California Free Press

Bolivians Celebrate 10th Anniversary of Fight Against Privatization of Water

Published on Monday, April 19, 2010 by Democracy Now!

The Cochabamba Water Wars: Marcela Olivera Reflects on the Tenth Anniversary of the Popular Uprising Against Bechtel and the Privatization of the City’s Water Supply

Ten years ago this month, the Bolivian city of Cochabamba was at the center of an epic fight over one of the city's most vital natural resources: its own water. The Water Wars occurred just months after the Battle of Seattle. The uprising against Bechtel on the streets of Cochabamba was seen as the embodiment of the international struggle against corporate globalization. Over the past week, water activists from around the world gathered in Cochabamba to mark the tenth anniversary of the Water Wars.  

Sanders: Congress Must Make Real Changes on Wall Street

Published on Monday, April 19, 2010 by CommonDreams.org

 

Statement by Senator Bernie Sanders (I-VT)

WASHINGTON - With the Senate slated soon to begin debate on a financial overhaul bill, Sen. Bernie Sanders (I-Vt.) said today that reform legislation must fundamentally change the way that Wall Street works. 

"Disgust at Wall Street is profound. The American people want us to change in a very profound way how Wall Street functions, and Congress must deliver," said Sanders.

He said real reform should include a credit card interest cap, similar to legislation sponsored by Sanders and endorsed last week by hundreds of religious leaders and community organizations from across the country. The Senate bill also must lift the secrecy at the Federal Reserve, which has refused to divulge which financial institutions received more than $2 trillion in loans. There are now 32 cosponsors of a Sanders bill demanding greater openness at the Fed.

Real financial reform also must break up big banks to eliminate monopoly-like ownership concentrations and to keep any single failing financial institution from dragging the economy down with it. The concept behind legislation Sanders first introduced last Nov. 5 has drawn support from progressives and conservatives alike, including three Federal Reserve bank presidents. The financial reform bill also must steer Wall Street toward investments in job-creating businesses and away from esoteric financial instruments, he said.

Sanders said he would offer or back amendments to the financial reform bill that would:

• Break Up Huge Banks. The four biggest U.S. banks - Bank of America, Citigroup, JPMorgan Chase and Well-Fargo - issue two-thirds of all credit cards, write half the mortgages and control nearly 40 percent of bank deposits in the United Sates. "We must break up these behemoths because of the incredible economic power they exert through their concentration of ownership," Sanders said. "It is simply not acceptable that a small handful of giant financial entities can exert such enormous influence over the economic well being of hundreds of millions of Americans." 
• Make Wall Street Part of the Real American Economy.  "With rampant unemployment and when small- and medium-size businesses are unable to obtain affordable credit, it is insane that our largest financial institutions continue to trade trillions in esoteric financial instruments which makes Wall Street the largest gambling casino in the world," he said.  Instead, Sanders said, we need to create millions of new jobs by rebuilding our manufacturing base, transforming our energy system and addressing our transportation and infrastructure crisis.  We need to make sure that businesses get the credit they need to expand and create employment.
  
  
• Cap Credit Card Interest Rates. Millions of middle-class Americans who pay their bills on time are being charged interest rates of 30 percent or more.  "That is not only obscene but, according to every major religion, immoral.  Banks cannot be allowed to engage in usury and charge outrageous interest rates," Sanders said. He will offer an amendment that would cap interest rates for private banks at the same level federal law allows for credit unions; 15 percent except under exceptional circumstances.
  
  
• End Fed Secrecy. During the bailout, large financial institutions received trillions of dollars in near-zero interest loans.  "Who received those loans and under what terms?   The Fed won't say.  Did some of them turn around and, in a mammoth welfare scam, invest that Fed money in government treasury bonds at 3 percent or 4 percent interest rates?  The Fed isn't telling.  It's time we had transparency at the Fed so that the American people know what our central bank is doing with taxpayer dollars," Sanders said.

Sanders said it is clear that it will not be easy for Congress to pass real and meaningful financial reform. When Wall Street and the financial sector successfully fought for deregulation, they poured some $5 billion dollars into lobbying and campaign contributions over a 10-year period.  Now, as Congress begins to address financial reform, they are at it again.  In 2009, the major financial interests spent $300 million in lobbying and campaign contributions.

The Fall Of Goldman Sachs?

Published on Monday, April 19, 2010 by FireDogLake.com

 

by David Dayen

The last 72 hours have left Goldman Sachs with a shattered reputation among the people who matter to them, their customers and the politicians they have courted. The SEC’s civil fraud suit over one of their synthetic CDO deals is bad enough, but it’s just getting worse and worse for them.

Goldman Sachs, one of the most prestigious banks in the world, has issued a detailed rebuttal of the SEC's accusation of fraud, but many assume more investigations will follow.

First of all, the SEC is not alone in investigating the giant financial firm. Gordon Brown, fighting for his political life in Britain, savaged Goldman’s “moral bankruptcy” in an interview and called for an immediate investigation with the UK Financial Services Authority. Germany’s Angela Merkel joined him, saying that her nation would evaluate “legal steps.” The major clients in the derivative deal, the ones who bought long while Goldman never disclosed their hedge fund partner Paulson and Co. was buying short, included the Royal Bank of Scotland and the German bank IKB.

Obviously, politicians here in America are pushing each other out of the way to find a microphone where they can denounce Goldman Sachs. You couldn’t find a speech at the California Democratic Party convention which didn’t mention them by name. The DNC bought the Google ad for “Goldman Sachs SEC,” and Democrats are clearly wanting to use the case as a springboard for financial reform.

And beyond the politics there are the facts of the case. Securities fraud is pretty clear on the point that disclosure to investors must be put in writing. “Nobody reads those statements” is no excuse. The Abacus (name of the deal) pitchbook just never mentions Paulson’s role in devising the mortgage-backed securities that made up the deal. And while Goldman wants to claim that this was merely one deal and they were not trying to mislead their investors, today’s NY Times just obliterates that argument:

Mr. Tourre was the only person named in the S.E.C. suit. But according to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman, viewed as the most powerful bank on Wall Street.

According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline [...]

With Mr. Paulson’s help, Goldman created an Abacus investment that, the S.E.C. now says, was devised to fall apart. By betting against that Abacus investment, Mr. Paulson reaped $1 billion in profit, according to the S.E.C. Mr. Paulson was not named in the S.E.C. complaint.

Goldman’s top ranks changed its stance on housing in December 2006. In a meeting in a windowless conference room on the executive floor, Mr. Viniar, the chief financial officer, and Mr. Cohn, the president, gathered about 10 executives for a briefing. Mr. Sparks, the head of the mortgage unit, walked them through the numbers. The group was unanimous: Goldman had to reduce its exposure to the increasingly troubled mortgage market.

All the literature provided to investors said basically the opposite, that the securities put in the CDO (which is “synthetic” because the holders of the CDO don’t own the product in question) were designed for long-term advances. With Goldman’s top executives apparently aware of what they were doing in the housing market, they face serious criminal and civil penalties, says Simon Johnson (he also thinks John Paulson should call a lawyer).

And Goldman’s in serious, class-action lawsuit kind of trouble if this is true:

Talk about Goldman not disclosing material information. I’m not talking about Abacus here, I’m talking about the fact that Goldman knew as far back as last September that the SEC was on the warpath with respect to Abacus, and gave no hint to shareholders that there might be legal trouble afoot.

The WSJ has got its hands on — but, unforgivably, has not posted online — a letter that Goldman Sachs sent to the SEC in September, claiming that the Paulson’s involvement in Abacus was not material … In fact, the SEC probe dates back all the way to August 2008.

Anyone who did business with Goldman between August 2008 and last week has reason to sue.

And what’s more, this one deal is most certainly the beginning and not the end. The newly vigorous SEC is actively investigating other mortgage deals. Indeed, what they’re pinning on Goldman in the Abacus deals could just as easily be subscribed to the banks running the Magnetar deal, where that hedge fund created CDOs on mortgage backed securities they believed would fail.

Brad DeLong has a pretty helpful POV of the case as well. My gut feel is that this has the potential to take down the firm, and they’re going to have to call in every chit they have around the world to avoid that.

© 2010 FireDogLake.com

Mitch McConnell Gets it Wrong

by Robert Reich

Monday, April 19, 2010

CANDY CROWLEY (CNN, Sunday): The president says you are being deceptive in describing this bill.

MCCONNELL: Well, Candy … there is a bailout fund in the bill that was reported out of the Banking Committee, the partisan bill that came out of committee on a party-line vote.

CROWLEY: But that still does not—

MCCONNELL: I don’t think that’s in dispute.

CROWLEY: But that bailout is funded by the banks themselves, is it not? It is not a taxpayer bailout?

MCCONNELL: Well, Robert Reich, who was Bill Clinton’s secretary of labor, says it is a bailout fund.

   ***

When Mitch McConnell has to misquote me to find evidence he’s telling the truth, he is desperate.

No, Senator, I never said Dodd’s finance reform bill contains a bailout fund. The fund in the Dodd bill is a $50 billion liquidation fund designed to keep the creditors of distressed banks from jumping ship so fast they’d cause widespread financial panic before the bank’s operations could be wound down. And the cost of that liquidation fund would be paid entirely by Wall Street’s biggest banks. So it’s not, I repeat not, a bailout fund.

I did write in one of my recent posts that the bill “preserves the possibility that the Fed could launch another bank bailout.” That has nothing to do with the liquidation fund. It concerns a different provision of the Dodd bill that gives the Federal Reserve Board authority to open its discount window to healthy banks under its purview in order to protect taxpayers from loss during a major destabilizing event, like the popping of another large speculative bubble. Giving the Fed this authority is an open invitation to the biggest banks to create a destabilizing event in the first place, which is what Wall Street’s giants did the last time when they created the giant speculative bubble in home mortgages and related derivatives. That’s why I believe it essential to limit the size of all banks – so that none has the market power, alone or in league with the others, to create a massive destabilizing event that will surely require the Fed to bail them out.  

The Dodd bill strengthens the biggest Wall Street banks relative to smaller banks, and sets them up to become even bigger. As long as the Fed can open its discount window only to the biggest Wall Street banks, their borrowing costs inevitably will be lower than those of smaller firms because their debt will be safer. (This, incidentally, is also a problem posed by the liquidation fund.) So at a time when we ought to be ought to be trimming the sails of the giants on Wall Street, the Dodd bill puts more wind in them.

Phony "Economic Recovery," Real Alternatives

by Rick Wolff

Published by Monthly Review, April 18, 2010

The crisis persists.  Tens of millions remain unemployed or underemployed.  Millions are losing their homes this year adding to millions last year.  States and municipalities are cutting back on schools, hospitals, programs for disabled and the elderly, etc.  Business and political leaders stretch to keep the public away from blaming the system, capitalism.

So we are told to celebrate a "jobless recovery" because banks, the stock market, and some corporations did better over the last year.  A "jobless recovery" is like a "war-filled peace."  Such phrases abuse language.  Leaders use them to tell it like it isn't.   The facts are these.  Bush and Obama poured vast sums of public money into the banks, urging them to renew lending to individuals and businesses that would then buy and hire again.  The banks used the government money to improve their own bankrupt balance sheets, but they never lent it out across our economy.  That was far too risky, they said; bankers often miss irony.  The broad economy kept sinking, but the stock market rose because speculators borrowed the cheap government-provided money from the banks to buy shares at crisis-depressed prices.

In simple English, the plan to overcome crisis by using public money to refinance failed banks did not work.  Rather than admit failure and consider alternative plans, our leaders proclaim that government-refinanced banks and a partly restored stock market constitute "recovery."

Alternative strategies could yield a real recovery in jobs, production, and healthy budgets for states, cities, and towns.  During the 1930s economic crisis, then president Roosevelt used one such alternative to treat high unemployment.  His administration hired the unemployed directly because private capitalist enterprises had proven unable or unwilling to do so.  Federal programs like the Civilian Conservations Corps and the Works Progress Administration provided over 11 million jobs between 1933 and 1943.  Those unemployed re-hired by Washington built many of our nation's parks and highways, replanted forests, and delivered re-employed artists into every corner of the US, among other socially useful projects.  Those programs ended only when another government activity provided even more jobs and finally ended unemployment: World War 2.

No direct government hiring program exists now or is being sought by Obama's administration.  Business fears the consequences of production by and competition from the government.  Millions of government employees would fight hard politically to protect their jobs.  So business uses its revenues to block such government actions by contributing to candidates, lobbying elected officials, and bribing bureaucrats.  Business also spends billions on think tanks, foundations, publications, and academics to criticize the government in principle as the people's enemy, the cause of its miseries.  And we are surprised by teabaggers?

Another alternative to today's failed government bailout of banks would extend what FDR did in the 1930s.  The federal government would finance local, state, and national rehiring of the unemployed but with two new special qualifications.  First, at least half of goods and services they produce would have to be green: reduce pollution, restore the natural environment, reduce depletion of energy and materials resources, and so on.  Second, the enterprises created to re-employ people would differ from traditional capitalist corporations by establishing genuine economic democracy at the workplace.

Others have proposed green government employment programs such as building mass transit systems, so I need not discuss them again here.  However, few have so far proposed new organizations of work.  For example, one such proposal would assign the newly re-employed a new kind of job description.  Each of their jobs would include (1) a specific production task and also (2) full and equal  participation in running the enterprise.  These workers would democratically make the decisions that, in traditional capitalist enterprises, are reserved for boards of directors (12-20 individuals selected by and responsible to the major shareholders who are usually a tiny minority of all shareholders).  In such new enterprises, then, there would be no shareholders controlling boards of directors exploiting workers.  The workers collectively would instead be their own board of directors.  They would be accountable to the state that established them, to the communities immediately affected by and dependent upon them, to their consumers, and to other enterprises with whom they exchange goods and services.

This alternative plan offers many benefits.  It employs millions, pays them, and thereby allows them to pay their mortgages (thereby keeping their homes), to pay taxes (thereby adding revenues to states and localities), and to buy commodities (thereby creating jobs).  It restores self-esteem, vitality, and thus productivity to depressed workers, their families, and their communities.  It tackles long-neglected environmental needs.

This alternative plan also represents a commitment to achieving economic democracy.  All US workers could see for themselves how such differently organized enterprises function, whether their employees are more productive and happier than them.  Those enterprises' activities and results would be made public and transparent.  Over time, people would acquire two new freedoms of choice between democratic and undemocratic enterprises: (1) which they prefer to work in, and (2) whose products they prefer to purchase.  Imagine each commodity labeled to identify the work organization of its production.

This alternative plan could transform a bad thing -- today's crisis and failure of our traditional capitalist economy -- into an historic good thing.  It would inaugurate a national effort to diversify our economic system.  This is a win-win plan.  We gain in our relations with the natural environment and we gain in bringing democracy into our production system.

The losers would be those who prefer traditional capitalist organizations of work.  For them, the social costs of environmental and ecological deterioration, of non-democratic work organization, and of the repeated recessions and depressions capitalism imposes on societies don't seem so bad.  We should not be surprised.  After all, businesses and shareholders are the ones who got government help first as their system broke down over the last 3 years, and they are the ones who made the most before the breakdown.  Will those potential losers be strong enough again to block such a win-win plan?  Or might an alliance of environmentalists and anti-capitalist democrats carry some version of it to victory?

---

Rick Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York.   He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications.  Check out Rick Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com.  Visit Wolff's Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.

"Socialist" Obama Privatizes NASA - Why Aren't Conservatives Cheering?

by John Lawrence

Are these tea baggers and conservatives so detached from reality that they call Obama a socialist even after he has lowered taxes for 95% of Americans and privatized a government agency? That means smaller government, y'all in case you don't realize what that means. Y'all tea baggers want smaller government. Well there. You got it. You want lower taxes. You got that too. Obama is 100 times as conscientious and responsible about government as your hero, George W. Bush. He's even paying for the wars in Iraq and Afghanistan which Bush started. And then there's the tax breaks for the rich which Bush didn't pay for that Obama is allowing to expire. That's fiscal integrity and honesty and will lower the deficit, something conservatives were not the least bit concerned about when George W Bush was adding $5 trillion to the national debt. And their only concern now is to not give Obama any credit even when he acts in such a way as to be fiscally responsible, something that Bush never did.

And then there was Bush's Medicare prescription drug benefit which was totally unpaid for and for which he just borrowed the money from China. Smart, huh? Obama is correcting that atrocity within the health reform bill. So Obama is actually correcting Bush's fiscal profligacy, but inherited deficits can't be corrected overnight. They are structural and will go on until some sanity can be restored, and they can be corrected. Ending the wars in Iraq and Afghanistan would be a good start.  If Bush were still in power he would be knee jerkily sending more troops to Iraq with every suicide bombing there which occur about as frequently now as they ever did. Only difference is that Obama still is drawing down the troops and not blinking. As for Afghanistan one can only hope that Obama will get a grip, declare victory and get out leaving the corrupt Karzai to his fate and mercifully ending the killing of civilians by US forces.

As far as NASA goes, they are mainly just a bunch of contract monitors anyway so privatizing some of their functions just amounts to eliminating one layer of bureaucracy.

Here is an article from the New York Times entitled, Obama Plan Privatizes Astronaut Launchings:

By KENNETH CHANG Published: January 28, 2010 President Obama will end NASA’s return mission to the moon and turn to private companies to launch astronauts into space when he unveils his budget request to Congress next week, an administration official said Thursday. The shift would “put NASA on a more sustainable and ambitious path to the future,” said the official, who spoke on condition of anonymity. But the changes have angered some members of Congress, particularly from Texas, the location of the Johnson Space Center, and Florida, the location of the Kennedy Space Center. “My biggest fear is that this amounts to a slow death of our nation’s human space flight program,” Representative Bill Posey, Republican of Florida, said in a statement. Mr. Obama’s request, which will be announced on Monday, would add $6 billion over five years to the National Aeronautics and Space Administration’s budget compared with projections last year. With the increase, NASA would receive $100 billion over the 2011 through 2015 fiscal years. The new money would largely go to commercial companies that would provide transportation to and from the International Space Station. Until now, NASA has designed and operated its own spacecraft, like the space shuttles. The commercial rockets would displace the Ares I, the rocket that NASA has been developing for the past four years to replace the shuttles, which are scheduled to be retired this year. Companies expected to seek the new space taxi business include United Launch Alliance, a partnership between Boeing and Lockheed Martin that launches rockets for the United States Air Force, and Space Exploration Technologies, a start-up company led by Elon Musk, who founded PayPal. Speaking at a news conference in Israel on Wednesday, Gen. Charles F. Bolden Jr., the NASA administrator, gave hints of the new direction. “What NASA will focus on is facilitating the success of — I like to use the term ‘entrepreneurial interests,’ ” General Bolden said. Skeptics wonder whether the commercial approach would be significantly faster or cheaper than completing the Ares I and the Orion capsule that would carry the astronauts, and how astronaut safety would be maintained. NASA has spent about $9 billion on Ares I and Orion. “We have already spent valuable time and billions of dollars developing this program,” Representative Michael McCaul, Republican of Texas, said in an e-mail statement. “It makes no sense to throw away a plan backed by 50 years of NASA experience and institutional knowledge in favor of start-up operations, which may encounter delays and unknown obstacles.” Mr. Obama’s proposal would further dismantle what remains of the human spaceflight initiative started by the Bush administration in 2004. Last year, $3.5 billion in spending was cut from President George W. Bush’s NASA budget projection for 2011 through 2013, money that would have been used to develop the lander that was to return astronauts to the moon by 2020. The proposed budget increase would also be much less than the $3-billion-a-year increase that a blue-ribbon committee appointed by the Obama administration said was needed for NASA to successfully pursue a human spaceflight program beyond low-Earth orbit. As widely expected, Mr. Obama’s request will seek to extend the life of the space station five years, to 2020. It also proposes investments to improve the facilities at the Kennedy Space Center. The retirement of the space shuttles will cost at least 4,600 of the 15,000 jobs at the Kennedy Space Center. The administration official said the commercial launching initiative could create up to 1,700 jobs in Florida, but that figure is based on projections of the Commercial Spaceflight Federation, a trade group. Sally K. Ride, a former astronaut who served on the blue-ribbon panel, said she was encouraged by the budget increase for NASA in light of the planned freeze on domestic spending over all. “They plan to be sending people beyond low-Earth orbit, and they have a good formulation,” Dr. Ride said. “I think the way to evaluate this plan when it’s rolled out is to ask whether the administration has given NASA the funds for what it’s asked to do.” “It appears to me the answer is yes,” Dr. Ride said, based on briefings she had received on the plans. She said the administration took options the panel presented and “came up with an innovative approach for NASA.”

Evergreen Cooperatives Forge an Innovative Path toward High-Quality Green Jobs

Published on Saturday, April 17, 2010 by Apollo News Service

by Andrea Buffa

How can we make sure green jobs are good jobs? One approach to this much discussed question is to make green jobs union jobs, which typically offer higher wages and better benefits than non-union jobs. Another is to require that contractors who receive public funding for green projects pay their workers family supporting wages and provide health insurance. In Cleveland, Ohio, a new and different path is being forged toward high-quality, green jobs-through worker-owned cooperatives, where the workers are not only being paid well, but also can accumulate wealth for themselves and their communities as partial owners of profitable green businesses.

The idea for the Evergreen Cooperative Initiative came out of a partnership between the Cleveland Foundation and several local hospitals and universities that are situated in the Greater University Circle area of Cleveland, a one-square mile area surrounded by neighborhoods where the unemployment rate is 20-25 percent and 30 percent of the residents are living in poverty. (Photo credit: Janet Century)

"If you can link wealth building and ownership opportunities to the creation of green jobs, then you maximize benefits to workers and you stabilize communities," said Ted Howard, founding executive director of The Democracy Collaborative at the University of Maryland and one of the architects of Cleveland's groundbreaking Evergreen Cooperative Initiative.

The idea for the Evergreen Cooperative Initiative came out of a partnership between the Cleveland Foundation and several local hospitals and universities that are situated in the Greater University Circle area of Cleveland, a one-square mile area surrounded by neighborhoods where the unemployment rate is 20-25 percent and 30 percent of the residents are living in poverty. These groups realized that they could leverage the $3 billion that local "anchor institutions" like University Hospitals, the Cleveland Clinic and Case Western Reserve University spend on goods and services every year to generate significant economic development for the 43,000 people who live in the surrounding neighborhoods.

As Howard described it, the plan was to secure procurement agreements from the anchor institutions, then to build up new small businesses that could provide the anchors with goods and services. The businesses would be worker-owned cooperatives, so that their wealth would accumulate in the local community rather than being distributed out to shareholders; and they would be green, which would make doing business with them especially appealing to big institutions trying to reduce their carbon footprints.

While appealing, the proposal was also complex in several respects. The Initiative partners spent significant time and money interviewing the anchor institutions about what goods and services they would be interested in purchasing from the new cooperatives; determining which types of businesses would be profitable; developing business plans for the businesses with the most potential for profitability; and securing financing to get the businesses off the ground.

Luckily, the groups that were developing the Evergreen Cooperative Initiative had a successful role model to turn to for inspiration as they went through various stages of project development: the Mondragon Corporation of Spain. Mondragon is the world's largest industrial workers cooperative with annual sales of more than $21.7 billion. Key leaders and partners in the Evergreen Cooperative Initiative as well as allies such as Cleveland's economic development director have visited Mondragon twice and are planning a third visit. Mondragon has also attracted the attention of the United Steelworkers, which announced in October 2009 that it plans to collaborate with Mondragon to establish manufacturing cooperatives in the U.S. and Canada.

"What's really impressive about the Mondragon Corporation is that 50 years ago that region was poorer than Cleveland-it had lower education rates and a really high unemployment rate," said Lillian Kuri, program director for architecture, urban design and sustainable development at the Cleveland Foundation. "By creating this network of cooperatives-they now have more than 100 co-ops and 120,000 employee owners-they really stabilized this region of Spain. It's built on innovation, it's built on democratic principles, and it's built on real market forces. It's sustainable."

First Cooperatives Offer Laundry and Solar Panel Installation Services

The first two Evergreen Cooperative businesses, Evergreen Cooperative Laundry and Ohio Cooperative Solar, opened their doors in October 2009.

Evergreen Cooperative Laundry is the greenest commercial-scale healthcare bed linen laundry facility in Ohio. It currently has nine employees but plans to increase its workforce to 50 when operating at full capacity and processing 10 million pounds of linen every year. Its customers include Judson Retirement and McGregor Homes, two large nursing homes in the local area. James Anderson, Evergreen Cooperative Laundry's CEO, says the company uses less water to clean linens than traditional laundries do (.8 gallons of water per pound of laundry compared to three gallons of water per pound), less energy to heat the water in the washers, less energy to heat the air in the dryers, and much less energy in the ironing process. The laundry facility is housed in a building that is applying for LEED Silver certification.

Anderson was initially skeptical that a green laundry could be profitable, but now other partners in the Evergreen Cooperative Initiative refer to him as a "tree hugger." "From a business perspective, clearly, being green is a difference maker," Anderson said. "While we paid some extra for the processes, the pay back is quick enough that it is not going to be an issue in terms of profitability...very early on I came to realize, after some initial skepticism, that we can do this [be a green business] and not pay the premium I initially thought it was going to require."

In terms of the worker cooperative model, Anderson was never skeptical about its potential to help the businesses become highly successful and profitable. Due to his 20 years of experience working at employee-owned firms in the steel industry, Anderson knew that companies following this model tend to have lower turnover, lower absenteeism and higher productivity than firms in the same industry that are not fully owned and managed by their employees.

The other Evergreen Cooperative to go online in October 2009 was Ohio Cooperative Solar. Originally conceived of as a company that would install solar panels on the anchor institutions' rooftops, the company also added weatherization work to its portfolio to make sure the jobs it created would provide year-round employment. Ohio Cooperative Solar has 14 employees and had already become profitable only five months after its launch. The company has weatherized 62 houses in low-income communities through Cleveland's Home Weatherization Assistance Program, and its first solar panel installation job is underway at the Cleveland Clinic. In May, it will install solar panels on the rooftops of the University Hospitals and Case Western Reserve, and it has been contracted to install panels on the city hall building and library in the nearby city of Euclid.

Ohio Cooperative Solar signs Power Purchase Agreements (PPAs) with the businesses on whose rooftops it installs solar panels. Under the PPAs, Ohio Cooperative Solar owns the solar panels and has long-term (15-year) access to the rooftops where the panels are installed. Ohio Cooperative Solar sells the businesses all of the renewable energy that is produced on their rooftops for a fixed rate of 12 cents per kilowatt hour. The businesses then get credit on their electricity bills for the power they're getting from the sun instead of from the grid.

Ohio Cooperative Solar also gets paid by the local utility company when it produces energy that can help the utility meet its renewable energy goal under the state's Renewable Portfolio Standard (RPS). Ohio's RPS calls for utilities to source at least 12.5 percent of their energy from renewable sources by 2025, and there is a solar carve-out requiring that .5 percent of utilities' energy comes from solar energy sources.

A third Evergreen Cooperative business, Green City Growers, is set to launch in 2010. It will be a large-scale, food production hydroponic greenhouse that will grow some four million heads of lettuce per year, as well as 300,000 pounds of herbs like basil. The idea is for the business to grow food locally that can be sold to the anchor institutions and other businesses rather than importing it from out-of-state. According to Kuri of the Cleveland Foundation, growing food in greenhouses in states with cold winters like Ohio can be expensive, but the Evergreen Cooperative Initiative plans to keep costs-and greenhouse gas emissions-down through the use of advanced energy sources like wind and geothermal as well as the use of LED lighting made specifically for greenhouses.

Pathways out of Poverty and Into Worker Ownership

The Evergreen Cooperative Initiative businesses' employees are recruited from economically distressed neighborhoods surrounding Cleveland's University Circle, and many of them have barriers to employment such as lack of a driver's license, previous incarceration, and little job experience. "They come to us with very little in terms of prior skills," said Steven Kiel, president of Ohio Cooperative Solar. "We try to find folks who have some sort of construction or deconstruction background, but we're also taking folks without skills and training them on the job. Some have had previous classroom training in green academies, but maybe there's been some time since they received that training. We provide on-site supervision for them to get the skills to do weather stripping, caulking, the blower door test, etc. We think the best learning environment is the working environment."

Evergreen Cooperative Laundry recruits its workers through a community nonprofit called Towards Employment, which offers an intensive four-week class to prepare trainees for the most challenging situations they might encounter on the job. After they've successfully completed the course, trainees qualify to apply for a job at the Evergreen Cooperative Laundry.

Workers at the laundry and the solar cooperative are considered temporary employees for their first six months. After six months, if they've proven that they have an interest in and aptitude for the work, they are invited to buy an employee share of the company and become a worker-owner. Since most employees don't have the $3,000 that it costs to buy an employee share in the company, the businesses give each employee who's going to become a worker-owner a raise to bring his/her pay up to a living wage and then deduct $.50 per hour for three years until the $3,000 is paid off. Once the companies become profitable, the profits will be distributed among the employee owners and accrue in their ownership accounts.

"It's a great place to work and it isn't just a job," said Anderson of the Evergreen Cooperative Laundry. "At a minimum, you get paid a living wage, you get benefits, and you accumulate capital as a member of the cooperative, so that over eight years you will accumulate about $65,000 in your account. On the employee involvement side of the business, you will be involved in purchasing committees, marketing committees, electing members of the board and so on, so there are financial rewards and employee engagement rewards."

Kiel of Ohio Cooperative Solar says one of the most exciting things he has experienced as part of the Evergreen Cooperative Initiative is seeing the positive effect of worker ownership on people who have generally had negative prior experiences with employment. "What this is offering them is a different employment experience where they get to vote, they have a say in what the business does and what policies it develops. I'm beginning to see-six months into it-that this sense of pride coming from this sense of ownership manifests itself in different ways. It's really interesting to watch brand new people speak up and say, our uniforms need to be clean, and we need to turn off our cell phones at work."

In April 2010, the businesses will start offering no-cost health insurance to their employees, a policy that was implemented after interviews with prospective employees who said they wouldn't be able to take advantage of health insurance that had high co-pays and deductibles.

Next Steps: Scaling Up and Inspiring Others to Adopt the Model

While some might rest on their laurels after having created two new employee-owned green businesses, the groups involved with the Evergreen Cooperative Initiative are striving for more. "The next piece of work for us is, how do you scale this up so you can have a significant impact? Although launching three or four businesses is exciting, the unemployment rate in our target area is 25 percent, and we had over 500 applicants for a position we didn't even advertise," said Kuri of the Cleveland Foundation.

"In a neighborhood of 43,000 people, we really need to create thousands of jobs to reach a tipping point," added Howard of The Democracy Collaborative.

Toward that end, the goal of the Evergreen Cooperative Initiative is to catalyze the creation of up to ten new for-profit, worker-owned cooperatives over the next three to five years that will employ approximately 500 residents. Eventually, the Evergreen partners hope to go way beyond 500 jobs toward a number closer to 5,000. They also want to provide career ladders for employees by allowing them to advance into higher-level positions at other cooperatives that are part of the network.

A significant challenge will be finding financing for the new businesses. The Cleveland Foundation and other Evergreen Cooperative Initiative institutional partners have made grants totaling $5 million toward a revolving loan fund, the Evergreen Cooperative Development Fund, which will provide low-interest, long-term financing to start up cooperative businesses. The businesses have also tapped state and local funding mechanisms including the New Markets Tax Credit Program, the HUD Section 108 Loan Guarantee Program, federal renewable energy tax credits and the Ohio Advanced Energy Fund among others.

Kuri says it was a struggle to raise capital for the first two businesses (more than $3 million was raised for the solar company and $5.7 million for the laundry) but that policy reforms could make financing much easier. For example, the New Markets Tax Credit program could be modified to make it easier to apply the program to job-creation projects rather than just to the real estate projects it currently serves. The Small Business Administration could start making loans to small businesses that are cooperatives. Federal renewable energy tax credits could be extended for more years and the Advanced Energy Program could be expanded. Modifications like these would also make it easier for other cities to duplicate the Cleveland model.

"Our fundamental commitment is to make a significant difference in the lives of the people here in Cleveland," Howard said. "But we also think there are broader national implications to what we're doing. Anchor institutions all around the country are trying to become more green, and our proposition to the institutions here in Cleveland is: do business with a worker-owned company, and you will be able to reduce your carbon more than with any competitor. There are 4,000 to 5,000 universities around the country that are major economic engines in their areas. By leveraging the purchasing and investments of these institutions, virtually any city in America could create new, local jobs and business opportunities for its citizens."

Copyright © 2008 Apollo Alliance

President Clinton: "I Was Wrong About Derivatives"

President Clinton, already having admitted he was wrong about free trade, now admits he was wrong about derivatives.

The following is from ABC News:

by Senior White House Correspondent Jake Tapper,

April 17, 2010 7:20 PM

In my EXCLUSIVE “This Week” interview, I asked former President Bill Clinton if he thought he got bad advice on regulating complex financial instruments known as derivatives from his former Treasury Secretaries, Robert Rubin and Larry Summers.  He acknowledged that he was wrong to take the advice of those advising him against regulating derivatives.   

“On derivatives, yeah I think they were wrong and I think I was wrong to take [their advice] because the argument on derivatives was that these things are expensive and sophisticated and only a handful of investors will buy them and they don’t need any extra protection, and any extra transparency. The money they’re putting up guarantees them transparency,” Clinton told me.

“And the flaw in that argument,” Clinton added, “was that first of all sometimes people with a lot of money make stupid decisions and make it without transparency.”

The former President also said he was also wrong about understanding the consequences if the derivatives market tanked.  “The most important flaw was even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect a 100 percent of the investments, and indeed a 100 percent of the citizens in countries, not investors, and I was wrong about that.”

Clinton also blamed the Bush administration for scaling back on policing the financial industry.   “I think what happened was the SEC and the whole regulatory apparatus after I left office was just let go.” 

Much of the financial carnage of the past several years, Clinton said, could have been prevented if only his appointed regulator had been kept on after he left office..  “I think if Arthur Levitt had been on the job at the SEC, my last SEC commissioner, an enormous percentage of what we’ve been through in the last eight or nine years would not have happened.” 

Clinton said he regretted not trying to regulate derivatives, but that Republicans would have stood in the way.   “Now, I think if I had tried to regulate them because the Republicans were the majority in the Congress, they would have stopped it.  But I wish I should have been caught trying.  I mean, that was a mistake I made.”

Walking Plants and Non-Predatory Evolution

by John Lawrence

In the ongoing debate over whether human life came about by design or by evolution, one commenter said that it must have been by evolution because no God could have designed a nature that was so violent and barbaric. Such a God would have been a sadist. I replied that perhaps it was something specific to the particular conditions on earth that caused evolution to proceed in such a way as to evolve predators, and these conditions might be different on other planets in the universe which would cause evolution to proceed along completely different lines. There seems to be three major categories of life on earth: plants, herbivores and carnivores. Since life started in the oceans with plants supposedly, plant eaters must have evolved later followed by meat eaters.

But what if plant eaters and meat eaters never evolved. Instead, it's not too hard to imagine that plants might have evolved in such a way that some of them might have started walking instead of being rooted in one spot. The advantage of plants is that they synthsize energy directly from sunlight much like a solar panel. So we could imagine a walking plant with a little solar panel on the top of its head. After all the only advantgage of being rooted is that plants have a direct pipeline for obtaining water, but water's not too hard to come by if one walks. Other nutrients could be obtained by a walking plant by eating dirt. So there would never be a need to either eat other plants (a mild form of predation) or to eat other animals (a major form of predation).

So now the questions are 1) what would be the conditions necessary for evolution to produce walking plants and 2) would a planet on which life consisted of walking plants be a peaceful planet lacking in violence and barbarity?

We can speculate about the answer to (1) as follows. What if the ratio of water to land mass were different on some planet other than earth so that life might have evolved first on land instead of in the oceans. Life evolving on land might have produced a different evolutionary line in which each living being got its energy source directly from the sun instead of by eating plants or animals. On other planets in the universe (and there are probably billions of them) the differing ratios of water to land mass might have produced diffrent forms of evolution. Or other parameters peculiar to that planet might have produced different evolutionary avenues.

As for (2) violence and barbarity over natural resources would be diminished but not totally eliminated. Certainly on earth in climates and conditions where food is plentiful and available just for the taking - the proverbial low hanging fruit - violence over the possession of food seems to be diminished. However, other forms of energy for transportation etc might be competed for leading to resource wars. And then there still might be the violence found in nature over the competition over mates.

One can certainly imagine a planet on which food and other resources are so plentiful that it makes no sense to fight over them. One could also imagine situations in which mates were so plentiful that it would make no sense to fight over them. In such situations sharing and cooperation would seem to prevail. In other situations where resources are scarce compared to the population, competition and war would seem to prevail.

But then there is violence and barbarity over religion, over whose religion is the true and correct religion. No matter how plentiful resources are on the perfect planet, this source of violence wouldn't be eliminated.

Goldman Sachs' Abacus Fund Was Set Up To Suck Duped Investors' Money

For Goldman, a Bet’s Stakes Keep Growing

By LOUISE STORY and GRETCHEN MORGENSON

Published by the New York Times: April 17, 2010

Accusations that Goldman defrauded customers who bought investments tied to risky subprime mortgages have only just begun to reverberate through the financial world.

The civil lawsuit that the Securities and Exchange Commission filed against Goldman on Friday seemed to confirm many Americans’ worst suspicions about Wall Street: that the game is rigged, the odds stacked in the banks’ favor. It is the first big case — but probably not the last, legal experts said — to delve into a Wall Street firm’s role in the mortgage fiasco.

It is a particularly sensitive time for Wall Street. Washington policy makers are hotly debating a sweeping overhaul of the nation’s financial regulations, and the news could embolden those seeking to rein in the banks. President Obama on Saturday stepped up pressure for financial reform by accusing Republicans of “cynical and deceptive” attacks on the measure.

The S.E.C.’s action could also hit Wall Street where it really hurts: the wallet. It could prompt dozens of investor claims against Goldman and other Wall Street titans that devised and sold toxic mortgage investments.

On Saturday, several European banks that lost money in the deal said they were reviewing the matter. They could try to recoup the money from Goldman.

And it raises new questions about Goldman, the bank at the center of more concentric circles of economic and political power than any other on Wall Street. Goldman — whose controversial success has leapt from the financial pages to the cover of Rolling Stone — has fiercely defended its actions before, during and after the financial crisis. On Friday, it called the S.E.C.’s accusations “unfounded.”

Wall Street played a complex and, at times, seemingly conflicted role in the mortgage collapse. Goldman and others worked behind the scenes, bundling home loans into investments for sale to investors the world over. Even now, more than 18 months after Washington rescued the teetering financial system, no one knows for sure how much money was lost on those investments.

The public outcry against the bank bailouts was driven in part by suspicions that a heads-we-win, tails-you-lose ethos pervades the financial industry. To many, that Goldman and others are once again minting money — and paying big bonuses to their employees — is evidence that Wall Street got a sweet deal at taxpayers’ expense. The accusations against Goldman may only further those suspicions.

“The S.E.C. suit against Goldman, if proven true, will confirm to people their suspicions about the total selfishness of these financial institutions,” said Steve Fraser, a Wall Street historian and author of “Wall Street: America’s Dream Palace.” “There’s nothing more damaging than that. This is way beyond recklessness. This is way beyond incompetence. This is cynical, selfish exploiting.”

On Friday, Goldman’s stock took a beating, falling 13 percent and wiping out more than $10 billion of the company’s market value. It was a possible sign that investors fear that the S.E.C. complaint will damage Goldman’s reputation and its ability to keep its hands on so many sides of a trade — a practice that is immensely profitable for the firm.

It is unclear whether the S.E.C. can prevail against Goldman. The bank has long maintained that it puts its clients first and, in a letter in its latest annual report, it reiterated that position. Goldman said it never “bet against our clients” in its trades but rather was trying to hedge against other trading positions.

The transaction cited in the S.E.C. complaint cost investors just over $1 billion, relatively small by Wall Street standards.

Still, Wall Street analysts said Goldman and other banks, having navigated the financial crisis, might now face a new kind of risk: angry investors. Most major Wall Street banks also created collateralized debt obligations, which are at the heart of the Goldman case. C.D.O.’s, which are essentially bundles of securities backed by mortgages or other debt securities, turned out to be among the most toxic investments ever devised.

“Any investor who bought these C.D.O.’s and lost a significant amount of money is probably looking at their investment and wanting to know: what were the details behind the sale?” said William Tanona, an analyst at Collins Stewart. “Will they contact the S.E.C. and say, ‘Here’s the transaction we participated in, and we’d love to know who is on the other side of it?’ ”

more ...

Government's the Puppet, Banks the Puppeteer

Published on Saturday, April 17, 2010 by CommonDreams.org

Crocodile Tears on Wall Street

by Bill Moyers and Michael Winship

With all due respect, we can only wish those Tea Party activists who gathered in Washington and other cities this week weren't so single-minded about just who's responsible for all their troubles, real and imagined. They're up in arms, so to speak, against Big Government, especially the Obama administration.

If they thought this through, they'd be joining forces with other grassroots Americans who in the coming weeks will be demonstrating in Washington and other cities against High Finance, taking on Wall Street and the country's biggest banks.

The original Tea Party, remember, wasn't directed just against the British redcoats. Colonial patriots also took aim at the East India Company. That was the joint-stock enterprise originally chartered by the first Queen Elizabeth. Over the years, the government granted them special rights and privileges, which the owners turned into a monopoly over trade, including tea.

It may seem a bit of a stretch from tea to credit default swaps, but the principle is the same:when enormous private wealth goes unchecked, regular folks get hurt -- badly. That's what happened in 2008 when the monied interests led us up the garden path to the great collapse.

So the Tea Party crowd should be demanding accountability from Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Wells Fargo, and scores of hedge funds and private equity firms that constitute what we loosely call Wall Street.

But are the culprits taking responsibility for devastating the lives of millions of ordinary Americans? Don't kid yourself. If you've been watching them appear before congressional committees and the Financial Crisis Inquiry Commission -- the independent inquiry that's supposed to find out what really happened -- you've no doubt been reaching for the Pepto-Bismol.

Here's Robert Rubin, former Treasury Secretary and director of Citigroup, testifying last week. "Almost all of us involved in the financial system, including financial firms, regulators, ratings agencies, analysts and commentators missed the powerful combination of forces at work and the serious possibility of a massive crisis," he said. "We all bear responsibility for not recognizing this, and I deeply regret that."

Okay, maybe you didn't have a crystal ball. But what about good, old-fashioned business sense? How could you make so much money and not know the score? "You are talking about a level of granularity no board will ever have," Rubin claimed. Citi paid you $120 million as a senior advisor and rainmaker and you're not responsible for knowing what's happening below you? You didn't bother to assess the risk you were peddling to clients?

The committee heard a similar alibi from Chuck Prince, who served as CEO of Citigroup during its meltdown: "Let me start by saying I'm sorry. I'm sorry that the financial crisis has had such a devastating impact on our country... And I'm sorry that our management team, starting with me, like so many others, could not see the unprecedented market collapse that lay before us."

Commission Chairman Phil Angelides, the former state treasurer of California, wasn't buying it. "The two of you, in charge of this organization, did not seem to have a grip on what was happening," he said, and to Rubin, "I don't know that you can have it two ways: you were either pulling the levers or asleep at the switch."

Nonetheless, the financiers wail, it was all an enormous accident, a once in a century calamity, an act of God. But of course that's not true. Lots of people saw it coming and made a bundle, taking off with the loot at the expense of the millions who lost their jobs, homes and savings. There's no longer any question that many bankers continued to game the system after the collapse -- still paying themselves exorbitant salaries and bonuses while hitting everyday people with usurious same day paycheck loans, credit card fees and other charges -- and refusing to help small and medium-sized businesses that could be creating employment.

The Tea Party gang really should have dropped by those Senate hearings this week looking into the failure of Washington Mutual, the bank that went belly up during the meltdown in September 2008 - the largest such failure in American history.

As an 18-month Senate investigation revealed, WaMu made subprime loans that its executives knew were rotten, then packaged them as mortgage securities and pawned them off on unsuspecting investors. Loan officers were paid by the number of mortgages they sold, and ran up the numbers by lying to customers and falsifying data so they could make bigger bucks and win trips to Maui and the Caribbean. At one Washington Mutual office in Montebello, California, 83 percent of the housing loans contained bogus information.

Then there's Lehman Brothers. Their misfortune, apart from some chicanery only now coming to light, was being small enough to fail. During those black September days two years ago, the Feds decided it was expendable and let it go, leading to America's biggest bankruptcy ever. In an admirable job of journalism this week, The New York Times reported that Lehman secretly controlled a company called Hudson Castle. Critics say it was used by Lehman to borrow money and to hide bad investments in commercial real estate and subprime mortgages.

But the week's award for sheer gall goes to a Chicago area hedge fund called Magnetar, named after a kind of neutron star that spews deadly radiation across the galaxies. Thanks to the teamwork of the investigative reporting website ProPublica, as well as public radio's Planet Money project and "This American Life," we learned that Magnetar worked with Citigroup, JPMorgan Chase, Merrill Lynch and other investment banks to create toxic CDO's -- collateralized debt obligations -- securities backed by subprime mortgages that management knew were bad. Then Magnetar took that knowledge and bet against the very same investments they had recommended to buyers, selling short and making a fortune.

To simply call all of this "creative accounting" is to do it an injustice. This is corruption, cynicism and greed on a scale that would make the Roman Emperor Caligula cringe. Or rather, the Emperor Nero. He didn't just poison the citizens of Rome; legend has it that he burned the place down, fiddling around in the ashes, just like our Wall Street tycoons.

But since we know all this, why is it so hard to hold Wall Street accountable? Which brings us to what the Tea Party people should have been complaining about this week. The banking industry and corporate America are fighting against proposed financial reform with all the money and influence at their disposal, attempting to preserve a system that would enable them to ransack the country once again.

Look at Eric Lichtblau's report this week, also in The New York Times, under the headline. "Lawmakers Regulate Banks, Then Flock to Them." The financial services industry has hired more than 125 former members of Congress and congressional staffers from both parties to help them fight off accountability.

No wonder, too, that this headline appeared in the Times this week: "GOP Takes Aim at Plans to Curb Finance Industry." That's not surprising. Earlier this year Republican politicians told Wall Street: Give us the scratch and we'll scrap reform.

The GOP's SWAT team -- also known as the United States Chamber of Commerce -- has already spent three million dollars to try to kill or cripple a key part of reform -- the proposed new Consumer Financial Protection Agency. With the Chamber as their front, corporations have bankrolled ads that make it seem like the Red Army is at our doorsteps.

Advocates for reform have countered with ads of their own, but Democrats are deeply in hock to Wall Street, too. Remember the hedge fund Magnetar that bet against its own products? The owners covered their bets with ample campaign contributions to Rahm Emanuel. Yep, the same -- President Obama's White House chief of staff. At the time he was an Illinois congressman and chair of the Democratic Congressional Campaign Committee, which collected millions of dollars from the financial services industry.

In fact, the website Politico.com reports that "the nation's ten richest hedge fund managers have dumped nearly one million dollars into campaign accounts over the past several years... consumer advocates and critics from other financial sectors say hedge funds would get off pretty easily" under the Senate reform bill.

Bottom line: "The Wall Street banks are the new American oligarchy - a group that gains political power because of its economic power, and then uses that political power for its own benefit." So write Simon Johnson, former chief economist at the International Monetary Fund; and James Kwak, former management consultant and software entrepreneur, in their important new book, "13 Bankers: The Wall Street Takeover and the Next Financial Meltdown."

Their words of warning and the past year and a half make you realize that as usual, Thomas Jefferson, whose birthday we celebrate this week, had it right. Back in 1816, he wrote, "I sincerely believe... that banking establishments are more dangerous than standing armies."

Bill Moyers is managing editor and Michael Winship is senior writer of the weekly public affairs program Bill Moyers Journal, which airs Friday night on PBS. Check local airtimes or comment at The Moyers Blog at www.pbs.org/moyers .

Tax the Rich

Published on Friday, April 16, 2010 by CommonDreams.org

Tax, Baby, Tax

by Bob Burnett

As we approached Tax Day, April 15, there was increasing conservative rhetoric about the unfairness of US taxes. A typical lament came from conservative ideologue Grover Norquist, “The tax burden is too high. Americans should not (on average) work 3 plus months a year to pay taxes.” Knowing that conservatives habitually lie about important political issues, why should we believe what they say about taxes?

We shouldn’t. Tax rates have fallen. Fifty years ago, the top marginal tax rate was 91 percent and the bottom rate was 20 percent. In 1960 the median family income was $5600 and the average family paid $1232 in Federal taxes. Last year, the Obama Administration lowered taxes for 95 percent of Americans. Today, the top marginal rate is 35 percent and the bottom is 10 percent. In 2010 the median family income is approximately $50,000 and that would require roughly $7500 in Federal taxes. Over the past 50 years, while median family income has increased ninefold, their taxes are only six times greater.

Tax revenues as a percentage of GDP have also plummeted. A chart from the conservative Heritage Foundation indicates that since 1945, Federal tax receipts as a percentage of GDP have averaged 18.2 percent. In 1960 they were roughly 17 percent and in 2010 the Heritage Foundation expects them to be 14.8 percent – the lowest rate since 1950.

While our taxes are considerably lower than they were fifty years ago, conservatives such as Grover Norguist contend taxes are still too high because government is inefficient. But conservatives forget the US operates in a global economy. So another way to consider US taxes is to compare them to those of our competitors. Writing on his FiveThirtyEight web site, statistician Nate Silver compares US total tax revenues, as a percentage of GDP, to those of the other 29 members of the Organization for Economic Cooperation and Development (OECD), which includes Canada and Mexico, Australia, Japan, Korea, and New Zealand, and the members of the European Union. Mexico was the lowest with 20.6 percent and Sweden was the highest with 49.1 percent. The average was 35.9 percent. The US was the fifth lowest with 28 percent (which includes federal, state, and local taxes.)

When confronted with these facts, conservatives change their argument; they contend the richest Americans pay too much. Writing in USA TODAY, conservative analyst Jonah Goldberg asserts: “60% of American families already get more from the government than they pay in taxes (and the top 10% of earners pay more than 70% of taxes).” “Low-income families tend to benefit most from social services and welfare programs such as food stamps, subsidized housing, Medicaid, and unemployment insurance.”

But America’s tax/service distribution is similar to those in the OECD countries. Nate Silver observes: “The [before taxes and transfers] maldistribution of income here is about the same as for comparable nations… [But] after-tax-and-transfer income distribution [is considered], of the 26 OECD countries the United States has the most maldistributed income of all 26.” In America, the rich do less for the poor than do their counterparts in other developed countries; the US system is unfair, because the top 10% don’t pay enough taxes.

When confronted with this evidence, conservatives play their trump card, the claim that taxing the rich hurts the economy. Jonah Goldberg contends: “There's also the simple fact that taxes impede growth, and low economic growth curtails the pursuit of happiness for everyone.” Goldberg cites a 2006 study by a conservative think tank. Their ideas were heavily influenced by the discredited Chicago School of Economics, whose notions about the proper relationship between government and the market produced 2008’s financial meltdown and The Great Recession.

In reality, there is no persuasive statistical evidence that tax increases have a negative economic impact. Moreover, there’s little evidence that tax cuts spur growth. The 2001 Bush Tax cuts – coupled with the wars in Afghanistan and Iraq – depressed the economy.

Conservative models of the economy fail because they assume that average consumers – many of whom belong to the “60% of American families [who] already get more from the government than they pay in taxes” – can borrow indefinitely to maintain a comfortable lifestyle. But 2008’s financial meltdown proved this to be false.

Economist Joseph Stiglitz contends that the debt-based consumption model of the US economy is broken. Writing in his most recent book, Freefall, Stiglitz observes: “For total American consumption to be restored on a sustainable basis, there would have to be a large redistribution of income, from those at the top who can afford to save, to those below who spend every penny the can get.”

Once again, conservatives are lying. The tax burden isn’t too high on the rich; it’s too low. Tax fairness requires the US to increase taxes on the richest 10 percent of Americans and cut taxes for working families.

Bob Burnett is a retired executive founder of Cisco Systems who has a second career as a Berkeley writer. He can be reached at [email protected]

Cap the Size of Wall Street's Big Banks

The Only Way to Prevent Another Bailout of Wall Street is to Cap the Size of Wall Street’s Big Banks

by Robert Reich

Friday, April 16, 2010

The best way for Senate Dems and the White House to respond to the Republican charge that the Dem plan for financial reform doesn’t go far enough to prevent another bailout is to call their bluff — and simultaneously do what’s necessary to avoid another bailout: Cap the size of big banks, as the UK is close to doing for its big banks.

The so-called “resolution” mechanism the Dems are pushing to wind down any big bank that gets into trouble is a step in the right direction. But it won’t work if two or more giant banks are endangered at the same time — which is likely to be the case when the next crisis occurs because every big bank uses whatever profitable financial ploys every other bank uses (as they did in the runup to the crash of 2008).

Furthermore, as I’ve noted before, as long as the big banks are allowed to be huge and become even bigger, their political clout in Washington will remain huge and become even bigger.  And as long as they have this kind of clout, they’ll wangle a bailout from Washington the next time their bets get them into trouble regardless of any “resolution” authority.

So the Dem bill must cut the big banks down to size. The limit should be $100 billion in assets.

Banks complain that their global competitiveness will suffer if they’re held to this size. Baloney. No one has been able to show any competitive efficiencies above $100 billion in assets. And for Wall Street to suggest its global competitiveness is somehow tied to the competitiveness of the rest of the American economy is the height of hubris anyway. Wall Street is making deals all over the world (i.e. Goldman Sachs and Greece), it’s parking its money all over the world, its star employees reside all over the globe, and it invests wherever it can get the best deals all over the world.

The only competitive advantage to being a giant bank headquartered on Wall Street is to have the economic and political clout to get bailed out by American taxpayers when the next crisis hits. We have learned this once. We do not need to learn it again.

Repeat: The only sure way to ensure that no bank becomes too big to fail is to make sure no bank is too big.

U.S. Accuses Goldman Sachs of Fraud in Mortgage Deal

By LOUISE STORY and GRETCHEN MORGENSON

Published by the New York Times: April 16, 2010

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.

The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

In a statement, Goldman called the S.E.C. accusations “completely unfounded in law and fact” and said the firm would “vigorously contest them and defend the firm and its reputation.”

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market. Those deals, which were the subject of an article in The New York Times in December, initially protected Goldman from losses when the mortgage market disintegrated and later yielded profits for the bank.

As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.

According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.

Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson, who is not named in the suit, as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

“The product was new and complex, but the deception and conflicts are old and simple,” Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

The complaint heralds the return of a more aggressive S.E.C. The case may help the agency recover from some initial mishaps, and signals that the agency is tracing the mortgage pipeline all the way from the companies like Countrywide that originated home loans to the raucous trading floors that dominate Wall Street’s profit machine.

In the half-hour after the suit was announced, Goldman Sachs’s stock fell by more than 10 percent. It closed at $160.70, down almost 13 percent from the day before. Investors sold off other bank stocks, as well, as rumors swirled about which other firms might become embroiled in the S.E.C.’s investigation.

Goldman issued a second statement after the market closed saying that the firm had lost money on the deal in the S.E.C. case and that it provided investors with extensive disclosure on the deal. The firm said the losses in the deal came from the overall collapse of the mortgage market, not from the way the deal was designed.

In recent months, Goldman has repeatedly defended its actions in the mortgage market, including its own bets against it. In a letter published last week in Goldman’s annual report, the bank rebutted criticism that it had created, and sold to its clients, mortgage-linked securities that it had little confidence in.

“We certainly did not know the future of the residential housing market in the first half of 2007 anymore than we can predict the future of markets today,” Goldman wrote. “We also did not know whether the value of the instruments we sold would increase or decrease.”

The letter continued: “Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a ‘bet against our clients.’ ” Instead, the trades were used to hedge other trading positions, the bank said.

In a statement provided in December to The Times as it prepared the article on the Abacus deals, Goldman said that it had sold the instruments to sophisticated investors and that these securities “were popular with many investors prior to the financial crisis because they gave investors the ability to work with banks to design tailored securities which met their particular criteria, whether it be ratings, leverage or other aspects of the transaction.”

Goldman was one of many Wall Street firms that created complex mortgage securities — known as synthetic collateralized debt obligations — as the housing wave was cresting. At the time, traders like Mr. Paulson, as well as those within Goldman, were looking for ways to short the overheated market.

Such investments consisted of insurance-like policies written on mortgage bonds. If the mortgage market held up and those bonds did well, investors who bought Abacus notes would have made money from the insurance premiums paid by investors like Mr. Paulson, who were negative on housing and had bought insurance on mortgage bonds. Instead, defaults spread and the bonds plunged, generating billion of dollars in losses for Abacus investors and billions in profits for Mr. Paulson.

For months, S.E.C. officials have been examining mortgage bundles like Abacus that were created across Wall Street. The commission has been interviewing people who structured Goldman mortgage deals about Abacus and other, similar instruments. The S.E.C. advised Goldman that it was likely to face a civil suit in the matter, sending the bank what is known as a Wells notice.

The S.E.C. focused on only one Abacus deal in its complaint, but Mr. Khuzami said in a conference call that the commission continues to look at the rest. All told there were $10.9 billion of Abacus investments sold.

Mr. Tourre was one of Goldman’s top workers running the Abacus deal, peddling the investment to investors across Europe. Raised in France, Mr. Tourre moved to the United States in 2000 to earn his master’s in operations at Stanford. The next year, he began working at Goldman, according to his profile in LinkedIn.

He rose to prominence working on the Abacus deals under a trader named Jonathan M. Egol. Now a managing director at Goldman, Mr. Egol is not being named in the S.E.C. suit.

Goldman structured the Abacus deals with a sharp eye on the credit ratings assigned to the mortgage bonds associated with the instrument, the S.E.C. said. In the Abacus deal in the S.E.C. complaint, Mr. Paulson pinpointed those mortgage bonds that he believed carried higher ratings than the underlying loans deserved. Goldman placed insurance on those bonds — called credit-default swaps — inside Abacus, allowing Mr. Paulson to short them while clients on the other side of the trade wagered that they would not fail.

But when Goldman sold shares in Abacus to investors, the bank and Mr. Tourre only disclosed the ratings of those bonds and did not disclose that Mr. Paulson was on the other side, betting those ratings were wrong.

Mr. Tourre at one point complained to an investor who was buying shares in Abacus that he was having trouble persuading Moody’s to give the deal the rating he desired, according to the investor’s notes, which were provided to The Times by a colleague who asked for anonymity because he was not authorized to release them.

In seven of Goldman’s Abacus deals, the bank went to the American International Group for insurance on the bonds. Those deals have led to billions of dollars in losses at A.I.G., which was the subject of an $180 billion taxpayer rescue. The Abacus deal in the S.E.C. complaint was not one of them.

That deal was managed by ACA Management, a part of ACA Capital Holdings, which changed its name in 2008 to Manifold Capital Holdings.

Goldman told investors the mortgage bond portfolio would be “selected by ACA Management,” according to the deal’s marketing documents, which were given to The Times by an Abacus investor.In that flip-book, it says that Goldman may have long or short positions in the bonds. It does not mention Mr. Paulson or say that Goldman was in fact short.

ACA was not named in the case. That firm was led to believe that Mr. Paulson was positive on mortgages, not negative, and so it did not see a problem with his involvement, the S.E.C. said. Mr. Tourre was aware of ACA’s misconception, the S.E.C. said. In February 2007, Mr. Tourre met with both ACA and Mr. Paulson, and he sent an e-mail message to a Goldman colleague acknowledging the awkwardness of the situation. “This is surreal,” Mr. Tourre wrote.

Nine days later, a Goldman colleague wrote Mr. Tourre and said, “The C.D.O. biz is dead. We don’t have a lot of time left.”

The Abacus deals deteriorated rapidly when the housing market hit trouble. For instance, in the Abacus deal in the S.E.C. complaint, 83 percent of the mortgage bonds underlying it were downgraded by rating agencies just six months later, and 99 percent had been downgraded by early 2008, according to the S.E.C.

It takes time for such mortgage investments to pay out for investors who short them, like Mr. Paulson. Each deal is structured differently, but generally, the bonds underlying the investment must deteriorate to a certain point before short-sellers get paid. By the end of 2007, Mr. Paulson’s credit hedge fund was up 590 percent.

Mr. Paulson’s firm, Paulson & Company, is paid a management fee and 20 percent of the annual profits that its funds generate, according to a Paulson investor document from late 2008 titled “Navigating Through the Crisis.”

 

 

Evolution and Creationism Not Incompatible?

Evolution Presupposes Design, So Why the Controversy?

by Ervin Laszlo

Systems philosopher, integral theorist, concert pianist

Posted: April 15, 2010 04:17 PM

The debate among conservative Christians, Muslims, and Jews (the "creationists") and natural scientists and the science-minded public (the "evolutionists") centers on biological evolution. But on a deeper level, it concerns the universe in which life has evolved -- or in which it was created. And, as I will argue, on this level there is no contradiction between design and evolution: both are equally needed to explain the facts.

At first glance, the scientific community -- and anyone who believes that science can tell us something about the nature of reality -- is compelled to reject the hypothesis that all organisms are the way they are because they were designed to be that way. But the creationists question that the stupendously varied panoply of life arose from mutations in the genome occurring by chance with the resulting organisms fitting by chance into environments where they can reproduce better than their predecessors. Such a chance-mutation and lucky-environmental-fit process is surely too "hit or miss" to have created the complex web of life in the biosphere. The theory that affirms it is bound to be false.

However, at the cutting edge of science, the theory of evolution doesn't rely on random serendipity. That view marks the classical Darwinist position, still championed by a few (though always fewer) mainline biologists. Richard Dawkins, for example, insists that the living world is the result of processes of piecemeal trial and error, without deeper meaning and significance. Evolution happens, but there is no purpose and meaning to it.

Take cheetahs, said Dawkins. They give every indication of being superbly designed to kill antelopes. The teeth, claws, eyes, nose, leg muscles, backbone, and brain of a cheetah are all precisely what we should expect if God's purpose in creating cheetahs was to maximize deaths among antelopes. At the same time, antelopes are fast, agile, and watchful, apparently designed so they can escape cheetahs. Yet neither the one feature nor the other implies creation by design: this is just the way nature is. Cheetahs have a "utility function" to kill antelopes, and antelopes have a utility function to escape cheetahs. Nature itself is indifferent to this game. This is a world of blind physical forces and genetic replication where some get hurt and others flourish. It has precisely the properties we would expect it to have if there were no design, no purpose, and no evil and no good in the world, only blind indifference.

If a Designer is responsible for the way the living world works, He/She would have to be at best indifferent to what comes about in that world, or at worst a sadist who enjoys blood sports. It's more reasonable, according to Dawkins, to hold that the world just is, without reason and purpose. The way it is results from random processes played out within limits set by fundamental physical laws. The idea of design is superfluous. Classical Darwinists echo French mathematician Pierre Laplace, who is reputed to have said to Napoleon that God is a hypothesis for which there is no longer any need.

Confronted with the classical theory, creationists are justified in pointing out that it's extremely improbable that all we see in the world of life, ourselves included, should be the result of chance processes governed by impersonal laws. The idea that everything evolved by blind chance out of common and simple origins is just theory, they say. The world is more than a random assembly of disjointed elements; it exhibits meaning and purpose. This implies design.

The creationist position would be the logical choice if -- but only if -- scientists would persist in claiming that the evolution of living species is a product of two-fold serendipity. But at the cutting edge, scientists no longer claim this. Post-Darwinian biologists recognize that the evolution of species is far more than the chance processes classical Darwinists say it is. It must be more, because the time that was available for evolution would not have been sufficient to generate the complex web of life on this planet merely by trial and error. Mathematical physicist Sir Fred Hoyle calculated the probabilities and came to the conclusion that they are about the same as the probability that a hurricane blowing through a scrap-yard assembles a working airplane.

Leading-edge scientists realize that the evolution of organic species is an orderly, highly coordinated process, even if it's not mechanistic and deterministic. The evolution of the living world is part of the great wave that created particles from the underlying virtual-energy and information field misleadingly called "vacuum" (and is better called unified field, nuether, or Akashic field). The wave unfolded in the cosmos by structuring particles into atoms, atoms into molecules, molecules into macromolecules and cells, cells into organisms, and organisms and populations of organisms into local, regional, and continental ecologies.

The wave of evolution could only have unfolded in a universe where the fundamental laws and constants are finely tuned to permit the emergence of complexity. Ours is such a universe. Physicists know that even a minute difference in these laws and constants would have foreclosed the possibility of life forever.

Our universe is staggeringly fine-tuned to the creation of systems of higher and higher orders of complexity, differentiation, and integration. That such a universe would have come about by chance is astronomically improbable. According to quantum cosmology, some 1 x 10⁵⁰⁰ (1 followed by five hundred zeros) universes could exist physically, but only a handful could give rise to life. That our life-supporting universe would have come about by a random selection from this enormous set of possible universes is a zillion times more improbable than that living species would have come about by random mutations. The great wave of evolution requires highly harmonized and coordinated processes in all its domains.

In the final count the evolution of life presupposes intelligent design. But the design it presupposes is not the design of the products of evolution; it's the design of its preconditions. Given the right preconditions, nature comes up with the products on her own.

The debate between creationists and evolutionists would be better focused on the origins of the universe than on the origins of life. Could it be that our universe has been purposefully designed so it could give rise to the evolution of life? For creationists, this would be the logical assumption. Evolutionists could not object: evolution, being an irreversible process, must have had a beginning, and that beginning must be accounted for. And our fine-tuned universe is entirely unlikely to have come about by chance.

So the creationist/evolutionist controversy really is pointless. Design is a necessary assumption, because chance doesn't explain the facts. But evolution is likewise a necessary assumption, for given the way this universe works, the evolution of complexity is a logical and by now well-documented consequence. Therefore the rational conclusion is not design or evolution. It's design for evolution.

Then why the controversy?

The Economic Dichotomy: One Tier for the Wealthy, Another for the Poor

by John Lawrence

The American economy is getting back to normal. The stock market is roaring - the DJIA is over 11,000 - up 70% from its low of 6800 in March of last year. Consumer spending is up; retail sales were up 1.6% in March. But there are other signs that it isn't actually doing too well. Foreclosures are up and new jobless claims are up as well.

Everyone was getting excited over the 162,000 jobs added in March. However, a goodly part of these were temporary census jobs, and 100,000 jobs are needed to be added each month just to keep up with new entrants to the work force. So what are the lessons to be learned here?

Number 1. We're having a jobless recovery. The stock market and job creation have been diametrically opposed to each other for some time. Anyone who thinks it's a sign of a recovering economy that the stock market is up is not thinking clearly. The stock market goes up when jobs are eliminated - not the opposite. Yes, the economy is recovering for those heavily invested in the stock market and in the right sectors of the stock market. I haven't seen a recovery in my mutual fund, but then maybe alternative energy isn't where the smart money is. All of which leaves me feeling that the stock market is an inside deal with traders and insiders executing deals at warp speed, hypertrading in microseconds while the rest of us schlobs sit there with our patient money not making any gains. And don't trust the stock market to continue its upward swing indefinitely. At a certain point, after all the suckers have reinvested near a peak, as if there were an unseen signal, all the big guys will get out and sell short, the stock market will plummet, and all the oxygen will be sucked out leaving the recently reinvested investors with their pants down again. This is how, I believe, the stock market works. It's an insider's game. This is how Wall Street sucks money out of Main Street. See Matt Taibbi's excellent article.

Number 2. Foreclosures are up and there is no end in sight. They're on track to one million foreclosures this year. What this means is that the average Joes are still losing their houses, and that means a large segment of the population is still in a downward spiral. Foreclosure and bankruptcy usually go together. As well as increased divorce and suicide rates. Why are people continuing to lose their houses? Because they are continuing to lose their jobs. First time unemployment claims are up, and continuing unemployment claims are also up.

NEW YORK (CNNMoney.com) -- The number of Americans filing for unemployment insurance for the first time jumped for the second week in a row, according to government data released Thursday.

There were 484,000 initial jobless claims filed in the week ended April 10, up 24,000 from an unrevised 460,000 the previous week, according to the Labor Department's weekly report.

Economists surveyed by Briefing.com had expected new claims to fall to 440,000 in the latest week. The number of new claims was the highest since the week ended Feb. 20, when initial claims totaled 486,000.

People need to analyze all this data and figure out what is going on. Here's my analysis. Rich people are getting richer as witnessed by retail spending increasing and the stock market going up. Poor people are getting poorer as witnessed by increasingly high rates of job losses while job creation remains puny in comparison - 484,000 initial jobless claims vs 162,000 jobs created? C'mon. It's a sinking ship! Formerly middle class people are falling into the poverty class due to, first, job loss and then, secondly, losing their homes to foreclosure. It doen't take a rocket scientist to figure this out. The single biggest driver of the downward spiral is job loss due to productivity gains (from computerization, automation and robotization) and lack of "the next big thing" which would create a job creating bubble. But the business model in this era of globalization is to do the high end work here (which creates few jobs) and then immediately offshore the production and manufacturing jobs to Asia (which represents most of the newly created jobs).

Therefore, the only jobs to be created really are in the local economy - construction (no need of that. We're overbuilt), teaching (municipalities are laying off teachers because they are broke), and health care (still a budget busting sector). The only jobs that have a national or international impact are in the military-industrial complex. The Army, Navy and Marine Corps are still hiring. They'll even train you. No need  to repay expensive college loans. Or you could go to work for Boeing or Lockheed Martin. Their lobbyists are still procuring lucrative contracts which have nothing to do with defending the US but everything to do with lining their own pockets and providing some degree of middle class social welfare. And the FBI and CIA are still hiring.

Meanwhile, the Obama administration dithers on job creation. I'm sure they would like to do more, but the party of "Hell, no" won't let them. Tax breaks for small businesses won't really do anything because small business must have a market for their products. And besides small businesses and startups are getting less labor intensive than they used to be due to the aforementioned computerization etc. The local economy can only absorb so many lawyers, doctors, plumbers and electricians. So there is a surplus labor army whose only remaining choice is to go with the employer of last resort - the military.

As corporations become more centralized and concentrated putting local Mom and Pops out of business due to economies of scale, the economy sheds jobs. Profit making enterprises become concentrated in the hands of a few. Is it any wonder that inequality has increased to the point where it is greater than it was just before the Great Depression? Is it any wonder that there are more unemployed in absolute numbers than there were during the Great Depression? The Obama administration is waiting for the next big technological breakthrough that will produce the next big boom in hiring. It ain't agonna happen any time soon. We've had a spate of technological breakthroughs recently in the computer, internet and wireless fields and within a few short years, as the industries consolidated, the jobs were gone overseas. The point is that tech breakthroughs are not the job producers they used to be.

So what's the alternative? The government has to step in and create jobs directly or through public-private partnerships, and, hopefully, not just in the military-industrial complex. You can only goose private enterprise and entrepreneurship so much and for so long till you realize it's not working. It's not a question of redistributing wealth or income. That's already happening through increased unemployment benefits. It's either that or let more and more people fall into homelessness and despair, an outcome that most conservatives would not find unpalatable. But here is an idea that could not only create jobs (which are becoming increasingly irrelevant due to the fact that labor is becoming increasingly irrelevant for the production of goods), but, more importantly, create widely distributed wealth. And it's not a redistribuition of wealth. It's a creation of new wealth (meaning people make money off of investment rather than work) so rich people can't complain that their present wealth is being redistributed. It's just that they won't be able to control future wealth creation and distribution to as great an extent.

It's something that has already been done in Germany where the government set up a program to encourage citizens to install solar panels on their roofs. The power companies were required to buy all the electricity generated at several times the normal rate. This paid the mortgage for the installation of the panels, and new power plants would not have to be built thereby justifying the higher rate paid to the homeowners. So much electricity has been generated in this way that the program will probably be terminated in the near future. But wealth has been created and widely distributed so that, as the number of jobs decreases, this will to some extent be made up for by a distribution of wealth. People can make money from their (now paid for) solar farms, and their job will just be the maintenance of those farms which will require little time and effort. In the same way people make money off of rentals, they will be making money as a return on investment instead of from actual labor in the job market. But it was the government who facilitated this investment in such a way that the average Joe could take advantage of it. Of course, one would have to be a property owner first, but cooperatives of non-property owners could also be incentivized as well as other ways of benefiting poor people by encouraging the widespread distribution of wealth. This is from a previous blog:

The Renewable Energy Sources Act (Erneuerbare-Energien-Gesetz, or EEG), enacted by the government of Germany, promotes the development of renewable energy sources with a feed-in tariff scheme. In conjunction with Germany’s climate preservation efforts, the ultimate objective of this legislation is to increase the amount of renewable energies in the German power supply to 12.5% by the year 2010. On the 1 January 2009 the latest version of the EEG came into force. The fundamental idea of the EEG is that grid operators must pay a government-specified feed-in tariff to energy generators supplying energy to the grid from renewable sources. This feed-in tariff is intended to make energy from renewable sources cost-competitive with that from traditional sources, and it varies with the amount of energy generated by the producer and the type of renewable energy source. As an incentive to encourage technological advancements and cost decreases for parts and installation, the feed-in tariff drops yearly by a fixed percentage (degression rate). Under the German electricity grid system, the grid operator is legally obliged to provide free access to the grid for all interested generators, and to pay the specified reimbursement for those suppliers qualifying under the terms of the EEG. No contract with the plant operator is necessary. The Energy Feed-In Unit (Energieversorgungsunternehmen, or EVU) is responsible for calculating feed-in tariffs in an equitable way based upon current market prices of energy. Grid generators then pass the feed-in tariff costs down to end-consumers as an incorporated part of the final price seen on their energy bills.

Makes sense, huh? As the need for work decreases, a widespread distribution of wealth means that people will be able to provide for themselves with a minimum of labor. The alternative is to have all the wealth concentrated in a few hands while the masses live at a starvation and homeless level. Or have the government function as state capitalist controlling a large amount of wealth in sovereign wealth funds which are then spent in such a way as to subsidize the average person whether in terms of free education, free health care, old age pensions or various other stipends, sinecures and subsidies. But this would represent the Europeanization of America, something that conservatives would deeply resent. Their resistance to any constructive change is dooming the US to political and economic sclerosis while other nations are passing us by.

Revenue Enhancement for Dummies

10 Ways to Force the Stinking Rich to Share Their Wealth

How rich people can stop whining about the deficit and start paying their taxes.

 

by Zach Carter, Published by Alternet

April 15, 2010  |  

 

 

For all the moaning from deficit hawks, the U.S. budget is simply not in crisis. If investors were losing confidence in our nation's ability to pay off its debts, we'd see a major reduction in demand for U.S. Treasury bonds. And we do not, in fact, see any such reduction. Last week the Treasury sold $21 billion in 10-year bonds, and investors were clamoring for them in such droves that the government had to turn away nearly 80 percent of them. If investors were really worried about the U.S. paying back its debt, they'd demand a very high interest rate from the government to compensate them for the risk they were taking. But in fact, interest rates are remarkably low. That 10-year bond currently fetches a yield of around 3.9 percent. For entire years of President George H. W. Bush's reign, the yield was above 8 percent, often eclipsing 9 percent.

Deficit hawks aren't interested in the deficit, they just don't like the idea that the government spends money on social projects that help poor people. To close the deficit, we could either raise taxes or cut expenditures, and you never hear deficit haws begging to raise taxes. Here are 10 ways a deficit hawk who didn't hate poor people could ease his anxiety

1.  Ban Offshore Tax Havens For Big Corporations

The government loses about $100 billion a year from corporate tax evasion. Companies that do their business in the United States hide their assets in another country that offers very low taxes, or none at all. You know the places: Bermuda, the Bahamas, the Cayman Islands, Switzerland, etc. This is illegal, but it happens anyway. President Obama vowed to end this absurdity shortly after taking office last year, but strangely, the proposal evaporated over time. It's easy to see why. According to the Government Accountability Office, 83 of the 100 largest American corporations (pdf) engage in this kind of tax evasion. All of those companies have lobbyists.

Congress did finally take some action on this front in March, when it passed its paltry $15 billion jobs bill. The legislation included some efforts to crack down on corporate tax deception, but nowhere near enough. Over 10 years, the new provisions are only expected to bring in an additional $8.7 billion—that's less than 1 percent of the overall problem. 

2.Close the Loophole for Hedge Fund Kingpins 

Why do the richest people in the world get taxed at the lowest rates? Nobody makes more money than Wall Street hedge-funders, but thanks to a particularly preposterous loophole in the tax code, they pay only a 15 percent tax rate for income that is supposed to be taxed at 35 percent. Why? Instead of taking a salary, hedge fund managers compensate themselves by taking a percentage of their fund's profits, and these profits are subject to the capital gains tax rate, rather than the income tax rate.

This costs us about $5 billion a year, and it's very easy to fix. Obama supports closing the loophole, and has included it in his current budget proposal. Congress just has to pass the thing.

3. Increase the Capital Gains Tax

But why is the capital gains tax only 15 percent? For that, we can thank Dick Cheney. When President Bush was devising his epic tax cut agenda, he didn't have a problem with axing most taxes for the super-rich. But one tax cut struck him as just too conservative: the capital gains tax. Capital gains are increases in the value of investments like stocks—poor people don't buy stocks, and besides, the capital gains rate was already very lenient, a mere 20 percent. But Cheney fought a behind-the-scenes battle to overrule Bush, and his plan to slash the capital gains tax passed.

Obama supports reinstating the pre-Cheney 20 percent capital gains tax, and Congress doesn't have to lift a finger to restore it—the Cheney cut expires at the end of this year. As always, be on the lookout for heavy lobbying from Wall Street.

4.  Tax Financial Speculation

We all know that rampant financial speculation fueled the housing bubble that led the U.S. economy off a cliff in 2008. There's an easy way to crack down on this—make Wall Street companies pay a small tax for every trade they make. The idea is simple. If there is a small up-front cost to each trade, speculators will be less likely to make reckless bets, since they'd stand to make less money. The U.K. government already levies a tax like this for every trade conducted on the London Stock Exchange. If the tax doesn't deter any trading, then the government makes a lot of money off an economically unproductive activity. If the tax does deter trading, then Wall Street is taking fewer reckless bets that put the economy in danger.

Either way, taxpayers win. But even with a transactions tax much smaller than that deployed in the U.K., Dean Baker, co-director of the Center for Economic Policy and Research, calculates the government could bring in $100 billion a year (pdf), even if financial speculation dropped by 25 percent as a result of the new tax. That's actually a very conservative estimate, since Baker's calculations are based on trading volumes from 1997, which are much lower than those today.

5.  Impose a Wall Street Bonus Tax

Wall Street bonuses are obscene, and everybody knows it. Taxing the hell out of them is one way to rein them in. Rep. Dennis Kucinich has proposed a 75 percent tax on banker bonuses, and Wall Street has a $150 billion bonus pool.

6.  Tax Too-Big-To-Fail

Remember President Obama's big push earlier this year to tax too-big-to-fail banks? It was a good idea, but it actually could have been much stronger. Obama decided to try and tax big banks in order to pay off the $117 billion loss that taxpayers are expected to take from the Troubled Asset Relief Program. But his tax didn't actually do that—it would have recouped $90 billion over 10 years, although Obama vowed to keep the tax in place until the full $117 billion was recouped, something Obama himself would have no way of ensuring.

But there's no reason why we should settle for even $117 billion from giant banks, whose failure puts our entire economy in jeopardy. By establishing much more onerous tax rates for banks with assets above a certain level—say, $300 billion—the government could actively discourage banks from becoming too-big-to-fail. If banks didn't downsize, taxpayers would at least benefit from some upside in the arrangement. As it stands, big Wall Street banks take home the profits while we eat the losses.

Sadly, even Obama's weak version of the too-big-to-fail tax has evaporated amid heated Wall Street lobbying.

7.  Restore the Estate Tax to Pre-Bush Levels

One of Bush's major tax cuts was literally a boon for rich kids. When wealthy parents die, the government taxes the inheritance their children can receive. (Conservatives refer to this as the "death tax.") It's a tax on millionaires—before Bush, estates worth with up to $1 million ($2 million for couples) were totally exempt from the tax. Bush cut the tax rate on these inheritances from 55 percent to 45 percent in 2001, but he also phased in other cuts in increments, excluding more millionaires from the tax. By last year, inheritances worth up to $3.5 million ($7 million for couples), were totally exempt. If Obama hadn't acted last year, the estate tax would have been wholly obliterated.

Obama rightfully stepped in to stop this slide, proposing to hold the estate tax even at the levels from the end of the Bush era, instead of letting it go away altogether. This year's budget proposal would make the Bush-era estate tax permanent. But Obama could clearly do much more by simply restoring the estate tax to Clinton-era levels.

8.  Tax Rich People for Social Security

Right now, any income you make in excess of $108,000 a year isn't subject to Social Security taxes. If Wall Street tycoons like Pete Peterson are so worried about the financial state of Social Security (which is currently projected to be totally fine through 2037), they can surely agree that millionaires should be taxed more in order to boost the program's balance sheet.

9.  Raise Income Taxes on The Rich

Bush cut the tax rate for the wealthiest Americans from 39.8 percent to 35 percent. Obama plans to reverse this cut by simply letting the Bush cut expire at the end of the year. Bravo.

10.  Simplify the Tax Code 

In 2008, Goldman Sachs paid a total tax rate of just 1 percent.The bank did this despite being one of the largest and most profitable banks in the country. Under any reasonable tax system, the bank would have paid the full 35 percent tax rate for the largest corporations. But the bank didn't do that. It pays lots of tax lawyers very well to sift through the massive U.S. tax code and find loopholes that will benefit Goldman Sachs, at the expense of the United States.

The sheer complexity of the U.S. tax code encourages this kind of behavior. It allows corporations and rich individuals, to take the time to exploit the system for their own advantage, and makes explaining this exploitation very difficult. That's why stories about taxes are always so technical and boring (apologies). Overhauling the tax code and imposing a simple, progressive system would end a lot of abuse. But don't hold your breath. Congress has always had the power to reconfigure the tax code. Instead, it has spent decades inventing new loopholes.

Zach Carter is an economics editor at AlterNet. He writes a weekly blog on the economy for the Media Consortium and his work has appeared in the Nation, Mother Jones, the American Prospect and Salon.

Europe's Promise by Steven Hill: IKEA

by John Lawrence

Our last post on Europe's Promise can be found here. This installment is about my favorite store - IKEA. I always feel good when I go there. Whether it's the inexpensive nutritious breakfast or the great designs for inexpensive furniture, I get the feeling that this store represents more than just a concern about the bottom line. They used to have bins where one could just help themselves to extra screws, nuts etc if needed, but I noticed last time I was there that they'd done away with that probably because someone or ones took advantage and just filled their pockets. I've bought most of my furniture from IKEA over the years and I'm happy with my purchases. Even after paying my Swedish handyman to put some of it together, it was still a better deal and shopping experience than found in any other store. So this blog is in praise of capitalism - Swedish style!

Here's what I blogged previously about IKEA:

Europe takes care of its people but still has its share of billionaires. So a society can't provide for its people and still produce billionaires? Give me a break. Look at IKEA. Its founder, Ingvar Kamprad, drives a 15 year old Volvo and buys his furniture from IKEA which he assembles himself. He started from scratch in 1965 and now he's the world's seventh richest person with a fortune of $32 billion.

In his faded coat, tinted prescription glasses and scuffed shoes, he looks like just another pensioner scraping by on a tight budget. But the man pictured here is Ingvar Kamprad, the reclusive Swedish founder of Ikea. And he is worth £15.7billion. That makes him the world's seventh richest man, but the 81-year-old admits he is still "a bit tight" with money. He takes easyJet flights, drives himself around in a 15-year-old Volvo, and has furnished his modest house almost entirely with Ikea items - which he assembled himself. He boasted that he fired his barber of many years' standing after finding another who would cut his hair for only £6. And when he arrived at a gala evening recently to collect a businessman of the year award, the security guards refused to let him in because they saw him getting off a bus when he arrived. ... His eagerness to save money extends to his visits to London, when he shuns taxis and prefers to use the Tube or buses. ... He now lives in semi-retirement with his wife Margaretha in a villa in Switzerland. The couple are often seen dining out in cheap restaurants and haggling over prices in the market. He always does his food shopping in the afternoon, when the prices in his local market start to fall. Recently, a statue of him was erected in his Swedish home town, and he was invited to cut the ribbon. It was reported that instead he untied it, folded it neatly and handed it to the mayor, telling him he could now use it again. Explaining his frugal nature, he said: "I am a bit tight with money, a sort of Swedish Scotsman. But so what? "If I start to acquire luxurious things then this will only incite others to follow suit. It's important that leaders set an example. "I look at the money I'm about to spend on myself and ask if Ikea's customers could afford it. From time to time I like to buy a nice shirt and cravat - and eat Swedish fish roe."

And he did it in a society which provides free health care for all its citizens, free education - total social security! Its a myth that only in the US can someone start with nothing and become a billionaire and, in order to protect everyone's right to do this, in order to have freedom, we can't provide a high level of social welfare for all people because this would lead to dependency and no one would want to get ahead. They would just live off the government teat. Well go tell that to Ingvar Kamprad who grew up in a coddled welfare state and still went on to become a billionaire even with the enormous amount of taxes he had to pay there. And, furthermore, he represents an example that people with enormous wealth can still live simply, that happiness doesn't come from conspicuous consumption.

I get the feeling that Mr. Kamprad is not just in it for the money. Here's more from pp. 40-41 of Europe's Promise:

"Sweden's Ikea is perhaps the most emblematic of this pro-green business attitude. When you walk into one of its cavernous halls the size of airline hangars and stroll beneath its familiar blue and gold pennants,  you are doing more than entering the world's emporium of bargain furniture. You are also stepping across the threshold of one of the world's great commercial experiments in using green practices, designed to help both the environment and Ikea's bottom line.

"Ikea has installed solar panels on rooftops and reduced store electricity use by half. It has decreased greatly the use of packaging and vigorously recycles what it does use. In fact, the company's stores reclaim 67 percent of their store waste, and Ikea aims to increase that to 90 percent. The company has perfected the "flat pack," its signature packing technique for unassembled furniture that allows it to pack more units into one cargo shipment, thereby cutting energy and transportation costs. Not only do Ikea's green practices put every big American retailer to shame, but Ikea is also kind of the anti-Wal-Mar. Wal-Mart forces its suppliers into the worst labor and environmental practices in order to lower its prices to compete. But Ikea expects a high code of conduct from its suppliers concerning the environment and working conditions, so its green attitude ripples throughout the economy.

"But Ikea's most cutting-edge practice has been to install its own miniturbines as the core of a decentralized energy grid to power its facilites on-site. These turbines incorporate cogeneration - also known as CHP, or "combined heat and power"- that recycles the 65 percent of the fuel normally lost in the power generation process as wasted heat. IKEA uses this usually lost energy to warm things and even to generate air conditioning. That achieves an efficiency of up to 90 percent and an energy savings of up to 40 percent when compared with conventional generation, a huge increase in energy productivity. At one Ikea outlet in Carugate, Italy, estimates indicate that Ikea's cogeneration plant saves seventy tons of oil and two hundred tons of carbon dioxide anually. Ikea's savings at warehouses and factories, which are much larger facilities than the retail outlets, are projected to be even greater. So IKEA's tough green standards not only are good for the environment but also result from good business practices that save money and give the company a competitive edge.

"IKEA is not the only European business embracing such innovations. An increasing number of businesses, factories, and stores have installed their own miniturbines to power their facilities on-site. Small-scale cogeneration is becoming popular with businesses because its decentralized grid allows more efficient use of fuel and significantly reduces carbon emissions (a reduction that will increasingly add value to a business's bottom line as the European carbon trading system continues to kick in). It also decreases exposure to escalating energy prices and ensures a high-quality power supply. Europe is taking this kind of centralized energy creation much more seriously than the United States has - it accounts for 25 percent of total power production in some European countries - but in the United States, only 4 percent of total power comes from decentralized energy creation."

Disgusting Lies and Contortion of Truth

John,

Robert  Reich´s article on the disgusting lies and cortortion of truth by the Republicans about the "disastrous" bailout of  Wall Street being caused by  Democrats rather than being caused and supported by Republicans, reminds me of the Catholic Church's denial and attempt of placing blame for the rampant raping of young children on homosexual priests who, as one cardinal preposterously claimed, are all pedofiles. 
   A disgusting world of programmed deceit on high has emerged in our nation's cultural and political behavior ... not dissimilar to that of the worldwide  sexual abuse and coverup by the Catholic hierarchy and its laity. On a slightly positive note, the Pope today finally admitted to the Church's "mistakes"  of  pervasive sexual abuse of young children by large numbers of its priests. This public admission gives a mouse-hole opening for reconciliation for the morally molesting evil and ugly perpetuation of same by the Catholic Church for so many decades, if not centuries. When are we Americans going to take the same step towards internal reconciliation by admitting that our rotten political system of lies and public manipulation motivated by a greed-for-power-reelect-culture at all costs is destroying the very essence of our Founding Fathers creed of a nation at peace with itself, a nation of, by, and for the American people?
   
Robert Reich's latest article intelligently screams out calmly about just how far must our nation's political integrity and soul descend to new levels of moronic communicative stupidity before we Wakeup to our self-destructive ways of dividing people ...  making a tragic absurdity of our Founding Fathers' destiny of a body politic intent on progressing together! 
    U.S. President (1865-1923) Warren Harding said it equally honestly and beautifully for times now in a speech in Boston in 1920:  ``America´s present need is not heroics but healing; not nostrums but normalcy; not revolution but restoration; ... not surgery but serenity.´´ 
But all I can manage to say at this moment is  ... Good Luck fellow Americans .... wherever in Hell we are going with our cynically, corrupt politics  ... which is certainly not bringing us any closer to heaven on earth or to the hereafter!   

Frank Thomas
The Netherlands 

Glenn Beck Calls His Listeners Idiots!

Beck: ‘If you take what I say as gospel, you’re an idiot.’

Today, the New York Times has a front-page article on the success of Glenn Beck’s Fox News show. According to the Times, Beck has become “one of the most powerful media voices for the nation’s conservative populist anger.” Although he says he believes every word he says, he doesn’t think smart people should actually listen to him:

Mr. Beck says he believes every word he says on his TV show, and the radio show that he still hosts from 9 a.m. to noon each weekday. [...]

At the same time, though, he says he is an entertainer. “I’m a rodeo clown,” he said in an interview, adding with a coy smile, “It takes great skill.” [...]

He added later: “I say on the air all time, ‘if you take what I say as gospel, you’re an idiot.’“

The Republican Strategy on Financial Reform: Make Democrats Look Like Patsies for the Street

by Robert Reich

Tuesday, April 13, 2010

Senate Republicans today debuted their new strategy for financial reform: Refuse to cooperate with Democrats on grounds that the Dems are too willing to give Wall Street what it wants.

I’m not making this up.

In a Senate floor speech Minority Leader Mitch McConnell said Republicans couldn’t support the legislation that emerged from Chris Dodd’s banking committee because it “institutionalizes” future taxpayer bailouts of the Street, giving the Federal Reserve “enhanced emergency lending authority that is far too open to abuse.” Senator Bob Corker, a senior Republican on the committee who had spent many weeks negotiating the bill with Dodd, huffed that Dodd’s final bill provides “the ability to have bailouts.”

Sen. Lamar Alexander, a member of the Senate Republican leadership, blasted Dodd for partisanship — “Dodd jerked the rug out from under Sen. Corker and went back into a partisan bill” — that is, partisanship toward Wall Street. Alexander said Republicans will hold out for a plan “that would end the practice of too big to fail and that would make certain that we don’t perpetually use taxpayer dollars to bail out Wall Street.”

Republicans have been looking for a way to oppose Senate Dems on financial reform without looking like patsies for the Street. And now they think they’ve found it — by trying to make Democrats look like patsies for the Street. The strategy is surely the handiwork of Republican pollster Frank Luntz who for months has been telling Republicans “the single best way to kill any legislation is to link it to the Big Bank Bailout.” (See Luntz’s memo.)

Let’s be clear: The Dodd bill doesn’t go nearly far enough to rein in the Street. It allows so-called “specialized” derivatives to be traded without regulatory oversight; its capital requirements are weak; it gives far too much discretion to regulators, who, as we’ve seen, can fall asleep at the switch; it does nothing about conflicts of interest within credit rating agencies that rate the issues of the companies that put food on their plates; it puts a consumer protection agency inside the Fed whose consumer bureau didn’t protect consumers; it doesn’t do anything to control the size of banks; it delays dealing with other hard issues by assigning them to vaguely-defined “studies;” and, yes, it preserves the possibility that the Fed could launch another bank bailout.

But the Street thinks the Dodd bill goes way too far, and wants its Republican allies to water it down with more loopholes, studies, and regulatory discretion. Republicans figure they can accommodate the Street by refusing to give the Dems the votes they need unless the Dems agree to weaken the bill — while Republicans simultaneously tell the public they’re strengthening the bill and reducing the likelihood of future bailouts.

It’s a bizarre balancing act for the Republicans, reflecting the two opposing constituencies they have to appease — big business and Wall Street, on the one hand, and the emerging Tea Partiers, on the other. The Tea Partiers hate the Wall Street bailout as much as the left does. It was the bailout that “really got this ball rolling,” says Joseph Farah, publisher of WorldNetDaily, a website popular among Tea Party adherents. “That’s where the anger, where the frustration took root.”

The awkward fact, of course, is that the bank bailout originated with George W. Bush and a Republican congress. “Without this rescue plan,” Bush told the nation in September 2008, “the costs to the American economy could be disastrous.” New Hampshire Senator Judd Gregg, the leading Republican negotiator of the bailout bill, warned that without the bank bailout, “the trauma, the chaos, and the disruption to everyday Americans’ lives would be overwhelming.”

Republicans figure the public’s attention span is so short they won’t remember, and that the public understands so little about the details of financial reform that Republicans can weaken the Dodd bill without leaving any fingerprints.

I have a suggestion for Senate Democrats: Don’t let them get away with it. Smoke the Republicans out. Respond to their criticism that the Dodd bill leaves open the possibility that some future bank will become too big to fail by amending the bill to limit the size of banks to $100 billion of assets — so no bank can become too big, period. Challenge the Republicans to join you in voting for the amendment. If they decline, force them to explain themselves to their local Tea Partiers.

Looting Main Street

How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece

by MATT TAIBBIPosted Mar 31, 2010 8:15 AM in Rolling Stone magazine

If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff's precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. "I'd be on the phone sometimes until two in the morning," she says. "I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I'd go to bed at night, and I'd be in tears."

Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area — like the $64 sewer bill that Pack and her family paid each month. "Yeah, it went up about 400 percent just over the past few years," she says.

The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet — "the Taj Mahal of sewer-treatment plants" is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack.

And once the giant shit machine was built and the note on all that fancy construction started to come due, Wall Street came back to the local politicians and doubled down on the scam. They showed up in droves to help the poor, broke citizens of Jefferson County cut their toilet finance charges using a blizzard of incomprehensible swaps and refinance schemes — schemes that only served to postpone the repayment date a year or two while sinking the county deeper into debt. In the end, every time Jefferson County so much as breathed near one of the banks, it got charged millions in fees. There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed — yes, that's right, bribed, criminally bribed — the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back the fuck off, so they could have the rubes of Jefferson County to fleece all for themselves.

Birmingham became the poster child for a new kind of giant-scale financial fraud, one that would threaten the financial stability not only of cities and counties all across America, but even those of entire countries like Greece. While for many Americans the financial crisis remains an abstraction, a confusing mess of complex transactions that took place on a cloud high above Manhattan sometime in the mid-2000s, in Jefferson County you can actually see the rank criminality of the crisis economy with your own eyes; the monster sticks his head all the way out of the water. Here you can see a trail that leads directly from a billion-dollar predatory swap deal cooked up at the highest levels of America's biggest banks, across a vast fruited plain of bribes and felonies — "the price of doing business," as one JP Morgan banker says on tape — all the way down to Lisa Pack's sewer bill and the mass layoffs in Birmingham.

Once you follow that trail and understand what took place in Jefferson County, there's really no room left for illusions. We live in a gangster state, and our days of laughing at other countries are over. It's our turn to get laughed at. In Birmingham, lots of people have gone to jail for the crime: More than 20 local officials and businessmen have been convicted of corruption in federal court. Last October, right around the time that Lisa Pack went back to work at reduced hours, Birmingham's mayor was convicted of fraud and money-laundering for taking bribes funneled to him by Wall Street bankers — everything from Rolex watches to Ferragamo suits to cash. But those who greenlighted the bribes and profited most from the scam remain largely untouched. "It never gets back to JP Morgan," says Pack.

If you want to get all Glenn Beck about it, you could lay the blame for this entire mess at the feet of weepy, tree-hugging environmentalists. It all started with the Cahaba River, the longest free-flowing river in the state of Alabama. The tributary, which winds its way through Birmingham before turning diagonally to empty out near Selma, is home to more types of fish per mile than any other river in America and shelters 64 rare and imperiled species of plants and animals. It's also the source of one of the worst municipal financial disasters in American history.

Back in the early 1990s, the county's sewer system was so antiquated that it was leaking raw sewage directly into the Cahaba, which also supplies the area with its drinking water. Joined by well — intentioned citizens from the Cahaba River Society, the EPA sued the county to force it to comply with the Clean Water Act. In 1996, county commissioners signed a now-infamous consent decree agreeing not just to fix the leaky pipes but to eliminate all sewer overflows — a near-impossible standard that required the county to build the most elaborate, ecofriendly, expensive sewer system in the history of the universe. It was like ordering a small town in Florida that gets a snowstorm once every five years to build a billion-dollar fleet of snowplows.

The original cost estimates for the new sewer system were as low as $250 million. But in a wondrous demonstration of the possibilities of small-town graft and contract-padding, the price tag quickly swelled to more than $3 billion. County commissioners were literally pocketing wads of cash from builders and engineers and other contractors eager to get in on the project, while the county was forced to borrow obscene sums to pay for the rapidly spiraling costs. Jefferson County, in effect, became one giant, TV-stealing, unemployed drug addict who borrowed a million dollars to buy the mother of all McMansions — and just as it did during the housing bubble, Wall Street made a business of keeping the crook in his house. As one county commissioner put it, "We're like a guy making $50,000 a year with a million-dollar mortgage."

To reassure lenders that the county would pay its mortgage, commissioners gave the finance director — an unelected official appointed by the president of the commission — the power to automatically raise sewer rates to meet payments on the debt. The move brought in billions in financing, but it also painted commissioners into a corner. If costs continued to rise — and with practically every contractor in Alabama sticking his fingers on the scale, they were rising fast — officials would be faced with automatic rate increases that would piss off their voters. (By 2003, annual interest on the sewer deal had reached $90 million.) So the commission reached out to Wall Street, looking for creative financing tools that would allow it to reduce the county's staggering debt payments.

Wall Street was happy to help. First, it employed the same trick it used to fuel the housing crisis: It switched the county from a fixed rate on the bonds it had issued to finance the sewer deal to an adjustable rate. The refinancing meant lower interest payments for a couple of years — followed by the risk of even larger payments down the road. The move enabled county commissioners to postpone the problem for an election season or two, kicking it to a group of future commissioners who would inevitably have to pay the real freight.

But then Wall Street got really creative. Having switched the county to a variable interest rate, it offered commissioners a crazy deal: For an extra fee, the banks said, we'll allow you to keep paying a fixed rate on your debt to us. In return, we'll give you a variable amount each month that you can use to pay off all that variable-rate interest you owe to bondholders.

In financial terms, this is known as a synthetic rate swap — the spidery creature you might have read about playing a role in bringing down places like Greece and Milan. On paper, it made sense: The county got the stability of a fixed rate, while paying Wall Street to assume the risk of the variable rates on its bonds. That's the synthetic part. The trouble lies in the rate swap. The deal only works if the two variable rates — the one you get from the bank, and the one you owe to bondholders — actually match. It's like gambling on the weather. If your bondholders are expecting you to pay an interest rate based on the average temperature in Alabama, you don't do a rate swap with a bank that gives you back a rate pegged to the temperature in Nome, Alaska.

Not unless you're a fucking moron. Or your banker is JP Morgan.

In a small office in a federal building in downtown Birmingham, just blocks from where civil rights demonstrators shut down the city in 1963, Assistant U.S. Attorney George Martin points out the window. He's pointing in the direction of the Tutwiler Hotel, once home to one of the grandest ballrooms in the South but now part of the Hampton Inn chain.

"It was right around the corner here, at the hotel," Martin says. "That's where they met — that's where this all started."

They means Charles LeCroy and Bill Blount, the two principals in what would become the most important of all the corruption cases in Jefferson County. LeCroy was a banker for JP Morgan, serving as managing director of the bank's southeast regional office. Blount was an Alabama wheeler-dealer with close friends on the county commission. For years, when Wall Street banks wanted to do business with municipalities, whether for bond issues or rate swaps, it was standard practice to reach out to a local sleazeball like Blount and pay him a shitload of money to help seal the deal. "Banks would pay some local consultant, and the consultant would then funnel money to the politician making the decision," says Christopher Taylor, the former head of the board that regulates municipal borrowing. Back in the 1990s, Taylor pushed through a ban on such backdoor bribery. He also passed a ban on bankers contributing directly to politicians they do business with — a move that sparked a lawsuit by one aggrieved sleazeball, who argued that halting such legalized graft violated his First Amendment rights. The name of that pissed-off banker? "It was the one and only Bill Blount," Taylor says with a laugh.

Blount is a stocky, stubby-fingered Southerner with glasses and a pale, pinched face — if Norman Rockwell had ever done a painting titled "Small-Town Accountant Taking Enormous Dump," it would look just like Blount. LeCroy, his sugar daddy at JP Morgan, is a tall, bloodless, crisply dressed corporate operator with a shiny bald head and silver side patches — a cross between Skeletor and Michael Stipe.

The scheme they operated went something like this: LeCroy paid Blount millions of dollars, and Blount turned around and used the money to buy lavish gifts for his close friend Larry Langford, the now-convicted Birmingham mayor who at the time had just been elected president of the county commission. (At one point Blount took Langford on a shopping spree in New York, putting $3,290 worth of clothes from Zegna on his credit card.) Langford then signed off on one after another of the deadly swap deals being pushed by LeCroy. Every time the county refinanced its sewer debt, JP Morgan made millions of dollars in fees. Even more lucrative, each of the swap contracts contained clauses that mandated all sorts of penalties and payments in the event that something went wrong with the deal. In the mortgage business, this process is known as churning: You keep coming back over and over to refinance, and they keep "churning" you for more and more fees. "The transactions were complex, but the scheme was simple," said Robert Khuzami, director of enforcement for the SEC. "Senior JP Morgan bankers made unlawful payments to win business and earn fees."

Given the shitload of money to be made on the refinancing deals, JP Morgan was prepared to pay whatever it took to buy off officials in Jefferson County. In 2002, during a conversation recorded in Nixonian fashion by JP Morgan itself, LeCroy bragged that he had agreed to funnel payoff money to a pair of local companies to secure the votes of two county commissioners. "Look," the commissioners told him, "if we support the synthetic refunding, you guys have to take care of our two firms." LeCroy didn't blink. "Whatever you want," he told them. "If that's what you need, that's what you get. Just tell us how much."

Just tell us how much. That sums up the approach that JP Morgan took a few months later, when Langford announced that his good buddy Bill Blount would henceforth be involved with every financing transaction for Jefferson County. From JP Morgan's point of view, the decision to pay off Blount was a no-brainer. But the bank had one small problem: Goldman Sachs had already crawled up Blount's trouser leg, and the broker was advising Langford to pick them as Jefferson County's investment bank.

The solution they came up with was an extraordinary one: JP Morgan cut a separate deal with Goldman, paying the bank $3 million to fuck off, with Blount taking a $300,000 cut of the side deal. Suddenly Goldman was out and JP Morgan was sitting in Langford's lap. In another conversation caught on tape, LeCroy joked that the deal was his "philanthropic work," since the payoff amounted to a "charitable donation to Goldman Sachs" in return for "taking no risk."

That such a blatant violation of anti-trust laws took place and neither JP Morgan nor Goldman have been prosecuted for it is yet another mystery of the current financial crisis. "This is an open-and-shut case of anti-competitive behavior," says Taylor, the former regulator.

With Goldman out of the way, JP Morgan won the right to do a $1.1 billion bond offering — switching Jefferson County out of fixed-rate debt into variable-rate debt — and also did a corresponding $1.1 billion deal for a synthetic rate swap. The very same day the transaction was concluded, in May 2003, LeCroy had dinner with Langford and struck a deal to do yet another bond-and-swap transaction of roughly the same size. This time, the terms of the payoff were spelled out more explicitly. In a hilarious phone call between LeCroy and Douglas MacFaddin, another JP Morgan official, the two bankers groaned aloud about how much it was going to cost to satisfy Blount:

LeCroy: I said, "Commissioner Langford, I'll do that because that's your suggestion, but you gotta help us keep him under control. Because when you give that guy a hand, he takes your arm." You know?

MacFaddin: [Laughing] Yeah, you end up in the wood-chipper.

All told, JP Morgan ended up paying Blount nearly $3 million for "performing no known services," in the words of the SEC. In at least one of the deals, Blount made upward of 15 percent of JP Morgan's entire fee. When I ask Taylor what a legitimate consultant might earn in such a circumstance, he laughs. "What's a 'legitimate consultant' in a case like this? He made this money for doing jack shit."

As the tapes of LeCroy's calls show, even officials at JP Morgan were incredulous at the money being funneled to Blount. "How does he get 15 percent?" one associate at the bank asks LeCroy. "For doing what? For not messing with us?"

"Not messing with us," LeCroy agrees. "It's a lot of money, but in the end, it's worth it on a billion-dollar deal."

That's putting it mildly: The deals wound up being the largest swap agreements in JP Morgan's history. Making matters worse, the payoffs didn't even wind up costing the bank a dime. As the SEC explained in a statement on the scam, JP Morgan "passed on the cost of the unlawful payments by charging the county higher interest rates on the swap transactions." In other words, not only did the bank bribe local politicians to take the sucky deal, they got local taxpayers to pay for the bribes. And because Jefferson County had no idea what kind of deal it was getting on the swaps, JP Morgan could basically charge whatever it wanted. According to an analysis of the swap deals commissioned by the county in 2007, taxpayers had been overcharged at least $93 million on the transactions.

JP Morgan was far from alone in the scam: Virtually everyone doing business in Jefferson County was on the take. Four of the nation's top investment banks, the very cream of American finance, were involved in one way or another with payoffs to Blount in their scramble to do business with the county. In addition to JP Morgan and Goldman Sachs, Bear Stearns paid Langford's bagman $2.4 million, while Lehman Brothers got off cheap with a $35,000 "arranger's fee." At least a dozen of the county's contractors were also cashing in, along with many of the county commissioners. "If you go into the county courthouse," says Michael Morrison, a planner who works for the county, "there's a gallery of past commissioners on the wall. On the top row, every single one of 'em but two has been investigated, indicted or convicted. It's a joke."

The crazy thing is that such arrangements — where some local scoundrel gets a massive fee for doing nothing but greasing the wheels with elected officials — have been taking place all over the country. In Illinois, during the Upper Volta-esque era of Rod Blagojevich, a Republican political consultant named Robert Kjellander got 10 percent of the entire fee Bear Stearns earned doing a bond sale for the state pension fund. At the start of Obama's term, Bill Richardson's Cabinet appointment was derailed for a similar scheme when he was governor of New Mexico. Indeed, one reason that officials in Jefferson County didn't know that the swaps they were signing off on were shitty was because their adviser on the deals was a firm called CDR Financial Products, which is now accused of conspiring to overcharge dozens of cities in swap transactions. According to a federal antitrust lawsuit, CDR is basically a big-league version of Bill Blount — banks tossed money at the firm, which in turn advised local politicians that they were getting a good deal. "It was basically, you pay CDR, and CDR helps push the deal through," says Taylor.

In the end, though, all this bribery and graft was just the table-setter for the real disaster. In taking all those bribes and signing on to all those swaps, the commissioners in Jefferson County had ­basically started the clock on a financial time bomb that, sooner or later, had to explode. By continually refinancing to keep the county in its giant McMansion, the commission had managed to push into the future that inevitable day when the real bill would arrive in the mail. But that's where the mortgage analogy ends — because in one key area, a swap deal differs from a home mortgage. Imagine a mortgage that you have to keep on paying even after you sell your house. That's basically how a swap deal works. And Jefferson County had done 23 of them. At one point, they had more outstanding swaps than New York City.

Judgment Day was coming — just like it was for the Delaware River Port Authority, the Pennsylvania school system, the cities of Detroit, Chicago, Oakland and Los Angeles, the states of Connecticut and Mississippi, the city of Milan and nearly 500 other municipalities in Italy, the country of Greece, and God knows who else. All of these places are now reeling under the weight of similarly elaborate and ill-advised swaps — and if what happened in Jefferson County is any guide, hoo boy. Because when the shit hit the fan in Birmingham, it really hit the fan.

For Jefferson County, the deal blew up in early 2008, when a dizzying array of penalties and other fine-print poison worked into the swap contracts started to kick in. The trouble began with the housing crash, which took down the insurance companies that had underwritten the county's bonds. That rendered the county's insurance worthless, triggering clauses in its swap contracts that required it to pay off more than $800 million of its debt in only four years, rather than 40. That, in turn, scared off private lenders, who were no longer ­interested in bidding on the county's bonds. The banks were forced to make up the difference — a service for which they charged enormous penalties. It was as if the county had missed a payment on its credit card and woke up the next morning to find its annual percentage rate jacked up to a million percent. Between 2008 and 2009, the annual payment on Jefferson County's debt jumped from $53 million to a whopping $636 million.

It gets worse. Remember the swap deal that Jefferson County did with JP Morgan, how the variable rates it got from the bank were supposed to match those it owed its bondholders? Well, they didn't. Most of the payments the county was receiving from JP Morgan were based on one set of interest rates (the London Interbank Exchange Rate), while the payments it owed to its bondholders followed a different set of rates (a municipal-bond index). Jefferson County was suddenly getting far less from JP Morgan, and owing tons more to bondholders. In other words, the bank and Bill Blount made tens of millions of dollars selling deals to local politicians that were not only completely defective, but blew the entire county to smithereens.

And here's the kicker. Last year, when Jefferson County, staggered by the weight of its penalties, was unable to make its swap payments to JP Morgan, the bank canceled the deal. That triggered one-time "termination fees" of — yes, you read this right — $647 million. That was money the county would owe no matter what happened with the rest of its debt, even if bondholders decided to forgive and forget every dime the county had borrowed. It was like the herpes simplex of loans — debt that does not go away, ever, for as long as you live. On a sewer project that was originally supposed to cost $250 million, the county now owed a total of $1.28 billion just in interest and fees on the debt. Imagine paying $250,000 a year on a car you purchased for $50,000, and that's roughly where Jefferson County stood at the end of last year.

Last November, the SEC charged JP Morgan with fraud and canceled the $647 million in termination fees. The bank agreed to pay a $25 million fine and fork over $50 million to assist displaced workers in Jefferson County. So far, the county has managed to avoid bankruptcy, but the sewer fiasco had downgraded its credit rating, triggering payments on other outstanding loans and pushing Birmingham toward the status of an African debtor state. For the next generation, the county will be in a constant fight to collect enough taxes just to pay off its debt, which now totals $4,800 per resident.

The city of Birmingham was founded in 1871, at the dawn of the Southern industrial boom, for the express purpose of attracting Northern capital — it was even named after a famous British steel town to burnish its entrepreneurial cred. There's a gruesome irony in it now lying sacked and looted by financial vandals from the North. The destruction of Jefferson County reveals the basic battle plan of these modern barbarians, the way that banks like JP Morgan and Goldman Sachs have systematically set out to pillage towns and cities from Pittsburgh to Athens. These guys aren't number-crunching whizzes making smart investments; what they do is find suckers in some municipal-finance department, corner them in complex lose-lose deals and flay them alive. In a complete subversion of free-market principles, they take no risk, score deals based on political influence rather than competition, keep consumers in the dark — and walk away with big money. "It's not high finance," says Taylor, the former bond regulator. "It's low finance." And even if the regulators manage to catch up with them billions of dollars later, the banks just pay a small fine and move on to the next scam. This isn't capitalism. It's nomadic thievery.

[From Issue 1102 — April 15, 2010]

Senator Bernie Sanders Instrumental in Providing Community Health Centers as Part of Health Reform Bill

by John Lawrence

Senator Bernie Sanders of Vermont was instrumental in getting increased funding for a doubling of community health centers throughout America, one of the most significant parts of the recently passed Health Reform Bill. Neither a Republican nor a Democrat, Sanders is the only independent serving in the US Senate. This is from Bernie's website:

"As health center leaders from Vermont and across the country assembled in Washington, D.C., for their annual conference, President Obama and congressional leaders met to discuss ways to advance health care legislation. Obama on Monday for the first time detailed his own health care proposal, which includes $12.5 billion for health centers and training for primary care doctors and other professionals. The Obama proposal mirrors a proposal by Senator Bernie Sanders for community health centers that was included in a bill the Senate passed late last year. The Senate legislation also invested in training for health care professionals.  The president’s plan, according to Sanders, would double the number of health center sites nationally over the next five years from 7,500 to 15,000 sites.

"The $11 billion the White House allocated for health centers would increase the number of patients served from 20 million today to about 39 million by 2015. That investment in health centers, Sanders added, would save Medicaid $17 billion that would otherwise be spent on more expensive hospital and emergency room care, according to a George Washington University study.

"The White House proposal incorporated another Sanders provision in the Senate bill that would provide $1.5 billion for loan repayments and scholarships through the National Health Service Corps. The increase would add more than 17,000 primary care doctors, dentists, nurse practitioners, physician assistants and mental health professionals in medically-underserved areas.

"Sanders conferred in his Capitol Hill office with representatives from some of the eight health centers in Vermont that provide affordable primary care, dental care, mental health counseling and low-cost prescription drugs. The state’s eight Federally Qualified Health Centers now provide primary health care at 41 locations for more than 110,000 Vermonters. Sanders is working with organizations in Addison and Bennington counties to expand community health centers into those areas, giving residents of every region access to primary health care.

"The system of Federally Qualified Health Centers began four decades ago under pioneering legislation by the late Sen. Edward M. Kennedy, who created the first Federally Qualified Health Centers, which are open to patients with or without insurance and regardless of their ability to pay.

"The National Association of Community Health Centers on Thursday honored Sanders as its “Distinguished Community Health Campion” for 2010, an award bestowed in the past on Senator Kennedy."

India Census Includes Fingerprints, Photos

This is from the Washington Times about the census taking place in India this year:

NEW DELHI | India began a yearlong census of its billion-plus population Thursday in which it plans to photograph and fingerprint every citizen over the age of 15 to create a national database and then issue its first national identity cards. About 2.5 million census-takers began traveling across more than 630,000 villages and 5,000 cities in an effort to visit every structure serving as a home, from tin shanties to skyscrapers, in what the government calls the world's largest administrative exercise. For the first time, they will note the availability of toilets, drinking water and electricity, and the type of building materials to create a comprehensive picture of housing in India. They will also take fingerprints and photographs of each person and collect information on Internet, mobile phone and bank account usage. The census-takers - mostly local government officials or schoolteachers - also plan to include millions of homeless people who sleep on railway platforms, under bridges and in parks. So far, India has not had a system of national identity cards. The collection of fingerprints and photographs will be linked with another massive exercise launched last year to assign every Indian an identity number. "It is for the first time in human history that an attempt is being made to identify, count, enumerate and record and eventually issue an identity card to 1.2 billion people," Home Minister Palaniappan Chidambaram said.

So India doesn't have a problem with having a national data base of fingerprints and photographs. Just try that in the US. People would complain that their privacy was being invaded. But having a foolproof system of identification for all its citizens could be a priceless investment. It would lead to rapid identification of all criminals who left fingerprints at a crime scene or who could be identified from a photo. Crime solving would be greatly simplified.

Issuance of a national ID card would simplify mountains of paperwork involved when there are myriad ways of identifying people. All in all a very rational way to do things. But just try it in the antiquated US where the only ID system is state drivers' licenses. Although everyone has a social security number, there is no national ID card let alone a national fingerprint and photo database. India far surpasses the US in this rational way of doing things. And it sounds like they are doing a more thorough job of counting every citizen and not just relying on citizens to return census forms which many in the US are not doing.

The Future of American Jobs

by Robert Reich

Monday, April 12, 2010

Many of my students at Berkeley who will be graduating in June are worried about the job market. I understand their worries. But they and other new college grads have less cause for concern than most American workers. Let me explain.

Since the start of the Great Recession in December 2007, the U.S. economy has shed 8.4 million jobs and failed to create another 2.7 million required by an ever-larger pool of potential workers. That leaves us more than 11 million jobs behind. (The number is worse if you include everyone working part-time who’d rather it be full-time, those working full-time at fewer hours, and people who are overqualified for the jobs they’re in.)

This means even if we enjoy a vigorous recovery that produces, say, 300,000 net new jobs a month, we could be looking at five to eight years before catching up to where we were before the recession began.

Given how many Americans are unemployed or underemployed, it’s hard to see where we get sufficient demand to support a vigorous recovery. Outlays from the federal stimulus have already passed their peak, and the Federal Reserve won’t keep interest rates near zero for very long. Although consumers are beginning to come out of their holes, it will be many years before they can return to their pre-recession levels of spending. Most households rely on two wage earners, of whom at least one is now likely to be unemployed, underemployed or in danger of losing a job. And even households whose incomes have returned are likely to be residing in houses whose values haven’t—which means they can’t turn their homes into cash machines as they did before the recession.

While consumers have been shedding their debts like mad—often simply by defaulting on loans—their remaining burdens are still heavy. At the end of last year, debt averaged $43,874 per American, or about 122% of annual disposable income. Most analysts believe a sustainable debt load is around 100% of disposable income, assuming a normal level of employment and normal access to credit—neither of which we are likely to have for some time.

Some economic cheerleaders say rising stock prices are making consumers feel wealthier and therefore readier to spend. But most Americans’ biggest asset is their homes. The “wealth effect” is felt mainly by the richest 10%, whose net worth is largely stocks and bonds. The top 10% accounted for about half of total national income in 2007. But they were only about 40% of total spending. A vigorous jobs recovery can’t be based on 40% of what was spent before the economy collapsed.

What’s likely to slow the jobs recovery most, however, is the indubitable reality that many of the jobs that have been lost will never return.

The Great Recession has accelerated a structural shift in the economy that had been slowly building for years. Companies have used the downturn to aggressively trim payrolls, making cuts they’ve been reluctant to make before. Outsourcing abroad has increased dramatically. Companies have discovered that new software and computer technologies have made many workers in Asia and Latin America almost as productive as Americans, and that the Internet allows far more work to be efficiently moved to another country without loss of control.

Companies have also cut costs by substituting more computerized equipment for labor. They’ve made greater use of numerically controlled machine tools, robotics and a wide range of office software.

These cost-cutting moves have allowed many companies to show profits notwithstanding relatively poor sales. Alcoa, for example, had $1.5 billion in cash at the end of last year, double what it had on hand at the end of 2008. It managed this largely by cutting 28,000 jobs, 32% of its work force. But for workers, there’s no return. Those who have lost their jobs to foreign outsourcing or labor-replacing technologies are unlikely ever to get them back. And they have little hope of finding new jobs that pay as well. More than 40% of today’s unemployed have been without work for over six months, a higher proportion than at any time in 60 years.

The only way many of today’s jobless are likely to retain their jobs or get new ones is by settling for much lower wages and benefits. The official unemployment numbers hide the extent to which American workers are already on this downward path. But if you look at income data you’ll see the drop.

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less. Or new hires are paid far lower wages than the old. (In January, Ford Motor Co. announced that it would add 1,200 jobs at its Chicago assembly plant but didn’t trumpet that the new workers will be paid half of what current workers were paid when they began.) Or they have become consultants or temporary workers whose pay is unsteady and benefits nonexistent.

This shift also helps explain why the unemployment rate for Americans with college degrees is now only 5%, while it is 10.5% for those with only a high-school degree, and 15.6% for Americans with less than a high-school diploma. The jobs of well-educated Americans, although hardly immune to foreign outsourcing and technological displacement, have been less vulnerable to these trends than the jobs of Americans with fewer years of education.

The likelihood, therefore, is that as the economy struggles to recover and today’s jobless begin to find work, the median wage will continue to fall—as it did between 2001 and 2007, during the last so-called recovery.

More Americans will be working, but for pay they consider inadequate. The approaching recovery will be tepid because so many people will lack the money needed to buy all the goods and services the economy can produce.

Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

A Long Period of Structural Joblessness?

by John Lawrence

Now that the health reform bill is in the bag, the Obama administration is turning its attention to the issue of job creation. But what is it going to do? The recent uptick in jobs created was largely due to the government's hiring of census workers, jobs that will shortly disappear once the census data gathering is over with. Here again the government is pushing on a string because they insist that the jobs must be created in the private sector. Well, how is the government going to create jobs in the private sector? By lowering taxes? Taxes have been lowered for the last 30 years with the result ... that we're facing a prolonged period of joblessness.

To say that workers are expendable is to state the obvious. Private equity funds (formerly know as leveraged buyout artists) have bought businesses, and the first thing they have done is to lay off workers. Transnational corporations have outsourced American jobs to China and elsewhere. You can hardly find a profuct at Wal-Mart or Target that's made in America. American workers suddenly find themselves competing for jobs with low paid workers from all over the world. It didn't have to be this way. Government policies for the last 30 years under Republican administratrions and the Clinton administration have encouraged corporations to offshore jobs. The American interpretation of globalism is outsourcing followed by importing the products produced overseas back into the US. Government policies of free trade have encouraged this and could put a stop to it if the government chose to do so. However, they are stuck in the embarassing bind that they would have to renounce the philosophy they've been preaching for 30 years. Other countries sense this and with no philosophical irons in the fire are alrfeady taking steps to take advantage of America's hoisting itself on its own petard.

David P. Goldman writes:

High levels of unemployment may last indefinitely. A number of economists (including this writer) have been warning about permanent joblessness, and the idea is now seeping into popular magazines. More than 8 million American jobs were lost since 2007, based on the most recent revision of the overall job count of U.S. establishments. But that is not the worst of it, because the establishment survey fails to capture smaller businesses and the self-employed. By the Bureau of Labor Statistics’ broadest measure of unemployment, including the forced part-time workers and so-called discouraged workers, the unemployment rate rose to 17 percent from 8 percent before the recession. That is 9 percentage points, corresponding to slightly over 12 million adults. A website called Shadow Government Statistics includes “long-term discouraged” workers defined out of the labor force by the BLS, but that alternative measure has tracked the BLS broad measure quite closely in the past few years. There are several reasons to believe that most of these jobs never will come back. That is a less contentious statement than it might appear, because the jobs lost in the recessions since 1981 never came back. Some sectors, notably manufacturing, continued to shrink, and other sectors, such as heath care and retail, replaced them. The difference in 2010 is that it is not apparent where new jobs will come from.

Manufacturing jobs as a percentage of the economy have continued to decline to new lows. At just 12 million jobs, manufacturing employment is a small and diminishing portion of the 138 million employed Americans. The only gains in employment in recent history have been in the education, health and government arenas. There have been huge productivity gains in other sectors, but this is not due to workers working harder; it's due to the automation, computerization and robotization of jobs. Machines are doing work formerly done by humans. This is nothing new, but the computer has sent the process into mach speed. Since most jobs are provided by small start-up businesses, government could encourage those businesses to form by public-private partnerships. But this would amount to an industrial policy, something the US desperately needs, but something which it remains unalterably, philosophically opposed to.

And the US, deeply in debt, doesn't have the money to encourage start-ups or do do any of a number of things to encourage employment including giving targeted tax breaks. The US needs to stop hemhorraging money. It has gotten itself into a position where the avenues it might explore to create jobs have been closed off because they cost money which the US doesn't have. The US has to do two things: it has to raise money somehow AND it has to use that money to create jobs. A similar thing was done with the health reform bill which was totally paid for by a combination of revenue enhancing procedures. The same thing can be done for job creation. Mature industries, which have outsourced most of their jobs, can be taxed and those revenues used to provide public-private partnerships to create new businesses which will employ a lot of people. The whole process could be revenue neutral.

We all know what the businesses of the 21st century will look like: green energy production including solar and wind power. Other countries have gotten these industries off the ground with generous assistance from their central governments. Only the US is lagging. China, for instance, which posseses a sovereign wealth fund which buys up US debt, has the money to invest in its own fledgling industries and has provided a robust stimulus package during the current recession. The US with an economy based on debt is not in a position to do so. But to get back on the right track the US must come up with a robust jobs creation bill which doesn't add to the debt as it did with the health reform bill. There are many potential sources for an injection of new funds. We have gone over them before in a post entitled Revenue Enhancement for Dummies. A financial transaction tax would be a great way to recoup some of the money lost to the financial sector. Tariffs on products imported by transnational corporations which have outsourced American jobs would be another. A VAT tax, a Federal sales tax, would be another. Any of these methods would face an uphill battle in Congress which is becoming increasingly reactionary instead of creatively exploring methods for turning this imploding economy around. Lobbyists will do everything in their power to keep things the way they are because it benefits the status quo.

Direct job creation by the government is also a possibility. What the Obama administration will be able to accomplish in the few remaining months before the mid-term elections is problematic. The Republicans will do everything in their power to see that nothing gets done, because they believe that that will result in the biggest political gains for them. If Obama can't take major action with at least some immediate tangible results, his goose is cooked.

U.S. Troops Fire on Bus in Afghanistan, Killing Civilians

By RICHARD A. OPPEL Jr. and TAIMOOR SHAH

Published by the New York Times: April 12, 2010

KABUL, Afghanistan — American troops raked a large passenger bus with gunfire near the southern city of Kandahar on Monday morning, killing as many as five civilians and wounding 18, Afghan authorities and survivors said.

The attack infuriated Kandahar leaders and could harm public opinion before perhaps the most important offensive of the war, a campaign that is intended to take control of the Kandahar region from the Taliban this summer.

Hundreds of demonstrators gathered around a bus station on the western outskirts of Kandahar, shouting anti-American chants and blocking the road for an hour, according to people in the area.

The American military confirmed the shooting but there were disputes over details, including whether the troops who fired on the bus had first shot flares and warned the driver to stay back.

One of the bus passengers and a man who identified himself as the driver said that an American convoy about 70 yards ahead of the bus opened fire as the bus began to pull to the side of the road to allow another military convoy traveling behind to pass.

The two convoys and the bus were on the main highway in Sanzari, about 15 miles west of Kandahar city. All of the windows on one side of the bus were shot out.

Troops opened fire on the bus just after daybreak as it was taking dozens of passengers to Nimruz Province, said Zalmy Ayoubi, a spokesman for the Kandahar provincial governor.

Some of the wounded were in critical condition, and the death toll could rise, local officials said.

Mr. Ayoubi said five civilians had been killed, including one woman.

The Interior Ministry in Kabul issued a statement saying four civilians had been killed and 18 wounded, blaming “NATO forces” traveling in front of the bus for the shooting.

An American military spokeswoman put the toll at four dead — including one woman — and said five people had been wounded.

The military spokeswoman confirmed that a convoy traveling west, in front of the bus, had opened fire, but said the second convoy was traveling eastbound toward the bus.

She also said that immediately before the shooting the troops fired three flares toward the bus to warn the driver he was following too closely, and that one soldier raised his fist in the air as another warning. She also said the driver of the bus was killed.

However, the man who identified himself as the driver said the bus did not violate any signal from the troops.

“I was going to take the bus off the road,” said the man, Mohammed Nabi. Then the convoy ahead opened fire from a distance of 60 to 70 yards.

“It is a huge bus full of passengers, and if they think we were a suicide bomber, we are sad that the Americans have killed innocent people,” he said. “We don’t feel safe while traveling on the main highways anymore because of NATO convoys.”

Mr. Ayoubi, the provincial spokesman, said, “We strongly condemn this action carried out by NATO forces, and we want a thorough investigation of the incident, to find out why they targeted the civilian bus.”

If the Afghan government’s casualty toll is correct, it would suggest that troops fired scores or even hundreds of rounds. It was not clear why such a large fusillade would have been directed at a passenger bus.

“An American convoy was ahead of us and another convoy was following us, and we were going to pull off of the road, and suddenly the Americans opened fire,” said one passenger, Nida Mohammed, who suffered a shoulder injury.

“We were not close to them, maybe 60 yards away from their convoy,” Mr. Mohammed said.

A helicopter evacuated some of the wounded, he said.

“This bus wasn’t like an a suicide bomber, and we did not touch or come close to the convoy,” Mr. Mohammed said. “It seems they are opening fire on civilians intentionally.”

Richard A. Oppel Jr. reported from Kabul, and Taimoor Shah from Kandahar, Afghanistan. Sangar Rahimi contributed reporting from Kabul.

NORWAY’S LESSON ON BEING FINANCIALLY “SOVEREIGN”

by Frank Thomas

The Netherlands, April 12, 2010

Norway’s sovereign wealth fund – formerly named “The Petroleum Fund”and now named “The Government Pension Fund – Global” – is the 2nd largest sovereign wealth fund in the world after Abu Dhabi’s fund. Today, 30 years after oil started flowing ashore, Norway has created a national fund valued at ±$500 billion (vs. ±$900 billion for Abu Dhabi). Norway generates revenues for its sovereign wealth fund from three sources:

            

            1. Taxes on oil and gas

2. Ownership of petroleum fields

3. Dividends from Norwegian government’s 62.5% ownership of Statoil – a merger between Norsk Hydro’s  oil and gas division and Statoil, making Statoil the biggest offshore oil and gas company in the world.

 

All this means the Norwegian government (i.e., the Norwegian taxpayers) has effectively had a ±50% ownership share in offshore deep-water oil-gas cashflows over the past 3 decades! As noted, Statoil is a world  pioneer in complex offshore projects where water conditions are very tough.

 

The sovereign wealth fund in which Norway saves its oil-gas income is invested internationally primarily in stocks, bonds, and, starting recently, real estate. The strict primary goal is to save for future generations, when hydrocarbons run out.  Investing abroad also helps to avoid overheating the Norwegian economy. In 2009, the fund advanced 34% to recover most of the bubble losses.The fund now owns more than 1% of the world’s shares in over 8000 companies. It is Europe’s biggest equity investor. Strategically, the fund takes a 30 year investment horizon. Thus, not surprisingly,the fund is  currently investing aggressively in green industries. Helped by the past 30 year petroleum revenues that have been well-invested, Norway has become the 2nd richest nation per capita.

 

Except in economic crisis times, only 4% of Norway’s $500 billion fund is used in the national budget for its 4.8 million people. An exception was made in 2009 to finance a stimulus package amounting to nearly 5% of the nation’s GDP of $450 billion. Imagine if our country could divert from a comparable sovereign fund a sum equal to  a modest 1% of our GDP, or ±$150 billion annually for social-infrastructure investments and/or deficit reduction!  I would even be content with half this, or a $75 billion annual contribution to our nation’s health. Wouldn’t you Mr. President?

 

Are there obvious lessons to be learned from Norway about how to become financially “more sovereign” in our offshore, deep-water hydrocarbon exploitation deals with oil firms?  

 

Norway has given a simple answer: extremely scarce (offshore) natural hydrocarbon resources are national assets not there for the primary money benefit of multinational oil firms and their shareholder  interests. Nor are they there for manipulation by local petty politicians doing small-time deals with quite willing oil firms to buy local votes for 1 cent on the dollar … as smugly engineered by the hypocritical federal-pork subsidy lover Sarah Palin. These are national assets that represent potentially huge cashflows which should be federally managed equitably in the long-term welfare interests of all U.S. citizens.

 

Norway presents lessons we had better learn quickly … like TOMORROW! … before we lose another opportunity – this time in the new world of the sovereign wealth fund builders – to come out of our Debt/Deficit spiral and become a financially “sovereign”and solvent nation.

Europe's Promise by Steven Hill

by John Lawrence

Frank Thomas and I have been reading a book by Steven Hill: Europe's Promise. Hill dispenses with the myths about Europe - that it is a nanny state coddling its citizens from cradle to grave - early on. Rather then being a welfare state, Hill describes European society as a workfare state. Seen in this light everything that is done that benefits the average citizen does so in order to enable him or her to be a better and more productive worker. Universal health care enables small business to concentrate on business without having to be responsible for health care in exchange for a tax that is far lower than what the average American small business spends on their employees' private health care plans. In this sense government takes the weight off small business' back. In the US there is an obsession with getting government off our back. In Europe government takes the weight off small business' back. Government is an enabler rather than a disabler of business, and as such, Europe has become an economic powerhouse far outstripping the US in many indices.

Europe has not only become an economic powerhouse, but it has done so in a way that widely distributes the rewards and produces far less inequality than does the US. Economic democracy is a way of life. Workers participate in management decisions at all levels. In the 1940s a group of economists based in Freiburg and Cologne proposed a new type of capitalist blueprint which was neither the US laissez faire capitalist model nor the communist state command model. They called it the "social market economy." It was founded on the principles of both pursuing the free market and of serving humanity. Far from being a boom and bust economy like the US, Europe pursues a slow growth steady state model. Slow and steady wins the race. If the US is the hare, Europe is the tortoise and we all know who won that race.

While the US main jobs program is its military - the US spends over 4% of its GDP on the military - Europe spends less than 2% on its military. The savings is spent on benefits for its people like universal health care, universal child care, free or near free education up through university level and massive infrastructure projects like high speed rail. On the other hand Europe pursues a carrot philosophy as opposed to the US' stick when it comes to foreign policy providing more than twice the aid to poor countries than does the US.

The EU also benefits from a close government-industry partnership that represents an industrial policy totally lacking in the US which leaves everything to private enterprise. This is also true of other countries that have a different model from the EU - China, for example. Hill states:

Today in the post-economic crash era, in which state regulation and state direction of economies have a new found legitimacy, this American free market fundamentalism seems nostalgically quaint, especially since the government owned sovereign wealth funds of China, Saudi Arabia, the Gulf states, and elsewhere manage about $3 trillion in assets and investments all over the world, and huge state-owned enterprises such as Russia's Gazprom, Saudi Arabia's Aramco, and China's SINOPEC rely on much greater government involvement than [Europe's government-industrial partnership,] Airbus. The economic rules have shifted dramatically. but the United States, even under the Obama administration, still remains in an antiquated free market ideology.

While other countries have vibrant and active interconnections between government and industry, the US has a government controlled by corporate paid lobbyists who work to use government as a paid adjunct to their particular business interests resulting in short-sighted payoffs to special interests which do nothing for the overall economy not to mention the average worker/citizen. Sovereign wealth funds introduce a state capitalist component to many countries including EU countries such as Norway which reaps 50% of off shore oil drilling profits which are then plowed back into Norway's social security program. While the US contemplates its social security program going broke, Norway is acting as a state capitalist in cooperation with private capitalists to extract oll from the North Sea, sell it on the world market and plow part of the profits (widely distributed)  back into its own people. The US considers state capitalism to be socialistic and so remains, as a government, in huge debt with no idea how to get out of it except to reduce social programs that benefit its people. In the EU these programs are well and rationally funded.

To be continued ...

Nine Myths about Socialism in the US

Published on Saturday, April 10, 2010 by CommonDreams.org

by Bill Quigley

Glenn Beck and other far right multi-millionaires are claiming that the US is hot on the path towards socialism. Part of their claim is that the US is much more generous and supportive of our working and poor people than other countries. People may wish it was so, but it is not.

As Senator Patrick Moynihan used to say “Everyone is entitled to their own opinions. But everyone is not entitled to their own facts.”

The fact is that the US is not really all that generous to our working and poor people compared to other countries.

Consider the US in comparison to the rest of the 30 countries that join the US in making up the OECD – the Organization for Economic Cooperation and Development. These 30 countries include Canada and most comparable European countries but also include some struggling countries like Czech Republic, Greece, Hungary, Korea, Mexico, Poland, Slovak Republic, and Turkey. See www.oecd.org

When you look at how the US compares to these 30 countries, the hot air myths about the US government going all out towards socialism sort of disappear into thin air. Here are some examples of myths that do not hold up.

Myth #1. The US government is involved in class warfare attacking the rich to lift up the poor.

There is a class war going on all right. But it is the rich against the rest of us and the rich are winning. The gap between the rich and everyone else is wider in the US than any of the 30 other countries surveyed. In fact, the top 10% in the US have a higher annual income than any other country. And the poorest 10% in the US are below the average of the other OECD countries. The rich in the U.S. have been rapidly leaving the middle class and poor behind since the 1980s.

Myth #2. The US already has the greatest health care system in the world.

Infant mortality in the US is 4th worst among OECD countries – better only than Mexico, Turkey and the Slovak Republic.

Myth #3. There is less poverty in the US than anywhere.

Child poverty in the US, at over 20% or one out of every five kids, is double the average of the 30 OECD countries.

Myth #4. The US is generous in its treatment of families with children.

The US ranks in the bottom half of countries in terms of financial benefits for families with children. Over half of the 30 OECD countries pay families with children cash benefits regardless of the income of the family. Some among those countries (e.g. Austria, France and Germany) pay additional benefits if the family is low-income, or one of the parents is unemployed.

Myth #5. The US is very supportive of its workers.

The US gives no paid leave for working mothers having children. Every single one of the other 30 OECD countries has some form of paid leave. The US ranks dead last in this. Over two thirds of the countries give some form of paid paternity leave. The US also gives no paid leave for fathers.

In fact, it is only workers in the US who have no guaranteed days of paid leave at all. Korea is the next lowest to the US and it has a minimum of 8 paid annual days of leave. Most of the other 30 countries require a minimum of 20 days of annual paid leave for their workers.

Myth #6. Poor people have more chance of becoming rich in the US than anywhere else.

Social mobility (how children move up or down the economic ladder in comparison with their parents) in earnings, wages and education tends to be easier in Australia, Canada and Nordic countries like Denmark, Norway, and Finland, than in the US. That means more of the rich stay rich and more of the poor stay poor here in the US.

Myth #7. The US spends generously on public education.

In terms of spending for public education, the US is just about average among the 30 countries of the OECD. Educational achievement of US children, however, is 7th worst in the OECD. On public spending for childcare and early education, the US is in the bottom third.

Myth #8. The US government is redistributing income from the rich to the poor.

There is little redistribution of income by government in the U.S. in part because spending on social benefits like unemployment and family benefits is so low. Of the 30 countries in the OECD, only in Korea is the impact of governmental spending lower.

Myth #9. The US generously gives foreign aid to countries across the world.

The US gives the smallest percentage of aid of any of the developed countries in the OECD. In 2007 the US was tied for last with Greece. In 2008, we were tied for last with Japan.

Despite the opinions of right wing folks, the facts say the US is not on the path towards socialism.

But if socialism means the US would go down the path of being more generous with our babies, our children, our working families, our pregnant mothers, and our sisters and brothers across the world, I think we could all appreciate it.

Bill Quigley is Legal Director at the Center for Constitutional Rights and law professor at Loyola University New Orleans. There is a version of this article with footnotes for those interested. [email protected]

The Perplexed Puppet Jerks on His Strings: Karzai Calls US Troops Invaders

Published on Friday, April 9, 2010 by CommonDreams.org

by Tom Turnipseed

Afghan President Hamid Karzai, a former consultant for UNOCAL oil company was installed by the US as the President of Afghanistan after our invasion and occupation of that country. Now he complains that US and NATO troops are invaders of Afghanistan and this is drawing a furious reaction from the Obama administration and the mainstream media. His outburst deserves a closer look at what led up to this furor in Afghanistan as Karzai turns on his US puppeteer.

Karzai denounced those in the Washington and the media who have criticized the corruption and incompetence of his regime with what could be a very true complaint, "They wanted to have a puppet government. They wanted a servant government."

The Afghan parliament voted to strip Karzai of his power he had asserted to appoint the members of the country's election commission, which will be in charge of parliamentary elections in the fall. The parliament's action was pressured by the US ambassador.

Karzai said, "In this situation there is a thin curtain between invasion and cooperation‑assistance." He predicted that if the people of Afghanistan thought that the Afghan government were mercenaries for the Western powers, the Taliban‑led insurgency "could become a national resistance." Karzai was quoted as saying "I might join the Taliban".

What Karzai warns of as a possible outcome for the US‑led war in Afghanistan has already largely come to pass, as a report in Sunday's New York Times makes clear. NY Times correspondent Richard A. Oppel, Jr., in a front‑page article from Marja, Afghanistan, wrote that after their much publicized offensive that had been described as successful, the US marines have no control in the region outside their own bases. Oppel also said the Taliban is resurgent, the collaborators with the US occupation are isolated and targeted for retaliation, and that much of the US‑funded reconstruction work has been shut down.

Oppel concluded: "In Marja, the Taliban are hardly a distinct militant group, and the Marines have collided with a Taliban identity so dominant that the movement appears more akin to the only political organization... with an influence that touches everyone. Even the Marines admit to being somewhat flummoxed."

"We've got to re‑evaluate our definition of the word ‘enemy,'" Brig. Gen. Larry Nicholson, commander of the Marine expeditionary brigade in Helmand Province, told the Times. "Most people here identify themselves as Taliban."

Is Karzai revealing the underlying reason for the nine year old US war in Afghanistan, that we were told was in a response to the 9/11 terrorist attacks? Are we fighting to prop up a puppet regime that will serve US corporate interests in Central Asia-one of the largest suppliers of oil and gas to the world market.

Karzai, the amiable former business consultant and CIA "asset", was installed by Washington as Afghanistan's president. Remember when he was the honored guest at President Bush's State of the Union message to Congress, smiling and waving from the balcony in his regal Afghani robe? As the U.S. gets bogged down in a quagmire in Afghanistan, are we scape-goating the puppet for our problems?

Is the underlying reason for all the railing and blaming of Karzai in actuality a refrain of "Bad puppet! Bad puppet!"

The U.S. Congressional Research service just revealed it costs a staggering $1.3 million per annum to keep an American soldier in Afghanistan. This huge expense can't go on forever.

When the head of a government kept in place by US arms and dollars issues a public rebuke to his master it requires a closer look at why. Could it be the increasing animosity of the Afghan people to the occupation, with thousands of innocent people being killed by American bombs, rockets, commando raids and massacres, along with despair of Karzai, who feels increasingly marginalized as the nominal head of Afghanistan. Also Karzai has an agenda different from the US. Just like the policy of the U.S., Pakistan, the Taliban, as well as Karzai and every other interest involved, all realize that sometime, perhaps sooner than later, the US will have to leave-- due to the costs in lives and money and its effect on US public opinion.

Karzai's speech to election officials was just four days after the visit by Obama who had a confrontational meeting with Karzai. Published reports said that Obama berated Karzai over the corruption in his regime and the vote‑rigging in last year's presidential election. Perhaps Karzai's overtures to Iran and China were also raised.

White House Press Secretary Robert Gibbs called Karzai's comments "troubling" and "cause for real and genuine concern." Karzai's remarks were also called "preposterous" by a State Department official.

The rebuke from our puppet has the US media in a dither. A New York Daily News editorial was headlined "Cuckoo Karzai." Have 1,000 US soldiers and tens of thousands of Afghans died to keep a madman in power?

The New York Times, termed Karzai's criticism "delusional" and warned that his statement could have political repercussions in the United States, because "it undermines the fragile public support for President Obama's strategy" of pouring 30,000 more US troops into the Afghanistan war.

"Mr. Karzai is encouraging those who want the United States out of Afghanistan," the editorial concluded. "He risks boiling down a more complicated policy debate to the notion that American lives are being sacrificed simply to keep him in power. It's hard to think of a better way to doom Afghanistan's future, as well as his own." This has a sinister sound because almost 50 years ago another US puppet had a fatal problem with the US in 1963 when President Ngo Dinh Diem of South Vietnam was overthrown and murdered in a US‑backed military coup that set the stage for even deeper US military intervention in Southeast Asia. Diem faced similar criticism for corruption, incompetence and vote‑rigging.

Should Karzai as a successor US puppet to Diem, be concerned about Diem's fate since he also jerked on the strings of his US puppeteer?

Tom Turnipseed is an attorney, writer and political activist in Columbia, South Carolina, www.turnipseed.net

Off Shore Oil Drilling

by Frank Thomas

The Netherlands, April 9, 2010

In the very early 70s,  I was a member of the developing team for IHC Holland that introduced very advanced "dynamically positioned drill ships" for exploitation of offshore gas-oil sites. Dynamically positioned means such vessels had proprietary propellar systems on each side of the vessel that automatically kept the ship perfectly on site under certain sea depth and wave height conditions. We used the system first in Asia's deep, relatively calm waters with great success. Then the vessel's technology accelerated to much deeper and more difficult sea conditions as exist in the North Sea (maximum 100 foot wave heights!). We also developed and promoted a "Floating Production System" where, after the drill ship made a deep-water discovery and capped it,  the oil flow to shore commenced with oil flowing from the find to a large tanker on the find-site and moored to a proprietary revolving "Single Buoy Mooring System." The oil that accumulated in the moored tanker was then offloaded into a number of smaller tankers which transported the product to a coastal short onshore pipeline to onshore storage tanks or directly to onshore storage tanks. Under this system, if weather and sea conditions exceed certain parameters, production can be stopped and the drill ship can leave the site to return and reconnect later.

Advantages? Avoidance of extremely costly laying of a deep water pipeline to shore and avoidance of costly offshore production platforms! This saves multi-millions in initial investments and at least 18-24 months in getting oil flowing to shore storage facilities and thus into production sooner. Furthermore, we offered the option of leasing the entire system long-term to oil firms which spared them from committing substantial upfront investments.

Over the past 35 years, such mobile-floating offshore production systems have been placed in operation by my former employers, IHC Holland, in world-wide offshore oil development sites, including Burma, for example. Such mobile systems could well be very appropriate, given the continuing advance in vessel design technology the past three decades, for finding and developing, relatively quickly, difficult, offshore deep water oil projects like those off the Alaskan coast or elsewhere. But, of course, the U.S. government should follow the Norway model of 50-50 ownership of an offshore field's cashflow for finding and developing relatively quickly difficult, deeper offshore oil prospects. This would over a period of 8-10  years completely reverse our nation's desperate financial situation, assuming a promising find is ultimately made in offshore deep waters similar to those around the Alaskan vicinity.

Bring Back the WPA

by John Lawrence

 

The Works Progress Administration (WPA) was a government funded jobs program that FDR instituted during the Great Depression to put people to work immediately. They did a lot of good things like build schools, roads, bridges - infrastructure in general. The very school that I attended as a young boy, Wantage Consolidated School, was built by the WPA. Furthermore, this WPA built school gave my father a job as principal so our family was a direct beneficiary of FDR's WPA. How's that for a testimonial? Although my father was a lifelong Republican, I never heard him refer to this as socialism which it would immediately be called if Obama was to propoae something similar in today's political climate.

 

The following was published on Friday, April 9, 2010 by The Huffington Post

Jobs We Can Believe In

by Deepak Bhargava

Today is the 75th anniversary of the Works Progress Administration, a $10 billion federal program that put millions of Americans to work during the Great Depression. The WPA enabled workers and their families to survive the ravages of the Great Depression, while taking on public works projects that created a sound foundation for greater economic growth.

Across the country, local organizations are holding events marking the anniversary and calling on Congress to pass legislation introduced by Rep. George Miller, D-Calif., that would put one million people to work almost immediately. The jobs created by the bill would help build schools and keep our streets safe, among other essential work in communities across America. The Local Jobs for America Act, which quickly gathered nearly 120 co-sponsors, is the best chance this country has to begin filling the massive shortfall in jobs that our economy is experiencing. (The prestigious Economic Policy Institute estimates that the economy is now nearly 17 million jobs short.)

Faced with the enormous unemployment created by the Great Depression, President Franklin Roosevelt and Congress acted decisively to get Americans back on their feet with real jobs, helping jump-start the economy. From LaGuardia Airport to Camp David to the Golden Gate Bridge, the legacy of WPA remains with us today. No matter where you reside, there are lasting testaments to the enduring legacy of infrastructure and rejuvenation created by the WPA.

We need the same type of bold investment to address the scale of our current crisis. The Local Jobs for America Act is an important first step. The Local Jobs for America Act will provide $100 billion over two years to create or save a million public and private sector jobs, extend critical support to local communities to maintain essential services, and fund private sector job training to help local businesses put people back to work. While the focus of the jobs created will be on education and other vital community services rather than infrastructure, the principle is the same: create meaningful jobs to meet public needs and provide long-term benefits for our communities and economy.

Congress and the Administration have failed to adequately address the needs in our communities and their efforts haven't been bold enough to make a dent in the enormous human disaster we face. Consider that almost 3.5 million people (a number higher than population of 21 entire states) have been unemployed for more than a year. That's a post-World War II record. Nor have efforts to date been targeted in a manner which can get the hardest hit communities back on their feet. It's important to note that the staggering 9.7% unemployment rate is even worse amongst some populations. Nearly 20 percent of African-American men are now jobless. The unemployment rate amongst Latinos is nearly 13 percent.

Franklin D. Roosevelt's bold actions to meet the challenge of economic crisis were founded on an important understanding that our present generation of leaders ought to heed on this important anniversary. Roosevelt understood that the depression was the product of government failing to live up to its obligations. Much like the Great Depression, the Great Recession grew out of the Republican leadership's decisions to block government oversight of markets and eschew any role for government in addressing persistent economic problems in communities across America. The failed policies of George Bush were not merely tactical mistakes - they were the fundamental product of an ideology that places greed above social responsibility.

Roosevelt's answer to all those who pronounced that every person should be on their own and that government does not have a role in creating mutual responsibility was simple and straight forward: "In our seeking for economic and political progress, we all go up -- or else we all go down." That's what a direct job creation program means: it recognizes that we are all in this together, and creating jobs in distressed communities benefits the nation and our economy as a whole.

On the anniversary of one of the most successful programs ever created by our government, we would do well to remember the notions of mutual responsibility and community values that underpinned its overwhelming success.

To join the movement for bold action, text change to 69866.

Copyright © 2010 HuffingtonPost.com, Inc.

Deepak Bhargava is Executive Director of the Center for Community Change, a national nonprofit organization whose mission is to develop the power and capacity of low-income people, especially low-income people of color, to change the policies and institutions that affect their lives.

Why More Immigrants Are An Answer to the Coming Boomer Entitlement Mess

by Robert Reich

Friday, April 9, 2010

I was born in 1946, just when the boomer wave began. Bill Clinton was born that year, too. So was George W. So was Laura Bush. And Ken Starr (remember him?) And then, the next year, Hillary Clinton. And soon Newt Gingrich (known as “Newty” as a boy). And Cher. Why so many of us begin getting born in 1946? Simple. My father was in World War II. He came home. My mother was waiting. Ditto for the others.

Sixty years later, we boomers have a lot to be worried about because most of us plan to retire in a few years and Social Security and Medicare are on the way to going bust. I should know because I used to be a trustee of the Social Security and Medicare trust funds. Those of you who are younger than we early boomers have even more to be worried about because if those funds go bust they won’t be there when you’re ready to retire.

It’s already starting to happen. This year Social Security will pay out more in benefits than it receives in payroll taxes. The tipping point came sooner than anyone expected because the recession has kicked so many people off payrolls. But it was coming anyway. And it adds new urgency to reforming Social Security — a task the president’s commission on the nation’s debt is focusing on.

So what’s the answer?

Fed Chair Ben Bernanke this week listed the choices. “To avoid large and unsustainable budget deficits,” he said in a speech on Wednesday, “the nation must choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.”

Bernanke is almost certainly right about “some combination,” but he leaves out one other possible remedy that should be included in that combination: Immigration.

You see, the biggest reason Social Security is in trouble, and Medicare as well, is because America is aging so fast. It’s not just that so many boomers are retiring. It’s also that seniors are living longer. And families are having fewer children.

Add it all up and the number of people who are working relative to the number who are retired keeps shrinking.

Forty years ago there were five workers for every retiree. Now there are three. Within a couple of decades, there will be only two workers per retiree. There’s no way just two workers will be able or willing to pay enough payroll taxes to keep benefits flowing to every retiree.

This is where immigration comes in. Most immigrants are young because the impoverished countries they come from are demographically the opposite of rich countries. Rather than aging populations, their populations are bursting with young people.

Yes, I know: There aren’t enough jobs right now even for Americans who want and need them. But once the American economy recovers, there will be. Take a long-term view and most new immigrants to the U.S. will be working for many decades.

Get it? One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree, and the simplest way to do that is to allow more immigrants into the United States.

Immigration reform and entitlement reform have a lot to do with one another.

Concentrated Animal Feeding Operations and the Filth They Produce

Welcome to

ANIMAL FACTORY

by David Kirby

"A propulsive chronicle. Thanks to Kirby’s extraordinary journalism, we have the most relatable, irrefutable, and unforgettable testimony yet to the hazards of industrial animal farming." BOOKLIST

"Kirby combines the narrative urgency of Sinclair's novel with the investigative reporting of Schlosser's book - Animal Factory is nonfiction, but reads like a thriller. There's no political pleading or ideological agitprop in this book; it's remarkably fair-minded, both sober and sobering... it has the potential to change the collective American mind about contemporary food issues." NATIONAL PUBLIC RADIO

Swine flu. MRSA. Unusual concentrations of cancer and other diseases. Massive fish kills from algal blooms and flesh-eating parasites. Recalls of meats, vegetables, and fruits because of deadly E-coli bacteria contamination. Recent public health crises raise urgent questions about how our animal-derived food is raised and brought to market. In Animal Factory, bestselling investigative journalist David Kirby exposes the powerful business and political interests behind large-scale factory farms, and tracks the far-reaching fallout that can contaminate our air, land, and water supply.

In this thoroughly researched book, Kirby follows three families and communities whose lives are utterly changed by immense neighboring animal farms. These facilities, known as “Concentrated Animal Feeding Operations,” or CAFOs, confine thousands of pigs, dairy cattle, and poultry in small spaces, often under stressful conditions, and generate enormous volumes of fecal and biological waste as well as other toxins. Weaving science, politics, big business, and everyday life, Kirby accompanies these families in their 20-year struggle against animal factories. A North Carolina fisherman takes on pig farms upstream to preserve his river, his family’s life, and his home. A mother in a small Illinois town pushes back against an outsized cattle farm and its devastating impact. And, a Washington state grandmother becomes an unlikely activist when her home is covered with soot and her water supply is compromised by runoff from leaking lagoons of animal waste.

Animal Factory is an important book about our American food system gone terribly wrong—and the people who are fighting to restore sustainable farming practices and safe natural resources.

Good Reasons for Stopping the Insane War in Afghanistan

Published on Wednesday, April 7, 2010 by CommonDreams.org

Stop Being and Funding the Evil We Deplore

by Medea Benjamin

“Let us not become the evil we deplore”, warned Cong. Barbara Lee when she cast the lone vote against going to war in Afghanistan in September 2001. Well, it’s time to look in the mirror—and it’s not a pretty picture.

Just contemplate these two incidents, one that took place in Iraq in 2007 and has now gone viral on the internet, the other that took place in Gardaz, Afghanistan in February 2010.

Baghdad: U.S. aerial shooters chuckle as they let loose a torrent of bullets, killing over a dozen people, including two Reuters staff. Then they unleash another round on an Iraqi who—passing by in his van—tries to help the wounded. When the American soldiers discover they have hit two children in the van, they can be heard snorting, “It's their fault for bringing their kids into a battle.”

No one—from those who pulled the triggers to those who gave the okay—has been punished for the murder of these innocents. That’s because this blatant disregard for human life falls within the rules of engagement. And the only reason the incident came to light is thanks to Reuters for its persistence and to Wikileaks for procuring the footage and putting on their site.

Gardez, Afghanistan: US Special Operations forces surround a home where a party is taking place for the birth of a grandson. Two men come out to see why they are being surrounded. They are shot dead. The US soldiers later report they found three women inside the house, gagged and murdered by their own relatives.

The Times of London later reports that the women were killed by the American soldiers. Not only that. To hide the murder, the soldiers dug bullets out of the women’s bodies and washed the wounds with alcohol to hide the evidence. One of the women was a pregnant mother of 10; another was a pregnant mother of six; the third was a teenage girl.

No one has been punished in this incident either. General McChrystal was briefed on the case in March but said nothing about it. The murders only came to light because the Times reporter Jerome Starkey visited the family and talked to Afghan investigators.

While McChrystal issued a new directive in July 2009 restricting activities likely to result in civilian casualties and urged troops to act with greater sensitivity to Afghan cultural and religious concerns, the killing of innocents continues. According to the UN, at least 98 Afghan civilians were killed in night raids in 2009.

The same is true at checkpoints. In a rare moment of honesty, while addressing a virtual townhall with troops in Afghanistan, General McChrystal admitted, "We really ask a lot of our young service people out on the checkpoints because there's danger, they're asked to make very rapid decisions in often very unclear situations. However, to my knowledge, in the nine-plus months I've been here, not a single case where we have engaged in an escalation of force incident and hurt someone has it turned out that the vehicle had a suicide bomb or weapons in it and, in many cases, had families in it…We've shot an amazing number of people and killed a number and, to my knowledge, none has proven to have been a real threat to the force."

Our killing of civilians has spread to Pakistan, where the most deadly attacks come from unmanned drones. A report by the New America Foundation speculates that U.S. drone strikes in Pakistan have killed somewhere around 700 to 1,000 people, one-third of them civilians.

As Americans on conscience, we can’t stand by and allow these killings to continue. Here are some actions we should we be calling for:

• stop the air wars, including the deadly drone attacks in Afghanistan and Pakistan;
• stop the night raids that sow terror and abuse; 
• hold the soldiers and higher ups accountable for their actions, including General McChrystal; 
• pressure Congress to hold hearings on these atrocities;
• organize teach-ins that educate the public and help build the anti-war movement.
• Sign on to CODEPINK's open letter condemning the cover-ups and demanding accountability!

These are all critical actions to engage in. But there is really only one way to stop the collateral murder by our military: stop the wars and bring our troops home. The Obama administration is now asking Congress for another $33 billion of our tax dollars for war. Enough is enough. These are wars we can’t afford, we can’t win, and we can’t condone on moral grounds. Call your representatives—202-224-3121—and tell them “No more money for war.” It’s time we stop being and funding the evil we deplore.

Medea Benjamin ([email protected]) is the cofounder of CODEPINK (www.codepinkalert.org) and Global Exchange (www.globalexchange.org).

Break Up The Banks

by Robert Reich

Monday, April 5, 2010

A fight is brewing in Washington – or, at the least, it ought to be brewing – over whether to put limits on the size of financial entities in order that none becomes “too big to fail” in a future financial crisis.

Some background: The big banks that got federal bailouts, as well as their supporters in the Administration and on the Hill, repeatedly say much of the cost of the giant taxpayer-funded bailout has already been repaid to the federal government by the banks that were bailed out. Hence, the actual cost of the bailout, they argue, is a small fraction of the $700 billion Congress appropriated.

True, but the apologists for the bailout leave out one gargantuan cost — the damage to the economy, which we’re still living with (witness the latest unemployment figures). Leave it to the Brits to calculate this. Andrew Haldane, Bank of England’s Financial Stability Director, figures the financial crisis brought on by irresponsible bankers and regulators has cost the world economy about $4 trillion so far.

So while the bailout itself is gradually being repaid (don’t hold your breath until AIG and GM repay, by the way), the cost of the failures that made the bailout necessary totals vast multiples of that.

Needless to say, the danger of an even bigger cost in coming years continues to grow because we still don’t have a new law to prevent what happened from happening again. In fact, now that they know for sure they’ll be bailed out, Wall Street banks – and those who lend to them or invest in them – have every incentive to take even bigger risks. In effect, taxpayers are implicitly subsidizing them to do so. (Haldane figures the value of that implicit subsidy to be about $60 billion a year for each big bank.)

Congress and the White House tell us not to worry because financial reform legislation will contain what’s called a “resolution” mechanism allowing regulators to wind down any big bank that gets into trouble. (Think bankruptcy with more safeguards against runs by bank by creditors wanting to get their money out right away.) By virtue of this resolution authority, they say, future bank creditors will have to price in the possibility of the bank being allowed to fail. Hence, the implicit subsidy for risk-taking will disappear. At least that’s the theory.

But the theory isn’t likely to work in practice. Do you really believe bank regulators will use the resolution authority — especially if two or more giant banks are endangered at the same time? Multiple threats are almost certain because each big bank races to copy any gambling technique that pays off big for any other. The reality is, they’ll get bailed out.

Even if the resolution authority were combined with an array of new regulations designed to cover all the “shadow banking” operations of the giant banks — requiring that they put up more capital and thereby limit their leverage – there’s no way such regulations can succeed. The giant banks already hire fleets of lawyers, accountants, and financial entrepreneurs to find loopholes in every existing regulation. 

Finally, consider the political power of the big Wall Street banks. They and their executives and employees are now among the biggest contributors to both parties. Wall Street lobbyists are crawling over Capitol Hill. The banks and their lobbyists will ensure that regulatory loopholes are built into regulations from the start. Remember: They dismembered Glass-Steagall (with the help of their friends in the Fed, on the Hill, and in the Clinton White House), and fought off derivative regulation (ditto).

As long as the big banks are allowed to remain big, their political leverage over Washington will remain big.  And as long as their political leverage remains big, the taxpayer and economic tab for the next mess they create will be big. 

By all means, give regulators resolution authority and also impose the tightest regulations possible. But Congress and the White House shouldn’t stop there. Limits should be placed on how big big banks can become.

How big? No one has been able to show significiant efficiencies over $100 billion in assets. Make that the outside limit.

To be sure, smaller banks might still be subject to runs. That’s why the Federal Deposit Insurance Corporation was created in the 1930s – to ensure depositors in the event a bank gets into trouble, so they won’t have to run to protect their savings. And why the Glass-Steagall Act was passed – to separate commercial banking (where depositors put their money) from investment banking (where betting is done). We could expand insurance to certain categories of bank creditor, and we should resurrect Glass-Stagall.

But the only way to make sure no bank it too big to fail is to make sure no bank is too big. If Congress and the White House fail to do this, you have every reason to believe it’s because Wall Street has paid them not to. 

Hamid Karzai Wants to Join the Taliban, Two Pregnant Mothers Killed by US Forces, Why is the US Wasting its Money in Afghanistan?

by John Lawrence

Recent reports have quoted an exasperated Hamid Karzai as saying that he was thinking of joining the Taliban because he's so fed up with the US telling him what to do and putting pressure on him.

From the Huffington Post:

(AP) KABUL - Afghan President Hamid Karzai threatened over the weekend to quit the political process and join the Taliban if he continued to come under outside pressure to reform, several members of parliament said Monday.

Karzai made the unusual statement at a closed-door meeting Saturday with selected lawmakers -- just days after kicking up a diplomatic controversy with remarks alleging foreigners were behind fraud in last year's disputed elections.

Lawmakers dismissed the latest comment as hyperbole, but it will add to the impression the president -- who relies on tens of thousands of U.S. and NATO forces to fight the insurgency and prop up his government -- is growing increasingly erratic and unable to exert authority without attacking his foreign backers.

"He said that 'if I come under foreign pressure, I might join the Taliban'," said Farooq Marenai, who represents the eastern province of Nangarhar.

"He said rebelling would change to resistance," Marenai said -- apparently suggesting that the militant movement would then be redefined as one of resistance against a foreign occupation rather than a rebellion against an elected government.

Marenai said Karzai appeared nervous and repeatedly demanded to know why parliament last week had rejected legal reforms that would have strengthened the president's authority over the country's electoral institutions.

Two other lawmakers said Karzai twice raised the threat to join the insurgency.

Meanwhile, US forces continue to kill innocent civilians in Afghanistan thus creating many more terrorists than they are eliminating. The latest atrocity is the killing of two pregnant mothers, the one the mother of 10 children and the other a mother of 7. Is it worth it to kill one terrorist? I don't think so. It's blood on the hands of the US military and by extension of the US people. McCrystal has apologized over and over again for killing Afghanistani civilians. But apologies are not enough especially when the same thing continues to happen again and again.

Meanwhile, in Kyrgistan the government has been overthrown by a group that looks unfavorably on the US military base located there which happens to be the main supply center for Afghanistan. If the US can't use this base, its already phenomenal cost of doing war in Afghanistan will skyrocket even farther. Is it worth it? All the money for this war is being borrowed from the Chinese. So as the Chinese continue to do good works in the war torn countries that the US has invaded like building roads and dams, the US continues to become more indebted to the Chinese effectively becoming a Chinese client state. Enormous amounts of interest on the debt owed the Chinese must be paid year after year. The Chinese are using this money to buy up world resources while the US is getting nowhere in terms of its claims on world resources due to its military power. The US is essentially burning itself out while others pick up the pieces.

The US cannot continue to say "Whoopsie" as civilians are killed on a daily basis including some horribly tragic situations like the killing of two pregnant mothers with the responsibility for 17 children between them not to mention their unborn babies. Put yourself in their shoes. How would you feel if a foreign invader did the same thing here ... and all to support the non-government of a corrupt idiot like Hamid Karzai?!

Obama's Missed Oil Drilling Opportunity

by John Lawrence

President Obama is opening up certain portions of the coastline for oil drilling. Well and good, but he missed the boat insofar as changing the nature of off shore drilling. The oil located offshore in US waters is owned by the taxpayers of the US. Yet all the profits will go to the oil companies. The US taxpayers are essentially giving the oil away to the oil companies.

Not so in Norway. Every cent of profits from offshore drilling is split 50-50 with the Norwegian taxpayers. The US with its desperate need for new revenues and its humungus national debt, nevertheless, will give all the profits to private corporations. Norway funds its social security program with the profits derived for the people of Norway from offshore drilling. It essentially subcontracts out the process for retrieving the oil to private companies who then are obliged to split the profits with the taxpayers.

But then all resources in the US are under private corporate control so there is nothing that would serve as a source of national wealth. Contrast that with Norway in which the state has a 50% interest in all oil sales. That still leaves 50% for Big Oil. For the US, however, 50% is not enough. The US gives essentially all the profits from oil finds on its property to Big Oil. Other states share the profits among their citizens and private enterprise. The US essentially has a weak central government controlled by lobbyists representing corporate interests. The US government itself, supposedly a democracy, does nothing to accumulate wealth in behalf of its citizens the way other nations do. Even Kazahkstan, the butt of the movie Borat's jokes, has a Sovereign Wealth Fund. Kazahkstan may get the last laugh while the US has to eat crow. Are you ready for Borat, the sequel?

Uncle Sucker, er uh, Sam has a Sovereign Debt Fund while other countries have Sovereign Wealth Funds. The US accumulates debt while other countries accumulate wealth. While the US spends trillions fighting needless wars of aggression, China is eating our lunch by loaning us money and buying up natural resources around the world. Thus China is really winning any future resource wars without firing a shot. China is furthering its own interests by totally peaceful means. China's system is essentially state capitalism, which means that the nation as a whole is in the business of accumulating wealth. Not so in the US where private corporations are in the business of stripping the US government of its wealth. A recent example is the trillions of dollars spent in bailing out US banks, but other examples abound.

Sun Tzu, the Chinese philospher who wrote The Art of War emphasized the Taoist approach of obtaining one's goals without firing a shot if possible. China is well on its way to becoming the 21st century's ascendant nation uses Sun Tzu's principles. China is running its chief rival into debt while the US fights futile wars. At the same time China is tying up valuable world resources by peaceful means not wasting a yuan on ammo. A totally brilliant strategy!

Mark McNeilly writes in Sun Tzu and the Art of Modern Warfare that a modern interpretation of Sun and his importance throughout Chinese history is critical in understanding China's push to becoming a superpower in the 21st century. Modern Chinese scholars explicitly rely on historical strategic lessons and The Art of War in developing their theories, seeing a direct relationship between their modern struggles and those of China in Sun Tzu's time. There is a great perceived value in Sun Tzu's teachings and other traditional Chinese writers, which are used regularly in developing the strategies of the Chinese state and its leaders.

I have blogged previously on this:

Sun Tzu in "The Art of War" said that the best way to overtake your enemies is without even firing a shot. This is happening before our eyes as the Chinese have overtaken the US economically, effectively turning the US into a client state. The role of Europe in providing adequate safety nets for its citizens while not investing heavily in weaponry has had somewhat the same effect ironically. The Europeans do not have the same fear of terrorism evidently that the US does. Why else are they not sending a whole lot of troops to Afghanistan? It's as if they're saying "well, if you (the US) want to waste your money on military adventures, go ahead, but we'd rather spend ours on the welfare of our people."

If the US is foolish enough to continue espousing "free trade" when the result has been massive trade deficits and the export of its manufacturing base to China, then the US has become a sclerotic old man who can't act with any intelligence in his own interests. If the US political system allows one party to say "no" to everything when it is of paramount importance to act now with no time to waste, then the US is only hastening its own decline.

Frank Thomas wrote the following to me in an email:

"I was very disappointed in Obama's message about exploring for fossil fuels offshore [in] Alaska where he apparently didn't adopt some version of Norway's policy that the government (the taxpayers) is the de facto owner of offshore property. Thus, this entitles the central government to be in a 50-50 partnership with oil firms for exploration and development of any finds. Government's equity contribution is the land while the oil firm's equity contribution is the exploration/development cash (equity) investment. Arrangements can be made that the oil firm gets FIRST an agreed 10% annual return on its investment, then the government gets its 10% return on a comparable imputed investment for the land, with any remaining profit/cashflow from the find's production lifecycle shared 50-50 between the partners.  

"It's really quite stupid and irresponsible, if not downright cowardly, how we allow the major oil firms to gobble up all the profit and cashflow from exploitation of such scarce, precious natural resources. The oil firms will fight this with some standard arguments, but eventually a firm will enter into such a partnership arrangement, knowing full well how profitable many of the deeper water oil-gas finds can be. I saw firsthand offshore oil-gas joint ownership cooperations working nicely, for example, in Norway, when I was in the offshore construction and contracting business with some big Dutch players in the 70s -- particularly during the North Sea oil-gas discovery boom years. The offshore oil-gas partnership policy Norway started in the early 70s has led to the country's huge sovereign fund from which they are very wealthy just from the annual interest earned on the fund today."

So as the US founders and misses opportunities for reducing its deficit, other countries, notably China and Norway, are not missing any opportunity for increasing their wealth. The notion that the US is a rich nation while China is a poor nation is laughable. We've already debunked that. China is using the Taoist philosophy, the rope-a-dope philosophy of Muhammid Ali, if you will, to accomplish its goals by entirely peaceful means. Actually it should be applauded for that. Meanwhile, the US is stuck in its tracks, not being able to disengage from costly and futile wars, not being able to disengage from its own philosophy of free trade, deregulation and privatization even when that philosophy has been proven to be a failure and not being able to overcome its own sclerotic political system which is dominated by monied interests for the benefit of large corporations. The party of "no" is the party of complete and total capitulation and pre-sell-out to wealth and corporate power and domination. Obama has been able to put his finger in the dike of national regression, but when the Republicans retake power, they will open the floodgates of backwardness and ignorance.
 

Greenspan, Summers, and Why the Economy Is So Out of Whack

by Robert Reich

Sunday, April 4, 2010

I’m in the “green room” at ABC News, waiting to join a roundtable panel discussion on ABC’s weekly Sunday news program, This Week.

Alan Greenspan is now being interviewed. He says he bore no responsibility for the housing bubble that catapulted the nation into a financial crisis in 2008 because no one could have known about the bubble when he chaired the Fed in the years before it burst. Larry Summers was interviewed just before Greenspan. He said the economy is expanding, that the Administration is doing everything it can to bring jobs back, and that the regulatory reform bills moving on the Hill will prevent another financial crisis.

What?

If any single person is most responsible for the financial crisis, it’s Alan Greenspan. He presided over a Fed that lowered interest rates to zero (adjusted for inflation) but failed to prevent banks from using essentially free money to speculate wildly. You do not have to be a brain surgeon to understand that if money is free, banks will take it and lend it out. And if oversight is inadequate, the banks will lend the money to anyone who can stand up straight and to many who cannot. The result will be a giant subprime lending bubble that will burst. 

If any three people are most responsible for the failure of financial regulation, they are Greenspan, Larry Summers, and my former colleague, Bob Rubin. In 1999 they advised Congress to repeal the Glass-Steagall Act, which since 1933 had separated commercial from investment banking. By 1999, Wall Street was salivating over such a repeal because it wanted to create financial supermarkets that could use commercial deposits to place bets in the financial casino. That would yield the Street trillions. 

At the same time, Greenspan, Summers, and Rubin also quashed the efforts of the Commodity Futures Trading Corporation to regulate derivatives, when its director began to worry that derivative trading already was getting out of control.

Yet Greenspan continues to take no responsibility for what occurred. In the interview he just completed he avoiding saying anything about the failure of the Fed under his watch to adequately oversee the banks, and the absence of sufficient financial regulation to begin with. 

I dislike singling out individuals for blame or praise in a political system as complex as that of the United States but I worry the nation is not on the right economic road, and that these individuals — one of whom advises the President directly and the others who continue to exert substantial influence among policy makers — still don’t get it. 

The direction financial reform is taking is not encouraging. Both the bill that emerged from the House and the one emerging from the Senate are filled with loopholes that continue to allow reckless trading of derivatives. Neither bill adequately prevents banks from becoming insolvent because of their reckless trades. Neither limits the size of banks or busts up the big ones. Neither resurrects the Glass-Steagall Act. Neither adequately regulates hedge funds. 

More fundamentally, neither bill begins to rectify the basic distortion in the national economy whose rewards and incentives are grotesquely tipped toward Wall Street and financial entrepreneurialism, and away from Main Street and real entrepreneurialism. It was just reported, for example, that America’s top 25 hedge fund managers last year earned an average of $3 billion each. They continue to pay a federal income tax of 15 percent on most of that, by the way, because their lobbying efforts have been so successful. 

Meanwhile, the so-called jobs bills emerging from Congress and the White House are puny relative to the challenge of restoring jobs in America. Last Friday’s jobs report, read most positively, showed 112,000 private-sector jobs added to the economy in March. But that’s below the number needed simply to keep up with an expanding population. In other words, we’re actually worse off now than we were a month ago. At the same time, the median wage of Americans with jobs keep dropping. 

The American economy is seriously out of whack. The two people interviewed this morning don’t seem to understand how far.

Elizabeth Warren Fights to Protect Consumers From Wall Street

Published on Wednesday, April 7, 2010 by Creators Syndicate

An Inside Outsider Takes on Wall Street

by Jim Hightower

Wall Street banksters — who could possibly love them?

OK, presumably their mommas do, and possibly their pet dogs, but that's it. The general public loathes them and would be delighted to see the whole bunch tarred, feathered and deported to a barren atoll, where their punishment would be living with themselves.

These preening, narcissistic elites turned America's financial system into a rigged casino game that paid off big-time for them. Then it crashed, wrecking our real economy and making life miserable for millions of people. Yet, there they are, still on their exalted thrones, still playing casino games (now with our bailout funds) and still lavishing obscene bonuses on themselves.

Despite their perfidy, they've not been made to pay any price by our public officials. Americans of all political stripes have watched in dismay as both Democratic and Republican leaders rushed to pat the hands and soothe the fevered brows not of us aggrieved parties, but of the banksters.

(Democrats at least publicly scolded the Wall Street chieftains, while such Republican bosses as Rep. John Boehner of Ohio and Sen. John Cornyn of Texas have turned public dismay into disgust by openly blowing kisses to the disgraced bankers. Boehner and Cornyn have been pledging that their party will keep fending off legislative restrictions on executive pay if Wall Street would only show a little return love in the form of more campaign cash for GOP coffers.)

Good grief, is there no sanity, no smidgen of integrity? Are no public officials on our side?

Meet Elizabeth Warren. She heads an independent agency that Congress set up in 2008 to monitor and report on the government bailout of Wall Street — and the main thing you need to know about her is that the big-shots of finance despise her. Now that's refreshing!

Warren doesn't play the smooth insider game of Bohner, Cornyn, Timothy Geithner and Larry Summers. She doesn't because she's not a Wall Street insider. "Dang gummit," she says in her native Oklahoma twang, "somebody has got to stand up on behalf of middle-class families."

While she doesn't have the power to reform the Street's ingrained culture of greed, she can shine a light on it — and she has been a fearless and tenacious griller of Gucci-clad bankers and weak-willed regulators.

Her admiring husband describes her as a grandmother who can make grown men cry.

Coming from a working-class family, Warren knows first-hand what it is to face financial crisis (including foreclosure) and to feel the crushing power of uncaring banks. "I learned early on what debt means, how vulnerable it makes people," she told The New York Times last month. At age 16, she won a debate scholarship to college, then worked her way into law school and ultimately became a leading authority on bankruptcy.

Despite her success as a lawyer, she hasn't forgotten her populist roots and purpose. Warren is Wall Street's worst nightmare: a middle-class champion who gives a damn about workaday people, is smart and tenacious — and can't be bought.

She is now bringing her background, legal expertise and moral outrage to bear on a proposal that she conceived and developed: a new agency with real regulatory teeth that would exist solely to protect consumers against banker deceit, scams and greed. Big bankers keel over in a dead faint at the very mention of Warren's proposal for a totally independent Consumer Financial Regulatory Agency, and they're lobbying ferociously to kill it ... and to demonize her.

However, the Wall Street reform package already passed by the House does include the independent CFPA she proposed. The Senate bill also includes a CFPA, but wimps out by putting it in the soft, banker-coddling hands of the Federal Reserve. The fight rages on, and its hard to have much faith that Washington would really go against Wall Street — but Warren's a real fighter, and she has strong progressive supporters both inside and outside the Capital City.

She gives us someone to cheer for — and to back. To join Elizabeth Warren's gutsy push on our behalf, contact the grass-roots coalition called Americans for Financial Reform: ourfinancialsecurity.org, (202) 263-4533.

© 2010 Creators.com

National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.

Congress Vacations While Unemployed Lose Benefits

Published on Monday, April 5, 2010 by CommonDreams.org

Shame on All of You for Hurting the Least of These Again

by Donna Smith

So, Congress is letting unemployment benefits expire for many thousands of Americans just because they cannot work together for the public good?  And our President cannot even step in and step up to protect these most vulnerable citizens during this recession?  Shame.  Shame on the whole lot of them.

From MSNBC today:

"Senate Majority Leader Harry Reid (D-Nev.) criticized Republicans Sunday for blocking unemployment benefits, which will expire Monday while Congress is out of session," The Hill reports. Reid issued a statement saying that Republicans making 'excuses' for stalling the benefits package and are hurting the unemployed. 'Families in Nevada and across America are struggling to make ends meet, and many are relying on unemployment insurance and health benefits as they look to find work,' he said. 'It is inexcusable and irresponsible for Republicans to once again block the extension of these benefits. Their excuses ring hollow to American workers who lost their jobs through no fault of their own and are trying to put food on the table, pay the rent, and take their children to the doctors.'"

The Republicans were angry about the passage of the lame health insurance recovery act (also known as healthcare reform bill) so they saw fit to block the extension of unemployment benefits in order to punish the Democrats.  Really?  Who got punished?  And the Dems are blaming the Repubs for the ending of the benefits even though they were so busy getting out of town for their own spring recess that they left Washington just complaining about it and not demanding some other way to get the extension approved so that millions of people would not suffer.  So much for the Dems really caring about these families.

The President had some pretty important Easter plans following the health bill signing celebration, so he couldn't possibly take a pro-active stand to demand a fix for the lost money, could he?

So, during this most holy of weeks for many, our government officials saw fit to take their recess and let the unemployed whose benefits were expiring today just suffer.

Do they know what it's like to have that unemployment check not arrive?  Already much less income than one gets when working, the benefits are sometimes just enough to prevent folks from qualifying for other government help but not enough to really afford payment of all the bills.  Being on unemployment is no picnic but it is better than nothing.

I recall weeks when those unemployment checks were the difference between buying a child's asthma inhaler and not being able to do so.  And I suspect that thousands of families are facing just those kinds of decisions this week as their benefit checks will not arrive.  Would they like watching their children wheeze and gasp for air?  Would they want their utilities cut off or to see an eviction notice posted on the door.   The pharmacist and the landlord, the tax collector and the utility companies don't really give a damn whether the Republicans were punishing the Democrats by cutting benefits - the bill collectors want their bills paid.  On time.  No wiggle room.

Cutting off unemployment benefits during this time is causing great harm.  It isn't just about not being able to have a spring holiday or a new iPad, it's about having groceries and a roof over one's head.  I know we all understand clearly after the healthcare debate that precious few of our elected officials really believe healthcare is a human right for all persons, but now it should be abundantly clear that they also have nearly total disregard for the suffering resulting from their failure to protect most human rights in this nation.

Cruel and unusual punishment is forbidden by the Constitution, but not by this Congress and not by this President.  I am angry with them all for not being in the least bit courageous or creative in finding a way around and through their differences that did not harm the people they are elected to represent.  Shame on you all.  And may you never know what it is to have such cruelty thrown your way by people who pretend they care. Restore the benefits, by whatever means necessary, before more people suffer.  Just because you are on recess doesn't mean you can hide from your responsibilities.  The people who elected you sure can't.  Get it done.

Donna Smith is a community organizer for National Nurses United (the new national arm of the California Nurses Association) and National Co-Chair for the Progressive Democrats of America Healthcare Not Warfare campaign.

How Americans Are Propagandized About Afghanistan

Published on Monday, April 5, 2010 by Salon.com

 

by Glenn Greenwald

On February 12 of this year, U.S. forces entered a village in the Paktia Province in Afghanistan and, after surrounding a home where a celebration of a new birth was taking place, shot dead two male civilians (government officials) who exited the house in order to inquire why they had been surrounded.  The Pentagon then issued a statement claiming that (a) the dead were all "insurgents" or terrorists, (b) the bodies of three women had been found bound and gagged inside the home (including two pregnant women, one a mother of 10 children and the other a mother of six children, and a teenage girl), and (c) suggested that the women had already been killed by the time the U.S. had arrived, likely the victim of "honor killings" by the Taliban militants killed in the attack.

Although numerous witnesses on the scene as well as local investigators vehemently disputed the Pentagon's version, and insisted that all of the dead (including the women) were civilians and were killed by U.S. forces, the American media largely adopted the Pentagon's version, often without any questions.  But enough evidence has now emerged disproving those claims such that the Pentagon was forced yesterday to admit that their original version was totally false and that it was U.S. troops who killed the women:

After initially denying involvement or any cover-up in the deaths of three Afghan women during a badly bungled American Special Operations assault in February, the American-led military command in Kabul admitted late on Sunday that its forces had, in fact, killed the women during the nighttime raid.

One NATO official said that there was likely an effort to cover-up what happened by U.S. troops via evidence tampering on the scene (though other NATO officials deny this claim).  The Times of London actually reported yesterday that, at least according to Afghan investigators, "US special forces soldiers dug bullets out of their victims' bodies in the bloody aftermath of a botched night raid, then washed the wounds with alcohol before lying to their superiors about what happened."

What is clear -- yet again -- is how completely misinformed and propagandized Americans continue to be by the American media, which constantly "reports" on crucial events in Afghanistan by doing nothing more than mindlessly and unquestioningly passing along U.S. government claims as though they are fact.  Here, for instance, is how the Paktia incident was "reported" by CNN on February 12:

Note how the headline states as fact that the women were dead as the result of an "honor killing."  The entire CNN article does nothing but repeat what an "unnamed senior military official said" about the incident, and it even helpfully explained:

An honor killing is a murder carried out by a family or community member against someone thought to have brought dishonor onto them.

The U.S. official said it isn't clear whether the dishonor in this case stemmed from accusations of acts such as adultery or even cooperating with NATO forces.

"It has the earmarks of a traditional honor killing," said the official, who added the Taliban could be responsible. . .

The operation unfolded when Afghan and international forces went to the compound, which was thought to be a site of militant activity.  A firefight ensued and several insurgents died, several people left the compound, and eight others were detained.

Similarly, The New York Times, while noting that there were "varying accounts of what happened" among U.S. forces and Afghan police, also passed along the Pentagon's false version of events with no questioning.  Here's the NYT's February 12 article in its entirety:

Several civilians were killed in Paktia Province on Friday when a joint Afghan-NATO force went to investigate a report of militant activity, but NATO and the Afghan police gave varying accounts of what happened. A NATO statement said the joint force went to a compound in the village of Khatabeh, in the Gardez district, where insurgents opened fire on them from a residential compound. Several insurgents were killed and a large number of men, women and children fled and were detained by the NATO force. Inside the compound, soldiers "found the bodies of three women who had been tied up, gagged and killed," the NATO statement said. The Paktia Province police chief, Aziz Ahmad Wardak, confirmed the episode but said the dead in the house were two men and three women, who he said were killed by Taliban militants. He said the killings took place while the residents were celebrating the birth of a baby.

CNN conveyed its version of events without the slightest contradiction or doubt, and the NYT simply ignored entirely the claims of the residents of the village -- notwithstanding the fact that serious conflicts about what actually took place were known from the very beginning.  Consider, for instance, this February 12 article by Amir Shah of the Associated Press, who actually bothered to pick up a phone to determine if the Pentagon's claims were true before "reporting" them as fact; this is what Shah found:

However, relatives of the dead accused American forces of being responsible for the deaths of all five people when contacted by The Associated Press by phone.

A man who identified himself as Hamidullah said he had been in the home as some 20 people gathered to celebrate the birth of a son when a group of men he described as "U.S. special forces" surrounded the compound.

When one man came out into the courtyard to ask why, Hamidullah said he watched U.S. forces gun him down.

"Daoud was coming out of the house to ask what was going on. And then they shot him," he said.

Then they killed a second man, Hamidullah said. The rest of the group were forced out into the yard, made to kneel and had their hands bound behind their back, he said, breaking off crying without giving any further details.

A deputy provincial council member in Gardez, Shahyesta Jan Ahadi, said news of the operation has inflamed the local community that believes the Americans were responsible for the deaths.

"Last night, the Americans conducted an operation in a house and killed five innocent people, including three women. The people are so angry," he said.

The Pentagon's version of events was vehemently disputed from the start.  But there was not a hint of any of that in the CNN or NYT "reporting," which simply adopted the press release claims of NATO forces.  That Press Release, false from start to finish, claimed that "a combined force of Afghan and international troops last night found the bound and gagged bodies of two women and the bodies of two men during an operation in the province's Gardez district," and "members of the combined force found the bodies inside."  Ironically, the Pentagon Press Release ended this way:  "'ISAF continually works with our Afghan partners to fight criminals and terrorists who do not care about the life of civilians,' ISAF spokesman Canadian army Brig. Gen. Eric Tremblay said."  On March 16 -- more than a month later -- the NYT ran a story detailing the gruesome claims of residents about what really happened; click that link for the horrific details and to get a sense for how false were the Pentagon and U.S. media's original claims about what took place.

Contrast the pure propaganda dissemination of the American media with the immediate reporting of the Pajhwok Afghan News, an independent news agency created in Afghanistan to enable war reporting  by Afghans.  Here is how they reported the Pakita incident from the beginning, on Febraury 12 (via NEXIS):

US Special Forces have shot dead a district intelligence chief along with four family members in the volatile southeastern province of Paktia, a senior police officer claimed on Friday. Brig. Gen. Ghulam Dastagir Rustamyar explained that Daud and his family were celebrating the birth of his son. But acting on a misleading tip-off, foreign troops raided the intelligence official's residence. . . . He said the dead included Daud, his brother Zahir, an employee of the attorney's office, and three women. . . .

But the International Security Assistance Force (ISAF) claimed Afghan and international forces found the bound and gagged bodies of three women during the operation in Gardez late Thursday night.  "The joint force went to a compound near the village of Khatabeh, after intelligence confirmed militant activity. Several insurgents engaged the joint force in a firefight and were killed," the ISAF press office in Kabul said.

As a result of the raid, the multinational force added, a large number of men, women, and children exited the compound. They were detained by the joint force.

When the troops entered the compound, according to the press release, they conducted a thorough search and found the bodies of three women who had been tied up, gagged and killed.  "The bodies had been hidden in an adjacent room."

Note the crucial difference:   the Afghan news service shaped its report based on the statements of actual witnesses on the ground and local investigators, while also including the Pentagon's version of events.   Put another way, anyone reading about what happened from American news outlets would be completely misled and propagandized, while anyone reading the Pajhowk Afghan News would have been informed, because they treated official claims with skepticism rather than uncritical reverence.

* * * * * 

All of this is a chronic problem, not an isolated one, with war reporting generally and events in Afghanistan specifically.  Just consider what happened when the U.S. military was forced in 2008 to retract its claims about a brutal air raid in Azizabad.  The Pentagon had vehemently denied the villagers' claim that close to 100 civilians had been killed and that no Taliban were in the vicinity:  until a video emerged proving the villagers' claims were true and the Pentagon's false.  Last week, TPM highlighted a recent, entirely overlooked statement from Gen. McChrystal, where he admitted, regarding U.S. killings of Afghans at check points:  "to my knowledge, in the nine-plus months I've been here, not a single case where we have engaged in an escalation of force incident and hurt someone has it turned out that the vehicle had a suicide bomb or weapons in it and, in many cases, had families in it. . . . We've shot an amazing number of people and killed a number and, to my knowledge, none has proven to have been a real threat to the force."  And as I documented before, the U.S. media constantly repeats false Pentagon claims about American air attacks around the world in order to create the false impression that Key Terrorists were killed while no civilians were.

At the Nieman Watchdog Foundation, Jeremy Starkey, the Afghanistan war reporter for The Times of London, has a crucial, must-read piece on all of this.  Amazingly, his piece was written three weeks ago, and recounted in detail:  (a) how clearly the U.S.-led forces had lied about what happened in Paktia; and (b) the reasons why the U.S. media continuously spews false government propaganda about the war.  Starkey wrote under this headline:

In this mid-March piece, Starkey explained how he had discovered that NATO's claims about the Haktia incident were false (he recounted his evidence in gruesome detail in the Times on March 13), and more importantly, highlighted why the U.S. media so frequently disseminates false NATO claims with no questioning:

The only way I found out NATO had lied -- deliberately or otherwise -- was because I went to the scene of the raid, in Paktia province, and spent three days interviewing the survivors. In Afghanistan that is quite unusual.

NATO is rarely called to account. Their version of events, usually originating from the soldiers involved, is rarely seriously challenged. . . .

It's not the first time I've found NATO lying, but this is perhaps the most harrowing instance, and every time I go through the same gamut of emotions. I am shocked and appalled that brave men in uniform misrepresent events. Then I feel naïve.

There are a handful of truly fearless reporters in Afghanistan constantly trying to break the military's monopoly on access to the front. But far too many of our colleagues accept the spin-laden press releases churned out of the Kabul headquarters. Suicide bombers are "cowards," NATO attacks on civilians are "tragic accidents," intelligence is foolproof and only militants get arrested.

Starkey describes the some of the understandable reasons so many reporters do nothing more than regurgitate officials claims:  resource constraints, organizations limits, dangers of traveling around, and the "embed culture."  But he also recounts how NATO tries to intimidate, censor and punish any reporters like him who report adversely on official claims.  Illustratively, in response to Starkey's March 13 article detailing what really happened at Paktia and the cover-up that ensued, NATO issued a formal statement naming him and insisting that this article was "categorically false." As recently as mid-March, NATO was still claiming -- falsely -- that the women in Paktia were killed prior to the arrival of American troops.

There are some very courageous and intrepid reporters in Afghanistan, including some who work for American media outlets.  It was, for instance, a superb and brave investigative report by the NYT's Carlotta Gall in Afghanistan that uncovered what really happened in that air attack Azizabad and documented the Pentagon's false claims.  But far more often, Americans are completely misled about events in Afghanistan by the combination of false official claims and mindless stenographic American "journalism."  And no matter how many times this process is exposed -- from Jessica Lynch's heroic firefight to Pat Tillman's death by Al Qeada -- this propaganda process never diminishes at all.

Copyright ©2010 Salon Media Group, Inc.

Glenn Greenwald was previously a constitutional law and civil rights litigator in New York. He is the author of the New York Times Bestselling book "How Would a Patriot Act?," a critique of the Bush administration's use of executive power, released in May 2006. His second book, "A Tragic Legacy", examines the Bush legacy.

STEVEN HILL’S BOOK ON EUROPE’S GOVERNMENTALLY BALANCED SOCIAL-MARKET MECHANISMS AND VALUES

By  Frank Thomas

 

The Netherlands

March 31, 2010

 

It was great to read how Americans are learning something from Steven Hill’s 10-year researched book just out entitled, “Europe’s Promise,” … although for over 30 years now this American from Maine has resided in Europe where I’ve lived Hill’s observations of  Europe’s uniquely prudent and sensible human balance between government and market mechanisms to achieve a decent quality-of-life  experience for the vast majority of its citizens. Of course there are problem countries here,  as there are problem states in America. But the EU community, as a last resort, will not let those in trouble fall through the cracks. As I’ve said before, this career independent entrepreneur has been deeply taken in with the European philosophy, “We are all in this life together,” … where the common good and individual freedom are seen as inextricably linked.

It’s impressive to see how thoroughly the Dutch are evaluating hard pro-active fiscal policies and budgeting measures to keep their economic house in order – with the intention of taking appropriate actions NOW. Holland is faced with an escalating annual revenue-cost shortfall of +-€29 billion or +-$41 billion over next decade – a significant deficit but one that’s tiny compared to recent +$1.2 trillion U.S. annual deficit figures! The Dutch budget shortfall comes mainly from accelerating pension and health care costs – caused by the increasing numbers of people over 65 who are also living longer and using ever more expensive medical technologies and treatments. Hence, cost-cutting reforms are needed here also – even though Holland already has a sophisticated quality, cost-effective regulated competition health care system for ALL where people are put before profits. Evidence? Today, Holland’s basic health care for a family of four costs 40% of a comparable U.S. average plan.   

For years, I’ve watched the Dutch pragmatically, consistently adjust and refine their social-economic system to meet emerging environmental  realities. They generally manage this without compromising a basic cultural goal of ensuring a broad, equitable sharing of their society’s progression in good and bad times. Details are being now formulated on a sensible, step-by-step phasing of the $41 billion annual budget cost reduction by 2020, starting with an initial reduction of $25 billion (€18 billion) by 2015. The general public is kept well-informed and represented in this critical process by multiple party debates, discussions, and studies of the required economizing tradeoffs and personal sacrifices that must be undetaken.       

 

I’m confident the right mix of cost reduction/tax decisions will be achieved in a timely manner and equitably implemented by the Dutch – with the aim of keeping  the middle class as secure and solid as possible and not  reducing the living standard of lower income groups. Prudent by nature, the Dutch are NOT about to burden future generations with a crunching National Debt buildup necessitating economically punishing  debt payments by taxpayers – especially in light of the far fewer number of people who will be working to support  the much larger numbers of people retiring in coming years.

 

Enlightened conservatism and human consciousness confronting global changes and societal adjustments HEAD ON … this is where it happens!  But America can’t get its act together on systemic social and economic breakdowns due to the mind-numbing Ideological blindness and corrupt political system bought-out-by Special Interests – paralyzing  effective  governance to a divisive, do-little paradigm of feeble compromise largely benefiting the top 10%. Another factor is unaffordable Defense spending at +5% of GDP (+$800 billion including home-security/anti-terrorist budgets). We remain obsessed with the illusion we can afford being the world’s policeman and enforcer … while the social-infrastructure decays further, while middle-class Americans become victims of outsourcing, downsizing,  automating, forcing more and more into a survival-to-avert poverty lifestyle.     

 

Europe  has not adopted America’s hyper-militarized model with all its negative financial and human effects  … prefering multilateralism and change by patient  dialogue over military posturing, “smart power over hard power,” as Steven Hill aptly says in his book. Our huge military spending is bankrupting us making it impossible to take better care of the Mess on our home front  – made worse by more costly Medicare & Social Security programs as society ages.  Profligate Defense spending is castrating America’s ability to invest more productively and profitably in its own people, in new more permanent job generation, and in a long-ignored obsolete social-infrastructure. We can learn much from Europe’s social-capitalist blend of values that give prime time attention to home-based  priorities: affordable university education; inequality reduction; poverty alleviation; affordable quality health care for all; state-of-the-art efficient transportation, sewer, and water systems; a healthy, trained, and productive workforce.

 

Hill’s book is must reading  for all U.S. media pundits, politicians and those interested in learning how much they participate in public lies, are lied to, and how little they know about the relatively stable, progressive, Social-Economic models at play in advanced European countries. An example of European social-capitalism successfully at work today is Holland with its current +-4 % unemployment rate and positive trade surplus – not  bad in a time of severe economic crisis. Are there painful problems ahead? Of course!  But it’s reassuring to see the Dutch addressing problems forthrightly and fairly to minimize personal risks to their people in a new age of globalized, insecure capitalism. Guiding Dutch themes are SOLIDARITY and SHARING … as they  readjust the sensitive balance between free-enterprise and government controls to protect the mainstream and to stimulate dynamic market impulses …  a balance of cultural values we Americans junked long ago.  

 

Instead, we have gone down the path of societal polarization and pauperization … where failure to definanancialize and reindustrialize our economy in a way all citizens equitably benefit is excluding more and more people from what we once proudly called a middle class life. An out-of-control free-market fundamentalism is clearly destroying middle class security and solidity.  This is embedded in the ruthless pursuit of maximizing profits by morally (often corrupt) non-productive financial gimmickry, by the export and permanent elimination of decent jobs under the corporate Stakeholders’creed of Shareholders FIRST, Consumers SECOND, and Employees THIRD … rather than the other way around as one of America’s truly great businessmen, Warren Buffet, has done in managing his companies so successfully the past 50 years.  

   

For Americans stuck in the antiquated “trickle down”mentalities of the money-making, brainwashing Gingriches-Becks-Limbaughs-FoxNews – with their ultra-right repetitive fear-mongering rhetoric: “loss of freedom,” “government takeover,” and “creeping socialism”– opening the mind to new thinking and how social-capitalism elsewhere works and self-corrects to ensure wealth is broadly shared is obviously threatening to pre-conceived dogma. Result? A deadening of minds to any patience for creative, objective analysis, or all embracing “WE” reasoning … divorcing ourselves from the tried and true American Way of a fair playing field for all, support for the community and  working families. Little wonder we’ve descended to a complete “ME”system, an extreme individualist “to-each-his-own culture” behaving like a parasitic cancer …. where, for example, basic affordable health care coverage for over 45 million  Americans uninsured today is considered by many as being ‘too expensive,’ as being ‘big brother government’ sucking out the last breath of  our Jeffersonian liberty! This of course assumes our uninsured poor classes  get their last minute health care in hospital emergency rooms for no cost to society. Pure rubbish!  … and a classic example of how distorted ideology triumphs over common sense in our national communication today.

 

What a shame! Because failure to open the brain’s more balanced, self-critical,  self-learning channels will continue to carry us down the road to a socially and financially selfish stratification, a dangerously divided Have vs. Have Not oligarchical democracy … on the constant edge of chaos. If this happens, we will get what we deserve and will have only ourselves to blame. 

 

Of Paradigm Shifts and Paradigms Unshifted

by John Lawrence

It was 1968. Everybody was looking forward to the Age of Aquarius.

Harmony and understanding
Sympathy and trust abounding
No more falsehoods or derisions
Golden living dreams of visions
Mystic crystal revelation
And the mind's true liberation
Aquarius! Aquarius!

So sang the Fifth Dimension. There was to be a forthcoming paradigm shift from the old paradigm of war, acquisitiveness, competition, ticky tack houses, jealousy, suspicion, exclusiveness to a new paradigm of peace, love, cooperation, trust, inclusiveness. There was to be more sharing and less money grubbing, everyone was to be entitled to a good life - no more poverty, no more racism. Harmony and understanding, no more hypocrisy. And everyone could lead a fulfilling life of satisfaction.

What happened? The paradigm never shifted, that's what. Instead of a new paradigm, what happened instead was that the old paradigm intensified. We got more war, a more intensified rat race, more McMansions. Instead of the mind's true revelation we got ... Ronald Reagan! We got fed more drivel about "Morning in America." We got more exploitation, more commercialism. In fact the Age of Aquarius itself was commercialized! Instead of hippies with bell bottoms and tie died shirts, we got J Crew and Abercrombie and Fitch. We got an ever expanding and all inclusive military-industrial complex. We got hedge funds and credit default swaps.

True, the new paradigm was just too risky. Trust and unlocked doors led to the murderous perversion of the Manson family. People withdrew into more conservative lifestyles after criminals took advantage of the trust and openness. The paradigm never shifted. Things went back to business as usual. Students, once relieved of the draft, became more conservative. We entered a 40 year period where Republican politics held sway. John Kennedy, Robert Kennedy and Martin Luther King had all been killed. A dream deferred became a dream that, for all intents and purposes, had died. The CIA overthrew democratically elected governments in South America only to replace them with repressive governments, military dictatorships and the Chicago Boys - disciples of Milton Friedman dedicated to the libertarian dream of privatization, deregulation and free trade - a free trade, incidentally, that President Clinton recently admitted had ruined Haiti's rice farmers. It was good to be greedy. Sharing was for the birds. Egotism and arrogance were back in fashion. The USA was number 1, and don't you forget it, baby.

Ronald Reagan initiated the tax break mantra that would lead to all good things including increased government revenues, according to the Laffer curve. Free trade would open up brave, new vistas where American goods and American ideas were exported everywhere. Instead American jobs were exported. Trade and national deficits grew. NAFTA produced that "giant sucking sound" that Ross Perot had predicted. The one Democratic President during this period, Bill Clinton, got co-opted and then impeached for his efforts. The Laffer curve turned out to be a fake. The US having lowered taxes collected less revenues and went further into debt. American markets were flooded with cheap foreign imports. THe US went from being the world's largest creditor nation to being the world's largest debtor nation. The US was reduced to begging China to revalue its currency because having invested its prestige in the libertarian philosophy of Milton Friedman, Alan Greenspan and Ayn Rand of free trade, deregulation and privatization, it could not go back even when it became obvious in the Great Financial Meltdown of 2008 that this philosophy had left the US in a shambles, fast becoming a Third World nation left in the dust by the rest of the developed and developing world.

No, when the paradigm really needed to shift from the lower taxes, smaller government crowd, when the libertarian paradigm had proven to be a fraud and a failure, Americans hung on ever more tightly to the outmoded paradigm - America is the best and the wisest nation on earth. We're the leaders. We "won" the Cold War. We're number 1. Even after China had become our banker, loaning us the money to fight ridiculous, unwinnable wars of aggression while leaving our borders undefended, even after the middle class had lost ground under the old paradigm of less government (more deregulation), even after Alan Greenspan had admitted that the banks had not regulated themselves but had screwed up everything and then were rewarded with billions of dollars of taxpayer money, Americans clung to the old paradigm of getting government off their backs and out of their lives. As Ronald Reagan had said: "The nine most terrifying words in the English language are 'I'm from the government and I'm here to help.'". Americans still clung to the happy homilies of "Morning in America."

Barack Obama was elected to bring about change, but change is the last thing American corporations wanted. They clung to the old paradigm with a vengeance. They spent untold millions on lobbyists whose job was to guarantee that there would be no change. The left, which had been so vocal in the sixties, replaced the right as the silent majority with no vision for an America any different from the status quo plus maybe a little extra for the middle class. The right amped up its rhetoric to the point that a health care reform bill became "Armageddon." A bill that guaranteed that there would be only privatized health care corporations which were to be delivered 30 million new customers became socialism. It was unthinkable even to advocate for real socialism. Everything had to be couched in the rhetoric of the right. Reform had to be acceptable to the large corporations. Even human genes had been privatized and patented to the point that biotech companies owned the genes responsible for early onset breast cancer and would send "cease and desist" letters to any other party that had the audacity and temerity to want to do further research regarding them.

Barack Obama had his work cut out for him. No longer was it acceptable to have a War on Poverty. The poor and homeless continued to accumulate on the streets of America as jobs continued to dry up. But Americans considered it immoral for the government to use their tax money to try to help them. It was not immoral, however, to use their tax money to fight wars of aggression on foreign soil while ignoring the real war raging on the border. Arcane rules in the Senate allowed a determined bunch of paid off politicians to stop any progress whatsoever even after the prevailing conservative philosophy had produced the catastrophe of the Great Recession. The big banks, even after having been bailed out at taxpayer expense because they were too big to fail, were determined to get even bigger and to hand out even more outrageous bonuses to their executives. The culture of money and accumulation was intact. Greed was still good. The growing army of bankrupts and the foreclosed upon were losers in the American argot. Americans didn't want their tax money supporting them. Americans, it seemed, only wanted their tax money to go for war and to give corporate welfare to large corporations. They complained that it was socialism and a government takeover when the government took back under its wings the issuance of student loans which had been a cash cow for private corporations at taxpayer expense.

So when the paradigm really needed to shift, Americans wouldn't let it. They were all caught up in the disappearing reality that they were the privileged elite of the world who were entitled to consume the majority of the world's resources and produce the majority of the world's garbage. Instead they were becoming Richard Nixon's descriptive term: "pitiful, helpless giants". President Obama had all he could do to get meager health care reform and for his efforts was branded a socialist and a Nazi. He dare not even speak of reducing the deficit by ending the wars and shifting the military-industrial complex budget, larger than that of the rest of the world combined, to more productive purposes like alternative energy production and high speed rail. No, people still wanted lower taxes. They didn't care if their taxes were lowered by just a few dollars while the large corporations had theirs lowered by millions. They didn't care if lower taxes increased the national debt. They didn't care if more futile offensive wars increased the national debt while actual defenae could be had for a relative pittance and the savings used for peaceful purposes. Just don't tread on them.

When the handwriting was on the wall, when the old pardigm had completely failed, when the paradigm really needed to shift, Americans clung to the old paradigm with a vengeance. Even  as large corporations took control over their lives, they clung to their freedom, misidentifying the source of its diminution as the government itself rather than the government as controlled by private corporations by means of their lobbyists, campaign contributions and TV advertising. After all how can there be a national debate when the chief advertisers on "Meet the Press" are the Boeing Corporation (chief defense contractor) and the Exxon Corporation (major oil producer). Do you think the debate on Meet the Press is going to be critical of the military-industrial complex or the oil industry?

So while America treads water, despite the heroic efforts of President Obama and a few Democrats to turn around the ship of state and enter a new paradigm, Americans clamor for smaller government and long for the days in the 1950s when Eisenhauer was President, cars had tail fins and jobs were plentiful.

Personal Bankruptcies Up in US

From Time:

Personal Bankruptcies Hit a High and May Keep Rising

By Kevin O'Leary / San Diego Monday, Apr. 05, 2010

In the fourth-floor courtroom of the U.S. Bankruptcy Court of the Southern District of California, which serves San Diego and Imperial counties (pop. 3.4 million), Chief Judge Peter W. Bowie's docket is overflowing. Bowie has 77 Chapter 13 bankruptcies on his Tuesday calendar, one of which is the case of Juan Flores.

Flores, 55, is the owner and sole proprietor of a local business, Carpet Care 4 Less. Throughout 2007, he saw his income plummet along with the national economy. "My business dropped off by 50%," he says. As his client roster evaporated, Flores started drawing on credit cards and took out a second mortgage to the tune of $57,000 in order to stay afloat. In 2009, out of options and under threat of losing his home of 10 years, Flores filed for Chapter 13 bankruptcy — a reorganization filing under which consumers agree to a plan to make payments of past-due debts to creditors for a three- to five-year period. But now he is behind on his payments again, and Wells Fargo Bank wants to restart foreclosure proceedings.

Cases like Flores' are being brought before judges all across the country, and the number of such legal actions promises to increase. In March, more individuals and businesses filed for bankruptcy than in any month since October 2005, when federal bankruptcy laws were made more restrictive. There were 158,141 U.S. bankruptcy petitions filed last month — a 35% increase over February's figure, according to data compiled by Automated Access to Court Records (AACER). This was a 19% increase over the number in October 2009, the last record-high month.

In the first quarter of 2010, the rate of personal bankruptcy filings in a dozen states increased by double-digit percentages over 2009's monthly averages. "What is surprising is that there are still hefty increases in states like Arizona, California and Florida," says AACER president Mike Bickford, referring to the fact that it might seem that the worst would be over in states hard-hit by the housing bubble. "Intuitively, you would think there might be some leveling off in these states, but that is not the case. In addition, there were large increases in bankruptcy filings in the Midwest, especially Michigan and Illinois."

But many law scholars are not surprised by Americans' mad rush to bankruptcy court. Adjusted for inflation, personal borrowing in the U.S. is 10 times greater than in 1960, according to the Federal Reserve. "Now, consumer credit has dried up," says law professor Robert Lawless, an expert on bankruptcy among sole proprietors and small entrepreneurs at the University of Illinois. "That is why people are ending up in bankruptcy court."

Katherine M. Porter, a bankruptcy expert at the University of Iowa and the University of California, Berkeley's Boalt Hall Law School, says people typically "seriously struggle" with their debt for two years before turning to bankruptcy.

The statistics show that Chapter 7 bankruptcy filings are rising faster than the more complex Chapter 13 filings. While the latter requires individuals to repay a substantial portion of their debt and prevents banks from foreclosing on their homes, Chapter 7 bankruptcy allows a debtor to wipe out his or her debts entirely and get a fresh start. "It is very fast and very deep debt restructuring," says Porter. Since 2005, Chapter 13 filings have dropped from about 35% of all personal bankruptcy filings to 25%, she says. "Systemically, that's a big change."

That change suggests that more home owners are simply walking away from their mortgages, rather than attempting to make payments, especially during a recession with record-high long-term unemployment. "Chapter 13 was designed for regular economic times when people might lose their jobs and fall behind on their mortgage for three to four months, but having found a new job they would be able to use the Chapter 13 process to keep their homes," says Porter, noting that even during normal economic times only 1 in 3 Chapter 13 bankruptcy filings results in the individual's successful meeting of payment obligations.

Under current bankruptcy law, Porter says, bankruptcy courts have "no tools to reduce the principal, stretch out the payments or adjust the interest rate" — that is, since judges can't adjust mortgages to make them easier to pay, people end up ditching them instead.

San Diego resident Flores is still unwilling to give up, though a skeptical Judge Bowie says he is inclined to dismiss the case. "Have you run the numbers to see if he can meet the payments on just unemployment?" Bowie asks Flores' attorney, Larissa Lazarus. The attorney informs the court that her client needs 12 months to catch up with his payments, saying the problem is a back-property-tax issue of $908 a month that will be resolved in nine months. From the bench Bowie says, "I can do nine months, not 12."

Flores, who has run his carpet-cleaning business for 30 years, is relieved. "I just have to work like hell," he says.

A substantial number of cases before Bowie involve a financial institution asking the court for relief from stay, so they can pursue foreclosure against borrowers like Flores. Lenders represented in the courtroom include JPMorgan Chase Bank, Bank of America, Deutsche Bank Trust, Wells Fargo Bank, US Bank and GMAC Mortgage. When a Chapter 13 bankruptcy is ordered and confirmed, lenders must cease any foreclosure proceedings and the delinquent homeowner must begin making regular mortgage payments. But if the debtor cannot keep up the payments, "sooner or later the court drops the bomb," says attorney James Beshears.

To help individuals make their payments, Bank of America announced in March that it would start reducing the principal on some home loans. This, after the banking industry successfully fought off attempts by Democratic Illinois Senator Dick Durbin and others in Congress to pass legislation last spring that would have allowed for mortgage modifications. But since then, it has become clear that without loan modification, many borrowers have no recourse but to accept foreclosure and walk away, says Porter. "I think one reason the economic recovery is slow is that it is taking so long to work through these delinquencies," she says.

According to Jay Brinkmann, chief economist of the Mortgage Bankers Association (MBA), "Loans 90 days or more past due now account for half of all delinquencies, the highest share in the history of the MBA survey."

In San Diego and Imperial counties alone, bankruptcy filings have increased 379%, spiking from 4,210 in 2006, the peak of the housing boom, to 20,193 in 2009. Nationally, more than 1.4 million business and consumer bankruptcy petitions were filed in 2009, up 32% from the 2008 figure, and Samuel J. Gerdano, executive director of the American Bankruptcy Institute, says the number of consumer filings (Chapter 7 and 13) in 2010 will likely surpass those in 2009. If the just-released March numbers are any indication, Gerdano is probably right.

US Continues to Add to Civilian Body Count in Afghanistan

U.S. Admits Role in February Killing of Afghan Women

By RICHARD A. OPPEL Jr.

Published: April 4, 2010 by the New York Times

KABUL, Afghanistan — After initially denying involvement or any cover-up in the deaths of three Afghan women during a badly bungled American Special Operations assault in February, the American-led military command in Kabul admitted late on Sunday that its forces had, in fact, killed the women during the nighttime raid.

The admission immediately raised questions about what really happened during the Feb. 12 operation — and what falsehoods followed — including a new report that Special Operations forces dug bullets out of the bodies of the women to hide the true nature of their deaths.

A NATO official also said Sunday in an interview that an Afghan-led team of investigators had found signs of evidence tampering at the scene, including the removal of bullets from walls near where the women were killed. A senior NATO official later denied on Monday that any evidence tampering occurred.

The disclosure could not come at a worse moment for the American military: NATO officials are struggling to contain fallout from a series of tirades against the foreign military presence by the Afghan president, Hamid Karzai, who has also railed against the killing of civilians by Western forces.

Gen. Stanley A. McChrystal, the American and NATO commander in Afghanistan, has tried hard, and with some success, to reduce civilian casualties through new rules that include restricting night raids and also bringing Special Operations forces under tighter control. But botched Special Operations attacks — which are blamed for a large proportion of the civilian deaths caused by NATO forces — continue to infuriate Afghans and create support for the Taliban.

NATO military officials had already admitted killing two innocent civilians — a district prosecutor and local police chief — during the raid, on a home near Gardez in southeastern Afghanistan. The two men were shot to death when they came out of their home, armed with Kalashnikov rifles, to investigate.

Three women also died that night at the same home: One was a pregnant mother of 10 and another was a pregnant mother of six. NATO military officials had suggested that the women were actually stabbed to death — or had died by some other means — hours before the raid, an explanation that implied that family members or others at the home might have killed them.

Survivors of the raid called that explanation a cover-up and insisted that American forces killed the women. Relatives and family friends said the bloody raid followed a party in honor of the birth of a grandson of the owner of the house.

On Sunday night the American-led military command in Kabul issued a statement admitting that “international forces” were responsible for the deaths of the women. Officials have previously stated that American Special Operations forces and Afghan forces conducted the operation.

The statement said that “investigators could not conclusively determine how or when the women died, due to lack of forensic evidence” but that they had nonetheless “concluded that the women were accidentally killed as a result of the joint force firing at the men.”

“We deeply regret the outcome of this operation, accept responsibility for our actions that night, and know that this loss will be felt forever by the families,” said Brig. Gen. Eric Tremblay, a spokesman for the NATO command in Kabul.

The admission was an abrupt about-face. In a statement soon after the raid, NATO had claimed that its raiding party had stumbled upon the “bodies of three women who had been tied up, gagged and killed” and hidden in a room in the house. Military officials had also said later that the bodies showed signs of puncture and slashing wounds from a knife, and that the women appeared to have been killed several hours before the raid.

And in what would be a scandalous turn to the investigation, The Times of London reported Sunday night that Afghan investigators also determined that American forces not only killed the women but had also “dug bullets out of their victims’ bodies in the bloody aftermath” and then “washed the wounds with alcohol before lying to their superiors about what happened.”

A spokesman for the Afghan Interior Ministry, Zemary Bashary, said that he did not have any information about the Afghan investigation, which he said remained unfinished.

In an interview, a NATO official said the Afghan-led investigation team alerted American and NATO commanders that the inquiry had found signs of evidence tampering. A briefing was given by investigators to General McChrystal and other military officials in late March.

“There was evidence of tampering at the scene, walls being washed, bullets dug out of holes in the wall,” the NATO official said, adding that investigators “couldn’t find bullets from the wounds in the body.”

The investigators, the official said, “alluded to the fact that bullets were missing but did not discuss anything specific to that. Nothing pointed conclusively to the fact that our guys were the ones who tampered with the scene.”

On Monday, a senior NATO official denied that there was any effort to tamper with evidence.

“We have discovered no evidence in our investigation that any of our forces did anything to manipulate the evidence at the scene or the bodies,” said the deputy chief of staff for communications for General McChrystal, Rear Adm. Gregory J. Smith.

Several bullets that were fired but had not struck either of the two men were removed from the walls, Admiral Smith said. But he said that was done “to make sure what kinds of rounds they were.”

NATO officials have also rejected allegations that the killings were covered up. But it was not immediately clear on Sunday night how troops who shot the women and later examined their bodies would not have recognized that it was their bullets that killed them.

Abdul Waheed Wafa contributed reporting.

Obama Claws Back Student Loans and Medicare Advantage

by John Lawrence

There is a seesaw battle going on between conservatives and progressives for the public mindset. For the last 30 years, since the onset of the Reagan Presidency, the US has been under the libertarian paradigm as espoused by Milton Friedman, author of Capitalism and Freedom, and Alan Greenspan, Chairman of the Federal Reserve appointed by Reagan, both open and proud libertarians, the latter a disciple of nutcase Ayn Rand. Their philosophy for the US and the rest of the world (which they notably imposed on Latin America) consisted of privatization, deregulation and free trade. They don 't believe in social programs such as social security, public health care, public water and sewage systems or even public schools. Anything public, paid for by taxpayers, is bad, and anything private, sold as a good or service for profit, is good.

This is why Medicare is always under attack from the right. If they can't get rid of it, they undermine and vitiate it by drilling holes and planting Trojan horses. Such a Trojan horse was Medicare Advantage. Medicare Advantage was a purported equivalent to traditional Medicare and is wholly run by private health insurance companies. Since its advent in 1997 after Republicans had taken over both Houses of Congress in the disastrous 1994 elections during the Clinton administration, it has siphoned off unsuspecting seniors into totally privately run health care plans with the temptation of a few added perks like annual free medical exams which, until the recent health reform bill, were forbidden in traditional Medicare itself. It would seem that, if the government wanted to save money, it would have offered free annual medical exams to seniors under Medicare. That only makes sense. But no, having drilled holes in traditional Medicare and having at least partially privatized it, Republicans then stacked the decks by allocating more funds to doctors who accepted Medicare Advantage patients than to doctors who accepted traditional Medicare patients.

The point here is that Republican, conservative administrations were doing everything they could to undermine Medicare as a government run "public" program and to turn it over to private health insurance corporations. Obama's health reform bill reverses that tendency. Although it hasn't eliminated Medicare Advantage, it has put it on a level playing field with traditional Medicare and has thus saved government and taxpayers the money that was going to Medicare Advantage over and above what was going to traditional Medicare. The whole point of Medicare Advantage was to lure seniors away from public Medicare into the clutches of for profit health insurance corporations. The Health Reform bill reverses that trend and those incentives.

But the point is that the game's not over till it's over. New Republican controlled Congresses and administrations will seek to do just the opposite. That's why the mid-term elections later this year are so important. What happened to Clinton in 1994, if repeated under Obama, would be a disaster for Medicare, student loan reform and every other public program. A Republican controlled Congress will seek to undermine traditional Medicare and hasten the flow of seniors back to Medicare Advantage, private health care. Medicare Advantage patients, having been lured by slick advertising promises, are already finding out that, when the chips are down, they will be denied expensive but necessary treatments by their Medicare Advantage for profit health insurance corporations. So that's where Medicare Advantage is heading - denial of health care when it's most needed - just as it is for the general public under 65 until the recent passage of the reform bill. The seesaw between socialization and privatization will continue with government decisions being swayed by the millions of dollars private corporations spend on lobbyists and campaign contributions. This is not balanced in any way by advocates for public programs. The money is on the side of privatization, and, if you can't afford what private corporations are selling, be it health care or anything else, then God bless you. In a totally marketized, privatized economy, you have no rights to anything that can't be bought and sold. You have no human rights. You have only the right to buy and sell in the marketplace. If you can't pay, you go without. That's it.

When it comes to student loans, the same tug of war between government provided student aid and corporate provided loans is occurring. When government was the primary source of student aid prior to the advent of the Reagan administration, grants were emphasized. After the conservative paradigm shift occured around 1980, student aid was shifted towards privatized loans.

The federal government officially entered the student loan arena in 1958. Not only was the demand for access to college increasing, but a report from 1947 called the President’s Commission on Higher Education had revived the debate in Congress in time for the National Defense Education Act of 1958, which was a program of low-interest student loans (to become the Perkins Loan) provided in response to concerns that the United States was falling behind in fields of science and engineering. The scare was caused by the Soviet launch of Sputnik which, combined with the war on poverty, provided for the government a kind of back entrance into the arena of federal student aid.

Of the eight titles of the Higher Education Act of 1965, only Title IV addressed assistance to students, and initially it took a back seat to institutional aid. Title IV established Educational Opportunity Grants based on institutions aggressively pursuing students with “exceptional financial need”. The Guaranteed Student Loan Program (to become the Stafford Loan) was designed to appeal more to middle-income students by providing loan subsidies; the government paid interest accrued during the student’s collegiate career and paid the difference between a set low interest rate and the market rate after graduation. It was, however, in 1972 with the reauthorization of the Higher Education Act that Congress rounded out the program to form what is the “basic charter of today’s federal student aid system”. Out of the heated debates about the program there emerged new language, new types of assistance, expanded opportunity grants, and more incentives for the states. The term “postsecondary education” replaced “higher education” in order to expand aid to students entering junior colleges as well as trade schools and career colleges. During a congressional session in 1980, the Pell Grant (named after Senator Claiborne Pell) emerged from the Basic Economic Opportunity Grants; it was larger than its predecessors and designed to encourage students from low-income situations to attend college. Eligibility for Pell Grants is based on a family’s total income and assets. Finally, the State Student Incentive Grant Program, which also originated with the 1972 Higher Education Act, offered matching funds to states to encourage their need-based aid programs, and within three years all fifty states actively participated in this program.

After 1972, new initiatives such as the Middle-Income Assistance Act of 1978, which widened Pell Grant eligibility, further catered to the middle class. Already a gap was becoming apparent between the availability of federal aid and access to institutions as tuition began to rise steadily. President Reagan cut spending significantly during the 1980s though demand for loans continued to rise, though less rapidly than before. The leveling off of student aid spending was partially responsible for the shift toward loan spending and away from grant spending that has continued to the present day.

Privatization of the student loan industry accelerated in 1997 when Sallie Mae, which had hitherto been a government sponsored enterprise was privatized. After the Republicans took control of both Houses of Congress in 1994, the impetus toward privatization continued on steroids. Albert Lord proceeded to lobby Congress to fully privatize Sallie Mae which it proceeded to do. In a previous post, "Sallie Mae Pauperizes Students," we reported on the draconian laws that Albert Lord's lobbying efforts resulted in with consequent gigantic profits for Lord and Sallie Mae. Congressman John Boehner was Lord's man in Congress and Lord lavished campaign contributions on Boehner. Sallie Mae essentially could have its cake and eat it too. If a student defaulted, the government came in and paid Sallie Mae the full amount of the loan plus interest. In addition Sallie Mae could pursue the student in collections and collect even more. Meanwhile, the student was forbidden by law to consolidate his or her loans for a more favorable interest rate or even to discharge the loan in bankruptcy. The student could be pursued till his death bed with even his social security check being garnished. So privatization worked well for CEO Albert Lord and his other executives; it was a total disaster for students driving some of them to suicide.

The student loan reform bill claws back the privatization of student aid undertaken by the Republicans which has resulted in extreme profits for some at the expense of immiseration for a whole class of students who come out of college with the equivalent of a first mortage and no house to show for it. In a sense it is a "government takeover" of the student loan industry. That's after it was subjected to a "corporate takeover" in 1997 by a Congress and a mindset hell bent on privatizing everything, the libertarian way. Please remember that originally student aid was a government program. Government is simply "clawing back" what was originally under government auspices saving taxpayers billions of dollars in the process that won't go to private profits in the future. Instead, this money will be spent giving out more student loans.

So President Obama and the Democrats are to be credited for socializing the student loan industry. No wonder Republicans are decrying socialism. They want everything to be privatized so that corporations who are their paymasters can make bigger profits at public expense. The student loan industry was originally a government run, socialized public program before it was privatized with disastrous results for students. Elizabeth Warren, the same Elizabeth Warren who is now fighting for a Consumer Financial Protection Agency, had said about the privatized student loan industry: "It's a market in which the protection goes to the lender. And the students get served up like turkeys at the Thanksgiving dinner."

This seesaw between privatization and socialization can be expected to continue with the conservative, libertarian goal to privatize everything: public schools, public parks, public libraries, public health care. Any public program that is taxpayer funded would be privatized if these guys had their way. And they have enormous power on their side: unlimited corporate money. The proper role of govenment is to prevent the fusion of corporate and government interests and to protect the average consumer and citizen. The false dichotomy is between big government and small government. Private corporations don't really want small government except when government benefits the average citizen. They want that sector of government shrunk to the vanishing point. They want to use government for their own profits even to the point of taking goverment (read taxpayer) money at every opportunity lobbyists can buy. The real dichotomy is between government in the interests of the privatized corporations and government in the interest of the average public citizen.

Obama and Dems Put a Stop to the Republicans' Kickback Cash Cow in the College Loan Industry

by Alexander Zaitchik/ Alternet

 

For years, Sallie Mae fed on taxpayers to finance Republican campaigns and private golf courses for their executives. No more.

 

March 31, 2010  |  

 

 

Reining in insurers and expanding health coverage for Americans aren't the only reforms achieved last week by the White House and Congress. The passage of the health care bill also accomplishes a much-needed if less-noticed goal that, like health care, was last seriously pursued during the early days of grunge rock: The termination of federal subsidies to the scandal-plagued private student loan industry.

Within the pages of the Health Care and Education Reconciliation Act of 2010 is a section that, at long last, stops private lenders from profiting off federally subsidized student loan programs. This means an end to nearly four decades of corporate welfare for the government-created -- but now fully privatized -- icon of the industry, Sallie Mae. The savings to be had from terminating this subsidy -- estimated at between $60 and $70 billion over the next decade -- will go toward shoring up the Pell Grant program (which helps low-income Americans attend college), health care programs and deficit reduction. Where the Department of Ed has long paid private loan companies like Sallie Mae and Citigroup to issue and manage government-backed student loans, the department will now make all federal loans directly, without the help of a middleman, through its own Direct Loan program.

Private lenders, meanwhile, will bid for contracts to service, not originate, these loans.

The change is a major setback for a student loan industry grown fat and arrogant, which for decades has racked up huge profits by making government-backed, risk-free loans to students. Since 1965, these taxpayer-subsidized loans came with a double-guarantee: first against default, and another providing a floor on the rate of return. Taxpayers not only guaranteed high interest rates for lenders, they also protected the banks against any losses. The subsidies are a big part of the reason why Sallie Mae CEO Albert Lord was recently able to build a private 18-hole golf course on his 225-acre estate near his company's headquarters in Reston, Virginia.

Starting in July, those loans will be Sallie Mae's to lend no more. In acronymic language almost every college grad under the age of 50 can understand, the famous FFEL is dead.

To grasp why Obama's termination of the FFEL deserves a loud cheer, it helps to call Sallie Mae by its real name. Sallie Mae and Nellie Mae, its sister company, sound like kindly maternal aunts, the sort who not only provide money for college at stable interest rates, but might also bring out a warm plate of raisin cookies to munch on while you fill out the forms. In reality, Sallie and Nellie are cutesy public relations masks for the SLM Corporation, a publicly traded billion-dollar company that long ago lost any resemblance to the public-minded "government-sponsored enterprise" launched by Congress in 1972 to encourage wider involvement in government loan programs created by the Higher Education Act of 1965.

Within a decade of being launched with the mission to help kids afford college, executives at Sallie Mae grew bored. To expand their operations (and increase profits) they began courting Wall Street in the late 1970s. Wall Street was an eager suitor in return, anxious to get in on the endless flow of government-guaranteed action. It seemed too good to be true: Sallie Mae was congressionally chartered and had the promise of the U.S. Treasury behind 97.5 percent of every FFEL loan it originated and serviced. Along with other major lenders that entered the game during the 1970s and '80s, Sallie Mae's profits swelled on the back of a booming student loan market racing to keep pace with the upward spiral of tuition costs.

By the time Bill Clinton entered the White House in 1993, there were growing rumblings -- by both Democrats and fiscally conservative Republicans -- over this taxpayer-sponsored boomlet. During his first year in power, Clinton announced plans to stop funding what had become an anachronistic cash cow for private lenders. The Department of Education, after all, could save a lot of money by issuing the loans directly, and then use the benefits to help educate more Americans at lower cost -- which was the whole point of the program to begin with. Building on plans hatched by deficit hawks in the George H.W. Bush administration, Clinton created the Direct Loan program and set a timetable to gradually phase out the FFEL program.

But the loan industry lucked out. When Republicans won control of Congress in 1994, they ran to the fierce defense of the industry that had supported so many of their campaigns.

"After the midterms in 1994, the Republicans did their best to hamstring the Department of Education from effectively promoting the Direct Loan program," says Edie Irons, of the Berkeley-based advocacy group Institute for College Access & Success. "They also negotiated the survival of the FFEL as part of the deals to pass Clinton's budgets. So the subsidy lived on."

Sallie Mae did not waste its second lease on life. With the student loan market breaking records every quarter, and confident with the backing of strong new allies in Congress, the company went on a buying spree. Between 1997 and 2000 the firm purchased roughly a quarter of all the outstanding federally backed FFEL loans, totaling some $40 billion. As Sallie Mae and other lenders serviced ever-greater amounts of taxpayer-backed money, they began peddling -- many would say pushing -- other high-risk financial products and services.

Sometimes, this involved using the muscle provided by its role as a leading purveyor of federal loans.

"Sallie Mae is the student-loan industry's Microsoft," one competing servicer told the Chronicle of Higher Education in 2000. "[It] bundles its services to [banks and financial aid departments]. They say, 'If you want us to originate and disburse your loans, you have to sell them to us at below-market rates.'"

During this period, the company increased its business in predatory subprime private loans, which it pushed on borrowers as a way to close the student loan "donut hole" created by rising costs. Internal company documents show that Sallie Mae's strong move into risky, high-interest private loans was underwritten by the guaranteed income Sallie Mae made on FFEL loans. In other words, the United States government was directly financing the slimiest practices of its private partner-competitor.

Under the chairmanship of Albert Lord, Sallie Mae grew increasingly cozy with Republican lawmakers in the Bush era. The relationship was a two-way street: The administration protected Sallie Mae's steady, no-questions access to FFEL money, and the company generously supported GOP candidates and causes. It was, of course, an outrageously corrupt and inefficient arrangement, with taxpayers subsidizing both political kickbacks and lobbying costs. The relationship was consummated in 2004, when Sallie Mae was allowed to go completely private -- with no talk of ending its subsidy or controlling salaries and costs.

It was thus a dual celebration when the SLM Corporation donated $250,000 -- the maximum amount allowed by law -- to the 2004 Bush Inauguration. Sallie Mae CEO Albert Lord developed a particularly close relationship with Ohio Republican John Boehner, a frequent guest on SLM's corporate jet who cosponsored a party the company threw during the 2004 Republican National Convention. That same year, Lord ranked first in a Washington Post survey of D.C.-area executives, pulling in $41.8 million in salary and stock. By 2007, Karl Rove was pushing to get Republican lawmakers lucrative seats on SLM's board of directors.

But the return of Democrats to congressional power in 2006 returned focus to the wasteful student loan subsidy. The question was given added urgency by a string of scandals resulting from the industry's years running amok under Bush. In February 2007, New York Attorney General Andrew Cuomo launched an investigation into allegations of deceptive lending practices by major student loan providers, including Citibank and Sallie Mae. Later that year, the same companies were the subject of a federal investigation focused on the kickbacks it they were providing colleges to get the schools to steer borrowers their way. Over the course of the investigation, documents surfaced showing that Sallie Mae tried to use the Freedom of Information Act to force the State University of New York to turn over students' personal information.

Around the same time, Sallie Mae faced a lawsuit that it was intentionally ballooning students' debt by pushing delinquent students into forbearance (and thus adding interest). Then there was the class action lawsuit brought against Sallie Mae alleging that the company discriminates against African American and Hispanic private student loan applicants by charging them higher interest rates and fees. Echoing concerns voiced by Cuomo's earlier investigation, the lawsuit also alleged Sallie Mae gave misleading information on private loan terms to prospective borrowers. 

Sallie Mae has settled some of these suits; others are ongoing.

The financial crisis of 2008 finally delivered the knockout blow to the FFEL cash cow. "The credit crunch put the loan industry in the precarious position of having to rely on the government to finance its loans," says Stephen Burd, writer of the Higher Ed Watch blog at the New America Foundation. "As a result, for the last two years, the government has essentially been running two direct loan programs. That was not a sustainable model."

After Obama's election, the industry had a flashback to 1993 and began to mobilize to stop the termination of its subsidy. With Democrats in power, private lenders turned to the same for help. The Hill reports that Sallie Mae's $3.48 million rearguard lobbying effort last year included the hiring of several prominent Democratic lobbyists, including former deputy attorney general Jamie Goralick and several Democrats working for the Podesta Group. According to Jane Hamsher, who has the inside scoop on the last-minute politics behind the legislation, the efforts of these lobbyists can only be described as bungling; despite being paid millions to protect the subsidy, they completely failed to see the reconciliation bill barreling down the pipe.

Throughout the battle over the FFEL program, the loan industry's K Street army and its conservative media allies took a peculiar line of attack: removing the industry's right to service federal loans, they argued, amounted to a "government takeover." The talking point was distributed in a September 2009 memo circulated by the House Republican Conference that urged House Republicans to oppose a move to 100 percent direct lending because it "kills jobs and greatly expands the federal government's control of the education loan market."

Needless to say, this laughable argument failed to catch much traction with the public. How could a government program be "socialized" by streamlining it? The subsidies were nothing but a way to socialize risk for private servicers and lenders using taxpayer money -- the precise opposite of their free market ideology. The irony and hypocrisy of the industry's opposition did not escape the notice of principled small-government conservatives who follow education issues.

"In their support for the FFEL program, it appears that House Republicans want big government too -- they just want to dress it up as private enterprise," Jason Delisle, a former Republican Congressional aide who is now the director of the New America Foundation's Federal Education Budget Project, wrote recently on Higher Ed Watch:

Under FFEL, the federal government sets the terms of the loans while taxpayers insure private lenders against 100 percent of the interest rate risk, subsidize administrative costs, and cover all but a sliver of default losses on loans. How exactly does that arrangement make for smaller government than if the same loan were made directly from the Treasury? When private entities are paid under no-bid formulas to run a government entitlement program as they are in the FFEL program, it's quite a stretch to claim the jobs entailed are "private sector" jobs.

But since Republicans still want to talk about these jobs, it's worth emphasizing again exactly what the employees of these lenders were doing. In an article for the Washington Monthly last winter, Stephen Burd described the worst of the Bush-era abuses: offering buckets of private loan money to financial aid departments in exchange for the exclusive right to issue federal loans. The result was Sallie Mae misleading more students into taking out high-risk, high-interest, high-default predatory loans that students could not shake off in bankruptcy -- thanks to the loan industry supported Bankruptcy Act of 2005 -- all the while recovering costs with the lock it had on federally guaranteed loans.

"In 2007, Senate investigators uncovered internal company documents showing that executives expected a staggering 70 percent of its private [mostly subprime] student loans at one for-profit school to end in default," reported Burd. "Investigators concluded that Sallie Mae viewed these loans as a 'marketing expense' — a token sum to be paid in exchange for the chance to gorge on federal funds."

Thanks to Obama and Congress, those days are over. But work remains to be done in the area of student loan reform. Most urgently, the double standard that allows private loan creditors to claim bankruptcy protection, but denies their student borrowers the same right, must end. Considering that Barack Obama was one of only 25 Democratic senators to vote against this law when it passed in 2005, there is reason for optimism that the loan industry is in for another losing fight.

Alexander Zaitchik is a Brooklyn-based freelance journalist and AlterNet contributing writer. His book, Common Nonsense: Glenn Beck and the Triumph of Ignorance, will be published by Wiley in June.

The Paper Entrepreneurs Are Winning Over the Product Entrepreneurs (A Thirty Year Retrospective)

by Robert Reich

Friday, April 2, 2010

The paper entrepreneurs are winning out over the product entrepreneurs.

Paper entrepreneurs — trained in law, finance, accountancy — manipulate complex systems of rules and numbers. They innovate by using the systems in novel ways: establishing joint ventures, consortiums, holding companies, mutual funds; finding companies to acquire, “white knights” to be acquired by, commodity futures to invest in, tax shelters to hide in; engaging in proxy fights, tender offers, antitrust suits, stock splits, spinoffs, divestitures; buying and selling notes, bonds, convertible debentures, sinking-fund debentures; obtaining government subsidies, loan guarantees, tax breaks, contracts, licenses, quotas, price supports, bailouts; going private, going public, going bankrupt.

Product entrepreneurs — engineers, inventors, production managers, marketers, owners of small businesses — produce goods and services people want. They innovate by creating better products at less cost.

Our economic system needs both. Paper entrepreneurs ensure that capital is allocated efficienctly among product enrepreneurs. But paper entrepreneurs do not directly enlarge the economic pie. They only arrange and divide the slices. They provide nothing of tangible use. For an economy to maintain its health, entrepreneurial rewards should flow primarily to product, not paper.

Yet paper entrepreneurialism is on the rise. It dominates the leadership of our largest corporations. It guides government departments, legislatures, agencies, public utilities. It stimulates platoons of lawyers and financiers.

It preoccupies some of our best minds, attracts some of our most talented graduates, embodies some of our most creative and original thinking, spurs some of our most energetic wheeling and dealing. Paper entrepreneurialism also promises the best financial rewards, the highest social status.

The ratio of paper entrepreneurialism to product entrepreneurialism in our economy — measured by total earnings flowing to each, or by the amount of news in business journals and newspapers typically devoted to each — is about 2 to 1.

Why? Our economic system has become so complex and interdependent that capital must be allocated according to symbols of productivity rather than according to productivity itself. These symbolic rules and numbers lend themselves to profitable manipulation far more readily than do the underlying processes of production.

It takes time and effort to improve product quality, exploit manufacturing efficiencies, develop distribution and sales networks. But through strategic use of accounting conventions, tax rules, stock and commodity exchanges, exchange rates, government largesse, and litigation, enormous profits are possible with relatively little effort.

When paper entrepreneurs look for solutions to America’s declining productivity and international competitiveness, they come up with paper remedies to stimulate large-scale capital investment: accelerated depreciation, tax credits, government subsidies, relaxation of antitrust laws. 

Product entrepreneurs focus on techniques for improving output: better quality controls, improved labor-management relations, more effective incentives for managers and employees, more aggressive marketing and sales.

If we are to increase the economic pie, we will need to redress the balance of entrepreneurial effort. Which strategies will stimulate more paper, and which more product?  

[I wrote this thirty years ago. It appeared on the The New York Times oped page May 23, 1980.]