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Robert Kuttner

By Robert Kuttner
Co-founder and co-editor of The American Prospect

As events in Egypt showed, you never know what will set off mass protest.

Here at home, over-reaching by a novice Republican governor of Wisconsin has finally triggered the protest marches that have been eerily missing during the more than three years of an economic crisis that has savaged the middle and bottom and rewarded the top.

It’s not as if we lack a politics of class. As mega-investor Warren Buffett famously said, there is plenty of class warfare in America, but the billionaire class is winning.

This economic crisis, after all, was brought on by excesses on Wall Street. Yet with the rest of the economy still mired in high unemployment and fiscal crises of public services, Wall Street was first to be bailed out, the first to return to exorbitant profitability, and the last to be held accountable.

Month after month, progressives have been asking each other, where are the mass protests?

You might expect popular indignation to be focused on the banks. Instead, the economic unease of ordinary people has been substantially captured by the Tea Party right and directed against government, while Beltway politicians of both parties are outdoing one another to vie for the role of more austere deficit hawk, which will hardly win back popular support for the public sector.

Then the newly energized Republicans made a couple of big mistakes. One was trying to cut too deep, on the heels of a massive tax cut for the rich. But the other miscalculation was to declare war on the one bastion of organized economic representation of regular people — the labor movement. (more…)

For the decade just ended on Dec. 31, 2009,  the U.S  total trade deficit with all nations totaled $6 trillion, by far the most in our history! Why is this figure important? Answer: it’s the best single measure of how well America is competing in its own domestic market, by far the largest and richest in the world. The huge, ever-growing trade debt says we’re losing badly in that competition. Every day, the United States must borrow $2 billion abroad to cover it. How did this happen? Who benefits and who is hurt by it? Most important, can it be stopped and turned around to our advantage? Who from business should take the lead with labor to get government action? Here are the blunt answers.

First, our trade deficits needn’t have happened at all!  America’s multi-national companies were the main culprits. Until the mid-1970’s, the United States maintained total annual balance of payments surpluses with the rest of the world. But with globalization growing, those companies urged very open U.S. trade policies to gain easier access  to other countries’ markets. They went too far in attacking existing trade policies that had helped domestic industries like textiles, steel, and autos. They claimed that free trade would work wonders for America! They stand by that claim despite our ravaged domestic industry and millions of unemployed. It’s time we all face the damage and correct it for the good of our country.

Most important, where does patriotism come into play? Who should take the lead to stop this national tragedy. Answer: The same multi-nationals that caused the problem! They have the power! They’ll benefit too under the right policies. The best known solution is based on a 2003 idea by Warren Buffett, one of the wisest business leaders. He said, “Our trade deficits are selling America out from under us.” We’ve got to stop it now! We must return to balanced trade with the rest of the world! He explained what happens to any nation that doesn’t earn as much as it spends in trade with other nations – it loses its freedom of action and becomes poor. That’s the fate that patriotic Americans cannot permit happening.

A bill to implement this idea was drafted in 2006, but got nowhere under President Bush and has not been taken up by President Obama due to opposition by  some “free trade” economic advisors. An estimated 5 million jobs would be created within 2 years and without any deficit spending, just by passing and instituting the needed legislation.

Where do we stand with U.S. multinationals on this proposal? There’s been no open dialog with them. Recent confidential discussions with one leading multi-national that also has big domestic U.S. operations were disappointing.  They like free trade policies and don’t see the domestic economy as their responsibility. For now, the blunt answer is “We strongly believe there’s a balanced trade policy that’s the answer for America, but we haven’t won the multi-nationals yet.”

Will a bold leader please stand up!

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

Kenneth Davis

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The fall elections are less than three months away, and the economy is signaling that America  is in deep trouble in earning its way in the world and providing jobs for our people. We’re piling up huge foreign debts but don’t have any plans for repaying them or putting people back to work.

I’ve been trying to present a proposal based on an idea from Warren Buffett in 2003. It became a Senate  bill, “The Balanced Trade Restoration Act of 2006.”  It could be updated and submitted to Congress in a few weeks.

It would create a system to assure that imports to our rich market will not exceed our exports. This balanced trade would strengthen U.S. industry, bring much  business back to American companies and provide millions of jobs for our workers. No deficit spending would be needed. It would also eliminate our ruinous trade deficits and related foreign borrowing. And it would be fully in accord with all GATT/WTO rules.

I am seeking reconsideration of this proposal by the Administration’s top trade executive. The goal is to get as fast a decision so that the plan can be presented to the public  before election day and ready for Congress soon after.

Kenneth N. Davis Jr.
President, Economic Strategy Associates, Inc.
Stamford, Conn.

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To submit a blog to Free Speech Zone, e-mail it to bstack@usw.org. Keep it to 250 words or fewer. You MUST include your full name, hometown, and state. You may attach a photograph of yourself. Please include a phone number. This WILL NOT be published. Posting any given blog is within the discretion of the USW.  No blog using foul language (this is a family site), false information (we don’t want to get sued), or unnecessary personal attacks (again, we don’t want to get sued) will be used. Wait a reasonable period of time, then blog again! This is a Free Speech Zone. 

Roger Bybee

By Roger Bybee
Milwaukee Freelance Writer

Recent news provides a set of unusally illuminating numbers.

They drive home several critical messages about where America stands today: the value (and limits) of President Obam’s stimulus efforts and the preposterousness of GOP tax cut plans as an economic cure for a very fragile economy, among others. The numbers truly tell much of the story:

16%: A crucial new report How the Great Recession Was Brought to an End was just released. Written by Princeton economist Alan Blinder and Moody’s Analytics chief economist Mark Zandi, it estimates that without Obama’s stimulus, TARP, and other emergency initiatives, unemployment would have reached 16% and 8.5 million fewer people would have jobs.

2015: Reflecting the limits of Obama’s stimulus, the Economic Policy Insitute noted,

Considering that even if the country were to sustain the strongest pace of job growth seen in the boom of the late 1990s (2.6% in 1998), it would still take until 2015 to return to pre-recession levels of unemployment. The much slower rate of growth seen in recent months suggests that without additional policy action, unemployment will remain high for years to come.

83%: “In 2007, of the 100 largest publicly traded U.S. corporations, 83 ran subsidiaries in offshore tax havens,” as Too Much reported. (more…)

Robert Reich

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

Forty of America’s richest families or individuals – almost all billionaires – have pledged to donate at least half their fortunes to charity. The total is a whopping $125 billion. Warren Buffett and Bill and Melinda Gates reached out to some 80 members of the Forbes billionaires list, seeking their pledges.

I think it’s admirable that Bill and Melinda Gates and Warren Buffett give so much to charity and have corralled other billionaires to do the same.

But I’m also appalled at what this reveals about how much money is now concentrated in so few hands. It’s more evidence we’re back in the late nineteenth century when robber barons lorded over the economy and almost everyone else lost ground. The Vanderbilts, Carnegies, Rockefellers made so much money they too could give away large chunks to charity and still maintain their outsized fortunes and their power and influence.

Most telling is how much wealthier the richest have become over the past year. Forbes Magazine’s list of the world’s billionaires (40 percent of them Americans), show them with an average net worth of $3.5 billion – and an average increase of $500 million in the last 12 months.

America’s median hourly wage, meanwhile, dropped last year, and it continues to drop. That’s not even counting the 15 million Americans still out of work.

Most Americans don’t need charity. They need good jobs.

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Cross-posted from Robert Reich’s Blog 

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Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three presidential administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including “The Work of Nations,” “Locked in the Cabinet,” and his most recent book, “Supercapitalism.” His “Marketplace” commentaries can be found on publicradio.com and iTunes. For copies of his articles, books, and public radio commentaries, go to www.robertreich.org.

Sen. Bernie Sanders

By Sen. Bernie Sanders
Independent U.S. Senator from Vermont

The American people are hurting. As a result of the greed, recklessness and illegal behavior on Wall Street, millions of Americans have lost their jobs, homes, life savings and their ability to get a higher education. Today, some 22 percent of our children live in poverty, and millions more have become dependent on food stamps for their food.

And while the Great Wall Street Recession has devastated the middle class, the truth is that working families have been experiencing a decline for decades. During the Bush years alone, from 2000-2008, median family income dropped by nearly $2,200 and millions lost their health insurance. Today, because of stagnating wages and higher costs for basic necessities, the average two-wage-earner family has less disposable income than a one-wage-earner family did a generation ago. The average American today is underpaid, overworked and stressed out as to what the future will bring for his or her children. For many, the American dream has become a nightmare.

But, not everybody is hurting. While the middle class disappears and poverty increases the wealthiest people in our country are not only doing extremely well, they are using their wealth and political power to protect and expand their very privileged status at the expense of everyone else. This upper-crust of extremely wealthy families are hell-bent on destroying the democratic vision of a strong middle-class which has made the United States the envy of the world. In its place they are determined to create an oligarchy in which a small number of families control the economic and political life of our country.

The 400 richest families in America, who saw their wealth increase by some $400 billion during the Bush years, have now accumulated $1.27 trillion in wealth. Four hundred families! During the last 15 years, while these enormously rich people became much richer their effective tax rates were slashed almost in half. While the highest paid 400 Americans had an average income of $345 million in 2007, as a result of Bush tax policy they now pay an effective tax rate of 16.6 percent, the lowest on record. (more…)

Cecil Roberts

Leo W. Gerard

 By Leo W. Gerard, International President United Steelworkers, and Cecil Roberts, International President United Mine Workers of America

As oil mucked the Gulf of Mexico and families mourned 11 dead rig workers, BP officials proclaimed that the corporation’s priority always was safety.

This tracked the tack taken by Massey Energy, whose officials also declared safety was paramount after an explosion in the corporation’s Upper Big Branch mine killed 29 workers.

CEOs commonly make such incongruous assertions to protect profits after corporate-caused disasters. They’re driven by the same factor that is fundamental to the catastrophes – greed.  

Nothing wrong with that, right? Not in a society that has converted greed from a vice to a virtue. Not in the place that inspired the book, “Greed is Good: The Capitalist Pig Guide to Investing.”  Surely it’s no problem in the land where “Greed” has its own game show on Fox and where Ayn Rand, the “money-is-the-root-of-all-good” philosopher, reigns as Republican queen long after her death.

Americans worship God on the Sabbath and the rich every other day. Billionaire Warren Buffett’s word is investment gospel.  Americans gave Wall Street banksters hundreds of billions in bailout money — protecting their multi-million dollar bonuses. But in the midst of the Great Recession caused by Wall Street recklessness, America has repeatedly delayed renewal of unemployment benefits and now is terminating federal health insurance support for the furloughed middle class.

Middle class workers are the ones who die in coal mines and on oil rigs.

Afterwards, CEOs say anything to save the bottom line – the one that will determine their bonuses.

Discussing the Upper Big Branch Mine disaster, Massey CEO Don Blankenship told stock analysts in a conference call late in April:

“Some of the implications have been that we don’t focus on safety or we put dollars in front of safety and nothing could be further from the truth.” 

Though the Mine Safety and Health Administration (MSHA) issued 1,342 safety violation notices to Upper Big Branch over the past five years, Blankenship explained that’s just life in the coal business:

“Violations are unfortunately a normal part of the mining process.”

In addition, Blankenship said the titles of two Massey programs proved safety was supreme:

 “The naming of those two programs speaks for itself: S1 – safety is job one; P2 – production is job 2. That’s been the case for my entire tenure.”

Still, 29 miners are dead. And dozens died at Massey mines in the past decade. Three died at Upper Big Branch between 1998 and 2010. The Massey dead include two workers who suffocated in a mine run by Massey subsidiary Aracoma Coal Co. on Jan. 19, 2006, just three months after Blankenship issued a memo ordering underlings to produce coal to the exclusion of other activities, such as building ventilation systems called overcasts. Aracoma officials pleaded guilty in December, 2008, to removing and failing to replace ventilation devices, the lack of which contributed to the suffocation deaths.

And Massey workers aren’t as sure as Don Blanekship that safety is job one. Several spoke to NPR about it. Teddy Cole, who worked a dozen years at Upper Big Branch, said Blankenship prioritizes production:

“It’s supposed to be safety first, but to me, it was production first.”

 Former co-worker Brian Jerral agreed:

“A lot of times, it’s production first and safety third.”

Adam Vance, who worked at two Massey mines, described a culture of greed:

“They cover [themselves] with their safety meetings, but the main thing Massey’s out for is to get that all-mighty dollar. If the coal ain’t running, they ain’t making no money.”

And it’s a lot of money for Massey — $1.02 million a day in 2008.

Massey miner Ricky Lee Campbell 24, of Beckley, W.Va., told reporters about his safety concerns on April 7. Massey suspended him a week later, then fired him. He has filed a federal whistle-blower complaint.  

Similar to Massey, BP officials claim safety is job one.

Shortly after BP named Tony Hayward CEO in 2007, he told the Houston Chronicle:

“I think we have the opportunity to set a new benchmark in industrial safety. . .We have to have a work environment where people don’t get injured or killed, period.”

That was significant since an explosion two years earlier had killed 15 workers and injured another 170 at BP’s Texas City, Texas oil refinery, and federal regulators blamed the catastrophe in part on cost cuts initiated by Hayward’s predecessor. The following year, BP admitted oil leaks into Alaska’s Prudhoe Bay were caused partly by cost cutting.

Despite Hayward’s safety assertions, another 11 workers are dead. And survivors told CNN that PB routinely cut corners and pushed production despite potential safety problems. They also told CNN co-workers had been fired for raising concerns about dangerous practices  that could delay drilling if remedied and that BP had insisted on an unsual process shortcut on the day of the blast.

Immediately after the rig explosion, BP contended its under-Gulf pipe was spewing only 1,000 barrels of oil a day. Fairly quickly, it revised that estimate to 5,000 barrels, but continued to refuse to make public its live video of the oil-churning pipe.  

After a freedom of information request and Congressional pressure forced BP to release the video, federal officials estimated as much as 40,000 barrels are being discharged daily.  

Still, BP’s Hayward flatly denied the existence of underwater oil plumes, saying:

“The oil is on the surface. There aren’t any plumes.”

And he discounted the effect of the unleashed oil on the environment:

“The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.”

Hayward had a good (greed-based) reason to deny access to the video, discount the amount of oil spewing into the sea and defy the assessment of government and university researchers who confirmed the plumes of dispersed oil stretching for miles beneath the ocean surface. BP will be fined based on the number of barrels of oil its well disgorges into the gulf – somewhere between $1,100 and $4,300 a barrel — depending on whether the government can prove gross negligence.  

David Leonhardt, an economics columnist for the New York Times, described BP’s Texas City, Gulf of Mexico and Alaska crises this way:

“Much of this indifference stemmed from an obsession with profits, come what may.”

Greed.

It’s one of the seven deadly sins. When it afflicts corporate CEOs, it’s deadly to workers.

Honest profit is fine. But it’s perverse to celebrate greed, to elevate it over human life.

Les Leopold

 By Les Leopold
Author, “The Looting of America”

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. (Berkshire Hathaway annual report, 2002)

Those were some wise words from Warren Buffett, the Will Rogers of the financial world. He used to say such things at his stockholder meetings, where tens of thousands come to savor his homilies and celebrate their own good fortune–a kind of Woodstock for people who dig money more than sex, drugs and rock n roll. His fans love to party with the iconic multi-billionaire from Omaha with the sparkle in his eyes. The guy makes people feel proud to be Americans and capitalists, big and small.

Buffett’s reputation is as a straight shooter. For years he had only contempt for fantasy finance securities that contain nothing but air and risk. He was among the first to see that if we let toxic securities like synthetic collateralized debt obligations run wild, we’d soon be engulfed in a financial crisis. (For an easy to read account of these “financial weapons of mass destruction” please see The Looting of America.)

But times have changed. Today, Buffett is all about the bottom line. He’s taken to defending the biggest shysters in the country–and argues that his own questionable derivatives should be shielded from government regulators.

If this were just about Warren Buffett, it wouldn’t be worth giving him more ink. But his betrayal comes at a time when Congress is finally realizing that most of us are truly upset with Wall Street’s looting of America. While big bank profits and bonuses are reaching record highs, April’s unemployment statistics show that there are over 29 million of us without work or forced into part-time jobs. The BLS U6 jobless rate is at 17.1 percent.

There’s a genuine populist upsurge that might force the Senate to pass legislation that would bust up the largest banks, reintroduce Glass-Steagall, control dangerous derivatives and provide consumer financial protection. Buffett has decided instead to lend his credibility to defend Wall Street against Main Street. (Hey Warren, how about that high speed trading that tore the stock market apart yesterday. Are you for that too?)

Apparently something happened on the way to the bank–or actually, on the way to the bank bailout. Good old Mr. Buffett is no dummy. When he saw the Goldman Sachs alumni and groupies in government (like Henry Paulson at Treasury and Tim Geithner at the Fed) shoveling billions (not millions) of taxpayer dollars into Goldman, one of the richest financial institutions in history, he knew where next to put his own money. (Bob Kuttner’s Presidency in Peril provides a virtual yearbook of Goldman Sachs graduates now in top government posts.)

The government, led by Paulson, the former Goldman Sachs CEO, pumped $10 billion of TARP money into Goldman Sachs at 5 percent interest. But the oracle of Omaha, put in $5 billion and got 10 percent interest plus extra goodies if the stock price rose. Now that’s a smart businessman.

Mr. Buffett also knew that Goldman Sachs would probably snag lots more ($12.9 billion, in fact) in bailout funds via AIG, which had insured billions of Goldman’s toxic assets–including a bristling arsenal of financial weapons of mass destruction. Goldman Sachs was going to get a free ride on two colossal bad bets. One bet was on complex derivatives that turned bad and festered on its balance sheet. It had been a big gamble for Goldman to hold those assets, but the returns (while they lasted) and the upfront fees were just too juicy to resist. Goldman’s second big bet was that AIG was sound enough to insure those risky derivatives against default. Wrong again. Had AIG gone into bankruptcy, Goldman Sachs would have received pennies on the dollar for their bad bets. Hey, that’s capitalism, isn’t it? Well, maybe once upon a time.

Fortunately for Goldman, their old colleagues who were now in control of the government purse strings decided that AIG was way too big to fail. So we bailed them out to the tune of about $180 billion. But the Goldman Sachs alumni went one step further. They allowed AIG to pay off its debts in full to Goldman Sachs: $12.9 billion went straight to the company’s bottom line and bonus pool. And pass those interest payments over to Mr. Buffett! If the journalists around Buffett weren’t so awestruck by his wealth and rock star status they might’ve asked him: Is this capitalism too?

So here’s Mr. Buffett holding a big fat slice of Goldman Sachs, and now the SEC comes busting in, accusing the bank of fraud. Goldman Sachs is charged with loading up investors with a package of financial transactions called Abacus that it knew amounted to toxic junk–thus enabling a hedge fund friend, John Paulson (no relation to Henry), to make a billion by betting against the Abacus deal. What kind of toxic junk are we talking about? The very same synthetic collateralized debt obligations that Buffett once called “financial weapons of mass destruction.” Mr. Buffett, Berkshire Hathaway and its delirious stockholders are now the proud owners of said weapons.

So what does Mr. Buffett do? The plain speaking dude from the Great Plains takes a stand–in defense of Goldman Sachs and its CEO Lloyd Blankfein. Then he steps smack into the financial cow pie by endorsing the Abacus financial weapons of mass destruction.

“I don’t have a problem with the Abacus transaction at all, and I think I understand it better than most.”

You betcha. Those darn critters are really kind of cute–when they’re paying off big time for Berkshire Hathaway.

Buffett didn’t stop there. He’s lobbying hard on Capitol Hill to protect his own special derivatives, which he developed just before the crash. The financial reform Congress is considering would require companies like Berkshire to set aside large sums to cover potential losses on their risky investments. But if Buffett gets his way, the legislation will include a provision to “largely exempt existing derivatives contracts from the proposed rules,” reports the Wall Street Journal. “The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.”

In other words, Mr. Buffett is following in the footsteps of AIG, which made hundreds of billions of bets without posting collateral. But what the heck, Warren is as good as gold, isn’t he?

Since Buffett says he understands these shady financial products “better than most,” maybe he can explain to us what economic value his special derivatives added to our economy. I can hear echoes of Claude Raines in Casablanca: “I’m shocked, shocked to find that gambling is going on in here!” It sure is and Mr. Buffett is now making himself quite at home at the poker tables. It seems casino capitalism is fine with him after all, even if it’s a criminal scam.

I hope Buffett’s fans realize that their dividends and capital gains are partly derived from taxpayer bailouts and from those financial weapons of mass destruction Buffett used to denounce. You know, the ones that blew up the global economy and put tens of millions of Americans out of work?

Maybe it’s time to hold our billionaires to account, even the nice ones.

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Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.