recession

Green Shoots. For Whom?

Eric Lotke — Thu, 05 Nov 2009 09:43:58 -0800

Today’s “Productivity and Costs” data from the Bureau of Labor Statistics contain what looks like good news. Productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the largest gain since 2003.

The Associated Press called it “sizzling.” The New York Times said we “surged.”

It’s good news and I’m happy about it. I especially like the 4.0 percent increase in outputs, led by a 12.4 percent increase in the manufacturing of durable goods. It almost starts to look like green shoots in a gray economy.

But keep the cork in the bottles. The hours worked last quarter dropped by fully 5.0 percent. The productivity gain came from doing more work in fewer hours. In the durable goods sector, the hours worked dropped a full 7.2 percent. The increase in productivity is fundamentally about people working harder.

And people aren’t getting paid for their hard work. Real hourly compensation rose only 0.2 percent last quarter. So if somebody is pocketing the gains from 9.5 percent increase in productivity, it isn’t the people working on the lines. Yes, they’re happy to have jobs. Yes, it’s nice to see any gain at all after a decade of decline in wages and income. But no, we don’t want to recreate the bubble that popped. We need to make sure these gains are widely shared and that the people doing the work reap their fair share of the benefit.

Source: BLS

Higher Ed Slashed, Left Dripping in Red

Armand Biroonak — Sat, 31 Oct 2009 08:51:12 -0700

The Chronicle of Higher Education released a survey of chief financial officers at four-year universities across the country and it is no treat; their outlook for this budget year (FY 2010) was gloomy, by next year? Even scarier. According to universities surveyed, 62% of officials expect the worst of financial pressures are still to come, with higher education budgets dripping in red ink, bitten by the recession looking forward.

This is despite the fact that universities have already slashed budgets, passed hair-raising tuition hikes, and in some cases chopped enrollment. At least 34 states already took the ax to public colleges and universities, reducing faculty and staff, coupled with steep tuition increases for the upcoming year.

And fiscal year 2011 looks equally sour, a total of 39 states expect to face or have already addressed shortfalls, amounting to an estimated $80 billion or 14 percent of state budgets. Although no real specifics, these fiscal challenges will surely trickle down to effect higher education spending even further.

To make up at least some of the difference, universities are spooking students with truly frightening tuition rates. On average the past year, tuition rose by nearly 10 percent for public four-year institutions. This comes after students were tormented with tuition increases of over 60 percent adjusted for inflation since 2000.

Meanwhile, enrollment and aid cuts are furthering the pain for students in a number of states. The California State University system plans to cut enrollment by 40,000 students. In Illinois, about 140,000 undergraduates (a quarter of all Illinois college students) will likely lose financial aid from the state. Ohio cut its top grant program in half, by $224 million.

And it is not just universities, weak state budgets are haunting community colleges equally. The majority of community college administrators predict that they will have mid-year budget cuts next year. While students can expect tuition to rise more than double the rate of inflation, as 46 states predict tuition increases at their community colleges.

And community colleges are feeling the effects of this recession in another way, as throngs of returning workers seek skills or job retraining. But the timing could not be worse. By a margin of 3:1 states report stress on their institutions to accommodate growing enrollment amid classroom cuts. In fact, in many cases, community colleges are so overextended that they now offer classes well into the graveyard shift to meet demand.

So what can be done to alleviate the skeletal state of higher education? A good start will be if the Senate passes the Student Aid and Fiscal Responsibility Act that expands Pell Grants and invests in community colleges. But that will not stop the bleeding alone. A second stimulus to help bridge state budget gaps for the upcoming year is critical until the economy shows signs of life again. While also, greater student aid and the creation of a ‘micro-Pell grant’ for workers to help pay for non-degree training can improve accessibility and affordability. While looking outward, we must start considering a way to better finance our education system, so it no longer resembles a sugar high and low.

IBEW Members Rally Against “Jobless Recovery”

Alex Hogan — Fri, 09 Oct 2009 11:24:45 -0700

Despite hopeful numbers on Wall Street, the job situation for most Americans remains bleak – and it’s getting worse.

September brought the 21st straight month of job loss, the worst stretch since 1939. More than 7 million jobs have been lost since the beginning of the recession with little hope that they will ever come back.

The official unemployment rate of 9.8 percent only underestimates the total damage as official records don’t count those who have given up looking for a job, pushing the unofficial rate past 10 percent.

While some leading pundits are now claiming the economy is on the rebound, the reality for most Americans is that they are facing the worst job market since the recession of the early ‘80s.

Complacency in the face of rampant unemployment isn’t an option for union members. Across the United States this fall, members of the International Brotherhood of Electrical Workers have taken the lead – working in coalition with other labor unions, community and faith-based groups – in fighting for good jobs.

On October 1, more than 1,000 union members, unemployed workers and neighborhood activists marched through downtown Boston protesting layoffs and the failure of corporate America and policymakers to address the jobs crisis.
Said Boston Local 2222 Business Manager Myles Calvey:

It is not a coincidence that the rally was on the one-year anniversary of the bank bailout. We need our political leaders to focus on making sure every American who wants a job can get one instead of bailing out Wall Street.

Protestors stopped to rally in front of the New England headquarters of Verizon, which recently announced that it was laying off more than 8,000 employees, including more than 150 members of Local 2222.

Dan Manning, a Verizon technician facing an upcoming layoff, told the crowd:

I know these are hard times, but with Verizon there’s no excuse. There is still plenty of work for us to do (and) they have the money, too.

Michigan has been particularly hard hit by the recession, with unemployment topping 15 percent. Many building trade locals have upward of 60 percent of their members sitting on the bench.

Calling on state leaders to “put us to work,” nearly 2,000 union members came to Lansing on October 6 to ask Gov. Jennifer Granholm (D) take the lead in job creation by approving the construction of clean coal plants, which are expected to create nearly 2,000 construction jobs in hard-hit Northern Michigan.

According to IBEW Representative Jeff Radjewski, one of the speakers at the rally:

We’ve been waiting for over two years for these projects. The plants meet existing environmental standards, and Lansing needs to move so we can put the people of Michigan back to work.

Workers in Minnesota are hopeful that federal and state investments in green energy will help bring new jobs to the Midwest. Union members, community leaders and environmental activists rallied in Duluth on October 1 telling residents to call on their U.S. Senator to get behind new renewable energy legislation which supporters say will create 1.7 million new jobs.

Chris LaForge, a Duluth Local 242 member and owner of Great Northern Solar, told the Duluth News Tribune:

Renewable energy is local. The fuel is free … the jobs are long-term and multipurpose.

Deficit reduction: DOs and DON’Ts

Eric Lotke — Wed, 30 Sep 2009 18:02:51 -0700

The forum on American debt and deficit had it right. First, don’t panic. Don’t stop the stimulus spending or raise taxes with the economy still near the bottom.

The Center for American Progress and Center on Budget and Policy Priorities convened the forum. Guests included Paul Krugman (NYT), Robert Reischauer (Urban Institute, OMB), Senator Mark Warner (D-VA), and some all star academics.

I won’t attempt a blow-by-blow but some main themes emerged. First, a strong consensus on what NOT to do:

-- DON’T panic at the size of the deficit or worship at the feet of debt reduction.

-- DON’T stop the stimulus spending or raise taxes in the short term. We’re still in the depths of recession. Consumers aren’t spending and neither is business. The government needs to drive demand in the short run. If we quit now, we’ll likely tip back over the wrong side of the precipice.

These charts aren’t from the forum, but can help reduce the panic. America’s debt is high, but well within historical and international norms.

Source: OMB history, 1930-2008; CBO projections, 2009-11

Source: CIA

Those are DON’Ts from the forum. There were DOs as well:

-- DO worry about debt in the long term. Our progressive goals – education, health care, high speed rail, help for the needy – cost money. Negative budget numbers make it hard to reach our goals.

-- DO talk about more than just cuts.

Conservatives discuss the budget in terms of spending, and demand cuts. But there are other ways to shrink the deficit. Most obvious is to grow the economy, even if it takes stimulus or infrastructure spending to get there. That’s a different way to shrink the deficit as a percent of GDP.

-- DO go ahead and talk about raising revenues. “Raising revenues” is better language than “tax hikes,” and it opens more doors. Closing loopholes and corporate exemptions are also ways to raise revenue. We might give those Bush tax cuts some extra years during the recession, but ultimately we need to raise revenue. Don’t fall for the conservative framework of a one-side ledger, with spending-cuts as the only path to balance. The ledger has a revenue side as well; we can also level up.

-- DO link what we get with what it costs and where the money comes from. Nobody likes taxes. But people realize that schools and roads cost money. Package them all together.

Behind all of this lurk some political cautions. The ghost of Peter Orszag was often heard, reminding us that the budget problem is a health care problem. We need to fix health care (Medicare and Medicaid, not Social Security) to fix the budget.

Senator Warner recommended that Democrats find some spending cuts or new efficiencies to show good faith effort to control costs. They need to earn the taxpayers’ trust with their money.

Charlie Cook (Cook Political Report) warned that Democrats are likely to lose seats in the 2010 midterm elections, and will have more Senate seats than Republicans open or at risk in 2012. The American people are always suspicious of government, and nowadays they’re angry. They don’t trust government with their money.

Maybe the frustration comes from Republican failures after Hurricane Katrina, Bush bungling in Iraq or the current recession … but it’s the Democrats’ government now, and distrust is the Democrats’ problem. The current distrust jeopardizes long term progressive goals.

The conclusion: DON’T quit the stimulus yet; it’s too soon. But DO attend to the debt in the long run. It’s important both politically and financially to the progressive mission.

The Great Recession's Phony New 'Silver Lining'

Sam Pizzigati — Sun, 20 Sep 2009 16:16:17 -0700

Hard times, a rash of new media reports now assures us, are significantly narrowing the gap between the rich and everybody else. So why are so many super rich still smiling?

Job worries have you down? Bills piling up? Nothing left in your retirement stash? You need a reason to feel a bit better about the Great Recession, and major media outlets, over the last few weeks, have been energetically endeavoring to give one to you.

This new cascade of media retrospection began with a front-page Wall Street Journal article, picked up steam with a front-page Washington Post piece, and revved into worldwide overdrive this past week after a top wealth management consulting firm released a new report on the impact of the global economic crisis on the world’s rich.

The basic message that all this coverage is shouting: The Great Recession hasn’t been all bad. Inequality, the claim goes, is finally easing. The gap that divides the rich from the rest is shrinking — because the rich, amid the worst economic times since the 1930s, are losing significant money and power.

The wealthy are losing money, the story continues, as asset bubbles pop and crash the value of their investments. And they’re losing power as angry lawmakers move to rein in rich people’s capacity to rebuild their grand fortunes.

Unequivocally worded headlines, the world over, are propagating this narrative of rapidly ebbing inequality: Recession hits super rich hard, Wealth inequality shrinks during financial crisis, study says, World's wealthy pay a price in crisis, Nations raise taxes, tighten regulations. The narrative, in fairly quick order, seems to be hardening into a global consensus.

“If the financial crisis has achieved one small goal,” as one Australian daily summed up last Thursday, “at least it has slightly narrowed the gap between rich and poor.”

So do we now have, at long last, a real reason to stop worrying and love the Great Recession?

Not hardly. Inequality isn’t ebbing. It’s regrouping — for a nasty upsurge. The world’s affluent have certainly lost net worth. But that loss — for the super rich — has been far more inconvenience than calamity. Average working families in the United States and throughout the world have lost far more that matters.

The rich, as Yale School of Management senior faculty fellow Bruce Judson observed last week, are “suffering relative to the past.” But average households are undergoing wrenching life changes.

“With each job loss or foreclosure,” Judson points out in a powerful critique of the Wall Street Journal’s new take on the Great Recession, “another family joins the ranks of the former middle class.”

And the actual losses the super rich have “suffered” remain inconsequential. The Boston Consulting Group study on global wealth released last week does report that households worth at least $5 million saw their net worths drop 21.5 percent in 2008. But this hefty figure mixes in together merely rich worth $5 million and super rich who consider $5 million just an ordinary year’s income.

To get a more accurate picture of what’s happening to super rich fortunes, we need to look deeper into the data, to the Boston Consulting Group study’s stats on assets held in “offshore” tax havens like Switzerland.

The merely rich don’t stuff much cash in offshore tax havens. The super rich do. In 2007, offshore accounts held $7.3 trillion. In 2008, the new Boston Consulting Group data show, the value of the wealth “stowed away in money-havens” only dropped 8 percent.

Average working people,don’t have “money-havens” at their disposal. They have homes, and homes, not financial investments, make up the bulk of their household net worth. Home values, notes former labor secretary Robert Reich, have “taken a far bigger beating than stocks and bonds.”

On average, U.S. home prices have fallen by a third since the housing bubble popped, and, Reich adds, they're “still falling.” Stocks, meanwhile, have rallied considerably since they “hit bottom earlier this year.”

That rally has been good news for the top 1 percent of Americans — who own over one-third of the nation’s shares of stock — but not much solace to average families struggling through hard times. And you don’t have to have had your home foreclosed or your job eliminated to feel how hard these times can be.

Seventeen percent of U.S. employers, as the Economic Policy Institute reports, have recently “imposed furloughs on their workers,” and 20 percent “have suspended their contributions to 401(k)s and similar pension plans.”

“The Great Recession,” suggests Yale analyst Bruce Judson, “may be creating an even less economically equal society.”

But what about the worldwide tax-the-rich offensive major media outlets are reporting? Are governments, as the Washington Post contends, “helping themselves” to wealthy people's wallets “in a manner not seen in years”? Are financial industry movers and shakers, as the Post adds, witnessing a “government scrutiny of bankers' pay considered unthinkable before the crisis”?

On one level, these observations might possibly rate as accurate. Since the meltdown, the rich in the United States and elsewhere have come under greater pressure. But this pressure in no way amounts to “piling on when it comes to the rich.”

In fact, the real news here seems to be not how much governments have done to go after the wealth of wealthy but how little.

In the United States, lawmakers have so far this year made not one move to undo the George W. Bush tax cuts for America’s wealthy. In 2009, these tax cuts for the wealthiest 1 percent alone — average income, $1.3 million — will cost the federal treasury $74 billion.

Nor have lawmakers yet moved to end the widely criticized tax loophole that lets hedge fund kingpins — the Wall Streeters who've profited the most from the “bubble economy” of recent years — pay taxes on their windfalls at a bargain-basement 15 percent.

The Obama administration, to be sure, has proposed to end both this loophole and the Bush tax cuts in 2010. But even if the White House succeeds, America’s awesomely affluent will face a top tax rate no higher than 39.6 percent. In 1980, before Ronald Reagan’s election, rich Americans faced a 70 percent tax rate on income over $400,000.

But all these numbers actually understate the gentleness of the treatment America’s wealthy — especially in the financial industry —have been receiving.

We need to keep our eye, as Laurence Grafstein noted last week in the New Republic, on the outrageous big picture: Last fall, as taxpayers poured hundreds of billions into the financial industry, the power suits who run that industry took hundreds of millions out.

The outrage goes even further than the bonuses these power suits pocketed, stresses Grafstein, a veteran Wall Street financial executive. Wall Street’s biggest banks also awarded their elites “new grants of restricted stock at historical stock-price troughs," shares now worth fortunes thanks to the taxpayer subsidies that have stabilized the stock market.

Indeed, the Institute for Policy Studies revealed last month, just 40 executives at JPMorgan Chase, Wells Fargo, and six other U.S. high-finance powerhouses have already seen the stock rewards they received early in 2009 increase in value by just under $90 million.

In the face of all this continuing — and largely unchecked greed — how should average Americans be reacting? Should we be despairing? Have we missed a once-in-a-lifetime opportunity to trim the wealthy down to democratic size?

Not yet. These things take time. The last time average Americans had an opportunity to undo enormously concentrated wealth at the top, during the Great Depression, progress didn't come quickly. The first big Depression tax hike on the rich didn’t come until three years after the Depression began.

In short, we haven’t — yet — missed any historic opportunity. We have time. We just need the will.

Sam Pizzigati edits Too Much, the online weekly on excess and inequality.

Back to School, Students Turn to Loans for Help

Armand Biroonak — Fri, 04 Sep 2009 13:54:41 -0700

Students are borrowing more than ever to pay for college. As reported in the Wall Street Journal, for the 2008-09 academic year, students borrowed nearly 25 percent more than the previous year to pay for school, borrowing a total of over $75 billion. But as the economy worsens and states continue to slash higher education spending, this upcoming year will certainly be worse.

Why?

To begin with, the bad economy translates to fewer jobs available for students. Job openings that students traditionally apply for either are filled by more experienced workers or have vanished completely. This has helped push the current unemployment rate for 16 to 24 year olds over 18 percent. And considering how nearly half of full-time students and over 80 percent of part-time college students rely on jobs while in school –the dismal job market thus pressures them to borrow more. I of course neglect the impact of parents losing jobs, but its effect is easy to predict.

A second, more important reason is cash strapped states are cutting student aid and hiking tuition. Already 32 states have announced such measures, leaving students to foot the bill. In Michigan, the state has frozen merit awards to nearly 97,000 students. In Illinois, 145,000 need-based students have been told that their aid will be cut in half. And to highlight this trend once more, Pennsylvania is slashing aid for over 170,000 of its students.

These cuts will be extremely painful when considering in prior years nearly two-thirds of students nationwide received some form of financial aid.

Meanwhile, with states’ belt-tightening they are jacking up tuition. Tuition hikes of course are sadly, nothing new –the average tuition at a public four-year university has already increased 29% between 2000 and 2007. But by next year, states warn they will raise tuition again, and quite dramatically. For example, Cal State, California’s largest post-secondary system, announced a 20 percent increase for 2010 and Florida’s public universities tell of a 15 percent increase.

These radical actions are sure to leave students and parents in a vulnerable position. The unpredictability of next semester's costs and dwindling aid packages lead to a scramble for money by individuals, and as we can see by the latest data, a turn to borrowing.

Moreover, with state budgets appearing increasingly gloomy for 2010, college affordability will only grow worse. Already, the Obama administration has shown a commitment to higher education, with a historic increase in Pell Grants. Now is the time though for further action to be taken. Obama must make clear that states can no longer privatize the education system by slashing aid and hiking tuition, resulting in more students taking on loans. The solution is for the administration to incentivize and reward ‘good state’ behavior (that avoids harmful cost cutting) by offering stop-gap measures to plug the hole in states’ budgets. But Obama must act quickly as state finances are disappearing by the day.

The Bonuses and the Damage They Do

Dave Johnson — Wed, 26 Aug 2009 04:00:10 -0700

This is a story we are all too familiar with: Wall Street vs. Main Street. Irresponsible behavior leads to bonuses for Wall Street while working hard and playing by the rules leads to unemployment and foreclosure for Main Street.

You've heard the elements of the story: For quite some time Wall Street and the banks were operating irresponsibly, fomenting a huge credit bubble which led to the financial collapse. At the end of 2008 millions and millions of regular people – popularly known as “Main Street” – began losing their jobs, losing their houses, losing their savings and forgetting about ever retiring.

Wall Street: Huge Wall Street bonuses are in the news: Bank Bonus Tab: $33 Billion

Nine banks that received government aid money paid out bonuses of nearly $33 billion last year -- including more than $1 million apiece to nearly 5,000 employees -- despite huge losses that plunged the U.S. into economic turmoil.

… The nine firms in the report had combined 2008 losses of nearly $100 billion. That helped push the financial system to the brink, leading the government to inject $175 billion into the firms through its Troubled Asset Relief Program.

The Cost: The same amount, used for the people, would bring over 2.5 million good-paying jobs.

The "financial collapse" bonus pool is $33 billion. For comparison, look at what $30 billion could buy for We, the People, if only we had some control over things. $30 billion is the amount requested in Senator Sherrod Brown’s (D-Ohio) Impact Act. $30 billion = more than 2.5 million jobs:

“IMPACT (Investments for Manufacturing Progress and Clean Technology) creates a $30 billion Manufacturing Revolving Loan Fund to help small and medium-sized manufacturers finance retooling, shift design, and improve energy efficiency.

. . . the IMPACT Act could create 680,000 direct manufacturing jobs nationally and 1,972,000 indirect jobs over the next five years.”

Gas Prices and Bonuses: Do you remember those soaring gas prices that hit Main Street so hard last year. They play a part in this bonus story. For some background, see Matt Taibbi's Rolling Stone piece, Inside The Great American Bubble Machine,

So what caused the huge spike in oil prices? Take a wild guess. . . . [Wall Street] persuad[ed] pension funds and other large institutional investors to invest in oil . . . The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

[. . .] But it wasn't the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

This fits our story because the top bonus-getter this time around is Andrew J. Hall. Hall "earned" it by helping to run up the price of oil last year. Hall is getting a $100 million bonus. (Thanks to previous years' bonuses Hall already owns a 1000-year-old castle called Schloss Derneberg. Go look at some of the pictures of what these nice Wall Street bonuses can buy.)

Here's some more bonus news: Goldman may pay out largest bonus pool ever,

Looks like things are back to normal, or perhaps even better, at Goldman Sachs Group Inc. (NYSE:GS) as the firm is reportedly on track to pay out its largest bonus pool in the firm's 140-year history thanks to soaring profits in the first half of 2009.

Yes, that’s right "back to normal." Huge bonuses, in some cases the largest ever.

Main Street: Also back to "normal," the rest of the country remains mired in debt, unemployment, foreclosures, budget cuts and a health care crisis looks on, helpless to do anything about it because the functioning of their government has been captured by a wealthy few. Even before the financial collapse things were pretty bad. Wages had been near-stagnant for decades while costs rose, resulting in soaring credit card and other household debt. The savings rate had actually gone below zero. But not for Wall Street. While this was happening the finance sector had quadrupled to nearly 40% of all corporate profits and insiders were reaping tens and hundreds of millions and even billions for themselves.

There are many who say that these problems of debt and stagnant wages are because of Wall Street. Wall Streeters encourage companies to focus on maximizing short-term profit rather than investing in long-term stability. Wall Street pressure encourages companies to cut benefits, outsource jobs, increase workloads and eliminate customer services as much as possible.

These changes in business practices occurred partly because of the huge cuts in the top tax rates from the Reagan through the Bush years. It used to be that people built fortunes over time by carefully building businesses. But the tax cuts enabled "get rich quick" schemes that let a few benefit from chopping up and selling off once-stable companies, raiding pension funds, and so many of the business practices that have destroyed Main Street livelihoods.

This also happened because of deregulation. People were convinced that regulation of business "cost jobs," or a hundred other things we were told. Well it turned out that regulation was important. And it turned out that a few people reaped massive fortunes from the experiments in deregulation and tax cuts.

The Damage Done: While the bonuses are the largest ever, for public trust in their government and elected leaders this may equate to some of the most damage ever. People see these bonuses being handed out, paid for with taxpayer money, and they understand that their money is going out to the very people who destroyed the economy and their dreams. This kind of unfairness and injustice can tear apart the fabric of society. We are seeing elements of this in the disruptions at the Town Hall meetings on health care. People are angry at the way they are being treated, and the corporate right is channeling that anger into further demands for deregulation and favors for a few at the top.

While the stage was set for the bailouts and bonuses by the Bush administration, President Obama was elected to change things. Immense damage has been and continues to be done to the Obama administration in the public mind by these huge Wall Street bonuses. This set the stage for opposition to the health care plan. People feel that the President should find a way to stop this travesty. But instead he is seen as continuing it. His advisors are seen as being from Wall Street and unwilling to stand up against their friends and social and professional circles in which they live.

The Hope: President Obama has appointed a "Pay Czar." Kenneth Feinberg, who previously worked for free as head of the September 11th Victim Compensation Fund, has the job of "Special Master for Compensation." He will look at the compensation of the top 25 executives at these firms and decide if it is fair.

I think I speak for a lot of people when I say I want Mr. Feinberg to be aware that this bonus pool comes from taxpayer money, that the firms giving these bonuses wouldn't even be here if the taxpayers hadn't bailed them out, that the rest of the country - Main Street - hasn't seen a raise in a very long time, largely because of the policies of Wall Street, and that the bonus pool just happens to match the amount that would create 2.5 million jobs on Main Street through the IMPACT Act.

Mr. Feinberg, claw it back. Don't let these people get these bonuses, and be very public about it. The public needs to have their trust restored.

But more than that, the conditions that enabled Wall Street to benefit from destroying the livelihoods of the rest of us need to be reversed. Strong regulation needs to be reintroduced by the administration and backed up as necessary by the Congress. Top tax rates need to be increased back to where they were before Reagan to discourage this terrible "get rich quick" behavior and to reverse the concentration of the country's wealth among a top few. Most important: strong campaign finance and lobbying rules need to be implemented to remove Wall Street's ability to influence government. Truest and fairness need to be restored to our system.

It's The Economic Paradigm, Stupid!

Dave Johnson — Mon, 20 Jul 2009 07:41:10 -0700

I am happy to announce that beginning today I will be working as a Fellow and blogger with Campaign for America's Future. This post introduces the areas I will be pursuing.

The economy is terrible. There aren't enough jobs. Most of the jobs that are still there are not paying enough for people to keep up, and people are afraid they could lose them tomorrow. So we all have too much debt. We have too little health care. We have too much stress. And in the bigger picture we have too little power to do anything about it.

They say we're reaching a "bottom" and that there are "green shoots." But I am afraid that this isn’t your father’s recession. I'm afraid this economy isn’t a pendulum that has swing too far in one direction, ready to be pulled by natural forces back to the other side. I am afraid that this isn't a "business cycle" pattern with a fall, then a bottom, then a recovery where all the shoppers return to the stores, all the jobs come back and growth picks up where it left off. Even "green shoot" optimists admit there will be few new jobs if there is any recovery.

It may be that we are not in a period of waiting for things to "get back to normal." Many people think that this economic collapse IS the return to normal.

For decades concerned observers have warned about problems with the "sustainability" of our economic paradigm. If you look at charts describing changes in the economy, environment, population - all kinds of things - you see that in recent decades they all change and start to move, often exponentially, in directions that obviously cannot be sustained. They look like this:

A wise man once said that when something is unsustainable it can’t be sustained. And here we are. A very good explanation of the problem of unsustainability of our economic paradigm is The Story Of Stuff. "It's a linear system and we live on a finite planet."

It is not just the economy out of whack. The business practices that brought us here -- overextraction, overextension, overleveraging, overconsumption -- have also whacked the planet’s resources. The fisheries are increasingly depleted. The aquifers are increasingly drained. The forests are increasingly logged. The landfills are increasingly full. And, of course, the planet is increasingly hotter.

Our economic system has also taken a toll on the people. Too many hours at a stressful workplace with too little sleep have burned many of us out. Our thinking and identity are about our jobs, not our spirit and character. Our values are devoted to markets with many of us placing making money over loving and caring for families and others. And there's no time for that stuff anyway. We have become consumers instead of citizens and humans. Decades of falling wages, decreasing savings and increasing debt have tapped us out. Consumption has used us up. And we’re fed up.

So things reached a breaking point and broke down. This has been coming at us for decades. And here we are.

If this economic collapse was the consequence of decades of an unsustainable economic model, then what do we do?

The government, of course, has been working to fix this problem within the context of the current failed economic system. And in that context they have been doing a good job. They lowered interest rates to encourage even more borrowing. The stimulus pumped borrowed money into the economy to cover the loss of demand from people and business. They raised the FDIC protection levels so we're not all wiped out if banks fail. They bailed out overleveraged financial institutions so they could again provide credit.

Of course the stimulus is better than none. We need unemployment benefits and infrastructure investment. And investment has a longer-term payoff.

But what happens after the stimulus? What do they think will drive our economy back to what they think of as normal? Will it be renewed manufacturing of cars? If we don't bring back the good-paying jobs, who will buy them? Same for houses. Same for TVs and appliances and furniture and jewelery and expensive shoes and all the rest.

In a June interview on the Lehrer News Hour, Treasury Secretary Geithner said that they are doing what they need to do to "get growth back on track."

Back on track? Does he mean we will fish out the remaining fish? Cut the rest of the trees? Drain the rest of the aquifers? Take the tops off the rest of the mountains? Does he mean that we will run up the rest of the credit cards? Will we cover the rest of the land with even bigger houses and subdivisions and strip malls? Will we export all the rest of the jobs? Will we hand the rest of the nation's income and wealth over to an elite few?

I don't think they are going to get things back "on track" by applying more of the same "solutions" that got us to where we are today. Will they bail out more companies, making them even too bigger to fail? None of the fixes will work if the problem is that we have reached the limits of sustainability of the economic model we have been following for decades.

So what can we do to change the system itself? How do we restructure the model - the economic paradigm - in ways that let We, The People enjoy and share the benefits of our economy? There are a number of clues that I will be writing about in my work with Campaign for America's Future. Maybe we can follow the clues and find answers.

One obvious part of problem is that we have an economic system in which we tolerate a few people controlling –- and thereby getting most of the benefits from –- things that should belong to and be controlled by all of us. Aren't We, The People supposed to be making the decisions here? And shouldn't we make decisions that benefit all of us instead of just a wealthy few?

At the center of this problem is the role of the corporation in our society. Corporations have amassed immense power and that power is used to control the country's decision-making processes, always to the benefit of the wealthy few. Getting a grip on this problem requires us to regain understanding of why we have corporations in the first place. We, The People enacted the laws that allow corporations to exist because we felt that it would be to our benefit to do so. And to the extent that they are now benefiting a few at the expense of the rest of us, we can change the laws. Let that sink in.

Another thing we have to get control over is the concept of externalization. Why do we allow companies to externalize their costs while internalizing the profits? In other words, companies are allowed to push costs onto the rest of us, but are not asked to share the resulting profits with the rest of us. We even let them see and treat people (us) as "costs" -- a layoff pushes the responsibility to support a worker onto the community while the company keeps the wages they were paid.

When a company replaces a worker with a machine, the company pockets the wages that would have gone to the worker and the worker is discarded. But now we are learning that eventually enough workers are discarded that there is no one to purchase what those workers replaced by machines were making. So the company and the economy lose, too. This just doesn't work.

Here is a big one: We need to understand that actually making things is what drives an economy. America became an economic powerhouse because we made things here. China is an economic powerhouse because they make things there. I'll be writing about that a lot.

These are just a few of the things that I will be exploring in the coming months. Let's see where it goes.

*About the title.

Many States Look For A Federal Lifeline

OurFuture.org Staff — Sat, 27 Dec 2008 08:13:54 -0800

Many States Look For A Federal Lifeline

OurFuture.org Staff — Sat, 27 Dec 2008 08:13:54 -0800