same time, income for the richest soared. In 1979 the richest 1 percent of Americans earned 9 percent of all U.S. income. Now they earn 24 percent of all U.S. income. One percent of Americans earn nearly one-fourth of all the income in the country.
Then came the crashes of 2001 and 2008 and the recessions that followed.
The crash hasn’t changed anything. Things have become worse.
From 1990 to 2005, adjusted for inflation -- the minimum wage is down 9 percent, production workers’ pay is up only over 15 years 4.3 percent.
At the same time, the rich get richer:
Corporate profits are up 106.7 percent. The S&P 500 is still up 141.4 percent since 1990. CEO compensation is up 282 percent. Call it transfer of wealth. Or call it class warfare.
What’s wrong with the rich getting richer?
Slate's Timothy Noah, in "The United States of Inequality," wrote, “Income distribution in the United States [has become] more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador.”
Take a look at that list.
Countries with wide income inequality don’t lead the world in research, technology, industry, and innovation. They’re unstable. They have large underclasses. They have high rates of crime. They have little opportunity.
In such countries the rich have disproportionate power. They take control of all aspects of society, especially government, the police, and the judiciary. They become self perpetuating.
If current trends continue, “The United States by 2043 will have the same income inequality as Mexico.” (Tula Connell, Mar 12, 2010, AFL-CIO Now.)
Countries with high levels of income inequality are third-world countries.
Here’s how regular people can deal with cultures of high inequality. The primary, and best, weapon is a progressive tax structure. As people move up the income ladder they pay a higher rate at each rung. Unearned income –from dividends and capital gains – is taxed at least as high as earned income (money that people actually work for.) Tax cuts for the wealthy mark, with great precision, the decline in fortunes of ordinary Americans. Tax cuts for the wealthy mark, with equal precision, the increase in inequality. We had a chance to slow the process by letting the last round, the Bush tax cuts, expire. We’ve lost that round.
People can become educated and move on up.
Back in the '60s, when I was growing up, New York City had free universities. The burgeoning SUNY system charged $400 tuition a semester. The minimum Regents scholarship was $400 a semester. If a student didn’t get one, he or she could easily earn enough to pay tuition with a summer job. The same held true for most state university systems across the country.
Today, students have to borrow. The median student debt for an undergraduate degree – forget about a doctorate, law school, and med school – is $20,000. The first, and truest, lesson you learn when you go to college is how to be in service to the banks.
We’ve lost that battle.
What does it mean?
Businesses have become very good at beating unions. And they’re getting better at it. According to Business Week, ("How Wal-Mart Keeps Unions at Bay,” 10/28/2002),"over the past two decades, Corporate America has perfected its ability to fend off labor groups."
In the 1940s a third of private sector employees were unionized. Now it’s down to just 7.2 percent. Unions only remain strong in the public sector, where membership is 37 percent.
If you read the papers or watch the news, you will see an anti-public service union story almost everyday. These are the people who teach your kids, pick up the trash, clean the sewers, drive the buses and trains, they’re the police and fireman. The stories will tell you their pension fund liabilities will bankrupt the states; that it’s unionized teachers who have ruined our schools. Charter schools – without unions – are the new favorite charity for billionaires.
When a country is, or becomes, a third-world country, the other thing people can do is run. To some place richer and freer. Like America.
But when America becomes Mexico, where you gonna run to?
By Larry Beinhart, AlterNet
Posted on January 13, 2011
We’re in a class war.
It’s the corporations and the very wealthiest against all the rest of us. We’re losing.In 1962 the wealthiest 1 percent of American households had 125 times the wealth of the median household. Now it’s 190 times as much. Is that a case of a rising tide lifting all boats, just a few of them a little bit higher? No.
From 1950 to 1965, median family income rose from $24,000 a year to $38,000 a year. That’s close to 4 percent a year, close to 60 percent over 15 years. That’s a rising tide.
In 1964 there was a big tax cut. That’s when things started to slow down for average people. By the mid-'70s the rise of the middle class stalled. From 1975 to 2010 median family income rose $42,936 to $49,777. That’s not quite 16 percent over 25 years, less than six-tenths of 1 percent per year.
Briefly, when taxes went up under Clinton, median income rose, peaked at $52,587 in 1999, and then, after Bush cut taxes, declined. Keep in mind that this is median family income. In the '50s and '60s, family income was usually earned by a single person. Today, family income normally comes from at least two people.
At the same time, income for the richest soared. In 1979 the richest 1 percent of Americans earned 9 percent of all U.S. income. Now they earn 24 percent of all U.S. income. One percent of Americans earn nearly one-fourth of all the income in the country.
Then came the crashes of 2001 and 2008 and the recessions that followed.
The crash hasn’t changed anything. Things have become worse.
From 1990 to 2005, adjusted for inflation -- the minimum wage is down 9 percent, production workers’ pay is up only over 15 years 4.3 percent.
At the same time, the rich get richer:
Corporate profits are up 106.7 percent. The S&P 500 is still up 141.4 percent since 1990. CEO compensation is up 282 percent. Call it transfer of wealth. Or call it class warfare.
What’s wrong with the rich getting richer?
Slate's Timothy Noah, in "The United States of Inequality," wrote, “Income distribution in the United States [has become] more unequal than in Guyana, Nicaragua, and Venezuela, and roughly on par with Uruguay, Argentina, and Ecuador.”
Take a look at that list.
Countries with wide income inequality don’t lead the world in research, technology, industry, and innovation. They’re unstable. They have large underclasses. They have high rates of crime. They have little opportunity.
In such countries the rich have disproportionate power. They take control of all aspects of society, especially government, the police, and the judiciary. They become self perpetuating.
If current trends continue, “The United States by 2043 will have the same income inequality as Mexico.” (Tula Connell, Mar 12, 2010, AFL-CIO Now.)
Countries with high levels of income inequality are third-world countries.
Here’s how regular people can deal with cultures of high inequality. The primary, and best, weapon is a progressive tax structure. As people move up the income ladder they pay a higher rate at each rung. Unearned income –from dividends and capital gains – is taxed at least as high as earned income (money that people actually work for.) Tax cuts for the wealthy mark, with great precision, the decline in fortunes of ordinary Americans. Tax cuts for the wealthy mark, with equal precision, the increase in inequality. We had a chance to slow the process by letting the last round, the Bush tax cuts, expire. We’ve lost that round.
People can become educated and move on up.
Back in the '60s, when I was growing up, New York City had free universities. The burgeoning SUNY system charged $400 tuition a semester. The minimum Regents scholarship was $400 a semester. If a student didn’t get one, he or she could easily earn enough to pay tuition with a summer job. The same held true for most state university systems across the country.
Today, students have to borrow. The median student debt for an undergraduate degree – forget about a doctorate, law school, and med school – is $20,000. The first, and truest, lesson you learn when you go to college is how to be in service to the banks.
We’ve lost that battle.
What does it mean?
“Children from low-income families have only a 1 percent chance of reaching the top 5 percent of the income distribution, versus children of the rich who have about a 22 percent chance.Working people can organize and form unions. Unions do more than raise wages. They improve working conditions and safety. They provide protection against abuse, intimidation and wrongful dismissal. Non-union employers have to compete, partly to keep out unions, so the existence of unions helps everyone. Unions also have political power, they spend money and mobilize their members to vote.
“Children born to the middle quintile of parental family income ($42,000 to $54,300) had about the same chance of ending up in a lower quintile than their parents (39.5 percent) as they did of moving to a higher quintile (36.5 percent). Their chances of attaining the top five percentiles of the income distribution were just 1.8 percent.”
(Understanding Mobility in America, April 26, 2006, Tom Hertz, American University.)
Businesses have become very good at beating unions. And they’re getting better at it. According to Business Week, ("How Wal-Mart Keeps Unions at Bay,” 10/28/2002),"over the past two decades, Corporate America has perfected its ability to fend off labor groups."
In the 1940s a third of private sector employees were unionized. Now it’s down to just 7.2 percent. Unions only remain strong in the public sector, where membership is 37 percent.
If you read the papers or watch the news, you will see an anti-public service union story almost everyday. These are the people who teach your kids, pick up the trash, clean the sewers, drive the buses and trains, they’re the police and fireman. The stories will tell you their pension fund liabilities will bankrupt the states; that it’s unionized teachers who have ruined our schools. Charter schools – without unions – are the new favorite charity for billionaires.
When a country is, or becomes, a third-world country, the other thing people can do is run. To some place richer and freer. Like America.
But when America becomes Mexico, where you gonna run to?
Monday, January 10, 2011
The Crying Shame of John Boehner
(And he's too damn orange, too!--jef)
***
by Matt Taibi, Rolling Stone (in the Jan 20, 2011 issue)
John Boehner is the ultimate Beltway hack, a man whose unmatched and self-serving skill at political survival has made him, after two decades in Washington, the hairy blue mold on the American congressional sandwich. The biographer who somewhere down the line tackles the question of Boehner's legacy will do well to simply throw out any references to party affiliation, because the thing that has made Boehner who he is — the thing that has finally lifted him to the apex of legislative power in America — has almost nothing to do with his being a Republican.
The Democrats have plenty of creatures like Boehner. But in the new Speaker of the House, the Republicans own the perfect archetype — the quintessential example of the kind of glad-handing, double-talking, K Street toady who has dominated the politics of both parties for decades. In sports, we talk about athletes who are the "total package," and that term comes close to describing Boehner's talent for perpetuating our corrupt and debt-addled status quo: He's a five-tool insider who can lie, cheat, steal, play golf, change his mind on command and do anything else his lobbyist buddies and campaign contributors require of him to get the job done.
As for what that job is, here's the thing: In this age of greed-enabling bailouts and rampaging Tea Parties and coast-to-coast voter rage toward the entire political process, Congress in particular now ranks as one of the single most unpopular political entities on earth. Recent polls show that only 13 percent of Americans approve of the job performance of their national legislature — which makes our elected representatives even less popular here at home than, say, Al Qaeda is in Pakistan. (Bin Laden and Co. scored an 18 percent approval rating not long ago.)
The reasons aren't hard to figure. Voters are fatigued not only by the seemingly endless kinky-sex and corruption scandals emanating from Capitol Hill, but also by the increasingly infuriating fact that no matter which party is in power, the leadership inevitably borrows like dice addicts on the Vegas strip and uses the money to pay for huge Frankensteinian initiatives that bloat the size and power of the federal government, often without semblance of sense or plan. The underlying dynamic is bought-off congressmen ignoring real social problems and using the legislative process to construct massive perpetual handouts for their campaign-contributor sponsors. Both parties have now made the servicing of the giant handout machine their primary raison d'être — and it's this perception, that Washington is occupied by an unbreakable bipartisan conspiracy of favor-churning hacks, that has inspired anti-Washington revolts like the Tea Party.
"Medicare Part D, No Child Left Behind, the Patriot Act — practically any significant piece of legislation that came out of the Bush presidency, it was a joke," says Chris Littleton, who heads a coalition of 58 Tea Party groups in Boehner's home state of Ohio.
The anger of Tea Partiers like Littleton erupted when they suddenly realized that their elected leaders in Congress had developed a primary allegiance not to constituents back home or even to ideology, but to themselves and their own dissolute, pay-for-play, you-scratch-mine, I'll-scratch-yours intramural bureaucratic calculus. Voters got mad when leaders covered up sex scandals, partied on corporate junkets when they should have been working on the public dime, wasted mountains of taxpayer money on political witch hunts instead of working to stave off another financial crisis or terrorist attack — and they got mad, especially, when congressional leaders stopped having the common decency to hide the lavish gifts funneled to them by their lobbyist pals in exchange for political favors, parading around in public with their goodies in hand without even caring how it looked.
The irony is, no one — no one — represents all of these bile-inspiring qualities better than John Boehner. His most striking achievement is that there's a check mark next to his name on virtually every entry on the list of common public complaints about Congress. And yet, when the Republicans rolled back into the control of the House this past November on the strength of a nationwide Throw-the-Bums-Out movement, it was Boehner, the prototypical bum, who somehow clambered onto the congressional throne. It's hard to imagine that in all of American political history there has been a more unlikely marriage than John Boehner and the pitchfork-wielding, incumbent-eating Tea Party, whose blood ostensibly boils at the thought of business as usual. Because John Boehner is business as usual, a man devoted almost exclusively to ensuring his own political survival by tending faithfully to the corrupt and clanking Beltway machinery. How? Let us count the ways.
From the very start, Boehner's career has been a heartwarming tribute to the gentle spirituality and tender human connections that surround the experience of congressional service. Here's how he got into the House in the first place: His predecessor, a white Republican named Donald "Buz" Lukens, got caught on camera talking with a black woman at a McDonald's in Columbus, Ohio, about how he had slept with her teenage daughter. It came out later that Lukens, his negotiating skills honed by years of public service, had paid 40 bucks to the girl to have sex with him in his Columbus apartment.
Convicted of "contributing to the unruliness of a minor," old Buz refused to resign his seat, and so John Boehner, a young plastics salesman (plastics!), took him on in the primary and won on a platform of restoring morals and ethics to the Congress. Boehner then joined up with a group of other freshmen congressmen, including God-humping Pennsylvanian Rick Santorum, and formed the so-called Gang of Seven. The group made names for themselves by giving sanctimonious speeches blasting Democratic congressional leaders for things like getting free haircuts at the House barbershop and free meals at the Senate restaurant. Shortly thereafter, Boehner ascended to a leadership role himself after helping co-author the "Contract With America," and it wasn't long before the man who swept into office in the shiny red underpants of an ethical crusader was creating his own peculiar ethics record.
Forget about free haircuts: Boehner was soon caught literally handing out checks from the tobacco lobby on the floor of the House. This was 1995; the House was voting to consider an end to federal subsidies of the tobacco industry, and Boehner, at the time the fourth-ranking Republican in the party hierarchy, went on the floor and handed out, by his own admission, "a half-dozen" donation checks from the tobacco lobby to various members.
Boehner only got busted when former-football-star-turned-GOP-congressman Steve Largent got wind of the check-passing and confronted Boehner about it. The fallout from the incident reveals the future House speaker at his absolute finest: While being interviewed by a television reporter about what he had done, Boehner with a straight face tries to turn the tables and present himself as an opponent of the practice.
"It's a practice that's gone on here for a long time that we're trying to stop, and I know that I'll never do it again," he deadpans. Asked how he feels about the episode, he says, "It's a bad practice. We've gotta stop it." While he may have stopped handing out checks on the floor of the House, Boehner didn't stop taking in lobbyist money and doing favors for his favorite industries. If you go back over his record, you'll find one instance after another of Boehner standing up on this or that issue in a way that dovetails perfectly with a pile of money that happens to have been sent to his PAC or his campaign fund from the industry that stood to benefit from his position. For years, Boehner was one of the largest recipients of campaign donations from UPS; by an amazing coincidence, he was also the sponsor of a bill that would have allowed companies that pay into group pension plans — like UPS — to cut pension benefits for their own employees if another employer in the group went out of business. In another curious connection between campaign funding and political favors, Boehner received hundreds of thousands of dollars from for-profit colleges and the private-student-loan industry — and then sponsored laws that restricted the Department of Education from making less expensive government loans to students, pushing for federal subsidies for private colleges and trade schools.
In the Nineties, Boehner started weekly meetings with a group of lobbyists, originally known as "The Thursday Group," that helped him develop close ties to companies like Citigroup, MillerCoors, UPS, Goldman Sachs, Google and R.J. Reynolds. And what does Boehner do with these lobbyists? Well, one thing we know he does is play golf — shitloads and shitloads of golf, which he apparently likes a lot more than, well, working. "Lazy" is how one former congressional aide describes Boehner's work ethic. "Not the hardest worker," said Joe Scarborough, former congressman and current MSNBC host. Congressional sources say that Boehner likes to knock off early, and that seems to square with his record, which reveals a real passion — for the links. He went on 180 junkets in six years, most of them golf trips, and reportedly copped to playing 100 rounds a year at a time when he was collecting a six-figure salary, paid for by the U.S. taxpayer, to serve in Congress. His political action committee spent almost $83,000 on golf events in 2009, and over the past 18 months he has run up a $67,000 tab at the Ritz-Carlton golf resort in Naples, Florida. He flew on a corporate jet 45 times between 2000 and 2007, and took at least 41 other corporate-sponsored trips in the past decade.
When he wasn't playing golf on some lobbyist's tab, Boehner was often sleeping in an apartment rented to him by industry pals; for years he lived in a posh two-bedroom apartment owned by John Milne, a Beltway lobbyist who represents health-insurance companies and restaurant chains, two industries with keen interest in the work of the House Education and Workforce Committee chaired by Boehner.
More than anything else, though, it's Boehner's skill at raising cash that gives him his power base in the House. In his most recent re-election effort, political action committees donated $2.4 million to Boehner's campaign fund, a staggering number for a House member. Boehner also raised some $44 million for other candidates.
Boehner's fundraising prowess is so legendary that his own office uses it as a defense against character attacks. When MSNBC's Scarborough caused a stir by accusing Boehner of being a light worker who's at bars every night by 5 or 6 p.m., Boehner's own spokesman Michael Steel shot back that "the only time [Boehner] is 'around town' these days is to raise money for our House Republican team. Thus far this year, he's headlined more than 230 events and raised about $27 million." At the time, the year was only half over — meaning, as one pundit pointed out, that Boehner was attending 1.25 fundraisers a day.
Look back over almost every controversial episode in the recent history of the U.S. Congress and you will find Boehner's face appearing, Zelig-like, somewhere in the foreground. He was a key figure in the historic waste of time that was his and Newt Gingrich's witch-hunting effort to get Bill Clinton impeached for lying about a blow job. He crossed the aisle to co-author the No Child Left Behind Act, a grotesque and grotesquely expensive expansion of federal power that helped jack up the federal education budget by an astounding 80 percent in the first five years of Bush's presidency, then voted for the obscene Medicare Part D, a staggering $550 billion handout to the pharmaceutical industry — two portentous initiatives that helped turn the Republicans into the new party of big government.
Then, in the middle of the Bush years, the man who got into office thanks to Buz Lukens' child-groping was enmeshed in his own sex scandal involving minors. When the news broke in September 2006 that Rep. Mark Foley, a Republican from Florida, had been sending sexually suggestive e-mails to a 16-year-old male page, it turned out that Boehner had been sitting on the information for months. Nancy Pelosi called for an immediate investigation into the Foley scandal, but Boehner blocked the resolution. Boehner later claimed that he had told then-Speaker Dennis Hastert about the Foley incident as soon as he found out — and promptly retracted his own alibi. The ensuing scandal nearly toppled Hastert, but Boehner survived mostly unscathed.
When he wasn't busy protecting sex offenders, Boehner was gracing the hallowed grounds of the Capitol building with all the dignity and class of a boxing promoter, calling one legislative deal a "crap sandwich" and blasting an Obama tax compromise as "chicken crap" (an unfortunate choice of words, given that massive amounts of poultry waste have created an ecological disaster in his own district). Boehner is also an innovator in the loathsome new political phenomenon of men crying in public, co-owning mastery of the habit with screeching media dillweed Glenn Beck.
But beyond all of that, Boehner just represents a certain type of hollowly driven, two-faced personality unique to the Beltway. It's not so much that he's likely at any moment to start pounding his fist in favor of something that only yesterday he was denouncing as a threat to the American way of life (when benchmarks in Iraq were a Democratic idea, Boehner said they would ensure failure; when George Bush came out for them, he said they were "very important"). Nor is it so much that he's prone to descending into hysterical hyperbole when the well-being of his campaign donors is threatened in even the vaguest way (he called the watered-down Dodd-Frank financial regulation bill "killing an ant with a nuclear weapon," with the ant in question being a financial crisis that wiped out over 40 percent of the world's wealth). It's more that . . . well, you have to spend a lot of time in Washington to know the type, but he's the kind of guy who would step over his mother to score a political point.
This is true almost in a literal sense. One congressional aide tells a story that goes back many years. Boehner's mother, Mary Ann, had just died. The aide, who at the time worked for a prominent Democratic congressman, suggested that his boss offer Boehner condolences. The Democrat, who had just heard that he was going to face an unexpected challenge from a state senator in his own re-election campaign, went along with the aide's advice, despite the fact that he didn't have a good relationship with Boehner.
The story goes like this: The Democrat approached Boehner, and said, "Hey, John, I'm sorry to hear about your mother."
Boehner, not missing a beat, shot back: "And I'm sorry to hear you have an opponent."
"That's John Boehner in a nutshell," the aide says now. "I mean, this is right after his mother died, and that's where his head was at."
Although there's a bit of an omaertà effect going on now that Boehner has risen to the speaker's chair, there are certainly members, particularly on the Democratic side and particularly in the Ohio delegation, who aren't shy about voicing opinions about Boehner's Machiavellian bluntness. Marcy Kaptur, the Ohio congresswoman who garnered nationwide attention back in 2008 when she urged people facing foreclosure to stay in their homes, crossed paths with Boehner last year when he publicly campaigned for Kaptur's opponent, Rich Iott, a lunatic whose weekend hobbies included dressing up in Nazi costumes in military re-enactments.
Iott denied that dressing up in the uniforms of the 5th SS Panzer Division meant that he sympathized with Nazi politics — but that didn't mean there weren't aspects of the Nazi regime that he could admire. "I've always been fascinated by the fact that here was a relatively small country that from a strictly military point of view accomplished incredible things," Iott said. Yet Boehner quietly continued to campaign for Iott even after his beaming Nazi photos were blasted over the national airwaves. "Boehner came to the district to campaign for him through the back door," says a Kaptur aide, "and left just as stealthily."
Kaptur and her staff were mystified as to why Boehner would back a nutjob in an SS costume, especially when Kaptur was so far ahead in the polls. They could come up with only two explanations, both humorously nauseating. One was that it was a personal thing to tweak Kaptur, who had recently held a press conference criticizing a Boehner proposal to raise the Social Security retirement age to 70. The other was that Boehner was milking the moronic Iott, the wealthy heir to a supermarket chain, for future campaign contributions.
"The fact that my opponent is among the wealthiest individuals not just in our region but in the nation leads me to believe Mr. Boehner, sadly, has his eye on the money that can be wrung out of him in the future," says Kaptur.
Another Ohio Democrat, Steve Driehaus, clashed repeatedly with Boehner before losing his seat in the midterm elections. After Boehner suggested that by voting for Obamacare, Driehaus "may be a dead man" and "can't go home to the west side of Cincinnati" because "the Catholics will run him out of town," Driehaus began receiving death threats, and a right-wing website published directions to his house. Driehaus says he approached Boehner on the floor and confronted him.
"I didn't think it was funny at all," Driehaus says. "I've got three little kids and a wife. I said to him, 'John, this is bullshit, and way out of bounds. For you to say something like that is wildly irresponsible.'"
Driehaus is quick to point out that he doesn't think Boehner meant to urge anyone to violence. "But it's not about what he intended — it's about how the least rational person in my district takes it. We run into some crazy people in this line of work."
Driehaus says Boehner was "taken aback" when confronted on the floor, but never actually said he was sorry: "He said something along the lines of, 'You know that's not what I meant.' But he didn't apologize."
Others in Washington see Boehner not so much as a bloodless partisan but as a clueless yutz, one who rose to power through a combination of accidents and bureaucratic inertia. "He's just sort of like, 'Oh, how did I get here?'" says one Democratic aide. "I think of him sort of as a big Saint Bernard to [new Republican Majority Leader] Eric Cantor's yapping Chihuahua." Boehner is the butt of a lot of jokes around the Hill, with his wino eyes, perennial Crayola-orange tan and phallic surname providing even members of his own party with endless comic material. (George Bush, famous for giving colleagues nicknames, called Boehner "Boner.") His pseudo-acceptance speech on the night in November when Republicans retook the House was brilliant clown theater, a Wayne's World version of a right-wing political rally. At the very moment when millions of GOP voters were celebrating their ouster of the great socialist enemy Obama in the name of patriotism and liberty, Boehner was tearing up over what an awesome job he had finally scored for himself.
"I've spent my whole life...[chokes up]...chasing...[chokes up]...the American dream," he sniffed. Becoming verklempt, Boehner waved his hands in a "No, I can't go on" gesture, then went on anyway, as the crowd nonsensically chanted "U-S-A! U-S-A!"
"I put myself through school, working..." — he choked up again — "every rotten job there was, and I poured my heart and soul into running a small business." The words "small business" were too much for Boehner to take (remember, this is a man who went on 180 corporate junkets in six years, who took 45 flights on private jets), and so he cried again, putting a fist over his mouth and squeaking "Uha!" before pronouncing himself "ready to lead." Boehner later repeated his election-night performance in a 60 Minutes interview with Lesley Stahl, not just crying but weeping — he looked like a Girl Scout watching a puppy get pushed through a meat grinder — as he flogged his "I've been chasing the American dream my whole life" act.
The cryfests have left Democrats rolling their eyes. "He cries sometimes when we're having a debate on bills," grumbled Nancy Pelosi. "If I cry, it's about the personal loss of a friend or something like that. But when it comes to politics — no, I don't cry."
And while all prominent politicians live half their lives in front of the cameras and have more than a few verbal hiccups to live down, Boehner seems to have an almost Yogi Berra-ish talent for grammatical violence and logic-defying goofball platitudes. This past summer, in a sage observation that Jon Stewart was moved to call "the most profoundly retarded statement I've ever heard," Boehner remarked that "the only way we're going to get our economy going again and solve our budget problems is to get the economy moving."
Adding to the perception of Boehner as more clown than tyrant is the widespread belief on the Hill that he doesn't really have much, if any, control over his Republican members. More than one Democratic aide describes Boehner as a man who in private negotiations is more than willing to work with the other side, and will make promises of Republican cooperation — only to have his even crazier right-wing members, especially the hyperambitious Eric Cantor, go off the reservation with lunatic amendments and resolutions within hours after Boehner has promised that everyone would be cool. "He's all talk," says one Democratic aide with long experience working with Boehner. "He has no ability to control his base. Look at the TARP vote in '08."
The Troubled Asset Relief Program — the $700 billion bailout of the absurdly irresponsible megabanks that got us into the financial crisis — is a classic example of what Boehner is all about, expressing perfectly his tenuous position vis-Ã -vis the hard-line anti-spending Tea Party base that thrust him into power. Boehner, who over the course of his political career has collected nearly $4 million from the finance and insurance sectors, backed TARP from the start, summoning his full rhetorical arsenal to argue for the bill.
"None of us came here to have to vote for this mud sandwich!" he declared during the infamous vote on September 29th. "I didn't come here to vote for bills like this!" Then he paused, took a $4 million gulp of air into his lungs, and pulled out all the stops to move his caucus — hilariously whipping out his Coffee Talk crying act on behalf of JP Morgan Chase and Goldman Sachs.
"So I ask all of you, both sides of the aisle," he said, tearing up. "What's in the best interest of our country? Not what's in the best interest of our party! Not what's in the best interest of our own re-election! What's in the best interest of our country!" He choked back tears again. "Vote yes!"
The fact that Boehner supported TARP and No Child Left Behind and mega-handouts to the pharmaceutical industry and a range of other federal subsidies is hardly surprising, for this is what mainstream Washington politicians of both parties do — they take great buttloads of money from giant transnational companies, play golf with the CEOs of those same companies ("If someone I've gotten to know on the golf course comes into my office with a good argument," Boehner once said, "I tend to want to listen"), and deliver taxpayer money back to their buddies when the need arises, or sometimes even when the need doesn't arise. In this regard, Boehner has had a lot more in common with campaign-contribution-devouring Democrats like Chris Dodd and Harry Reid than he has with the Tea Party Republican voters he now ostensibly represents.
Boehner, in short, has for most of his career been a Bush Republican, i.e., a corporate schmoozer and a remorseless spender of taxpayer money for whom the notion of small government is just something to say when the cameras are on, or when the public money in question might go to poor people or immigrants or other such unlikely golfers. This was a fine way to be during the 2000s, back when America was still unfucked enough to enjoy a phony real estate boom and launch recreational wars of conquest in the Middle East — but in this new decade, post-Bush and post-crash, there is serious doubt on the Hill that a reflexive favor-churner like Boehner will be able to keep delivering Republican votes to lavish taxpayer money on his industry pals. Money is simply too tight now, and people are too pissed off.
Getting Republicans to line up for the permanent extension of Bush tax cuts is one thing — GOP congressmen will never have a problem slashing taxes for the Lloyd Blankfeins and Jamie Dimons of the world. But there are TARP-like votes ahead that will prove to be the real indicators of whether or not Boehner leads the Republican caucus, or whether the caucus will end up leading him. Sometime in the spring, for instance, the Republicans will likely be forced to choose between raising the debt ceiling or shutting down the government. Refusing to raise the debt ceiling was an explicit campaign issue for many Tea Party-backed candidates, and in the wake of the election, several prominent Republicans, including dingbat party chief Michael Steele, have vowed to oppose any move to raise the debt limit next year.
"It's going to be really interesting to watch," says one Democratic aide. "Is Boehner going to let the Tea Party shut the government down?"
Boehner, somewhat predictably, has indicated an unwillingness to do so. Reflecting the sentiment of veterans in both parties, he calls raising the debt ceiling a procedural no-brainer, something that simply has to be done. After all, the modus operandi for Bush Republicans like Boehner has always been to talk a good game on spending cuts, so long as the cuts were coming out of the food-stamp program or aid to Katrina victims — but they would never go so far, or be so radical, as to cut overall spending, which would require scaling back the industry handouts they have spent so much time putting together on the golf courses of America. The Republican attitude toward spending during the Bush years was probably best summarized by Alaska congressman Don Young, author of the infamous $223 million "bridge to nowhere" earmark, who scoffed at the idea that spending for Katrina should be paid for by cuts to his transportation pork programs. Proponents of such offsets, Young said, could "kiss my ear."
So one can imagine how Boehner, who has funneled billions to big business over the years, would respond to the idea of shutting the government down. "Whether we like it or not," the new speaker-in-waiting told reporters right after the election, "the federal government has obligations. We're going to have to deal with it as adults."
This may in fact be a rare instance of Boehner being right. After all, the best way to reduce spending is probably to cut down on future obligations, rather than simply to default on the old ones you already passed. But in this case, the speaker has the misfortune of coming from a state with a highly organized and politically aware Tea Party that has absolutely no interest in being lectured about what's "adult" and what isn't.
"They're all worried the government would shut down," says Littleton, the head of the Ohio Liberty Council. "I don't care if it shuts down! So what?" Whether the Republican establishment led by Boehner can keep the support and approval of Tea Party leaders like Littleton over the next year or so is, right now, the most fascinating story line in all of American politics. The whole system of entrenched Beltway hackdom that Boehner represents is at stake. The GOP leadership largely succeeded this past fall in appropriating the political energy of the Tea Party for its own ends, pulling off a brilliant coup by using Tea Party rage to push through the long sought-after extension of the obscene Bush tax cuts. This was always going to be the model of how Republican Party hacks would deal with the Tea Party: Bash the living hell out of hated blue-state Gorgons like Nancy Pelosi and Barack Obama, jack off the mob by incorporating the Tea Party's Constitution-and-liberty rhetoric, hand the Tea Party those reforms that the GOP's big campaign contributors want anyway (most notably, tax breaks for the rich and deregulation of big business), and then cough up a note from the doctor or some other lame excuse when the time comes to actually cut spending.
Of all the longtime Republican Beltway hacks who are now scrambling to find ways to throw enough sunshine on the Tea Party mob to keep their jobs, Boehner has been the most hilariously transparent. In yet another scene straight out of a screwball comedy — maybe it was an early hommage to the now-departed Leslie Nielsen — Boehner in November 2009 stood up in front of a crowd of Tea Partiers who had gathered to protest the upcoming Obamacare vote, and tried to stroke his audience by holding up a copy of the Constitution. Professing his love for the sacred document, Boehner pledged to "stand here with our Founding Fathers, who wrote in the preamble: 'We hold these truths to be self-evident.'" The crowd was silent. Boehner had confused the Constitution with the Declaration of Independence.
Boehner's irrepressible hackosity is a serious problem for the Republican establishment, which desperately needs a more convincing con man to stave off voter anger on the right. In this regard, the contrast between Boehner and Littleton, the Tea Party leader in Boehner's home state, is interesting. The two men live in the same place, the small township of West Chester near Cincinnati, so Littleton is very familiar with Boehner. But Littleton's opinion of the Republican establishment couldn't be lower: It was precisely programs like the Medicare drug benefit bill and No Child Left Behind, programs he considers unacceptably wasteful and intrusive, that moved him to get into politics. "These were all Republican programs," Littleton says. "If you look at Republican congressmen from Ohio, they all voted for this stuff."
What's interesting is that the survival of the hack political class that Boehner represents now depends almost entirely on their ability to neutralize grass-roots leaders like Littleton — and the word "leader" here is used in the real sense of the word. While Boehner often negotiates for a Republican delegation that winds up rejecting the compromises he reaches, Littleton, when I speak with him, strikes me in exactly the opposite way — I feel very aware that I am talking to someone with a lot of political power, who represents quite a lot of actual human beings.
For obvious reasons, this is a real problem for the Republican Party establishment, which would forfeit any ability to squeeze the Goldmans and Citigroups of the world for golf vacations the instant they stop being able to deliver the votes for cushy spending bills and deregulatory goodies — votes that are now, at least in part, controlled by people like Littleton. This is why in some states the Republican Party fought so fiercely against the Tea Party; in Ohio, the party spent nearly $1 million campaigning to stop Tea Party candidates from assuming jobs at the state level. "They hate us more than they hate the left," says Littleton. "The left's just an enemy. We present a legitimate threat to them."
How do you get rid of a threat like that? Littleton recounts some of the ways the party has tried. One tack was dazzling the hayseeds with splendor and bullshit. During a visit to Washington, for instance, Littleton was meeting with Republican officials to go over "nitty-gritty" stuff like monetary policy, when an aide suddenly stopped the session. He was surprised, he told Littleton, that they were bothering with all this serious stuff — he thought the Tea Partiers just wanted to meet famous politicians. The aide's attitude, Littleton recalls, was: "I thought we could just throw you a bone, and bring in my rock star, and you're just really so impressed by him that you're going to smile and hug him and go out and do whatever we need you to do." Another time, when the Tea Party was making noise about a farm subsidy, a staffer for a prominent Republican congressman simply called Littleton up and asked him to be quiet. "Hey, would you mind leaving that issue alone?" the staffer said. "The congressman would really appreciate it — we work with a lot of farmers." Littleton was amazed that Republican leaders seemed to think the Tea Party was engaged in a collaborative effort to keep Republicans in office, but this is just the way things are done inside the Beltway. Everything's negotiable, everyone's pals with everyone else, and the only thing that matters is keeping the right people in office.
Littleton has also been approached with offers of corporate funding from the energy interests as well as FreedomWorks, the much-publicized national umbrella organization led by Dick Armey. While many Tea Parties across the country have been happy to accept such largesse, Littleton was unimpressed. When FreedomWorks offered to set up a rally in Ohio during the heat of the election season, it turned out that Armey only wanted to get a crowd together to hawk his new book, Give Us Liberty: A Tea Party Manifesto. "We're here in trench warfare," Littleton says, laughing, "and they're on a book tour."
This is where Boehner comes in: He represents the last stand of the Bush Republicans against this rising tide of public anger. The GOP establishment want the energy of the Tea Party, but they don't want to have to work for it. They're hoping — and they have plenty of reasons to have this hope — that the vast majority of Tea Partiers will be dazzled by their new status in Congress, or be willing to be bought off with corporate money, or be just plain dumb enough to fall for whatever pulled-out-of-the-ass phony reform rhetoric that guys like Boehner come up with, instead of making real changes to the way Congress does business. In a hilarious example of the former, Boehner with a straight face recently announced that he would push to cut committee budgets and member allowances by five percent, for an anticipated savings of — cue the clueless Dr. Evil laugh — $30 million. "It likely would be one of the first votes we cast," Boehner declared proudly, failing to recognize that paying for trillion-dollar bailouts and $900 billion tax breaks by cutting $30 million at a time is a little like planning a hostile takeover of IBM with a stack of Rite Aid coupons. That's not government; it's stand-up comedy. As for the sweeping changes that the Tea Party is looking for — Littleton's personal litmus test is deep cuts in both defense spending and Social Security — it's virtually unimaginable that Boehner will push for such a radical agenda. When Littleton met with party leaders after the election and asked what programs they are willing to cut, he was brushed aside. "We're going to be discussing that in April," he was told.
"I thought to myself, 'You campaigned on an entire platform of cutting government spending, and you don't know what you're going to be cutting until April?'" Littleton pauses. "I don't trust these guys — whether it's Boehner or anybody else."
It was good times in America for a while. A man could wait for his local congressman to get caught diddling a 16-year-old, make a run for his seat, and then spend the next 20 years getting hustled around the world on golf junkets and showered with campaign checks and apartments and corporate-jet flights, and nobody would utter so much as a peep of protest. Congress was an easy job for any man with a nice fairway stroke, a limited moral compass and a keen sense of bureaucratic loyalty; it was half an acting job and half clerical work, taking orders from industry captains and selling the resultant giveaway bills to your voters as principled blows for Adam Smith, the flag and the free-enterprise system. Back when America was still a feared international bully that was flush with borrowed Saudi and Chinese cash and could stand to blow a few hundred extra billion in public funds every year on budget-padding deals — back in the Bush years — John Boehner was the perfect candidate for congressional leadership, a lifetime company man who didn't give a shit about most Americans but could shed tears on national television on behalf of Jamie Dimon's bottom line.
Things are different now. America is so broke, there's no longer really any money in the Treasury to give away — the job of overseeing corporate handouts that used to belong to the leaders of Congress has now moved to the Federal Reserve, which itself is so broke that it has to invent dollars out of thin air before it can give them away to influential billionaires. This leaves congressional leaders with nothing to do but their ostensible jobs — i.e., fixing the country's actual problems — and few of the current leaders have any experience with that, Boehner being a prime example. The new speaker represents an increasingly endangered class of Beltway jobholders who know how to raise money and get elected, but not much beyond that. He now finds himself the party's last line of defense against millions of angry voters who, for the first time in recent memory, are at least attempting to watch what Congress is up to. The tee times are over.
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