We can sit around and complain that the post-election spin is not properly giving credit to Democratic and progressive victories in the House, in mayoral campaigns, and in many ballot initiatives outside of the painful defeat in Maine. Or, we can realize that in this instance, given the magnitude of the problems facing the country, spin is insignificant compared to the power of the force economic conditions facing the average American.
When you are highly engaged in political news and activism, there is a tendency to overestimate the importance of winning the messaging war. However, there probably isn't a single American who will vote in 2010 based on how well one side or the other messaged after the 2009 elections. The post-election spin is distant, abstract horse pockey compared to the job market, the health care market, the housing market, and other very real economic problems people are facing in their everyday lives.
As Mike wrote this morning, Democratic performance in the 2010 elections will be based on whether Democrats "deliver the goods," aka, the economic improvements they were hired to produce. If economic conditions still suck in 2010, then Democrats are toast no matter what sort of spin or other abstract positioning in which we engage.
We can already see that in the outcome of the elections last night. Democrats were reduced in the two states where they had been in power for eight years during the economic difficulties (New Jersey and Virginia), but were still able to make gains at the federal level (swept the House seats), where they have really only been in charge for one year. The lesson is clear: if you are in power during an economic catastrophe, voters will replace whoever you are with just about anything.
For now, at the federal level at least, voters still blame Republicans. However, that will no longer be the case by 2010. By that point, we will own either the continue economic slump or the ongoing economic recovery. As such, in both political and human terms, it is imperative that there is an substantial improvement in the economic livelihood of average Americans over the next year. To do this, Democrats are not only going to need to make sure that the health care bill contain benefits that will kick in during 2010 (something which Democrats in Congress are increasingly aware of and delivering), but that there can be additional stimulus spending over the next year.
There is no going to be any way to pass a second omnibus stimulus bill. Support simply is not there for it, either in Congress or in the public at large. However, there are two things that can be done (more in the extended entry):
Today, the public will get a look at how funds distributed through the American Recovery and Reinvestment Act of 2009 are being spent when the reports from agencies receiving these stimulus funds are released.
While many questions will surround the release of this information, it's likely that a critical part of this story will be lost unless we ask the right questions about this spending. Namely, is this stimulus really creating a recovery for everyone?
This is an important consideration given that many groups of Americans have consistently been left behind in ways that hard work and personal achievement alone cannot address. This was true even before the economic downturn began to affect everyone else, and it's likely that the crisis has further worsened gaps in income and assets that existed already.
To get an idea of what some Americans faced before the crisis, just look at 2007, the year before the crisis began affecting everyone:
Bailout pay czar Ken Feinberg raised a ruckus last week when he announced plans to slash cash payouts to executives at seven companies that have received massive levels of taxpayer support. While better oversight of the bailout barons is helpful, the best way to change Wall Street pay practices is to adopt a set of tough, comprehensive regulations that cover everything from the executive suite to the loan department. As is, many of the executives Feinberg cracked down on will still make millions this year from stocks and other perks, while the very banks that depend the most on bailout money are spending like mad to lobby against reform.
Feinberg's new salary limits only apply to executives at Citigroup, Bank of America, AIG, GM, Chrysler, GMAC and Chrysler Financial. But while these new rules are an effort to reduce the incentive for executives to take big risks for short-term gains, the rules of the game for non-bailout barons haven't changed at all. Risky securities trading and unenforced consumer protection regulations still allow financiers to make a killing by gambling on mortgages and credit cards.
As Greg Kaufmann explains for The Nation, Feinberg has been barred from altering some of the most egregious bonus arrangements at even the biggest fund recipients, as the employment contracts were signed prior to the government's bailout. AIG plans to pay out $198 million in bonuses in March 2010, and none of Feinberg's recent rulings will change that. As Kaufmann also notes, back in March, AIG agreed to pay pack $45 million of the bonuses it shelled out early this year. After over seven months, just $19 million has been repaid.
The government's hands-off approach to AIG employment contracts is a rather flagrant display of deference to executives. Nothing stopped the government from renegotiating contracts for union laborers when it bailed out Chrysler and GM, as Dean Baker notes for The American Prospect.
Lest we forget, the government literally owns AIG, and would own both Citigroup and Bank of America had it demanded a market rate of return for its investment. Taxpayers injected several times the stock market values of both Citi and BofA into the troubled banks, but settled for a 36% stake in Citi and preferred stock in BofA. As Mike Madden emphasizes for Salon, Feinberg is still letting executives make several times the median household income in cash alone-nevermind stock-and it's unlikely that his move will spark changes among bankers outside the handful of companies ordered to make changes.
"Executives are still taking home paychecks that dwarf what the average American earns. And it's not clear whether any other companies will get on board with the Treasury plan unless they're forced to," Madden writes.
Congress hasn't taken any significant steps to curb Wall Street paydays since the crisis broke, but lawmakers did take two other important steps toward banking reform this week. Two different House committees passed bills to rein in the wild world of derivatives trading and establish a new Consumer Financial Protection Agency (CFPA). In a video piece for the Huffington Post Investigative Fund, Amanda Zamora and Lagan Sebert detail the legislative battle to create a CFPA, which has faced an enormous lobbying push from both banks and the top lobby group for the corporate executive class, the U.S. Chamber of Commerce.
Zamora and Sebert note that top bank lobbyist Ed Yingling is arguing that if regulators simply enforced the existing consumer protection laws, all of the major abuses in mortgage lending and credit cards would have been prevented. Even for a corporate lobbyist, Yingling's disingenuousness is absolutely breathtaking. He acknowledges that existing regulators are not enforcing consumer protection laws, says he wants the laws enforced, and then says it would be a bad idea to create a new agency to enforce those laws.
The CFPA won't have any mysterious new powers. It will have the same authorities on credit cards and mortgages that existing federal regulators have. But the current regulators are focused primarily on bank profits, which often run directly contrary to fair play with consumers. Yingling and Wall Street are really afraid of a serious regulator who will stand up for consumers. They're terrified that the CFPA will actually enforce consumer protection rules against powerful banks-but are talking as if all they want is effective enforcement. It's a lie, pure and simple.
On Monday and Tuesday, thousands took to the streets in Chicago to protest a meeting of Yingling's lobby group, the American Bankers Association (ABA). Esther Kaplan details the protests in a piece for The Nation, complete with video footage. The ABA retaliated against Kaplan's reporting by revoking her press credentials, but it appears to have been worth it, as her piece describes everything from citizen outrage to police intimidation and awkward banker solidarity. As Democracy Now! explains, the ABA has spent decades lobbying against rules to strengthen the economy and prevent banker abuses, and is now at the heart of an effort to use taxpayer bailout money to lobby Congress against financial reforms.
So far, their efforts seem to be paying off. Last week, one of the CFPA's chief advocates, Rep. Brad Miller (D-NC), co-authored an amendment significantly restricting the agency's enforcement powers. As Sebert and Zamora note, Miller agreed to exempt banks with $10 billion or less in assets from regulatory examinations by the CFPA-roughly 98% of all banks. The existing, corrupted regulators who didn't lift a finger to prevent the subprime mortgage crisis will be the people actually going to the banks and reviewing their books. While the CFPA could send along one of its own regulators to participate in the exam, the new agency can't tax the bank to pay for it, which would make it very difficult for the CFPA to keep an eye on smaller banks.
Even worse, there is nothing to prevent a giant bank like Bank of America from moving all of its most egregiously predatory activities into a series of small corporate subsidiaries. By exploiting this loophole, 100% of U.S. banks could be exempt from CFPA enforcement, including the giant banks most heavily involved in subprime mortgage abuses.
The other big piece of Obama-backed financial legislation to make its way through Committee last week had to do with derivatives, also known as the wild Wall Street securities that brought down AIG. The best way to fix the derivatives mess is to require that derivatives be traded on an exchange the same way stocks are, so that companies can't make crazy bets without regulatory and market scrutiny. But Obama only wants "standardized" derivatives to be processed through a central clearinghouse-like an exchange, except without any public pricing information. And so long as a derivative contract can be deemed "customized," it would be totally exempt from even this limited reform.
But as Art Levine notes for AlterNet, the derivatives bill actually got worse in committee. Plenty of non-financial businesses use derivatives to legitimately hedge real risks: Airlines try to insure themselves against swings in oil prices, for instance. Lawmakers agreed to exempt any contract with these companies, termed "end-users" in the financial jargon, from central clearing requirements. The trouble is, big Wall Street hedge funds and private equity firms can be classified as "end-users," opening a fatal loophole in the legislation. The five banks who control 95% of the derivatives market will just conduct all of their most reckless trades with hedge funds and avoid oversight entirely.
A modest reform on paychecks for bailout recipients is nowhere near sufficient to protect our economy from banker excess. If Wall Street is going to serve any productive economic function, it has to be subject to serious consumer protection rules, and its derivatives casino has to be dismantled.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
The U.S. economy has diverged: Wall Street is living high on the hog, while everyone else is struggling. The Dow Jones Industrial Average eclipsed 10,000 for the first time since last October this week, even as unemployment continues to spiral out of control. And while President Barack Obama has taken some very real steps to help ordinary people, his administration's efforts to save Wall Street have far outstripped their support of workers.
Matthew Rothschild details these disparities for The Progressive. Regulatory reforms are moving through Congress at a snail's pace and the wreckage from the mortgage bubble is increasing. Wage cuts are more widespread today than in any era since the Great Depression, even as bankers capitalize on taxpayer bailouts to score epic profits and outsized bonuses.
"One economy is for the rich and the upper middle class," Rothschild writes. "The other economy is for everybody else."
So how can a few big banks make so much money while the rest of the economy suffers? As Kevin Drum explains for Mother Jones, the kind of banking that helps the economy is a pretty simple business of taking deposits and making loans. But a lot of what we now call "banking" really just consists of making bets on just about anything you can dream up.
"Banks aren't using all this cheap money to increase lending. They're using it to fund bigger and bigger bets in the fixed-income sector - the same sector that brought us junk bonds, credit default swaps, subprime loan securitization, interest rate carries, collateralized debt obligations, and all the rest of Warren Buffett's 'financial weapons of mass destruction.'"
The banks, in other words, are gambling with taxpayer money. A host of big finance companies have reported earnings in the past week, and the numbers are ugly: JPMorgan Chase reaped $3.59 billion in third-quarter profits and Goldman Sachs is planning to payout $23 billion in bonuses from speculative trading, while Bank of America and Citigroup are hemorraging money on mortgages and credit cards. The Wall Street casino is alive and well, but anything that is actually tied to the real economy is a disaster.
According to a new report from the U.S. Treasury, lending among the largest recipients of the Troubled Asset Relief Program fell by 17% from July to August. Small businesses can't cope with the cutoff in financing. A lot of businesses stay profitable over the long-term by borrowing money to meet short-term expenses. A baker can borrow money to buy flour and pay the bank back when she sells her bread. With bank lending on ice and consumers cutting back on spending, many small businesses are failing. Thousands more will be at risk in the next couple of years while unemployment remains elevated.
Writing for Salon, former Clinton Secretary of Labor Robert Reich notes that these economic struggles are not reflected in major stock indices. Stock are soaring as big corporations who don't need bank loans score short-term profits from cost-cutting, i.e., mass layoffs. Obviously, this strategy can't work for very long. When millions of Americans are out of work, they can't afford to buy the things companies make.
There's an important lesson in our current economic state-of-affairs, as Katrina vanden Heuvel emphasizes for The Nation. The bailout has not done what Henry Paulson told us it would do. To be sure, it saved the banks-- even the strongest banks would have failed last fall without extraordinary government support. But it has not increased lending and kept the economy from disaster. The Obama administration, which has extended the Bush administration's support for bank balance sheets and bonus checks, is facing a political nightmare if it doesn't show produce some stronger economic results for ordinary citizens.
"Heading into 2010, the Obama administration must put itself back on the side of working people," vanden Heuvel writes.
The administration must address two critical problems in order to restore the nation's economic credibility. Putting the unemployed back to work is at the top of the list. Anything that saves jobs will help, including aid to states to keep teachers and cops on government payrolls and tax credits for companies that hire new full-time workers.
Something must also be done about the foreclosure epidemic. Nothing underscores our economic disparity like continuing housing mess, which has been in full-blown crisis mode since 2006. Despite a multi-trillion-dollar bank bailout, foreclosures are surging to all-time highs. Writing for The American Prospect, Tim Fernholz details the prolonged problems with the Obama administration's current foreclosure relief program.
While millions of troubled borrowers are eligible for the plan, which reduces monthly mortgage payments to affordable levels, foreclosures are still outpacing loan relief efforts by more than two-to-one.
Banks are dragging their feet and the administration has imposed no penalties on lenders who don't live up to the program's standards. Instead, the Treasury Department is offering banks cash incentives to keep people in their homes. Bank of America, which has received $45 billion in direct government bailout funds, plus hundreds of billions in government guarantees and other perks, has modified merely 11% of the mortgages it controls that are eligible for the plan.
Fernholz offers several potential improvements to Obama's foreclosure relief plan, including more aggressive government policing of the current plan and allowing foreclosed homeowners to continue to live in their homes as renters. With up to 12 million foreclosures projected by the end of 2012, just about anything the administration does will help.
The economy is a measure of social well-being, not a stock market index or a corporate earnings statement. Policymakers need to prove they can respond to the very real needs of all their citizens, not just those with financial clout.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
ATLANTA, Oct. 14 (UPI) -- Georgia will stop posting signs along highway construction projects funded by economic stimulus funds, because the signs cost too much money, officials said.
The signs were first considered a nice indication that stimulus funds were putting Georgians to work but they became a target for ridicule and criticism once it was determined that they cost $1,200 apiece, The New York Times reported Tuesday.
Albuquerque, a fairly Democratic town, just elected a Republican mayor because of low Democratic voter turnout. Democrats are in danger in both of the big gubernatorial races coming up in New Jersey and Virginia. The generic congressional polling numbers are in a statistical dead heat, and Democratic base voter enthusiasm is trending down.
There is no reason for Democrats to panic, as demographics are still trending in our favor and the Republican brand is still in tatters, but the warning signs for my party are out there and should not be ignored. What Democrats need to be extremely well focused on is short term deliverables for real people. On health care, on jobs, on banking legislation, on immigration reform, on climate legislation - on all of these major initiatives and more, they of course should be thinking about what's best in the long term, but better damn well be focused on delivering real and tangible benefits to voters before the next election, or Democrats will suffer a bruising defeat in November 2010.
Let's start with health care. When you are working to re-structure 17% of the American economy - and probably the most byzantinely-structured 17% there is - there are a lot of complications, and it is obviously going to take some time. Some of the features of the plan will need time to phase in, which is understandable. But some of the benefits need to be apparent to Americans right away too. If we spend a year and a trillion dollars passing health care reform, and no one sees any benefits to them by November 2010, we Democrats have a really big problem in the next election.
Another key point on this issue: if a public option doesn't go into effect for a while, say until 2013, insurance companies better not be free to raise their rates at will until they finally have competition, when the public option enters the scene. There is nothing that will guarantee voters turning away quickly from health reform, and the politicians who voted for it, more than letting insurance companies hike up their insurance costs over the next four years, and we know they would have because they already promised to do it.
Health care reform needs to have immediate benefits - no pre-existing conditions, no lifetime caps, all of those insurance regulations we've been hearing about need to kick in immediately. But even more importantly, if a public option gets delayed, there has to be a short term way to keep insurance company greed and power in check. To leave the public utterly at the mercy of the arrogant insurers who have already promised they would raise their rates after this is passed - like consumers were left at the mercy of credit card companies for many months after the consumer protection bill passed - is not only unfair to people but is truly terrible politics. If you think these insurers won't jack rates through the roof, and then blame the rate increases on reform, you are truly naïve. Don't make voters feel like it was a bad idea to pass health reform because they are seeing only the downside in the short term.
On the economy, the macro-economists in the administration like Larry Summers love to say that, "jobs are a lagging indicator", that eventually in the long run, that jobs will start getting created. Even if they are right (and I tend to be skeptical when economists tell me that in the long run, things will eventually trickle down to working people), neither the economy nor the Democratic Party can afford for there to be another year where no jobs are being produced. To have that many people in trouble exacerbates the foreclosure crisis, weakens the housing market, forces more cuts in the state and local budgets, and a higher federal deficit: and it is a complete political disaster for Democrats. Jobs need to be created ASAP, lots of jobs, not a few here and there, and should not be seen as the lagging indicator that will take care of itself someday. In the long run, as John Maynard Keynes liked to say, we are all dead, but the Democrats will be dead in the short term unless we start producing lots of jobs quickly. The stimulus is certainly helping, and Obama deserves credit for that, but it is not enough. Democrats need to think bigger on creating jobs.
On financial reform, as with health care, much of what needs to be reformed will take a long time to kick in, and in fact much of the goal will be to keep disaster from happening in the future - a harder thing to get credit for. (Which by the way, is the main thing the Obama White House is claiming about the economy - that we would have had a disaster if not for the US. It's a hard thing to win votes on.) But a strong policy of consumer safety in financial products will be noticed by people who went through the outrages of being ripped off over the last few years, and there are other things that could be done that voters would notice and cheer. How about a tax on financial transactions, structure to cost the most for the biggest traders, where the proceeds would go to new job creation? Based on private polling I was shown recently, that would get about 85% support. How about anti-trust actions against the biggest banks? How about throwing some of the worst violators of the financial system in jail, and returning their ill-gotten gains to the people they ripped off? There are plenty of things to do in the financial sector that would get voter attention and would be seen as an immediate benefit.
On climate change, the first item of business should be dramatically expanding green jobs. On immigration, families ought to be reunited right away. On issue after issue, we need to get things done, and make sure that what we get done has immediate benefits to regular people.
George W. Bush was a disastrous President, rated by many historians as the worst President of all time, and he handed Democrats a terrible mess that we will be digging our way out of for years. But blaming the other guys for bad times doesn't cut it in American politics, and it shouldn't: we need to deliver real things to real people. Trying to convince voters that it would have been so much worse if it wasn't for us, and that our policies will help them someday in the long run, is not a winning strategy. We need to deliver things that make a difference in voters' lives now.
Last month, the U.S. unemployment rate surged to 9.8% as 260,000 people lost their jobs. Although the stock market and corporate profits appear to be recovering from last year's financial catastrophe, work is harder to find. President Barack Obama and Congress need to act now to get people working again and help soften epic unemployment in years to come.
President Barack Obama was awarded the Nobel Peace Prize today for his accomplishments in international diplomacy, climate change and attempts to curb nuclear proliferation. The Nobel Committee praised Obama for his "constructive role in meeting the great climatic challenges the world is confronting," but, Richard Kim of The Nation wonders if the award comes too soon, as Obama has not yet committed to attending the international climate summit at Copenhagen.
The economy is still getting worse. Foreclosures are surging above last year's epic highs and the unemployment rate marches upwards every month. As the misery grinds on, Wall Street lobbyists and their allies in Congress are pushing hard to distract the public from the real causes of the current global economic crisis. Corporate America is trying to pin the blame for our empty pocketbooks on President Barack Obama and the phantom socialist menace, and cable news pundits are taking the bait.
As David Korten explains in a blog post for Yes!, this surge of distractions is a conscious political strategy designed to sabotage reform. "Wall Street's greatest fear is that the public might demand Congress and the president shut down the casino," Korten writes. "Any issue that shifts attention away from Wall Street and pins the blame for job loss and mortgage foreclosures on President Obama works in its favor."
The banking lobby is kicking and screaming over President Obama's plan to overhaul consumer protection in finance. As a result, the battle over the proposed Consumer Financial Protection Agency (CFPA) has become the most heated economic controversy in the nation's capital, even though the issue isn't controversial where ordinary citizens are concerned.
The existing hodgepodge of bank regulators completely failed to stand up for consumers as the housing bubble grew and burst. Our current bank regulators are charged not only with consumer protection, but safety and soundness regulation, which basically means making sure that banks don't fail. Preventing bank failures often means protecting bank profits, even when those profits come at the expense of communities. Instead of relying on the same inept and conflicted agencies, consumer regulation of credit cards, mortgages, student loans, payday loans should be funneled into a single, new agency with no other priorities: The CFPA.
As Greg Kaufmann details for The Nation, recent economic history isn't stopping Wall Street's favorite lawmakers from pushing against the CFPA. Kaufmann highlights some of the most outrageous comments from a hearing on the CFPA last week. Rep. Jeb Hensarling (R-TX) claimed that if the CFPA had existed a few years ago, there would be no ATMs or frequent flyer miles. David John, a researcher from the Heritage Foundation, said that employees of the new agency would spend too much time trying to find their new desks to actually do any regulating. Bank lobbyist Ed Yingling tried to erase the last ten years with his claim that "no real case has been made" for better enforcement of consumer protection in banking.
These are not serious arguments. They are intentional distractions designed to kill an obviously productive policy. Kaufmann's headline says it all: "Do They Take us for Schmucks?"
But loudmouth Republicans like Hensarling aren't the only politicians we need to keep tabs on. Plenty of lawmakers on the Financial Services Committee won't stand up and make crazy speeches about ATMs, but will still go to bat for Wall Street behind the scenes. As I emphasize in a piece for AlterNet, with outsized Democratic majorities in both chambers of commerce, conservative, pro-Wall Street Democrats pose just as great a threat to our economic security as loony Republicans.
If you think that sounds pessimistic, consider Ralph Nader, who Matthew Rothschild profiles in The Progressive. Nader knows corporate America has its hands on nearly every lever in the U.S. political system. Lobbyists don't just hurl money at lawmakers, they spend tremendous sums on misleading advertisements to sway public opinion. Rothschild quotes from a recent speech Nader gave on his current book tour. He argues that progressives don't just need concerned citizens on our side. They need concerned citizens with money to counter the flood of corporate cash in the political system.
"There is a poignance in listening to Ralph Nader these days," Rothschild writes. "Here is a man who, for the last 45 years, has hurled his body at the engine of corporate power. He's dented it more than anyone else in America. But he knows it's still chugging, even more strongly than ever."
Even when lawmakers talk tough about Wall Street, it's not obvious what's really going on. Senate Banking Committee Chairman Chris Dodd (D-CT) recently rolled out an extremely ambitious plan to overhaul the bank regulatory system. It has very little common ground with Obama's plan, and in some respects would be an improvement. Obama's plan is very strong on consumer protection and not much else. But Dodd's plan is so ambitious, it seems like a politically impossible waste of time, one that could easily delay reforms into next year. Dodd wants to consolidate all four bank regulators into a single agency to prevent a race to the bottom and strip the Federal Reserve of all of its regulatory responsibilities. They aren't bad ideas, but they have absolutely no political momentum. Dodd has been holding hearings on the financial crisis since 2007-- he could have started pushing for this plan a long time ago. By introducing it so late in the process, major legislative delays seem inevitable. The longer it takes to pass a regulatory bill, the more time the bank lobby has to water it down. Writing for Mother Jones, Nick Baumann suggests this may be exactly what Dodd intends.
"Maybe getting it done by 2010 isn't the point. Dodd is up for reelection that November. If he manages to win by talking populist while raising money from Wall Street, he'll have plenty of time afterward to figure out what to do next."
For now, the economy is still absolutely horrible. Writing for In These Times, David Moberg translates the statistics from the government's most recent unemployment report and deciphers some recent polling on the economy. Things are bad, and people know it. Many economists believe the recession may have technically already ended. The Gross Domestic Product, a statistical measure of the country's economic output, may no longer be declining. But the unemployment rate keeps going up. It was 9.8% at the end of September.
Moberg notes that if the rate counted the long-term unemployed who have given up looking and people who want full-time jobs but settled for part-time work, the unemployment rate is a staggering 17%. Over one-third of the 15.1 million would-be workers encompassed by the 9.8% unemployment rate have been out of a job for at least six months. Voters overwhelmingly believe that government policies have helped Wall Street, while just 13% think the government has given a lot of help to the average working person.
Economics and politics are inextricably linked. To strengthen our economic foundation, we need policymakers who are willing to stand up to corporate America and corporate media and serve the citizens who elect them.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.
The economic free-fall is finally slowing down, although nobody expects the recovery to be very pleasant. Job losses and foreclosures are expected to increase well into next year. But even if our economic system gets back to normal, it's important to remember that gross inequalities are embedded in the global order. At home, minorities face significant barriers to economic security, while abroad, children in poor countries are denied access to basic nutrition. This is especially disheartening in the wake of the G-20 meeting in Pittsburgh, which demonstrated that the world's economic leaders are more focused on bailing out banks than eradicating global poverty.
Robert Reich sums up the domestic economic scenario succinctly for Salon. The stock market is humming along, even as most Americans are tightening their belts. It's a counterintuitive situation: Wall Street is celebrating an economic recovery, but the consumers that drive our economy are still cutting back. Reich explains that the government has stepped in to fill the hole caused by consumer spending. Business executives may scream "Socialism!" when the tax man comes around, but without massive government help, those same CEOs would be watching their earnings and companies collapse.
Without the jobs and tax cuts created by President Barack Obama's economic stimulus package, we'd see more red ink from just about every industry. The entire U.S. mortgage market is currently supported by the federal government via Fannie Mae and Freddie Mac, while other special initiatives like the Cash for Clunkers program brought the auto industry out of its recession-induced coma this summer.
The trouble is, while a few programs have been good for ordinary citizens, most of the government's economic salvage operations are aimed at giant corporations. Of all the paradoxes in today's economy, the most significant can be found in the financial sector. Bank stocks are up, even though banks are in serious trouble. Their customers are broke, foreclosures are soaring, and analysts are predicting a fresh round of multi-billion-dollar losses on commercial real estate loans soon. So what makes an investor want to buy a bank stock right now? Nothing but the government's limitless willingness to bail out banks.
How much bailout money did the government actually spend? We've all heard about the $700 billion Troubled Asset Relief Program (TARP), but the real haul for bankers is much, much bigger, as Nomi Prins and Christopher Hayes detail in a piece for The Nation. A whopping $17.5 trillion has been dedicated to subsidies, guarantees, below-market-rate loans, and other special perks for the financial industry. That's roughly one-fourth of the entire global economic output for a full year, and more than the entire annual productivity of the U.S.
Prins and Hayes make use of a clever thought experiment: What if, instead of spending the money on big institutions, the money had gone to a small-time gambler? It's an apt comparison. Taxpayer money went to financial speculators who used our homes and neighborhoods as poker chips in a global casino. The dozen or so bailouts the government has enacted seem absurd when we think of them as cheap financing for bets on the craps table. The number of programs is staggering. Bank executives love to proclaim that their banks didn't really need TARP money, they just accepted it because the government wanted them to. Next time you hear that boast (sometimes it sounds more like a whine), remember that every big bank in the country issued debt guaranteed by the government, then scored ridiculously cheap loans from the Federal Reserve while others got federal help through AIG, Fannie and Freddie.
"A fraction of the $17.5 trillion bailout could have been used to cut the principal of homeowners' mortgages (using homes, even devalued ones, as collateral) and cover student loans at zero percent interest," Prins and Hayes write. "Rather than pouring it into the top layers-the banks-a people's bailout would have cost less and been more humane. And it likely would have prevented the ongoing increase in defaults, foreclosures and general economic anxiety."
There are very good reasons to maintain a healthy financial sector, but only if banks actually do something useful. Banks are supposed to lend money to enable socially productive economic activity. This bailout money has not been spent on anything socially productive. Instead, it's covered losses from predatory lending and boneheaded speculation.
The dominant cause of the recession was the collapse of an $8 trillion housing bubble, which banks helped inflate with all outrageous loans. For decades, the value of a family's house was the foundation of most American middle-class wealth. When home prices took a nosedive, so did the spending power of every homeowner. Even borrowers who had affordable mortgage payments were hit hard. For borrowers stuck with expensive, predatory mortgages, the result was a wave of foreclosures. Writing for Mother Jones, Andy Kroll highlights a hard reality: Recovery in the housing market will not lead to middle-class financial security. It will be at least a decade before home prices reach pre-crash levels.
It's critical to remember how the recession is deepening existing inequalities, particularly along racial lines. In a post for In These Times, Michelle Chen explains how African Americans and Latinos are consistently paid less than whites during boom times, and are pushed even further down the ladder when things go bust. Communities of color are more likely to be targeted by predatory lending, which can devastate entire neighborhoods for generations. That means people of color are more likely to be foreclosed on, more likely to be laid off, and less likely to have access to basic necessities like health insurance.
The statistics are stark. In a story for New America Media, Christina Fernandez-Pereda, notes that while the overall unemployment stands at 9.7%, for minorities, the actual number is much higher. A full 15.1% of Blacks are unemployed, while unemployment among Asian Americans has doubled since early 2007. A full third of Latinos between the ages of 16 and 29 are unemployed.
The bank bailout has done nothing to improve the status of the global poor. The G-20 made grand promises to help those who need it most in developing countries this year, but so far, the talk has resulted in very little action. As Hayley Hathaway explains at Sojourners, only $50 billion has been dedicated to the 78 countries where humanitarian risk is greatest. As Hathaway notes, that's less than 25% of the TARP money received by the 20 largest U.S. banks.
Without major action, between 1.4 million and 2.8 million children will die of malnutrition in the next five years. Instead of pushing major humanitarian aid, the G-20 has promised $750 billion to the International Monetary Fund. The IMF was supposed to act as an international lender of last resort-if a nation's financial woes got really bad, they could get a loan from the IMF while they restructured. But IMF money ends up flowing to private-sector banks, and governments in need are forced to cut spending on programs that help the poor. When the G-20 met in Pittsburgh last week, a major topic of discussion involved giving developing nations a greater voice in IMF policies. But despite this talk, wealthy nations remain committed to the status quo, protecting the interests of their bankers eyeing future international bailouts.
For most people, it will be a long time before our economic recovery is a reality. But as the economy crawls out of the ditch, it's critical to build our future on a stronger foundation, one where we don't allow millions children to starve and where skin color does not determine economic security.
There have been many reports in recent years that the U.S. government used psychiatrists and/or psychologists to assist in designing torture techniques to be used against Muslims in the middle east in connection with the U.S. War Against Afghanistan and Iraq. And maybe additional wars to come.
The reports are that the U.S. military trains its own people to survive torture and, in connection with that training, devised certain methods of torture that they believed no human being could withstand. Or at least at the conclusion of the use of these types of torture, the human psyche would be destroyed even if the body continued to function.
The desired outcome from the torture was to create in the prisoners a state of "Learned Helplessness." This is a term that comes from experiments done on dogs by an American psychiatrist who was invited by the CIA to lecture the U.S. military on his experiments, and his conclusions. Those lectures were, in turn, used by the CIA and the U.S. military in developing these torture techniques designed to destroy the human psyche.
The experiments done on animals, specifically dogs, showed the following: one group of dogs were put into a cage and given certain options for their behavior. They could, for example, try to escape, they could push a lever. But no matter what they did, no matter how hard they tried, they continued to be subjected to electrical shocks. They learned that they had no ability to stop the abuse. No matter what they did, the torture continued. When those dogs were allowed out of the cages, they simply laid down and submitted, no longer tried to avoid further abuse and torture. They had learned that they were helpless to have any control over their own lives.
This is the desired goal of the U.S. widespread torture programs in the middle east, as well as those which have been conducted in Central and South America by people trained by the U.S. at the School of Americas.
The original experiments were used as part of an investigation into depression and other forms of mental disease in which people feel helpless to do anything to improve their lives. No matter how bad the conditions, they are psychologically trained to believe that they must submit, they are helpless to change or to stop the abuse. This is probably a good explanation of the battered spouse, but also of large numbers of people in our society who are in unhappy relationships, or who are abused and mistreated in their work, but feel unable to try to make any changes. Often, changing jobs isn't a real solution if a country allows workers to be mistreated and underpaid, denied benefits or rights. So a state of learned helplessness exists in the American workforce. For good reason. They've been mistreated and abused, fired if they stand up for themselves, and have learned that they are helpless to stop the abuse.
Is it possible our entire society has been conditioned into a state of learned helplessness. No matter what people do, the government continues to simply take bribes from the corporations, lie to the people, conduct foreign wars of choice, steal our money, send our jobs overseas, give tax breaks to the rich and deny healthcare to the rest of us. This despite the historic number of people who got out and campaigned last year. All the people who believed in change are right now being taught the underpinnings of the state of learned helplessness.
Think about it: the Democrats control the House, have a 60-seat control of the Senate, and control the white house, and despite that they refuse to end the wars, they refuse to provide a real healthcare program for people, they refuse to create job programs, they refuse to hold the Bush administration responsible for its numerous violations of our constitution and other laws, they refuse to hold Wall Street responsible for its criminal theft from the public. They have, quite simply, done nothing for progressive or even for liberals since taking office, except to routinely bash us by calling us names. "The left won't like it," but they need to live with it. And we, as it turns out, are just now learning that we are completely helpless to do anything to affect what our government is doing.
Below is link to an article on the psychiatrist who developed the theory, and how it is the CIA and U.S. military used his theory to develop a program of torture designed not to get information, but instead to destroy human beings, to drive them crazy, to take away their will to live.
Naomi Klein argues in her book The Shock Doctrine that torture is often used after a coup to create a state of submission in the civilian population. Torture a few thousand, make it public, make it particularly brutal, get the information out to the rest of the public, and most people are likely to stop resisting, just do what they are told and try to survive.
We've heard a lot about the "ticking time bomb," by which people argue that we need to torture to find out whether someone has a nuclear weapon ready to go off in our country. But no one has ever provided any factual support to show that's why we began a program of systematic torture throughout Afghanistan and Iraq. Isn't it more likely that the torture program was designed from the outset to destroy human beings and create a state of submission among the other civilians, so the U.S. could keep its permanent military bases in the region, steal all the oil, bomb and attack the neighbors conveniently, with the majority of the population too terrified to do anything to stand up against them.
On Wall Street today, AFL-CIO President Richard Trumka is calling for tough new regulations on the financial industry and a new approach to making the U.S. economy work for working people.
Trumka spoke today at the New York Stock Exchange as part of the new AFL-CIO leadership team's national tour to set out a jobs-focused, progressive vision for the economy-and to fight back against the corporate agenda that left workers behind.
We've let wealth concentrate for too long, Trumka said. The past decade has shown us the folly of building an unfair and unequal economy that only works for a few, while working people pile up debt to get by. We need to be able to protect consumers from abuses by mortgage lenders and credit card companies and hold accountable those whose greed and irresponsibility have undermined the economy, Trumka said:
Banks and other financial institutions must be held accountable for making this mess that required trillions of dollars of our money to clean up. For the pain they've inflicted on families who face financial ruin-unemployment, wiped out pensions, foreclosures and bankruptcy.
The past decade, which allowed the Bush Administration, American corporations and the great financial giants to turn the country into a dispeptic ulcer, which was mostly Bush and some Obama administered, has left us in a slump. It has taken so much energy to try and turn things around that we wonder if we can summon up more just to keep going.
On Thursday, the U.S. Census released new data on the economic straits many American households faced in 2008. The grim report illustrates a nation enduring its highest poverty level in decades, coupled with a significant decline in middle class financial security. But one year after Lehman Brothers filed for the largest bankruptcy in U.S. history, not a single law has been passed to protect ordinary citizens from Wall Street's excess.
Low-wage workers are struggling to navigate the current recession. A new study conducted by a team of academics reveals that the majority of workers at the bottom of the economic ladder have been shorted on their paychecks as recently as last week. But the compensation crisis looks very different on Wall Street, where excessive pay tied to risky activities helped set the economy on its crash course. Despite the resulting deep recession, pay for high-level U.S. financiers remains over-the-top, even as low wage workers struggle to navigate the downturn.
The U.S. has made a few gestures toward scaling back executive compensation for banks that it bailed out under the Troubled Asset Relief Program, but the rules have amounted to little more than window-dressing, according to a paper published last week by the Institute for Policy Studies. The paper's authors, Sarah Anderson and Sam Pizzigati, found that ten of the 20 largest bailout banks have reported stock option compensation for 2009, and the top five executives at those companies have scored a full $90 million so far this year. That's just through stock options. The number gets even more obscene if you include bonuses, salary and other payouts.
As Anderson and Pizzigati explain in a companion piece published in AlterNet, bank executives collected huge bonuses based on the profits from subprime loans during the housing bubble. Since subprime mortgages were more expensive than traditional loans, profits were high-until borrowers stopped being able to pay back their predatory, unaffordable debt. Suddenly the banks were all busted, but the executives had already made a killing.
Katrina vanden Huevel emphasizes in The Nation that the U.S. government doesn't even try to tax this kind of income, much less regulate its connection to risk-taking. Billions of dollars in tax revenue are lost each year as financiers hide payouts in offshore tax havens, while on-the-books income from financial activities are taxed at arbitrarily low rates. Capital gains like stock price increases, for instance, are taxed at just 15%, while income from an ordinary paycheck is taxed at 35% for the wealthiest individuals.
While the U.S. dallies on executive pay, key leaders in Europe are moving to rein in risky compensation practices in the financial sector, as detailed in this video report over at The Real News. President Barack Obama will meet with U.K. Prime Minister Gordon Brown, French President Nicholas Sarkozy, German Chancellor Angela Merkel and other leaders of the G-20 in Pittsburgh later this month, and financial regulatory reform will be at the top of the agenda.
For ordinary workers, there are few positive signs in the current economy. The Washington Monthly's Steve Benen dissects the latest batch of unemployment numbers from the Labor Department. The good news is that the overall pace of layoffs seems to be abating. The bad news? The U.S. still lost a whopping 216,000 jobs in August. And broader measures of workplace woe are even worse. The unemployment rate does not include discouraged workers who have stopped looking for a job, and it doesn't include those who want to work full-time but have to settle for part-time employment. That statistic actually declined slightly in July, giving some economists cause for optimism. But the metric soared again in August, reaching the highest level on record.
And unemployment is not the only problem workers face. Both Tim Fernholz of The American Prospect and Elizabeth Palmberg of Sojourners highlight a New York Times story by labor reporter Steven Greenhouse, which details how low-wage workers are routinely cheated by their employers. According to a recent study, a full 68% of these workers report having experienced an illegal workplace abuse in the past week, such as being denied overtime pay or being required to work for less than minimum wage. On average, workers lost 15% of their weekly income as a result of this exploitation.
We have good laws to protect workers, but they just aren't being enforced. Companies have successfully intimidated their employees into not reporting blatantly illegal pay practices. The best way to resolve this situation is to expand unionization and give workers a stronger voice in the workplace, making it safe to speak out against abuses. And the best way to expand unionization is to enact the Employee Free Choice Act, which lowers barriers to creating a union. But the legislative process has been delayed by a smear campaign organized by executives and managers claiming that unions, and not corporate elites, are the actual source of workplace coercion.
"It ought to make your blood boil-especially as people decry union thugs 'intimidating' people into joining unions when that doesn't happen and most workers want to join a union," Fernholz writes.
The U.S. needs to get its economic priorities in order. We should be protecting low-wage workers from executive excess, not the other way around. President Obama will have an opportunity to coordinate that effort globally at the G-20 summit later this month. Let's hope he doesn't squander it.
Unemployment was up .3%, and underemployment a whopping .5% of a percent.
The number of job losses actually declined (216K) to its lowest level since the recession began, so the increase is partially the result of more people trying to enter the labor force (which is a reversal from July).
I still don't know where the new jobs are going to come from to get people back to work.
Political notes:
It is important that we don't sell a lower level of job losses as good news. That sounds like the Bush administration, the McCain campaign, and other Republicans trying to convince the country that the economy really was oh so great, even though we were entering a collapse. Economic conditions cannot be improved through better spin. Rather, they are objective concerns people deal with every day. If it isn't getting any better, and is in fact getting a lot worse, a governing party only compounds its culpability by trying to deny reality to the country.
If this keeps getting worse, we really are screwed in 2010. We were voted in to fix this problem. While the country may not believe that Republicans could have done any better, they might very well believe that all the spending which took place under Democratic governance caused a new and unnecessary problem on top of the terrible economic conditions. Even if the Democratic programs prevented economic conditions from becoming much worse, many voters will simply weigh "a crappy economy and large deficits versus a crappy economy plus even larger deficits." That is a tough election formula for us to face.
A second stimulus, even if needed, isn't going to happen. You don't get a second chance at the same idea if you became unpopular as a result of the first time you tried it. Majorities are already opposed to a second stimulus program, and those numbers will only get worse if economic conditions continue to deteriorate.
The Wall Street bailout was actually the first stimulus anyway, and the American Reinvestment and Recovery Act was already the second one. The stimulus opportunity costs that we lost with the bailout are staggering.
The political upside is that Democratic programs like the stimulus will get credit for a turnaround when, and if, one takes place. Forecasts seem to average at around 2 to 2.5 million jobs created by the end of 2010, and for those increases to start happening fairly soon since the economy is expected to expand in the third quarter. Whether that will be enough growth to prevent a big backlash against Democrats is impossible to say at this time, but the forecasts of an 8.0% unemployment rate as late as 2012 are not encouraging.
Yikes. No fun to be the captain of a sinking ship, either
After Ben Bernanke allowed an $8 trillion housing bubble to ravage the global economy and nearly destroy the U.S. financial system, President Barack Obama has decided he deserves another term as Chairman of the Federal Reserve. (The UpTake has video of Obama's announcement here.) As the Fed Chair, Bernanke has more economic power than any other person on the planet. By heading the committee that sets interest rates, he can control the economy's rate of growth or contraction; as head regulator of the largest banks, Bernanke has more influence over the rules of the economic game than anyone else.
Why is the Bernanke reappointment a mistake? Matthew Rothschild of The Progressive turns to Sen. Bernie Sanders, an independent democratic socialist from Vermont. Put simply, Bernanke is completely culpable for allowing an economic crisis to foment.
"Like the rest of the Bush administration, he was asleep at the wheel during this period and did nothing to move our financial system onto safer grounds," Sanders said.
Corporate media generally neglects to mention Bernanke's role at the Fed prior to 2008, and instead credits him with stopping a second Great Depression. It's true that the Fed has done everything possible to keep Wall Street from imploding, but Bernanke also repeatedly insisted that the subprime mortgage crisis would be "contained" as late as 2007 and made no plans for a situation that might prove worse than his rosy forecasts.
As William Greider explains for The Nation, it's a bit too soon to celebrate our economic salvation at Bernanke's hands. Small banks are failing at an alarming rate, job losses remain heavy and households are being squeezed by plummeting property values and growing credit card debt.
Greider emphasizes that Bernanke repeatedly bailed out financial giants without demanding anything in return, which bodes poorly for any future economic crisis. Kenneth Lewis remains Bank of America's CEO, even though the company has needed $45 billion in taxpayer funds to date, and high-level Fed officials think Lewis may be guilty of securities fraud. On the one bailout where the Fed did assume ownership of the company and discharge it's top-level management, AIG, the deal was structured to funnel no-strings-attached money to other Wall Street companies. Goldman Sachs raked in $12.9 billion from the arrangement. It's one thing to funnel money to financial firms in the name of economic necessity. It's quite another to allow executives at those companies to be paid like princes and subsidize their shareholders.
As economist James K. Galbraith discusses in a piece for The Washington Monthly, it's not clear if Bernanke and Co. actually saved the economy. Even if the financial system gets back to normal functioning, that stability has been purchased with massive taxpayer support. In order to do just about anything involving finance in the United States, a company now needs a very explicit government seal of approval to convince investors that they're safe to do business with. Just ask Colonial Bank, which failed earlier this summer after being denied bailout funds under the Troubled Asset Relief Program.
But there has been secret support as well. Bernanke's Fed committed over $2 trillion in emergency loans to keep the financial system from collapsing during the crisis, and has refused to tell the public who got the money, and on what terms. We don't know who we saved, or at what the consequences of this massive bank support operation will be. Bernanke always believed that rescuing Wall Street would prevent major damage to the broader economy, but Galbraith questions whether the economy would be stronger if policymakers had focused more on direct aid to workers and homeowners, including an earlier, more robust economic stimulus package.
"Perhaps the right thing would have been less focus on saving banks, and much more on saving jobs, families, and homes."
Writing for In These Times, Roger Bybee profiles a new group called Americans for Financial Reform, which is pushing for changes on Wall Street and fighting against business-as-usual at the Fed. The bank lobby is probably the most powerful interest group on Capitol Hill. Unfortunately, there hasn't been a strong and consistent voice urging lawmakers to protect the entire economy, rather than the banks. The very structure of the Fed makes it more responsive to Wall Street interests than those of the general public. Private-sector banks like Citigroup and Bank of America are shareholders in each of the Fed's regional branches, while private-sector bank executives sit on the board of directors at each branch. Since the boards get to name the regional presidents, private-sector bank CEOs are given major power to name their own regulators. Regional presidents also rotate through positions on the Fed's monetary policy board, making decisions to set interest rates.
The Fed's institutional structure, and its reliance on mainstream economists overly acquiescent to the financial sector has helped fuel the boom-and-bust bubble economy, as the Real News explains in this video piece:
In addition to the turmoil surrounding the Bernanke appointment, the recent budget deficit projections have been receiving a lot of attention lately. By throwing around a lot of big numbers that end in "trillion," deficit hawks have created the impression of crisis where none exists. The government will have a $1.6 trillion shortfall this year, equal to about 11% of the U.S. economy. That's the highest such number since the U.S. economy started to soar in the years after World War II, high enough to mobilize CNBC pundits to warn of financial apocalypse and a bankrupt U.S. government.
But as Robert Reich notes for Salon, it's not really worth getting too worked up over the current deficit projections. In a recession, countries want to run a deficit: the government needs to fill hole created by the drop-off in private-sector economic activity. If the U.S. doesn't run a big deficit, it will shed millions of additional jobs. And the country is nowhere near losing control of its currency. The federal debt stands at about 54% of our economic output right now, and is projected to reach 68% by 2019. But Reich notes that in 1945, the number was far higher: 120%. This number shrank dramatically over the next few years, not because of draconian cuts to government programs, but because the economy grew so much that the debt burden became less severe. We are nowhere near a crisis with the budget that compares to the current unemployment crisis, so pulling back spending right now doesn't make much sense.
Bernanke has always argued that the Fed chair's only duty is to control inflation. But managing the economy means not only attending to inflation, but making sure the true engine of economic growth-financially secure households-isn't sacrificed to the short-term interests of a few Wall Street elites. Bernanke failed to block that economic predation early in his tenure as Fed Chairman. If Bernanke is going to be with us for another four years, President Obama needs to find other ways to restore our economic balance.
For much of today, the top headline at Talking Points Memo declared that "Support for reform Drops a Bit After Teabaggers August Assault." While I don't deny that support for health care reform is dropping, it seems like a big stretch to argue that Republicans and conservative protesters are actually the cause of this drop. Instead, support for health care reform is dropping because the economy is causing support for the people trying to pass health care reform (aka, Democrats) to drop.
Superficially, it seems to make sense that if one major political party is becoming less popular, it is because the other major political party is winning over hearts and minds. However, as we should have all noticed in 2006 and 2008, it is entirely possible to win landslide elections simply because you are out of power when everything goes down the tubes in the country. Whatever advanced Democrats and progressives made in terms of fundraising, grassroots activism, creating new media, the fifty state strategy, or recruiting candidates, hopefully everyone knows that 80% of our victories can be attributed to an unpopular war (2006) and a crappy economy (2008). That Republicans had more scandal-ridden incumbents than did Democrats helped out chances quite a bit, too.
Much the same is happening now. Support for health care reform is not dropping because birthers are yelling "socialism" at Democratic members of Congress. Instead, support for health care reform is dropping because the economy is causing support for the people trying to pass health care reform (aka, Democrats) to drop.
Health care reform is proposed and passed by the people in control of government. Polling on health reform measures those people as much as it measures health care reform. This can be seen in the questions which are viewed as the most relevant to health care reform: "do you favor or oppose President Obama's health care reform plan" or "favor or oppose the democrats health care plan?
The approval rating of the people in the government is heavily dependant upon the state of the national economy. As the economy continues to weaken according to virtually every major indicator (and weakening at a slower rate is still weakening), the approval rating of the people in charge will continue to slowly decline.
The economy is causing a slow decline in the approval ratings of President Obama and Democrats in Congress, which is in turn causing a slow decline in support for health care reform. So really, in a painful irony, it is actually the terrible economy that is weakening support for health care reform legislation, even though this is the time when we need that reform the most.
It is easy, especially if you are a progressive, to fall under the delusion that electoral and legislative politics are a series of arguments over policy ideas. It's not. Rather, electoral and legislative politics in America are largely about attaching blame or credit to the objective conditions voters face on a daily basis. More often than not, the group that ends up assigned blame or credit for the good or bad conditions in the country are the people in charge of the government of the country. And so, when times are good, elected officials (and their policy proposals) have high approval ratings. When times are bad, electoral officials (and their legislative proposals) have low approval ratings.
This is the case for health care reform now, too. The economy is dragging down Democratic approval ratings, and lower Democratic approval ratings means lower approval for their legislative proposals. While we may like to think that we are arguing over policy ideas, and that rising or falling support for policy ideas means one side is gaining ground in that argument, the truth is that the objective conditions people face in their day to day lives are the main cause of shifting grounds in political fortune.
For the current health care fight, this means Democrats are going to have to summon up the courage to pass a health care bill that might very well be unpopular when it passes (at least it will be unpopular when the polling question is "do you support the Democrat's / President Obama's health care proposal?) they will have to trust that not passing a strong health care reform bill will make them look even worse, and that an improving economy will make them look a lot better in 2010.
The U.S. economy may finally be bottoming out. But if the worst is really behind us, we are likely facing a painful period of "growth" that looks very much like the present. Without increasing unionization and mitigating racial inequality, our economic progress will prove as hollow as it is slow. While the economy may improve in a dry, statistical sense, the foundation for a productive economy has been decimated over the past three decades.
The economy has shown some encouraging signs of strength lately. Home prices have actually increased and the pace of layoffs slackened quite a bit in July. But that data doesn't signify a strong recovery, as Andrew Leonard notes in a pair of blog posts for Salon. Even in areas where there is some good news-housing and the job market-there is plenty of contradictory bad news. First, mortgage delinquencies are at an all-time high, and the souring loans are not just subprime. Even people with relatively affordable mortgages have problems paying when they lose their jobs, and with the unemployment rate at 9.4%, a lot of people are losing their jobs.
What's worse, Leonard notes, new claims for unemployment benefits escalated in August, suggesting that last month's job market improvements may have been a fluke. And while home prices may be ticking up slightly, they have been abysmal for the past two years. Since many households accumulated debt based on higher home values, the overall ratio of consumer debt to household net worth is perilously high.
Household net worth is a crucial statistic and is often overlooked by a focus on day-to-day measurements of worker well-being, like wage growth. While wages matter for paying the rent and buying groceries, our long-term economic security is defined not by what we make each week, but by the value of the things we own. In a piece for The American Prospect, economists Derrick Hamilton and William Darity Jr. detail the massive racial disparities in household net worth in the U.S. While the median white family has roughly $90,000 to its name, the median Latino family has just $8,000, while the median Black family has only $6,000.
Centuries of discrimination have resulted in today's inequality, but Hamilton and Darity propose a simple, straightforward solution: The government should establish savings accounts for children born into poor families, and fund it with a relatively small amount of money. Children will not be able to access the accounts until they turn 18, but over the years, interest will accrue on the accounts to the point where children should have between $50,000 and $60,000 by the time they can withdraw funds. Since so many people of color are born into households with relatively low net-worth, establishing a policy to use government money to boost the wealth of those born without it would have the effect of promoting racial economic equality.
But we also have to worry about jobs. President Barack Obama's economic stimulus package has succeeded in creating or saving hundreds of thousands of jobs since going into effect earlier this year, but it is important to focus not only on creating jobs, but on creating good jobs. As Laura Flanders of GritTV emphasizes in a roundtable discussion with key academics and labor representatives, our increasingly hostile attitude towards unions has created major barriers to a sustainable economic recovery.
The legislation critical to ending this intimidation is known as the Employee Free Choice Act, one of the most important bills presented to Congress in decades, although it has been overshadowed by the debates surrounding health care reform and financial regulatory overhaul. Flanders' panelists include Kate Bronfenbrenner, a Columbia University Professor who wrote a recent paper for the Economic Policy Institute examining 1,000 attempts to establish unions all over the country, and found that employer opposition to unionization is more aggressive than ever. A full 30 million workers want to be part of an organized union, but only 70,000 workers successfully organize each year.
"It's always been hard to organize, but employers now have made it harder than ever. They've literally have said to workers that, 'If you try to organize, we will go after you in every way possible,'" Bronfenbrenner said. "They threaten workers, they harass them, one in every three employers fire workers for union activity . . . . There literally is a war on workers who try to organize."
Another panelist, Mark Winston Griffith, Director of the Drum Major Institute, notes that the decline of unionization has weakened the economy. In the 1950s, when one-third of all U.S. workers belonged to a union, the potential foundation for the economy was strong. Workers were well-paid and had excellent job security, which created a strong source of demand. With less than 8% of U.S. workers unionized today, our economic demand is fueled by household debt, which has left families struggling for financial security and has injected a heavy dose of instability into the entire economy.
Writing for The Nation, Sarah Jaffe details the difficulties faced by a group of security officers in Philadelphia trying to unionize under current labor laws.
But while the workers who form the foundation of our economy are gasping for air, the elite have almost never had it better. A recent study found income inequality to be deeper than any period since World War I, and this absurdity plays out in public policy. While workers struggle to get a fair shake from their employers, executives and managers evade taxes through elaborate international financial deception. Swiss banking giant UBS recently agreed to turn over the names of thousands of its clients who allegedly used the company's banking operations to skip out on the bill for Uncle Sam.
UBS has been caught with its hand in nearly every cookie jar labeled "bank scandal" over the past two years, from the subprime mortgage crisis to phony securities peddling to diamond smuggling. But as Robert Scheer explains at Truthdig, former senator and deregulation hawk Phil Gramm (R-Texas), has been an executive at the firm while the company has been destroying its reputation. Gramm helped pass some two key anti-regulation bills later years of the Clinton administration, and was unabashed about jumping to UBS immediately after leaving office. Scheer notes that the public knows almost nothing about Gramm's role at the company, including any potential involvement in its laundry list of scandals.
Real economic progress in the U.S. is impossible without a stronger base of unionized workers. But it's just as important to invest in our future by giving the children of poor families an even economic playing field.
