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“A Cancer Growing On Our Society”: Progressives Must Stand Up Against The Right Wing War On Public Employees

For many years the American Right — and many of the most powerful elements of corporate and Wall Street elite — have conducted a war on public employees.

Their campaign has taken many forms. They have tried to slash the number of public sector jobs, cut the pay and benefits of public sector workers, and do away with public employee rights to collective bargaining. They have discredited the value of the work performed by public employees — like teachers, police and firefighters — going so far as to argue that “real jobs” are created only by the private sector.

Last week a conservative court ruled that by going through bankruptcy the city of Detroit could rid itself of its obligation under the state constitution to make good on its pension commitments to its retirees.

It should surprise no one that the Republican Chairman of the U.S. House Budget Committee, Paul Ryan, is demanding that a budget deal with the Democrats include a 350 percent increase in pension contribution by all civilian federal employees. That would effectively mean a pay cut of about 2 percent for every federal worker. And that cut would come after a three-year pay freeze and multiple furloughs caused by the Republican “sequester.”

Unbelievably, in Illinois the right wing Chicago Tribune and the state’s corporate elite snookered the Democratic-controlled legislature into passing changes in that state’s pension laws that slashed the pensions of its public employees. The changes affected all state employees and many of Illinois’ teachers. All of them had faithfully made their required contributions to the state’s pension funds for years, even though the legislature regularly failed to make its required payments so it could avoid raising taxes on the state’s wealthiest citizens.

Illinois cut teacher pensions, even though many do not participate in the Social Security system and the state pension is their only source of retirement income.

All of these attacks on public employees — and cuts in public sector expenditures in general — are premised on two myths that are simply untrue.

Myth number one. The Right claims we live in a period of scarcity that requires extreme public sector austerity. They claim “we just can’t afford” to pay people like teachers the pensions that we had agreed to in the past, because “America is broke.”

This, of course, is simply wrong. In spite of the hardships brought on by the Great Recession that resulted from the reckless speculation of Wall Street banks — and even though George Bush thrust our country into an unnecessary war that cost our economy a trillion plus dollars — America is wealthier today than ever before in its history.

Per capita income in America is at an all-time high because productivity per person has gone up 80 percent since 1979.

Of course the Right is able to make the case that “we can’t afford” to pay our teachers as much as we once did, because everyday Americans feel like they have been losing ground – which of course they have. That’s because virtually every dime of that increase in our per capita national income went to the top 1 percent.

The solution to this problem is, of course, to change the rules of the game that have been rigged over the last three decades to bring about this result. By cutting the incomes, pensions and collective bargaining rights of middle class public employees rather than raising taxes on the wealthy, we make the problem worse.

But from the standpoint of the corporate Wall Street elite, that is precisely the idea. They want to continue to siphon off more and more of America’s bounty. And they want to shrink the public sector, because they don’t want to pay taxes at rates like they did back in the ’40s, ’50s and ’60s when the American middle class was born and the portion of our national income going to the top 1 percent actually dropped.

That gets us to myth number two.

Myth number two. The right wing is doing its best to convince ordinary voters that the only way to make our economy grow and create “real jobs” is to cut public sector spending and allow big corporations and Wall Street to control a bigger and bigger portion of the country’s wealth.

Unfortunately, even the most basic understanding of economic history — or a shred of common sense — make clear that this is categorically untrue.

Historically, spending by government has been a critical engine for long-term economic growth.

America’s investment in universal public education has provided the indisputable foundation for our economic expansion.

The public infrastructure of roads, airports, and public transportation are essential to all economic activity. Rural electrification, our system of farm to market roads, the agricultural extension service — and a whole system of federal programs to stabilize the agricultural economy — have made possible the most productive food production system in the history of humanity.

The Internet was invented by the American government. GPS navigation that is essential to modern commerce, was developed by our government, and depends on a system of government-run navigation satellites.

Anyone who has ever been to a third world country that is ravaged by starvation and disease understands that the nutrition and health of a population is a prerequisite to vibrant economic activity. People can’t work hard if they are hungry or sick. Government provides the public health infrastructure that gives us sanitary water, picks up our garbage, disposes of our wastes, protects the quality of the air we breath and invests in the research that underlies most new medicines. And the government food stamp program is intended to prevent a significant number of our people from going hungry.

And just try to engage in productive economic activity in a society where there is no physical security, where there is no functioning police or fire protection, or that is constantly threatened by war or conquest or civil strife.

People who argue that investments by government do nothing to create economic growth — or that the only “productive” economic investments are made by a bunch of investors on Wall Street, many of whom are nothing more than professional gamblers — are just plain nuts.

Cutting back on the public sector — and demonizing public employees — has nothing whatsoever to do with economic necessity — or with “redirecting” our resources into “more productive” uses. In fact, just the opposite.

The greatest threat to our economy is the shrinking buying power of everyday Americans and the growing concentration of wealth in the 1 percent. Economic inequality is a cancer growing on our society.

Fact is that if ordinary people don’t get a proportionate share of the income from increased economic productivity, it stands to reason that they won’t have the money to buy the products the economy produces. That leads to economic stagnation and recession, it’s that simple.

Every economic and political decision we make should be viewed through the lens of whether it reduces or increases that economic inequality. When it comes to public employee pensions and wages, the corporate elite tries to convince ordinary people that the choice is between “lavish” benefits to public employees or education for our kids. They play upon the resentment that most ordinary people feel that their incomes have been stagnant for three decades to pit them against middle class public employees.

Of course the real choice is not whether ordinary people must fight over the crumbs, while the Wall Street’s “masters of the universe” jet off to gamble in Monaco on their private jets. It is whether to further reduce the share of income going to middle class teachers, fire fighters and police officers or to increase taxes on millionaires.

It’s time for Progressives — and Americans of all stripes — to wake up and smell the coffee. Without a robust, efficient, well functioning public sector, our economy will fall behind in the world and our standard of living will drop.

Government is the name we give to the things we choose to do together.

We have to attract the best and the brightest to staff our government. That requires that the teaches, firefighters, police officers, maintenance people, researchers, clerks, constituent service workers, programmers, air traffic controllers, managers, construction workers, corrections officers, policy analysts, and everyone else who works for our governments must be respected, well compensated, and have the right to collectively bargain over the wages and working conditions.

It’s time for us all to stand up against the Right Wing war on public sector employees.

 

By: Robert Creamer, The Blog, The Huffington Post, December 9, 2013

December 10, 2013 Posted by | Collective Bargaining, Economic Inequality, Public Employees | , , , , , , | 1 Comment

“Our Democracy Is Drowning In Big Money”: JP Morgan Chase, The Foreign Corrupt Practice Act, And The Corruption Of America

The Justice Department has just obtained documents showing that JPMorgan Chase, Wall Street’s biggest bank, has been hiring the children of China’s ruling elite in order to secure “existing and potential business opportunities” from Chinese government-run companies. “You all know I have always been a big believer of the Sons and Daughters program,” says one JP Morgan executive in an email, because “it almost has a linear relationship” to winning assignments to advise Chinese companies. The documents even include spreadsheets that list the bank’s “track record” for converting hires into business deals.

It’s a serious offense. But let’s get real. How different is bribing China’s “princelings,” as they’re called there, from Wall Street’s ongoing program of hiring departing U.S. Treasury officials, presumably in order to grease the wheels of official Washington? Timothy Geithner, Obama’s first Treasury Secretary, is now president of the private-equity firm Warburg Pincus; Obama’s budget director Peter Orszag is now a top executive at Citigroup.

Or, for that matter, how different is what JP Morgan did in China from Wall Street’s habit of hiring the children of powerful American politicians? (I don’t mean to suggest Chelsea Clinton got her hedge-fund job at Avenue Capital LLC, where she worked from 2006 to 2009, on the basis of anything other than her financial talents.)

And how much worse is JP Morgan’s putative offense in China than the torrent of money JP Morgan and every other major Wall Street bank is pouring into the campaign coffers of American politicians — making the Street one of the major backers of Democrats as well as Republicans?

The Foreign Corrupt Practices Act, under which JP Morgan could be indicted for the favors it has bestowed in China, is quite strict. It prohibits American companies from paying money or offering anything of value to foreign officials for the purpose of “securing any improper advantage.” Hiring one of their children can certainly qualify as a gift, even without any direct benefit to the official.

JP Morgan couldn’t even defend itself by arguing it didn’t make any particular deal or get any specific advantage as a result of the hires. Under the Act, the gift doesn’t have to be linked to any particular benefit to the American firm as long as it’s intended to generate an advantage its competitors don’t enjoy.

Compared to this, corruption of American officials is a breeze.  Consider, for example, Countrywide Financial’s generous “Friends of Angelo” lending program, named after its chief executive, Angelo R. Mozilo, that gave discounted mortgages to influential members of Congress and their staffs before the housing bubble burst. No criminal or civil charges have ever been filed related to these loans.

Even before the Supreme Court’s shameful 2010 “Citizens United” decision — equating corporations with human beings under the First Amendment, and thereby shielding much corporate political spending – Republican appointees to the Court had done everything they could to blunt anti-bribery laws in the United States. In 1999, in “United States v. Sun-Diamond Growers,” Justice Scalia, writing for the Court, interpreted an anti-bribery law so loosely as to allow corporations to give gifts to public officials unless the gifts are linked to specific policies.

We don’t even require that American corporations disclose to their own shareholders the largesse they bestow on our politicians. Last year around this time, when the Securities and Exchange Commission released its 2013 to-do list, it signaled it might formally propose a rule to require corporations to disclose their political spending. The idea had attracted more than 600,000 mostly favorable comments from the public, a record response for the agency.

But the idea mysteriously slipped off the 2014 agenda released last week, without explanation. Could it have anything to do with the fact that, soon after becoming SEC chair last April, Mary Jo White was pressed by Republican lawmakers to abandon the idea, which was fiercely opposed by business groups.

The Foreign Corrupt Practices Act is important, and JP Morgan should be nailed for bribing Chinese officials. But, if you’ll pardon me for asking, why isn’t there a Domestic Corrupt Practices Act?

Never before has so much U.S. corporate and Wall-Street money poured into our nation’s capital, as well as into our state capitals. Never before have so many Washington officials taken jobs in corporations, lobbying firms, trade associations, and on the Street immediately after leaving office. Our democracy is drowning in big money.

Corruption is corruption, and bribery is bribery, in whatever country or language it’s transacted in.

 

By: Robert Reich, The Robert Reich Blog, December 8, 2013

December 9, 2013 Posted by | Corporations, Democracy | , , , , , , , | 1 Comment

“Taking On Too Big To Fail”: Financial Reform Is About To Catch A Second Wind And Elizabeth Warren Is Ready To Ride It

Financial reformers seeking new rules beyond the range of the Dodd-Frank law haven’t had much to cheer about this year. The chances of Congress passing new regulations—OK, passing anything—look bleak, and the Obama Administration wants to simply finish implementing the last set of reforms. But reformers are playing a longer game, biding their time until the conditions are ripe for a dam burst. That could happen sooner than you think. High-profile champions for reform are gradually bending regulators to their will, and a pile-up of big bank abuses have eroded Wall Street’s reputation in Washington. Most importantly, a new report detailing the extraordinary largesse granted banks during the financial crisis, and questioning whether Dodd-Frank would prevent a rerun, could set off a fresh spark.

An unlikely bipartisan duo, Senators Sherrod Brown and David Vitter, have tried all year to focus attention in Congress on ending “too big to fail,” the perception that large financial institutions will inevitably receive government bailouts if they run into trouble. This allows banks to take on outsized risks with implicit government support, and receive a de facto subsidy, with lower borrowing costs than their smaller competitors, because investors believe a backstopped institution will always pay them back. Brown and Vitter introduced legislation earlier this year to significantly raise capital requirements, which they say will reduce reliance on bailouts by forcing banks to pay for their own losses.

Brown and Vitter commissioned a study from the Government Accountability Office (GAO) to quantify the public subsidy bestowed on banks, which could give them powerful evidence to rally support for their legislation. GAO released the first part of the study last week. It mostly looks backward at the “extraordinary support” given to banks from 2007-2009 to weather the financial crisis, and whether the Dodd-Frank financial reform law ended this tendency toward bailouts. The more controversial part of the study, on how much the government subsidizes big banks considered too big to fail, isn’t due until next year.

But the report still contains some explosive material. It details how banks received trillions of dollars in capital injections, emergency lending and debt guarantees during the financial crisis, offered with more favorable terms than they could have found in the private market, and secured by junk collateral that non-government lenders would never accept. Some debt guarantees given by government agencies to banks were up to 10 percent cheaper than private alternatives, saving the banks billions of dollars. Banks with over $50 billion in assets used the crisis-era programs nearly twice as much as their smaller counterparts. Outside of the broadly available emergency programs, JPMorgan Chase received a $30 billion loan from the New York Federal Reserve (then run by Timothy Geithner) for its purchase of Bear Stearns, and both Citigroup and Bank of America received special direct assistance of $20 billion each. According to a summary released by Brown and Vitter, those three banks, the U.S.’s largest, would have been insolvent without the government support provided during the crisis. Since the biggest banks are even bigger today (the report states that the nation’s four largest banks are $2 trillion larger than they were in 2007), it’s hard to believe that similar support wouldn’t be granted if needed.

Dodd-Frank’s architects claim the law would prevent future bailouts. At least some of the market is convinced it would; the rating agency Moody’s downgraded the debt of major U.S. banks last week, after determining they would not have the advantage of future government support in a crisis (it’s worth noting that rating agencies receive the majority of their funding through the structured finance deals of these same big banks). But the GAO report concludes that Dodd-Frank “implementation is incomplete and the effectiveness of some provisions remains uncertain.”

The best example of this is the Federal Reserve’s Section 13(3) authority, a primary vehicle for emergency lending during the crisis. Dodd-Frank prevents the Federal Reserve from using section 13(3) to assist an individual institution, restricts even broad-based 13(3) programs from lending to insolvent firms, and adds other requirements and limitations. But the Fed has not written any 13(3) regulations yet, nor has it set any time frames for doing so. GAO recommended that the Fed establish a timeline for drafting 13(3) procedures, and the board accepted that recommendation.

The report comes at an interesting moment. Readers of this magazine may have heard of a certain Massachusetts senator named Elizabeth Warren. She has also taken on too big to fail, as an antecedent to her agenda of building an economy that works for ordinary Americans, rather than using them as giant wealth-extraction machines. And Warren has something Brown and Vitter don’t—a national platform, with the ability to shape and transform the national debate. She has already used this power to provoke incremental changes, mostly because regulators would rather be on her side than in her crosshairs. Nobody is better positioned to put this new set of facts from the GAO to use than the Warren wing of the Democratic Party.

To see this attitude change in real time, simply review the Senate Banking Committee confirmation hearings for Janet Yellen, nominated to take over the chair of the Federal Reserve. In 2009, Ben Bernanke sought confirmation for the same position, and when he was questioned about the Fed’s failures in financial regulation before the crisis, he vociferously defended the institution’s actions. Yellen, right in her opening statement, added financial regulation to the Fed’s core responsibilities, along with full employment and price stability—a huge shift. During questioning from Warren, Yellen agreed that the Board of Governors should reinstate regular principals meetings on financial supervision for the first time in 20 years, instead of relegating the decision-making to the staff level.

 

By: David Dayen, The New Republic, November 21, 2013

November 25, 2013 Posted by | Big Banks, Financial Reform | , , , , , , , | 2 Comments

“Fruits Of Republican Folly”: It Falls To Democrats To Find A Way To Take Advantage Of The Moment

The Republicans badly damaged themselves with their contrived government shutdown and debt crisis, but it remains for the Democrats to drive home their advantage. Will they?

Based on the cost to the Republican brand and the pressure from corporate elites not to harm the economy, the days of shutdowns and games with the debt are probably over for the foreseeable future. If the Tea Party faction tries to repeat these maneuvers, House Speaker John Boehner would likely permit a free vote again, and enough Republicans would vote with Democrats to keep the government open.

The Republicans seem hopelessly split between a Tea Party faction that relishes governing crises and a more mannered corporate faction that kills government softly. But the GOP is still one party when it comes to destroying government as a constructive force in the economy and society.

Since Barack Obama took office, the two Republican factions have complemented each other in a successful “good cop, bad cop” effort to ratchet down public spending. Wall Street creates one sort of crisis; the Tea Party creates another; government takes the hit. Except for the short-lived stimulus of the American Recovery and Reinvestment Act in 2009, this is the first prolonged slump of the postwar era in which government cut rather than expanded public spending.

President Obama’s pivot to deficit reduction in late 2009 was in response to the pressures of the corporate elite, while his several capitulations in the budget cuts since 2010 have been driven by the Tea Party. In effect, the Tea Party and corporate Republicans have executed a pincer movement. Domestic discretionary spending relative to gross domestic product is now below that of the Eisenhower era.

With everything else having been cut, the pressure has shifted to the big social-insurance programs—so-called entitlements—that have thus far been protected. Once again, the corporate right and Tea Party right have called for a grand bargain targeting Social Security and Medicare.

A bargain connotes giving something and getting something. Republicans are disinclined to give anything in exchange for cuts in social insurance, least of all tax increases. Their opening gambit was an improbable offer to shrink Social Security and Medicare in exchange for increases in defense spending.

The Democratic caucuses in both the House and Senate are resolute defenders of Social Security. Polls show that more than 80 percent of Republicans and Democrats alike don’t want Social Security reduced. With Republicans pressing for cuts, defense of Social Security is a clear, bright line that benefits Democrats.

Unless, that is, President Obama chooses to blur it. He has already proposed in his 2014 budget a change in the annual cost-of-living adjustment to Social Security (the chained Consumer Price Index). Although a grand bargain is unlikely, Republicans are pushing a mini-bargain of sequester relief in exchange for cuts in other domestic spending or in Social Security. The chained CPI would yield about $34 billion of deficit reduction per year. This disguised benefit cut would split the Democrats as badly as the government shutdown split the Republicans.

A better mini-bargain would be relief from the depressive impact of the sequester without any offsetting cuts. The Democrats have some leverage here, because the sequester mandates at least $23 billion of defense cuts to take effect in January, requiring cancellation of multiyear weapons contracts dear to key Republican legislators. In exchange for restored military spending, Democrats could demand, and get, $23 billion in social spending. That $46 billion would help stimulate a stagnant economy.

Looking forward to the 2014 midterm, pollsters discern a paradox. Support for the Republican Party is down sharply. In October, Gallup found that 28 percent of those polled approve of the Republicans, down from 38 percent in September and the lowest since Gallup began asking the question in 1992. Yet message testing also shows that large majorities of voters are still inclined to fault “partisan bickering”—blaming both parties—rather than Republican obstruction for the government’s failure to make substantive progress in improving a feeble recovery.

So the shutdown debacle helps the Democrats but only marginally, unless they maximize their moment. Midterm elections are notorious for low turnout. Democrats have a prayer of taking back the House only if they energize their core voters. If President Obama goes into the midterm bragging about how much progress has been made, that won’t resonate with Americans suffering from flat or declining incomes and job insecurity. The Democrats need to stand for restored, broadly shared prosperity, not tinkering, and brand Republicans as the party that would cut your benefits.

Senate Republican leader Mitch McConnell, of all people, has set a fine example. In the deal that opened the government, McConnell sneaked in the only earmark: $3 billion for a dam in Kentucky. If we ramped that up to the whole country based on Kentucky’s share of the economy, the outlay would translate to about $200 billion. Call it the Mitch McConnell Memorial Infrastructure Program—a nice down payment on the public investment America needs.

 

By: Robert Kuttner, Co-Founder and Co-Editor, The American Prsopect, November 7, 2013

November 11, 2013 Posted by | Medicare, Republicans, Social Security | , , , , , , | Leave a comment

“Only Division Is Over Tactics, Not Policy”: The Tea Party And Big Business Want The Same Things

Dave Weigel patiently explains today that there isn’t actually a brewing war between “the Tea Party” and Wall Street and “the business community.” There is, really, just the same fruitful alliance that birthed the Tea Party. Because as long as “the Tea Party” means “Republicans in control of the House,” that means “Democrats not in control of the House.” Which is good for business! (In a very dumb and short-sighted way, mostly.) As Weigel says: “No one’s looking to primary the average Class of 2010 Republican because he’s trying to repeal Dodd-Frank or challenge EPA rules or prevent any changes in tax law that would anger the donors.”

And “big business,” in the form of the Chamber of Commerce and other business-backed groups, has spent and will continue to spend a small fortune electing Republicans, including “Tea Party” Republicans, in order to help Republicans, including “Tea Party” Republicans, maintain control of the House and possibly take over the Senate. The shutdown and the default showdown didn’t stop that. There is still one party that is very committed to rolling back environmental and other regulations, preventing meaningful financial reform, and, most importantly, keeping taxes as low as possible on very wealthy people and corporations. The Tea Party is not opposed to any of those things.

There are really only two issues dividing “the business community” from “the Tea Party.” They are a) tactics and b) immigration. “The business community” wants the Republican Party to be competitive in national races — they’re also be fine with the Republicans trying to win elections through gerrymandering and voter suppression — while “the Tea Party” prioritizes purity over electability. (In fact most of them don’t see conservative purity as any sort of obstacle to electability, but they are wrong.) The backlash to Ted Cruz and the House “suicide caucus” was mainly a reaction to tactics, not a blow-up over policy.

Conservatives simply differed over the best way to force Democrats into accepting the roll-back of the ACA and/or a tax-cutting, social insurance-cutting long-term budget deal. Plenty of “establishment” Republicans still believe it is perfectly appropriate to use the debt ceiling, and the implicit threat of default, to extract policy concessions. Where Republicans split was on the wisdom of actually shutting the government down or merely threatening to, and on what precisely to demand in exchange for reopening the government. Grover Norquist attacked Ted Cruz for demanding the unachievable, but he doesn’t actually oppose defunding Obamacare. He just thought Paul Ryan had a better strategy for actually winning concessions. (Grover Norquist is right, by the way.)

Where there could actually be a break of some kind is in next year’s primaries, when Tea Party groups will fund some less-electable candidates against perfectly conservative members with more realistic grasps of the achievable. But if the Tea Party groups win those primaries, big business will still support their candidates. (The Chamber of Commerce donated to Mike Lee and Allen West in 2012.)

The biggest problem with the moderate fantasy of a new Moderate Republican rising from the ashes of Ted Cruz is that “big business” isn’t going to force the “Tea Party” to moderate its positions, it’s going to fight to get them to fight for their positions more effectively.  People opposed to the goals of the Tea Party movement should be even more opposed of the business community reasserting control over the party. The end result of the “grown-ups” stepping in to squash the Tea Party would be more power to people like… Mitch McConnell, the man who’s done more than anyone else to block Barack Obama’s agenda. The actual policies being fought for, with few exceptions, wouldn’t change.

The one major issue where there is actually tension between the bottom-line priorities of the donor class and the desires of the activist movement is immigration. There are many obvious reasons why big business would prefer looser immigration restrictions, more guest-workers and visas for “highly skilled” immigrants. But for a popular movement still fueled by the tribal panic of aging whites, “more immigrants” is not a winning message. (It’s also true that “the donor class” is much more socially liberal than the grassroots activists, but same-sex marriage isn’t enough of a profit-booster to make it a fight worth having outside the “blue states” where it’s already popular.) Even on immigration, smart representatives of the donor class seem to be suggesting that they believe it’s better to let activist conservatives have their way than to create a genuine split in the party. Because what’s good for Republicans is good for rich people.

That will still be true  in 2014 and in 2016. And that’s why when the next presidential election rolls around, the conservative grassroots and the money will fall in line behind whichever guy the GOP nominates, even if they disagree about him at first.

 

By: Alex Pareene, Salon, October 21, 2013

October 22, 2013 Posted by | Big Business, Tea Party | , , , , , , , | Leave a comment

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