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Previous weeks' top issues

Other economic absurdities that
Democrats must expose:


...because it's wrong to penalize success and hard work.


...After all, they came from, and understand, business.


...even though it is based on pitting the worlds' workers against each other.


...union bosses are only out for themselves.


...and the more the rich have, the more will trickle down to everyone else.


...Democrats are communists, or at least, socialists at heart.


...so when we tax wealthy investors, we lose jobs.


...so investors, not workers, create wealth.


...so we should give them all the tax breaks possible.


...Democrats just want to tax and spend today.


General Issues:

...It's a mountain, and a terrible defense of globalization.


...for those of Indonesia, Mexico, China and India.


...and how not to do it again.


...and the "crisis" is just a ploy by those who want to destroy it.


...Republicans' most important propaganda technique.


...and get the media on your side



So, how are America’s investors using the tax breaks that
Republicans and Blue Dog Democrats bestowed on them?...

...All you have to do is read the investment advice from columnists in January 8’s issue of Barron’s, the premiere Wall Street publication for serious investors.

Finding Riches on the Frontier

By MIKE HOGAN

Young, emerging markets like the Middle East and Vietnam hold big potential for ETF investors.

With stock markets in the developed world flat for a decade, investors are looking farther and farther afield for opportunity—even beyond emerging markets.

They're increasingly turning to "frontier" markets like the Middle East, parts of Southeast Asia and sub-Saharan Africa. Thanks to the commodities boom and the globalization of business, a number of these economies have begun growing briskly and could remain on an upward trajectory for 20 years or more.

---------------------------------------------------------------------------------------------

Wanted: Agility, and Ability to Move Overseas

By LAWRENCE C. STRAUSS

U.S. asset managers will succeed if they innovate retirement-fund management and diversify abroad, says this Goldman analyst.

This is not your parents' mutual-fund industry anymore. Gone are the days when firms like Fidelity were dominant, thanks to their stable of mega-U.S. stock funds like Magellan.

What's ahead for the fund business? Marc Irizarry, a financial-services analyst and managing director at Goldman Sachs, has some ideas....

So despite outflows from long-dated funds, particularly from U.S. domestic-focused equity mutual funds, there have been consistent inflows into allocation funds. Those products are capitalizing on this need for downside protection. Again, that's coming from both the convergence between traditional and alternative asset classes and strategies—but also from just the overall portfolio diversification that these funds are offering investors.

There you have it. The advice investors are getting from the print media, radio, and the cable networks is consistent. The old-line mutual funds that invested in the U.S. need downside protection, because our economy is getting worse, and the economies of the developing nations that now have our jobs are getting better.

Republicans and conservative Democrats have emerged victorious. Future growth will be in countries with no unions, low wages and/or abundant natural resources. American workers’ ability to negotiate for higher wages is now close to zero and the decline of the middle class will continue and accelerate. International investors and corporations will thrive in the new low-wage world, and America's new royalty will become even more powerful.




It’s time for a new Fair Labor Standards Act

The current Bloomberg Businessweek unwittingly describes how and why working-class Americans are losing their standard of living, and nothing short of a major change in our nation’s labor policy is going to correct the situation.

We’re seeing a repeat of the economic disaster of the 1930s, when we had chronic unemployment and workers were working 65 hours a week for little pay. It took the Fair Labor Standards Act of 1938 to turn the situation around and establish the 40-hour workweek as the national standard.

From Bloomberg Businessweek, November 24, 2010:

Campbell's Quest for Productivity

The food company enlists its workers to help squeeze every efficiency out of its plants

Every day, before their shifts begin, workers at the Campbell Soup factory in Maxton, N.C., huddle with managers to find ways to save the company money. The savings they achieve—and the savings realized at other companies' plants across the country—help explain why U.S. corporations are piling up profits without hiring enough people to put a big dent in unemployment.

U.S. companies slashed 8.5 million jobs during the recession. At the same time most have slowed capital investment plans. Instead, companies such as Campbell, DuPont, and United Parcel Service are asking employees to help them save cash by working smarter with existing technology. The efficiency gains make it less likely that recession-casualty jobs will come back. "When the productivity growth comes, then watch out, because that is when companies start not needing so much labor," says Edmund Phelps, a Columbia University economist and Nobel laureate. …

Yet the latest data from the Bureau of Labor Statistics show that while firing has slowed, hiring hasn't picked up. Job gains from new or expanding businesses were 6.1 million in the first quarter, the lowest quarterly rise since the recession ended. U.S. companies "live in a perpetual state of recession" because of global competition, says Thomas J. Schneider, chief executive officer of consultant Restructuring Associates. "They are much more disciplined about staying lean." …

Former Federal Reserve Chairman Alan Greenspan says companies need to keep innovating or the current burst of cost-saving will run its course and margins will shrink. "We have been experiencing this harvesting for a year or so," he says. "You have to ask the question: Are we running out of backlog?"

The bottom line: Companies such as Campbell are working hard to boost productivity. That means fewer new workers will be brought on.

As a former management consultant who participated in many productivity and quality improvement programs, I can say with confidence that the employees described in this story were told that their jobs depended upon their successfully reducing costs and improving productivity. Their reward will not be any significant improvement in pay or working conditions, but simply the possibility that they won’t be downsized.

Reason: Because of globalization, the high unemployment rate, and improvements in robotics and technology, all the power rests with management, and the workers have none. Any protections they’ll get will come from the Federal Government, just as it did in 1938.

When today’s management gurus say that Americans must sacrifice across the board in today’s economy, they’re not talking about corporate executives or their investors. They’re talking only about workers.

Note that Campbell’s CEO, Douglas R. Conant made $13,107,660 in 2009, about 408 times what the average worker made in that same year. If anything, I imagine he will be making even more in 2010.

This basic issue is discussed throughout this entire website, but probably the most relevant file is The most important 2-minute video for election 2012. Check it out.




Securities industry favors ultra-rich over the merely rich

At least twice a year, Forbes magazine informs its conservative, small-millionaires that they should treat their advisors nice and not demand too much of their time or they might get canned.

If you ever wondered why the ultra-rich get richer and the merely rich have problems getting good financial advice, check out Forbes’ latest, November 22, 2010:

How To Use A Financial Adviser

Yes, financial advisers do dump clients.

…Often the decision to show a client the door comes down to money--or the lack of it. Schwab Advisor Services, which has $610 billion in custody for more than 6,000 independent advisers, estimates that the 9% of client accounts worth $5 million or more generate 43% of advisers' revenues. Another 59% of accounts have less than $1 million but drive just 18% of revenues....

As advisers themselves become more prosperous, many stop catering to the small fry....

Suppose you're a busy young professional with a $1 million investment portfolio but little time to manage it. If you decide to hire an adviser and pay a fairly standard 1% of assets annually for his services, that's $10,000 per year. At that price, if you're suspicious of your adviser's every move you're probably wasting your money....

J. Scott Slater, managing director of business consulting for Charles Schwab ( SCHW - news - people ), notes that it doesn't make financial sense for senior partners to spend too much time on small accounts.

"When advisers start building their books . . . they'll take anyone who walks and breathes," says Dan Inveen, a principal at adviser consulting firm FA Insight in Seattle, Wash. "Eventually the practice matures and some of those clients are no longer a good fit."...

Three points seem especially relevant here:

  • The richest investors are getting the best advice, which, today, largely consists of advising them to invest their tax-cut money in the low-wage or resource-rich developing countries that are competing with American industries for growth or even survival.

  • Previous articles in the conservative financial press have reported that sometimes securities firms have advised their least profitable clients to buy the securities being dumped by their most profitable clients.

  • This is the industry that wants the government to privatize Social Security. They want working-class Americans who have no experience with investing to put their economic futures into the hands of the greenest novices in the securities industry.

The class war against working Americans, even the relatively affluent ones, continues.



Class war against America’s workers is shifting into overdrive

The Republican’s class war against America’s workers is shifting into overdrive. Check out this article from the ultra-conservative Wall Street Journal, November 18, 2010:

Bernanke Makes Case to Senators

Federal Reserve Chairman Ben Bernanke defended the central bank's plan to buy government bonds during a private gathering with U.S. senators, responding to several days of attacks from Republicans who say the Fed is causing inflation and weakening the dollar.

The Fed chairman denied the U.S. was manipulating the currency through its plan to purchase $600 billion of U.S. Treasury bonds and pointed to research by the Federal Reserve Bank of Boston which estimated the program could create 700,000 to one million jobs over two years….

Republican lawmakers said in a letter to Mr. Bernanke released Wednesday that the Fed's move "introduces significant uncertainty regarding the future strength of the dollar and could result…in hard-to-control, long-term inflation."

The letter, which says the Fed is also putting at risk U.S. trade relations, was signed by Rep. John Boehner (R., Ohio), the likely next speaker of the House; Sen. Minority Leader Mitch McConnell (R., Ky.); Sen. Jon Kyl (R., Ariz.); and Rep. Eric Cantor of Virginia, the number-two House Republican.

Some Republicans want to narrow the Fed's focus to price stability and take away its other objective of achieving full employment.

In a sign of divisions within conservative political circles about the Fed, Tom Donohue, head of the U.S. Chamber of Commerce, a frequent ally of Republicans, came out in support of Mr. Bernanke. Mr. Donohue said the Fed chairman had "acted in a very important way" to support economic growth and warned lawmakers "not to louse that up."

Traditionally, the Fed’s job has been twofold. First, it supposed to regulate the money supply so that the economy has enough money to function properly, but not so much that it cheapens its value and creates inflation. Second, it is supposed to make enough money available to encourage an adequate level of employment for working-class Americans.

Unfortunately, the Fed’s major role seems to have been to manipulate the financial markets in such a way as to stimulate corporate profits and rising stock markets, and to keep working class wages from going up.

For detailed descriptions of this issue, go to Google and get a free download of my book, Class War in America, and check out the chapters on how the Fed has traditionally manipulated the prime interest rate in order to keep working class wages from going up.

Now, we can expect the situation to get even worse than it has been in the past for working Americans. Republicans are so clearly anti-labor, it has even become embarrassing to the pro-business Chamber of Commerce, who warns Republicans “not to louse that up.”

But take heart. Bus companies are gearing up to provide transportation to Canada.



Globalization continues to fail the world's workers

Here’s another example of why readers of conservative financial publications should pay more attention to their advice to investors, vs. their propaganda for the general public.

For years we’ve been told that free market globalization would eventually be good for all the world’s workers. Again, we’re finding out that in China, “given the sheer size of China's increasingly testy population, and the yawning gap between the comparatively few in the upper reaches of the income scale,” China is beginning to face the inevitable conflicts that a growing income and wealth disparity always creates.

From Barron’s November 13, 2010:

A Double Hex

By ALAN ABELSON

Inflation in China and a slowdown in Germany may be twin omens of hard times. Plus, a chilly G-20 greeting for President Obama.

...As we've observed more than once, given the sheer size of China's increasingly testy population, and the yawning gap between the comparatively few in the upper reaches of the income scale and the mass of the citizenry, a delicate balance between keeping smoke curling out of its factories and keeping inflation in check is an imperative. Put us down among the doubters that it can pull off that neat financial trick.

In any case, there was nothing irrational in global markets, equity and commodity both, including our own, turning queasy at the prospect of Ireland and Greece going under or Germany and China losing economic traction. For too many investors have been chasing the chimera of a strong, more or less across-the-board global recovery for months now. Last week's reaction to signs that everything on the planet isn't hunky-dory suggests to us that those investors got a sobering glimpse of reality.

Globalization (international trade based on the freedom of corporations to locate operations based purely on low wages, no worker protections, and no environmental protections) is a disaster for our country. Reason: there is no world government to protect the interests of workers, and corporations can pit nations against each other with impunity.

The main reason the U.S. developed what was once the greatest economy in the world is that, to a minimal degree, it could set national standards that kept corporations from ruthlessly pitting states against each other in offering them benefits (low wages, low taxes, no worker protections, etc.).

For more explanation of this this issue, check out the following files: Friedman’s globalized world isn’t flat; it’s a gigantic mountain; We’ve abandoned traditional U.S. values for those of Mexico, China and India; and American investors bailing out in economic recovery.

There are many more files on this site that relate to this subject, but these will do for now.



Globalized class warfare is entering its last stage

We’re entering the last stages of international class warfare. The world’s investors have pitted workers against each other to their limits, and we’re now seeing a repeat of the Great Depression.

Nations across the world are experiencing serious social disruptions among their working-class and impoverished citizens, and they are belatedly trying to compete for labor-intensive industrial jobs. The developed nations, like the U.S., Spain, Ireland, England, etc., are trying to preserve the few industries they have left, while the undeveloped nations like China, India, Mexico, etc. are trying to attract more industries for their huge numbers of citizens who have not yet realized better standards of living.

Absent in all these discussions is the fact that the real problem with globalization is that wealthy and powerful investors are reaping most of the benefits of international trade, and the world’s working-class citizens are making all the sacrifices—especially workers of the developed world.

For additional discussion of this issue, check out my op-ed at American investors bailing out in the economic recovery

From The Wall Street Journal, November 12, 2010.

U.S. Hit by Trade Setback

Hang-Up With South Korea on Autos, Beef Dashes Obama Plan to Boost Exports

SEOUL—The presidents of the U.S. and South Korea were unable to overcome disputes over cars, cattle and domestic politics, potentially killing the biggest bilateral trade deal the U.S. has taken up in more than a decade.

The failure to resolve issues by Barack Obama's self-imposed deadline was a blow to the president, who has put export growth at the center of his jobs agenda and had invested political capital in getting a deal by the Group of 20 summit in Seoul.

A U.S. trade official said working-level staff from both sides will meet Friday. But chances for a deal look dim given opposition Mr. Obama faces from Ford Motor Co., labor unions and Democratic lawmakers.

Labor leaders and some powerful politicians from both parties praised Mr. Obama for not going ahead with a deal they characterized as bad for U.S. workers. "President Obama is exactly right in holding out for a deal that puts working people's interests first," said Richard Trumka, president of the AFL-CIO. ...

The trade-talk failure came on top of criticism from other G-20 nations concerning the Federal Reserve's move to pump billions into the U.S. economy, potentially weakening the dollar.

"This reinforces the opinion of many key global and business leaders that the U.S. isn't really committed to global engagement and is instead pushing mercantilist, beggar-thy-neighbor policies," said Matthew Slaughter, a former member of George W. Bush's Council of Economic Advisers.

Of course Republican Matthew Slaughter wants more international trade deals, no matter what the conditions. Working-class Americans haven’t suffered enough, and multi-national corporations aren’t yet powerful or profitable enough.

And of course labor union leaders don’t want the deal to go through. They’ve been warning Americans about the disastrous consequences of caving in to the power of multinational corporations for the last three decades. And they’ve been right.

Protectionism and tariffs didn’t cause the depression and the unemployment of the 1930s. Depression and unemployment caused protectionism and tariffs. As a matter of historical fact, tariffs and our protection of American industries against low-wage countries was a significant part of America’s prosperity during most of the last century. It’s way past time to do it again.



The wealthy are still winning the class war

No wonder Republicans and conservative Democrats feel no pressure to actually address our economic problems. Their supporters are still doing fine in this new globalized economy. Under the head “Unemployment? Not for the Rich,” the The Wall Street Journal ( February 13, 2010) reported that:

For those wondering why luxury spending is back even as unemployment hovers close to 10%, consider this: Unemployment among the affluent is only 3%.

According to a study from Northeastern University's Center for Labor Studies, unemployment for those in the top income decile—individuals earning more than $150,000 a year—was 3% in the fourth quarter. That compares with unemployment of 31% for the bottom 10% and unemployment of 9% for the middle decile.

The differing rates—including those working part-time for economic reasons—also are notable. Underemployment for the top 10% was 1.6%, while the bottom was 21%.

In other words, the top 10% is experiencing what economists consider full employment.

"These stark findings clearly reveal the economic costs of underemployment in the current U.S. economy are disproportionately borne by workers at the lower end of the income distribution," the report stated. "Thus underemployment contributes in an important way to the high and rising degree of income inequality in the U.S." (Boldface not in the original.)

Congratulations to America’s new aristocracy: they’ve created an economy that benefits themselves at the direct expense of middle- and low-income workers in both prosperity and recession. Fantastic!

And they’ll still insist on getting more tax breaks for themselves. Of course, that also means that we’ll have to reduce benefits for those who are making all the sacrifices (we can’t have deficit spending, you know).


We’re entering the last stages of international class warfare. The world’s investors have pitted workers against each other to their limits, and we’re now seeing a repeat of the Great Depression.

Nations across the world are experiencing serious social disruptions among their working-class and impoverished citizens, and they are belatedly trying to compete for labor-intensive industrial jobs. The developed nations, like the U.S., Spain, Ireland, England, etc., are trying to preserve the few industries they have left, while the undeveloped nations like China, India, Mexico, etc. are trying to attract more industries for their huge numbers of citizens who have not yet realized better standards of living.

Absent in all these discussions is the fact that the real problem with globalization is that wealthy and powerful investors are reaping most of the benefits of international trade, and the world’s working-class citizens are making all the sacrifices—especially workers of the developed world.

For additional discussion of this issue, check out my op-ed at American investors bailing out in the economic recovery

From The Wall Street Journal, November 12, 2010.

U.S. Hit by Trade Setback

Hang-Up With South Korea on Autos, Beef Dashes Obama Plan to Boost Exports

SEOUL—The presidents of the U.S. and South Korea were unable to overcome disputes over cars, cattle and domestic politics, potentially killing the biggest bilateral trade deal the U.S. has taken up in more than a decade.

The failure to resolve issues by Barack Obama's self-imposed deadline was a blow to the president, who has put export growth at the center of his jobs agenda and had invested political capital in getting a deal by the Group of 20 summit in Seoul.

A U.S. trade official said working-level staff from both sides will meet Friday. But chances for a deal look dim given opposition Mr. Obama faces from Ford Motor Co., labor unions and Democratic lawmakers.

Labor leaders and some powerful politicians from both parties praised Mr. Obama for not going ahead with a deal they characterized as bad for U.S. workers. "President Obama is exactly right in holding out for a deal that puts working people's interests first," said Richard Trumka, president of the AFL-CIO. ...

The trade-talk failure came on top of criticism from other G-20 nations concerning the Federal Reserve's move to pump billions into the U.S. economy, potentially weakening the dollar.

"This reinforces the opinion of many key global and business leaders that the U.S. isn't really committed to global engagement and is instead pushing mercantilist, beggar-thy-neighbor policies," said Matthew Slaughter, a former member of George W. Bush's Council of Economic Advisers.

Of course Republican Matthew Slaughter wants more international trade deals, no matter what the conditions. Working-class Americans haven’t suffered enough, and multi-national corporations aren’t yet powerful or profitable enough.

And of course labor union leaders don’t want the deal to go through. They’ve been warning Americans about the disastrous consequences of caving in to the power of multinational corporations for the last three decades. And they’ve been right.

Protectionism and tariffs didn’t cause the depression and the unemployment of the 1930s. Depression and unemployment caused protectionism and tariffs. As a matter of historical fact, tariffs and our protection of American industries against low-wage countries was a significant part of America’s prosperity during most of the last century. It’s way past time to do it again.



Good news for Asia; bad news for the U.S

To know what’s actually happening to our economy, it helps to read the inner pages of our conservative news media. Under the head, “Asia-led Recovery,” Business Week, February 22, 2010, reported that:

Americans have tightened their belts, but folks elsewhere continue to eat and drink merrily—good news for the likes of McDonald's and Coca-Cola. On Feb. 9 the companies reported that while sales fell in North America during the most recent period, overall revenue was up, thanks to higher sales abroad.

Reporting a 4% rise in operating income for the fourth quarter, Coke noted that it sold 1% fewer cases of soft drinks in the U.S. and Canada but 29% more in China. At McDonald's, January same-store sales slipped 0.7% in the U.S., but increased 4.3% in Europe and Asia/Pacific.

Now you know why investment advisors are telling clients to invest their job-creation money in countries with the lowest wages or that are rich in natural resources. Those are the nations that still have growing industries and that are employing people who are buying things.

Of course, they aren’t buying as much as Americans could when we were still the industrial leader of the world, but, as American workers’ incomes go down, Asian workers’ incomes go up. So, that’s why investors are going to put their tax-refund money to work in Asia, not the U.S.

The big winners in all this: international corporations and their investors.

The big losers: American workers, for now. Naturally, the present workers who have decent jobs by China’s standards will suffer as soon as they start making better incomes, and corporations go elsewhere. China is a country with 1,300,000,000 people, and when the incomes of the top 300,000,000 get too high—by corporate standards—corporations will relocate to the other parts of China where the impoverished 1,000,000,000 are living.

The corporate search for sources of low-wage workers-without-rights never ends. When is the American voter going to wake up to what’s happening?






Our government's failure to recognize the disastrous effects of globalization will ensure chronic, low-paid working-class jobs--for those who still have jobs.

The disastrous effects of the class war on American workers continues with a vengeance. How in the world can we expect to have decent, good-paying working-class jobs when American investors use their tax breaks to put their job-creation money into those countries that offer the lowest wages and the worst working conditions?

Check out this article that was buried on page B1 of The Wall Street Journal, February 3, 2010, “Radical Shifts Take Hold in U.S. Manufacturing”:

America's industrial base is undergoing its most radical restructuring in decades as manufacturers rethink their businesses in the wake of the recession.

From Dow Chemical Co. to Intel Corp., iconic companies are telling stories of wrenching change—both contraction and recovery—as they report their earnings for 2009.

Dow Chemical said Tuesday it is aiming to shed some $2 billion worth of basic-chemical factories and other assets this year as it moves into more-profitable specialty chemicals. Appliance maker Whirlpool Corp. said it cut about a tenth of its capacity in 2009 as it struggled with a 9.6% drop in sales. Intel, by contrast, is investing billions of dollars in its U.S. plants as demand for computer gear recovers.

"We are emerging from one of the most challenging economic environments we've seen in decades," said Whirlpool Chief Executive Jeff Fettig, on a conference call Tuesday.

The latest moves are accelerating the U.S. manufacturing economy's longer-term shrinkage, as well as its shift away from heavy sectors, such as automobiles and basic chemicals, toward higher-tech products like super-fast computer chips. In some cases, as with auto makers, companies are stripping down to adjust to diminished U.S. demand or investing in smaller, more-efficient facilities. In other cases, as with chemical makers, they are relocating labor-intensive operations to countries where wages are cheaper. …

As a result, economists expect unemployment to remain high for many years as millions of American workers in the hardest-hit sectors struggle to find new jobs. And while some economists see the restructuring as necessary to make U.S. industry leaner and more profitable, others worry that the sheer scope of the cutbacks could doom companies that ought to survive.

"The earthquake that we felt was so big, and the aftershocks so strong, that we could easily destroy perfectly good manufacturers that are crucial in the supply chain," such as auto-parts makers that supply the entire industry, said Diane Swonk, chief economist at Mesirow Financial in Chicago. "That's the great danger, and it's still a risk."

“Economists expect unemployment to remain high for many years as millions of American workers in the hardest-hit sectors struggle to find new jobs.” And as these workers enter the job market, they depress wages for everyone in their class.

For additional insight into this issue, check out International Free Trade; It’s not “Globalization.”






Finally, even the conservative Wall Street Journal indirectly identifies the real culprits in our economic meltdown

Here’s another example of why it’s important to read the news stories of the Wall Street Journal vs. their editorials and opinion columns.

In their publications and on radio and TV, conservatives have been blaming government for the recent real estate and derivatives meltdown. According to them, if government hadn’t pressured banks to loan money to people who couldn’t afford their mortgages, there never would have been a problem to begin with. High on their list of villains were Fannie Mae and Freddie Mac, federal guarantors of the mortgages.

Now, in a little noted Wall Street Journal story, “Fannie, Freddie Chase Bad Mortgages” (January 30, 2010), some hopeful new developments are reported and the real problem is described:

It is payback time for Fannie Mae and Freddie Mac on some mortgages sold to the finance companies by lenders.

Stuck with about $300 billion in loans to borrowers at least 90 days behind on payments, Fannie and Freddie have unleashed armies of auditors and other employees to sift through mortgage files for proof of underwriting flaws. The two mortgage-finance companies are flexing their muscles to force banks to repurchase loans found to contain improper documentation about a borrower's income or outright lies.

The result: Freddie Mac required lenders to buy back $2.7 billion of loans in the first nine months of 2009, a 125% jump from $1.2 billion a year earlier. Fannie Mae won't disclose its figure, but trade publication Inside Mortgage Finance said Fannie made $4.3 billion in loan-repurchase requests in the first nine months of 2009.

"Because taxpayers are involved, we're being very vigilant," said Maria Brewster, who oversees Fannie's repurchase team. "No taxpayer should have to pay for a business decision that caused a bad loan to be sold to Fannie Mae."...

The biggest losers are likely to be Bank of America Corp., J.P. Morgan Chase & Co. and other mortgage lenders when the housing bubble burst. Such lenders also are being deluged with loans kicked back to them by holders of mortgage-backed securities who uncover deficiencies with loans bundled into the pools. One common example: a borrower who said the loan was for an owner-occupied home but used it for a second house.

Certainly Fannie and Freddie shares some of the blame for our economic meltdown, but the primary villains are the bonus-driven corporate executives, salespersons, and traders who got incredibly rich by breaking all the rules governing sound financial practices.

Now, mercifully for the taxpayer, the corporations are paying some of it back. Unfortunately, it’s only the corporations’ investors who will ultimately pay the penalties for their reckless, and possibly illegal, behaviors. The greedy and corrupt individuals who made it happen are now very wealthy and, apparently—judging from their present compensation—not even remotely remorseful.






Why Obama and the Democrats lost and are losing

In Tuesday’s bellwether election, Republican Scott Brown won the senatorial race in Massachusetts, the bluest of the blue states. The pundit consensus is that America is a centrist country, and President Obama and congressional Democrats pursued a liberal agenda that violated most voters’ values.

If the leaders of the Democratic Party panic and fall for this line of reasoning, their future failures will be assured. Obama and congressional Democrats won landslide elections in 2008 because voters were fed up with the conservative policies that resulted in record national debt, an unnecessary war, record unemployment, a broken health care system, and special interest control of the legislative process.

Obama promised to end all that. Unfortunately, he and his advisors were conned into believing that they shouldn’t reach too far, because the country wasn’t ready to accept realistic but difficult solutions to our problems.

So, instead of offering the sensible single-payer health system that most voters supported, Medicare for everyone, the Democrats came up with a compromised, convoluted package that no one could understand, let alone explain. It was therefore incredibly easy to attack from many different directions, and with justification.

They chose to endorse the argument that raising taxes on anyone, even the extremely wealthy, was a bad idea in a failing economy—instead of explaining why a progressive income tax was needed,. They should have noted that that’s exactly how we got out of the Great Depression. The top income tax rate was 70% to 88% from 1941 to 1982, along with record high taxes for inheritances and capital gains, and, during WWII, corporate excess profit taxes.

On a related issue, instead of justifying deficit spending, they joined the Republicans in insisting that our fiscal policies be deficit neutral. Again, that’s contrary to what got us out of the Great Depression. In the first three years of WWII, the U.S. deficit-spent seven times the amount of money it spent for the entire eight years of the New Deal. Deficit spending, along with the progressive taxes, put more money into the hands of workers and consumers, vs. into the hands of investors who were not about to put money into businesses whose customers couldn’t even buy the things they needed.

We’re in a similar situation today. The typical consumer is tapped out, and investors are now putting their job-creation money into China, Russia, India, Brazil, Australia, Canada and other low-wage or rich-resource countries. When Democrats reluctantly agreed that we must rely primarily on the private sector to remedy the chronic unemployment problem that defies solution, they added credibility to the Republican anti-tax, anti-deficit, anti-government argument.

On economic policy, Obama decided to play it safe and not depart too much from the status quo. Instead of relying on liberal economists who have been critical of the economic policies of the past three decades, like Paul Krugman, Joseph Stiglitz, and Robert Kuttner, he chose the same high prestige free market advocates who got us into the unregulated banking crisis: Ben Bernanke, Timothy Geithner and Larry Summers.

Result: huge income increases for those in the financial industry, and no significant public protections from their future excesses or misdeeds. Much more money has been accumulated by Wall Streeters and their investors, and middle- and low-income citizens are finding it increasingly difficult to find jobs that pay decent wages.

Instead of admitting that unregulated foreign trade (globalization) has been a windfall for America’s investors and corporate executives—and a colossal disaster for America’s workers—Democrats have decided to support the Republican claim that unregulated free world trade will eventually benefit everyone.

There is a reason China and India will be the future world economic powers: in order to stop the dreaded “wage inflation” in the U.S., we willingly gave them, not only our industrial jobs, but also, increasingly, our professional jobs: accountants, architects, engineers, scientists, and so on. Unless we make some fundamental changes in government policy, the situation will only get worse.

Let’s hope Obama will keep his pledge to change those strategies that have been found not to work. His first step: get rid of all advisors who have lost confidence in the American voters’ ability and willingness to listen to reason. Then, instead of yielding to his opposition and pursuing half-measures that are guaranteed to fail, he needs to tell it like it is, and actually bring about the genuine change he promised.






Our economy needs a truly progressive tax on wealth

A brief article in today’s Wall Street Journal (Jan. 19) demonstrates what’s wrong with our economy and our government. Under the head “O'Brien's Exit to Cost NBC $40 Million,” the Journal reported that:

Conan O'Brien is close to signing a nearly $40 million deal to walk away from his dream job hosting NBC's "The Tonight Show," bringing down the curtain on one of the entertainment industry's biggest debacles in years.

The comedian's exit agreement, which could be completed as early as Tuesday, bars Mr. O'Brien from bad-mouthing his former NBC bosses, according to people familiar with the matter, but paves the way for him to land another television gig within a year.

O’Brien will get $40 million for doing nothing. But that’s just a drop in the bucket when you consider all those who are making tens of millions of dollars in the entertainment industry—rock stars, radio and TV stars, professional athletes, actors and actresses, etc.

And that doesn’t include the other members of America’s elite who also are making tens of millions—corporate CEOs, prestige doctors, accountants, lawyers, Wall Street speculators, and so on.

The biggest reason these people are making all that money isn’t because they work hard or are contributing to society. They’re making all that money because wages of workers have been stagnating or declining for the past three decades.

Lower working-class wages allow businesses and corporations to make more money, spend more money for advertising, and, hence, pay incredibly high fees for the services of their supporters, spokespersons or media stars.

And that’s only part of the problem. Since wealth is a zero-sum game, they use their money to drive up the cost of housing, land, gasoline, food and everything else in the U.S.’s auction markets.

Recently there's been a lot of talk about the need to limit the incomes of people on Wall Street and in the banking industry. Actually, we shouldn’t try to limit anyone’s income. That would be a nightmarish mishmash of legislative gobbledygook. Instead, we should implement the kind of progressive income tax we had from 1941 to 1962: 88% for the top income earners, no matter how they made their money. Or, at least, 70%, as we had from 1962 to 1980.

In addition, we should increase the earned income tax credit for those who don’t even make poverty wages when working 40 hours a week, and lower the taxes for middle- and low-income Americans. These actions would actually help the economy, by putting more money into the hands of consumers.

If you want to know how Republicans and conservative Democrats have deliberately caused wages to stagnate over the past three decades and brought about the destruction of America's middle class, just check out the links all over this website. You’ll be amazed.






The good news: the class war is over.
The bad news: the people who work for a living have lost.

Connect the dots between two of our best conservative financial publications and it’s clear that America’s wealthy and powerful have it made in this economy, and workers are in a state of permanent decline—unless something radical is done by our federal government. (Like a Roosevelt-style New Deal.)

The current Fortune magazine (Jan. 18), “Directors: Feeding at the Trough,” describes how directors of 491 corporations made an average of $213,000 in 2008, with several making over $1,000,000. Fortune asked the question: “How does a board member challenge a CEO when the director is being paid oversize amounts likely to be important to his or her lifestyle?” If there ever were a mystery about why CEOs are making tens of millions a year, this should remove it.

It hardly matters that some of these “directors” were ex-corporate cronies or relatives of the CEO, since even total strangers will support each other if it means that they will both become famously rich by doing so. Their shareholders won’t object to such ridiculous incomes because they’ve been profiting immensely themselves. Why?

Easy. The current Business Week cover story (Jan. 18), “The Disposable Worker,” describes how “Pay is falling, benefits are vanishing, and no one’s job is secure. How companies are making the era of the temp more than temporary.” Not only that, the Bureau of Labor statistics estimates that over 26% of today’s workers have “nonstandard” jobs—workers classified as “independent contractors,” “temps,” day laborers, and so on. In almost all cases: no pensions, no health care benefits, and draconian working conditions.

As Business Week concluded:

At the bottom of the ladder, workers are so powerless that simply getting the minimum wage they're entitled to can be a struggle. A study released in September and financed by the Ford, Joyce, Haynes, and Russell Sage Foundations found that low-wage workers are routinely denied proper overtime pay and are often paid less than the minimum wage. It followed a Government Accountability Office report from March 2009 that found that poor oversight by the Labor Dept.'s Wage & Hour Div. leaves low-wage workers "vulnerable to wage theft."

Some companies have been fined for misclassifying employees as freelancers and then denying them benefits. Meanwhile, the George W. Bush Administration made it easier for people earning as little as $23,600 a year not to be covered by overtime-pay rules.

Workers hired for temporary or contract work face a higher risk of developing mental health problems like depression, according to research presented in 2009 by Amélie Quesnel-Vallée of McGill University. A lack of job security and health-care benefits, as well as social ties to the rest of the workforce, increase stress levels for temps and contractors. A survey conducted in September by the National Alliance on Mental Illness found that people who experienced a forced change in their employment during the last year were twice as likely to report symptoms consistent with severe mental illness as individuals who hadn't experienced one.

The situation is especially difficult for young people, many of whom haven't been able to get a first foot on the career ladder. The percentage of people 16 to 24 who have jobs has plummeted by 13 percentage points since the beginning of 2000, while the share of workers 55 and over who have jobs has edged up over the period, despite the recession.

Some young people are so desperate to get a start, they're working for free as semi-permanent interns. "Companies that used to use only one or two interns are now asking me for five or six at a time," says Lauren Berger, who runs a company that matches interns with entertainment, marketing, and media companies. Berger also reports a rise in the number of "adult interns," who work for free while trying to break into a new career.

The Business Week article went on to describe what everyone knows by now. The relentless war on the wages of those who work for a living is continuing up the economic ladder, and now includes lawyers, teachers, engineers and everyone in a class that must compete with their counterparts in the developing world.

To check out this issue further, go to International Free Trade; It’s Not “Globalization”






A clear and obvious explanation of why
the U.S. economy will not recover

In the article "Not So Radical Reform; How New Democrats and Wall Street are watering down financial regulation in Congress," Business Week (Jan. 11 issue) described why our economy is likely to remain in deep trouble.

…[Barney} Frank, House Speaker Nancy Pelosi, and other left-leaning Democrats have had to deal with the New Democrat Coalition, a moderate group inside the party that shares many of the values associated with Bill Clinton and the Democratic Leadership Council, which was founded 25 years ago in the belief that Democrats couldn't win elections without a strong moderate platform.

In the House of Representatives, where the debate on regulatory reform started, the New Democrat Coalition has 68 fiscally conservative, pro-business members who fill 15 of the party's 42 seats on the House Financial Services Committee. And with just a 38-member voting majority over Republicans (who often vote as a block in the House), Frank and Pelosi can't push legislation through without the New Democrats' support. "We're pro-growth, innovative Democrats with real-life experience," said New York Representative Joseph Crowley, the Coalition's chairman. "Many of us come out of the business world." The group's growing importance isn't lost on the President. After traveling to Manhattan in September to rally support for financial regulation, Obama invited a couple of members, including Crowley, to fly back with him to Washington on Air Force One.

The New Democrats' ties to Wall Street are strong. Jim Himes, a first-term congressman from Connecticut, is a former Goldman Sachs investment banker. Representative Mike McMahon represents a large constituency of Wall Street employees in Staten Island and Brooklyn....Since the start of the 2008 election cycle, the financial industry has donated $24.9 million to members of the New Democrats, some 14% of the total funds the lawmakers have collected, according to the Center for Responsive Politics. Representative Melissa Bean of Illinois, who has led the Coalition's efforts on regulatory reform, was the top beneficiary, with donations of $1.4 million.

How clear can it be? Today's ideological battles are not between Democrats and Republicans, they are between those who are trying to represent the interests of the entire U.S. (progressive Democrats) and those who are in the pockets of Wall Street (Republicans and "new Democrats). So far, those in the pockets of Wall Street are winning big time.

For more insights into this issue, go to: Bill Clinton, a Moderate Republican.






Closet aristocrats who pretend to be capitalists

If you ever doubted that conservatives who claim to believe in capitalism are actually closet aristocrats who believe in royalty, check out the following two recent articles in Barron’s, America’s premier conservative financial publication.

In a December 28 column, “Ready for the Grave,” Thomas Donlan wrote: “…the estate tax should be repealed permanently because it takes capital out of private investment (meaning fewer jobs and less economic growth) and puts it into government expenditure (meaning more dependency and less economic growth).”

It’s the usual defense of America’s aristocratic dynasties of billionaires and multimillionaires, whose descendants will never have to work a day in their lives except for therapeutic purposes. And there are a lot of them.

In a November 30 column, “Watching Over the Family Fortune,” Hilary Johnson described a growing sector of the financial industry that is servicing “multifamily offices,” by making sure that entire groups of wealthy families are properly invested in today’s hazardous economy.

If you would like your own family to take advantage of this road to perpetual wealth, don’t get your hopes up unless you have a lot of money. As Johnson explains, “In effect, the firms are replicating the services of traditional single-family offices for a broader audience. While it can take a net worth of $1 million to justify the costs of a single-family office, multifamily offices typically target folks with $30 million and up.”

Republicans and conservative Democrats will try to assure you that all this is a good thing because it means that rich investors will have even more money to invest in new businesses and jobs. Unfortunately, if they follow the prevailing Wall Street advisors, they’re going to be investing—not in jobs in the U.S.—but in jobs in China, India, and a variety of developing countries.

The average American would be much better off if the inheritors of great wealth had to pay at least as much tax as those who work for a living. Then government would have more money to actually create jobs in this country: teaching, policing, building and repairing roads, bridges, schools, etc.

Actually, both of these articles are recurring themes that come out about every six months or so in the conservative news media. Check out the older excerpts of conservative articles in other places in this website, and you’ll find similar examples.






A voter's guide to healthcare double-speak

The massive confusion about upcoming congressional healthcare legislation would be reduced if voters understood the actual meanings behind the sound bites they hear on radio and TV. For example:

  • “You can’t allow government bureaucrats to control your health care.” Meaning: To the extent that pharmaceutical, insurance and healthcare industry bureaucrats can make governmental protections of patients’ rights absent or ineffective—they will be able to control your health care and its costs.

  • “We’ve got to make the healthcare program deficit neutral.” Meaning: We can’t revoke tax cuts for the wealthy or raise their taxes, so that means we must allow low- and middle-income citizens to go without the care they need, even to continue living. (Anyway, the world is overpopulated.) Of course, deficit spending is perfectly ok to finance a war—even the ones we never should have started in the first place.

  • “We’re passing the costs of this healthcare bill down to our grandchildren.” Meaning: The grandchildren of the wealthy will eventually have to pay for some of this, since they’ll be the only ones making enough money in the globalized economy to pay any additional taxes. You can’t get blood out of a turnip, and we obviously won’t be able to raise taxes on the grandchildren whose parents couldn’t afford to send them to college.

Although the above clichés specifically relate to healthcare legislation, the following are indirectly connected:

  • “We’ve got to give workers a break and let them keep more of their own money.” Meaning: Today’s spin doctors define “workers” as corporate executives, professional athletes, hedge fund managers, hard-working investors, prestige doctors, lawyers, entertainers, etc. Virtually no one today suggests that government raise taxes on actual workers: those low-wage, working-class Americans who keep our country going. In fact, many get, and will continue to get, earned income tax credits because they’re not even making a living wage.

  • “Small businesses are the biggest job creators in the U.S.” Meaning: Since Congress has embraced globalization, the largest, decent-wage corporations are no longer in the country. They’ve all gone to low-wage Third World countries. Today, a large manufacturer will locate in the U.S. only when a state gives it huge tax breaks and incentives, and promises an eager supply of desperate, low-wage, non-union workers—and as few workplace standards as possible.

  • “We shouldn’t tax small businesses, the source of job growth.” Meaning: Even though a small business owner may make over $250,000 after all expenses, we shouldn’t tax him like we tax people who aren’t fortunate enough to own profitable businesses.

  • “We’ve got to save Social Security, Medicare and Medicaid.” Meaning: We’ve got to cut benefits to those who need them the most. Again, it’s actually a cover for the anti-tax ideology that says you can’t “penalize” those who are profiting most from an economy that is deliberately biased in favor the politically powerful and wealthy, and at the direct expense of those in the middle and bottom of the income scale.

The inherent weakness in the all-pervasive anti-tax, anti-government ideology is that it is essentially a reactive mindset. Its premise is that the federal government should ignore obvious, looming national problems until they reach a crisis stage, and is forced to act—and then hope it’s not too late.

A proactive mindset, on the other hand, holds that it is much cheaper and more effective to prevent problems in the first place, or at least keep them from getting worse—than to wait until they approach insolvability. Many of our national problems are approaching very dangerous junctures: global warming, the loss of our national standing relative to China and India, the unending decline of well-paid working-class jobs, exploding disparity of income and wealth between rich and poor, social disintegration, and the declining availability of health care to the poor and middle class.

Isn’t it time for citizen outrage at those Congresspersons who are deliberately yielding to the anti-tax, anti-government crowd? This is not an argument for that bugaboo, “big government.” It’s an argument for good government, and voters shouldn’t allow spin doctors to confuse the two with their doublespeak.




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