Dialectical Surrealism

Where have all the commies gone?

Relax America. Ignore the shrill sirens of xenophobic alarmists bent on making our Asian counterparts the new threat. I have met the enemy, and they are ours!

Passing through Beijing last week, on the way to Hangzhou and Sanya, cabbing from the Capitol Airport by elegant turnpike and driving through the Wangfujeng district, the spectacle of the New China was conspicuous.

Not far from the seat of government, still near Tienanmen Square, close by the official residences of the current leaders and the well maintained neighborhoods reserved for those retired, western decadence dominates the scene.

Passing the Ferrari and Lamborghini dealerships, cruising by showrooms for Rolls Royce and Bentley automobiles and an almost endless array of designer stores, one could easily be confused and disoriented. Is this Beverly Hills? Rodeo Drive?

Only the occasional three-wheeler, or stooped figure of an old woman sweeping with a crude broom reminds the traveler they are at the political center of the Middle Kingdom.

Just as Lao Tzu's and Confucius' names were replaced by Mao and Zhou Enlai a half century ago, the latter seem to have been eclipsed by Lauren, Coach, Prada and Vuiton, not just here in the capitol, but in most major cities in eastern China.

Much as Dada and Dali understood the evocative juxtaposition of dream with reality, so too the masters of political surrealism trick the mind to plant their message. Where Mao understood poverty gives rise to the desire for changes, the desire for action, and the desire for revolution, the elites of international finance, who in the 19th century used opium to enslave the country, corrupt its government and drain it of silver, promote a new dreamworld.

This time round the counter-revolutionaries will subvert economic reform by addicting their targets with a desire for cars, clothing and cosmetics and intoxicating all with the belief that consumption is progress.

The new opiate of the masses can not be found in any little red book. It shines down instead from countless billboards, and endless glossy advertisements of American celebrities hawking expensive and exotic brands; produced largely by impoverished Chinese right here, or the poor in nearby third-world countries.

Consumerism, materialism, conspicuous consumption are the measure for young Chinese. Inherently self-interested, in a dog eat dog world, and unable to appreciate their benefits in the common good, they display labels like merit badges; Addidas, North Face, London Fog ... even their native brands are largely knock offs of their western counterparts with logos obviously trading on the image of a Nike or Apple.

For all the bluster and national pride, China is again become just a colony of western empires. And on every corner, along almost every thoroughfare, bank after bank, almost common as cell phones, are ready to provide the hapless Chinese consumer a financial shot in the arm.

As in the West, government is the useful tool of the extractors who know full well that a loyal cadre of corruptible officials, a pseudo master class, is required to tend the plantation. One is reminded, the nation is rotted, like a fish, from its head first.

Nonetheless, it's at least quaint (if ingenuous) that at the annual gathering of the Central Committee of the Communist Party, going on in Beijing as I gaze westward over the Yellow Sea, to hear the Party boys lament the growing disparity in wealth; extol the necessity for egalitarian correction; and lament the fact the peasants outside the urban fringe earn less than a third of the pittance on which most city dwellers exist.

In the US, its well fed and well tended leaders are almost silent on these subjects; reflecting the general outlook of their critical constituents that it's only natural the rich get richer, the poor get poorer, and you're a sucker if you think there'll be a middle class much longer.

And everywhere on the street and in Chinese news, the rapidly rising costs of food, energy and housing evidence the advent of a sobering reality: like Japan and the US, all bubbles burst; what goes up, will go down. Indeed, the Great Withdrawal may be under construction just around a nearby corner.

As inflation accelerates, recent efforts to recruit workers for new enterprises are coming up short. In some cases no workers could be found to take their positions in the economic harness. At the same time, the advancing cost of living has even precipitated strikes, something unheard of in the last several decades. The end of cheap labor is nigh!

Financial fissures are beginning to appear in the construction area. Notwithstanding the desire of speculators to build, and the bankers to keep the bubble inflating, the inability of buyers to afford new housing, or service mortgages, was compounded by anti-speculation measures intended to cool the over heated housing sector; all of which spells doom for the boom.

While China may not have a long history of private ownership to which to compare current prices, the simpler rent to value measure certainly indicates that prices have far outstripped incomes.

Reports already circulate of construction firms unable to get or keep the financing needed to finish projects already underway. What will become of the millions of Chinese who could be turned out of construction jobs? I swear, the construction crane is the national bird!

Will these workers turn to the low paying jobs offered by new enterprises? Will they depress already depressing wages? Will the latest five-year-plan, to increase peasant wages in the countryside stimulate domestic consumption? Will unemployed Americans buy the output of these new businesses?

Can the Chinese continue to peg the yuan to the sinking dollar and expect their consumers to suffer the inflated cost of imported food and energy that entails? They are a long suffering people; several millenia now. Will the Great Helmsman's observation remain true: will poverty again give rise to the desire for change?

If so, it hardly appears the Communist Party will be the vehicle for that change. It seems the answer to the question, "Where have all the commies gone?" is "Gone to Starbucks ... every one. When will they ever learn? When will they ever learn?"

Whitney: Rhetoric Meets Reality

A new position on business regulation

"It's clear, the Obama team is worried that the president hasn't been sufficiently servile to win big business's backing in the upcoming 2012 presidential campaign. So they're pulling out all the stops to show that they can be bigger suck-ups than their Republican rivals."

On Tuesday, Barack Obama made the case for easing regulations in an op-ed in the Wall Street Journal. The article, titled "Toward a 21st-Century Regulatory System", was accompanied by a caricature of a scissor-wielding businessman slashing-away at red tape, a symbol that is revered among anti-regulation zealots. In the opening paragraph, the president praises free market capitalism ("the greatest force for prosperity the world has ever known") and Wall Street ("vibrant entrepreneurialism is the key to our continued global leadership") while taking aim at the "burdensome" restrictions that prevent speculators from maximizing profits. Even by the administration's abysmal standards, the article is a new low, which is why the WSJ editors mockingly critiqued Obama's op-ed as "one of the greatest policy walkbacks in American history". Here's a clip from the text:

"Sometimes, those rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled innovation and have had a chilling effect on growth and jobs......Over the past two years, the goal of my administration has been to strike the right balance. And today, I am signing an executive order that makes clear that this is the operating principle of our government.

This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades."

The tone of the article strongly suggests that it wasn't deregulation that triggered the financial meltdown, but all those pesky rules that inhibit innovation and growth. This is pure revisionism and Obama knows it. But he also knows who he is talking to when he takes a spot on Murdoch's editorial page; rabid right-wingers who think business can do no wrong. That's why Obama skips the liberal blather altogether and reiterates themes that read like the daily printout of GOP bullet-points. Here's how the WSJ's economics editor David Wessel summed it up:

"Mr. Obama told agencies to scour the books for obsolete rules.....Within 120 days, each agency is to devise "a preliminary plan...to periodically review its existing significant regulations" to see which should be "modified, streamlined, expanded, or repealed."

So now the onus falls on the agencies to "prove" that businesses are not in compliance. That will make it harder to stop bad behavior or to penalize offenders. Obama's remedy will also extend compliance dates, offer more exemptions, and force regulators to make their judgments on stricter cost-benefit analysis. It's just one roadblock after another. The net result will be fewer rules, more pollution, a more dangerous working place, more financial fraud, and a general watering down existing regulations. No wonder the Journal's editors are so elated over Obama's transformation. He's abandoned any pretense of serving the public's interest.

It's clear, the Obama team is worried that the president hasn't been sufficiently servile to win big business's backing in the upcoming 2012 presidential campaign. So they're pulling out all the stops to show that they can be bigger suck-ups than their Republican rivals. According to Bloomberg, there will be more pandering in the State of the Union Speech; a "call to promote greater accountability in the educational system" (charter schools), an "overhauling of the tax system" (a regressive flat tax), and "cuts to Social Security benefits". (the steady evisceration of a retirement safetynet) All of these will be wrapped in Obama's populist rhetoric and invoked as a way of "fighting unemployment". Obama might just turn out to be the most business friendly president in US history.

Nader: It's an Obamanation

On Friday, December 10, 2010, Senator Bernie Sanders, Independent Socialist, of Vermont, came of age. At last. With just about the best progressive voting record, Senator Sanders has nonetheless been an underachiever in the minds of those Americans who marveled at his tenure as mayor of Burlington, Vt. before he became a Congressman and now a Senator.

Last Friday, Sanders tore the covers off an oligarchic driven Congress and a concessionary President with eight-and-a-half hours of non-stop presentations of facts and figures and a plea for fairness and justice. His goal was not heated rhetoric, though he showed deep moral indignation, but to attempt to rally the American people "to voice their feelings" to their members of Congress via phone calls, letters and e-mails. C-Span carried him live, since he was the only activity on the Senate floor that day.

He asked the over-riding question of "who is winning and who is losing?" The winners were the giant, bailed out corporations and other companies so coddled with tax breaks and subsidies that they pay no federal income tax at all. He named some of these company bosses who make sky-high salaries and bonuses and take advantage of tax havens. ExxonMobil, Sanders noted, made $19 billion in profits last year, paid no federal income taxes and even received a $156 million refund from the U.S. Treasury!

Senator Sanders filled the Congressional Record with statements about a variety of inequities and contradictions regarding President Obama's capitulation. Highlights follow:
--A Government Accountability Office report states that two-thirds of corporations making $2.5 trillion in sales over several years paid no federal income taxes.

--During the giant Wall St. bailout of 2008-2009, the Federal Reserve also bailed out with huge credit draws foreign banks from Bavaria to Japan. Such disclosures will be more common as a result of a successful Sanders amendment to the financial reform law earlier this year.

--The Obama-Republican deal would increase the deficit by $900 billion dollars over ten years but devote "not one nickel" to any infrastructure projects in local communities.

--He cited Warren Buffet and 90 other very rich Americans who wrote a letter to Congress opposing a tax cut for rich people like themselves.

--He cited the top one percent of the richest Americans who have wealth equal to the bottom 90 percent and receive 24% of all income. "When is enough, enough, do you want it all?" cried Sanders to an empty Senate chamber. (His colleagues had gone home Friday morning except for Senators Sherrod Brown and Mary Landrieu who conducted brief colloquies with Sanders while he rested his voice or went to the men's room.)

--The top 25 hedge fund managers each made an average of a billion dollars last year with much of that income taxed only at a 15% rate. The richest 400 families paid a 16.6% effective tax rate on average. The Obama deal would extend their tax cuts for another two years.

--There has been zero net job creation since 1999 leading to a decline in average household income. Inequality of wealth in the U.S. is the worse in the industrialized world.

--The U.S. has the highest rate of child poverty in the western world, in some cases five to six times that of Scandinavia.

--The Obama Republican deal would divert for the first time $120 billion from the payroll tax, leading Sanders to say this is the beginning of the unraveling of social security, "eating our own seed," he added.

-- "Let us be very clear: This [estate] tax applies only--only--to the top
three-tenths of 1 percent of American families; 99.7 percent of American
families will not pay one nickel in an estate tax. This is not a tax on the rich, this is a tax on the very, very, very rich." (The estate tax is reduced, while the exemption is increased, leading to $30-52 billion retained by the very wealthiest of estates over two years.)

--And of course over $120 billion over two years are left with the highest income rich, worsening the deficit in the coming years.

"We can do better" repeated Sanders, noting that Obama challenged his liberal base in Congress by asking "where are the votes?" To which, Sanders replied: "Our job is to mobilize the people of America," noting a rising flood of support for a fairer deal.

Of course, Obama has a healthy majority in Congress until January 2011. It is the threat of a Senate Republican filibuster—which Majority Leader Senator Harry Reid et al have never made the Republicans use during the first two years of the Obama Administration—that has neutralized that majority. Moreover, the Senate Democrats could have changed these obstructive rules by a simple majority vote back in January 2009. But they chose not to allow their own working majority of well over 50 votes to prevail.

Obama came to the White House swearing that he would not live in "a bubble" and that he would keep his promises, which explicitly included no further extensions of tax cuts for the rich and a $9.50 federal minimum wage (still lower in purchasing power than the federal minimum wage in 1968!) by 2011.

So what do we see from the President? Well, he boasted about being a community organizer in Chicago years ago. Yet for months, knowing what was coming, he failed to arouse the citizenry against the Republican tax cuts for the wealthy which Obama swallowed last week. He is known to be an expert poker player, but he displayed none of that skill with the Republican corporacrats, Rep. John Boehner and Senator Mitch McConnell. Where are Obama's touted oratorical skills? How smart can he be−undercutting his own Democrats and presenting them with the results of a closed-door sweetheart deal with their Republican adversaries?

Obama has frittered away his comfortable majority in Congress on many accounts for two years. And millions of people and their children will be paying the bill for his failure to fight for them.

Volscho: Socialism's for the Rich

... working and middle-class taxpayers now pay a “bondholder's tax” to firms like Goldman Sachs and JP Morgan Chase (as well as Japan and China). The domination had become quite apparent in early 1993 when President-elect Bill Clinton remarked "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?" Clinton ditched his 1992 campaign promises to the whims of the Wall Street Ruling Class and the Federal Reserve Bank.

Anybody tell you, "it's the economy, stupid."? (editor)

Who rules America? Sociologists and political scientists have debated this question since C. Wright Mills published his 1956 book The Power Elite. Writing in the 1950s, Mills argued that the United States was ruled by a triangle of power between the federal government, large corporations, and the military industrial complex (with many people moving between these sectors). Robert McNamara went from CEO of Ford Motor Company to Secretary of Defense under the Kennedy-Johnson administrations (modern examples include Dick Cheney, Henry Paulson, Robert Rubin, Larry Summers, etc). Since the late 1960s, sociologist G. William Domhoff has revised, updated, and increased the sophistication of power elite theory. If we look at the composition of cabinet-level and other White House appoints since the Reagan administration, it is clear that there is a significant movement between Wall Street and the Federal Reserve Bank and Treasury Department. But why? The answers are found in the social and economic crises of the 1960s and 1970s.

The rate of profit in the non-financial sector fell after peaking in 1966 and continued its fall into the mid 1970s. At the same time, the Civil Rights, anti-war, feminist, brown power, black power, American Indian Movement, student revolts, prison riots, and other rebellions against the establishment were taking place. Regulatory victories by Ralph Nader and other challenges to the power of the capitalist establishment were increasingly seen as a threat in the 1970s. Lewis F. Powell (a corporate lawyer, board member, and future Supreme Court Justice) wrote a memo to the Chamber of Commerce in 1971 and opened the document by stating, “No thoughtful person can question that the American economic system is under broad attack.” But what was most alarming was that “ Although New Leftist spokesmen are succeeding in radicalizing thousands of the young, the greater cause for concern is the hostility of respectable liberals and social reformers.” The great fear was that mainstream liberals were becoming more radical. A further fear was that Yale's graduating classes (composed of old and new money and elites-to-be) in the late 1960s and 1970s included those who were versed in the “politics of despair.”

In response capitalists mobilized politically and ideologically. By 1976, the U.S. Chamber of Commerce's membership started increasing rapidly and doubled by 1980. In 1975, there were just under 200 Corporate Political Action Committees (PACs) but about 1400 by 1981. The ideological factions of the right in the late 1970s included Supply-Siders, Monetarists, and Neoconservatives. Each of these factions were in power at the Treasury Department, White House, and Federal Reserve Bank beginning in 1979. While they didn't necessarily always get along, they put policies into place that led to the rise of the Wall Street Ruling Class.

Supply-siders argued that radical tax cuts would increase economic growth so much that it would actually increase government tax revenues. This theory (known as the “Laffer Curve”) was drawn on a napkin at a bar and then presented in editorials in the Wall Street Journal. One of Reagan's wunderkind, Office of Management and Budget David Stockman, confided to a Washington Post reporter (William Greider) that Reagan's tax cut was really a “trojan horse” for cutting taxes on the rich.

At the same time, monetarists believed that the only cause of inflation was the money supply. Beginning in October 1979, one of the first applications of the “shock doctrine” came in the form of very high interest rates. The vague proclamations of the Federal Reserve Banker, Paul Volcker, that the Fed was only focusing on M1 (a measure of money supply) and that the Fed's hands were tied such that it was “the market” that determined interest rates was sold to the public. What this really was, was “bitter medicine” and Volcker was quoted in the New York Times as saying that Americans must get used to declining living standards. In essence, the Federal Reserve Bank was implementing the “shock and awe” phase of the first-strike of a thirty year class war.

In 1981 Reagan signed the “Kemp-Roth” tax bill about a week after he had taken the radical step of firing 11,000 striking federal air traffic controllers. This was accomplished within the context of the highest interest rates and subsequent unemployment rates of the postwar era (in 1981-1982). This strategy, as explained by Naomi Klein in her book The Shock Doctrine, requires that radical policy shifts must occur when the public is disoriented and confused. High interest rates, business failures, foreclosures, plant closures, downsizing, and rising unemployment can have this effect. The interest-rate shocks enabled elites to pursue radical anti-union policies and radically reduce taxes on the rich. At the same time, neoconservatives argued that “missile gaps” and “acoustic submarines” (the inability to detect them being given as evidence for their existence) developed by the Soviet Union were posing a major threat to the United States. This justified unprecedented defense spending increases. One of the failed moments of the Reagan revolution, of course, was the decision not to pursue “Social Security reform” while only having limited success at cutting other social programs. This left a problem. Tax cuts for the rich reduced the tax revenue of the Federal government while a defense-spending spree threatened to create the largest federal deficit in history.

In a widely ignored 2000 book, Wall Street Capitalism: A Theory of the Bondholding Class, economist E. Ray Canterbery explains what happened. The tax cuts drastically increased the incomes of the rich and they used their newfound money from the tax cuts to buy the Treasury bonds, notes, and bills that the Treasury Department had to issue in order to finance Reagan's deficits. The combination of monetarism (high interest rates), supply-side tax cuts, and the phantom Soviet threat created the bondholding class. In essence, a Wall Street Welfare institution known as the bond market came to dominate politics in the United States. Instead of using taxes to fund the federal government (and increasingly state and municipal governments), taxes on the rich were cut and they were handed an “investment opportunity” so that working and middle-class taxpayers now pay a “bondholder's tax” to firms like Goldman Sachs and JP Morgan Chase (as well as Japan and China). The domination had become quite apparent in early 1993 when President-elect Bill Clinton remarked "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?" Clinton ditched his 1992 campaign promises to the whims of the Wall Street Ruling Class and the Federal Reserve Bank.

Treasury securities come in maturities of 1 month, 3 months, 3 years, 7 years, 10 years, and 30 years. But rarely does the bondholding class hold their securities to maturity. Instead, they are circulated through high-volume secondary markets. In October of 2010, for instance, the average daily trading volume of Treasury bonds was $558 billion. Treasury, State, and Municipal bonds are highly concentrated among the rich. In the 2007 Survey of Consumer Finances, the Top 5 percent (ranked by net worth) held about 93.6 per cent of all bonds (this does not include the savings bonds that the working and middle classes are familiar with). Likewise, the Top 5 percent owned 82.4 per cent of all stocks. The bondholding class oscillates between bonds and stocks as market conditions dictate. The Wall Street Ruling Class manipulates the supply of bonds, bills, and notes of differing maturities through its “Treasury Borrowing Advisory Committee” to maximize the economic gains of the bondholding class. The current Chairman and Vice Chairman are from JP Morgan Chase and Goldman Sachs, respectively.

By implementing what Canterbery calls a “bondholding class strategy,” the Federal Reserve Bank managed interest rates so as to optimize returns for the bond and stock market. Studies indicate that bond prices and the stock market generally react negatively to what is good news for most Americans: strong employment growth, a decline in jobless claims, an increase in wages, or an uptick of inflation sends bond and stock prices falling. When news reports of slower housing starts, slower than expected employment growth, an increase in unemployment or jobless claims are released, the bond and stock markets rally. This is a major difference in the class interests between the vast majority of Americans whose primary income is from wages and salaries and the minority of rich asset holders. When the economy grows too fast, the ideology of the bondholding class dictates that the Federal Reserve Bank should raise interest rates (which increases the unemployment rate and reduces wages). Keep wage and commodity inflation in check by all means necessary while allowing for stock market and home mortgage inflation.

The last thirty years of the class war waged by the Wall Street Ruling Class and the Federal Reserve Bank has been about reducing wages and goods inflation while sustaining financial asset inflation to increase the enrichment of the bond and stock holders. Net interest payments on Treasury securities are welfare payments to the Wall Street Ruling Class. One of the propaganda functions of the highly concentrated (by ownership) mass media is to keep the masses confused about this great source of power. From the perspective of the elite, it is better to inflame and encourage hatred for Mexican immigrants, welfare recipients, and Muslims. But Mexican immigrants and Muslims, generally speaking do not run the country. Instead, the simple answer is: follow the money. By following the money you will be led to a street with a river at one end and a graveyard at the other. In fact, it is for whom the firms located on this street received the largest welfare check ever written. As the chorus of Ron Paul supporters, Tea Party activists and white supremacists continues rising and violence escalates, the question arises: Is there socialism in the United States? The answer is a resounding Yes! Socialism for the rich.

Thomas Volscho is Assistant Professor of Sociology, CUNY / College of Staten Island.

Lindorff: Foreclosures; The Big Con

"Enough pussyfooting around! It’s time to make the banks and the bankers pay for their crimes. If government is to have any purpose, it must be to protect the public against crime.  And we have been robbed blind by these banks.  The problem here is that we Americans have lost any sense of community. We don’t really care about the millions who have had their homes stolen by the banksters, as long as our own homes haven’t been stolen."

There are calls in this election season for establishing a moratorium of some sort on home foreclosures, and a number of large banks have even voluntarily stopped, at least until after Election Day, on foreclosing on houses. That’s fine as far as it goes, but what about the millions of homes that have already been lost or stolen over the past several years?

Behind the talk of a legal moratorium on foreclosures, and the voluntary pause announced by some banks, lies the reality that many if not most of the mortgages in question are legally dubious. The homeowner getting a foreclosure notice frequently has no idea who the actual holder or holders of a mortgage may be, and banks that are trying to foreclose often themselves have no idea who actually holds title to the papers. This is because with the securitization of mortgages, they have been traded and re-traded, and often have even been diced up into pieces of mortgage-backed securities, so that the paper trail of ownership has been lost, perhaps irrevocably.

In some cases and some jurisdictions, federal bankruptcy courts have been tossing out foreclosure cases, saying that the foreclosing bank has no proof of ownership of the mortgage and thus cannot claim the property. It’s a little like the person who is caught speeding and shows up in court to contest the charge only to have it tossed out because the ticketing officer didn’t show up in court to make her or his case.

The truth is that there is nothing particularly virtuous about the moratorium that Bank of America and some other national banks have announced on foreclosures. They are probably only holding off because they know that they are in trouble for fraudulently signing and processing foreclosure documents claiming title to properties that they actually cannot prove they have any claim to. (It has even been suggested that the banks are temporarily halting foreclosures because they are afraid that the glut of foreclosed homes will depress the value of other properties which are in their mortgage portfolios, hurting their own balance sheets.)

But the real question is, why is nobody mentioning the over 9 million homes that have been foreclosed on already, or that have been threatened with foreclosure, in this longest and deepest recession since the 1930s.

If it is the right thing to do to put a stop to foreclosures until banks can prove ownership, then it is equally right to reverse, or pay damages for all those foreclosures that already occurred--1.3 million in 2007, 2.3 million in 2008, 2.8 million in 2009 and 1.6 million in just the first six months of this year--where there was bank fraud in the signing of documents, or where there is simply no paper trail to prove the bank in question owns the mortgage. (A difficulty is that if a foreclosed property was later sold, reversing the transaction could mean displacing another family that made a good-faith purchase from the bank, meaning that a compensation payment to the wronged first owner would be a better option.)

If an individual committed the kind of fraud that the nation’s banks have been committing in order to steal someone’s assets, she or he would be convicted of fraud and locked up in jail, yet not one banker has been locked up yet for mortgage foreclosure fraud.

This wave of foreclosures is really Grand Theft Home on an unprecedented scale. The number of homes foreclosed in 2004 was 677,000, so if we take that number as being an average foreclosure rate for ordinary times, and subtract it from the figures for following years, and if we assume that the balance of foreclosures are the result of the bank-induced recession, we’re talking about six million homes that have been stolen by the banks. If each foreclosed home over the period 2005-July 2010 was worth an average of just $50,000--probably a very conservative figure--we’d be talking about the theft through fraud or economic malpractice of some $300 billion in the assets of ordinary citizen homeowners.

Actually, of course, the theft of assets from the public has been much greater, since every time a home is foreclosed in a neighborhood, the value of all the surrounding homes plunges, but that’s a story for another day.

Just in terms of outright bank fraud and home theft, we are talking about perhaps hundreds of billions of dollars worth of property that has been stolen through forged papers. We are also talking about the heartless destruction of millions of families, who have been torn from their homes.

So why are we only discussing foreclosure moratoriums now and going forward? Why are we not seeing aggressive federal action by the Justice Department seeking restoration of title or compensation to families who have already lost their homes through bank fraud? As reported yesterday in the Washington Post, 40 state attorneys general have joined together to file court challenges to the securitization of mortgages, but so far, this effort appears aimed primarily at requiring banks and mortgage companies, going forward, to comply with all legal requirements in foreclosing on properties, not at recovering stolen property. The focus of this effort is also not on prosecuting banks and bankers for perjury, though this would certainly be possible.)

Why is Congress not aggressively investigating this colossal theft?

It’s one thing to say that financial institutions like Bank of America, Wells Fargo, JP Morgan Chase and Citibank are too big to fail. It is another to say that even though they are criminal enterprises that have perpetrated an unprecedented fraud on the public, they are too big to prosecute and to punish. That sounds like the way the Italian government has generally treated the Cosa Nostra.

Enough pussyfooting around! It’s time to make the banks and the bankers pay for their crimes. If government is to have any purpose, it must be to protect the public against crime. Even libertarians agree with that concept. And we have been robbed blind by these banks.

The problem here is that we Americans have lost any sense of community. We don’t really care about the millions who have had their homes stolen by the banksters, as long as our own homes haven’t been stolen. We’re so self-involved that we don’t even recognize that it is in our own self-interest to protect others from foreclosure because if they lose their home, our neighborhood suffers. Even the people who are acting riled up--the Tea Party folks--are only concerned about their own taxes, not about their neighbors. There were stories during the 30s of people who rallied to block auctions abd save their neighbors’ homes and farms. No stories like that today. But at least we could demand political action from our so-called political leaders.

There’s an election coming up Nov. 2. If the US Department of Justice and the attorney general offices of the 50 states cannot or will not go after the banks to demand the restoration of stolen properties to their rightful owners, and will not act to put the criminal bankers who committed fraud behind bars the way they do to the poor schmucks who pass a bad check, and if the House and Senate won’t seriously investigate these crimes by the banks, they should all be thrown out of office, Republicans and Democrats alike, and to hell with the consequences.

We couldn’t end up with anything worse than a government that coddles criminals, which is what we have right now.

Dave Lindorff is an award-winning veteran investigative journalist, a 1975 graduate of the Columbia University Graduate School of Journalism, and is author of Killing Time: An Investigation into the Death Penalty Case of Mumia Abu-Jamal (Common Courage Press, 2003) and three other books. He is also a founding member of the online newspaper ThisCantBeHappening! (http://www.thiscantbehappening.net/)

Roberts: Really Irrational Exuberance

For a number of years I reported on the monthly nonfarm payroll jobs data. The data did not support the praises economists were singing to the “New Economy.” The “New Economy” consisted, allegedly, of financial services, innovation, and high-tech services.

This economy was taking the place of the old “dirty fingernail” economy of industry and manufacturing. Education would retrain the workforce, and we would move on to a higher level of prosperity.

Time after time I reported that there was no sign of the “New Economy” jobs, but that the old economy jobs were disappearing. The only net new jobs were in lowly paid domestic services such as waitresses and bartenders, retail clerks, health care and social assistance (mainly ambulatory health care services), and, before the bubble burst, construction.

The facts, issued monthly by the US Bureau of Labor Statistics, had no impact on the ”New Economy” propaganda. Economists continued to wax eloquently about how globalism was a boon for our future.

The millions of unemployed today are blamed on the popped real estate bubble and the subprime derivative financial crisis. However, the US economy has been losing jobs for a decade.

As manufacturing, information technology, software engineering, research, development, and tradable professional services have been moved offshore, the American middle class has shriveled. The ladders of upward mobility that made American an “opportunity society” have been dismantled.

The wage and salary cost savings obtained by giving Americans’ jobs to Chinese and Indians have enriched corporate CEOs, shareholders, and Wall Street at the expense of the middle class and America’s consumer economy.

The loss of middle class jobs and incomes was covered up for years by the expansion of consumer debt to substitute for the lack of income growth. Americans refinanced their homes and spent the equity, and they maxed out their credit cards.

Consumer debt expansion has run its course, and there is no possibility of continuing to drive the economy with additions to consumer debt.

Economists and policymakers continue to ignore the fact that all employment in tradable goods and services can be moved offshore (or filled by foreigners brought in on H-1b and L-1 visas). The only replacement jobs are in nontradable domestic services, that is, those jobs that require “hands-on” activity, such as ambulatory health services, barbers, cleaning services, waitresses and bartenders--jobs that describe the labor force of a third world country.  Even many of these jobs are now filed with foreigners brought in on R-1 type visas from Russia, Ukraine, Thailand, Romania, and elsewhere.

The loss of American jobs and the compression of consumer income by low wages has removed consumer demand as the driving force of the economy. This is the reason expansionary monetary and fiscal policies are having no effect.

The latest jobs report issued today shows that America’s transformation into a third world economy continues. The economy lost 95,000 jobs in September, mainly due to cuts in local education and federal employment. Part of the loss of 159,000 government jobs was offset by 64,000 new private sector jobs.

Where are the new jobs? They are in nontradable lowly paid domestic services: 32,000 were in health care and social services, and 33,900 were in food services and drinking places.

There you have it. That is America’s “New Economy.”

Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.  His latest book, HOW THE ECONOMY WAS LOST, has recently been published by CounterPunch/AK Press

Michael Hudson: Class Warriors

"In sum, the Neoliberal Revolution seeks to achieve in Europe what the United States has achieved since real wages stopped rising in 1979: doubling the share of wealth enjoyed by the richest 1 per cent. This involves reducing the middle class to poverty ..."

Most of the press has described Europe’s labor demonstrations and strikes on Wednesday in terms of the familiar exercise by transport employees irritating travelers with work slowdowns, and large throngs letting off steam by setting fires. But the story goes much deeper than merely a reaction against unemployment and economic recession. At issue are proposals to drastically change the laws and structure of how European society will function for the next generation. If the anti-labor forces succeed, they will break up Europe, destroy the internal market, and render that continent a backwater. This is how serious the financial coup d’etat has become. And it is going to get much worse – quickly. As John Monks, head of the European Trade Union Confederation, put it: “This is the start of the fight, not the end.”


Spain has received most of the attention, thanks to its ten-million strong turnout – reportedly half the entire labor force. Holding its first general strike since 2002, Spanish labor protested against its socialist government using the bank crisis (stemming from bad real estate loans and negative mortgage equity, not high labor costs) as an opportunity to change the laws to enable companies and government bodies to fire workers at will, and to scale back their pensions and public social spending in order to pay the banks more. Portugal is doing the same, and it looks like Ireland will follow suit – all this in the countries whose banks have been the most irresponsible lenders. The bankers are demanding that they rebuild their loan reserves at labor’s expense, just as in President Obama’s program here in the United States but without the sanctimonious pretenses.

The problem is Europe-wide and indeed centered in the European Union capital in Brussels, where fifty to a hundred thousand workers gathered to protest the proposed transformation of social rules. Yet on the same day, the European Commission (EC) outlined a full-fledged war against labor. It is the most anti-labor campaign since the 1930s – even more extreme than the Third World austerity plans imposed by the IMF and World Bank in times past.

The EC is using the mortgage banking crisis – and the needless prohibition against central banks monetizing public budget deficits – as an opportunity to fine governments and even drive them bankrupt if they do not agree roll back salaries. Governments are told to borrow at interest from the banks, rather than raising revenue by taxing them as they did for half a century following the end of World War II. Governments unable to raise the money to pay the interest must close down their social programs. And if this shrinks the economy – and hence, government tax revenues – even more, the government must reduce social spending yet further.

From Brussels to Latvia, neoliberal planners have expressed the hope that lower public-sector salaries will spread to the private sector. The aim is to roll back wage levels by 30 per cent or more, to depression levels, on the pretense that this will “leave more surplus” available to pay in debt service. It will do no such thing, of course. It is a purely vicious attempt to reverse Europe’s Progressive Era social democratic reforms achieved over the past century. Europe is to be turned into a banana republic by taxing labor – not finance, insurance or real estate (FIRE). Governments are to impose heavier employment and sales taxes while cutting back pensions and other public spending.

“Join the fight against labor, or we will destroy you,” the EC is telling governments. This requires dictatorship, and the European Central Bank (ECB) has taken over this power from elected government. Its “independence” from political control is celebrated as the “hallmark of democracy” by today’s new financial oligarchy. This deceptive newspeak evokes Plato’s view that oligarchy is simply the political stage following democracy. The new power elite’s next step in this eternal political triangle is to make itself hereditary – by abolishing estate taxes, for starters – so as to turn itself into an aristocracy.

It is a very old game indeed. So it is time to put aside the economics of Adam Smith, John Stuart Mill and the Progressive Era, to forget Marx and even Keynes. Europe is ushering in an era of totalitarian neoliberal rule. This is what Wednesday’s strikes and demonstrations were about. Europe’s class war is back in business – with a vengeance!

This is economic suicide, but the EU is demanding that Euro-zone governments keep their budget deficits below 3 per cent of GDP, and their total debt below 60 per cent. On Wednesday the EU passed a law to fine governments up to 0.2 per cent of GDP for not “fixing” their budget deficits by imposing such fiscal austerity. Nations that borrow to engage in countercyclical “Keynesian-style” spending that raises their public debt beyond 60 per cent of GDP will have to reduce the excess by 5per cent each year, or suffer harsh punishment. The European Commission (EC) will fine euro-area states that do not obey its neoliberal recommendations – ostensibly to “correct” budget imbalances.

The reality is that every neoliberal “cure” only makes matters worse. But rather than seeing rising wage levels and living standards as being a precondition for higher labor productivity, the EU commission will “monitor” labor costs on the assumption that rising wages impair competitiveness rather than raise it. If euro members cannot depreciate their currencies, then they must fight labor – but not tax real estate, finance or other rentier sectors, not regulate monopolies, and not provide public services that can be privatized at much higher costs. Privatization is not deemed to impair competitiveness – only rising wages, regardless of productivity considerations.

The financial privatization and credit-creation monopoly that governments have relinquished to banks is now set to pay off – at the price of breaking up Europe. Unlike central banks elsewhere in the world, the charter of the European Central Bank (ECB, independent from democratic politics, not from control by its commercial bank members) forbids it to monetize government debt. Governments must borrow from banks, which are create interest-bearing debt on their own keyboards rather than having their national bank do it without cost.

The unelected members of the European Central Bank have taken over planning power from elected governments. Beholden to its financial constituency, the ECB has convinced the EU commission to back the new oligarchic power grab. This destructive policy has been tested above all in the Baltics, using them as guinea pigs to see how far labor can be depressed before it fights back. Latvia gave free rein to neoliberal policies by imposing flat taxes of 51 per cent and higher on labor, while real estate is virtually untaxed. Public-sector wages have been reduced by 30 per cent, prompting labor of working age (20 to 35 year-olds) to emigrate in droves. This of course is contributing to the plunge in real estate prices and tax revenue. Lifespans for men are shortening, disease rates are rising, and the internal market is shrinking, and so is Europe’s population – as it did in the 1930s, when the “population problem” was a plunge in fertility and birth rates (above all in France). That is what happens in a depression.

Iceland’s looting by its bankers came first, but the big news was Greece. When that nation entered its current fiscal crisis as a result of not collecting taxes on the wealthy, European Union officials recommended that it emulate Latvia, which remains the poster child for neoliberal devastation. The basic theory is that inasmuch as members of the euro cannot devalue their currency, they must resort to “internal devaluation”: slashing wages, pensions and social spending. So as Europe enters recession it is following precisely the opposite of Keynesian policy. It is reducing wages, ostensibly to “free” more income available to pay the enormous debts that Europeans have taken on to buy their homes and pay for schooling (hitherto provided freely in many countries such as Latvia’s Stockholm School of Economics), transportation and other public services. Manly such services have been privatized and subsequently raised their rates drastically. The privatizers justify this by pointing to the enormously bloated financial fees they had to pay their bankers and underwriters in order to get the credit to buy the infrastructure that was being sold off by governments.

So Europe is committing economic, demographic and fiscal suicide. Trying to “solve” the problem neoliberal style only makes things worse. Latvia’s public-sector workers, for example, have seen their wages cut by 30 per cent over the past year, and its central bankers have told me that they are seeking further cuts, in the hope that this will lower wages in the private sector as well, just as neoliberals in other European countries hope, as noted above.

About 10,000 Latvians attended protest meetings in the small town of Daugavilpils alone as part of the “Journey into the Crisis.” In Latvia’s capital city, Riga, Wednesday’s Action Day saw the usual stoppage of transportation and an accompanying honk concert for 10 minutes at 1 PM to let the public know that something was happening. Six independent trade unions and the Harmony Center organized a protest meeting in Riga’s Esplanade Park that drew 700 to 800 demonstrators, relatively large for so small a city. Another union protest saw about half that number gather at the Cabinet of Ministers where Latvia’s austerity program has been planned and carried out.

What is happening most importantly is the national parliamentary elections this Saturday (October 2). The leading coalition, Harmony Center, is pledged to enact an alternative tax and economic policy to the neoliberal policies that have reduced labor’s wages and workplace standards so sharply over the past decade. A few days earlier a bus tour drove journalists to the most visible victims – schools and hospitals that had been closed down, government buildings whose employees had seen their salaries slashed and the workforce downsized.

These demonstrations seem to have gained voter sympathy for the more militant unions, headed by the hundred individual unions belonging to the Independent Trade Union Association. The other union group – the Free Trade Unions (LBAS) lost face by acquiescing in June 2009 to the government’s proposed 10per cent pension cuts (and indeed, 70per cent for working pensioners). Latvia’s constitutional court was sufficiently independent to overrule these drastic cuts last December. And if the government does indeed change this Saturday, the conflict between the Neoliberal Revolution and the past few centuries of classical progressive reform will be made clear.

In sum, the Neoliberal Revolution seeks to achieve in Europe what the United States has achieved since real wages stopped rising in 1979: doubling the share of wealth enjoyed by the richest 1 per cent. This involves reducing the middle class to poverty, breaking union power, and destroying the internal market as a precondition.

Latvia’s Harmony Center program shows that there is a much easier way to cut the cost of labor in half than by reducing its wages: Simply shift the tax burden off labor onto real estate and monopolies (especially privatized infrastructure). This will leave less of the economic surplus to be capitalized into bank loans, lowering the price of housing accordingly (the major factor in labor’s cost of living), as well as the price of public services. (Owners of monopoly utility services would be prevented from factoring interest charges into their cost of doing business. The idea is to encourage them to take returns on equity. Whether or not they borrow is a business decision of theirs, not one that governments should subsidize.) The tax deductibility of interest will be repealed – there is nothing intrinsically “market dictated” by this fiscal subsidy for debt leveraging. This program may be reviewed at rtfl.lv, the Renew Task Force Latvia website.

No doubt many post-Soviet economies will find themselves obliged to withdraw from the euro area rather than see a flight of labor and capital. They remain the most extreme example of the Neoliberal Experiment to see how far a population can have its living standards slashed before it rebels.

But so far the neoliberals are fully in control of the bureaucracy, and they are reviving Margaret Thatcher’s slogan, TINA: There Is No Alternative. But there is an alternative, of course. In the small Baltic economies, pro-labor parties are pressing for the government to shift the tax burden off employees and consumers back onto property and financial wealth. Bad debts beyond the reasonable ability to pay must be scaled back. It may be necessary to let the banks go under (they are mainly Swedish), even if this means withdrawing from the Euro. The choice is between who will be destroyed: the banks, or labor?

European politicians now view this as being truly a fight to the death. This is the ideology that has replaced social democracy.

Hudson: Helping Wall Street Help America

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), and this editor's favorite economist.  He is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. He can be reached via his website, mh@michael-hudson.com (editor)

I can smell the newest giveaway looming a mile off. The Wall Street bailout, health-insurance giveaway and support of real estate prices rather than mortgage-debt write-downs were bad enough, not to mention the Oil War’s Afghan extension. But now comes a topper: the $50 billion transportation infrastructure plan that Obama proposed in Milwaukee – cynically enough, on Labor Day. It looks like the Thatcherite Public-Private Partnership, Britain’s notorious giveaway to the City of London underwriters. The financial giveaway had the effect of increasing prices for basic infrastructure services by building in heavy financial fees – guaranteed for the banks, who lent the money that banks and property owners used to pay in taxes in more progressive times.


The Obama transport plan is like a Fannie Mae for bankers, based on the President’s guiding mantra: “Let’s help Wall Street put Americans back to work.” The theory is that giving public guarantees and bailouts will enable financial managers to use some of the money to fund some projects that employ people – with newly created, non-unionized companies, presumably.

Here’s the problem. Transportation projects will make real estate speculators, the construction industry and their bankers very rich unless the government recovers its public spending through windfall site-value gains on property along the right-of-way.

What’s the point of a party having a constituency, after all, if not to sell it out? Is not the Democratic Party’s role to deliver labor, the minorities and the large cities hog-tied to Wall Street?

Hollywood surely has made enough movies along these faux-populist lines. The banker of a Western town manages to grab property along the railroad tracks coming through, to make a killing. The local mobster pays off a state legislator to build a highway by his property, making his land much more valuable. Mortgages will be refinanced in much larger sums. At least, this seems to be President Obama’s hope as he positions himself to become America’s Tony Blair. The role of Britain’s New Labor, after all, was to ram through economic programs so far to the right than no Conservative government could get away with them. In the United States it falls to Obama’s New Democrats to shepherd through proposals that Democrats would vote down if the Bush-Cheney Republicans had tried to enact them.
What President Obama did not acknowledge is a basic principle that every transportation economist is taught: Transport investment normally can pay for itself, simply by a windfall-gains tax enabling cities or other jurisdictions to recapture the higher rent-of-location and site value along the right-of-way.
London’s extension of the Jubilee Tube Line to the city’s financial district in Canary Wharf recently demonstrated this principle. The line’s extension cost £3.5 billion but increased property values by an estimated £13 billion along the route. A political protest movement arose over London’s failure to finance its transport system by taxing the higher rent-of-location and site values it created. Failure to do so gave landlords a windfall – one that the city could have recaptured by a windfall tax to cover the cost of what it spent. For instance, it could have issued bonds secured by a windfall property-rent tax.

Paying for capital investment out of such tax levies could provide transportation at a subsidized price, minimizing the cost getting to and from work. That would have made its labor force more competitive by alleviating cost-of-living pressure on wages, freeing more income for spending on goods and services and thus helping the economy.

But Obama’s infrastructure plan is for Wall Street investors to get the windfall – as property owners or as mortgage lenders making much larger loans against the enhanced site value. Balzac said that behind every family fortune is a great theft, and I would add that behind every great fortune is a public-sector giveaway. The largest asset in most families, billionaires as well as small homeowners, is land. The key to its site value (“location, location and location”) is transportation and other public infrastructure. The land grants to railroad barons after America’s Civil War, for example created the largest American fortunes for the ensuing century.

Obama’s guiding principle since taking office is that of his Republican predecessors: It’s Wall Street that makes America rich. In this mythology it’s the wealthiest brackets that employ labor, not downsize and outsource it. So it’s the rich who deserve tax breaks.

No wonder Americans are listening to populist rants against “big government.” The Wall Street bailout was the watershed in making our government look like those of Britain and France in medieval times, with their special interests, insider dealings and giveaways to court favorites. Governments were hated when they were controlled by landed aristocracies and foreign bankers funding each new war debt by an excise tax borne by the population at large, not by the wealthy.

America got rich from the Progressive Era onward by a different kind of big government than we have today. From the Cumberland Road and Erie Canal onward, it provided roads and other basic services at public expense for free or at subsidized prices. The guiding idea was that the “return” to public investment should be measured by the degree to which it lowers the economy’s costs of living and doing business, not in the amount of income it could extract.

The plan would not add to the government deficit, Obama promised. Unfortunately, in place of government taking more revenue, it will be the finance, insurance and real estate (FIRE) sector that does the taking. The banking system will now do what government was supposed to do back in the Progressive Era: finance infrastructure. The difference today is that instead of funding transportation out of tax proceeds (levied progressively on the wealthy) or by the central bank monetizing public debt, the Obama plan calls for borrowing $50 billion at interest from banks.

The problem is that this will build in high interest charges, high private management charges, underwriting fees – and government guarantees. User fees will need to cover these financial and other privatization costs “freed” from the government budget. This will build about $2 billion a year into the cost of providing the transport services.

This threatens to be the kind of tollbooth program that the World Bank and IMF have been foisting on hapless Third World populations for the past half-century. The “infrastructure bank,” reports The New York Times, “would be run by the government but would pool tax dollars with private investment.” It would be a test balloon for financing “a broader range of projects, including water and clean-energy projects,” for which Democrats already are drawing up a blueprint:

“[Connecticut Democrat Rosa] DeLauro’s plan would create an infrastructure bank that would be part of the United States Treasury, where it would attract money from institutional investors, then channel the funds to projects selected by a panel. The program, which would make loans much like the World Bank, would finance projects with the potential to transform whole regions, or even the national economy, the way the interstate highway system and the first transcontinental railway once did.
“The outside investors would expect a competitive return on their money, so many of the completed projects would have to charge fees, taxes or tolls. In an interview, Ms. DeLauro said she would be “looking at a broader base,” meaning the bank would finance not just roads and rails, but also telecommunications, water, drainage, green energy and other large-scale works.
“But if the projects did not raise enough money, the Treasury might get stuck paying back the investors, a prospect that gave pause to so-called deficit hawks like [Ohio Republican Congressman Pat] Tiberi. In an e-mail last week, he said he agreed the nation’s road and communications networks needed to be improved but was concerned about creating another company like Fannie Mae that might need a bailout.” Sheryl Gay Stolberg and Mary Williams Walsh, “Obama Offers a Transit Plan to Create Jobs,” The New York Times September 7, 2010.

Britain’s Public-Private Partnership built enormous financing charges into the cost of providing transport. London could have built the tube extension without running up public debts to the banks, paying the construction costs by funding the higher rent-of-location. America could do the same. In fact, in times past the United States financed public infrastructure out of progressive taxation that fell mainly on the wealthy, and by monetizing the budget deficit. But under Obama’s plan, the rental value is to be capitalized into interest payments or simply kept by well-placed landowners.

It looks like President Obama sat down with Larry Summers, Tim Geithner and his other Rubinomics holdovers from the Clinton/Goldman-Sachs Administration and asked what policies can be funded without taxing the wealthy, but by borrowing via a separate entity – with a government guarantee like the Fannie Mae and Freddie Mac gravy train for Wall Street.

The cover story is always that giveaways to the wealthy are needed to employ labor. (“Wall Street creates jobs.”) The Democratic excuse these days is that the economy won’t work without providing financial investors with “incentives.” The Democratic Leadership Council helped President Clinton accept the world as it is, rife with the fraud, crime and the proverbial free lunch as part and parcel of how the economy works. This certainly is how to attract campaign contributors and the Wall Street lobbyists that are designing today’s right-wing shift by Washington.

After its $13 trillion giveaway to Wall Street, the government has little debt-creating ability left in its budget to create jobs by public spending. Or so we are told. The giveaway money has not been lent out as promised to “get America back to work.” It has been paid out as bonuses to the bailed-out campaign contributors on Wall Street – and make offenders such as Bank of America and Citibank for their purchases of Countrywide, Wacovia and Washington Mutual (Wamu) whole for junk mortgages, on the pretense that a “sound banking system” is needed to get the economy moving again – the euphemism for pushing it further into debt.

But if there was so much money for bailouts, why is there any need to finance the fairly modest $50 billion transport initiative by borrowing instead of funding it out of the general budget?
There is no such need, of course. The program is simply an excuse for re-introducing Reaganomics as if the aim this time around is to “create jobs.” The way that Obama proposes to do this threatens to price American labor even further out of world markets, by raising the cost of getting to work, and of renting or going into debt to buy homes and offices near the new transportation hubs. And I suspect that as in Britain, the new public-private agency will be non-unionized. Britain’s Public-Private Partnership still looms as the dress rehearsal for what we are getting into.

Bucheit: Fooling Themselves?

Paul Bucheit teaches in the School for New Learning at DePaul University. Like many of us, he finds the Tea Party's support for the Republican Party's agenda strange. He invites those who are capable of understand this to get mad together with the rest of us ...(editor)

Not because the government does too much. But because it's done too little.

Consider a few disturbing truths:

-- We cry 'socialism!' at the mention of higher taxes, but we allow a businessman to make enough money to pay the salaries of every police officer, firefighter, and public school teacher in the city of Chicago.

-- The richest 1% had a big slice of the American income pie in 1980. Since that time, they've cut a second piece of the same size for themselves, and then a THIRD piece! Three times as much in 25 years. They got this extra pie not from being good hard-working little boys, but from tax cuts and deregulation.

-- As Howard Zinn argued, low-income people go to jail for thefts of a few hundred dollars. The people who take BILLIONS from society by calling their income "carried interest" instead of income are considered shrewd capitalists.

-- And how about corporations, the driving force of a 'revitalized' economy? Right now the 500 largest non-financial corporations are sitting on $1.8 trillion in cash instead of investing in people. And they're not paying much in taxes. The portion of federal revenue derived from corporate income tax decreased from 33% in the 1950s to 12% in 2005. Companies have saved billions by moving their headquarters to tax havens such as Bermuda or the Cayman Islands. Business-backers claim that the U.S. has one of the highest corporate tax rates among OECD countries, but the U.S. is actually the fourth lowest among OECD countries in the collection of corporate taxes as a percentage of GDP.

Tea Partiers, we should get mad together at government, because they've done too little to correct these injustices. It is not in their own best interests to raise taxes on the rich.

And we should get mad together at the mainstream media for not reporting on the abuses of the small percentage of very wealthy people who make it so hard on the rest of us.

Green: How the Obamacrats Blew It

David Michael Green is a professor of political science at Hofstra University in New York.

The Democratic faithful should probably not read this liberal's analysis of recent political history, or consider the future consequences of their party's abdication of its role in the struggle for social justice. (editor)


In the 1930s, the only thing we had to fear was fear, itself.

Today, the main thing we have to fear is us, ourselves.

Looking out over the horizon, I’m starting to wonder just how many shades of dark there are on the pallette. Lately, I get the feeling that we’re about to find out.

I wish I could say that this society did our best to fight our demons, but that the odds were simply insurmountable. You know. Like we were just sitting there by ourselves on our remote little Pacific island, a thousand years before telephones and radar when – bang – the tsunami hit, no fault of our own. And we bravely struggled heroically, doing our mightiest to save as many lives as we could.

I mean, if you’ve got to crash and burn, better to go down with a little dignity and honor, eh?

But, no, not for me, apparently. I’m an American. I live in a country – nay, an empire! – that insists on destroying itself. I’m part of the generation of decline. My people are the fools who perfected the fine art of committing suicide by stupidity.

It’s an astonishing act, and one of wide participation.

The nightmare of the right in America edges increasingly close to dragging the country past the point of no return, over the cliff of violent implosion. At this point, there is already little that is missing save the jackboots and broken glass.

The Republican Party was once a moderately conservative, pro-business outfit, until it was highjacked by the oligarchy and turned into a full-on predatory machine, hiding behind the facade of hate mobilizing issues like bogus overseas threats abroad and uppity brown people and demanding women at home. Basically, any way that middle class white males could be distracted from their sinking economic status – through the diversion of a sense of superiority over others, or the supposed threat to that superior status – was employed to cover for a party whose true agenda was to quietly produce the greatest transfer of wealth in all of human history.

Having succeeded dramatically, they are back at it again. It is now transparent, for anyone who cares to look, that the ugly tea party movement in America is an invention of the Koch brothers, Rupert Murdoch, Dick Armey and their sick ilk, once again mobilizing a boatload of fools who are angry, but too stupid to know quite why. This explains their endless rhetoric about the evils of the federal government, and their simultaneous desire to keep their Social Security and Medicare benies. It also explains their unmatched idiocy in serving as tools for their own destruction. If they succeed, they fail. If they get their champions elected, they lose their government-provided (Shhhh!) goodies. Brilliant.

In any case, the takeover of the GOP by Serious Money is now well into its second stage. Just when you thought it couldn’t get any worse, it is. Seriously, what is the next step after this one fails to provide any long-term solutions to what ails America, as most assuredly will be the case? For a decade or three now, regressives in America have been showing that they are capable of anything. Which more or less answers that question, doesn’t it? If you’re willing to savage military icons like John McCain, Max Cleland and John Kerry in order to win elections – and especially after you get away with it every time – you’re willing to do anything. If you’re willing to mock the 9/11 widows as scheming opportunists, you’re willing to do anything. If you’re willing to don a tuxedo and joke about missing WMD at a press banquet in Washington, just as you’re telling the American military’s adversaries in Iraq to “bring it on”, you’re willing to do anything.

Looking at the rhetoric the right throws in the direction of our president these days, questioning his very nationality (oh, did I mention that he’s black?), it’s easy to see that they‘ve gone completely over the line. But what’s really out of control is what lies underneath this insanity generated for the consumption of an ignorant hoi polloi. And what that is – what you see when you move the slime-infested rock away – is an unfathomably monstrous greed. Watching these folks in action, you could easily get the impression that they had been impoverished their whole lives. That they had been denied everything, right down to food and water. That they had been deprived through poverty especially of their dignity. You know, like the real poor people of this world, the forty or fifty percent of the Earth’s population that survives on less than two dollars per day. Those folks.

Instead, we are talking about people who are already fantastically rich. And who, despite this, are absolutely hell-bent on getting richer, even if that means depriving hundreds of millions of people in the American middle class of their middle classness, and in many cases, ultimately of their lives. How do we explain people like this? Are they not essentially sociopathic? Are they not made of essentially the same stuff as those who can kill without guilt or remorse? Especially when you consider that even the greediest among us reach a limit beyond which one can effectively make use of the next dollar and the one beyond that, so that pushing others into poverty is no longer even for purposes of your own benefit, but instead for some kind of sick sport? Aren’t these the characters whose essential sickness preachers and philosophers and shrinks have been trying to sort out for millennia?

Whatever the explanation for such illness, the effects of their efforts are certainly plain to see. We’re talking here about a class of Americans who have been essentially offended by the diminishment of inequality produced in America during the middle part of the twentieth century, due to the national policies ranging from the New Deal to the Great Society, Republican administrations included. America’s socio-economic structure changed dramatically during that time, and almost entirely for the better. A huge middle class that had never existed before came into being. Anti-poverty programs took the worst sting out of living conditions for the poor. And America became the greatest economic dynamo since the Roman Empire. Meanwhile, by the way, the rich remained very, very rich.

But that was not enough. So they have made a concerted effort over the last generation or so to revert the country back to the bad old days of Herbert Hoover and Calvin Coolidge. Think about that for a second. What sort of elevated sickness, what sort parental deprivation in childhood, what sort of total absence of conscience and consciousness is required to produce a group of people with that mentality?

I wish I knew. But I do know that their plan worked. As Robert Kuttner notes in The American Prospect: “For more than three decades, the wages of American workers have been close to flat while economic insecurity has risen massively. Although the productivity of the U.S. economy has doubled in a generation, most of those gains have not been captured by workers. And in the decade that began in 2001, inflation-adjusted wages have fallen for all but the most affluent 3 percent of the population.

“This pattern of deepening inequality was well entrenched before the financial collapse – which only made things worse. In 2006, economists at Goldman Sachs, sounding almost Marxian, reported that ‘the most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income.’ By 2006, wages as a percentage of gross domestic product were already at their lowest share – 45 percent – since government began keeping statistics in 1947. In the past three years, the decline in worker earnings has only intensified, as worker bargaining power has been undermined by very high unemployment. As the economy has stumbled toward a feeble recovery, corporate profits and executive bonuses have rebounded smartly, but salaries and wages have not.

“In the 1940s, 1950s, and 1960s, wages and productivity moved upward in lockstep. Beginning in the 1970s, as government regulation of labor conditions faltered, trade with nations that exploited their own workers increased, and corporations declared open war on unions, the lines diverged. Productivity kept increasing, while median wages were nearly flat.”

This is the successful agenda of the right in America, though it has been cleverly masked by the politics of resentment. This has been the real ‘class warfare’ in the United States these last decades – not, as pouncing regressives instantly scream out in an effort to silence truth, the very occasional and even more feeble attempts by the odd Democratic politician who slips up and mentions what has actually happened. And, as Warren Buffett is honest enough to point out, the war is over and his side won. As Robert Reich noted in a recent New York Times op-ed, the richest one percent of Americans have gone from taking in nine percent of the total national income right before the Reagan era began, to nearly one-fourth of it today. As Reich also reminds us, the last time this happened was in 1928. I would rush to say, “Hey, remember how that one turned out?”, but it’s pretty unnecessary to crack the history books for that reference, since we’re now living it. As just about the stupidest society that ever was, we’ve decided to get together to explore the fun and exciting question, “What would happen if America had a devastating economic downturn once again, boys and girls?!?!”

There is one big difference between today and the 1930s, however. Once there was a political party in America – the one that did the New Deal and the Great Society – that stood up a bit for the middle class and the poor. But Bill Clinton and Barack Obama have led the Democrats down a different path. Now the party stands for a slightly weaker version of the GOP’s plutocracy protection service. And, seemingly, for getting its face bitch-slapped bright red at every possible juncture. Both aspects of the New Democrats are a puzzle, but particularly the latter. What sort of psychology of the self-loathing explains how a Clinton or an Obama can be so passive, even when getting handed their heads by the most scurrilous of creeps on the political landscape, pieces of (allegedly) human garbage who could be destroyed with the slightest show of self-defense, let alone a wee assertion of political courage?

The current White House is such a failure that I am sometimes left scratching my head in understanding why that is the case. The puzzle becomes especially acute if one considers how transparently intelligent Barack Obama is, and how strategically clever they were in running their presidential campaign. It’s true, of course, that there are different kinds of smart. Jimmy Carter understood nuclear physics, but not the presidency. George W. Bush understood the presidency, but was otherwise as intellectually vacuous as a mud pie. Still, Obama has shown serious evidence that he has keen political smarts. Until he became president, that is.

One obvious explanation for this puzzle is that the guy, like Clinton before him, is just another flavor of corporate tool. Ya got yer Republican Wall Street marionettes, see, and ya got yer Democratic Wall Street marionettes... That much is clear, but it still doesn’t explain why this White House has been as inept as it has. Another claim that some people make is that he just wants one term, and will take the money and prestige and run. The problem with that theory is that he already had the money. And, quite arguably, he could have done better financially by simply writing a third book than by sitting in the Oval Office earning a mere half mil per year. What is absolutely clear, unless there is some radical and nearly unimaginable change of course, is that he will leave the presidency as one of history’s great losers, which again suggests to me that he would have been better off just sitting it out. Not to mention all the stress and ever-present death threats he could avoid by just hanging on the sidelines.

Whatever the explanation, the effect could not be clearer. Obama came into his presidency with more wind in his sails than perhaps anyone since Johnson in 1964, and this for a black man with an Islamic name, no less. He then blew it, utterly and completely. The indications of this are everywhere, starting with all the subsequent by-elections which he has turned into ‘bye’ elections for candidates from his party. Meanwhile, there are Democrats running for Congress today who are literally running TV ads dissing Barack Obama and Nancy Pelosi. And even those who are not mostly don’t want the president showing up in their districts before this election.

Now the latest polls are showing Republicans with a ten percent lead in generic congressional ballots. This is the biggest they’ve ever had in the 68 year history of polling. Meanwhile, half of Republican voters are enthusiastic about voting this November, while only one-fourth of Democrats are. On top of everything else, Republicans are doing this well despite offering nothing in terms of a plan for solving the problems that are upsetting voters. They will cut taxes on the rich. That’s it. The entirety of the rest of what they stand for is simply “NO!!!” to all things Demon Obama.

Now, think about this for a second, and bear in mind that when it comes to the GOP we are talking about a political party that the very same polls show voters still hating. How astonishingly inept do you have to be to turn the world upside down on its axis and hand not only resurrection but in fact control of Congress to such thugs, and hugely despised ones at that? What kind of a full-blown multiple-car crash of a politician do you have to be to make the party of Bush, Cheney, Boehner and McConnell seem preferable to the public, by a wide margin?

Wait. Don’t answer yet. It gets worse from there. In 2003, the ratio of Democratic to Republican identifying/leaning voters was about 50 to 40 among young voters, known as the Millennial generation. By 2008, via a combination of the effects of both George W. Bush and (candidate) Barack Obama, that ratio had moved an astonishing distance to provide a whopping gap of 62 to 30. Now, less than two years into the rule of Mr. We Are The Ones We’ve Been Waiting For, it is back to 54 to 40. These are incredible swings in identities that are usually far more stable. And they are incredibly important, because there is good evidence to suggest that voters who select a given party over a series of elections in the early part of their lives wind up keeping that party ID for life. In other words, Democrats had an opportunity here to lock in with an entire generation of voters a hugely disproportionate preference to continue voting for them. Imagine the difference this would have made in elections for the next seventy(!) years, especially over time as these Millennials replaced older, more conservative, voters in the electorate, and as they themselves came to turn out in larger proportion each election cycle, as every generation does when it ages. Democrats could have come close to locking up control of American government for the coming half-century, just as they essentially did after 1932. Instead, the party’s leaders have alienated this generation so much that they have returned the identification numbers to the period when George Bush and his party were highly popular. That’s a real achievement, folks.

Dan Pfeiffer, Obama's communications director, recently averred that “The public is rightly frustrated and angry with the economy”. So far so good, Dan. Very perceptive for a guy in the Obama White House. You should have stopped there, though. Instead, Dan went on to say that, “There is no small tactical shift we could have made at any point that would have solved that problem”. You know, I don’t really know who Dan Pfeiffer is, but I would say that anyone making this claim should be removed from office, and fast. Indeed, right now I would say that anyone who has the title of Obama's communications director should probably just be taken out back and shot, on account of gross incompetence and lethal negligence. I’m sorry, but these fools are so clueless. This could have turned out so differently, and, moreover, that was obvious in January of 2009 to anyone who had paid attention to American politics for the last thirty years. This White House was not praiseworthy for seeking to be bipartisan. Rather, it was embarrassing for not even knowing who its enemies were.

The worst, though, is what is to come. Obama and the Democrats will get slaughtered in November. This will happen not so much because of the socialist crimes they are alleged by the right to have committed – which are of course utter nonsense – but simply because of what they have not done, which is to solve the country’s problems. Yet, because of the socialist, big-spending, freedom-crushing narrative that regressives have successfully fomented and that the administration (including – Hello! – paging COMMUNICATIONS DIRECTOR DAN PFEIFFER!!) has been completely inept about countering, and because the other post-election option of actually getting it right would appear to be (and would be vociferously made to appear to be, by Republicans) an act of spiteful spitting in the public’s eye, the administration will have no option after the election but to tack yet further to the right in the ensuing two years.

That will be disastrous for Obama, for Democrats and for the country. (I could care less about the first two, who deserve it, and frankly I’m leaning that same way for number three on the list as well.) Like Clinton before him, Obama will try to placate voters and Republican monsters with their sponsoring oligarchy by moving to the right. Of course, there is absolutely nothing there except tax cuts for the wealthy (he is already proposing tax cuts for the bottom 98 percent). The Republicans have no other solutions for the economy (or anything else, for that matter), though these dam-busting boondoggles for the fiscally obese are, of course, no solution either. And, like Clinton before him, Obama will be relentlessly hounded by congressional investigations into every manner of bogus scandal that the fevered minds of the closeted perverts on the right can dream up to keep the administration reeling.

Unlike Clinton, however, there will be one big difference. I often said, back in the day, that the only thing that kept the American public from immolating Wild Bill, and the only thing that kept the Senate from convicting him in his impeachment trial, was that the economy was jumping at the time and Americans were therefore fat, dumb and happy. Today, however, they’re merely fat and dumb, and even the fat part isn’t a good thing in this case. The public could not possibly be more surly – apart that is, from how surly they’ll be in a year or two. Obama has been as idiotic a president as could be created if you sat down with the intention of making one, and they will be happy to watch him get savaged him when they have a chance. By bringing timidity and compromise with criminals to bear against multiple severe crises, and by refusing to fight for anything, he has launched a vicious cycle that is sucking him inexorably down, and us with him: He fails to solve the problems, the public gets angry and frustrated, his party loses elections, the right accuses him of everything from being a socialist to a fascist, he says nothing in response, the public gets angrier and more frustrated, his party loses more elections, they are then even more unable to govern than before, the public is about to explode in anger and frustration, he moves to the right and thereby offers even less of a solution to these crises than the non-solutions already on display, and ... so on. And so on, again. Rinse and repeat.

Obama and the rest of the cowardly and corrupt members of his party have guaranteed their own destruction, that’s for sure, but that is likely the least unkind thing that history will say about them. If we think about where this all goes next, it becomes clear what these shallow punks are trading away for their pathetic self-interest and unwillingness to fight against treasonous criminals. Democrats will be smashed in the next two elections, and the right will gain full control of the government and full responsibility for the state of the country. At that point, Republicans will have to put up or shut up. Since they will have no remotely viable way to solve the problems people face – since, indeed, their real mission is to make those problems worse, because that is necessary to further enrich their sponsors – they will reach for ever greater means of distraction to keep the public’s attention elsewhere. All I can say is, “Watch out, third world countries everywhere”.

We know what these people are capable of, though Cheneyism has only hinted at how bad it could ultimately get.

History will record – if there are historians left to record it – that this was a moment of monsters, cowards and indolents: those being the right, the supposed left, and the public, respectively.

It’s the worst of all worlds, and the combination is likely to be catastrophic.

Given the magnitude of the crises we face and the ability of those who would govern us – and those who would be governed by them – to do anything whatsoever in pursuit of their own, narrow, short-term interest, it could well be far worse than catastrophic.

It could be entirely lethal.

Dean Baker: Wall Street Rules

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy. (editor)

The middle class is getting whacked by the Great Recession. Fifteen million people are out of work, another 9 million workers can only find part-time jobs, and millions more have given up looking for work altogether. Those lucky enough to be employed are unlikely to see any substantial wage gains for years to come.

Millions of homeowners are facing the loss of their home and more than 10 million are underwater in their mortgage. Most of the huge baby boom cohort is approaching retirement with little other than Social Security to support them, now that the collapse of the housing bubble has destroyed their home equity and much of the rest of their savings.

This pain is infuriating for two reasons. First, this was an entirely preventable disaster. The housing bubble was easy to see. Competent economists had long warned of its dangers.

The second reason why the current situation is infuriating is that we know how to get the economy out of this mess. We just need to boost demand. This can be done either with much more government stimulus, more aggressive monetary policy from the Fed, or pushing the dollar down to boost exports.

If this disaster were preventable and we knew how to get out of it, why didn't our leaders try to stop it before it happened? Why don't they take the steps necessary now to get the economy moving again?

The answer to both these questions is simple: The politicians work for someone else. On Election Day, the politicians might need our votes, but they won't get to be serious contenders unless they've gotten the campaign contributions of the big money crew. And the moneyed elite has been using its control of the political process to ensure that an ever larger share of the economy's output is redistributed upward in their direction.

The reason that there was little interest in cracking down on the housing bubble is that Goldman Sachs, Citigroup and the rest were making a fortune from the financial shenanigans that fueled the bubble. Former Treasury Secretary Robert Rubin personally pocketed over $100 million from this fun. Why would they want the government to rein it in?

Of course, when the bubble did finally blow and threaten their banks with bankruptcy, the Wall Street crew just ran to the government for help. And they got trillions of dollars in loans and loan guarantees to ensure that they would not be victims of the crisis they had created. Now that they are back on their feet, with Wall Street profits and bonuses both again at near record levels, they see little reason to concern themselves with the measures that might set the economy right for the rest of us.

After all, the steps necessary to revitalize the economy could mean some inflation. This would reduce the value of the debt owned by the wealthy. And the wealthy don't see any reason that they should risk any of their wealth just for the good of the economy.

We have enormous ground to cover to restore an economy that works for the vast majority, but the first step is to know where we are. The upward redistribution of the last three decades has nothing to do with the market and a belief in "market fundamentalism." This is about a process where the rich and powerful have rewritten the rules to make themselves richer and more powerful.

For example, they wrote trade rules that were designed to put downward pressure on the wages of the bulk of the U.S. workforce by placing manufacturing workers in direct competition with low-paid workers in China and other developing countries. This had nothing to do with a belief in "free trade." They did not try to subject lawyers, doctors or other highly paid workers to the same sort of international competition. They only wanted international competition to put downward pressure on the wages of workers in the middle and bottom, not those at the top.

This elite has instituted a system of corporate governance that allows top executives to pilfer companies at the expense of their shareholders and its workers. Top executives are overseen only by a board of directors who owe their hugely overpaid sinecures to the executives they supervise. And of course the Wall Street barons themselves are given a license to gamble with the implicit promise that government picks up their tab when they lose.

No progressive movement will make any progress until we understand the battle we are fighting. Our income is a cost to the rich. They will look to cut it wherever they can, whether this is wages for private sector workers, pensions for public employees, or Social Security for retirees. That is their target.

We have to fight back using the same logic. Their income is our cost -- the multimillion dollar bonuses for the Wall Street wizards is a direct drain on the economy. So are the bloated paychecks of top executives and their lackey boards. Progressives must be prepared to use all the same tactics to bring down the income of the rich and powerful that they have used to reduce the income of everyone else.

This means restructuring the rules of corporate governance to put serious downward pressure on the pay of top executives. The highest paid workers (doctors, lawyers, and economists) must be subjected to international competition in the same way as manufacturing workers have been subjected to international competition. And, we should sharply limit the extent of the patent or copyright protections that are exploited by the drug industry and the entertainment and software industries

We have to put the focus on the ways the rich have rigged the rules and place this at the center of political debate. The three decade-long battle over tax cuts for the rich is important, but at the end of the day it is a side show. If we let them steal all the money at the onset, it really doesn't make much difference if they end up letting us tax a little of it back.