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Interest rates for student loans will double on July 1 unless Congress acts. That’s outrageous — but the fiscal abuse of our nation’s young people runs far deeper than that. An entire generation has been trapped into debt servitude and joblessness by the implacable machinery of Wall Street greed. Bank-servile scolds insult the young people of America while the bankers’ economic engines strip-mine their financial future.

Jobless or overextended college graduates aren’t even allowed to declare bankruptcy — a privilege that’s extended to every reckless investor and mismanaged corporation in the nation. Once they finally find work, college graduates face years of garnished wages to repay the loans that funded their often-overpriced educations. If they haven’t repaid that debt by the time they grow old — a very real possibility at the cost of a college education today — they’ll even be forced to surrender part of their Social Security benefits.

That’s indentured servitude.

Meanwhile banks have been slicing and dicing student loans into derivative financial instruments called “SLABS” — student-loan asset backed securities. We’ve seen this movie before — the one where big banks mass-market loans to a population with stagnated wages and dwindling economic prospects, then bundle them and sell them to investors who haven’t reviewed the way they were underwritten and sold.

Hey, what could go wrong?

It’s true that many of these packaged debts are backed by the U.S. government — but not all of them.

Why are these graduates facing such a bleak job market? Because Wall Street’s gambling on other financial bets crashed the economy, leaving an entire generation without much of a future to give them optimism and hope. Their parents can’t help them much, because most of their assets were taken by Wall Street, too. So as an entire generation of college students graduates with unprecedented debt — and joblessness that’s unprecedented in modern memory — they’re looking forward to a lifetime of reduced expectations. (more…)

Congressional Republicans this past week failed in their latest attempt to roll back workers’ rights. The U.S. Senate defeated (45-54) a measure (S.J. Res. 36) to kill a new National Labor Relations Board (NLRB) rule that makes modest changes in the procedures for workers who want to vote on whether to form a union. It also would have banned the NLRB from ever issuing any similar fair election rule.

Before the vote, the White House announced that President Obama opposed the Republican assault on workers and would veto the legislation if it got to his desk.

The administration is committed to supporting the right of workers to join and participate in a union and bargain for fair wages, benefits and a safe workplace. These rights are fundamental to better conditions for American workers and to an open, just, economically fair and prosperous society. S.J. Res. 36 attacks these bedrock American values.

Christine Owens, executive director of the National Employment Law Project (NELP), said of the Republican proposal:

It is disappointing that in the face of growing income inequality and stagnant wages for all but the highest earners, lawmakers would fail to stand by workers who seek only to exercise their legal rights in an atmosphere free of intimidation and retaliation. (more…)

Europe is in recession.

Britain’s Office for National Statistics confirmed today (Wednesday) that in the first quarter of this year Britain’s economy shrank .2 percent, after having contracted .3 percent in the fourth quarter of 2011. (Officially, two quarters of shrinkage make a recession). On Monday Spain officially fell into recession, for the second time in three years. Portugal, Italy, and Greece are already basket cases. It seems highly likely France and Germany are also contracting.

Why should we care? Because a recession in the world’s third-largest economy, combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest.

Remember — it’s a global economy. Money moves across borders at the speed of an electronic impulse. Wall Street banks are enmeshed into a global capital network extending from Frankfurt to Beijing. That means that notwithstanding their efforts to dress up balance sheets, the biggest U.S. banks are more fragile than they’ve been at any time since 2007.

Meanwhile, goods and services slosh across the globe. If there’s not enough demand for them coming from the second and third-largest economies in the world, demand in the U.S. can’t possibly make up the difference. That could mean higher unemployment here as well as elsewhere.

What’s the problem with Europe? Don’t blame it on the so-called “debt crisis.” There was no debt crisis in Britain, for example, which is now experiencing its first double-dip recession since the 1970s.

Blame it on austerity economics — the bizarre view that economic slowdowns are the products of excessive debt, so government should cut spending. Germany’s insistence on cutting public budgets has led Europe into a recession swamp. (more…)

President Obama visits Lorain County Community College in Elyria, Ohio to highlight how federal job training funding is providing critical services for unemployed workers and helping them to get jobs in high-demand, high-growth industries. April 18, 2012.

Mitt Romney opened the general election campaign last night in Manchester, New Hampshire, using his acceptance speech to unleash a fierce attack on Barack Obama’s “false promises and failed leadership.”

He said little about his own policies, preferring to contrast his free enterprise vision with what he called Obama’s government-centered vision.

And buoyed by his victory, Romney felt free to issue a clear defense of privilege.

At the heart of the contrast Romney drew with Obama was the big lie. After the absurd charge that under Obama, we will have “effectively ceased to be a free enterprise economy,” Romney made his defense of privilege:

We’ve already seen where this path leads. It erodes freedom. It deadens the entrepreneurial spirit. And it hurts the very people it’s supposed to help. Those who promise to spread the wealth around only ever succeed in spreading poverty.

What world is he living in? In America, extreme levels of inequality have led to economic calamity. The Gilded Age extremes of the 1920s — when the richest 1% owned about 44% of all private wealth — were followed by the Great Depression. The excesses of the Bush years — when the richest 1% owned nearly 40% of all private wealth — were followed by the Great Recession. (more…)

When the trustees of the Social Security and Medicare programs release their annual reports, one of the first thing folks look for is whether the life of the trust funds that finance these retirement security programs have been extended or reduced.

Well, in Monday’s release, the life of the Social Security trust fund was reduced by three years, from 2036 to 2033 (without changes to inflows or outflows, at that point Social Security would be able to pay about 75% of scheduled benefits). The date for the Medicare Hospital Insurance fund was unchanged.

My CBPP colleagues take you through the relevant conclusions here and here. The key takeaway from where I sit is that these remain critically important programs whose future can and should be ensured by policy actions designed to enable both programs to continue to provide retirement security for generations to come. Such actions should be careful not to hurt the security of middle and lower income retirees.

My point here, however, is a simple one regarding the exhaustion of the trust funds. The figures below show the exhaustion dates projected by the trustees over the last few decades. Note that they move around — a lot. The Medicare hospital insurance trust fund has generally increased since the 1990s, as a function of legislative measures, like the Affordable Care Act, that extended its life (ACA added eight years to the HI fund). (more…)

Former Gov. Mitt Romney, the likely Republican Presidential nominee, loves government spending when it benefits him.

OK, we now know that Walmart’s meteoric rise to Mexico’s biggest retailer and employer appears to have been fueled by a massive bribery scheme. We know that millions of dollars were apparently paid to “gestores,” fixers whose job was to ensure that local zoning and environmental laws didn’t slow the approval of new stores. We know that when a whistleblower brought the scandal to the attention of Walmart headquarters in Arkansas, the company’s general counsel and compliance officers called for a full-fledged investigation. And we know that company’s senior leadership allegedly not only refused to allow such an investigation but strategically and intentionally defanged the ability of its investigative units to pursue such problems in the future.

As the New York Times investigation that brought all this light summarized, it found “credible evidence that bribery played a significant and persistent role in the Wal-Mart’s rapid growth in Mexico.”

We know in short that Walmart’s much heralded commitment to ethical behavior has once again proven to be a pathetically flimsy shield against the driving imperative of its “grow at any cost” business model. And we can see that even when grow at any cost means “break the law” the company is not only willing to overlook, but actually to reward, success purchased at that price.

We know all this, incidentally, even if it should turn out (almost tooth fairy implausibly) that every peso of the fees Walmart paid its fixers were stolen by those agents and none actually passed along as intended to bribe Mexican officials — because either way, whoever was paid off, Walmart knew that company funds had been used illegally, did nothing about it, and concealed the evidence from shareholders and law enforcement officials in both Mexico and the US.

The scale of this potential bribery dwarfs the fears that have been expressed that Rupert Murdoch’s NewsCorp’s reliance on bribing the police and hacking cell-phones to obtain stories in Britain might entail violations of the US Corrupt Practices Act by its US operations. Based on the Times’ investigation, Walmart’s greatest recent business success, the explosive growth of Walmex, was overwhelmingly empowered by a strategy of rushing new locations through Mexico’s permitting processes so quickly that Walmart’s opponents could not compete — the entire enterprise was based not on better service or prices, but on obtaining, if necessary through illegal means, a monopoly.

These revelations come on the heels of a series of previous scandals in which Walmart’s growth at any cost mandate led its leadership to abuse its workers, violate its ethical standard, and taken the company far too often out of the gray zone and into the black. It’s faced criminal charges for employing illegal workers, and outraged communities when it adopted the practice of locking its workers into some US stores overnight, so they could not even leave if they had medical needs. Recently workers at Walmart’s seafood processing facilities in Asia were subjected to human rights violations. Even in Mexico five years earlier, Walmart had been implicated in a massive scheme to avoid sales taxes, eventually paying $34.3 million in back taxes, but along the way refusing to take corrective action when the problem was flagged for its leaders. EXAMPLES EXAMPLES. (more…)

In the coming days and weeks we’ll be hearing a lot of misinformation about the Trustees Report from the Social Security Administration. It’s time to separate the myths from the realities:

Myth: “Social Security and Medicare have a cost problem.”

Fact: Medicare has a financial problem. As this chart shows, the cost of providing Social Security benefits is not out of control or skyrocketing.

Social Security is on an even keel for the foreseeable future. Twenty years from now it’s projected to be in a position to pay only 75 percent of benefits – but that’s easily fixed by lifting the payroll tax cap.

Myth: “Aging workforce strains Social Security, Medicare”

Fact: That’s a headline we saw repeated across the country in anticipation of the Trustees Report, but it’s wrong. What’s “straining” Social Security and Medicare today is the unequal distribution of income and a broken regulatory system for Wall Street that has put the entire economy under stress.

Social Security was actuarially stable after it was overhauled by the Greenspan Commission in the 1980s. The Baby Boomers were all alive and (mostly) working by then. So what really happened? (more…)

It was very big of Richard Parsons to admit that the repeal of Glass-Steagall (the law that had kept traditional commercial banking walled off from Wall Street speculators for more than 60 years) was part of the reason for the financial collapse of 2008 two days after he retired as head of Citigroup. Given that Citigroup never would have been created in its current elephantine form, and that Parsons never would have made many of the millions of dollars he had earned from being CEO without that repeal, it was quite a concession. I hope his conscience is eased. And I certainly hope his words open up a discussion about Glass-Steagall, which desperately needs to be reinstituted. What Parsons said in public is being talked about “in quiet rooms,” as Mitt Romney would put it, all over Wall Street right now. Most people who understand our financial system know it is true, but don’t want to change anything because they are making too much money the way things are now.

But this post is not about breaking up our banking monstrosities, the six conglomerates that control assets equivalent to two-thirds of America’s GDP. I have written about that many times before, and no doubt will again. But this post is about an even more fundamental issue to our nation’s future.

Since 48 hours isn’t generally enough time to rethink your life’s work and transform your entire philosophy, Parsons’ dramatic admission immediately upon retiring does raise some important questions about not only public policy, but about corporate morality — which some people would argue is a contradiction in terms, but I think is worth exploring a little. Parsons’ defenders will argue that he couldn’t speak out while representing his corporation, since the corporation as a whole certainly would not be in favor of raising questions about the very act of Congress that allowed them to come into existence in their current overgrown form. In fact, this line of thinking is explicit: Parsons only moral duty was to benefit his corporation’s shareholders — and all else, certainly including his own conscience as well as whatever random thoughts about public policy that might hurt the company’s bottom line, was not to be spoken.

This line of defense in regard to Parsons is the dominant morality in big business today. This ethic, if you can call it that, is very explicit: your only moral duty as an officer of the corporation is to the shareholders and the quarterly profit line of your company. But this ethos does not represent the way business leaders, let alone the rest of society, have always thought. The core idea of a social contract between business, government, workers, and the rest of society was for many decades a central ethic ascribed to by much of the business community. A wide variety of business leaders throughout American history have felt a responsibility for society. My friend Leo Hindery, formerly CEO of several major corporations, in his book It Takes a CEO and in his other writings, outlines very clearly that good CEOs and boards of directors have often taken a broader view. The view he advocates for is, as Hindery puts it, “that a responsible CEO has equal and concurrent responsibility to his employees, shareholders, customers, communities, and nation.” The notion of a business completely unconnected in its ethos from its workers and customers, along with the community and country in which it operates, is in fact a recipe for disaster — especially when companies are as large and powerful as these companies have become. What worshipers of the free market usually forget is that Adam Smith himself, the author of the “invisible hand of the market” idea, was a thoughtful and nuanced moral philosopher as well as economic theorist, and that his moral philosophy was quite different from the Ayn Rand-style “selfishness is a virtue” ideology. (more…)