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Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

One out of four homeowners is now under water, owing more on their homes than the homes are worth. Why? The biggest single factor behind the housing crisis is rising unemployment. According to the latest ABC-Washington Post poll, one out of every three Americans has either lost their job or lives in a household with someone who has lost a job. Today it takes two and sometimes three incomes to buy the groceries and pay the mortgage or the rent. So if one of those incomes is gone, a homeowner can’t make the payment.

The scourge of unemployment is splitting America into three groups: (1) the third just mentioned, whose households are in danger of losing their homes and whose kids are surviving on food stamps (that’s up to one in four children in America today); (2) the vast majority of Americans who are managing but worried about keeping their jobs and homes; and (3) a small number who are taking home even more winnings than they did in the boom year 2007.

Prominent among category (3) are Wall Street bankers, many of whom are now concluding their most profitable year ever. Goldman Sachs is so flush it’s preparing to give out bonuses in a few weeks totaling $17 billion. That will mean eight-figure compensation packages for lots of Goldman executives and traders. JPMorgan Chase is rumored to have a bonus pool of around $5 billion. The three other major Wall Street banks are ratcheting up their compensation packages so their “talent” won’t be poached by Goldman or JPMorgan.

Wall Street is booming again in large part because the rest of America — categories (1) and (2), above — bailed it out to the tune of $700 billion last year. The Street has repaid some of that but, according to the bailout program’s inspector general, much of it is gone forever. For example, the taxpayer money that bailed out giant insurer AIG went directly through AIG to its “counterparties” like Goldman Sachs — to whom Tim Geithner, according to the inspector general, gave away the store. As Goldman Sachs prepares to dole out some $17 billion to its executives and traders, it’s worth noting that Goldman received $13 billion a year ago from the rest of us via AIG and Geithner, no strings attached.

Which brings us back to homeowners who are falling further behind. The $75 billion federal program designed to bribe banks to modify mortgages has been a bust. No one knows the exact number of mortgages that have been modified (that will be reported next month) but housing experts I’ve talked with say it’s a tiny fraction of the number of homeowners in trouble. Seems that the big banks can’t be bothered. “Some of the firms ought to be embarrassed,” Michael Barr, the assistant Treasury secretary for financial institutions told the New York Times. Barr says the government will try to use shame as a corrective, publicly naming institutions that have moved too slowly.

Shame? If we’ve learned anything over the last year, it’s that Wall Street has none. Eight months ago Wall Street lobbyist beat back a proposal to give bankruptcy judges the right to amend mortgages in order to pressure lenders to reduce principle owed, just like Wall Street lobbyists are now beating back tough regulations to prevent the Street from causing another meltdown. Goldman Sachs, attempting to preempt a firestorm of public outrage when it dispenses its $17 billion of bonuses, is setting up a crudely conceived $500 million PR program to help Main Street.

Shame won’t work. Only political muscle and courage will. Congress and the Obama administration should give homeowners the right to go to a bankruptcy judge and have their mortgages modified.

And while they’re at it, resurrect the Glass-Steagall Act that used to separate investment from commercial banking, so Wall Street can’t continue to use other people’s money to gamble.

Finally, before Goldman hands out $17 billion in bonuses, claw back the $13 billion Goldman took from AIG and the rest of us and add it to the pool of money going for mortgage relief.

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Cross-posted from Robert Reich’s Blog

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Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.robertreich.org.

Dean Baker

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

The country is being bombarded with stories claiming that record budget deficits threaten our children’s future and jeopardize the credibility of the dollar. These stories are a serious problem – they have hugely confused the public about the nature of the country’s economic crisis. And both parties share the blame.

Starting with the reality behind the scare stories – trillion-dollar deficits are really huge relative to the money that any of us will ever see in our lifetime. But this is an absurd measure. The United States is a country with more than 300 million people. It doesn’t matter than a trillion dollars is a huge amount to any of us individually. What matters is the size of the deficit and the debt relative to the size of the economy.

Only people who want to deceive the public would talk about the deficit or debt in “trillions” of dollars. This is a very simple lie-detector test since honest economists and policy analysts always refer to these sums relative to the size of the economy.

Relative to the size of the economy, the deficits that we are running are large and the debt that we are projected to incur is substantial, but the deficit level is still not coming close to the levels hit in World War II. Nor is the debt level projected to reach post-war peaks or the levels sustained by countries like Italy and Japan. The idea that we are near some debt-driven crisis is absurd on its face.

The United States had the strongest period of growth in its history in the three decades following World War II. This undeniable fact should put to rest the idea that our debt levels will threaten the prosperity of future generations. We hand our children a whole economy and society. If we give them a bad education, a decayed infrastructure, a ruined environment, then we will be jeopardizing our children’s economic well-being. However, the debt levels we are currently projecting aren’t even large enough to make it to the list of serious problems.

The claim that the dollar faces an imminent crisis because of the budget deficit or national debt is readily refuted by the example of Japan. Japan already has a debt to GDP level that is far larger than we are projected to have by the end of the next decade. In spite of this debt burden, investors are willing to hold ten-year Japanese government bonds at just a 1.5 percent interest rate. If these debt burdens are supposed to make Japan a high risk, someone forgot to tell the people who are putting billions of dollars on the line by holding Japanese government bonds.

There is another side of this Japan story that makes the idiocy of the deficit scare stories even more apparent. According to the deficit fear mongers, the dollar has been falling in recent months because investors are becoming increasingly worried about the US government’s ability to pay off its debt. But one of the currencies that the dollar has fallen against is the yen. Are investors who are worried about the US government’s ability to pay off its debt selling dollars to buy the bonds of the Japanese government, which has an even higher debt burden?

Let’s face it: The deficit hawks will say anything to advance their agenda. Even worse, the media will print it.

This deficit nonsense should have been put to rest long ago, but both parties have hyped it to advance their ends. Currently, the Republicans are making headway in the polls by blaming the Obama administration for a deficit that is primarily the result of economic mismanagement during the Bush years.

But Republicans don’t have a monopoly on demagoging the deficit. During the Bush years, many Democrats spoke of the Bush deficits in cataclysmic terms. This was absurd. The deficits were larger than was desirable during part of the Bush administration (large deficits in 2002 and 2003 were helpful in boosting the economy), but they were not hugely out of line. There is certainly no story that can pass the laugh test in which these deficits are responsible for the collapse of the housing bubble and subsequent recession.

There were plenty of grounds to attack President Bush for the economy’s performance under his watch. Most importantly, he let an $8 trillion-dollar housing bubble grow unchecked, and giving big tax cuts to the wealthy is not the way to create an educated workforce and a modern infrastructure.

But the Democrats often hyped the deficit – it was the easiest way to score political points. That helped to give us a situation in which tens of millions of people somehow think the deficit is the cause of the economy’s problems when in reality it is the only thing keeping it afloat. In short, the Democrats are paying the price of their own political opportunism. Unfortunately, so is the rest of the country.

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This piece was first published on Huffington Post

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Dean Baker is the author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy.”

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

First there was Medicare for all 300 million of us. But that was a non-starter because private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it was too much like what they have up in Canada — which, by the way, cost Canadians only 10 percent of their GDP and covers every Canadian. (Our current system of private for-profit insurers costs 16 percent of GDP and leaves out 45 million people.)

So the compromise was to give all Americans the option of buying into a “Medicare-like plan” that competed with private insurers. Who could be against freedom of choice? Fully 70 percent of Americans polled supported the idea. Open to all Americans, such a plan would have the scale and authority to negotiate low prices with drug companies and other providers, and force private insurers to provide better service at lower costs. But private insurers and Big Pharma wouldn’t hear of it, and Republicans and “centrists” thought it would end up too much like what they have up in Canada.

So the compromise was to give the public option only to Americans who wouldn’t be covered either by their employers or by Medicaid. And give them coverage pegged to Medicare rates. But private insurers and … you know the rest.

So the compromise that ended up in the House bill is to have a mere public option, open only to the 6 million Americans not otherwise covered. The Congressional Budget Office warns this shrunken public option will have no real bargaining leverage and would attract mainly people who need lots of medical care to begin with. So it will actually cost more than it saves.

But even the House’s shrunken and costly little public option is too much private insurers, Big Pharma, Republicans, and “centrists” in the Senate. So Harry Reid has proposed an even tinier public option, which states can decide not to offer their citizens. According to the CBO, it would attract no more than 4 million Americans.

It’s a token public option, an ersatz public option, a fleeting gesture toward the idea of a public option, so small and desiccated as to be barely worth mentioning except for the fact that it still (gasp) contains the word “public.”

And yet Joe Lieberman and Ben Nelson mumble darkly that they may not even vote to allow debate on the floor of the Senate about the bill if it contains this paltry public option. And Republicans predict a “holy war.”

But what more can possibly be compromised? Take away the word “public?” Make it available to only twelve people?

Our private, for-profit health insurance system, designed to fatten the profits of private health insurers and Big Pharma, is about to be turned over to … our private, for-profit health care system. Except that now private health insurers and Big Pharma will be getting some 30 million additional customers, paid for by the rest of us.

Upbeat policy wonks and political spinners who tend to see only portions of cups that are full will point out some good things: no pre-existing conditions, insurance exchanges, 30 million more Americans covered. But in reality, the cup is 90 percent empty. Most of us will remain stuck with little or no choice — dependent on private insurers who care only about the bottom line, who deny our claims, who charge us more and more for co-payments and deductibles, who bury us in forms, who don’t take our calls.

I’m still not giving up. I want every Senator who’s not in the pocket of the private insurers or Big Pharma to introduce and vote for a “Ted Kennedy Medicare for All” amendment to whatever bill Reid takes to the floor. And if this fails, a “Ted Kennedy Real Public Option for All” amendment. Let every Senate Democratic who doesn’t have the guts to vote for either of them be known and counted.

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Cross-posted from Robert Reich’s Blog

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Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.robertreich.org.

Robert Borosage

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

House Speaker Nancy Pelosi gets it. No wonder she drives the wingnuts batty. With the Senate befuddled by the antics of Joe Lieberman and Max Baucus on health care and the White House Clintonistas lobbying the President to devote his January State of the Union address to deficit reduction, Pelosi ladled up a portion of common sense. Unemployment is over 10% and rising. It is time to focus on jobs. Senate Majority Leader Harry Reid added his support. The President announced a job summit for December. Democrats finally got the subject right.

The need is clear. One in six workers is unemployed, has given up looking or is forced to work part-time. For young workers aged 16 to 24, unemployment is 19%. For young African Americans, unemployment is at 30%. And as Federal Reserve Chair Ben Bernanke testified yesterday, we’re likely to see — at best — a slow recovery with no new job growth. That exacts a devastating toll in hopes crushed, families stressed, young people stalled, and poverty and hunger spreading.

And even if we avoid another downturn, the job picture will get worse. Crippling state deficits — over $260 billion over 2 years — will force layoffs that cost an estimated 900,000 jobs next year if nothing is done.

How do we produce jobs?

Republicans, of course, voted unanimously against Obama’s first recovery plan, and have gleefully trumpeted its failure ever since (although many don’t hesitate to take credit for local projects that are putting people to work).

What’s their plan? It can’t be found on the national party’s web page. But the perpetually tanned House minority leader John Boehner trumpets an October letter that House Republicans dispatched to the president as the essence of their plan.

Turns out it’s the same ideas they offered at the beginning of the year — reality has made no impression on these folks. Three of the five suggestions are ways to help small businesses afford health care for their workers — “legal reform and incentivizing wellness” (tort reform), allowing small business to purchase health care collectively (already in the president’s plan), and more health savings accounts (a bow to a leading Republican contributor). At a time when small businesses are closing, when customers are drying up, foreclosures rising, and states and localities are laying off teachers, these seem, as the lawyers say, de minimus.

And then of course, the Republicans recycle their panacea for anything that ails you — more tax cuts. One of these — letting businesses write off losses against profits over an extended period of time — has just been signed into law. The other is Bush lite — small tax cuts for everyone but low wage workers.

Now despite all the posturing about Obama’s red ink, these Republican ideas will create larger deficits and more debt. Is this the best way to spend money we borrow?

Well, we tried the same thing under Bush at the beginning of the Great Recession and it didn’t work very well. The reason is pretty simple. Americans have lost some $13 trillion in assets from the housing crash and the stock market decline. They no longer can spend more than they earn, and use their homes like an ATM machine. So they are tightening their belts, paying down debts and rebuilding their savings. Provide them with small tax cuts and they will sensibly save most of the money – and not provide the demand need to get reluctant companies to rehire workers.

What are the Democratic ideas? The current debate is still pretty fluid. Democrats, intimidated by deficits, initially hoped to do a stealth plan piecemeal — $250 for seniors here, extend unemployment there, pump up infrastructure spending in the transport and clean water bill over there.

But Pelosi’s call for a jobs agenda and Obama’s summit invite more coherent responses, ones that might get closer to the scale needed to deal with the challenge we face.

AFLCIO President Rich Trumka released a program this week — joining with leaders of the NAACP, the National Council of La Raza, and the Center for Community Change and the Leadership Conference on Civil Rights — that will frame the discussion.

Trumka’s agenda features five initiatives:

1. Extend the lifeline to jobless workers - continuing unemployment benefits, food assistance and health care subsidies.

2. Rebuild schools, roads and energy systems. This is the very area that got slashed in the first recovery plan by so called Republican moderates and Blue Dog Democrats. Repairs – in schools, sewers and bridges – can begin rapidly. More ambitious projects – fast trains and a modernized electric grid – take longer, but as Bernanke says, unemployment will be with us a long time.

3. Aid to state and local governments to maintain vital services. This is the least popular but most effective program. It forestalls deep layoffs in basic services, from teachers to police.

4. Direct public service jobs in communities. Congress could dramatically expand the Youth Corps, AmericaCorps and Vista to put young people to work. New initiatives – a Green Corps to rebuild parks, an Urban Corps to build low cost housing – could be targeted for areas with the greatest job loss.

5. Use Wall Street bailout funds for Main Street Use the billions still in the TARP to enable community banks to lend money to small and medium sized businesses. Even Republicans might sign onto increasing low interest rate loans to small businesses with expansion plans. This surely is a better idea than a job tax credit to businesses, almost of all which will reward companies for jobs they would have created anyway.

Obama would be well advised to go even bigger. His most compelling argument has been the simple truth that we can’t go back to the old boom and bust economy and should not want to. We’ve got to build a new economy on a strong foundation of basic investment in education and training, in 21st century infrastructure, in research and development — all of which have got the short end of the stick in the era of tax cut, squander and plunder conservatism. And we’ve got to insure that the US is a leader in the new green industrial revolution that will be the growth industry of the future.

So devote the State of the Union to lay out the bold agenda on jobs. Make the commitment now to make the investments needed for the new economy, and to drive the green industrial revolution. These will involve large scale public investments – financed in the next couple years while the economy recovers – and paid for over time, in part by growth and rising employment, and in part by progressive taxes, beginning with a securities transactions tax that will curb the Wall Street casino while insuring that Wall Street helps pay for the cleaning up the mess that it made. And the president should be clear: these investments will be linked to procurement policies designed to insure that the plants, supply chains and jobs are built here – not shipped abroad.

Let Republicans ante up their arguments on more tax cuts and tort reform. People can choose. Do we go back to the policies that drove us over the cliff – and didn’t work for most Americans even when the economy was growing? Or do we go forward boldly to build a new economy that puts people to work through investments vital to our future? That’s an argument that would serve the nation well. And could also give Republican leader Boehner even more time to work on his tan.

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Robert Borosage and Campaign for America’s Future Co-Director Roger Hickey are co-editors of the book, The Next Agenda: Blueprint for a New Progressive Movement.

Robert Reich

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

President Obama says he wants to “rebalance” the economic relationship between China and the U.S. as part of his plan to restart the American jobs machine. “We cannot go back,” he said in September, “to an era where the Chinese . . . just are selling everything to us, we’re taking out a bunch of credit-card debt or home equity loans, but we’re not selling anything to them.” He hopes that hundreds of millions of Chinese consumers will make up for the inability of American consumers to return to debt-binge spending.

This is wishful thinking. True, the Chinese market is huge and growing fast. By 2009, China was second only to the U.S. in computer sales, with a larger proportion of first-time buyers. It already had more cell-phone users. And excluding SUVs, last year Chinese consumers bought as many cars as Americans (as recently as 2006, Americans bought twice as many).

Even as the U.S. government was bailing out General Motors and Chrysler, the two firms’ sales in China were soaring; GM’s sales there are almost 50% higher this year than last. Proctor & Gamble is so well-established in China that many Chinese think its products (such as green-tea-flavored Crest toothpaste) are Chinese brands. If the Chinese economy continues to grow at or near its current rate and the benefits of that growth trickle down to 1.3 billion Chinese consumers, the country would become the largest shopping bazaar in the history of the world. They’ll be driving over a billion cars and will be the world’s biggest purchasers of household electronics, clothing, appliances and almost everything else produced on the planet.

So this will mean millions of American export jobs, right? No.

In fact China is heading in the opposite direction of “rebalancing.” Its productive capacity keeps soaring, but Chinese consumers are taking home a shrinking proportion of the total economy. Last year, personal consumption in China amounted to only 35% of the Chinese economy; 10 years ago consumption was almost 50%. Capital investment, by contrast, rose to 44% from 35% over the decade.

China’s capital spending is on the way to exceeding that of the U.S., but its consumer spending is barely a sixth as large. Chinese companies are plowing their rising profits back into more productive capacity–additional factories, more equipment, new technologies. China’s massive $600 billion stimulus package has been directed at further enlarging China’s productive capacity rather than consumption. So where will this productive capacity go if not to Chinese consumers? Net exports to other nations, especially the U.S. and Europe.

Many explanations have been offered for the parsimony of Chinese consumers. Social safety-nets are still inadequate, so Chinese families have to cover the costs of health care, education and retirement. Young Chinese men outnumber young Chinese women by a wide margin, so households with sons have to accumulate and save enough assets to compete in the marriage market. Chinese society is aging quickly because the government has kept a tight lid on population growth for three decades, with the result that households are supporting lots of elderly dependents.

But the larger explanation for Chinese frugality is that the nation is oriented to production, not consumption. China wants to become the world’s preeminent producer nation. It also wants to take the lead in the production of advanced technologies. The U.S. would like to retain the lead, but our economy is oriented to consumption rather than production.

Deep down inside the cerebral cortex of our national consciousness we assume that the basic purpose of an economy is to provide more opportunities to consume. We grudgingly support government efforts to rebuild our infrastructure. We want our companies to invest in new equipment and technologies but also want them to pay generous dividends. We approve of government investments in basic research and development, but mainly for the purpose of making the nation more secure through advanced military technologies. (We regard spillovers to the private sector as incidental.)

China’s industrial and technological policy is unapologetically direct. It especially wants America’s know-how, and the best way to capture knowhow is to get it firsthand. So China continues to condition many sales by U.S. and foreign companies on production in China — often in joint ventures with Chinese companies.

American firms are now helping China build a “smart” infrastructure, tackle pollution with clean technologies, develop a new generation of photovoltaics and wind turbines, find new applications for nanotechologies, and build commercial jets and jet engines. GM recently announced it was planning to make a new subcompact in China designed and developed primarily by the Pan-Asia Technical Automotive Center, a joint venture between GM and SAIC Motor in Shanghai. General Electric is producing wind turbine components in China. Earlier this month, Massachusetts-based Evergreen Solar announced it will be moving its solar panel production to China.

The Chinese government also wants to create more jobs in China, and it will continue to rely on exports. Each year, tens of millions of poor Chinese pour into large cities from the countryside in pursuit of better-paying work. If they don’t find it, China risks riots and other upheaval. Massive disorder is one of the greatest risks facing China’s governing elite. That elite would much rather create export jobs, even at the cost of subsidizing foreign buyers, than allow the yuan to rise and thereby risk job shortages at home.

To this extent, China’s export policy is really a social policy, designed to maintain order. Despite the Obama administration’s entreaties, China will continue to peg the yuan to the dollar–when the dollar drops, selling yuan in the foreign-exchange market and adding to its pile of foreign assets in order to maintain the yuan’s fixed relation to the dollar. This is costly to China, of course, but for the purposes of industrial and social policy, China figures the cost is worth it.

The dirty little secret on both sides of the Pacific is that both America and China are capable of producing far more than their own consumers are capable of buying. In the U.S., the root of the problem is a growing share of total income going to the richest Americans, leaving the middle class with relatively less purchasing power unless they go deep into debt. Inequality is also widening in China, but the problem there is a declining share of the fruits of economic growth going to average Chinese and an increasing share going to capital investment.

Both societies are threatened by the disconnect between production and consumption. In China, the threat is civil unrest. In the U.S., it’s a prolonged jobs and earnings recession that, when combined with widening inequality, could create political backlash.

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Cross-posted from Robert Reich’s Blog

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Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.robertreich.org.

Leo W. Gerard

By Leo W. Gerard
USW International President 

It turns out a Texas windmill farm developer’s request last month for nearly half a billion in stimulus funds to create 2,000 jobs in China doesn’t rank first on the audacity scale.

Shockingly for American taxpayers, and sadly for the staggering 10.2 percent of Americans who are unemployed, it doesn’t even rank second.

That’s because Washington already has doled out hundreds of millions in stimulus funds to foreign renewable energy firms. Of the $1.05 billion in clean energy grants awarded by D.C., $849 million — 84 percent — went to foreign wind companies, according to an analysis by Russ Choma of the Investigative Reporting Workshop. He wrote:

“The cash grants were given for the installation of 1,763 megawatts of capacity – 1,566 installed by foreign companies. Using the Renewable Energy Policy Project’s own numbers, as many as 4,500 manufacturing jobs may have been created overseas.”

A strong, broad Buy American clause in the stimulus bill could have prevented the off-shoring of U.S. tax dollars intended to create jobs for unemployed Americans. My union, the United Steelworkers, and the AFL-CIO pushed hard for that language, and polls showed 86 percent of Americans supported it. Republicans and lobbyists for multi-national corporations that wanted to spend U.S. tax money overseas opposed Buy American provisions.

Congress adopted weak, limited Buy American language. Now D.C. exports stimulus dollars to create jobs in foreign countries.  

Some of the foreign wind firms that got stimulus funds have American subsidiaries. But most of them shipped major components for wind farms to the U.S. That means  American stimulus dollars employed foreign workers. One Spanish company, Iberdrola S.A., got $545 million from U.S. taxpayers. 

Sen. Charles E. Schumer, a Democrat from New York, denounced the request to use U.S. tax dollars to create jobs in China and demanded the Obama administration deny funding. But it’s too late for the $849 million in stimulus dollars already given away to foreign wind companies. American tax dollars, meant to create jobs and nurture a green energy industry in the U.S., are gone with the wind.

Lavishing stimulus funds on foreign businesses is tragic for another reason:  Those overseas companies are competitors to fledgling U.S. firms that were supposed to get the money. President Obama has said he wants the U.S. to be “the world’s leading exporter of renewable energy.” That’s not going to happen if the U.S. pays European and Chinese manufacturers to import wind turbines. 

Congress set aside at least $3 billion in the stimulus bill for renewable energy projects. That investment would have two benefits. Growth in renewable energy – from sources such as windmills and solar cells – could reduce dangerous pollution from burning fossil fuels. In addition, the Blue Green Alliance estimated in its report, “Building the Clean Energy Assembly Line,” that U.S. manufacturers could create 850,000 jobs if Congress adopted a national standard requiring 25 percent of electricity to be generated with renewable sources by 2025. 

The key, obviously, is that the wind turbines and solar cells constructed to meet that standard couldn’t be imported for the jobs to be created in the U.S. The U.S. industry, however, needs the kind of help foreign governments give their clean energy manufacturers. The Blue Green Alliance report notes:

“Without new policies promoting domestic manufacturing, an unnecessarily large portion of these jobs will remain overseas.”

Keith Bradsher of the New York Times in a July 13 story described China’s policy to protect and promote its renewable energy industries: “China is shielding its clean energy sector while it grows to a point where it can take on the world.” That includes, Bradsher recounted, a competition last spring where China disqualified all foreign bidders on technicalities for 25 contracts to supply wind turbines. Beijing then awarded the contracts to seven Chinese companies, including some that had never built a turbine.

There’s no reason except a desire to shoot itself in the foot for the U.S. not to protect and promote its own renewable energy industries. “The Building the Clean Energy Assembly Line” report provides recommendations for Congress to cultivate American renewable energy industries, including long-term investment tax credits,  adopting a national standard requiring a minimum percentage of electricity be generated through renewable energy, passing cap and trade legislation, and providing low-interest financing.  

After the Texas windmill incident, I wrote Sen. Schumer asking for bold action to support U.S. clean energy manufacturing. In the letter copied to all members of Congress, I told him we must expand and accelerate the availability of incentives for manufacturing wind turbines and other clean energy technologies – here, in the U.S. One important way to do that is for Congress to extend to the manufacture of components like turbines the funding incentives that are now provided for production of clean energy.

Clearly, another method would be to Buy American. When constructing a wind farm in Texas, why would taxpayers give their money to support importing the turbines from China or Spain when there are perfectly good turbine manufacturers here in the U.S.? 

The Texas windmill farm developer announced this week that its Chinese partner plans to construct a $50 million turbine factory in the U.S., according to a story in the New York Times.  But that facility won’t supply the turbines for the project that the partnership wants $436 million in stimulus funds to support. Those would come from China. So, in the end, it still means nearly half a billion in U.S. tax dollars would create 2,000 turbine-building jobs in China.  

When China passed its $600 billion economic stimulus bill this summer, it adopted “Buy China” provisions. Obviously, as far as wind turbines were concerned, it was implementing a “Buy China” policy before that.

Is the U.S. going to continue thwarting itself and tilting at windmills or is it going to adopt and enforce a robust Buy American policy and build some?

Dean Baker

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

As most of us are preparing for the holidays a small clique in the Senate, with their collaborators in the Washington punditry, are planning for a dramatic hostage-taking event. Their target of opportunity is a bill to increase the nation’s debt limit. The hostage-takers propose to obstruct the bill’s passage unless the rest of the country gives into their demands to cut Social Security and Medicare and takes other steps to meet their warped sense of fiscal responsibility.

The debt limit must be increased at regular intervals in order to allow the government to function normally because the government is currently operating at a deficit. If the debt limit is not passed, then at some point the government will not be able to pay workers and contractors. It won’t be able to send out Social Security checks or make payments for Medicaid and unemployment insurance to state governments. And, it will not be able to make interest payments on government bonds, effectively defaulting on the national debt.

As a condition of allowing a bill to increase the debt limit to pass the Senate, the hostage-takers are demanding that Congress agree to establish a special commission to make recommendations for reducing the long-term budget deficit. This commission would be stacked with people who want to cut Social Security and Medicare.

When the commission makes its report to Congress, which would include huge cuts for these programs along with some tax increases, the report would not be subject to regular Congressional procedures. It would be fast-tracked, which means that it could not be amended, debate would be limited, and there would not be the usual 60 votes required to bring the report to a vote in the Senate. In short, the deck would be stacked toward approving large cuts in ways that would not ordinarily be the case.

The hostage-takers argue that such a commission is necessary because the current system is broken. This is another way of saying that the hostage-takers have been unable to get what they want through the normal democratic process. Rather than trying to organize popular support for their position, like people pushing for health care reform, restrictions on greenhouse gas emissions, or an end to the wars in Iraq and Afghanistan, this group of senators and their collaborators prefer the route of hostage-taking. They hope that by threatening the passage of a vital bill, they can advance measures for which they lack public support.

This adventure in hostage-taking is especially infuriating since this gang did so much to push the country into its current economic crisis. At a time when some of us were trying to warn of the housing bubble and the economic disaster that would inevitably follow in the wake of its collapse, this crew was filling the airwaves and newspapers with their scare stories of huge deficits in 2050. Of course, these deficits were driven almost entirely by the cost of maintaining a broken health care system, a point that they rarely chose to highlight.

As a result of the bubble and its collapse, we have enormous deficits today, in addition to 15 million unemployed and tens of millions of homeowners underwater in their mortgage. But the hostage-takers act as though nothing has changed. They acknowledge no responsibility for this disaster and just press on in their drive to gut Social Security and Medicare, two programs that are now more important than ever as a result of the economic mismanagement of the last decade.

The key here is to refuse to give in to the hostage-takers. This is a high stakes game of chicken, but at the end of the day, the hostage-takers, many of whom are financed by Wall Street money, stand to lose far more than the rest of us. None of us should want to see the government defaulting on its debt, but if this crew wants to press the matter, the Wall Street gang will lose much more than those of us who don’t possess great wealth.

The Wall Street gang may have suckered us with getting the TARP bailout money last year, but we don’t have to let them get away with the same trick again. If they want to threaten to crash the financial system with their irresponsible hostage-taking, then we should steal a line from a former president: “bring it on!”

***

Dean Baker is the author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy.” 

This piece was first published on Huffington Post.

Richard Trumka

By Richard Trumka
President, AFL-CIO

We’ve got a jobs crisis in this country, and we need to fix it–now!

This fact shouldn’t come as a surprise–in fact, a look around our nation makes it painfully obvious. The “official” unemployment rate is 10.2 percent–that’s one in every 10 workers without a job–but that doesn’t include the millions who have been unemployed and discouraged in the long term, and the millions more who are barely getting by with part-time work.

While millions go without work, some people are talking about “recovery”–as though numbers on Wall Street or profits at the big banks are the same as the real economy for working families. Wrong. We’re still in crisis–and if we don’t create jobs now, we will slide even further.

We have to put America to work–at good jobs that support families. We’ve tried out the everything-must-go, trickle-down, bubble economy for the past decade, and it’s been a disaster. If we’re really going to have a recovery–not just a recovery on Wall Street or for the big banks, but for real people–we absolutely must create new jobs.

Last summer at an event in Ohio, I met a young woman who is facing this crisis head-on. Lacey, who is not yet 20 years old, wants to become a teacher. But after her dad’s factory closed and he was laid off, she had to put off her hopes of attending college to help her parents keep a roof over their heads. Lacey took a job in a school cafeteria–until the state budget got cut, and she got laid off, too. After months in which she and her father were both searching for jobs, Lacey said she felt lucky to find a part-time, fast-food job that pays half of what the cafeteria paid. Lacey has more unemployed friends than friends with jobs, and, like a third of workers her age, she’s still living with her parents. Here’s what Lacey said to me that day:

I wanted to be a teacher to help children get the education they need to get ahead. But now I feel like I’m just going backward myself. I’m really scared for the kids my age. We want to work. We need jobs.

We owe Lacey our support. We owe Lacey and millions like her a future to be hopeful about–not one to be feared. Lacey and her generation could find their future permanently stunted, their potential never fully met. That’s unacceptable. We can’t afford to let that happen.

The recovery package passed by Congress this year was a major accomplishment, and it saved our country a million jobs, but it only takes us part of the way toward repairing the damage done to our economy. We need serious, active investment in job creation. Our economy has lost more than 8 million jobs since the recession began in December 2007–that’s a big hole to fill.

What does our jobs agenda look like? It’s based on five key points that will give working families the help they need now and set us on a better course in the long term. Congress and the Obama administration must take these steps to turn around our dangerous slide.

1. We must extend the lifeline for jobless workers. The families who have been hit by this economic crisis are at risk of losing unemployment benefits, food assistance and health care benefits at the end of the year. We need to act now to prevent the human suffering and economic damage that would result.
2. Rebuild America’s schools, roads and energy systems. We must put people to work to fix our nation’s broken-down school buildings and invest in transportation, green technology, energy efficiency and more.
3. Increase aid to state and local governments to maintain vital services. State and local governments and school districts have a178 billion budget shortfall this year alone–while the recession creates greater need for their services. States and communities must get help to maintain critical frontline services, prevent massive job cuts and avoid deep damage to education just when our children need it most.
4. Fund jobs in our communities. While workers go without jobs, important work is left undone in our communities. These are not replacements for existing public jobs. They must pay competitive wages and should target distressed communities.
5. Put TARP funds to work for Main Street. The bank bailout helped Wall Street, not Main Street. We should put some of the billions of dollars in leftover Troubled Asset Relief Program funds to work creating jobs by enabling community banks to lend money to small- and medium-size businesses. If small businesses can get credit, they will create jobs. The administration can act on this immediately.

Families like Lacey’s are hurting, and they need support. Millions are losing not only their jobs but also their homes, their health care and their hope. We can’t afford to do nothing–America’s working families are demanding action now and we intend to fight for them. We’ll work with businesses, government and community organizations to make a jobs agenda a reality. We’ll call out and fight back against those who would block progress, and we’ll work hard to support leaders who do the right thing.

We need jobs now.

Leo W. Gerard

 
By Leo W. Gerard
USW International President

A business group is honoring Roger Agnelli, the CEO of Vale, one of the largest mining companies in the world, which, coincidentally, is in the midst of its longest ever labor dispute. The award is for exceptional accomplishments in corporate social responsibility.

The Business Council for International Understanding will give Agnelli the Dwight D. Eisenhower Global Citizenship Award, feting him for his corporate behavior five months after he provoked the strike by more than 3,000 miners, mill workers and smelters in my hometown of Sudbury and neighboring Port Colborne, Canada.

The strikers now include 450 Vale nickel and copper workers from Voisey’s Bay, also represented by my union, the United Steelworkers (USW).  

Vale is the Brazilian-based corporation that boasted $13.2 billion in profits last year and reported third-quarter, after-tax earnings of $1.7 billion this year, more than double its second quarter haul. Vale is a highly-profitable corporation demanding workers take concessions. For example, it wants deep cuts to pay supplements workers get only when nickel prices are high.

Cash flush even during the worldwide recession, Vale has engaged in a buying spree for mines and properties worldwide. In 2008, it announced it would spend $2 billion on electrical projects, mostly coal-fired, and by year end reached agreement to spend $300 million on Colombian coal assets. It got permission from the Brazilian government this year to buy iron ore mines for $750 million. It spent $17.8 billion in 2006 for Inco’s nickel mines and smelters in Canada, and as metal prices rose, earned nearly as much from them over the next two years as Inco had in the previous 10. Still, Agnelli insisted the very Canadian workers whose labor helped Vale make that money take cuts to their income – causing the strike.

Workers and their families have struggled since the strike. The towns in Ontario and Newfoundland have suffered as well because many mining supply and service companies temporarily closed, idling untold additional workers. Kari Cusack, a member of Families Supporting the Strikers, talked about it early in November before a family day on the picket line in Sudbury. She told a local newspaper reporter:

 “We see Vale’s attack on Local 6500 as an attack on our entire community, and we want to do our part to fight back against corporate greed.”

The Business Council for International Understanding chose that corporate social responsibility to reward.

In Brazil, Agnelli has shown off some of that corporate social responsibility as well. In September, the government fined Vale $20 million for failing to comply with an antitrust order. Last year, Agnelli secured a court injunction in an attempt to block protestors from the country’s largest social activist group, the Landless Rural Workers Movement, rather than negotiate with those complaining that the company’s iron furnaces were polluting their village and that a hydroelectric dam in which Vale is a partner was flooding their homes. Also last year, Brazil’s Office of the Environment fined Vale $3 million for illegal sale of wood.

Workers from Canada and Vale Brazil demonstrated together in August in front of the multi-national’s Rio de Janeiro headquarters. They served pieces of a giant cake commemorating the 30^th day of the USW strike in Ontario. There the Canadian workers learned that Agnelli had forced its Brazilian workers to accept a defined contribution pension plan. Now Agnelli is trying to force the Canadians take the same inferior plan. 

The International Metalworkers’ Federation (IMF), the National Union of Metalworkers of South Africa (NUMSA), the Botswana Power Corporation Workers Union (BCPWU) and others from around the world have written Agnelli expressing outrage about the strike. Bohithetswe Lentswe, BCPWU General Secretary, wrote:

“We have every reason to believe that Vale is trying to destroy its strongest collective bargaining agreement for the purpose of setting a precedent to weaken other collective bargaining agreements throughout the world. Vale is also attempting to export its anti-worker, anti-union practices in Brazil to the rest of the world.”

Of course. That’s what great CEOs do, as the Business Council for International Understanding will proclaim at its Dec. 3 dinner in the Waldorf=Astoria, New York City. With the cheapest tickets going for $1,000, it’s likely none of those $29-an-hour Vale workers will get a seat. But Agnelli, who is one of six Vale executives who together pulled down $33 million last year, could effortlessly drop $100,000 for an “underwriting level” table of 10 at his award dinner.

Perhaps there the Business Council for International Understanding will detail its reasons for selecting Agnelli for the Dwight D. Eisenhower Global Citizenship Award. It only profiles Vale and Agnelli on its web page, without, for example, providing the kind of insight into Agnelli’s personality that Antonio Regalado did for the Wall Street Journal in 2008 in a story:

“Current and former Vale executives say Mr. Agnelli can be hard on subordinates. Some of them cite what they say is an autocratic style and a table-pounding temper. . . . In internal company surveys, employees complain frequently that they are under too much pressure . . . Marco Dalpozzo, Vale’s head of human resources, doesn’t deny that Mr. Agnelli can be rough on people, “He’s a tough guy,” he says.”

Again: of course. That’s what business groups prize – executives with table-pounding tempers.

The Business Council is, however, a group that claims it was started by the late President Dwight D. Eisenhower and named its prize for him.  It’s not clear, though, that the business values of the current council and Agnelli resemble those of President Eisenhower. For example, here’s what the President wrote in November, 1954:

“Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt. . ., a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.”

To let the Business Council know the ways in which you think this award for Agnelli will increase its goal of International Understanding, call 212-490-0460 in New York, 202-595-2668 in Washington or 44-207-225-3561 in London.

LabourStart has created a web page so you can easily write a personal note directly to Agnelli. It’s here. It enables you to quickly drop Agnelli a little note telling him just how much you think he deserves this honor.

Robert Borosage

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

This week, Barack Obama trips to China — as part of an 8 day trip to Asia. The White House paints a full agenda — Afghanistan, human rights, North Korean nukes, climate change, trade relations, and the economy. But it’s really just the economy, stupid.

For decades during the Cold War, the US gave security concerns priority over economic issues. Now the economy is our central security concern. It will simply be another measure of the administration’s gathering calamity in Afghanistan if that is allowed to distract from the essential discussions about the economy.

On economic issues, Asian leaders — particularly the Chinese — are in the mood to deliver lectures, not receive them. It was the excesses of Wall Street that brought the world to its knees. And Asian nations — not burdened zombie banks or purblind conservative politicians — are enjoying a rapid recovery, after boosting demand with large-scale government spending.

But the president has a vital message to deliver. We can’t go back to the old bubble-bust economy. That requires more than just financial reform. Central to that old economy was our relationship to the mercantilist nations of Asia, particularly China. For years, the US consumed more than it made, running up record trade deficits. The Asian nations, particularly China, financed our consumption to increase their exports and market share. The Chinese kept their currency undervalued, hoarded dollars, bought up treasury bills, enabling the US to borrow more and more without suffering rising interest rates. That helped inflate the housing bubble that finally blew up in our faces.

Correcting this imbalance — even as we move to meet the challenge of catastrophic climate change — is essential. Thus far, President Obama has forwarded this discussion carefully. He got the G-20 nations (including China) to establish a mandate for more balanced growth as part of the global economic reconstruction. The IMF has been tasked with monitoring — and pressuring — surplus as well as deficit nations to change their ways.

And the president has shown some teeth. He signed off on slapping temporary tariffs on cheap tires flooding in from China. Punitive tariffs have just been imposed on steel pipe dumped on the market by the Chinese. Serendipitously, the WTO ruled in August that the Chinese restrictions on foreign publications, film and music imports are illegal.

The Chinese haven’t got the message yet. They did a far better job than the administration in boosting their economy with a bold stimulus package, but much of the spending went to new infrastructure designed to boost exports. They continue to manipulate their currency while denying it. They decry protectionism while practicing it. They’ve now made a commitment to new energy, but significantly as an export industry, while continuing to open a coal fired energy plant every week.

So what should the president do when he talks to our bankers in China? In public, for this president particularly, we can expect vision, not fireworks. We can hope for more candid discussions in private, with Secretary of State Clinton there to provide the needed grit. Here’s what we should look for in public

1. Forceful Statement of the New Reality

The President should forcefully state the new reality. We can’t go back to the old imbalances. As recovery gains force, there must be adjustments in both surplus nations and deficit nations. This can be difficult and antagonistic or cooperative and mutually beneficial — but one way or the other, it must occur.

The US has already begun. American consumers are tightening their belts, and have begun to save more and to pay down debts. The American government will invest more, and once the economy recovers, lower its deficits. The US will export more and buy less from abroad. We will move to a more balanced trade posture.

Thus the surplus nations — whether Germany in Europe or China and Japan in Asia — must rely less on America as the source of demand. They should be consuming more of what they make. This can be immensely beneficial to their people. Workers should be empowered to gain better wages; social supports from pensions to paid vacations can be afforded. Service industries expanded. In emerging from the crisis, regional trade has already expanded faster than exports to the US.

2. Invoke the Vision of a New Age

The president should emphasize that the new economy will be built amid a new green industrial revolution. Catastrophic climate change, accelerating beyond scientific estimates, brooks no alternative. This too requires wrenching, massive transformation – but it also can be the source for growth and jobs as we balance the global economy.

Addressing catastrophic climate change will generate enormous demand – for new energy, for rebuilding old buildings, for new transportation systems. We will change the way we live, the way we travel, the way we work. This transition will generate new jobs, new inventions, and new industries.

This transition can disintegrate into bitter disputes about who is to blame and who is to pay. Instead the president should focus on the challenges and the opportunities it presents. Mandating this transition can also help in the move to a more balanced global economy, fostering decentralized production closer to markets, like the movement for slow food encourages local farming. Yes, we will need to assist poorer countries and poorer people within each country in the transition. Companies must not be allowed to undermine progress by playing off countries with weak environmental standards against those with stronger ones. But we should not let the costs and the disputes blind us to the opportunity.

3. Make Human Rights the Measure of Progress

The president should publicly reaffirm our commitment to human rights. The Declaration of Human Rights forged after World War II made protection of basic human rights — from freedom of speech to the right to organize to the right to a good job — the central charge of the peace. In the Cold War years, rivalry turned human rights into ideological weapons, with the US championing free speech and property rights and the Soviet Union celebrating economic rights.

Now the president should reassert the reality that basic human rights are indivisible. And increasingly, we understand that they are also economic imperatives. A vibrant market cannot function without the rule of law. Free speech is essential to freedom of contract. To sustain growing economies over time, workers must have the right to organize so the blessings of growth can be widely shared. Basic protections like health care, education and old age security make it possible for consumer societies to flourish.

4. Show Some Grit in Private

The private discussions will be and should be more contentious. The president needs to make it clear that the old days are over. The US will move to more balanced trade. That means that we’ll invest to make our own economy more productive. We’ll slowly bring our budget deficits down as the economy recovers.

And we will enforce our trade laws. American states and localities will pass Buy America provisions. China should not be misled by corporate lobbies. It will find more and more resistance if it continues to play by a different set of rules.

The president should be clear about reality. China’s currency is undervalued. This feeds the trade imbalances. It threatens China too — as investors will increasingly move to China, assuming that the currency must go up. The Chinese will risk a growing bubble in assets — housing, commercial property, stock markets – which could well expand and burst with destructive consequence. Abrupt unilateral moves could destabilize the dollar. We have a mutual interest in agreeing on currency adjustment.

The Chinese want the US to recognize it as a market economy, to make it more difficult to penalize its trade malpractices. The president should be brutally candid about this. A mercantilist nation that doesn’t play by the global rules will not be so recognized. A nation that doesn’t enforce labor rights will get special scrutiny. A country that undervalues its currency for trade advantage doesn’t qualify. Concessions on this will follow changes in practice, not promises of future reform.

Finally, the president should be frank about his human rights commitments. The US will not seek to embarrass the Chinese generically. But the US will remain an advocate of basic human rights. We will continue to report on violations, and condemn them when they are egregious. The president will meet with human rights champions, including the Dali Lama.

Moreover, he should indicate that his administration will place increased emphasis on worker rights and decent work, as well as women’s rights, both at home and abroad. We will seek to help countries move to empowering workers, to guaranteeing basic rights. We surely will reward those countries that are democracies that respect human rights, over those that are not.

China and the US have been in a long intense relationship that is no longer functional. Renegotiating the terms won’t be easy. Neither partner can afford a divorce. Both will find it difficult to change their own ways. Neither has exactly been straight with the other in the past. At best, this trip will lead both to agree that something must be done.

***

Robert Borosage and Campaign for America’s Future Co-Director Roger Hickey are co-editors of the book, The Next Agenda: Blueprint for a New Progressive Movement.