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Last week several groups, including the United Steelworkers, petitioned the federal government to whack the latest trade mole – illegally traded auto parts from China.

With President Obama announcing creation of a new trade enforcement unit in his State of the Union Address, the feds probably will investigate. But even if they whack down the auto parts mole, experience has shown a new mole will pop up.

Mole-by-mole trade enforcement isn’t the solution to America’s massive trade deficit. Although conservative candidates revel in ridiculing Western Europe, America could learn crucial economic lessons from Germany, which doesn’t rely on Whack-a-Mole and maintains trade surpluses, including one with China in auto parts.

The Steelworkers – along with the United Auto Workers, the Alliance for American Manufacturing and Campaign for America’s Future – explained why the federal government must smack down the latest trade problem that has raised its ugly head.

China and several other countries promote their auto parts manufacturers by providing subsidies and engaging in additional practices banned by the World Trade Organization (WTO). As a result, the United States imports more auto parts than it produces, a situation that kills manufacturers and manufacturing jobs here.  For example, over the past 11 years, as the U.S. auto parts trade deficit increased by 867 percent, the Unites States lost 45 percent of its auto parts jobs – a total of 419,000.

The reason the groups sought action against China specifically is that its exports of auto parts to the United States have increased faster in the past three years than any other country’s and China supports its auto parts industry in ways that violate its commitments to the WTO.

For example, China provided $27.5 billion in subsidies to its auto parts industry between 2001 and 2010. It’s fine with the WTO if countries subsidize industries that sell their products domestically.  But it forbids subsidies for exported products because that distorts the free market, wrongly destroying jobs and industries in the countries that buy those artificially low priced goods.

Beijing also aggressively limited import of American-made auto parts. This is hardly startling. In December, China imposed steep tariffs on imported American-made sports utility vehicles and other large cars. And the WTO affirmed last week that China violated its trade commitments by restricting export of key raw materials. Earlier, the WTO supported President Obama’s imposition of tariffs on tires imported from China because Beijing had violated international trade rules.

China has prospered by breaking the rules. Electronics manufacturing is a good example. In a story about Apple’s experience, The New York Times described how America lost these jobs to China. Worker wages, while achingly low in China, were not the lure. And they were not the issue for Apple, a company that makes $400,000 in profit for every worker. It was a combination of other factors including the Asian supply chain and Chinese subsidies. (more…)

If you want to field a good baseball team, you don’t just show up on opening day and say “Let’s play.”  No, you carefully plan your team.  You make sure to get the best pitchers (“pitching, pitching, pitching,” as they say).  And you make sure your sluggers take a lot of batting practice.  In short you work at it and you plan.

The same fundamental idea applies to building a nation’s manufacturing sector.  With global competition so aggressive, it’s not enough to simply hope that other countries will buy your exports.  You have to make a concerted effort to build up your factories and then give them the tools to succeed.

Take Germany, for example. The German workforce continues to be well-paid and highly unionized while the country enjoys the position of being a manufacturing juggernaut.  The secret?  Thriving labor conditions are combined with smartly targeted niche production, industrial specialization, and deliberately localized financing.

Simply put, Germany has identified and implemented the key steps it needs to field a home run-hitting industrial sector.

However, almost every industrialized nation has adopted similar tactics.  Common sense tells us that manufacturing generates value-added income.  It produces wealth and supports good-paying jobs.  Why shouldn’t these countries do what it takes to win?

Sadly, the United States is the one major country without any semblance of a manufacturing strategy.  The U.S. has no concerted plan to address predatory trade from other countries or to focus investment on new areas of technology.  The Alliance for American Manufacturing (AAM) has repeatedly offered a key plan for U.S. manufacturing, one that would pull together efforts in these key areas.

The latest country intent on bypassing the U.S. on the road to industrial success is India.  As Adrienne Selko reports in IndustryWeek, the Government of India is ramping up its factories: (more…)

Germany, with a 6% unemployment rate, relatively low by economic measures both in Europe and USA has found that strengthening unions is an important way for reducing unemployment. It is also and important policy for reducing economic inequality.

The New York Times on June 8, reporting on the German economy stated, “Germany, with its 6% unemployment rate against the US 14 % unemployment rate,” enacted policies based on strengthening and building unions as a way of increasing consumer spending through higher wages paid to union workers. Thus this policy reduces unemployment by increasing workers purchasing power.

In addition, German policies encouraging union building and negotiation power found that it was able to reduce economic inequality. Proof of this is the fact that the top 1% of German households earns 11% of all income, virtually unchanged since 1970. However, in the US the top 1% makes more than 20% of all income, up from 9% in 1970. It should be noted that Germany has the tightest market regulation of banks in Europe.

Germany does not have a smaller deficit than the US, because it spends less; it has a smaller deficit, because its tax policies take a heavier toll from huge corporations. Thus, this reduces the total amount of governmental deficits that it carries. Unlike the US, the German government believes that fairness demands that its huge corporations pay a heavier share of taxes which increases their general government revenue stream. It is the obverse of US tax policies as illustrated by the Bush tax cuts. (more…)

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

Once again, the job numbers are dismal. In January, the U.S. economy created just 36,000 domestic jobs, far below the roughly 145,000 that economists had forecast. The unemployment rate fell, to 9 percent, but only because more and more discouraged workers are giving up and leaving the workforce.

The U.S. still has a jobs gap of about 14 million jobs, and that number is increasing as the labor force grows. Counting people who’ve given up, or who are working part time when they want full time jobs, the real unemployment number is around 17 percent. America now has about 25 million people either out of work or underemployed.

Meanwhile, corporate profits continue to set records. Profits in the third quarter of 2010 were 1.659 trillion, about 28 percent higher than a year before, and the highest year-to-year increase on record.

What’s going on? Very simply, America‘s corporations no longer need America’s workers.

As Harold Meyerson documents in a brilliant piece for The American Prospect, our most admired corporations — GE, Apple, Hewlett Packard, Intel — are creating ever more jobs overseas and relatively fewer at home. This has the double benefit of taking advantage of cheap labor abroad and disciplining workers to accept low wages at home. Along with the high unemployment rates have come declining earnings. Meyerson writes:

“In 2001, 32 percent of the income of the firms on Standard & Poor’s index of the 500 largest publicly traded U.S. companies came from abroad. By 2008, that figure had grown to 48 percent.” (more…)

By Richard Trumka
President, AFL-CIO

What kind of country are we? A country of isolated individuals fending for themselves or a country with shared values and a shared vision? A country with scant resources, fading glory and no choices? Or a blessed nation with the potential to do right by its people and be a leader in the world?

Those are the questions that confront our nation’s leaders, whether they acknowledge it or not. And while they wrestle with the questions, America’s working people already know the answer. We are a nation that still has choices. We don’t need to settle for stagnation and ever-spiraling inequality. We don’t need to hunker down, dial back our expectations and surrender our children’s hope for a great education, our parents’ right to a comfortable retirement, our own health and economic security, our nation’s aspiration to make things again — or our human right to advance our situation by forming a union if we want one. All these things are within the reach of the great country we live in.

But here in Washington, we live in an Alice-in-Wonderland political climate. We have a jobs crisis that after three years is still raging — squeezing families, devastating our poorest communities and stunting the futures of young adults. Yet politicians of both parties tell us that we can — and should — do nothing. And the Republican leaders in the House are instead using their first days in office to take away health care gains from 30 million families. (more…)

By Mike Elk
Of Campaign for America’s Future

Conservatives have started a disturbing pattern of attacking Democrats for the consequences of weak Buy America provisions in last year’s Recovery Act, even though they opposed the tougher Buy America provisions that would have averted the problems in the first place.

Last week, I wrote about how Republican National Committee Chairman Michael Steele launched this Republican talking point:

… Steele blasted the Obama administration in a fund-raising email earlier this week for allowing stimulus money designated for clean energy solutions to be spent on overseas companies. Which is interesting, because stimulus money going to overseas firms was the direct result of conservative opposition to attempts to keep that money in America.

Now it seems that Sarah Palin has joined the chorus of flip-flopping conservatives opposed to Buy America, who ignore the fact that progressive Democrats were fighting for Buy America language in the stimulus. Palin wrote on her Facebook wall:

“We were promised it would provide “green jobs” for Americans, but 80% of the $2 billion they spent on alternative energy went to purchase wind turbines built in China!”

While some of the money did go to foreign companies to spend on windmill components built overseas, a lot of that money went to the U.S.-based subsidiaries of foreign companies. Russ Choma, author of the study which Palin cites, rebuts Palin in this Politifact article:

The Investigative Reporting Workshop’s story on stimulus dollars and the wind industry came in two parts. In October 2009, it published its first analysis. The group found that of the $1.05 billion in clean-energy grants already handed out by the Department of Energy, about 84 percent — or $849 million — ended up in the hands of foreign wind companies. We spoke with Russ Choma, the story’s author, who explained that these grants are given to U.S.-based wind projects, but that many of these projects are being built by the American subsidiaries of foreign-owned companies. For instance, on Sept. 22, 2009, the DOE awarded $464.2 million to wind projects, and all of it went to local subsidiaries of foreign companies, according to the report. Those companies include Iberdrola, a Spanish company that received $250.9 million; the American subsidiary of Japan’s Eurus Energy, which got $91.3 million; and the American subsidiary of Germany’s E.ON Group, which received $121.9 million. Choma also points out that the wind turbine manufacturing industry in the United States is relatively weak compared to those abroad; of the 1,807 turbines erected in the United States as a result of the stimulus grants, foreign-owned manufacturers made 1,219, according to the report.

Besides Palin misrepresenting the facts, Palin fails to note that her fellow conservative Republicans opposed Buy America language, labeling it“bad for America.”

As I noted last week:

Republican presidential candidate John McCain went on CBS’s Face the Nation on February 8, 2009:

“I think it has policy changes in it which are fundamentally bad for America. For example, their ‘Buy America’ provision: that’s protectionism, and that did not work in any time in our history.”

As recently as October 2009, GOP Congressional leaders held an event to call for the rollback of Buy America provisions claiming that Buy America provisions were “costing American jobs.”

This is just another example of Republicans obfuscating their positions in order to win votes. But what’s disturbing is that there is a margin of truth in what they say. Because Buy America provisions were weak in the stimulus bill, some of the money (though not as much as Palin claims) did go overseas. It happened because Democrats failed to put up a strong enough fight.

That can’t happen again. As Congress considers a jobs bill, it’s important that we encourage members not to compromise on Buy America provisions. If Democrats allow Buy America to be weakened, conservatives will use the result to attack them anyway. They should instead force Republicans into a real, round-the-clock filibuster Buy America language. That will show just how patriotic conservatives are when its comes to using American taxpayer money to give Americans jobs.

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

China has surpassed Germany as the world’s largest exporter. It is the largest holder of American Treasury bonds, nearly $800 billion. America runs its largest trade deficit by far with China. The low price flood of goods – the Wal-Mart trade – is pervasive. Now the US even runs a growing deficit in advanced technology products.

China flouts the rules and the spirit of the “free trade” global economic order that the US constructed and, under Bill Clinton, invited China to join, granting both permanent normal trading relations and membership in the WTO.

China is a mercantilist nation, largely copying the successful Asian model developed by the Japanese and the Asian tigers. Its communist dictators plan and guide an economy geared to develop through exports. The elements of its model are clear, evident to all who would see, and not often admitted. They include:

An artificially undervalued currency, pegged to the dollar; An industrial policy that targets “pillar industries,” using a broad range of subsidies and protections to capture of world markets; A complicated maze of trade barriers that allows Systematic pressure on foreign multinationals to invest for export in China and to transfer their most advanced production techniques to China; Systematic efforts to pirate technology, trade secrets and copyrighted materials; A system of forced savings that funds investment

In the global economy, China is a rogue nation – with success that breeds envy and imitation. Its system works very well for China, but not for the rest of the world, as respected commentators like Martin Wolf of the Financial Times have pointed out. Fixing Global Finance, 2008 As the IMF warned, the dramatic trade imbalances run by China as a mercantilist nation and the US as the consumer of last resort are destabilizing and unsustainable – and contributed directly to the financial bubble and bust that drove the world into the Great Recession.

This poses a central problem. What do you do when the most successful nation in a trade regime routinely and systematically violates that regime?

You can deny reality. This has been a favored response of the China lobby, arguing that China is really far more open and free market than Japan and other East Asian countries, or trumpeting preposterously that the “World is Flat,” and there are no alternatives to the Washington consensus.

You can argue that the situation is improving. Successive administrations have claimed that the Chinese will inevitably become more democratic and more free as the economy grows, that the Chinese government has agreed to crack down on piracy, to curb its internal systems of bribes and controls, to let its currency adjust, to increase domestic demand and decrease forced savings. But after twenty years, the routine gets a bit tired. .

You can argue that the situation doesn’t matter. This is the favorite trope of the US foreign policy elite.(See most recently, Fareed Zakaria) China and the US have a symbiotic relationship, we’re told. They have to keep the dollar strong and cover our deficits. So we benefit by buying more than we produce and getting a flood of cheap products; they benefit by producing more than they buy.

But this too is hard to swallow after twenty years. The imbalances contributed directly to the financial casino that Wall Street opened — while US workers saw their jobs shipped abroad, their wages fall, and their prospects dim.

The Obama administration, not surprisingly, has tip-toed around this question. Obama led the drive to get the G-20, including China, to set up a process to monitor – and highlight — excessive trade imbalances. Unlike Bush, Obama accepted the decision of the US Trade Commission in cases concerning Chinese dumping or flooding of our markets. But as under Bush, the Obama Treasury Department ducked calling things by their real name, refusing to certify that China was doing what everyone understands it is doing – manipulating its currency to keep it undervalued.

Now, as the world starts to turn its attention to recovery – however prematurely – the question remains. How will the US handle a rogue nation with policies that are destabilizing for the globe, and ruinous for the American middle class?

At the end of the day, the US will have to have an aggressive trade policy to challenge Chinese mercantilism and a smart industrial policy to revive advanced US manufacturing. We know how to do it – to target a key industry with public supported R and D, smart procurement, planning to build supply chains, subsidies for investment here.

The president rightly says that capturing a lead in the new green industrial revolution is a matter of our nation’s basic economic security. Well, consider the way we deal with national security when it comes to the military. There’s no parading about free trade. No conservative blather about small government, or getting government out of the way. Here’s how the Pentagon’s recently published 2010 Quadrennial Defense Review described the Pentagon’s industrial policy:

America’s security and prosperity are increasing linked with the health of our technology and industrial bases. In order to maintain our strategic advantage well into the future, the Department requires a consistent, realistic, and long-term strategy for shaping the structure and capabilities of the defense technology and industrial bases–a strategy that better accounts for the rapid evolution of commercial technology, as well as the unique requirements of ongoing conflicts.

That strategy includes export controls, procurement policy, and “a strategic approach to climate and energy.”

China has made new energy a “pillar industry.” It has deployed the entire range of its mercantilist strategies to make itself the leading manufacturing of solar panels.

If capturing a leading edge of these industries is vital to our nation’s economic security, then shouldn’t we get serious about an industrial policy that goes far beyond the Pentagon?

***

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.

By Leo W. Gerard
International President

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

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

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

They are Toyota Republicans.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Okay, as we all know now that almost everything about Joe the Plumber is a lie. He doesn’t own a plumbing business and apparently is not even licensed as a plumber, but he does raise a legitimate concern about “spreading the wealth around.” The only problem is that in this country, when the government spreads the wealth around it usually means redistributing it upward.

That is certainly the case with the hundreds of billions of dollars being used to bail out the banks. The public has a real interest in keeping the banking system functioning. It has zero interest in subsidized the pay checks of wealthy bank executives or enriching the bank’s shareholders, which Secretary Paulson is now doing.

There is no question about what is going on here. The public is providing massive subsidies to the country’s major banks. The terms of the bailout were far more generous than what the banks could get from the private market. As a result, banks that might not have survived otherwise, or at least would have been forced to make serious cutbacks, can now keep operating as they had been.

This means that their high level executives will continue to draw salaries in the millions or tens of millions of dollars. It also means that the shareholders will continue to receive dividends.

This was not inevitable. Paulson could have imposed serious pay caps on executive compensation. In Germany, the banks that are getting government money can’t pay their executives more than 500,000 euros, about $680,000. The United Kingdom also limited executive compensation as part of its bailout.

In addition, the banks in the UK are prohibited from paying dividends as long as they have public capital. This makes sense not only as a punitive measure, but it will also help them to build up the capital they need to stay in business.

It has sometimes been argued that the healthy banks would not take part in a bailout under such conditions. Let’s see.

Suppose we apply the compensation limits/no dividend bailout rules, and then give everyone the option to opt in or out. Those taking the opt-out route will not benefit from the government’s extension of deposit insurance nor will they be able to count on access to the Fed’s discount window. My bet is that no banks go this route, but if any do, there will be plenty of investors happy to short their stock, assuming the government allows it.

But, Paulson went the bank welfare route. Joe the Plumber and everyone else should be very upset about this method spreading around the wealth. The top executives at the big banks will be getting the equivalent of several thousand years of TANF checks for a mother with two kids. And, unlike the mother receiving a TANF check, the bank honchos inflicted serious damage on the economy.

The big question is, which candidate is opposed to this sort of spreading around the wealth?