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Rise in U.S. Debtor Prisons

Posted on October 5, 2010 by dandelionsalad

Democracy Now!
Oct. 5, 2010

New reports by the ACLU and the Brennan Center for Justice have found a sharp rise in debtor prisons across the country. Poor defendants are being jailed for failing to pay legal debts. In Ohio, a man named Howard Webb, who earns $7 an hour as a dishwasher, has served two stints in jail totaling over 300 days for being unable to pay nearly $3,000 in fines and costs from various criminal and traffic cases. In Michigan, a twenty-five-year-old single mother named Kawana Young has been jailed five times for being unable to afford to pay a few minor traffic tickets. Eric Balaban of the ACLU said, “Incarcerating people simply because they cannot afford to pay their legal debts is not only unconstitutional but also has a devastating impact upon men and women, whose only crime is that they are poor.”


The Credit Meltdown and the Shadow Banking System

By Dr. Ellen Brown

While local banks are held in check by the new banking czars in Basel, WallStreet’s “shadow banking system” has hardly been curbed by regulators at all; and it is here that the 2008 credit crisis was actually precipitated. The banking system’s credit machine is systemically flawed and needs a radical overhaul.

On September 13, the Bank for International Settlements issued heightened capital requirements that will make lending even more difficult for local banks, which do most of the consumer and small business lending today. The new rules are ostensibly designed to prevent a repeat of the 2008 credit collapse, but they fail to address its real cause, which involves a “shadow” banking system that has largely escaped regulation.

What went wrong in September 2008 was not that the existing Basel II capital requirements were too low but that banks found a way around the rules. The Basel II rules base a bank’s capital requirement on how risky its loan book is, and banks can make their books look less risky by buying unregulated “insurance contracts” known as credit default swaps (CDS). This insurance, however, proved to be what was effectively a fraud, when insurer AIG went bankrupt on September 15, 2008. The credit collapse that followed has normally been blamed on the collapse of the subprime housing market. But according to Yale economist Gary Gorton (whose views were recently embraced by Fed Chairman Ben Bernanke), the subprime problem was not itself sufficient to trigger a global credit freeze. What it did trigger was an old-fashioned bank run, in the not-so-familiar market known as the shadow banking system.

Bank runs don’t generally occur in the traditional banking system anymore, because (a) depositors are now protected by FDIC insurance, and (b) banks that run out of reserves can borrow from the Federal Reserve, which is empowered to create money ex nihilo (out of nothing). But FDIC insurance covers only $250,000 in deposits, and there is a massive and growing demand for banking by large institutional investors — pension funds, mutual funds, hedge funds, sovereign wealth funds — which have millions of dollars to park somewhere between investments. They want an investment that is secure, that provides them with a little interest, and is liquid like a traditional deposit account, allowing quick withdrawal.

The shadow banking system evolved in response to this need, operating largely through the repo market. “Repos” are sales and repurchases of highly liquid collateral, typically Treasury debt or mortgage-backed securities. The collateral is bought by a “special purpose vehicle” (SPV), which acts as the shadow bank. The investors put their money in the SPV and keep the securities, which substitute for FDIC insurance in a traditional bank. (If the SPV fails to pay up, the investors can foreclose on the securities.) To satisfy the demand for liquidity, the repos are one-day or short-term deals, continually rolled over until the money is withdrawn. This money is used by the banks for other lending, investing or speculating. But that puts the banks in the perilous position of Jimmy Stewart in It’s a Wonderful Life, funding long-term loans with short-term borrowings. When the investors get spooked for some reason and all pull their money out at once, the banks can no longer make loans and credit freezes.

In September 2008, investors were spooked when the mortgage-backed securities backing their repo “deposits” proved not to be “triple A” as represented. But the next time it might be something else, and Basel III has not fixed this systemic weakness. Arguably, the weakness cannot be fixed under the current scheme of private banking and credit. As noted in an article on Seeking Alpha byThe Business Insider:

Our financial system remains vulnerable to another credit crunch, with many of the same exact features as the last. All it needs is someone to strike the match of panic.

The question is how to eliminate this systemic risk:

Regulate shadow banking more tightly, and you probably have to also provide government backstops. Shudder. Try to shut the thing down or restrict it and you suck credit out of the system, credit which much of the non-financial ‘real’ economy uses and needs.

The real economy needs credit, and choking it off by over-regulating the banks will kill the real economy. Indeed, according to Gary Gorton, the shadow banking system evolved because banks were already so over-regulated that they could not turn a profit. He writes:

Holding loans on the balance sheets of banks is not profitable. . . . This is why the parallel or shadow banking system developed. If an industry is not profitable, the owners exit the industry by not investing; they invest elsewhere. Regulators can make banks do things, like hold more capital, but they cannot prevent exit if banking is not profitable. ‘Exit’ means that the regulated banking sector shrinks, as bank equity holders refuse to invest more equity.

Toward a Better Solution

Only a complete overhaul of the banking system can eliminate these systemic flaws, flaws that ultimately stem from a misconception about what money is. We think of it as a “thing,” something that must be dug out of the ground or borrowed from someone who already has it. Since banks don’t have enough of this thing to cover their loans and investments, they engage in a shell game in which they advance credit and scramble to cover it with short-term loans, exposing them to the systemic risk of sudden and unpredictable withdrawals.

That is the old model, but today money and credit are something else. No gold or other commodity backs our money today. Nothing backs it but “the full faith and credit of the United States.” Money and credit are creatures merely of legal agreement, a tally of accounts keeping track of who owes what to whom. Two or more parties can enter into a legal agreement without having any money at all. They can advance credit against goods or services and engage in productive trade. The tribute exacted by a private banking monopoly actually hampers this productive flow. As Thomas Jefferson complained to Treasury Secretary Gallatin in 1815:

The treasury, lacking confidence in the country, delivered itself bound hand and foot to bold and bankrupt adventurers and bankers pretending to have money, whom it could have crushed at any moment.

Jefferson wrote to John Eppes in 1813:

Although we have so foolishly allowed the field of circulating medium to be filched from us by private individuals, I think we may recover it . . . . The states should be asked to transfer the right of issuing paper money to Congress, in perpetuity.

The “full faith and credit of the United States” could and should be overseen by a branch of the United States, just as legal agreements are overseen by the judiciary. Publicly-owned banks could issue the full faith and credit of the nation without worrying about capital or reserves. After all, if you are the United States, why do you need “reserves” of your own credit?

While we’re waiting for the Calvary to swoop down from Washington and save us — something that could take a while — we might consider setting up some state-owned banks. The Bank of North Dakota, currently the country’s only state-owned bank, is very stable and very profitable, returning a 26% dividend to the state. A bank of that sort could be an attractive investment for all those state and local rainy day funds, pension funds and other local government funds looking for greater returns from the low-risk investments allowed by their legislative mandates. We need to set up some banks that serve the needs of the real economy rather than those of Wall Street bankers, brokers and their super-rich clients for yet more bonuses, bailouts and paper profits. State-owned banks could fill the role the Wall Street banks have declined to fill, providing an effective credit engine for state and local economies.

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest of eleven books, she shows how the Federal Reserve and “the money trust” have usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are, and

Why is the right calling the shots?

September 1, 2010

“DEFUND EVERYTHING. Get rid of the socialist aspects of government, not just in health care, but the other entitlement areas that are driving us into insolvency.” That was the response of Alaska Republican Senate candidate Joe Miller, when Fox Business News asked him what parts of the federal government he would get rid of first.

Talk like that would have marked Miller as a crackpot on the far fringes of the Republican right not that long ago. But this is what passes for mainstream discourse in U.S. politics today–the Republicans spout inflammatory lies and pander to bigotry, and the Democrats, though still in control of both the White House and Congress, retreat even more and act like there’s nothing they can do about it.

A year and a half ago, when Barack Obama was moving into the Oval Office, it seemed like the demoralized Republican Party would face years as an ineffectual minority party in Washington. Even half a year ago, when the Obama administration finally overcame all the GOP obstacles to passing health care legislation, most commentators thought the Republicans would pay a political price for their fanatical right wing.

Not anymore. Now the Republicans are setting the agenda in U.S. politics, and their right-wing attack machine–from Fox News to the crusaders of the Christian Right–is on the warpath, supremely confident that they can get away with anything, from blocking the construction of a religious center in New York City to appropriating the iconic image of Martin Luther King speaking at the Lincoln Memorial for a right-wing circus presided over by Glenn Beck.

Whether from a politician like Miller or a celebrity blowhard like Beck, the right’s campaign is mostly exciting the minority of hard-core conservative supporters that the Republicans can always rely on. The Tea Partiers aren’t the “populist” insurgency sweeping the country that the mainstream press often makes them out to be.

But when reactionary ideas go unopposed in mainstream politics and the media–and in an economic climate of uncertainty and fear for millions of ordinary people–they can gain a wider hearing.

The right wing claims it represents the majority of Americans. It doesn’t–by any number of measures, most people in the U.S. reject the bigoted and pro-corporate policies that the right actually stands for, once its rhetoric is swept aside.

But because of the pitiful performance of the Obama administration and the Democratic Party, the right never faces a real challenge from inside the U.S. political system. That’s why the key to reversing the right turn in U.S. politics is to organize and mobilize outside Washington, in struggles that demand justice and democracy.

– – – – – – – – – – – – – – – –

THE RIGHT isn’t just talking fire and brimstone. Its drive to dominate U.S. politics is having a real impact on millions of lives.

Earlier this year, Senate Republicans held up an extension of unemployment benefits for the long-term unemployed–with the preposterous claim that the “American people” wanted a balanced budget more than help for workers who desperately need it.

In several states, politicians are following the lead of Arizona Gov. Jan Brewer in pushing racist legislation designed to victimize undocumented immigrants. In Arizona, SB 1070 had already led to an exodus of immigrants fearing the coming crackdown, even before it went into effect.

The wider political climate is sowing the seeds of vigilante violence. According to the Southern Poverty Law Center, hate crimes against Latinos are up again in the wake of Arizona’s SB 1070. Likewise, the anti-Muslim racism spewed by right-wingers against the building of a Muslim community center in Lower Manhattan has set the stage for racist attacks, including the stabbing of a New York City cab driver and an arson at a mosque site in a suburb of Nashville.

Of course, Barack Obama and the Democrats have criticized the Republicans for their obstructionism in Congress and catering to bigotry. And with the November congressional elections approaching, we’re certain to hear more tough talk. “You want to go forward, what do you do?” Obama told a room of supporters last month. “You put it in ‘D.’ When you go backward, what do you do? You put it in ‘R.'”

But the Democrats also deserve their share of the blame for Washington’s rightward shift. They have dashed all the expectations of change placed in them during the 2008 campaign–and they respond to every attack by Republicans with retreat and concessions.

Obama took office in January last year with the Wall Street financial meltdown fresh in everyone’s minds and vast popular sentiment in for holding the bankers accountable for the crisis. But the new administration adopted its predecessors’ financial bailout almost without change, putting literally trillions of taxpayer dollars at the service of the biggest banks. This allowed–incredibly–the pro-corporate shills of the Republican Party to pose as opponents of the bankers’ bailout.

Health care reform seemed a certainty when the Democrats took over in 2009, but during the yearlong battle to get legislation passed, the administration was willing to bargain away even half-measures at the first sign of opposition from the industry. The Republicans’ total opposition to any reform proposal was completely out of step with popular opinion, but because the Democrats never took a stand, the “debate” on the issue was disorienting even to people who wanted to see the health care system changed.

This isn’t a matter of a bad political strategy reigning in the Obama White House. The Democrats present themselves as the “party of the people” at election time, but their real role is to represent the corporate and political establishment. And so the instinctive attitude of party leaders, unless faced with pressure from below, is to take the moderate and non-threatening path.

This sets up a well-worn dynamic of U.S. politics: With every retreat by the Democrats, the right wing’s battle cry becomes louder. No amount of concessions will satisfy the right–they only embolden it to go further.

– – – – – – – – – – – – – – – –

THE RESULT is a huge gap between what passes for politics in Washington and the attitudes and beliefs of people in the country as a whole–people’s anger at the banksters, for example, or their support for government programs to create jobs or increased agreement with demands for LGBT equality.

The right wing’s anti-immigrant, anti-gay and pro-business rhetoric doesn’t speak for the hopes and dreams of most people in the U.S. But that doesn’t mean the right’s domination of the national debate has no effect. It has energized the Republican hard core–while among the Democrats’ base supporters, there is demoralization and passivity, which makes the right look even stronger by comparison.

And more generally, a basic fact of politics is being proved again: When people hear the same lies and distortions repeated by voices of authority on the right, endorsed with only a few criticisms by the “left” side of the mainstream establishment, and then served up with the latest media technology via a willing press, some people are going to accept those right-wing ideas.

The potential for the right to get a hearing is even greater in an economic crisis that has plunged millions of workers into unemployment and poverty, and left many more struggling to get by, and fearful of what the future holds.

The only way to shift the political debate is for our side to make its voice heard–to build a left-wing alternative as a part of all the struggles and initiatives for change today. Every political activity we organize–whether they are small or big, a demonstration or a public forum–can play a role in challenging the right wing’s dominance.

One opportunity to make our case to a big audience will come next month. On October 2, a demonstration initiated by the NAACP and supported by the AFL-CIO and numerous social justice and labor organizations is expected to draw thousands of people to Washington, D.C., to speak out for jobs and justice.

The demonstration’s organizers will likely focus all their fire on Republicans, while ignoring the complicity of the Democrats. Nevertheless, this rally represents an opportunity for people who have been looking for a place to raise their voices against the right’s crusade and in favor of government efforts to help working people. It’s important for socialists and activists to see it as such, whatever its organizers’ illusions in Obama.

We have to build a left-wing alternative that recognizes the truth about the Obama era: It’s not just the right wing that’s the problem, but both wings of a political establishment dedicated to the status quo of unemployment, crisis, poverty and war.

Banking on Hunger; Goldman Sachs Vampire

by Alan Maass, author of The Case for Socialism

LAST YEAR, Rolling Stone journalist Matt Taibbi wrote a damning e

xposé of mega-bank Goldman Sachs that began by describing the Wall Street giant as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

It’s an apt description and one we quoted more than once at Goldman Sachs helped inflate the housing bubble of the 2000s in order to keep the Wall Street casino going strong. It hyped investments based on pooling huge numbers of mortgage loans, some headed for foreclosure–and it provided other “opportunities” for investors to gamble that the same mortgages would go bad. And whatever the investment, Goldman Sachs executives were there with their hands out, raking in fees from every deal.

Then, when the housing bubble burst–and in the process pushed the world financial system to the brink of a meltdown–Goldman unerringly aimed its blood funnel at another huge pot of money: the U.S. Treasury. In a bailout engineered in part by former Goldman executives, the federal government rescued Wall Street and returned the big banks to financial health with an immense infusion of money from U.S. taxpayers.

But a year has passed since Taibbi wrote his article, and based on what we’ve learned since, it’s worth asking: Was comparing Goldman Sachs to a vampire squid too generous?

Is Matt Taibbi, in fact, guilty of insulting vampire squids?

For example, earlier this year, Congress investigated a scam from a few years ago in which Goldman created a security that was designed to fail–anyone who invested in it lost their money. Why was it designed to fail? So hedge fund boss John Paulson could place a financial bet that the security would, in fact, default. Paulson made a cool $1 billion on a sure thing–and, once again, Goldman pocketed big fees for setting it all up.

And now, more details are emerging about a Goldman Sachs plot that wreaked deadly havoc around the world–speculation on food commodities, which pushed prices for the most basic of necessities through the roof, sparking rioting in dozens of countries and causing untold misery in the rest.

Whatever else can be said about them, vampire squids don’t understand the consequences of their actions. Goldman Sachs, on the other hand, knew exactly what it was doing to people around the world.

The banksters knew that if their schemes went exactly according to plan, millions of people would lose their homes, and hundreds of millions would go hungry. But there was money to be made–so Goldman pulled the trigger.

– – – – – – – – – – – – – – – –

GOLDMAN SACHS’ contribution to the food crisis of 2007-08 is a particularly ugly chapter in the career of global capitalism’s super-villains.

Starting at the end of 2006, world food prices, particularly for staple crops, began to rise–and fast. Between 2006 and 2008, average prices for rice rose by 217 percent, wheat by 136 percent, corn by 125 percent and soybeans by 107 percent.

Overall, according to the Economist magazine, the real price of food, after accounting for inflation, reached its highest level since 1845, when the magazine first started calculating the statistic.

The food price increases had horrifying consequences around the world. For example, aNew York Times reporter described being confronted in Haiti by a mother who was holding an infant in her arms and pointing to four other children, all of whom had gone without food that day. “Take one,” the woman said. “You pick. Just feed them.”

According to Harper’s journalist Frederick Kaufman, author of an excellent article on what he calls “the food bubble” of the mid-2000s, the crisis pushed 250 million more people–almost the population of another United States–into the category of “food insecure.” The ranks of the world’s hungry jumped past the 1 billion mark.

Even in the U.S., food prices reached levels not seen in a generation. In 2008, the number of Americans vulnerable to hunger grew to 49 million, or about one in every six men, women and children in the country. By the end of the year, 36 million people were getting food stamps from the federal government, an increase of nearly 40 percent in just two years.

And then, just as quickly, food prices started falling again. By the end of 2008, they were close to their pre-crisis levels at the big commodities exchanges where agribusinesses and investors trade large quantities of food–though the prices that consumers paid didn’t drop nearly as fast.

What happened? Was there some kind of terrible natural disaster that radically reduced the supply of food? No. Natural causes like a drought in Australia played some role, but, for example, global wheat production increased during the period, according to the International Grain Council.

One man-made cause of the crisis was rising oil prices, resulting from the U.S. war on Iraq–which drove up costs for nearly every aspect of agricultural production, from the making of fertilizer to transportation. Another was the U.S. government’s biofuel craze, which led agribusiness to take land away from other crops to grow corn for ethanol.

But it turns out that the most important cause of the food crisis of 2007-08 was commodity speculation. Wall Street’s biggest players saw an opportunity for profit by manipulating the price of food, and they took it–at the cost of people around the world going hungry.

So to ask again: What happened? The short answer is: Goldman Sachs happened.

– – – – – – – – – – – – – – – –

HOW COULD Wall Street speculate on something so important to people’s lives as food? For more than a century, agricultural producers in advanced countries have relied on a system where they sell crops or products that they promise to deliver in the future. In theory, this “futures” system protects producers against the risk of a bad harvest or price decreases, and it assures businesses that buy agricultural goods of a steady supply.

The introduction of futures trading at commodity exchanges opened up opportunities for speculators to bet on whether the price for contracts to deliver some product–wheat, corn, cattle, etc.–would rise or fall before they came due.

This was nothing more than gambling, with people’s livelihoods as the stakes. But the damage speculators could do was limited to at least some extent by the basic rules of futures trading–that actual agricultural products ultimately had to exchange hands somewhere in the system when the futures contracts came due.

Enter Goldman Sachs. In 1991, it launched the Goldman Sachs Commodity Index–a measure of the price of 18 different commodities–and invited speculators to place their bets on whether it would go up or down. Other Wall Street firms copied Goldman and set up their own agricultural index funds.

Moreover, Goldman turned the traditional method of the commodity speculators–buy low and sell high–on its head with an emphasis on always buying more and more, and pushing off any losses into the future. The key for Goldman wasn’t the direction of commodities prices, but that the market kept sucking in cash, which could then be plowed into more speculation far removed from agricultural commodities.

Of course, government regulations on commodities trading needed to be loosened for the new system to thrive–but the Clinton administration, under Treasury Secretary Robert Rubin, was happy to oblige.

The stage was set for a speculative frenzy on agricultural commodities unlike anything seen in the past. It took another decade for the catastrophe to materialize because there were other more lucrative opportunities for financial gambling–first the tech bubble of the 1990s, then the housing bubble of the 2000s.

Food’s turn came in the mid-2000s. The big Wall Street players like Goldman Sachs recognized that the mortgage and real estate markets were poised for a fall. The gamblers had to find a new table at the casino–and the agricultural commodity index funds looked good. In 2003, holdings in these funds totaled $13 billion. Five years later, there was $317 billion invested in commodities index funds.

The same logic that inflated the housing and real estate bubble was now operating on food prices. With more and more speculators climbing into the market, prices shot upward. The price of the main variety of wheat traded in the U.S. historically varies $3 and $6 per 60-pound bushel. That price started climbing–doubling and doubling and doubling again. On February 25, 2008, wheat futures hit $25 a bushel.

At this point, the price that investors were willing to pay for a gamble on the cost of future commodity prices had surpassed the so-called “spot” price to buy the same commodity in the here and now–and so the spot price was dragged upward, too. People the world over felt the effects of casino capitalism on a new realm of their life.

As Frederick Kaufman summarized, “Bankers had taken control of the world’s food, money chased money, and a billion people went hungry.”

– – – – – – – – – – – – – – – –

WALL STREET’S responsibility for the food crisis is an extreme example, but the underlying logic of food production under capitalism, even in normal times, is no less obscene.

Year in and year out, the statistic from the United Nations is horribly similar–around 6 million children under the age of 5 will die in the next 12 months from malnutrition and related diseases.

This isn’t because the world doesn’t grow enough food. Even conservative estimates calculate that enough food is produced around the globe for everyone in the world to get 2,800 calories a day, well above the minimum standard set by the UN Food and Agriculture Organization. And that isn’t to speak of what could be cultivated if the world’s agricultural system was made more efficient.

But that 2,800 calories a day depends on the food produced being shared equally. It isn’t. Food costs money, and that means the poor go without.

As World Food Program Executive Director Josette Sheeran put it: “We are seeing more urban hunger than ever before. Often we are seeing food on the shelves but people being unable to afford it.” The Financial Times made the same point years ago more bluntly: “People are not hungry these days because food supplies are not available. They are hungry because they are poor.”

In a capitalist system, food is treated like any other commodity, from cars to televisions to pharmaceuticals and health care. Instead of being organized to feed the hungry, the system is organized around not feeding everyone.

The explosive rise in food prices in 2007-08 came as supplies held steady, and in some cases expanded. The year when the price of a futures contract for wheat doubled and doubled and doubled again was the greatest wheat-producing year in world history, according to Frederick Kaufman.

When Kaufman talked to a grain trader about the market manipulations during the food bubble, he asked whether agribusiness ought to see itself as responsible to society for maintaining a stable supply of a fundamental necessity of human life.

No way, said Todd Posthuma, who works at one of the main exchanges for trading wheat contracts. “I view what we’re working with as widgets,” Posthuma said.

There can be no greater indictment of the capitalist system than the fact that its masters view food not as something that all people must have–and that more than 1 billion people desperately need more of–but as a thing that can be bought and sold, in order to acquire more riches.

As Johann Hari concluded in the Independent: “The world’s wealthiest speculators set up a casino where the chips were the stomachs of hundreds of millions of innocent people. They gambled on increasing starvation and won…What does it say about our political and economic system that we can so casually inflict so much pain?”

Democrats Take on Supreme Court’s Giant Sell-Out of Our Democracy to Corporations

Thursday 29 July 2010

by: Joshua Holland

Democrats in Congress are fighting to undo, or at least mitigate, the potential damage wrought by the Supreme Court in its Citizens Uniteddecision, an example of right-wing judicial activism that has the potential to put the final nail in the coffin of American self-governance and turn over our elections to multinational corporations.

Speaking at last week’s Netroots Nation conference, a gathering of liberal activists, Rep. Alan Grayson, D-Florida, put the threat posed by Citizens United in simple-to-understand terms. “We’re now in a situation,” he told the crowd, “where a lobbyist can walk into my office…and say, ‘I’ve got five million dollars to spend, and I can spend it for you or against you. Which do you prefer?’” That’s power.

The Citizens United ruling overturned key provisions of the McCain-Feingold campaign finance law, rules that kept corporations — and their lobbyists and front groups (as well as labor unions) — from spending unlimited amounts of cash on campaign advertising within 60 days of a general election for federal office (or 30 days before a primary). To get there, the court’s conservative majority stretched the Orwellian legal concept known as “corporate personhood” to the limit, and gave faceless multinationals expansive rights to influence our elections under the auspices of the First Amendment.

“They wanted to hear the possibility that that’s the way the constitution would read to them,” said Grayson. “So they picked an issue out of the air that nobody had conceived of [as a First Amendment case] because 100 years of settled law meant that corporations cannot buy elections in America, and they not only allowed corporations to buy those elections, but they made it a constitutional right.” He called the decision “a tragedy for us all,” as “corporations now have rights that human beings can never have.”

It’s hard to overstate the ruling’s potential to undermine American democracy. Robert Weisman, president of the watchdog group Public Citizen, offered “a reality check” for the court, and anyone else who agrees with its majority’s belief that unlimited corporate money for independent ad buys won’t corrupt our political class. “$5.2 billion [was] spent in the 2007-2008 election cycle by all federal candidates, including candidate Obama,” Weisman said. “Exxon in that same period made $85 billion in profit; Pfizer made $27 billion selling just Lipitor alone. Last year, Goldman Sachs spent $16.5 billion on executive compensation. So if they choose to, corporations can completely overwhelm the political process, and they’re going to choose to do it more and more.”

And when corporations do get into the game in force, voters won’t know who’s picking up the tab for the flood of campaign ads. The money won’t come directly from Exxon or BP or Goldman Sachs, it’ll be filtered through the Chamber of Commerce and other corporate front groups with benign-sounding names like the Center for Consumer Freedom, Citizens for a Sound Economy or the American Council on Science and Health.

Now members of Congress are fighting to push back against the ruling on a number of fronts. Grayson has introduced a flurry of legislation, including the Business Should Mind Its Own Business Act (HR 4431), which would impose a hefty tax on corporate campaign contributions in federal races; the Corporate Propaganda Sunshine Act (HR 4432), which requires financial firms to disclose any contributions to federal candidates that exceed $1,000, and the End the Hijacking of Shareholder Funds Act (HR 4487), which requires shareholders to vote on any corporate expenditures that are meant to influence public opinion about anything other than their products and services.

The DISCLOSE Act (HR 5175), sponsored by Chris Van Hollen, D-Maryland, passed the House last month, but was killed by a unified GOP this week. DISCLOSE would have “required organizations involved in political campaigning to disclose the identity of the large donors, and to reveal their identities in any political ads they fund. It would also bar foreign corporations, government contractors and TARP recipients from making political expenditures.” After the vote, Sen. Chuck Schumer, D-New York, said, “This is a sad day for our democracy. Not only does the Supreme Court give those special interests a huge advantage, but [now the Senate] says they should do it all in secret without any disclosure. That … eats at the very fabric of our democracy. It makes our people feel powerless and angry.”

Because the Supreme Court has made campaign issue advertising a constitutional right for corporations, these efforts, while laudable, can only work at the margins. Rep. Donna Edwards, D-Maryland, has taken a much bolder approach, offering a constitutional amendment that would grant Congress the explicit power to regulate expenditures for “political speech by any corporation, limited liability company, or other corporate entity.”

The Citizens United decision, said Edwards, “is another reminder that the Court has gotten it wrong, the Congress has gotten it wrong and that we need to do something serious to restore fairness in our elections, and one of the ways that we do that is setting the balance right in terms of our constitutional protection of real people, and not just of corporate interests and corporate money.”

Edwards’ amendment has attracted 24 co-sponsors to date, but her bill isn’t the only one. Congressmen Paul Hodes of New Hampshire (HJ Res 82) and Leonard Boswell of Illinois (HJ Res 68) have introduced variations in the House, and on Tuesday Max Baucus, D-Montana, one of the most conservative Dems in the upper chamber, joined Chris Dodd, D-Connecticut, and Tom Udall, D-New Mexico, in introducing similar amendments in the Senate. (Here is a summary of the differences between the various amendments.)

It’s an uphill climb — amending the U.S. Constitution requires a two-thirds majority in both chambers of Congress, and then must be ratified by 38 state legislatures. It’s been done only 27 times in the history of the Republic. And with both chambers of Congress in the hands of what David Sirota terms “the Money Party,” skeptics rightly point out that passing it would be a steep uphill climb.

Yet the Right has long used unlikely constitutional amendments to raise awareness of an issue and rally the Republican base (think: flag-burning). And even a losing effort to amend the constitution can have a significant impact on the political scene. “If we don’t seize it as an opportunity because it’s so discouraging, they win,” said Lisa Graves, executive director of the Center for Media and Democracy. Graves added that losing efforts like the proposed Victim’s Rights Amendment had nevertheless had a profound effect on the law. “A constitutional amendment is a powerful organizing tool,” she said, “and we must embrace it … we need to learn that we can win when we lose.”

Not surprisingly, there’s plenty of support for Citizens United on the Right. This week, the Tea Party Patriots — the well-heeled corporate lobby group that pulls the strings of much of the “grassroots movement” — sent its rubes an “urgent alert” about the DISCLOSE Act, which it called an “effort to silence us before the elections.” They described it as being “tantamount to a witch-hunt.”

Ultimately, it will require a massive grassroots effort to overcome that narrative — and a hopelessly deadlocked Congress — to get either a constitutional amendment overturning Citizens United or a legislative fix to lessen its harm enacted into law.

It appears to be taking shape. A coalition of progressive groups has created a petition calling on lawmakers to push back against the Supreme Court’s activism (which you can sign here), and People for the American Way and Public Citizen have launched a campaign to get active citizens to urge lawmakers and candidates for Congress to pledge that they’ll vote with the American people on the issue if they get the chance. (You can find out more about that effort here.)

American democracy has taken a beating, but it’s still possible to save it. It certainly won’t be an easy task in this climate, but promoting and maintaining a robust democracy has never been easy.

Joshua Holland is an editor and senior writer at AlterNet.

Let them eat fiscal responsibility

July 28, 2010

WORKERS IN the U.S. are still getting hammered by the worst economic slump since the Great Depression. That’s something people in every state of the country understand all too well.

“It’s not like a hurricane loss or a drought or something that’s typically referred to as an ‘act of God’ outside the control of the government,” said Nebraska Democratic Sen. Ben Nelson. Nelson was explaining why he voted alongside Republicans to try to block an extension of unemployment benefits.

That extension finally did pass in mid-July, in spite of Nelson and the Republicans–seven weeks after the extra jobless benefits expired, cutting off a total of 2.5 million people who have been without work for longer than the standard 26 weeks for unemployment insurance.

The cost of the legislation is $34 billion–a little over half the amount that the Senate approved for a war spending bill a few weeks earlier. Nevertheless, Republicans and some Democrats fought the unemployment extension at every turn–in the name of “fiscal responsibility.”

“Americans are frustrated with the amount of spending and borrowing around here,” said Senate Minority Leader Mitch McConnell (R-Ky.). “Let’s not wave on through legislation that is going to worsen the deficit and dig an even deeper hole than we’re in.”

For millions of workers and their families, though, the “hole we’re in” is how to pay the bills when there’s no work to be found–and the extension of jobless benefits that average just over $300 a week is little enough help as it is.

Actually, the bill to extend unemployment was even less help after Senate Democrats got done bargaining away several important provisions. For example, they dropped badly needed funding for state Medicaid programs–a compromise that will force state governments into more cuts from health care and other spending. The Center for Budget and Policy Priorities warned that dropping the extra Medicaid funding could ultimately lead to the loss of 900,000 public- and private-sector jobs.

The Democrats also sweetened the deal for Republicans by agreeing to cut a $25-a-week increase in benefits allocated in previous bills extending unemployment.

– – – – – – – – – – – – – – – –

SOME 15 million people are unemployed, according to official figures, and at least that many are involuntarily working part time because they can’t find full-time work, or have dropped out of the workforce altogether in despair at ever finding a job.

So why are the politicians so slow to act? Public opinion isn’t stopping them. A recentUSA Today/Gallup poll reported that 60 percent of people support “additional government spending to create jobs and stimulate the economy.” A National Employment Law Project survey found that 74 percent agreed with the statement, “With unemployment close to 10 percent and millions still out of work, it is too early to start cutting back benefits and health coverage for workers who lost their jobs.”

Yes, Republicans have continued to pursue their strategy of obstructing every Democratic initiative. But the problem in Washington isn’t just the intransigence of the GOP, but the commitment of the Obama administration and the leadership of the Democratic Party to many of the same neoliberal dogmas and policies of the past.

Obama and the Democrats passed one big economic stimulus package in their first months in power in 2009–not as large or as directed at creating jobs as many supporters had hoped, but nevertheless the biggest such measure since the Great Depression.

But since then, the talk has turned steadily to austerity, austerity and more austerity. Obama himself promised a spending freeze at most government agencies–not the Pentagon, of course–for the next three years, and in June, White House budget officials ordered departments to cut 5 percent from their budgets.

Democrats in Congress let several proposals–a summer job program for teenagers, aid to states to prevent layoffs of teachers, expansion of funding for Pell Grants–die on the vine at the first whiff of Republican opposition.

With even mainstream economists warning of the threat of a double-dip recession, the Obama administration–like governments around the advanced world–is carrying out policies that are the exact opposite of what’s needed. As it is, the effects of last year’s federal stimulus were drastically undercut by the scale of spending cuts at the state and local level.

If the Democrats were serious about their ritual talk of creating jobs, millions of people could be put to work rebuilding the country’s crumbling infrastructure–roads, bridges, transit systems and schools. Those jobs would be certain to pay a living wage if the minimum wage was raised to keep up with years of inflation–and millions of the working poor could be helped as well.

Rather than bailouts for bankers and more tax breaks for corporations, the government could reverse the cuts in programs that poor and working people depend on. And while we’re at it, let’s talk about strengthening, not slashing, Social Security to make up for the massive decline in pensions that workers used to receive–and in retirement savings that vanished during the financial crisis of 2008-09.

– – – – – – – – – – – – – – – –

UNFORTUNATELY, THE labor movement and liberal organizations have put up very little opposition to the Obama administration’s many disappointments. But
one positive sign for putting forward an alternative agenda is the plans for an October 2 national march in Washington, D.C.

The AFL-CIO has joined with the NAACP, 1199 SEIU, National Council of La Raza and many other organizations for a demonstration to demand “jobs, economic security, comprehensive immigration reform, a safe and renewable energy policy and a reversal of national priorities from making wars to meeting human needs.” George Gresham, president of 1199 SEIU, called the planned rally a “massive–and we believe historic–march.”

At the group’s convention in early July, NAACP President Ben Jealous announced that the purpose of the march on Washington was to show “that the majority of this nation is ready and willing to fight back and ensure that all of the change we voted for is a reality for all of our children.”

In addition, the United Auto Workers and Rev. Jesse Jackson’s Rainbow PUSH are uniting for a campaign for jobs that will be kicked off at a march on August 28 in Detroit, on the anniversary of the 1963 March on Washington where Martin Luther King Jr. gave his “I Have a Dream” speech. Detroit was the site of the “Freedom Walk,” a march of 125,000 that King led several months before the March on Washington.

The Detroit event will call for an end to the ongoing U.S. wars in the Middle East and redirect the war budget to rebuilding in the U.S. Organizers say the campaign will focus on foreclosures and call for a moratorium on “the practice that forces hard-working Americans from their homes while at the same time bailing out Wall Street executives and paying them million-dollar bonuses.”

History tells us that the most important social changes–reforms that improved the lives of working people and expanded democracy and freedom–didn’t come about because of proposals in Washington, but because working people organized and struggled for them.

The spirit of solidarity that we build today–in our unions, workplaces, schools and communities, in movements to save our schools in California or stop foreclosures in Boston–will be the basis for a real fight for jobs, and ultimately for real economic justice.

Again the rich get richer!

The Budget Deficit Chicken Hawks

by Dean Baker

Most people are familiar with the concept of “chicken hawks.” Chicken hawks are the politicians who are anxious to send other people to risk their lives in war, but somehow managed to avoid service when they had the opportunity to fight themselves. Former Vice-President Dick Cheney and former President George W. Bush are the leading members of the chicken hawk society.

It turns out that we have a similar story with budget policy, where there appears to be a large contingent of budget deficit chicken hawks. The deficit hawks have been filling the news lately. These are the folks who are yelling that something terrible will happen if we don’t reduce the deficit. Most of them seem to have missed the fact that something terrible is now happening. We have almost 15 million people unemployed and 9 million underemployed, with several million facing the loss of their home in the next few years.

People of all ages are seeing their lives wrecked by a economic disaster that was entirely preventable, if the folks running economic policy were not too incompetent to notice an $8 trillion housing bubble. In fact, one of the reasons that this bubble did not get noticed was that, even before the bubble burst – creating large deficits – the deficit hawks were running around yelling about the deficits. These deficit hawks were able to get far more attention for their whining than the people who were warning about the dangers posed by the housing bubble.

Now that we have seen the collapse, rather than supporting action to get the economy back on its feet, the deficit hawks are again yelling about the long-term deficit. But what is really striking is that many of the people who whine loudest about the deficit are the most reluctant to take steps to reduce the deficit – at least when it involves powerful interest groups.

So, in the last week, we were treated to the sight of two senators who are leading Democratic deficit hawks, Kent Conrad from North Dakota and Ben Nelson from Nebraska, both came out for the extension of the portion of President Bush’s tax cuts that went to upper-income people. These two senators, who have been in a near panic about the debt that we are handing on to our children, came out firmly for more debt for our children if the alternative was higher tax payments by the wealthy.

Unfortunately, this chicken hawk approach to deficit reduction is more the rule than the exception. The surge in the deficit in the last three years was overwhelmingly due to the economic collapse. It might be reasonable, therefore, to look to Wall Street to pick up much of the tab for future shortfalls. My calculations indicate that a tax on financial speculation could raise in the neighborhood of 1.0 percent of Gross Domestic Product (GDP) or $150 billion a year.

The deficit chicken hawks also don’t have much commitment to honesty. When America Speaks reported its results to the public and President Obama’s deficit commission, it noted that one cut to Social Security, raising the retirement age, got majority support from participants. However, it turns out that this result was based on a software error. When the error was corrected, support fell to 39 percent.

Remarkably, America Speaks did not have the integrity to publicly acknowledge and correct this mistake. It just quietly changed the number on its web site. This is the sort of behavior we should expect from deficit chicken hawks, who want to attack the programs on which so many ordinary working people depend, while protecting the interests of the rich and powerful.

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Budget Nightmare at the Pentagon

An extremely broad right-left coalition may be forming to bring real change to the Pentagon. Such change is not coming otherwise, explains Straus Military Reform Project Director Winslow Wheeler.

The Huffington Post by Winslow Wheeler

Change is coming to the Pentagon.  The prevailing wisdom is that Secretary of Defense Robert Gates brings it.  Real change is, indeed, in the wind, but it is not coming from Gates.  The long overdue program terminations and overhead savings Gates pursues are surely welcome, but they are not bringing the re-birth the Pentagon desperately needs.  Luckily, others seek to do what is needed.

Gates commands real respect.  Against all odds, last year he and President Obama terminated the uber-expensive, underperforming F-22 fighter.  This year, Gates seeks to end further production of the superfluous C-17 transport and kill off a second engine for the high cost, kluge-like F-35 “Joint Strike Fighter.”  Impressing many, he has also instructed the Pentagon to cut bureaucratic fat by $102 billion.

When you scratch the surface, it’s a little less impressive.

While Gates and Obama won that Titanic F-22 fight last year, they waffled on the C-17 and let 18 more be produced.  This year, Gates says he means it on the C-17, but the C-17 porkers are laying in wait for him in the Senate where they have the votes, and the House C-17 porkers lust to tag along.

More problematic is Gates selection of the second F-35 engine to take a stand on.  In 2009, the Government Accountability Office (GAO) repeated a previous internal DOD study saying the second engine, bought competitively, could save money.  Nonetheless, Gates – now with Obama belatedly backing him – says he’ll get the bill vetoed if it endorses any competition between F-35 engines.

Gates’$102 billion reduction in overhead is a cumulative goal for five years, not one, and the bigger savings don’t arrive until the elusive (may-never-happen) out-years.  This will be after Gates, maybe even Obama, is long gone.  The first year savings ($7 billion) is a puny 1.2 percent of the 2012 Pentagon spending plan.  The public schedule includes no savings in the next fiscal year, the one for 2011 that doesn’t even start until next October.

According to an internal Defense Business Board study, DOD spends 40 percent of its funds on overhead.  If the whole $102 billion is saved, and if it all comes out of overhead (which is not the plan), DOD spending for bureaucratic fat will be reduced only 8.5 percent.  The administrative bloat would go down, but only from 40 percent to 37 percent of total DOD spending.

Similar timidity and procrastination is recommended by the Chairman of the House Armed Services Committee, Congressman Ike Skelton, D-MO.  Having finished shepherding the 2011 DOD authorization bill through the House of Representatives last month, Skelton now announces that next year will he look at saving money.  The only sum he would identify is “X amount.” Expect little to nothing from this diffidence, and you will not be disappointed.

Others are less timid.  Congressman Barney Frank, D-MA, has put together an alternative DOD budget plan to reduce spending there by $1 Trillion over ten years.  He has logic on his side: since 2000, the Pentagon’s “base” budget has gone up by the same amount ($1 Trillion), in addition to the $1 Trillion also spent on the wars in Iraq and Afghanistan.

Remarkably, two smart, tough Republicans have associated themselves with Congressman Frank, Walter Jones of North Carolina and Ron Paul of Texas. That Frank has this bipartisan support in this hyper-partisan age indicates that real change is occurring.

Another proposal, auguring even more fundamental change, has been offered. The proposal suggests a broad political coalition encompassing progressive Democrats, conservative Republicans, and government fundamentalists, such as libertarians and tea baggers.

Senator Tom Coburn, R-OK, is a member of President Obama’s National Commission on Fiscal Responsibility and Reform to control all federal spending. As the co-chair of the commission’s panel on discretionary spending, which includes the DOD budget, Coburn has sent a pretty interesting, eight page letter to all commission members.  (Find it at Coburn’s website at

Coburn outlines how our military forces have become smaller, older, and less ready to fight at the highest level of Pentagon spending – adjusted for inflation – since the end of World War II.  (Both Republican and Democratic presidents, including Ronald Reagan and Barack Obama, have made it so, with the eager assistance of Congress.)  Coburn offers several recommendations to reverse the corrosive tide, but the central theme is to freeze the defense budget unless and until it can pass an audit.

Pass an audit?  What does that have to do with it?

Today, the Pentagon’s comprehension of its own material resources is a deep, dark void.  It can’t track its own money; it cooks its own books to make them appear in balance, and then it makes new spending decisions based on the phony data.  Nor can it accurately track its own property, even supplies to the troops fighting in Afghanistan.  There are three decades of GAO and DOD Inspector General reports on this mess.

Coburn has the good sense to understand that you can’t fix a system you can’t measure   and to have lost patience with empty promises that it will all be fixed – someday.

Imagine not just a Pentagon that can accurately track what it pays to contractors and every weapon program is audited regularly; imagine a Pentagon where the purposefully biased estimates for the cost, schedule, and performance of a new weapon are laughed out of the building until they get an auditable, accountable, independent assessment of what it will really cost, what it will actually do, and when it truly might arrive.

Moreover, the Coburn proposal makes the Barney Frank proposal plausible.  A trillion dollars less spent as it is now would be the worst of both worlds, but that much less spent in the manner Coburn suggests, with competence and accountability, is the change everyone talks about but can’t produce.

Business as usual at the Pentagon may be about to meet its worst nightmare: a broad political coalition to put its undisciplined spending under severe restraint and to fundamentally reform the way it makes decisions

The Attack of the Real Black Helicopter Gang: The IMF Is Coming for Your Social Security

Monday 12 July 2010

by: Dean Baker, t r u t h o u t

A few years back, there was a fear in some parts about black UN helicopters that were supposedly taking part in the planning of an invasion of the United States. While there was no foundation for this fear, there is basis for concern about the attack of another international organization, the International Monetary Fund (IMF).

Last week, the IMF told the United States that it needs to start getting its budget deficit down. It put cutting Social Security at the top of the steps that the country should take to achieve deficit reduction. This one is more than a bit outrageous for two reasons.

First, the IMF deserves a substantial share of the blame for the economic crisis that gave us big deficits in the first place. The IMF is supposed to oversee the operations of the international financial system. According to standard economic theory, capital is supposed to flow from rich countries like the United States to poor countries to finance their development. In other words, the United States should be having a trade surplus, which would correspond to the money that we are investing in poor countries to finance their development.

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However, the IMF messed up its management of financial crises so badly in the last 15 years that poor countries decided that they had to accumulate huge amounts of currency reserves in order to avoid ever being forced to deal with the IMF. This meant that capital was flowing in huge amounts in the wrong direction. One result of this reverse flow was that the United States ran a huge trade deficit instead of a trade surplus.

The trade deficit in the United States was a big part of the story of the housing bubble. The trade deficit cost millions of workers their jobs. This was one of the main reasons that economy was so weak coming out of the 2001 recession. This weakness led the Fed to keep interest rates at 50-year lows, until the growth of the housing bubble eventually began to generate jobs in the fall of 2003.

The IMF both bears much of the blame for the imbalances in the world economy and then for failing to clearly sound the alarms about the dangers of the bubble. While the IMF has no problem warning about retired workers getting too much in Social Security benefits, it apparently could not find its voice when the issue was the junk securities from Goldman Sachs or Citigroup that helped to fuel the housing bubble.

The collapse of this bubble has not only sank the world economy, it also destroyed most of the savings of the near retirees for whom the IMF wants to cut Social Security. The vast majority of middle-income retirees have most of their wealth in their home equity. This home equity largely disappeared when the bubble burst. Maybe the IMF doesn’t have access to house price series and data on wealth, because if they did, it’s hard to believe that they would advocate further harm to some of the main victims of their policy failure.

The other reason that the IMF’s call for cutting Social Security benefits is infuriating is the incredible hypocrisy involved. The average Social Security benefit is just under $1,200 a month. No one can collect benefits until they reach the age of 62. By contrast, many IMF economists first qualify for benefits in their early 50s. They can begin drawing pensions at age 51 or 52 of more than $100,000 a year.

This means that we have IMF economists, who failed disastrously at their jobs, who can draw six-figure pensions at age 52, telling ordinary workers that they have to take a cut in their $14,000 a year Social Security benefits that they can’t start getting until age 62. Now that is real black helicopter material.

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