Bipartisan Solutions

Here is how the DC game works:

– One side proposes to kill everyone in Kentucky and Tennessee. 15% of the public supports this (0% in Kentucky or Tennessee.)

– The other side thinks children should have enough food so they can grow up strong. (85% of the public supports this.)

– A Grand Bargain is reached in which they agree to kill everyone in Tennessee and spare the people in Kentucky, and children will get half as much food as they need.

The DC pundits will say that since everyone is angry at this, it must be the right solution because “both sides” only got part of what they want.

Austerity Lovers In D.C., Austerity Haters At Home

In Washington, austerity-hungry Republicans called the sequester’s “across the board” spending cuts a “victory” – until their districts feel them. Then they complain about the cuts, but still demand cuts somewhere else and add new demands that someone ELSE decide what should be cut. This is because Republicans talk about cuts, but the American Majority doesn’t want cuts.

Please send us examples of sequester supporters in Washington who go home and cry about how it is hurting their constituents.

The Sequester

Some people think the “sequester” has something to do with racing horses. But it’s a technical word for the “across-the-board” budget cuts resulting from when the Republicans took the “debt ceiling” hostage, demanding big cuts in government or they would force the country to default on our promises to pay our debts, which would crash the economy.

They demanded these cuts, and they called the cuts a victory. That is, until the citizens who voted them into office started feeling the cuts.

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Surprising Studies Find DC Does What Wealthiest Want, Majority Opposes

A new study, Democracy and the Policy Preferences of Wealthy Americans, by Professors Benjamin I. Page, Jason Seawright and Larry M. Bartels sought to gauge the political and policy priorities of the wealthy, and how these concerns contrast with the concerns of the rest of us. Amazingly, the priorities of the 1% match up with the priorities of our political class, while the priorities and needs of the vast majorities of us are ignored.

The study questioned people with wealth that placed them in the top 1%. They were asked what they felt were the “very important problems” facing the country. The most common response was the budget deficit, with 87 percent believing this to me the most important problem. This contrasts with the rest of the population, with only 7% saying this is the country’s most pressing problem. Of course jobs and the miserable state of the economy for people what are not in that 1% were cited by regular people as the most important problem.

The 1%’ers want “entitlement programs” like Social Security and healthcare cut while the American Majority want (and need) them expanded.

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Cyprus Lesson: Watch Your Bank

There is a lesson from the Cyprus situation: If you are a large depositor you need to watch your back bank. You can’t just assume someone will bail out the banks — and you. The big banks have been able to keep governments from reigning them in, while getting governments to bail them out. That game is over.

From now on you have to take a look at the bank’s books and business practices and decide for yourself if your money is safe.

Right now it looks like large depositors in Cyprus’ banks are going to take a 30-40% “haircut” – meaning when the banks reopen 30-40% of their money will be gone. This is the “bailout” alternative to the banks failing and all of the money going away.

The Cyprus lesson is that deregulation and “keeping government from meddling with business” means it’s all on you now, on your own, by yourself, to watch out for your own interests. And that’s expensive. Really, really expensive.

It’s the libertarian dream, home to roost.

Not Greece

Cyprus is not like Greece. The government didn’t borrow a lot of money. What happened is that their banks failed. Cyprus’ banks seven-or-eight times the size of Cyprus’ economy when the EU average was three times, in-part because they offered tax-haven status to depositors around the world. In particular they attracted wealthy Russian and British tax-evaders. If the banks fail they will lose their money. And they were doing what big banks do with depositors’ funds — bad loan, speculation, investing in Greek bonds… It turned out that when something is unsustainable it can’t be sustained, and this time it wasn’t. The banks failed.

But it wasn’t just wealthy Russians and Brits on the line here … Cyprus’ businesses also have their money in Cyprus’ banks. So here’s the thing: If the banks just fail it would mean that every business in Cyprus would lose their money too, and be unable to make their payrolls, pay their creditors, even pay their rent.

When Banks Fail You Lose Your Money

Here is something that most people don’t understand: When banks fail every depositor loses their money. In the depression banks failed and depositors lost their money. Regular people around the country lost their savings. This is what causes bank runs – people trying to get their money out in time. The ones who don’t get there in time lose everything.

Since the depression American banks are insured up to a certain amount by the Federal Depository Insurance C-something (FDIC), and this has prevented these bank runs. When bank fails the FDIC steps in (usually on a Friday evening), closes the bank and arranges for another bank to take over the insured accounts (usually by Monday morning) and regular depositors hardly even notice the change.

European depositors with $100,000 Euros or less are also insured, so these Cypriot depositors will be repaid at some point. Amounts over that will have to wait for the banks to be liquidated, and might or might not get some pennies on the Euro.

On top of that, when banks fail you can’t get normal financing. It becomes difficult to borrow to meet the next payroll even though you have more than that due from receivables, or to get financing to upgrade your equipment even though your cash flow can handle the payments…

So governments have to step in when there is a systemic banking-system failure. If they don’t the entire economy in that country basically just shuts down.

The Cyprus Deal Means You Have To Watch Your Bank

So Cyprus needs to bail out its big banks or lose everything, and the government is making a deal with the International Monetary Fund and German and other banks for a loan to keep things going. It looks like the Cyprus bank bailout deal means depositors with amounts over the insured level are “taking a haircut” and losing 40% of their money.

Before this happened in Cyprus you usually large depositors could stick their money in a generic “bank” and if something happened a government would step in and get you most, if not all, of your money. Banks were generic banks, they held you money and when you needed it you could just get it.

But now there is a lesson: banks can fail and government might not step in and bail everyone out. You can lose your money.

You can lose your money.

This means you have to pay attention to which bank you are putting your money in. You need to look at the particular bank you are putting your money into and understand if they are playing games, speculating, hiding things from their books, making bets with a “London Whale,” using fantasy valuations or “repos” to make their books look better, laundering money for drug dealers or terrorists, etc.

It’s on you, because government’s aren’t doing it. Whether it is due to deregulation or “regulatory capture,” the banks are doing what they want, when they want and to whom they want. And no one is holding them accountable. You can lose your money.

Government is no longer functioning when it comes to big banks, so you have to do the work yourself. You can lose your money so you have to know if your bank is on the level. Good luck with that.

Anti-government types, you got what you wanted. Government is not “meddling” with businesses – at least not with the big banks. So sit back and enjoy the ride.


This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF. Sign up here for the CAF daily summary

Beware the New Corporate Tax-Cut Scam: LIFT Is A Big LIE

First it was Fix the Debt, with tax-dodging corporations “leading the charge for massive new corporate tax cuts paid for with cuts to Social Security, Medicare, and Medicaid.” Now there’s a new “LIFT America coalition,” pushing for massive, massive corporate tax cuts, without bothering about cutting benefits. LIFT stands for “Let’s Invest for Tomorrow,” but as Citizens For Tax Justice (CTJ) points out, it really ought to be called LIE, for “Let’s Invest Elsewhere.”

The executives who run the giant multinationals want to be let off the hook for paying taxes on profits they make outside our borders. As an Apple executive said to The New York Times, giant multinationals “don’t have an obligation to solve America’s problems.” And to prove it, American corporations are holding $1.7 trillion in profits outside the country – just sitting there – rather than bringing that money home, paying the taxes due and then paying it out to shareholders or using it to “create jobs” with new factories, research facilities and equipment.

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The Democratic Wing Of The Democratic Party

The House voted on budgets yesterday and austerity won. 84 Democrats voted for the jobs and growth “Back To Work Budget” from the Congressional Progressive Caucus. 102 Democrats voted against it. (1 voted “present” and 13 were not voting.) Here is the roll call vote so you can see who voted yes and who voted no.

The Black Caucus budget with some jobs measures and tax increases on the wealthiest got 105 Democrats voting yes and 80 no.

Rep. Mulvaney’s substitute, which was very similar to Senate Committee-backed austerity budget resolution of budget cuts “balanced” with tax cuts got 154 Democrats voting yes and 35 no. The Democratic (Van Hollen) substitute austerity budget that replaced the sequester with targeted cuts and tax increases got 165 Democrats voting yes and 28 no.

The Democratic Wing Of The Democratic Party

Ten years and 6 days ago today: (transcript)

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Important Bipartisan Currency Bill Introduced In House

A new bill was introduced in the House today to fight currency manipulation, including China’s. The bipartisan Currency Reform for Fair Trade Act was introduced by Representatives Sander Levin (D-MI), Tim Murphy (R-PA), Tim Ryan (D-OH), and Mo Brooks (R-AL). This bill would treat undervalued currency as a subsidy under U.S. trade law, meaning we could apply tariffs to goods from countries that do this.

A nearly identical bill passed the House overwhelmingly in the 111th Congress and had 234 bipartisan cosponsors in the recent 112th Congress after passing overwhelmingly in the Senate. But Speaker Boehner refused to allow a vote, and the bill did not become law.

Currency Manipulation

Some countries go to great lengths to keep their currencies “weak” relative to where currency markets say they should be set. This means goods from these countries cost less than goods from countries with “stronger” currencies. This gives companies making things in these countries a competitive advantage in world markets, and the jobs and factories flow to those countries. It costs these countries money to accomplish this, but they get it back by gaining all those jobs and sales of goods and services.

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Today’s Housing Bubble Post

Yes, I am reviving the “Today’s Housing Bubble Post” that was so popular prior to the (last) crash.

In a local weekend paper today I saw a 3br, 2ba regular old house on a regular old street in a regular neighborhood in Cupertino, CA listed for $1.4 million.

Fed-driven low interest rates lead to asset bubbles. Tax cuts for the rich lead to massive wealth inequality and investors with too much money chasing fad-speculations like birds all flying off a wire at the same time.

We need a different approach. What we need for the economy is a massive infrastructure modernization effort. Since the Reagan tax cuts we have deferred maintaining our infrastructure (and cut education and everything else) and it has caught up with us.

The Congressional Progressive Caucus “Back To Work Budget” immediately hires 7 million people to fix our infrastructure and pays for it by bring tax rates on the wealthy back to Clinton levels, plus new brackets for millionaires and billionaires. And they tax capital gains at the same rate as regular income. But they don’t even bring it back to pre-Reagan levels!

72000+ to 2: “Wired For Republican” Media Ignores CPC/Dem Back-To-Work Budget

They say that Washington DC and the major media are “wired for Republicans.” Steve Benen explains how this works,

… week in and week out, this debate is dominated by voices from only one party.

A couple of years ago, Josh Marshall talked about how the Washington establishment is simply “wired” for Republicans. It’s GOP ideas that get attention; it’s GOP talking points that get internalized; it’s GOP voices that get aired.

Today we have a measurement of this effect: 72,000+ to 2.

Today the Progressive Caucus released their “Back To Work” budget. Rep. Keith Ellison, the Progressive Caucus co-chairman, explains the budget in this interview.

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Looks Like I Need To Revive The Housing Bubble Series

Looks like the housing bubble is back — waaaayyyy back. In my area prices are waaaayyyy above the peak of the bubble.

I do not live in a great neighborhood. But it looks like a 3br, 2ba house can go on the market now for $750 – 800K, and sell right away, sometimes the same day, for as much as $900K. Word is that around here that it is Chinese nationals and hedge funds buying about 1/3 of them for cash. The rest pretty much sell for cash as well.

Here is a 2br 1ba offered at $775K. Seriously, go look at the street view.

Over at Calculated Risk, Jim the Realtor: Here is what it looks like at an open house:

Video: Parent Trigger – False Promises, Divided Communities and Disrupted Young Lives

From the Education Opportunity Network:

“…the real story of how one campaign behind parent trigger laws misled parents and fractured the community. The video tells the story of Adelanto, California where a well-funded, outside group “Parent Revolution” came to town and instead of working to improve the schools tricked parents with false promises, bitterly divided the community, and disrupted the education of young children.