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As the Supreme Court shows every sign of throwing out “Obamacare” and leaving 30 million Americans without health insurance, another drama is being played out in the quiet corridors of the Federal Reserve system that may affect even more of us.

Taxpayers will be on the hook for another giant Wall Street bailout, and the economy won’t be mended, unless the nation’s biggest banks are broken up.

That’s not just me talking, or the Occupier movement, or that wayward executive who resigned from Goldman Sachs a few weeks ago. It’s the conclusion of the Dallas Federal Reserve, one of the most conservative of the Fed’s regional banks.

The lead essay in its just released annual report says a cartel of giant banks continues to hobble the recovery and poses an ongoing danger to the economy.

Wall Street’s increasing power remains “difficult to control because they have the lawyers and the money to resist the pressures of federal regulation.” The Dodd-Frank act that was supposed to control Wall Street “leaves TBTF [too big to fail] entrenched.”

The Dallas Fed goes on to argue that the Fed’s easy money policy can’t be much help to the U.S. economy as long as Wall Street is “still clogged with toxic assets accumulated in the boom years.” (more…)

In 2010, as the economy began its slow recovery from the Great Recession, a new study shows the richest 1% of Americans captured a staggering 93% of all income growth, while the incomes of most Americans stagnated. 93%. Occupy that. The 1% are back

The stock market — leading source of wealth for the few — rebounded. Housing — the leading source of wealth for middle income Americans — continued to decline. Median CEO pay soared a stunning 27%. When the 2011 figures come out, the disparities will be even greater. America is recovering the old economy’s extreme inequalities.

This divorce of the 1% from the rest of us is bad for the economy and for the democracy. It’s even bad for your health. The question is what can be done about it.

In the New York Times last week, financier Steven Rattner summarized the conventional remedies: “better education and training, a fairer tax system, more aid programs for the disadvantaged” to help them “escape the bottom rung.”

OK, but as Harold Meyerson suggests in the Washington Post, this agenda ignores the major source of the new inequality: the changes in how corporations reward their employees.

Who is in the 1%? As Emmanual Saez, the author of the inequality study report, writes, today’s top earners tend to be “working rich.” About a third (31%) of the top 1% are executives and managers outside of finance. Another 14% are “financial professionals.” Doctors are about 16%, lawyers 8%.

Inside our companies, CEO pay has soared, while worker pay has stagnated at best. According to the Institute for Policy Studies, CEOs are now making 325 times what the average worker makes. CEO pay has soared as companies have dramatically increased stock options as part of compensation packages. Worker pay has stagnated as companies have waged relentless and successful war on unions. Even mid-level executives have not shared in the fabulous rewards offered the top.

The Costs of CEO Excess

Ironically, the new concentration of rewards at the top is dysfunctional to companies, as well. As Roger Martin details in his brilliant, Fixing the Game: Bubbles, Crashes, and What Capitalism can Learn From the NFL, CEO pay exploded when companies adopted reward systems based upon maximizing shareholder value. Stock options were dramatically increased as a source of CEO pay, on the theory that the CEO would share the interests of shareholders. Before the change — from 1960 to 1980, CEO compensation per dollar of net income earned for the 365 largest publicly traded U.S. companies FELL by 33%. CEO pay rose, but they earned more for the shareholders for steadily less relative compensation. After 1980, as new compensation schemes came into play, CEO compensation per dollar earned doubled from 1980 to 1990 and quadrupled between 1990 and 2000. And, stockholders fared better in the earlier period than the latter. (more…)

If only it were funny.

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The new Republican budget (called the “Ryan Budget” by DC insiders) reflects current electoral reality: billionaires and corporations now finance candidates, and we get government of, by and for billionaires and corporations. The rest of us no longer matter, except as “the help” and, at least to the extent we haven’t been entirely fleeced, a flock to harvest. This budget starts with $10 trillion in tax cuts — mostly for the rich. After adding $10 trillion to the deficits Republicans then claim that severe cuts are necessary to “fight deficits.” Right. Details below.

Keep in mind where we are starting from: The way our economy and tax system is already structured, the top 1 percent received 93 percent of income gains from recovery. As Mitt Romney’s tax returns demonstrated, those at the very top — whose income comes as checks generated by the money they already have — already pay much lower tax rates than those of us who work for a living.

Shock Doctrine

“Nothing is more important in the face of a war than cutting taxes.” — Republican Majority Leader Tom Delay, 2003

After passing tax cut after tax cut, and military spending increase after military spending increase, and starting war after war, Republican borrowing has added up. So now Republicans terrify the public, telling them that budget deficits will lead to the destruction of the country — and soon. After a decade of screaming “9/11,” “9/11,” noun verb “9/11,” they now scream “deficit, deficit, deficit.” Then with the public suitably stirred up and terrified they offer “solutions” they say are necessary to cut the scary deficit (that they caused, for this purpose).

Behind a blizzard of fog and mirrors, the new Republican budget completes the ongoing shift of our government and our economy away from “we are in this together” democracy to a “you are on your own” system that is entirely for the benefit of a few at the top.

Cuts Taxes for the 1%

The smoke and mirrors: they claim this budget is necessary to reduce deficits, but it doesn’t even pretend to. Instead it starts by cutting taxes on the rich and their corporations by another $4.6 trillion while making permanent the Bush tax cuts, costing another $5.6 trillion. It gives a $187,000 tax cut to every millionaire!

Cuts Jobs

Ethan Pollack at the Economic Policy Institute describes how “Ryan’s budget cuts would cost jobs” — 4.1 million of them:

Paul Ryan’s latest budget doesn’t just fail to address job creation, it aggressively slows job growth. Against a current policy baseline, the budget cuts discretionary programs by about $120 billion over the next two years and mandatory programs by $284 billion, sucking demand out of the economy when it most needs it and leading to job loss. Using a standard macroeconomic model that is consistent with that used by private- and public-sector forecasters, the shock to aggregate demand from near-term spending cuts would result in roughly 1.3 million jobs lost in 2013 and 2.8 million jobs lost in 2014, or 4.1 million jobs through 2014. (more…)

Occupy Wall Street is not known for the precision of its economic analysis, but new research on income distribution in the United States shows that the group’s sloganeering provides a stunningly accurate picture of the economy. In 2010, according to a study published this month by University of California economist Emmanuel Saez, 93 percent of income growth went to the wealthiest 1 percent of American households, while everyone else divvied up the 7 percent that was left over. Put another way: The most fundamental characteristic of the U.S. economy today is the divide between the 1 percent and the 99 percent.

It was not ever thus. In the recovery that followed the downturn of the early 1990s, the wealthiest 1 percent captured 45 percent of the nation’s income growth. In the recovery that followed the dot-com bust 10 years ago, Saez noted, 65 percent of the income growth went to the top 1 percent. This time around, it’s reached 93 percent — a level so high it shakes the foundations of the entire American project.

How has the top 1 percent been able to decouple itself from the nation beneath it? To begin, much of its income comes from investments in funds and firms that are raking in profits from overseas ventures in economies like China’s, which weathered the downturn better than ours. Much of those firms’ profits also derive from their reduced labor costs — the result of layoffs and paycuts. Finally, as Saez points out, there has been “an explosion of top wages and salaries” since 1970. In that year, 5.1 percent of all wages and salaries paid in the United States went to the wealthiest 1 percent. In 2007, the share going to the wealthiest 1 percent had more than doubled, to 12.4 percent.

The consequences of this concentration of wealth and income extend beyond the purely economic. A middle class enduring prolonged stagnation isn’t likely to fund projects the nation needs to undertake — such as rebuilding our infrastructure or increasing teacher pay — or, ultimately, to retain its faith in the efficacy of democracy. The rise of super PACs, the low rates of taxation on capital gains and hedge fund operators, the ability of the major banks to fend off reform — all testify to the power of a neo-plutocracy beyond democratic control. (more…)

We’ve spent billions of dollars – perhaps trillions – to rescue big banks. But instead of dialing back on the risky behavior that shattered the economy in 2008, they’re doubling down on it. And when their bill comes due we won’t just be asked to pay it again. We’ll be asked to take the blame for it again, too.

But who are the real deadbeats in this country? Banks acted recklessly in the years leading up to the financial crisis – and ran up a bill which the rest of us have been paying since 2008. And guess what? They’re doing it again.

Take student loans. Americans owe more than a trillion dollars in student loans, a figure that’s growing by $50 to $60 billion every month. Now we’ve learned that as many as 27% of these loans are delinquent, meaning they’re more than thirty days past due. That amounts to roughly $270 billion in troubled loans – most of which have been guaranteed by the U.S. taxpayer.

We’ve already rescued American banks with hundreds of billions in public money, saving them from the consequences of their incompetent underwriting of mortgage loans. Now we’re about to do the same thing with student loans, many of which were money-making ventures for those same banks.

Politicians “privatized” Sallie Mae, the government-sponsored enterprise (GSE) created to help students borrow for their education. Its greed-crazed executives promptly went on a spending spree, using their government backing to pay themselves inflated salaries and buying corporate jets so they could travel in luxury. Yet, without irony, their backers and shills shrieked “socialism!” when wiser heads wanted to stop private-sector skimming at the expense of our nation’s students. (See “Sallie Mae’s Jets.”)

And now that their loans are going bad, who will pick up the tab? It won’t be those high-flying executives. And Wall Street won’t be held accountable for the fact that today’s graduates face the worst employment situation in recent memory, even though that’s a direct result of bank malfeasance. Instead the public will pay the tab for this consequence of the banks’ behavior, just as it has paid for so many others.

Student loans aren’t the only burden young people – and the rest of us – are carrying today. Today’s college seniors are also graduating with an average of more than $4,000 in credit card debt – and then entering an economy where only 46 percent of their peers in the 18-24 year old age group have jobs. That’s the lowest percentage since the government began tracking these figures in 1948.

Credit card debt is another exploding area of risk for America’s too-big-to-fail banks – and therefore for the Federal government. In this country there are now more than 50 million American Express credit cards in circulation, along with 176 million Mastercard credit cards and 261 million Visa credit cards. That’s nearly half a trillion active credit cards from these three companies alone.

Credit cards are unsecured debt, meaning that nothing has been put up as collateral if the borrower defaults. Credit-card holders owed a reported $771 billion – more than three-quarters of a trillion dollars – in the second quarter of 2011. The average amount owed by a credit-card-holding household was more than $16,000. (more…)

As of Wednesday afternoon, House Republicans were at an impasse within their own caucus on how to move forward on a surface transportation funding bill. There is a real possibility that, because of this impasse, federal funding for transportation projects would abruptly stop at the end of this week, with Congress out of Washington on a two-week recess.

Meanwhile, a “work crew” from LiUNA—the Laborers’ International Union of North America—was dispatched Wednesday to the Key Bridge, which connects the western edge of Washington to the northern Virginia suburbs. On their truck was a giant roll of duct tape, used to symbolically patch the 89-year-old bridge.

LiUNA chose Key Bridge because it is on the list of the nation’s more than 70,000 structurally deficient bridges around the country. That’s almost 12 percent of all of the nation’s bridges. The Department of Transportation ranks a bridge as “structurally deficient” if it needs “significant maintenance and repair” in order to remain a safe bridge to use. Often, a structurally deficient bridge must carry less capacity than it was designed to hold—for example, heavy trucks might be banned—in order to keep it from having to be closed altogether.

Key Bridge may not be in imminent danger of collapsing, but it is slowly crumbling, as House Republicans refuse to move forward on a sensible transportation reauthorization bill.

The Senate has passed a two-year, $109 billion bill that, while imperfect, buys Congress time to tackle the long-term issues that need to be faced about what our future transportation policy should look like and how we should pay for it.

House Republicans have proven themselves so far incapable of uniting around a way forward on these key questions, caught as they are between an ideological bloc that wants to use the transportation bill to push the fossil fuel lobby’s agenda for oil drilling and coal burning, and small-government ideologues who want to offload national transportation responsibilities onto the states and the private sector. (more…)

Later this week on the floor of the House of Representatives, several federal budget proposals embodying different approaches to our country’s economic challenges will compete for attention. One of those, the Congressional Progressive Caucus’s “Budget for All,” offers the most dramatic contrast between the effort by House Republicans to double down on the failed conservative policies of the past and a contrasting approach that is our only real hope for rebuilding the middle class and getting the nation out from under the specter of crushing debt.

We all should be rallying behind the Budget for All as a counter to the Budget for the 1 Percent that the House Republicans have put forward under the leadership of Budget Committee chairman Rep. Paul Ryan, R-Wis. Here are three reasons why.

The Budget for All will create jobs. The Republican Budget for the 1 Percent will kill them.

The Budget for All contains a long list of initiatives, more than $2 trillion worth, designed to put people to work doing jobs that need to be done, such as repairing schools, upgrading and expanding our transportation network, protecting our communities, providing health care and other services to those in need. The Republican budget would slash discretionary spending by $38 billion below the president’s request in 2013, and by $352 billion over 10 years, reducing the money available for a broad range of job-creating initiatives.

In the short term, the Budget for All would increase the deficit more than either President Obama’s proposed budget, and certainly more than the Republican budget. But it makes eminent sense to run a larger deficit now, when the economy is slack, borrowing costs are near zero, and unemployment is running well above 8 percent.

By contrast, the Republican budget starts by slashing and burning domestic spending, irrespective of the impact on the economy. The budget is based on two false premises: one, proven wrong during the Bush administration, is that cutting taxes on the wealthy leads to job creation for the middle class. It did not; the Bush administration’s economic growth period was the most anemic in terms of job creation of any economic upturn since World War II, and of course what little job growth that did take place was more than erased by the Bush economic collapse. The second false premise, being proved wrong in Europe, is that government austerity causes the private sector to grow. In fact, as governments slash budgets, parts of the Euro Zone are sliding into a double-dip recession.

The Emergency Jobs to Restore the American Dream program in the Budget for All alone would put 2 million Americans back to work. That is on top of the millions of jobs created or maintained by a $556 billion surface transportation program, plus investments in clean energy. The Republican budget would cost the economy “roughly 1.3 million jobs lost in 2013 and 2.8 million jobs lost in 2014, or 4.1 million jobs through 2014,” economist Ethan Pollock of the Economic Policy Institute estimates.

The Budget for All does the most for deficit reduction — the right way.

The charts below say it all. The Budget for All would bring the annual federal deficit down to less than 1 percent of gross domestic product in 10 years, compared to 1.2 percent projected by the Ryan Republican budget and the 5.3 percent of GDP the deficit would be if we maintained the status quo for the next 10 years. The cumulative debt would be reduced to 62.3 percent of GDP in 10 years.

The Budget for All offers deficit reduction of $6.8 trillion in 10 years. Some of that deficit reduction comes through cuts in defense spending, with a goal of “a leaner, more agile force” to combat 21st-century threats, rather than basing defense budgets on a long-over cold war.

But what is particularly important in how this budget deals with deficit reduction is how it deals with taxes. (more…)

Learn how the Affordable Care Act benefits you.