Tag Archives: Wall Street

Pension Gimmicks Blamed On Workers

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The student loan deal is badly needed. It should have just been extended – duh! But the 1 percenters took it hostage and demanded their pound of flesh before We, the People can preserve even this little bit of what we do for ourselves. So as part of the “sweetener” for those 1 percenters there is a corporate pension giveaway in the deal that has nothing to do with student loans. It appears they are going to let companies underfund pensions — money that should be set aside for worker pensions tomorrow will instead go into 1 percenter pockets today — and are setting up for a taxpayer bailout (or just stiffing retirees) later.

Pension Calculations Are Tricky But Regulated

This is kind of tricky, so bear with me. When companies (and governments) put money into pension funds they have to calculate how much will be needed to pay the promised pensions. This involves estimating things like how long (and how many) people will live, and how much “return” (interest, stock price increases,dividends…) to expect as the money is set aside. Key point: If you expect a too-high rate of return you can set less aside now (and put it in your pocket,) but when the time comes to pay the pensions you won’t have enough.
This is supervised by government standards and regulations. They say how much of a rate of return is allowed to be used in these calculations. A higher expected-rate-of-return allowance means less has to be set aside, so more money can go into 1 percenter pockets. So there is a lot of pressure from corporations to let them get away with overestimating, and therefore putting more in their pockets today. Since this is complex, it is easier to get away with diverting promised-worker-retirement money into 1 percenter pockets.
This student loan deal apparently lets corporations claim a higher expected rate of return, thereby diverting more money today into 1 percenter pockets.

Money Into Worker Pensions Or 1 Percenter Pockets?

For a long time the government has been allowing pension funds to use a too-high estimated rate of return, with the result that many pensions are now underfunded. Money that should have gone into savings to pay worker pensions was diverted into 1 percenter pockets, either through improved corporate bottom lines in the case of companies, or through lower taxes in the case of state & local governments. (Of course, many companies shifted worker-pension promises into 1 percenter pockets using the 401K scam — you fund your own retirement, on your own, with little help, and have to know how long you’ll live, and it turns out badly every time — but that’s for another post.)
In fact, this worker-set-asides-for-later vs 1 percenter-pockets-today issue is similar to what happened with the Social Security Trust Fund. Money from workers was set aside into the fund but was used to pay for tax cuts (and massive military increases). Now 1 percenters are demanding austerity — cutbacks in the things We, the People do for each other — instead of workers getting the money back from where the money went, namely the 1 percenters.
And since this is about money for worker retirees, and retired workers don’t have big, influential PR firms while 1 percenters do, it is convenient and easy to blame workers when the promised money isn’t there for their retirement.

The Much-Hyped Public-Employee Pension Crisis

The supposed public-employee pensions crisis is partly the result of state and local governments not setting aside enough money to pay up on pension promises (because of tax cuts). It is also partly caused by Wall Street scamming on those same governments as they got into riskier investments trying to get a high enough rate of return to make good on their pension promises. But the blame is being placed on the workers themselves.
The post Discover The Network Out To Crush Our Public Workers traced just a few of the corporate-conservative think tanks (really just PR firms) promoting the idea that public-employee unions are responsible for pension shortfalls. Almost all of these organizations traced back to Wall Street firms and individuals for their governance or funding. They are engaged in a campaign to divert attention and blame the workers themselves for pension shortfalls,

These corporate/conservative organizations are very good at manipulating the media and public opinion — it is their purpose. Their “experts” are well paid and always available to talk to reporters, appear on TV and radio shows and write articles and opinion pieces for newspapers, blogs and for their network of similar organizations. Their “reports’ and “studies” reach the conclusions that fit the strategy, and are crafted to sound just right. And there are so many of them! The result is development of “conventional wisdom” about what is going on in our society. This is why that conventional wisdom more and more reflects the corporate/conservative line. And right now the corporate conservative line is that we should think that public employees and their unions are responsible for state and local budget shortfalls.

See also Understanding The Attacks On Public Employees, Ten Holiday Attacks On Public Employees and Are Public Employee Unions Strangling Us? Also, Rick Smith And Dave Johnson Counter The Attack On Public Employees.

Others See It, Too

NY Times Editorial, The Deal on Student Loans,

The pension provision is not ideal. It could mean that more companies will underfinance their pension liabilities, shortchanging employees down the road. Lawmakers have tried to address that potential shortfall by strengthening the agency that insures private pensions with more money from higher premiums.

Thus from the Competitive Enterprise Institute, usually a most unreliable source. (The check from the big corps who want to underfund pensions must have been late.) In this case it is the same gimmick but added the the highway bill…: Threat of Pension Fund Bailouts Lurks in Senate Highway Bill, “Pension Smoothing” a License to Make Up Numbers,

The bill … would amend the Employment Retirement Income Security Act (ERISA) to allow for an accounting gimmick known as “pension smoothing,” whereby pension managers spread losses out over several years, while overestimating projected investment returns.
Specifically, this provision would expand the range of allowable projection figures, starting this year at a 20 percentage point range, to 60 percentage points after 2015. This is essentially a license to make up numbers for income projections four years out from now. …
“This accounting trick will likely expose taxpayers to potential pension fund bailouts in the future. ” …
“It would further remove pension investment return projections even further from reality, by expanding the range of allowable projections so broadly as to render them meaningless.”

Making Things Worse

To get a deal that keeps student-loan interest rates low enough for more people to afford to go to college, we had to pay off the 1 percenters with this “pension-smoothing” deal. Such is the way of Washington since we shifted from a democracy (rule by the people, for the people) to a plutocracy (rule by the rich, for the rich). Or, in this case a 1 percenter kleptocracy (rule by the rich, stealing from everyone).
But make no mistake, this deal makes the country’s future pension problems even worse. It diverts even more money from promised pensions into 1 percenter pockets. The result will be clear in 10, 20 or 30 years when people are retiring and the money isn’t there. Taxpayers will be asked for ever more “austerity” to cover money that was diverted to the 1%.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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We, The People Have To Say, “No You Can’t Do That”

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In Will We Choose A Chinese Future, David Sirota asks the core question: “Do we accept an economic competition that asks us to emulate China?” THIS is the choice that the “job creators” are demanding that we make when they say we need to be more “business friendly.” THIS is what they are asking us to do to ourselves when they say that less government, less regulation, lower taxes, anti-union “right-to-work” laws, and the rest of the corporate-conservative litany is what will restore the economy and “create jobs.”
We, the People have to say, “No, you can’t do that.”
It’s Not Low Wages, It’s Low Democracy
The reason so many factories have moved to China is not just price, it is because they do things a democracy cannot allow. Steve Jobs famously said, “Those jobs aren’t coming back,” because over there they make people live in dormatories at the factory and can roust them at midnight and make them work 12-14 hour days, seven days a week, using toxic chemicals. Richard Eslow lays it out in, Hell Is Cheaper: China, Apple, And The Economics Of Horror,

Companies like Apple don’t outsource to China because the workforce is better-educated or more highly motivated. They don’t even outsource just because the labor is cheaper there. They outsource because employers who defraud their workers can make products more cheaply, and those who ignore their safety can produce them more quickly. […] It’s possible that Steve Jobs and other outsourcing executives really think that “those jobs aren’t coming back” because they expect it will always be impossible to underbid the Chinese – because they don’t believe Chinese workers will ever be protected by law.
That’s the inexorable logic of the unrestrained and unregulated market. If things don’t change, there will be no stopping the outflow of employment from the safe and the stable to the cheated, the endangered, and the abused. Bad ethics drives out good ethics.

Jobs is saying that those jobs and companies and factories are not coming back because over there the workers can be forced to do those things, because they don’t have a say. They don’t have We, the People democracy like we do, so they can’t do anything about it. And our trade agreements allow our companies to close our factories here and force our workers to compete with that.
We can’t ever be “business-friendly” ENOUGH. We have to do something else. We have to understand that We, the People — the 99% — are in a real fight here to keep our democracy, or we will lose what is left of it.
We, the People have to say, “No, you can’t do that.” We have to say it to the companies that move jobs to China, where people have no say and are exploited. And we have to say that goods made by people with no say cannot be brought into our country without a strong tariff. We should use the funds brought in by that tariff to subsidize goods made here so they can compete in world markets. Otherwise we are making democracy into a competitive disadvantage. And if countries like China don’t like it, they can give their people a say, pay them decent wages, and protect their environment. That would be a race to the top instead of the current race to the bottom.
The Climate Change Denial Industry
Oil and coal companies are funding a “denial industry” to keep us from doing what needs to be done to rescue the planet’s climate. They make billions upon billions from pumping carbon into the air, and block efforts to cut back their polluting. Modeled after the tobacco denial industry and its “doubt is our product” strategy, they fight efforts to move us to green energy sources. They even direct their propaganda to attack electric cars and high-speed rail.
We, the People have to say, “No, you can’t do that.”
The Too-Big Banks
It’s the same story with the biggest banks. They pushed debt on us. They used their power to gut regulations and then took huge risks that crashed the economy. They demanded taxpayer money to rescue them without even cutting back the huge salaries and bonuses. And then they funded propaganda that blamed us, the poor, the government, public employees, unions — anyone but themselves. And they used their vast power and wealth to block investigations and accountability, forcing “settlements” that make their shareholders and their employees and their customers pay.
We, the People have to say, “No, you can’t do that.”
Other Examples
There are many, many other examples of wealthy, powerful interests – “the 1%” – using their wealth and power to make us do things that benefit themselves at the expense of the rest of us. And as this continues life for “the 99%” gets harder and bleaker and we fall further and further behind.
In all of these example We, the People have to say, “No, you can’t do that.”
That’s What Government Is
Government is We, the People banding together to watch out for and take care of each other. Government is We, the People saying to the wealthy and powerful, “No, you can’t do that.”
When the1%ers demand “less government” they are using their power and propaganda to force us into a position where we are less able to say to them, “No, you can’t do that.”
We, the People have to say, “No, you can’t do that.” Until we do, they will do that, and that, and that.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Blaming The Economy’s Victims For Economic Crimes

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
Blame the unions, blame the unemployed, blame loans to the poor, blame the government… As income and wealth increasingly go to a few at the top public anger is directed at the economy’s victims.
I am in a clinic all day participating in a medical study, so I was talking to one of the nurses. She brought up that California is in real trouble, is going broke, it’s a real mess. She says she doesn’t know what we’re going to do. She has heard that, “lots of states are going bankrupt. There is no money anymore.”
So I asked her what we should do about it.
She said it is because of the unions. “It’s just ridiculous. They want so much.”
I asked if she follows the news closely, she said she does. “I watch the news a lot.”
Some facts: California is famous for leading the country in a wave of anti-government tax-cutting and into Reaganism. We cut taxes an an anti-government ferver and increased prison spending in a law-and-order fever. Then the federal government cut taxes and increased military spending, leading to big deficits. Now we’re out of money to run the state government and the country is getting there, too. California’s problems have little or nothing to do with what state employees are paid, and a lot to do with tax cuts and people across the state not getting paid enough.
Blaming The Unions
This weekend CBS’ 60 Minutes joined the anti-worker chorus, blaming public employee unions for the problems faced by the states. Media Matters, in 60 Minutes’ one-sided, GOP-friendly report on state budgets describes the segment,

In 2,600 words about state deficits, you won’t find the phrase “tax cuts.” Instead, CBS adopts the Republican framing that deficits are all about spending — frequently with loaded phrasing like “gold-plated retirement and health care packages.” And throughout the report, CBS allows Christie, New Jersey’s Republican governor, to launch attacks on unions and make unsupported claims about budget problems, all without ever challenging his assertions and without including substantive disagreement from Christie critics.
… You’d never know from CBS’ report that a big part of the reason that “Christie and his predecessors” failed to make required contributions to the pension fund is that they decided to use the money for tax cuts instead. [emphasis added]

Mike Hall at the AFL-CIO blog explains that New Jersey’s workers and pensions are not the problem,

While politicians like Christie rail against the pensions public employees have secured through collective bargaining—painting them as overly generous golden parachutes, McEntee notes the average annual pension for an AFSCME member is $19,000, and the workers contribute 80 percent during their lifetime on the job.

Tax cuts, income and wealth going to a few at the top, but the unions take the blame because they fight for a better life for working people.
Blaming The Unemployed
The unemployed and the checks they get are often blamed for their plight. They are called “lazy,” and it is even suggested the be tested for drugs. CAF graduate David Sirota, in Why the ‘Lazy Jobless’ Myth Persists

The thesis undergirding all the rhetoric was summed up by conservative commentator Ben Stein, who insisted that “the people who have been laid off and cannot find work are generally people with poor work habits and poor personalities.”
[. . .] The trouble, though, is that the whole narrative averts our focus from the job-killing trade, tax-cut and budget policies that are really responsible for destroying the economy. And this narrative, mind you, is not some run-of-the-mill distraction. The myth of the lazy unemployed is what duck-and-cover exercises and backyard nuclear shelters were to a past era—an alluring palliative that manufactures false comfort in the face of unthinkable disaster.

Blaming The Poor And Government
Republicans on the Financial Crisis Inquiry Commission are sabotaging the commission’s work, demanding that “Wall Street” and “deregulation” not appear anywhere in the report. They are refusing to participate, instead releasing a counter-report blaming the government, claiming We, the People forced the giant banks to give home loans to the poor, and blaming the poor for receiving those loans.
What People Think
People tend to think about what is put in front of them to think about. That’s why everyone goes to see a new movie on the first weekend instead of waiting until they can get good seats with no lines. Wall Street and the likes of the Chamber of Commerce understand this so they put scapegoats in front of the public to mask what they are doing. Right now there is a corporate/right campaign to blame working people for the problems they caused.
Like 60 Minutes this weekend, the news sources are run by big corporations, and they have been saying over and over (and over and over) that unions and the unemployed and the poor and the government are the cause of the problems. (When was the last time you saw a union representative on TV, explaining the benefits of joining a union?) And, naturally, after hearing these things over and over (and over and over), viewers like the nurse at the clinic I am in think they should blame the unions, the unemployed, the poor, the government, too.
So much of the income and wealth are concentrating at the top. Taxes have been cut so far. The things our government does for us have been cut back so far. Working people’s wages have been stagnant for so long.
But the blame right now is directed at the unions, the poor, the unemployed and our government: We, the People.
As the AFL-CIO blog concludes,

The long term solution to state and local fiscal challenges … is “a robust economy, one that is creating jobs and replenishing tax revenue.”

To repeat: The long term solution to state and local fiscal challenges … is “a robust economy, one that is creating jobs and replenishing tax revenue.”
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Extend Unemployment Benefits Not Tax Cuts For Wealthy

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
In a stunning public display of just who our government works for and who it does not work for, unemployment checks for people out of work longer than 26 weeks run out tomorrow night. Congress, meanwhile, is caught up in a debate over extending a special tax break for the few people making more than $250,000 a year.
This is the situation. Here is a chart of the number of people unemployed for 26 weeks or longer: (click to enlarge)

Here is a chart of the economic divide, showing members of Congress receiving employment benefits from Wall Street: (don’t click the pig is big enough already)

Yes, the extended unemployment benefits that go people who have been unemployed more than 26 weeks will run out at the end of November – tomorrow night. Congress did not extend this program because Republicans blocked it, saying the cost is too high, since we spent so much money making sure that the banksters continue to receive their bonuses. Instead of acting on extending these unemployment benefits Congress is currently debating extending a special tax break that goes only to wealthy people making more than $250,000 a year.
The Human Cost
The terrible human cost doesn’t even get considered. According to the Ayn Rand terminology that conservatives favor, considering the human cost would be wrong and would enable the parasites (us) to feed off of the producers (the wealthy few).
Pennsylvania: Food pantry organizers hope stockpiles hold up in case unemployment benefits run out,

Unless Congress extends unemployment benefits, an estimated 83,000 people will see their benefits run out in December and another 200,000 in the first four months of 2011, according to the state Department of Labor and Industry.

Kentucky and Indiana: Thousands in Kentucky and Indiana face lapse of unemployment benefits,

Amid an anti-spending atmosphere in Washington, funds to extend unemployment compensation for more than 33,000 Kentuckians and nearly 67,000 Hoosiers are likely to run out next month.

Maryland: Benefits due to end for thousands in Md.

Thousands of Marylanders face being cut off from unemployment benefits next month — just in time for the holiday season — as Congress remains undecided on whether to extend the payments in one of the worst job markets in decades.
An estimated 2 million people nationwide are slated to lose benefits, including 14,000 in Maryland. And more than 30,000 laid-off Maryland residents will exhaust their benefits early next year. The phase-out is happening because a federally funded program that gave residents payments beyond the normal 26 weeks lapses on Tuesday.

Iowa: Interactive map shows unemployment by county,

Extended federal benefits lapse on Nov. 30, giving Congress only two days to pass an extension. If they fail, hundreds of thousands could lose benefits. Failure to pass an extension would mean nearly 44,000 Iowans will see an immediate reduction in benefits and 8,700 Iowans will be prematurely cut off completely. Every week beginning Dec. 1, another 1,500 Iowans will lose their benefits.

Michigan:
Flint: Many Genesee County families could lose unemployment benefits without vote from Congress
Grand Rapids: With unemployment benefits to end this month, Gov. Jennifer Granholm makes plea for extension,

Michigan, with the nation’s second-highest unemployment rate at 12.8 percent, would see 168,520 unemployed workers lose their benefits between December and April 30, according to new figures from the Michigan League for Human Services. But even if an extension is granted, 13,011 will lose their benefits because they will have received the maximum 99 weeks of assistance.

Ohio: 2,332 Muskingum County residents face losing jobless benefits,

Statewide, 301,404 people will lose jobless benefits in the same window.

Arizona: Many Arizonans on verge of losing jobless benefits,

PHOENIX — About 90,000 Arizonans will lose their unemployment benefits soon unless Congress passes an extension, according to the Arizona Department of Economic Security.

Alabama: Unemployment expiration could leave thousands without benefits,

Unless Congress extends unemployment benefits by Nov. 30, Alabamians could begin losing unemployment compensation and nearly 58,000 residents could be off the rolls by April.

Mississippi: Editorial: House failing the jobless,

An effort to extend unemployment benefits past Nov. 30 for an estimated 53,000 Tennesseans, 8,000 Arkansans and 6,600 residents of Mississippi fell short of the necessary votes in the House of Representatives last week.

Colorado: 150k unemployed Coloradoans at risk of joining more than 26k with no UI benefits,
North Carolina: Unemployment Extension Standoff Makes NC Woman ‘Feel Like A Pawn In A Chess Game’,

“My last check will be the week ending Nov. 30 unless they come back on Nov. 29 and miraculously vote an extension,” said Millen, who lives in Charlotte, N.C.

Will Congress act before tomorrow night and extend unemployment benefits to people who are suffering because of the greed of a few?
Action Items
Click here to call your members of Congress and demand they act!
Sign this petition to Congress: Continue the Federal Unemployment Insurance Programs
Sign the petition: Tell Congress: Don’t extend the Bush tax cuts for the wealthy
Visit unemployedworkers.org
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The Great American Credit Catastrophe

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The 911 of the Middle Class is the consumer credit debacle. It is the gift that keeps on giving. The reality is that the housing crisis is just one piece of this really big, ugly mess. It seems to me that our President MUST call for immediate reform and take action through executive order. Call me politically naïve, but we need action. Unemployment continues to hover close to 10%, and higher in badly hit areas. Interest paid by the banks on savings ranges from less than 1% to maybe 2.5% on a good day. The consumer credit card companies, though regulated now sort of, ran naked through the streets jacking up everyone’s interest rates to over 15 to 30%. Yes they have to notify the poor, irresponsible slobs now before they do things, but the banks still get to burn kerosene in the town square with no permits. And we haven’t even gotten to the health insurance yahoos that have four more years for their trickery. Oh Nelly, bar the door! It’s the Wild West again as the cattle are corralled – only this time it’s the American people being herded to ruin by the giddy-up bankers and health insurance companies, not just the mortgage guys.
People are getting sick from worry. Their backs hurt, their necks are out, and they are grinding their pearly whites. Few sleep well at night. Pharmaceutical sales are up. The banks we saved are savaging us. They are bulldozing the Middle Class under mountains of debt. People are losing their homes, divorces are up, businesses are closing, and unemployment is rampant. The consumer credit world and their FICO scores are broken. They are based on a world that no longer exists. In two short years, many consumers have watched their scores collapse under an avalanche of debt. The FICO scores were calibrated for a different time when consumer credit cards were not the only source of money available, mortgages were not under water, and unemployment was not soaring. If we are ever to unwind this situation, these algorithms must be reset. Otherwise the banks will never lend again. The Middle Class needs a do-over, just like the banks got.
Yes sir, Obama stood up against the broad sweeping foreclosure legislation, and Bank of America seized the moment halting foreclosures nationwide. But we’re all holding our breath waiting for the other shoe to fall as even Progressive strategist Mike Lux gens up the netroots to re-engage with the President and Congress. It is inconceivable that people have not taken to streets in protest over their lost pensions, and the absence of any kind of interest bearing bank account — except on consumer credit cards. In fact, this week Robert Sheer wrote brilliantly about Obama’s “No Banker Left Behind” — while every normal person has been thrown under the bank bus. How did we allow the bail-out of every financial institution, while abandoning the common folk? Why are Democrats — whether conservative, moderate or netroots – not able to channel this collective anger, rage and disappointment other than to take aim at one another? Given the data, there is no way out for the once resilient Middle Class without a do-over. Instead of “No Banker Left Behind” let us heal the Middle Class by fixing the credit industry; restricting the health care industry now, not in four years; and making those banks lend the money we gave them and not hide behind FICO scores. All of the Democrats are writing, but no one is demanding change now. The Tea Party has successfully harnessed the anger and rage, but has no plan. Frankly, they are just another distraction taking our attention away from the gravity of the problems.
Mr. President, come back to us as Mike Lux laments. We need you. We, in the Middle Class, are living this nightmare everyday of our lives. Figure it out, and get the Middle Class out from under. The numbers do not lie. This is our emergency, our call to action, our 911. Friends and neighbors are collapsing from the stress when they can ill afford it. Unemployment is not going away. Consumer debt is skyrocketing. Mr. Obama, Americans are not being frivolous and irresponsible as Dr. Summers would like you to believe. They are boxed in with no escape hatch. Consider enacting a nationwide job core like the WPA, putting the banks on real notice, corralling those nasty health insurance folks, redoing the credit industry, and loosening up cash. No one is sleeping at night. People are nervous and cannot see a future.
Please, inspire us again, show emotion, get messy, and let the wrinkles show. Mr. President raise your voice in outrage. Give us voice. Come back to us. The time is now.
This was originally published on the Huffington Post earlier today.
See the pearltree below for the references for this article.
US Economy

The Real Deficit Is Jobs!

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
The real deficit is jobs. That is one more of those things that everyone can see in front of their faces, but we’re told it isn’t what it is. There aren’t enough jobs, and we’re being told this is our fault because we wanted pensions and good wages and vacations and respect and dignity and please, sir, just a little slice of the pie.
In case you haven’t noticed, the world’s economy is suddenly undergoing a classic “Shock Doctrine”-style, coordinated propaganda attack. The wealthy and powerful, having insisted that countries cut their taxes and run up debt, now insist that the middle class and poor must work harder, have their pensions reduced, sell off (to them) their publicly-held resources, and take other “austerity” steps to pay off the debt that these lazy, parasitic peasants dared to run up.
The excuse is that “the markets” will “lose confidence” in us. Apparently we aren’t working the salt mines hard enough. “The markets” — that’s the crowd who got in trouble and insisted that the world would end unless we immediately handed over to them all the rest of the money in the world — will “lose confidence” in our ability to work the mines hard enough, and will cut us off, unless we cut our pensions, sell off (to them) our resources, and promise never to be lazy and make demands for better wages, pensions, workplace safety, and do it now.
The real deficit is jobs.
History teaches that the way out of an economic slowdown is to invest in infrastructure, education and modernizing manufacturing.
Slactivist said it best the other day,

This calls to mind an old story:

But knowing their hypocrisy, he said unto them, “Why are you putting me to the test? Bring me a dime and let me see it.”
And they brought one. Then he said to them, “Whose head is this — FDR’s or Herbert Hoover’s?”
They answered, “Roosevelt’s.”
And he said unto them, “Right. So shut up. Have you morons already forgotten the 20th Century? When the choice is between imitating what worked and what really, really didn’t work, why are you pretending it’s terribly complicated?”
And after that, no one dared to ask him any question.

I’m not an economist, but we’ve got five applicants for every single job opening. If you tell me that the best response to that situation is to lay off hundreds of thousands of teachers, I will not accept that this means that you’re smarter and more expert than I am. I will instead conclude — regardless of your prestige or position or years of study — that you’re a moral imbecile.

According to the Labor Department,

By the end of 2009, the jobless rate stood at 10.0 percent and the number of unemployed persons at 15.3 million. Among the unemployed, 4 in 10 (6.1 million) had been jobless for 27 weeks or more, by far the highest proportion of long-term unemployment on record, with data back to 1948.

That’s right, it was the policies of austerity that created a depression, and the policies of job-creation, infrastructure investment and taxing the wealthy to pay for it that got us out. But that was back when We, the People were still in charge.
In other news:
Number Of Millionaires Grew Amid Recession.

The rich grew richer last year, even as the world endured the worst recession in decades.

Top 1 Percent of Americans Reaped Two-Thirds of Income Gains in Last Economic Expansion, Income Concentration in 2007 Was at Highest Level Since 1928, New Analysis Shows,

Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928, according to an analysis of newly released IRS data by economists Thomas Piketty and Emmanuel Saez.
During those years, the Piketty-Saez data also show, the inflation-adjusted income of the top 1 percent of households grew more than ten times faster than the income of the bottom 90 percent of households.

Top 1% Increased Their Share of Wealth in Financial Crisis,

According to his analysis, the top 1% held 34.6% of all national wealth in 2007. By Dec. 31, 2009, they held 35.6%.
Meanwhile, share of national wealth held by the bottom 90% fell to 25% from 27%.

Corporate Wealth Share Rises for Top-Income Americans

In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data.
. . . For every group below the top 1 percent, shares of corporate wealth have declined since 1991.
. . . Long-term capital gains were taxed at 28 percent until 1997, and at 20 percent until 2003, when rates were cut to 15 percent. The top rate on dividends was cut to 15 percent from 35 percent that year.

See if you can make the connection. They want us to cut back our pensions, cut our wages, sell off our resources and work harder, to pay back the money that was borrowed and handed to them.
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China’s American Enablers

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
China argues that some American companies will suffer if China stops subsidizing manufacturing and adjusts their currency to market levels. They’re right. The fight over Chinese violations of trade rules is also another story about Wall Street and big, monopolistic corporations vs Main Street and American workers.
A China Daily story says China’s huge export surplus is being “misread.” The Chinese government says that US companies — the ones who close US factories, lay off workers, devastate communities and throw the costs onto the government — are also beneficiaries of China’s government subsidies. From the story,

China’s large trade surplus is often used by the United States to argue why China should allow its currency to rise.
Yet most US officials ignore a very important fact: a majority of China’s exports to the US are produced by US-funded companies and huge profits go back into American pockets. . . .
“China’s cheap labor helps foreign companies cut wage costs and increase their profits. Ironically, the rising profits go into foreign bosses’ pockets and China is left to take the blame for the trade imbalance,” said Tan Yaling, an expert at the China Institute for Financial Derivatives at Peking University.

This story is correct. SOME Americans do benefit from closing our factories. Actually, “benefit” might even be the wrong word here. SOME Americans are getting fabulously wealthy from these policies, beyond anything seen before in history, with the rest of us falling further and further behind as a result. Wal-Mart, for example, with their stores full of Chinese goods, has for decades been wiping out regional and local retailers and lowering the local wage and tax base.
So yes, SOME Americans are doing very well, thank you, from these policies. They gain a quick buck today, the rest of us pay the costs later. In Wall Street’s War Against The Real Economy & We, The People, I wrote,

Over and over again we see the consequences of conservative economics and Wall Street domination: Short-term profits for a very few with devastating long-term consequences for the rest of us.

Wall Street firms have been making vast fortunes from this game,

The private equity company-buyout game works like this: buy a company, borrow against the company name and assets and put the proceeds straight into your pocket, sell off assets, outsource jobs, lay people off, cut pay and benefits for the rest, close facilities and factories, externalize costs onto the community, cheapen whatever the company makes or does, run up the debt some more, squeeze money out and pocket it and then sell. Hopefully you make off with the pension fund in the process.

They have been backed by American conservatives who have have long argued in favor of these “free market” and “free trade” scam that, close US factories, instead importing goods subsidized by China’s government. A few get fabulously wealthy at the expense of the rest of us. To persuade people to support this nonsense they say that adjusting China’s currency to market rates would “punish” consumers. Typical of this line is this from the Heritage Foundation a couple of years ago, China’s Undervalued Currency Benefits Americans,

To the extent that the renminbi is undervalued … the benefit goes to U.S. consumers and businesses, which pay lower prices for Chinese goods imported into the United States.
. . . U.S. consumers have the most to lose by congressional efforts to force revaluation of the renminbi. Chinese goods in the U.S. are cheap because the renminbi is cheap. Revaluation will weaken the purchasing power of the American consumers, mostly from the middle and lower economic strata, who depend on Chinese products to maintain their standard of life.

So here we are at a crossroads. April 15 the President has to officially declare that China is manipulating its currency and impose tariffs that will start to bring back factories and jobs to America. There is going to be tremendous pressure from the usual suspects to do the wrong thing, but the wrong thing has been going on long enough.

It Is Time To Put Our Foot Down: Ten Steps We Can Take To Stop Closing Factories And Eliminating Jobs

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
The economy is still getting worse more slowly. We lost “only” 36,000 jobs last month. We need to create 11 million new jobs just to get back to where we were before “free-market” conservatives took over our government and dismanted the protections and regulations that had protected us from this.
Jobs lost, communities devastated, lives destroyed. Over and over again. Yet with all of this going on companies like Whirlpool and Toyota are still closing factories, laying of American workers, and moving manufacturing out of the country! Toyota is closing the NUMMI plant in Fremont, California, which could lose up to 50,000 jobs across California. Whirlpool — recipient of stimulus dollars from the government — is closing a factory in Evansville, Indiana and moving the jobs to Mexico where people will be paid $70 a week and certainly won’t be buying anything made in America.
It’s the system. While the executives collect bonuses and tax breaks for their destructive actions We, the People have to pick up the tab. We pay the unemployment, the stimulus, etc. Our communities pay the cost of losing the jobs and the tax base, our economy pays the cost of losing the manufacturing capability. And the executives and private equity firms and Wall Street get rich. So of course they do more of it.
How crazy is this? In the middle of this terrible jobs crisis companies are still closing factories here and shipping the jobs out of the country. Why do we allow this?
Whirlpool and Toyota (and Wall Street’s $140 billion bonus pool this year) ought to be the last straw. It is time for We, the People to put our foot down and say not one more factory closed, not one more job sent out of the country! In fact, it is time to start bringing jobs BACK.
It is time to stop letting goods into the country that are made by exploited workers in areas with no environmental protections without a tariff to take away the price advantage gained from going around the protections that We, the People have fought so hard for.
There is only one way the country can earn the money to pay back what we borrowed from China, Japan and others. That is to make and sell things to others!!! THAT is what “trade” means. “Trade” does not mean allowing greedy executives to sidestep the laws and regulations and protections that We, the People fought so hard to get.
Look around us. Jobs lost, communities devastated, homes foreclosed, lives destroyed, governments going broke. All because of a runaway system that encourages the destruction of our economy. Our system actually encourages executives to close factories and lay people off! Executives make profits and get bonuses (that benefit from tax cuts) if they can figure out how to eliminate YOUR job or close a factory or cheapen a product or keep you from talking to customer support or make you pay an extra fee, etc.
Wall Street and executives benefit from this — and get tax cuts, tax breaks and subsidies for doing it. But the economy-at-large is destroyed by these same actions when they are widespread. On top of that, we know that when we lose the factories we have to borrow money to buy the things we used to make. But we give tax breaks instead of penalties to companies that do this.
Here are just some steps that We, the People can take to start turning this around:
– A border tariff on imports to remove the price advantage of goods produced by exploited, underpaid workers.
– A border tariff to remove the price advantage of goods produced in ways that harm the environment.
– A border tariff on goods from countries that are not democracies, to remove any pricing advantage gained from not allowing people to vote and set rules that benefit themselves.
– A border tariff on goods from countries that restrict workers from organizing to improve their wages and working conditions, to remove any pricing advantage gained from not allowing workers to bargain. (America currently doesn’t meet this standard.)
– Remove tax benefits and instead impose tax penalties and fines on companies that close factories here. Don’t let it be profitable to do this!
– Increase taxes on the big monopolistic companies to remove the advantages that help them destroy America’s smaller, regional and local businesses — the very job creators we need.
– Increase income taxes on high incomes to reduce the incentive to pursue short-term windfalls instead of long-term interests. Make it take a long time to accumulate a fortune. Making a fortune is great but it should be a reward for helping our economy and society, not destroying them.
– Break up the “too big to fail” Wall Street firms that wrecked the economy. And get the money back — all of it.
– Explore the use of Eminent Domain to keep factories in communities and workers in the factories.
– Formulate and follow a national economic/industrial strategy to build a new green manufacturing economy
Please add some ideas in the comments. I will have more to say on all of this.

Whirlpool Exec Responds: The System Made Us Do It

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
In last week’s post, Whirlpool Bites Hands Of American Taxpayers That Feed It, I wrote about Whirlpool closing a factory in Evansville, Indiana. In summary,

    • Whirlpool closes a plant in Evansville
    • Taxpayers will shoulder the unemployment and other costs.
    • All the local supplier, transportation and other third-party jobs are destroyed.
    • Even more home foreclosures in the area as a result.
    • Local businesses are stressed or have to go out of business.
    • They are playing nearby Iowa against Indiana for tax breaks and subsidies to keep just a few of the jobs.
    • Whirlpool is profiting from making all this someone else’s problem.
    • And, of course, Wall Street celebrates the move.

This would be just one more “dog bites man” story – a company closes a plant and moves production out of the country, destroys workers’ lives, devastates communities and small businesses, sets states against each other, increases their profit margin, and Wall Street cheers. We read the same story over and over again for decades now, and the economy and the country of course have reached a limit of what can be lost. So what? What else is new?
But at Huffington Post a Whirlpool spokesperson responded, saying the post is “based on misinformation that’s floating around the Internet.” He wrote that their decision was based on “competitive factors.” In other words, Whirlpool says that the system made us do it. (The response in full is at the end of this post)
The spokesperson for Whirlpool is exactly right. It is the system that makes them do this. They are only following the market’s orders.
Set aside for a minute the lack of humanity in Whirlpool’s response, the lack of patriotism, the placing of market values (privatize the profits, socialize the costs) above human values, and the lack of concern for the destructive effect of their moves on the larger American economy. The system – the market – lets Whirlpool plead that those things are not Whirlpool’s job or concern. They are only trapped in the rules of the playing field and it is the job of We, the People to set those rules. It’s OUR fault, not theirs…
So to the extent that we are upset that Whirlpool moves jobs to Mexico, devastates surrounding communities, sets Indiana and Iowa bidding against each other for a few scraps and killing off the supplier and other businesses it isn’t Whirlpool’s fault, “WE” have fallen down on the job. WE have allowed a few large monopolistic corporate giants to take over the job of defining national policy. And of course those monopolist giants set the rules to their own advantage and against the interests of the rest of us, including all of the Whirlpools (unless Whirlpool becomes lucky enough to be the biggest, then THEY get to set the rules.) A few monopolistic giants benefit greatly from keeping this system the way it is, so their lobbying power keeps the country from changing the rules to benefit anyone else.
The rules are what they are. Yes, that’s a huge part of the problem.
BUT while Whirlpool pleads a “competitive factors” case, let’s look at Whirlpool’s competitor GE. GE isn’t perfect, but they are finding ways to move jobs BACK to the US. For example, look at this recent news report,
General Electric announces new product coming to Appliance Park

GE announced Appliance Park will get a new product – a “hybrid” or energy efficient water heater. The product line will arrive in 2011 and bring with it 400 new jobs.

How was GE was able to make Louisville work for producing durable goods, when Whirlpool is not able to make Evansville work? Is it a lack of corporate imagination on Whirlpool’s part? Why isn’t Whirlpool inspired to go the extra mile to find ways to keep jobs here, to help the communities that surround them and to help the workers who build their products for so many years? Are Whirlpool’s executives just happy enough with their profit margins, and this is all that matters? Will Whirlpool work to change the system that makes them do the things they do?
And more importantly in the big picture, I conclude this post with the same question as the previous post concluded: Will Congress listen?
Here is the Whirlpool spokesperson’s response:

Dear Dave Johnson and readers of the Huffington Post:
In reviewing your blog post, I noticed it appears to be based on misinformation that’s floating around the Internet. I’d like to contribute the following facts for the sake of context and clarity.
• Whirlpool has approximately 17,000 U.S.-based manufacturing employees – more than any of our competitors.
• We produce the majority of our major appliances in the U.S., while some of our competitors do not produce any of their major appliances in the U.S.
• The economic downturn and other factors lead us to expect lower demand for the refrigerators produced by our plants in Evansville, Indiana and Apodaca, Mexico, and we therefore decided to consolidate their manufacturing in one location.
• We based our decision to consolidate in Apodaca on a full analysis of all the competitive factors between the two plants.
• We worked with Indiana state and local officials to keep the company’s Product Development Center of 300 design engineers in Evansville.
• As a recipient of $19 million in stimulus funds from the Department of Energy’s (DOE) Smart Grid Investment Grant program, we are required to match that amount with an investment of equal value in the development of new smart products. The grant and related investment are completely unrelated to the manufacturing of existing product lines such as these refrigerators.
• We have honored the Union and others’ requests for meetings to discuss the decision, but given the competitive nature of the industry and the state of the markets, no combination of changes proposed at those meetings could make the plant competitive.
We appreciate the support shown for our Evansville employees, and hope that this message helps clarify the facts.
Thank you,
Christopher Wyse
Corporate Director
Communications and Public Affairs
Whirlpool Corporation

$140 Billion for Bonuses, Zero for America’s Future

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
Here is another story about Wall Street’s war on the real economy.
US Steel was planning to invest $1 billion in building an environmentally-friendly new “coke battery” plant in Clairton, PA. The new battery would dramatically reduce the emissions used in the process, and use the gases to produce electricity. According to the Pittsburgh Post-Gazette,

The strategic investment would build two new coke batteries at Clairton, install top-flight environmental controls and add a cogeneration plant that would make electricity from gas produced by coke-making, which will help power all three U.S. Steel sites.

Another Post-gazette story explains,

Coke is a baked coal that is used to fuel blast furnaces at the company’s Edgar Thomson plant in Braddock and U.S. Steel’s other North American operations. The Clairton plant can produce 4.7 million tons of coke annually and just under 1 million tons are consumed at the Braddock plant.

U.S. Steel broke ground on the project on October 22, 2008. Along came the financial crisis, and financing for the plant dried up. They had to suspend work in April, 2009. U.S. Steel puts hold on $1B Clairton project.

U.S. Steel is suspending indefinitely the $1 billion modernization of its Clairton coke plant, a massive, multi-year project that was expected to create more than 600 construction jobs.
The Pittsburgh steel producer said it was forced to make the “difficult but necessary decision” because of the economic slowdown that has prompted it to lay off about 7,000 union workers in recent months.

When the financial crisis hit, George W. Bush and Henry Paulson came up with – and Congress approved – the massive bailout scheme that has rewarded Wall Street for the actions that collapsed the economy. We gave the financial sector of the economy – commonly called “Wall Street” – hundreds of billions of direct dollars and trillions in guarantees, supposedly to fix the credit crisis and get the financial sector working again as the sector of the economy that provides financing for projects like the US Steel Clairton Coke Battery.
This is November and US Steel still has not found financing at reasonable rates to get back to work building this plant. They need $1 billion and this project is good for America’s industrial capability, workers and environment. But, apparently, Wall Street needs to pay out $140 billion in bonuses this year, speculate on life insurance plans, do “flash trading” on stocks, etc. instead.
What Wall Street Is Supposed To Be Doing
Wall Street and the financial economy are supposed to be to supporting the real economy by playing the role of middleman, connecting sources of money with companies needing that money to allocate capital where it is needed. This is supposed to be a constructive process that helps We, the People fund innovative startup companies, build factories and schools,allocate capital for company expansion and fund other large-scale projects that require a pooling of resources and dilution of risk. That is their essential role in the economy.
But there is a problem with the way Wall Street has been and is operating. Instead of playing a background role supporting the real economy Wall Street has been dominating the economy, influencing the government and running quick-buck schemes, creating bubbles, speculating up prices on commodities and generally running wild. Before the financial meltdown Wall Street was not allocating capital productively, it was allocating capital destructively. In the companies-as-buy/sell-commodities posts I have been exploring how Wall Street’s practices has been destroying companies, eliminating jobs and generally wrecking our economy while making a very few vastly wealthy. The company-buyout game turns good companies into debt-ridden, job-shedding shells. The greed-based drive for ever-higher returns tries to destroy companies like Costco because they are “overly generous” to their customers and employees. Wall Street has turned into a machine that grinds up jobs and communities, forcing wage cuts, dehumanization of workplaces, and corruption of our democracy.
When the financial sector broke down as a result of quick-buck risky investments (that didn’t allocate capital), massive leveraging (that didn’t allocate capital), Ponzi-like scams (that didn’t allocate capital), outright but not-yet-prosecuted fraud (that didn’t allocate capital), etc., our government stepped in to rescue the sector. But instead of fixing the system, Wall Street still is not allocating capital where it is needed. They are, however, taking huge profits and giving out huge bonuses.
Let’s make finance the servant of the real economy again, rather than its master. Let’s invest our money in our industry, not bailouts and bonuses for a few. There are so many incentives for Wall Street to destroy factories, etc, and so few incentives to build the economy. Let’s develop a strategy to build a new, sustainable economy that respects the environment and us as workers, customers and citizens. Let’s develop a national economic/industrial strategy/policy — call it what you want — so our country has a plan to create jobs, invest in research and development and solve our problems. Other countries do this but our policy and strategy is to not have a policy and strategy and just let things continue in the wrong directions. I’m tired of that. What about you?

Wall Street’s War Against the Real Economy & We, the People

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
At a meeting with bloggers before last week’s Building The New Economy conference, AFL-CIO President Rich Trumka talked about how we have developed two economies, one real and one financial. As he said, originally the financial sector was designed to support the real economy by providing capital as needed for building manufacturing facilities, public infrastructure, etc. But in recent decades the power of Wall Street has twisted that relationship until the real economy now feeds the financial economy.
As I have been writing about, for decades the real economy has been “financialized” by the Wall Street types — sold off piece by piece providing short term profits for a very few. We lost more than 50,000 manufacturing facilities in just the last decade! If you sell your house you might have some cash in your own pocket for a while but your family doesn’t have a place to live and the present state of our economy demonstrates the long term cost of this kind of short-term thinking: a few Wall Street types have a bunch of cash and the rest of us don’t have an economy anymore.

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Companies As Buy-And-Sell Commodities – Workers, Customers and Country As Costs

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
As we consider what we need to do to get our economy working again it is useful to look back at the things that went wrong.
The way people used to think about why you start a business was to make a product or provide a service. The business provides something that people need and if you do a good job and serve your customers well over time they will reward you for it. The better you do at that, the better you do for yourself. Right?
It’s a pretty basic business model: a business does what it is in business to do, and people like it or don’t, and the people who run the business do well or not accordingly.
For example, you would think that a mattress company was in the business of making mattresses, and a bakery was in the business of baking. You would think that an assisted living facility or nursing home company was in the business of caring for the people who came to them for care.

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