Give Karl Marx a Chance to Save the World Economy: George Magnus

s he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”

Karl Marx and the World Economy

By George Magnus

Policy makers struggling to understand the barrage of financial panics, protests and other ills afflicting the world would do well to study the works of a long-dead economist: Karl Marx. The sooner they recognize we’re facing a once-in-a-lifetime crisis of capitalism, the better equipped they will be to manage a way out of it.

The spirit of Marx, who is buried in a cemetery close to where I live in north London, has risen from the grave amid the financial crisis and subsequent economic slump. The wily philosopher’s analysis of capitalism had a lot of flaws, but today’s global economy bears some uncanny resemblances to the conditions he foresaw.

Consider, for example, Marx’s prediction of how the inherent conflict between capital and labor would manifest itself. As he wrote in “Das Kapital,” companies’ pursuit of profits and productivity would naturally lead them to need fewer and fewer workers, creating an “industrial reserve army” of the poor and unemployed: “Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery.”

The process he describes is visible throughout the developed world, particularly in the U.S. Companies’ efforts to cut costs and avoid hiring have boosted U.S. corporate profits as a share of total economic output to the highest level in more than six decades, while the unemployment rate stands at 9.1 percent and real wages are stagnant.

U.S. income inequality, meanwhile, is by some measures close to its highest level since the 1920s. Before 2008, the income disparity was obscured by factors such as easy credit, which allowed poor households to enjoy a more affluent lifestyle. Now the problem is coming home to roost.

Over-Production Paradox

Marx also pointed out the paradox of over-production and under-consumption: The more people are relegated to poverty, the less they will be able to consume all the goods and services companies produce. When one company cuts costs to boost earnings, it’s smart, but when they all do, they undermine the income formation and effective demand on which they rely for revenues and profits.

This problem, too, is evident in today’s developed world. We have a substantial capacity to produce, but in the middle- and lower-income cohorts, we find widespread financial insecurity and low consumption rates. The result is visible in the U.S., where new housing construction and automobile sales remain about 75% and 30% below their 2006 peaks, respectively.

As Marx put it in Kapital: “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses.”

Addressing the Crisis

So how do we address this crisis? To put Marx’s spirit back in the box, policy makers have to place jobs at the top of the economic agenda, and consider other unorthodox measures. The crisis isn’t temporary, and it certainly won’t be cured by the ideological passion for government austerity.

Here are five major planks of a strategy whose time, sadly, has not yet come.

First, we have to sustain aggregate demand and income growth, or else we could fall into a debt trap along with serious social consequences. Governments that don’t face an imminent debt crisis — including the U.S., Germany and the U.K. — must make employment creation the litmus test of policy. In the U.S., the employment-to-population ratio is now as low as in the 1980s. Measures of underemployment almost everywhere are at record highs. Cutting employer payroll taxes and creating fiscal incentives to encourage companies to hire people and invest would do for a start.

Lighten the Burden

Second, to lighten the household debt burden, new steps should allow eligible households to restructure mortgage debt, or swap some debt forgiveness for future payments to lenders out of any home price appreciation.

Third, to improve the functionality of the credit system, well-capitalized and well-structured banks should be allowed some temporary capital adequacy relief to try to get new credit flowing to small companies, especially. Governments and central banks could engage in direct spending on or indirect financing of national investment or infrastructure programs.

Fourth, to ease the sovereign debt burden in the euro zone, European creditors have to extend the lower interest rates and longer payment terms recently proposed for Greece. If jointly guaranteed euro bonds are a bridge too far, Germany has to champion an urgent recapitalization of banks to help absorb inevitable losses through a vastly enlarged European Financial Stability Facility — a sine qua non to solve the bond market crisis at least.

Build Defenses

Fifth, to build defenses against the risk of falling into deflation and stagnation, central banks should look beyond bond- buying programs, and instead target a growth rate of nominal economic output. This would allow a temporary period of moderately higher inflation that could push inflation-adjusted interest rates well below zero and facilitate a lowering of debt burdens.

We can’t know how these proposals might work out, or what their unintended consequences might be. But the policy status quo isn’t acceptable, either. It could turn the U.S. into a more unstable version of Japan, and fracture the euro zone with unknowable political consequences. By 2013, the crisis of Western capitalism could easily spill over to China, but that’s another subject.”

(George Magnus is senior economic adviser at UBS and author of “Uprising: Will Emerging Markets Shape or Shake the World Economy?” The opinions expressed are his own.)

To contact the Bloomberg View editorial board: view@bloomberg.net.

emphasis mine

see:http://www.bloomberg.com/news/2011-08-29/give-marx-a-chance-to-save-the-world-economy-commentary-by-george-magnus.html

We’re Not in Lake Wobegon Anymore

“I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” Republicans: The No.1 reason the rest of the world thinks we’re deaf, dumb and dangerous.

Written in 2004.

How did the Party of Lincoln and Liberty transmogrify into the party of Newt Gingrich’s evil spawn and their Etch-A-Sketch president, a dull and rigid man, whose philosophy is a jumble of badly sutured body parts trying to walk?

By GARRISON KEILLOR

Something has gone seriously haywire with the Republican Party. Once, it was the party of pragmatic Main Street businessmen in steel-rimmed spectacles who decried profligacy and waste, were devoted to their communities and supported the sort of prosperity that raises all ships. They were good-hearted people who vanquished the gnarlier elements of their party, the paranoid Roosevelt-haters, the flat Earthers and Prohibitionists, the antipapist antiforeigner element. The genial Eisenhower was their man, a genuine American hero of D-Day, who made it OK for reasonable people to vote Republican. He brought the Korean War to a stalemate, produced the Interstate Highway System, declined to rescue the French colonial army in Vietnam, and gave us a period of peace and prosperity, in which (oddly) American arts and letters flourished and higher education burgeoned—and there was a degree of plain decency in the country. Fifties Republicans were giants compared to today’s. Richard Nixon was the last Republican leader to feel a Christian obligation toward the poor.

In the years between Nixon and Newt Gingrich, the party migrated southward down the Twisting Trail of Rhetoric and sneered at the idea of public service and became the Scourge of Liberalism, the Great Crusade Against the Sixties, the Death Star of Government, a gang of pirates that diverted and fascinated the media by their sheer chutzpah, such as the misty-eyed flag-waving of Ronald Reagan who, while George McGovern flew bombers in World War II, took a pass and made training films in Long Beach. The Nixon moderate vanished like the passenger pigeon, purged by a legion of angry white men who rose to power on pure punk politics. “Bipartisanship is another term of date rape,” says Grover Norquist, the Sid Vicious of the GOP. “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” The boy has Oedipal problems and government is his daddy.

The party of Lincoln and Liberty was transmogrified into the party of hairy-backed swamp developers and corporate shills, faith-based economists, fundamentalist bullies with Bibles, shriekChristians of convenience, freelance racists, misanthropic frat boys, shreiking midgets of AM radio, tax cheats, nihilists in golf pants, brownshirts in pinstripes, sweatshop tycoons, hacks, fakirs, aggressive dorks, Lamborghini libertarians, people who believe Neil Armstrong’s moonwalk was filmed in Roswell, New Mexico, little honkers out to diminish the rest of us, Newt’s evil spawn and their Etch-A-Sketch president, a dull and rigid man suspicious of the free flow of information and of secular institutions, whose philosophy is a jumble of badly sutured body parts trying to walk. Republicans: The No.1 reason the rest of the world thinks we’re deaf, dumb and dangerous.

Rich ironies abound! Lies pop up like toadstools in the forest! Wild swine crowd round the public trough! Outrageous gerrymandering! Pocket lining on a massive scale! Paid lobbyists sit in committee rooms and write legislation to alleviate the suffering of billionaires! Hypocrisies shine like cat turds in the moonlight! O Mark Twain, where art thou at this hour? Arise and behold the Gilded Age reincarnated gaudier than ever, upholding great wealth as the sure sign of Divine Grace.

Here in 2004, George W. Bush is running for reelection on a platform of tragedy—the single greatest failure of national defense in our history, the attacks of 9/11 in which 19 men with box cutters put this nation into a tailspin, a failure the details of which the White House fought to keep secret even as it ran the country into hock up to the hubcaps, thanks to generous tax cuts for the well-fixed, hoping to lead us into a box canyon of debt that will render government impotent, even as we engage in a war against a small country that was undertaken for the president’s personal satisfaction but sold to the American public on the basis of brazen misinformation, a war whose purpose is to distract us from an enormous transfer of wealth taking place in this country, flowing upward, and the deception is working beautifully.

The concentration of wealth and power in the hands of the few is the death knell of democracy. No republic in the history of humanity has survived this. The election of 2004 will say something about what happens to ours. The omens are not good.

Our beloved land has been fogged with fear—fear, the greatest political strategy ever. An ominous silence, distant sirens, a drumbeat of whispered warnings and alarms to keep the public uneasy and silence the opposition. And in a time of vague fear, you can appoint bullet-brained judges, strip the bark off the Constitution, eviscerate federal regulatory agencies, bring public education to a standstill, stupefy the press, lavish gorgeous tax breaks on the rich.

There is a stink drifting through this election year. It isn’t the Florida recount or the Supreme Court decision. No, it’s 9/11 that we keep coming back to. It wasn’t the “end of innocence,” or a turning point in our history, or a cosmic occurrence, it was an event, a lapse of security. And patriotism shouldn’t prevent people from asking hard questions of the man who was purportedly in charge of national security at the time.

Whenever I think of those New Yorkers hurrying along Park Place or getting off the No.1 Broadway local, hustling toward their office on the 90th floor, the morning paper under their arms, I think of that non-reader George W. Bush and how he hopes to exploit those people with a little economic uptick, maybe the capture of Osama, cruise to victory in November and proceed to get some serious nation-changing done in his second term.

This year, as in the past, Republicans will portray us Democrats as embittered academics, desiccated Unitarians, whacked-out hippies and communards, people who talk to telephone poles, the party of the Deadheads. They will wave enormous flags and wow over and over the footage of firemen in the wreckage of the World Trade Center and bodies being carried out and they will lie about their economic policies with astonishing enthusiasm.

The Union is what needs defending this year. Government of Enron and by Halliburton and for the Southern Baptists is not the same as what Lincoln spoke of. This gang of Pithecanthropus Republicanii has humbugged us to death on terrorism and tax cuts for the comfy and school prayer and flag burning and claimed the right to know what books we read and to dump their sewage upstream from the town and clear-cut the forests and gut the IRS and mark up the constitution on behalf of intolerance and promote the corporate takeover of the public airwaves and to hell with anybody who opposes them.

This is a great country, and it wasn’t made so by angry people. We have a sacred duty to bequeath it to our grandchildren in better shape than however we found it. We have a long way to go and we’re not getting any younger.

Dante said that the hottest place in Hell is reserved for those who in time of crisis remain neutral, so I have spoken my piece, and thank you, dear reader. It’s a beautiful world, rain or shine, and there is more to life than winning.

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Garrison Keillor is the host and writer of A Prairie Home Companion, now in its 34th year on the air and a syndicated newspaper columnist.

Emphasis Mine.

see:http://readersupportednews.org/off-site-opinion-section/72-72/7193-were-not-in-lake-wobegon-anymore

How the Political Right Bullied the US Government Into Ignoring the Threat of Right-Wing Extremism

After right-wingers freaked out about a report detailing the rise in right-wing extremism, Homeland Security effectively dismantled a unit tasked with tracking it.

From AlterNet, by Rania Khalek

“In the wake of the terrorist attack in Norway by right-wing Christian extremist Anders Breivik, conservative media pundits rushed to vilify anyone who brought up the underlying far-right ideology that fueled Breivik’s violence.

The uproar that follows any suggestion that right-wing extremism is on the rise works to silence the conversation about the danger of right-wing militancy. According to disturbing revelations by a former Homeland Security Intelligence Analyst, the consequences of this dynamic extend to the highest branches of the US government.

For six years, Darryl Johnson headed a Department of Homeland Security team tracking domestic extremist groups. Now Johnson, who is no longer with DHS, says that conservative furor over the report’s findings pressured Homeland Security to abandon reporting on and monitoring the rising threat of right-wing extremism for the past two years.

In April 2009, DHS issued an intelligence assessment, co-authored by Johnson, titled “Rightwing Extremism: Current Economic and Political Climate Fueling Resurgence in Radicalization and Recruitment.” The document was one of many threat assessments shared between DHS and state and local law enforcement agencies to keep them apprised of potential and looming threats, and warned of a surge in right-wing extremism due to the election of the country’s first black president and the economic recession.

Although the report was intended only for distribution to law enforcement agencies, it was immediately leaked to the media causing a political firestorm among conservativepundits, who wrongly suggested that it labeled all conservatives as potential terrorists.

DHS initially defended the report, but within days caved to political pressure and practically disowned it, with Secretary Napolitano apologizing to the American Legion for the report’s mention of military veterans. But DHS did more than just publicly buckle under the political weight of conservative critics. According to Johnson, the department effectively dismantled his intelligence team following the right’s uproar.

In an in-depth interview published in the Southern Poverty Law Center’sIntelligence Report, Johnson reveals the level of sway the political right had in thwarting intelligence work on right-wing extremism. He says DHS deliberately mischaracterized the report as unauthorized, even though it had passed through proper channels and instituted restrictive policies that brought the important work of his unit to a virtual standstill. As a result, Johnson left DHS in dismay and was followed by almost all the members of his team, leaving a single analyst where there had been six. In comparison, there are at least 25 analysts devoted to tracking Islamic terrorism.

When questioned about Johnson’s claims — which have been confirmed by current and former department officials in the Washington Post – DHS officials, speaking on condition of anonymity, have repeatedly disputed his account and insist that the level of activity by right-wing extremist groups has remained consistent over the past few years. In addition, they claim the perception of increased extremist activity may be due to increased awareness of the threat by the government and the public. But the numbers beg to differ.

Right Wing Extremism on the Rise

Johnson’s report was consistent with data from the Southern Poverty Law Center, which finds that hate groups topped 1,000 for the first time since SPLC began counting such groups in the 1980s. The most dramatic growth was seen in antigovernment “Patriot” groups — militias and other extremist organizations that see the federal government as their enemy — which came roaring back to life over the past year after more than a decade out of the limelight. SPLC’s Intelligence Project identified 824 anti-government “Patriot” groups that were active in 2010, up from just 149 in 2008.

According to Mark Potok, director of SPLC’s Intelligence Project, these groups are driven by resentment over changing racial demographics, which he describes as, “The idea that the country is becoming less white every day and in fact the prediction by the census bureau that whites will lose their majority about the year 2050 in the United States is very important. Virtually every white supremacist in America knows that date.” Other drivers include frustration over the economy, and the mainstreaming of conspiracy theories and propaganda aimed at various minorities.

Potok told AlterNet that events following the 2009 DHS report have proved it to be prescient. 

In May 2009, just one month after the report’s release, an anti-abortion zealot murdered Dr. George Tiller in Kansas. In June 2009, neo-Nazi James von Brunn murdered a security guard at the U.S. Holocaust Memorial Museum. In March 2010, nine members of a Michigan militia were charged with seditious conspiracy and attempted use of weapons of mass destruction in connection with an alleged plot to murder police officers.

On May 20, 2010, two West Memphis Arkansas police officers were shot to death during a routine traffic stop by a father-son duo of “sovereign citizens,” a group of US residents who believe the government has no authority over them. West Memphis Police Chief Bob Paudert, whose son was one of the officers killed, told me that prior to the loss of his son, he had never heard of sovereign citizens, nor had any other law enforcement officials he spoke to about the matter. After some digging and research he discovered that his son’s murder was not an isolated incident, and in fact sovereign citizens were responsible fordozens of police officer deaths around the country.

Paudert was particularly surprised to learn that the Sovereign movement is estimated at 300,000 people strong and growing, which is why he was disappointed in the federal government’s failure to alert state and local law enforcement that such a threat existed. Paudert says he is absolutely positive that had they been alerted and trained to recognize sovereign citizens, “my son would still be alive today.”

Conservatives Throw a Temper Tantrum

The loudest outcry came from the right-wing shock jocks like Rush Limbaugh, who claimed that Janet Napolitano and Barack Obama were “portraying standard, ordinary, everyday conservatives as posing a bigger threat to this country than al-Qaeda terrorists or genuine enemies of this country like Kim Jong-Il.”  Sean Hannity warned his Fox News viewers that “if you have a pro-life bumper sticker on your car, if you have an ‘America is overtaxed’ bumper sticker, if you have a pro-Second Amendment bumper sticker, they’re viewing you potentially as a radical.”

In possibly the most deranged interpretation, conservative blogger Michelle Malkin wrote that the report was a “hit job on conservatives” and “one of the most embarrassingly shoddy pieces of propaganda I’d ever read out of DHS. I couldn’t believe it was real….the piece of crap report issued on April 7 is a sweeping indictment of conservatives.”

In a sad sort of irony, Johnson told SPLC that the conservative media personalities who misinterpreted and attacked his report “would have been shocked to know that I personify conservatism. I’m an Eagle Scout. I’m a registered Republican. I’m Mormon. In fact, I was helping the Boy Scouts with a fundraiser when I heard the report being attacked on the news.”

Outrage over the report’s findings quickly spread to Congress, where several conservative lawmakers demanded the ouster of DHS Secretary Janet Napolitano. Among them was Rep. John Carter, R-Tex., who remarked, “We shouldn’t even give her the respect of letting her resign. She should be fired by the administration for accusing honest, American citizens — because of their political beliefs — of being domestic terrorists.”

The self-described conservative and Christian non-profit Thomas More Law Center went even further and filed a lawsuit against Secretary Napolitano on behalf a Michigan-based anti-abortion group, claiming the DHS report was all part of a conspiracy between the Obama administration and liberal groups to violate their constitutional rights.

The section of the report that stirred the most controversy referred to “disgruntled military veterans” and cautioned that “rightwing extremists would attempt to recruit and radicalize returning veterans to boost their violent capabilities.”

This did not sit well with David Rehbein, the commander of the veterans’ organization American Legion, who wrote in a letter to Secretary Napolitano, “To continue to use McVeigh as an example of the stereotypical disgruntled military veteran is as unfair as using Osama bin Laden as the sole example of Islam.” Had Rehbein actually read the full report he would have discovered that this specific concern was based on factual data collected by the FBI.

The DHS assessment cited a July 2008 report by the FBI’s Counterterrorism Division under the Bush administration, titled “White Supremacist Recruitment of Military Personnel since 9/11.” Based on its findings the 2008 FBI report observed that “some returning military veterans from the wars in Iraq and Afghanistan have joined extremist groups,” and that “military experience is found throughout the white supremacist extremist movement as the result of recruitment campaigns by extremist groups and self-recruitment by veterans sympathetic to white supremacist causes.” Furthermore, based on analysis of FBI case files from October 2001 to May 2008, the report identified 203 military personnel or veterans who were active members in white supremacist organizations during that period.

It’s not surprising that conservatives threw a fit. What’s disturbing is that these conservative complaints prompted DHS to withdraw the report.

Pretending the Threat Doesn’t Exist

I spoke with Johnson, who has been following right-wing extremism in a professional capacity since the early ‘90s. Upon the Democratic nomination for president of then Senator Obama, Johnson says that based on his experience and expertise, he immediately recognized that “this would be a huge recruiting tool for groups like white supremacists, militia extremists, sovereign citizen extremists, those extremists groups that are on the fringes of the right of the political spectrum, which we refer to as right-wing extremists in the counterterrorism community.”

When it was clear that Barack Obama would win, Johnson became worried about the “potential radicalization factor” that would ensue following the election of America’s first black president. “It would agitate people to go beyond their mainstream and law-abiding protest activity to more criminal activity and violence because people would see that these ‘enemies’ so to speak, these minorities in America are actually integrated in society and they’re actually fulfilling the American dream.”

All of this prompted the drafting of the report in the early months of the Obama administration.

He chose to go public because “the conditions that existed back in 2008 and 2009 when we drafted this document still persist today….the climate in this country from a political standpoint and economic standpoint has not changed. The economy is still sluggish, unemployment’s still flirting with 10 percent, and there’s this anti-government sentiment and agitation out there in this country. That’s one thing that concerns me is that we’ve had two years now where these people have been boiling in this environment that could possibly agitate somebody to carry out a violent act.” 

Mark Potok told AlterNet that DHS’s handling of the report’s criticism was “nothing more than an act of political cowardice,” but it doesn’t change the report’s disturbing accuracy.

The Southern Poverty Law Center keeps a detailed and unsettling list of major terrorist plots and racist rampages that have emerged from the American radical right in the years since Oklahoma City, a pattern Potok says continues to this day. That prompted SPLC’s president, J. Richard Cohen, to send a letter to DHS Secretary Janet Napolitano two months ago, urging her to reassess the level of resources that DHS is devoting to the threat of non-Islamic domestic terrorism.

The letter highlights several recent examples of thwarted attacks, one of which occurred this past January, when a neo-Nazi activist was arrested for planting a bomb along an MLK Day parade route in Spokane, Washington. That same month, another neo-Nazi was arrested on his way to the Arizona-Mexico border and later charged with possessing explosive devices packed with ball bearings – to “maximize human carnage,” as a federal prosecutor put it. In March, authorities arrested five members of a militia in Alaska and charged them with plotting to murder or kidnap police officers and judges if their leader, who was then fleeing prosecution on weapons charges, were arrested or killed. Unfortunately, Secretary Napolitano has yet to respond to SPLC’s letter.

That the right’s outrage over the report managed to influence the Department of Homeland Security should raise alarm bells for anyone who is concerned about homegrown extremism. It’s frightening that the US government bowed to political pressure. The atrocity that took place in Norway is a reminder of the brutality that ideological extremists are capable of dishing out.

According to Johnson, Anders Breivik “was under the radar, he acquired relatively unsophisticated weaponry and was able to go and target people that he opposed because of his ideology and beliefs and was able to kill close to 80 people, and it was done effortlessly. He didn’t go to some place in Pakistan and learn how to build a bomb.  He learned how to do this on the Internet, and he was able to acquire these materials legally. And I know for a fact that that is going on here in this country, people are stockpiling weaponry.”

Potok believes the right’s ability to silence the conversation about right-wing extremism will have fatal consequences, warning, “The danger of pretending this movement doesn’t exist is that it will grow more and more deeply entrenched in our society and more dangerous. There’s an immediate criminal danger. Timothy McVeigh murdered 168 men women and children in 15 seconds. It absolutely could happen again. It hasn’t because we are lucky and because law enforcement has done a fine job overall.”

Similarly, Daryl Johnson fears that, “These incidents are starting to add up. Yet our legislators, politicians and national leaders don’t appear too concerned about this. So my greatest fear is that domestic terrorists in this country will somehow become emboldened to the point of carrying out a mass-casualty attack, because they perceive that no one is being vigilant about the threat from within. This is what keeps me up at night.”

Rania Khalek is a progressive activist. Check out her blog Missing Pieces or follow her on Twitter @Rania_ak. You can contact her at raniakhalek@gmail.com.

Emphasis Mine

see:http://www.alternet.org/story/152033/how_the_political_right_bullied_the_us_government_into_ignoring_the_threat_of_right-wing_extremism?akid=7406.123424.6GLo_-&rd=1&t=5

Don’t Fall for the GOP Lie

Don’t fall for the GOP lie: There is no budget crisis. There’s a job and growth crisis.

By Robert Reich, Robert Reich’s Blog

Don’t fall for the GOP lie: There is no budget crisis. There’s a job and growth crisis.

“A friend who’s been watching the absurd machinations in Congress asked me “what happens if we don’t solve the budget crisis and we run out of money to pay the nation’s bills?”

It was only then I realized how effective Republicans lies have been. That we’re calling it a “budget crisis” and worrying that if we don’t “solve” it we can’t pay our nation’s bills is testament to how successful Republicans have been distorting the truth.

The federal budget deficit has no economic relationship to the debt limit. Republicans have linked the two, and the Administration has played along, but they are entirely separate. Republicans are using what would otherwise be a routine, legally technical vote to raise the debt limit as a means of holding the nation hostage to their own political goal of shrinking the size of the federal government.

In economic terms, we will not “run out of money” next week. We’re still the richest nation in the world, and the Federal Reserve has unlimited capacity to print money.

Nor is there any economic imperative to reach an agreement on how to fix the budget deficit by Tuesday. It’s not even clear the federal budget needs that much fixing anyway.

Yes, the ratio of the national debt to the total economy is high relative to what it’s been. But it’s not nearly as high as it was after World War II – when it reached 120 percent of the economy’s total output.

If and when the economy begins to grow faster – if more Americans get jobs, and we move toward a full recovery – the debt/GDP ratio will fall, as it did in the 1950s, and as it does in every solid recovery. Revenues will pour into the Treasury, and much of the current “budget crisis” will be evaporate.

Get it? We’re really in a “jobs and growth” crisis – not a budget crisis.

And the best way to get jobs and growth back is for the federal government to spend more right now, not less – for example, by exempting the first $20,000 of income from payroll taxes this year and next, recreating a WPA and Civilian Conservation Corps, creating an infrastructure bank, providing tax incentives for small businesses to hire, expanding the Earned Income Tax Credit, and so on.

But what happens next week if Congress can’t or won’t deliver the President a bill to raise the debt ceiling? Remember: This is all politics, mixed in with legal technicalities. Economics has nothing to do with it.

One possibility, therefore, is for the Treasury to keep paying the nation’s bills regardless. It would continue to issue Treasury bills, which are our nation’s IOUs. When those IOUs are cashed at the Federal Reserve Board, the Fed would do what it has always done: Honor them.

How long could this go on without the debt ceiling being lifted? That’s a legal question. Republicans in Congress could mount a legal challenge, but no court in its right mind would stop the Fed from honoring the full faith and credit of the United States.

The wild card is what the three big credit-rating agencies will do. As long as the Fed keeps honoring the nation’s IOUs, America’s credit should be deemed sound. We’re not Greece or Portugal, after all. We’ll still be the richest nation in the world, whose currency is the basis for most business transactions in the world.

Standard & Poor’s has warned it will downgrade the nation’s debt from a triple-A to a double-A rating if we don’t tend to the long-term deficit. But, as I’ve noted, S&P has no business meddling in American politics – especially since its own non-feasance was partly responsible for the current size of the federal debt (had it done its job the debt and housing bubbles wouldn’t have precipitated the terrible recession, and the federal outlays it required).

As long as we pay our debts on time, our global creditors should be satisfied. And if they’re satisfied, S&P, Moody’s, and Fitch should be, too.

Repeat after me: The federal deficit is not the nation’s biggest problem. The anemic recovery, huge unemployment, falling wages, and declining home prices are bigger problems. We don’t have a budget crisis. We have a jobs and growth crisis.

The GOP has manufactured a budget crisis out of the Republicans’ extortionate demands over raising the debt limit. They have succeeded in hoodwinking the public, including my friend.”


Robert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including “The Work of Nations,” “Locked in the Cabinet,” “Supercapitalism” and his latest book, “AFTERSHOCK: The Next Economy and America’s Future.” His ‘Marketplace’ commentaries can be found on publicradio.com and iTunes.

Emphasis mine

see:http://www.readersupportednews.org/opinion2/277-75/6813-dont-fall-for-the-gop-lie

The Failure of The Free Market…

After all, the threat to a healthy democracy from concentrated wealth had been known to American leaders for generations.

From Alternet, By Robert Parry

If Ayn Rand and the Free Market Fetishists Were Right, We’d be Living in a Golden Age — Does This Look Like a Golden Age to You?

The lavish rewards flowing to the titans of industry have not exactly transformed society into a vibrant force for beneficial progress.

If the “free-market” theories of Ayn Rand and Milton Friedman were correct, the United States of the last three decades should have experienced a golden age in which the lavish rewards flowing to the titans of industry would have transformed the society into a vibrant force for beneficial progress.

After all, it has been faith in “free-market economics” as a kind of secular religion that has driven U.S. government policies – from the emergence of Ronald Reagan through the neo-liberalism of Bill Clinton into the brave new world of House Republican budget chairman Paul Ryan.

By slashing income tax rates to historically low levels – and only slightly boosting them under President Clinton before dropping them again under George W. Bush – the U.S. government essentially incentivized greed or what Ayn Rand liked to call “the virtue of selfishness.”

Further, by encouraging global “free trade” and removing regulations like the New Deal’s Glass-Steagall separation of commercial and investment banks, the government also got out of the way of “progress,” even if that “progress” has had crushing results for many middle-class Americans.

True, not all the extreme concepts of author/philosopher Ayn Rand and economist Milton Friedman have been implemented – there are still programs like Social Security and Medicare to get rid of – but their “magic of the market” should be glowing by now.

We should be able to assess whether laissez-faire capitalism is superior to the mixed public-private economy that dominated much of the 20th Century.

The old notion was that a relatively affluent middle class would contribute to the creation of profitable businesses because average people could afford to buy consumer goods, own their own homes and take an annual vacation with the kids. That “middle-class system,” however, required intervention by the government as the representative of the everyman.

Beyond building a strong infrastructure for growth – highways, airports, schools, research programs, a safe banking system, a common defense, etc. – the government imposed a progressive tax structure that helped pay for these priorities and also discouraged the accumulation of massive wealth.

After all, the threat to a healthy democracy from concentrated wealth had been known to American leaders for generations.

A century ago, it was Republican President Theodore Roosevelt who advocated for a progressive income tax and an estate tax. In the 1930s, it was Democratic President Franklin Roosevelt, who dealt with the economic and societal carnage that under-regulated financial markets inflicted on the nation during the Great Depression.

With those hard lessons learned, the federal government acted on behalf of the common citizen to limit Wall Street’s freewheeling ways and to impose high tax rates on excessive wealth.

So, during Dwight Eisenhower’s presidency of the 1950s, the marginal tax rate on the top tranche of earnings for the richest Americans was about 90 percent. When Ronald Reagan took office in 1981, the top rate was still around 70 percent.

Discouraging Greed

Greed was not simply frowned upon; it was discouraged.

Put differently, government policy was to maintain some degree of egalitarianism within the U.S. political-economic system. And to a remarkable degree, the strategy worked.

The American middle class became the envy of the world, with otherwise average folk earning enough money to support their families comfortably and enjoy some pleasures of life that historically had been reserved only for the rich.

Without doubt, there were serious flaws in the U.S. system, especially due to the legacies of racism and sexism. And it was when the federal government responded to powerful social movements that demanded those injustices be addressed in the 1960s and 1970s, that an opening was created for right-wing politicians to exploit resentments among white men, particularly in the South.

By posing as populists hostile to “government social engineering,” the Right succeeded in duping large numbers of middle-class Americans into seeing their own interests – and their “freedom” – as in line with corporate titans who also decried federal regulations, including those meant to protect average citizens, like requiring seat belts in cars and discouraging cigarette smoking.

Amid the sluggish economy of the 1970s, the door swung open wider for the transformation of American society that had been favored by the likes of Ayn Rand and Milton Friedman, putting the supermen of industry over the everyman of democracy.

Friedman tested out his “free-market” theories in the socio-economic laboratories of brutal military dictatorships in Latin America, most famously collaborating with Chile’s Gen. Augusto Pinochet who crushed political opponents with torture and assassinations.

Ayn Rand became the darling of the American Right with her books, such asAtlas Shrugged, promoting the elitist notion that brilliant individuals represented the engine of society and that government efforts to lessen social inequality or help the average citizen were unjust and unwise.

The Pied Piper

Yet, while Rand and Friedman gave some intellectual heft to “free-market” theories, Ronald Reagan proved to be the perfect pied piper for guiding millions of working Americans in a happy dance toward their own serfdom.

In his first inaugural address, Reagan declared that “government is the problem” – and many middle-class whites cheered.

However, what Reagan’s policies meant in practice was a sustained assault on the middle class: the busting of unions, the export of millions of decent-paying jobs, and the transfer of enormous wealth to the already rich. The tax rates for the wealthiest were slashed about in half. Greed was incentivized.

Ironically, the Reagan era came just as technology – much of it created by government-funded research – was on the cusp of creating extraordinary wealth that could have been shared with average Americans. Those benefits instead accrued to the top one or two percent.

The rich also benefited from the off-shoring of jobs, exploiting cheap foreign labor and maximizing profits. The only viable way for the super-profits of “free trade” to be shared with the broader U.S. population was through taxes on the rich. However, Reagan and his anti-government true-believers made sure that those taxes were kept at historically low levels.

The Ayn Rand/Milton Friedman theories may have purported to believe that the “free market” would somehow generate benefits for the society as a whole, but their ideas really represented a moralistic frame which held that it was somehow right that the wealth of the society should go to its “most productive” members and that the rest of us were essentially “parasites.”

Apparently, special people like Rand also didn’t need to be encumbered by philosophical consistency. Though a fierce opponent of the welfare state, Rand secretly accepted the benefits of Medicare after she was diagnosed with lung cancer, according to one of her assistants.

She connived to have Evva Pryor, an employee of Rand’s law firm, arrange Social Security and Medicare benefits for Ann O’Connor, Ayn Rand using an altered spelling of her first name and her husband’s last name.

In 100 Voices: An Oral History of Ayn Rand, Scott McConnell, founder of the Ayn Rand Institute’s media department, quoted Pryor as justifying Rand’s move by saying: “Doctors cost a lot more money than books earn and she could be totally wiped out.” Yet, it didn’t seem to matter much if “average” Americans were wiped out.

Essentially, the Right was promoting the Social Darwinism of the 19th Century, albeit in chic new clothes. The Gilded Age from a century ago was being recreated behind Reagan’s crooked smile, Clinton’s good-ole-boy charm and George W. Bush’s Texas twang.

Whenever the political descendants of Theodore and Franklin Roosevelt tried to steer the nation back toward programs that would benefit the middle class and demand greater sacrifice from the super-rich, the wheel was grabbed again by politicians and pundits shouting the epithet, “tax-and-spend.”

Many average Americans were pacified by reminders of how Reagan made them feel good with his rhetoric about “the shining city on the hill.”

The Rand/Friedman elitism also remains alive with today’s arguments from Republicans who protest the idea of raising taxes on businessmen and entrepreneurs because they are the ones who “create the jobs,” even if there is little evidence that they are actually creating American jobs.

Rep. Paul Ryan, R-Wisconsin, who is leading the fight to replace Medicare with a voucher system that envisions senior citizens buying health insurance from profit-making companies, cites Ayn Rand as his political inspiration.

A Land for Billionaires

The consequences of several decades of Reaganism and its related ideas are now apparent. Wealth has been concentrated at the top with billionaires living extravagant lives that not even monarchs could have envisioned, while the middle class shrinks and struggles, with one everyman after another being shoved down into the lower classes and into poverty.

Millions of Americans forego needed medical care because they can’t afford health insurance; millions of young people, burdened by college loans, crowd back in with their parents; millions of trained workers settle for low-paying jobs; millions of families skip vacations and other simple pleasures of life.

Beyond the unfairness, there is the macro-economic problem which comes from massive income disparity. A healthy economy is one where the vast majority people can buy products, which can then be manufactured more cheaply, creating a positive cycle of profits and prosperity.

With Americans unable to afford the new car or the new refrigerator, American corporations see their domestic profit margins squeezed. So they are compensating for the struggling U.S. economy by expanding their businesses abroad in developing markets, but they also keep their profits there.

There are now economic studies that confirm what Americans have been sensing in their own lives, though the mainstream U.S. news media tends to attribute these trends to cultural changes, rather than political choices.

For instance, the Washington Post published a lengthy front-page article on June 19, describing the findings of researchers who gained access to economic data from the Internal Revenue Service which revealed which categories of taxpayers were making the high incomes.

To the surprise of some observers, the big bucks were not flowing primarily to athletes or actors or even stock market speculators. America’s new super-rich were mostly corporate chieftains.

As the Post’s Peter Whoriskey framed the story, U.S. business underwent a cultural transformation from the 1970s when chief executives believed more in sharing the wealth than they do today.

The article cites a U.S. dairy company CEO from the 1970s, Kenneth J. Douglas, who earned the equivalent of about $1 million a year. He lived comfortably but not ostentatiously. Douglas had an office on the second floor of a milk distribution center, and he turned down raises because he felt it would hurt morale at the plant, Whoriskey reported.

However, just a few decades later, Gregg L. Engles, the current CEO of the same company, Dean Foods, averages about 10 times what Douglas made. Engles works in a glittering high-rise office building in Dallas; owns a vacation estate in Vail, Colorado; belongs to four golf clubs; and travels in a $10 million corporate jet. He apparently has little concern about what his workers think.

“The evolution of executive grandeur – from very comfortable to jet-setting – reflects one of the primary reasons that the gap between those with the highest incomes and everyone else is widening,” Whoriskey reported.

“For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression. In 2008, the last year for which data are available, for example, the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent.

“But economists had little idea who these people were. How many were Wall Street financiers? Sports stars? Entrepreneurs? Economists could only speculate, and debates over what is fair stalled. Now a mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap.”

Jet-Setting Execs

The Post article continued: “The largest single chunk of the highest-income earners, it turns out, are executives and other managers in firms, according to a landmark analysis of tax returns by economists Jon Bakija, Adam Cole and Bradley T. Heim. These are not just executives from Wall Street, either, but from companies in even relatively mundane fields such as the milk business.

The top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, according to the analysis, with nearly half of them deriving most of their income from their ownership in privately-held firms.

“An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. In all, nearly 60 percent fell into one of those two categories. Other recent research, moreover, indicates that executive compensation at the nation’s largest firms has roughly quadrupled in real terms since the 1970s, even as pay for 90 percent of America has stalled.”

While these new statistics are striking – suggesting a broader problem with high-level greed than might have been believed – the Post ducked any political analysis that would have laid blame on Ronald Reagan and various right-wing economic theories.

In a follow-up editorial on June 26, the Post lamented the nation’s growing income inequality but shied away from proposing higher marginal tax rates on the rich or faulting the past several decades of low tax rates. Instead, the Post suggested perhaps going after deductions on employer-provided health insurance and mortgage interest, tax breaks that also help middle-class families.

It appears that in Official Washington and inside the major U.S. news media the idea of learning from past presidents, including the Roosevelts and Dwight Eisenhower, is a non-starter. Instead there’s an unapologetic embrace of the theories of Ayn Rand and Milton Friedman, an affection that can pop out at unusual moments.

Addressing a CNBC “Fast Money” panel last year, movie director Oliver Stone was taken aback when one CNBC talking head gushed how Stone’s “Wall Street” character Gordon Gecko had been an inspiration, known for his famous comment, “Greed is good.” A perplexed Stone responded that Gecko, who made money by breaking up companies and eliminating jobs, was meant to be a villain.

However, the smug attitude of the CNBC stock picker represented a typical tribute to Ronald Reagan’s legacy. After all, greed did not simply evolve from some vague shift in societal attitudes, as the Post suggests. Rather, it was stimulated – and rewarded – by Reagan’s tax policies.

Reagan’s continued popularity also makes it easier for today’s “no-tax-increase” crowd to demand only spending cuts as a route to reducing the federal debt, an ocean of red ink largely created by the tax cuts of Ronald Reagan and George W. Bush.

Tea Partiers, in demanding even more cuts in government help for average citizens and even more tax cuts for the rich, represent only the most deluded part of middle-class America. A recent poll of Americans rated Reagan the greatest U.S. president ever, further enshrining his anti-government message in the minds of many Americans, even those in the battered middle class.

When a majority of Americans voted for Republicans in Election 2010 – and with early polls pointing toward a likely GOP victory in the presidential race of 2012 – it’s obvious that large swaths of the population have no sense of what’s in store for them as they position their own necks under the boots of corporate masters.

The only answer to this American crisis would seem to be a reenergized and democratized federal government fighting for average citizens and against the greedy elites. But – after several decades of Reaganism, with the “free market” religion the new gospel of the political/media classes – that seems a difficult outcome to achieve.

see:http://www.alternet.org/media/151426/why_do_people_believe_stupid_stuff%2C_even_when_they%27re_confronted_with_the_truth/

Obama’s Progressive Progress

Jacob Heilbrunn: writing in the HuffPost: “The verdict on President Obama is already in and it’s not a pretty one: he’s bungled health care. The economy is going nowhere. The Republicans are making a comeback….

By the end of this year, Obama will be in a very strong position. Congress will pass a health care bill — not a perfect one, to put it mildly, but it will be the first step toward creating comprehensive coverage. Obama will be able to claim it as a big win, as will congressional Democrats.

Then there’s the economy. Unemployment will remain high, but Obama will be able to point to a revival, not just in the stock market, but also in jobs creation. With a reviving economy, the Democrats will be in an impregnable position by the 2010 midterm elections. The Republicans who are counting on an off-year for the Democrats should think again.

What about foreign policy? Obama will have greatly curtailed the American presence in Iraq. Within a year, it will also become clear whether his approach to Afghanistan — upping the number of troops — is working. In addition, Pakistan seems to be stabilizing. Both would count as big wins for Obama.

Despite all the caterwauling about Obama, then, he remains firmly on course to become one of the most important Democratic presidents in history. It’s always tempting to demand more, to see betrayal of the cause. It’s what conservatives have been doing for decades, as they declared that even George W. Bush wasn’t conservative enough.  There is no reason to panic about Obama. His sobriety and sound judgment are his greatest assets. So far, the most significant thing about Obama isn’t that he hasn’t accomplished more, but how successful his presidency has already been.”

see: http://www.huffingtonpost.com/jacob-heilbrunn/stop-panikcing-about-obam_b_267140.html

How can the President Fire the GM CEO?

Good question!  How does  ‘the government’ have the authority to do this? 

Answer: From Tom Krishner, AP: ” The lender will always come in and push levers of corporate control,” said Douglas Baird, a professor who SPECIALIZES  in BANKRUPTCY at the University of Chicago Law School.

“It will basically say: ‘You want me to lend money. But there are these kind of targets you have to hit.’ PRIVATE lenders do it all the time,” Baird added.

President Barack Obama, in detailing his plans for the industry Monday, said the government has no interest in running GM. But at the same time, the White House has specifically rejected a restructuring plan turned in by GM and ordered it to make deeper cuts.

“What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company,” Obama said.

GM and Chrysler are alive today only because of $17.4 billion in government loans.”

Or, in other words: he who loans the money calls the plays…

see:http://www.cleveland.com/plaindealer/stories/index.ssf?/base/business-12/1238488404322180.xml&coll=2