Archive for the ‘Politics’ Category

The Business of Austerity

Saturday, August 13th, 2011

The New Yorker — James Surowiecki writes: When Congress finally reached an agreement to lift the debt ceiling, a week ago, many predicted that investors would react with a sigh of relief. After all, on the surface the deal looked good for business, allowing the U.S. to avoid defaulting on its debt while preserving corporate tax loopholes and avoiding a tax hike for the wealthy. And it was a clear victory for congressional Republicans, traditionally corporate America’s best friends in Washington. (The Chamber of Commerce spent more than thirty-four million dollars in the 2010 election, almost entirely on Republican candidates.) Yet the prophesied relief rally never materialized. Instead, investors spent the week dumping stocks as fast as they could.

The debt deal alone didn’t send stocks spiralling downward, obviously. But the market’s plunge was largely the product of fears about the prospects for corporate profit in an increasingly weak economy, and the debt agreement amplified those fears. Markets, for one thing, tend to be spooked by uncertainty, and the debt-ceiling agreement has increased uncertainty by making it more likely that we’ll see down-to-the-wire, default-risking negotiations in the future. Senate Minority Leader Mitch McConnell was explicit about this last week, saying that there would be no more “clean” debt-ceiling increases in the future—in other words, Republicans will keep using the threat of default as a political weapon. This approach may well be extended to bargaining over budget resolutions as well, with Republicans threatening a government shutdown unless they get what they want. If that sounds improbably reckless, consider that every Republican Presidential candidate except Jon Huntsman came out against the final debt-ceiling deal. Even if you explain this as pandering to Tea Party voters, there’s no ignoring the fact that these candidates were advising congressional Republicans to let the United States default. Once games of chicken become the accepted way to resolve budget issues, the U.S. economy will become a much riskier place.

The deal also hurts business in more concrete ways. Even though the spending cuts are backloaded, so that the major ones are still more than a year away, they will likely hit precisely the kind of public spending—on infrastructure, basic research, and defense—from which corporate America reaps great, if often unacknowledged, benefits. More important, the debt-ceiling fight made clear that, even as the economy struggles to avoid recession, no help can be expected from Washington. President Obama may be talking about the need to create jobs, but, with the advocates of austerity in charge, it’s hard to see where support for any new government initiatives is going to come from. Indeed, it’s possible that Republicans will block the extension of unemployment-insurance benefits and of the current payroll-tax cut. That would deliver a significant hit to the economy next year. And the austerity advocates will also be emboldened in their attacks on the Federal Reserve, which they argue has been overly loose in its monetary policy (when in fact it’s been too tight). The economy needs strong doses of both fiscal and monetary policy. The debt deal makes it more likely that we’ll get neither.  (08/13/11)


Smash the Ceiling

Monday, August 1st, 2011 New Yorker — James Surowiecki writes: In the past few years, the U.S. economy has been beset by the subprime meltdown, skyrocketing oil prices, the Eurozone debt crisis, and even the Tohoku earthquake. Now it’s staring at a new problem—a failure to raise the debt ceiling, which would almost certainly throw the economy back into recession. Unlike those other problems, however, this one would be wholly of our own making. If the economy suffers as a result, it’ll be what a soccer fan might call the biggest own goal in history.

The truth is that the United States doesn’t need, and shouldn’t have, a debt ceiling. Every other democratic country, with the exception of Denmark, does fine without one. There’s no debt limit in the Constitution. And, if Congress really wants to hold down government debt, it already has a way to do so that doesn’t risk economic chaos—namely, the annual budgeting process. The only reason we need to lift the debt ceiling, after all, is to pay for spending that Congress has already authorized. If the debt ceiling isn’t raised, we’ll face an absurd scenario in which Congress will have ordered the President to execute two laws that are flatly at odds with each other. If he obeys the debt ceiling, he cannot spend the money that Congress has told him to spend, which is why most government functions will be shut down. Yet if he spends the money as Congress has authorized him to he’ll end up violating the debt ceiling.

As it happens, the debt ceiling, which was adopted in 1917, did have a purpose once—it was a way for Congress to keep the President accountable. Congress used to exercise only loose control over the government budget, and the President was able to borrow money and spend money with little legislative oversight. But this hasn’t been the case since 1974; Congress now passes comprehensive budget resolutions that detail exactly how the government will tax and spend, and the Treasury Department borrows only the money that Congress allows it to. (It’s why TARP, for instance, required Congress to pass a law authorizing the Treasury to act.) This makes the debt ceiling an anachronism. These days, the debt limit actually makes the President less accountable to Congress, not more: if the ceiling isn’t raised, it’s President Obama who will be deciding which bills get paid and which don’t, with no say from Congress. …

We may nonetheless end up with a halfway sensible budget deal. But that would be the result of luck, not design. Instead of figuring out ways to raise the debt ceiling, we should simply go ahead and abolish it. The U.S. economy has plenty of real problems to deal with. We shouldn’t have to wrestle with ones we’ve created for ourselves.  (08/01/11)


Is Military Spending Good for the Economy?

Monday, July 11th, 2011 — Ellen Brown writes President Dwight Eisenhower answered this question in 1953. “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed…. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.” -Dwight David Eisenhower, “The Chance for Peace” speech given to the American Society of Newspaper Editors, April 16, 1953

In a Wall Street Journal editorial on June 8 bemoaning the failure of the Obama stimulus package, Martin Feldstein wrote:

Experience shows that the most cost-effective form of temporary fiscal stimulus is direct government spending. The most obvious way to achieve that in 2009 was to repair and replace the military equipment used in Iraq and Afghanistan that would otherwise have to be done in the future. But the Obama stimulus had nothing for the Defense Department.

You can’t make this stuff up. The most obvious way to stimulate the economy is to replace military equipment? And the Obama stimulus had nothing for the Defense Department? When veterans’ benefits and other past military costs are factored in, the military now devours half the US budget. If military spending is such a cost-effective stimulus, why have the trillions poured into it in the last decade left the economy reeling?

The military is the nation’s largest and most firmly entrenched entitlement program, one that takes half of every tax dollar. Even if “national security” is considered our No. 1 priority (a dubious choice when the real unemployment rate is over 16 percent), estimates are that the military budget could be cut in half or more and we would still have the most powerful military machine in the world. Our enemies (if any) are now “terrorists,” not countries; and what is needed to contain them (if anything) is local policing, not global warfare. Much of our military hardware is just good for “shock and awe,” not needed for any “real and present danger.” (07/11/11)


Let Me Pound the Table

Tuesday, June 7th, 2011 — Terry Wilken writes: We have come to the end of our options. It seems that our leaders will just stay with the status quo. That sure seems like a good option. Every idea is immediately turned down.  It just so happens that the dollar is losing its value.  What are we to do? I think that the answer is to change the currency to bitcoins.

Bitcoins have increased in value while all other currencies have gone down in value.

But then I realized if I were a real congress person, I would have to say NO! NO!

We cannot have bit coins as our new currency. Think of all the little people that we would offend. We cannot have that. A little bit of nothing. That sounds bizarre.  We cannot have that. It is too confusing. I would vote NO.

Remember when W started bailing out the auto industry, or at least GM and Chrysler? H took all the credit, but then who would question him. When it happened, I called the White House and asked for H. He was not available, but I told them that since I was now an investor in these auto industries, that I wanted to apply for my stock certificates. I explained that I was a taxpayer and stockholder, and that I thought I should have a say in how they did business in the future. They took my address and told me that they would send me an application if one became available. I still have not seen one yet.

If I had been asked about the taxpayer car business, I would have voted NO on this issue. It might have prevented this.

Not to worry, let’s bring back the suprime loans. If you thing subprime loans are not happening, then guess again. Remember when the housing market needed a kick from behind, so Congress said that the banks had to loan to everyone. Even if the borrowers had no money and bad credit. It created a banking crisis to end all banking crises. The government then bailed out the banks, but they forgot to bail out the homeowners.

Remember TARP? It was supposed to do away with all the toxic assets. The non-performing house mortgages. They just gave the banks money to strengthen their balance sheet. They did not fix anything. Now it is starting all over again. It is good business practice to loan to people that cannot afford to pay you back. Is not this true?

So let’s try subprime auto loans. That sounds like a great idea to me.

No what we need is more QE added to our moribund dollar. That will certainly get the economy moving. All we need is for the government to get busy voting for new stimulus spending or investing in new projects. They can ask the Fed to add more dollars to the mix. That will certainly fix everything. If you thought the Fed was going to quit QE, Then guess again. The Fed cannot stop QE. If they do, interest rates will go up. This will lower the value of their bonds, and not do a good thing for the banks either. If no one wants to buy what you are selling, even if it is money, it is hard to stay in business. Learn more here!

So if you elect me to congress, I promise to vote NO!

I will refuse to come up with any ideas of my own. I will just vote NO. It is better to just pound the table. If I do it right, I will not even hurt my hand. (06/07/11)


United Corporations of America

Tuesday, June 7th, 2011

Citizens for Tax JusticeTo better inform the public and lawmakers about how successful many American corporations have been in reducing or eliminating their federal income taxes, Citizens for Tax Justice is releasing a preview of its forthcoming major study of Fortune 500 companies and the taxes they paid — or failed to pay — over the 2008-10 period. … Today’s release details the pretax U.S. profits, federal taxes paid and effective tax rates of (in alphabetical order): American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell International, IBM, United Technologies, Verizon Communications, Wells Fargo and Yahoo. …

The 12 corporations analyzed are major, nationally recognized companies in a range of industries, including manufacturing, energy, services, transportation, high tech and finance. They all made significant profits in 2010 and over the 2008-10 period.

From 2008 through 2010, these 12 companies reported $171 billion in pretax U.S. profits.But as a group, their federal income taxes were negative: –$2.5 billion.

All but two of the dozen companies enjoyed at least one no-tax year over the 2008-10 period, despite reporting substantial pretax U.S. profits in those no-tax years. Eight of the twelve companies reported net tax benefits over the full three-year period.

Not a single one of the companies paid anything close to the 35 percent statutory tax rate. In fact,the “highest tax” company on our list, Exxon Mobil, paid an effective three-year tax rate of only14.2 percent. That’s 60 percent below the 35 percent rate that companies are supposed to pay. And over the past two years, Exxon Mobil’s net tax on its $9.9 billion in U.S. pretax profits was a minuscule $39 million, an effective tax rate of only 0.4 percent.

Had these 12 companies paid the full 35 percent corporate tax, their federal income taxes over the three years would have totaled $59.9 billion. Instead, they enjoyed so many tax subsidies that they paid $62.4 billion less than that.

If just these 12 companies had paid at a 35 percent tax rate over the past three years, total federal revenues from corporate taxes would have been 12 percent higher than they actually were.

“These 12 companies are just the tip of an iceberg of widespread corporate tax avoidance,” said Bob McIntyre, director of Citizens for Tax Justice. “Our elected officials have a duty to the American public to make reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy.” (06/07/11)


Why the Japanese Government Can Afford to Rebuild!

Sunday, April 3rd, 2011

The Huffington Post — Ellen Brown writes: The Japanese government can afford its enormous debt because it owns the bank that is its principal creditor. But competitors are attempting to force the bank’s privatization. If they succeed, they could propel the country into debt servitude along with other credit-strapped nations.

When an IMF spokeswoman said at a news conference on March 17 that Japan has the financial means to recover from its devastating tsunami, skeptical bloggers wondered what she meant. Was it a polite way of saying, “You’re on your own?”

Spokeswoman Caroline Atkinson said, “The most important policy priority is to address the humanitarian needs, the infrastructure needs and reconstruction and addressing the nuclear situation. We believe that the Japanese economy is a strong and wealthy society and the government has the full financial resources to address those needs.” Asked whether Japan had asked for IMF assistance, she said, “Japan has not requested any financial assistance from the IMF.”

Skeptics asked how a country with a national debt that was over 200% of GDP could be “strong and wealthy.” In a CIA Factbook list of debt to GDP ratios of 132 countries in 2010, Japan was at the top of the list at 226%, passing up even Zimbabwe, ringing in at 149%. Greece and Iceland were fifth and sixth, at 144% and 124%. Yet Japan’s credit rating was still AA, while Greece and Iceland were in the BBB category. How has Japan managed to retain not only its credit rating but its status as the second or third largest economy in the world, while carrying that whopping debt load?

The answer may be that the Japanese government has a captive funding source: it owns the world’s largest depository bank. As U.S. Vice President Dick Cheney said, “Deficits don’t matter.” They don’t matter, at least, when you own the bank that is your principal creditor. Japan has remained impervious to the speculative attacks that have crippled countries such as Greece and Iceland because it has not fallen into the trap of dependency on foreign financing.

Japan Post Bank is now the largest holder of personal savings in the world, making it the world’s largest credit engine. Most money today originates as bank loans, and deposits are the magic pool from which this credit-money is generated. Japan Post is not only the world’s largest depository bank but its largest publicly-owned bank. By 2007, it was also the largest employer in Japan, and the holder of one-fifth of the national debt in the form of government bonds. (04/03/11)


Are We on the Right Path?

Monday, March 7th, 2011 — Terry Wilken (with the camera around his neck) writes: Can our government function with the players that are in charge of watching over us? For those that believe that we are in good shape, let us examine the facts. It is time to look at who is overseeing the Fed, and the current money supply. Make sure and toggle down to the video and watch it all the way through. Then we can finish the story.

Well, I hope you watched all of it. If you did, than you can reach no other conclusion than there is no one who is looking after what is happening to our currency. The people in charge do not have a clue. The dollar is going down the hill as fast as it can go, and no one is trying to stop it. They are not even trying to slow it down. I guess that one should be thankful that we are a strong country, and all the other countries are trying to beat us to the bottom. Let us hope that they win the race. Oh the thrill of down hill skiing.  It cannot get better than this.

As part of taking care of or money supply, the government is also not taking care of our banks.

And the the increase in foreclosures on homes continues unabated.

It is amazing that everything that has to do with the financial condition of the country is being ignored. As the press tells us, we do not have to solve the problems, we just have to learn how to kick the can down the road. That is the mantra of the government anyway. Is there a solution to this problem? Probably not, as long as we have a dysfunctional government, we are in this to stay. However, there is a way to start on a path that will help us get out of this mess. We will need to change the rules.  First rule is that all budgets have to be balanced. Then we may have to change the banking system to one that we had long ago. North Dakota is the only state in the Union that is totally solvent. Why? That is a good question. The North Dakota banking system is a STATE run bank. It is not part of the FDIC (the federal deposit insurance corporation). In order to borrow money, it is necessary that you can demonstrate that you can pay off the loan, and that you are not borrowing beyond your means. Now is that not an interesting concept. More states are thinking about joining the rush to sanity. This would eliminate the federal government from monetary control. It would put it in the hands of the local people. North Dakota has had a state owned banking system since 1919.  This is not a solution to a dysfunctional federal government, but is could be a way to help us get back to the straight and narrow! Yes, there are some sound banks out there, but they are becoming the minority. (03/07/2011)


Decipline and Punish

Monday, December 13th, 2010

The Automatic Earth — Michel Foucault’s seminal work Discipline and Punish explored the extreme institutionalization of “discipline” in modern Western society, as best exemplified by the evolution of the modern penal system. He illustrated this transformation by contrasting medieval public executions with the wholly distinct system of punishment we have today. The former was a stage for the sovereign (usually a King) to exhibit physical punishment on a criminal for violating the laws of the land, which were seen as an extension of the sovereign’s body, and was designed to explicitly make the public aware of the sovereign’s absolute power.

According to Foucault, this non-uniform system of public punishment eventually had the unintended consequence of creating public resentment for the sovereign, as the oppressed people would begin to identify with the suffering of the punished. This dynamic was evidenced by the violent riots that would erupt in support of prisoners during public executions. The powerful sovereign could no longer continue to maintain its domination while its political legitimacy was being undermined by such adverse reactions. These public displays may have revealed the extent of the sovereign’s authority, but they were too disorderly for the modern state’s purposes.

It is no coincidence that the modern penal system evolved along with the emergence of industrial production as the dominant economic force in Western society. The latter was a system entirely focused on increasing efficiency, where students, workers and soldiers alike were trained to be more obedient, faster and stronger in every aspect of their designated functions. Modern states facilitated this process of immense wealth production by instituting high levels of order on their citizens, or what Foucault would term “discipline”. It was not really a tool for the Kings and Monarchs of old, but rather was more useful for controlling the populations of emerging democratic states [emphasis mine]:

Historically, the process by which the bourgeoisie became in the course of the eighteenth century the politically dominant class was masked by the establishment of an explicit, coded and formally egalitarian juridical framework, made possible by the organization of a parliamentary, representative regime. But the development and generalization of disciplinary mechanisms constituted the other, dark side of these processes. The general juridical form that guaranteed a system of rights that were egalitarian in principle was supported by these tiny, everyday, physical mechanisms, by all those systems of micro-power that are essentially non-egalitarian and asymmetrical that we call the disciplines. [Foucault, Michel (1975). Discipline and Punish: the Birth of the Prison, New York: Random House (p.222)]

Foucault pointed out the striking similarities of the prisons, schools, hospitals (especially “mental” institutions), military barracks, office buildings and factories that had been established in the modern state, as they were all designed around specialized functions, regimented schedules and high degrees of observation and control. These institutions even shared very similar physical architectures and were typically legitimized by an underlying “scientific” foundation, whether that be criminology, psychology, medicine or economics. It was their ultimate goal to internalize strict discipline within the individuals themselves, so they would automatically follow these societal “norms” without questioning any of their reasons or results. Anyone who strays too far from the expected behaviors are labeled as part of the “delinquent class”, and are deemed to be in need of reform, rehabilitation, treatment or punishment. (12/13/10)


Shock Therapy for Wallstreet

Monday, October 4th, 2010

Ellen BrownTruthOut — Ellen Brown writes: The hits are coming fast and furiously. It appears major Wall Street mortgage lenders could again be in serious trouble – and looking again for handouts.

On September 20th, Ally Financial Inc., which owns GMAC Mortgage, the nation’s 4th largest lender, halted evictions and the resale of repossessed homes in 23 states. This was after a document processor for the company admitted that he had signed off on 10,000 pieces of foreclosure paperwork a month without reading them. The 23 states were all those where foreclosures must be approved by a court, including New York, New Jersey, Connecticut, Florida and Illinois.

On September 24th, Representatives Alan Grayson (D-FL), Barney Frank (D- MA) and Corrine Brown (D-FL) directed a letter to Fannie Mae questioning its use of “foreclosure mills,” which were described as “law firms representing lenders that specialize in speeding up the foreclose process, often without regard to process, substance or legal propriety.” The letter followed a report by the Florida attorney general’s office in August that it was investigating three law firms that had allegedly fabricated documents in thousands of cases to obtain final judgments of foreclosure.

On September 24, California attorney general Jerry Brown asked GMAC to halt foreclosures in his state until the lender could prove it was complying with a law that prohibits lenders from taking steps to foreclose a home before making an effort to work with the borrower. California is a non-judicial foreclosure state, meaning foreclosures do not require the prior approval of a court.

On September 28, JPMorgan Chase said it was halting 56,000 foreclosures because some of its employees might have improperly prepared the necessary documents. All of the suspensions were in the 23 states where foreclosures require court approval.

On September 29, the Washington Post reported that a top federal bank regulator had directed seven of the nation’s largest lenders to review their foreclosure processes, after learning about widespread mishandling of homeowner evictions. Besides JPMorgan Chase, they included Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank and Wells Fargo. (10-04-10)


A Better Kind of Bank

Wednesday, August 4th, 2010 Huffington Post — Ellen Brown writes: President John Adams is quoted as saying, “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” The major conquests today are on the battlefield of debt, a war that is raging globally. Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. In Great Britain, where the Bank of England is owned by the government, 97% of the money supply is issued privately by banks as loans. In the U.S., where the central bank is owned by a private consortium of banks, the percentage is even higher. The Federal Reserve issues Federal Reserve Notes (or dollar bills) and lends them to other banks, which then lend them at interest to individuals, businesses, and local and federal governments.

That is true today, but in the past there have been successful models in which the government itself issued the national currency, whether as paper notes or as the credit of the nation. A stellar example of this enlightened approach to money and credit was the Commonwealth Bank of Australia, which operated successfully as a government-owned bank for most of the 20th century. Rather than issuing “sovereign debt” — federal bonds indebting the nation to pay at interest in perpetuity — the government through the Commonwealth Bank issued “sovereign credit,” the credit of the nation advanced to the government and its constituents.

The Bank’s achievements were particularly remarkable considering that for its first eight years, from 1912 to 1920, it did not have the power to issue the national currency, and it operated without startup capital. Sir Denison Miller, Governor of the Bank from its creation in 1912 to 1923, was quoted in the Australian Press on July 7, 1921 as saying:

The whole of the resources of Australia are at the back of this bank, and so strong as this continent is, so strong is the Commonwealth Bank. Whatever the Australian people can intelligently conceive in their minds and will loyally support, that can be done.

…  The Commonwealth Bank received almost all of the powers of a central bank in emergency legislation passed during World War II, and at the end of the war it used this power to begin a dramatic expansion of the economy. In just five years, it opened hundreds of branches throughout Australia. In 1958 and 1959, the government split the bank, giving the central bank function to the Reserve Bank of Australia, with the Commonwealth Banking Corporation retaining its commercial banking functions. Both banks, however, remained publicly-owned.

Eventually, the Commonwealth Bank had branches in every town and suburb; and in the bush, it had an agency in every post office or country store. As the largest bank in the country, it set the rates and set policy, which the others had to follow for fear of losing customers. The Commonwealth Bank was widely perceived to be an insurance policy against abuse by private banks, serving to ensure that everyone had access to equitable banking. It functioned as a wholly owned state bank until the 1990s, when it was privatized. Its focus then changed to maximization of profits, with steady and massive branch and agency closures, staff layoffs, and reduced access to Automated Teller Machines and to cash from supermarket checkouts. It has now become just another part of the banking cartel, but proponents say it was once the lifeblood of the country. (08/04/10)