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Leo W. Gerard

By Leo W. Gerard

International President

The words Barack Obama uses are deeply meaningful to organized labor. He speaks to union members on a gut level about concepts that define their lives: unity and brotherhood.

Listen to what he says in his closing argument speech:

“Each of us has a responsibility to work hard and look after ourselves and our families, and each of us has a responsibility to our fellow citizens. That’s what’s been lost these last eight years – our sense of common purpose; of higher purpose. And that’s what we need to restore right now.”

That’s the theme of serving as a brother’s keeper that Obama detailed at the Democratic National Convention.

He continues in the “closing” speech:

“Yes, we can argue and debate our positions passionately, but at this defining moment, all of us must summon the strength and grace to bridge our differences and unite in common effort – black, white, Latino, Asian, Native American; Democrat and Republican, young and old, rich and poor, gay and straight, disabled or not.”

These are the lyrics of unity that have distinguished Obama throughout his campaign.

They resonate with union members, who unify to achieve greater good for all and who call each other brother and sister because we are willing to sacrifice for one another.

This is what has lured members of my union, the United Steelworkers, to work for a candidate for president harder and longer than they ever have before.

More than 10,000 Steelworkers have volunteered their time to ensure Barack Obama’s election. They’ve knocked on doors, manned phone banks, filled envelopes with letters of persuasion, leafleted at plant gates, worked to protect voters’ rights and helped with the Steel Blitz for Barack bus tour that took Pittsburgh Steelers owner Dan Rooney and retired players on visits to battleground areas in Pennsylvania and Ohio over the past four weeks.

Steelworkers gathered together to accomplish these tasks, inspired by Barack Obama’s words of harmony:

“In this election, we cannot afford the same political games and tactics that are being used to pit us against one another and make us afraid of one another. The stakes are too high to divide us by class and region and background; by who we are or what we believe.

Because despite what our opponents may claim, there are no real or fake parts of this country. There is no city or town that is more pro-American than anywhere else – we are one nation, all of us proud, all of us patriots.”

By Election Day, Steelworker volunteers will have called and spoken to more than 105,000 union members in a dozen battleground states, including Pennsylvania, Ohio, Virginia and North Carolina. It’s an incredibly time-consuming and frustrating endeavor because to reach that many human beings, 850,000 phone calls will have been made. Many of those were entreaties to answering machines. But Steelworkers carried on, spurred by Obama’s counsel that everyone must work together to be part of the solution:

“I ask you to believe – not in my ability to bring about change, but in yours.”

On weekends and evenings, Steelworkers across the country went door-to-door, checking in with fellow union members to ensure they supported Obama and would vote on Nov. 4. This labor-intensive and gasoline-consumptive activity has proven incredibly effective in the past. Steelworker door-knocking aided both Ohio Sen. Sherrod Brown and Pennsylvania Sen. Bob Casey in winning their seats over the past four years. Steelworkers volunteered to block-walk and drive-the-suburbs in the past two presidential elections as well, but the number who gave time this year was unprecedented. Their willingness to suffer blisters and high gasoline prices was inspired by Obama’s expression of their shared principles as U.S. citizens:

“Understand, if we want to get through this crisis, we need to get beyond the old ideological debates and divides between left and right. We don’t need bigger government or smaller government. We need a better government – a more competent government – a government that upholds the values we hold in common as Americans.”

At the USW headquarters in Pittsburgh, at district offices across the country, and at local union halls, volunteers spent countless lunch hours stuffing, not their stomachs, but envelopes. All together, the USW mailed nearly 4.5 million pieces of persuasive literature. That is a lot of folding and licking. It was worth the time for Steelworkers who understand negotiation and support Obama’s intent to talk to prevent war:

“I will build new partnerships to defeat the threats of the Twenty-First Century and I will restore our moral standing, so that America is once again that last, best hope for all who are called to the cause of freedom, who long for lives of peace, and who yearn for a better future.”

I’ve been part of the campaign as well, phone banking, block walking, and touring and talking with the Steel Blitz for Barack. I know great leadership when I see it. New Mexico Gov. Bill Richardson, who was once Obama’s primary foe, mentioned what is for a union leader a key factor in leadership. Here’s what Richardson said during Obama’s half hour presentation to the American people Wednesday night about the Democratic candidate: “This guy is special because I think he can bring people together.”

That is what compelled 10,000 Steelworkers to donate their time and energy to Obama. He creates connections. He unifies. He motivates us all by calling on America to be the best she can be:

“In one week, we can choose hope over fear, unity over division, the promise of change over the power of the status quo.

“In one week, we can come together as one nation, and one people, and once more choose our better history. . .

“. . . together we will change this country and we will change the world.”

Steelworkers joined untold thousands of other Obama enthusiasts across the country to get him elected. If he is, Steelworkers will remain active to support his goals and ours during an Obama administration.

William Greider

By Willaim Greider

National Affairs Correspondent, The Nation

The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson’s transaction, the taxpayers were taken for a ride–a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public’s money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.

These are dynamite facts that demand immediate action to halt the bailout deal and correct its giveaway terms. Stop payment on the Treasury checks before the bankers can cash them. Open an immediate Congressional investigation into how Paulson and his staff determined such a sweetheart deal for leading players in the financial sector and for their own former employer. Paulson’s bailout staff is heavily populated with Goldman Sachs veterans and individuals from other Wall Street firms. Yet we do not know whether these financiers have fully divested their own Wall Street holdings. Were they perhaps enriching themselves as they engineered this generous distribution of public wealth to embattled private banks and their shareholders?

Leo W. Gerard, president of the United Steelworkers, raised these explosive questions in a stinging  letter sent to Paulson this week. The union did what any private investor would do. Its finance experts vetted the terms of the bailout investment and calculated the real value of what Treasury bought with the public’s money. In the case of Goldman Sachs, the analysis could conveniently rely on a comparable sale twenty days earlier. Billionaire Warren Buffett invested $5 billion in Goldman Sachs and bought the same types of securities–preferred stock and warrants to purchase common stock in the future. Only Buffett’s preferred shares pay a 10 percent dividend, while the public gets only 5 percent. Dollar for dollar, Buffett “received at least seven and perhaps up to 14 times more warrants than Treasury did and his warrants have more favorable terms,” Gerard pointed out.

“I am sure that someone at Treasury saw the terms of Buffett’s investment,” the union president wrote. “In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal–50 percent invested and 50 percent as a gift–is quite consistent with the Republican version of spread-the-wealth-around philosophy.”

The Steelworkers’ close analysis was done by Ron W. Bloom, director of the union’s corporate research and a Wall Street veteran himself who worked at Larzard Freres, the investment house. Bloom applied standard valuation techniques to establish the market price Buffett paid per share compared to Treasury’s price. “The analysis is based on the assumption that Warren Buffett is an intelligent third party investor who paid no more for his investment than he had to,” Bloom’s report explained. “It also assumes that Gold Sachs’ job is to protect its existing shareholders so that it extracted from Mr. Buffett the most that it could…. Further, it is assumed that Henry Paulson is likewise an intelligent man and that if he paid any more than Mr. Buffett–if he paid $1 for something for which Mr. Buffett would have paid 50 cents–that the difference is a gift from the taxpayers of the United States to the shareholders of Goldman Sachs.”

The implications are staggering. Leo Gerard told Paulson: “If the result of our analysis is applied to the deals that you made at the other eight institutions–which on average most would view as being less well positioned than Goldman and therefore requiring an even greater rate of return–you paid a$125 billion for securities for which a disinterested party would have paid $62.5 billion. That means you gifted the other $62.5 billion to the shareholders of these nine institutions.”

If the same rule of thumb is applied to Paulson’s grand $700 billion bailout fund, Gerard said this will constitute a gift of $350 billion from the American taxpayers “to reward the institutions that have driven our nation and it now appears the whole world into its most serious economic crisis in 75 years.”

Is anyone angry? Will anyone look into these very serious accusations? Congress is off campaigning. The financiers at Treasury probably assume any public outrage will be lost in the election returns. I hope they are mistaken.

Leo W. Gerard

By Leo W. Gerard

International President

Are you feeling depressed, dogged by daily bad news about the effects of reckless, unregulated Wall Street speculators sinking the economy? Well, U.S. Treasury Secretary Hank Paulson has decided to take this opportunity to kick you while you’re down. And use your money to do it.

Paulson cheated American taxpayers with his initial expenditure from that $700 billion Wall Street bailout fund – the $125 billion he gave to nine financial institutions.

That’s right. He paid twice what the securities were worth. That means he gave the CEOs and stockholders of these firms a $62.5 billion gift. From taxpayers.

Now Paulson is no rube. He’s a former Goldman Sachs CEO, who has surrounded himself with former Goldman Sachs executives for advice.

Oh, and by the way, one of the nine firms that received this gift from American taxpayers is Goldman Sachs.

You can find the financial analysis of Paulson’s deal here, on the USW web site.

I’ve written Paulson to demand an explanation for his profligate ways with taxpayer dollars. I’m copying it here to encourage you to write him as well. We need to stop him from spending the rest of the money as if he were still a Wall Street speculator.

October 28, 2008

Henry M. Paulson, Jr.

Secretary of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

Dear Secretary Paulson,

While I am sure that you face no shortage of advice regarding the crisis that continues to engulf the world’s capital markets, I did want to share with you some questions and concerns regarding your decision to invest $125 billion of the taxpayers’ money into nine financial institutions, including the securities firm which until recently you headed, Goldman Sachs.

While the media was filled with the usual breathless “behind-the-scenes” reports of your “High Noon” bargaining, what seems to have escaped their notice was your decision, on behalf of the taxpayers, to pay roughly twice as much as you needed to for the securities that you purchased.

To me, at least, this is far more important than whether you gave the assembled CEOs two hours, two weeks or two minutes to sign up; whether, as the New York Times helpfully tells us, you have seen “Butch Cassidy and the Sundance Kid”; whether you have worked long hours in the last few months; or what brand of cell phone you use.

While Wells Fargo Chairman Kovacevich, who was forced to get by on only $300 million over the past ten years, may or may not have actually pretended to resist the deal, if he had in fact turned you down, he should have been fired, given the extraordinary deal he was being offered.

I have enclosed with this letter a copy of the analysis that we prepared which values the investment of the taxpayers’ money in Goldman Sachs at only 50% of what was actually paid. Perhaps one of your former colleagues at Goldman could take a minute away from their busy day shorting mortgages to see if we are correct.

Mr. Secretary, this analysis is not rocket science. Just twenty days before Goldman announced that it would “accept” Treasury’s investment, Warren Buffett invested $5 billion into Goldman Sachs and acquired the very same type of security – preferred stock – with the very same form of “upside” – warrants to purchase common stock. For some reason, however, per dollar invested, Mr. Buffett received at least seven and perhaps up to fourteen times more warrants than Treasury did and his warrants have more favorable terms. In addition, Mr. Buffett’s preferred stock has a higher dividend rate and can only be bought away from him at a premium, while Treasury’s investment of taxpayers’ money pays a lower dividend and can be repurchased at par.

Now I know that you have a lot on your plate, but I am sure that someone at Treasury saw the terms of Buffett’s investment. In fact, my suspicion is that you studied it pretty closely and knew exactly what you were doing. The 50-50 deal – 50% invested and 50% as a gift – is quite consistent with the Republican version of the “spread-the-wealth-around” philosophy that seems so much in vogue.

If the result of our analysis is applied to the deals that you made at the other eight institutions – which on average most would view as being less well positioned than Goldman and therefore requiring an even greater rate of return – you paid $125 billion for securities for which a disinterested party would have paid $62.5 billion. This means that you gifted the other $62.5 billion to the shareholders of these nine institutions.

This is no different than if you paid me $10,000 for a car for which no one else would pay more than $5,000. You bought it for $5,000 and gifted me the other $5,000. In my world such gifts are rarely offered to working people.

It’s hard to list all of the ways in which this is disturbing, but let me note just a few:

• If this deal is the model for how you intend to spend the whole $700 billion that you got from the Congress, then it would appear that you intend to reward the institutions that have driven our nation, and it now appears the whole world, into its most serious economic crisis in 75 years with a gift of $350 billion from the American taxpayers, who have watched 760,000 of their jobs disappear over just the past nine months.

• The recipients of the first wave of gift-giving include Goldman Sachs. It has been widely reported that you have surrounded yourself with former Goldman employees as well as individuals from other Wall Street firms. Yet it has never been revealed whether in fact you and they have fully divested yourselves of your Wall Street holdings. Doesn’t it seem just a wee-bit of a conflict of interest for those setting the price of the investment to be either so directly linked to the firms receiving the investments or, even worse, direct beneficiaries of the decision to overpay with taxpayer money?

• Your investments do nothing to deal with the causes of the current crisis. Now that even Chairman Greenspan has discovered a “flaw” in his theories, wouldn’t it make sense to have some reason to believe that the recipients of this government largesse won’t just take the money and do it all again? Perhaps there is some reason I do not understand that you have seemingly handed this chicken coop back to the very same foxes who have been pillaging it for the last two decades?

• It has been reported in the media that these firms have no intention of using this money for its intended purpose. Don’t we deserve a commitment that the money will in fact be used for either loans to the companies which are groaning under the weight of the credit crisis and being forced to shed tens of thousands of more jobs or to help the millions of Americans struggling with their troubled mortgages? Does it really seem too much to demand that we get a commitment that our gifts to these firms be used to help revive the economy that they have driven into the ditch?

• Your terms also undercut the more stringent restrictions that the Brits imposed, thus making it clear that not only are you fronting for American wastrels, but European ones as well.

Now I do not doubt for a minute that the irresponsible and fraudulent actions of Wall Street have indeed put the world financial system and now the real economy at grave risk. And I also do not doubt that the literally hundreds of billions of dollars of undeserved bonuses ($38 billion in 2007 alone), reckless speculating and dividends to shareholders have left many of these institutions woefully under-capitalized and in need of new equity dollars. Where I get a little lost is why you think that the system or the American taxpayer is better off if the government gets half as much for its investment as Mr. Buffett did.

Let’s agree that America’s nine largest banks need $125 billion of new money and let’s further agree that no one else, not even Warren Buffett, has that kind of money lying around. That still does not explain why our $125 billion should buy us securities worth half of what we paid for them. Nor does it explain why the nearly $25 billion per year that the firms pay out in dividends to their shareholders should continue. At current levels, dividends to shareholders will distribute all of our money that you invested in just five years.

Secretary Paulson, out in the real economy, the unbridled pursuit of greed that you and your friends on Wall Street have celebrated as a national religion has taken a terrible toll on ordinary Americans. Jobs with stagnant real wages have now given way to massive lay-offs, home foreclosures and real suffering.

Out in the real economy, we need to once and for all bury the philosophy that worships only business, free markets, deregulation and free trade, and replace it with an economic program that restores the balance of power between workers and business, rebuilds the middle class and curbs corporate excesses.

Out in the real economy, we need our government to invest in creating sustainable shared prosperity – not play Santa Claus to the scoundrels who have laid waste to the American Dream.

I eagerly await your response.

Sincerely,

Leo W. Gerard

International President

Jared Bernstein

By Jared Bernstein

Director of the Living Standards Program, Economic Policy Institute

Most Congressional hearings are not that scintillating. The ones you see on TV, with Roger Clemens testifying about steroids, Ben Bernanke, or some general back from the field, are the exceptions (and let’s face it: they’re pretty predictable too, with important people working hard to not say anything important). Mostly, it’s a group of policy wonks or industry reps talking to members of Congress about some minutiae in a bill that may or may not go anywhere. At their worst, these hearings are scripted events where actors trot out their lines in order to move (or block) some legislation valuable (or hurtful) to their constituents.

At their best, however, a hearing can be a great example of good government in action, and as someone whose been testifying for years, let me tell you about one from last week that struck me as uniquely positive. My point is not simply to report on an unusually useful couple of hours in the halls of government. At the risk of over-extrapolating, I thought I saw a glimpse of what our political future might look like if we make the right choice on Nov. 4. And it provided a glimmer of hope.

The hearing was before the House Committee on Education and Labor, chaired by Rep. George Miller (D-CA). The topic was how to best craft a recovery package to accomplish two things: help those hurt by the troubled economy, and stimulate that economy back to life. The majority party gets to choose most of the witnesses, so this panel featured only one Republican witness and, uncharacteristically, not one Republican member of the committee showed up.

This sounds like glib snark, but I can tell you based on personal experience, that’s one reason why this hearing worked well. Like I said, I’ve done these for years, and ever since Reagan, Republican witnesses in economic hearings almost always have one, and only one, theme: supply-side tax cuts (okay, lately they’ve added “drill, baby, drill,” but that’s a newcomer, and it’s just about as compelling as their tax plan; oh yes, and “deregulation” shows up a lot too, though this is a bit of a non-starter right now, to put it mildly).

If you don’t believe me, read the testimony at the above link by the R witness, William Beach from the conservative Heritage Foundation: high-end tax cuts (extend the Bush cuts, cut the capital gains rate, lower the corporate tax), find more oil, avoid “burdensome regulations.”

That’s almost all they bring to the table, regardless of the evidence, the topic, or outside circumstances. Case in point, this hearing was about a stimulus package that needs to move quickly off the mark, and Beach was pushing tax changes (extending the Bush cuts) that come into play at the end of 2010. It’s the same supply-side agenda the Heritage folks push in good times and bad. Their only tool is a hammer, so it all looks like nails to them. Same with the oil thing. Does Beach not recognize that the price of gas is down well over a dollar nation-wide, yet we’re still mired in recession?

As I wrote last week in this space, ideology that’s impervious to facts is the last thing we need right now, and the fact that such thinking was vastly under-represented was one reason why this hearing worked.

The hearing began with testimony by Dana Stevens, a woman from New Jersey who’s been unemployed since July. Since then she’s applied for 143 jobs and gotten only seven interviews. She’s an extremely impressive, articulate person, and she’s even willing to take a pay cut, within reason given her financial needs.

But there’s just no work out there. Hiring freezes are pervasive. Back in January of last year there were 1.5 job seekers per available job. Now that ratio has doubled–it’s 3 to 1. Add in the six million people who are working fewer hours than they desire, and one in nine persons is un- or underemployed.

Economist Ron Blackwell and I presented facts like these, along with our views re the magnitude and composition of a recovery package. In order to offset a recession that is likely to drive unemployment to at least 8% by the end of next year (it’s about 6% now), I think we need to spend roughly $50 billion to help strapped states, $50 billion on infrastructure (more on that below), and $50 billion on extending both unemployment insurance and food stamps. Beyond that, it might be useful to boost household incomes with direct payments, but that was the exclusive thrust of the last round of stimulus, and we should deemphasize such payments this round. Checks can help for awhile, no question, but people need jobs, and that’s why many of us are bullish on infrastructure investment right now.

Here’s where Professor Robert Pollin’s testimony comes in. Do yourself a favor, and give this one a read (same link as above). It’s a detailed road map of a vital public investment agenda, with an emphasis on green technologies. There are the usual candidates–schools, water management, roads, bridges–as well as building retrofits, smart grid electrical systems, and renewable energy. Moreover, Pollin shows that in terms of jobs, these investments get you a bigger bang for the buck than tax cuts, military spending, or “drill, baby, drill” (see his figure 1).

In a similar vein, Chris Hansen made a solid case for including the expansion of high speed broadband networks in an infrastructure agenda, providing access to areas that are still off this grid, a serious economic and social disadvantage in today’s world.

(A related point in my testimony is that infrastructure investment has often been dismissed in the context of stimulus as having too long a lead time. Not so. There are tons of productive projects in all of these areas ready to go, if not already underway but starved for resources.)

But beyond the good information exchange, what stood out in this hearing was the discussion between the members of Congress and the panelists. These exchanges can too often reduce to partisans getting “experts” to confirm their biases: “Mr. X, you noted in your testimony that 2+2=5. Could you elaborate?”

In this case, members were genuinely seeking our insights into how to structure a recovery package, and providing their own amplification as to what parts made most sense to them. Reps. George Miller and Lynn Woolsey, clearly motivated by the deteriorating economy and rising unemployment, wanted to hear about ways we might extend unemployment insurance benefits to meet the needs of people like Ms. Stevens, including upping the “replacement rate”–the share of salary replaced by UI benefits (it rarely breaks 50%; I think now’s a good time to go up to 70%, at least temporarily).

John Sarbanes (D-MD) picked up on a great Pollin point about “crowding in”–how sometimes government investment creates untapped markets that later draws in private investment. The internet is, of course, a classic example, and green technologies create the same possibilities, with even greater potential benefits.

Other members, like Dave Loebsack (D-IA) stressed how the recession is cutting into their state’s revenues, and wanted to learn more about the actions states were taking. Unlike the Feds, states have to balance their budgets, and they’re actively cutting services (and jobs), as well as raising fees and taxes, actions that will only serve to deepen the recession. Thus, unlike the earlier stimulus package, this one must include state fiscal relief.

Like I said, I don’t want to get all starry-eyed here, but I couldn’t help but wonder if the dynamics of this hearing–creative, open-minded thinking about solving problems in a progressive, even green, way–might be a tiny harbinger of a new era, where government actually works to solve problems, not create them. Is this, I asked myself, the way things might operate in an Obama era?

I know, this election is by no means over, and despite the favorable polls, I’m not one iota complacent about the outcome. It’s just that this hearing revealed what may be a light at the end of the tunnel. Unless that’s the headlights of the Straight-talk Express headed right for us.

By Leo W. Gerard
International President

Protestors disrupted a convention of mortgage financers in San Francisco this week, storming the stage as former Bush advisor Karl Rove spoke, heckling bankers with bullhorns, and badgering a panel with demands for a foreclosure moratorium.

Fear and frustration compelled ordinary citizens to harangue the green-visor set at their normally-staid annual meeting. Middle class Americans are losing their jobs and their homes and their hope while watching Ben Bernanke and Hank Paulson spend their tax dollars to bail out the infinitely-wealthy on Wall Street whose reprehensible risk-taking caused the country’s financial crisis. The middle class want their piece of the American pie.

Congress is trying to dish it out in the form of a second stimulus package that would extend unemployment insurance and food stamps and create jobs through programs such as highway construction projects.

Republican candidates John McCain and Sarah Palin oppose it. They’re running around the country with caricatures of Joe the Plumber and Joe Sixpack, pretending the GOP ticket represents the best interests of the working class and small business owners. It’s all false rhetoric and no real action. McCain and Palin object to intervention for anyone other than the wealthy, for whom they plan to enshrine tax cuts; for overfed CEOs, for whom they believe the $700 billion bailout was justified, and for themselves, for whom they believe the Republican National Committee appropriately opened its purse to purchase haute couture wardrobes, hair stylists and makeup artists.

McCain wants to brand a socialist S on Barack Obama although both voted for the bailout plan under which the U.S. government is nationalizing banks.

Unlike McCain, however, Obama is a man of the people and believes not in socialism but in the religious concept of everyone serving as their brothers’ keepers.  This is how he explained it in his acceptance speech at the Democratic National Convention:

“What — what is that American promise? It’s a promise that says each of us has the freedom to make of our own lives what we will, but that we also have obligations to treat each other with dignity and respect.
It’s a promise that says the market should reward drive and innovation and generate growth, but that businesses should live up to their responsibilities to create American jobs, to look out for American workers, and play by the rules of the road.
Ours — ours is a promise that says government cannot solve all our problems, but what it should do is that which we cannot do for ourselves: protect us from harm and provide every child a decent education; keep our water clean and our toys safe; invest in new schools, and new roads, and science, and technology.
Our government should work for us, not against us. It should help us, not hurt us. It should ensure opportunity not just for those with the most money and influence, but for every American who’s willing to work.
That’s the promise of America, the idea that we are responsible for ourselves, but that we also rise or fall as one nation, the fundamental belief that I am my brother’s keeper, I am my sister’s keeper.
That’s the promise we need to keep. That’s the change we need right now.”

That philosophy has great appeal with unemployment at a five-year high of 6.1 percent, with the poverty rate rising to 12.5 percent in what is supposed to be the richest country in the world; with 47 million without health insurance; with 1 million homes lost to foreclosure in the past two years and another 1.5 million in the process, and with the chronically ill across American skipping medications because they can’t afford them, as the NYT reported this week.

Because this philosophy is popular, Palin and McCain are trying to channel it, to steal it just as they did the “change” slogan, to try to make Americans believe that they would best serve the middle class. The problem is that everything they do belies their claims.

Sarah “Sixpack” Palin definitely has an elitist eye for clothing, hair styling and makeup. She spent $150,000 of Republican National Committee money on designer duds for herself and her family since accepting the nomination on Sept. 3. That’s three times the annual income for a typical American family. If she doesn’t shell out another dime, she’ll have spent $2,400 a day on clothing between the convention and the election. The vice presidential candidate’s taste includes a $2,500 Valentino Garavani jacket from Saks Fifth Avenue that she wore to the convention.

In addition, she and McCain decided their most important advisor, the one they would reward with the highest salary in the first two weeks of October as the stock market crashed, was Sarah Palin’s makeup artist. Her earnings for proper Palin powdering were $22,800 for two weeks, nearly twice the salary McCain and Palin gave their second highest paid staffer – their chief foreign policy advisor. They paid him $12,500, just $2,500 more than the $10,000 they ponied up for Palin’s hair stylist, whose compensation was fourth highest. The total for Palin’s hair and makeup in two weeks: $32,800.

While you’re scrimping and saving and shopping at Costco to prevent foreclosure of your home, just remember what Palin told CNN reporter Drew Griffin about providing a stimulus package to help the middle class: “But now that we’re hearing that the Democrats want an additional stimulus package or bailout package for what, hundreds of billions of dollars more, this is not a time to use the economic crisis as an excuse for reckless spending and for greater, bigger government and to move the private sector to the back burner and let government be assumed to be the be all, end all solution to the economic challenges that we have.”

So, for Palin, great big government is okay to bail out Wall Street fat cats, but not to help the middle class. Palin’s knee-jerk Republican “let-the-private-sector-solve-it” attitude shocks the consciousness after the indiscretion of the private sector just landed this country in financial crisis. We’re not inclined to trust them, frankly, Ms. Palin.

McCain said the same, backing the bailout for the reckless on Wall Street, and damning attempts by Democrats to help those on Main Street – of course, all the while dragging up the image of Joe the Plumber and contending he’s the guy’s advocate.

The ticket clearly lacks both introspection and economic expertise. McCain said it himself last year – that he was no authority on the economy.  By contrast, a person with some degree of economic proficiency, Federal Reserve Chairman Ben S. Bernanke, this week endorsed additional fiscal stimulus, saying it was appropriate now because the economy is likely to be weak for several quarters. In addition, economic expert and Nobel Laureate Paul Krugman said this week that additional government spending now – for a stimulus package – is appropriate, particularly for infrastructure improvement, which would provide real value and create jobs.

Though McCain and Palin clearly don’t understand, it’s time for everyday Americans to share in the American pie. At a rally in Florida this week, Obama talked about how the policies of the Bush administration have shrunk the pie and permitted the wealthy to grab the few remaining crumbs. He told he crowd he has no desire to reapportion the pie, as McCain keeps accusing him wanting to do – as a socialist, you know. Also, Obama objects to the McCain-Palin policy of continuing to feed the rich all of the crumbs, which is particularly evident in the GOP tax plan.

Obama told the group his goal is to expand the pie to ensure that all Americans get a piece. The crowd responded with a spontaneous chant of, “We want pie!”

That’s what is going on in America. That’s why protestors accosted mortgage bankers at their California convention. The middle class won’t stand for the rich wolfing down all of the pie anymore.

Robert Borosage

By Robert L. Borosage
Co-Director Campaign for America’s Future

Focused on the election? Might be a good idea to watch your pockets at the same time. Here’s a glance at what’s happening to the Wall Street bailout.

Hank Paulson is, no doubt, the most impressive of the Bush administration cabinet members, (admittedly not a high bar.) He made hundreds of millions on Wall Street, ascending to be the head of Goldman Sachs. Now, as Treasury Secretary, he has brought in colleagues from Goldman to help manage the $700 billion bailout of Wall Street banks that are in trouble, including Goldman, and… Wait one minute. Doesn’t something ring false here? Hank Paulson no doubt is honorable, but even he has conflicted interests.

When the bailout bill was before Congress, a number of outside groups — including the Campaign for America’s Future which I head — pushed hard for the bailout to be managed by an independent agency, with an empowered board that included independent representatives of workers and consumers. Whatever the form of the bailout — Paulson’s initial demand for $700 billion left that undefined — it was vital that the transactions be accountable to more than once and future bankers.

And know we know why. After initially proposing to buy toxic securities from the banks at inevitably elevated prices, Paulson sensibly decided to follow the British model and inject capital directly into the major banks in exchange for equity. $125 billion is going into the first nine — Goldman Sachs, Morgan Stanley, Merrill Lynch, Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Bank of New York Mellon and State Street Corporation. This plus a guarantee of new debt over the next three years is designed to reassure other banks of their solvency, and hopefully get them to resume lending to one another and to businesses.

But Mr. Paulson didn’t exactly cut a great deal for taxpayers. He didn’t get the terms that Warren Buffett demanded, putting up a lot less cash, to invest in Goldman Sachs. And as the New York Times editorial complained, he made government a passive investor, leaving in place the boards and the directors that led their banks into crippling losses.

He made no demands that the banks begin lending again, instead of just hunkering down, girding for future losses. And remarkably — unlike the British — he didn’t demand that the banks stop paying out dividends to shareholders. Nor is it clear that bank regulators will perform the triage needed, merging and purging the banks of excess capacity.

That failure is likely to be very costly to taxpayers and very generous to the very folks who led us into this mess. In a New York Times op ed, David S. Scharfstein and. Jeremy C. Stein show that, if paid at the current levels, the dividends will redirect more than $25 billion of the $125 billion to shareholders in the next year alone. One in five dollars will go out the door, and thus be unavailable to plug the large capital hole on the banks’ balance sheets.

Will those dividends be paid? Most likely, since the directors and officers of the nine banks are leading shareholders. Scharfstein and Stein estimate their personal take will amount to $250 million in the first year, nothing to sneeze at.

Worse, Paulson does nothing to curb the bloated compensation levels that characterized Wall Street in the days of debauch. Jonathan Weil of Bloomberg News shows the effect. Morgan Stanley, for example, gets $10 billion in taxpayers, dollars. Yet this year it has racked up $10.7 billion in employee compensation — the vast majority not yet paid out — even as its stock market value plummeted lost 34.7 billion since the beginning of the company’s fiscal year. With taxpayers help, Morgan Stanley may well pay those bonuses.

Weil reports that the ” five families of Wall Street” — Goldman, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Sterns — lost about $83 billion in stock market value from the start of the 2004 fiscal year. At the same time, they reported about $239 billion of employee compensation. For every dollar of shareholder value destroyed, the employees pocketed almost three. And that was before they got taxpayer money.

No one doubts that the bailout is needed to prop up the global economy. But under Paulson’s plan, we may end up, in Weil’s words, “throwing money at an industry that pays too many people more than they’re worth, to perform services the world has too much of already.”

What’s needed is an independent agency with summary powers and an independent board, to work with the FDIC and other agencies to sort out the solvent banks from the broke, those that need to be saved from those that should fail. And, as in the Chrysler bailout, a suspension of dividends to shareholders until the government has been repaid.

Now maybe Paulson is making the best choices possible given the extent of the crisis. He’s got more information and is far better banker than the rest of us. But with $700 billion in taxpayers’ money at stake, surely it would be wise to have an independent board that can hold him accountable.

By David Sirota
Author of “The Uprising: An Unauthorized Tour of the Populist Revolt”

Last week, I appeared on Fox News to discuss Barack Obama’s tax proposals. You can watch the clip here – and make sure to watch the end where Fox News tries to drown me out with music.

Not surprisingly, the “debate” centered around the false premise that Obama’s tax cuts are actually welfare. I say that’s false because – as I pointed out on the show – everyone pays some form of taxes, whether it’s income, property, sales or payroll taxes. When you take all those taxes together, most working- and middle-class Americans pay a higher effective tax rate than the Warren Buffetts of the world (as Warren Buffett, by the way, readily acknowledges). So Obama’s plan to pass refundable income tax credits is only a handout if you look exclusively at one slice of taxes – in this case, income taxes. But in the overall tax scheme, those tax credits are aimed at better equalizing the tax structure so as to diminish the gap between Warren Buffett’s very low effective tax rate and Joe Sixpack’s high effective tax rate. Only in the asylums of Fox News and Republican Party politics is reducing that effective tax rate gap billed as theft from the rich to finance “welfare.”

This concept of effective tax rates (ie. the tax rate actually paid and enforced) is key to understanding the most telling part of this Fox News discussion – the part at the end where former Bush-Cheney spokeswoman Jennifer Millerwise Dyck parrots McCain campaign talking points about America supposedly having a very high corporate tax rate in relation to the rest of the world. This, says Dyck and fellow Republicans, is driving businesses to move offshore.

It sounds like a credible storyline, especially considering that officially, our corporate tax rate is somewhere between 35 and 39 percent. But, as always, the devil is in the details.

To know how high – or low – the effective tax rate is, you have to go beneath the top-line rate and account for all the loopholes, subsidies and write-offs – and the way to do that is by looking at corporate tax revenues as a percentage of a country’s GDP. That way, you know how much corporations are actually paying as a share of your overall economy – in other words, you know the real corporate tax rate, not the fake one advertised by top-line numbers. And when you look at America’s tax structure through this lens, you see that even the Bush Treasury Department admits we have the second lowest effective corporate tax rate in the industrialized world (see page 42 of this report).

Indeed, this explains the dissonance between Republican claims of “highest corporate income tax rate in the world” and the recent Government Accountability report showing that most corporations pay no corporate income taxes at all. The latter is the truth – most corporations don’t pay any taxes because of loopholes, writeoffs and subsidies that allow them to effectively reduce that 35 percent corporate tax rate to zero. In fact, many profitable corporations actually collect tax rebates. But as I told Fox News, we don’t hear criticism of that kind of “corporate welfare” from the Republican mouthpieces deriding Obama’s middle-class tax cuts as welfare.

As you can see from the video clip, when the GOP parrot I’m debating throws out the standard “high corporate tax” canard, I revert to the actual facts over and over and over again, to the point where Fox News feels the need to drown me out with music at the end. And I was, of course, rewarded with the usual river of hate email from Fox News viewers, most of which reaffirmed the dittohead nature of the modern conservative audience in that almost every email included exactly two links purportedly “proving” the GOP talking point – one a link to U.S. News and World Report’s right-wing business columnist, the other to the fringe Tax Foundation, a group funded by Scaife, Koch and the usual constellation of Wingnuttia’s trust-fund babies. You’ll notice that both of these sources focus only on the official tax rate, not the effective tax rate – deliberately misleading their readers about the facts.

The good news is that polling shows most Americans do not think the big problem facing our country is that wealthy corporations are oppressed by high taxes. That is, most Americans live in the “reality-based” world and understand that if anyone is winning big from the Bush-McCain tax policies, it is Corporate America and the super-rich. So if the GOP wants to attack Obama for trying to cut 95 percent of America’s taxes – if they want to lash their electoral hopes to a promise to give Big Business another tax handout – then I say that’s great. They are helping progressives build a landslide and an election mandate.

Dean Baker

By Dean Baker
Co-Director, Center for Economic and Policy Research

Okay, as we all know now that almost everything about Joe the Plumber is a lie. He doesn’t own a plumbing business and apparently is not even licensed as a plumber, but he does raise a legitimate concern about “spreading the wealth around.” The only problem is that in this country, when the government spreads the wealth around it usually means redistributing it upward.

That is certainly the case with the hundreds of billions of dollars being used to bail out the banks. The public has a real interest in keeping the banking system functioning. It has zero interest in subsidized the pay checks of wealthy bank executives or enriching the bank’s shareholders, which Secretary Paulson is now doing.

There is no question about what is going on here. The public is providing massive subsidies to the country’s major banks. The terms of the bailout were far more generous than what the banks could get from the private market. As a result, banks that might not have survived otherwise, or at least would have been forced to make serious cutbacks, can now keep operating as they had been.

This means that their high level executives will continue to draw salaries in the millions or tens of millions of dollars. It also means that the shareholders will continue to receive dividends.

This was not inevitable. Paulson could have imposed serious pay caps on executive compensation. In Germany, the banks that are getting government money can’t pay their executives more than 500,000 euros, about $680,000. The United Kingdom also limited executive compensation as part of its bailout.

In addition, the banks in the UK are prohibited from paying dividends as long as they have public capital. This makes sense not only as a punitive measure, but it will also help them to build up the capital they need to stay in business.

It has sometimes been argued that the healthy banks would not take part in a bailout under such conditions. Let’s see.

Suppose we apply the compensation limits/no dividend bailout rules, and then give everyone the option to opt in or out. Those taking the opt-out route will not benefit from the government’s extension of deposit insurance nor will they be able to count on access to the Fed’s discount window. My bet is that no banks go this route, but if any do, there will be plenty of investors happy to short their stock, assuming the government allows it.

But, Paulson went the bank welfare route. Joe the Plumber and everyone else should be very upset about this method spreading around the wealth. The top executives at the big banks will be getting the equivalent of several thousand years of TANF checks for a mother with two kids. And, unlike the mother receiving a TANF check, the bank honchos inflicted serious damage on the economy.

The big question is, which candidate is opposed to this sort of spreading around the wealth?

By David Sirota
Author of “The Uprising: An Unauthorized Tour of the Populist Revolt”

Remember how Treasury Secretary Henry Paulson promised full transparency in spending the $700 billion bailout money? And remember how bailout opponents predicted that the failure to mandate such transparency would allow all sorts of Halliburton-style shenanigans? From the looks of the first private contracts issued by the Treasury Department, it looks like the bailout opponents were correct.As flagged by

BailoutSleuth.com, Paulson is blacking out the sections of government contracts that spell out how much private firms will be paid for their services in administering taxpayer money. Here’s a page from the compensation part of a contract with Bank of New York, which has been hired to do some of the bookkeeping (because, of course, the Bush administration is happy to privatize that function):

And here’s a page from the compensation part of a Treasury contract with law firm Simpson Thatcher Bartlett – a firm being hired to provide “legal advice” to the government:

Think these are doctored images? Check them out yourself on Treasury’s website – the first contract is here (blacked out section on page 25 of the PDF) and the second contract is here (blacked out section on page 5 of the PDF).So, just to review – within just a few weeks of the bailout passing, our government is blacking out the parts of public contracts that explain how much taxpayer cash private contractors are going to be paid. Perhaps this is what Paulson meant when he promised transparency – by posting these blacked out contracts on the Treasury website, the government is being transparent about exactly where it is being secretive. But I don’t think that definition of transparency really flies, do you?

Of course, I wish I was surprised about this – but one of the major reasons I was opposed to this bailout from the beginning was because (as I and others repeatedly wrote) there is no real transparency at all. Now we know what “no transparency at all” really means.

International President

In a perverse way, the media painted Republicans perfectly when it selected red for their states.

Reporters would never have guessed when they did it that the red party’s candidate would engage in red-baiting. But there was John McCain repeatedly doing it in the debate Wednesday night, trying to convert Barack Obama into a terrifying “spread-the-wealth-around” commie. And earlier this month, the Republican’s brother, Joe “McCarthy” McCain, called two Democratic-leaning Virginia counties “Communist Country.”

When it comes to spreading assets around, however, the royal red Republicans, led by King “I-am-a-capitalist-really” George, take the Triple Crown. Their upside down communism works like this: the middle class pays for the tax breaks awarded the nation’s rich and for the financial recklessness of Wall Street’s ultra-wealthy.

Trickle down

In the Republican world, in the view of John McCain and George W. Bush, it never, ever works the other way. A curse, they would say, on anyone who would dare suggest that the rich should be taxed so that government could “trickle down” a portion of their extraordinary wealth to benefit the majority.

They believe in “free markets,” that is, allowing financial markets to run unrestrained and unregulated, or as some have put it recently – amok. They believe government interferes in markets and therefore should be shrunken and impotent. They believe that when an elite few accumulate wealth in that system, some of it naturally will eventually “trickle down” into the empty porridge bowls of the nation’s vast unworthy masses.

A dreadful thing happened on the way to the fiscal crash, though. That philosophy failed.

The “small government” Bush and Republican Congress increased spending, thus replacing the budget surplus bequeathed them with deficits. And not just any deficits – the largest known to man — $455 billion this year, edging out the $413 billion record debt Bush set in 2004.

The rich won’t be paying for that. No, Bush gave them a tax break, and McCain swears he’ll make that break for the wealthy permanent. The middle class, and their children and grandchildren will be making payments on that debt — which, by the way, was caused in part by the revenue loss from Bush’s tax break for the rich.

That’s spreading the wealth around – from the pockets of middle class to trust funds of the rich.

Over the past eight years, middle class Americans have watched with shock and awe as corrupt and incompetent CEOs left their failing corporations with golden parachutes – like McCain’s top financial advisor Carly Fiorina, who exited Hewlett-Packard with $45 million in 2005 when the board dismissed her as CEO following the company’s stock dropping 50 percent and her furloughing 20,000 workers.

Bail out speculators

Now those same middle class Americans are incredulous as Bush — who had McCain’s support 90 percent of the time over the past eight years — is taking $700 billion of their tax dollars to nationalize banks. Their tax dollars will be used to bail out the Wall Street financiers who wouldn’t cut the middle class a break when they were late on mortgage payments, the speculators whose uninhibited risk-taking caused financial institutions to fail, lending to freeze, stocks to swoon.

Deregulation of the financial industry allowed banks and other sorts of financial institutions to merge and become “too big to fail” and engage in risky purchases without sufficient supporting capital. McCain, who until recently bragged about being “Mr. Deregulation,” endorsed this suspension of rules. Its chief champion served as his campaign co-chairman – former Texas Senator Phil Gramm.

Gramm successfully pressed for repeal of the depression-era Glass-Steagall Act, which was designed to prevent financial institutions from becoming too big to fail, and for passage of the Commodity Futures Modernization Act of 2000 that deregulated those now infamous credit default swaps that took down insurer AIG, costing taxpayers another $85 billion.

Gramm left the senate in 2002 for an executive position with the Swiss investment bank, UBS, the stock for which, by the way, has plummeted right along with that of American banks.

McCain’s mentor

Gramm still advises McCain, though he’s no longer campaign co-chair. He had to resign that position after he called the United States a nation of whiners during an interview in which he also denied the seriousness of the financial crisis. Here’s what McCain’s financial mentor said, “You’ve heard of mental depression; this is a mental recession.”

Sure, when the coins of the middle class are flowing up into your pockets, Mr. Gramm, it doesn’t feel like a recession at all. Spreading the wealth around – from the middle class to the wealthy Gramms and multi-millionaire McCains.

Really, Joe “McCarthy” McCain was right when he called the Virginia counties of Arlington and Alexandria Communist Country. John McCain owns a condo in Arlington, and that’s where he located his campaign’s national headquarters. They’re communist all right, McCain Republican-communist, under which middle class earnings are spread to the rich.

In the debate Wednesday night, McCain accused Barack Obama of conducting class warfare because the Democrat wants to end Bush’s tax breaks for the wealthy and instead cut the taxes of the middle class – 95 percent of American families.

What Obama proposes isn’t warfare; it’s fairness.

Class warfare is what the Republicans have done to the middle class over the past eight years, and what McCain pledges to continue. It’s a war the rich now are winning.

That’s what Obama wants to change.