“They’re Stuck With The Mess”: Why Ordinary People Bear Economic Risks And Donald Trump Doesn’t
Thirty years ago, on its opening day in 1984, Donald Trump stood in a dark topcoat on the casino floor at Atlantic City’s Trump Plaza, celebrating his new investment as the finest building in Atlantic City and possibly the nation.
Last week, the Trump Plaza folded and the Trump Taj Mahal filed for bankruptcy, leaving some 1,000 employees without jobs.
Trump, meanwhile, was on twitter claiming he had “nothing to do with Atlantic City,” and praising himself for his “great timing” in getting out of the investment.
In America, people with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble.
The laws protect them through limited liability and bankruptcy.
But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills, have no such protection. Jobs vanish, skills are suddenly irrelevant, and home values plummet.
They’re stuck with the mess.
Bankruptcy was designed so people could start over. But these days, the only ones starting over are big corporations, wealthy moguls, and Wall Street.
Corporations are even using bankruptcy to break contracts with their employees. When American Airlines went into bankruptcy three years ago, it voided its labor agreements and froze its employee pension plan.
After it emerged from bankruptcy last year and merged with U.S. Airways, America’s creditors were fully repaid, its shareholders came out richer than they went in, and its CEO got a severance package valued at $19.9 million.
But American’s former employees got shafted.
Wall Street doesn’t worry about failure, either. As you recall, the Street almost went belly up six years ago after risking hundreds of billions of dollars on bad bets.
A generous bailout from the federal government kept the bankers afloat. And since then, most of the denizens of the Street have come out just fine.
Yet more than 4 million American families have so far lost their homes. They were caught in the downdraft of the Street’s gambling excesses.
They had no idea the housing bubble would burst, and didn’t read the fine print in the mortgages the bankers sold them.
But they weren’t allowed to declare bankruptcy and try to keep their homes.
When some members of Congress tried to amend the law to allow homeowners to use bankruptcy, the financial industry blocked the bill.
There’s no starting over for millions of people laden with student debt, either.
Student loan debt has more than doubled since 2006, from $509 billion to $1.3 trillion. It now accounts for 40 percent of all personal debt – more than credit card debts and auto loans.
But the bankruptcy law doesn’t cover student debts. The student loan industry made sure of that.
If former students can’t meet their payments, lenders can garnish their paychecks. (Some borrowers, still behind by the time they retire, have even found chunks taken out of their Social Security checks.)
The only way borrowers can reduce their student debt burdens is to prove in a separate lawsuit that repayment would impose an “undue hardship” on them and their dependents.
This is a stricter standard than bankruptcy courts apply to gamblers trying to reduce their gambling debts.
You might say those who can’t repay their student debts shouldn’t have borrowed in the first place. But they had no way of knowing just how bad the jobs market would become. Some didn’t know the diplomas they received from for-profit colleges weren’t worth the paper they were written on.
A better alternative would be to allow former students to use bankruptcy where the terms of the loans are clearly unreasonable (including double-digit interest rates, for example), or the loans were made to attend schools whose graduates have very low rates of employment after graduation.
Economies are risky. Some industries rise and others implode, like housing. Some places get richer, and others drop, like Atlantic City. Some people get new jobs that pay better, many lose their jobs or their wages.
The basic question is who should bear these risks. As long as the laws shield large investors while putting the risks on ordinary people, investors will continue to make big bets that deliver jackpots when they win but create losses for everyone else.
Average working people need more fresh starts. Big corporations, banks, and Donald Trump need fewer.
By: Robert Reich, The Robert Reich Blog, September 21, 2014
“Mitch McConnell’s 47 Percent Moment”: There For Millionaires And Billionaires, They Know They Can Count On Mitch
A year ago, President Obama convulsed the White House Correspondents Dinner when he responded to complaints that he wasn’t meeting enough with the Republican leaders in the Congress: “Why don’t you get a drink with Mitch McConnell?’ they ask. Really?” Obama asked the audience incredulously. “Why don’t you get a drink with Mitch McConnell?”
The Kentucky senator, continuously partisan and mean spirited in public, earned the jab by leading a record number of filibusters as Senate minority leader during Obama’s tenure, forcing more than a quarter of all cloture votes in the history of the Senate since the beginning of the Republic.
Now, many political bookies, however prematurely, have made Republicans favorites to win the Senate majority. What will McConnell do if he must go from opposition to governing? Last week, the Nation Magazine, which I edit, along with Lauren Windsor of the Undercurrent, released an audiotape of McConnell’s revealing remarks to a private June strategy session of deep-pocket Republican billionaire donors, convened by the Koch brothers.
Introduced by the general counsel of Koch Industries, McConnell begins by paying tribute to his patrons, thanking the Koch brothers personally “for the important work you’re doing. I don’t know where we’d be without you . . . rallying, uh, to the cause.”
So what is the cause? Putting Americans to work? Rebuilding the middle class? Unleashing free market answers to catastrophic climate change?
No, McConnell can’t seem to get himself to address a positive agenda. He envisions only more obstruction. If he is majority leader, he promises, “we’re not going to be debating all these gosh darn proposals. That’s all we do in the Senate is vote on things like raising the minimum wage . . . extending unemployment . . . the student loan package the other day, that’s just going to make things worse.”
With Republican majorities, McConnell tells the fat cats, “We own the budget. So what does that mean? That means that we can pass the spending bill. And . . . we will be pushing back against this bureaucracy by doing what’s called placing riders in the bill. No money can be spent to do this or do that”
So what parts of government would McConnell starve of funds? Although many Republicans are campaigning as faux populists against crony capitalism, McConnell doesn’t suggest that he’ll cut subsidies to Big Oil or the lard-filled budgets of the Pentagon. No, McConnell pledges to his millionaire funders “We’re going to go after them on health care, on financial services, on the Environmental Protection Agency, across the board [inaudible].”
For all his posturing about Obama’s dictatorial usurpations, McConnell reassures the millionaires that “we now have, I think, the most free and open system we’ve had in modern times.” Why? Because in the Citizens United decision, the conservatives on the Supreme Court overturned established precedents to give corporations the right to spend unlimited funds in elections. This is a victory for “open discourse,” McConnell argues, making clear just how he expects the corporations to make their opinions known:
“The Supreme Court allowed all of you to participate in the process in a variety of different ways. You can give to the candidate of your choice. You can give to Americans for Prosperity, or something else, a variety of different ways to push back against the party of government.” (Americans for Prosperity is the right-wing Koch funded political vehicle that has been called the “third-largest political party in the United States.”)
For McConnell, the court’s decision to unleash corporate contributions helped heal the pain from what he described as the “worst day of my political life.” Not the 9/11 terrorist bombings or the disastrous vote to invade Iraq. No, according to McConnell, the worst day of his political life was when a Republican congress passed and George W. Bush signed the McCain-Feingold campaign finance reforms, that put some limits of big money in our politics.
Mitch McConnell is surely a man for these times. Big money dominates our politics and corrupts our politicians (including, most recently, McConnell’s campaign manager, who resigned because of his possible involvement in bribing an Iowa state legislator to change his support from Michele Bachmann to Ron Paul in the 2012 Iowa Republican presidential primary). Legislators like McConnell openly serve “the private sector,” currying their donations while serving their interests.
As Sen. Elizabeth Warren (D-Mass.) said while campaigning for Alison Lundergan Grimes, McConnell’s underdog challenger: “Mitch McConnell is there for millionaires and billionaires. He is not there for people who are working hard playing by the rules and trying to build a future for themselves.”
Voters aren’t stupid. Given his views and his record, it is not surprising that McConnell is one of the most vulnerable of Republican incumbents, with Grimes running only a few points behind him. Nor is it surprising that more than $100 million may end up being spent on the race, making it one the most expensive contests in Senate history. Millionaires know they can count on McConnell.
McConnell ended his talk by repeating the Republican mantra against taxes and regulation, arguing, “If we want to get the country going again, we need to quit doing what we’ve been doing. Was it Einstein that [sic] said the definition of insanity is doing the same thing over and over again expecting a different result?” Let’s hope the voters of Kentucky come to the same conclusion about reelecting a senator who represents donors far better than voters.
By: Katrina vanden Heuvel, Opinion Writer, The Washington Post, September 3, 2014
“Inequality Is Natural”: The Big, Long, 30-Year Conservative Lie
First came Occupy Wall Street, and its pitch-perfect slogan on inequality: “We are the 99 percent.” After that movement fizzled, Thomas Piketty, the handsomely ruffled French professor, released a 685-page book explaining that we really were living in a new Gilded Age in which the wealth gap was as wide as it had ever been. Finally, in June, one of the plutocrats sitting atop the piles of money he made in the digital revolution, Nick Hanauer, wrote an article in Politico magazine—it’s the most-shared story ever on Politico’s Facebook page—warning that the pitchforks were coming, and rich people like him should advocate for a healthier middle class and a higher minimum wage.
The debate over inequality is now raging, and most Americans are unhappy about the widening divide between the haves and have-nots. Hanauer has been making the same case for years, drawing heaps of both praise and scorn. Forbes magazine has alternately called Hanauer insane and ignorant. His TED University presentation calling for a $15-minimum wage was left off the organization’s website because it was deemed too “political.” That’s nothing next to Piketty’s detractors, who at their most extreme accused him of twisting his data.
Hanauer and Piketty inspire these broadsides because they are challenging, in a far more aggressive way than plutocrats and economists usually do, the conservative economic orthodoxy that has reigned since at least the 1980s. Under Ronald Reagan, we called it trickle-down economics, the idea that the men who can afford their own private jets—they’re usually men—deserve gobs of money because they provide some special entrepreneurial or innovative talent that drives the American economy.
That’s well known. Far less often discussed is the flipside of this belief: that helping the less well off will dampen the American money-generating engine—that it will hurt growth, because the only thing that inspires the “job creators” to work so hard is the promise of insanely vast financial rewards. Poverty is a necessary evil in this worldview, and helping the less well off creates a “culture of dependency,” which discourages work. “The United States thrives because of a culture of opportunity that encourages work and disdains relying on handouts,” Matthew Spalding of The Heritage Foundation wrote in 2012, neatly summing up the conservative ethos.
Conservatives have dominated discussions of poverty for a generation with arguments like this one. It’s completely wrong. It’s more than that—it’s just a lie, concocted as cover for policies that overwhelmingly favored the rich. But it took the worst economic crisis since the Great Depression for many economists, liberal or not, to finally say publicly what many had long argued: Inequality is bad for the economy.
The latest to say so is the rating agency Standard and Poor’s, not exactly a bastion of lefty propaganda. An S&P report released August 5 says that rising inequality—gaps in both income and wealth—between the very rich and the rest of us is hurting economic growth. The agency downgraded its forecast for the economy in the coming years because of the record level of inequality and the lack of policy changes to correct for it. The report’s authors argue against the notion that caring about equality necessarily involves a trade-off with “efficiency”—that is, a well-functioning economy.
To be sure, they’re not making a case for a massive government intervention to help low-income Americans. They discuss the benefits of current policy proposals—like raising the federal minimum wage to $10.10 per hour—with the caveats that such changes could have potential negative consequences—like dampening job growth. (Most economists agree that such a small hike wouldn’t have that impact.)
At its core, though, the S&P report does argue that pulling people out of poverty and closing the gap between the 1 percent and the 99 percent will increase economic growth. The authors argue for some redistributive policies, like increased financial aid for post-secondary education. “The challenge now is to find a path toward more sustainable growth, an essential part of which, in our view, is pulling more Americans out of poverty and bolstering the purchasing power of the middle class,” the authors write. “A rising tide lifts all boats…but a lifeboat carrying a few, surrounded by many treading water, risks capsizing.”
It’s an important moment for such a debate. The Great Recession was a great equalizer, a crisis in which many in the middle class, and even upper-middle class, fell all the way to the bottom and relied on the government safety net. They learned what anyone who cared to look at the data already knew: The vast majority of people relying on government benefits are suffering a temporary setback that they will recover from, as long as they have a helping hand. The holes in the safety net also became more apparent. Even Paul Ryan, the Republican congressman from Wisconsin who has set his blue eyes on higher office, adequately diagnosed many of the problems with anti-poverty programs when he introduced a new plan last month. (Whether he would actually want to pay for the changes he calls for is debatable.)
Closing the gap by lifting low-income families out of poverty could do more to help the economy than any number of tax credits for “job creators” might, which is what Hanauer argued in Politico. And the S&P report puts more support in his corner.
On the question of what to do, there is widespread agreement on boosting educational attainment and increasing salaries at the bottom end. Policymakers have had a lot of time to think about how to help the middle class, since real wages began declining in the mid-1970s. Many of the problems of inequality have policy solutions ready to go, spelled out in a white paper stuffed in someone’s desk drawer. Why has it taken so long to think about addressing it? Was the political might of the right so overwhelming that they couldn’t speak up until people like Hanauer saw, as he warned in his essay, that the pitchforks would be coming for them?
By: Monica Potts, The Daily Beast, August 8, 2014
“Being Rich In America Is Tough”: The Continuing Agonies Of The Super-Rich
As we well know by now, being rich in America is tough. Imagine driving your Porsche out the Goldman Sachs garage, intent on a relaxing weekend at your Hamptons retreat, only to find some wretched Occupy sympathizer giving you a dirty look through the haze of patchouli and resentment that surrounds him. Who could endure it? No wonder they keep comparing their fearful existence to that of the Jews of late-1930s Germany.
But now, according to the Washington Examiner, America’s plutocrats have a new worry:
Democratic super PACs have outraised their Republican counterparts by millions, a factor attributed in part to GOP donors’ fear of being targeted by the Internal Revenue Service—or “getting Koch’ed.”
Republican political operatives concede that there are multiple reasons for the Democrats’ advantage in super PAC money raised.
Among them: Labor unions have become among their largest and most consistent donors. But this election cycle, two new challenges have chilled GOP super PACs’ effort to raise cash from wealthy individuals and corporate donors: anxiety that they could get slapped with an IRS audit and unease that donating could lead to public demonization.
Not to let facts intrude on their paranoid fantasies, but let’s not forget what the IRS scandalette actually involved. There’s never been any credible allegation that anyone was audited because of their political beliefs. There’s never been any allegation that the IRS “targeted” donors to Republican super PACs. The worst thing that happened was that some Tea Party groups that had applied for 501(c)(4) status—claiming, utterly falsely, that they were charitable, non-political organizations, I might add—had to wait longer than they should have to get approval on their applications. (And, I have to repeat, when you’re waiting for your approval, you’re permitted under the law to act as though you’ve gotten your approval. You can raise and spend money, which they did.)
On the second point, I suppose one might be concerned that Harry Reid would go to the Senate floor and denounce you for undermining our democracy with your donations, even if those donations are perfectly legal. But in order for that to happen, you’re really going to have to get into the first rank of donors. A couple hundred thousand dollars isn’t going to do it; in order to be “demonized,” your contributions are going to have to reach at least eight figures.
Nevertheless, I’m sure it’s unpleasant for the Kochs to get criticized by politicians. But being criticized—even vigorously, and even sometimes unfairly—is the price you pay for certain choices you make. If you decide to do anything that puts your efforts in front of the public—running for office, becoming an actor, or being a writer, among other things—people who don’t like that work are going to tell you so. They may even say rude things, like “You’re an idiot” or “You suck,” or whatever other insults their limited creativity can produce. People track me down to tell me things like that all the time. It certainly isn’t fun to hear, but since I’ve chosen a profession where my work is public, it’s just part of the deal.
Spending large amounts of money on politics is both a right and a privilege. Some rights, like the right to practice your religion, are available to everyone. The right to spend significant political money is technically available to everyone, but in practice is only open to those who have large amounts of money to spend. In the same way, Lebron James and I are both free to dunk basketballs, but because the cruel genetic lottery left me a couple of ticks under six feet, I can’t actually exercise that freedom.
Obviously, the IRS shouldn’t audit anyone because of their political beliefs, and fortunately, we have no reason to think it does. Part of me suspects that a lot of conservative donors are using the fear of “demonization” and audits as an excuse to brush off requests for contributions, since once you become a big donor, you’re going to get besieged by candidates and organizations asking you for money. But if super-rich conservatives are sincerely afraid of the fallout from giving, they have two choices: they can make contributions that don’t put them quite on par with the Kochs, and thereby be ignored, or they can just decide to suffer the slings and arrows bravely in the cause of liberty. It’s up to them.
By: Paul Waldman, Contributing Editor, The American Prospect, July 16, 2014
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