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- Economists at the International Monetary Fund project that the amount of government debt held in the world's advanced economies will soon be so great that it surpasses the value of what they produce in a year.
- In the United States, where the federal government's debt has reached 84 percent of GDP, Federal Reserve Chairman Ben S. Bernanke spelled out the risks in a speech this week calling for restraint of public spending on entitlement programs.
- But the same discourse is being heard across the world's mature economies, and IMF officials have begun to spell out the options -- tax hikes that might amount to as much as 3 percent of total economic output, a cap on increases in health and retirement benefits, and restrictions on spending on all other government programs.
- Economists disagree on the level at which government debt becomes a problem. Even the amounts currently forecast -- an average of 118 percent of GDP among the world's top developed economies by 2014 -- might be sustained if countries were willing to pay the price of high interest costs and slower growth. Some see 90 percent of GDP as a point at which government debt begins to influence growth. Read more.
The solution is simple though paradoxical: sufficient numbers of adult persons should be given enough money to purchase the necessities of life without having to work at all.
This is so because the benefits of technology have brought us to the point where distribution of purchasing power without reference to labor is the most efficient and least wasteful economic model available. The borrowed or printed federal dollars currently lavished on the banks, the armed forces, and the government bureaucracies that implement stimulus programs would be much more efficiently spent if simply given away.
No one can seriously doubt that the huge amounts of borrowed federal dollars poured into the economy since Barack Obama became president has prevented even more jobs from being lost than might otherwise have been the case in the current devastating recession. It’s impossible, however, to come up with a “real” number, because no economist has a good enough handle on matters to sort out all the variables at play, including readjustments due to the fall of housing prices, low interest rates, a slightly improved export environment, rebounding of depleted inventories, new highway construction resulting from stimulus spending, etc. Still, let’s look at some facts about the current so-called “recovery”:
- Un- and under-employment remains high–officially over 17 percent, not including people who have given up looking for work.
- The cost to create (or save) jobs has been ludicrously high. Estimates of what it has cost the federal government–meaning the taxpayer–to create a single job range from $70,000 to $500,000, depending on whether bailouts lavished on the failed banking system are included.
- While Wall Street rakes in record profits and the stock market creeps back with the DJIA now approaching 11,000, the rest of the economy is sputtering. Public service jobs at the state and local level, including teacher positions, are disappearing like shredded newspaper in a blast furnace. The best the Obama administration can come up with for the next phase is some extremely convoluted encouragement for more bank lending to small businesses, even though these businesses are operating in an environment of crippled consumer demand that may last for years to come.
- The two economic sectors that are reasonably “strong”–the military and health care–are essentially non-productive. The military uses Keynesian deficit-spending to support its gargantuan job base, while the health care industry feasts at the public trough through the ever-increasing cost of Medicare and other spending programs. But like the bailouts and stimulus, it’s being done by both sectors with borrowed or printed money through marketing of Treasury bonds whose value becomes more precarious by the day.
- What stimulus there is has been is coming to an end as the Federal Reserve reduces “quantitative easing” and the Obama administration launches its bipartisan deficit reduction commission. Read more.
If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff's precincts had to be closed so that Wall Street banks could be paid.
As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. "I'd be on the phone sometimes until two in the morning," she says. "I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I'd go to bed at night, and I'd be in tears."
Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town. There were also a few bills that were unique to the area — like the $64 sewer bill that Pack and her family paid each month. "Yeah, it went up about 400 percent just over the past few years," she says.
The sewer bill, in fact, is what cost Pack and her co-workers their jobs. In 1996, the average monthly sewer bill for a family of four in Birmingham was only $14.71 — but that was before the county decided to build an elaborate new sewer system with the help of out-of-state financial wizards with names like Bear Stearns, Lehman Brothers, Goldman Sachs and JP Morgan Chase. The result was a monstrous pile of borrowed money that the county used to build, in essence, the world's grandest toilet — "the Taj Mahal of sewer-treatment plants" is how one county worker put it. What happened here in Jefferson County would turn out to be the perfect metaphor for the peculiar alchemy of modern oligarchical capitalism: A mob of corrupt local officials and morally absent financiers got together to build a giant device that converted human shit into billions of dollars of profit for Wall Street — and misery for people like Lisa Pack. Read more.
The Republican Party and major corporations have joined forces in the first major rearguard attack on health care reform, charging that the cost of complying with "Obamacare" is resulting in hundreds of millions of dollars in added business expenses.
The crime that reform is guilty of: Slashing corporate welfare.
Under the previous system, major corporations were subsidized by the government to provide prescription drug coverage to their retired employees. At the same time, corporations could claim on their tax returns that it was they -- not the taxpayers -- who paid for the drug coverage, and could write the expense off as a tax deduction.
Health care reform cuts out that fat. The corporations still get taxpayer money to help pay for their drug coverage, but they can no longer continue the fiction that they're using their own money to do it. Read more.
Note: Although this topic was previously published, this article explains how corporations benefit while taxpayers pay much more clearly, especially toward the bottom of Ryan's article.
The U.S. should bust up its megabanks and impose strict laws curbing the size and complexity of financial institutions, a top Federal Reserve official told the Huffington Post.
In a 45-minute interview this week, Federal Reserve Bank of Kansas City President Thomas M. Hoenig, who's emerged as one of the few influential voices calling for a fundamental redesign of a broken U.S. financial system:
- Lambasted the tilted playing field that benefits Wall Street banks over Main Street banks;
- Called the idea that the U.S. needs megabanks to compete globally a "fantasy";
- Said Congress should mandate simple, easily understood and enforceable rules -- rather than guidelines -- so regulators can restrain financial firms and rein in the financial system;
- Prodded the Senate to get tougher on permanently ending Too Big To Fail by enacting laws that would take away much of the discretion currently held by policymakers (who bailed out financial firms when confronted with these decisions in late 2008);
- And criticized the Federal Reserve's ongoing policy to keep the main interest rate near zero because it "guarantee[s] a spread to Wall Street", enabling unearned profits and "encourag[ing] speculation."
Hoenig's criticisms echo those made by reformers pushing to remake a financial system that melted down in 2008 after years of excessive risk-taking and loose regulation finally took its toll, causing the worst economic collapse since the Great Depression and costing the nation more than 8 million jobs. Read more.
End Israel’s U.S. Allowance So Both Can Gain: Celestine Bohlen
Commentary by Celestine Bohlen | Business Week
The crisis in U.S.-Israeli relations isn’t going away. If anything, it keeps getting worse, precisely because it has exposed and crystallized a gap between the goals, expectations and even the national interests of these old allies.
The basic relationship may still be “rock solid,” as U.S. Secretary of State Hillary Clinton put it recently, but it is being tugged in opposite directions. Maybe now is the time to take money out of the equation.
Israel will get $2.7 billion in military aid from the U.S. this year -- or 18 percent of Israel’s military budget. By 2013, that will lock into an annual level of $3.15 billion for five years. It also has almost $4 billion outstanding in available U.S. loan guarantees, left over from $9 billion extended at former Prime Minister Ariel Sharon’s request in 2003.
That makes Israel the largest recipient of U.S. aid in the world, if you don’t count Iraq and Afghanistan. It also benefits from some of the easiest terms: Unlike other recipients, which must buy 100 percent American, Israel can spend about one quarter of its U.S. military aid at home, which amounts to a significant boost to its defense industry.
The problem with this kind of largess is that it muddies the picture, both for Israel and the U.S. The best thing for the relationship would be for the U.S. to cut Israel’s allowance. Read more.
In Washington, the more things change, the more they stay the same, or usually get worse. It's true each election cycle, and when Congress enacts "reform," watch out.
Obamacare: legislation that rations care and enriches corporate providers.
Financial reform, shaping up to be more business as usual, masquerading as change, and leaving what's needed unaddressed and papered over.
What Real Reform Looks Like - Abolish or Nationalize the Fed
For many years, Ron Paul waged a lonely struggle to abolish the Fed, trying and failing in the 106th, 107th, 108th, and 110th Congresses. Numerous times he explained what he said on the House floor on September 10, 2002, namely:
"Since the creation of the Federal Reserve, middle and working-class Americans have been victimized by a boom-and-bust monetary cycle. In addition, most Americans have suffered a steadily eroding purchasing power because of the Federal Reserve's inflationary policies. This represents a real, if hidden, tax imposed on the American people," a 1913 dollar (when the Fed was created) today worth about a nickel and continues to erode.
Under the Fed, we've also had rising consumer debt; record budget and trade deficits; an unsustainable national debt; a high level of personal and business bankruptcies; millions of lost homes; high unemployment; loss of the nation's manufacturing base; soaring poverty levels; an unprecedented wealth gap between the rich and most others; and a hugely unstable economy lurching from one crisis to another, the current one near-catastrophic with years more pain and suffering ahead for growing millions.
Yet the 1913 Federal Reserve Act violates the Constitution's Article I, Section 8 giving Congress sole power to coin (create) money and regulate the value thereof. In 1935, the Supreme Court ruled that Congress can't constitutionally delegate it to another body.
By Dave Lindorff
Back in 2005-06, I wrote a book, The Case for Impeachment, in which I made the argument that President George W. Bush and Vice President Dick Cheney, as well as other key figures in the Bush/Cheney administration--Secretary of State Condoleezza Rice, Defense Secretary Donald Rumsfeld, and Attorney General Alberto Gonzales--should be impeached for war crimes, as well as crimes against the Constitution of the United States.
These days, when I mention the book’s title, people sometimes ask, half in jest, whether I’m referring to the current president, Barack Obama.
Sadly, it is time to say, just 14 months into the current term of this new president, that yes, this president, and some of his subordinates, are also guilty of impeachable crimes--including many of the same ones committed by Bush and Cheney.
-I: The Ongoing Theft of Trillions
——-II: Off-the-Books, Off-the-Record
——-III: Osama bin Bank of America
——-IV: New Mafia World Order
——-V: The Goldman Sachs Obama Illusion
——-VI: American Heroes Speak Out on the Financial Reform Ruse
——-VII: Economic Weapon of Mass Destruction (WMDs)
——-VIII: Hank “Pentagon Sachs” Paulson
——-IX: $5.4 Trillion a Year Bullion Market Ponzi Scheme
——-X: Ponzi Nation: Welcome to America, Sucker
——-XI: Economic Shock and Awe
——-XII: Time for a Second American Revolution - The 99% Movement
——-XIII: How You Can Get Involved
As I've noted before, Haiti's earthquake recovery problems were exacerbated by the economic and trade policies pushed on them by the United States. Now Bill Clinton has admitted as much:
PORT-AU-PRINCE, Haiti -- The earthquake not only smashed markets, collapsed warehouses and left more than 2.5 million people without enough to eat. It may also have shaken up the way the developing world gets food.
Decades of inexpensive imports - especially rice from the U.S. - punctuated with abundant aid in various crises have destroyed local agriculture and left impoverished countries such as Haiti unable to feed themselves.
While those policies have been criticized for years in aid worker circles, world leaders focused on fixing Haiti are admitting for the first time that loosening trade barriers has only exacerbated hunger in Haiti and elsewhere. Read more.
Not long ago, the most prominent supporters of the public option were touting it as essential for healthcare reform. Now, suddenly, it’s incidental.
In fact, many who were lauding a public option as the key to a better healthcare future are now condemning just about anyone who insists that the absence of a public option makes the new law unworthy of support.
Consider this statement: “If I were a senator, I would not vote for the current healthcare bill. Any measure that expands private insurers’ monopoly over healthcare and transfers millions of taxpayer dollars to private corporations is not real healthcare reform.”
That statement is as true today as it was when Howard Dean, former chairman of the Democratic National Committee, made it three months ago in a Washington Post op-ed. But now, a concerted political blitz is depicting anyone who takes such a position as a menace to “real healthcare reform.”
After devoting vast amounts of time, money, energy and political capital to banging the drum for the public option as absolutely vital during 2009 and through this winter, countless liberal organizations and prominent Democrats in Congress have made a short-order shift.
You are now to understand that the public option isn’t essential—it’s expendable. And all of the sudden, people who assert that a public option is a minimal requirement for meaningful healthcare reform are no longer principled—they’re pernicious. Read more.
Last April, shortly after beginning his first term as president, Barak Obama promised that the war supplemental he requested from Congress would be the last one ever:
White House Press Secretary Robert Gibbs said Thursday that this will be the last supplemental spending request for the wars. The administration has already earmarked $130 billion for military operations next year, but officials have said they do not want that funding tagged “emergency.”
“The honest budgeting and appropriations process that the president has talked about falls somewhat victim to the fact that this is the way that wars have been funded previously,” Gibbs said. “So we can’t wait until the appropriations process is done in … August or September to fund operations in Iraq and Afghanistan in June.”
And suddenly a lot of the members of Congress who had opposed war supplementals in the past and promised not to vote for another one, decided “just this one last time” to go along. Read more.
The United States spends almost twice as much per person on health care as any other country in the world, and yet has some of the worst health outcomes of all developed nations. This means we spend a lot on care that does not contribute to better care, and there is extraordinary room for cost control that does not reduce access to or quality of care. However, we often pursue cost control strategies that are not based on evidence, and are designed to limit political opposition from the health care industry, for which our high costs are its high income. These efforts either don’t work at all, or don’t work on a scale that will have a noticeable impact on a system with double-digit premium inflation.
To a large extent, our high spending is due to a fragmented system where providers deal with hundreds of different insurers, all with different rules. This drives up administrative costs in the system, and means we lack what other jurisdictions have to effectively control costs: the ability to budget the health care system and publicly plan the allocation of limited resources to the communities and areas of care that need them most. This is why only nations with uniform payment systems and an extraordinary level of public oversight have been able to “bend the cost curve’’ without hurting health outcomes. Read more.
Most Americans believe tax hikes are OK if you're making more than $250,000, a policy proposed by President Barack Obama, but hands off Medicare and Social Security, a poll released on Monday found.
The Quinnipiac University poll found that 60 percent of Americans among both major political parties think raising income taxes on households making more than $250,000 should be a main tenet of the government's efforts to tame the deficit. More than 70 percent, including a majority of Republicans, say those making more than $1 million should pay more.
But 80 percent say raising taxes on those making less than that should not be part of the government's approach. Moreover, most oppose touching Medicare and Social Security - two long-term drivers of the budget deficit over the coming decades.
"Given those numbers, it's clear that those who want serious deficit reduction have their work cut out for them in convincing the public, which seems adamantly opposed to cutting the programs with the largest budgets," said Peter Brown, assistant director of the polling institute....
This year, the deficit is expected to top $1.5 trillion, about 10 percent of gross domestic product. The administration and many economists say a healthy deficit would be about 3 percent of GDP. Read more.
U.S. securities regulators are demanding detailed reports from major financial firms in an attempt to uncover any accounting tricks like the "Repo 105" method Lehman Brothers used to mask its losses.
Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said on Monday that the agency would be probing every major financial institution over the coming weeks.
"We want to make sure both their accounting and disclosures are accurate when it comes to how they're characterizing repurchases," Schapiro said in an interview with CNBC. Read more.
Bank of America, Wells Fargo Probably Won't Pay Income Tax for 2009
Annual reports suggest BofA and Wells Fargo won't have to pay federal income taxes for 2009.
By Christina Rexrode | Charlotte Observer
This tax season will be kind to Bank of America and Wells Fargo: It appears that neither bank will have to pay federal income taxes for 2009.
Bank of America probably won't pay federal taxes because it lost money in the U.S. for the year. Wells Fargo was profitable, but can write down its tax bill because of losses at Wachovia, which it rescued from a near collapse.
The idea of the country's No. 1 and No. 4 banks not paying federal income taxes may be anathema to millions of Americans who are grumbling as they fill out their own tax forms this month. But tax experts say the banks' situation is hardly unique.
"Oh, yeah, this happens all the time," said Robert Willens, an expert on tax accounting who runs a New York firm with the same name. "Especially now, with companies suffering such severe losses."
Bob McIntyre, at Citizens for Tax Justice, said he opposes the government giving corporations such a break.
"If you go out and try to make money and you don't do it, why should the government pay you for your losses?" McIntyre said. "It's as simple as that." Read more.
Update: There are now 80 cosponsors of the Public Option Act. Here is the current list: Reps. Baldwin, Berkley, C. Brown, Capuano, Carson, Castor, Chu, Clarke, Wm. Lacy Clay, Cleaver, Cohen, Cummings, D. Davis, DeGette, Delahunt, Doyle, Edwards, Ellison, Engel, Farr, Filner, Frank, Fudge, Garamendi, Green, Grijalva, Gutierrez, Hall, Hare, Hastings, Hinchey, Hinojosa, Hirono, Holt, Honda, Israel, Jackson-Lee, Jackson Jr., E.B. Johnson, H. Johnson, Kaptur, Kennedy, Kilpatrick, Kucinich, Lee, Lewis, Maloney, McDermott, McGovern, Meeks, James P. Moran, Nadler, Napolitano, Norton, Olver, Payne, Pierluisi, Pingree, Polis, Rangel, Richardson, Rush, Sablan, Sanchez, Robert “Bobby” Scott, Schakowsky, Shea-Porter, Speier, Sutton, B. Thompson, Tonko, Towns, Velazquez, Waters, Watson, Weiner, Welch, Woolsey, Wu.
Congressman Alan Grayson, D-Fla., today announced that 50 Members of Congress have signed on as cosponsors of his Medicare You Can Buy Into Act. The bill opens up Medicare for anyone who can pay for it.
Congressman Grayson said, “WOW! 50 cosponsors in less than 48 hours, including five Committee Chairs. I am thrilled, but not surprised, that so many of my colleagues support this bill. We all believe it deserves a vote.” Read more.
We decided that a good place to begin with unified action was to oppose the recent Supreme Court decision allowing corporations unlimited contributions to political candidates.
MICHAEL MOORE: A LOVE STORY
By Joan Wile
If you know the Upper West Side of Manhattan, you know there are probably more progressives per square inch here than in all the 50 states. So, it's no surprise that a big bunch of people showed up this evening at my small one-bedroom apartment in this highly liberal neighborhood to see Michael Moore's masterpiece, "Capitalism: A Love Story."
My event was one of MoveOn's 700 parties nationwide tonight to show the film in an effort to generate grass roots action against some of the evil excesses of capitalism rampant in the United States. These evils are powerfully exposed in Moore's movie -- the foreclosures on people's homes; the cancellation of jobs in order to make way for profits; the practice of taking out insurance on employees unbeknownst to them and then collecting large payments when they die (of which not one cent is shared with the family survivors), and all manner of other immoral practices so harmful to decent working Americans.
Sen. Bernie Sanders (I-Vt.) issued the following statement...after a federal appeals court in New York ruled that the Federal Reserve should reveal information about loans to private banks:
"Today's court decision is a major victory for the American taxpayers, and it is absolutely consistent with an amendment that I offered and Congress approved last year.
"We now have two courts, 59 senators and a large majority in Congress telling the Federal Reserve that the American people have a right to know which large financial institutions and corporations received more than $2 trillion in taxpayer loans, how much they received and what they are doing with the money.
"This money does not belong to the Federal Reserve. It belongs to the American people, and the American people have a right to know where more than $2 trillion of their money has gone."
Congress last year called on the Federal Reserve to identify banks and other financial institutions that received taxpayer-backed loans and other financial assistance. The provision in the budget resolution put Congress on record in favor of requiring the central bank to reveal the names of financial institutions that borrowed funds since the financial crisis began. Sanders sponsored the amendment on Fed transparency that was initially adopted by the Senate on April 2 by a vote of 59 to 39.
K Street appears to have cashed in on the lengthy battle over healthcare reform.
About 1,750 businesses and organizations spent at least $1.2 billion in 2009 to lobby on health reform and other issues, according to a study from the Center for Public Integrity released Friday. A precise figure isn’t available because lobbying disclosure forms don’t require companies or other groups to itemize how much they spend to lobby on a particular issue.
While serving on the commission, Gorelick came under attack by conservatives for a March 4, 1995, memo she wrote while deputy attorney general.
In the memo, Gorelick instructed the FBI and the U.S. Attorney’s office to go beyond what is “legally required” in maintaining the wall between them and U.S. intelligence services.
Her opponents argued that her instructions stopped the sharing of information that might have prevented the 9/11 attacks.
Her defenders argued that Gorelick was only articulating policies that were already in place.
Jamie S. Gorelick, a former assistant attorney general in the Clinton administration and a member of the 9/11 commission, is keeping busy in the private sector.
According to The Wall Street Journal, Gorelick is one of the attorneys representing Steven Rattner in his negotiations with the New York state attorney general’s office and the Securities and Exchange Commission. Read more.
Companies using "squishy numbers" for "double" tax deduction, now taken away under new health insurance reform. Does the IRS allow you to "estimate" your figures?
On March 24, 2010, social justice activists from the "Network to Stop Foreclosures and Evictions," held a press conference in Towson, MD. They are trying to stop the Bank of America (BOA) from foreclosing on the home of Renee DeFreitas. According to their press release, Ms. DeFreitas is 51-years old, with five children. She works for the state of Maryland and lives in Baltimore City. Ms. DeFreitas, "as a result of the economic crisis," was forced to apply to the BOA for "a home modification on her loan." Unfortunately, the BOA has ignored that important process and turned the matter over to a local law firm for foreclosure action. Check out for background on the growing foreclosure crisis, Finding in Foreclosure a Beginning, Not an End, Bailout People and The Foreclosure Crisis Reshapes America.
By Dave Lindorff
Get ready kids. It’s time for more scare stories about Social Security.
The New York Times weighed in today with a dire warning that this year, six years ahead of what had been predicted only a few years ago, the Social Security system would be (cue scary music) paying out more in benefits than it takes in from the payroll tax. The reason for this earlier-than-anticipated event is the Great Recession, the paper explained.
In December, we argued the urgent need to make public A.I.G.'s emails and "key internal accounting documents and financial models." A.I.G.'s schemes were at the center of the economic meltdown. Three months later, a year-long report by court-appointed bank examiner Anton Valukas makes it abundantly clear why such investigations are critical to the recovery of our financial system. Every time someone takes a serious look, a new scandal emerges.
The damning 2,200-page report, released last Friday, examines the reasons behind Lehman's failure in September 2008. It reveals on and off balance-sheet accounting practices the firm's managers used to deceive the public about Lehman's true financial condition. Our investigations have shown for years that accounting is the "weapon of choice" for financial deception. Valukas's findings reveal how Lehman used $50 billion in "repo" loans to fool investors into thinking that it was on sound financial footing. As our December co-author Frank Partnoy recently explained as part of a major report of the Roosevelt Institute, "Make Markets Be Markets," such abusive off-balance accounting was and is endemic. It was a major cause of the financial crisis, and it will lead to future crises.
According to emails described in the report, CEO Richard Fuld and other senior Lehman executives were aware of the games being played and yet signed off on quarterly and annual reports. Lehman's auditor Ernst & Young knew and kept quiet.
The Valukas report also exposes the dysfunctional relationship between the country's main regulatory bodies and the systemically dangerous institutions (SDIs) they are supposed to be policing. The NY Fed, the regulatory agency led by then FRBNY President Geithner, has a clear statutory mission to promote the safety and soundness of the banking system and compliance with the law. Yet it stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a "three card monte routine" (p. 1470). The report states: Read more.