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David Sirota

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

Millionaires and corporations continue to convince lawmakers to shield them from the taxman and balance budgets on the backs of everyone else. That’s what’s going on in revenue-starved states right now: Governors are preparing to slash middle-class programs and are resisting calls to raise taxes on the wealthy.

For most of us, Benjamin Franklin’s words in 1789 still apply: “Nothing is certain but death and taxes.”

However, millionaires, by definition, are not most of us. While they can’t stave off the grim reaper, they can convince lawmakers to shield them from the taxman and balance budgets on the backs of everyone else.

That’s what’s going on in revenue-starved states right now: governors are preparing to slash middle-class programs and are resisting calls to raise taxes on the wealthy. Nowhere is this class war more pronounced than in New York — the home of the financial thieves who killed the economy.

Having halved its top tax rate over the last three decades, New York today faces a $15.4 billion deficit. In response, Democratic Gov. David Paterson might have asked his state’s Gordon Gekkos to pay higher taxes, especially considering the idea’s popularity in polls and the news that Wall Street’s elite are still swimming in money. Indeed, according to CBS News, the allegedly beleaguered financial industry is so flush with cash it plans to dole out $14 billion in executive bonuses this year.

Yet, far from forcing robber barons to pay their fair share, Paterson told The New York Times that taxing millionaires is “the last place you want to go.” Instead, he proposes to punish Joe and Jane Six-pack by hiking the taxes and cutting the programs that disproportionately impact them. Specifically, he wants to increase sales taxes, college tuitions and licensing fees and slash education and low-income health programs.

Paterson defended his proposals by telling PBS’s Bill Moyers “that when you tax the wealthy in the downturn of an economy, you have an automatic link of a loss of job opportunities and then a loss of population.” The rationale sounds intelligently pragmatic — until you peruse the relevant data.

When New Jersey recently raised taxes on the wealthy, Princeton University researchers found that most of those who later left the state moved to places with higher taxes, meaning there is no causative link between levies on the rich and residential flight. Likewise, when New York temporarily raised high-income taxes after 9/11, the state added 127,000 jobs, meaning no link exists between higher taxes on the rich and job loss.

During times of surpluses, governors could get away with the unsubstantiated nonsense Paterson is peddling. But now, 43 states confront shortfalls, and because states cannot run deficits, the dollars and sense of these arguments matter. Lawmakers must choose what policy will create the best chances for economic recovery: spending cuts or tax increases, and if the latter, on whom?

The answer isn’t rocket science. As Nobel Prize-winning economist Joseph Stiglitz says, “Reductions in government spending on goods and services (are) likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”

That’s because government cuts automatically decrease the consumptive spending programs that broadly stimulate the economy whereas tax increases, when aimed at the wealthy, more often impact funds socked away in savings. “The more that the tax increases (are) focused on those with lower propensities to consume (i.e., the rich),” Stiglitz notes, “the less damage is done to the weakened economy.”

Incredibly, Paterson acknowledges how destructive his budget is, admitting that his own “education cuts are draconian, the health-care cuts are prohibitive [and] the taxes that are being levied … are not fair.”

So why would he — or any governor — nonetheless try to legislate such idiocy? Because millionaires are the ones who finance gubernatorial candidacies, and their campaign contributions buy tax protection. The result is what another New York royalist promised.

“Only the little people pay taxes,” said Leona Helmsley — a doctrine that will exacerbate this recession if states keep making it true.
David Sirota’s new book is “The Uprising.” He is a fellow at the Campaign for America’s Future and a board member of the Progressive States Network. His blog is at www.credoaction.com/sirota

Robert Kutner

By Robert Kutner
Co-Founder and Co-Editor of The American Prospect

Barack Obama may soon find that he is committing a big sin against one of the major premises of the reigning ideology. As part of his plan to restructure the auto industry, rebuild infrastructure, and create new green industries and jobs, he will be committing industrial policy. And this will create a head-on collision with one of the cherished dogmas of market fundamentalism — “free trade.”

This clash is long overdue. For several decades, American elites of both parties have been preaching the same gospel of free trade. Supposedly, if we just leave markets alone, different countries will produce and export what they naturally do best, and import products at which their partners excel. In the tidy and oversimplified textbook world, there is no room for questions about pollution, labor standards, product safety, financial engineering, or industrial policy.

But the real world doesn’t work like the Econ. 101 fable. In much of the rest of the world, governments help their industries develop.

However, in the hierarchy of America’s diplomatic priorities, countries like China that subsidize industries (and violate human rights) get a free pass. Other nations like Japan, that basically closed their borders to most imports for several decades while they became industrial powerhouses, got a seal of approval, too. Supposedly, what we lose in jobs and industries, we make up in cheap imports.

While other nations care about what they produce, the United States disdains having industrial policies, in order to set a good example. Indeed, we have been the principal architect of the World Trade Organization, which discourages government involvement in economic development as an illicit thumb on the free-trade scale.

Now, with the crash of 2008, it is clear that the US economy was built on a financial mirage. Our reliance on asset bubbles – inflated stock and real estate prices – disguised the fact that we were not paying our way. Much of our prosperity was simply borrowed.

Having let so many industries and jobs just go offshore, we don’t make enough to pay for our imports. Instead, we have been relying on loans from foreign central banks to finance our trade imbalance.

Looking at this economic calamity, President-elect Obama has proposed several sensible policies. He wants the U.S. auto industry to reinvent itself, with government aid and government standards. He wants to incubate other domestic industries around the goal of clean energy. And he wants to spend serious money on all of this, to help avoid a depression. The only historical counterpart is the vast industrial mobilization of World War II, which finally cured the Great Depression.

But these ideas about government involvement in the economy violate the sacred dogma of free trade. If the Obama administration is serious about reviving American manufacturing industry, it is only a matter of time before a foreign government hauls the U.S. before the World Trade Organization and charges us with the crime of industrial policy.

To quote our beloved leader George W. Bush in a different context, bring it on. The current version of the W.T.O., designed by and for US multinational corporations to make it easier to outsource jobs and production, has not served the national interest. It is indeed time to use industrial policy to rebuild long neglected domestic industries; and if something has to give, let it be the W.T.O.

As a mark of the total intellectual muddle in how policymakers have thought about these issues, the fact is that we have several implicit industrial policies. For instance, American commercial leadership in aerospace is no naturally occurring phenomenon. It reflects trillions of dollars of subsidy from the Pentagon and from NASA. Likewise, U.S. dominance in pharmaceuticals is the result of government subsidy of basic research, favorable patent treatment, and the fact that the American consumer of prescription drugs is made to overpay, giving the industry exorbitant profits to plow back into research. Throwing $700 billion at America’s wounded banks is also an industrial policy

So if we can have implicit industrial policies for these industries, why not explicit policies to rebuild our auto industry, our steel industry, our machine tool industry, and the industries of the next century such as green energy and high-speed rail? And why not devise some clear standards for which industries deserve help, and why, and what they owe America in return?

The new administration is already a bit schizophrenic on the subject. On the one hand, President-elect Obama has been saying bold things about building the industries of the future. On the other hand, he just appointed as America’s top trade official Dallas Mayor Ron Kirk, a man with no serious diplomatic experience and one whose main claim to fame on the trade issue is that he has been a big booster of NAFTA, a badly flawed deal that Obama has pledged to reopen.

Kirk’s appointment was meant to signal that Obama will not challenge the current orthodoxy on trade policy. It was cheered by the U.S. business establishment. What is truly bizarre is that Obama’s reported first choice for the job was California Congressman Xavier Becerra, a critic of NAFTA and other recent trade deals. Kirk will also vehemently disagree on trade and industry with Obama’s new labor secretary-designate, Rep. Hilda Solis, another NAFTA critic.

Maybe, like Lincoln, Obama has the genius to fuse this “team of rivals” into an effective administration; perhaps he will listen to the divergent advice and forge the best course. When the historian Doris Kearns Goodwin coined that phrase to describe Lincoln’s manner of governing, she was referring to the fact that Lincoln literally brought into his cabinet men who had been Lincoln’s rivals for the Republican presidential nomination in 1860. These were people of real stature and of fierce differences, representing a party that was badly fractured on the key issues of how to save the union and whether to free the slaves.

Obama has prided himself building bridges and transcending ideology. We are now beginning to see what that means in practice–a cabinet that represents people of thoroughly contradictory views, with some members who are public figures of real consequence and others who are surprisingly weak. This pattern puts all the more pressure on Obama himself to create coherence out of the stew.

Despite these gestures of broad inclusion, there is no escaping the fact that Obama must quickly make some difficult decisions about which path to follow. And one path precludes another. He can’t have both his industrial policies and his free trade.

Robert Kuttner’s new bestselling book is “Obama’s Challenge: America’s Economic Policy and the Power of a Transformative Presidency.”

Robert Kuttner’s new bestselling book is “Obama’s Challenge: America’s Economic Policy and the Power of a Transformative Presidency.”

Column first published on The Huffington Post

Leo W. Gerard

By Leo W. Gerard
International President

The nation’s most unpopular president – a head of state even more reviled than the one who resigned in disgrace – is cunningly planning revenge.

The legacy of George W. Bush’s final days in office will be degradation of the environment, endangered species and the safety of working people.

The Bush administration is rushing to finalize dozens of new regulations, many without normal hearings or comment periods. Such last minute presidential policy-mucking is so common that the rules have a name — “midnight regulations.” This set reveals Bush’s values.

They show he’s willing to sicken and kill working man and beast to accommodate profit, to further enrich his business buddies, the chamber of commerce, the wealthiest of wealthy to whom he gave that big tax break in the earliest days of his administration.

Killed could be those who drive on roadways with truckers – any of us – as well as the truckers themselves. One new rule will enable employers to schedule truck drivers for a grueling 77 hours in a seven-day period, give them just 34 hours off, then work them another 77 hours over seven days. Public Citizen, an advocacy group that twice in the past three years successfully persuaded courts to invalidate almost identical standards, says the new regulation creates sweatshops on wheels and ignores statistics showing 5,000 people killed and 110,000 seriously injured a year in crashes with large trucks.

Also killed by Bush’s midnight regulations could be endangered species which would lose protection. One regulation eliminates the mandatory outside evaluation of new federally-approved development projects that might affect endangered plants or animals. The assessment was done by experts from the U.S. Fish and Wildlife Service and the National Marine Fisheries Service. The new rule will allow the government agencies involved in the projects to determine whether their roads, bridges, dams, mines or logging would further threaten the species, regardless of the agency’s expertise.

Sickened could be those who work in and live around power plants. Now, when utilities build or renovate plants, they’re required to install the latest pollution control devices. The new rule will allow them to circumvent that Clean Air Act requirement. The Bush administration estimates that its evasion-regulation will put an additional 70 million tons of carbon dioxide — the greenhouse gas that’s warming the planet — into the atmosphere each year. That does not even address the particulates and acid rain that result from power generation pollution.

Also sickened could be those who work with toxic substances and hazardous chemicals. Among the most outrageous of the regulations is one that will make it more difficult for the federal government to limit workers’ exposure to these substances.

The rule will add an extra step to the already lengthy process of creating standards to protect exposed workers. Advocated by business groups, it will require federal agencies to gather and analyze industry-by-industry evidence of workers’ exposure to substances.
The director of occupational safety and health for the AFL-CIO estimates that it will add two years to the process of writing standards that frequently takes eight years as it is. For example, the government has been developing standards for silica, a lung carcinogen, for 11 years.

What makes Bush’s decision to move forward with this regulation particularly egregious is that President-elect Barack Obama clearly stated his objection to it. In September, candidate Obama urged the Labor Department to abandon this proposed regulation, and he and four other senators introduced a bill that would have prohibited the Department from issuing it. The letter says the regulation would “create serious obstacles to protecting workers from health hazards on the job.”

This pile of new rules is the insult to eight years of Bush regulatory injury. For example, for seven and a half years, the Bush Labor Department did not voluntarily issue a single health directive. Only under court order did it finally implement one health regulation. Not only that, it failed to write rules when it should have, for example, on beryllium exposure. The Occupational Safety and Health Administration backed off updating half-century-old standards for exposure to dust and fumes from the metal which can cause debilitating lung disease if inhaled even in tiny amounts. The Bush administration eliminated 22 of OSHA’s proposed health and safety rules. In addition, it gutted OSHA’s budget and staff.

Similarly, Bush didn’t enforce existing regulations to protect workers. The Government Accountability Office, which audits federal departments, has found that the Bush Labor Department failed to adequately provide basic pay and overtime protections for low-wage workers complaining that employers stiffed them for overtime and minimum wage. The GAO also found that the Labor Department reduced enforcement actions for wage violations to a low of 30,000 in 2007. It was 47,000 a decade earlier.

The Labor Department’s own inspector general reported that the agency neglected to complete federally-mandated inspections at more than 14 percent of the nation’s coal mines – in a year when worker deaths more than doubled to 47.

After all of that, Bush is pressing forward on his midnight regulations, knowing that Obama opposes them. He’s doing so even though he publically contended that he wanted to make the transition to the Obama administration as smooth as possible.

Bush told ABC News anchor Charlie Gibson in an exit interview that it’s not his failures or accomplishments in office that are most important to him, but going home, looking in the mirror and being able to say: “I did not compromise my principles. And I didn’t. I made tough calls. And some presidents have got a lot of tough decisions to make.”

There are no tough decisions involved in these directives. There are only political ones. By implementing his midnight regulations, Bush clearly illustrates that his primary concern is not the health of American workers but, instead, the principal of his wealthy business friends.

Leo W. Gerard

By Leo W. Gerard
International President

President Bush took to the TV Friday to announce that he wouldn’t walk past the financial crash of America’s Big Three automakers and do nothing to save their lives.

Refusing resuscitation, Bush said, would be irresponsible during the worst economic crisis since the Great Depression.

A week earlier, 31 GOP Senators, mostly from Southern states, voted to avert their eyes and allow American auto companies to die. They opposed $14 billion in federal loans for GM and Chrysler, revealing that their loyalty lies not with America, not even with their own states, but with South Korea and Germany and Japan.

They are Toyota Republicans.

Toyota has non-union manufacturing plants in Alabama, Kentucky, Mississippi and Texas – states whose senators led the GOP quest to slay the Big Three American auto manufacturers – Richard Shelby, R-Ala.; Mitch McConnell, R-Ky, and John Cornyn, R-Tx. Here’s the Republican from Mississippi, Sen. Thad Cochran, explaining why he’d vote against the loans, “Things have changed. It’s not just the Big Three anymore,” he said, pointing out that Nissan and Toyota employ more Mississippians than General Motors, Ford and Chrysler. But, he said, the foreign companies would not share “in the benefits of that automobile bailout program.”

No. But Mississippi did give Nissan and Toyota more than $650 million to entice them to locate in the state. GM, Ford and Chrysler didn’t share in those benefits, Sen. Cochran.

The Toyota Republicans are all for helping the rich with tax breaks and shelters, and they’re all for aiding foreign auto manufacturers with billions worth of tax forgiveness and government-paid infrastructure improvements.

But their disdain for the working class couldn’t be clearer as they organized defeat of loans to the Big Three under this command: “Republicans should stand firm and take their first shot against organized labor.”

They haven’t gotten the message sent out by the electorate in November. Voters rejected politicians prolonging the same old policy of protecting themselves and the rich. The nation’s voters want selfless leaders who will perform in the best interests of the entire country. They want change.

Clearly the allegiance of the 31 Republicans who opposed the loan to save GM and Chrysler is not with the United States of America, which would lose 900,000 jobs if just GM closed, and more than 2.1 million if the Big Three did. Those job losses would occur during the worst economic downturn since the Great Depression. In November, the 11th consecutive month of job losses, another 533,000 people were thrown out of work, swelling the pool of unemployed to 10.3 million. The Toyota Republicans were willing to increase that.

They voted against the interests of their own states as well. Consider what would happen in a few of those Southern States whose senators led the charge against preserving the Big Three. If just GM collapsed, Kentucky would lose 20,000 jobs; Alabama, 21,000; Georgia, 23,000, and Tennessee, 29,400, according to calculations by the Economic Policy Institute.

Sen. Cochran just didn’t think it was right for the U.S. government to aid its auto industry. But apparently he’s fine with foreign governments providing subsidies to the transplant automakers in his state. And, apparently, he’s okay with spending state and federal money to help foreign automakers locate manufacturing plants in the U.S.

Korean and Japanese automakers – including Nissan and Toyota with plants in Cochran’s Mississippi – benefit from manipulation of currencies by their governments, a factor that, according to EPI estimates, reduces their costs by between 10 and 20 percent. In addition, nationalized health care in countries such as Japan and Germany serves as a subsidy.

Also, the Toyota Republican opposed federal money for American companies but supported state and federal money for foreign auto makers estimated at $3.6 billion.
Shelby, for example, got $3 million in federal funds to improve roads near the Hyundai plant in Alabama after the state gave $250 million to the Korean automaker.

Shelby opposed loaning one federal cent to the U.S. automakers, though, telling “Face the Nation” that they should die: “Companies fail every day and others take their place. . . There’s not a bank in this country that would loan a dollar to these companies.”

But for foreign auto companies, his home state of Alabama couldn’t provide enough taxpayer cash – more than three quarters of a billion. In addition to the quarter billion it gave the Korean automaker, it handed another quarter billion to German Daimler for a Mercedes-Benz plant, nearly a quarter billion to Japanese Honda and $29 million to Japanese Toyota.

Similarly, Jim DeMint, another senator who led the Toyota Repubicans’ rebellion against the loans to GM and Chrysler, told the “National Review” recently, “Government should not be in the auto industry.” Yet, his state, South Carolina, got into the auto industry with nearly a quarter billion — $230 million – in gifts to a German auto company – BMW.

The same is true in Kentucky, home of Sen. Mitch McConnell, who said of loans for the Big Three, “Government help is not the only option. It’s not even the best option.” But government help was fine when Kentucky was providing grants for Toyota, which got $371 million from taxpayers since 1986.

It’s clear that the real problem was not a philosophical one. All of these lawmakers were willing to flick free market capitalism out the car window like a cigarette butt if their states could use taxpayer dollars to buy a foreign auto plant. No, what really gags them about the Big Three is that they pay good, middle class wages and benefits as a result of contracts with the United Autoworkers.

Repeatedly, the Toyota Republicans insisted that UAW members bear the brunt of the cost of the bailout. The senators insisted that UAW wages be lowered to match those of non-union auto workers at foreign-owned manufacturers. Toyota Republican Sen. Bob Corker of Tennessee, wrote an amendment to the bailout bill that would have required UAW members to accept pay cuts by a specific date in 2009. When Republicans defeated the bailout, DeMint blamed that on the union, saying, “It sounds like the UAW blew up the deal.”

The Toyota Republicans then conferred the American auto industry to bankruptcy. They said they favored bankruptcy because it would enable the Big Three to break pledges made in labor contracts and promises for health care and pensions made to retirees. The Toyota Republicans want the wages of American workers pulled down. To them, UAW members making an average of $28 an hour, accounting for less than 10 percent of the cost of a car, are earning just too much money.

The Toyota Republicans did not, however, make that claim about the white collar workers on Wall Street who got this country into the financial fiasco that led to the dire circumstances for automakers. And not just for American ones. Domestic car sales declined by 40 percent last month, but Asian producers’ sales dropped too – by 35 percent.

The average salary of white collar, Wall Street employees — workers in “securities, commodity contracts and investments” — is four times that of those laboring in the rest of the economy. Remember, these are the guys who are so smart that they took down Bear Stearns, Fannie Mae, Freddie Mac, Washington Mutual, AIG and Lehman Brothers – in less than a year – and ultimately required $700 billion from taxpayers to bail them out.

The top executives of Wall Street banks receive billions of dollars in year-end bonuses. The New York Times detailed those at Merrill Lynch in a story Dec. 17 entitled “On Wall Street, Bonuses, Not Profits Were Real.” In 2006, the firm gave its top executives between $5 billion and $6 billion in bonuses, which means, for example, a trader earning $180,000 a year got a $5 million bonus.

Merrill’s $7.6 billion earnings that year turned out to be bogus. The company’s losses now have exceeded all of the profits it earned over the previous 20 years. To prevent collapse, it sold itself to Bank of America in September. But then, Bank of America took $15 billion of that $700 billion in bailout money. Despite the gift of taxpayer dollars, the CEO of Bank of American has not publicly announced that he will decline a bonus, and Bank of America plans to tell Merrill Lynch workers the amounts of their bonuses beginning Friday, the New York Times reported Thursday.

When those Toyota Republicans voted in favor of providing $700 billion for Wall Street — including both of Tennessee’s senators, Bob Corker and Lamar Alexander; Kentucky’s Mitch McConnell; Georgia’s Saxby Chambliss and Johnny Isakson; South Carolina’s Lindsey Graham, and Texas’ Kay Bailey Hutchinson and John Cornyn – none asked for high-paid white collar workers to take pay cuts or give up their million dollar bonuses. There was a feeble attempt to limit the pay of chief executives, but that applied only to firms that received federal money under one particular method, and the treasury decided not to hand out the $700 billion that way.

And no lawmaker asked white collar workers or executives who got billions in bonuses based on false profits to return them.

But those Toyota Republicans want middle class, blue collar workers who don’t get year end bonuses, who don’t celebrate with five-figure dinners, to take wage cuts. They want autoworker pensioners to lose the monthly benefits they earned with a lifetime of labor.

And at no time did those Toyota Republicans suggest that they should cut their own salary or top-notch, government-paid health benefits or pensions. Like the reckless speculators on Wall Street, Congress bears responsibility for the crisis condition of the American economy because it deregulated financial markets.

In 2002, during a downturn in Japan, the House of Councillors reduced the pay of Diet lawmakers by 10 percent, and ended the transportation allowance, portrait-painting and  pension given senior lawmakers.

If the Toyota Republicans believe the Japanese way of pay is so great for autoworkers, they should first impose it on themselves.

Dean Baker

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

Post readers may ask that question given that the Post told them that: “Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives.”

The rest of the article explains how the bailout legislation, as approved by Congress, is not likely to impose any serious limits on executive pay. So, Congress was apparently unable to do what it wanted.

This is striking because most members of Congress are not morons. Congress is usually capable of passing legislation that does what it wants. For example, when they have wanted to fund the war in Iraq, they have been able to pass legislation that actually funds the war in Iraq. When they wanted to cut taxes for the wealthy, Congress was able to pass legislation that actually cut taxes on the wealthy. Why did Congress find it so difficult to pass legislation to limit executive compensation on Wall Street, if that is what it really wanted to do?

Let me suggest an alternative hypothesis. Perhaps Congress really did not want to cut executive compensation on Wall Street. After all, word has it that members of Congress gets lots of campaign contributions from very high paid Wall Street executives.

Of course, giving taxpayer dollars to the richest people in the country is not very popular with ordinary taxpayers. So, it might be in the interest of members of Congress to appear to be trying to rein in executive compensation on Wall Street, even if this is not their real intention. In other words, the restrictions of executive compensation put in the bailout bill were just a charade for the kids.

Is my explanation correct? I have no idea, but of course the Post has no idea either of what Congress really “wanted,” so why is it trying to tell readers what Congress wanted in the very first sentence of a front page news article.

Bob Ostertag

By Bob Ostertag

Associate Professor of Technocultural Studies, University of California, Davis

This week demonstrated for all to see two directions for organized labor in the Obama era. You can support laid off workers occupying the factories of their former employers, or you can focus on cutting backroom deals with corrupt politicians.

I know, it’s a tough call. Let’s see. At best, the backroom deal route lands you on the front page in a very embarrassing light; at worst, you end up maybe in jail.

Occupying factories, on the other hand, actually wins real stuff for people who are facing a very hard time. They might not have jobs, but at least they got what they were owed. Hooray! But that is trivial compared with what might be won if labor focused more generally on things like mobilizing workers to occupy factories instead of schmoozing the halls of power.

The plain truth is that the economic policies the Obama administration will actually implement will have far less to do with who gets appointed to what post than with whether there is a movement demanding economic justice from whoever’s hand is on the policy lever. On the one hand, the people labor would like to see in positions of power will need pushing just as much as anyone from the other sectors of Obama’s coalition. On the other hand, the “centrists” Obama has been naming are particularly vulnerable to being pushed right now. Given the scale of the crisis, they themselves are unsure of what to do, and this uncertainty will open doors for workers that would otherwise be closed. Just as importantly, the forces on the other side of the equation are so weak. Big capital is just as unsure of what to do as the technocrats in the center, and anyway corporate power has so little credibility at the moment it hardly matters what they think. Witness the big three automakers being rebuffed by the Republican minority in the Senate.

The centrist who should be pushed more than anyone is Barack Obama himself. And what is most promising of all, it seems that this view is shared by the President-elect himself. Speaking last Sunday of the factory occupation, Obama said,”When it comes to the situation here in Chicago with the workers who are asking for their benefits and payments they have earned, I think they are absolutely right. What’s happening to them is reflective of what’s happening across this economy.”

Say what? Did we just hear the President-Elect of the United States encouraging workers to occupy factories in defense of their rights?

Just to make sure we got this right, here is the rest of the statement:

When you have a financial system that is shaky, credit contracts. Businesses large and small start cutting back on their plants and equipment and their workforces. That’s why it’s so important for us to maintain a strong financial system. But it’s also important for us to make sure that the plans and programs that we design aren’t just targeted at maintaining the solvency of banks, but they are designed to get money out the doors and to help people on Main Street. So, number one, I think that these workers, if they have earned their benefits and their pay, then these companies need to follow through on those commitments.
Number two, I think it is important for us to make sure that, moving forward, any economic plan we put in place helps businesses to meet payroll so we are not seeing these kinds of circumstances again. Have we done everything that we can to make sure credit is flowing to businesses and to families, and to students who are trying to get loans? And to homeowners who have been making payments on their homes but are still finding their property values so depressed that it becomes very difficult for them to make the mortgage payments?

That’s where the rubber hits the road and that’s going to be the central focus of my administration.

So, here we have big capital in complete retreat, a bunch of liberal technocrats coming into power, and their incoming boss aligning himself with workers engaged in direct action on the job site. This is not an alignment of forces I expected to see in this country in my lifetime.

The weak link in the chain, by far, is not Obama’s much-criticized appointments, but rather the degree of labor mobilization at the base. Obama has essentially invited American workers to come out of the political cold and step into the sunshine. Are their leaders going to accept, or will the keep hanging out in the shadows of power, peddling their economic clout like a bail bond agent?

David Sirota

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

Please, forgive me for saying it. I know it’s a tad annoying, but it has to be said to America’s ruling class in this humble column space. Because if it’s not said here you can bet it won’t be said anywhere else in the media, and it needs to be said somewhere on behalf of the millions of citizens who were right.

We told you so.

In the slow-motion train wreck that became the current economic meltdown, our bipartisan political Establishment and the sycophantic punditburo have been wrong over and over and over again. They told us that eviscerating consumer protections would unleash the markets benevolent power and boost the economy. They told us that a trillion-dollar Wall Street bailout would solve a credit crisis. They told us that bailout would be subjected to intense oversight and scrutiny.

Wrong, wrong and wrong — and when critics predicted just that, sneering commentators and congressional leaders berated us as know-nothing Luddites, conspiracy theorists, or both.

But with the release of three new reports, there’s no debate anymore about who was correct and who wasn’t. The studies prove that the critics were right and the ideologues of Washington were wrong.

When in 2005 Congress overwhelmingly passed a credit card industry-written bill gutting bankruptcy laws, progressives were right to try to stop it — and not just because it was an immoral move to legalize usury. We were right because as the New York Federal Reserve Bank reports, the bill played an integral role in the recent foreclosure surge that crushed the economy.

In the past, bankruptcy laws made sure debtors first and foremost continued paying their mortgages so that they could stay in their home. But the 2005 legislation effectively compels debtors to first pay off their credit cards, meaning many then have no money left to pay their mortgage. The Feds report estimates that the bankruptcy bill is causing 32,000 more foreclosures per quarter than the economy would have already generated.

We told you so. When almost every media voice in America was sounding the alarm of financial panic and demanding a Wall Street bailout plan; when bailout opponents were roundly ridiculed as “irresponsible” by politician and pundit alike — those opponents were nonetheless right to say then what a study from the Minneapolis Federal Reserve Bank says now: that the case hadn’t been made.

While reporters and the Bush administration frantically insisted that bank-to-business lending had ceased, inter-bank lending had stopped, and short-term “commercial paper” loans had dried up, the Minneapolis researchers tell us that “all three claims were false” and continue to be false; that “nobody has explained how the money system has frozen when the data says it has not”; and that “a trillion dollar intervention warrant(ed) a bit more serious analysis.”

We told you so.

When lawmakers said the bailout included strict oversight measures, skeptics were right to say that claim was patently untrue. According to a new analysis by federal officials at the Government Accountability Office, virtually nonexistent oversight of the bailout means “taxpayers may not be adequately protected” and that the bailout’s stated goal of fixing the economy “may not be achieved in an efficient and effective manner.”

Yes, we told you so.

And so now, even though these damning reports have garnered scant news coverage, perhaps there will be a change. As we — the pragmatic progressive majority demand tough new financial regulations; job-creating investments in public infrastructure; labor law reforms; universal health care; revised international trade policies; a repeal of the odious bankruptcy bill and an end to Wall Street welfare maybe, just maybe, our humiliated rulers will start listening.

Dean Baker

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

The Detroit automakers have made many mistaken business decisions that have been important factors contributing to their current crisis. However, they are not responsible for some of the factors that have brought them to the brink of bankruptcy.

Most obviously, they are not responsible for the collapse of the housing bubble and the subsequent loss of more than $15 trillion in housing and stock wealth. This falloff in wealth has sent consumption plummeting. The auto industry has been especially hard hit, with sales falling by more than 30 percent year over year in the last two months.

The Big Three are also not responsible for the broken U.S. health care system. If we paid the same amount for health care as Canada, G.M. would have accumulated an additional $22 billion in profits over the last decade.

That would be the savings if we assumed that General Motor’s health care expenditures were reduced by roughly 48 percent to be in line with expenses in Canada. Of course, not all the savings in this counterfactual would have gone to profits. Some of it would have gone to workers in the form of higher wages or to consumers in the form of lower car prices.

On the other hand, G.M. is also picking up the tab for many spouses and dependent children. It would not have to pay these health care expenses in a Canadian type system. So the $22 billion figure is probably not a bad first approximation of the additional money that G.M. might have today if the United States had a more efficient health care system.

Even with these additional profits G.M. and the other domestic manufacturers would still face serious problems. They have made some bad choices in betting their future on SUVs and other low-mileage vehicles. They also have lagged foreign manufacturers in producing high quality, reliable cars.

But the real reason that Big Three are on their deathbeds right now is the economic crisis created by the Wall Street crew and their friends in Washington. It will be tragic if the people of the Michigan, Indiana, and Ohio are made to suffer through a depression because of the failed financial dealings of the Wall Street crew.

This situation is made even worse by virtue of the fact that most of the Wall Street executives who are directly responsible for this disaster are still quite wealthy, in large part because of the generosity of Congress and the Bush administration. While they demanded that the auto manufacturers produce plans for returning to profitability in exchange for providing loans, no similar conditions were imposed on Citigroup and the rest of the Wall Street gang.

As the autoworkers at the Big Three look at their last paychecks before an indeterminate period of unemployment, they should think about the portion deducted for income taxes. With this money, they have helped to ensure that Robert Rubin and other Wall Street types continue to enjoy pay packages in the millions or even tens of millions of dollars.

Happy Holidays!

Leo W. Gerard

 

 

By Leo W. Gerard

International President

From sea to shining sea, America is suffering.

She is, however, afflicted with an avoidable condition she brought on herself, like a hangover. Only this one’s interminable and internationally contagious.

She did it by choosing over the past 30 years to establish an economy that worshiped avarice. That decision has destroyed her financial system and taken down with it much of the world’s.

Now America must decide whether to be swayed by the greedy urging her to continue basing her economy on the destructive policies of deregulation, de-unionization, globalization and privatization or to construct a new financial system focused on industry and profit shared by the workers who produce it.

Over much of the  20^th century, the nation created real wealth by manufacturing – taking raw materials from the ground, using machines, energy and labor to convert them into products and selling those here and overseas. That process, to make steel or tires or washing machines, was the engine of the economy. In 1947, 32 percent of the workforce engaged in it belonged to unions, which meant workers received good wages and benefits. This enabled them to churn real money throughout the economy by buying homes and cars and television sets and sending their children to college. And it enabled them to save 7.5 percent of their earnings.

Then, in the 1980s, a new narrative for the economy emerged. In this story, greed was good. Self-interest was supposed to lead to the best outcomes for business. To accommodate this concept, Government de-regulated and, in fact, passed laws favoring big corporations and the nation’s wealthiest citizens. The idea was that some of the prosperity they created as a result of the abolished protections for workers and the environment would trickle down.

This was the new economy.

This was a scam to move wealth from the middle class to the affluent. And it worked. In 1976, the richest 10 percent in this country possessed 49 percent of the wealth. In 2007, it was 73 percent.

During this time of bowing to corporate demands, the government actually gave multinational corporations tax benefits to offshore their U.S. manufacturing facilities. Sometimes they shut down, throwing hundreds of Americans out of work, then packed the factory pieces into crates, numbered piece by numbered piece, and shipped them to China or Indonesia or whatever country would allow blatant violation of its own labor and environmental regulations. Sometimes they closed American factories and built brand new ones overseas with breaks from foreign governments. As U.S. companies closed, union membership dropped to below 12 percent. And America found herself importing toxic lead coated toys, paper made from trees illegally harvested in Indonesian national forests and untested pharmaceuticals.

Companies that remained here threatened to leave if workers didn’t accept wage and benefit concessions. American workers were vilified for seeking a living wage while CEOs pulled millions out of corporations in annual bonuses.

The American economy began to depend less on manufacturing and more on the “financial sector,” where profit was made moving money around, betting on stock trades, and participating in asset bubbles. Remember the tech bubble? That was manufactured value – not manufactured goods – and that’s why it disappeared when the bubble burst.

The same has now happened with the housing bubble. Those smart guys on Wall Street, among the brilliant ones who sold America on the idea that greed was good, bet on housing prices never falling. A decline in home values never entered their calculations.

Then they fell. And they took down with them a couple of Wall Street banks and the largest insurance company in the world and Fannie Mae and Freddie Mac, credit markets and then the economy of the nation and the world.

Now workers are really in trouble.

They were struggling before the crash as manufacturing jobs disappeared and wages stagnated. Personal savings declined so that the average family now owes $8,000 to credit card companies. Without sufficient wage increases to sustain their lifestyle, families borrowed against their major asset, their homes. Now, because the housing bubble burst, a quarter of mortgage holders owe more than their homes are worth and 2.5 million have lost theirs to foreclosure.

All of this is because America failed to give greed the wide berth warranted by one of the seven deadly sins.

Alan Greenspan, who served as steward over the rise of the culture of avarice for nearly two decades as chairman of the Federal Reserve, admitted to Congress in October that his opposition to federal regulation was a blunder:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.”

In the song, America the Beautiful,” from which the lines “from sea to shining sea, come, lyricist Katharine Lee Bates counseled in the second verse, “America! America! God mend thine every flaw.”

Clearly, this greed-based economy is a flaw. It was created by covetous humans. It must be mended by Americans of better grace, people Katharine Lee Bates described as those, “Who more than self their country loved.”

America’s workers must seize back control of their country and wrest back determination of its priorities. They must re-regulate the financial markets and remove the onerous restrictions placed on unions to prevent organization of new workplaces and bargaining of new contracts to raise worker salaries and benefits.

But, most immediately, America’s workers must insist Congress immediately pass an economic renewal package that will reinvigorate Main Streets across the nation. This is essential to prevent a prolonged and excessively painful deep recession resulting from the housing bubble collapsing.

This public investment has two purposes. It will stimulate the economy by providing jobs. In addition, it will strengthen America’s manufacturing competitiveness in the international marketplace.

The Institute for America’s Future has developed a plan called A Main Street Recovery Program calling for investment of $900 billion over two years.

The money would be targeted to areas that would create sustained, long-term, shared economic growth. This includes investing in green technologies to reduce the nation’s dependence on foreign oil and the threat of global warming. Another focus is repair and modernization of the country’s physical infrastructure, such as roads and bridges, and intellectual infrastructure – its education system. And finally, the third targeted area is assistance to workers most in need, which would include moves toward universal affordable health insurance, a middle class tax cut and expanded unemployment insurance.

More than 250 organizations and economists have endorsed this program. President-elect Barack Obama’s recovery plan outlined last weekend includes many of its aspects. Its passage would signal the beginning of conversion to an economy that values production and workers, something the self-interested greed-mongers will oppose.

But let’s work for realization of Katharine Lee Bates’ final verses:

“America! America”

God shed his grace on thee

Till selfish gain no longer stain

The banner of the free!”

 

 

 

 

Robert Borosage

Robert L. Borosage

Co-Director Campaign for America’s Future

Conservatives hail the Obama appointments; progressives express misgivings. Democratic Senator Claire McCaskill celebrates Obama as “pragmatic,” which she says may dismay some “on the left.” David Corn says this isn’t the change progressives voted for. The media wallows in the “disappointment of the left.”

Welcome to the new “post-partisan” world, in the silly season on political punditry. Turns out the center has triumphed once again. But that, of course, depends on what you mean by center.

Last weekend, pragmatic centrist Barack Obama called for a bold recovery plan, grounded on strategic public investment rather than tax cuts to “help save or create” 2.5 million jobs, “while rebuilding our infrastructure, improving our schools, reducing our dependence on oil and saving billions of dollars.” Elements that would include a “massive effort” to make federal buildings energy efficient, the “largest investment in roads and bridges since the creation of the federal highway system in the 1950s, “the most sweeping” program to upgrade and repair the nation’s schools; and a new push to extend broadband to every corner of the country. While refusing to talk numbers, Obama pledged to “do what’s required to jolt this economy back into shape,” with anonymous advisors suggesting $500-700 billion as a possible price tag.

In scope and substance, Obama’s plan tracks the elements of the Main Street Recovery Program, released by the Campaign for America’s Future, and endorsed by over 100 unions, citizen action, women’s, environmental and other progressive groups, and some 120 progressive economists. (To see the program, endorse or improve it, go here)

Now Republicans are reinventing their Keynesian heritage. Emil Henry, an assistant Treasury Secretary under Bush, writes that “investment in key infrastructure is consistent with Reagan principles,” and that investment in “renewable energy will be key in our future.” William Kristol suggests “small government Republicans” are virtually extinct, and suggests that Republicans support a “huge public works stimulus plan,” only insist on directing the dollars to the “underfunded defense procurement rather than to fanciful green technologies.” (Now that’s a winning agenda: apparently spending about as much as the rest of the world combined on our military isn’t enough.)

Bill Sher in his invaluable “progressive breakfast; memo, writes that now rabidly anti-government conservative business lobbies like The Chamber of Commerce and National Association of Manufacturers are climbing on the infrastructure bandwagon.

Welcome to the new center: post-partisan progressivism. “We’re all Keynesians now,” Richard Nixon once famously announced. And now the catastrophic failures of conservatism have set the stage for a new era of progressive reform. The election gave Obama a mandate and a majority for progressive reform: an end to the war in Iraq, health care for all, investment in new energy and education. He doesn’t seem to have backed off on any of his major commitments yet. And the economic crisis is forcing an ever bolder response, driving the entire “center” to the left.

So to all the newborn progressives — the DLC émigrés, the Third Way centrists, the Blue Dogs and abashed Cons — welcome to the new center. And get ready for the most intense period of progressive reform since the Great Society. Only one thing. As the economic crisis gets worse and goes global, don’t settle in. We’ve only begun to define the new economy which will come out of the collapse of the old.