Category Archives: Economy

Corporate loan sharking.

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Having read that credit card companies are increasing interest rates, I began to wonder: What separates our financial institutions from the Sicilian Mafia, the Chinese Tongs or anyone else imprisoned for loan-sharking? They all charge outrageous interest rates on loans. They all have aggressive collection tactics. And many of them have politicians in their pockets.

The main difference, of course, is that the banks have incorporated as financial institutions. This allows the banks and credit card companies to borrow money from the Federal Reserve at a discount rate that’s currently .05 percent. Then they lend it at interest rates ranging from 20 to more than 45 percent! Not even casinos enjoy that kind of return. But, then, casinos are regulated.

For those of you under age of 50, you might be interested to learn that all financial institutions used to be governed by usury laws designed to prevent the lending of money at unreasonably high interest rates. State banks still are. Unfortunately, usury laws no longer apply to banks that label themselves “national”. The result is that large banks such as Bank of America, Wells Fargo and Chase can charge pretty much any interest rate they want.

And they want a lot.

Of course, they justify their rates by claiming that consumer default is on the rise.

There are several problems with that claim. One, the managers of these companies pay themselves 6- or 7-figure bonuses. Two, it was their greed that led to an economy that has forced consumer defaults. And three, it was the government, financed by you and I, that kept these companies from going bankrupt.

If our Congress ever decides to put the interests of taxpayers above corporations, the corporate officers that run national banks might have even more in common with the Mafia and the Tongs – a prison cell.

How tea-baggers can eliminate the national debt.

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Since President Obama’s inauguration, the so-called tea-baggers have demonstrated, yelled at and threatened the administration. They claim the President is not a citizen. They believe he is trying to implement a socialist, or even communist, agenda. And they seem most angry over increases in the national debt. Never mind that the increases are the result of the previous administration’s policies. Never mind that much of the money allocated through TARP funds has been repaid. Never mind that GM seems on the road to recovery. And ignore the fact that, according to the CBO, the stimulus has saved or created 1.6 million jobs.

However, I think we can channel all that anger and energy to help pay off the national debt. Since the tea-baggers have driven up sales of guns and ammo following Obama’s election, they’re certainly well-enough armed to defend our shores. That would permit us to eliminate most of our national defense budget.

Just think, without a large military force, the tea-baggers would no longer have to fear that our government will take away their freedoms. Of course, we could keep a small professional military to operate, maintain and defend our enormous arsenal of nuclear tipped missiles. That would ensure that no foreign government would attack us. We’d bring home our troops from Afghanistan, Iraq, Germany, Japan and South Korea. Without an enormous military and all of its ships, planes, tanks and troop carriers, we would have less need for oil, so we would no longer need to project American power around the globe. And since most of our large, multi-national corporations have already exported most of our jobs, we should feel no obligation to protect corporate interests on foreign soil. Besides, those companies can afford to hire their own protection such as the likes of Blackwater, aka Xe.

What’s not to like? No more war. No more nation-building (other than on our own soil). No more national debt. All made possible by putting the tea-baggers’ guns and anger to better use.

The no-it-all party.

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As Republicans continue to attack President Obama over the lousy economy they, themselves, created, it becomes painfully obvious that they have no compassion, no ideas, no shame and no clue.  They keep serving up the same failed theories and rhetoric that got us into this mess. 

In their minds, the economy would recover if only the Democrats would provide more tax cuts for the wealthy.  At the same time, Republicans are attempting to stonewall any attempts at regulating Wall Street or reforming the runaway health insurance industry.  In their view, the “free” market and deregulation are cure-alls for anything that ails our economy.

But before anyone wants to sign onto their Reagan-inspired trickle-down economic theories, let’s look at what this kind of thinking has brought us over the last 30 years of Republican leadership:

1 – More than 14 million Americans are currently unemployed, and Federal Reserve Chairmen Ben Bernanke blames the continuing high level of unemployment on the too-big-to-fail banks for failing to make loans to small businesses, the engine that drives our economy. 

2 – 49 million Americans, including 17 million children, currently lack adequate, consistent access to food. 

3 – The VA estimates that 131,000 veterans are homeless on any given night and 18 veterans commit suicide every single day. 

4 – Nearly 47 million Americans lack health insurance.  Of those, nearly 45,000, including 2,266 veterans, die each year for lack of access to health care. 

5 – In what used to be a sight seen only in third world nations, thousands of American citizens have stood in line for free health care because they lack insurance.  More than 8,000 stood in line to receive health care in Los Angeles alone.  Many were turned away.  1,000 recently stood in line for free health care in New Orleans and there are similar free clinics scheduled in Little Rock, Kansas City and other U.S. cities.

These are not the kind of problems that will be solved by more tax cuts for the wealthy or further deregulation of our greedy, ship-the-jobs-off-shore industries.  They require substantial commitments of tax dollars, along with fresh ideas and political will, neither of which are currently available from the Republican Party.

Who’s really at fault for our nation’s predicament?

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Who is more at fault for the problems that face our nation?  Republican candidates?  Or the voters who are deceived into voting for them?  During campaigns, Republican candidates take a populist tone.  They talk about the issues that are important to ordinary Americans such as opportunity and personal freedom.  But when they are elected, they tend to focus almost exclusively on issues designed to benefit the elite. 

Despite promises of fiscal responsibility, Reagan and George W. Bush dramatically increase the deficit and national debt.  Despite promises of small government, Bush created the huge bureaucracy that is Homeland Defense.  And the Republican mantra of lower taxes has really proven to be nonsense.  They may occasionally offer a token tax cut for the middle and lower class, but the real cuts are reserved for the wealthy.   Republicans talk about creating jobs then make it easier for corporations to eliminate collective bargaining and ship jobs oversees.  They talk about getting government regulations out of the way then watch corporations create new scams to abscond with more of their consumers’ money. 

Why, then, do voters fall for these false promises over and over?  Often it’s because they aren’t curious enough to really examine the party’s platform and hold the candidates accountable.  And all too often it’s because they focus on a variety of wedge issues such as abortion, terrorism and same-sex marriage.  They fall victim to a sort of 3 card monte.  They’re mesmorized by the Republican distractions of fear, anger and religion.

How many lower and middle class voters actually benefited from Reaganomics?  How many benefited from George W. Bush’s “compassionate conservatism?”  I submit that instead of jobs, increased salaries and tax cuts, they were rewarded for their votes with war, massive deficits and decreased prosperity.  But the real Republican constituency consisting of CEOs, bankers, investors, oil executives and defense contractors is doing just fine, thank you.

The Bush Legacy: America in Decline

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A few weeks ago, economists Martin Wolf and Robert Shiller appeared on Fareed Zakaria’s GPS on CNN.  They said, “It is now clear that the Obama team has helped avert a complete meltdown of our financial markets.  But they warned that one of the greatest dangers facing our nation is the growing economic disparity between the rich and the poor.”  They went on to say, “This could create a country in which not even those with a great deal of money will want to live.”

There are other troubling effects of Bush’s tax cuts for the wealthy, deregulation and the Republican Party’s stubborn adherence to trickle-down economics. 

Although he draws no conclusions relative to party politics, Rick Newman talks about warning signs of American decline in a story published by U.S. News & World Report.  In the story he states, “…real household income in America has flat-lined, which means many middle-class families are barely keeping up with inflation. The exploding federal deficit hamstrings the government’s ability to help. Healthcare is too expensive, America’s manufacturing base is eroding, and two open-ended foreign wars are draining the national treasury.”

Newman goes on to point out that the annual “prosperity index“ published by Legatum Institute, a London-based research firm, now ranks the U.S. as the ninth most prosperous country in the world.  The same study ranks the United States 27th for the health of its citizens, a statistic that is all the more disturbing given the fact that we spend far more on healthcare per person than any other nation.

According to Newman’s article, the U.S. poverty rate of 17 percent ranks third worst among advanced nations above only Turkey and Mexico.  And since our future depends on the education of our youth, there is more disturbing news.  American 15-year-olds score below average among advanced nations on math and science.

There is one glimmer of positive news:  Newman points out that, according to a GfK Roper survey of how nations are viewed by others, “America rocketed from No. 7 in 2008 to No. 1 in 2009, largely because the world cheered the election of Barack Obama as U.S. president.”

“Starve the Beast”, Part II

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I previously wrote about the Republican Party’s plan to “Starve the Beast” which they believe to be big government.  They hope to cut taxes and the federal budget in order to reduce the size of government and bankrupt the so-called “entitlements” of Social Security, Medicare and Medicaid. 

But this conservative nonsense goes farther.

They also want to significantly cut funding for education.  If you aren’t already familiar with the notion, here’s the Republican line of “thinking” (I use the word loosely):  By cutting funds for public schools, the schools will be forced to increase class sizes.  With larger class sizes, the performance numbers of public schools will be worse.  The lower performance numbers will make government-funded school vouchers for private schools, parochial schools and home-schooling more attractive.  We will then be raising generations as dumb or dumber than the current pack of Republicans. 

If that fails to frighten you, imagine a whole generation of children being home-schooled by the likes of Sarah Palin and Glenn Beck, or their followers. 

Of course, this “Starve the Beast” mentality extends to other areas as well, most especially social services.  The Republican “thinking” is based on the belief that those unfortunates who are poor or sick are in those predicaments as a result of their own actions.  They didn’t follow the Republican philosophies of independence and personal responsibility.  If they had only worked harder and prayed more, the “thinking” goes, they wouldn’t require help.  Don’t concern yourselves with them.  When these downtrodden finally discover religion and Republican values, God will take care of them.

Now, I ask you, what is the real beast?  Big government?  Or the Republican Party?

The cost of war.

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Our war in Afghanistan has now dragged on longer than the failed Soviet Union occupation.  And President Obama is faced with a decision to expand the war by adding up to 40 thousand new troops, engineering a withdrawal, or committing to something between those extremes. 

By all accounts, this was a war that could have ended several years ago if we hadn’t become preoccupied with Iraq.  But as the Iraq “liberation” dragged on, our real enemies in Afghanistan regrouped and gained in strength.  Now it seems that no option in Afghanistan is a “good” option – especially given our economic woes at home.

It was recently reported that the Afghan war has already cost nearly $230 billion.  It was also estimated that the war costs $500,000 (Pentagon estimate) to $1 million (Congressional estimate) to maintain one U.S. soldier in Afghanistan for one year.  That cost includes transportation, equipment, support facilities and all incidentals.  If those figures are correct, adding 40 thousand more troops to the conflict will cost the U.S. an additional $20-40 billion over the next year.   And given that we still have combat troops stationed in Germany and Japan more than 60 years after the end of WW II, the cost will likely continue for many years to come. 

Not included in that estimate is the cost of VA to treat lasting injuries and psychological damage.  There are also the sums paid to veterans for disabilities.   And, of course, it’s impossible to place a price on the lives lost in action.   

Add to these costs the price of the war in Iraq which some estimate to total more than $2 trillion.

All of this is background to the debate over health care reform and economic stimulus.  The economic stimulus package that was signed by President Obama included $787 billion to create or save jobs by rebuilding our nation’s infrastructure.  And the cost of health care reform bills being considered are estimated to  cost more than $800 billion over 10 years.  Of course, the conservatives are horrified by these numbers.

So they must be apoplectic over the cost of Bush’s wars?  Not exactly.   The conservatives can’t wait to send more troops to Afghanistan and spend more money (and more lives) on open-ended, no-bid contracts for the likes of Halliburton and Xe.  They even trotted out the dark one (former V.P., and former Halliburton CEO, Dick Cheney) to attack Obama for “dithering” over the decision to commit more troops. 

Conservative logic goes something like this:  It’s un-American and un-patriotic to spend our own money on our own citizens for jobs and health care.  But it’s absolutely necessary to spend trillions to kill a few knuckleheads on the other side of the globe. 

Does this make any sense?  I think you know the answer.

A simple plan for taking back our economy.

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It has been more than a year since Wall Street’s risky investments collapsed our economy.  Unfortunately, Congress still has not passed legislation to prevent such calamities in the future.  Instead of trying to craft new legislation, I suggest that Congress look to the past.  To wit:

1 – Reinstate, in its entirety, the Glass-Steagall Act.  The act created firewalls between commercial banks, investment banks and insurance companies following the Great Depression.  It was the unraveling of this act in 1994 that undoubtedly led to our current recession.

2 – Re-regulate derivatives to prevent highly risky investments resulting from the so-called “Enron exception.”  The “Enron exception” protected the company’s on-line commodity trading from federal regulation ultimately leading to Enron’s failure.  So, of course, Republicans couldn’t wait to expand the legislation which resulted in runaway crude oil prices and the housing-fueled financial collapse of 2008.

3 – Re-regulate banks by instituting a national usury law that would cap interest rates at 12 percent.   Prior to the Reagan-era deregulation, today’s interest rates would have resulted in prison sentences for loan sharking. 

4 – Restore the maximum income tax rates to pre-Bush levels.  Better yet, restore the maximum rates to pre-Reagan levels.  This could provide additional income to rebuild our infrastructure and/or reduce the national debt.

5 – Close tax code loopholes which encourage U.S. corporations to establish off-shore “headquarters” in order to avoid taxes.  At the very least, prevent such corporations from receiving government contracts.

6 – Use our anti-trust laws to break up any corporations deemed “too large to fail.”  If a company is so large that its failure would damage the nation’s economy, it automatically qualifies as a monopoly.

There is nothing new or Earth-shattering about any of these measures.  And that’s the point.  They have all been proven.  In fact, they kept our government and our businesses operating effectively for decades until Republicans undermined our nation’s economic security in order to deliver greater profits to their greedy corporate masters.

For our economy, let’s give credit where credit is due.

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The so-called teabaggers and wing nuts claim their attacks on President Obama aren’t the result of racism or ideology.  They say their demonstrations are about the national debt which they believe has increased to staggering new levels under the Obama administration. 

There are three flaws with their argument.  One is that the debt only really matters if we plan on selling our nation sometime soon.  Otherwise, it’s merely a number.  Second, while it’s true that the debt has reached an all time high in actual dollar amount, as a percent of GDP (gross domestic product) it has been higher before.  And third, very little of the current debt can be attributed to actions by President Obama.

Following the Great Depression and WWII, the national debt as a percent of GDP stood at 120 percent.  It steadily decreased each year until the election of Ronald Reagan in 1980.  Under Reagan the administration so overspent on military weapons that the national debt nearly tripled.  The debt continued to increase during the George H.W. Bush administration.  When Bill Clinton was elected President in 1992, he prioritized the economy and succeeded in significantly reducing the debt.  Then, under George W. Bush, the debt nearly doubled again until, by the time he left office, it had risen back to 80 percent of GDP.  (One has to wonder where the tea parties and town halls were then.)

In reality, the recent increase in our national debt is the result of two wars begun by the Bush administration (one based on false information) that have cost more than $2 trillion – a figure that doesn’t even include the cost of health care, disability compensation and death benefits for those who have served in these wars.  Contributing to the increase was the creation of the massive Homeland Security department by the Bush administration.   And, of course, the primary cause was Republican-led deregulation of banks and commodities resulting in runaway greed and wild speculation.  When the banks’ risky investments failed, the Federal Government was faced with a decision of bailing out those responsible for this mess.  Or letting the nation slide into a 2nd Great Depression. 

By the time of his inauguration, President Obama was facing the worst economy since Herbert Hoover.  And, like FDR, he has little choice but to try to create jobs through stimulus funds and loans.  Yet, despite having created this mess, Republicans have fought Obama at every opportunity.  Not a single Republican in the House voted for the stimulus package and all but three Republicans in the Senate voted against it. 

It appears they would rather make some sort of political statement than uphold their commitment to serve our nation. 

Republicans have also tried to block health care reform and the proposed cap on carbon dioxide emissions intended to head off more severe climate change.  (They wouldn’t want to interfere with the profits of our large corporations, would they?)

Perhaps the most absurd attack on President Obama is his trip to promote Chicago as host of the Olympics.  They claim that he should be spending more time in the Oval Office.  Hmmm, I wonder what they thought of Bush’s vacations while in office.  The final statistics show that “W” spent 977 days (33 percent) of his two terms on vacation, including the days immediately following Hurricane Katrina.

In my opinion, everyone needs to be more patient with this president.  Republican presidents had nearly 30 years to get us into this mess.  Let’s give President Obama more than 9 months to get us out of it.

Where will our jobs come from?

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As economists talk about the prospects for an economic recovery, they often mention that it may well be a “jobless recovery.”  Is anyone really surprised by that?  After all, in the interest of “globalization” we’ve exported most of our jobs to other nations.

When large corporations began selling the notion of globalization in the 1980s, they promised American workers access to new markets for American-made products in places like China and India.  The reality is much different.  Once so-called Fair Trade rules were established, American corporations began relocating manufacturing to nations with cheaper labor.  One American manufacturing industry after another was closed…steel, textiles, shoes, electronics, furniture, tools…the list is extensive.

Soon after, much of our agricultural production was exported to Mexico, Central and South America. 

We were told that none of this would harm the U.S.  In fact, the corporations and politicians said that this would benefit Americans with more diverse and lower-priced products.  Moreover, we could easily replace “dirty” low-paying manufacturing jobs with “cleaner” technology, service and information jobs. 

The next step was to move corporate call centers to Mexico, India and the Philippines.  (After all, that kind of work is much too mundane and boring for American workers.)   

Next, the corporations began hiring illegal immigrants for restaurant, landscaping, meat processing and construction jobs.  We were told that these were jobs Americans citizens were unwilling to do.  (The corporations neglected to mention that the real reason American citizens didn’t want these jobs were reduced salaries and benefits.)

More recently, corporations have exported the creation of software to India.  At the same time, they’ve requested special green cards for Indian engineers.  The corporations claim that too few Americans are as well-educated and trained. 

Even our military has gotten into the act by hiring mercenaries from other nations to provide security for American diplomats in Iraq and Afghanistan.

Is it any wonder that our health care system now represents 1/6th of our economy?  And we’re already hiring nurses and doctors from other nations to meet “shortages”.

So what will unemployed American citizens do?  The most promising opportunity is for the invention and manufacture of so-called green products such as wind turbines, photovoltaic solar panels and higher mileage vehicles…if politicians and corporations don’t export these jobs first.