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David Sirota

By David Sirota
Political journalist, best-selling author and syndicated newspaper columnist

Redistributionist — as epithets go, the moniker is so mild, so … 2008. Today, we’re hammered by screeds against Democrats’ alleged socialism and President Obama’s supposed Marxism. The class war is clearly on — the paranoids and royalists of the world have united, seizing the means of propaganda production in these waning days of this year’s election campaign.

The onslaught, of course, is predictable. After all, this is an election season, which inevitably evokes redbaiting crusades by the plutocrats. Less predictable is this crusade’s traction. As Wall Street executives make bank off bailouts, as millions of Americans see paychecks slashed and as our economic Darwinism sends more wealth up the income ladder, it’s surprising that appeals to capitalist piggery carry more electoral agency than ever.

What could cause this intensifying politics of free-market fundamentalism at the very historical moment that proves the failure of such an ideology? Two new academic studies suggest all roads lead to ignorance.

The first, by Harvard’s Michael Norton and Duke’s Dan Ariely, finds that Americans grossly underestimate how much inequality our economy produces. Among the survey respondents, the vast majority said they believe the richest 20 percent own 59 percent of the wealth, when, in fact, that quintile owns 84 percent of the wealth. In other words, in spite of the data, many believe our system produces the moderate equality we desire, which means many see efforts to better spread wealth as a confiscatory overreach.

That, however, is not the full story of 2010. Because this now-ascendant economic view relies on misperceptions about inequality, we are still left to wonder: What accounts for those misperceptions? (more…)

Leo W. Gerard

By Leo W. Gerard
USW International President

The governors of the Gulf Coast states, all Republicans, asked the federal government for help dealing with the BP oil spill — yeah, the government, the very organization that their hero and mentor Ronald Reagan described as “the problem,” not the solution. “The problem” must deal with our oil problem, those Republicans told President Obama.

The President sent the help they requested, but at the same time, Republican mouthpieces like House GOP Conference Chairman Mike Pence accused the administration of responding too slowly to the spill. Republicans believe government should be shrunk so small it can be downed in a bathtub, that government should get out of the way and allow private enterprise to work.  But, simultaneously, they want government to clean up a catastrophe created by private industry.

Twenty-nine dead coal miners in West Virginia, seven dead workers at an oil refinery in Washington State, and 11 dead on a Gulf of Mexico oil rig followed by an ecological calamity all in the span of a month illustrate in blood the need for more regulation and stiffer enforcement. That is more government, not less. And it is government performing an essential basic role – protecting its citizens and preserving the environment in which they live.

Improving regulation and enforcement may cost money. But then, what is the value of the lives of those 47 workers killed in three workplace explosions in one month? What is the value of the oil-polluted Gulf waters and coastline? What is the value of untold oil-suffocated marine animals?

As the oil slick sloshed closer to the Florida coast, Sunshine State Republican Marco Rubio, a candidate for the U.S. Senate,  said of the clean-up by BP, which owns the oil-gushing underwater well, “I would prefer BP pay all of it, but ultimately I don’t even know if they have the resources to do that. . . they’re going to have to pay a significant chunk of this.”

Who does Tea-Party-darling Rubio suggest pay the remaining chunk? Taxpayers, of course. He is saying taxpayers should bail out BP, just as they did the too-big-to-fail banks when they got themselves in trouble.  

Too many taxpayers bought the Republican mantra that regulation is excessively costly for both business and government. Congress repealed banking regulations, then Wall Street gambling imploded the U.S. economy. Now, after that painful fact, Congress is trying to re-regulate banking.

It is so much cheaper to regulate and enforce than to pay for clean ups. Just like banking, that’s true for industry, which has repeatedly shown it can’t or won’t regulate itself. And clearly the free market fails to regulate business behavior, or Republican Rubio wouldn’t need to propose taxpayers bear costs of a corporate-caused catastrophe in the Gulf of Mexico.

BP is a perfect example. In March of 2005, an explosion at the BP refinery in Texas City, Texas killed 15 workers and injured 170 more. Afterwards, a study showed that one of the best ways to prevent catastrophes such as fires and explosions is a method called “process safety management.” Rather than counting slips and falls, process safety uses engineering and management techniques to constantly ensure that machinery and piping are in good condition, to meticulously record changes on refinery units, to properly train workers and to carefully schedule work to prevent fatigue. It also refers to an Occupational Health and Safety Administration (OSHA) standard governing refineries.

OSHA launched a program in June of 2007 to emphasize process safety, and in the first year completed 20 inspections and issued 456 citations to refiners.  “We were pretty shocked and dismayed by what we found,” said OSHA enforcement director Richard Fairfax.

These refineries knew about this program. Still they violated the regulations. Then an explosion at the Tesoro refinery in Anacortes, Wash. killed 7 workers on April 2. Eighteen days later, an explosion in the Gulf of Mexico killed 11 workers at a well owned by BP.

There was BP again, five years after the catastrophe at the Texas City refinery. This corporation didn’t regulate itself. The “invisible hand of the market” didn’t do it either.  

And let’s get something straight. These were not natural disasters, not earthquakes like in Haiti or hurricanes like Katrina. These are man-made disasters. And just as important, God didn’t have a hand in these catastrophes. Don Blankenship, the CEO of Massey Energy which owns the West Virginia mine that exploded, and Texas Governor Rick Perry, a Republican, both suggested the Lord’s wrath was at work. Perry said both the oil rig and coal mine explosions were “an act of God.” That would mean Massey and BP are not responsible. In the corporations-are-good and government-is-bad fantasy world where Blankenship and Perry live, society can’t hold corporations accountable because God is to blame.

Just like these Republicans, the American Petroleum Institute (API), which represents both drillers and refiners, does not believe in regulation. Ron Chittim, API senior policy advisor, told the San Antonio Express-News that no new regulation is necessary because the industry already must obey too many rules.

After the explosion at BP in Texas City, the United Steelworkers union, which represents oil and refinery workers, met with API and the oil industry in an attempt to write new safety guidelines. USW Vice President Gary Beevers abandoned the effort because he felt the industry was more concerned about image than safety.

Now, the USW is pressing Congress for stronger safety regulations and fines high enough to actually affect corporate behavior. As this year of fatal explosions has tragically illustrated, less government is a problem. More regulation is the solution.

You should have been with me on Saturday at my little Methodist Church in Pound Ridge, NY, where I used to live. I just rejoined it after several years attending a big church in nearby Stamford, CT, where I live now.

Here’s what happened. There’s an informal men’s breakfast meeting on the first Saturday of every month. This time some of the women also came to hear an outside speaker with close ties to the Discovery Institute and American Enterprise Institute (two very conservative think tanks). It was arranged by one of the members.

The speaker was there mainly to talk about his book,  “Money, Greed, and God.” You can imagine what he had to say – the “free market” should rule supreme. Capitalism isn’t the problem, it’s the solution.There’s no more greed in America than usual today. We’ll be okay, he said,  if we just “limit the government’s jurisdiction over the economy and civil society.”

One of our members said:

“I have a different title for your book, how about “Capitalism, a Love Story!”

I asked him what role government should have in setting new regulations for Wall Street or taking over management of the BP oil spill. His answers were:

1.)It wasn’t Wall Street’s fault that people took out mortgages they couldn’t afford, and
2.) BP is liable by law to pay for any damage the oil spill causes.They could be punished severely – it’s no problem!

I asked: 

“What about the millions of dead sea birds and the ruined fishing grounds? How can they ever repair and pay for that damage?”

He changed the subject.

Now I’m wondering how those in my new church liked what they heard – from him and from me.  Am I going to find “Tea Parties” there next? I’ve suggested to our fine Pastor that she and the Elders may want to decide whether to let this one matter die out or face it openly now. The next few days should be interesting, including church services today.

Kenneth N. Davis, Jr.
President, Economic Strategy Associates, Inc
Stamford, CT
Former U.S. Assistant Secretary of Commerce/International, IBM vice president and chief financial officer, and investment banker 

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Leo W. Gerard: The likes of Alabama Sen. Richard C. Shelby and other “Toyota Republicans,” as I call them, contend that GM and its partners in the Big Three American auto makers are antiquated and irrelevant and should be euthanized. You’ve written a book, “Why GM  Matters” that refutes Shelby’s premise by establishing that GM has remade itself as a company and is crucial to the American economy. I believe you. Why do so few others?

William J. Holstein: One major problem is that so many attitudes were formed five, 10, 20 years ago-long before GM began its transformation in earnest. These people, out of ignorance of the facts, are recycling old myths like these: GM can’t design cars that Americans want to drive. GM can’t innovate. GM hasn’t been willing to reduce its cost structure to compete internationally. And so on.
Then there are other people who are consciously trying to destroy or further cripple GM by recycling those arguments. One is U.S. Sen. Richard Shelby, who has four transplant factories in his home state of Alabama. It turns out that the Southern Republicans are working on behalf of their home states, and their home states have given hundreds of millions of dollars in incentives to Toyota, Nissan, Honda, Hyundai, BMW, Mercedes and others.
There is another lobby, which I call the “Bankruptcy Lobby,” that is trying to push GM into Chapter 11 because these bankruptcy lawyers and their law school allies would profit handsomely from it.

Gerard: So, to quote the book, here’s what you actually say:
“Free marketers had felt obliged to go along with the $700 billion {bailout} for Wall Street because Treasury Secretary Henry Paulson (the CEO of Goldman Sachs at the very moment that it had become embroiled in Wall Street’s love affair with mega-leverage) had convinced them the entire financial system would shut down if they did not.
“But when it came to the auto industry and the UAW, they wanted to slam the brakes on. Part of it also was sheer spite: Republicans were reeling after one of their most devastating electoral losses in history. The auto industry, and particularly, the United Auto Workers, had helped get the Democratic vote out and deliver the crucial swing states of Michigan and Ohio to Barack Obama.”
Are you actually saying that Republicans were willing to vote against the good of the country out of spite?

Holstein: Sad to say, but true. They are not acting in the national interest. They are playing for their home states. They have the right to do that. But everyone should be able to understand what they’re doing, and why. I blame the media for picking up comments from Shelby and others (“GM is a dinosaur”) and printing them, without subjecting them to critical scrutiny.

Gerard: Then you go on to say that the presence of “transplant” factories, or manufacturers like Honda and Toyota from foreign countries located in states like Shelby’s Alabama made a difference for some of these senators. And you cite Shelby as an example, noting that Honda, Hyundai, Mercedes and Toyota all located plants in Alabama with the help of state funds, but then he refused to provide federal funds for an American company. So are you saying that these senators were willing to vote for something that was bad for the U.S. – the bankruptcy of the Big Three – because it might provide more business for their home states?

Holstein: As I’ve said, I think that’s exactly what they’re trying to do.

Gerard: Oddly, considering the treatment of the UAW in the press, you manage not to lay blame for GM’s situation on the union. In fact, you say that by last spring, “The Harbour Report,” which you call the bible of car-making statistics, said Toyota factories needed 30 hours to assemble a vehicle while GM required 32. So what does that mean in productivity and difference in labor cost per vehicle?

Holstein: GM and the UAW have made dramatic progress in improving the way the company’s cars are manufactured. They’ve done that by absorbing the Toyota lean production method. And by altering their own relationship, by transferring health care costs to the union’s VEBA and by implementing a two-tier wage system. It is estimated that GM will have stripped out $5,000 from the cost of each vehicle by 2010. The relationship between GM and the UAW is by no means perfect, but they have made big progress in helping the company begin to approach the cost structure that Toyota has at its Georgetown, Kentucky plant. This is truly an historic response to Toyota.

Gerard: You cite a fascinating statistic in your third chapter. You say that although the transplants like Honda and Toyota located factories in the U.S. and American manufacturers make some cars overseas and import some parts, GM’s chief economist estimates that Toyota’s U.S. content is 50 percent while GM’s is 75 percent. What does that mean in the long run to Americans, in terms of jobs and the economy, for each GM car made?

Holstein: I don’t think it’s too dramatic to say that we are in the process of defining what kind of economy we want to have as Americans. Do we want to have an economy where we have many higher-paying jobs in finance, design, engineering, management, marketing (and in GM’s case, those jobs all depend on the folks working on the line) or do we want to send our kids to work in foreign-owned factories where a majority of the higher-value added functions are performed in Japan or Korea or Germany? You have heard it said, no doubt, that it doesn’t make a difference whether it’s a GM job in Michigan or Ohio or a Hyundai job in Alabama. The impact is the same for the American economy, so they say. But that statement is based on a very superficial understanding of auto manufacturing. In fact, it’s plain stupid.

Gerard: What I found striking about your book is that it took a hard look at Toyota as well. Here is a company that the Republicans glorified all through those hearings. Some said let the Big Three fail and Toyota can pick up the slack. And yet, Toyota’s sales fell off dramatically last year, and it posted a loss too. Wasn’t it simply affected by the same market forces that GM was? And if so, why does it retain an aura of perfection?

Holstein: Yes, Toyota has almost had a Teflon coating. The media and political leaders who are so critical of GM seem to turn a blind eye to what Toyota is doing. They glorified its Prius hybrids, which were undeniably a good thing, but ignored the fact that Toyota’s much more important push was into full-sized pickup trucks, which hasn’t worked. Toyota’s design also has fallen behind GM’s. Their cars aren’t as sexy or as fun to drive. They’re like appliances on wheels. Toyota’s reputation for quality is even suffering, as they launch recalls in the United States and Japan. Consumer’s Reports no longer issues an automatic recommendation for every Toyota car. So yes, things are changing at Toyota. I think we’re seeing them go through a period of consolidation or doubt. No company can avoid making mistakes forever.

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William J. Holstein is an author, writer and magazine editor. Before “Why GM Matters: Inside the Race to Transform an American Icon,” (Walker and Co.), he wrote two other books, “Manage the Media” and “The Japanese Power Game.” He has written for “United Press International,” “Business Week,” “The New York Times” and “Fortune” magazine and served as an editor for a decade for “Business Week,” managing the magazine’s Asian coverage.  He covered the American economy and the auto industry for “U.S. News.”

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In a related matter, U.S. Rep. Tim Ryan, D-Niles, spoke with passion in Congress on March 10 about how crucial it is to sustain the U.S. auto industry. Watch him here:
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By David Sirota
Author of “The Uprising: An Unauthorized Tour of the Populist Revolt Scaring Wall Street & Washington”

Last night on MSNBC, Rachel Maddow and I discussed John McCain’s new rhetoric claiming he supports better financial regulation.

But instead of focusing only on McCain’s words, we tried to follow in the spirit of the Institute for America’s Future’s call for a substantive debate by examining the Arizona senator’s career as a public official – one who’s formative regulatory experience was being a member of the Keating Five pressing federal financial regulators to stop doing their job in advance of the S&L crisis (ie. the most analogous crisis to today’s Wall Street meltdown).
You can watch the conversation here:

McCain, as the S&L scandal first suggested, is no run-of-the-mill free-market fundamentalist. Yes, he voted for the ill-advised repeal of the key Depression-era law that might have prevented the rampant consolidation and speculation that brought on today’s emergency.

But, then again, Bill Clinton and his DLC Democrats supported it too. Yes, McCain’s top economic adviser is Phil Gramm, the UBS investment banker who pushed through so much deregulatory legislation as a senator. But then again, Barack Obama’s top economic adviser is Robert Wolf, Gramm’s UBS boss.

Where McCain really leaps to the fringe and differentiates his extremism from others is in his use of the deregulatory label to publicly define himself. That’s how you can really tell what a politician believes in.

This is not a guy who just votes for the corrupt legislation his Wall Street friends tell him to vote for – this is a guy who has staked his name on being “fundamentally a deregulator,” as he recently described himself.

On 11/19/93, McCain took to the Senate floor to support an early financial deregulation bill and decry what he called “the tremendous regulatory burden imposed on financial institutions.” The guy who now claims to be the trustbusting Teddy Roosevelt back then lamented “the rapidly increasing regulatory burden imposed on banks is to cause them to devote substantial time, energy and money to compliance rather than meeting the credit needs of the community.”

Ten years later, McCain was bragging to the Associated Press that “I have a long voting record in support of deregulation,” and to CNN that “I am a deregulator. I believe in deregulation.”
And, during this year’s presidential campaign taking place in the shadow of financial meltdown, McCain was only months ago insisting on PBS that “we need less government [and] less regulation” and that “I’m always for less regulation.”
Of course, there’s plenty of good news for both Democratic partisans and ideological progressives about McCain’s about-face.

For partisans concerned only about Obama winning the election, McCain’s 180 on regulation opens up an obvious chance for Democrats to label him a against-it-before-I-was-for-it, say-anything-to-get-elected hypocrite – and Obama is (finally) moving to seize that opportunity.

For ideological progressives long fighting the good fight to resurrect the common-good regulatory agenda of the New Deal, McCain’s shift reflects a broader shift in the public debate. Suddenly, regulation isn’t a four-letter word anymore. Suddenly, even John “I’m always for less regulation” McCain is for regulation. That rhetorical shift could help create an election mandate forcing whoever wins the presidential contest to actually move away from Reagan-style extremism for the first time since, well, Reagan.

But as I told Maddow (and as I will examine further in my upcoming newspaper column on Friday), we have to all follow the money and the actions. Both Obama and McCain have taken huge sums of cash from the industries that caused this crisis. Both Obama and McCain continue to rely on Wall Streeters who engineered the meltdown as their top economic advisers (though only McCain employs lobbyists intimately involved in the crisis). That kind of influence doesn’t just slink away with a boom-bust crisis – it fights hard to make sure nothing concrete comes out of the situation (think the weak Sarbanes-Oxley after Enron).

Whether we get the kind of populist reforms will be decided by how much grassroots pressure is put on either of these potential presidents when they reach the Oval Office. The talk right now from both candidates may be good – and Obama is smart to point out McCain’s absurdly dishonest rhetoric. But talk is cheap when it comes time to write legislation.