Dollars & Sense blog

Growing CA Student Protests Over Tuition Hikes

2009-11-20T13:42:00.004-05:00

Student protests against the decision to hike student fees by 32% have spread from UCLA across the University of California system.

The Indybay citizen media site has some of the most up-to-date info on the protests:

11/20 7am: At least 40 students have occupied Wheeler Hall on the UC Berkeley campus and are asking supporters to come out to the hall to show support. UC Police have surrounded the building as a "crime scene".

On Thursday, November 19th, the University of California regents approved a 32% increase in undergraduate fees, pushing fees to over $10,000 a year for the first time. Student regent Jesse Bernal was the only vote in opposition. Protests, including the occupation of four buildings, have taken place November 18th and 19th at UCLA, UC Berkeley, UC Santa Cruz, UC Davis, San Francisco State and San Francisco City College. Students occupied Campbell Hall at UCLA, Kresge Town Hall and Kerr Hall at UC Santa Cruz, and Mrak Hall at UC Davis.

On Wednesday at UCLA, one protester was reportedly arrested after police struck students with batons and another person was reportedly tasered.

About a hundred students were arrested on Thursday at UC Davis. UCSC's Kresege Town Hall and Kerr Hall are the only buildings that remained occupied Thursday evening.

UCLA Students Protest 32 Percent Tuition Hike

2009-11-19T13:37:00.004-05:00

Students at UCLA have taken to the streets and occupied buildings in protest of an announced tuition hike of 32 percent. At least 14 protesters have been arrested so far.

Several students report being tased by police, according to the Daily Bruin.

WTO Says Brazil Can Saction US Over Cotton

2009-11-19T12:52:00.002-05:00

The World Trade Organization has ruled that Brazil may impose trade sanctions against a variety of U.S. exports in a 9-year old complaint about U.S. government subsidies for cotton farmers.

From the wires:

The formal move at the WTO's dispute settlement body (DSB) brought Brazil one step closer to retaliating against the United States, the world's biggest cotton exporter, in the highly sensitive 9-year-old row.

The reduction of rich countries' cotton subsidies is seen by developing countries as the litmus test of efforts to reform the world trading system in the WTO's Doha round, with African producers in particular demanding radical change.

Brazil's request to go ahead and impose sanctions, following an award by WTO arbitrators on August 31, responds to the U.S. failure to comply with earlier WTO rulings condemning the subsidies, which distort the world market for cotton, hurting farmers in poor countries.

But U.S. WTO diplomat Juan Millan told the dispute body that Washington did intend to comply with the rulings and so Brazil would not need to levy the sanctions.

"While the United States understands that the DSB will today be authorizing the suspension of concessions or other obligations, we do not believe that it will be necessary for Brazil to exercise that authorization," he said in a statement.

He said imposing sanctions could hurt the economies of both the United States and Brazil.

SCALE OF RETALIATION

The arbitrators allowed Brazil, the second biggest cotton exporter, in some circumstances to "cross-retaliate" against goods other than cotton, or even in services or intellectual property such as patents on drugs. to exercise that authorization," he said in a statement.

One source at Brazil's WTO mission said that any retaliation would not take effect until after that consultation concluded.

Meanwhile Brazilian officials are calculating the scale of any retaliation on the basis of a formula set by arbitrators.

The arbitrators allowed Brazil to impose sanctions worth $147.3 million a year for subsidies such as marketing loans and counter-cyclical payments that the WTO had previously found hurt Brazil's own industry.

In addition they allowed it to impose a variable amount to compensate for prohibited export credit guarantees known as GSM 102 payments, depending on the size of those payments.

For the fiscal year ended September 2006, that compensation would be $147.4 million, making total retaliation of around $300 million, but at the time of the arbitration award Brazil said it would be entitled to about $800 million in sanctions this year.

The Brazil mission source told Reuters that the United States had just provided data on the prohibited export subsidies for the fiscal year ended September 2008, but this now needed to be analyzed.

A Better Way to Regulate Financial Markets

2009-11-17T15:18:00.002-05:00

From sometime D&S author Thomas Palley, in the Financial Times's Economists' Forum series:

A better way to regulate financial markets: Asset based reserve requirements

By Thomas Palley | November 10, 2009

There is widespread recognition that the financial crisis which triggered the Great Recession was significantly due to financial excess, particularly in real estate lending. Now, policymakers are looking to reform the financial system in hope of avoiding future crises. But like the drunk who looks for his lost keys under the lamppost because that is where the light is, policymakers remain fixated on capital standards because that is what is already in place.

There is a better way to regulate financial markets through asset based reserve requirements which would extend margin requirements to a wide array of assets held by financial institutions. ABRRs are easy to implement, use the tried and tested approach of reserve requirements, are compatible with existing regulation (including capital standards), and would fill a hole regarding adequacy of financial policy instruments.

The toleration of periodic bouts of financial excess over the past two decades reflects profound intellectual failure among central bankers and economists who believed inflation targeting was a complete and sufficient policy framework. It also reflects lack of policy instruments for directly targeting financial market excess. With central banks relying on the single instrument of short-term interest rates, this supported the argument using interest rates to target asset prices would inflict large collateral damage on the rest of the economy. ABRRs offer a simple solution to this problem by providing a new set of policy instruments that can target financial market excess, leaving interest rate policy free to manage the overall macroeconomic situation.

ABRRs require financial firms to hold reserves against different classes of assets, with the regulatory authority setting adjustable reserve requirements on the basis of its concerns with each asset class. One concern may be an asset class is too risky; another may be an asset class is expanding too fast and producing inflated asset prices.

By obliging financial firms to hold reserves, the system requires they retain some of their funds as non-interest-bearing deposits with the central bank. The implicit cost of forgone interest must be charged against investing in a particular asset category, reducing its return. Financial firms will therefore reduce holdings of assets with higher reserve requirements, and shift funds into other relatively more profitable asset categories.

The effectiveness of this approach requires system-wide application. If applied only to banks, ABRR would simply encourage lending to shift outside the banking sector. To succeed, reserve requirements must be set by asset type, not by who holds the asset.

A system of ABRRs that covers all financial firms can increase the efficacy of monetary policy. Most importantly, it enables central banks to target sector imbalances without recourse to the blunderbuss of interest rate increases. For example, if a monetary authority was concerned about a house price bubble generating excessive risk exposure, it could impose reserve requirements on new mortgages. This would force mortgage lenders to hold some cash to support their new loans, raising the cost of such loans and cooling the market.

A similar logic holds for stock market bubbles. If a monetary authority wanted to prevent stock market inflation from generating excessive consumption, it could impose reserve requirements on equity holdings. This would force financial firms to hold some cash to back their equity holdings, lowering the return on equities and discouraging such investments.

ABRRs also act as automatic stabilisers. When asset values rise or when the financial sector creates new assets, ABRRs generate an automatic monetary restraint by requiring the financial sector come up with additional reserves. Conversely, when asset values fall or financial assets are extinguished, ABRRs generate an automatic monetary easing by releasing reserves previously held against assets. In all of this, ABRRs remain consistent with the existing system of monetary control as exercised through central bank provision of liquidity at a given interest rate.

At the microeconomic level, ABRRs can be used to allocate funds to public purposes such as inner city revitalisation or environmental protection. By setting low (or no) reserve requirements on such investments, monetary authorities could channel funds into priority areas, much as government subsidized credit and guarantee programs and government-sponsored secondary markets have expanded education and home ownership opportunities and promoted regional development. Conversely, ABRRs can be used to discourage asset allocations that are deemed socially counterproductive.

Finally, ABRRs have other significant policy benefits that are especially valuable now. First, ABRRs increase the demand for reserves which will prove helpful as central banks seek to exit the current period of quantitative easing to avoid future inflation. By gradually raising asset reserve ratios, central banks can implement a form of reverse quantitative easing that smoothly transitions the system to a new more stable regime.

Second, by increasing the demand for reserves ABRRs will increase seigniorage revenue for governments at a time of fiscal squeeze. To the extent required reserves constitute a tax on financial institutions, that tax is economically efficient given the costs of financial crises. It will also shrink a system that many believe is bloated.

Thomas Palley is Schwartz economic growth fellow at the New America Foundation

The Worst Is Yet to Come (Nouriel Roubini)

2009-11-16T14:18:00.003-05:00

From RGE Monitor and yesterday's NY Daily News, Nouriel Roubini tells the unemployed to "hunker down":

The Worst is yet to Come: Unemployed Americans Should Hunker Down for More Job Losses

Nouriel Roubini | Nov 15, 2009

Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.

Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.

So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.

There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.

The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost.

This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.

Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.

Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.

The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession.

As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures.

The damage will be extensive and severe unless bold policy action is undertaken now.

Roubini is professor of Economics at the Stern School of Business at New York University and Chairman of Roubini Global Economics.

Sustainability and Horsesh*t

2009-11-16T11:26:00.006-05:00

Here are two items related to climate change that read well next to each other.

One is from a magazine called Tin House—an article by Curtis White skewering the idea of sustainability. A taste:

For environmental, business, and political organizations alike, the term that has come to stand for the hope of the natural world is "sustainable." Sustainable agriculture. Sustainable cities. Sustainable development. Sustainable economies. But you would be mistaken if you assumed that the point of sustainability was to change our ways. It's not, really. The great unspoken assumption of the sustainability movement is the idea that although the economic, political, and social systems that have produced our current environmental calamity are bad, they do not need to be entirely replaced. In fact, the point of sustainability often seems to be to preserve—not overthrow—the economic and social status quo.

This should not be surprising. Sustainability is, after all, a mainstream response to environmental crisis. It may want change, but it does not want what would amount to a fundamental self-confrontation. While it wants to modify existing models of production and consumption, especially of energy, it does not want to abandon what it calls "freedom," especially the freedom to own and use large accumulations of private property. And certainly it does not want to ask, "What went wrong in the great Western experiment with freedom? Why do we seem to be mostly free to destroy ourselves?"

Read the full article (and admire Tin House's design).

The other is from the current issue of The New Yorker—Elizabeth Kolbert gives the Freakonomics guys a well-deserved skewering. Their new book, SuperFreakonomics, sounds even stupider than their first one.

Kolbert (I can't help pronouncing her last name with a silent "T" as with Stephen Colbert) starts her review with an historical anecdote about how for a while there it looked like horseshit from all the horses used to transport people and goods all around New York City would eventually take over the city:

The problem just kept piling up until, in the eighteen-nineties, it seemed virtually insurmountable. One commentator predicted that by 1930 horse manure would reach the level of Manhattan's third-story windows. New York's troubles were not New York's alone; in 1894, the Times of London forecast that by the middle of the following century every street in the city would be buried under nine feet of manure. It was understood that flies were a transmission vector for disease, and a public-health crisis seemed imminent. When the world's first international urban-planning conference was held, in 1898, it was dominated by discussion of the manure situation. Unable to agree upon any solutions—or to imagine cities without horses—the delegates broke up the meeting, which had been scheduled to last a week and a half, after just three days.

Then, almost overnight, the crisis passed. This was not brought about by regulation or by government policy. Instead, it was technological innovation that made the difference. With electrification and the development of the internal-combustion engine, there were new ways to move people and goods around. By 1912, autos in New York outnumbered horses, and in 1917 the city's last horse-drawn streetcar made its final run. All the anxieties about a metropolis inundated by ordure had been misplaced.

This anecdote, it turns out, is a curtain-raiser to the Steves' (Steven D. Levitt and Stephen J. Dubner, that is) "argument" that we shouldn't fret about climate change, since someone is sure to come up with some kind of technological fix so that we can keep consuming, growing, and using fossil fuels. Their preferred idea is to cool the earth by shooting tons of sulphur dioxide into the atmosphere using an 18-mile-long hose (hence the title of Kolbert's review, "Hosed"—if only that could be taken as referring doubly to their idea and the Steve's careers or reputations). And here are two of the skewering bits, one sober, the other light-hearted:

[W]hat's most troubling about "SuperFreakonomics" isn't the authors' many blunders; it's the whole spirit of the enterprise. Though climate change is a grave problem, Levitt and Dubner treat it mainly as an opportunity to show how clever they are. Leaving aside the question of whether geoengineering, as it is known in scientific circles, is even possible—have you ever tried sending an eighteen-mile-long hose into the stratosphere?—their analysis is terrifyingly cavalier. A world whose atmosphere is loaded with carbon dioxide, on the one hand, and sulfur dioxide, on the other, would be a fundamentally different place from the earth as we know it. Among the many likely consequences of shooting SO2 above the clouds would be new regional weather patterns (after major volcanic eruptions, Asia and Africa have a nasty tendency to experience drought), ozone depletion, and increased acid rain. Meanwhile, as long as the concentration of atmospheric CO2 continued to rise, more and more sulfur dioxide would have to be pumped into the air to counteract it. The amount of direct sunlight reaching the earth would fall, even as the oceans became increasingly acidic.

...

To be skeptical of climate models and credulous about things like carbon-eating trees and cloudmaking machinery and hoses that shoot sulfur into the sky is to replace a faith in science with a belief in science fiction. This is the turn that "SuperFreakonomics" takes, even as its authors repeatedly extoll their hard-headedness. All of which goes to show that, while some forms of horseshit are no longer a problem, others will always be with us.

She's probably right, but let's hope she's not about the Steves in particular. Maybe the scorn getting heaped on them for this particular pile they've produced (e.g. here) will hose their reputations permanently.

Read Kolbert's review; read White's article.

Maybe We Were a Tad Premature

2009-11-14T14:31:00.003-05:00

...in our choice of the next bailout candidate. And this one surely needs watching in the longer-term. It's the Pension Benefit Guaranty Corp (PBGC). From Calculated Risk:
Pension Benefit Guaranty Corporation Deficit Increases
by CalculatedRisk on 11/14/2009 11:58:00 AM

The Pension Benefit Guaranty Corporation (PBGC) is the federal agency that guarantees pensions for 44 million Americans. The PBGC deficit doubled over the last six months to $22 billion ... but this is only just the beginning as the agency's potential exposure to future losses increased sharply.

From the Pension Benefit Guaranty Corporation (PBGC): PBGC Releases Annual Management Report for Fiscal Year 2009

The Pension Benefit Guaranty Corporation (PBGC) ended fiscal year 2009 with an overall deficit of $22 billion, according to the agency's Annual Management Report submitted to Congress today. The result compares with the $11.2 billion deficit recorded at the previous fiscal year-end on September 30, 2008.

...

The Annual Management Report classified 27 large pension plans with total underfunding of $1.64 billion as probable losses on the PBGC balance sheet. The report also shows that the agency's potential exposure to future pension losses from financially weak companies increased to about $168 billion from the $47 billion booked in fiscal year 2008.

"Exposure to possible future terminations means that we could face much higher deficits in the future," said Acting Director Vincent K. Snowbarger. "We won't fail to meet our obligations to retirees, but ultimately we will need a long-term solution to stabilize the pension insurance program."

(emphasis added)

With companies moving away from defined benefit plans, there will be fewer companies paying for insurance in the future--and the "long-term solution" will probably involve some sort of bailout.

Next Bailout Candidate

2009-11-13T16:59:00.005-05:00

And the winner is...The Federal Housing Administration (FHA)! Lest it be forgotten, as the article duly notes:

The FHA and the government-sponsored housing agencies Fannie Mae and Freddie Mac currently provide about 90 per cent of all new mortgages in the US housing market.

From The Financial Times:
Defaults pose risks to US housing agency
By Saskia Scholtes in New York

Published: November 12 2009 21:12 | Last updated: November 12 2009 21:12
The Federal Housing Administration, the government agency that insured $360bn of US single-family mortgages last year, said on Thursday that its insurance reserves had fallen below its congressionally mandated threshold to their lowest level ever.

Amid depressed house prices and mounting losses on insured mortgages, the FHA's capital reserve ratio, which measures reserves after accounting for projected losses, fell to 0.53 per cent in the 12 months to September 30--well below the 2 per cent cushion it is required by Congress to maintain.

Last year its capital ratio stood at 3 per cent, and it was 6.4 per cent in 2007.

Rising defaults on FHA loans have prompted fears that the agency will need a taxpayer bailout. Defaults on FHA-backed loans reached 8.24 per cent in September--up from 8.1 per cent in August and 6.1 per cent a year ago.

Shaun Donovan, secretary for housing and urban development, whose office oversees the FHA, said the economy was worse than housing officials had expected. He projected that claims against the insurance fund would be higher than forecast and said action would be needed to shore up the agency's reserves.

The FHA's total reserves were more than $31bn, or more than 4.5 per cent of the insurance it had written, the agency said. Mr Donovan said that in almost every economic situation examined in an actuarial study, the FHA still had enough reserves to cover projected claims on outstanding loans.

Read the rest of the article

Yves Smith on Krugman on Jobs

2009-11-13T15:52:00.004-05:00

From the fantastic Yves Smith at Naked Capitalism:

Krugman on the Need for Jobs Policies

Paul Krugman has a good op-ed tonight on how Germany has fared versus the US in the global financial crisis. Recall that there was much hectoring of Germany early on, for its failure to enact stimulus programs. German readers were puzzled, since Germany has a lot of social safety nets that serve as automatic counter-cyclical programs. As an aside I visited a few cities in Germany on the Rhine and Danube in June (unfortunately in heavy book writing mode, and so did not get to see as much as I would have liked) and it was remarkable how there were no evident signs of the downturn: no shuttered retail stores, no signs of deterioration in public services, stores and restaurants looked reasonably busy (although I had no idea of what norms there might be).

Krugman holds Germany up as an example of the merits of employment oriented policies (which had been the norm in America prior to the shift to "markets know best" posture (and more aggressive anti-union policies) inaugurated by Reagan:

Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result—but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis.

Don't you think Country A might have something to learn from Country B?

This story isn't hypothetical. Country A is the United States, where stocks are up, G.D.P. is rising, but the terrible employment situation just keeps getting worse. Country B is Germany, which took a hit to its G.D.P. when world trade collapsed, but has been remarkably successful at avoiding mass job losses. Germany's jobs miracle hasn't received much attention in this country—but it's real, it's striking, and it raises serious questions about whether the U.S. government is doing the right things to fight unemployment....

Germany came into the Great Recession with strong employment protection legislation. This has been supplemented with a "short-time work scheme," which provides subsidies to employers who reduce workers' hours rather than laying them off. These measures didn't prevent a nasty recession, but Germany got through the recession with remarkably few job losses.

Should America be trying anything along these lines? In a recent interview, Lawrence Summers, the Obama administration's highest-ranking economist, was dismissive: "It may be desirable to have a given amount of work shared among more people. But that's not as desirable as expanding the total amount of work." True. But we are not, in fact, expanding the total amount of work—and Congress doesn't seem willing to spend enough on stimulus to change that unfortunate fact. So shouldn't we be considering other measures, if only as a stopgap?

Now, the usual objection to European-style employment policies is that they're bad for long-run growth—that protecting jobs and encouraging work-sharing makes companies in expanding sectors less likely to hire and reduces the incentives for workers to move to more productive occupations. And in normal times there's something to be said for American-style "free to lose" labor markets, in which employers can fire workers at will but also face few barriers to new hiring.

Yves here. Krugman does Germany an injustice by failing to contest US prejudices about European (particularly German) labor practices. If German labor practices are so terrible, then how was Germany an export powerhouse, able to punch above its weight versus Japan and China, while the US, with our supposedly great advantage of more flexible (and therefore cheaper) labor, has run chronic and large current account deficits? And why is Germany a hotbed of successful entrepreneurial companies, its famed Mittelstand? If Germany was such a terrible place to do business, wouldn't they have hollowed out manufacturing just as the US has done? Might it be that there are unrecognized pluses of not being able to fire workers at will, that the company and the employees recognize that they are in the same boat, and the company has more reason to invest in its employees (ignore the US nonsense "employees are our asset," another line from the corporate Ministry of Truth).

A different example. A US colleague was sent to Paris to turn around a medical database business (spanning 11 timezones). She succeeded. Now American managers don't know how to turn around businesses without firing people, which was not an option for her. I submit that no one is willing to consider that the vaunted US labor market flexibility has produced lower skilled managers, one who resort to the simple expedient of expanding or contracting the workforce (which is actually pretty disruptive and results in the loss of skills and know-how) rather than learning how to manage a business with more foresight and in a more organic fashion because the business is defined to a large degree around its employees.

Read the original post.

'Politicization' of the Fed (Dean Baker)

2009-11-11T16:12:00.006-05:00

There's an interesting article in today's New York Times about how Ben Bernanke has had to learn politicking, now that some in Congress are eager to provide more oversight of the Federal Reserve. The article discusses Ron Paul's bill that would allow the Government Accountability Office to audit the Fed:

Mr. Paul's bill would require the Government Accountability Office, an arm of the Congress, to complete a wide-ranging assessment of the Fed's financial operations by the end of 2010. The audit would delve into bailouts of individual firms, short-term loans to banks, currency swaps with foreign central banks and the Fed's effort to prop up mortgage lending by purchasing $1.25 trillion in mortgage-related securities.

Mr. Bernanke initially reacted to the bill in almost apocalyptic terms. The G.A.O. audits, he told a House hearing in late June, could lead to a Congressional "takeover" of monetary policy that would be "highly destructive to the stability of the financial system, the dollar and our national economic situation."

That did not go over well with many lawmakers, who were competing to describe the Fed in dark and conspiratorial tones.

Bernie Sanders is sponsoring the Senate version of Paul's bill.

Meanwhile, a Washington Post editorial is claiming that Christopher Dodd's proposed banking regulation would "politicize" the Fed by impinging on its independence in setting monetary policy, to which Dean Baker, in his blog Beat the Press, had this amusing response:

Washington Post: Taking Away the Banks' Control of the Fed is "Politicization"

Yes folks, according to the Washington Post, if the banks don't get to call the shots, then it's politicization. This is not a joke, that is exactly what the Washington Post said in an editorial about Senator Dodd's plan to have the Fed's district bank presidents approved by Congress rather than the banks in the district.

In Washington Post land if we let Pfizer and Merck appoint the directors of the Food and Drug Administration, then we can depoliticize the FDA. We can let Disney and Time-Warner appoint the directors of the Federal Communications Commission to depoliticize the FCC. It's an interesting conception of government.

—Dean Baker

I'm sure those changes are all in the works (and some of them well underway), alas, but in case they aren't, we wish you wouldn't give them any ideas, Dean!

The Public Purpose of Banking

2009-11-11T15:13:00.008-05:00

Maybe Goldman Sachs should have used some of its bonus money to hire better P.R. folks—the company has really been taking a beating, and not just because it is "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," as Matt Taibbi put it in Rolling Stone. Really, the company's making it even worse than it has to be.

First (back in October) there was the Goldman Sachs international adviser Brian Griffiths telling people that inequality was good for society as a whole

"We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all," Brian Griffiths, who was a special adviser to former British Prime Minister Margaret Thatcher, said yesterday at a panel discussion at St. Paul's Cathedral in London. The panel's discussion topic was, "What is the place of morality in the marketplace?"

This is true, apparently, because higher compensation encourages more charitable giving. "To whom much is given much is expected," Griffiths said, according to Bloomberg. "There is a sense that if you make money you are expected to give."

Later that month, Goldman Sachs abandoned adorable kittens. No kidding. As reported on the website of New Deal 2.0 (where we notice that a number of D&S authors, and at least one ex-boyfriend of a current D&S co-editor, are among the "braintrusters"), The Villager newspaper in lower Manhattan reported that Goldman Sachs "neglected to pay the vet bills for homeless kittens found in its nearly-completed Battery Park City headquarters." The newspaper offered this apology on Goldman's behalf:

Since Goldman Sachs has been a big part of the Lower Manhattan fabric for almost a century and a half, we'd like to take this opportunity to apologize to the rest of the country on behalf of our neighbor, a financial giant personifying much of what is wrong on Wall St.

Before we get to the multibillion-dollar stuff, we'd first like to apologize that the firm has not yet paid a few thousand dollars of vet bills for the five kittens born in its headquarters building nearing completion in Battery Park City. In August, after our sister publication Downtown Express reported the kittens' discovery, Goldman offered to pay the bills and encourage its employees to adopt the 'BlackBerries.'

It may be just a matter of Goldman waiting to get the vet invoices—we can't imagine they'd stiff kittens while writing out bonus checks worth $23 billion—but the cats still need adoptive homes. (Incidentally, anyone interested in one of these adorable kittens should e-mail their rescuer, the Brotmans, at rbrotpaw--at--aol.com.)

(This was a while back—I doubt any of the kittens are still homeless.)

Now Goldman's CEO, Lloyd Blankfein, is mouthing off to the London Times about how bankers do "God's work." The whole article is terrific, but here's the quotable quote:

Is it possible to make too much money?

"Is it possible to have too much ambition? Is it possible to be too successful?" Blankfein shoots back. "I don't want people in this firm to think that they have accomplished as much for themselves as they can and go on vacation. As the guardian of the interests of the shareholders and, by the way, for the purposes of society, I'd like them to continue to do what they are doing. I don't want to put a cap on their ambition. It's hard for me to argue for a cap on their compensation."

So, it's business as usual, then, regardless of whether it makes most people howl at the moon with rage? Goldman Sachs, this pillar of the free market, breeder of super-citizens, object of envy and awe will go on raking it in, getting richer than God? An impish grin spreads across Blankfein's face. Call him a fat cat who mocks the public. Call him wicked. Call him what you will. He is, he says, just a banker "doing God's work"

See what I mean? They need to hire better P.R. folks or at least forbid travel to London.

This is all a lead-up to the following piece, by Marshall Auerback (also of New Deal 2.0), from Naked Capitalism. Auerback takes Blankfein as his jumping-off point for a discussion of Christopher Dodd's new banking regulation bill.

Attention Lloyd Blankfein: The Public Purpose of Banking

By Marshall Auerback, a fund manager and investment strategist who writes for New Deal 2.0.

It seems odd that days after we were told by Goldman Sachs's CEO, Lloyd Blankfein, that bankers are doing "God's work", we are still having active debates about how to regulate these selfless apostles of capitalism.

The latest foray into financial reform comes from the Senate. Senator Christopher Dodd will propose creating a single U.S. regulator that would strip the Federal Reserve and Federal Deposit Insurance Corp. of bank-supervision authority, according to a report from Bloomberg. Dodd, according to the Bloomberg report, has faulted the U.S. bank regulation system, saying "it encourages charter shopping and a 'race to the bottom' by agencies to win oversight roles." Bloomberg notes that "his proposal goes further than proposals by President Barack Obama and House Financial Services Committee Chairman Barney Frank to merge the OTS and OCC."

Certainly, almost anything is an improvement over the abomination that came out of Barney Frank's committee. But we feel that the 'race to the regulatory bottom' could easily be solved via a simple mechanism: If you don't fall in line with our regulatory requirements, you're simply denied a banking license to operate in this country. Problem solved. The United States is the biggest banking market in the world. Do you think any major bank would willingly vacate this market?

And even if the "too big to fail" behemoths decided to transplant a bunch of their operations elsewhere, the country would still be left with thousands of community banks which could fill the void and better fulfill the public purpose described by Mr Blankfein: namely, to "help companies to grow by helping them to raise capital", rather than extracting their pound of flesh via grotesquely high financial intermediary fees, as is the case today.

We have argued before on New Deal 2.0 that the FDIC is best suited to carry on the role of chief systemic regulator, given its role as deposit insurer. That regulator has the best institutional incentives to be concerned with systemic risk and to be a vigorous regulator. It should be the least subject to regulatory capture (a pervasive problem at the Fed, which is full of quant economists who have virtually no interaction with other Fed examiners).

But WHO controls the banks is ultimately less important than HOW we control the banks' activities. Oversight is all very nice, but at times it pays to get back to first principles. What on earth is the public purpose of these things?

Banks are set up and supported by government for the further benefit of the macro economy via providing a payments system and lending in a way that is specifically defined by regulators. Newsflash: the public purpose of banking is NOT to provide profits per se to shareholders. Rather, the provision of the ability to earn profits is only a tool used to support the attendant public purpose. Banks should only be allowed to lend directly to borrowers, and then service and keep those loans on their own balance sheets. There is no further public purpose served by selling loans or other financial assets to third parties, but there are substantial real costs to government in regulating and supervising those activities. There are severe consequences for failure to adequately regulate and supervise those secondary market activities as well.

Banks should be prohibited from engaging in any secondary market activity because it serves no public purpose and may result in severe social costs in the case of regulatory and supervisory lapses. Some argue that these areas might be profitable for the banks, but this is not a reason to extend government sponsored enterprises into those areas. Therefore, banks should not be allowed to buy (or sell) credit default insurance. The public purpose of banking as a public/private partnership is to allow the private sector to price risk, rather than have the public sector pricing risk through publicly owned banks.

If a bank instead relies on credit default insurance, then it is transferring that pricing of risk to a third party, which is counter to the public purpose of the current public/private banking system. Banks should not be allowed to engage in proprietary trading or any profit-making ventures beyond basic lending. If the public sector wants to venture out of banking for some presumed public purpose it can be done through other outlets.

If the activities of the banks are not facilitating the production and movement of real goods and services what public purpose do they serve? It is clear they have made a small number of people fabulously wealthy. It is also clear that they have damaged the prospects for disadvantaged workers in many parts of the world.

It's more obvious to all of us now that when the system comes unstuck through the complexity of these transactions and the impossibility of correctly pricing risk, the real economies across the globe suffer. The consequences have been devastating in terms of lost employment and income and lost wealth.

All governments should sign an agreement which would make all financial transactions that cannot be shown to facilitate funding for real goods and services illegal. Simple as that. When we keep these principles at the front of the argument, we can see that what Senator Dodd and Congressman Frank are arguing about is akin to how to rearrange the deck chairs on the Titanic.

Read the original post.

Change Wall Street can believe in (Holly Sklar)

2009-11-10T11:37:00.002-05:00

Hat-tip to Mike P.

By Holly Sklar
Distributed by McClatchy Tribune News Service, 11/6/09
Copyright 2009 Holly Sklar

Wall Street is doing to America what private equity firms did to Simmons Bedding and many other productive companies. Taking control with borrowed money, stripping assets, slashing jobs and cashing out.

Taxpayer bailouts saved Wall Street from choking on its own greed. Now, as the Wall Street Journal reports, "Major U.S. banks and securities firms are on pace to pay their employees about $140 billion this year -- a record high."

$140 billion is more than the combined budgets of the U.S. Departments of Commerce, Education, Energy, Housing and Urban Development, the National Science Foundation and the Environmental Protection Agency.

Typical workers, meanwhile, make less today adjusting for inflation than they did in the 1970s. Wall Street rewarded CEOs who cut employee wages and benefits and offshored manufacturing, services, and research and development; feasted on Bush's tax cuts; turned mortgages into loan sharking; and vacuumed up home equity, college funds, retirement funds and other private and public investments into their rigged casino.

Goldman Sachs, for example, "peddled billions of dollars in shaky securities tied to subprime mortgages on unsuspecting pension funds, insurance companies and other investors when it concluded that the housing bubble would burst," McClatchy reports in a new investigative series.

The Great Depression gave way to the New Deal. The Great Recession has become the Great Ripoff.

The TARP inspector general's latest report to Congress says, "The firms that were 'too big to fail' ... are in many cases bigger still, many as a result of Government-supported and -sponsored mergers and acquisitions; the inherently conflicted rating agencies that failed to warn of the risks leading up to the financial crisis are still just as conflicted; and the recent rebound in big bank stock prices risks removing the urgency of dealing with the system's fundamental problems."

Enabled by the Bush and Obama administrations, the megabanks are lending less and gambling more -- using taxpayer money to pay bonuses, float a new stock market bubble and make even riskier bets.

The U.S. Treasury and Federal Reserve have become Wall Street's ATMs, while unemployment, foreclosures and homelessness rise, states slash public services, and small businesses are starved of credit.

Outside the TARP, trillions of dollars are flowing to the banksters in the form of near-zero interest loans, bond guarantees and extreme leverage for toxic assets. You can follow the money at www.nomiprins.com. Nomi Prins, a former managing director at Goldman Sachs, is author of "It Takes a Pillage."

The megabanks are not too big to fail. They're too big and irresponsible to exist.

Just months after taking office in 1933, President Roosevelt signed into law the Glass-Steagall Act, which separated the commercial banking of savings, checking and loans from investment banks doing underwriting and speculative trading. The former got depositor insurance, not the latter.

Glass-Steagall lasted until Citigroup and other power players killed it in 1999 through the Financial Services Modernization Act, taking us back to the pre-New Deal casino economy on steroids. Now former Citigroup CEO John Reed has joined the growing call to split commercial banking and investment.

In 2000, Congress passed the Commodity Futures Modernization Act, ignoring the warnings of Commodity Futures Trading Commission head Brooksley Born who said that unregulated trading in derivatives could "threaten our regulated markets or, indeed, our economy."

By 2002, the four largest bank holding companies -- Bank of America, JP Morgan Chase, Wells Fargo and Citigroup -- had 27 percent of FDIC-insured bank assets. Now, reports the Economic Policy Institute, they have nearly half. They overlap with the biggest derivatives dealers -- JP Morgan, Goldman Sachs, Bank of America, Morgan Stanley and Citigroup.

The government heavily subsidizes the megabanks, but it's the small banks that provide higher savings interest, lower fees, lower loan and credit card rates, and do much of the lending to small business, who in turn create most new jobs.

Behind their Main Street rhetoric, Congress and the Obama administration have so far been the change Wall Street can believe in. The administration and Federal Reserve are loaded with revolving door Wall Streeters and their proteges. Campaign donors and lobbyists are working Congress to minimize and distort reform.

Make your voices heard. We need to enact tough regulations and bust the banks who busted our economy -- before they do it again.

Holly Sklar is the author of "Raising the Minimum Wage in Hard Times" (www.letjusticeroll.org) and "Raise the Floor: Wages and Policies That Work for All of Us."

Santa Needs Extended Benefits, Too

2009-11-06T14:26:00.005-05:00

The October employment reports were released today, and the unemployment rate zoomed above 10%, to 10.2%, to be exact, earlier than most economists expected. The number of jobs lost in October also surprised on the negative side, at 190,000 (v. the projected 175,000). The unemployment rate is the highest it's been since the dreadful winter of 1982-83, when it hit 10.8% for two months running. The so-called "underemployment rate," which covers part-time workers looking for full-time work and suchlike, rose at an even higher clip, to 17.5% from 17.0%. The average workweek was unchanged at 33.0 hours, which matches readings in August and October for the lowest recording ever. Manufacturing production actually increased its average workweek length, to 40.0 hours (but lost net jobs for the month), but this is a small consolation given the heroic increases in GDP, and especially productivity, that have been reported in the past week. Oh, and lest we forget, the amout of workers unemployed more than 26 weeks rose to a stunning 3.6% of the entire workforce, which is the highest it's been since records began in 1948. All told, some 8.2 million jobs have been destroyed during this downturn--whatever name you want to give it--began some two years ago and change. It'll take 3 1/2 years of continuous, strong job growth to make that up, and that in an atmosphere starved of capital and averse to debt (unless you're the government or a big bank, and neither of them are going to be chalking up stellar jobs growth numbers anytime soon).

Some are arguing that the truly remarkable productivity statistics announced yesterday (an increase of over 9% annualized), most certainly presage an uptick in employment: you simply can't work the plebs much harder than this. But this comes off a series of strong performances for this year after which analysts said essentially the same thing. And there's still room to cut unit labor costs without cutting hours: by cutting or eliminating benefits. And there is anecdotal evidence to the effect that a good number of workers are actually accepting cuts in pay.

But it may not come to this: the vast inventory restocking that took place once the executive committee of the world bourgeoisie made it clear that governmets would guarantee all major financial institutions no matter what, may be overshooting future demand. You may be able to reestablish a global supply network in a relative jiffy, but recreating bloated living and investing standards may be a more arduous, or even impossible task. But stock markets, commodity markets and, strangely, bond markets (well, not so strangely: governments are buying heaps of their own bonds to keep interest rates down) are all way up since the near-death expereince of March. But one other employment indiccator shows how flimsy this tidal wave of risk-taking has been: holiday retail sales for October are languishing at last year's low levels, which were the lowest since, well, 1987: the month of the 1987 stock market crash. Santa's worried, too.

Brad DeLong on Productivity Growth and Kalecki

2009-11-05T18:24:00.004-05:00

Here's a post from Brad DeLong's blog, with DeLong using lots of all-caps and some abbreviations I can't figure out (what's "Z" for? Zounds? Zowie?--but I get the gist), and revising his view of the great Polish Marxist economist Michal Kalecki (he revised the spelling of Kalecki's first name, too, I noticed).

I am not quite sure why he's so surprised--productivity has to do with output per worker, and lots of people have been fired, and the ones who haven't are worried about losing their jobs. So--stands to reason. I guess it's that the growth is *so* large. Hat-tip to Larry P.

ZOMFG WTF!!!!! 9.5% THIRD QUARTER PRODUCTIVITY GROWTH NUMBER!!!!

I WAS EXPECTING A 6% PRODUCTIVITY GROWTH QUARTER, BUT THIS IS RIDICULOUS!!!

Productivity increased 9.5 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 5.2 percent (seasonally adjusted annual rates). In manufacturing, productivity increased 13.6 percent while unit labor costs fell 7.1 percent...

Back in the 1930s there was a Polish Marxist economist, Michel Kalecki, who argued that recessions were functional for the ruling class and for capitalism because they created excess supply of labor, forced workers to work harder to keep their jobs, and so produced a rise in the rate of relative surplus-value.

For thirty years, ever since I got into this business, I have been mocking Michel Kalecki. I have been pointing out that recessions see a much sharper fall in profits than in wages. I have been saying that the pace of work slows in recessions--that employers are more concerned with keeping valuable employees in their value chains than using a temporary high level of unemployment to squeeze greater work effort out of their workers.

Read the original post.

U2 Fans to MTV: "Tear Down This Wall!"

2009-11-05T15:06:00.003-05:00

A funny one from the Associated Press; hat-tip to Bryan S.

Outrage over wall blocking free U2 Berlin concert

By KIRSTEN GRIESHABER | November 5th, 2009

BERLIN (AP) -- Fans hoping to glimpse U2's free concert celebrating 20 years since the Berlin Wall fell were outraged Thursday to find that a nearly 6-1/2-foot (2-meter) high metal barrier was installed to block the view for those without tickets.

Both Berliners and tourists alike saw the irony in building a wall around a concert dedicated to the wall that already has come down.

"It's completely ridiculous that they are blocking the view," said Louis-Pierre Boily, 23, who came to Berlin even though he failed to get U2 tickets. "I thought it's a free show, but MTV probably wants people to watch it on TV to get their ratings up."

Boily, from Quebec City, was among several hundred people who gathered Thursday against the new fence, which was draped with a white tarp that blocked the view of the stage from the street. Some fans already were trying to tear down the tarp before the concert, which was being held in front of Berlin's iconic Brandenburg Gate.

The music network MTV, which organized Thursday's concert, said it worked with the local promoter, the city and Berlin police to install a temporary fence "around the site to ensure the safety and security of the attendees at the event as well as residents and businesses in the area."

U2's publicist RMP refused comment about the barrier.

Some 10,000 tickets were made available online for the Irish rockers' free show—and they were snapped up in just three hours.

U2 was performing four songs but only one song was being shown on television later Thursday as part of MTV's European Music Awards, according to MTV.

The Berlin Wall fell on Nov. 9, 1989, ending almost 30 years of Cold War division between the communist East and the democratic West. Throughout those decades, the Brandenburg Gate stood just inside East Berlin.

In 1988, musicians such as Pink Floyd and Michael Jackson performed in a three-day "Berlin Rock Marathon" on the western side of the concrete barrier, with the landmark as a backdrop.

Concertgoers in the West hurled bottles and firebombs at the wall, while some 2,000 youths gathered on the eastern side to listen, many shouting "The wall must go!"

Read the original article.

Sit-in for Single-Payer in Pelosi's Office

2009-11-03T17:30:00.001-05:00

Breaking news from the folks at the Mobilization for Health Care for All:

CALL PELOSI NOW! (415) 556-4862 and (202) 225-0100
There are 8 people sitting in RIGHT NOW in Nancy Pelosi's Office in San Francisco!

They are not leaving until they get an answer to their demands! Their demands are that the Kucinich amendment MUST be in the health care bill that the House votes on, and that the House MUST vote on the Weiner amendment.

Pelosi PROMISED the American people that she would ensure BOTH of the above would happen, and she has betrayed us by reneging on those promises!

YOU can HELP! Call her office in SF at (415) 556-4862 and Washington, DC (202) 225-0100; demand that she talk with the people sitting in. Demand that she keep her promises and put Kucinich Amendment in bill and allow Floor vote on the Weiner Amendment!

Burn up her phone lines people! This is NOT business as usual! This is FOR REAL - we can make a difference in the future of health care in this country!

Bird and Fortune on Bonuses and Bailouts

2009-11-02T13:14:00.004-05:00

An amusing video of Brit satirists John Bird and John Fortune giving their take on the financial crisis, from the Financial Times. Hat-tip to KH.

D&S collective member Ben Greenberg posted a video of Bird and Fortune's Subprime Primer almost two years ago.

Next Wave of Health-Care Sit-Ins

2009-10-30T15:00:00.003-05:00

The Mobilization for Health Care for All had its latest big wave of sit-ins for single-payer on Wednesday (and this wave is ongoing). Here's their report:

Yesterday [Oct. 28th], the next wave of the Mobilization for Health Care for All began with great success. See below for a list of media coverage of the actions.

In 11 cities across the country, hundreds of everyday Americans who want Medicare for All confronted the insurance companies and demanded that they redirect the money they're spending to control our democracy to pay for the care they deny to their members. Almost every company refused to even talk to us, and 37 people were arrested including doctor Matt Hendrickson at a Cigna office in Glendale, California. Dozens more - like the 30 people who blockaded the Blue Cross office in San Francisco for hours - sat in but weren't arrested. In Rhode Island, however, the protestors who joined cancer patient Robert Darling in occupying the UnitedHealthcare office won the first concessions of our campaign - a company representative agreed to give an answer to Robert about paying for his previous bone marrow transplant within 24 hours and to arrange a meeting for the group with the UnitedHealthcare CEO within a week! After 115 arrests in 18 cities, these companies are starting to feel the heat of our movement. And with more than 900 people now signed up to sit-in, this battle is just beginning.

Today, the Mobilization continued in Louisville, Kentucky and Baltimore, Maryland. The brave folks in Louisville are in the 9th hour of their sit-in inside the Humana headquarters as we send out this email. Humana is trying to wait them out, but may are prepared to stay overnight if they have to.

In Baltimore, four people were arrested at a CareFirst (Blue Cross) office including two doctors. One of those doctors, Margaret Flowers of the "Baucus 8," has withheld her name and is planning to stay in jail until the CEO of CareFirst, Chet Burrell, agrees to a public meeting with her.

Please call Mr. Burrell immediately and regularly at 410-528-2222 to demand that he agree to meet publicly with Margaret.
You can also email CareFirst by going to http://www.carefirst.com/email/html/ContactMediaRelations.html. Send the following message in your email:

I am writing to urge CEO Chet Burrell to agree to a public meeting with Dr. Margaret Flowers who was arrested at the CareFirst office in Baltimore while demanding to meet with Mr. Burrell about CareFirst business practices. She is going to stay in jail until Mr. Burrell agrees to a public meeting with her. CareFirst must publicly account for the serious concerns that citizens have about your company's practices.

Also, please donate generously today so we can be prepared to pay any bail that is set for Margaret's release. She decided to risk arrest and stay in jail despite a possible 6 month jail sentence for violating probation from her previous arrest in the fight for real health care reform - let's show her that we've got her back. Please donate today to support Margaret and post messages of support for her at our Facebook page (we'll read all messages to her over the phone when she calls from jail).

The Mobilization continues in Philadelphia tomorrow, and in more cities across the country next week. Click here for updated lists of all the upcoming actions and info about how you can plug in and participate. The insurance companies, the politicians in their pockets, and even some of the corporate media apparently want our movement to go away. But it's just getting started and spreading across America. Let's show them we're not going anywhere and we won't stop until health care is a right for everyone in America.

Thanks for everything you do.

—Katie, Kevin, Kai, Julia, Lacy, and the Mobilization team

Press Coverage from 10/28:

San Francisco Chronicle

South Florida Sun-Sentinel

NJ.com (Star-Ledger / Trenton Times / Jersey Journal blog)

projo.com (Providence Journal blog)

Glendale News-Press

National Public Radio, Topics

Democracy Now

Free Speech Radio News

Huffington Post

Institute for Public Accuracy

Atlas Press Photo

La Jornada (Mexico)

OpEdNews (featured story about doctors, by Kevin Gosztola):

OpEdNews (about Philadelphia rally)

Bay Area Indymedia (quality article, good for reference):

Press Coverage from 10/29:

Southern Maryland Online

Wave3.com

WFPL News

Steelworkers Form Collaboration with Mondragon

2009-10-27T17:20:00.003-05:00

A very interesting collaboration--hat-tip to Mary Hoyer.

Steelworkers Form Collaboration with MONDRAGON, the
World's Largest Worker-Owned Cooperative

Pittsburgh (Oct. 27, 2009)—The United Steelworkers (USW) and MONDRAGON Internacional, S.A. today announced a framework agreement for collaboration in establishing MONDRAGON cooperatives in the manufacturing sector within the United States and Canada. The USW and MONDRAGON will work to establish manufacturing cooperatives that adapt collective bargaining principles to the MONDRAGON worker ownership model of "one worker, one vote."

"We see today's agreement as a historic first step towards making union co-ops a viable business model that can create good jobs, empower workers, and support communities in the United States and Canada," said USW International President Leo W. Gerard. "Too often we have seen Wall Street hollow out companies by draining their cash and assets and hollowing out communities by shedding jobs and shuttering plants. We need a new business model that invests in workers and invests in communities."

Josu Ugarte, President of MONDGRAGON Internacional added: "What we are announcing today represents a historic first—combining the world's largest industrial worker cooperative with one of the world's most progressive and forward-thinking manufacturing unions to work together so that our combined know-how and complimentary visions can transform manufacturing practices in North America."

Highlighting the differences between Employee Stock Ownership Plans (ESOPs) and union co-ops, Gerard said, "We have lots of experience with ESOPs, but have found that it doesn't take long for the Wall Street types to push workers aside and take back control. We see Mondragon's cooperative model with ‘one worker, one vote' ownership as a means to re-empower workers and make business accountable to Main Street instead of Wall Street."

Both the USW and MONDRAGON emphasized the shared values that will drive this collaboration. Mr. Ugarte commented, "We feel inspired to take this step based on our common set of values with the Steelworkers who have proved time and again that the future belongs to those who connect vision and values to people and put all three first. We are excited about working with Mondragon because of our shared values, that work should empower workers and sustain families and communities," Gerard added.

In the coming months, the USW and MONDRAGON will seek opportunities to implement this union co-op hybrid approach by sharing the common values put forward by the USW and MONDGRAGON and by operating in similar manufacturing segments in which both the USW and MONDRAGON already participate.

The full text of the Agreement is available here.

About MONDRAGON:

The MONDRAGON Corporation mission is to produce and sell goods and provide services and distribution using democratic methods in its organizational structure and distributing the assets generated for the benefit of its members and the community, as a measure of solidarity. MONDRAGON began its activities in 1956 in the Basque town of Mondragon by a rural village priest with a transformative vision who believed in the values of worker collaboration and working hard to reach for and realize the common good.

Today, with approximately 100,000 cooperative members in over 260 cooperative enterprises present in more than forty countries; MONDRAGON Corporation is committed to the creation of greater social wealth through customer satisfaction, job creation, technological and business development, continuous improvement, the promotion of education, and respect for the environment. In 2008, MONDRAGON Corporation reached annual sales of more than sixteen billion euros with its own cooperative university, cooperative bank, and cooperative social security mutual and is ranked as the top Basque business group, the seventh largest in Spain, and the world's largest industrial workers cooperative.

About the USW:

The USW is North America's largest industrial union representing 1.2 million active and retired members in a diverse range of industries.

WEBSITES: www.usw.org; www.mondragon-corporation.com.

The Yes Men and the U.S. Chamber of Commerce

2009-10-27T11:18:00.003-05:00

Some of us are going to the Yes Men's new movie, The Yes Men Change the World, tomorrow night. The Yes Men themselves will be there, as will our pal Marilyn Frankenstein, radical math professor, who wrote a study guide for the movie. You can watch the official trailer for the movie here.

If you haven't heard of the Yes Men, they are anti-corporate pranksters who have been described as "Borat meets Michael Moore." One of their more recent pranks involved a press release claiming to be from the U.S. Chamber of Commerce announcing that the business-friendly group had reversed its position on tough climate-change legislation. In his column in Sunday's New York Times, Frank Rich compared the prank favorably to the "balloon boy" prank that got so much media attention.

Find the fake Chamber of Commerce press release here; here's Politico's report on the hoax:

In a dramatic shift, the Chamber of Commerce announced Monday that it is throwing its support behind climate change legislation making its way through the U.S. Senate.

Only it didn't.

An email press release announcing the change is a hoax, say Chamber officials.

Several media organizations fell for it.

A CNBC anchor interrupted herself mid-sentence Monday morning to announce that the network had "breaking news," then cut away to reporter Hampton Pearson, who read from the fake press release.

Pearson quickly followed up with a second report saying the "so-called bulletin" was an "absolute hoax." Smelling a rat, CNBC's Larry Kudlow demanded to know whether the White House had been involved.

In a story posted Monday morning, Reuters declared: "The Chamber of Commerce said on Monday it will no longer opposes climate change legislation, but wants the bill to include a carbon tax."

Reuters updated the story to acknowledge the hoax, but it was too late: The Washington Post and the New York Times had already posted the fake story on their Web sites.

"Reuters has an obligation to its clients to publish news and information that could move financial markets, and this story had the potential to do that," said a Thomson Reuters spokesperson. "Once we had confirmed the release was a hoax, we immediately issued a correction, and in keeping with Reuters policy, the story was subsequently withdrawn and an advisory sent to readers."

The Yes Men, a left-leaning activist group that often impersonates officials from organizations they oppose, took responsibility for the hoax.

Andy Bichlbaum--an alias the activist uses for Yes Men demonstrations--told POLITICO that his group is targeting the Chamber for what he considers "retrograde" positions on climate change.

"Clearly, there is a question of who is hoaxing who," Bichlbaum said. "I think the Chamber is hoaxing the American public at this point."

Bichlbaum said that activists will continue targeting the organization. Bichlbaum said the Yes Men got help with their prank from members of the AVAAZ Action Factory, an activist group, and BeyondTalk.net, an environmental website.

AVAAZ has not returned calls for comment. But a post on the group's Web site said it had plans to "make this the worst Monday ever for the anti-climate PR machine at the U.S. Chamber of Commerce. "

Pensions: The Next Casualty of Wall Street

2009-10-23T15:40:00.003-05:00

From Mark Brenner at Labor Notes:

Pensions: The Next Casualty of Wall Street

By Mark Brenner

Nobody wants to admit it, but the next casualty of the Wall Street meltdown will probably be your golden years. For years corporations have been trying to choke the life out of traditional pensions, working hard to get out from under the risk—and the cost—of providing for their retirees. Between last year's credit crunch and changes to federal pension laws, they may get their wish.

Nearly $4 trillion worth of retirement savings were wiped out in the first weeks of the 2008 financial freefall. Half of the drop was concentrated in traditional pension plans, also known as defined-benefit plans. While most workers in these plans haven't had their monthly benefits cut, unlike the 46 million people riding the stock market with 401(k) defined-contribution plans, the storm clouds are gathering.

Labor needs a strategy to protect what we've won. But holding our ground requires moving from defense to offense. If the pension crisis is going to be solved for union members, it has to be solved for everyone.

UNCOMFORTABLE ARITHMETIC

Even before the financial crisis, traditional pensions were a vanishing breed. Thirty years ago more than a third of the private sector workforce had traditional pensions. Last year that number was down to 16 percent.

Driving the decline were employers looking to get off cheap, eliminating pensions entirely when they could get away with it, and when they couldn't, shifting to 401(k)s. These programs were legalized in 1978 and were originally designed to supplement traditional pensions. Now they're choking them out like kudzu.

Corporations got a great deal, paying about half what they used to towards their workers' retirement by the '90s. Even more important—as anyone who has opened their 401(k) statement recently can attest—the move shifted risk off companies and onto us.

Traditional pensions were a collective solution to a collective problem. Young and old contributing together smoothed out insecurity for all. Now it's just you and the stock market—with far less in your pocket.

Even before the crash, studies showed that 401(k)s leave workers with 10 to 33 percent of what traditional pensions provide. Given the 30-year squeeze on wages, most people haven't saved much either, which explains why more than half of all 401(k) participants have less than $75,000 when they retire.

WHAT'S IN STORE?

Even for those with superior defined-benefit plans, the last 20 years have been rocky. Companies spent much of the 1990s gaming the system, siphoning off pension funds to pad the bottom line.

At the start of this year the nation's defined-benefit pension plans had only about 75 percent of what they owed participants. Companies may need to contribute as much as $100 billion to cover these gaps.

Although Congress waived compliance with new pension rules this year, the law will eventually take effect, and will force employers to cover these pension gaps. Rather than clean up their act, more and more employers are looking for the exit. By April of this year nearly a third of America's largest companies had frozen their pension plans.

Many others are invoking the nuclear option, declaring bankruptcy as a way to unload their pension plans on the taxpayers. Unfortunately, the Pension Benefit Guaranty Corporation (PBGC), established in 1975 to backstop private sector pensions, is already reeling from a decade of high-profile and expensive pension defaults at companies like United Airlines and steelmaker LTV.

Nine of the 10 largest pension defaults in history occurred since 2000, leaving the PBGC with a deficit of $11 billion at the end of 2008. That gap could swell to more than $100 billion over the next few years, amounting to a backdoor bailout for big corporations, and a bitter pill for abandoned retirees.

Workers at Republic Steel saw first hand how it works when they had their pensions cut by $1,000 a month in 2002 by the PBGC and then cut again in 2004. Five workers from the Lorain, Ohio, plant committed suicide after the first time their pension was diminished. In the second round of cuts, retirees like Bruce Bostick, former grievance chair for USW Local 1104, saw their retirements fall from $1,047 a month to $125.

The situation for public sector workers isn't much better. Although 80 percent of public employees have traditional pensions, those benefits are now in the cross-hairs of conservative and liberal politicians. Two-thirds of public sector pension plans are underfunded—to the tune of $430 billion—and state and local budget crises are pitting taxpayers against public employees from California to Maine.

ANCHORING RETIREMENT

For nearly 20 years the various financial bubbles—from the dot-com frenzy of the 1990s to the recent housing market run-up—papered over the urgent need to address the faltering retirement system.

Wall Street's collapse last year revealed how the current patchwork of retirement plans is failing almost everyone. As with health benefits, union workers with stable pensions increasingly find themselves on an island of security in a sea of uncertainty.

But the water is rising rapidly.

As the debate over the auto bailout and state budget crises revealed, defending your own decent pension is tough work when half the workers in the country don't have any retirement at all.

The PBGC—which has been swimming in red ink since 2002—is currently set up to pay less than half of what people were promised. If the funding gaps widen, it could fall to pennies on the dollar.

There will be calls to bail the PBGC out—which needs to happen—1.2 million people now depend on it. A sensible demand is to make it function more like the FDIC, by guaranteeing 100 percent of pension benefits up to a reasonable threshold.

But reform can't stop there.

If it does, workers are on the same path as before the economic collapse, with a temporary reprieve. Employers will still seek to drive union workers down to non-union standards and dump more risk onto individuals.

We need to return to the original vision of Social Security: a program that (like in Western European nations) can actually pay for most of your old-age living expenses.

Read the original article.

Pay Czar's Ruling on Compensation

2009-10-22T12:11:00.004-05:00

The Wall Street Journal, and (scroll down) Naked Capitalism, on compensation czar Kenneth Feinberg's ruling on executive pay at seven bailed-out financial firms:

Pay Czar to Slash Compensation at Seven Firms
By DEBORAH SOLOMON and DAN FITZPATRICK | Tuesday, October 22 2009

The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government's plans.

As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department's special master for compensation, is expected to issue his determinations today.

Mr. Feinberg's ruling will provide fodder for the long-running debate about whether the Obama administration is being [sic— something missing here? "tough enough"? "too tough"?] on Wall Street. An executive at one of the seven companies under Mr. Feinberg's authority said the terms came as a shock, especially because they changed so suddenly. The compensation restrictions "were clearly much worse than what had been anticipated."

The largest single compensation package will be less than $10 million and is destined for a Bank of America Corp. employee, according to people familiar with the matter. That is much less than Wall Street's standard payouts for star employees.

Yet some executives will still walk away with large paychecks. And some big salary cuts might skew overall numbers. Outgoing Bank of America Chief Executive Ken Lewis will receive no salary for 2009. Already, Citigroup Inc. is telling employees the net impact of Mr. Feinberg's rulings will be minimal because the cut salary will be shifted from cash to longer-term stock grants, said people familiar with the matter.

The Obama administration gave Mr. Feinberg the job of more closely tying compensation to long-term performance, something the White House believes will help prevent employees from taking unnecessary risks for short-term gains. The administration believes skewed compensation incentives were one cause of the financial crisis.

In addition to setting dollar amounts for the top 175 employees at the seven companies, Mr. Feinberg is also charged with setting compensation structures for an additional 525 people at the firms.

Some of the toughest pay restrictions will come at the financial-products unit of American International Group Inc., which has been blamed for the firm's near-collapse. No employee within that unit will receive compensation of more than $200,000, people familiar with the matter said.

The companies under Mr. Feinberg's authority are AIG, Bank of America, Citigroup, General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial.

Read the rest of the article.
Yves Smith of Naked Capitalism is skeptical:

Pay Czar Decides to Collect a Few Scalps, a Sign of Weakness

The Wall Street Journal reports that the pay czar, Kenneth Feinberg, is going to cut executive comp at 7 TARP recipients for the 25 most highly paid employees.

Does this really mean anything? The press will noise it up as significant (and some outlets will no doubt finger wag at this "interference") but the short answer is no.

First, recall Feinberg's hollow mandate. He is limited to only TARP recipients, not the beneficiaries of other forms of government largesse. And as anyone who has an operating brain cell knows, the number of firms on the dole and the degree of subsidies is much greater than the TARP. Have a look at the Fed's balance sheet for a reality check. Even Larry Summers said,

There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.

So let us look at the list of companies affected. AIG, Bank of America, Citigroup, General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial. AIG is effectively nationalized but is allowed to operate as a private company, a simply bizarre state of affairs. Pay cuts falls well short of the oversight the government should be exercising (any private owner with that big of a stake would have thrown out the board and installed new management, for starters, and be all over AIG like a cheap suit). So this is an overdue, token measure to appease the public over the AIG retention bonuses that were also extended to clearly non-essential support staff, which is a clear tipoff that they were also extended to non-essential management.

Four of the companies are auto bailout related, so we can exclude them as far as implications for big financial firms are concerned.

Citigroup is an obvious ward of the state too, and he AIG argument applies there. The government should have more control there too, which does NOT mean micromanagement. When the Swedish nationalized their banks, they replaced management and set strict goals and targets, but did not interfere in operations. Bank of America may look like a borderline case, but it would be dead now had it not gotten emergency infusions. Given its credit card losses, Merrill, and Countrywide (for starters) combined with the sudden exit of Ken Lewis, it may well be in worse shape than is now perceived.

The point is that the collection of these scalps will do nothing to comp levels ex these firms. The companies that also enjoy implicit government guarantees are free to do the "heads I win, tails you lose" game of privatized gains and socialized losses. And Ken Lewis is the poster child of why these measures are completely meaningless. He sacrificed his 2009 pay, but will still collect $125 million when he departs Bank of America.

If the government is going to backstop the industry (and this isn't an "if" anymore), it needs to limit those firm's activities to what is socially valuable and regulate them heavily to contain risk taking. As we have said, reining in executive pay (and note there is no will to do that anyhow) is not an effective approach. Those employees who don't like that are free to decamp and raise money in ways that do not involve the regulated firms in any way, shape, or form, save perhaps counterparty exposures on very safe, highly liquid instruments.

Read the original post.

Civil Rights Movement for the Middle Class

2009-10-21T15:33:00.003-05:00

A guest post on Naked Capitalism. Hat-tip to Ben C.

A New Civil Rights Movement is Afoot for the Middle Class

By John Bougearel, Director of Futures and Equity Research at Structural Logic.
Tuesday, October 21 2009

The core of America is the middle class. And Harvard Law Professor and chair of the Congressional Oversight Panel COP (the COP is to oversee TARP, the Troubled Assets Relief Program) Elizabeth Warren tells us that the core of America is being carved up, hollowed out. In her words, "I Believe Middle Class is Under Terrific Assault...Middle class became the turkey at the Thanksgiving dinner" of the financial elite. Elizabeth Warren is more than just right.

Call it for what it is. It has more names than Satan. Call it plundering. Call it pillaging. Call it extortion, Call it fraud. Call it racketeering. Call it the financial raping of the middle class. Call it criminal. Consider the following. Middle class never consented to this financial rape. They vehemently protested it when the gov't first proposed a $700 bailout of the financial system called TARP in Septermber 2008. Yet what did Congress and our government do? They went ahead and did it anyway. This boils down to one thing, taxation without representation. Our votes do not matter anymore.

This is happening because the US government is allowing it to happen. It is one thing for the government to raise the social safety nets for the poor, elderly and such. It is entirely another to raise the social safety nets for the financial elitists at taxpayer expense. But that is exactly what the government has done in the past year. They have rescued a financial system at the expense of everyone else. Mythical constructs and messages that financial companies are Too Big to Fail, systemic risk is too great, No More Lehman Brothers have been created by the powers that be. And it is in the name of No More Lehman Brothers and Too Big to Fail that Middle Class America is being carved up and hollowed out.

Appearing in Michael Moore's "Capitalism: A Love Story, Michael Moore asks Elizabeth Warren (regarding the $700 billion dollar taxpayer funded bailout of the financial elite) "Where's are money? And Warren takes a deep breath, looks briefly over her left shoulder (as if she might find it there), and exhales "I don't know."

Washington Post's Lois Romano asked Elizabeth Warren, "Why don't you know?"

WARREN: We don't know where the $700 billion dollars is because the system was initially designed to make sure that we didn't know. When Secretary Paulson first put this money out into the banks, he didn't ask for ‘what are you going to do with it.' He didn't put any restrictions on it. He didn't put any tabs on where it was going to go. In other words, he didn't ask...

US Secretary of the Treasury Hank Paulson did not ask the banks what they were going to do with our taxpayer money. The US treasury, given Congressional blessing, simply gave the banksters hundreds of billions of taxpayer dollars with no questions asked. This is wholesale taxation without representation.

So Romano asks Warren, "Are we, as an [economy] are we better off systemically now? Have we put things in place to prevent this from happening?" Warren replies "This really has me worried." And it should have Warren worried because our Humpty Dumpty financial system had a great fall, and Humpty was put together again by all the King's horses (read the US Treasury and Congress) and all the King's men (read Uncle Sam's taxpayers), Yet, Humpty Dumpty is still the same old fragile egg he was when he sat on a wall right before he had his great fall.

WARREN: A year ago the big concern was systemic risk and how to deal with 'too big to fail' firms...the big are bigger, we wiped out a lot of small folks and there's more concentration" in the banking system.

And it is not just the Humpty Dumpty financial system that is so fragile.

WARREN: The way I see it is that the financial system itself is quite fragile, and that the underlying economy, the real economy, jobs, housing, household wealth, is still in a very perilous state.

So Lois Romano asks Warren, "Are we going to look back in two or three years at this TARP expenditure and say well, it worked."

WARREN: "What is so astonishing about the first expenditures under TARP was that taxpayer dollars were put into financial institutions that were still, um, left all of their shareholders intact, that were still paying dividends, that paid their creditors 100 cents on the dollar. We put taxpayer money in without saying ‘you've got to use up everyone else's money first.' And once that's the case, I don't know how you ever put the genie back in the bottle. I don't know how you ever persuade either a large corporation or the wider marketplace that if you can just get big enough and tie yourself to enough other important people, institutions, that if something goes wrong, the taxpayer will be behind you.

That's a game-changer. That is a whole different approach than any we've ever used before.

ROMANO: What more can we be doing to protect the middle class, to protect what Michael Moore refers to as the American Dream?

WARREN: "You know, the answer is we're in trouble on so many fronts. In the 1950s and the 1960s, coming out of World War II, we said as a government and as a people, 'what can we do to support the middle class?' That's what, FHA was to help people get into homes, right? VA, uh, G.I. loans on education. We looked at policies by whether they strengthened and support the middle class. Somewhere that began to change in the late 1970s and early 1980s, and the middle class instead became like a resource to be pulled from. They became the turkey at the Thanksgiving dinner. Who could carve off a piece, who could get this little piece, who could make a profit from this piece and that piece or squeeze down on the wages? And, the middle class has gotten shakier and shakier, hollowed out.

The consequences of that are far more than economic. The middle class is what makes us who we are. It affects the poor. A strong and vital middle class is a middle class that can offer a helping hand to the poor. A strong and vital middle class is a middle class that has room, is creating new jobs to, basically to suck the poor up out of poverty and into middle class positions. The middle class is what gives us political stability. It's what gives us an America that's all bought in to the whole process. That what we do is not just about a handful of folks at the top who profit from it. We all profit from it. And that's why we work, and that's why we vote, and that's why we accept the outcome of elections, and, that's why we're safe to walk our streets, because we have a middle class for which this ultimately works, this country.

And every time we hollow that out. Every time we take away a little piece of that. We run the risk that some of what we understood as America, some of what we know as America, begins to die.

That's what scares me.

Aaron Task interviewed Elizabeth Warren at The Economist's Oct 15-16 "Buttonwood Gathering" In that interview, Warren says,

The big banks always get what they want. They have all the money, all the lobbyists. And boy is that true on this one. There's just not a lobby on the other side.

This is a moment when all around the country people are saying we've had it about up to here with these large financial institutions that want to write the rule then take our money. I find it astonishing that they have the nerve to show up and say, 'I'm a big financial institution. I took your money. And now I'm going to lobby against anything that might offer some protection to ordinary families in this marketplace.

This might be the time that the rules change.

The Buttonwood Gathering event took place over the weekend following Q3 earnings announcements from the big banks. Because of the taxpayer bailout of these big banks, some of them, namely JPM and GS are now enjoying record profits and will enjoy record bonuses this season. The irony is overwhelming that this is happening in 2009. Because of the failure of the financial system, more than 7 million middle class jobs have been lost, and the US economy is confronting double digit unemployment for the first time since 1982. Without taxpayer dollars, these record profits and record bonuses in 2009 would not even be possible for the big banks. Hell, without taxpayer dollars zombifying them with congressional and White House sanctioning, they'd have gone the way of the dinosaurs, the way of the buggy whips. That is the way history should have gone. But no, that is counterfactual now. There is something very wrong in America, the very way it is being run by government, and run over by the big banks. It is high time for middle class America to push back, precisely because our elected officials have not only failed to do so, but have legislated all of this to make it happen. Our government has become an active agent in the gutting of the middle class.
Commenting on Wall Street' record 2009 bonuses Elizabeth Warren says she is

Wordless, Speechless. I do not understand how financial institutions could think they could take taxpayer money and turn around and act like it's business as usual...I don't understand how they can't see that the world has changed in a fundamental way—it's not business as usual.

Read the rest of the post.

Cashing in the War Dividend (Jo Comerford)

2009-10-21T15:11:00.003-05:00

TomDispatch has a new piece by Jo Comerford, director of the National Priorities Project. See below for Tom's introduction to the piece.

Comerford also appears in one part of a six-part video series from Brave New Films, Rethink Afghanistan. Part Three, which features Comerford and also Linda Bilmes (who co-wrote The Three Trillion Dollar War with Joseph Stiglitz), addresses the costs of the war in Afghanistan.

Both Comerford's article and the video series go well with Tom's own piece Who's Next?: Lessons from the Long War and a Blowback World, which argues that the "Long War" (the term members of the Bush administration wanted to give to the global war on terror) is what the United States has already been fighting in the Middle East for the past 30-odd years. —cs

If you want a picture of how Washington deals with American war-making today, check out a moment from NBC's October 11th "Meet the Press." David Gregory, the show's moderator, is conducting a round-table discussion with former Chairman of the Joint Chiefs of Staff General Richard Myers, Senator Lindsey Graham, Senator Carl Levin, and retired General Barry McCaffrey (one of those generals who now spends his time on television explaining our wars to us). At one point, Gregory asks: "Can we beat the Taliban?" General McCaffrey's reply starts this way: "Well, I, I think in 10 years of $5 billion a month and with a significant front-end security component, we can leave an Afghan national army and police force and a viable government and roads and universities. But it's a time constraint that we can't change things in 18 to 24 months. So I think we got to lower expectations."

Now, if you were a normal citizen, you might begin frantically calculating: $5 billion a month... 12 months in a year... $60 billion a year... times 10 years... $600 billion dollars. If, in fact, the number of U.S. troops or trainers and advisors rises significantly and the U.S. commitment to the war rises as well, this will surely prove a gross underestimate. But leaving that aside, you, the normal, reasonable human being, might at this point say something like: "Hold on, general, $600 billion more dollars? Ten years? And where's that money coming from? And is that really how you want to invest taxpayer dollars -- in another supposedly too-big-to-fail bailout?" Or, of course, you might just jump up and yell, "Have you lost your senses?"

But of course this is Washington where such numbers for American war-fighting are so ho-hum, so run-of-the-mill, that none of the other participants even thinks to comment on or question them or stops for a second in wonder. In fact, when McCaffrey is done, here's how Gregory begins his response: "Just with, with very little time left, I want to get to two other issues. The president spoke last night at the Human Rights Campaign dinner and spoke about 'Don't Ask, Don't Tell'..." And so it goes in "wartime" Washington.

Jo Comerford, a TomDispatch newcomer, runs the National Priorities Project, whose mission is to analyze "complex federal spending data and translate it into easy-to-understand information about how federal tax dollars are spent." Its site even has a "cost of war" counter, constantly twirling as the dollars rise in dizzying fashion. Here, as a numbers cruncher, she makes the most basic point of all: Whoever may be losing in our country, others are cashing in their chips and I'm not just talking about Goldman Sachs. After all, there's also the "war dividend." —Tom

Cashing in the War Dividend
The Joys of Perpetual War
By Jo Comerford

So you thought the Pentagon was already big enough? Well, what do you know, especially with the price of the American military slated to grow by at least 25% over the next decade?

Forget about the butter. It's bad for you anyway. And sheer military power, as well as the money behind it, assures the country of a thick waistline without the cholesterol. So, let's sing the praises of perpetual war. We better, since right now every forecast in sight tells us that it's our future.

The tired peace dividend tug boat left the harbor two decades ago, dragging with it laughable hopes for universal health care and decent public education. Now, the mighty USS War Dividend is preparing to set sail. The economic weather reports may be lousy and the seas choppy, but one thing is guaranteed: that won't stop it.

The United States, of course, long ago captured first prize in the global arms race. It now spends as much as the next 14 countries combined, even as the spending of our rogue enemies and former enemies -- Cuba, Iran, Libya, North Korea, Sudan, and Syria -- much in the headlines for their prospective armaments, makes up a mere 1% of the world military budget. Still, when you're a military superpower focused on big-picture thinking, there's no time to dawdle on the details.

And be reasonable, who could expect the U.S. to fight two wars and maintain more than 700 bases around the world for less than the $704 billion we'll shell out to the Pentagon in 2010? But here's what few Americans grasp and you aren't going to read about in your local paper either: according to Department of Defense projections, the baseline military budget -- just the bare bones, not those billions in war-fighting extras -- is projected to increase by 2.5% each year for the next 10 years. In other words, in the next decade the basic Pentagon budget will grow by at least $133.1 billion, or 25%.

When it comes to the health of the war dividend in economically bad times, if that's not good news, what is? As anyone at the Pentagon will be quick to tell you, it's a real bargain, a steal, at least compared to the two-term presidency of George W. Bush. Then, that same baseline defense budget grew by an astonishing 38%.

If the message isn't already clear enough, let me summarize: it's time for the Departments of Housing and Urban Development, Transportation, Health and Human Services, Labor, Education, and Veterans Affairs to suck it up. After all, Americans, however unemployed, foreclosed, or unmedicated, will only be truly secure if the Pentagon is exceedingly well fed. According to the Office of Management and Budget, what that actually means is this: 55% of next year's discretionary spending -- that is, the spending negotiated by the President and Congress -- will go to the military just to keep it chugging along.

Read the rest of the article.

Read Tom Engelhardt's Who's Next?.

Watch Rethink Afghanistan. (Not for the faint of heart.)

Open Letter on Military Offensive in Central India

2009-10-20T16:05:00.004-05:00

We encourage readers of D&S and the D&S blog to consider signing the following open letter. Hat-tip to our friend Taki. —cs

Sanhati (www.sanhati.com), a collective of activists/academics who have been working in solidarity with peoples’ movements in India by providing information and analysis, took the initiative to bring together voices from around the world against the Government of India’s planned military offensive in Central India. A statement (Hindi, Bengali, and Telugu versions are available on our website) and a background note were drafted in consultation with Indian activists, and duly circulated for endorsement. Readers are encouraged to endorse the statement by e-mailing sanhatiindia [at] sanhati [dot] com with their full name and affiliation.

To:
Dr. Manmohan Singh
Prime Minister,
Government of India,
South Block, Raisina Hill,
New Delhi,
India-110 011

We are deeply concerned by the Indian government’s plans for launching an unprecedented military offensive by army and paramilitary forces in the adivasi (indigeneous people)-populated regions of Andhra Pradesh, Chattisgarh, Jharkhand, Maharashtra, Orissa and West Bengal states. The stated objective of the offensive is to “liberate” these areas from the influence of Maoist rebels. Such a military campaign will endanger the lives and livelihoods of millions of the poorest people living in those areas, resulting in massive displacement, destitution and human rights violation of ordinary citizens. To hunt down the poorest of Indian citizens in the name of trying to curb the shadow of an insurgency is both counter-productive and vicious. The ongoing campaigns by paramilitary forces, buttressed by anti-rebel militias, organised and funded by government agencies, have already created a civil war like situation in some parts of Chattisgarh and West Bengal, with hundreds killed and thousands displaced. The proposed armed offensive will not only aggravate the poverty, hunger, humiliation and insecurity of the adivasi people, but also spread it over a larger region.

Grinding poverty and abysmal living conditions that has been the lot of India’s adivasi population has been complemented by increasing state violence since the neoliberal turn in the policy framework of the Indian state in the early 1990s. Whatever little access the poor had to forests, land, rivers, common pastures, village tanks and other common property resources has come under increasing attack by the Indian state in the guise of Special Economic Zones (SEZs) and other “development” projects related to mining, industrial development, Information Technology parks, etc. The geographical terrain, where the government’s military offensive is planned to be carried out, is very rich in natural resources like minerals, forest wealth and water, and has been the target of large scale appropriation by several corporations. The desperate resistance of the local indigenous people against their displacement and dispossession has in many cases prevented the government-backed corporations from making inroads into these areas. We fear that the government’s offensive is also an attempt to crush such popular resistances in order to facilitate the entry and operation of these corporations and to pave the way for unbridled exploitation of the natural resources and the people of these regions. It is the widening levels of disparity and the continuing problems of social deprivation and structural violence, and the state repression on the non-violent resistance of the poor and marginalized against their dispossession, which gives rise to social anger and unrest and takes the form of political violence by the poor. Instead of addressing the source of the problem, the Indian state has decided to launch a military offensive to deal with this problem: kill the poor and not the poverty, seems to be the implicit slogan of the Indian government.

We feel that it would deliver a crippling blow to Indian democracy if the government tries to subjugate its own people militarily without addressing their grievances. Even as the short-term military success of such a venture is very doubtful, enormous misery for the common people is not in doubt, as has been witnessed in the case of numerous insurgent movements in the world. We urge the Indian government to immediately withdraw the armed forces and stop all plans for carrying out such military operations that has the potential for triggering a civil war which will inflict widespread misery on the poorest and most vulnerable section of the Indian population and clear the way for the plundering of their resources by corporations. We call upon all democratic-minded people to join us in this appeal.

*************

The unabridged list of signatories is available at sanhati.com.

National Signatories:

Arundhati Roy, Author and Activist, India
Amit Bhaduri, Professor Emeritus, Center for Economic Studies and Planning, JNU, India
Sandeep Pandey, Social Activist, N.A.P.M., India
Manoranjan Mohanty, Durgabai Deshmukh Professor of Social Development, Council for Social Development, India
Prashant Bhushan, Supreme Court Advocate, India
Nandini Sundar, Professor of Sociology, Delhi School of Economics, University of Delhi, India
Colin Gonzalves, Supreme Court Advocate, India
Arvind Kejriwal, Social Activist, India
Arundhati Dhuru, Activist, N.A.P.M., India
Swapna Banerjee-Guha, Department of Geography, University of Mumbai, India
Anand Patwardhan, Film Maker, India
Dipankar Bhattachararya, General Secretary, Communist Party of India (Marxist-Leninist) Liberation, India
Bernard D’Mello, Associate Editor, Economic and Political Weekly (EPW), India
Sumit Sarkar, Retired Professor of History, Delhi University, India
Tanika Sarkar, Professor of History, J.N.U., India
Gautam Navlakha, Consulting Editor, Economic and Political Weekly, India
Madhu Bhaduri, Ex-ambassador
Sumanta Banerjee, Writer, India
Dr. Vandana Shiva, Philosopher, Writer, Environmental Activist, India
M.V. Ramana, Visiting Research Scholar, Program in Science, Technology, and Environmental Policy; Program on Science and Global Security, Princeton University, USA
Dipanjan Rai Chaudhari, Retired Professor, Presidency College, India
G. N. Saibaba, Assistant Professor, University of Delhi
Amit Bhattacharyya, Professor, Department of History. Jadavpur University, Kolkata
D.N. Jha, Emeritus Professor of History, University of Delhi, India
Paromita Vohra, Devi Pictures
Sunil Shanbag, Theater Director
Saroj Giri, Lecturer in Political Science, Delhi University, India
Sudeshna Banerjee, Department of History, Jadavpur University, India
Achin Chakraborty, Professor of Economics, Institute of Development Studies, Calcutta University Alipore, India
Anand Chakravarty, Retired Professor, Delhi University, India
Anjan Chakrabarti, Professor of Economics, Calcutta University, India
Subha Chakraborty Dasgupta, Professor, Jadavpur University, India
Uma Chakravarty, Retired Professor, Delhi University, India
Kunal Chattopadhyay, Professor of Comparative Literature, Jadavpur University, India
Amiya Dev, Emiritus Professor of Comparative Literature, Jadavpur University, India
Subhash Gatade, Writer and Social Activisit, India
Abhijit Guha, Vidyasagar University, India
Kavita Krishnan, AIPWA, India
Gauri Lankesh, Editor, Lankesh Patrike, India
Pulin B. Nayak, Professor of Economics, Delhi School of Economics, Delhi University, India
Imrana Qadeer, Retired Professor, Centre of Social Medicine and Community Health, J.N.U., India
Neshant Quaiser, Associate Professor, Jamia Millia Islamia, Central University, Department of Sociology, India
Ramdas Rao, President, People’s Union for Civil Liberties, Bangalore Unit, India
Shereen Ratnagar, Retired Professor, Center for Historical Studies, JNU, India
Rahul Varman, Professor, Department of Industrial and Management Engineering, IIT Kanpur, India
Padma Velaskar, Professor, Center for Studies in the Sociology of Education, Tata Institute of Social Sciences, India

*************

International Signatories:

Noam Chomsky, Professor Emeritus of Linguistics, M.I.T., USA
David Harvey, Distinguished Professor of Anthropology, The C.U.N.Y. Graduate Center, USA
Michael Lebowitz, Director, Program in Transformative Practice and Human Development, Centro Internacional Mirana, Venezuela
John Bellamy Foster, Editor of Monthly Review and Professor of Sociology,University of Oregon Eugene,USA
Gayatri Chakravorty Spivak, University Professor and Director of the Institute for Comparative Literature and Society, Columbia University, USA
James C. Scott, Sterling Professor of Political Science, Yale University, USA
Michael Watts, Professor of Geography and Development Studies, University of California Berkeley, USA
Mahmood Mamdani, Herbert Lehman Professor of Government, Departments of Anthropoogy and Political Science, Columbia University, USA
Mira Nair, Filmmaker, Mirabai Films, USA
Howard Zinn, Historian, Playwright, and Social Activisit, USA
Abha Sur, Women’s Studies, M.I.T., USA
Richard Peet, Professor of Geography, Clark University, USA
Richard Levins, John Rock Professor of Population Sciences, Harvard University, USA
Gilbert Achcar, Professor of Development Studies and International Relations, School of African and Oriental Studies, University of London, U.K
Massimo De Angelis, Professor of Political Economy, University of East London, UK
Gyanendra Pandey, Arts and Sciences Distinguished Professor of History, Emory University, USA
Brian Stross, Professor of Anthropology, University of Texas Austin, USA
J. Mohan Rao, Professor of Economics, University of Massachusetts at Amherst, USA
Vinay Lal, Professor of History & Asian American Studies, University of California Los Angeles, USA
James Crotty, Professor of Economics, University of Massachusetts Amherst, USA
Haluk Gerger, Political Scientist, Activist, Political Prisoner, Turkey
Justin Podur, Journalist, Canada
Hari Kunzru, Novelist, U.K.
Louis Proyect, Columbia University
Biju Mathew, Associate Professor, Rider University, USA
Balmurli Natrajan, Campaign to Stop Funding Hate and South Asia Solidarity Initiative, USA
Harsh Kapoor, South Asia Citizens Web
Kim Berry, Professor of Women’s Studies, Humboldt State University, USA
Shefali Chandra, Professor of South Asian History, Washington University at St Louis, USA
Angana Chatterji, Professor, California Institute of Integral Studies, San Francisco, USA
Stan Cox, Senior Scientist, The Land Institute, USA
Martin Doornbos, Professor Emeritus, International Institute of Social Studies, Erasmus University, Netherlands
Robert A Hueckstedt, Professor, University of Virginia, USA
Louis Kampf, Professor of Literature Emeritus, MIT, USA
Emily Kawano, Director, Center for Popular Economics, USA
Arthur MacEwan, Professor Emeritus of Economics, University of Massachusetts Boston, USA
Bill Martin, Professor of Philosophy, DePaul University, USA
Ali Mir, Professor, William Paterson University, USA
Anuradha Dingwaney Needham, Longman Professor of English, Oberlin College, USA
Kavita Philip, Associate Professor, University of California, Irvine, USA
Nicholas De Genova, Assistant Professor of Anthropology and Latino Studies, Columbia University, USA
Peter Custers, Academic researcher on militarisation, Netherlands
Radha D’Souza, School of Law, University of Westminster , UK
Chris Sturr, co-editor, Dollars & Sense magazine, Boston, USA