What America Can Learn From The Revolt In Europe

By Robert Reich, cross-posted from his website

Who’s an economy for? Voters in France and Greece have made it clear it’s not for the bond traders.

Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts — but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.”

Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece – as well as his own poll numbers. Britain’s conservatives have been taking a beating.

In truth, the choice isn’t simply between budget-cutting austerity, on the one hand, and growth and jobs on the other. 

It’s really a question of timing. And it’s the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.

That’s because public spending is a critical component of total demand. If demand is already lagging, spending cuts further slow the economy – and thereby increase the size of the public debt relative to the size of the overall economy.

You end up with the worst of both worlds – a growing ratio of debt to the gross domestic product, coupled with high unemployment and a public that’s furious about losing safety nets when they’re most needed.

The proper sequence is for government to keep spending until jobs and growth are restored, and only then to take out the budget axe.

If Hollande’s new government pushes Angela Merkel in this direction, he’ll end up saving the euro and, ironically, the jobs of many conservative leaders throughout Europe – including Merkel and Cameron.

But he also has an important audience in the United States, where Republicans are trying to sell a toxic blend of trickle-down supply-side economics (tax cuts on the rich and on corporations) and austerity for everyone else (government spending cuts). That’s exactly the opposite of what’s needed now.  

Yes, America has a long-term budget deficit that’s scary. So does Europe. But the first priority in America and in Europe must be growth and jobs. That means rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat.

President Obama and the Democrats should set a clear trigger — say, 6 percent unemployment and two quarters of growth greater than 3 percent — before whacking the budget deficit.

And they should set that trigger now, during the election, so the public can give them a mandate on Election Day to delay the “sequestration” cuts (now scheduled to begin next year) until that trigger is met.

The Relentless Austerity Fetish

Lemmings

By Richard (RJ) Eskow, cross-posted from Campaign for America's Future

Europe's in crisis. Unemployment is at a fifteen-year high after climbing for ten straight months, thanks to the austerity measures imposed on it by conservative leaders in France, Germany, and the international financial community.

But if you think things are bad over there, imagine what they'll be like if Republican budget measures are imposed here. The GOP budget makes European austerity look like summer camp.

Ever wonder why lemmings jump off cliffs?

While England Slept

Great Britain blazed the trail for Europe with a series of steep cuts to government spending - and it soon led the continent in economic misfortune. Unemployment skyrocketed, consumer confidence plummeted, and growth stagnated.

That's what austerity economics does to struggling economies. When you ask already-beleaguered middle class and lower-income people to bear the burden for the mistakes that made other rich the results are predictable: real income falls, demand for goods and services drops, and the entire economy drops back into a death spiral.

You'd think that Europe and the world would have learned from Britain's mistakes, but they haven't. In fact, even Britain hasn't learned from its mistakes. As the New York Times reports, the UK is doubling down on the madness.

In its latest round of budget announcements the government announced that it's continuing to push for additional spending reductions but wants to cut taxes for the wealthiest citizens, including those who got rich from the bank speculation that broke the economy! As critics have correctly observed, the UK government is paying for this rich person's tax cut through a 'stealth tax' on low-income retirees.

Britain's misplaced emphasis on reducing government deficits is even backfiring where deficits are concerned. From the Times: "The Office for National Statistics said Wednesday that Britain's budget deficit almost doubled in February, to £15.2 billion, far exceeding economists' expectations of about £8 billion. "


Kamikaze Europe

Now the rest of Europe is following Great Britain's lead. Unemployment is officially 10.8 percent and expected to reach 11 percent soon. Seventeen million people are out of work.

Austerity mania spread through Europe like a plague. Unemployment's now at 23.6 percent in Spain and 21 percent in Greece. How is a country expected to lower its deficits when a quarter of its working population isn't paying taxes and doesn't have disposable income? Apparently the financial geniuses running things there didn't think about that.

Ireland was once touted as austerity's success story. They're not bragging on Old Eire much now that it's officially back in a recession. Spain's problems disprove the theory that government debt is the source of all economic woes since, as Paul Krugman notes, Spain has been a much more thrifty government spender than Germany. Further austerity measures there are going to be disastrous.

Then there's Greece. According to reports, there are no working traffic lights left in the city of Athens. People have taken to bartering for goods and services in a world where many people have little or no sources of currency income while the streets swarm with formerly middle-class Greeks who are now being described as 'the new poor.'

In fact, there are encampments of the working poor throughout Europe. Even the leading European economy, Germany, is losing ground because of Chancellor Merkel's obsession with austerity measures - while France, the other austerity leader, is also struggling.

What do they plan to do, now that they have the benefit of experience? More austerity, according to reports. Merkel even thinks that's the road to her own re-election.

The Home Front

Which gets us to the United States. The Republicans in Congress have just passed a budget that makes Europe's austerity measures seem positively genteel. Rep. Paul Ryan, the Pied Piper of nihilist economics, said when it passed that we're in a "debt-driven crisis, and so we have an obligation -- not just a legal obligation but a moral obligation -- to do something about it."

That budget's "moral obligation" doesn't extend to our military budget, which the Republicans voted to massively expand - or to tax breaks for millionaires and billionaires, whose current historically low tax rates will plunge if their budget ever goes into effect. And, as we now know, the GOP budget would essentially shut down every other function of government that Americans have valued for the last century and a half. 62 percent would come from programs for lower-income people and Pell grants to help young people go to college.

And what a time for austerity: As Matt Stoller notes, one in seven Americans is being pursued by debt collectors. Student loan debt exceeded $1 trillion last year, even as young people face sky-high unemployment. 8.8 percent of student loans defaulted in their first two years of payment last year and more than one-fourth of student loan payments are now delinquent.

Robert Schiller, arguably the world's top economic expert on real estate, says that prices for suburban real estate aren't coming back in our lifetime. Consumer debt is soaring. US growth is expect to turn even more sluggish, which even has Ben Bernanke pushing for more government action.

But while the projected deficit reductions in the GOP budget are a hoax, the cuts to vital programs, including its hidden cuts to Medicare, aren't. As Mike Konczal notes, states like Florida are a preview of a Ryan-budget America. Konczal coauthored an article with Bryce Covert which showed that "Of the eleven states in which Republicans came into power in 2010 -(five) lost more than 2.5 percent of their workforce from December 2010 to December 2011."

Bargain Basement

The budget-cutting rhetoric of the right is too often echoed by Democrats, at a time when they (or someone) should be proposing a more common-sense and more humane approach to the economy. Talking about deficits today is the moral equivalent of lecturing firefighters about water conservation while the town is burning down.

We need to put out the fire first. We urgently need spending to create jobs, especially when the government can borrow money for virtually nothing. Or, to put it another way -

This is your country:



(employment, United States)
This is your country on austerity:



(Konczal, Covert)
And yet there are still those in the White House and Congress who dream of a "grand bargain" with the Republicans, like the one the President nearly finalized last year - a bargain that would send the nation's economy over a cliff.

Lemmings

People used to believe that lemmings committed mass suicide. Scientists now say that they're following migration patterns which sometimes lead them straight into the ocean. Either way, a lot of them drown because they followed the tail of the rodent in front of them.

The US seems determined to cling to Europe's ragged tail as it plunges into the icy waters below. The Republicans would drown our economy in a way that would make Europe's problems seem mild by comparison. (At least they still have working governments over there.) But few Democrats are willing to challenge the austerity fundamentalism that's gripped Washington. Instead they prefer to debate means to an austere end, rather than the end itself.

It's all insane. But this Ryan budget - now the official budget of Republicans in Congress, and warmly embraced by presumptive GOP candidate Mitt Romney - is the biggest sign of insanity yet.
Not that our national leaders are lemmings. Far from it. They're intelligent economic actors behaving in a way that ensures they'll receive future rewards. That means if we don't like the way this story ends, we'll have to change it ourselves.

No, politicians aren't the lemmings in this story. Until the time comes when we demand something different from our leaders in Washington ...... we are.

The Ongoing Housing Crisis And The End Of An Era

By Robert Reich, cross-posted from his website

Economic cheerleaders on Wall Street and in the White House are taking heart. The US has had three straight months of faster job growth. The number of Americans each week filing new claims for unemployment benefits is down by more than 50,000 since early January. Corporate profits are healthy. The S&P 500 on Friday closed at a post-financial crisis high.

Has the American recovery finally entered the sweet virtuous cycle in which more spending generates more jobs, more jobs make consumers more confident, and the confidence creates more spending? > On the surface it would appear so.

American consumers in recent months have let loose their pent-up demand for cars and appliances. Businesses have been replacing low inventories and worn equipment. The richest 10 per cent, owners of approximately 90 per cent of the nation’s financial capital, have felt freer to splurge. Consumer confidence is at a one-year high, according to data released on Friday.

The U.S. government has not succumbed entirely to the lunacy of austerity. Republicans in Congress have just agreed to extend both a payroll tax cut and extra unemployment benefits, and the US Federal Reserve is resolutely keeping interest rates near zero.

Yet the US economy has been down so long that it needs substantial growth to get back on track – far faster than the 2.2 - 2.7 per cent projected by the Federal Reserve for this year (a projection which itself is likely to be far too optimistic).

A strong recovery can’t rely on pent-up demand for replacements or on the spending of the richest 10 per cent. Consumer spending is 70 per cent of the US economy, so a buoyant recovery must involve the vast middle class.

But America’s middle class is still hobbled by net job losses and shrinking wages and benefits. Although the US population is much larger than it was 10 years ago, the total number of jobs today is no more than it was then. A significant portion of the working population has been sidelined – many for good. And the median wage continues to drop, adjusted for inflation. On top of all that, rising gas prices are squeezing home budgets even more.

Yet the biggest continuing problem for most Americans is their homes.

Purchases of new homes are down 77 per cent from their 2005 peak. They dropped another 0.9 per cent in January. Home sales overall are still dropping, and prices are still falling – despite already being down by a third from their 2006 peak. January’s average sale price was $154,700, down from $162,210 in December. Houses are the major assets of the American middle class. Most Americans are therefore far poorer than they were six years ago. Almost one out of three homeowners with a mortgage is now “underwater”, owing more to the banks than their homes are worth on the market.

Optimists point to declining home inventories in relation to sales, but they’re looking at an illusion. Those supposed inventories don’t include about 5 million housing units with delinquent mortgages or those in foreclosure, which will soon be added to the pile. Nor do they include approximately 3 million housing units that stand vacant – foreclosed upon but not yet listed for sale, or vacant homes that owners have pulled off the market because they can’t get a decent price for them. Vacancies are up 1m from 2006.

What we’re witnessing is a fundamental change in the consciousness of Americans about their homes. Starting at the end of the second world war, houses were seen as good and safe investments because home values continuously rose. In the late 1960s and 1970s, early baby boomers got the largest mortgages they could afford, and watched their nest eggs grow into ostrich eggs.

Trading up became the norm. Homes morphed into automatic teller machines, as baby boomers used them as collateral for additional loans. By the rip-roaring 2000s, it was not unusual for the middle class to buy second and third homes on speculation. Most assumed their homes would become their retirement savings. When the time came, they’d trade them in for a smaller unit, and live off the capital gains.

The plunge in home values has changed all this. Young couples are no longer buying homes; they’re renting because they’re not confident they can get or hold jobs that will reliably allow them to pay a mortgage. Middle-aged couples are underwater or unable to sell their homes at prices that allow them to recover their initial investments. They can’t relocate to find employment. They can’t retire.

The negative wealth effect of home values, combined with declining wages, makes it highly unlikely the US will enjoy a robust recovery any time soon.

Under these circumstances it’s not enough to rely on low interest rates and make it easier for homeowners who have kept up with their mortgage payments to refinance their underwater homes. The Administration should also push to alter the federal bankruptcy law, so homeowners can use the protection of bankruptcy to reorganize their mortgage loans. (Few will actually do so, but the change would give homeowners more bargaining power to get lenders to voluntarily alter the terms.) A second possibility if for the Federal Housing Administration to offer to take on a portion of a household’s mortgage debt in exchange for an equitable interest in the home, of the same proportion, when it is sold. Such debt-for-equity swaps could help homeowners now struggling to keep up with their mortgage payments, while not adding to the federal budget in future years when housing prices are expected to rise.

But whatever is done will not affect the fundamental change that’s come over Americans with regard to their homes. It’s not clear what will take the place of houses as the major investments of the American middle class.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Aftershock.

State Of Disunion: A Globalizing Private Sector, A Government Overwhelmed By Corporate Money

By Robert Reich, cross-posted from his website

Who should have the primary strategic responsibility for making American workers globally competitive – the private sector or government? This will be a defining issue in the 2012 campaign.

In his State of the Union address, President Obama will make the case that government has a vital role. His Republican rivals disagree. Mitt Romney charges the President is putting “free enterprise on trial,” while Newt Gingrich merely fulminates about “liberal elites.”

American business won’t and can’t lead the way to more and better jobs in the United States. First, the private sector is increasingly global, with less and less stake in America. Second, it’s driven by the necessity of creating profits, not better jobs.

The National Science Foundation has just released its biennial report on global investment in science, engineering and technology. The NSF warns that the United States is quickly losing ground to Asia, especially to China. America’s share of global R&D spending is tumbling. In the decade to 2009, it dropped from 38 percent to 31 percent, while Asia’s share rose from 24 to 35 percent.

One big reason: According to the NSF, American firms nearly doubled their R&D investment in Asia over these years, to over $7.5 billion.

GE recently announced a $500 million expansion of its R&D facilities in China. The firm has already invested $2 billion.

GE’s CEO Jeffrey Immelt chairs Obama’s council on work and competitiveness. I’d wager that as an American citizen, Immelt is concerned about working Americans. But as CEO of GE, Immelt’s job is to be concerned about GE’s shareholders. They aren’t the same.


GE has also been creating more jobs outside the United States than in it. A decade ago, fewer than half of GE’s employees were non-American; today, 54 percent are.

This is all good for GE and its shareholders, but it’s not necessarily good for America or American workers. The Commerce Department says U.S. based global corporations added 2.4 million workers abroad in first decade of 21^st century, while cutting their US workforce by 2.9 million.

According to the New York Times, Apple Computer employs 43,000 people in the United States but contracts with over 700,000 workers abroad. It makes iPhones in China not only because of low wages there but also the ease and speed with which its Chinese contractor can mobilize their workers – from company dormitories at almost any hour of the day or night.

An Apple executive says “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” He might have added “and showing a big enough profits to continually increase our share price.”

Most executives of American companies agree. If they can make it best and cheapest in China, or anywhere else, that’s where it will be made. Don’t blame them. That’s what they’re getting paid to do.

What they want in America is lower corporate taxes, less regulation, and fewer unionized workers. But none of these will bring good jobs to America. These steps may lower the costs of production here, but global companies can always find even lower costs abroad.

Global corporations — wherever they’re based — will create good jobs for Americans only if Americans are productive enough to summon them. Problem is, a large and growing portion of our workforce isn’t equipped to be productive.

Put simply, American workers are hobbled by deteriorating schools, unaffordable college tuitions, decaying infrastructure, and declining basic R&D. All of this is putting us on a glide path toward even lousier jobs and lower wages.

Get it? The strategic responsibility for making Americans more globally competitive can’t be centered in the private sector because the private sector is rapidly going global, and it’s designed to make profits rather than good jobs. The core responsibility has to be in government because government is supposed to be looking out for the public, and investing in public schools, colleges, infrastructure, and basic R&D.

But here’s the political problem. American firms have huge clout in Washington. They maintain legions of lobbyists and are pouring boatloads of money into political campaigns. After the Supreme Court’s Citizen’s United decision, there’s no limit.

Who represents the American workforce? Organized labor represents fewer than 7 percent of private-sector workers and has all it can do to protect a dwindling number of unionized jobs.

Republicans like it this way, and for three decades have been trying to convince average working Americans government is their enemy. Yet corporate America isn’t their friend. Without bold government action on behalf of our workforce, good American jobs will continue to disappear.

 Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Aftershock.

Austerity For Dummies

By Richard (RJ) Eskow, cross-posted from Campaign for America's Future

"I feel stupid," someone said the other day. "I consider myself well-informed, but I have no idea what the term 'austerity economics' really means."

Actually it's not that complicated, and most of the lesson plan can be found in today's headlines.

We'll explain austerity to you in six steps, and we promise it it won't take more than 900 words. Since adults read an average of 250-300 words per minute - and we know all of you are above average - our little course shouldn't take more than three minutes.

It's certainly worth knowing. Despite its many failures, "austerity economics" keeps remaking - and unmaking - the global economy. The only disagreement at this weekend's Republican debate was over which candidate would push austerity more aggressively. And austerity dominated the political agenda last year - "Deficit Commission," anyone? - until Occupy came along.

Merriam-Webster named "austerity" the "Word of the Year" for 2010. But like the monster from a 1950's science-fiction movie, it just keeps on growing. This week alone the name was invoked in government houses from Athens to Lagos.

What is this creature called "austerity," and why does it still hold so much power? If you've got three minutes, let's get started.


1. What is it?

The Longman Dictionary of Contemporary English defines "austerity" as "when a government has a deliberate policy of trying to reduce the amount of money it spends."

Wikipedia calls it "a policy of deficit-cutting, lower spending, and a reduction in the amount of
 benefits and public services provided," adding that it's "sometimes coupled with increases in taxes to pay back creditors to reduce debt."

Got that? Austerity backers want government to spend less on benefits and public services, and to pay back its creditors more quickly. Higher taxes aren't part of the plan and they're strictly optional.

2. What's austerity supposed to accomplish?

Austerity advocates don't just see lower deficits and reduced debt as tools to promote long-term economic health. They consider them ends in themselves - sometimes even as moral values.
Many austerity advocates see government spending as inherently evil. That goes for all government spending, including police, teachers, nurses, and firefighters.

Sure, some of them will admit there can be necessary evils or useful evils - usually weapons procurement or law enforcement. But spending is always evil.

Other people aren't philosophically opposed to government spending, but have been convinced that it has become unaffordable today.

3. What's the theory behind austerity economics?

To answer that, it's important to understand that the economics profession has been systematically taken over by well-funded conservative academics. They've created elaborate theoretical constructs to prove that government spending is economically destructive.

These include theories like 'Barro-Ricardo equivalence,' which says people won't spend money when they know their government's incurring debts they'll have to pay someday. Conservative economists like Robert Barro insist this is true even in times of widespread unemployement, like now, and argue against stimulus spending to create jobs.

Oddly, they find this theory more compelling than the idea that people aren't spending money because they don't have jobs.

Then there's supply-side economics, which argues that the best way to grow the economy is by cutting taxes. That means smaller government. Supply-siders also rely on the "Laffer curve," which says people will stop investing, producing, and creating jobs if taxes are too high.

Austerity advocates also argue that international markets will lose confidence in governments if they don't curb spending and will charge them higher interest. So they even push cuts in Social Security, which doesn't even add to the deficit, because macroeconomists consider it 'government spending.'

4. Do these theories make sense?

Economists argue about this kind of thing ferociously, but we can look at the record and reach some common-sense conclusions about whether these theories are right or wrong:

Barro-Ricardo Equivalence: Wrong. To affect demand, government spending would have to be much higher than it is today.
Supply-Side Economics: Ridiculously wrong. We've had lower taxes and less regulation for more than a decade. Where are the jobs?
Laffer Curve: Also wrong. This country had a 70% tax rate or higher for top earners and the economy was doing much better than it is today. At 98% or higher, as the top rates once were in Great Britain, this could be a legitimate concern.

But now? Nah.

5. Does austerity work?

A resounding no. That's the conclusion reached in this paper from the International Monetary Fund. (The IMF was once the world's leading enforcer of austerity measures.)

And here are some clips from this week's headlines:

Austerity Reigns Over Euro Zone as Crisis Deepens, New York Times: " Europe’s leaders braced their nations for a turbulent year, with their beleaguered economies facing a threat on two fronts: widening deficits that force more borrowing but increasing austerity measures that put growth further out of reach."
Euro-Zone Manufacturing Activity Falls for Fifth Month, Wall Street Journal: " Manufacturing activity in the euro zone declined for the fifth straight month in December, although less sharply than earlier in the fourth quarter, according to a survey of purchasing managers released Monday. The survey is consistent with other indicators of recent activity, and together the numbers suggest the euro-zone economy contracted during the final three months of the year."
Merkel, Sarkozy stress growth a priority in eurozone crisis, call for quick Greek accord, Washinggton Post: "The German and French leaders stressed Monday that boosting economic growth in the 17-nation eurozone is a priority, a recognition that the focus on austerity cuts is unlikely to get Europe out of its debt crisis. Some analysts fear excessive austerity measures will take a heavy toll on weakening economic growth and push the eurozone into recession this year, in turn hindering the region’s deficit-cutting efforts.

Austerity's been a disaster for Great Britain and Europe, yet leaders are demanding more of the same - there, and here. They're ignoring the approaches that have worked in the past, as in the Great
Depression: Invest in short-term growth, put people back to work, and then address long-term deficit issues once the economy's back on its feet.

6. Why do people still push austerity?

Some do it because they're still under the influence of economists indoctrinated in that profession's conservative intellectual orthodoxy.

It's also in many politicians' interests to promote austerity, since wealthy and powerful people like the idea of lowering their own taxes.

One thing's for sure: They're not doing it because they're looking at the facts.
__________________

That wasn't too bad, was it? And it only took 877 words. If you were one of those who felt you didn't understand austerity, hopefully this has helped. You probably realize now that you understood more than you realized. In fact, you were never the problem.

The real problem with austerity economics is that there's less there than meets the eye.

That hasn't stopped leaders all over the world from insisting that it's the solution to the very problems it has caused, or which it has made worse. They're trying to impose even more of it on the global population.

Who's the dummy now?

China Currency Manipulation -- From "Enough Is Enough" To "Not Enough To Certify"

By Dave Johnson, cross-posted from Campaign for America's Future

In November President Obama said, "enough is enough" to China's currency manipulations. Today the Treasury Department said it hasn't seen enough to call China a currency manipulator. This is happening because certain powerful interests are benefiting tremendously and using their wealth and power to keep things from changing.

China's Currency Manipulation
 
China manipulates its currency to keep it "undervalued." This means that things made there cost less in world markets than things made in other countries. The result is that manufacturing moves there, bringing them entire industries, supply chains, and the "industrial commons" of expertise, suppliers and culture that brings with it new businesses and industries. Many economists say that China's currency is undervalued by 25 to 40% meaning products made there have a 25-40% pricing advantage before any other advantages, subsidies, manipulations, etc. are considered. The currency it does not rise to market levels because China takes steps like preventing open trading and buying other currencies -- most of us wold call this manipulation -- to keep this from happening.

Instead of competing fairly China uses this manipulation and others, throwing world trade completely out of balance. Countries "make their living" by producing things and selling them to the rest of the world. This imbalance is costing our country jobs, factories, industries and trillions of dollars but we can't seem to get our government to do anything about it.


"Enough Is Enough"

In a November 14 press conference at the Asia Pacific Economic Cooperation (Apec) summit in Hawaii, President Obama acknowledged the simple reality that China is not allowing its currency to rise to market levels and that this is distorting global trade. He said “enough’s enough.”

“Changes are difficult for them politically, I get it…But the United States and other countries, I think understandably, feel that enough’s enough.”
And in regards to to the glacial pace at which China has been raising the value of the yuan, the president pointed out that “We recognize they may not be able to do it overnight…but they can do it much more quickly than they’ve done it so far.”

But Not Enough

The US Treasury Department today released its semi-annual Report to Congress on International Economic and Exchange Rate Policies. From the report's Key Findings:

"This Report highlights the need for greater exchange rate flexibility in these economies and most notably in China.
Over the past decade, China has resisted very strong market pressures for RMB appreciation. China’s real effective exchange rate has exhibited persistent and substantial undervaluation, although the estimated range of misalignment has narrowed over the course of the past 18 months."

This is the sixth time the Obama administration has refused to label China a currency manipulator and begin taking steps to remedy this problem that is distorting world markets and taking our jobs, factories, industries and money.

Currency Legislation

In October the Senate passed a bipartisan bill -- on a vote of 65 to 35 -- a bill requiring the administration to label China a currency manipulator and begin the necessary steps to remedy the problem. The House Republican leadership has refused to allow this to come up for a vote - because it will pass.

House Speaker John Boehner has made it clear he wants nothing to do with the legislation that has already raised heckles in Beijing.
And for now he seems to be in control despite loud protests including from within his own party.
Boehner, the most powerful Republican in Congress, denounced the bill again on Wednesday, a day after it passed the Senate, saying it posed a "very severe risk" of starting a trade war between the world's two biggest economies.

Even though many Republican members of the House say they support the bill, none of them will sign a discharge petition to force Speaker Boehner to allow a vote. Wall Street opposes addressing the currency imbalances, and has made it clear through their front-group Club For Growth that Wall Street will oppose House members who help bring this up for a vote. And right now Wall Street has more influence in DC's ongoing influence scheme than those who want to manufacture in the US, thereby bringing jobs, factories, industries, innovation and money back to the US.

R.I.P. Austerity Economics (1921-2011)

By Richard (RJ) Eskow, cross-posted from Campaign for America's Future

This is the time of year when we're reminded of all the famous people who died over the last twelve months, a list which includes two of my favorite guitar players (Hubert Sumlin and Cornell Dupree). But there were also some notable non-human deaths in 2011, especially in the world of economic policy.

One of those deaths should have completely altered the political debate in Washington. The name of the deceased was "Austerity Economics," and it was first glimpsed in a 1921 paper by conservative economist Frank Wright. Austerity died of natural causes brought on by prolonged exposure to reality.

But the debate in Washington didn't change nearly enough after its passing. In the nation's capital, dead things still rule the night. 

Why Austerity?

"Austerity economics" backers claim that today's economic woes can only be fixed by dramatic reductions in government spending, which will lead to increased private-sector confidence and therefore to greater investment and growth.

But it's never worked. And if investors have lost confidence in the U.S. government's fiscal stability, they're sure not acting that way. There hasn't been this much demand for Treasury bonds since the government began tracking it twenty years ago, and they haven't performed as well since the go-go 1990s.

It's easy to understand austerity's attraction for power elites inside and outside of government. The people who suffer from austerity budgets aren't the kinds of people they know personally, since they're typically public employees like teachers, police, firefighters and the administrators of social programs; people who need government assistance, like the poor; and middle-class people with the temerity to either grow old or become disabled.

Austerity's attraction became even greater in the U.S. because once it became conventional wisdom that tax increases on the wealthy was "politically infeasible." That made it a program whose sole purpose was to cut government spending, lowering the pressure to increase taxes on the wealthy from today's historically low levels.

For a one-percenter, what's not to love? 



Austerity Comes of Age

The idea's been around in one form or another since that 1921 paper, and the International Monetary Fund (IMF) had been imposing it on Third World nations for decades.

But 2009 was the year that austerity really came of age. That was the year that a wealthy stockbroker's son named David Cameron began campaigning for Prime Minister of Great Britain on an explicitly pro-austerity platform.

It was also the year that Cameron helped to form a group named European Conservatives and Reformists (ECR) dedicated to electing like-minded politicians across Europe and helping them collaborate on ways to slash government spending. It was also the year that right-leaning Angela Merkel won reelection as the Chancellor of Germany with a stronger mandate than she'd been given in her first term.

With Nicolas Sarkozy as President of France, Great Britain was the only major European power not yet in the hands of the corporate-backed austerity crowd. 

The Global Sado-Erotic Thrill Machine

That changed with Cameron's election as Prime Minister in May 2010, an event that threw pro-austerity Americans into throes of near-erotic ecstasy. And if that sounds like hyperbole, consider conservative Anne Appelbaum's reaction to Cameron's budget in September of 2010:

Vicious cuts." "Savage cuts." "Swingeing (sic) cuts." The language that the British use to describe their new government's spending-reduction policy is apocalyptic in the extreme. The ministers in charge of the country's finances are known as "axe-wielders" who will be "hacking" away at the budget. Articles about the nation's finances are filled with talk of blood, knives, and amputation.
And the British love it.

What can I say? There are people who collect serial-killer memorabilia, too. But Appelbaum wasn't just speaking for herself. It became unacceptable for any politician in Washington, Democrat or Republican, to advocate anything other than an austerity budget for the United States.

And it was more than an economic strategy to its backers. Austerity became a way to demonize those who had suffered most from the banking abuses and self-indulgences of the wealthy, a totemic "blame the victim" response that turned the political debate into a grotesque inversion of morality. Again, Appelbaum:

"Not only is austerity being touted as the solution to Britain's economic woes; it is also being described as the answer to the country's moral failings."

Bad Metaphors vs. Good Economists

The Democratic President of the United States, Barack Obama, jumped onto the bandwagon with both feet by repeatedly lecturing Americans on the need for government to stop "spending beyond its means." Obama recycled the popular conservative metaphor of a family that has to sit around the kitchen table and decide how much money it has to spend.

That's one of the worst metaphors in modern politics. Does a family establish its own currency -- especially one that has the unique position of the dollar? Can a family borrow money at rates so low they're effectively less than zero? Would a family let Grandma go hungry because Junior bought too many Porsches out of the family kitty and then gambled it away on lousy mortgage investments?

The world's top economists, those who had successfully predicted the crisis of 2008, tried telling the rest of the world what was wrong with the idea: Joblessness and consumer fears were killing any chance of real recovery. More short-term spending was needed to get the economy moving again. Austerity would make things worse, not better.

But nobody listened. Austerity's S&M-like attraction had the world's elites in its grip. 

Death of a Delusion

And then something else came into the picture: Reality.

Cameron's austerity budget had a shattering effect on the already-struggling British economy. His government's financial stability was downgraded five times during his first year in power and retail sales had fallen 2.5 percent. Household income was projected to fall an additional 2 percent if his austerity plans were carried forward. Britain's modest employment gains were reversed, youth unemployment reached record levels, and income inequality was the worst it had been in more than half a century.

Anne Appelbaum's erotic dreams had become Great Britain's nightmare.

As Europe's ruling austerity class pushed forward with their plans, even the IMF tried to dissuade them. It was clear to anyone who wasn't blinded by ideology or political cynicism that austerity economics was a failed program. Even in countries like Greece, where government was far graver than elsewhere, the austerity programs imposed from outside threatened to destabilize society while other reasonable measures like improved tax collection were still not taken seriously enough.

And now the entire Eurozone hangs in the balance. Bankers became wealthy by treating governments as if they were mortgages, lending recklessly and pocketing their fees without considering the long-term reliability of their loans. European leaders insisted for months they were take the kind of sensible steps that should've been taken in the United States by requiring bankers to accept at least part of the losses for the bad loans they had issed.

That plan was quietly dropped last month. "Austerity economics" never calls for austerity from those who have gotten rich by being irresponsible, only from those who didn't benefit from it at all. 

The Afterlife

President Obama has dropped his austerity rhetoric, at least for the time being, but the Republicans have not. Listening to Mitt Romney discuss economics is like having a doctor wave a dead chicken over your head and saying he's decided to cast a spell on you rather than operate on that thing they found in your X-rays.

Aside from the bill introduced this month by the House Progressive Caucus to almost no media attention, there's no comprehensive plan for dropping this country's ineffective austerity strategy and replacing it with an agenda that works.

Rational solutions to our economic problems are being ignored. There won't be a real debate about alternatives to austerity until an entire political party, not just part of it, adopts this kind of program. Until then there will be chaos. And where there is chaos, austerity's powerful advocates can step in and take charge.

Austerity economics died in 2011 and is survived by the British, German, and French governments as well as the GOP and large portions of the Democratic Party. Instead of sending flowers, the family has asked the public to abandon all hopes of future economic growth.

Vetoing Democracy: In Athens Or Washington, Elites Still Call The Shots

By Richard (RJ) Eskow, cross-posted from Campaign for America's Future

This week was a sharp reminder that the ancient ideal of democracy is just as threatened - and to some, just as threatening - as it's ever been. In government offices in Athens, G20 meeting rooms in Cannes, and "Super Committee" chambers in Washington, we learned that there are still places where the will of the people can be overruled by the whims of the powerful.

From the Parthenon to the Potomac, it was the same story: Elites still hold veto power over the democratic process, and they're not afraid to use it.

Democracy: 'Radical,' 'Irrational,' 'Dangerous'

Ironically, this week's ferment began in the country that's usually credited with creating democracy. In many ways the Greek economy couldn't be more different from our own. The government's fiscal problems there are due in large part to widespread corruption and massive tax evasion - not tax breaks, tax evasion - which are very different from our own problems. The government's finances dramatically worse than our own - almost like night and day - and a default could create the next major financial crisis.

A certain level of fear and concern was understandable when Greek President George Papandreou announced there would be a referendum on the new bailout plan imposed on his country. The global economy is still unstable, top-heavy, and still riddled with too-big-to-fail institutions. In a worst-case scenario, Greece could trigger another financial meltdown.

Yet the fear was rarely balanced with an understanding of what's really happening in Greece. There was no acknowledgement that the bailout's terms might be grossly unfair (they are), that they're likely to make a terrible situation even worse (they will), or that Greece is in chaos, misery, and despair. (It is.)

And what was most striking was the assumption the elite - the 1%, if you will - have veto power over the democratic process. In most of the commentary that flowed from the powerful and the press, a surprising number of world leader didn't even acknowledge that Greece had the right to its own democratic decision-making process.



South Korean President Lee Myung-bak, whose nation will benefit from "bipartisan" U.S. actions to create a free trade agreement between the two countries, said that "The world has plunged into fears again because of the Greek prime minister's radical step to hold a referendum." Closer to home, French President Sarkozy said that "the Greek's gesture is irrational and, from their point of view, dangerous."

The first part of that statement is a slur against democracy. The second part is, of course, a threat.

What's the Greek word for 'shafted'?

Few are asking who created the Greek debt problem, or who benefited. As in the United States, deficit-creating behavior primarily served the wealthy, the powerful, and the banks. Tax collections for corporations and the wealthy have been very low in Greece. And while tax evasion is commonly for everyone from taxi drivers to millionaires, it takes a lot of cheating cabbies to equal one rich tax dodger.

Bankers didn't give Greece these loans out of kindness, either. They saw an opportunity and they took it. That's why they're being asked to take "haircuts" and lose part of the loan repayment (a reasonable measure that hasn't been yet considered in the US mortgage crisis.)

Greeks are struggling with devastating levels of unemployment, a declining standard of living, and widespread social unrest. While the austerity measures imposed on it do include tax hikes and measures to reduce tax evasion, they will have an especially devastating impact on already hard-hit middle class Greeks. They're the ones who went to work, paid their taxes (wage earners were disproportionately taxed because of the evasion), and paid into their Social Security and health funds with the expectation these services would be available when they were needed.

It doesn't matter now. They won't get their say. Once again the elites were given veto power over democracy. A "bipartisan" revolt of politicians in both major parties made sure of that, and today George Papandreou is looking forward to joining the swelling ranks of Greece's unemployed.

The public's widespread dissatisfaction is understandable, and this stifling of democracy should raise even more fears for Greece's future stability than the referendum did. What will happen if the Greek people continued to be denied a place at the bargaining table as their fate is decided? Given that nation's troubled past, and its tormented present, there's always John F. Kennedy's quote to consider: Those who make peaceful evolution impossible make violent revolution inevitable.

Elites Only

But what does this have to do with us? We certainly don't face Greek-level problems. In fact, it serves the elite's narrative to suggest otherwise. Our currency is the dollar, which helps a great deal. We're a commanding world economy. We have the money and resources to fix our joblessness problem, if we only had the will, and we're not part of a larger group like the European Community.
Bet we are part of the G20, which this week reaffirmed its obsession on austerity measures even as Europe sinks under the weight of those already imposed. Washington's Powers That Be are still obsessing about austerity, too.

Here, as in Europe, public opinion is expected to take a back seat to the elites. Yet another poll has been released which shows that a majority of people in all age groups oppose cutting Social Security to fix the deficit. Past polls have shown that strong majorities of Republicans, independents, and even Tea Party member oppose such measures.

Yet despite the strong public objections, and despite the fact that there's overwhelming evidence these cuts are unnecessary and counterproductive, an elected "Super Committee" is likely to recommend them anyway. The usual Congressional rules have been waived in order to force their proposal to a simple up-or-down vote, with no possibility of filibuster and no chance to offer amendments. And US politicians will be under as much pressure to vote for this austerity measure as their Greek counterparts were.

Vetoing Democracy

The same week that democracy was under siege in Greece, the "Super Committee" heard from a blue-ribbon panel representing the austerity elite: a Republican hater of Social Security recipients; a Democratic member of Morgan Stanley's Board of Directors; a Republican ex-Senator; and an economist aligned with the Democratic establishment advocates for entitlement cuts. The activities of all four been funded by Republican anti-government-spending billionaire Pete Peterson.

In words that echoed those of the South Korean and French Presidents, the quartet told the unelected committee that if it fails to offer austerity measures which the public rejects, "We haven't got a prayer and neither have you." The elites have spoken: The public is to be ignored. Democracy's been vetoed.

Here's what they didn't teach us in civics class: Democracy has always been controversial. "Democracy... is a charming form of government," said Plato, "full of variety and disorder; and dispensing a sort of equality to equals and unequals alike." He could sound like a Tea Partier at times. "Dictatorship naturally arises out of democracy," he said, " and the most aggravated form of tyranny and slavery out of the most extreme liberty."

Plato's aversion to democracy is shared by a lot of powerful people these days. But politicians, especially those whose party derives its name from the democratic principle, would be better off remembering another Greek philosopher, Aristotle, who said that "The only stable state is the one in which all men are equal before the law."

Representatives from groups that represent Social Security and Medicare recipients, the disabled, and the elderly requested an opportunity to address the Super Committee. They wanted to present their case for preserving these programs, a position that's supported by compelling evidence and supported by majorities in all political parties and of all generations.

Their requests were ignored.

What's Your Beef (And Why's It Coming From Tanzania)?

By Marcia Ishii-Eiteman, cross-posted from PAN's website

What does an American businessman, Iowa State University and 162,000 refugees in Tanzania have in common? 

Answer: they are all either directly involved in or soon-to-be impacted by a small group of U.S. investors’ plans to acquire 800,000 acres (1,250 square miles) of land in Tanzania and transform it into large-scale industrial crop, beef and agrofuel production. They plan to use genetically engineered (GE) seed and other inputs supplied by Monsanto, Syngenta and other global agribusinesses.

As you might guess, not everyone is going to benefit from this mega-project! The deal, if it goes through, would force 162,000 former refugees from Burundi off land they have tended for the past 40 years, destroying their livelihoods and the communities they have built to give their children a future. 

Follow the money (sigh, yes — again)

So who wins? The Tanzanian government might make a few dollars off the deal, but it won’t be much, once negotiations over a suite of investor incentives (tax holidays, duty waivers, and relaxed rules for repatriation of dollars out of Tanzania) are concluded. The three biggest winners would be Iowa-based AgriSol Energy, Summit Group (a large-scale farming and livestock operation headquartered in Alden, Iowa) and Pharos Global Agriculture Fund. Iowa State University is also a key supporter of the project.

These three private entities stand to gain the most, not only by ramping up lucrative agrofuel production for export, but even more significantly, by requiring — as a condition of the deal — that the Tanzanian government overturn its current prohibition of genetically engineered crops. They are demanding creation of a regulatory framework that allows importation and cultivation of GE crops in that country.

Rewriting Southern countries’ biosafety legislation in order to start flooding the region with exports of U.S. GE crops has long been a tactic of the U.S. State Department and Agency for International Development (USAID). And it’s no coincidence that the Obama administration’s Feed the Future initiative targets Tanzania for “agricultural development” based on public-private partnerships and transgenic biotechnology.

The deal requires the Tanzanian government to overturn its current prohibition of GE crops.

And who loses? Obviously, the Burundi people who are getting kicked off the land. But the threats go well beyond the 800,000 acres and 162,000 people in question there. Tanzanian farmers, consumers, their agricultural markets and biodiversity are all at risk.

Until recently, Tanzanians were somewhat protected from the intrusion of transgenic crops by the country’s placement of the precautionary principle at the center of its biosafety legislation. That has shifted, as under intense industry pressure, the government has relaxed its laws and allowed research and field trials of GE corn and cassava, with GE cotton around the corner. The last legal protections against GE crops could fall, if the AgriSol land grab is able to effectively rewrite Tanzania’s biosafety laws. And this is why Tanzanians have formed an alliance to fight back.

Here in the U.S. the Oakland Institute is leading the charge to expose and block the Tanzanian land grab and is calling on concerned individuals to take action and urge the wealthy Iowa investor Bruce Rastetter (who is simultaneously CEO of Pharos Ag and Summit Farms as well as Managing Director of AgriSol Energy) and the Prime Minister of Tanzania to drop the project. Joining the call, the Sierra Club has brought the voices of its one million members to bear, sending its own letter urging Rastetter and the Prime Minister to abandon “this ill-advised project.” It's easy to follow Oakland Institute's lead by sending a letter of your own. 

Global policy stalled

The Tanzanian case is one of many such land grabs — more formally described as large-scale land acquisitions — that have been sweeping across the Global South in recent years. The epidemic reached such disastrous proportions, with such gross violations of human rights, that the United Nations finally turned its attention to the issue and began in 2008 to draft “voluntary guidelines” to protect communities from the harmful effects.

Earlier this month, 800 farmers’ rights, environment and development groups joined victims of land grabs in petitioning the Chair of the U.N. Food and Agriculture Organization’s Committee on Food Security to swiftly finalize the guidelines. Governments meeting in Rome were to adopt the voluntary guidelines by October 17, but failed to do so.

The U.N. body came close to approving the guidelines, explained U.N. Special Rapporteur on the Right to Food, Olivier de Schutter, but foundered over the specific provisions affecting large-scale investments in farmland. The Committee on Food Security will meet again in early 2012 and de Schutter expects that the guidelines could be ratified later in the year. Civil society groups and farmers’ coalitions like La Via Campesina continue to play a critical role in these negotiations, pressing for strong and enforceable language. 

Stand with Tanzania

While adoption of the voluntary guidelines in 2012 is urgently needed, every additional week of delay puts hundreds of thousands of farmers’ livelihoods at risk.

Take Action » Join Oakland Institute’s campaign to block the Tanzanian land grab. Send a letter to AgriSol’s Bruce Rastetter and the Tanzanian Prime Minister urging them to abandon the land deal.

Greece's Choice -- And Ours: Democracy Or Finance?

By Robert Reich, cross-posted from his website

Which do you trust more: democracy or financial markets?

Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.

(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)

If Greeks accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further.

If Greeks reject the terms and the nation defaults, it will face far higher borrowing costs in the future. This may reduce the standard of living of most Greeks, too. But it doesn’t have to. Without the austerity measures the rest of Europe and the IMF are demanding, the Greek economy has a better chance of growing and more Greeks are likely to find jobs.

Shouldn’t Greeks be able to make this decision for themselves?


Of course, if Greek defaults on its loans, global investors (fearing that a default in Greece sets a dangerous precedent) may yank their money out of Italy. This would almost certainly bust several big European banks – and generate panic on Wall Street. That’s why Tim Geithner has been pressing Europe to bail out Greece.

We’ve been here before, remember? Here in the United States, at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street.

The difference is, we didn’t hold a referendum. Instead, the Bush administration told Congress the nation risked “economic Armageddon” if it didn’t immediately authorize a giant bailout of the Street – with no strings attached. Of course Congress hastily agreed. Hank Paulson, Ben Bernanke, and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more.

So instead of allowing the Street to live with the consequences of its negligence, we bailed it out – and allowed the Main Streets of America to suffer the consequences.

If Americans had been consulted about the bank bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.
But Americans weren’t really consulted. It was an inside job.

As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth.

And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to – going into effect a little over thirteen months from now – or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.

So which is it? Rule by democracy or by financial markets? Based on what’s happened in America, I’d choose the former.

Robert Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, writes a blog at www.robertreich.org.   His most recent book is Aftershock.

Follow The Money: Behind Europe's Debt Crisis Lurks Another Bank Bailout Of Wall Street

By Robert Reich, cross-posted from his website, October 4, 2011.

Today Ben Bernanke added his voice to those who are worried about Europe’s debt crisis.

But why exactly should America be so concerned? Yes, we export to Europe – but those exports aren’t going to dry up. And in any event, they’re tiny compared to the size of the U.S. economy.
If you want the real reason, follow the money. A Greek (or Irish or Spanish or Italian or Portugese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008.

Financial chaos.

Investors are already getting the scent. Stocks slumped to 13-month low on Monday as investors dumped Wall Street bank shares.

The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That’s no big deal.

But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.

That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.



The Street’s total exposure to the euro zone totals about $2.7 trillion. Its exposure to to France and Germany accounts for nearly half the total.

And it’s not just Wall Street’s loans to German and French banks that are worrisome. Wall Street has also insured or bet on all sorts of derivatives emanating from Europe – on energy, currency, interest rates, and foreign exchange swaps. If a German or French bank goes down, the ripple effects are incalculable.

Get it? Follow the money: If Greece goes down, investors start fleeing Ireland, Spain, Italy, and Portugal as well. All of this sends big French and German banks reeling. If one of these banks collapses, or show signs of major strain, Wall Street is in big trouble. Possibly even bigger trouble than it was in after Lehman Brothers went down.

That’s why shares of the biggest U.S. banks have been falling for the past month. Morgan Stanley closed Monday at its lowest since December 2008 – and the cost of insuring Morgan’s debt has jumped to levels not seen since November 2008.

It’s rumored that Morgan could lose as much as $30 billion if some French and German banks fail. (That’s from Federal Financial Institutions Examination Council, which tracks all cross-border exposure of major banks.)

$30 billion is roughly $2 billion more than the assets Morgan owns (in terms of current market capitalization.)

But Morgan says its exposure to French banks is zero. Why the discrepancy? Morgan has probably taken out insurance against its loans to European banks, as well as collateral from them. So Morgan feels as if it’s not exposed.

But does anyone remember something spelled AIG? That was the giant insurance firm that went bust when Wall Street began going under. Wall Street thought it had insured its bets with AIG. Turned out, AIG couldn’t pay up.

Haven’t we been here before?

Republicans and Wall Street executives who continue to yell about Dodd-Frank overkill are dead wrong. The fact no one seems to know Morgan’s exposure to European banks or derivatives – or that of most other giant Wall Street banks – shows Dodd-Frank didn’t go nearly far enough.

Regulators still don’t know what’s happening on the Street. They have no clear picture of the derivatives exposure of giant U.S. financial institutions.

Which is why Washington officials are terrified – and why Treasury Secretary Tim Geithner keeps begging European officials to bail out Greece and the other deeply-indebted European nations.
Several months ago, when the European debt crisis first became apparent, Wall Street banks said not to worry. They had little or no exposure to Europe’s problems. The Federal Reserve said the same. In July, Ben Bernanke reassured Congress the exposure of U.S. banks to European nations in trouble was “quite small.”

Now we’re hearing a different tune.

Make no mistake. The United States wants Europe to bail out its deeply indebted nations so they can repay what they owe big European banks. Otherwise, those banks could implode — taking Wall Street with them.

One of the many ironies here is some badly-indebted European nations (Ireland is the best example) went deeply into debt in the first place bailing out their banks from the crisis that began on Wall Street.

Full circle.

In other words, Greece isn’t the real problem. Nor is Ireland, Italy, Portugal, or Spain. The real problem is the financial system — centered on Wall Street. And we still haven’t solved it.

Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley.  He writes a blog at www.robertreich.org.  His most recent book is Aftershock.

How Many Jobs Has Deregulation Cost Us, Senator Shelby?

By Richard (RJ) Eskow, cross-posted from Huffington Post

The Republicans have opened another front in their never-ending war against regulations, those tools that help government protect us from greedy corporations. Leading the charge once again is Sen. Richard Shelby, the willing servant of Wall Street who weakened the regulations in Dodd/Frank during negotiations with Sen. Dodd ... and then refused to vote for it anyway.

After that little bit of procedural treachery, Sen. Shelby attacked the Consumer Financial Protection Bureau (Protect consumers? How dare they?) with outright falsehoods about the extent of that organization's power.

Now Shelby's fighting urgently-needed regulations by proposing something called the "Financial Regulatory Responsibility Act." It would, according to the Senator, "determine the economic impacts of proposed rule-makings, including their effects on growth and net job creation."

Sen. Shelby added: "My colleagues and I are simply proposing that each financial regulator determine whether the economic cost of a new regulation exceeds its economic benefit. If it does, then the regulation should not be implemented."

Here's where you're probably expecting a hostile comment about the Senator's proposal. Forget it. I think it's a great idea ... one one condition: The bill should be revised so that every politician who proposes de-regulating an industry, and every regulator who fails to use their powers properly, must be held to the same standard. They must first "determine the economic impact of the proposed deregulation, including its effects on growth and net job creation."


How have the deregulators performed so far? Let's look at the record:

The Republicans, aided by business-friendly Democrats, deregulated Wall Street in the nineties. Their actions in overturning Glass-Steagall and removing other protections led directly to the financial collapse of 2008. How did that affect growth and jobs?

• 20 million jobs lost worldwide


• 8 million jobs lost in the United States


• $100,000 in lost asset value for the typical American household

The GOP's right to emphasize jobs. They're our most urgent priority right now, thanks to the crisis caused by deregulation. (They're also a key topic in next week's Take Back the American Dream conference.)


But the Republicans who are now fighting to overturn Dodd/Frank should be required to honestly estimate the cost in jobs and growth if they're successful in their efforts. Republicans and Democrats who are resisting the breakup of too-big-to-fail banks or the full enactment of the Volcker rule should also be required to estimate the potential costs of their actions.

And the financial sector isn't the only industry they've been deregulating. How have they done in energy, for example? Lousiana Governor Bobby Jindal likes to say that the partial moratorium on deep-water drilling could cost his state 20,000 jobs. Oil companies like BP were allowed to "self-regulate" -- which is to say, they were unregulated -- based on arguments like Gov. Jindal's.

How much has the oil industry's "self-regulated" deepwater drilling cost the Gulf? BP alone is likely to spend more than $40 billion in claims, fines, and other expenses. Local businesses have lost anywhere from $4 billion to $12 billion in lost income. 29% of people with plans to visit Louisiana cancelled them after the spill, according to the Natural Resources Defense Council.

The NRDC added that "the Gulf of Mexico saw a 39 percent decline in commercial fishing landings overall between 2009 and 2010. This represents a $62 million loss in dockside sales." According to the NRDC, "The Gulf Coast Claims Facility paid 174,172 claims to individuals and businesses who have suffered damages and costs related to the spill."

Anybody who proposes deregulation in the future (sorry, I meant "self-regulation") should be required to let the public know just how much money it could cost, how many jobs might be lost, and how much of our nation's beauty and other priceless treasures might scarred or destroyed.

To be fair and balanced, let's look at the upside of deregulation. Has it created any jobs to make up for the millions it destroyed, as its supporters have promised? The Bush Administration aggressively cut regulations and appointed regulators who were industry-friendly and lax on enforcement. The result? Even before the deregulation-caused crisis, the Bush years were the worst extended period of job growth in this country since World War II. They also marked the first decline in median household incomes since the Census Bureau began tracking that information in 1967.

So a fair and balanced version of the Shelby bill would have warned the public that the last ten years of deregulation were going to cost millions of jobs and trillions in wealth. And in return, deregulation was going to produce ... well, nothing.

Yep. The more I think about Sen. Shelby's idea, the more I like it -- with this little modification, of course. An honest assessment of the way that regulation affects jobs and growth, compared with the effects of deregulation, will conclusively prove that the only way to put America back to work is by putting regulations back to work for us.

The only problem is the name of the bill. The old one, the "Financial Regulatory Responsibility Act," just doesn't fit anymore. Maybe we could call it the "Deregulatory Responsibility Act." Or the "Deregulatory Irresponsibility Act." Or the "Think Before Your Act Act."

But whatever we call it, politicos like Richard Shelby should be forced to tell the truth the next time they claim they have an idea that will "protect jobs." And if the real motivation for a bill like this one is just to make it harder to protect the American people ... well, they should be forced to disclose that, too.

Seeding Justice, Cultivating Democracy

By Marcia Ishii-Eiteman, cross-posted from PAN's website

Last week, hundreds of people poured into the Women’s Building here in San Francisco to take part in the Justice Begins with Seeds conference, organized by the California Biosafety Alliance and co-sponsored by PANNA and several other partner groups. Abuzz with activities from September 13-17, the conference provided a forum for Californians to engage in movement building that challenges the corporate food system, pushes back against genetically engineered food and seeds, and nourishes the roots of food democracy.

I had the honor of speaking at the opening plenary Friday morning, and of sharing the PAN network’s vision of what it means to reclaim our food system. The auditorium pulsed with the diversity, wisdom, courage and vast experience of our movement: Latino community organizers, urban food justice activists, Mexican farmers and keepers of the ancient, vital heritage of corn seed diversity, youth leaders, lawyers, scientists, poets, writers and artists.

As a global network linking 600 groups from over 90 countries, PAN is best known for our three decades of work challenging the global proliferation of pesticides. At the same time, ever since our founding in 1982, PAN has fought for people’s rights to a safe, fair and sustainable food system. That work has taken many forms over the years: farmer caravans travelling across Asia, denouncing the corporations that manufacture chemical pesticides and GMOs and highlighting farmers’ innovative ecological alternatives; organic cotton farmers in Peru, Benin and Senegal collaborating with European partners in devising clean, fair and green marketing initiatives; and here in the U.S., campaigning to save conservation payments in the Farm Bill as the most concrete step we can take right now to support American farmers who are stewarding the earth and protecting future generations.

As I told conference participants last week, “seeding justice” at PANNA means two things to me: growing agroecology and nourishing the emerging food democracy movement in this country. The many faces of these two things can get us a long way towards food sovereignty. In so many concrete ways, I am energized by our daily work in this realm:

• fighting for fairness for workers and for family farmers (call your Senator to urge support for the fair farm rules! the fight is still on!);
• exposing and challenging Monsanto’s monopoly control over the world’s seed supply;
• campaigning for green payments and policy measures to support farmers transitioning towards agroecological and organic practices; and
• mobilizing communities from California to Colombia to Cameroon, to stand together for food justice, food democracy and food sovereignty.

As Indian scientist-activist Vandana Shiva explained in her rousing keynote address:

We have to make food democracy the core of the defense of our freedom and survival. We will either have food dictatorship for a while and then a collapse of our food systems and our societies, or we will succeed in building robust food democracies, resting on resilient ecosystems and resilient communities.